Morning News: January 17, 2020
Posted by Eddy Elfenbein on January 17th, 2020 at 7:04 am

China’s Economic Growth Hits 30-Year Low

China’s Improving Economic Data Masks Deeper Problems

China’s Birthrate Hits Historic Low, in Looming Crisis for Beijing

U.S. Passes Global Growth Baton to Rest of World, For Now

The Debate Over Whether to Call It QE Is Over, and the Fed Lost

Trump Fans or Not, Business Owners Are Wary of Warren and Sanders

Banks That Shun Risky Borrowers Offer Rosy View of U.S. Consumer

Google Reaches $1 Trillion in Value, Even as It Faces New Tests

Temasek, Trustbridge Target Majority Stake in WeWork China at $1 Billion Valuation

Sinopec to Review Potential $16 Billion U.S. Gas Deal With Cheniere

Tesla Overruns German Forest in Attack on Auto Establishment

Facebook Foes Sue to Force Zuckerberg to Sell Majority Stake

Ben Carlson: Updating My Favorite Performance Chart For 2019

Roger Nusbaum: I Got Ratio’d On Twitter Big Time & Learned A Ton

Joshua Brown: The “Trade Deal” is Hilarious, Bond Market Doesn’t Bite & Dow 29,000 and the Markets Are Grinding Away

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The Gold Bubble 40 Years On
Posted by Eddy Elfenbein on January 16th, 2020 at 8:57 am

Next week will mark the 40th anniversary of gold’s peak, on January 21 to be exact.

Since then, gold is down one-third in real terms (gold has nearly doubled while inflation has tripled).

Here’s the price of gold adjusted to today’s dollars:

What’s interesting is that gold seems to move in decade-long patterns that are either really good or really bad. Not much in between.

December Retail Sales Rose by 0.3%
Posted by Eddy Elfenbein on January 16th, 2020 at 8:45 am

This morning, the Commerce Department said that December retail sales rose by 0.3%. This report is important to watch because it’s often a good indicator of consumer spending. Also, retail sales growth for November was revised higher to +0.3%.

This suggests that the U.S. economy ended 2019 at a moderate pace.

Excluding automobiles, gasoline, building materials and food services, retail sales jumped 0.5% last month after falling by a downwardly revised 0.1% in November.

The so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously reported to have edged up 0.1% in November.

Consumer spending accounts for two-thirds of the economy.

Growth estimates for the fourth quarter are as high as a 2.5% rate, in part because of a drop in imports, which compressed the trade deficit.

In December, auto sales fell 1.3%, the biggest drop since last January, after increasing 1.5% in November. Higher gasoline prices lifted receipts at service stations, which jumped 2.8%. Online and mail-order retail sales rose 0.2% after being unchanged in November.

Sales at electronics and appliance stores rebounded 0.6% in December. Receipts at building material stores surged 1.4% and sales at clothing stores accelerated 1.6%. Spending at furniture stores edged up 0.1%.

Americans also spent more at restaurants and bars, with sales rising 0.2% last month. Spending at hobby, musical instrument and book stores rebounded 0.9%.

Also, weekly jobless claims fell to 204,000. That’s a very good number.

Morning News: January 16, 2020
Posted by Eddy Elfenbein on January 16th, 2020 at 7:14 am

What’s In (and Not In) the U.S.-China Trade Deal

The $95 Billion Centerpiece of the Trade Deal Is Already In Doubt

Trump Hopes Trade Deals Will Boost Growth. Experts Don’t Agree.

Trump Tax Break That Benefited the Rich Is Being Investigated

In Huawei Battle, China Threatens Germany ‘Where It Hurts’: Automakers

Will Beyond Meat Get Nibbled to Death?

Comcast, Late to the Streaming Party, to Give Details of NBC’s Peacock Service

Nissan Is in Trouble. Carlos Ghosn May Deserve the Blame.

Hyundai, Kia Invest $110 Million in UK Electric Van Startup Arrival Ltd

BlackRock’s Assets Blow Past $7 Trillion in Milestone for Investment Giant

Nobody Makes Money Like Apollo’s Ruthless Founder Leon Black

Flash Crash Culprit Seen as Childlike Gamer Not Fit for Prison

Ben Carlson: The Relationship Between War & The Stock Market

Howard Lindzon: Fintech On Fire…No Surprise To Us Here

Jeff Carter: Markets And Preferences And Longevity

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Eagle Bancorp Earned $1.06 per Share
Posted by Eddy Elfenbein on January 15th, 2020 at 4:32 pm

After the close, Eagle Bancorp (EGBN) reported Q4 earnings of $1.06 per share. That’s one penny below estimates. It’s also down from $1.17 per share from one year ago.

