Archive for November, 2011

• Morning News: November 9, 2011
  Eddy Elfenbein, November 9th, 2011 at 5:17 am

  Financial Alchemy Foils Capital Rules in Europe

  European Debt Crisis as Berlusconi’s Last Stand

  European Stocks Slide as Italian-German Bond Yield Spread Widens

  Lagarde Warns of Risk of ‘Lost Decade’ for Global Economy

  China October Inflation Cools, More Policy Tweaks Seen

  Bank of Japan Official Urges Japan to Restore Fiscal Health

  Occupy Movement Inspires Unions to Embrace Bold Tactics

  A Board Complicit in MF Global’s Bets, and Its Demise

  HSBC Investment Bank Profit Shrinks

  AB InBev Revenue Misses Estimates as U.S. Beer Sales Slide

  Carlsberg Surges After Brewer Reiterates Full-Year Forecast

  Republic Surges Most Since 2009 With Frontier Airlines Set for Separation

  Maersk Sees Losses as Freight Rates Plunge

  Shares Dive as Olympus Scrambles for Answers

  Cullen Roche: The Stocks Vs. Italian Yields Conundrum

  Joshua Brown: Citi Spots a Positive Trend in Housing – Depletion

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• Leucadia National Reports Q3 Loss of $291 Million
  Eddy Elfenbein, November 8th, 2011 at 9:04 pm

  Leucadia National ($LUK) just reported a loss of $291 million for the third quarter. Don’t be too alarmed. LUK refuses to follow the Wall Street script of making their earnings report easy-to-read.

  The accounting they present is strictly by the book and little is done to make the numbers more accessible for shareholders. Despite the company having a market value of more than $6 billion, no analysts on the Street cover them which gives them even less incentive to play the quarterly earnings game.

• 10-Year TIPs Spread and Equity Returns
  Eddy Elfenbein, November 8th, 2011 at 1:14 pm

  I’m clearly having fun with my spreadsheets today.

  Check this out:

  Since 2003, the total return of the Wilshire 5000 has lost 9.2% when the 10-year TIPs spread is 2.36% or greater. Annualized, that’s -2.7%.

  When the TIPs spread is 2.35% or less, the total return of the Wilshire 5000 has been 95.1%. Annualized, that’s +13.5%.

• S&P 500 and the 10-Year Yield
  Eddy Elfenbein, November 8th, 2011 at 12:00 pm

  Here’s an interesting stat I found.

  Since 2007, the S&P 500 has done much better when the yield on the 10-year T-bond has been below 3.5% than when it has been above 3.5%.

  When the 10-year yield has been below 3.5%, the S&P 500 has gained a combined 78.6%.

  When the 10-year yield has been above 3.5%, the S&P 500 has lost 50.2%.

  The 10-year is currently at 2%.

• Booming North Dakota
  Eddy Elfenbein, November 8th, 2011 at 10:03 am

  Ever heard of the Bakken formation? You soon will. Thanks to oil, western North Dakota’s economy is growing so fast that communities are struggling to keep up. Strippers make $2,000 a night. Here’s a look at how fast production is growing.

• Morning News: November 8, 2011
  Eddy Elfenbein, November 8th, 2011 at 5:32 am

  EU Eyes December Start for Rescue Fund

  In Turmoil, Greece and Italy Deepen Euro Crisis

  Interest Rates on Italian Bonds Pushed to New Levels

  Businesses Feel the Pinch as China Tightens Lending

  Oil Trades Near a Three-Month High on U.S. Supply, European Crisis Outlook

  Promises Made, and Remade, by Firms in S.E.C. Fraud Cases

  MF Global’s Europe Clients Fume, U.S. Breathes Easier

  Its Leader on Sidelines, Regulator Faces Biggest Test in MF Global

  Toyota Q2 Falls 32%, Withdraws Full-year Forecast

  Olympus Hid Losses With Acquisition Fees

  Societe Generale Q3 Profit Declines 31% on Greece

  Vodafone Raises Full-Year Forecast

  Global Reinsuring Giant Munich Re’s Quarterly Net Decline Exceeds Analysts’ Forecast

  Facebook Wins Battle of Europe Clones

  High Bank Fees Give Wal-Mart a Money Aisle

  Edward Harrison: Italy’s Debt Woes and Germany’s Intransigence Lead to Depression

  Paul Kedrosky: Germany, Not China, Must Bail Europe

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• Buffett Is Buying
  Eddy Elfenbein, November 7th, 2011 at 10:36 am

  From Bloomberg:

  Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) invested $23.9 billion in the third-quarter, the most in at least 15 years, as he accelerated stock purchases and broadened the portfolio beyond consumer and financial-company holdings.

