Market Talk

- Digital Daily blogger John Paczkowski picks up on an interesting Apple (AAPL) factoid: Its 2Q retail store revenue soared 73% from a year ago to $2.6B. To put that in perspective, AAPL’s store revenue was greater than the company’s total quarterly revenue from 2Q of fiscal 1996 through 4Q of fiscal 2004. IPad is the catalyst.

- “By showing it’s smart enough to swallow its pride and get rid of bad ideas, like Wave and the Nexus One store, Google is showing us it’s probably smart enough to come up with some really successful ideas, too,” Dan Frommer writes at SAI.

- “It’s an uncomfortable moment for a Google fanboy,” Jeff Jarvis says. The company is getting so big it’s becoming unwieldy, as a string of recently launched products, which all failed, shows. “All of these are just early warning signs. It’s good…to see these cracks because, used properly, they are lessons that help a company get back on its track.”

- Warren Buffett rounding up 40 of America’s richest families or individuals and having them donate at least half their fortunes to charity is certainly an admirable act. “But I’m also appalled at what this reveals about how much money is now concentrated in so few hands,” former labor secretary Robert Reich says, especially as 15 million Americans are still out of work and median hourly wages keep dropping. “Most Americans don’t need charity. They need good jobs.”

- Initial jobless claims jump 19,000 to 479,000, their highest level since early April. No wonder Treasurys rallied today, while stocks fell. “Until the economic data signals a change in the trend, yields will inch lower, fears of deflation will continue to bubble,” notes James Picerno. “And the crowd will be increasingly open to arguments that the ‘new normal’ has legs.”

- “In a deflationary environment, unemployment is a coincident indicator, not a lagging one,” Josh Brown writes at The Reformed Broker,  while pointing to data from 1970 to 1982 as proof. “Unemployment began to rise as the economy slowed down and peaked at the nadir of economic activity. The deflationary recessions of that period are more apropos to what we’re experiencing now than anything post 1990. No jobs = no soup for you.”

- The expected return of “quantitative easing” measures from the Fed won’t fix the economy’s actual problems, portfolio strategist Marshall Auerback writes at naked capitalism. “The Fed’s fixation on credit growth is curiously perverse, given the high prevailing levels of private debt.”

- BLS readings on private nonfarm payrolls during 1H have been notably higher than ADP monthly data. “Most likely the correct number is somewhere between ADP’s number which does not factor in new business creation, and the BLS number which I believe hugely overstates it,” says Michael Shedlock.

- The debate about unemployment largely centers around whether the jobless problem is cyclical, meaning more government action can improve the situation, or structural, where there’s not much the government can do. “We don’t know the exact structural-cyclical breakdown, but the cyclical problem is certainly larger than any imaginable Congressional response,” writes Mark Thoma. “So the excuse for inaction based upon the ‘it’s all structural’ claim isn’t persuasive.”

- Mark Cuban chronicles his failed chase of the Texas Rangers.

- BofA, Citi, JPMorgan and Goldman Sachs all racked up perfect trading quarters in 1Q, but the Kid Dynamite blogger is less than impressed with the ensuing analysis. “See, the probability of winning when your cost of funds is near zero and you can invest at positive interest rates at assets which are already being supported by the Government is probably closer to 100% than 50%.”

- “It’s no wonder that Goldman Sachs–perhaps the largest market maker in the world–consecutively avoids trading losses quarter after quarter,” FT’s Alphaville blog says. “That’s because when you’re making markets with no obligation to do so, you are in complete control. You dictate the terms. It’s very hard to lose.”

- EU’s nearly $1T bailout package stabilized Europe’s stock and bond markets this week, but hasn’t done much for the sliding euro.

- The online advertising business is improving from its dismal
performance a year ago, but how much of an improvement is tough to quantify.

- Paul Volcker’s candidness is undermining Obama. “It’s one thing for people in the private sector to express negative views about the future on the Eurozone, quite another for someone of Volcker’s stature who is playing a policy role for the Administration to undermine an initiative deemed so important that the President has thrown its weight behind it,” Yves Smith says.

- The number of people considered long-term unemployed sits at its highest level on record even as the economy has experienced four-straight months of net payroll growth. “Think about what that means: The new jobs that have been created so far seem to be going disproportionately to people out of work for only a short period,” Catherine Rampell writes.

- NBC canceling Law and Order could mean 8,000 people will join the unemployed ranks.

- Bespoke compiles a list of companies whose stocks have performed well on their earnings release days, but then declined the most since then. Topping the list, First Solar (FSLR) which rose 18% after posting earnings April 28, but since has dropped 20%.

