Morning News: November 19, 2014
Posted by Eddy Elfenbein on November 19th, 2014 at 7:03 am

India’s Strong Growth to Depend on Modi-Led Reforms: OECD

Russia and Venezuela to Fight Low Oil Prices

Bank of Japan Rebels Switch Over to Back Extended Easing

Differences Appear Within Majority of Bank of England Rate Setters

Yellen Inherits Greenspan’s Conundrum as Long Rates Sink

Economists Call October Inflation Measure ‘Distorted,’ a ‘Statistical Quirk’

Black Friday Isn’t Dead! It’s Just Evolving With Shoppers

Xiaomi Stake Said to Value IQiyi at Up to $3 Billion

Uber’s Media Revenge Fiasco: What Went Wrong and How to Fix It

Home Depot Warns There’ll Be More Costs Due to Its Data Breach

Wells Fargo Unit to Launch Europe Infrastructure Fund, Target $1 Billion

Exercise in a Bottle Is Next Food Frontier for Nestle

Ranbaxy May Be Making a Huge Mistake by Suing All-Powerful U.S. FDA

Roger Nusbaum: A Yield Play Without Any Yield?

Epicurean Dealmaker: What Is It Like to Be a Banker?

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The S&P 500 and Its Earnings
Posted by Eddy Elfenbein on November 18th, 2014 at 12:04 pm

Here’s a look at the S&P 500 along with its earnings. The S&P 500 is in black and it follows the left scale. The earnings line is in yellow and it follows the right scale. The two lines are scaled at a ratio of 16-to-1. That means that whenever the lines cross, the market’s P/E Ratio is 16.

Medtronic Meets Earnings
Posted by Eddy Elfenbein on November 18th, 2014 at 10:15 am

This morning, Medtronic ($MDT) reported fiscal Q2 earnings of 96 cents per share. That’s a decent number. The company hit the consensus forecast right on the head. Medtronic earned 91 cents per share in last year’s Q3.

More importantly, the company said that the Covidien ($COV) deal is still on track. The company hopes to close out the deal early next year. Medtronic will reincorporate in Ireland and the new name will be Medtronic PLC.

Quarterly sales came in at $4.37 billion which was a shade more than the consensus of $4.36 billion. The medical devices company reiterated its full-year earnings outlook of $4.00 to $4.10 per share. The company has already earned $1.89 per share for the first half of its fiscal year which ends in April.

“Our second quarter performance was strong and well balanced across our businesses and geographies,” said Omar Ishrak, Medtronic chairman and chief executive officer. “Revenue growth was at the upper end of our full-year revenue outlook and within our mid-single digit baseline goal, reflecting the strong execution of our global organization.”

The shares have popped a little bit today. Shares of MDT have been as high as $72.26 this morning which is a gain of 4.4%.

Morning News: November 18, 2014
Posted by Eddy Elfenbein on November 18th, 2014 at 7:07 am

As Japan Falls Into Recession, Europe Looks to Avoid It

UK Inflation Rate Rises to 1.3% in October

Flash Boys Raising Volatility in Wild New Treasury Market

FHA is Back in the Black – But Not Out of the Woods

Halliburton May Sell Fewer Baker Assets Than Expected

Actavis Surges to Top Drugmaker Ranks With Acquisitions

Home Depot Profit Tops Estimates on Customer Traffic Gain

Toyota Tackles Chicken And Egg With Rollout Plan for Hydrogen-Powered Mirai

DreamWorks: Too Greedy For A Deal?

SunEdison and TerraForm Buy First Wind, Gaining a Toehold in Turbines

Urban Outfitters Reports Earnings Miss, Sales Decline At Namesake Brand

U.S. Mobile Payments Market to Boom by 2019, Research Firm Says

Latest Madoff Fraud Deal Pushes Amount Recovered to Over $10 Billion

Edward Harrison: Banks, Japanese Trade, the Currency Wars and Deflation

Edward Hugh: Abenomics 2.0 – Just What Are They Trying to Achieve?

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James Gandolfini on Sesame Street
Posted by Eddy Elfenbein on November 17th, 2014 at 5:39 pm

Some Fun Market Stats
Posted by Eddy Elfenbein on November 17th, 2014 at 12:12 pm

Here are some fun stats I recently found.

So far this year, the S&P 500 is up 12.73% on Tuesday and Wednesday. The rest of the week, the index is down -2.10%.

