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Daily Market Update – January 23, 2014 (Close)
What a day, but at least it was another good day to be Carl Icahn.
Oh, to be Carl Icahn.
While the market was getting everyone’s attention by being down more than 200 points at its lowest, just 30 minutes before the closing bell, Carl Icahn was sitting pretty.
eBay, the newest in the Icahn family, as we would find out later, was widely expected to have a throw away earnings report this quarter and analysts were expecting shares to fall 5% or more.
This was a company that barely two months ago was widely derided, yet like Caterpillar, which equally caught slings from everyone, just kept moving higher, at a time when the overall market was beginning to lose its way.
But I also thought that eBay would likely see shares fall at earnings and welcomed the idea, because that would bring it back to rollover price territory and eBay has been a great stock for that kind of play.
Instead, eBay took the opportunity to time the announcement of Carl Icahn having picked up a stake in the company and wanting two board seats for his less than 1% share of ownership.
Shares, of course, responded as they usually do when Icahn gets involved and went wildly higher in the after market, although settling down by the pre-open market this morning, yet heading in a direction opposite that of the broad market, which was looking to open trading with a triple digit loss.
Of course, he also owns Apple and has added another billion or so, timed perfectly with shares moving higher. Apple happens to report earnings next week.
Then there’s Netflix. Despite having sold of portion of his shares to take immense profits a few months ago, Icahn still owns about 4% of a company that just reported earnings and saw its shares climb 17% in the pre-open.
And then there’s the rest of us. The people who are unable to move a stocks price by virtue of a Tweet, although I must say I still get a thrill when I see an option sale executed and my trade represents 100% of the day’s volume at that moment in time.
For just that moment in time, I am the market.
Still, not quite Carl Icahn territory.
What is fascinating is that there is reportedly so much cash on the sidelines.
Carl Icahn has it. Companies have record amounts of cash even after record buybacks and reportedly there is still lots of money wallowing away in bonds or money markets.
At the moment it seems as if only investor activists and those share buybacks are able to maintain the market at these levels.. Whether its Dan Loeb, David Einhorn or Carl Icahn, the reality is that that are relatively few people that can create substantive movements in shares and even they have limited resources.
At the moment, Carl Icahn is involved in as many companies as can be imagined. It’s hard to envision him doing much more without dropping some other positions. Of course, a victory as with Netflix opens up lots of other opportunities and his continuing stake there could easily fuel more activity elsewhere.
Yet these high profile stock stories are bound to have a natural limit, just as share buybacks have their limits and are actually a poor use of money when shares are already so high, as has been the practice of companies such as Cisco and IBM.
What is somewhat telling, and may confirm the role of Quantitative Easing, is that the market hasn’t been the same since the initiation of the taper has been announced.
The next challenge may simply be the announcement of an increase in the taper, thereby reducing the amount that the Federal Reserve introduces into the market.
At that point we may get back to the quandary of whether good news is bad and bad news is good.
In the meantime, earnings are relatively straightforward and guidance even more so.
Today, it was obvious that bad news was bad news. It takes more than Netflix to be a reflection of an economy that’s turning around..
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