Morning News: March 17, 2016
Posted by Eddy Elfenbein on March 17th, 2016 at 7:05 am

Abe Coalition Ally Says Premier Shouldn’t Back Down on Tax Rise

Billionaire Li Ka-shing Says China Property Prices `Reasonable’

Swiss Central Bank Holds Negative Rates Steady

Norway’s Central Bank Cuts Key Rate, as Expected; Sees Further Cut

Dollar Swoons as Fed Scales Down Rate Hike Forecasts

The Other March Madness: What the IRS Thinks of Your Bracket

Oil Investors See $7.4 Billion Vanish as Dividends Are Targeted

How GE Exorcised the Ghost of Jack Welch to Become a 124-Year-Old Startup

Lufthansa Shares Fall After Airline Warns of Slower Earnings Growth

Investors Shrug as China’s State Press Slams Alibaba for Fraud

Tencent’s Profit Misses Estimates as Video Content Costs Climb

GlaxoSmithKline CEO Andrew Witty to Retire in March 2017

Toshiba Gets $5.9 Billion Deal to Sell Medical Unit to Canon

Do You Hate Tying Laces? Nike Has A Solution For You!

Coal’s ‘Last Man Standing’ Dragged to the Brink of Bankruptcy

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The Fed’s Policy Statement
Posted by Eddy Elfenbein on March 16th, 2016 at 2:00 pm

The Federal Reserve has left interest rates unchanged. Here’s the policy statement:

Information received since the Federal Open Market Committee met in January suggests that economic activity has been expanding at a moderate pace despite the global economic and financial developments of recent months. Household spending has been increasing at a moderate rate, and the housing sector has improved further; however, business fixed investment and net exports have been soft. A range of recent indicators, including strong job gains, points to additional strengthening of the labor market. Inflation picked up in recent months; however, it continued to run below the Committee’s 2 percent longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen. However, global economic and financial developments continue to pose risks. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. The Committee continues to monitor inflation developments closely.

Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

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 objectives of maximum employment and 2 percent inflation. 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. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo. Voting against the action was Esther L. George, who preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.

Here are the updated projections.

The Fed Has Been Cutting Real Rates
Posted by Eddy Elfenbein on March 16th, 2016 at 11:06 am

That’s a provocative title, but I’ll stand by it. If we look at the real Fed funds rate — the overnight rate adjusted for core inflation — then the Federal Reserve has been slightly lowering interest rates not increasing them.

The Fed’s one modest hike has been completely swallowed up by the recent rise in core inflation.

Core CPI Is Finally Running Hot
Posted by Eddy Elfenbein on March 16th, 2016 at 9:10 am

The government just released the CPI numbers for February. The headline inflation rate fell 0.2% last month, but the “core rate” came rose by 0.3%. Over the last year, core inflation has risen by 2.33% which is the highest since September 2008.

Of the last 117 months, this month’s Core CPI was the fourth-highest. Last month’s was the highest.

Update: Capacity utilization came in at 76.7%, which is down 0.4%, and industrial production fell 0.5% last month.

Morning News: March 16, 2016
Posted by Eddy Elfenbein on March 16th, 2016 at 7:07 am

China Seeks to Avoid Mass Layoffs While Cutting Production

Frankfurt and London Seal $30 Billion Trading Tie-Up to Counter U.S. Threat

Europe’s New Car Sales Leaped Ahead in February

New Guard Rises in Saudi Arabia as Oil Crisis Forces Rethink

Federal Reserve Expected to Leave Key Interest Rate Unchanged

Low Gas Prices Drag Down US Retail Sales in February

U.S. NAHB Housing Index Holds at 58 in March

Peabody Says It May Need to File Bankruptcy Amid Coal Rout/a>

UberEats Expands in SF with All-Day-Orders from 100 Restaurants

Santander’s U.S. Unit Misses Report Deadline Again

Chipotle Weighs Stepping Back From Some Food-Safety Changes

Are Drones a Useful Tool or Toys That Need To Be Regulated?

Meet the DIY Quants Who Ditched Wall Street for the Desert

Cullen Roche: The Single Entity Risk Problem

Josh Brown: The Global Economy Our Next President Has to Deal With

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The Two-Year Yield Soars Back
Posted by Eddy Elfenbein on March 15th, 2016 at 2:33 pm

Perhaps the big story of the investing year so far is that the consensus went from expecting several rate hikes this year, to expecting none, and now back to expecting some.

