Blog Posts by Jennifer Carinci

It's a make or break week for the financial sector with five of six of the nation’s largest banks scheduled to report fourth-quarter earnings results. JPMorgan (JPM) and Goldman Sachs (GS) report on Wednesday morning, followed by Citigroup (C) and Bank of America (BAC) on Thursday, and Morgan Stanley (MS) on Friday.

Bank stocks have seen strong gains ahead of these key earnings reports. The Financial SPDR ETF (XLF), which tracks over 80 diversified financials, is up over 4% since the start of the year and 23% from one year ago.

Earnings expectations for the group are relatively strong. According to FactSet, the overall financial sector is expected to post an earnings growth rate of 8.7%, but stripping out insurance companies, growth is expected to top 30%.

Wells Fargo (WFC) was the first mega-bank to report last week, jumping ahead of JPMorgan which typically starts off bank earnings. WFC posted profit and revenue above estimates, but raised concerns about net interest margins or NIM. Wells, the largest mortgage lender in the country, funded $125 billion in mortgages last quarter, which rose from $120 billion during the same quarter last year, but fell from $139 billion in the third quarter. Further, the bank reported a 2% drop in interest income compared to the same quarter last year, fueling fear that historically low rates are pressuring margins.

Pressure on bank margins is expected to be heavy and has some investors favoring smaller financials to avoid larger NIM compression.

“If you’re going to be in the financial services arena, I like the regional banks,” says Kyle Harrington, managing partner at Harrington Capital Management. “When this housing market comes back and people put cash back into the real estate market, those banks will benefit first.”

Stocks remain flat after the December jobs report showed the economy added 155,000 jobs last month and the unemployment rate ticked up to 7.8%. According to various consensus estimates, economists were expecting between 150,000 to 160,000 jobs added and a 7.7% unemployment rate.

The unemployment rate for November was revised higher to 7.8% and nonfarm payrolls growth was revised to 161,000 from 146,000.

“That might be the goldilocks number the market was looking for,” says David Lutz, head of ETF trading at Stifel Nicolaus. “There was a lot of conjecture saying ‘if we had a really good nonfarm payrolls number, if we added a lot of jobs, does that increase a lot more of the anxiety that the FOMC minutes brought on yesterday?’”

Federal Reserve minutes from the December meeting jolted investors on Thursday afternoon, revealing several members want to end quantitative easing sometime this year. During that policy meeting the FOMC adopted official rate targets of 2% for inflation and 6.5%

Volatility (^VIX) is creeping higher and stocks are lagging today as fiscal cliff dramatics weigh on confidence. President Obama is returning from Hawaii and the Senate is back in Washington to resume negotiations to avoid the brunt of the tax hikes and spending cuts set to go in effect on January 1. Senate Majority Leader Harry Reid is calling on the Republican leaders to come forward with a new fiscal plan, albeit one emulating the Democrats’ push to raise taxes on those earning above $250,000, saying it “looks like” we’ll go over the cliff, while speaking out this morning on the Senate floor.

Related: Boehner's No-Brainer -Let the White House Own It

Even Starbucks (SBUX) is getting into the mix. The company’s 120 DC-area coffee shops are encouraging employees to write “Come Together” on coffee cups, in reference to the need for politicians to compromise, according to AP. The small effort is strongly backed by CEO Howard Schultz who says if talks don’t progress, he’ll make the initiative bigger to call attention to the harm being done to “consumer psyche and behavior.”

Meanwhile, the Conference Board’s consumer confidence index dropped to 65.1 in December from 71.5 in November –which was revised down from its initial 73.7 reading. Further within the data, a barometer of short-term expectations fell to 66.5 this month from 80.9 in the prior month; the lowest level since November 2011.

Economists have been quick to point to the fiscal cliff as the main drag on short-term consumer confidence, but the longer-term outlook still appears to be relatively strong.

Facebook’s (FB) messy IPO last May is going down as one of the worst debuts in history, and certainly one of the biggest finance events of 2012; if only because of the hype. Looking ahead to 2013, you can’t help but wonder whether Twitter is the next big event on the IPO docket. A management shuffle just last week makes it look like the company is taking some preparations to go public.

“Could they do an IPO in 2013? For sure,” says Eric Jackson, founder of IronFire Capital, “they’re continuing to grow by leaps and bounds.”

There’s chatter that Twitter ad revenues could top $1 billion next year, well-positioning the company to start a roadshow to IPO. That would be extremely impressive growth when, according to Techcrunch, Twitter brought in roughly $350 million in total revenue for 2012, with nearly 50% of that coming from mobile ads.

“Whether it’s luck or smarts, they’ve figured out that their service is uniquely adapted for the mobile environment and they’re having an easier time selling ads in their form factor compared to Facebook,” says Jackson. “So they could do it [IPO] in 2013, but I don’t think they should."

In addition to Facebook, Jackson points to struggling tech start-ups Zynga (ZNGA) and Groupon (GRPN), which both went public in late 2011, and experienced major growing pains throughout this year. Shares of the companies are down, 75% and 78%, respectively in 2012.

Traditionally, Santa Claus is the person making a list and checking it twice, but this year one company decided to turn the tables and have a little fun with numbers. Yes, Santa has been audited. ParenteBeard, a top 25 U.S. accounting firm, decided to balance the books of what would be the world's largest non-profit organization — Santa, Inc.