For all of 2019, Eagle made $4.18 per share. That’s down from $4.44 per year in 2018.

“Notwithstanding the negative impact that declining interest rates in the second half of 2019 and a flat yield curve are having on our revenues and net interest margin, we are pleased to report a continued trend of both average loan and deposit growth, together with continuing solid asset quality and favorable operating leverage. Additionally, our capital base remains very strong, with ratios well in excess of the requirements for well capitalized status,” noted Susan G. Riel, President and Chief Executive Officer of Eagle Bancorp, Inc. Ms. Riel added that “While period end loan balances in the fourth quarter 2019 were flat as compared to September 30, 2019, average loans increased 0.5% over the third quarter of 2019 and were 9% higher in the fourth quarter of 2019 as compared to the fourth quarter of 2018. In the fourth quarter of 2019 the funding of construction loans tapered off as expected and we experienced higher loan payoffs. These payoffs (which accounted for about 40% of the full year of 2019 payoffs) were expected and reflected in part the successful completion of projects. Funding of C&I loans improved during the quarter and the loan pipeline remained strong. For the full year of 2019, loan balances increased 8% while average loans increased 10% over 2018, close to planned levels.”

Ms. Riel added, “Deposit activity in the fourth quarter 2019 was very fluid as period end balances declined by about 2% as compared to September 30, 2019, however, average deposit balances increased a strong 5% in the fourth quarter 2019 over the third quarter in 2019. We have many large depositor clients whose balances fluctuate regularly and can impact overall deposit levels at a point in time. We focus more on growing average balances, which more directly relate to revenue. For the fourth quarter of 2019, average deposits were 11% higher as compared to the fourth quarter in 2018. For the full year 2019, deposit balances increased by 4%, while average deposit balances increased a strong 12%.”

The shares are down a little over 1% after hours.

More details:

Ms. Riel further commented, “For the fourth quarter of 2019, as noted, we experienced very strong growth of average deposits as compared to minimal loan growth, resulting in significantly higher average liquidity. This higher average liquidity ($739 million for the fourth quarter of 2019 vs. $306 million normalized average for the first three quarters of 2019) contributed to a decline in the net interest margin to 3.49% for the fourth quarter from 3.72% in the third quarter of 2019. The higher liquidity position in the fourth quarter resulted in an average loan to deposit ratio of 98% as compared to 102% for the third quarter of 2019. Also contributing to the decreased net interest margin for the fourth quarter was a 21 basis point decline in the yield on the loan portfolio to 5.18% versus 5.39% for the third quarter 2019, largely due to the sharp decline in the one month average LIBOR interest rate in the fourth quarter (down 39 basis points to 1.79%). Approximately 40% of the Bank’s loan balances are on notes indexed to this LIBOR rate.” Ms. Riel added, “While we were able to realize declines in our cost of funds as market rates declined in the fourth quarter of 2019 (13 basis points from 1.28% to 1.15%), the variable rate nature of our loan portfolio has resulted in a sharper decline in asset yields than in the cost of funds. Importantly, our credit quality remained very strong in the fourth quarter as the level of nonperforming assets was 0.56% of total assets at December 31, 2019 and the annualized level of net charge offs to average loans was 0.13%.” Ms. Riel added, “The Company’s operating efficiency, another key driver of our financial performance, remained favorable.” For the fourth quarter in 2019, the efficiency ratio was 39.7%, as compared to 36.1% in the fourth quarter of 2018, and was 40.0% for the full year 2019, which is inclusive of elevated legal costs as discussed below.

Combining all operating factors for the fourth quarter 2019, the company achieved a return on average assets of 1.49%, a return on average common equity of 11.78%, and a return on average tangible common equity ratio of 12.91%, while sustaining strong capital levels.

For the full year 2019 over 2018, average deposit growth was 12%, average loan growth was 10%, revenue growth was 3% and noninterest expense growth was 10%. The net interest margin for 2019 was 3.77% as compared to 4.10% for the year 2018. While lower, we believe our net interest margin for 2019 remains above peer banking companies. Period end to period end, loan growth in 2019 was 8% and deposit growth was 4%.

“The real key to making money in stocks is not to get scared out of them.”
Posted by Eddy Elfenbein on January 15th, 2020 at 1:05 pm

Peter Lynch once said, “The real key to making money in stocks is not to get scared out of them.” There’s a lot of truth in that.

