Morning News: March 2, 2016
Posted by Eddy Elfenbein on March 2nd, 2016 at 7:10 am

South Korea’s Output Drops More Than Estimates as Exports Slump

How Can Brazil Restore Its Growth Trajectory?

Molotovs and Death Threats: Russian Debt Collectors Go Medieval

Shale Oil Isn’t Saudi Arabia’s Only Nemesis

Shell Proves Test Case For Oil Majors’ Environmental Records

What Super Tuesday’s Victories Mean for Wall Street Now

Forbes Outs World’s Billionaires List

AB InBev Reaches Deal for Sale of SABMiller’s Chinese Beer Business

Sports Authority Files Bankruptcy After Missing Fitness Boom

Mark Pincus, Founder of Zynga, Is Replaced as C.E.O. Again

Honeywell Saved By United Technologies

Qualcomm Settles SEC Charges That It Repeatedly Bribed Chinese Officials To Gain An Edge

Former Chesapeake CEO McClendon Charged With Bid-Rigging of Land Leases

Jeff Carter: How Can the U.S. Win the Corporate Tax Battle?

Joshua Brown: Warren Buffett Said Everything on CNBC

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Ross Stores Earns 66 Cents per Share
Posted by Eddy Elfenbein on March 1st, 2016 at 4:10 pm

Ross Stores (ROST) just released its fiscal Q4 earnings. For November, December and January, the discounter earned 66 cents per share. Sales rose 6% to $264 million, and same-store sales rose 4%.

Barbara Rentler, Chief Executive Officer, commented, “We are pleased with our sales and earnings results for the fourth quarter, which exceeded our expectations despite the highly promotional holiday selling environment and our most challenging sales comparisons from the prior year. These results were driven by the competitive values we offered on a wide assortment of name brand bargains and gifts throughout our stores.”

Ms. Rentler continued, “Fourth quarter operating margin was 12.7% compared to 13.1% in the prior year, as higher merchandise margin and tight expense control were more than offset by the timing of packaway-related costs. For the 2015 fiscal year however, operating margin rose 10 basis points to a record 13.6%.”

For the year, Ross earned $2.51 per share. Net sales rose 8%, and same-store sales rose 4%.

Ross is also raising its quarterly dividend by 15% to 13.5 cents per share. The previous dividend was 11.75 cents per share.

February ISM Rises to 49.5
Posted by Eddy Elfenbein on March 1st, 2016 at 10:20 am

More encouraging news. The February ISM Index rose to 49.5. This is the second straight monthly gain for an index that hasn’t done well over the last 18 months.

A reading above 50 means the manufacturing sector is expanding while below means it’s contracting. This is the fifth report in a row below 50, but it appears we may be in an upward trend.

Also, the Commerce Department said that construction spending rose by 1.5% in January. That’s the biggest increase since October 2007.

Ford Jumps on Strong February Sales
Posted by Eddy Elfenbein on March 1st, 2016 at 9:39 am

It’s still early but Ford Motor (F) is having a nice morning. The stock has been up as much as 4% today, and it broke above $13 per share.

The company just reported its best February sales in 11 years.

Ford Motor Company’s U.S. sales were up 20 percent in February versus a year ago with 217,192 vehicles sold. Retail sales grew 11 percent – the company’s best February since 2005.

Retail sales gains came across the product portfolio. Cars gained 6 percent, trucks increased 5 percent, and SUVs were up 22 percent.

Ford SUV sales last month – the best February in company history – totaled 65,016 vehicles, up 28 percent versus a year ago. Edge jumped 91 percent, Explorer was up 18 percent and Escape gained 14 percent.

F-Series sales were strong, too, with 60,697 vehicles sold – a 10-percent increase – marking Ford’s best February for F-Series in a decade.

“We saw a solid industry last month and a strong month for Ford, as customer demand for our newest vehicles – including new high-end series on Explorer and Edge – helped Ford increase its average transaction prices at almost double the industry average,” said Mark LaNeve, Ford vice president, U.S. Marketing, Sales and Service. “Offering more high-end options for truck and SUV customers and having the capability fleet buyers value as they are reinvesting in their fleets are strengthening our business.”

Morning News: March 1, 2016
Posted by Eddy Elfenbein on March 1st, 2016 at 7:35 am

Euro-Area Unemployment Drops to 4-Year Low Amid Stimulus Debate

Supercore Inflation Guides ECB as Oil Muddies Price Outlook

ICE Confirms It May Bid for LSE as Shares Soar to Record

Why China’s Economy Will Be So Hard to Fix

Fed’s Dudley Sees Risks to U.S. Economic Outlook Tilting to Downside

Angry Americans: How the 2008 Crash Fueled a Political Rebellion

Apple Wins Ruling in New York iPhone Hacking Order

Discount Chain Dollar Tree’s Sales Rise Less Than Expected

Fiat Chrysler U.S. Auto Sales Jump 12%

Valeant Pharmaceuticals Is Under S.E.C. Investigation

Barclays, Reporting Loss, Plans to Cut Stake in African Business

Jamie Dimon on Finance: ‘Who Owns the Future?’

The Rise and Fall of Commodities Hedge Fund King Willem Kooyker

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

Roger Nusbaum: Making the Most of a Messy Market

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The Correlation Continues
Posted by Eddy Elfenbein on February 29th, 2016 at 1:38 pm

Here’s the year-to-date chart. The S&P 500 is in red and oil is in black.

