Author Archive

• The Japanese Market Plunges
  Eddy Elfenbein, June 13th, 2013 at 10:08 am

  There have been some high-profile buyouts lately. Yesterday, Apollo Tyres of India said it’s buying Cooper Tire & Rubber ($CTB) for $2.5 billion, or $35 per share. Despite being a 43% premium, I still think they’re getting a good deal.

  Today we learned that Safeway ($SWY) is selling all of its Canadian stores to Sobeys for $5.7 billion. The deal leaves Safeway with about 1,400 stores that are mostly based in the Western U.S. The stock has gapped up about 17% this morning. Unfortunately, I think the jump in SWY takes away any compelling buying opportunity.

  The volatility in the Japanese market is reaching extreme levels. The Nikkei dropped -843 points today which was a loss of -6.35%. Even after the recent losses, the market in Japan has done incredibly well since late last year. There are now concerns that the government isn’t fully committed to the policy of inflating consumer prices. The yen has strengthened considerably against the dollar over the few weeks, which in turn has been good for AFLAC ($AFL).

  

  The government reported that initial jobless claims fell to 334,000 last week. We’re very close to the best report in years. In late April, we had 327,000 followed by 328,000 the next week. That was the lowest since 2007.

• Morning News: June 13, 2013
  Eddy Elfenbein, June 13th, 2013 at 7:19 am

  BOJ Shirai Says JGB Yields To Stabilize, Signals No New Steps

  Global Stocks Slide as World Bank Pares Outlook; Yen Up

  Conflicting Goals Complicate an Effort to Forge a Trans-Atlantic Trade Deal

  EU Urges U.K. to Probe Currency Rigging in Libor’s Wake

  RBS Chief Hester Ushered Out By Board

  Fannie, Freddie Shareholders Roll Dice, Sue Uncle Sam

  Policy Shifts Spook Clean Energy Investments

  Fed Taper Fear Stalks World Financial Markets: Cutting Research

  A Call For Google To Face A Tax Inquiry. Not That It Will Go Anywhere

  Google Details How It Hands Over Data To Federal Officials

  HP CEO Sees Possible 2014 Revenue Growth; Shares Up

  Gatekeepers of Cable TV Try to Stop Intel

  Hong Kong to Handle NSA Leaker Extradition Based on Law

  Cullen Roche: Japan…

  Joshua Brown: Bond Returns and Rates by Decade

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• Morning News: June 12, 2013
  Eddy Elfenbein, June 12th, 2013 at 6:56 am

  Euro-Area Industrial Production Unexpectedly Gains on France

  Export Slowdown Threatens Emerging Asia’s Credit-Fuelled Boom

  The World is Heading for an Oil Production Glut

  Can Bernanke Avoid a Meltdown in the Bond Market?

  SEC Puts Exchanges in Sights Charging Regulatory Lapses at CBOE

  Traders Said to Rig Currency Rates to Profit Off Clients

  Insurers Inflating Books, New York Regulator Says

  Vodafone Approaches Kabel Deutschland to Discuss Bid

  Glencore Xstrata Said to Raise $17.3 Billion of Credit Lines

  Inditex Shares Advance on Outlook for Profitability This Year

  Google Expands Its Boundaries, Buying Waze for $1 Billion

  Facebook CEO Gets a Grilling From Investors

  Boeing Scores Over $10 Billion in U.S. Aircraft Orders

  Credit Writedowns: When Will The Rise in US Mortgage Rates Hit Consumer Demand?

  John Hempton: Vodafone – Kabel Deutschland: Meet Vittorio Colao – the New Sir Fred Goodwin

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• The Buy List YTD
  Eddy Elfenbein, June 11th, 2013 at 11:29 am

  We’re nearing the half-way point and our Buy List (the red line) has finally pulled ahead of the S&P 500, but it’s still very close. Through yesterday’s close, our Buy List is up 16.16% to the S&P 500’s 15.19%. That doesn’t include dividends.

  

• 10-Year TIPs Yield Is Finally Positive
  Eddy Elfenbein, June 11th, 2013 at 10:40 am

  The yield on the 10-year TIPs has finally broken into positive territory. After all, lending your money to Uncle Sam for ten years ought to pay you something.

  

  Look how sharply the line has bent up, especially since late April. On April 26, the 10-year TIPs yielded -0.68%.

• Tuesday Has Lost Its Mojo
  Eddy Elfenbein, June 11th, 2013 at 10:26 am

  Tuesday is losing its magic! The U.S. market is down again today. The Bernanke of Japan, Haruhiko Kuroda, said they don’t need anymore stimulus. I have no idea if that’s right but it’s put a damper on our market. The VIX is up to 16.66 which is still pretty low.

  The Commerce Department said that wholesale inventories rose 0.2% last month. This is important because restocking of shelves won’t be a major factor in the Q2 GDP report. The first estimate will be out in late July.

  Gold is slipping again. The metal seems to have stabilized after its big April plunge. Gold is now around $1,373 per ounce and will soon test recent lows. Gold traders, however, have become very bullish.

  This week is still pretty much a snoozer.

