• Morning News: April 26, 2013
    Posted by on April 26th, 2013 at 6:27 am

    Bank of Japan Sees Inflation Nearing Target in 2015

    Bundesbank Slams ECB Bond-Buy Plan in Opinion for German Court

    Southern Europe’s Recession Threatens to Spread North

    Cyprus Will Get Debt Relief Because It Has Gas

    Initial Jobless Claims in U.S. Fell Last Week to 339,000

    The Seductive Simplicity of a New Banking Bill

    CBOE Preaches to Vegas Choir as ‘Glitch’ Crashes Exchange

    Amazon Beats Estimates as Digital Content Pays Off

    Alcatel Loses Cash, Plans to Change

    New York Times Moves Toward Netflix Model as Ads Tumble

    United Continental, Southwest Tops View, But JetBlue Misses

    Archer-Daniels-Midland Wins GrainCorp Board Approval for Bid

    Microsoft Gets Upper Hand In First Google Patent Trial

    Credit Writedowns: Some Thoughts on What’s Next for Italy

    Phil Pearlman: One Point No One is Making About the Flash Crash

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  • Silver — The Poor Man’s Gold
    Posted by on April 25th, 2013 at 8:02 am

    Silver, which is often called “the poor man’s gold,” has failed to move up recently even though gold has regained a tiny bit of its luster. Last Tuesday, April 16th, spot silver got down to $22 per ounce. That was Ag’s lowest print since October 5th, 2010.

    Gold now trades at 62 times silver. During the worst of the financial crisis in 2008, gold got to more than 80 times silver. The Gold/Silver ratio has been an important ratio through history. Way back in antiquity, Plato mentioned that the ratio was 12-to-1. In 1792, the U.S. Congress, at the advice of Alexander Hamilton, passed the Coinage Act of 1792. This was the government’s first attempt at price-fixing (and not the last). The act defined a U.S. dollar as 371.25 grams of silver or 24.75 grams of gold. In other words, Hamilton pegged the Gold/Silver ratio at 15. In 1834, Congress had to bump it up to 16. The all-time high for the Gold/Silver Ratio came during the first Gulf War. On February 22, 1991, gold was going for 102 times silver.

    In 1979-80, there was an absolutely crazy rally in silver when two Texas brothers tried to buy all the silver in the world. What’s even crazier is that if it hadn’t been for those meddling exchanges, they would have gotten away with it.

    When Nelson Bunker Hunt and Herbert Hunt started their plan, silver was around $6 per ounce. By early 1980, it got $50 per ounce. Time Magazine estimated they made between $2 billion and $4 billion in just nine months. To pull this off, they had to borrow zillions of dollars. At one point, it was estimated that they held one-third of the world’s silver. Tiffany (TIF) took out a full-page article to denounce them.

    Since I’m probably the only person who knows this trivia, the Hunt brothers were the sons of the legendary oilman, Haroldson Lafayette “H.L” Hunt, Jr. Hunt the senior wrote a totally batshit-crazy novel based on his idea of a fascist utopia called “Alpaca.” It’s literally one of the worst books ever written. I remember one person calling it “1984, but Big Brother is the good guy.” I wish I were making this up.

    Not all the Hunts were nuts. Lamar Hunt was one of the most influential people in the development of modern football. He was the one who came up with the name “Super Bowl.”

    Anyway, back to silver. The Hunts were convinced that the Establishment was out to crush them and they were pretty much right. The exchange changed the margin requirement which forced the brothers to put up much more collateral. (By the way, one of my first jobs in this industry was making margin calls. That’s not a metaphor. I had to actually call people to tell them they had to sell or put up more money. Good times!)

    On March 27, 1980, the bottom fell out of the silver market. This is now known as “Silver Thursday.” The Hunts had to put up more money, but they couldn’t reach their margin requirement. The government was worried (tell me if you’ve heard this one before) that Wall Street banks were so much in debt to the Hunts that if the Hunts went under, so would the banks. In fact, a silver panic could start a banking panic.

    The Hunts had finally been broken and even today, silver is still far short of its peak in 1980. The Hunts eventually become the models for brothers Randolph and Mortimer Duke in the movie Trading Places.

  • Morning News: April 25, 2013
    Posted by on April 25th, 2013 at 7:52 am

    Britain Avoids Triple-Dip Recession

    Spanish Unemployment Rate Hits 27.2%

    Brown-Vitter Bill Seeks to End ‘Too Big to Fail’

    Fed Debate Moves From Tapering to Extending Bond Buying

    Possible Fed Successor Has Admirers and Foes

    Manufacturing in U.S. Cools as Durables Orders Slump

    Verizon Eyes $100 Billion Bid for Vodafone’s Wireless Stake

    Qualcomm Forecasts Profit That May Miss Some Estimates

    Deutsche Telekom Secures U.S. Position With MetroPCS Deal

    Time Warner Cable Revenue Misses As Data Services Disappoint

    Southwest Airlines 1Q Profit Falls, But Higher Fares Help It Beat Wall Street Expectations

    Lower Output, Higher Won Hurt Hyundai

    Hundreds Of Service Workers Strike In Chicago

    Roger Nusbaum: And That’s All I Have to Say About That

    Howard Lindzon: Who Really Caused the Flash Crash of 2013…Twitter? AP? Hackers?

