Archive for 2014

• Morning News: April 16, 2014
  Eddy Elfenbein, April 16th, 2014 at 6:46 am

  U.K. Unemployment Falls to 6%

  Lehman Freeze Evoked as Russian Bond Sale Scrapped Again

  China GDP Growth Slows to 7.4%

  Slackening Growth Pressures Beijing

  Stumbling S&P 500 Reaches Worst Stretch of Election Cycle

  Alibaba Earnings Surge Boosts Valuation Ahead of IPO

  Intel’s Mobile-Chip Progress Falters as PC Market Stabilizes

  Credit Suisse Net Falls 34% on Lower Investment Bank Profit

  Rolls-Royce, Daimler Price Stake at $3.3 Billion

  Smaill is Beautiful for Coca-Cola as Volumes Soar in China

  Burberry Warns of ‘Material’ FX Headwinds This Year

  CITIC Pacific in $36.5 Billion Deal to Buy Parent’s Main Business

  Brazil’s Star, Petrobas, Is Hobbled by Scandal and Stagnation

  Roger Nusbaum: Time to Get Real About Income Investing

  Jeff Carter: How Do You Get to The Next Round?

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• Today’s Inflation Report
  Eddy Elfenbein, April 15th, 2014 at 1:12 pm

  This morning’s consumer inflation report showed that prices rose 0.2% last month. Economists were expecting an increase of 0.1%. The “core rate,” which excludes food and energy prices, rose 0.1%.

  It’s too early to make such a call with confidence, but we may be seeing the end of disinflation, the falling rates of price increases.

  The chart below shows the monthly changes for headline inflation (blue) and core inflation (red). The monthly changes are annualized.

• Me at the Motley Fool
  Eddy Elfenbein, April 15th, 2014 at 8:19 am

  Here’s part of a talk I gave at the Motley Fool.

• “The Iron Law of Behavioral Finance”
  Eddy Elfenbein, April 15th, 2014 at 8:02 am

  I wanted to share this passage from Cullen Roche of Pragmatic Capitalism:

  As regulars will know, I am not a big fan of trying to claim that the market is worth “this much”, and investors think it’s worth “this much” therefore you need to be bullish or bearish. The whole concept of “value” appears nebulous to me.

  So, I’d introduce the Iron Law of Behavioral Finance – the market can remain irrational longer than you can remain solvent. You might very well know the true “value” of the market at present. You might have some software or indicator that tells you precisely what the market is worth. But if the rest of the market doesn’t agree with you then your concept of value is 100% useless.

  And this is the flaw in so many value approaches. While many of them reject concepts like rational expectations or the efficient market hypothesis, they implicitly embrace these views by assuming that their own view is the rational view and that that market will eventually come around to it. I reject these views and embrace the idea that the market is filled with irrational people and more often than not, understanding the market and protecting yourself within it is about protecting yourself from the madness of the crowd rather than trying to predict what it’s thinking at any given time. Or worse, waiting and hoping that this mad crowd will one day agree with your idea of what is or isn’t “valuable”….

• Morning News: April 15, 2014
  Eddy Elfenbein, April 15th, 2014 at 6:37 am

  Draghi’s Euro Warning Seen as Cheap Talk by Traders

  U.K. Inflation Rate Falls to 1.6%, Lowest in Four Years

  Coal Returns to German Utilities Replacing Lost Nuclear

  China New Credit Declines as Money-Supply Growth Decelerates

  China Gold Demand to Rise, World Gold Council Says

  March Retail Sales Surged, Bolstering Hopes

  Citigroup CEO Vows to Fix Regulatory Problems as Bank Logs Higher Profit, Beats Estimates

  Motorola Solutions’ Enterprise Business Sold for $3.5 Billion

  Walgreen Pressured to Move Headquarters to Europe

  Bid to Upend Disney’s Deal for Maker Studios Falls Short

  H&M CEO Warns Rising Bangladeshi Wages May Spook Some Firms

  Hedge Fund Manager Makes Lonely Defense of G.M.

  Diageo Offers $1.9 Billion to Gain United Spirits Majority

  Cullen Roche: Three Things I Think I Think

  Joshua Brown: Jeffrey Kleintop: The Weakest Earnings Cycle in 55 Years

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• CBO Cut Budget Deficit Estimate
  Eddy Elfenbein, April 14th, 2014 at 11:15 am

  In February, the Congressional Budget Office lowered their estimate for this year’s Federal budget deficit to $514 billion. Today, they lowered it to $492 billion. Furthermore, the CBO sees next year’s deficit coming in at $469 billion. As a percent of GDP, the deficit is expected to 2.8% for this year and 2.6% for next year.