- Well, that experiment didn’t last long. Google plans to stop selling its Nexus One on the Web.

- The summer of LeBron officially starts now. Mayor Bloomberg says he’ll give LeBron a “big sales pitch” to come to NY, but President Obama hopes the King goes to Chicago. LeBron, you can guest post here at Market Talk anytime you’d like if you become a Knickerbocker.

- 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.

- AOL paid some hefty sums to its former employees – $28.4 million to be exact – to its four top executives it replaced last year. “Want to make money? Become a former AOL executive,” MediaMemo blogger Peter Kafka says.

- Housing starts tumbled 5.9% in February. “This level of starts is both good news and bad news,” Calculated Risk says. “The good news is the excess housing inventory is being absorbed – a necessary step for housing (and the economy to recovery. The bad news is economic growth will probably be sluggish – and unemployment elevated – until residential investment picks up.”

- Bearish stance from Albert Edwards, Societe Generale strategist, isn’t losing steam. He questions recovery’s sustainability in large part because “credit is disappearing at this debilitating dehydrating rate.”

- Google’s (GOOG) Nexus One sales only 135,000 after 74 days at market, according to analytics firm Flurry. “A piddling amount,” Digital Daily blogger John Paczkowski says, especially since Apple’s (AAPL) iPhone and Motorola’s (MOT) Droid sold 1M and 1.05M, respectively, after their first 74 days on the market.

- A downgraded US credit rating wouldn’t be pretty. Good thing Tim Geithner says there’s no way that will happen.

- “Don’t kid yourself: the hype currently surrounding short sales and the HAFA program will prove to be short-lived, and REO expertise will be prove to be the key to recovery, as it has been in prior cycles,” Paul Jackson writes at Housing Wire.

- What does corporate America think about financial reform? “It’s actually really hard to say,” Justin Fox says.

- Columbia Journalism Review argues blogs have been doing a better job covering the examiner’s report on Lehman’s collapse when compared to mainstream media’s coverage.

- The worry about the Fed ending its MBS purchase program is it will cause long-term interest rates to rise, which will hinder recovery. But if that happens, the Fed’s capable of restarting the program “very quickly if needed,” Mark Thoma writes.

- NJ Gov Chris Christie proposes steep spending cuts that will hit “the poor, elderly, schoolchildren, college students and inner-city residents hardest, while largely sparing the wealthy and businesses,” NYT says.

Apple (AAPL) goes on the offensive against HTC, a key Google (GOOG) partner, by suing the Taiwanese smart phone maker for several alleged patent violations.

It’s interesting that Apple would sue small potatoes like HTC and not go after Google. But the suit obviously has a not-so-hidden agenda between Apple and Google (even if Google isn’t mentioned in the suit), suggesting a brewing war between Apple’s iPhone and Google’s Nexus One is heating up. But first, here are some details of the suit, from WSJ:

Apple’s two complaints—filed Tuesday in federal court in Delaware and the U.S. International Trade Commission—allege HTC devices, including the Nexus One, infringe a total of 20 Apple patents. The complaints claim the patents cover an array of cellphone technologies, everything from power-management functions to a method of unlocking a handset with a finger swipe on a touch screen.

“We can sit by and watch competitors steal our patented inventions, or we can do something about it. We’ve decided to do something about it,” Apple Chief Executive Steve Jobs said in a prepared statement. “We think competition is healthy, but competitors should create their own original technology, not steal ours.”

Jobs offers a valid argument on paper, but Dan Frommer at Silicon Alley Insider says the suit is a sign Apple is terrified that Google’s Android mobile operating system is becoming a formidable rival in the smart phone industry.

Moreover, the lawsuit makes Apple “look wimpy,” Frommer says, which is not likely how Jobs wants his company to be perceived.

“[Apple's] going on the offense with patents, not just products, which reeks of fear,” Frommer adds.

But keep in mind that Apple likely didn’t just sue Google because the two companies still work closely together on a couple of integral apps: search and maps, Digital Daily blogger John Paczkowski points out.

“Going after Google outright might put those projects at risk at a time (pre-iPad launch) when they need to be preserved,” Paczkowski says. “Safer then for Apple to spank a company like HTC to make its point – unless, of course, Google feels compelled to come to HTC’s defense.”

Google shares recently up 0.8%; Apple up a fraction.

(Scott Morrison contributed to this post.)

- Obama’s bailout fees on TARP recipients should become a “too-big-to-fail” tax.

