Archive for December, 2016

• Morning News: December 27, 2016
  Eddy Elfenbein, December 27th, 2016 at 7:33 am

  Outrage Over the Economy Doesn’t Explain Surge in Global Populism

  Oil Prices Edge Up as Investors Remain Positive

  Saudi Royal Family Is Still Spending in an Age of Austerity

  Monte dei Paschi Rescue Cost Jumps as Deposits Fall

  Dollar’s Rise Threatens Manufacturing Recovery

  Fear of Trump Triggers Deep Spending Cuts by Nation’s Second Largest Union

  Toshiba Flags ‘Billions of Dollars’ Loss on U.S. Nuclear Acquisition

  Tesla, Panasonic to Begin Solar Panel Production in New York

  Boeing Is Flying Toward a Cloudy 2017

  Tepco, Investors Discussing First Bond Sale Since Fukushima

  Global Diamond Business Roiled as Cash Crunch Hits Indian Stone Cutting

  Prying Eyes Are Watching Airbnb Customers as Tenants Fight Back

  Clean Brexit Is The Way To Go, Saving UK £24 Billion A Year – Thank You, Goodbye, We’re Gone

  Josh Brown: How I Got My Readers Through 2016

  Cullen Roche: Don’t Get Trumped in 2017

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• Morning News: December 26, 2016
  Eddy Elfenbein, December 26th, 2016 at 7:16 am

  How JPMorgan Could Not Save Italy’s Problem Bank

  Arun Jaitley’s Correct – India Needs A Lower Level Of Taxes

  Kuroda Defends BOJ’s Yield Curve Control, Upbeat On Global Outlook

  20,000 in 2016? Dow Chases Milestone as Consumer Confidence Data Comes

  Banks Just Can’t Quit Charging You Overdraft Fees

  Brands Start Planning for Unexpected Criticism by Trump

  To Stop Price Spikes on Prescription Drugs, a Widening Radar

  Snapchat Has Quietly Acquired An Israeli Startup For a Reported $30 to $40 Million

  Blindsided by SUV Boom, Hyundai Trims Costs, Perks

  `Suplex’ in Chinese? Professional Wrestling Tries a Big New Market

  Iran Says It Sealed Boeing Plane Deal at Half Price

  For Fact-Checking Website Snopes, a Bigger Role Brings More Attacks

  Power Surge: Chinese Electric Car Battery Maker Charges For Global Market

  Howard Lindzon: Authenticity, Style, and Scarcity…and Peak Yelling

  Roger Nusbaum: Being Disciplined ¾ of the Time Won’t Work

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• Merry Everything!
  Eddy Elfenbein, December 25th, 2016 at 8:05 am

  

  I wanted to take this opportunity to wish everyone a Merry Christmas and a happy, healthy and profitable new year.

  This has been an incredible year for us. The blog continues to grow its readership. The newsletter has a record number of subscribers and our Twitter following is growing as well.

  The biggest news this year was the launch of our ETF. So far, it’s going very well. I want to thank all our shareholders for their trust and confidence in me.

  I also want to thank my tireless editor, Marcia Hippen. She also posts the invaluable morning news links. I also want to acknowledge some of my fellow financial bloggers Barry Ritholtz, Josh Brown, Morgan Housel, Howard Lindzon, Tadas Viskanta and many, many others for their continued support.

  I’d also like to thank the people who follow and interact with me each day on Twitter.

  Most of all, I want to thank all of my readers for your continued support.

  Let’s hope 2017 brings us more success!

