A Tale of Two Markets: Perception and Expectation

What in tar nation is going on with this market?  Are we irrationally exuberant again or are earnings so good that equities just had to keep rallying? On the topic of earnings season, some stocks fared better than others.  In the case of Apple (AAPL) and Netflix (NFLX) you have a darling-to-dog scenario which creates a provocative portrait of contrasts.  

The irony here of course is that NFLX surprised with a modest quarterly profit of $0.13 per share (vs an estimated -$0.13 loss) while AAPL posted earnings that were below consensus views.  The company with the paltry $8 million in profits (guess who) saw its stock pop 12% for the week (79% Y-T-D) while the company who earned $13 billion received a 12% haircut!  That's pretty wacky.  It's all about perception and apparently, expectations do matter in this market.

We still think the real fireworks will occur later this year as debt ceiling, budget and all other "deferred" political issues get put back on the table.  One of the most discouraging aspects of US politics is our lawmakers innate ability to put their political careers before the needs of the constituents that have elected them.  This applies to both sides of the aisle.

Good Read: Fellow Seeking Alpha author Alan Brochstein put out a wonderful post this week that any individual investor should read.  I admire Alan for many reasons; he is sharp, objective and his insights offer the voice of experience. For any investor wanting perspective on markets, Alan's piece is definitely worth a look.

Boxing Comes to CNBC:  Anybody who caught the Ackman/Icahn fight last Friday (live) on CNBC probably had a drink or two after work.  CNBC's Scott Wapner found himself ring-side with these two hedge fund titans as they exchanged unpleasantness towards each other.  It was a ballsy move for CNBC to air the exchange on a live broadcast, but I give kudos to Wapner for his handling of the situation.

However, it also revealed a rancor between two men who obviously do not like each other.  I see pundits yelping amongst themselves all the time, but to hear these two "activist" guys go at it was wild!!!  From a human nature and sentiment perspective, could this be anecdotal evidence of a weary bull market?

Crop Prices:  Commodities broker Allendale forecasts higher than expected yields for wheat and corn harvests.  Keep an eye on cereal stocks such as Kellogg (K) and General Mills (GIS).




        

NFL Conference Play-off Predictions

Well folks, we are coming a 'nigh to the big banana aka The Super Bowl.  There will be two stops first though, both on this coming Sunday to decide which two NFL teams will shoot-it-out for the pigskin prize at the Superdome on February 3rd.

Sunday's Conference Championships will pit the 49'ers against the Falcons (at Georgia Dome) followed later in the day with the Ravens at Patriots (Gillette Stadium).  Our simulation program has been shooting bullets most of the season so we decided that why not push the envelope and post our Sunday picks here.

Sports analysis is a bit off topic for the Merriam Report blog, but we have been known to wager a few paddles during the football season. Here's our picks and 25-cent opinions:

San Francisco vs Atlanta:  We are in the camp that thinks SF Coach Jim Harbaugh's ballsy move to start QB  Colin Kaepernick in post-season play-offs is a wise one thus far.  Kaepernick is versatile and his avg. 6.6 yards per carry rushing isn't too shabby either.  The Falcons however, slipped into this conference playoff by the skin of their teeth so we will give the nod to San Francisco for this game.  Our model shows SF scoring 26.55 points to Atlanta's 26.8, but with special teams it will likely be a shootout to the end. 

That said, we would prefer to avoid taking the spread (currently -4 for SF) and wager on the over (currently 49).

Baltimore vs New England:  Baltimore QB Joe Flacco is a gutsy player and he has a lot at stake here.  His contract is ending soon and one can only assume he would like to show the folks writing the checks that he deserves to be paid as much as some of his peers.  Getting to the Super Bowl would help this cause, but that doesn't mean he or the Ravens will win the game.

The main adversary of course is the surgical precision of  New England QB Tom Brady and Co.  Brady reminds us of a sharpshooter and his 63% avg completion rate is evidence he doesn't shoot recklessly.  Our model shows NE scoring 30.87 points to Baltimore's 26.1.  Again in this game, we are inclined to play the over (currently 51) as the spread is currently -8.5 for NE.  Not that NE can't cover the spread, but the bet advantage (approx. 6 points) seems to favor the over-under scenario in our view.

The divisional play-offs thus far have been exciting and this weekend's games should also be terrific.  Best of luck to all.  Note: Our selections are provided for informational purposes only and should not be construed or implied as wagering recommendations.