Apparently Greece is no longer an issue -- and if you believe that, there's a fellow named Ponzi who has a fantastic investment program that you ought to consider!
Nobody who's paying attention thinks the Greek situation is in any way resolved. No country in history has ever taxed itself out of a depression, yet that's essentially the European Union's current plan -- so don't be surprised if the Greek problem comes back around soon to rattle some cages.
With every kick of this can down the road, the day of reckoning is only getting more painful. And yes, that should remind you of our own debt ceiling here in America.
Putting that bit of economic insanity aside, Apple (AAPL) -- the world's biggest company as measured by market capitalization -- reported earnings after the close on Tuesday that sent after-hour traders into a tizzy of disappointment. AAPL dropped as much as 9% at one point before ending the after-hours session down nearly 8%.
Your ardent Apple lovers here feel compelled to point out that this seems like quite the overreaction. Revenue rose 32.5% to just shy of $50 billion for the quarter, but investors were dismayed to see that iPhone sales were only 47.5 million.
Really? Come on -- average iPhone sales prices rose 18%, iPhone revenue soared 59% year over year, overall net profit increased 39% and EPS jumped 45%. And that's on top of Apple putting about $51 billion into dividends and share repurchases.
To us, the market's reaction seems to be a bit like a petulant teen who's never satisfied with mom and dad's attempts at fun.
Microsoft (MSFT) was hit as well after reporting a $3.19 billion loss thanks to a $7.5 billion writedown and restructuring of the smartphone business that it acquired from Nokia (NOK). But with investor expectations already low, MSFT didn't get slammed with quite the brutality that Apple faced.
Microsoft is a company that doesn't seem to be able to find its mojo past the PC world. But with a continuing decline in PC shipments (coupled with risks MSFT faces as it moves into the cloud-computing business), we aren't expecting much from Microsoft going forward, Xbox excepted.
On the other end of the spectrum, Google (GOOGL) enjoyed a record gain of nearly $67 billion in market capitalization last Friday after investors embraced an earnings report that frankly left us scratching our heads.
At first glance, GOOGL's 9.6% gain in net income over the prior quarter looked pretty good. But digging deeper, we found that about 75% of that gain was simply thanks to Google's tax rate declining to 20.7% from 22.1%, as well as General and Administrative expenses falling to 8.2% of top-line sales from the previous 8.8%.
Removing the impact of these two items, net income rose by just 2.9% over the quarter. To us, that doesn't warrant a 16% increase in market cap, particularly when we look at Google's potential sales growth. We simply don't see the opportunity for the kind of hockey-stick increases that the stock's big jump seems to imply.
While the market's reaction to some of the new-economy firms have us scratching our heads, the more-traditional world of commodities is getting pounded -- with the Bloomberg Commodity Index at levels not seen since 2002.
The slow global economy and China's increasing weakness are no doubt contributing to trouble for commodities. So is the strong U.S. dollar, with the inverse relationship between commodities and the greenback clearly shown in the chart below.
It's clear that the dollar isn't likely to do much of anything but continue to move up. The Federal Reserve is still talking about raising U.S. interest rates even as central banks from Japan to Europe continue trying to stimulate their economies through various forms of quantitative easing. That should only increase the dollar's strength, making oil and other commodities something we'll continue to avoid.
However, midstream Master Limited Partnerships that primarily operate pipelines could actually benefit from the dollar's strength and oil's ongoing crash. That's because their business relies more on how much stuff travels through their pipelines than the price that what they transport actually fetches. Two MLPs that we like are Plains All American Pipeline (PAA) and JP Energy Partners (JPEP).