• Morning News: June 11, 2013
  Eddy Elfenbein, June 11th, 2013 at 6:59 am

  BOJ Gov Kuroda: Not Necessary For BOJ To Extend Fixed-Rate Fund Supplying Ops For Now

  France, Germany Oppose EU’s Single Sky Reform Plans – Minister

  UN Climate Goals Possible With Efficiency Measures, IEA Says

  U.S. Crop Growth Seen Excellent While Plantings Stay Slow

  Lawsuit Challenges Takeover of Fannie Mae, Freddie Mac

  Regulators Turn Up Heat Over Bank Fees

  Citigroup Facing $7 Billion Currency Hit on Dollar, Peabody Says

  SoftBank Raises Sprint Offer, Wins Key Shareholder Support

  McDonald’s Global Comparable Sales Rise 2.6% In May

  Lululemon Stock Squeezed 15% On CEO’s Decision To Step Down

  Rare Protest Vote From Wal-Mart Shareholders

  Dole CEO Offers $12 Per Share To Buy Rest Of Company

  The Hunt is On For Edward Snowden

  Cullen Roche: Negative Earnings Guidance Weakest Since Q1 2001

  Jeff Carter: Where Are the StartUps?

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• Preview of the Fed’s Next Meeting
  Eddy Elfenbein, June 10th, 2013 at 10:13 am

  The stock market opened up a little bit higher today but is now down a little bit. Looking across the sectors in the U.S. market, frankly, there doesn’t appear to be much movement at all. But the Japanese Nikkei had a very impressive move today as it jumped nearly 5%. Of course, the volatility there has been very high.

  The Federal Reserve meets again next week, and this looks to be an important meeting. The central bank will be discussing the beginning of the end of its bond buying program. Up till now, I’ve been in the camp saying the Fed won’t make any moves before the end of the year. I’m less sure of that today.

  On Friday, Jon Hilsenrath of the Wall Street Journal, who is widely understood to be Bernanke’s go-to media conduit, wrote:

  Federal Reserve officials are likely to signal at their June policy meeting that they’re on track to begin pulling back their $85-billion-a-month bond-buying program later this year, as long as the economy doesn’t disappoint.

  I’m going to assume that’s Bernanke speaking. Note that he didn’t say they “will pull back,” but “they’re on track to begin pulling back.” Of course, I can say that I’m “on track” for a lot of things. It doesn’t mean that’s about to happen. Still, the Fed wouldn’t be floating this in the media if they didn’t think it was important. This is a big deal.

  We also have to remember that the Federal Open Market Committee is just that—a committee. Bernanke is the head of it but a majority can oppose him. It’s happened before.

  We’ve come to an interesting point in the market where the economic events that are normally the big boys, like the jobs report or a Fed statement, are no longer top dog. Instead, the releasing of the Fed’s minutes is perhaps the most important event. The Fed releases the minutes of each meeting three weeks after they’re held. That means the all-important minutes from this meeting will be out around July 10th. Everyone will want to know what is said. I should add that the Fed’s minutes are a study in indefinite pronouns. Many said this. A few said that. Some added that. It’s almost like it’s written in code.

  Also, the minutes release will be probably be just ahead of Bernanke’s Humphrey Hawkins testimony before Congress. He does that twice a year, once in the dead of winter and again in the middle of summer. This is where he spells out the details of monetary policy.

  The key driver of what the Fed will do is the Fed’s own forecast of what will happen. Hilsenrath notes that the Fed has been consistently over-optimistic in what I’ll generously call “the recovery.” The problem is that fiscal policy has been holding back the economy. At least, that’s Bernanke’s view. The Fed believes that the economy will ramp up later this year. The stock market believes earnings will, too. There’s a lot riding on this second-half recovery. If it indeed comes, a lot of problems will be taken care of.

  Hilsenrath had another article on Friday saying that the Fed really doesn’t like Wall Street’s latest buzzword: tapering.

  The hangup for Fed officials is the word “tapering” suggests a slow, steady and predictable reduction from the current level of $85 billion a month at a succession of Fed meetings, say to $65 billion per month, then to $45 billion and so on. And that’s not necessarily what Fed officials envision.

  Because Fed officials are uncertain about the economic outlook and the pros and cons of their own program, they might reduce their bond purchases once and then do nothing for a while. Or they might cut their bond buying once and then later increase it if the economy falters. Or they might indeed reduce their purchases in a series of steps if warranted by economic developments — but they don’t want the markets to think that’s a set plan. It is, as Fed officials like to say, “data dependent.”

  This strikes me as a bit pedantic. With interest rates, Fed policy almost always follows a trend. It stands to reason that bond buying will be similar. I think it would be a mistake for the Fed to start tapering (or whatever you call it) before the end of the year. Inflation is hardly a threat and the jobs market is sluggish at best. Unfortunately, I don’t think they’ll take this advice.

• Morning News: June 10, 2013
  Eddy Elfenbein, June 10th, 2013 at 6:46 am

  Hearing Pits German Monetary Heavyweights Against Each Other

  On the IMF’s Big Fat Greek Woulda-Shoulda-Coulda

  Japan’s Economy Builds Momentum, Gives Abe’s Policies A Boost

  Japan’s Nikkei Surges on Revised Growth Figures

  Rupee Falls to Record Lows

  AirAsia X, Nok Air to Raise Funds in IPO Amid Boom in Travel

  U.S. Expansion Poised for Longevity

  Middling Jobs Numbers Signal a Long Path to Healthy Payrolls

  AstraZeneca Buys U.S. Lung Drug Firm Pearl For Up To $1.15 Billion

  Battery Maker Exide Technologies Files For Bankruptcy

  Inside Amazon’s Plan to Sell You Groceries

  Disruptions: Celebrities’ Product Plugs on Social Media Draw Scrutiny

  New Report Details Just How Apple Will Change The Look Of The iPhone’s Software

  Joshua Brown: “modest encroachments on privacy”

  Jeff Miller: Weighing the Week Ahead: Is This a Tipping Point?

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• Buffett & Gates on Success
  Eddy Elfenbein, June 8th, 2013 at 7:51 pm