ELAM: Cloudy future for software

Yesterday, Thursday, Salesforce 20% share price drop subtracted 352 points from the Dow Industrials. Revenue for the quarter ended, April rose a mere 10.7% from a year earlier, below analysts’ forecast. Salesforce Chief Executive Marc Benioff used the word ‘incredible’ 35 times during a conference call.

Friday’s Wall Street Journal

Salesforce’s president used the word ‘compression’ to describe closing deals which took longer and grew smaller if they closed at all. The reality is that investments are pouring into Artificial Intelligence which leaves other fields like cloud computing chasing smaller deals.

I suspect that lots of money is being spent on projects for which the outcome is at best vague to uncertain. The Big Four CPA firms are pouring millions into new audit packages. Will it stem their many audit blow-ups?

A Wall Street saying is that in a bull market all news is bullish. Conversely in a bear market, news tends to be bearish. Two years ago the market would have brushed off a mere 10.7% increase in revenue. One would think the CEO could put a better spin on a revenue increase but no. He was so caught up in the positive mood of the cloud software, that he too was disappointed in a solid revenue increase. The thing to remember is that there will be many earnings disappointments as the bear emerges.

The market is not as strong as cable business news would have you believe. Since January the percent of SPX stocks over their 50-day moving average has dropped form 90% to 43.8%. Only a handful of tech stocks are holding the average up, Salesforce’s surprise decline is a hint of things to come in the tech sector.

Meanwhile twelve Senate democrats called for an investigation into “Big Oil.” They claim Pioneer Resources’ CEO engaged in collusive activity with OPEC that would potentially raise oil prices. Given the worldwide market in exchange traded oil contracts that is really a stretch. But it does draw attention from the administration failed billions of EV subsidies for cars the public are not buying.

Crude oil remains range bound between $75 and $80. I remain optimistic for higher prices.

Gold and silver shares remain strong. Given that the U.S. is spending one trillion dollars it does not have every 100 days, is it any wonder?