Blog Posts by Jeff Macke

Facebook (FB) reports after the bell today. Consensus estimates for Facebook are EPS of 13-cents on $1.44 billion in revenue. Unofficially, analysts don't care about the numbers as much as they do the story. On that front, Lee Munson, chief investment officer at Portfolio LLC, suggests investors brace themselves for a letdown.

"I think we're going to be again disappointed by the mobile app growth," he says in the attached video. "Without that what else is there?"

Not much as far as Wall Street is concerned. As was the case when they went public a year ago, Facebook still struggles to monetize users, particularly those migrating to mobile platforms. Any signs that FB is lagging the pace of migration from desktop to handheld will be poorly received.

FB also needs to assuage claims that the number of users in developed markets is already shrinking. Claiming over 1 billion users is a fantastic accomplishment, but it's also about 1/3 of the entire online world. Right now most of the street is looking for growth while the reality of large numbers suggests retention of such a massive user base would be an upside surprise.

Related: Facebook Needs a New CEO, Says Munson

User growth going negative isn't on most analyst radars even if the press is starting to ponder the idea.

Apple (AAPL) and gold spent a decade making true believers rich only to gut them over the last 6 months. From October 1st of 2012 to the middle of this month, shares of Apple dropped 40%. At the same time, safe haven-seekers long the SPDR Gold Trust ETF (GLD) got drilled by 25%.

Gold and Apple aren't "supposed" to move in lock-step. As Lee Munson, chief investment officer of Portfolio LLC notes in the attached clip, the first thing they teach you in "little trader's school" is that gold and stocks move opposite to one another.

Assets don't care what you think should happen. Not only did Apple and gold drop in synch, they bottomed together as well. Since the start of last week shares of Apple are up more than 11% and the GLD ETF has tacked on half that amount.

With gold trading like a lower beta version of Apple, Breakout asked Munson the same thing we did last June: Which would you rather own? Munson's going with Apple again, but only for the very patient.

Best Buy (BBY) shares were strong in early trading on Tuesday driven by the company's decision to pull the plug on European expansion plans. The embattled Minnesota-based electronics retailer said it is selling out to joint venture partner Carphone Warehouse for roughly $775 million in cash and stock.

Best Buy CEO Hubert Joly says the retreat shouldn't be taken as a sign that the company is pulling back from all foreign markets; only the ones that don't make financial or strategic sense.

Joly's move illustrates the advantage of bringing a fresh set of eyes to the corner office. An entrenched CEO would likely have given more rope to a partnership generating more than $5.5 billion in revenues and is less than 5 years old. To Wall Street the European excursion was just a distraction from rotting operations in the US. Killing such legacy operations are exactly what turnaround CEOs are supposed to do.

As Joly chips away the dysfunction at Best Buy, investors are left to wonder if there will be anything left when he's done. Lee Munson of Portfolio LLC thinks Best Buy is going to have to keep shrinking in order to stay alive.

"Best Buy used to be a place where you could go and get great information about the products and I think that's slipped over the years," Munson says in the attached video. "To get your profit margins up you've got to provide a value added experience for people."

Wednesday afternoon the Federal Open Market Committee will release its latest monetary policy statement. For comparison, the March statement is posted on FederalReserve.gov. If you must engage in the act of combing through each word, it's always best to have the prior release in front of you when the new one hits the wires.

Hugh Johnson, chairman and CIO at HJ Advisors, says investors are safe in assuming that there aren't going to be any seismic shifts in policy. "It's going to be pretty much the same statement," Johnson says in the attached video.

Ticking through the old favorites, Johnson says he's looking for commentary on low rates, unemployment, slow growth, etc. "You can parse all you want but basically that's what it's going to tell you," he states.

The exception is whether or not the list of dissenters to current policy expands beyond Esther George. It's the behind the scenes debate regarding the timing of tapering the quantitative easing programs that Johnson is paying

"Bull markets don't go wrinkle free," says Hugh Johnson, chairman & CIO of Hugh Johnson Advisors. "They get a bit overvalued and a little undervalued. Right now, if anything, we're a little overvalued."

Not wanting his observation to be construed as a trading call, Johnson says no one has a timing edge, even if they claim otherwise. The prudent thing to do as he sees it isn't to jump in or out of stocks entirely, but simply to "drag your feet when it comes to making new commitments to the equity markets."

