Market Talk

- The 10-year yield has fallen 40 bps during the past month, James Hamilton notes at Econbrowser. “If you wanted to attribute all of this to expectations of QE2, and if you were assuming that $400 billion in long-term bond purchases could lower the rate about 13 basis points, you might think the market has already discounted some $1.2 trillion in additional large-scale asset purchases,” he says. “All of which raises the interesting possibility that if the Fed were to announce in November another trillion in purchases, nothing would happen, because the market has already discounted it.”

- “The fact that an IMF meeting ended with the participants unable to feign a narrowing of differences on the currency front is further evidence that positions are hardening,” Yves Smith writes at naked capitalism.

- Bank stocks no longer driving this rally. “That old adage of ‘as financials go, so goes the market’ — I don’t think that’s tru this time,” said John Lynch, chief equity strategist at Wells Fargo Funds management Group.

- Next-gen 4G mobile phone systems promise faster speeds and better audio. Various US carriers have already promised to roll the new technology out within the next couple of years, but Apple (AAPL) will wait until the technology is more mature before adding it to the iPhone, according to TechCrunch. Instead, the blog speculates that AAPL will release phones next year that are compatible with many more carrier networks using different technologies.

- The Reformed Broker blogger Josh Brown channels his inner Alanis Morrisette as he discusses Dow 11000. “When I consider the state of the market rally, I can only think to myself, ‘Isn’t it ironic, don’t ya think?’”

- Piper Jaffray’s Gene Munster tells Silicon Alley Insider that tablets built with Google’s (GOOG) Android software will provide some “very stiff competition” to Apple’s (AAPL) iPad. While Apple will probably ship about 20M-25M iPads next year, Munster says “ultimately we think that Apple won’t have the majority of the (tablet) market share. It’ll probably be with Android-based tablets.”

- “The biggest problem with TARP is that the other portions of the response were so poorly crafted,” the Economist’s Free Exchange blog says. “And the legacy of that underperformance — a weak American recovery alongside continued wealth on Wall Street — is what continues to give political TARP-bashing its potency.”

- Southwest (LUV) announces it’s ending its eight-year tenure as the “official airline” of the NBA after the two sides couldn’t agree on an extension. Farewell then to Slam Dunk One, a specially painted plane that marked the partnership which is now destined for a new color scheme. “With our tough financial climate and limited resources, we had to make the tough decision to say goodbye to one of our dear friends and partners, and both sides agree — we’ll miss each other!” gushes Southwest’s blog.

- Big Picture blogger Barry Ritholtz says America needs an intervention. “The credit crisis and now foreclosure debacle have revealed to anyone who cares to look what we have sought to ignore: That the past decade has been based on a set of fundamental beliefs that are intrinsically false,” he says. “The sooner we stop kidding ourselves, the sooner we can move forward with more productive honest economic lives.”

- Jets-Vikings: the hyperbole bowl, WSJ’s Jason Gay writes.

Dow Jones’ Roger Cheng reports:

BlackBerry maker Research In Motion (RIMM) might be a bit late to the game, but it finally unveils its highly-anticipated tablet computer and operating system in an effort to attract more consumers.

WSJ has the details, including this great paragraph describing where RIM currently stands among consumers:

The announcements come as RIM revamps its iconic BlackBerry smartphones—originally made for businesses to handle email—for a market driven increasingly by consumers looking for fast handsets and cool software. Users and developers complain BlackBerry’s operating system is slow, clunky and lacks fun apps; the handsets are facing tough competition from Apple’s iPhone as well a handsets that run on Google Inc.’s Android operating system, particularly in the critical U.S.

On paper, Research in Motion’s Playbook tablet has a lot going for it, including a dual-core processor, full Flash, two high-definition cameras, and USB ports.

But in the end, it’s still all about the applications. RIMM faces the same dilemma Palm did with its new smartphones: an unproven product that may not attract app developers like Apple (AAPL) or Android.

RIMM is spending the latter half of its presentation focusing on “Super Apps” and making life easier for developers. IDC’s Al Hilwa notes that it will still take some time to build up the number of apps available to the product, which runs on different software than Blackberrys.

The Playbook, unlike the Blackberry, will not feature a cellular connection. So who will sell the tablet? RIMM has traditionally relied on its wireless carrier partners to push Blackberrys, either to business customers or consumers. But without a 3G connection, there really isn’t any motivation for the carriers to sell the Playbook.

