Morning News: October 5, 2018
Posted by Eddy Elfenbein on October 5th, 2018 at 7:05 am

Nafta’s China Clause Is Latest Blow to Trudeau’s Asia Ambitions

China Spy Chips Report Adds Pressure on Pentagon Cloud Security

Macron, With Popularity Slumping, Tries Tax Cuts for France’s Working Class

Era of Bank Secrecy Ends as Swiss Start Sharing Account Data

Will U.S. Economic Growth Dip, or Will the Rest of the World Catch Up?

Lindsey Graham Welcomed Trump’s China Tariffs, Then Helped Companies Avoid Them

The Big Problem at the Heart of Tech’s Latest Spy Scandal

SoftBank Deepening Ties to Ride-Hailing Firm Grab With $500 Million Funding

Unilever Backs Down on Dutch HQ Move After British Investor Revolt

Yale Invests in Crypto Fund That Raised $400 Million

Elon Musk Calls the SEC the `Shortseller Enrichment Commission’ on Twitter

Amazon CEO Jeff Bezos Just Overtook Bill Gates on Forbes’ List of the Richest Americans

Blue Harbinger: Is Breaking News Useless Noise Or Trading Fuel?

Cullen Roche: Debunking Passive Investing Myths on Bloomberg TV

Howard Lindzon: The Elastic IPO

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The NYSE’s Proposal to Alter Exchange Fees
Posted by Eddy Elfenbein on October 4th, 2018 at 10:15 am

Bloomberg has an interesting story on Intercontinental Exchange‘s (ICE) proposal to alter how stock exchanges make money. ICE (owner of the NYSE) wants to freeze rates they can charge for market data.

The SEC wants an incentive system. The drawback under that plan is that trades would be routed to the exchange that paid the most, not that best served the client.

ICE’s plan is to “reduce the maximum amount exchanges can charge for trades to 10 cents per 100 shares, from 30 cents.” They claim that would dramatically reduce the amount of rebates. More importantly, ICE wants exchanges to agree not to raise fees for “existing market data products, connectivity services and co-location.” This is a sensitive topic, and many investors already think the data fees are too high.

“We recognize that a large part of the industry’s support for the Transaction Fee Pilot is driven by a desire to reduce their cost to trade,” according to the NYSE letter. “We propose addressing this concern by taking fixed cost growth off the table during the Alternative Pilot and reducing the existing Access Fee Cap.”

Some in the industry would like to see market-data rates comes down, so simply freezing them, and thereby keeping the status quo, might not alleviate their concerns.

Morning News: October 4, 2018
Posted by Eddy Elfenbein on October 4th, 2018 at 7:06 am

The Big Hack: How China Used a Tiny Chip to Infiltrate U.S. Companies

Congress Backs F.A.A. Measure But With Few New Traveler Protections

What Happened To Treasurys On Wednesday?

Bond Bears Popping Champagne Say U.S. Yields Have Room to Rise

Firing Back at Trump in the Trade War With Tariffs Aimed at His Base

Wealth Managers Count Cost of U.S.-Chinese Trade War on Asian Business

The Republican Attack on California

eBay Claims Amazon Illegally Tried to Poach Top Sellers

Cadillac Edges Tesla in Semi-Automated Driving Test

Honda Putting $2.75 Billion Into G.M.’s Self-Driving Venture

Barnes & Noble Names Board Committee to Review Possible Sale, Shares Soar

E-Cigarette Maker Juul Files Complaints Against ‘Copycat Products’

Roger Nusbaum: Only One Fund? That’s Crazy!

Michael Batnick: The End is Nigh

Joshua Brown: Jerome Powell Making Sense

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RPM Earns 76 Cents per Share
Posted by Eddy Elfenbein on October 3rd, 2018 at 7:56 am

Fiscal 2019 first-quarter net sales were a record $1.46 billion, up 8.5% over the $1.35 billion reported a year ago. Including the impact of restructuring charges, first-quarter net income was $69.8 million versus $116.4 million in the year-ago period, and diluted earnings per share (EPS) were $0.52 compared to $0.86 in the year-ago quarter. Income before income taxes (IBT) was $91.9 million compared to $155.3 million reported in the fiscal 2018 first quarter. RPM’s consolidated earnings before interest and taxes (EBIT) were $113.9 million compared to $177.6 million reported in the fiscal 2018 first quarter. The fiscal 2019 first quarter included asset write-offs and other restructuring-related expenses of $39.8 million. Excluding these charges, RPM’s adjusted EBIT was $153.7 million and diluted EPS was $0.76.