- Netflix’s business model transformation continues.

- Recovery won’t happen in a vacuum, bulls, Miller Tabak’s Peter Boockvar says.

- One week later Nexus One is off to a slow start.

- Google’s pride stands out in China’s threats.

- Jamie Dimon previously didn’t even consider a stress test when housing prices fell. Unbelievable.

- More than 100,000 are feared dead after Haiti earthquake.

- Some questions for the banking chiefs.

- Beige book shows modest improvement.

- California’s debt rating cut again.

- As the market embarks on another earnings season, Barry Ritholtz wonders if this is merely the start of a consolidation, or the rally’s end.

- Fed becomes latest bank generating record profits. “This is good news: all that money is being dividended back to the public fisc, keeping the deficit that little bit lower,” Reuters blogger Felix Salmon says.

- CES attendance doesn’t break records, but it exceeds expectations. “A small, but not inconsequential bump, and one that suggesets the industry is indeed beginning to turn the corner,” John Paczkowski writes at Digital Daily.

- Wal-Mart may once again look to get into the Web TV business, as Web video startup Vudu is in “meaningful” acquisition discussions, with WMT the likely buyer, MediaMemo blogger Peter Kafka reports.

- A less fearful market, measured by the VIX, actually represents a cause for concern, Bespoke says.

- Apple’s (AAPL) ‘iSlate’ rumor du joir: TG Daily reports Apple has “snapped up” the entire supply of 10.1-inch, LCD and OLED multi-touch screens for its supposed tablet.

- The carrier cancellation fee is typical, but having to pay two termination fees is a buzzkill for Google’s (GOOG) Nexus One phone.

- Goldman Sachs (GS) acknowledges conflicts with clients and its own trading operation.

- FDIC’s Bair blasts other regulators for reluctance on banker pay plan.

- Conan refuses later “Tonight Show” time slot.

So NY Fed claims then-president Tim Geithner had nothing to do with decisions to limit AIG disclosures in 2008. Should make for an interesting congressional testimony later this month.

A dead-cat bounce for jobs? “It is likely that many companies cut back too much, particularly last winter, and are approaching a time when they will have to start hiring to meet even a low level of demand,” NYT’s Floyd Norris says.

Corporate insiders continue to heavily sell their own shares. “Much like Main Street, corporate insiders aren’t feeling or seeing the impacts of the recovery that have been so widely reported,” the Pragmatic Capitalist says. “This is one more sign that leaves us skeptical of the new secular bull market theory.”

Marginal new-high pattern for stocks may last for some time “followed by abrupt and often steep losses virtually out of nowhere,” John Hussman says. “Given this context, the next few months are likely to be extremely important.”

AOL’s “corporate slim-down” enters its next phase. MediaMemo blogger Peter Kafka says AOL is firing more than 1,000 employees.

Friday’s weak jobs report adds fuel to pessmists’ fire, Paul Krugman says.

Google’s lack of customer support for Nexus One needs to be addressed.

Hard to ignore rising commodity prices.

The never-ending Bank of America/Merrill Lynch drama continues. SEC’s seeking permission to add new charges against BofA for failing to disclose Merrill Lynch’s “extraordinary losses” in time for shareholder vote on its takeover.

Obama’s considering levying a fee on banks to recoup taxpayer funds spent to rescue the financial sector and auto companies.

- “If the bond vigilantes are ready to ride again, there should be little doubt who will be leading the charge,” Tom Petruno says.

- Big buzzword at CES this year is 3-D. But major problem facing TV manufacturers is they have lousy timing.

- Say it loud and clear, it’s a renter’s market. US apartment vacancy rates in 4Q jumped to a 30-year high, while rent prices keep falling.

- Nexus One’s product placement couldn’t be better.

- Apple (AAPL) is looking for new ways to touch its fans. The US Patent and Trademark Office publishes an APPL patent describing touch screens with pixels that both display information and receive touch instructions from the user, according to a blog post on Patently Apple.

- Rail traffic trending in the right direction. “The data continues to reflect a weak recovery, but the trend is positive for now and equity markets have remained robust as the rail data troughed and turned higher,” Pragmatic Capitalist says.

- “One striking aspect of the public debate about the future of derivatives – and how best to regulate them – is that almost all the available experts work for one of the major broker-dealers,” Simon Johnson says.

- Retailers generally reported above-average December sales. Discounters Costco and BJ’s fared well. But Abercrombie lagged behind other teen retailers.

- China unexpectedly raises key interbank rate.

- Believe it or not, GM expects to be profitable this year.

- 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.