• “Yes Minister” Holiday Sketch
  Eddy Elfenbein, December 23rd, 2016 at 3:58 pm

• CWS Market Review – December 23, 2016
  Eddy Elfenbein, December 23rd, 2016 at 7:08 am

  Ladies and gentlemen, here are the 25 stocks for the 2017 Crossing Wall Street Buy List:

  AFLAC (AFL)

  Alliance Data Systems (ADS)

  Axalta Coating Systems (AXTA)

  Cerner (CERN)

  Cinemark Holdings (CNK)

  Continental Building Products (CBPX)

  Cognizant Technology Solutions (CTSH)

  CR Bard (BCR)

  Danaher (DHR)

  Express Scripts (ESRX)

  Fiserv (FISV)

  HEICO (HEI)

  Hormel Foods (HRL)

  Ingredion (INGR)

  Intercontinental Exchange (ICE)

  Microsoft (MSFT)

  Moody’s (MCO)

  Ross Stores (ROST)

  RPM International (RPM)

  Sherwin-Williams (SHW)

  Signature Bank (SBNY)

  JM Smucker (SJM)

  Snap-on (SNA)

  Stryker (SYK)

  Wabtec (WAB)

  The ten new stocks are Axalta Coating Systems (AXTA), Cinemark Holdings (CNK), Continental Building Products (CBPX), Danaher (DHR), Ingredion (INGR), Intercontinental Exchange (ICE), Moody’s (MCO), RPM International (RPM), Sherwin-Williams (SHW) and JM Smucker (SJM).

  I’ll have more details on the new buys in next week’s issue.

  The five sells are Bed Bath & Beyond, Biogen, Ford, Stericycle and Wells Fargo.

  To recap, I assume the Buy List is equally weighted among the 25 stocks. The buy price for each stock will be the closing price as of Friday, December 30, 2016. The new Buy List goes into effect on Tuesday, January 3, 2017, the first day of trading of the new year.

  The Buy List is now locked and sealed, and I won’t be able to make any changes for the entire year. I’ll have a complete recap of 2016 at the end of the year. I’ll also have more to say about our new buys, and I’ll give you new Buy Below prices.

  With a week to go, this looks to be one of our rare years where we trailed the market. Through Thursday, our Buy List is up 1.93% for the year, compared with 10.62% for the S&P 500. That doesn’t include dividends, but I’ll have the final calculations in next week’s issue.

  I should add two points in my defense. The first is that most of our underperformance came during a difficult spring and summer. We turned the corner recently and have beaten the market over the last two months. Let’s hope that trend continues into next year.

  Also, our 11-year track record against the market is still quite good. Again, I’ll have complete details in next week’s issue.

  Our Five Sells

  Let me add a few words on the sells. My belief is that each new buy should last a few years. I only turn against a stock when it turns out to be something quite different from what I originally believed.

  Bed Bath & Beyond was one of the most frustrating stocks to own. They had a long-time reputation for being a well-run outfit. Unfortunately, they fell behind the times. I simply stayed in this one for too long. I waited for a turnaround that never came. This week, the company released yet another poor earnings report. It’s time to let it go.

  There’s a lot I like about Ford. Overall, I think the company did a good job managing its way through the recession. Ford was never bailed out. They also made an impressive change to aluminum-body trucks. I also liked Ford’s generous dividend, plus their special dividend payment. Unfortunately, the outlook for Ford isn’t as rosy as I had assumed.

  I’m sad to part with Biogen. There’s a lot to like about this biotech, but I think they need to make some big changes first. Sales of Tecfidera have slowed down dramatically, and their broader pipeline is weak. Next year’s spinoff of Bioverativ is a good start. Despite its terrible name, Bioverativ could turn into a winner. I need to see results first, however.

  Stericycle was a mistake from the beginning. I simply missed how poorly organic sales had been performing. Management tried to mask these issues with a series of unwise rollups. This was a massive loser for us this year.

  There’s not much else to be said about Wells Fargo that hasn’t been said before. Fundamentally, WFC is a sound bank, but it’s been tainted by its indefensible behavior. At least, the stock has been a terrible performer this year.

  Dow Flirts with 20,000, Gets Number, Never Calls

  There wasn’t much news this week. The Dow has made a few runs at 20,000 but has so far failed to break through. On Wednesday, the index got as high as 19,986.56. On Tuesday, Wednesday and Thursday, most stock market volatility slowed to a crawl. The Dow is apparently doing its own version of the mannequin challenge. On Wednesday, the VIX briefly dropped below 11. That hasn’t happened in more than a year.

