Greece Gets Great Loans; Talbot's a Loser; Stocks Tack on More Gains

If anybody out there can offer advice on how to write the same story 33 different ways, I'll be your first subscriber, because that has been my primary task since February 8, the date of the last interim bottom on the Dow.

While the index hasn't been going straight up, it often seems that way, as, over the span of the past 44 trading days, the Dow has advanced 33 of them. That's a 3-1 ratio of up days over down, and a winning investing formula in anyone's book. I admit, due to my disbelief in the overall economic recovery that everyone keeps talking about but nobody sees, to have completely missed this 1100+ point rally.

That's my fault, but I'm also not about to jump in at these seemingly inflated levels, either. I remain steadfastly, stubbornly, in cash, and it's not a matter of wanting to catch the next low, because I probably won't be investing in stocks for the next few years, at least not US stocks.

Today was more of the broken record variety of days on the Street. Stocks were up, though not by much. Earnings are beginning to trickle into investor equations, with Alcoa (AA) announcing earnings in line with forecasts on Monday at 10 cents per share in the 1st quarter on revenue of $4.9 billion, lower than consensus estimates of $5.24 billion.

After the closing bell today, Intel (INTC) announced 1st quarter results of 43 cents per share, beating the street consensus of 38 cents. Revenue for the chip giant was $10.3 billion, on expectations of $9.84 billion.

Earnings season is off to a good start. Even a company like Talbot's showed a profit of 7 cents per share, even better if you exclude one-time items (Why not? It's a party!). The women's retailer then shows 13 cents per share.

The company had been on the brink of failure, but has redefined itself over the past two years. Still, it's profit was a mere $4.1 million for the quarter, but shares rose significantly due to the amount of short interest. Selling at nearly $15 per share, investors are taking a pretty heavy risk with Talbot's. The company shows negative return on equity, virtually no growth, a p/e of 27 and nearly a half billion dollars in debt. That debt burden alone is enough to keep heavy volume investors away and the shorts making their downside bets.

Talbot's looks a lot like the nation of Greece, which should be the subject of some focus due to the favorable loans it secured from the EU and IMF. Greece will be able to finance its debts at around 5%, or about 100-120 basis points below market rates. The unusually-generous terms have been applied because all of the European finance ministers understand that a Greek default would likely have a severe domino effect on countries like Portugal, Italy, Ireland and Spain. The stronger nations, especially Germany, would likewise be affected, either having to underwrite immense losses or suffer a collapse of its own economy or the Euro.

While a decoupling from the Euro might be the very best thing for the Germans and the continent as a whole, scrapping the entire Euro project has not been something widely anticipated, though it could very well happen within the next 2-3 years. The Southern countries aren't nearly as industrious as their Northern neighbors, and the German populace isn't taking kindly to the concept of bailing out countries which cannot manage their internal budgets. Giving Greece better terms than the very best borrowers, when they are, in fact, sub-prime, at best, reeks of the kind of unfair "picking winners" that was a hallmark of the infamous bank bailouts in the US.

With Greece, failure is being rewarded. With Talbot's, failure has only been delayed. The losers will be the investors who could not judge the risk, as it should be.

Dow 11,019.42, +13.45 (0.12%)
NASDAQ 2,465.99, +8.12 (0.33%)
S&P 500 1,197.30, +0.82 (0.07%)
NYSE Composite 7,638.35, -3.40 (0.04%)

Volume was a little bit perkier than normal, possibly owing to options expiration on Friday or the flood of earnings announcements due out over the next two weeks. Advancing issues outnumbered losers, though marginally, 3362-3108. New highs bettered new lows, 646-50.

NYSE Volume 5,806,878,000
NASDAQ Volume 2,557,582,750

As oil dropped for the fifth straight day, CNN Money ran this headline, Oil declines on oversupply worries. All we can say, after watching naked speculation take the price above $87 last week is, "no kidding?" Crude dropped another 29 cents, to $84.05 on the day, which is still $20-35 above where it should be. The oil speculators are so concerned about keeping the price this high due to imminent, continuing threats of production cuts by the oil-rich nations of the mid-East. Their economies are teetering on insolvency and a price of at least $80 per barrel is needed to keep them current on payments. Eventually, somebody's going to see the light and force the price lower, despite the economic realities facing the royal Suadis and other potentates in the region. Maybe Russia.

