What's Important in the Financial World (9/14/2012)

EU Finance Ministers Meet

The financial ministers of the euro area will meet over the next two days. There is a very wide range of topics that they might discuss. The gathering should begin with some optimism about ECB plans for aiding crippled economies in the region, although the aid comes with strings. Yields on the sovereign paper of weak countries have come down sharply, which will make it easier for them to fund deficits. But in the background are the recent figures on unemployment, business confidence and production throughout the area. And there have been increases in forecasts the entire region will fall back into recession. Almost no one would argue that the economies of Spain, Greece, Portugal and perhaps Italy won’t be hurt for years. But the most recent economic figures show that France already has slipped perilously close to GDP contraction, and Germany has begun to suffer significantly, too. As often as it is said, it is worth repeating: the real trouble in Europe cannot be solved by the European Central Bank or modest bailouts.

Nintendo Wii U Faces Challenges

The new Nintendo Wii U may be a super game console, but probably not super enough. The problem the product faces goes well beyond the success of competitive products from Microsoft Corp. (NASDAQ: MSFT) and Sony Corp. (NYSE: SNE). The Wii U will be available in the United States on November 18, so it will just catch the start of heavy holiday shopping. That may favor its success, but its lack of original features will hurt it. Owners of the new hardware will be able to make their own TV program lists and record programs through TiVo Inc. (NASDAQ: TIVO) and other time-shift machines. But many American homes already have set-tops that do these things. So, Nintendo has the disadvantage of a lack of originality. The other hurdle that Nintendo probably will not clear is the same one that Microsoft, Sony and most PC companies have. People have rapidly adopted portable smart devices as their preferred platforms for a number of daily functions — game playing among them. The likely rapid sales of the Apple Inc. (NASDAQ: AAPL) iPhone 5 and the success of the Samsung Galaxy S III make the challenge worse.

PC Companies Lag Rally

The markets’ broad rally has left some sectors behind, most notably the PC and PC-related hardware companies. The death of the platform, which has become broadly accepted by Wall St., has not been changed by the Fed’s effort to turn the economy. Dell Inc.’s (NASDAQ: DELL) stock price has hovered near $10.60 for the past five days. That number is barely above its 52-week low. Advanced Micro Device Inc.’s (NYSE: AMD) shares rallied a bit, but also stand near a 52-week low. The same is true for Hewlett-Packard Co. (NYSE: HPQ). The market believes more in the prospects of firms that sell more enterprise software. International Business Machines Corp.’s (NYSE: IBM) shares are near a 52-week high, as are Oracle Corp.’s (NASDAQ: ORCL) and EMC Corp.’s (NYSE: EMC). Among the PC firms, the smartphone continues to claim another set of victims.

Douglas A. McIntyre