Archive for August, 2014

• Morning News: August 6, 2014
  Eddy Elfenbein, August 6th, 2014 at 6:43 am

  Euro Hurt by German Industrial Data, Ukraine Worries

  Gold Gains in London as Investors Weigh Ukraine Against U.S.

  Beijing Cuts Car Use to Clean Up Pollution Before APEC Meeting

  Italy Slips Back Into Recession in Second Quarter

  Too-Big-to-Fail Banks’ Living Wills Are Inadequate, Regulators Say

  Standard Chartered Profit Slips 20% on Financial Markets

  Swiss Re Falls Most Since April as Profit Misses Estimate

  Fox Rationale for Time Warner Unraveled With Share Drop

  Walgreens Buying Boots Wouldn’t Qualify As A Tax Inversion Anyway

  CVS Suffers After Quitting Cigarettes, But Pharmacy Saves The Day

  Gannett Spins Off Publishing Arm, Buys Cars.com

  Target’s Data Breach Is Going To Cost The Company $148 Million

  Disney Earnings Boosted by Marvel

  Cullen Roche: What Could Trigger the Next Recession?

  Howard Lindzon: Can Bloomberg Be Killed?

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• Industrials and Tech Diverge
  Eddy Elfenbein, August 5th, 2014 at 2:07 pm

  I thought this was interesting. Over the past few months, the Tech sector has started to lead the market while the Industrials have lagged.

  

• The Rise and Fall of the U.S. Economy
  Eddy Elfenbein, August 5th, 2014 at 12:10 pm

  I was playing around with some GDP data and came up with this chart. This shows U.S. Real GDP divided by a trendline growing at 3.2%.

  In short, when the line is rising, that means that the U.S. economy grew faster than 3.2%. When it’s falling, it grew slower than 3.2%.

  

  It’s hard to see a precise trend in this data, but it appears to vaguely form an arc. The economy grew very strongly from 1949 to 1966. Over the next 40 years, growth trended at 3.2% (with some notable dips). Since then, growth has been far below the trend.

• The FRED Cult
  Eddy Elfenbein, August 5th, 2014 at 11:08 am

  Regular readers know that I’m a big fan of FRED, the St. Louis Federal Reserve’s Economic Data. This database contains huge numbers of economic data series that are easily searchable.

  A user can effortlessly transform FRED data into a usable chart, the kind of which you’ve seen many times on this site (for example, see the ISM chart from yesterday). I’m not alone in my admiration of FRED. The Washington Post writes:

  Nobel Laureate economist Paul Krugman is a huge FRED fan. Harvard economist Greg Mankiw uses it. Former Fed chairman Ben Bernanke cited it in a textbook. The site Business Insider called it “the most amazing economics Web site in the world.”

  “It definitely has a cult following,” said Eddy Elfenbein, a financial analyst in Washington and editor of CrossingWallStreet.com. For him, FRED has emerged as the central hub for finding and sorting through the reams of financial data. He can spend hours looking up trivia such as the historical price of copper in Britain. “It’s addictive,” Elfenbein said.

  There are well over 200,000 different series at FRED. A personal favorite is brick production in England and Wales, 1785 to 1815.

• Morning News: August 5, 2014
  Eddy Elfenbein, August 5th, 2014 at 6:45 am

  What Crisis? EU Rules on Banks Lauded as Right After All

  Crédit Agricole Takes $950 Million Charge on Portuguese Bank

  WH Group Makes Solid Hong Kong Debut

  Time Warner Taking Hard Stance on a Bid By Fox

  Telefonica Launches USD 9 Billion Bid for Vivendi’s Brazilian Unit GVT

  Focusing on G.M. Unit, U.S. Starts Civil Inquiry of Subprime Car Lending

  McClatchy Announces Agreement To Sell Its 25.6% Stake In Cars.com To Gannett

  Toyota Reports Surprise Record Profit on U.S. SUV Demand

  BMW Sees 2nd-Quarter Earnings Jump as Sales Grow, Better Model Mix Boosts Profitability

  Apple Buybacks Pay Most Ever as CEOs Spend $211 Billion

  Valeant’s Deal With Ackman May Be Too Clever to Be Legal

  LinkedIn Pays $6 Million Over Employee Wage Violations

  Ecclestone Offers $100 Million to Settle Munich Case

  Jeff Carter: Do You Bet on Teams, Or Ideas?