Will RIMM try its hand at the direct retail business? More likely, it will rely on a retail partner like Best Buy (BBY).

Research in Motion shares were recently up 1.2% to $48.95 in after-hours trading.

- National savings rate in June inched up to 6.4% from 6.3% a month earlier and is approaching the 50-year average of 6.9%. “On the one hand, higher savings will put a crimp on consumer spending which of course makes up a majority of US GDP,” says Miller Tabak’s Peter Boockvar.. “But on the other, higher savings is the fuel for investment which helps to finance businesses everywhere that are getting crowded out in their borrowing by the enormous needs of the US government and some European ones.”

- The Wells Fargo/Gallup Small Business Index hit its lowest level since the index’s inception in 2003. Most of the poll’s decline came from the “Future Expectations” category of the survey, which follows business owners’ expectations for cash flows, new jobs, access to credit and capital spending. “In other words, as dour as the subjects are about the present sitch, they are even more so about the near future,” Josh Brown writes at The Reformed Broker.

- By next year, Apple (AAPL) will likely become the second-largest semiconductor buyer in the world, thanks to the iPhone, which prompts TechCrunch’s Steve Cheney to ponder: “Should Apple own its own wireless chip development?” Rumors are swirling Intel (INTC) may be close to acquiring Infineon’s (IFX.XE) wireless chip business, but “based on Apple’s deep relationship with Infineon, and its famed secrecy around M&A, it is a pretty safe bet that Steve Jobs is analyzing the implications of a deal.”

- Consumer spending and personal income were both flat last month, slightly below economists’ expectations. “That’s not terribly surprising these days, but it’s hardly encouraging. Perhaps the best we can say is that it’s more of the same,” James Picerno writes at The Capital Spectator.

- Android may not be a money-maker, yet, but it’s still a success. Google’s (GOOG) strategy differs from Apple (AAPL), which sells great products while tightly controlling its hardware and software distribution. Conversely, Google “sprays its software all over the place for free, betting on owning the future of the mobile Internet and search advertising businesses the way it owns them on the web,” Dan Frommer notes. “That’s why, despite Apple’s huge financial lead, Android is already a big early success for Google.”

- About the Fed potentially plowing cash from its maturing debt back into the Treasury market: “It’s not a huge move, but letting the MBS portfolio slowly burn off is inherently tightening,” Joe Weisenthal says at The Money Game. “Rolling over that portfolio, therefore, maintains the status quo.”

- “Lately the Fed seems more interested justifying why it doesn’t need to do anything more to boost the economy rather than grappling with actual data showing that the economy needs more help from the Fed,” University of Oregon economics professor Mark Thoma writes.

- Ever since stocks bottomed out in early July, gold hasn’t been able to generate a sustainable rally. And for much of 2010 gold and the US dollar, which are usually inversely correlated, have essentially moved in lockstep. “Over the last six months the two assets have been more positively correlated than at any other time in at least ten years,” Bespoke Investment Group says.

- Research in Motion (RIMM) Co-CEO Mike Lazardis calls BlackBerry Torch launch one of most important in the company’s history, which certainly isn’t an understatement. But the question remains: Is this device a “buzzworthy breakthrough or just another BlackBerry?” asks Digital Daily blogger John Paczkowski.

- Many corporations and their shareholders are enjoying surging profits and boosted dividends, but employees are still waiting on returns of the 401(k) matches.

- “The key to a sustainable recovery and robust economic growth is to get companies to start investing in America,” a recent Washington Post op-ed says. But Big Picture blogger Barry Ritholtz disagrees with that premise. “Since we know that personal consumption expenditures comprise 70% of GDP, I’m not sure why ‘getting companies to start investing’ would be considered the key,” Ritholtz writes. “The demand problem we have on our hands is what is keeping companies’ spigots closed.”

- S&P 500′s 5% gain last week comes on the heels of a 5% drop the week before, highlighting “one more example of how sentiment in this market turns on a dime,” Bespoke Investment Group says. “Sentiment heading into the current earnings season is certainly a lot less positive than it was last quarter.”

- Google (GOOG) launches App Inventor for Android, a do-it-yourself tool that makes it easy for anyone – programmers and non-programmers — to create mobile applications for Android-powered smartphones. App Inventor should make Android more accessible — and useful — to more developers, a key constituency as Google vies with Apple (AAPL) for dominance in the emerging smartphone market.