  The CBO projects federal spending next year of 20.4% of GDP which is lower than every fiscal year from 1980 to 1993.

  Here’s an update to the chart of “My Simple Rule for Government Financing.”

  (Unemployment Rate x 2) – 10 = Budget Deficit / GDP

• Best Retail Sales Report in 18 Months
  Eddy Elfenbein, April 14th, 2014 at 10:01 am

  This morning, the Census Department released the best retail sales report in 18 months. For March, retail sales rose by 1.1% which was 0.2% above expectations. Some of this was a rebound due to the weather’s impact earlier this year.

  A 0.7 percent gain in retail sales excluding autos was the biggest in more than a year after a 0.3 percent increase in February, today’s data showed. The figures used to calculate gross domestic product, which exclude categories such as food services, auto dealers, home-improvement stores and service stations rose 0.8 percent in March after rising 0.4 percent the prior month.

  The market was also helped by a better-than-expected earnings report from Citigroup ($C). By most conventional measures, Citigroup is a very cheap stock. However, I’m not willing to go near it until they’re allowed to raise their dividend to a respectable level. Citi has paid out a penny per share for the last few years. Bloomberg notes that mortgage lending has plunged to a 17-year low. For seven quarters in a row, mortgage originations at Wells Fargo ($WFC) topped $100 billion. Last quarter, that fell to $36 billion.

  Shares of Medtronic ($MDT) are getting dinged today. On Friday, Edwards Lifesciences “won a court order limiting U.S. sales of Medtronic’s CoreValve system.” MDT was also downgraded by JPMorgan Chase.

  The Wall Street Journal runs one of my favorite headlines: “Stock-Market Jitters Put Investors at Ease.”

• Morning News: April 14, 2014
  Eddy Elfenbein, April 14th, 2014 at 6:52 am

  Draghi Euro Warning Looms as ECB Debates Policy Measures

  High-Frequency Traders Get Curbs as EU Reins In Flash Boys

  Greece Sees Fragile Signs of Recovery

  Raising World Economy’s Speed Limit Emerges as Challenge

  Ukraine Tensions Land Fresh Blow on Struggling Stocks

  Brent Rises, Hovers Near $108 as Ukraine Crisis Worsens

  Beef Prices Reach Highest Level Since 1987

  UK Drug Company Glaxo ‘Paid Bribes to Polish Doctors’

  Melbourne-Based Miner MMG Buys Glencore Mine for $6.2 Billion

  Symrise Pays $1.8 Billion for French Food Firm

  Saab in Talks to Buy ThyssenKrupp Shipyard Operations

  Peugeot to Halve Lineup in Push for 2% Margins by 2018

  Goldman Dodges a Shareholder Battle That Dogs Rivals

  Credit Writedowns: Four Key Reasons for Capex Accelerating

  Jeff Miller: Weighing the Week Ahead: A Volatility Cocktail!

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• About that Nasdaq Crash
  Eddy Elfenbein, April 11th, 2014 at 8:54 am

  A little context….

  

• Wells Fargo Beats, JPM Misses
  Eddy Elfenbein, April 11th, 2014 at 8:50 am

  Today is a big day for bank earnings. Our former Buy List stock, JPMorgan Chase ($JPM), missed earnings. For Q1, JPM earned $1.28 per share which was 12 cents below consensus. They earned $1.59 in last year’s Q1.

  The good news is that our current Buy Lister, Wells Fargo ($WFC), beat earnings. Wells earned $1.05 per share which beat estimates by eight cents per share. For last year’s Q1, Wells earned 92 cents per share.

  Wells Fargo’s mortgage business, which provides nearly one in five U.S. home loans, continued to suffer from a drop in refinancing. Income from mortgage banking fell to $1.5 billion from $2.8 billion in the first quarter of 2013.

  For the week ending April 4, applications for refinancing fell to their lowest share of total mortgage applications since July 2009, according to the Mortgage Bankers Association.

  Wells Fargo’s new home loans fell to $36 billion in the quarter from $109 billion a year earlier and $50 billion in the fourth quarter.

  February was the worst month for new home loans since at least 2000, according to Black Knight Financial Services.

  Wells Fargo had $27 billion of mortgage applications in the pipeline at the end of the quarter, down from $65 billion at the end of the fourth quarter.

  In the pre-market, JPM is looking to fall about 3% while WFC is up a few pennies.