Tuesday, September 29, 2009

Nike A-Go-Go Though Results Not Even So-So

All the money-printing has produced a sameness to the financial news that is likely deceptive. The news continues to be almost relentlessly upbeat. I liked it much better in the winter and spring of 2003 when the obvious recovery from the recession of 2001 was loudly doubted on CNBC, with everyone waiting for another terrorist attack or some imminent disaster in Iraq. For example, Nike came out with news after the closing bell today that does not sound "so hot":

Revenue fell 12 percent to $4.8 billion -- narrowly missing analyst expectations of $4.9 billion.

OK; in a "normal" market, a miss on revenues is considered at least as important as a hit on earnings, as it is harder to game sales than earnings. How were earnings:

Nike Inc. on Tuesday reported its profit was practically unchanged in its fiscal first quarter while revenue fell sharply as consumers around the globe limited their spending.

Well, perhaps guidance was really good?

The company's future orders, a key measure for the company that indicates what retailers and other customers are planning to have delivered for the coming season -- fell 6 percent compared to last year.

OK then. Perhaps their Chinese operations are going great guns. Well, maybe not:

Nike's sales fell around the globe, with particular struggles in Europe and China.

Perhaps Nike has a truly new and exciting repositioning? This is what the company says about its revitalization:

Nike executives said while consumers remain cautious, the company is focused on long-term growth and it will push harder than ever for innovative products to help it grow.

"Nike is not a wait-and-see company," its CEO Mark Parker said.

Whatever that means.

Given the above, the ending of the article might be a bit surprising:

Investors were cheered by the company's ability to perform in the tough economy and sent Nike's shares up $2.70, or 4.5 percent, to $62.79 in after-hours trading Tuesday.

It's perhaps churlish to report that before this marvelous corporate report, Nike's stock traded at 20X trailing earnings with a dividend yield of 1.7% with a market value of 1.5X sales and 3.5X book value. The stock was already near all-time highs, only 10% off its 12-month high and over 50% up from its 12-month low.

While of course individuals are responsible for their actions, it is the Fed that is responsible for this manic speculative behavior. Just as most dieters cannot resist that piece of cake on the table, how can a trader resist the chance to "make" 4.5% overnight when that 4.5% equals 4.5 years of the 1% interest rate his/her bank is paying to borrow that speculator's money?

Nike's stock looks as if it is being moved by momentum players. Any remaining shorts are afraid, and the bulls are feeling their oats. Anyone who believes stocks are trading as if Armageddon were in the recent past or might be in the near future is mistaken. For many stocks, the go-go days are here.

Meanwhile, approximate 12-month total returns for gold, the S&P 500 and the long T-bond as judged by the 'TLT" ETF are:

Gold: 14%
S&P: -6%
TLT: 9%.

Remember this is after having lapped the Lehman Bros. collapse.

Copyright (C) Long Lake LLC 2009

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