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What casino stocks can tell us, in charts

October 23, 2011

Resort and casino stocks are the best barometer I can think of to represent the true state of the economy. Historically, when times are good and cash is free-flowing, companies like Wynn, Las Vegas Sands, and MGM (at least used to) haul in kings’ ransoms. From gaming profits — the house always wins, or wynns if you prefer — to high-budget shows, to full-capacity weekends, the gaming resort revenue triforce is unstoppable…when times are good. Now, please direct your attention the following two charts of WYNN and LVS:

http://www.google.com//finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1319353574195&chddm=470750&chls=IntervalBasedLine&cmpto=INDEXDJX:.DJI&cmptdms=0&q=NASDAQ:WYNN&&fct=big

http://www.google.com//finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1319353057841&chddm=464897&chls=IntervalBasedLine&cmpto=INDEXDJX:.DJI&cmptdms=0&q=NYSE:LVS&ntsp=0

Notice that in spite of the recent hopium addiction of the markets for the last month, both WYNN and LVS are in lockstep down. Do you see the similarity to late 2007? It looks identical to me. Gambling and staying at the WYNN is the ultimate luxury good. Is a weekend at the Encore vital to your survival? I’m guessing that in Maslow’s hierarchy of needs, a Friday night gambling and going to a shitty Criss Angel show is about 100 light years above the pyramid’s capstone. That’s why spending a weekend at the Bellagio or the WYNN is the first thing cash-squeezed people will cut from their budgets.

It’s no surprise that WYNN’s earnings were well below expectations. Average people are broke, and markets are just about to realize this ugly truth. WYNN has dropped through the key $135 support, signifying the start of a trend downwards. LVS is slowly spiraling down in spite of its price being propped up by the markets’ hopium.

Mark my words: if gaming stocks tell us anything, it’s that we are right now in the equivalent of February, 2008. Tharr be rough seas ahead.

Verizon (VZ) reports today, boredom ensues

October 21, 2011

VZ reports today before the bell. It is expected to report Q3 EPS of $.55 on $27.86 bil in revenue. Considering beta is low on this stock, and earnings are likely to be in line plus or minus 2 cents, I don’t expect the stock price to go anywhere. Telecom earnings are some of the easiest for wall street to predict. This is because most user contracts last two years, so accurate revenue projections can be made months in advance because cell phone users are locked up at a set monthly rate.

Now, you might be asking: why am I bringing this stock up? Three words: the conference call.

We’ll get details about iPhone 4S orders, as well as a breakdown of phones sold by type (smart phones, iPhone/Android splits, brick phones, etc). Given the current economic climate and all Wall St.’s analysts drinking the hope koolaid, expect smartphone sales to not impress. Based on this underwhelming announcement, VZ might move down a few cents, AAPL might move down a few bucks, and NOK will keep on rolling!

 

 

Why I don’t trust most finance blogs

October 20, 2011

I do not trust any self-hosted stock prediction blog that has any sort of advertising.

Think about it: if the person writing the blog is truly an expert of finance and one of the rare sort who can navigate market turmoil, they shouldn’t need to pull in money from advertising. In addition, this blogger-trader shouldn’t need to concern themselves with blog traffic. If their money is where their mouth is, and I mean that literally, they should be making money by the truckload in the markets.

Just my 2 cents. Hope it will soon be my 200k. I will never put ads in this blog. If I do, you can assume I’m bankrupt 🙂

And I'm an expert on finance, or at least I play one on CNBC!

Nokia (NOK) beats earnings! Brick phones reign supreme!

October 20, 2011

Yes, and look how happy he is!

The last time I actually used my Nokia brick phone was to prop up a projector during a business meeting. That was this morning. I love my Nokia brick phone. It doesn’t have a camera, or even a color screen for that matter, but it makes calls, it texts, it even has a flashlight!

Bright and early this morning, Nokia shocked the world with a surprise sales beat. NOK is up about 7% in pre-market action after reporting EPS of $.03, beating analyst expectations of a .02 loss. While profits are down at Nokia, sales are up.

What does this tell us about the global economy?