While not a trader per se Johnson does have his timing "tells," one of which is to take money off the table when a stock or sector's price starts to lag that of the market as a whole. Trim a little to stay ahead of a real pull back that tends to shake investors out at the lows.

On a 5 to 8% pullback, Johnson is a huge buyer. He sees no evidence whatsoever that the bull cycle is coming to an end (fits and starts on the economy aside).

Johnson's biggest contrarian play is a whopper.

The NY Post is reporting that "at least two major hedge funds" have amassed significant stakes in troubled, near dead, strategically challenged retailer JC Penney. The news comes on the heels of last week's SEC filing from George Soros revealing a 7.9% stake in JC Penney (JCP) stock.

Adding to the JC Penney positive news from earlier this morning, the company confirms it secured a $1.75 billion financing package from Goldman Sachs (GS). The terms have been rumored to be a remarkably generous 7%.  [JC Penney has now confirmed the financing from Goldman; demand is rumored to be strong suggesting a yield between 5 and 6%]

A whopping 36.8% of JC Penney's float was short as of April 15th. A big part of the short thesis had been the very real possibility that the company wouldn't have the liquidity to make it to the Christmas buying season.

Between the Post's unnamed funds and Soros, the timing of the stock purchases are curious if not flat out suspicious. JC Penney had been known to be looking for loans for months, and Goldman no doubt shopped the deal around the Street to find indications of interest.

JC Penney stock has been locked in the mid-teens for almost two months. So much smart money jumping in all at once is curious if not a smoking gun. Knowing the deal was likely to get done would have made the $15 area a low-risk entry point.

The company still has a laundry list of problems, but at least for the moment liquidity isn't one of them. "This company obviously has a lifeline now," says Yahoo Senior Columnist Michael Santoli in the attached clip. "You can kind of make the case that if JCPenney can at all stop the bleeding, maybe there's value there." Nothing beats a couple billion dollars at favorable rates when it comes to stanching a cash bleed.

Gold may or may not be a currency or hedge against crisis but it has been traded for thousands of years. That being the case, gold can probably be expected to fluctuate in value but it's not going to disappear. At least not in a straight line.

Jeff Kilburg, founder & CEO of KKM Financial, is a gold trader rather than a fundamental purist. For him the underlying demand gives him a trading backstop, but getting ahead of price fluctuations are how he brings home the bacon.

Kilburg says the trader in him thinks gold is on the cusp of a breakout. "I want to see it get back above $1,500, but I think you can layer into gold positions here," says Kilburg in the attached video.

Why wait? Because good commodity traders know to respect the technicals. $1,500 is a level from which gold broke down. Those who bought that level and rode gold to the lows and back the mid-$1,400s are weak holders likely to breath a sigh of relief and bail when they get back to their cost basis. Traders who bought lower will see resistance at $1,500 and take profits. Either way Kilburg says it pays to wait.

There's no substitute for experience. In the life of every person or corporation there will eventually be moments of adversity. The latest hot, trendy store will someday have to deal with changes in consumer tastes, a downturn in the economy or just its own failure to execute.

When times get tough, most companies simply disappear; others tweak their business just enough to stay alive. Retailers like Sears (SHLD) and RadioShack (RSH) have been staggering along for years, failing to evolve or dedicate the resources necessary to convince customers to come back. They seem trapped in time, offering the same goods that have been hashed over and rejected countless times already.

The best companies, or for that matter people, are those that have met adversity by taking it as an opportunity to rediscover what they did best while changing to meet the times. For a business to thrive it needs to reliably deliver what its customers expect and then add just a little bit more as a special treat.

In the attached clip, retail expert Hitha Prabhakar, author of Black Market Billions lists three companies that haven't just survived but have also come back much better than when they first captured the public's attention.

Home Depot (HD)

The housing meltdown hit Home Depot hard. During boom times, when millions of Americans were remodeling and "flipping" houses, Home Depot's biggest problem was keeping all the hardware and supplies in stock.

When the music stopped, HD was stuck with palates full of lumber in a world with no construction. In short, they needed to rebuild their concept from the studs up in order to survive.