• I'd look to sell on the post-earnings gap up.

After going over the Apple (AAPL) report, I would be a $435-$445 seller on the post-earnings gap.

All the challenges to growth remain, and reward/risk is probably about even at the current share price of $439.

Limited upside/limited downside as far as the eyes can see ... from my perch.

• Apple's (AAPL) results are more or less in line for the quarter and guidance is weak, as expected.

The market's reaction -- like that of other similar reports -- is favorable and forgiving.

Thanks so much for reading my Diary. Enjoy your evening.

• Challenges remain.

My expectations for Apple (AAPL) remain unchanged.

Our channel checks remain worrisome.

I expect the company to miss slightly relative to reduced expectations for the current quarter and to miss more measurably on forward guidance.

The challenges that I outlined in my negative analysis on Apple in September 2012 remain the same.

The competitive landscape has dramatically changed, margins are vulnerable and it is unlikely that the company will introduce a new product that can move the needle in the foreseeable future.

• Another talking head checks brain at the door.

A talking head interviewed by Michelle (MC2) Caruso-Cabrera on CNBC says that the market is attractive because "expectations are low."

Memo to that talking head: Expectations are always low.

Guidance from corporations' managements and their investors relations departments are like Monty Python's "Twit Olympics" -- easy to beat.

• Although a couple of my recent shorts are heading lower.

Several of this week's new shorts -- namely, Yahoo! (YHOO) and McDonald's (MCD) -- are heading lower, though the overall market continues its up skein, which apparently started when I was Bar Mitzvahed a few years ago.

Limited trading today.

• Run, don't walk, to read legendary investor Steve Reynolds' latest commentary.

Legendary investor Steve Reynolds writes an irregular commentary, which, when he sends it out, is mandatory reading.

His most recent piece, which develops his thoughts on Fed strategy, is an exceptional read.

• The company's decision to become more price-competitive sparks a selloff.

Travelers (TRV) shares have sold off hard despite better-than-expected results.

The reason is the company's decision to become more price-competitive in the auto insurance business.

Over the short term, this could adversely impact Berkshire Hathaway's (BRK.B) shares, owing to its Geico subsidiary.

• Here we go again.

Here I go, here I go, here I go again (again?)

Girls, what's my weakness? (Men!)

Ok then, chillin', chillin', mindin' my business (word)

Yo, Salt, I looked around, and I couldn't believe this

I swear, I stared, my niece my witness

The brother had it goin' on with somethin' kinda...uh

Wicked, wicked (oooo) - had to kick it.

-- Salt-n-Pepa, "Shoop"

Here we go, here we go, here we go again.

It is likely that during the next few months leading up to the late October debt-ceiling deadline will contain a lot of mean language and continued threats of a shutdown of the U.S. government.

These sort of periods have led to a wicked correction in risk assets in the past. (For example, the S&P 500 dropped by 14% as a result of U.S. debt-ceiling issues and sovereign debt contagion in the Eurozone debt contagion.)

A friend described 2013 market as "Teflon-like" -- one that has ignored the coming debt-ceiling debate, China's issues and other headwinds.

Boehner Signals Clash With White House on Raising Debt Limit

By Roxana Tiron

July 23 (Bloomberg) -- House Speaker John Boehner signaled a clash with the White House and the Democratic-led Senate over raising the U.S. borrowing authority later this year.

"We're not going to raise the debt ceiling without real cuts in spending," Boehner, an Ohio Republican, told reporters in Washington today. President Barack Obama and Senate leaders have said they wouldn't accept anything short of a clean debt-limit increase.

Senate Majority Leader Harry Reid, a Nevada Democrat, said July 18 that Democrats are "not going to compromise on the debt ceiling."

Let's see if the impending October debt-ceiling confrontation becomes Kryptonite-like for markets that are, arguably, quite elevated.

• It's my new maket tell.

My new tell as an indicator for the market is Bank of America (BAC).

• A humorous debriefing.

Some humorous midmorning musings from Southwest Securities' Sir Mark J. Grant: 

"Fool! I am the Fates' lieutenant; I act under orders."

There are moments when you know the Fates are dancing around and playing games with our futures. I had left Chapel Hill, North Carolina after celebrating my mother's birthday and was heading home. My laptop was in my briefcase in the overhead bin. Upon arriving home I opened the briefcase and my laptop had been pilfered. Pinched!

Realizing that my IPad was not going to help much with using Bloomberg I grabbed the large laptop off my boat. Being too large to carry I packed it in my suitcase. Upon arriving at the Beverly Hills Hotel, where I am now, I opened my suitcase. There was a note from TSA that my luggage had been inspected. All of my clothes were there but no laptop. Pinched!

