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MSFT: sold 39 million 360 consoles world-wide, 20 million are on Xbox Live. 500 million 360 games have been sold since launch, 13 per console

SNE: last five weeks of 2009 sold 3.8 million PS3 systems, up 76% y/y. There are 38 million registered PSN accounts world-wide. PS3 can run 3D games and movies after a firm-ware update

GME: reports 9 week holiday sales for $2.86 billion, flat y/y. Comp store sales -8.6%. They had shortages of New Super Mario Bros Wii, Nintendo Wii, and PS3. New software +4% y/y. Top five sellers were Call of Duty: Modern Warfare 2 from Activision, Ubisoft’s Assassin’s Creed II, Nintendo’s New Super Mario Bros. Wii, Left 4 Dead 2 and Dragon Age: Origins from Electronic Arts. Hardware -8% y/y with price cuts and decline in units y/y. Used products +10% y/y.

Q4 2009 EPS 1.25-1.29 vs. 1.57 est. (comp -8.5 to -9.5), full year 2.23-2.27 vs. 2.55 est. (comp -8 to -9).

Although we are still in the planning stages for our fiscal year 2010, we expect that strong PlayStation 3 demand, an exciting title line-up, combined with anticipated economic recovery, will all be factors that should drive software growth and therefore GameStop earnings in 2010.

Note: Please check out the GME channel check I posted on December 28th, 2009 (Link). It nailed the shortages in PS3 and New Super Mario Bros. Wii and talked about the big promotions right at end of December, which was kind of fishy and wound up hurting their margins.

Bit-tech has a very good interview with Richard Huddy (Link). Excerpts below.

bit-tech: IF – given we don’t know yet – when Nvidia’s Fermi cards finally arrive they are faster than your HD 5970…
RH: Well if it’s not faster and it’s 50 per cent bigger, then they’ve done something wrong.

bit-tech: Well if it is then, do you have something else up your sleeve to compete?
RH: Let me say that I suspect that through 2010 it’s possible there will be moments where we don’t have the fastest graphics card, but I expect that for the majority of 2010 we’ll have the fastest card you can buy. I’ve good reason for believing that but I can’t talk about unannounced products or any of the stuff we’re doing to secure that.

bit-tech: I bet you must sell plenty because we keep getting asked where can we find a HD 5850 all the time.
RH: Actually we’re working really hard on that supply and the numbers are going up quite dramatically – we’ve sold over 800,000 units of DirectX 11 hardware already.

From his January 2010 investment outlook (Link)

Here’s the problem that the U.S. Fed’s “exit” poses in simple English: Our fiscal 2009 deficit totaled nearly 12% of GDP and required over $1.5 trillion of new debt to finance it. The Chinese bought a little ($100 billion) of that, other sovereign wealth funds bought some more, but as shown in Chart 2, foreign investors as a group bought only 20% of the total – perhaps $300 billion or so. The balance over the past 12 months was substantially purchased by the Federal Reserve. Of course they purchased more 30-year Agency mortgages than Treasuries, but PIMCO and others sold them those mortgages and bought – you guessed it – Treasuries with the proceeds. The conclusion of this fairytale is that the government got to run up a 1.5 trillion dollar deficit, didn’t have to sell much of it to private investors, and lived happily ever – ever – well, not ever after, but certainly in 2009. Now, however, the Fed tells us that they’re “fed up,” or that they think the economy is strong enough for them to gracefully “exit,” or that they’re confident that private investors are capable of absorbing the balance. Not likely.

Additionally, if exit strategies proceed as planned, all U.S. and U.K. asset markets may suffer from the absence of the near $2 trillion of government checks written in 2009. It seems no coincidence that stocks, high yield bonds, and other risk assets have thrived since early March, just as this “juice” was being squeezed into financial markets. If so, then most “carry” trades in credit, duration, and currency space may be at risk in the first half of 2010 as the markets readjust to the absence of their “sugar daddy.” There’s no tellin’ where the money went? Not exactly, but it’s left a suspicious trail. Market returns may not be “so fine” in 2010.

I guess Bill Gross is saying my blog post last night was RIGHT ON THE MARK.

There’s a lot of conspiracy theories out there about how the government is manipulating the stock market upwards (I’m looking at you Zero Hedge) by buying stock futures, etc. However a light bulb went off in my head after I read this Time magazine interview with Pimco’s Bill Gross on how simple the explanation is.

