Premarks {07.25.12}

Things that are getting my attention this morning before the market opens.  {Futures indicate stocks will will be higher by the way}.

Europe:  With region after region in Spain and Italy now pressing their national governments for money and these countries forced to borrow at very high rates relative to the rest of the world and with Greece being forced to admit it can't get it's house in order, it strikes me that the EU is truely now in its endgame.  They will either fix it and become a much more integrated national union or it will break into a northern and southern block or it will go away.  My gut says they fix it but the cultural divide between the north and south over there may be too much at the end of the day.  

Cultural divide between north and south?  Where have I heard that before?  

Apple Computer {AAPL} shocked the world yesterday with a big earnings miss.  What does that mean?  Is that company specific due to an expected new upgrade for the iPhone 5 in the fall or does it reflect slowing international economies.  AAPL sold a record 17 million tablets in the quarter, adding to my thesis that the tablet is replacing the laptop and probably the desktop at a much faster rate than most currently acknowledge.  It also helps my thesis that the tablet is only in the 2nd inning of what it will look like in 10 years and is a game changer in many different industries.

Earnings season has been so far a disappointment with many more companies lowering guidance for the rest of the year.  Street estimates have come down accordingly with the consensus now on the S&P 500 for between 102-104 now for 2012.  Does that mean my 103.75 number is too high.  Will have to think about this in the next few weeks.  Even at the low end of the range of these S&P 500 estimates  stocks are cheap trading a bit over 13 times this year's earnings.  Earnings yield is 7.6%.  That of course assumes these numbers can be met.

Polls continue to show that President Obama holds a slim lead over Republican challenger Mitt Romney.  These numbers change day to day depending on and how the polls are conducted.  But at the state level where the electoral college is fought the President continues to hold the upper hand.  He is leading in virtually every state he needs to hold in order to get reelected.  In particular I pay attention to   Colorado {Obama leads by three percentage points}, Ohio {Obama by four}, Florida{Obama by one}, Iowa {Obama by one} and Wisconsin {Obama by seven}.  Data from realclearpolitics.com. Obama may lose a couple of these, Colorado, Iowa and Florida are the most likely candidates.  But the way the rest of the states work right now, Romney needs to run the table in these battlegrounds and I don't think he can do it.   

*Long ETFs related to the S&P 500 in client and personal accounts.  AAPL is a component of several ETFS we own for clients and in personal accounts.