  

  On Thursday, the government revised its report on Q3 GDP growth from 3.2% to 3.5%. Last quarter was the best for economic growth in two years. The first quarter is about to start.

  Over the last ten years, there’s been a very noticeable trend of Q1 being quite poor for economic growth. I don’t know if that’s due to weather or other factors. Still, for the first time in a long time, I’m optimistic about the economy. I think there’s a good chance GDP growth for Q4 will top 2.5%. This week, we learned that consumer spending rose by 0.2% last month, while the number for October was revised up to a healthy 0.4%.

  I also wanted to pass along this excerpt by Gary Alexander in Louis Navellier’s most recent Market Mail. Keep this in mind when you hear the latest forecasts from experts.

  Last August, shortly after the political nominating conventions ratified Clinton and Trump as the two major party candidates, William Buiter, Chief Economist at Citigroup, and his team warned of a global recession if Trump won. His team said that a Trump win would cut world growth by 0.7-0.8 percentage points and could “easily” push growth below 2%, the threshold that indicates a looming recession. But last week, Buiter and his team reversed course and raised their 2017 forecast for global growth to 2.7%. (Source: Business Insider, December 12, 2016, “RPT-Investment Focus: Among the shocks, steady global growth is the biggest surprise.”)

  (…)

  On October 31st, Andrew Ross Sorkin wrote a New York Times analysis of what would happen after a surprise Trump victory. First, he quoted MIT economist Simon Johnson, who said a Trump presidency would “likely cause the stock market to crash and plunge the world into recession.” Sorkin added that Johnson’s “pessimism is shared by many economists across Wall Street, from Citigroup to Goldman Sachs. Each cites a different set of reasons the markets will fall if Trump wins.”

  Remember: Prices drive narratives.

  Before I go, I want to adjust two of our Buy Below prices. I’m lifting our Buy Below on Fiserv (FISV) to $111 per share. I’m also raising Stryker (SYK) to $128 per share.

  That’s all for now. The stock market will be closed on Monday, December 26 for Christmas. Trading resumes on Tuesday, and the final day of trading for 2016 will be on Friday, December 30. The next issue of CWS Market Review will be on Saturday, December 31. I’ll have a complete summary of how we did in 2016, plus I’ll list the starting prices for 2017. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

  – Eddy

• Morning News: December 23, 2016
  Eddy Elfenbein, December 23rd, 2016 at 6:53 am

  Bitcoin Surges Above $900 on Geopolitical Risks, Fed Tightening

  Hedge Fund Math: Heads We Win, Tails You Lose

  Monte Paschi’s Fatal Sin Brings Nationalization for Oldest Bank

  U.K. Current-Account Deficit Widens; GDP Growth Revised Up

  Putin Says Russian Economy Is On The Mend

  China Fines GM Venture $29 Million For Monopolistic Pricing

  Donald Trump’s New Appointments Shake Up Trade, Regulation

  Ignoring Climate Change Just Got More Expensive

  Deutsche Bank, Credit Suisse Reach Multibillion Settlements Over Toxic Securities

  Airbus Will Sell 100 Planes to Iran After Similar Boeing Deal

  Alibaba Enlists Brands to Help Snuff Out Knockoffs

  Apple and Nokia Battle Over Cellphone Patents

  1MDB Case Hangs Over Goldman Sachs as Investigators Dig for Answers

  Howard Lindzon: Uber – Losses Aren’t Cool…Unprecedented Losses are Cool

  Josh Brown: Dimon on His Role as a Trump Advisor

  Be sure to follow me on Twitter.

• Q3 GDP Revised up to 3.5%
  Eddy Elfenbein, December 22nd, 2016 at 12:44 pm

  Good, albeit, dated news for the economy today. The government revised its estimate for third-quarter GDP growth up to 3.5%. Bear in mind that Q3 began six months ago and ended nearly three months ago. The government’s previous report was for 3.2%.