In twenty-four hours both of my laptops were stolen.

A town car to the Sony store and I have a new laptop. The problem, of course, is that there is nothing on this laptop. No Microsoft Word, no Bloomberg program. Painful would be the expression that best describes what the Fates have handed out to me. The vile creatures of Greek heritage are surely making an attempt to get even for my laments about their nation.

I suffer the slings and arrows.

In the meantime the Fates are also playing with the markets. Each day brings a new guess as to what the Fed might do. One day the consensus is this and the next day that and equity prices and yields scurry like Dungeness Crabs across the ocean's floor. There seems to be no real rhyme or reason for the movements though the gurus of days long past point to this or that for the justification.

Europe sputters, the mouths of the elite proclaim and beckon as China drips with numbers only believed if wearing rose colored glasses. Lost in a colorless sea we meander about waiting for some sign, some small note to drop from the heavens so we may find our way.

Our boat has lost its anchor. The Sea Sprites jump as the Fates allow. Be careful when floating with the tide!

• The survey's weakness points to a still mixed bag in manufacturing.

After seeing improvement in both the New York and Philly manufacturing surveys, the Richmond region saw a big drop. Its index fell to -11 from +7, well below expectations of +9. It's the weakest since January and was soft across the board.

Maybe it was the sequester impact that was the cause; other areas of the country that are not as defense-dependent wouldn't feel that as much. Likely due to the recent rise in commodity prices, raw materials and finished goods prices were higher. The overall outlook over the next six months was mixed, as shipments, new orders and capital expenditures improved from June but backlogs and the employment outlook fell.

Bottom line: While the Richmond manufacturing survey is never market-moving itself, its weakness, following the better New York and Philly reports, points to a still mixed bag in manufacturing. We'll see some more regional figures in coming weeks, and the consensus is the national ISM is expected to improve a touch in July to 51.7 from 50.9 in June. Europe is stabilizing, and that alone could lend itself to an above 50 print.

• I am running to the conference call.

Altisource Residential (RESI) had a nice earnings beat.

I am running to the conference call.

More later.

• Several nonrecurring items took down earnings.

Northwest Bancshares' (NWBI) earnings were weak, owing to several nonrecurring items.

I am a buyer at $13.50.

More to come.

• I am sticking with the short.

McDonald's (MCD) is slipping in an otherwise strong market.

I am sticking with the short.

• Three months.

Caterpillar (CAT) has just released its three-month dealer statistics.

• Let's take a look at the overnight and early-morning price action of the major asset classes.

The rundown:

• S&P futures +3;
• Nikkei +;
• European markets +;
• euro -;
• crude oil -$0.80;
• gold -$9 (after yesterday's outsized gain); and
• 10-year U.S. note yields 2.52%

Worth mentioning:

• Stocks trade sideways most of Monday and, as has been the custom, rallied near the close of the day's trading session.
• Again, Mr. Market ignored some disappointing economic news -- particularly on the housing front, as existing-home sales were weak and the prior month was revised lower).
• This Wall Street Journal article, "Housing Recovery Increasingly Prices Out First-Time Buyers," made the exact point I recently made on "Futures Now."
• The Chicago Fed National Acitivity Index missed expectations. It is a good broad-based economic indicator.
• I again added small to my growing net short exposure.
• I reshorted Yahoo! (YHOO) and initiated a short in McDonald's (MCD). 
• Chinese Premier Li is publicly drawing a line in the sand of economic growth by saying 7% is the bottom line for the nation's economy, according to Beijing News. In a country where central planning is still policy, growth can be anything they say it is, but from a market perspective, it assumes some policy pushback to further slowing of substance from here. The Shanghai index rallied 2% in response with shares traded in Hong Kong up 3.7%. Commodities aren't responding, though, as copper and crude are trading lower.
• Overseas news elsewhere is mostly quiet. French business confidence in July did rise to 95 from 93, 1 point above expectations, and it's at the highest level since April 2012. Over the past two years, this figure has ranged from a high of 110 in early 2011 to a low of 85 in October 2012. This data point joins others in Europe that show things have stopped getting worse, but the runway to growth is still a long one. Also of note, Ireland, another poster boy for the housing boom and bust, saw home prices rise year over year in June by 1.2%, the first year-over-year rise since January 2008. Home prices there fell 50% from top to bottom.
• The FHFA home price data and Richmond Fed manufacturing survey will be released today, and while not market-moving, they should point to continued home price gains and manufacturing improvement from June, as also seen in the New York and Philly regions.
• If you have access, I recommend Jeff Saut's morning commentary this morning, "Everyone's Gone to the Moon." It's a great read.
• Expected earnings: Lockheed Martin (LMT, $2.30); Ryder (R, $1.23); United Technologies (UTX, $1.58); DuPont (DD, $1.27); Altria (MO, $0.63); United Parcel Service (UPS, $1.13); Paccar (PCAR, $0.75); Illinois Tool Works (ITW, $1.10); Norfolk Southern (NSC, $1.49); AT&T (T, $0.68); Apple (AAPL, $7.31); Juniper Networks (JNPR, $0.25).

