Today’s Fed Policy Statement
Posted by Eddy Elfenbein on November 8th, 2018 at 2:03 pm

No change.

Information received since the Federal Open Market Committee met in September indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has declined. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier in the year. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced.

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 2 to 2-1/4 percent.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the FOMC monetary policy action were: Jerome H. Powell, Chairman; John C. Williams, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Richard H. Clarida; Mary C. Daly; Loretta J. Mester; and Randal K. Quarles.

Q3 2018 Earnings Calendar
Posted by Eddy Elfenbein on November 8th, 2018 at 9:10 am

Earnings season is winding down with 20 of our 25 Buy List stocks now having reported Q3 earnings. Here’s a list of reporting dates, Wall Street’s consensus estimates and actual reported results.

Morning News: November 8, 2018
Posted by Eddy Elfenbein on November 8th, 2018 at 7:09 am

Strong Dollar Hits China’s Foreign-Exchange Reserves

Respect Our Choices, China’s Xi Says Ahead of Trump G20 Meeting

‘Fed Is in Denial’: How a $4 Trillion Dilemma Could Get Ugly

Why Corporate America Is Content With the Midterms

What Democratic Control of the House Could Mean for Your Wallet

Tesla Names New Chair As Elon Musk Steps Down

Google Plans Large New York City Expansion

Two Hong Kong Companies in Lose More Than 75% of Value

Why the Google Walkout Was a Watershed Moment in Tech

UBS Faces New Legal Battle in U.S. Over Mortgage Securities

Roku Stock Falls Late Despite Beating Third-Quarter Estimates

Berkshire Hathaway’s Profits Are Not What You Think They Are

Ben Carlson: Spirit Animal

Michael Batnick: I Remember When

Blue Harbinger: Do You Trade Binary Events?

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Morning News: November 7, 2018
Posted by Eddy Elfenbein on November 7th, 2018 at 7:16 am

Markets Got the Midterms Right. Now What Happens?

What the Election Results Mean for Business

Job Openings Outnumbered Unemployed Americans by More Than One Million in September

Looking for Higher Yields? Try Lending Money

Russian Trolls Were at It Again Before Midterms, Facebook Says

A $240-Billion-a-Day Market Is Leaving London Ahead of Brexit

Shanghai Is Being Thrust Into the High-Stakes Tech I.P.O. Race

How Apple Is Losing Its Grip on India

Ahold Ups Stakes in U.S. Grocery War With Mini-‘Robot Supermarkets’

EU Approves Disney’s $71 Billion Acquisition of Fox, But Disney Will Have to Get Rid of Networks Like History and Lifetime

CVS Lays Out Vision for Future as Aetna Merger Looms

Dish Revenue Falls 5% as Satellite Subscribers Drop

Nick Maggiulli: The McRib Effect

Jeff Carter: Was It The Banks Fault?

Cullen Roche: Three Things I Think I Think – What In the Hell is Going On Out There?

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The Math Hustle
Posted by Eddy Elfenbein on November 6th, 2018 at 10:23 pm

Institutional Investor has a very good article on Wall Street’s abuse of math. Let me explain. Financial economics has an inferiority complex. As a result, the field needlessly uses fancy math to justify itself. This seeps into money management.

The financial industry uses mathematics in a manner that would be mortifying to any other field of science. Academic literature and industry research are rife with pseudo-mathematical nonsense. You don’t have to look far to see where the motivation lies: Many of the authors are either employed by or retained by richly paid investment management and consulting firms. Faced with soaring investor interest in algorithm-powered investment strategies, the habit — indeed, the requirement — today is for firms to use scientific language and notation to nourish the idea that they’ve proved mathematically that there’s a way to systematically beat the market.

They haven’t.

It’s not surprising that more is claimed by their suggestive language than they actually “prove” because the field suffers from a subtle corruption. There is a pattern developing of publishing a semi-quantitative paper and using it as the basis to establish an investment advisory firm, become the seller of an investment product “relying only on math,” and go off on a globe-circling marketing bender. The fastest-growing asset management firms are purveyors of investment products that draw upon mathematical finance research, so theories ridden with poorly specified mathematics and wildly exaggerated results abound.

Becton, Dickinson Earns $2.93 per Share
Posted by Eddy Elfenbein on November 6th, 2018 at 7:37 am

This morning, Becton, Dickinson (BDX) reported fiscal Q4 earnings of $2.93 per share. That matched Wall Street’s estimates. It was also a nice increase from $2.40 per share one year ago. This was a big year for BDX because it was the first year they’ve operated after absorbing CR Bard. For the year, Becton made $11.01 per share. Adjusting for the acquisition, revenues were 5.8% for the fiscal year.

“Fiscal 2018 was a historic year for BD with the successful completion of the acquisition of C. R. Bard. We are extremely proud of our strong fourth quarter and fiscal year results, which demonstrate how agile we can be as an organization while executing concurrently on two transformative acquisitions,” said Vincent A. Forlenza, Chairman and CEO. “We enter fiscal 2019 with continued strong momentum and confidence in our ability to execute on our strategy, deliver on our commitments and create value for our shareholders.”

In fiscal 2017, Becton made $9.48 per share. Last November, the company originally pegged EPS for fiscal 2018 at $10.55 to $10.65. In February, they bumped the range up to $10.85 – $11 per share. In May, they raised the range again to $10.90 – $11.05 per share. Then in August, it went to $10.95 – $11.05 per share. Ultimately, they made $11.01 per share.

For the current fiscal year, BDX expects earnings between $12.05 and $12.15 per share. They’re looking for adjusted revenue to rise by 5% to 6%.

