Archive for 2013

• Morning News: February 21, 2013
  Eddy Elfenbein, February 21st, 2013 at 7:44 am

  Euro-Area Manufacturing, Services Contraction Worsens

  Obama Rated at 3-Year High in Poll, Republicans at Bottom

  Gasoline Futures Fall From Highest in More Than Four Months

  Fed Signals Possible Slowing of QE Amid Debate Over Risks

  Fed Comments Rattle Markets

  Wal-Mart Holiday Profit Rises Despite Lackluster Sales

  Office Stores’ Merger News Jumped Gun

  New York Times Co. Puts Boston Globe Up for Sale

  As Construction Begins Rebound, Looming Labor Shortages Raise Concern

  Lego Profit Soars 35% as Toy Bricks for Girls Drive Sales Growth

  Christie Lets Atlantic City Bet Ride as Revel Reorganizes

  MGM China Rises on Special Dividend

  With PlayStation 4, Sony Aims for Return to Glory

  Joshua Brown: QOTD: Advice is Not a Transaction

  Roger Nusbaum: Understanding the Bull Market

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• Morning News: February 20, 2013
  Eddy Elfenbein, February 20th, 2013 at 7:01 am

  King Defeated in QE Vote as BOE Broadens Policy Debate

  Monti’s Market Votes Worthless as Berlusconi Gains

  Greek Unions Walk Out in Fresh Austerity Protest

  S&P Leaves Japan Rating Unchanged as Abe’s Task Seen Critical

  Gasoline Pump Prices Soaring on Refinery Repairs, Oil Rally

  With Cutbacks Days Away, Obama Tries to Pressure G.O.P.

  Are REITs Overexposed To The Big Box Office Supply Chains?

  Dell Sales Top Estimates as Company Prepares for Buyout

  Taking a Longer Look at Buffett and Berkshire’s Latest 13F Filing

  Marriott Fourth-Quarter Earnings Increase on U.S. Demand

  Staples May Be Winner in Office Depot-OfficeMax Merger

  Credit Agricole Posts Record Fourth-Quarter Loss

  Maker’s Mark Reverses Decision to Water Down Whiskey

  Jeff Carter: What Should We Do About Higher Gas Prices?

  John Hempton: Linn Energy: A Bizarre Definition Of Distributable Cash Hides Really Clapped Out Assets

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• Is Healthcare Inflation Simmering Down?
  Eddy Elfenbein, February 19th, 2013 at 11:03 pm

  On Thursday, the government will release the CPI numbers for January. I’m not worried about overall inflation which has been extremely tame. But deep within the report, I’m very curious to see how healthcare costs are doing.

  As you’re probably aware, healthcare costs continue to rise every year. Here’s a look at the relative inflation of healthcare. This is the healthcare component of the CPI divided by core CPI. In other words, this isn’t just inflation — it’s the healthcare inflation that’s on top of inflation.

  

  This is a very important. Nearly every issue facing our economy and finances at some point intersects with the problem of rising healthcare costs. If that is somehow brought under control, the outlook completely changes.

  There’s some emerging evidence for optimism on the cost containment front (NYT: “Slower Growth of Health Costs Eases Budget Deficit“). Here’s the same chart above, but I’ve zoomed in to show the last few years.

  

  The line is still rising, but the last few dots are rather flattish. This is obviously far too early to call a trend, but it’s something worth keeping our eyes on.

• Nicholas Financial to Pay 12 Cent Dividend
  Eddy Elfenbein, February 19th, 2013 at 8:05 pm

  Perhaps I misinterpreted this, but I was under the assumption that Nicholas Financial‘s ($NICK) monster dividend was in place of its dividends for 2013. Apparently not. NICK announced another 12 cent quarterly dividend today. The dividend will be paid on March 29th to shareholders of record as of March 22nd.

  Peter L. Vosotas, Chairman and CEO noted, “Our capital position and continued confidence in our earnings capability played a large part in the Board of Director’s decision to declare a cash dividend.” Subject to market conditions and profitability targets, the Company anticipates it will continue to declare quarterly cash dividends in the future, however no assurances can be given.

  The stock rose to $13.25 today. That’s a yield of 3.62%.

• Berkshire Hathaway Breaks $150,000
  Eddy Elfenbein, February 19th, 2013 at 7:56 pm

  On Friday, for the first time ever, shares of Berkshire Hathaway ($BRKA) closed over $150,000. In December 2007, the stock popped its head above $150K a few times, but was never able to hang on by the close. Then came bad times. Not that long ago, September 2011 to be precise, BRKA dropped below $100,000.

  Since 1998, Berkshire has lost a lot of its historical super mojo. Still, it’s been a good performer. Berkshire first closed at $15,000 on May 27, 1993 — almost 20 years ago. The stock first broke $1,500 only eight years before that on March 19, 1985.

• Total Investor Yield
  Eddy Elfenbein, February 19th, 2013 at 12:40 pm

  I mentioned this before but Shawn Tully has an interesting article on the concept of total yield — the dividend yield plus buybacks.

  As I’ve written many times before, I’m not a fan stock buybacks. As a shareholder, I’d much rather have the cash in hand. A major issue is that too many companies wash away any benefit of share buybacks with massive executive stock compensation.