• Here it is.

Below is the complete update that was released by Monitise (MONI.L) this morning. It's good news, but the shares have slipped a bit over in London (-2%).

23 July 2013

Monitise plc

Trading update

Monitise continues substantial growth trend for fifth year running

Demand for Monitise services at all-time high

Payments and transfers initiated via Group's technology passes $40bn

Monitise plc (LSE: MONI.L) (the "Company" or "Group") announces an unaudited trading update following its 30 June 2013 financial year-end. Monitise's 2013 full-year results are scheduled to be published on 5 September 2013.

Highlights

· Full-year 2013 revenue of at least £70m, compared to £36m in FY 2012, representing another year of substantial growth across the Monitise Group.

· Gross margins for the year above 70% with H2 particularly strong owing to a number of significant licence deals (FY 2012: 66%).

· Net cash at year-end of £85.6m.

· Over 23 million registered users to the Monitise platform.

· Further growth in live transactions with 2.4bn transactions on an annualised basis.

· Payments and transfers initiated via Monitise technology now worth $40bn on an annualised basis.

· Monitise partners and clients in the US include Visa Inc., FIS, American Savings Bank, Webster Bank, BMO Bank of Montreal, Fifth Third Bank, PNC, US Bank, Frost Bank, UMB, First Citizens, Alerus Financial, Veridian and Desert Schools Federal Credit Union.

· New business wins and Mobile Money launches:

- Becoming the preferred mobile payments and commerce technology partner for Telefónica Digital, the global innovation arm of Telefónica, one of the world's largest telecommunications businesses with more than 316m subscribers in 24 countries. It operates under the O2, Movistar and Vivo commercial brands.

- A new three-year deal with Visa Europe spanning the development and deployment of Mobile Money payments and commerce solutions for Europe's leading financial institutions.

- The launch of BBM Money, a person-to-person mobile payments service launched through Monitise's Joint Venture with Astra International in partnership with Indonesian financial institution PermataBank and BlackBerry.

- Entering a mobile point of sale partnership with Lloyds Bank Commercial Banking to develop a suite of mobile card acceptance solutions for micro-merchants, start-ups and small business owners shortly after the launch of Monitise's new white-labelled mobile payments service for banks, mobile operators and acquirers.

- Launching an international partnership with Blackhawk Network, a leading prepaid payment network, to make mobile gift card purchasing available to consumers through certain banks and financial institutions.

- ICICI Bank joins Movida, our Indian Joint Venture with Visa Inc. to enable its payment card holders to pay bills, recharge prepaid airtime and buy cinema tickets via their mobile.

· At Mobile World Congress in February, Monitise joined Visa Inc. at a press briefing to showcase innovations that Monitise is delivering as it supports Visa's mobile strategies including:

- Functionality enhancements to the Visa DPS Mobile Card Management Services that launched last year.

- Developing a Remote Payments Platform in India ("Movida") to bring innovative mobile payments capabilities to hybrid markets around the world.

- Collaboration on Visa PayWave, Visa's contactless payments application.

- Supporting Visa's product development of V.me by creating the mobile wallet for smartphones that extends V.me's ecommerce acceptance to mobile devices.

· Significant corporate activity during the financial year also includes the integration of Clairmail Inc., the acquisitions and integrations of eMerit Solutions Limited and the Mobile Money Network Limited along with the August and December capital raises.

Monitise Group CEO, Alastair Lukies, said:

"This has been a hugely successful 12 months for Monitise. As well as the substantial revenue growth, numerous launches on a global basis, some very important new partnerships, the integration of three acquisitions and the raising of more than £100m, we have entered our new financial year with momentum at an all-time high.

I could not be more proud of every employee for their incredible endeavour and commitment to the journey. While the global Mobile Money landscape is growing as predicted, it is gathering momentum faster than anyone anticipated. Our strategic focus on enhancing our existing mobile banking and payments franchises with world-leading mobile commerce capabilities has proven to be very timely. We are delighted with the interest and demand we are seeing and the new partnerships we recently announced with Visa Europe and Telefónica Digital."

