Good morning

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The headlines:

1. Google’s earnings.

   Link: everyone is talking about it.

   Google announced in Q3 results yesterday, and their share price did this:

   

   You’ll notice that there is a second graph below the share price line: which shows the volume of trade. And there’s a gap in that trade when trading went dead yesterday. On the share price line above it, you’re see a period when the share price is flat, followed by a period where it increased exactly evenly until the next lot of trading began.

   This is not normal.

   The reason for it is that Google prematurely released its Third Quarters results by accident*. So it halted trading on the stock for two and a half hours. The general idea is that everyone must be given enough time to come to their conclusions about the impact of the earnings announcement before leaping in with the trading.

   Either way, the earnings were not as good as hoped for/expected. The reason being cited is the same as facebook’s: more people are accessing Google from their media devices, where ads are harder to post and easier to ignore overlook.

   Google also announced that it is “streamlining” and “cutting costs”. Which is the universal phrasing for “we’re not sure how much more we can do with the revenue”. Is Google no longer a growth company?

   *Apparently, the printer released the results before Google gave the go-ahead. Can you say “fired”?

2. Microsoft earnings.

   Link: everyone is surprised, just not so much.

   Microsoft too had a bad week for earnings. People just aren’t buying PCs anymore. And there has been disappointment around revenue earned from the Windows Operating System. We’re told that this is probably because people are delaying their purchase until the new OS rolls out.

   Windows 8. Next week.

3. Spain’s bad loan figures.

   Link: they’re out, they’re restated, and they’re more bad.

   We spoke about Spain’s bad loans situation yesterday; and since then, the proportion of bad loans on the Spanish banks’ asset books has grown. Well actually, the growth took place between July and August, so Heaven (and Mr Rajoy) knows how bad it got between August and September.

   The numbers: July’s bad loan percentage was restated upward from 9.86% to 10.1%. And the August figure came in at 10.5%. Here’s a link to the actual data on the Bank of Spain’s website. Here’s a summary:

   

4. Knight Capital.

   Link: after all that software, where’s the recovery?

   So Knight Capital finally reported the earnings figures that included the devastating losses it made from that software glitch (wrote about it here). The share price is still floating around the $2 mark:

   

   I always look at these really low share prices and wonder whether it’s reasonable. Because when you read through the earnings announcement, you see terms like “once-off trading fees” and “impairment losses” and “losses directly attributable to trading error” – which all sound a lot like they’re not going to repeat themselves.

   And then you see that excluding those amounts results in earnings of “1 cent per share”.

   Business had better really pick up to justify that share price…

5. So about that electricity price-fixing.

   Link: JP Morgan is really really sorry.

   A while ago, everyone was talking about JPM’s energy-trading unit, with them being accused of price-fixing and/or taking advantage of their trading power.

   JPM’s licence to trade in energy could be revoked over this. The statement from JPM calls that “an unjustified reaction to unintentional, good-faith mistakes, misunderstandings and miscommunications”. JPM also “regrets and apologises”.

   For a better explanation of the backstory, I first wrote about it in my post on the 4th of July (here). But I do think that it must be fun to be a big bank in America. Wheeling and dealing in Congress, scoring bailouts and getting paid not to lend money.

   If we look at how the banks** have fared against the S&P 500 over the last five years, here’s a graph:

   

   They’ve done well, but not nearly as impressively as they’ve done over the 3 months:

   

   Why is everyone rushing to buy US Treasury Securities at those ridiculously low yields? Everyone should buy bank shares. Why? Well, as has been empirically-proven, these bad boys are fully backed by the US Treasury. They’re basically a giant call option. When they play with risk and do well, the shareholders win. When they play with risk and get burned, the shareholders don’t lose.

   And as for the rest of the World, we should also get to benefit at the “expense” of the American taxpayer. After all, if we have to bear the brunt of the Fed’s domestic decisions around the Dollar, then why not at least hedge ourselves by scoring the occasional bailout.

   **JP Morgan (JPM), Citibank (C), Goldman Sachs (GS) and Bank of America (BAC).

6. Greg Smith is back in the news.

   Link: 3 days to go.

   Greg Smith’s book comes out in 3 days time. For more talk of muppets, read it then.

   

   In the meantime, you can be entertained by this story about Greg getting denied a promotion and a $1 million bonus just weeks before his now-infamous departure.

   It’s either a Goldman smear campaign and it’s untrue; or it’s a Goldman smear campaign and it is, in fact, fact. Either way, I believe in Capitalism. Why would Mr Smith asking for a promotion and a bonus be a bad thing?

That’s all for now.

Have a good day.