Brief Note

I have seen the Intel results and must admit they are quite impressive - a record qauarter in this economy. I am not sure what to make of it. I suspect companies are updating computers to be more efficient and productive, i.e. to do more with less employees. And companies have the money. Do not make any mistake, companies in the U.S. and elsewhere, by-and-large, are absolutely flush with cash. They have been hoarding it in part as they do not see many better uses for it than to stash it for better times. I suspect that they are spending a bit of this hoard to improve efficiency/productivity. As I noted, efficiencies from computers can free up companies to let some employees go. I have no proof of this - it is just my best guess of what is happening. Either way, the Intel results are impressive and I suspect they will spill over to some other computer related companies. The real question is whether they apply to the broader economy.

Now yesterday Alcoa came out with results that beat expectations. The stock was up 1.2% today, which, curiously, was less than the overall market was up. So you beat market expectations and Bloomberg attributes the market bounce to you in large part, yet your stock does poorer than the overall market. What gives? I suspect what gives is that the expectations for Alcoa in terms of quarterly profit per share has shifted a good bit the past 90 days. 90 days ago the average earnings expectation was 23 cents a share (compared to over 60 cents a share in actual results before the economic troubles). In the last 90 days, however, the expectations have come down rather significantly. 60 days ago the average expectation shrank to 19 cents a share, 30 days ago it shrank to 17 cents a share, and more recently went to 12 cents a share. Alcoa reported 13 cents a share and low and behold, beat expectations.

Let me begin by noting that Alcoa has for several months been one of my biggest short holdings, and it has done quite well for me as it was a big loser in the DOW this year to date, so I have a financial interest in Alcoa. Nonetheless, it is not a big dollar position for me so I will not lose sleep over it. Still, it was curious to see the market bouce on the Alcoa results without Alcoa itself not bouncing so much - go figure.

Disclosures: As noted above, I have short postions on Alcoa.