Author Archive

  • Your Cash Hoarding Data Point of the Day
    , December 9th, 2010 at 1:30 pm

    From WSJ:

    U.S. companies continued to hoard cash in the third quarter, while households pared back borrowing, according to a Federal Reserve report.

    U.S. nonfinancial companies had $1.93 trillion stashed in cash and short-term assets at the end of the third quarter—7.4% of total assets—up from $1.8 trillion, or 6.9% of total assets. That’s the highest level in more than 50 years.

    The total debt in the U.S. nonfinancial sectors grew 4.2% in the third quarter, boosted by increased government and business debt.

    Household debt, however, fell by 1.7%, the 10th straight quarterly decline, the Fed on Thursday said in its “Flow of Funds” data. Home mortgage debt dropped, as did consumer credit. Another Fed report this week showed credit-card use by U.S. consumers tumbled a 26th straight time in October, as Americans keep working to clean up their balance sheets amid high joblessness that’s restraining the economic recovery.

    Though consumers avoided taking on new debt, the report showed the net worth of Americans rose last summer on a rebound in stock-market prices.

    U.S. households’ total net worth rose 2.2% during July through September, to $54.89 trillion.

    Net worth represents total assets such as homes and stock portfolios, minus liabilities like mortgages and credit card debt. Rising stock market assets offset declines in real estate holdings in the third quarter, the Fed report showed. Stock market wealth had fallen in the second quarter, contributing to a decline in total net worth during those three months.

    The “Flow of Funds” said household net worth rose to about 4.81 times disposable personal income in the third quarter from about 4.72 times income in the second quarter.

  • Discussion of Irish Economy With Actual Irishman
    , December 9th, 2010 at 11:48 am

    Needless to say, hysterical but NSFW:

    I want to see this guy on Fast Money. This needs to happen.

  • Morning News: December 9, 2010
    , December 9th, 2010 at 8:02 am

    BOE Maintains Bond Plan as Economy Sustains Momentum

    Futures Rise as Treasuries Steady, Jobs Data Due

    EU to Decide Greek Loan Extension in Early 2011

    Home Values Tumble $1.7 Trillion in 2010

    Oil Rises for First Day in Three as Recovery Trims Supply Excess

    Japan’s 3Q Growth Revised Up to 4.5 Percent

    U.S. 10-year Yields Rise to Highest Level Since June

    AIG Strikes Deal to Retire Fed Credit Line, Wind Down Bailout

    Mastercard Set to Buy Part of Travelex

    Home Depot Ups Outlook Slightly

    McDonald’s November Store Sales Rise 4.8% Globally

    Largest IPO in History, QueeQuee.com, Set to Debut

  • Stryker Raises Dividend By 20%
    , December 8th, 2010 at 9:19 pm

    Good news for Stryker (SYK). The company is raising its quarterly dividend from 15 cents per share to 18 cents per share. The dividend will be paid on January 31st to shareholders of record on December 31st.

    The company also announced that it’s buying back $500 million of its stock.

  • Poll: Americans Think China has the World’s Largest Economy
    , December 8th, 2010 at 12:24 pm

    This passage caught my attention:

    Asked which nation now has the world’s strongest economy, just 20 percent picked the United States. More than twice as many (47 percent) picked China. Eleven percent chose Japan. White working-class voters—the group that turned most sharply against the Democrats in November—were the most pessimistic: Just one in seven of them placed the U.S. atop the list; half named China. But the pessimism was widespread. Almost half of both college-educated whites and minority adults also tabbed China as No. 1. Americans who consider themselves politically independent were especially downbeat (53 percent went with China), but both Republicans and Democrats were also twice as likely to name China as the U.S.

    Few economists would second that judgment. China this year became the world’s second-largest economy, but the U.S. gross domestic product remains more than two and a half times bigger than China’s, according to the International Monetary Fund. On a per capita basis, the advantage is nearly 11-to-1. China’s economy has grown much faster than the U.S. for years, however, and Beijing has amassed an enormous surplus in its international accounts while accumulating huge amounts of U.S. government debt.

  • The New Yorker’s John Cassidy on China and Trade
    , December 8th, 2010 at 11:57 am

    In this week’s New Yorker, John Cassidy writes about China and state capitalism. The article is only for subscribers, but here’s some audio of Cassidy discussing the piece.