I’ll give you an example.

Here’s a look at Clorox (CLX) over the last 30 years. The stock has been a huge winner. CLX is up more than 30-fold over 30 years.

Here’s the same stock, but I’ve zoomed in a bit on one five-year stretch.

The point is that even with big winners, there are periods of lackluster performance. Just don’t get scared out of them.

Morning News: January 15, 2020
Posted by Eddy Elfenbein on January 15th, 2020 at 7:09 am

Race to Refine: The Bid to Clean Up Africa’s Gold Rush

Trump to Sign Trade Deal With China While Leaving Tariffs in Place

Why the U.S.-China Trade Deal Targets Corporate Secrets

U.S. Data-Release Plan Has Wall Street Readying for Algo Wars

Smile for Your Data File!

JPMorgan First Major Brokerage to Rate Saudi Aramco ‘Overweight’

Target Says Holiday Sales Missed Its Forecasts

Bank of America Beat Analysts’ Profit Estimate on Rebound in Bond-Trading Revenue

BlackRock Profit Beats as Exchange-Traded Funds Boom

Amazon in India: Jeff Bezos Announces $1 Billion Indian Investment

Twitter’s Top Lawyer Is Final Word on Blocking Tweets—Even Donald Trump’s

Climate Change Is Killing Alpine Skiing as We Know It

Nick Maggiulli: The Investor’s Fallacy

Michael Batnick: Animal Spirits: The 10 Best Jobs in America

Jeff Carter: The Free Market Always Is Better

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Modest Inflation for December
Posted by Eddy Elfenbein on January 14th, 2020 at 10:25 am

This morning, the government released the inflation numbers for December. The good news is that inflation appears to be well under control.

For the month, the Consumer Price Index rose by 0.2%. That comes after a 0.3% increase in November. For the year, the CPI increased by 2.3% which was close to the Fed’s target of 2%.

Digging into the numbers a bit, we see that the “core” rate of inflation increased by 0.1% last month. This is the regular inflation rate except for food and energy prices which can be very volatile. The core rate was up by 0.2% in November. For the year, the core rate increased by 2.3%.

Overall, these are good numbers and it looks like the Fed won’t need to make a move, in either direction, in the immediate future. It’s especially impressive that inflation is so low considering that the unemployment rate is low as well.

Morning News: January 14, 2020
Posted by Eddy Elfenbein on January 14th, 2020 at 7:06 am

How India’s Booming Economy Went Bust

China to Ramp Up U.S. Car, Aircraft, Energy Purchases in Trade Deal

Xi Strikes Optimistic Tone After Riding Out Trade War With Trump

Yuan Soars, Yen Falls as U.S. Drops China Forex Manipulator Label

U.S., EU Square Up for Trade Brawl After Trump’s China Deal

Why Dutch Officials Want You To Forget the Country of Holland

Budget Deficit Topped $1 Trillion in 2019

Gold Falls Again as Demand for Havens Wanes

BlackRock Puts Climate at Center of $7 Trillion Strategy

Oyo Scales Back as SoftBank-Funded Companies Retreat

Visa Makes Another Move Beyond Credit Cards with $5.3 Billion Deal for Plaid

Bang & Olufsen Struggles to Sell $15,000 TV Sets

Roger Nusbaum: Stay Curious

Joshua Brown: Who Is Accountable?

Ben Carlson: The Future of Book Publishing & Are We Facing An Aging Crisis?

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Morning News: January 13, 2020
Posted by Eddy Elfenbein on January 13th, 2020 at 7:09 am

The Merchants of Thirst

India’s About to Hand People Data Americans Can Only Dream Of

Labor Dept. Rule to Curb Lawsuits by Franchise Workers

As Businesses Hold Back, U.S. Consumers Seen Boosting Big Banks’ Profits

The End of the Bonus Culture Is Coming to Wall Street

WeWork Debacle Has Unicorn Investors Seeking Cover

The Real Price of Occidental’s ‘Costless’ Oil Hedge

Goldman Readies a Hiring Spree and Capital to Meet Its China Ambitions

Ford’s China Vehicle Sales Drop 26% in Third Straight Year of Decline

Hummer: How To Relaunch An Iconic Brand

Away’s Once and Future C.E.O.

Cullen Roche: Let’s Talk About the Utility of Balance Sheet Consolidation

Howard Lindzon: Momentum Monday…Too Easy?

Jeff Miller: Weighing the Week Ahead: Is It Time to Worry About Inflation?

Jeff Carter: Crypto IB

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