Thoughts

NetApp Disappoints

NetApp reports only in-line revenue, and the stock gets creamed.

More on the Wells Fargo Story

A company spokesman defends the bank's financial integrity.

A WFC spokesman told Dow Jones Newswires this afternoon:

Any assertion that our recent CFO succession has had to do with conflicts over the integrity of the company's financial conditions, financial reporting disclosures or financial controls is completely untrue. And to underscore this, investors can expect Wells Fargo & Co. to file its form 10-K for 2010 on schedule and with all required Sarbanes-Oxley Act certification later this month.

Fed Raises Inflation Expectations

The FOMC raised expectations for growth and inflation. It appears, as well, that several FOMC members leaned toward ending quantitative easing with QE2.

YHOO's CFO will be presenting at a Goldman Sachs Internet Conference after the close at 4:30 p.m. EST. YHOO's shares are approaching the April 2010 high.

Large-cap "quality" stocks have lagged the market over the last 12 months. From my perch, this is where value resides today.

Within the context of a zero-interest-rate policy and a yield of 3.70% on the 10-year U.S. note, I suspect a package approach will be rewarding.

BAX, CSCO, KO, HD, IBM, JNJ, MCD, MSFT, TGT and TRV:

1. The average P/E on 2010 EPS is 14.5x.
2. These stocks trade at 84% of their five-year average P/E.
3. The average P/E on 2011 EPS is 13.2x.
4. The free cash flow yield is 6.0%.
5. The average dividend yield is 2.2%.
6. Cash as a percentage of assets is 17%.
7. The growth rate of dividends over the last five years is 14%.
8. The estimated growth rate of dividends over the next five years is 10%.
9. 16% of the outstanding shares have been repurchased in the last five years.
10. The average return on equity is 30%.
11. Long-term debt as a percentage of total capital is 30%.

January housing permits stood at only 562,000, in line with consensus but down by 100,000 from December 2010 (which was buoyed by anticipatory permiting ahead of the implementation of new building codes in 2011).

Of late, foreclosures have begun to reaccelerate, and the shadow inventory will continue to weigh on housing activity throughout the year.

Housing, from my perch, is scrapping along the bottom even though production has been well under household formation for some time.

If one is looking for a sector that will be the beneficiary of pent-up demand, look at cars not homes.

From my perch, cars are more safe -- at any speed.

Words of wisdom from Tony Crescenzi this morning:

Pipeline inflation pressures remain high in producer prices. The prices of both crude and intermediate goods continue to increase at a fast pace. Crude prices of course reflect raw materials prices. Intermediate prices reflect the prices of materials that have had some processing. To better understand these stages, picture a shirt: the crude material is cotton from the field; the intermediate material is cotton yarn; the finished good is the shirt. Importantly, perceptions about inflation are high, too, and this will continue to affect the yield curve, because the Fed is hinged to core prices. In other words, the Fed, which should because of its mandate be the bondholder's protector, is in the face of rising headline inflation pressures, letting the enemy outflank the bondholder by paying more attention to headline inflation that core inflation.

It now seems as if the U.S. stock market is interpreting the outcome of almost every world political development and domestic economic release as market-friendly; at the same time, emerging stock markets are beginning to break down, the pace of increase in the rate of change in bond yields has accelerated (as we fail to address our ever-growing deficit), and signs of a possible contraction in corporate profit margins grow more visible (as raw material input costs are increasingly more difficult to be passed on to customers). Meanwhile, rising food costs and the prices of life's necessities continue to pressure the average consumer and raise the specter that recent gains in retail sales are not durable but rather represent nothing more than recession fatigue.