Market Talk

- Oracle (ORCL) CEO Larry Ellison wasted no time slamming H-P’s (HPQ) hiring last week of former SAP chief Leo Apotheker as new CEO. “I’m speechless,” he tells WSJ late Friday. “H-P had several good internal candidates…but instead they pick a guy who was recently fired because he did such a bad job of running SAP.” Harsh, to say the least, though not particularly out of character for Ellison, Digital Daily blogger John Paczkowski says.

- Goldman gets harsh on Microsoft (MSFT) and offers three strategies it should employ to help boost shares. Firm calls for huge dividend increase, a “coherent consumer strategy” and MSFT to become the global leader in cloud computing. “Oh, that’s all?” Paul Kedrosky quips. “Pulling this off would be like Microsoft learning Geller-ian magic tricks, the equivalent of being able to bend spoons with its brain.”

- Another economic downturn is “not only a possibility but a likelihood,” John Hussman says. “A significant correction in valuations and resolution of the growing backlog of delinquent debt may finally restore strong ‘investment merit’ to the US stock market, but only after a greater amount of pain and adjustment than most investors seem to anticipate.”

- Executive departures at Yahoo has put more scrutiny on CEO Carol Bartz, who she still has to convince Wall Street she has what it takes to turnaround the struggling Internet giant. But YHOO’s 3Q report, scheduled for Oct. 19, will provide clues into how she’s really doing, Kara Swisher notes. And as executive departures “garner a lot of attention,” Yahoo’s results are “the most important of all to watch,” she says.

- With the September jobs report due at the end of the week, Calculated Risk says keep an eye on the participation rate. Right now, it sits at a “very low” 64.7%. “A future decline would be considered bad employment news (even if the unemployment rate declined slightly),” blog says. “An increase in the participation rate, combined with a weak labor market, could lead to a jump in the unemployment rate. This is something to watch closely.”

- Another unsavory wrinkle in the US foreclosure epidemic as some big banks (BofA, JPMorgan, Ally’s GMAC) suspend foreclosure activity across close to half the nation amid reports of seriously flawed paperwork. Seems “the real estate/financing industry has brought the same machine-like technical prowess that they used to automate the process of underwriting mortgages to a similar automated foreclosure process,” Big Picture blogger Barry Ritholtz notes. “Is it any surprise that the results of this are similarly disastrous?”

- The bulls, like John Paulson, looked pretty smart in September.

- “But even if we agree that the Fed could depress long-term yields with these kinds of measures, it is a separate question as to whether it should,” James Hamilton says. “I remain of the opinion that while the Fed is understandably reluctant to embrace QE2, it may have little other choice.”

- Twitter promotes chief operating officer, Dick Costolo, to CEO amid company’s scramble to build its advertising business. He succeeds Evan Williams.

- New York Observer wants Dealbreaker, but Bess Levin wants her big pay day. Good for her, she deserves it. Now, Barry Ritholtz hopes to get in on the action.

- Financial stocks have hit bear market territory, while materials, energy, industrials and consumer discretionaries are getting close. “Unsurprisingly, it’s the defensive sectors that have held up the best since the market peaked on April 23rd, if declines of 9% to 14% can be characterized as holding up,” Bespoke says.

- It’s tough to ignore the increasing deflation risks filtering through the market. “The sure-fire economic solution to the mounting deflationary risk is a strong and sustained rebound in job growth,” James Picerno says at The Capital Spectator. “Unfortunately, the odds look high for a jobless recovery at the moment, thus the market’s outlook for a new round of disinflation, perhaps outright deflation.”

- All the bailout money that was dished out to the banking sector simply allowed the financial sector to avoid a vast restructuring. “The can was kicked down the road,” Barry Ritholtz writes, noting banks weren’t allowed to suffer the same destiny that happens to other insolvent businesses. “This was a terrible error, the greatest financial tragedy of the 21st century.”

- Despite the widespread opinion that double-dips are rare, data and indicators are warning that one is coming, John Hussman of Hussman Funds points out. His own firm’s recession warning composite is showing the same combination of factors that appeared in November 2007 and October 2000.

- ISM’s non-manufacturing report shows service sector activity slowed last month. “In yet another sign the economy is cooling substantially, three components of the June Services ISM are now in contraction,” Mish says. “This report was weakest where it matters most: employment, imports and exports.”

