Mel's Blog

March 6, 2013 Market News

March 6th, 2013 9:21 AM by Mel Samick

Investors also hope that many new ideas are brewing at Apple to save its sinking fortune. Its stock price has receded below $430 after touching $700 not so long ago. Bloomberg reported that Apple has an internal team of as many as 100 individuals working on the iWatch project. Compare this to a TV, which many people have been anticipating the release of. Going with an iWatch could be a more lucrative, innovative move from Apple. Features under consideration include letting users make calls, see the identity of incoming callers and check map coordinates, a pedometer for counting steps and sensors for monitoring health-related data, such as heart rates. I am wondering if we will have to take regular breaks to charge our watches?

Mortgage rates have been easing a little as a result of slackening demand, itself the result of higher rates in February. Lesser demand for credit may encourage lenders to offer somewhat more aggressive rates in order to attract more business. The proximate cause of the fall in rates was investor concerns over elections in Italy, which served to add more uncertainty into the Eurozone financial mess. Reassuring testimony from Federal Reserve Chairman Bernanke about the Fed's commitment to QE served to prop up stock markets as the week progressed, but yields remained subdued.

Corporations are more profitable with fewer employees than in 2008. With the Dow Jones industrial average flirting with a record high, the split between American workers and the companies that employ them is widening and could worsen in the next few months as federal budget cuts take hold. With millions still out of work, companies face little pressure to raise salaries, while productivity gains allow them to increase sales without adding workers. Unemployment, after steadily declining for three years, has been stuck at just below 8 percent since last September. With $85 billion in automatic cuts taking effect between now and Sept. 30 as part of the so-called federal budget sequestration, some experts warn that economic growth will be reduced by at least half a percentage point. But although experts estimate that sequestration could cost the country about 700,000 jobs, Wall Street does not expect the cuts to substantially reduce corporate profits -- or seriously threaten the recent rally in the stock markets.

One size does not fit all. At least the new CEO of JC Penny has learned this lesson recently. During the last few years JC Penny's fortune and stock has continued to tank despite many bold initiatives from its newly hired CEO, Ron Johnson, who was considered a legend at Apple having designed the world's most famous, sleek white showrooms and having made Target a discount fashion destination. Johnson is an "ideas guy", and, naturally, he arrives at JC Penney with an idea: No more coupon games, just low prices. However, his new strategy failed miserably and a lesson was learned in that what works at Apple does not necessarily work at JC Penny. With 99 percent of purchases being discounts, coupons are looking like an unbeatable business strategy at similar retail stores.

It's all about strategy and positioning. In contrast, under CEO Jeff Weiner, LinkedIn has seen massive growth. The executive has driven tenfold growth in revenue over the past four years, while exceeding analyst earnings expectations nearly every quarter. Social networks like Facebook, Groupon and Google+ may have much larger membership bases than LinkedIn, but LinkedIn's steady run has proven why it beats them both in the business world. It's become a real battle among the three companies, and LinkedIn's success keeps the other two innovating and hustling. LinkedIn has successfully elevated its niche user base to the point where it has gained wider acceptance and relevance in the technology world. Its 200 million members is not a small number, but LinkedIn has been very successful in monetizing them and has become a real money-maker. Since its IPO last year at $45, LinkedIn stock has soared above $170 recently, unlike Facebook and Groupon who are still trading below their respective IPO prices.

Some noteworthy U.S. economy spotlights are:

· Sales of new homes popped by 15.6 percent in January, climbing to the best levels seen since the summer of 2008.

· Initial claims for unemployment for the week ending January 12th were 335,000, which is down considerably from 372,000 the prior week.

· The delinquency rate for mortgage loans fell to a seasonally adjusted rate of 7.09 percent, the lowest level since 2008.

Mel

Posted in:General
Posted by Mel Samick on March 6th, 2013 9:21 AM

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