“We saw strong top-line sales growth in the first quarter, with organic sales growth up 7.8%, while profitability continued to be adversely affected by rising raw material costs. In addition, bottom-line results reflected the impact of restructuring charges, higher legal and advertising costs in our consumer segment, and the adverse effect of transactional foreign exchange,” stated Frank C. Sullivan, RPM chairman and chief executive officer.

“Our team is focused on driving increased profitability, long-term growth and enhanced value for our shareholders, and we are making good progress in executing on our operating improvement plan, which is specifically designed to increase margins, reduce working capital, and improve overall operating efficiency. During the quarter, we continued our strategic restructuring initiatives, including the reduction of more than 150 positions and the announced closure of four manufacturing facilities, all in line with our 2020 Margin Acceleration Plan,” stated Sullivan.

Morning News: October 3, 2018
Posted by Eddy Elfenbein on October 3rd, 2018 at 7:09 am

Italian Markets Find Relief After Budget-Deficit Concessions

There’s No Escape From This U.S. Car Crash

Fed’s Powell Says Strong Economic Path `Not Too Good to Be True’

The Super-Rich Are Stockpiling Wealth in Black-Box Charities

Offering Inspiration and Advice, Real Vision Is HGTV for Hedge Fund Hopefuls

Berkshire Hathaway Is Trading At A Discount To Its Intrinsic Value

GE Downgrade Will Lift Its Costs in a Debt Market It Once Ruled

Elon Musk’s Ultimatum to Tesla: Fight the S.E.C., or I Quit

Tencent Music Files for U.S. IPO

Toys ‘R’ Us Lenders Plan to Revive Brand

Facebook Hack Puts Thousands of Other Sites at Risk

Nick Maggiulli: Exception To The Rule

Cullen Roche: Three Things I Think I Think – ETF Edition

Ben Carlson: 9 Underrated Investing Books

Michael Batnick: Animal Spirits: Buy the Housing Dip

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ICE Looks to Buy All of MERS
Posted by Eddy Elfenbein on October 2nd, 2018 at 12:53 pm

I mentioned this in the previous post but it’s worth discussing in more detail. Intercontinental Exchange (ICE) already owns part of Mortgage Electronic Registration Systems, also known as MERS, but we don’t know how much. ICE is currently planning to buy the whole thing. A deal may come in the next few weeks.

What ICE has done successfully is buy analog markets and make them digital. That looks to be their plan with MERS, the system that tracks millions of mortgages.

The mortgage industry is still mostly on paper. The financial crisis has stalled any serious effort to move the industry to the wonderful paperless word.

One of the problems it that MERS has been under special regulations due to lawsuits surrounding the financial crisis. That’s kept most buyers at bay, but that looks to be ending which, in turn, is drawing ICE’s interest.

The Financial Times article quotes one observer, “If I had to guess, what is probably their long-term play is to create the New York Stock Exchange for mortgages.” MERS registers 5.5 million new loans every year which is about 75% of all new mortgages.

Here’s the FT on ICE:

Most financial exchanges were built in centuries past, when brokers and traders agreed deals with shouts and hand gestures. Intercontinental Exchange was formed in May 2000 as the dotcom bubble was losing air.

Entrepreneur Jeffrey Sprecher set up the company as an all-electronic marketplace for gas and power. ICE received an inadvertent assist from the energy trader Enron, whose rival online platform imploded when the company did. “After the collapse of Enron, our revenues took off,” Mr Sprecher has said.

A lack of attachment to physical trading venues marked its growth. In 2001 it acquired International Petroleum Exchange, the largest energy futures exchange in Europe. After shutting down the IPE’s floor in 2005, volumes in flagship crude oil contract Brent have grown eightfold.

