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From when Ben Bernanke first gave his “QE2 is coming” Jackson Hole speech on August 27th, 2010 to the end of 2010: the S&P500 rose +19%, oil +16%, copper +32%, coffee +34%, corn +43%, and cotton +57%. (Source: Greenlight Capital)

Half of Egypt’s 80 million people live on less than $2 per day. When the cost of food and clothing go up 40-60% driven primarily by money-printing (AKA QE2), it is the people in poverty that suffer the most. It will not be surprising if we see more riots around the world driven primarily by food inflation. And who can blame them if they can’t afford to feed their families.

To make it worse, the biggest generator of jobs in the United States are from small businesses. Unfortunately small businesses do not have the pricing bargaining power of large public companies. With sky-rocketing raw material costs leading to lower profit margins, hiring is being put on the back-burner.

% of Profits Made in Q4

Big Lots 70%
Sears 57%
Best Buy 56%
Williams-Sonoma 53%
TIBCO Software 49%
Weight Watchers 19%
Coca-Cola 18%
Carnival 15%
Whole Foods 14%
Campbell Soup 9%

Source: Bloomberg

Here are some notes on how Paul Tudor Jones trades from Sebastian Mallaby’s great book “More Money than God“:

-Write a script. If the market follows it surf the wave, if not get out. He understood the importance of how investors were positioned and market psychology
-If you understand the other players in the market, you can identify trades with hugely attractive risk-to-reward. Identifying an illogical price anomaly was only the start of a trader’s thought process. The next step was to identify the trigger, a reason why the anomaly might correct; since otherwise it might persist indefinitely. The trigger could be an upcoming election, a psychological tipping point identified in the charts, or some factor that would change the behavior of large institutional investors. Whether consciously or otherwise, the great discretionary traders were acting on signal from this blend of inputs
-Always look for a trending market. Investors frequently react to information gradually. Once a move become overextended he is looking to profit from its reversal

Remember also to read my first blog post on Tudor: Lessons from Paul Tudor Jones

VeriSign reported Q2 EPS ex-items of 24c and revenue of $169 million from continuing operations. Analysts were expecting EPS of 24c and revenue of $166.5 million.

On the conference call the company gave 2010 guidance of 8-11% naming services growth, revenue of $665-685 million, non-GAAP gross margin of 77-80%, and non-GAAP operation margin of 40-41%. The street expected 2010 revenue of $769.7 million, but it is likely the number is not comparable due to the recent divestiture of the authentication business to Symantec for $1.28 billion in cash.

On July 27th, the Board authorized a share buy-back of up to $1.5 billion. The company bought $230 million of stock during the quarter. The company also instituted a 7% price increase on July 1st ($6.86 to $7.34 for .coms). 7.9 million new domain names were registered in Q2 representing growth of 13% y/y. The average duration of a registration is 1.17 years.

The stock traded up 2.86% to $28.80 in after-hours trading.

Games: $1.1 billion (-6%)
Hardware: $401.7 million (+5%%)
Software: $531.3 million (-15%%)
Accessories: $169.6 million (+6%)

HARDWARE SALES
DS: 510,700
Xbox 360: 451,700
Wii: 422,500
PlayStation 3: 304,800
PSP: 121,000

TOP 10 GAMES (by SKU)
Title / Platform / Publisher / Release Date / Units sold
1. Red Dead Redemption / 360 / Take-Two Interactive/ May-10 / 582,900
2. Super Mario Galaxy 2 / Wii / Nintendo / May-10 / 548,400
3. Red Dead Redemption / PS3 / Take-Two Interactive/ May-10 / 380,300
4. New Super Mario Bros. / Wii / Nintendo / Nov-09 / 200,900
5. Just Dance / Wii / Ubisoft / Nov-09 / 174,800
6. Wii Fit Plus (with Balance Board) / Wii / Nintendo / Oct-09 /
7.Toy Story 3 / DS / Disney Interactive Studios / Jun-10
8. UFC 2010: Undisputed / 360 / THQ / May-10
9. Lego Harry Potter: Years 1-4 / Wii / Warner Bros. / Jun-10
10. UFC 2010: Undisputed / PS3 / THQ / May-10

Games: $823.5 million (-5%)
Hardware: $241.5 million (-20%)
Software: $466.3 million (+4%)
Accessories: $115.7 million (+3%)

HARDWARE SALES
DS: 383,700
Wii: 334,800
Xbox 360: 194,600
PlayStation 3: 154,500
PSP: 59,400

