IBM, AAPL Beat Earnings, MSFT Misses and USO

Fellow investor,
Once again, the buyers have stepped in at obvious support levels and sent stocks higher. We’ve identified support for the Dow Industrials at around 8,000. And while the index traded below 8,000 this week, the fact that buyers continue to step in remains one of the few positives for stock prices. 
Both the housing market and unemployment continue to show more weakness than expected. But stocks are currently priced for the worst. We see only incremental declines when worse-than-expected numbers are reported.
But when a company reports something positive, the stock takes off. 
*****Yesterday, it was IBM (NYSE:IBM). The multi-national technology bell-weather reported better-than-expected Q4 numbers. And IBM also raised its earnings guidance for 2009. 
Clearly, that’s remarkable. I can’t give you much insight into IBM’s revenue mix and how it counts revenues and profits. But quite frankly, in this environment, I don’t care if the improved results come from accounting gimmicks, one-off sales, discounting or cost-cuts. Better numbers are better numbers, something the market is starved for at this point. 
And investors rewarded IBM with a huge 11% rally yesterday.    
*****Apple (Nasdaq:AAPL) is poised to provide the encore to IBM today. The stock is up 7% or so after the company hit the upper end of its revenue range for Q4. Given the weakness in holiday retail sales overall, that’s impressive. 
Apple sold plenty of iPods, iPhones and enough computers around Christmas. Its fall launch of the iPhone was well-timed. And despite one analyst suggesting that iPod sales have hit a plateau, sales continue to be strong. Apple sold 23 million of them. 
It seems to me that the iPod is the most commoditized of Apple’s products. I tend to look at them as Apple’s introductory product that paves the way for higher margin sales of iPhones and computers. And if you’re interested in Apple, it’s the computer sales (especially the notebooks) that have the most upside. Apple’s share of the computer market remains but a sliver. 
*****So what’s this mean for technology stocks? First, it should be noted that both Apple and IBM are exceptional companies. We can expect them to be the exceptions. 
Microsoft (Nasdaq:MSFT) is out with earnings this morning. I don’t consider Microsoft exceptional, and its earnings reflect that. The company missed earnings expectations and is cutting jobs. 
Ultimately, the earnings results coming in suggest that technology stocks can be expected to recover before housing and banking stocks, for instance. It may premature to say they’ll lead the market higher, but they should be among the biggest beneficiaries of rising confidence of investors. 
*****Oil prices jumped 6% yesterday. Oil’s obviously been range-bound due to the competing catalysts of demand destruction and rising inventories on the bearish side and production cuts and the assumption that demand destruction is temporary. 
In other words, most expect oil to rise again, the only question is when. 
Since the US Oil Fund (NYSE:USO) is the only pure play ETF for oil prices, we can use it as a benchmark. USO has been trading just above $30, with the extreme range between $28 and $38. For trading purposes, buys below $30 for USO should lead to short-term gains. 
*****Speaking of commodities, gold has been out of the headlines for a while, but that’s likely to change. The flood of money from the Fed will eventually lead to some much needed inflation, and may even lead to excessive inflation. 
Morgan Stanley analyst Mark Liinamaa said yesterday that gold remains depressed due to a stronger U.S. dollar, weaker economic growth and deflation fears. 
But he also expects gold to rally to $1,000 an ounce in 2010. 
Personally, I think gold could go higher than that. Fed Chief Bernanke is pulling out all the stops to combat deflation. And I just don’t see how the Fed will be able to mop up the excess liquidity quickly when the time comes. In fact, I believe it’s a basic Fed policy to allow excess liquidity to form asset bubbles before policy is tightened. 
This time around, I think gold is highly likely to be bubble-ized. And that’s why some of the first investments I make in my $100,000 Recovery Portfolio will be in gold. 
In fact, I’ll be discussing this very investment theme in tonight’s airing of my $100,000 Recovery Portfolio video conference. It starts at 6 pm tonight. And while turnout looks to be huge, there are still some seats left. 
If you’d like to attend and find out how I’m going to invest $100,000 of my own money, you can sign up HERE. I think you’ll find this an informative and profitable way to spend 30 minutes of your time this evening.

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