China Cuts Reserve Requirement
Posted by Eddy Elfenbein on February 29th, 2016 at 12:03 pm

The stock market is up modestly today. The big news is that China cut its reserve requirement for its big banks. That’s how much money they have to keep in reserve and can’t lend out. The rate is now 17%. According to Bloomberg, the move will inject $105 billion to the Chinese economy.

The economy in China is weak and getting weaker. The authorities there have been trying everything to get it back on its feet, and the reserve requirement cut is their latest move. Of all the world’s stock markets, China’s is the single worst performer this year.

This is a change in China’s policy. Until now, the PBOC, China’s Fed, had used more modest policy tools to help the economy. Lowering the reserve requirement is seen as playing hardball. One concern is liquidity.

At noon, the U.S. market is up about 0.5%. It seems to be a fairly broad rally. Materials are leading while Healthcare is lagging.

Morning News: February 29, 2016
Posted by Eddy Elfenbein on February 29th, 2016 at 7:01 am

China Cuts Reserve Requirement Ratio for Fifth Time Since Feb. 2015

India Unveils Pro-Poor Budget, Keeps Deficit Target

ECB Window for Stimulus Message Closing as Inflation Stalls

Buffett: Politicians ‘Dead Wrong’ on Economy

Social Security Explains New Claiming Rules

Bullish Oil Bets Rise as Hedge Funds See Supply Tightening

Debt Swaps Become a Tough Sell for Cash-Strapped U.S. Energy Firms

Apple’s Cook Picks Up Where Snowden Left Off in Privacy Debate

Amazon Strikes Deal with U.K. Grocer Morrisons

With Humility, Starbucks to Enter Italian Market

Sharp Says Has Not Set a Deadline for Deal With Hon Hai

Lumber Liquidators Swings to Loss Amid Laminate Flooring Fallout

Gameloft Board Rejects Vivendi’s Takeover Offer

Jeff Miller: Can a Rebounding Economy Support Stock Prices?

Jeff Carter: Some Wrongheaded Policy on Minimum Wage

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Leap Day Returns
Posted by Eddy Elfenbein on February 27th, 2016 at 5:19 pm

Here’s a look at all the Leap Day returns for the Dow. Twelve of the last 16 have been down days. Odd fact: There was no Leap Day in 1900.

Warren Buffett’s Shareholder Letter
Posted by Eddy Elfenbein on February 27th, 2016 at 11:28 am

This is always worth a read. Here’s Warren Buffett’s latest letter to shareholders. Here’s a key passage:

It’s an election year, and candidates can’t stop speaking about our country’s problems (which, of course, only they can solve). As a result of this negative drumbeat, many Americans now believe that their children will not live as well as they themselves do.

That view is dead wrong: The babies being born in America today are the luckiest crop in history.

American GDP per capita is now about $56,000. As I mentioned last year that – in real terms – is a staggering six times the amount in 1930, the year I was born, a leap far beyond the wildest dreams of my parents or their contemporaries. U.S. citizens are not intrinsically more intelligent today, nor do they work harder than did Americans in 1930. Rather, they work far more efficiently and thereby produce far more. This all-powerful trend is certain to continue: America’s economic magic remains alive and well.

Some commentators bemoan our current 2% per year growth in real GDP – and, yes, we would all like to see a higher rate. But let’s do some simple math using the much-lamented 2% figure. That rate, we will see, delivers astounding gains.

America’s population is growing about .8% per year (.5% from births minus deaths and .3% from net migration). Thus 2% of overall growth produces about 1.2% of per capita growth. That may not sound impressive. But in a single generation of, say, 25 years, that rate of growth leads to a gain of 34.4% in real GDP per capita. (Compounding’s effects produce the excess over the percentage that would result by simply multiplying 25 x 1.2%.) In turn, that 34.4% gain will produce a staggering $19,000 increase in real GDP per capita for the next generation. Were that to be distributed equally, the gain would be $76,000 annually for a family of four. Today’s politicians need not shed tears for tomorrow’s children.

Indeed, most of today’s children are doing well. All families in my upper middle-class neighborhood regularly enjoy a living standard better than that achieved by John D. Rockefeller Sr. at the time of my birth. His unparalleled fortune couldn’t buy what we now take for granted, whether the field is – to name just a few – transportation, entertainment, communication or medical services. Rockefeller certainly had power and fame; he could not, however, live as well as my neighbors now do.

Though the pie to be shared by the next generation will be far larger than today’s, how it will be divided will remain fiercely contentious. Just as is now the case, there will be struggles for the increased output of goods and services between those people in their productive years and retirees, between the healthy and the infirm, between the inheritors and the Horatio Algers, between investors and workers and, in particular, between those with talents that are valued highly by the marketplace and the equally decent hard-working Americans who lack the skills the market prizes. Clashes of that sort have forever been with us – and will forever continue. Congress will be the battlefield; money and votes will be the weapons. Lobbying will remain a growth industry.

The good news, however, is that even members of the “losing” sides will almost certainly enjoy – as they should – far more goods and services in the future than they have in the past. The quality of their increased bounty will also dramatically improve. Nothing rivals the market system in producing what people want – nor, even more so, in delivering what people don’t yet know they want. My parents, when young, could not envision a television set, nor did I, in my 50s, think I needed a personal computer. Both products, once people saw what they could do, quickly revolutionized their lives. I now spend ten hours a week playing bridge online. And, as I write this letter, “search” is invaluable to me. (I’m not ready for Tinder, however.)

For 240 years it’s been a terrible mistake to bet against America, and now is no time to start. America’s golden goose of commerce and innovation will continue to lay more and larger eggs. America’s social security promises will be honored and perhaps made more generous. And, yes, America’s kids will live far better than their parents did.