Morning News: November 6, 2018
Posted by Eddy Elfenbein on November 6th, 2018 at 6:51 am

Italy Gets a Warning From the 14th Century

Iran Sanctions and Oil Prices: Who’ll Feel the Pain?

China’s Trade Olive Branch Can’t Dispel Fears of Clash With U.S.

Amazon Plans to Split HQ2 Evenly Between Two Cities

Crazy Work Hours and Lots of Cameras: Silicon Valley Goes to China

Apple’s Asia Suppliers Fall on Report iPhone XR Production Boost Canceled

Ford Goes Local in India, Aims for Bigger Slice of Competitive Market

Boeing, Airbus Fret Over Trade War as China Displays Aviation Ambitions

Verizon to Break Up Wireless Unit in Reorganization

The Airline Most Famous for $55 Flights from the US to Europe Has Been Purchased By Its Greatest Rival

Drugmaker Lilly’s Third-Quarter Profit More than Doubles

How Bill Gates Aims to Save $233 Billion by Reinventing the Toilet

Michael Batnick: Gratitude

Joshua Brown: Will the Stock Market Celebrate Gridlock?

Howard Lindzon: Momentum Monday…The FANG/FAANG Blues and Mood Matters

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RIP: Evelyn Y. Davis
Posted by Eddy Elfenbein on November 5th, 2018 at 11:04 am

Evelyn Y. Davis, one of Wall Street’s true characters, has passed on, aged 89. She was known as the original shareholder activist, which is a polite way of saying she grilled CEOs at shareholder meetings.

It’s a basic rule of our free enterprise system that if you own shares in a company, you are the owner. As a result, you’re fully within your right to question management. And question, Ms. Davis did.

For more than five decades, the Netherlands-born Ms. Davis attended annual meetings of Bank of America, Ford Motor Co. and Goldman Sachs Group Inc., among many other companies, to offer advice and demand changes. She advocated lower pay for executives and term limits for directors. Sometimes she advised CEOs to resign or commented on their looks.

At a Goldman Sachs annual meeting in 2011, when the investment bank was still facing regulatory and legal fallout from the 2008 financial crisis, she advised the CEO, Lloyd Blankfein, to step down. “I want people to know I have nothing against you personally,” she told Mr. Blankfein. “And you are not a bad-looking guy.”

Mr. Blankfein replied that he had no plans to resign.

She held stock in more than 80 companies and published an annual newsletter, Highlights and Lowlights, to recount her tussles with top executives. She charged $600 an issue and insisted that companies buy at least two copies.

Morning News: November 5, 2018
Posted by Eddy Elfenbein on November 5th, 2018 at 7:04 am

Big Short’s Eisman Is Shorting Two U.K. Banks on Brexit

Despite Killing, SoftBank Chief Sees ‘Responsibility’ to Invest in Saudi Arabia

Iran Says It Will Resist ‘Economic War’ as U.S. Revives Curbs

Xi’s Swipes at Trump Show China Standing Its Ground in Trade War

China Seeks Allies as Trump’s Trade War Mounts. It Won’t Be Easy.

Fading Hopes for U.S.-China Trade Truce Hit Markets

Their Soybeans Piling Up, Farmers Hope Trade War Ends Before Beans Rot

Jack Ma Says the Trade War Is the ‘Most Stupid Thing’

Amazon Drops Free Shipping Minimum in Tussle for Holiday Sales

Should You Buy Or Sell Apple For No Longer Disclosing iPhone Sales Numbers?

How Hyundai Motor, Once a Rising Star, Lost its Shine

Fewer Stars to Rise at Goldman Sachs as Partnership Class Shrinks

Ben Carlson: Tiny Improvements, Big Results

Cullen Roche: No, The Government Didn’t Cause Unemployment

Jeff Miller: Storm Warnings

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October NFP = +250K; Unemployment = 3.7%
Posted by Eddy Elfenbein on November 2nd, 2018 at 9:03 am

The October jobs report is out! The US economy created 250,000 net new jobs last month. Wall Street had been expecting 190,000. The unemployment rate stayed at 3.7%.

The ranks of the employed rose to a fresh record 156.6 million and the employment-to-population ratio increased to 60.6 percent, the highest level since December 2008, according to the department’s household survey. That headline jobless number stayed level even amid a two-tenths of a percentage point rise in the labor force participation rate to 62.9 percent.

Those counted as outside the labor force tumbled by 487,000 to 95.9 million.

But the bigger story may be wage growth, which has been the missing piece of the economic recovery. Average hourly earnings increased by 5 cents an hour for the month and 83 cents year over year, representing a 3.1 percent gain. The annual increase in wages was the best since 2009.

That number is being watched closely by Federal Reserve, which has increased its benchmark interest rate three times this year and is on track for a fourth quarter-point hike in December. Higher wage growth feeds into the central bank’s desire to raise rates to keep inflation under control.

Here’s the year-over-year increase in average hourly earnings. It finally topped 3%.

U-6, which is a broader measure of unemployment, fell to 7.4%. The futures market is indicating a strong open.

Health care showed some of the biggest gains for the month, adding 36,000. Manufacturing contributed 32,000, thanks to a gain in durable goods and in particular transportation equipment, which added 10,000.

Construction also rose sharply, with an increase of 30,000 while transportation and warehousing jumped by 42,000.

In addition, leisure and hospitality was a strong contributor, with 42,000 new positions after being unchanged in September, due likely to Hurricane Florence, the government report said.

Professional and business services increased by 35,000, bringing its 12-month total gain to 516,000, and mining added 5,000.

Job growth skewed by full-time positions, which rose by 318,000, while part-time jobs increased by 242,000, according to the household survey.

Another closely watched internal metric, the average work week, increased 0.1 hour to 34.5 hours.