  In theory, I really like the idea of total shareholder yield, but I’m afraid that it needs to be adjusted to benefit companies that primarily use share repurchases to benefit shareholders. By the way, DirecTV ($DTV) is a good exmaple of a company that truly lowers its outstanding shares.

• Inflation Is a Tax on Capital
  Eddy Elfenbein, February 19th, 2013 at 11:36 am

  Roben Farzad writes at Bloomberg Businessweek:

  Longtime readers of BusinessWeek (now Bloomberg Businessweek) will recall its Dewey-Defeats-Truman moment: A 1979 A 1979 cover story that heralded the “Death of Equities: How Inflation is Destroying the Stock Market.” Inflation was the bogeyman of the late 1970s and early ’80s, an oft-cursed scourge to the average family’s buying power. The problem with BusinessWeek’s headline declaration is that it came shortly before the Paul Volcker Federal Reserve vanquished runaway inflation, setting up an 18-year bull market.

  Since that bull maxed out 13 years ago, the market has pretty much gone to hell and back, twice. While inflation has been consistently in the low single digits, it hasn’t been as irrelevant as many investors imagine. Indeed, like termites coring out a wooden house, rising prices have already set them back a long way.

  “Inflation,” says Crossing Wall Street‘s Eddy Elfenbein, “is a tax on capital and it slowly eats away at your portfolio. Even a low rate of inflation—say, 3 percent per year—compounds to 50 percent in less than 14 years. It’s proverbial running to stand still.”

  In simple terms, if you were to take the Standard & Poor’s 500-stock index’s fin de siècle high and factor in the subsequent growth in the consumer price index, the market is 27 percent below its inflation (as the government defines it)-adjusted high. So much for the few percent we need to hit that market record you’re hearing so much about of late.

• Is the Sequester Really Going to Happen?
  Eddy Elfenbein, February 19th, 2013 at 10:51 am

  We’re getting down to the wire and if nothing is done, automatic spending cuts will go into effect. The conventional wisdom seems to think the cuts will happen.

  Fortunately, I have a better tool than the conventional wisdom and that’s the stock market. Here’s a look at the Spade Defense Index divided by the S&P 500. This is a key metric because much of the cuts will hurt the Pentagon.

  

  Defense stocks started to lag the market at the beginning of the year, but have reversed course somewhat this month.

• Medtronic Earns 93 Cents Per Share
  Eddy Elfenbein, February 19th, 2013 at 10:35 am

  The stock market is doing well this morning. The S&P 500 has been as high as 1,526.82, which is yet another multi-year high. The market is trying to extend its weekly winning streak to eight. This is a good way to start.

  Investors have impressively run past a lot of minor negatives that easily could have hurt stocks in previous markets. The earnings news continues to be decent. The latest numbers show that 388 companies in the S&P 500 have reported Q4 earnings. Of that, 69.8% have beaten expectations. Compare that with the long-run average of 62%. Earnings are up 5.6% from one year ago, and 1.9% above expectations.

  Our latest Buy List stock to report earnings was Medtronic ($MDT). For their fiscal third quarter, Medtronic earned 93 cents per share which was two cents better than Wall Street’s forecast. That’s an increase from 84 cents per share a year ago. Sales rose 2.8% to $4.03 billion which was $10 million below forecasts.

  Medtronic once again reiterated their full-year earnings forecast of $3.66 to $3.70 per share. For clarity, Medtronic’s fiscal year ends in April. MDT is our first Buy List stock in the January-April-July-October cycle to report earnings. The shares are currently down about 3.3% although I don’t see why. In today’s earnings release, the CEO said:

  “We are playing a leading role in transforming global healthcare by implementing our long-term strategies of economic value and globalization,” said Ishrak. “We are only at the beginning of establishing our track record, but we believe that crisp execution of both our baseline and long-term growth strategies, combined with strong and disciplined capital allocation, will enable us to create long-term dependable value in healthcare.”

  Shawn Tully at CNN/Money makes a good point about Medtronic. The dividend yield is 2.3% and the repurchases come to 3.7% for a total shareholder yield of 6.0%.

• Morning News: February 19, 2013
  Eddy Elfenbein, February 19th, 2013 at 6:50 am

  Merkel Cites East German Lessons for EU’s Problem States

  German February Investor Confidence Jumps to Three-Year High

  Draghi Seeks to Ease Talk of Global Currency War

  Yen Rises After Aso Rules Out Japan’s Foreign-Debt Buying

  Chinese Army Unit Is Seen as Tied to Hacking Against U.S.

  Japan’s Orix Buys Dutch Asset Manager

  Swelling U.S. Labor Force Keeps Fed at Ease

  Get A Social Security Check? Treasury Says It’s Time To Go Electronic

  Buffett Cash Makes General Mills to Grainger Target

  Reader’s Digest Brand is Key to Strategy in Bankruptcy

  Xstrata Unit Wins Environmental Approval For $5.9 Billion Philippine Mine

  Novartis Scraps Non-Compete Payment to Departing Chairman

  Paulson Leads Funds to Bermuda Tax Dodge Aiding Billionaires

  Cullen Roche: Barron’s Doesn’t Do Monetary Realism

  Credit Writedowns: Will The Corporate Sector Expansion Peak In Spring Once Again?

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