 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Tuesday's Headlines 1. Buffett Adds $10 Billion to Occidental's Bid for Anadarko 2. Google's Parent Loses $70 Billion in Market Value... in One Day! 3. Europe Might be OK, Actually Markets Closed
 U.S. Markets Back Off Record Highs Alphabet's disappointing earnings report Monday carried over into today, knocking $70 billion off of the company's market cap, and bringing the tech-heavy Nasdaq off its record highs. The S&P500 did squeeze out a slight gain, pushing the index to another record. James has more on Alphabet/Google's historically bad day - the worst in six years, below, but suffice to say that investors sold off Class A, B, and C shares of the company without mercy. (Alphabet... get it?)
Quick recap: Alphabet hit profit estimates for the first quarter, but underdelivered on revenue, blaming weakness in its advertising businesses on Google.com and YouTube. Investors have no patience this earnings season for companies that don't crush expectations.
Speaking of expectations... Apple beat analysts forecasts for both earnings and revenue, although both were lower than a year ago. Investors expected that, as Apple has been fairly transparent about its challenges selling new iPhones, especially in China. Still, the company generated $58 billion in sales in just one quarter. For the six month period ending March 31, it brought in $142 billion in sales.
Here are some highlights:
The big news for investors... Apple announced it will repurchase an additional 75 million shares and is increasing its dividend 5% to $0.77/share.
Shares of Apple are up 5% in after-hours trading, and will likely lead the market even higher tomorrow. Investors love dividends!
If you bought Apple at the beginning of the year, when many investors were bailing out of it, you are up 34%.
chart from tradingview.com  Guess who owns owns 5% of Apple's outstanding shares?  More on Buffett and his latest deal, below... but it is worth noting that the FAANG Stocks, which have been market leaders in the first half of the year, are all experiencing sales slowdowns. The law of large numbers means it will be more and more difficult for companies like Apple, Amazon and Facebook to post the kind of sales growth that turned them into the juggernauts they are today.
Apple has an installed base of 1.4 billion. Yes, there are 7.53 billion on the planet today, so there is opportunity, but don't expect sales growth of 40-50% in the future.
Facebook just posted 25% quarterly sales growth, and it was the slowest in the company's history.
Here's a chart from Charlie Bilello, illustrating the trend.  Buffett Wades in Warren Buffett waded into the bidding war between Chevron and Occidental Petroleum for Anadarko Petroleum, by offering Occidental $10 billion to finance the purchase of the driller. Quick recap, Chevron bid $33 billion for Anadarko a few weeks ago, which seemed like a done deal until Occidental topped the bid last week, offering $38 billion.
Here's our full write-up on the deal: Why Buffett is Betting $10 Billion on Occidental
Buffett's $10 billion offer is contingent on Anadarko accepting the higher bid. If it does, Buffett and Berkshire Hathaway get the following:
Historical Context Buffett and Berkshire Hathaway are no strangers to the oil and gas world. Berkshire Hathaway owns a little under 1% of Canada's Suncor Energy, and owns the largest interstate natural gas pipeline company in the U.S., Northern Natural Gas.
Anadarko owns major oil fields in the Permian Basin, which straddles New Mexico and Texas. It also owns major fields in the Gulf of Mexico and Northern Africa.
Buffett has lamented that he and partner Charlie Munger can't find enough big acquisitions to suit Berkshire's enormous cash pile because valuations are too high for big companies, making them too pricey for the frugal pair. The potential Occidental/Anadarko deal presented a great opportunity to put that cash to work in a near risk-free proposition. Occidental only gets the money if the deal is approved. Once it is, Buffett and Berkshire get 100,000 shares of preferred stock and the right to buy 80 million more shares at a discount. Slick deal! Expect Buffett and Munger to get a lot of questions about this at the company's annual meeting in Omaha, Nebraska this weekend. Europe Might be OK At the end of 2018, Europe looked like it was on the verge of an extreme economic slowdown and a potential recession. Brexit was a mess (as it still is). Germany, the most powerful economy in the EuroZone was limping badly. New tariffs, courtesy of the U.S., were hurting Italy and Spain. The International Monetary Fund (IMF), had lowered growth forecasts from 1.8% to 1.6% for 2019, and that was considered optimistic.