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  • AFLAC Earns $1.69 per Share for Q1
    Posted by on April 24th, 2013 at 4:48 pm

    AFLAC‘s ($AFL) earnings results are out. The company earned $1.69 per share in operating earnings for the first three months of the year. The answer to the big question is yes, the yen took a bit out of their bottom line — 15 cents per share was lost due to currency. That’s actually not as much as I thought.

    For Q1 last year, the company earned $1.74 per share in operating earnings. If we discount currency moves, AFLAC’s earnings rose by 5.7% last quarter. The company expects Q2 operating earnings to range between $1.41 and $1.56 per share. Assuming the yen averages 95 to 100 per dollar for the year, AFLAC expects full-year earnings between $5.99 and $6.37 per share.

    Commenting on the company’s first quarter results, Chairman and Chief Executive Officer Daniel P. Amos stated: “Although the underlying strong results were masked by a significantly weaker yen, we are pleased with our overall results in the first quarter of 2013. Aflac Japan produced solid financial results that exceeded our expectations for the quarter. Aflac Japan’s overall sales were up due to the advanced purchases of products prior to a scheduled premium increase. Third sector sales on the other hand, were down for the first quarter as expected. However, we believe consumer response to our third sector products will be strong in the second half of 2013. As such, we continue to expect that Aflac Japan’s sales of third sector products will be flat to up 5% for the year.

    “While Aflac U.S. sales declined in the quarter, we believe sales will be weighted more toward the latter half of the year. Therefore, we are retaining our objective of a flat to 5% sales increase for the year. The foundation of Aflac U.S. is strong and we are focused on expanding our reach to employees at companies of all sizes. We continue to look for opportunities to leverage our strong brand and relevant product portfolio in the evolving health care environment.

    “Low investment yields, particularly in Japan, remain a significant challenge. As such, we continue to invest a significant portion of our cash flows in U.S. corporate bonds. This strategy provides greater liquidity, enhances flexibility for our portfolio and increases the opportunity to diversify the investment of our significant cash flows beyond Japanese Government Bonds, with the objective of producing higher returns. In light of 10-year JGB yields hitting historical lows, we want to be flexible in our asset allocation. Given significant changes impacting financial markets including Japanese interest rates and the yen/dollar exchange rate, our investment team is carefully monitoring Japan’s monetary and fiscal policies to evaluate investment options related to our JGB asset allocation.

    “The strength of our regulatory capital ratios demonstrates our commitment to maintaining financial strength on behalf of our policyholders and bondholders. As we have communicated over the past several years, sustaining strong RBC and SMR ratios remains a priority for us. While we have not yet completed our statutory financial statements for the first quarter, we estimate our quarterly RBC ratio at March 31 was above our 2012 year-end ratio of 630%. We believe Aflac Japan’s SMR will also improve over its year-end 2012 level of 669%.

    “We communicated last quarter our intention is to purchase $400 to $600 million of our shares this year. We purchased approximately $150 million of our shares in the first quarter of 2013. Given the strength of our capital ratios and parent company liquidity, we are even more comfortable with that range.

    “Reflecting the underlying strength of the business, we still expect to have another good year for Aflac. I want to reiterate that our objective for 2013 has not changed: To increase operating earnings per diluted share 4% to 7%, or approximately $6.86 to $7.06 per share, on a currency neutral basis. Assuming we achieve our earnings objective and the yen averages 95 to 100 to the dollar for 2013, we would expect to report operating earnings of $5.99 to $6.37 per diluted share for the full year. Additionally, for the second quarter of 2013, using the same currency assumptions, we expect operating earnings will be in the range of $1.41 to $1.56 per diluted share.”

  • The Meltdown in Cognizant
    Posted by on April 24th, 2013 at 3:50 pm

    Shares of Cognizant Technology Solutions ($CTSH) have dropped sharply over the past few weeks. The stock closed at $77.66 on April 11th, and including today, it’s dropped for nine days in a row. Today’s low was $61.80.

    So what’s going on? The company doesn’t report Q1 earnings until May 8th. The problem is that Infosys ($INFY), a similar company, recently gave terrible guidance, so traders are convinced CTSH will do the same. The earnings miss from IBM ($IBM) also dinged the sector.

    There are also concerns that, in light of recent events, upcoming legislation may impact the status of foreign workers. I really can’t weigh any of these events at the moment because they don’t impact the company directly but are instead tangential concerns. I don’t mean to downplay them, but we can’t say yet if they will impact CTSH’s first-quarter results.

