Morning News: April 14, 2016
Posted by Eddy Elfenbein on April 14th, 2016 at 7:15 am

Pound Falls After BOE Considered Brexit Risks in Policy Decision

Draghi’s German Baggage Follows Him to Washington After ECB Spat

Japan Stocks Continue Their Roll—at Least for Now

IEA Sees Oil Oversupply Almost Gone in Second Half on Shale Drop

Fed Beige Book Notes Job, Wage Growth; March Drop in Sales Reflects Caution

Regulators Warn 5 Top Banks They Are Still Too Big to Fail

BofA Profit Misses Estimates on Dealmaking Slump, Energy Loans

Energy XXI Files for Bankruptcy After $5 Billion Expansion

Unilever Sales Fall on Currencies, Offsetting Better Volume, Prices

Gap Taps Syngal to Be Old Navy’s President

BlackRock Profit Falls 20% as Market Volatility Curbs Fees

Investor Group Pushes for Shakeup at Chipotle

Plan for Woman on $10 Bill in Question as Hamilton Fans Lobby

Cullen Roche: Janet Yellen (Might Have) Nailed It*

Jeff Carter: Networks, Target Markets and Company Structure

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Stocks Against Bonds — Who Will Win?
Posted by Eddy Elfenbein on April 13th, 2016 at 2:35 pm

Here’s a chart I like to look at every so often. It’s stocks versus bonds which is the classic Wall Street grudge match.

For my stock proxy, I use the Vanguard 500 Index Fund (VFINX) and for bonds, I use the Vanguard Long-Term Investment-Grade Bond Fund (VWESX). I suppose people could quibble with those choices, but I think they’re broadly fair. The data here goes back to 1990. (Note that the chart has a log scale.)

Ideally, stocks should return more than bonds, but only by a little bit. I think the equity risk premium has probably been overstated, but I do think it’s real. It’s probably around 1.5% to 2% long-term. The chart here shows how disruptive the stock market of the late 90s was. Bonds have beaten stocks over the last ten years, and over the last 14 through 19 years.

As a long-term investor, it’s disconcerting that simply relaxing in a bond portfolio has been so competitive with stocks. Will that continue? I’m not so sure.

The current yield for VWESX is 4.21%, which makes me think that stocks are due for some more outperformance. Just the dividend yield gets you halfway there.

15-Week High
Posted by Eddy Elfenbein on April 13th, 2016 at 10:25 am

The S&P 500 touched a fresh 15-week intra-day high this morning. The index got as high as 2,076.45 which is the highest since December 30, 2015.

The intra-day high from that day was 2,077.34, which means we have a chance of eclipsing that today.

Update: We did it!

Retail Sales and PPI
Posted by Eddy Elfenbein on April 13th, 2016 at 10:07 am

This morning’s retail sales report was a dud. The Street had been expecting an increase of 0.1%. Instead, retail sales fell 0.3% last month. This could be evidence that consumers are pulling back.

While nine of 13 major categories showed gains last month, those increases weren’t large enough to offset the drop in autos, clothing and restaurants.

Automobile dealers’ sales dropped 2.1 percent in March, the biggest decrease since February 2015. That was in line with industry data earlier this month that showed the torrid pace of car demand was leveling off. Purchases of cars and light trucks grew at a 16.5 million annualized rate in March, the slowest in more than a year, according to Ward’s Automotive Group.

Economists like to focus on “core” retail sales, which excludes cars and gas stations. Here the Street had been expecting a 0.3% rise, but core sales rose by just 0.1%.

The retail report showed sales decreased 0.9 percent at clothing chains, the biggest retreat since October, and a 0.8 percent drop at restaurants and bars.

Another report showed that wholesale prices fell 0.1% last month. Economists had been expecting an increase of 0.2%. We’ll get the consumer price index report tomorrow.

Nathan’s Famous
Posted by Eddy Elfenbein on April 13th, 2016 at 8:29 am

Did you know that Nathan’s Famous, the hot dog place, is publicly traded? It is. Their symbol is NATH.

Here are some numbers: The stock closed yesterday at $43.69 per share. There are 4.35 million outstanding shares, which gives them a market value of $190 million. In Wall Street terms, that’s peanuts.

But there’s another fact about NATH. The stock has been a gigantic winner! Since December 31, 1999, the S&P 500 Total Return Index is up 92.55%, but Nathan’s is up 1,936.36%.

Check it out:

In simpler terms, investing in hotdogs would have made your money grow by 18-fold while the rest of the stock market would have almost doubled it.

Yet that’s still not the most arresting fact about investing in Nathan’s. What I find truly remarkable is that despite being based in New York, and being an icon of the city (Bernie just went there with Michael Stipe), AND being a tremendous winner, the stock isn’t followed by a single Wall Street analyst.

Nathan’s might as well be invisible. Think about that. We can’t even say whether Nathan’s “beat consensus” because there isn’t any.

I highlight this stock to show you that there are lots of great companies out there. It just takes a little digging. So much investment talk seems to focus on about 15 to 20 stocks, but there are thousands of stocks out there. In fact, it’s probably easier to find a bargain by looking at areas where Wall Street isn’t looking.