It tells us that people are either (1) reverting to cheaper, simpler phones due to economic hardship; or (2) the developing world loves cheap Nokia brick phones. I am more partial to believe the former. Luxury goods are the first to be hit during economic downturns, and as you will know if you’ve read my other posts, I firmly believe we are in the early throws of a major global downturn. This pessimism is not reflected in the markets although it is front and center in the minds of most Americans. The truth is, things are not better than in 2008. If anything, things are worse. People have been out of work longer. Wages have stagnated. Congressional gridlock has eliminated political proactivity to fix economic problems.

Anyway, I’m very happy to see NOK beat earnings. Did I love my brick phone? I can drop it from the top of Steven Cohen‘s future subpoena pile (about 3km high), and it doesn’t break.

Maybe if Nokia brick phones make a big comeback, people will actually be able to have fluid dinner conversations. Maybe we’ll actually remember how to be compassionate, like we were before we checked our emails every 20 seconds. Implicit escapism from reality reigns supreme among iPhone and Crackberry addicts. I used to have an iPhone (correction: still have it, just never use it), and I was a member of the greater lemming populace — I couldn’t have a one minute conversation without checking my phone. The iPhone didn’t make me more popular, productive, or happier. In fact it detracted from my quality of life in every metric I can think of.

Hats off to Nokia. Really.

Playing roulette with WYNN earnings

October 19, 2011

Wynn reports Q3 earnings at 4PM EST today. As you may know, I do not hold a bullish view of this company. In short, expectations are too high and WYNN’s 4 resorts do not provide enough diversification to allow the company to gracefully weather economic downturns.

Consensus EPS expectation is $1.17. Macau revenues will be up, but that’s not a surprise after the September gaming report. On the other side of the Pacific, Vegas revenues will be stagnant. Don’t see much room for surprise to the upside here. As I’ve said, analyst expectations are too high.

“Past Earnings Performance: The company missed estimates last quarter after beating forecasts in the prior two. In the second quarter, the company reported net income of 97 cents per share versus a mean estimate of profit of 99 cents per share. In the first quarter, the company beat estimates by 65 cents.”

The conference call at 4:30PM wil likely discuss the potential new resort planned for Macau. In addition, Wynn will gloss over stagnant Vegas revenues, preferring to flaunt any and everything Macau related instead.

Unrelated to earnings, Macau announced today that it will keep the number of gambling tables unchanged through 2013. WYNN Macau is down about 4% today. Look for WYNN to be down today as well.

Pandora is screwed. Mark Zuckerberg, Sean Parker, and Spotify?

October 18, 2011

Yes, that's who you think it is on the left...with Daniel Ek, founder of Spotify and Sean Parker (far right), founder of Napster, billionaire repressed frat bro and Director of Spotify

Facebook recently launched integration with Spotify. Something tells me this relationship will be pretty exclusive, with Pandora stuck in the cold. Mark Zuckerberg, Sean Parker, and Daniel Ek, founder of Spotify, are all drinking buddies. With Snoop as their priest, this unholy marriage has been consummated, Spotify has clinched the streaming radio and music throne, and Pandora’s fate has been sealed.

What’s Tim got Cook(in) over in the AAPL kitchen?

October 18, 2011

Let's hope so...

First: If you haven’t already, I think today is a good day to cash out your Sprint holdings. The run up over iPhone 4S hype is over and the downgrades will finally catch up with it.

Now, on to the second biggest story of the day (after GS earnings IMO): Apple reports Q4 earnings at 5PM EST

The big story here is not so much earnings, it’s guidance. Apple always guides VERY conservatively in order to beat each quarter. Therefore, I wouldn’t be surprised to see AAPL beat, with EPS somewhere in the $7.40-7.50 range. I anticipate slightly lower iPhone sales, as consumers were waiting for the iPhone 4S. However, lower material costs should boost profit margins. All in all, I don’t expect earnings to do much.

The conference call at 5PM EST is what will really drive this stock. I fully expect the guide conservatively protocol to remain in effect under Tim Cook. The key point of the conference call, the make or break point, will be a discussion of China. Any indication of Apple planning to make moves into the Chinese market will push this baby much higher.

Overall, I don’t feel comfortable owning this stock one way or another. Earnings won’t be a huge surprise, but if you believe strongly that Apple will talk China or no longer guide conservatively without Mr. Jobs, there could be easy money to be made. If I were to play this with a large amount of money, I would get short AAPL and pick up some in the money calls with 19 Nov. expiration.