- Deflation chatter seems to be ramping up of late, especially as worries over a double-dip gain steam. “If you have loads of cash and no debt, falling prices sound wonderful,” Tom Petruno writes at LA Times’ Money & Co blog. “But the danger is that a broad deflation could cause many people to stop spending and hoard cash, figuring that they could get whatever they wanted for less if they just waited.”

- Amid all the banter between bulls and bears, it seems like both parties have actually been right in 2010, Joshua Brown notes at The Reformed Broker. Bulls are right because stocks are still in the same bull market since March 2009, he says. But bears are also correct because everything’s down year-to-date except gold, silver, treasurys and the yen. Calls for more stimulus make sense, but concerns about deficit-spending are also justified. “Only the future can serve as judge.”

- Flight to safety and quality is the biggest reason foreigners, mutual funds, banks and households keep increasing their Treasury holdings. “But, unless financial conditions deteriorate further, I wonder why there would be a similar increase in demand for Treasury debt over the next two years,” James Hamilton writes at Econbrowser. “What I’m having more trouble seeing is who is going to buy the additional $8 trillion in net new debt that would be issued over the next decade under the CBO’s alternative fiscal scenario.”

- “There’s an old adage that tapes that are oversold are bought on bad (but not horrid) news while tapes that are overbought are sold on good (but not great) news,” Minyanville’s Todd Harrison says. “Through that lens, last week’s rally made the upcoming earnings entirely more difficult to game.”

- Google (GOOG) has secretly invested $100M-$200M in social gaming behemoth Zynga, TechCrunch reports, which will be the cornerstone of a new Google games service that will launch later this year. TechCrunch points out Google has posted a job opening for a product manager who will be responsible for developing Google’s games commerce product strategy. Both companies declined comment.

- “As we evaluate financial reform and political change, we should keep in mind that it is not 2008 that we must struggle to prevent,” Steve Randy Waldman writes at Interfluidity. “It’s 2006 that was the worst of times, the piranha were feeding while we splashed and giggled in our water wings.”

- “Many individual investors were tiptoeing back into stocks in the spring,” WSJ says. “Now, they’re running for cover again.”

- Eurobail package is keeping the wolves at bay, for now. “The package is clearly an effective short-term palliative,” Richard Alford writes at naked capitalism. “Its curative powers remain in question. In the absence of market signals and discipline, it is not at all clear that the political elites in Europe will have the will to discipline each other.”

- The duration of Apple (AAPL) and AT&T’s (T) iPhone exclusivity deal has long been a mystery, but Engadget uncovers some new details pertaining to the pact. Blog reports both companies agreed to five-year iPhone exclusivity in 2007, based on court documents filed by Apple. AT&T says it has a great relationship with Apple and doesn’t comment on specifics.

- George Mason economics professor Tyler Cowan offers his “simple thoughts” on Europe and the EU’s nearly $1T bailout package. “The fundamental cause of the financial crisis has been people and institutions thinking they are more wealthy than they are; this spread to Europe as well and now we are seeing the comeuppance.”

- Bespoke dissects yesterday’s rally and concludes that short covering was only part of the story.

- Eurobail euphoria eases. “I’m glad to see that the immediate crisis has been delayed, but I don’t see how all of this goes according to plan,” Ryan Avent writes at The Economist’s Free Exchange blog.

- Mark Thoma tackles the issue of bank lending. “I think the problem is on both sides. Supply has tightened up due to poor economic conditions — as noted above banks are unwilling to loan to firms who look shaky during the downturn, firms that might have looked very solid and worthy not all that long ago. But the demand for loans has fallen as well since firms have little reason to invest in such bad economic conditions.”

- Apple’s not too concerned about a recent report showing Android devices are outselling the iPhone.

- Intel (INTC) CEO Paul Otellini predicts sharp growth for its business in new markets over the next few years.

- Europe’s turmoil and high debt levels in America won’t derail this economic recovery, says Jim O’Sullivan, chief economist for MF Global.

- A-Rod’s run to become home-run king may not be such a sure thing like many expect.

Newswires’ Roger Cheng reports:

Research in Motion’s largest strength is its ability to release a steady stream of new Blackberrys. It’s also, however, the company’s biggest liability.

With RIM on the wrong end of a widening technology gap between itself and Apple’s iPhone and Google’s Android software, the company doesn’t need incremental improvements to its phones; it needs a quantum leap to catch up. It’s becoming more necessary with each passing day, as both the iPhone and Android make ground in taking RIM’s U.S. smartphone crown.