  • Ford Earns 41 Cents Per Share
    Posted by on April 24th, 2013 at 12:29 pm

    This morning, Ford Motor ($F) reported pretty good earnings for Q1. The automaker made 41 cents per share which was four cents more than Wall Street’s expectations. The company made 35 cents per share one year ago. Sales rose to $33.9 billion which beat estimates by $400 million.

    As expected, Ford continues to do very well in North America but Europe still remains weak. The key driver of Ford’s results is the success of the Fusion. I was glad to see Ford given an ambitious production forecast for Q2; 800,000 vehicles in North America and 390,000 in Europe.

    For the quarter, Ford made $2.4 billion in North America but lost $462 million in Europe. That’s about three times what they lost one year ago. The company expects to lose $2 billion in Europe this year. Right now, the company is trying to right itself in the same way they turned around in the U.S. In South America, Ford lost $218 million. They expected to lose $300 million.

  • Lousy Durable Goods Report
    Posted by on April 24th, 2013 at 10:28 am

    From Reuters:

    Orders for long-lasting manufactured goods recorded their biggest drop in seven months in March and a gauge of planned business spending rose only modestly, signs of a slowdown in economic activity.

    Durable goods orders slumped 5.7 percent as demand fell almost across the board, the Commerce Department said on Wednesday. The drop last month in orders for these goods, which range from toasters to aircraft, followed a 4.3 percent increase in February.

    Economists polled by Reuters had expected orders to fall only 2.8 percent. Excluding transportation, orders declined 1.4 percent after falling 1.7 percent the prior month.

    From transportation to primary metals and machinery, orders were weak, the latest indication of cooling in a sector that has played a pivotal role in the economy’s recovery from the 2007-09 recession.

    “Overall, the weak tone of this report underscored the emerging narrative of a considerable slowing in economic growth momentum in March,” said Millan Mulraine, senior economist at TD Securities in New York.

    This was the report for March. On Friday, the government will release its first estimate for Q1 GDP growth. The current consensus is for 3.2% but that may come down after today’s durable goods report.

  • Wells Fargo Raises Dividend 20%
    Posted by on April 24th, 2013 at 10:06 am

    Last month, the Federal Reserve approved a 30-cent dividend for Wells Fargo ($WFC). The bank just announced that it’s raising its dividend from 25 cents to 30 cents per share.

    This is the second dividend hike this year. In January, WFC raised their dividend from 22 cents to 25 cents per share. Going by yesterday’s close and the new dividend, the stock yields 3.23%.

  • Morning News: April 24, 2013
    Posted by on April 24th, 2013 at 7:42 am

    German Business Sentiment Falls

    India’s Jet Airways in $379 Million Stake Sale to Etihad

    P&G Forecasts Profit Below Street View, Shares Fall

    FedEx Wins $10.5 Billion Postal Contract as UPS Shut Out

    Jon Corzine Sued By MF Global Bankruptcy Trustee

    Ford Profit Tops Estimates as Fusion Boosts Record North America

    Wealthiest Americans Only Winners in Recovery, Pew Says

    Barclays Posts Bigger-Than-Estimated Investment Banking Profit

    Daimler Lowers Profit Forecast After First-Quarter Drop

    AT&T Misses Estimates as It Struggles to Keep Pace With Verizon

    Barrick Profit Tops Estimates as Costs Rise Less Than Expected

    WellPoint Earnings, Sales Rise, Lifts Outlook

    Does Apple’s Dividend Make It Microsoft 2.0?

    Joshua Brown: I Survived the Flash Crash of ’13

    Jeff Carter: Hackers Do The Work That Used to Be Done By Wall Street

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  • Bard’s Conference Call
    Posted by on April 23rd, 2013 at 10:29 pm

    Here are some highlights of Bard‘s ($BCR) conference call:

    Diluted shares for the period were 82.5 million, as we purchased 1.5 million shares during Q1. The net result is adjusted EPS of $1.44 at the top end of our guidance range for the quarter.

    The balance sheet, as of March 31, reflects cash, restricted cash and short-term investments of $905.3 million versus $921.3 million at December 31. For the quarter, accounts receivable days were down 2.3 days, and inventory days were down 0.2 days. Capital expenditures totaled $13.2 million for the quarter.

    On the liability side, total debt was $1.4 billion as of March 31, no change from December 31. Debt to total cap at the end of the quarter was about 43%, and total shareholder investment was $1.9 billion at March 31, 2013.

    In looking at Q2, we’re expecting to see similar constant currency sales growth to what we saw in Q1. Given the previously discussed first half headwinds, we told you that our revenue growth expectations for the start of the year was flattish, and we don’t see any reason to change that.

    From an EPS standpoint, excluding items affecting comparability, we see the second quarter in the range of $1.35 to $1.39, as we continue to aggressively ramp our investment spending in both SG&A and R&D, consistent with our strategic plan.

    Wall Street had been expecting $1.46 per share.