Monitise Group CFO, Brad Petzer, commented:

"This has been another strong year of growth for the company with momentum across the business. Monitise has continued to focus on investing in our people, platforms, internal systems and infrastructure as we scale the business for the next phase of growth. We believe we are very well placed with our strong balance sheet and proven platform to continue to strengthen and expand our market reach and benefit from the acceleration in Mobile Money globally."

About Monitise

Monitise (LSE: MONI) is a world leader in Mobile Money - banking, paying and buying with a mobile device. Leading banks, payments companies, retailers and mobile networks utilise Monitise's technology platforms and services to securely connect people with their money.

• The law of diminishing returns applies to each round of quantitative easing.

The massive rally in in the U.S. stock market has increasingly ignored that quantitative easing has become an ineffective stimulant to domestic economic growth.

Second-quarter 2013 Real GDP now looks to be under +1%, well below expectations when the quarter started. This follows only +0.4% in fourth quarter 2012 and +1.8% in first quarter 2013 ¿ both of which were well under forecasts as well. In nominal terms, the GDP growth rate will likely drop from +3% in first quarter 2013 to +2% in second quarter 2013.

As a result of weak nominal GDP, sales growth in both the first and second quarter of this year has been nonexistent.

Second-half growth expectations for the domestic economy (as well as the forecast by the Fed) remain in the area of +2%. Recent economic data suggest that these projections may also fall short.

Optimistic second-half forecasts incorporate the view that fiscal drag is receding, job growth is improving, the wealth effect should take hold (and trickle down) and that the U.S. housing market will continue to strengthen. As a friend reminded me, putting aside the fact that the consensus and the Fed always seem to be forecasting an acceleration that never seems to materialize, I am less certain that fiscal drag will moderate and that the housing recovery will continue to be strong.

Moreover, a favorable analysis of the jobs market fails to take into account the rising percentage of part-time (and low-paying) jobs and a generally anemic wage growth outlook. As well, the trickle-down theory fails to recognize that this effect is far less important than the income effect on overall spending. With the personal savings rate at a five-year low, it is unlikely that personal consumption expenditures will be strong enough to generate inventory rebuilding at the corporate level and, thus, a virtuous or self-sustaining economic cycle.

Of course, second-half projections also have to incorporate the non-U.S. picture. Unfortunately, the global economy still lacks an engine for meaningful recovery. China may no longer be the engine of growth that it has been in the past, and the eurozone's economy remains strained.

Finally, there is the issue of interest rates and our addiction to their low levels. Tapering appears around the corner, and we shall see if the equity market will be tolerant or if rising interest rates act as a headwind to growth and the expected rebound in second-half growth fails to materialize.

While second-half 2013 S&P 500 earnings have exceeded expectations (with year-over-year growth of close to +5%), much of that improvement has been confined to the financial sector, where share buybacks and reserve reversals have buoyed results.

Importantly, if we exclude financials (which benefited from buybacks and lower loan-loss provisions or reserve releases) from overall results, both first- and second-quarter earnings growth are barely expanding and are likely to be flat to down.

In other words, the quality of earnings growth and the absolute rate of growth in profits (excluding financials) thus far in 2013 have been poor.

Rather than take down valuations reflecting this poor earnings quality, the weak absolute level of nonfinancial earnings and tepid sales growth, to my surprise, market participants have elevated valuations.

In fact, the year-over-year change in the S&P 500's P/E multiple has been roughly 4.2x the average year-over-year increase in the last 35 years.

I now believe that 2013 S&P profits will total about $107 a share and 2014 S&P profits will fall in the range of $109-$110 a share. These estimates, though slightly higher than I expected when the year began, are about $1-$2 below 2013 consensus projections and $5-$6 below 2014 consensus projections.

The previously mentioned domestic economic growth dynamic calls into question whether the U.S. is in a self-sustaining recovery or whether our economy is still, four years after the end of the recession, dependent upon continued and unprecedented easing in monetary policy and the maintenance of zero interest rates.

Based on the dialogue over the last two months, it is clear that both the Fed and other central banks are fearful of spooking the markets. Nevertheless, it is also clear that global bond rates have likely completed a three-decade decline.

Given these conditions mentioned in the body of today's opening missive, it is increasingly clear that the benefits of quantitative easing have been diminished with each round.

I continue to believe that the recent evidence of slowing economic growth (and the uncertainty of a second-half acceleration), flat sales and nonfinancial earnings combined with the reduced effect of quantitative easing are the ingredients for lower valuations and share prices.