"With what's going on in the economy, with the fiscal cliff, we thought it would be a good idea to check in on Santa and see whether or not he had solid operations," says Jeff Ferro, president of ParenteBeard, in the attached video. "We found out he's got a pretty expensive operation."

In a short report "Santa, Inc: By the Numbers" the firms puts a $42.3 billion annual price tag on the entire North Pole operation. They broke down the numbers starting with the heart of the business.

Gift Production: $39.5 billion

Ferro says 90 — 95% of Santa's operation is gifts. Here's how ParenteBeard determined the costs: There are roughly 526 million kids under age 14 that celebrate Christmas. They estimated a $75 value for each gift.

"We didn't differentiate who's naughty and nice," says Ferro. "We just assumed everyone gets a gift." This costs Santa, Inc. an annual total of $39.5 billion.

Employee Costs: $2.77 billion

Of course, somebody has to make the gifts. ParenteBeard estimated there are 50,000 elves producing the goods. Since the average real life toymaker in the U.S. earns $35,859 a year, the firm assumed Santa would be more generous and pay his employees a $40,000 salary + $15,475 for healthcare costs.

Facebook (FB) officially joins the ranks of the tech elite tomorrow when it's added to the Nasdaq 100 (^NDX).

The widely watched index is comprised of the top 100 non-financial stocks by market cap that trade on the Nasdaq (^IXIC), including heavyweights like Apple (AAPL), Google (GOOG), Microsoft (MSFT) and Oracle (ORCL). With a $60+ billion market cap, Facebook replaces Infosys (INFY), which is moving to the New York Stock Exchange (NYX).

Facebook's inclusion is largely seen as a positive due to the popularity of the NDX among ETFs and mutual funds. "The question that has to be asked though, is that given the corporate governance practices in place at Facebook -- namely Zuckerberg's totalitarian control of the company and the ability to appoint his own successor and the risk that puts on minority shareholders -- are other indices like the S&P 500 going to follow suit?" asks David Garrity, principal at GVA Research. "That is very much an open question because there have been doubts raised about Facebook."

Facebook shares have seen plenty of ups and downs since the initial public offering on May 18. The stock debuted at $38 a share and was more than cut in half after a series of insider share lockup periods began expiring.

The first expiration in mid-August set off a downward spiral that took the stock to its all-time low of $17.55 on Sept. 4. Facebook has since recovered 55% from the low despite expirations in October and November that put a combined 1 billion shares on the market.

The Federal Reserve will hold its last policy meeting of the year next week, and two key issues are expected to dominate the gathering and the market's attention -- the expiration of "Operation Twist" and a potential change in interest rate guidelines.

Implemented in September 2011, Operation Twist was designed to lower rates for mortgages and corporate bonds. The program, which expires at the end of this month, entailed the Fed buying $667 billion (roughly $45 billion per month) in longer-term Treasuries above 6-year durations, while selling the same amount in shorter-term securities under 3-year durations.

The goal of the monetary twist has been to lower long-term rates to fuel consumer and corporate borrowing and spending.

"With Operation Twist ending, that means they've run out of short-dated securities to sell in order to purchase more [longer-term securities], so what they've got to move to now is buying up pure $40 billion per month of mortgage-backed securities [QE3]," says Andrew Wilkinson, chief economic strategist at Miller Tabak. "They probably have to compensate for that loss of $40 [billion] to $45 billion per month."

Rumors of QE4

Wilkinson is touching on concerns that have recently been addressed by various Fed governors. That is, that simply carrying out the third round of quantitative easing is not enough to boost the economy. QE3 is an open-ended program that has the Fed buying $40 billion per month in mortgage-backed securities.

So will the Fed turn Operation Twist into another outright securities purchasing program, essentially becoming QE4? Or are they more confident in the economy given the improvement in the November jobs report?

The market will be watching very closely to see if the Fed changes its tune. The decision on handling Twist's expiration will be very telling as to how the committee views the recovery and how much stimulus will be pumped into the economy in 2013.

Don't look now, but shares of BlackBerry-maker Research in Motion (RIMM) are up over 50% since the start of November.

Several analyst upgrades for RIM have created a splash of confidence that's having a positive ripple effect for the stock price. But the sustainability of the recent rise is contingent upon the success of the BlackBerry 10, expected to officially launch on Jan. 30 and begin shipping in February.

"They have been clowns for the last five years. Let's state that upfront," says Eric Jackson, founder of IronFire Capital. "I just don't think at this point they're going to screw up from here."

Just today, the company launched its BlackBerry 10 Ready Program aimed at helping businesses prepare for the new platform. The BB10 will run on a new operating system and offer keyboard and touch versions of the device.

Until recently, the only position Jackson ever had in RIM was shorting the stock from $70 to $20 a share. He detailed his change of heart in a blog post: "Why I —A Former Short—Just Bought Blackberry's Stock And Think It Can Go to $40".

"The reason why I own it is I'm anticipating no new people migrate to the BlackBerry, but what they do have is 80 million net subscribers," he explains in the attached video. "A lot of lawyers, a lot of investment bankers, finance people, still carry these things around. I'm constantly amazed when I look around and I see people walking around in the street with them."