Goodbye, old friends?Wells Fargo Daily Advantage – 5-23-2013
The major stock indexes plummeted at the open following a huge sell-off in Japan's stock market and hints from Chairman Ben Bernanke on Wednesday that the Federal Reserve might soon curtail its bond-buying program. But as the session advanced, the indexes clawed their way back to near break-even levels. The Dow lost 12 points, the Nasdaq fell by 3, and the S&P 500 declined by 4. After Hewlett-Packard reported better than expected earnings on Wednesday evening, the price of its shares (HPQ) jumped 17% and led the Dow's gainers in today's session. Twenty-one of the Dow's 30 components lost ground, led by Alcoa (AA), which lost almost 2%. Volume was light. Decliners led advancers on the NYSE by three to two, but on the Nasdaq, the decliners and advancers ran nose to nose. The prices of Treasuries strengthened, and the price of gold futures jumped 1.78% to $1,391.80 an ounce. The price of crude oil on the New York Mercantile Exchange edged lower by 0.03% to $94.25 a barrel.
In Earnings News:
- Dollar Tree, the retailer that sells goods for $1.00 or less in its stores, announced earnings increased from 50 cents a share one year ago to 59 cents a share in the latest quarter. The company has done well as consumers turned to low-cost retailers during the financial crisis. Revenue in the latest quarter grew by 8%, and the company's CEO said Dollar Tree's business model is "more relevant than ever" as consumers remain concerned about the price of gasoline, higher taxes, and high unemployment. The results beat Wall Street's estimate, and the price of the shares (DLTR) gained 3% in today's session.
- Ralph Lauren reported earnings climbed from 99 cents a share a year ago to $1.37 a share in the latest quarter. Revenue increased by only 1%, but the luxury fashion retailer benefited from a decline in cotton prices. The price of the stock (RL) lost 2%.
In Other Business News:
- New claims for unemployment benefits dropped last week by 23,000 to 340,000, according to the Labor Department, thus confirming the gradual improvement in the employment picture. The four-week moving average of claims, which smooths out the volatility of weekly fluctuations, edged lower to 339,500.
- Sales of newly-built, single-family homes climbed 2.3% in April, according to the Commerce Department. And the median sales price for newly built homes jumped to $271,600, which is an increase of 14.9% compared with the same month a year ago. Both data points are strong evidence that the recovery in the housing sector is still on track.
I'm going to miss books and bookstores. I mean books with spines that you can pick up in your hands and leaf through, books you can put on a shelf after you read them and whenever you walk by you see them sitting there together like a party of old friends. Those kinds of books are slowly dying, and e-booksbooks from the "cloud"are taking over.
And when physical books go, so too will go bookstores. I used to love browsing in bookstores. I would spend entire lunch hours searching for my next great read. Now bookstores, large and small, are winking out like stars before the approaching storm. Remember the movie "You've Got Mail?" Tom Hanks plays Joe Fox, the owner of a big-box bookstore chain who falls in love with Meg Ryan's Kathleen Kelly, whose boutique bookstore is being put out of business by the low prices at Fox Books. Joe and Kathleen fall in love with each other while chatting anonymously online, not realizing they are bitter rivals in the business world. Before the movie ends and they walk into the sunset, Kathleen is forced to close her store, and Fox Books is triumphant. The irony is that in real life, Joe's business model is also doomed, a victim of low prices on the internet, which brought Joe and Kathleen together. "You've Got Mail" came out in 1996 when the big chains looked unbeatable, but 1996 was also the year Amazon started selling books on the internet.
First, the little stores fell to the big stores, and now the big chains are falling. Walden and Borders are gone. Barnes & Noble is struggling. When I go into a Barnes & Noble, I'm amazed by how much bookshelves have retreated and games, toys, greeting cards, coffee, and chocolate truffles have taken over. I'm eager to see B&N's next earnings report, which is scheduled for June 28. Thomson Financial forecasts a loss of 97 cents a share, and those results will come against a backdrop of a rumor that B&N tried to sell Nook, its e-reader business, for $1 billion, which is more than half of what some experts believe the shrinking bookstore chain is worth. The sale didn't materialize, and Motley Fool, the investing website, recently concluded that B&N's "final chapter will end with these three words: 'just like Borders.'"
Not long ago, I "self-published" an e-book on a website called Smashwords.com, which bills itself as the favored publisher of independent authors. Smashwords posted the book on its site and forwarded it to some other sites, including Barnes & Noble's Nook bookstore. By going with an e-book, I thought I was being hip. After all, Joe Fox is so last century. But in the end, e-publishing was pretty unsatisfyinglike throwing a paper airplane off the rim of the Grand Canyon. I watched it for a nanosecond until it vanished into the virtual "cloud." But I didn't get to follow its graceful flight, if any, or its humiliating crash, if any. And afterword, I had nothing real to pick up and display battered and muddied on a shelf. It didn't feel like I had created a new "old friend" for myself or for anyone else, even if it lives forever in the "cloud."
I have no doubt that the internet will vastly extend the reach of human knowledge, but it will also deprive us many, dog-eared, old friends. And I like Jerry Seinfeld's funnyif untruecomment on this subject: "A bookstore is one of the only pieces of evidence we have left that people are still thinking."
The opinions stated are those of the author and are not intended to be used as investment advice. The views are subject to change at any time in response to changing circumstances in the market and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or any mutual fund.