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My Gut Feeling for Today, September 3, 2013

Welcome to September. Now that August is over and done, the front line players are back at their desks and in front of their screens. The markets are poised to rise today on strong overseas markets on Monday and Tuesday. We also woke up to a series of important deals:

  • Microsoft (MSFT) buying Nokia’s (NOK) mobile business. My take is that Microsoft as a company has already begun its slide into irrelevancy. I say begun because still the huge installed enterprise base is significant to keeping the company relevant for now. In a few years, maybe as long as two decades, it will become irrelevant. The purchase is something that Microsoft had to do, primarily as a last ditch effort to keep up with Apple (AAPL) and Samsung. Note however, Microsoft is beginning to suffer from Second Banana Syndrome with its failed Zune, newer Surface tablet and the newly acquired Nokia line of phones. The market is voting in the pre-market that the deal is a plus for Nokia and negative for Microsoft. The purchase price of just over $7 billion is not significant from Microsoft’s perspective. It is not of the magnitude of the ill advised purchases that Hewlett-Packard (HPQ) has closed on in the last decade, such as: Palm, 3Par and Autonomy.
  • In a well telegraphed deal, Verizon (VZ) is buying out its mobile partner Vodafone (VOD). The reaction is likely to be to sell-on-the-news. For the purchase price of $130 billion, equal to Verizon ‘s current market capitalization, the company better be right on the purchase or this doubling down will backfire to the advantage of AT&T (T)
  • Bank of America (BAC) will dispose of its investment in China Construction Bank for about $1.5 billion. BAC is the last of the major American banks to monetize their Chinese bank investments. This is a positive move for Bank of America which can use the proceeds to bolster its capital.

As for this week, I expect early strength on Tuesday and Wednesday and then back to sluggishness for Thursday, the first day of Rosh Hashanah followed by some volatility on Friday, the second day of Rosh Hashanah and when the monthly labor report is released for August. I will be taking off to celebrate the holidays on Thursday and Friday. Sell Rosh Hashanah, buy Yom Kippur? The way the calendar works this year, that might be prescient advice.

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Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long AAPL, T and BAC  — although positions can change at any time.

                                                                                        

Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant and agricultural stocks. You can subscribe at www.restaurantstox.com 

 

Interact all day with Scott all day with your Platinum subscription to Wall Street All-Stars.

 

You can email Scott at scottallstars@gmail.com

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