But secondly, there’s a ripple affect. Just speaking about Pimco’s general portfolio strategy, we’ve sold our agency mortgage securities, Fannie and Freddie, in the billions to the willing check of the Fed. They’re buying a trillion dollars of them, or have over the past 9-12 months, and so we sold them a lot of ours. Now, what did we do with the money? We bought Treasuries, we bought corporate bonds, and so the bond markets in general have benefited, as have stocks because this available money effectively flows through the capital markets. So it’s a trillion-and-a-half dollar check that won’t be there as the Fed withdraws from the market. How that affects the markets, I just don’t know. I’m not eagerly anticipating the answer, but I think it holds some surprises in 2010, not just in mortgage securities but stocks as well.

So basically Bill Gross, the largest fund manager in the world, explains it to us. The Fed has been buying $1.5 trillion worth of securities from financial firms at unnatural supply/demand and some would say inflated prices, who then use this big pile of money they get from selling to the Fed to buy other stuff like corporate bonds and stocks. This is $1.5 trillion that did not exist before. It is printed money that is flowing through the financial capital markets lifting all boats. A simple explanation for the markets’ rise.

To prove this let’s look at the timing of Fed mortgage backed security buy program announcements. In 2008 the SP500 bottomed on November 21st, 2008. I remember things being very scary then. The Fed then announced their first $500 billion mortgage backed security (MBS) buy program on November 25th, 2008 (Link). The market then rallied 25%+ off the low and topped on January 6th, 2009.

The market then tanked again and bottomed on March 6th, 2009. I remember things being even scarier then. The Fed decided to add $750 billion to the MBS buy program to the original $500 billion and $300 billion of long-term Treasuries for a total over $1.5 trillion of buying power on March 18th, 2009 (Link). In time this $1.5 trillion of printed money worked its way through the system, hence the amazing 70%+ rally.

The lesson is the next time the Fed announces another $500 billion+ capital markets buy program buy the market hand-over-fist, although I doubt this will happen anytime soon given the political climate. And the $1.5 trillion of securities that the Fed bought? Here’s what Bill Gross says about that.

They won’t sell — it’s a near impossibility to unload what they’ve purchased over past 12 months.

Bill Gross was interviewed in Time. Excerpts below:

Where do you see the economy going over the next 6 to 12 months?
The economy should be relatively strong in the first half of 2010 then weaken in the second half. That’s not to say we’ll return to recession but we’ll see weakness as opposed to a continuation of what will probably be a decent first half.

What will make the first half of 2010 so good?
The first half will be dominated by government stimulus and by inventory accumulation or a lack of [inventory] liquidation among businesses. I expect nothing from consumer [spending] and nothing really from housing or really any of the standard cyclical leading sectors. It’s hard to put a number on GDP growth rates, but let’s say 4% in the first half and then 2% in the second half, which would basically call for some additional help.

What does this say about the Federal Reserve’s hopes to start pulling its added liquidity out of the markets, either by raising short-term rates or just getting out of buying bonds, which has been keeping long rates low?
I think the Fed’s statements suggest that they really want to exit in some fashion from the buying program. The first step in that direction, logically, would be to stop buying and our sense is that they’re at least going to try that. But based on our forecasts for the second half of the year they may have to re-initiate it, and that will be difficult to do once they stop because it then becomes a political hot potato.

All that said, I think they’ll stop buying mortgage agency securities, and the trillion-and-a-half dollar check that’s been written over the past 9 to 12 months basically disappears.

Because they might have to restart the buying program later?
Yes, I think the Fed wonders about this as well. But you have to understand that the Fed’s probably under political pressure — such as the hearings for new regulation of the Fed, the growing public unease about the supersized Fed balance sheet, etc.. The Fed’s expanded balance sheet is not something that I consider to be a problem, but I think the market does — and so the Fed will probably be working in the direction of pulling some of the liquidity out of the marketplace. They won’t sell — it’s a near impossibility to unload what they’ve purchased over past 12 months. But they’ll at least stop buying.

Won’t that put upward pressure on interest rates?
I think it will. I mean the mortgage market would be your first place to look in terms of something that’s overvalued that would become normalized. Nobody knows what the Fed’s buying is worth — we think about half a percentage point on rates, but we don’t know.