  • What Wikileaks has on BofA
    , December 8th, 2010 at 11:25 am

    The Onion has the story:

    * TARP bailout funded the Men’s Warehouse spree needed to restore confidence in the company

    * List of employees who have generously contributed to executive Catherine P. Bessant’s Bank of America fun run, employees who have not

    * Whenever CEO Brian Moynihan needs to buy a cup of coffee, he takes a few dollars from a random customer’s account

    * CFO Charles Noski has had to have the concept of interest explained to him eight times since being hired

    * There is nothing in the Bank of America vaults excepts bones of poor people

    * Tellers have been secretly cramming 51 cents into each roll of pennies to try and get rid of them all

    * Executives attempted to cover up a video showing a Bank of America helicopter strike on squatters in a Tampa-area foreclosed home

    * During the October 2008 collapse, then-CEO Ken Lewis proposed removing lollipops from lobbies to cut costs

  • Costco Posts Good Earnings
    , December 8th, 2010 at 11:15 am

    Shares of Costco (COST) have been in a blistering rally since last August. This is probably a good indication of the strength of the consumer (or at least, employed consumers).

    The stock recently broke $70 per share. It reached its all-time high in May 2008 at $75.23. Today this company reported decent earnings. The company earned 71 cents per share which was two cents more than the Street was expecting. Margins continue to expand as profits rose by 17% while sales rose by 11%.

    Costco has lifted sales since the recession by luring bargain-hungry consumers to pay for membership, which lets shoppers and small businesses buy discounted goods including groceries and televisions. Membership increased 3.6 percent to 58 million in the year through August, and fee revenue rose 10 percent to $416 million last fiscal quarter.

    “The quarter continued the theme of modest gross margin expansion, strong membership fee growth and execution on curtailing expenses,” Brian Sozzi, an analyst for Wall Street Strategies Inc. in New York, said in a note to clients.

    Costco fell 46 cents, or less than 1 percent, to $69.18 at 10:13 a.m. New York time in Nasdaq Stock Market trading. The stock rose 18 percent this year before today, while competitor BJ’s Wholesale Club Inc. gained 44 percent. Wal-Mart Stores Inc., the world’s largest retailer and operator of wholesaler Sam’s Club, climbed 3.1 percent in 2010.

    Membership Fees Up

    Costco’s gross profit, or income after cost of goods sold, as a percentage of total revenue rose to 12.9 percent from 12.8 percent. Selling and administrative costs as a portion of revenue dropped 0.2 percentage points.

    Sales at stores open at least a year, excluding fluctuations in gasoline prices and currency exchange rates, rose 5 percent, Costco said. Sales advanced 10 percent at the company’s 157 stores outside the U.S. and 4 percent at its 425 locations in the U.S. and Puerto Rico.

    Total revenue, including membership fees, rose to $19.2 billion from $17.3 billion a year earlier, the company said. Analysts predicted $18.8 billion, the average of 16 estimates.

    In many ways, this story is a like a microcosm of the broader economy. The earnings report is good and Costco’s stock has performed well over the past several months, but it seems like the margin-expansion story is hitting a wall. Gross profit margins aren’t even expanding any more, and SG&A can only be cut so much.

    The message is clear: For Costco and others to continue to grow, they need to see top-line growth. More sales means more consumers which means more employed consumers.

  • Morning News: December 8, 2010
    , December 8th, 2010 at 7:43 am

    U.S. Stock Index Futures Mixed; Eyes on Bonds

    Tax Deal: Rich Aren’t the Only Ones Who Benefit

    EU Banks Reportedly Face Further Stress Tests

    Bullish Commodity Bets Sustained Near Four-Year Peak, Data Show

    Euro Slips as Debt Worries Persist

    U.S. Fiscal Health Worse Than Europe’s: China Adviser

    Gasoline: $3 by Christmas and a ‘Mini-Apocalpyse’ in Spring?

    Bank of America Deal in Muni Case May Be `Tip of the Iceberg’

    Jim Beam Maker Fortune Brands to Split in Three After Ackman Builds Stake

    Citigroup Shares Rise After Bank Escapes U.S. Fetters

    Costco Wholesale First-Quarter Profit Gains 17% on Gasoline, Grocery Sales

  • From One Month Before the Bottom
    , December 7th, 2010 at 10:31 pm

    Here’s a blast from the past. This is from February 9th, 2009. I’m waiting for these two to grovel before Jon Stewart and be cheered on by the White House.