But then, the European Central Bank got to work. It held interest rates at bay and offered cheap loans to banks to spur liquidity and business spending. France enacted a tax break and a tax bonus to boost consumer spending, and Brexit was pushed off all the way to the end of October.
The result, GDP for the Eurozone grew at a 1.5% rate in the three months ending March 31, up from the 0.9% growth for the three months ending December 31, 2018.
While the Eurozone is still trailing China and the U.S. in terms of GDP growth, the economic situation is better today than most people thought it would be. 
Charts courtesy of www.koyfin.com  General Electric showed some progress selling off assets and paying down its debt today. Seagate technologies makes hard drives and other hardware. The company reported a strong first quarter and said business looks good for the rest of the year. It also issued a cash dividend of $0.63 per share. Investors love dividends.  When you see "Alphabet", think Google. It has several share classes, and all of them were sold off hard today.  Word of the Day Why today: Because, today, President Trump implored the Federal Reserve to cut interest rates by 1% and resume quantitative easing, to stimulate the economy.
What is Quantitative Easing?  Today in History  April 20, 2009: Chrysler becomes the first U.S. automaker to file for Chapter 11 bankruptcy protection. At the time, Chrysler had about 35,000 U.S. workers, including 21,150 in Michigan. Under the deal the automaker struck with the Obama administration, Chrysler formed an alliance with Italian automaker Fiat SpA, which took a 20 percent stake in the company. At the time, Chrysler was owned by Cerebus Capital Management, a private equity firm. Its CEO was Robert Nardelli.
The federal government agreed to provide Chrysler with about $3.5 billion in debtor-in-possession financing to allow the company to pay bills and operate while in bankruptcy. Upon exiting bankruptcy, Chrysler received another $4 billion from the government in addition to loans from the Canadian government.
In 2011, Chrysler, now a part of Fiat, returned its first profit since 2006, and repaid the U.S. and Canadian Governments $7.6 billion.
source: https://www.mlive.com/auto/2009/04/chrysler_becomes_first_automak.html Chart of the Day: Alphabet Tumbles on Revenue Miss  Alphabet Inc. (GOOGL) tumbled well more than 8% at its worst on Tuesday. Driving this stock plunge was the company's earnings release after the market close on Monday, which revealed substantially slowing sales growth in the first quarter compared to previous quarters and estimates. Despite higher-than-expected earnings, Alphabet announced its slowest overall sales growth in several years.
This slowdown was driven largely by the company's key source of revenue: advertising. The company reported that ad sales rose a relatively tepid 15% in its fiscal fourth quarter, down from 24% in the same period a year ago. As a comparison, previous quarters have seen consistent revenue growth at or above 20%, which makes Monday's report stand out like a sore thumb. Making matters even worse, Alphabet executives were vague and, by some accounts, confusing when explaining the slowing sales growth. This confusion likely exerted even more pressure on the stock.
The chart above clearly shows Tuesday's large gap down from what was a new record high on Monday, just short of $1300 per share. Prior to the drop, GOOGL had been up 24% year to date and was entrenched in a sharp uptrend from the late-December lows. After the drop, the stock has reached back down to its 50-day moving average.
Where might the stock go from here? Tuesday's plunge may well have been overdone, but a slowdown in revenue is a clear, fundamental signal that something may be wrong or that Alphabet's business may be changing, especially since the company relies so heavily on advertising sales. If the stock remains below its 50-day moving average, the next dynamic target is around the key 200-day moving average. If that is unable to hold, Alphabet will likely have significantly further to fall.
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Tuesday, April 30, 2019
Warren Buffett's Slick Deal
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