  Berkshire bought almost $7 billion of equity securities in the three months ended Sept. 30, compared with $3.62 billion in the second quarter and $834 million in the first, the Omaha, Nebraska-based company said Nov. 4 in a filing. Stockholdings labeled “commercial, industrial and other” soared 62 percent in the three months to $17.4 billion on a cost basis, surpassing equity investments in financial and consumer-product firms.

  “He sees something, and it’s big,” said Thomas Russo, a partner at Berkshire investor Gardner Russo & Gardner.

  Buffett, 81, drew down Berkshire’s cash as Europe’s debt crisis and Standard & Poor’s downgrade of the U.S. pushed stocks to their worst quarterly performance since 2008. The investments disclosed Nov. 4 include $6.9 billion of equities, $5 billion for preferred shares and warrants in Bank of America Corp. and the acquisition of Lubrizol Corp. for about $9 billion.

  Buffett is expanding a portfolio that for more than 20 years has included equity stakes in Coca-Cola Co. (KO), the world’s largest soft-drink maker, and Wells Fargo & Co. (WFC), now the No. 1 U.S. home lender. The chairman and chief executive officer acquired a power company in 2000 and railroad Burlington Northern Santa Fe last year.
  “Historically he has preferred consumer products and banking to industrial companies,” said James Armstrong, president of Berkshire shareholder Henry H. Armstrong Associates. “But the market changes, so the names he comes up with changes.”

  (Via: The Reformed Broker)

• Sysco Earns 55 Cents Per Share
  Eddy Elfenbein, November 7th, 2011 at 9:58 am

  Sysco ($SYY) just reported earnings for its fiscal first quarter of 55 cents per share which was three cents better than estimates. Quarterly revenue rose 8.6% to $10.59 billion which was $140 million over consensus.

  First Quarter Fiscal 2012 Highlights

  * Sales were $10.6 billion, an increase of 8.6% from $9.8 billion in the first quarter of fiscal 2011.

  * Operating income was $509 million, an increase of 0.6%, compared to $506 million in last year’s first quarter, and Sysco’s highest first quarter on record.

  * Adjusted1 operating income increased 6.1%, excluding gross business transformation expenses and the impact of corporate-owned life insurance (COLI).

  * Diluted earnings per share (EPS) were $0.51, which included a $0.04 negative impact from gross business transformation expenses. Last year’s first quarter EPS was also $0.51, but included a $0.02 benefit from COLI and a $0.02 negative impact from gross business transformation expenses.

  * Adjusted diluted EPS was $0.55, an increase of 7.8%, excluding gross business transformation expenses and the impact of COLI.

  “I am encouraged by our underlying business performance during the quarter as softening consumer sentiment contributed to ongoing challenges for the foodservice industry,” said Bill DeLaney, Sysco’s president and chief executive officer. “Our associates remain committed to supporting our customers by meeting and exceeding their expectations each and every day.”

  First Quarter Fiscal 2012 Summary

  Sales for the first quarter were $10.6 billion, an increase of 8.6% compared to sales in the same period last year. Food cost inflation, as measured by the estimated change in Sysco’s product costs, was 7.3%. Inflation continued to be broad-based, but was impacted most significantly by increased prices for dairy, meat and canned/dry products. This compares to inflation of 3.3% in the prior year period, and 5.9% in the fourth quarter of fiscal 2011. In addition, sales from acquisitions (within the last 12 months) increased sales by 0.7%, and the impact of changes in foreign exchange rates for the first quarter increased sales by 0.7%. Case volume for the company’s Broadline and SYGMA operations combined grew nearly 2% during the quarter including acquisitions, and more than 1% excluding acquisitions.

