Apple Again?

April 25, 2012

A funny thing happened on the way to Apple (AAPL) missing their quarter-they didn’t!  The stock has been correcting for the past couple of weeks, dragging the NASDAQ down more than the other indices due to its extreme weighting in the tech heavy index.  Equity futures are up this morning, led by the NASDAQ after AAPL reported better than expected numbers, with that stock rising 7% in pre-market trading.  Weak phone sales from both AT&T (T) and Verizon (VZ), combined with a correction from all-time highs, had spooked the market and led to a significant pullback in the stock.  iPhone sales were strong at 35.1 million, in excess of street estimates of 30 million. 

A recent government report is showing that Social Security will run out of funds by 2033, three years earlier than estimated last year.  Medicare will run dry in 2024.  In 2011 Social Security’s 44 million recipients cost the government $736 billion, the US Government’s largest expenditure.  The chart below shows the estimated growth of entitlement programs versus total government tax receipts. 

Earnings reports continue to surprise as 3M Corp (MMM) beat earnings and raised guidance for the 2^nd quarter.  Overall earnings have been better than anticipated, with the manufacturing sector showing particular strength. 

New home sales continue to be weak, with new home sales dropping 7.1% in March.  The median price of a new home fell by 1% from February to $234.5K. 

The Bank of Greece unveiled its outlook for 2012, which includes an estimated decline in GDP of 5%, worse than their late 2011 estimate of -4.5%. 

According to the Economist, the 30% rise in the yuan since 2005 has move the currency to fair value, and claims of the currency’s undervaluation are now misplaced.  “Most economists expect the yuan to resume its rise soon, but at a much slower pace and with greater flexibility up and down.”

In an effort to ensure that no private investor ever owns the debt of systematically important financial institutions, the IMF is proposing that regulators should be allowed to “bail-in” banks.  A bail-in would force the bank’s bondholders to take losses to avoid a collapse of the institution.  Uh, no. 

Have a great day

Ned