RIM’s unveiling of two new devices — both updates to existing Blackberry lines — illustrates its strategy of churning out phones with minor updates. In this case, the Bold 9650, which replaces the Tour, and a new version of the consumer-focused Pearl, were announced as part of the company’s Capital Markets Day and RIM’s WES Conference. Both add new features like a touchpad, but neither break significantly new ground. One analyst called the new phones “underwhelming.”

The strategy, however, has been a key to its success. Carriers like it because they consistently have a new product to market. The “Crackberry” faithful appreciate it because RIM has had a solid track record of identifying and eliminating problems with subsequent models of a phone line.

But with phones coming out with more bells and whistles, RIM can’t rely on its much-loved messaging platform alone.

Continue reading…

- It’s debatable whether technicals or valuation are driving stocks higher, but “excessively bullish sentiment is the biggest risk right now,” Barry Ritholtz writes at The Big Picture.

- The ratings agencies’ flaws need to be addressed. “Perhaps the recent attention to the role the ratings agencies played in the crisis will change that, but I’m certainly not counting on it,” Mark Thoma says on his blog.

- It’s hard to see how Palm considering licensing its WebOS platform to other hardware makers could ultimately be successful, especially as Google’s (GOOG) Android popularity rises, Dan Frommer writes at Silicon Alley Insider. “While licensing WebOS might make a sexy story to tell potential acquirers or Wall Street, it’s not going to save Palm.”

- Can’t be too defensive, right? “I do recognize that my credibility in sounding a cautious note would presently be stronger if I had ignored further credit risks and captured some of the past year’s gains,” John Hussman says. “But the awful outcome of this same set of conditions, which we also observed in 2007, should provide enough credibility.”

- Newspaper circulations keep declining, as average weekday sales have dropped almost 9% since last year, NYT’s Media Decoder writes, citing data from the Audit Bureau of Circulations. “The reality facing American newspaper publishers continues to look stark.”

- “It’s ironic how the ‘Goldman was so smart to have shorted subprime’ meme is now being turned on its head…as Goldman’s conduct in the run-up to the crisis is being re-examined in a new light, Yves Smith writes at naked capitalism.

- Felix Salmon details the continuing Goldman wars.

- Whirpool (WHR) shares soared after its blowout 1Q report. “I continue to think that the panic a year ago was greatly overdone, as individuals and companies cut costs wherever they could, while waiting to find out if forecasts of Great Depression II were going to be borne out,” NYT’s Floyd Norris says. “But now the spending — and the hiring — is coming from people and companies that overreacted in the panic.”

- Google’s (GOOG) decision to scrap plans to sell Nexus One through Verizon Wireless seems a bit curious.

- The current bull market has now gone 400 days without a 10% correction, Chad Brand notes.

- 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.”

- Google’s actually a fan of Apple’s Quattro Wireless deal. “Google’s logic here is straightforward: If other big companies are buying mobile ad networks, then Washington can’t possibly be upset with us for buying AdMob,” MediaMemo blogger Peter Kafka says.

- Palm Pre, Pixi to Verizon could finally become a reality. Announcement could come this week at CES.

- Demand for 3-D TVs seems questionable. “I’m not against 3-D televisions, I’m just wary of the actual viewer experience,” Nick Bilton writes at NYT’s Bits blog.

- IPhone and Nexus One “will appeal to different constituencies, to some degree, but Apple is going through the same experience it did in the early days of the PC industry,” Paul Kedrosky notes. “It legitimized a more elegant approach, and now looks set to stake out a somewhat marginalized position, if a highly profitable one.”

- UK’s trying to bully Iceland around, which upsets Reuters blogger Felix Salmon. But Mish says Iceland’s tough stance is the right move. “Congratulations to Iceland for figuring out that it is better to suffer a credit rating downgrade than to torture its citizens for a decade or longer.”

- Hard to believe, but securities fraud suits actually dropped 24% last year.

- Nexus One only unveiled 24 hours ago and its already creating winners and losers in the tech space, Barry Graubart says.

- Expect a “boring” year compared to 2009 if you’re looking to invest in financials.

- Fed officials disagree about withdrawing stimulus.

- AT&T’s adding cellphones running Google’s Android software to its lineup this year, including a smart phone from Dell, as well as Palm devices as it faces competition to carry the iPhone.