But secondly, there’s a ripple affect. Just speaking about Pimco’s general portfolio strategy, we’ve sold our agency mortgage securities, Fannie and Freddie, in the billions to the willing check of the Fed. They’re buying a trillion dollars of them, or have over the past 9-12 months, and so we sold them a lot of ours. Now, what did we do with the money? We bought Treasuries, we bought corporate bonds, and so the bond markets in general have benefited, as have stocks because this available money effectively flows through the capital markets. So it’s a trillion-and-a-half dollar check that won’t be there as the Fed withdraws from the market. How that affects the markets, I just don’t know. I’m not eagerly anticipating the answer, but I think it holds some surprises in 2010, not just in mortgage securities but stocks as well. We could miss the money, put it that way.

Germany looks interesting to us. Germany has problems, but it’s in a much better budget situation than the U.S. because of a constitutional amendment three months ago that forces a balanced budget in four years.

-Wii consoles over 3 million units sold in U.S. December 2009 vs. 2.15 million in 2008 (Note: $50 price cut to $199 in September)
-New Super Mario Bros Wii sold nearly 4 million units to date in U.S.
-DS and DSi will post all time calendar year U.S. record for a console
Source

I sat through the launch webcast and wrote down some thoughts.

Winners
-T-Mobile: they have a hot iPhone buzz worthy product to sell exclusively at launch
-Consumers: finally some decent competition to Apple’s iPhone is always a good thing. Google Nexus One has a faster CPU processor, better 5 mega-pixel camera with flash and video recording, 2 microphones for noise-cancellation of background noise, expandable flash storage with Micro SD slot, voice-to-text feature in the OS where you can literally “speak your tweets”, Adobe flash video support, and the ability to use multiple apps at the same time (huge)
-Verizon: in a few months they will also have a iPhone worthy competitive offering
-Google: launching the best or at least second best smart-phone on the market, which will help their Android mobile OS gain market-share to be at least the #2 player for good
-HTC: manufacturing and being instrumental in the design of Google Nexus One. This product may sell tens of millions of units for them

Losers
-Apple: some buyers will definitely choose Android now over iPhone for the new features mentioned above
-Research in Motion: their java OS looks older and older each day. The market is clearly discounting the fact that some day in the future an Android OS phone with a keyboard is going to eat their lunch
-Palm: is anyone going to buy a Pre if a faster, more capable, with far more apps Google Nexus One is available on Verizon?
-Motorola: although Google did give them the carrot of selling Droid phones on Google’s phone web store, Droid on Verizon is the big loser when Google Nexus One for Verizon launches. For the best Android smart-phone contest, Nexus One crushes Droid at least in its current form

-3.7 inch WVGA AMOLED touch screen
-800X480 pixels, 100K to 1 contrast ratio, 1ms response rate
-5 megapixel camera, autofocus, LED flash
-video recording 720×480 20 fps or higher
-HSDPA 7.2Mbps, HSUPA 2Mbps, GSM/EDGE, Wi-Fi, stereo Bluetooth 2.1+EDR
-up to 10 hours talk time 2G, up to 7 hours talk time 3G
-standby up to 290 hours 2G, up to 250 hours 3G
-internet up to 5 hours 3G, up 6.5 hours Wi-Fi
-video playback up to 7 hours
-audio playback up to 20 hours
-Snapdragon Qualcomm QSD 8250 1 Ghz
-Android 2.1 OS
-512MB flash, 512MB RAM, 4GB Micro SD card (expandable to 32GB)
-AGPS receiver
-119×59.8X11.5 mm, 130 grams with battery, 100 grams w/o battery
-3.5 mm stereo headphone jack, clickable trackball, micro USB port
-2 microphones for noise cancellation of background noise during calls

-available today $179 with 2 year T-Mobile contract or $529 un-locked
-T-Mobile contract $80/month with 500 voice minutes, unlimited SMS/internet
-Verizon Wireless version coming soon
-usable on AT&T, but no 3G

-buying household product manufacturers, drug makers, computer companies
-Traxis fund up 38% in 2009, down 40% in 2008

“Big capitalization, high-quality U.S. stocks are very, very cheap compared to everything else,” said Biggs, who cited Procter & Gamble Co. and Johnson & Johnson in a Dec. 29 interview. He called commodities “an investment vehicle for maniacs” that will probably fall in 2010. “I don’t know what’s going to happen in the second half of next year. I’m just saying that in the next three to six months, the economy is going to keep recovering and stocks are going to go up again.” Source

-estimated to hit $1.02 billion since December 18 release
-5th film ever to break the $1 billion barrier. Fastest movie in history to do so
-probably surpass #2 movie Lord of the Rings: The Return of the King ($1.13 billion) within a week
-#1 movie of all time is Titanic ($1.84 billion)
Source