Morning News: April 13, 2016
Posted by Eddy Elfenbein on April 13th, 2016 at 7:05 am

China Imports Record Oil as Higher Margins Boosts Purchases

Eurozone Industrial Output Fell in February

Puerto Rico’s Debt Crisis in Seven Questions

Panama Leak Spurs Global Zeal to Crack Shell Companies, But How?

JPMorgan First-Quarter Profit Beats Estimates on Trading

Verizon Workers Strike on East Coast After Deadline Passes

Peabody Energy Files for Chapter 11 Bankruptcy Protection

Chesapeake Energy Scores Big Win To Avoid Bankruptcy

The Relationship That Helped Sumner Redstone Build Viacom Now Adds to Its Problems

Ford Announces Plans to Transform World Headquarters, Other Dearborn Facilities

Emirates to Buy Two More Airbus A380 Superjumbos in $865 Million Deal

No Loser in Cola Wars – Coke & Pepsi Thriving

VW Executives to Accept `Significant’ Bonus Cuts Amid Unrest

Roger Nusbaum: Heads (of State) Are Gonna Roll?

Joshua Brown: My Favorite Trader on Twitter

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AFLAC Closes Over $65 per Share
Posted by Eddy Elfenbein on April 12th, 2016 at 11:05 pm

Shares of AFLAC (AFL) have been quacking up lately, and they’re getting near the price level that’s been a tough ceiling for them.

First, some history. The duck stock made its all-time high on April 28, 2008, just before the financial crisis, when it closed at $68.22 per share.

Then things got bad. At the market’s low on March 9, 2009, AFLAC closed at $11.49 per share.

AFLAC then rallied back to somewhat near its 2008 high two more times. The shares closed at $67.47 on November 14, 2013. Then, on this past December 1, AFL closed at $65.99 per share.

The stock closed today at $65.53 per share. In the last two months, AFL has rallied 17.9%.

BBBY’s Delayed Reaction
Posted by Eddy Elfenbein on April 12th, 2016 at 12:18 pm

It seems like some stocks have a delayed reaction to important news. After the last earnings report from Bed Bath & Beyond (BBBY), which I thought was quite good, the stock initially reacted very well.

But after a while, the market thought it over and decided it didn’t like the results.

The shares got as low as $46.23 this morning. That’s well below where it was going into the earnings report.

I’ll reiterate my support for the stock. There was no important news that should have caused the market to change its mind so abruptly. But the lesson here is that the market isn’t always so rational.

Morning News: April 12, 2016
Posted by Eddy Elfenbein on April 12th, 2016 at 6:55 am

Saudi Arabia Rating Cut at Fitch; Outlook Remains Negative

Why Low Oil Prices Are A Threat To Saudi Arabia: Investment Plan Doesn’t Work

China First Quarter GDP Growth Seen at 6.7% on Year, Slowest Since 2009

Google, Facebook and Amazon May Be Forced to Reveal Tax Haven Activity

Puerto Rico Aims to Appease Congress With New Debt Proposal

Goldman Sachs to Pay $5 Billion in U.S. Justice Department Mortgage Bond Pact

Freeport-McMoran: This Is An Opportunity

About Time, Ma

PC Shipments Fall in Latest Quarter

Marathon Selling $950 Million of Assets in Latest Move for Cash

Shell, Chevron Await Demand From LNG Market in ‘Pause Mode’

Wells Fargo Misjudged the Risks of Energy Financing

Canadian Pacific Ends Bid for Norfolk Southern

Cullen Roche: Three Things I Think I Think – Monday Funday Edition

Howard Lindzon: The Future of Asset Management…The State of Venture Capital…and Goldman Sachs is Spamming Me

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First-Quarter Earnings Season Begins
Posted by Eddy Elfenbein on April 11th, 2016 at 11:05 am

Earnings season kicks off today. Here are some bullet points I saw in this morning’s news:

From Bloomberg:

Analysts are projecting profits for S&P 500 companies will contract 10 percent, compared with calls for flat earnings growth at the start of the year.

From WSJ:

During the first three months of the year, analysts cut their first-quarter earnings estimates for S&P 500 companies by the largest percentage since the height of the financial crisis. And it wasn’t just analysts slashing their view. A near-record number of companies in the index issued guidances below Wall Street’s expectations.

(…)

Third, the first quarter is poised to be the first period of the post-crisis era in which year-over-year earnings for S&P 500 companies outside of energy also fall, noted J.P. Morgan Chase’s U.S. equity strategy team last week.

(…)

The JPM Chase Institute estimates some 80% of oil savings have been spent by consumers.

“It may be wishful thinking to expect a sudden lift in EPS growth from higher consumer spending,” J.P. Morgan equity strategist said.

Combined with some projecting sub-1% GDP growth for the first quarter and consensus congealing around the period’s adjusted earnings falling some 8% for S&P 500 companies, news the rest of the month might not sit well with U.S. equities.