  Gross profit for the first quarter was $1.9 billion, an increase of 5.5%, compared to the prior year. Operating expenses in the first quarter increased $98 million, or 7.3%, compared to operating expenses in the prior year period. This was due mainly to a $40 million increase in payroll expense, a $16 million increase in gross business transformation expenses, a $14 million increase in fuel expense and a $13 million lower benefit from COLI, partially offset by a $7 million decline in expenses for the corporate-sponsored pension plan. Excluding gross business transformation expenses and the impact of COLI, adjusted operating expenses increased 5.3%. Management believes that excluding these items better represents the company’s underlying business performance.

  Operating income was $509 million in the first quarter, increasing $3 million, or 0.6% compared to operating income in the prior year. Excluding gross business transformation expenses and the impact of COLI, adjusted operating income increased 6.1%.

  Net earnings for the first quarter were $303 million, an increase of $4 million, or 1.2%, compared to net earnings in the prior year. Diluted EPS in the first quarter of fiscal 2012 was $0.51, which included a $0.04 negative impact from gross business transformation expenses. Last year’s first quarter EPS was also $0.51, but included a $0.02 benefit from COLI and a $0.02 negative impact from gross business transformation expenses.Excluding gross business transformation expenses and the impact of COLI, first quarter fiscal 2012 adjusted EPS was $0.55, an increase of 7.8% compared to the prior year.

  Cash Flow and Capital Spending

  Cash flow from operations was $255 million for the first quarter of fiscal 2012. Capital expenditures totaled $227 million for the first quarter, including $45 million related to the company’s business transformation project. The primary areas for investment included facility replacements and expansions, replacements to Sysco’s fleet, and technology.

  

• Morning News: November 7, 2011
  Eddy Elfenbein, November 7th, 2011 at 5:02 am

  Papandreou to Step Down in Accord on Unity Government

  World Economy Dodges Slump With China-U.S. Buoy

  Stocks Decline, Euro Weakens on Italian Vote Concern; Swiss Franc Slides

  Danish Firms Pleading With Banks for Credit

  China Swaps Drop Most Since ‘08

  Thailand Flooding Cripples Hard-Drive Suppliers

  Futures Signal Weaker Start for Equities

  CME, ICE Cut Margin Needs to Limit MF Global Fallout

  Carphone Sells U.S. Stake to Best Buy

  Ryanair Boosts Profit Forecast 10% on Fares

  Buffett Broadens Portfolio by Spending $23.9 Billion

  Cnooc Purchase of BP’s $7.1 Billion Argentine Unit Scrapped

  Vodacom Earnings Miss Estimates on Network Spending, Prices

  Disney and YouTube Make a Video Deal

  Stone Street: How I Learned to Stop Worrying and Love Italy’s Finances

  Epicurean Dealmaker: Known Unknowns

  Howard Lindzon: Investing and Trading….Just Words.

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• The New York Times on Place-Kicking
  Eddy Elfenbein, November 6th, 2011 at 3:33 pm

  The New York Times has a fascinating article on the rise in kicking accuracy in the NFL.

  Gee, it’s almost as if I read that somewhere before!

  Here’s the NYT:

  The only pure kicker in the Pro Football Hall of Fame, Jan Stenerud, made only 17 of 64 field-goals attempts of 50 yards or more in his 19-year career. He made the most — converting 3 of 4 — in 1984.

  This season, the most successful long-distance kickers, Oakland’s Sebastian Janikowski and Jacksonville’s Josh Scobee, have already made five each. Stenerud’s career field goal percentage was 66.8. Were he kicking this season, that would place Stenerud next to last in success rate, one-tenth of a point ahead of Jay Feely, the Arizona kicker who is having an unusually bad season at 66.7 (his career average is 81.8). Overall field goal percentage this season is 85.9, up from 82.3 last season.

  Here’s me:

  This high-octane accuracy is completely new to football. In 1974, the first year when the uprights were placed at the back of the end zone, kickers made just four of 30 field goals from 50 or more yards. Jan Stenerud, the only pure placekicker in the Hall of Fame, made 66.8% of his career field goal attempts. Today that’s good enough for 105th place in career accuracy. Nearly every player in the top 30 for career accuracy is currently active.

  Two entries on the same topic, using the same stats and even using the same obscure reference points — mine being posted a few days before. This could be a highly unusual coincidence, however, I’m very suspicious.

  Update: The writer from the Times contacted me and claims she was unaware of my post. I’ve edited some of the language of this post to be less accusatory. You can read both and determine for yourself. I remain very suspicious.