Mar 9, 2012

Starbucks Responds to K-Cup

March 9, 2012

I am hesitant to discuss unemployment this morning after Wednesday’s Abbott and Costello note, but unemployment was in line this morning at 8.3%, while U-6 showed a slight decline to 14.9% from 15.1%. Average hourly earnings were lower than expected, rising 1.9%, and last month’s figure was revised down to 1.8%. Nonfarm payrolls rose by 227K, with a 31K increase in manufacturing payrolls.

Starbucks (SBUX) is up strong this morning at the expense of Green Mountain Coffee (GMCR), which is down over $9 or 14% this morning. SBUX announced plans to release their new Verismo single-cup machine, a direct comp to the GMCR Keurig (pictured below), before the end of the year.

Greece received 95% approval from investors to accept the “voluntary” debt exchange. Bondholders tendered 172 billion euros of Greek bonds. The country may still have to invoke the CACs we discussed Wednesday, which may trigger the CDOs. Holders of the old bonds will receive new bonds with face values of 31.5% of the old bonds plus notes from the EFSF. Morgan Stanley (MS) is estimating that the newly issued bonds will yield over 20% when they begin trading.

Today is the third anniversary of the 2009 market bottom. The chart below shows where we’ve been over the past 36 months. That’s a pretty good rally during a really lousy economic period.

Facebook (FB, pending) is planning to raise $10 billion in their IPO later this year. While there will be many individual winners enjoying their well-deserved spoils from the issuance, there is a surprise winner many of us haven’t considered. The State of California, ever dysfunctional in its financial acumen, is already making plans for the additional $5 billion in revenue (i.e. taxes from capital gains and increased spending) they anticipate from the deal. That’s right, from the state that illegally issues its own currency in the form of IOU’s every year, we now have legislators planning their budgets on the back of the underwriting calendar. They cite the Google (GOOG) IPO in 2004 for justification of their estimates. Unfortunately, when the GOOG bump came along, legislators added permanent spending and bond issuance based upon the temporary increase in taxes, which helped tilt the state into their current quagmire.

During their mid-quarter update last night, Texas Instruments (TXN) lowered guidance last night for both sales and earnings. The company cited lower demand for OMAP and Connectivity after a strong ramp and inventory build in Q4. These products are primarily consumed in KindleFire tablets.

A recent CFA Institute poll asked “During the past few years, central banks’ easy-money policies have been”, and the options were “Too aggressive” (60% of respondents), “Just Right” (31%), and “Not aggressive enough” (9%).

The Department of Justice is threatening Apple (AAPL) and book publishers, suggesting they colluded on setting the price of e-books.

GE cited stronger demand from APAC on their recent earnings calls. McDonald’s (MCD) missed earnings on weak APAC and European demand, higher commodity and labor costs.

The Indianapolis Colts released Peyton Manning to avoid paying him a $28 million bonus. The Colts have the #1 pick in the upcoming NFL draft, and presumably will take Andrew Luck to replace Manning. The MLS is kicking off their 17th season this weekend, although The Fire isn’t schedule to begin until St. Patrick’s Day.

BTW-quite a few people have been asking about the wing suiting last weekend. There were technical difficulties which kept me from going-my wife said NO!

Have a great weekend


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