  Joshua Brown: If Everyone Wants Their Money Back at the Same Time…

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• The Junk Scare
  Eddy Elfenbein, August 4th, 2014 at 2:10 pm

  Check out the recent performance of the High-Yield bond ETF ($HYG). If you look at the right scale, it’s really not that big of a move, but it’s plenty big compared with the junk bond market’s recent history.

  

  So why are people fleeing junk? I suspect it’s part of a larger pattern where investors are clamoring for safer assets. That’s understandable given the news out of places like Syria, Argentina and Ukraine. What’s also interesting is that Industrial stocks have badly lagged the market over the past two months while Technology has been a leader.

• July ISM = 57.1
  Eddy Elfenbein, August 4th, 2014 at 11:02 am

  One more news item from Friday. The ISM Index for July came in at 57.1. That’s the highest figure in more than three years.

  The ISM came very close to expanding for six months in a row but there was a 0.1 drop from May to June.

• GDP Series Revised
  Eddy Elfenbein, August 4th, 2014 at 10:02 am

  On Friday, the government released their first estimate of Q2 GDP growth. They also revised their historical data as well. Here’s a side-by-side look at the old and new numbers.

  

  It turns out that the economy did worse during 2011-12 than we originally thought, but the bounce back since then has been better than we thought.

• McDonald’s Is Coping With Several Issues
  Eddy Elfenbein, August 4th, 2014 at 9:55 am

  I’ve not been pleased with the performance of McDonald’s ($MCD) this year. I added MCD to this year’s Buy List at what I thought was a very good price. The problems at the fast food joint, however, have been more serious than I anticipated.

  MCD missed earnings by three cents in April and by four cents last month. The company is on pace to earn about $5.65 per share this year. What’s also troubling is that MCD has also been plagued by issues that aren’t much under their control, such as possible sanctions in Russia.

  Investors, analysts and franchisees are clamoring for the company to stop trying to be “all things to all people”. They want it to simplify its unwieldy menu and point to the success of rivals like Chipotle Mexican Grill Inc and In-N-Out Burger, which have won passionate fans by selling just a few items.

  McDonald’s was caught up in the latest China food safety scare after a July 20 television expose showed workers allegedly mishandling meat at Shanghai Husi Food Co Ltd, a factory owned by OSI Group LLC, a major supplier to the chain.

  When the story broke, McDonald’s China business had been rebounding from the double whammy of a food safety scare and a bird flu outbreak that crushed sales in 2013.

  McDonald’s roughly 2,000 restaurants in China suffered meat shortages after it ended its relationship with OSI China. Executives from the chain’s long-struggling Japanese unit, McDonald’s Holdings Co Ltd, who were forced to find alternate chicken McNugget supplies, said the scare sent sales down as much as 20 percent.

  (…)

  The bigger concern, she said, are McDonald’s troubles in Russia, where the company has about 400 restaurants.

  Against the backdrop of the political tussle over U.S. sanctions imposed on Russia because of Moscow’s intervention in Ukraine, Russia’s chief sanitary inspector Anna Popova on July 25 accused the company of violations “which put the product quality and safety of the entire McDonald’s chain in doubt.”

  Europe contributes about 35 percent of McDonald’s operating profit. The company does not break out country-specific contributions, but Russia “up until recently had been one of the stronger markets for them in Europe,” Senatore said.

  I still think that most of the issues at McDonald’s are fixable, but I’m not sure if the current management team is up to the task. The stock is down to $94 compared with $104 in May.

• Morning News: August 4, 2014
  Eddy Elfenbein, August 4th, 2014 at 6:48 am

  Germany Blocks Rheinmetall Sale of Russian Combat Center

  Banco Espirito Santo Junior Bonds Slide as Bailout Forces Losses

  UK House-Building PMI Grows at Fastest Rate Since 2003

  China’s Stocks Rise to Eight-Month High as Chalco Rallies

  Chinese Group Bids $441 Million for Roc Oil of Australia

  Booming African Lion Economies Gear Up to Emulate Asians

  HSBC’s Profit Declines on Slowdown in Asia and Markets

  McDonald’s to Resume Full Menu in China Cities This Week

  A Glance at New Changes at Walmart.com

  P&G to Sell Up to 100 Brands to Revive Sales, Cut Costs

  Auto Sales Head for Best Since ’06 on Confidence, Jobs

  Tycoon Li Ka-Shing’s Cheung Kong Eyes on AWAS Assets

  Evercore Partners to Buy ISI Group

  Jeff Miller: Weighing the Week Ahead: Will the Fed’s Experiment End Badly?

  Epicurean Dealmaker: Where Did He Learn to Negotiate Like That?

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