Obama's Financial Regulation, Google (Nasdaq), GE (NYSE: GE), McDonald's (NYSE: MCD)

Morning Coffee

Obama's regulatory attack on Wall Street has got the market buzzing this morning, but a few big earnings reports deserve some attention as well. News from Google (Nasdaq: GOOG), General Electric (NYSE: GE) and McDonald's (NYSE: MCD) serve as a good barometer for the economy.

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(Mentioned Tickers: Nasdaq: GOOG, NYSE: MCD, NYSE: HSY, NYSE: GE, NYSE: BAC, NYSE: JPM, NYSE: C, NYSE: GS, NYSE: XLF, NYSE: AGU, NYSE: CF, NYSE: APD, NYSE: ACO, NYSE: AVX, NYSE: BBT, NYSE: EXC, NYSE: HOG, Nasdaq: HBAN, NYSE: JCI, NYSE: KMB, Nasdaq: MBFI, Nasdaq: PRSP, NYSE: SLB, Nasdaq: SCMF, Nasdaq: STBC, NYSE: STI, Nasdaq: ERIC, NYSE: WBS, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD)

Obama's Financial Regulation & Google, GE and McDonald's

The world is abuzz about President' Obama's nascent onslaught of the US financial sector. Yours truly wrote about this in an article that never made these pages last week, as it was sold to another publisher. We will publish a reconstituted work on the same premise here today. While we do our best to publish our top work here on the blog first, we need your suppport in order to ensure you the provision of our most prescient work on a timely basis. You could have been ahead of the curve on financials, if we could afford to publish here alone. Please consider a donation to help us make that possible.

Obama's War on Wall Street

The Dow Jones Industrial Average sank 2% Thursday, after falling 1.1% the day before, greatly due to the rumors of and the release of the President's latest whipping of Wall Street. Obama is showing his ugly side, the one every Republican and Independent who voted for him worried about. We suggest you take your profits NOW, because this has trouble written all over it; and IF the bill can pass OR if the Administration takes on China next, read that "big trouble."

With the late Edward Kennedy's Senate seat in Massachusetts falling to the reds, it seems the Democratic majority is adopting a new strategy based on really scary stuff. What's going on is a positioning in order to gain bargaining power for the important (to the Democrats) work. The Dems are playing on Main Street ire, and there's quite enough fuel for that fire given high unemployment and a general feeling on the street of being duped by the big boys on Wall Street.

In the meantime, stocks are tanking, with the financials leading the way. The Financial Select Sector SPDR (NYSE: XLF) fell 2.8% yesterday led by big drops at Bank of America (NYSE: BAC) -6.2%; Goldman Sachs (NYSE: GS) -4.1%; J.P. Morgan Chase (NYSE: JPM) -6.6%; and Citigroup (NYSE: C) -5.5%. An analyst at a Wall Street firm today estimated the economic costs of the President's regulation for these firms would be significant, justifying the value destruction seen (that will likely continue today).

In our yet-to-be-seen-here article, we mentioned that we doubted Obama's economic gurus were on board with the new regulatory effort against Wall Street. Today, many in the mainstream media are questioning the same, especially with regard to the position of Treasury Secretary Geithner. If the President goes too far, perhaps we will see some resignations.

All this concern about the economic leadership skill of the President has got the dollar down as well. Such a shame, just when the Greek debt crisis and questions about European unity had shaken the euro... Look for our detailed work on this regulation campaign later today. We assure you, it's still worth reading.

Speaking of...

The House Financial Services Committee takes up executive compensation today. President Obama will meet with small business representatives to discuss the economy and the small business situation. Hiring in the small business sector is said to be "gun shy" due to concerns about legislation and the surety of economic recovery. Funny that in a recent Bloomberg poll, a rather timely one mind you, President Obama is seen as anti-business by 77% of US investors. Gee, I thought you all thought he was the anti-Christ, not the Anti-Businessman!

In other government meddling (how soon we forgot the crisis and corporate improprieties huh?), the Chief Investment Officer of the TARP program, Jim Lambright, gives a speech in New York today.