- Yahoo’s still searching for an ad sales chief. “We’ll see how it turns out, but as Yahoo just closed its second quarter, it’ll be important for some clarity around its most important business in its most important market, especially as its stock continues to its lackluster performance,” Kara Swisher writes.

- The likelihood of a “double dip” recession may be low, according to economists, but as Catherine Rampell points out at NYT’s Economix blog, the general public still seems pretty worried. Google searches for “double dip” have soared this year, she notes, with a specific spike beginning in May.

- Out of all the long-term unemployed, the older, more educated workers have the highest length of unemployment, Calculated Risk reports, citing BLS data.

- AgBank IPO totals $19.21 billion, still in the running for the biggest IPO ever.

- Brian Cashman says LeBron is going to be a Knick. Keep your fingers crossed. Oh yea, and LeBron starts a Twitter account today, tweets ONCE and has 114,000 followers and counting. Hey LeBron, how about throwing Market Talk some of your followers, eh?

- Gold hit a fresh record high yesterday just as the euro and stocks also gained, while the VIX fell to a six-week low. “Maybe the strange cross-currents were a sign that some market players were wrapping up their week a day early and heading for the beach,” Tom Petruno says. “In fact, Friday might be a good day to take off.” Spot on – Dow finishes up 16 in a sleepy session.

- Not much action out of Palm since word of acquisition by H-P (HPQ), but expect that to change in the near future, Digital Daily blogger John Paczkowski says. At a developer event yesterday, PALM developer liaison Josh Marinacci offered some of the company’s upcoming plans. “We are working on future devices. And a new version of the OS. So I think you’re going to find the next year very exciting.”

- It appears the White House may be changing its mind on reining in CEO pay, according to The Huffington Post. But the change doesn’t seem to be garnering the attention it deserves. “Well, the BP disaster, in particular the intense press coverage of this week, appears to have provided the Administration with some very useful air cover, by diverting public attention from the final rounds in the battle to reform Wall Street,” Yves Smith says.

- Investor sentiment readings this week were mixed. “Although far from extreme bearishness, this level of optimism is consistent with an oversold market, but does not necessarily signify that all is clear,” Pragmatic Capitalism notes. “The majority of the reliable short-term buy signals have coincided with lower levels of bullishness.”

- Ratings agencies played a prominent role in the financial crisis, but the big three agencies have “escaped much blame, liability and scrutiny for most of the post-crisis period,” FusionIQ CEO Barry Ritholtz writes. But that may be coming to an end.

- Enthusiasm for Apple’s (AAPL) iPad has been obscured by excitement over its new iPhone 4, but DigiTimes says the tablet computer is moving quickly. The Taiwanese technology publication says iPad monthly shipments reached a whopping 1.2M units and could balloon to 2.5M by year’s end.

- Nevada registers the highest monthly state unemployment rate in May, coming in at a staggering 14%, marking the first time in four years Michigan wasn’t awarded the dubious distinction, according to a new Labor Department report (via NYT’s Economix blog). By contrast Michigan’s rate was 13.6%.

- Twitter’s strong growth continues. ComScore reports the microblogging service registered 90.2M unique visitors last month, a 7.6% increase from 83.8M uniques in April. “After a lull in the winter, it’s clear that Twitter is back on track,” TechCrunch says.

- “No one will pay any heed to the now discredited Greenspan who ironically was worshiped for all the things he got wrong and ignored the few times he ever said anything that made any sense,” Mish opines.

- WSJ’s Jim Chairusm writes about why the lost US goal in the Slovenia game today shouldn’t matter.

- Soon it might not be so easy to walk away. “It seems some banks have realized that they have made it too easy for borrowers to wash their hands of a bad home purchase, and they are pushing back,” FusionIQ CEO Barry Ritholtz says. “Don’t be surprised if this becomes a national trend. The next leg down in housing is upon us, and banks do not want to take the full hit for the losses.”

- Housing starts and new building permits last month show the recovery’s next phase won’t be a walk in the park. “The post-snapback period in the economy is history, replaced by the harder work of keeping the rebound in positive territory,” James Picerno writes at The Capital Spectator. “The numbers in May remind that the task ahead isn’t going to be easy.”

- “I will simply say this: free market capitalism hasn’t been allowed to dictate the process of price discovery for a long time as policymakers have attempted to engineer the business cycle,” Minyanville’s Todd Harrison says. “As we’ve learned before and as we’ll again see, it’s never wise to mess with Mother Nature.