TOP 10 GAMES (by SKU)
Title / Platform / Publisher / Release Date / Units sold
1. Red Dead Redemption / X360 / Take-Two / May-10 / 945,900
2. Red Dead Redemption / PS3 / Take-Two / May-10 / 567,100
3. Super Mario Galaxy 2 / Wii / Nintendo / May-10 / 563,900
4. UFC 2010: Undisputed 2010 / X360 / THQ / May-10 / 221,100
5. UFC 2010: Undisputed 2010 / PS3 / THQ / May-10 / 192,300
6. Wii Fit Plus w/ Balance Board / Wii / Nintendo / Oct-09
7. New Super Mario Bros. Wii / Wii / Nintendo / Nov-09
8. Alan Wake / X360 / Microsoft / May-10
9. Pokemon SoulSilver / DS / Nintendo / Mar-10
10. Skate 3/ X360 / Capcom / May-10

OVERALL DOLLAR SALES
Total: $766.2 million (-26%)
Hardware: $249.3 million (-37%)
Software: $398.5 million (-22%)
Accessories: $118.4 million (-9%)

HARDWARE SALES
DS: 440,800
Wii: 277,200
Xbox 360: 185,400
PlayStation 3: 180,800
PSP: 65,500

TOP 10 GAMES (by SKU)
Title / Platform / Publisher / Release Date / Units sold (only provided for top five)
1. Splinter Cell: Conviction / 360 / Ubisoft / Apr-10 / 486,100
2. Pokemon SoulSilver / DS / Nintendo / Mar-10 / 242,900
3. New Super Mario Bros. / Wii / Nintendo / Nov-09 / 200,300
4. Pokemon HeartGold / DS / Nintendo / Mar-10 / 192,600
5. God of War III / PS3 / SCEA / Mar-10 / 180,300
6. Wii Sports Resort / Wii / Nintendo / Jul-09
7. Battlefield: Bad Company 2 / X360 / Electronic Arts / Mar-10
8. Wii Fit Plus w/ Balance Board / Wii / Nintendo / Oct-09
9. Just Dance / Wii / Ubisoft / Nov-09
10. Super Street Fighter IV / PS3 / Capcom / Apr-10

Games: $1.52 billion (+6%)
Hardware: $440.5 million (-4%)
Software: $875.3 million (+10%)
Accessories: $206.8 million (+11%)

HARDWARE SALES
DS: 700,800
Wii: 557,500
Xbox 360: 338,400
PlayStation 3: 313,900
PSP: 119,900
PlayStation 2: 118,300

TOP 10 GAMES (by SKU)
Title / Platform / Publisher / Release Date / Units sold
1. God of War III / PS3 / SCEA / Mar-10 / 1.1 million
2. Pokemon SoulSilver / DS / Nintendo / Mar-10 / 1.02 million
3. Final Fantasy XIII / PS3 / Square Enix / Mar-10 / 828,200
4. Battlefield: Bad Company 2 / X360 / Electronic Arts / Mar-10 / 825,500
5. Pokemon HeartGold / DS / Nintendo / Mar-10 / 761,200
6. Final Fantasy XIII / X360 / Square Enix / Mar-10 / 493,900
7. New Super Mario Bros. Wii / Nintendo / Nov-09 / 457,400
8. Battlefield: Bad Company 2 / PS3 / Electronic Arts / Mar-10 / 451,200
9. Wii Fit Plus w/ Balance Board / Wii / Nintendo / Oct-09 / 429,600
10. MLB 10: The Show / PS3 / SCEA / Mar-10 / 349,200

Press Release
-Revenue $4.08B ($4.31B est.), +18% y/y, 10.5M units shipped (11M CS est.)
-EPS 1.27 (1.28 est.), gross margin 45.7%
-4.9M net adds, 41 million subscribers, ASP $311 ($320 CS est.)
-$5.11 net cash/share

Guidance
-Q1 revenue $4.25-4.45B (4.33B est.), EPS 1.31-1.38 (1.23 est.)
-Q1 11.2-11.8M units, ASP $305-310, gross margin 44.5%
-Q2 will have similar ASP as Q1
-2H-FY margins will be in low 40s with higher ASPs due to product mix/new launches

Conference Call
-units lower than they guided last quarter (10.6-11.2M) due to “one-time” carrier inventory adjustment
-inventory at 4 weeks, will be even lower in Q1
-10M activations in the quarter
-”If you saw the roadmap, you’d be blown away”
-launching new products hurts gross margins initially

Net-net
-Pros: good guidance for next quarter, ASPs guided higher in back half of year with new products
-Cons: revenue deceleration 41% last quarter to 18% y/y, ASPs weakening for now, inventory adjustment issues even in Q1
-At $71 after-hours, $5.11 net cash + $5 EPS power = 13.2Xs EPS

Key Questions
-Competitive landscape getting tougher with new Android phones from HTC/Sprint, HTC/Google, and Motorola. June launch of new iPhone with possible front-facing camera and higher resolution screen
-Can the RIMM OS compete as Google’s “free” Android OS gets better and iPhone App eco-system continues to ramp?
-Will carriers balk at monthly revenue share model at some point vs. “free” competition?