Here’s how it works out:

Monday: -0.89%
Tuesday: 8.12%
Wednesday: 4.27%
Thursday: -4.66%
Friday: 3.59%

I also found that the best seven days of the last seven years comprised the S&P 500’s entire gain. The rest of the time, the index was net flat.

That’s a good example of a stat that’s true, but it’s a bit misleading. For one, it excludes dividends. Even with low yields, dividends add up after seven years.

Also, the last seven years haven’t been that good for the market. Add in a very volatile time in 2008 and the stat isn’t that hard to believe. All seven days came within an unpleasant six-month period, and five of the seven came during a six-week stretch.

Stock Returns and 5-Year TIPs
Posted by Eddy Elfenbein on November 17th, 2014 at 10:25 am

Here’s a remarkable stat I just found. Since 2003, when the yield on the 5-year TIPs is 1.11% or less, the Wilshire 5000 Total Return Index has had an average annualized return of 22.5%.

But when the yield on the 5-year TIPS is 1.12% or more, the Wilshire 5000 has averaged -5.0% per year.

The difference is quite striking. I should warn you that that’s a small sample size. Unfortunately, TIPs are fairly new so the data doesn’t go back that far. Intuitively, this relationship makes sense. When real bond yields are high, investors will ditch stocks in favor of bonds. Conversely, when real bond yield are in the dumps, investors will naturally turn to stocks.

Since 2003, the 5-year TIPs has been 1.11% or less, 58.1% of the time. It’s been 1.12% or more, 41.9% of the time.

The good news is that real bond yields are still quite low. The five-year TIPs is currently barely positive (0.16% on Thursday). That’s up from the spring of 2013 when the 5-year TIPs were near -1.5%.

The 5-year TIPs last yielded 1.12% or more on September 4, 2009. If this relationship is to be trusted, it means the stock rally still has room to run.

Industrial Production Fell 0.1% in October
Posted by Eddy Elfenbein on November 17th, 2014 at 9:41 am

We got a little surprise this morning when the Industrial Production report for October showed a 0.1% decline.

Output fell 0.1 percent after a 0.8 percent increase in September that was smaller than previously estimated, figures from the Federal Reserve in Washington showed today. The median forecast in a Bloomberg survey of 83 economists projected a 0.2 percent gain. Factory production rose 0.2 percent, matching the prior month’s advance that was also revised down.

Four Straight Under 0.1% Moves
Posted by Eddy Elfenbein on November 17th, 2014 at 8:27 am

Oh dear lord, this market has been sound asleep. Here are the five closings, in order, for the S&P 500 last week; 2,038.26, 2,039.68, 2,038.25, 2,039.33 and 2,039.82.

Someone check for a pulse.

The S&P 500 has finished the day, up or down, by less than 0.1% for four straight days. That’s the longest such streak in more than 35 years.

Since October 17, we’ve had only one day down of more than 0.3%. On Friday, the S&P 500 closed above its five-day moving average for the 21st day in a row.

This has been a cat’s-feet rally, but the market is taking a rest after a hectic few weeks. Bloomberg notes that from October 15 to November 11, the market staged its biggest 20-day rally in more than two years.

Morning News: November 17, 2014
Posted by Eddy Elfenbein on November 17th, 2014 at 6:52 am

Carney Says Fixed Pay May Be Next Target After Bonus Curbs

France, a Tax Haven? Yes, for Companies From Microsoft to Huawei

Japan’s Economy Makes Surprise Fall Into Recession

Australia, China Deepen Ties With Landmark Free-Trade Deal

Link Opens Between Hong Kong and Shanghai Stock Markets

Tiger Economy Loses Its Roar as Thailand’s Exports Slump

Crude Oil Prices Fall Sharply as OPEC Meeting Awaited

Allergan Near Buyout of Up to $65 Billion to Escape Valeant, Ackman

Halliburton to Buy Baker Hughes for $34.6 Billion

Apple Adds Chinese Payment System UnionPay to App Store

Pfizer Dampens Astra Bid Hopes By Signing German Merck Cancer Deal

Boeing Deepens Supply Relationship With Toray

The World Could Be Heading Toward a Global Shortage of Chocolate

Howard Lindzon: Peak America? Peak Internet Freedom? Peak Lindzon?

Jeff Miller: Weighing the Week Ahead: Time to Buy Commodities?

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