- Ongoing chatter of a bailout for Spain is causing euro-zone debt worries to fester again. But even as the latest rumors look suspect, their mere existence is a cause for concern, FT’s Alphaville says. “The fact that the rumor is out there shows how vulnerable Spain is on the market at the moment,” blog says. Escalating bailout rumors amid repeated denials prompts the old saying: where there’s smoke, there’s fire.

- TechCrunch founding editor Michael Arrington may be ready to sell his blogging empire. According to TechFlash, Arrington hinted at an event yesterday that he was burned out and possibly looking to sell. “It has been five years, and I can tell you, I am ready,” he said.

- Twitter says the month of June has been its “worst month” since last October, based on a site stability and service outage perspective, and this will likely be a “rocky few weeks” amid increased web traffic due to the World Cup.

- “We are setting ourselves up, without question, for another boom based on excessive and reckless risk-taking at the heart of the world’s financial system,” Simon Johnson writes. “This can end only one way: badly.”

- S&P 500 broke above its 200-day moving average amid yesterday’s rally, Bespoke Investment Group notes, and the percentage of S&P 500 stocks trading above their 50-DMAs sits at 39%. “While not great, this reading indicates that the market has at least picked itself up out of the doldrums.”

- Citi’s halting certain foreclosures near the Gulf spill, WSJ reports. Citi announces a three-month suspension of foreclosure sales and notifications, effective from Thursday through Sept. 17. Citi expects about 1,000 borrowers to participate initially, but that number might increase.

- Rick Bookstaber sheds light on OTC derivatives and new financial legislation.

- Good ol’ Thomas Brown is at it again. Yes, the same Thomas Brown who called the bottom in bank stocks in July 2008. Now he’s saying Nouriel Roubini and Meredith Whitney are too bearish on the banking sector.

- GDP’s 1Q revised down to 3.0% represents only a “minor disappointment” amid current economic recovery, Ryan Avent writes at The Economist’s Free Exchange blog. “America’s recovery remains young and fragile. Still, many developed nations would be happy to have a nine-month performance like the one the American economy has managed since returning to growth.”

- BofA and Citi incorrectly hid from investors billions of dollars of their debt, similar to what Lehman did to obscure its level of risk, WSJ reports, citing company documents.

-WSJ’s Matt Phillips wonders if Libor fears are overdone.

- FT’s Alphaville relays a century-long look at the US equity market, via Deutsche Bank. Blog wonders whether we’re currently mired in a cyclical bull market within a longer, structural bear market?”

- “I believe the government response to the recession has created budgetary stress sufficient to bring about the crisis much sooner. Our generation — not our grandchildren’s — will have to deal with the consequences,” David Einhorn says in his NYT op-ed.

- Banks aren’t short of cash to spend on lobbying Washington to make sure serious financial reform never gets passed. But considering what’s at stake, the best hope for stronger reform is to make the upcoming House-Senate conference in June more transparent, writes Simon Johnson, former IMF chief economist.

- Palm’s mobile design guru, Matias Duarte — who led webOS development — is leaving the company and is headed to Google (GOOG), Digital Daily blogger John Paczkowski reports, noting Duarte’s departure is a “significant loss” for Palm and H-P.

- Blogosphere has been abuzz about rumors that Microsoft (MSFT) CEO Steve Ballmer would appear on stage at Apple’s Worldwide Developer Conference. But Microsoft quickly squashes those rumors. “Steve Ballmer not speaking at Apple Dev Conf. Nor appearing on Dancing with the Stars. Not riding in the Belmont. Just FYI,” Microsoft says via Twitter.

- Obama says he’s “angry and frustrated” over the spill in the gulf.

- John Hussman writes about a subset of market conditions that have historically been associated with sharply negative implications for stocks. “The combination of unfavorable valuations and collapsing market internals is a sharp warning to examine risk exposures carefully here,” he says.

- Job prospects are showing signs of life for college graduates. But make no mistake, they the labor market is far from thriving.

- European banks not for the faint-hearted investors. “It makes more sense to simply bypass these stocks until the story is over unless you are more of a trader or don’t mind very big swings,” writes Roger Nusbaum. The consequence for being wrong is greater with these banks. Obviously this will be too conservative for some folks but ultimately this is a know thyself question.”