That’s probably best captured by looking at the two-year yield since the start of the year.

The Fed meets today and tomorrow. I don’t expect any hikes, but the odds for a June hike are about 50-50. A month ago, the odds were 2%.

Retail Sales Fell Last Month
Posted by Eddy Elfenbein on March 15th, 2016 at 12:40 pm

I had hoped to see a rebound in consumer spending, and a subsequent uptick in retail sales. No such luck. Retail sales fell 0.1% last month.

The 0.1 percent decline in purchases followed a revised 0.4 percent January decrease, Commerce Department figures showed Tuesday. Sales excluding gasoline rose 0.2 percent in February, reversing the previous month’s retreat.

The decrease in purchases, which included auto dealers, department stores and furniture outlets, showed Americans were salting away money saved at the gas pump amid volatile financial markets. The disappointing reading on the biggest part of the economy comes as Federal Reserve officials meet to gauge whether growth is strong enough to eventually warrant another increase in interest rates.

The retail report topped expectations. The key is that after we exclude gasoline, we’re still seeing an increase in retail sales.

Valeant -44%
Posted by Eddy Elfenbein on March 15th, 2016 at 11:46 am

As if Valeant Pharmaceuticals (VRX) weren’t already having a rough time, the stock is down 44% today. That’s on top of a 70% plunge going into today.

The drugmaker slashed its guidance and warned that it faces an “event of default,” if they don’t get their annual report in by next month. It’s already late.

The stock has been the target of shortsellers, and they’ve been proven right. At the other end, Bill Ackman has reportedly lost several hundred million dollars betting on VRX.

What a mess.

Morning News: March 15, 2016
Posted by Eddy Elfenbein on March 15th, 2016 at 7:13 am

BOJ Keeps Policy Steady, Offers Gloomier View on Economy, Inflation

Obama Said to Reverse Atlantic Drilling Policy After Opposition

Stanley Fischer and Lael Brainard Are Battling for Yellen’s Soul

Group Led By Chinese Firm Anbang Bids $12.8 Billion For Starwood Hotels

Valeant Lowers Forecast as Drugmaker’s Woes Weigh on 2016

Don’t Blame the Fed: Bangladesh Seen at Fault for Bank Heist

Renault, Nissan Name Nicolas Maure as New CEO at Russia’s AvtoVAZ

Lyft and GM Roll Out Car Rental Program to Attract More Drivers

Institutional Investors Sue Volkswagen Over Fall in Share Price

Campari Is Buying Grand Marnier in a Quest To Cash in on Classic Cocktails

Goldman Sachs Buys Online Retirement Benefits Business

Redbox Owner Outerwall Boosts Dividend, Seeks Alternatives

Sony to Pay Michael Jackson’s Estate $750 Million for Stake in Music Catalog

Jeff Carter: Simple Mills is Cracking Me Up

Roger Nusbaum: Heavy Handed Central Banks

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Morning News: March 14, 2016
Posted by Eddy Elfenbein on March 14th, 2016 at 6:49 am

Inflation Target Draws Fire From All Sides

Eurozone Industrial Output Surges in January

How Much Foreign Debt Has China Repaid?

Egypt Adopts More Flexible Exchange Rate After Devaluation

How Saudi Arabia Turned Its Greatest Weapon on Itself

Putin’s $50 Billion Oil Cache Gives Russia Luxury to Ignore ECB

Social Security: The GOP vs. the American People

Inside the Billion-Dollar Dig to America’s Biggest Copper Deposit

Anbang Expands U.S. Hotel Foray With Record $6.5 Billion Deal

China Vanke Seeks to Thwart Possible Takeover Bid

Toyota and Partners Begin Hydrogen Supply Chain Test Project

Top Start-Up Investors Are Betting on Growth, Not Waiting for It

The Final Days and Deals of Aubrey McClendon

Cullen Roche: Passive Investing – I Doth Protest Too Much

Howard Lindzon: Peak ‘Passive’ Investing? …The Rise of Robinhood…and ‘Trade Gen’

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