What's Important in the Financial World (1/10/2012) Consumer Electronics Show, EU Hampers Earnings

CES – The Consumer Electronics Show is awash with new gadgets. Most will never see the light of day. Many will trigger tens of millions of dollars in manufacturing and marketing costs for the companies that invented them. At the top of the list of extremely expensive launches are the Nokia (NYSE: NOK) Lumia smartphone and the Sony (NYSE: SNE) 55-inch “Crystal LED Display” screen TV. The Sony product has six million LEDs in its crystal display. That terminology is too complex for most consumers. Sony has a history of lavish introductions of new products. So does Nokia. The problem each firm has is that buyer interest rarely matches management enthusiasm. Nothing about Nokia’s new phone or Sony’s new TV is likely to change either company’s track record.

Chinese Imports Slow – China’s trade growth reached a tw0-year low in December. That puts it near to its low point in the middle of the Great Recession. The annual export growth rate was 13.4%. But the media and analysts pointed to import growth as a matter for greater concern. It was up only 11.8% year-over-year. The figure probably is a sign that China needs less raw material to feed the factory systems that engender its exports. This information, taken together with the rapid slowdown in most of the EU and Japan, is the latest sign that a new recession already has begun in certain parts of the world.

Bank of America Layoffs – Bank of America (NYSE: BAC) continued what seems like an endless period of layoffs. Many bank analysts still argue that the financial firm is in worse shape than management will admit. Rumors are that the bank will fire 20% of the managing directors in its Asia investment bank division. One reason for the action may be a slight slowing of the region’s economic activity. However, the layoffs are large enough to indicate that Bank of America’s troubles are worse than most of its competitors.

EU Drag on Earnings – Corporate signals that Europe has become a trouble spot for them continue to grow. Alcoa (NYSE: AA) released poor earnings and blamed its EU business for much of the problem. Philips, one of the largest consumer electronics and lighting firms in the world, warned on its fourth-quarter numbers. It said the moribund GDP growth in Europe was to blame. The news from the two companies will add to investors’ focus on corporate earnings as they are released over the next two months. And with those earnings will come earnings forecasts, which will signal whether the damage from the EU region’s problems will extend well into this year.

Douglas A. McIntyre