ICE also shut down the trading floor after purchasing the New York Board of Trade, an exchange for cotton, sugar and other soft commodities, in 2007. The Winnipeg Commodity Exchange, a Canadian canola seed venue, was acquired by ICE and incorporated into its US-based electronic futures platform.

In 2013 ICE made its largest-ever acquisition with the purchase of the NYSE Euronext. The prize justifying its $10bn price tag was the all-electronic Liffe futures exchange in London, but the deal also gave ICE ownership of the New York Stock Exchange — whose ornate floor has been kept open.

Buy List Updates
Posted by Eddy Elfenbein on October 2nd, 2018 at 10:36 am

Here are a few stories I wanted to pass along.

GE has selected Larry Culp to be their new CEO. Larry was the former CEO of Danaher (DHR). This is an outstanding choice. While at Danaher, the stock rose 465%, much more than the S&P 500. However, my fear is that GE is in so much trouble that there’s not much a CEO can do.

GE made a lot of news yesterday by rising over 10%. But as I noted, it was really going from 65% off its high to something like 61% off its high.

Stryker (SYK) said it’s buying HyperBranch for $220 million. “HyperBranch is dedicated to developing medical devices based on its proprietary polymers and cross-linked hydrogels. Its Adherus AutoSpray Dural Sealant product is one of only two FDA-approved dural sealants on the market.”

Additionally, on Friday it was announced that Stryker will pay $7.8 million to “settle charges it violated the Foreign Corrupt Practices Act, without admitting or denying the allegations.”

Intercontinental Exchange (ICE) is close to taking full control of Mortgage Electronic Registration Systems. This could be a very big deal.

Morning News: October 2, 2018
Posted by Eddy Elfenbein on October 2nd, 2018 at 7:17 am

Italian Assets Suffer Fresh Blow as Borghi Evokes `Own Currency’

Canada’s $31 Billion LNG Project Gets the Green Light

Venezuela’s Crisis Imperils Citgo, Its American ‘Cash Cow’

Trump Clears Deck for China Trade War With New Nafta Deal

I.R.S. Tax Fraud Cases Plummet After Budget Cuts

The Most Important Least-Noticed Economic Event of the Decade

Amazon to Raise Minimum Wage to $15 for U.S. Employees

Charles Schwab Has a $3.6 Trillion Edge on the Fintechs

Another New Boss at General Electric

Primera Air, Which Sold $99 Tickets from the US to Europe, is Filing for Bankruptcy and Shutting Down Operations

What We Know About the Facebook Hack Affecting 50 Million Accounts

Pepsi Tops Quarterly Revenue Estimates on LatAm Strength

Jeff Miller: Asking the Right Questions

Howard Lindzon: Just Another Manic Market Monday

Joshua Brown: The Nine Essential Conditions to Commit Massive Fraud

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The Bull Market in Dividends
Posted by Eddy Elfenbein on October 1st, 2018 at 1:56 pm

For the third quarter, dividends from the S&P 500 grew by 10.96%. That’s the strongest growth rate in more than three years. It’s the 34th quarter in a row of dividend growth.

Over the last eight years, dividends are up 234%, which is pretty close to what the S&P 500 price index has done.

Considering how simple it is, the S&P 500 has tracked a 2% dividend yield fairly closely for the last several years.

September ISM = 59.8
Posted by Eddy Elfenbein on October 1st, 2018 at 10:33 am

The new ISM report always comes out at 10 am on the first business day of the month. Today’s report came in at 59.8 which is a good number. It’s down from 61.3 for August, but that was the best report in 14 years.

The slowdown came as new orders fell to 61.8 from 65.1 in August. Supplier deliveries and inventories also decreased last month, ISM said.

In another report, the Commerce Department said that construction spending rose 0.1% in August. The figure for July was bumped up to 0.2%. In the last year, construction spending is up 6.5%.

Spending on public construction projects jumped 2.0 percent in August to the highest level since July 2009. That followed a 1.7 percent increase in July. Spending on federal government construction projects soared 5.9 percent to a 10-month high after increasing 2.3 percent in July.

State and local government construction outlays accelerated 1.7 percent in August to the highest level since March 2009. That followed a 1.6 percent rise in July.

The economy continues to expand. Pricing pressures are growing but they’re not quite a problem.