- Facebook CEO Mark Zuckerberg addresses new privacy settings in a Washington Post op-ed, hoping to quell privacy concerns. But his memo seems like a “classic non-apology,” MediaMemo blogger Peter Kafka says. “He’s sorry that Facebook ‘move[d] too fast.’ That’s the kind of thing you say in a job interview if someone’s lazy enough to ask you to describe your biggest weakness — ‘Sometimes I try too hard.’”

- The fact that current and former AIG executives won’t face criminal charges seems baffling. But “if you rope your advisors like your accounting firm into signing off on your stupid or possibly even criminal behavior, then you get off scot-free,” Yves Smith writes at naked capitalism.

- Existing home sales increased more than expected, but keep an eye on inventory levels, Bill McBride notes at Calculated Risk. Inventory rose to 4.04M in April from 3.63M in March. It’s also an increase from April 2009, breaking a string of 20 consecutive months of y/y declines in inventory. “The increase in inventory is the big story.”

- Twitter announces it’s banning in-stream advertising from third-party developers, which “are not necessarily looking to preserve the unique user Twitter has created,” COO Dick Costolo writes on Twitter’s corporate blog. “We believe it is our responsibility to encourage creative product development and to curb practices that compromise innovation.”

- What are the implications of Twitter’s move to ban third-party ad networks? “Twitter has now reduced the number of companies trying to figure out their optimal business model from thousands to 1,” angel investor Chris Dixon says in a tweet.

- Intel (INTC) introduces a series of low voltage chips that could make the price for ultra-thin laptops more attractive and affordable, Digital Daily blogger John Paczkowski says, which “bodes well for the ultra-thin laptop which hasn’t had much success staking out a middle ground between the netbook and the laptop because its performance often doesn’t justify its price.”

- Some excellent explanations of the Lost finale.

- S&P 500 posts biggest gain in more than a month. But keep an eye on the index at these levels as it may face sturdier chart resistance ahead, Bill Luby cautions.

- US Dollar’s uptrend hits a bit of a rough patch this week.

- The economy’s still too lame for Bernanke to hint at rate changes.

- It’s hard to ignore that Elevation Partners has invested about 25% of its $1.8 billion fund in Palm. “Basically, if you invest 15% or more of your portfolio in a single company, you are just begging to be knocked to the ground,” Dan Primack notes at PE Hub.

- Spending more on prescription-drug commercials doesn’t necessarily mean TV viewers will remember your ads.

- Abercrombie’s wacky 8-K raises some eyebrows.

- Google (GOOG) offers small fix for Twitter Search, allowing users to sift through archived tweets and pull results from a particular time period. “That’s not nearly enough to fix Twitter search, but it is cool,” Peter Kafka says. “And probably useful, in some situations.”

- “We got into this mess because we had an over-financialized economy, with finance making a share of profits out of all proportion to its actual economic contribution,” Paul Krugman writes. “And now it’s baaack.”

- S&P 500 year-to-date gains bode well for the remainder of 2010.

- Greece’s tedious tale needs an ending. “Markets are officially bored of Greece — and that’s a bad place for it to be right now,” FT”s Alphaville says.

- VIX volatility index can be a great contrarian indicator — problem is, it’s a backward-looking gauge, Tom Petruno says.

- Crude oil’s getting sneaky high and no one seems to care. “One explanation is that oil prices haven’t climbed as fast as they did in early 2008, with the slope of the ascent being a primary source of worries,” Paul Kedrosky writes.

- “The key to long term economic health, though, will be a greater contribution from exports and less on borrowing and spending all over again,” Peter Boockvar notes.

- He’s chairman and CEO of the world’s largest health-care conglomerate, Johnson & Johnson (JNJ), but yesterday Bill Weldon took on a new role: blogger.

- Twitter users will not abandon the microblogging service just because it will start running search-based advertising, Forrester analyst Josh Bernoff says.

- Rumor du heure for Palm: Let Intel buy them, Jason Perlow writes.

- Google (GOOG) reportedly developing a new tablet device compatible with Android would be great for Adobe (ADBE), but not so good for Apple (AAPL).

- Tech blogger Om Malik gets his hands on Microsoft’s (MSFT) new Kin smartphones, but doesn’t exactly offer a stellar review.

- “If the US economy was about to reach “escape velocity” as Larry Summers says, small business optimism would not be in the gutter and sinking,” Mish says.

- “We live in an age of unprecedented bailouts,” Simon Johnson writes. “The Greek package of support from the eurozone this weekend marks a high tide for the principle that complete, unconditional, and fundamentally dangerous protection must be extended to creditors whenever something “big” gets into trouble.”