Corporate News Drivers

We see good news in the three of these economic barometers. Between Google, GE and McDonald's, we've got a good read on the overall economy, and from a global perspective. Advertising recovery at Google reflects growth in an economically sensitive sector. Improved sales in December for McDonald's speaks of growing consumer spending. Rising orders for GE's goods offers sign that demand for equipment and infrastructure is up.

Google

Google (Nasdaq: GOOG) reported strong earnings results last night, but the stock is off today. GOOG's EPS line beat the analysts' consensus, posting $6.79 when excluding special items, compared to the consensus estimate for $6.48, based on Thomson Reuters data. However, revenue was reportedly only in line, and the market was apparently looking for a beat on the top line.

Google representatives said the US market was outpacing Europe in recovery, and the situation did not seem recession like anymore. Google pointed toward an upturn in Internet advertising, clearly critical to the company's business, as the driver behind the gain. I would look for a turnaround in GOOG shares from the down start, but if Obama spits on the entire market (don't forget I like the guy generally), you might get a better entry point for your long-term play down the road. The Greek has been a fan of Yahoo! (Nasdaq: YHOO) since its drop to mid-single digits (and we still like it), but we love Internet all around, as you might expect... and Google is king. Keep an eye on valuation though...

General Electric

General Electric (NYSE: GE) reported Q4 EPS results this morning as well. GE's shares were up 3.3%, despite reporting lower revenue and earnings. While revenue fell 10% and EPS (from continuing operations) dropped 22%, the market found reason to rally. GE's EPS result of $0.28 still beat the analysts' view for $0.26, according to Bloomberg. Also, some kind words from the GE crew on order growth offered investors some hope.

GE's better than expected results came mostly from cost cuts (read jobs shed), and also on a tax gain. Still, GE's order backlog increased, offering investors a sign that revenue erosion may finally cease. Its Equipment and Services backlog improved a billion to $175 billion, and Infrastructure orders rose $3.7 billion.

Still, concerns remain about GE Capital. The segment is writing fewer loans and raising reserves, while conspicuously refraining from significant write-downs. The company added $700 million to reserves, and noted its real estate segment had about $7.0 billion in unrealized losses, with another 13% value decline seen this year. Still, with the aid of its historic dividend cut, GE was able to generate $16.6 billion in cash in 2009.

The most important takeaway for global economy followers is that order backlog is stabilized and increasing in the businesses where GE makes things.

McDonald's

McDonald's (NYSE: MCD) shares are up today, after the company reported EPS ($1.03) a penny ahead of the analysts' consensus, based on Thomson Reuters. The company also noted an important 1% same-store sales rise in December, versus decreases in the prior two months. Revenues also beat analysts views, and the three of these factors are key to analyzing MCD's outlook and economic recovery. The company noted its international operations and growth continued to pick up its weaker US business, where stiff competition in tough times has discounting hurting all (especially chickens confined to a tight space for their entire lives so you can eat that $1 McNugget pack).

Other Corporate News

Agrium's (NYSE: AGU) offer to buy CF Industries (NYSE: CF) is due to expire Friday. The earnings slate includes news from Air Products & Chemicals (NYSE: APD), AMCOL International (NYSE: ACO), AVX Corp. (NYSE: AVX), BB&T Corp. (NYSE: BBT), Exelon (NYSE: EXC), Harley-Davidson (NYSE: HOG), Huntington Bancshares (Nasdaq: HBAN), Johnson Controls (NYSE: JCI), Kimberly-Clark (NYSE: KMB), MB Financial (Nasdaq: MBFI), McDonald's (NYSE: MCD), Prosperity Bancshares (Nasdaq: PRSP), Schlumberger (NYSE: SLB), Southern Community Financial (Nasdaq: SCMF), State Bancorp (Nasdaq: STBC), SunTrust (NYSE: STI), Telefon AB Ericsson (Nasdaq: ERIC) and Webster Financial (NYSE: WBS).


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