Gold dropped $8.80, to $1,152.80, while silver slid 16 cents to $18.24. Once again, the metals are unable to break out to new highs, for reasons that should, by now, be pretty obvious to everyone.

Where are the jobs, and how about that housing market?

Investors Play Waiting Game in Advance of Earnings

On the heels of a long holiday weekend, investors were met with a troubling scenario on Monday, as there was hardly a headline upon which to base trading. As such, stocks took an immediate dive to the negative at the opening bell and stayed down until momentum traders brought the major indices back to positive bearings after the noon hour. The Dow lagged the S&P and NYSE Composite, with the NASDAQ making a sharp turn at midday and closing close to unchanged.

Overall, there was little movement in anticipation of major earnings announcements which begin this week and will be the focus of trading through the end of the month. Of course, following the key Wells Fargo pre-announcement from Thursday, there's a good deal of excitement and anxiety building over first quarter earnings from major banks. The schedule for bank earnings goes as follows: Goldman Sachs (GS) on April 14, JP Morgan Chase (JPM) on April 16, Citigroup (C) on April 17, Bank of America (BAC) on April 20 and Wells Fargo (WFC) on April 22.

It is notable that Wells Fargo is the last to report, as their actual announcement will more than likely result in a sell-off, the company already having jumped the shark by leaking out their earnings news. The balance of this week, however, will be dominated by the three big banks reporting and it should be quite a show.

Dow 8,057.81, -25.57 (0.32%)
NASDAQ 1,653.31, +0.77 (0.05%)
S&P 500 858.73, +2.17 (0.25%)
NYSE Composite 5,410.28, +33.84 (0.63%)

As for today, it was just a low-volume grind in a fairly tight range. For the time being, volatility has been wrung out of the markets if only because stocks have once again topped out. The next move, whether to the upside or down, will be decisive though earnings reports from various companies over time could contribute to wide swings.

Advancing issues were 4644, to 2855 declining. New lows beat down new highs, 93-31, with the margin increasing again. Volume was on the low side.

NYSE Volume 1,481,100,000
NASDAQ Volume 1,832,720,000

What the market was waiting all day for - Talbot's earnings for the 4th quarter and full year of 2008 - finally appeared online after the close. If the market is seeking direction, take note: The company, trading under the symbol TLB, reported a 4th quarter adjusted net loss (period ended January 31, 2009) of $128.4 million or $2.40 per share compared to last year’s adjusted net loss of $7.1 million or $0.13 per share.

Talbot's operates more than 1000 retail apparel stores in the US, UK and Canada, so all this does is re-confirm that the retail sector is in deep trouble. Shares were down nearly 20% in after-hours trading.

Well, that's what we thought the market was awaiting. Instead, Goldman Sachs decided to report a day earlier, posting earnings of $3.39 per share, beating forecasts of $1.64 per share. Expect stocks to gap up at the open tomorrow on that surprise.

What is troubling about Goldman Sachs' earnings is that since changing their designation from an investment bank to a commercial bank, they also changed their reporting periods, which can be seen plainly in this report. [PDF]

The problem is that the company seems to have completely eviscerated the month of December, 2008, in which - according to unpublished reports - the company lost $1 billion, or $2.15 per share, which would have dramatically changed their results. Goldman's actual results - including the December loss - should have been $1.24 per share, well below the expectations. This is all just spin, and possibly accounting fraud, which, of course, will not be investigated. Shares of Goldman Sachs were lower in after-hours trading.

Oil closed down $2.19, at $50.05. Gold gained $12.50, to $895.80, while silver edged higher by 44 cents, to close at $12.77.

With companies - notably banks - jumping the gun on earnings announcements, the trading environment has gone from nearly impossible to "forget it" status. Nothing makes sense any more. Banks which needed billions of dollars just months ago are now reporting healthy profits. Is it all a sham, a grand design to raid the US treasury? We may never know, but all indications sure seem to be pointing that way.