  Last quarter was the best quarter for the economy in two years.

  The first quarter of 2017 is about to begin in a few days. Over the last 10 years, the economy has performed much worse during Q1 than in the rest of the year.

  Here’s how it breaks down. Since 2007, average real GDP growth by quarter:

  Q1: -0.08%
  Q2: +2.20%
  Q3: +1.96%
  Q4: +1.21%

  One of these things is not like the others.

  Perhaps it’s weather or season factors. Or maybe it’s coincidence. In the chart below, you can see how many of the poor quarters were Q1s.

• Morning News: December 22, 2016
  Eddy Elfenbein, December 22nd, 2016 at 7:01 am

  The Year in Money

  Monte Paschi Said Headed for Nationalization After Sale Failure

  OPEC Vs. Reality, Which Will Give First?

  U.S. Refiners Cash In On Mexico’s Record Fuel Imports

  Trump May Have a $300 Million Conflict of Interest With Deutsche Bank

  Trump Summons Contractors to Mar-a-Lago Over Spending

  Trump Names Carl Icahn as Adviser on Regulatory Overhaul

  Alibaba, Labeled ‘Notorious,’ Faces Growing Pressure Over Fakes

  Hershey Names 11-Year Vet Michele Buck to CEO Post

  In a Retreat, Uber Ends Its Self-Driving Car Experiment in San Francisco

  Why China and Hollywood Don’t Mix

  Secret Unit Helped Brazilian Company Bribe Government Officials

  Former Official at New York State Pension Fund, Two Brokers Charged in Bribery Scheme

  Jeff Carter: At Seed Do You Worry About Exit?

  Jeff Miller: Why Wall Street Strategists Always Seem Bullish

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• Bed Bath & Beyond Earns 85 Cents per Share
  Eddy Elfenbein, December 21st, 2016 at 4:28 pm

  Bed Bath & Beyond (BBBY) just dropped a rotten third-quarter earnings report. The home furnishings stock earned 85 cents per share for Q3. That was well short of Wall Street’s estimate of 98 cents per share. That’s also down from the $1.09 per share they made in last year’s Q3. Net sales rose 0.1% to $2.955 billion, and comparable sales fell 1.4%.

  Bed Bath updated its guidance. Before, they said to expect full-year earnings to range between $4.50 and $5 per share. Now they say to expect earnings at the low end of that range.

  The company has made $2.76 per share for the first three quarters of this year. That implies a Q4 earnings of $1.74 per share to reach $4.50 for the year. Wall Street had been expecting $1.86 per share. For context, BBBY made $1.91 per share in last year’s Q4. The stock is down about 4% in the after-hours market.

• Morning News: December 21, 2016
  Eddy Elfenbein, December 21st, 2016 at 7:05 am

  IMF Doubles Down on Lagarde as Trump Aims to Upend World Order

  Paschi Falls to Record as Investors Said to Balk at Share Offer

  Spanish Banks Face $4.2 Billion Hit From European Court’s Loan Ruling

  U.S. Stocks Hit Record Close, but Dow Short of 20000

  President Obama Bans Oil Drilling in Large Areas of Atlantic and Arctic Oceans

  Social Security Checks Are Being Reduced for Unpaid Student Debt

  Nike’s Profit Rises on Stronger Demand in U.S. and China

  Twitter’s Chief Technology Officer to Leave Company

  FedEx Plays Hardball With Retailers as Profits Get Squeezed

  Careful What You Wish For, Praxair

  Darden Restaurants Results Boosted by Olive Garden

  Walgreens, Rite Aid Find Unlikely Buyer for 865 Stores

  Volkswagen Expected to Pay Another $1 Billion in Emissions Scandal

  Howard Lindzon: The 12 Charts of 2016 … Semiconductors and New Daily Extras

  Josh Brown: Ray Dalio: Welcome to the Age of Trump

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