- Rober Shiller’s op-ed in yesterday’s NY Times highlights some dicey prospects facing the the housing recovery. Calculated Risk weighs in: “Momentum only goes so far. And I think it is likely that prices will fall further in many bubble areas later this year as more distressed properties hit the market.”

- Now that Greece appears to have been saved, former IMF chief economist Simon Johnson wonders if Portugal is next. “We are still lurching from crisis to crisis in Europe.”

- As the stock market grinds higher, there are two distinct groups of market observers developing: “vacillating bulls and dogmatic bears,” according to Josh Brown at The Reformed Broker.

- Dow Jones Industrial Average taking its time treading higher. “As is typically the case, the market’s declines were a lot swifter than the subsequent advances,” Bespoke says. Dow closes up 8 at 11006.

- “The strongest sectors of late have been the consumer-related ones,” Howard Simons notes at Minyanville, and every dollar “out of the consumer’s pocket for higher energy costs is a dollar unavailable to support the great national pastime of spending money like there’s no tomorrow.”

- “When you don’t require the reported value of assets to have a clear and tangible link to the value that the assets would have in liquidation, bad things happen,” John Hussman says. “Yet this is what regulatory and accounting rules are allowing for the banking system at present.”

- Declaring bailout costs may look less expensive than initially feared may be a bit premature, FusionIQ CEO Barry Ritholtz says.

- “The only systemic risk the VC business is creating for the financial system is attempting to put the current out of business,” writes Fred Wilson, principal of Union Square Ventures. “To suggest that small venture funds of $30mm could possibly be creating systemic risk to the global financial system is ludicrous.”

- Google’s buying spree continues, this time acquiring Plink, a four-month-old UK outfit that specializes in “visual search” and has 50,000 users, Jay Yarow reports at Silicon Alley Insider.

- Twitter’s doing some deals of its own, purchasing Tweetie – an app that runs on the iPhone and iPod Touch. “Given the rumblings that have been coming from Twitter in recent days, this is likely to be followed by more deals down the line,” Peter Kafka says.

- It’s been a sweet six weeks for S&P 500. Index hasn’t had a 1% pullback, either on a single or multi-day basis. And, according to Bespoke, there have only been 10 other periods since 1990 in which the index went at least 40 days without a 1% decline.

- Breaking up the nation’s biggest banks doesn’t come without costs. “In evaluating the benefits of busting up the big guys, we shouldn’t lose sight of the possibility that this is also a strategy that could carry very real costs,” according to Atlanta Fed’s macroblog.

- In its eight page letter to shareholders, Goldman Sachs (GS) denies it bet against clients.

- Recent consumer spending reports suggest “signs of pent up demand being satisfied slowly but surely,” Barry Ritholtz notes. Data isn’t as cheer as the bulls believe, but it’s also not as dire as the pessimists proclaim. Ultimately, “a slow, painful recovery still awaits us.”

- It’s mindboggling that Fannie Mae (FNM) and Freddie Mac (FRE) aren’t included in Sen. Chris Dodd’s financial regulatory reform bill. “This denial is so egregious,” NYU’s Regulating Wall Street blog says, especially since both are involved in more than half of all US mortgages.

- Recent economic news seems to be trending in right direction. Unfortunately, housing doesn’t fall into that category as sales, starts, prices and builder confidence have all weakened this year, Economist’s Free Exchange notes. “A weak housing sector will be a drag on employment, and so long as employment growth lags, recovery is in doubt.”

- Bebo, Digg exemplify “hot going cold” in Silicon Valley. “At one time Digg and Bebo could do no wrong,” Kara Swisher says. “Now, no right.”

- Apple (AAPL) will likely introduce its mobile ad platform tomorrow at its iPhone developer event. And, ironically, Google (GOOG) can’t wait, Peter Kafka writes.

- Amazon’s (AMZN) Kindle may be coming to Target (TGT). Tech blog Engadget posts a picture of a Target inventory form showing a listing for the e-reader. Blog says Kindle could hit stores April 25. “Is this Amazon’s first response to Apple’s (AAPL) iPad?” Jay Yarow ponders at Silicon Alley Insider.

- Twitter investor Fred Wilson says the microblogging’s platform and ecosystem is at an “inflection point.” Silicon Alley Insider reads between the lines and wonders if Twitter “could buy or build its own photo-uploader and mobile app, squashing third-party developers in its way.”