Archive for September, 2014

• 1-, 2- and 3-Year Treasuries
  Eddy Elfenbein, September 10th, 2014 at 9:20 am

  Ed Bradford, the brilliant bond tweeter (@fullcarry), noted this morning that the part of the yield curve between one and three years out is now the steepest part of the curve. This is where we investors can try to figure out what the Fed has up its sleeve.

  Check out this chart:

  You can see how the one-year yield (the black line) has stayed pretty flat. But the two- and three-year yield (blue and red lines respectively) have gradually inched higher. In short, the market thinks higher rates are coming — not now, but soon.

  Meanwhile, longer-term rates have been moving in the other direction — they’ve been coming down. As of yesterday’s close, the 10-year yield was 54 basis points below where it was at the end of last year. The 20-year yield is down 75 basis points and the 30-year is down by 73 basis points. Low long-term rates hit bottom on the Thursday before Labor Day and have come up some.

• Morning News: September 10, 2014
  Eddy Elfenbein, September 10th, 2014 at 6:59 am

  Draghi’s Case For Quantitative Easing in Europe

  Money Supply Growth Slows in China

  France to Miss Deficit Target, Lowers Growth Projections

  Fed Proposes New Rule, and Wall St. Banks Feel the Pressure

  Fed Weighs Change to Rate Guidance for Added Flexibility

  U.S. States Probe Home Depot Breach, Senators Seek FTC Investigation

  McDonald’s Warns Supplier Scandal Hurts 3Q Results; Shares Tank

  Rocket Internet Seeks to Raise Nearly $1 Billion in German IPO

  Apple Gives NFC Chip Technology a Prized Seal of Approval

  Dollar General Commences Cash Tender Offer for Family Dollar Shares

  Barnes & Noble Fights Book Decline by Selling More Toys

  Alibaba Already Has Enough Orders To Cover Its Record-Breaking $21 Billion IPO, Sources Say

  Economy, Beware: Singles Are Taking Over America

  Joshua Brown: The Next Crash is Coming – Person With Web Access

  Jeff Carter: Preserving the Floor Traders

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• Worst Day in Five Weeks
  Eddy Elfenbein, September 9th, 2014 at 4:07 pm

  Today was the worst day for the U.S. stock market since August 5th. The arresting part of that statement isn’t today’s loss but how subdued the market has been for the last five weeks. The S&P 500 lost a mere 0.65% today which brought the S&P 500 back down to 1,988.44. That really ain’t much.

  Our Buy List didn’t fall as much as the overall market, but it was not an easy day. Only four Buy List stocks closed higher for the day. McDonald’s was especially weak as the fast food giant reported terrible sales for August. It was their worst sales slump in more than ten years. MCD also said that problems with their supplier in China will take off 15 to 20 cents per share in Q3 earnings. The yield on MCD is now yielding 3.56%.

  Shares of eBay also took a hit but that wasn’t because of anything they did. Instead, Apple announced its new Apple Pay which would be a direct competitor of PayPal. That could be more reason for eBay to consider selling off PayPal.

• Morning News: September 9, 2014
  Eddy Elfenbein, September 9th, 2014 at 7:02 am

  U.S. Consumer Credit Soars In July With Biggest Gain Since ’01

  Alibaba’s Jack Ma Begins Wooing Wall Street Investors For IPO

  Amazon Cuts Struggling Phone’s Price to 99 Cents

  Home Depot Data Breach Could Be the Largest Yet

  Rakuten of Japan to Buy Ebates, a U.S. Rebate Site, for $1 Billion

  GE Lighting Seen Following Appliances in Consumer Exit

  General Mills to Buy Natural Foods Company Annie’s

  PayPal’s Support Is the Best Thing That Could Happen to Bitcoin

  Treasury Chief Urges Reforms to Keep Firms From Dodging U.S. Taxes

  Campbell Soup Swings to Profit on Higher Sales

  Gambling Panel Weighs Wynn, Mohegan Sun Proposals

  Chick-Fil-A Rules the Roost, Even 6 Days A Week

  Martoma, SAC Capital Ex-Trader, Gets 9 Years in Prison

  Roger Nusbaum: AdvisorShares Weekly Market Review – Week Ending 9/5/2014

  Credit Writedowns: Income Inequality, Corporate Inversions and Financial Engineering

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• Colgate-Palmolive Drops on Triclosan
  Eddy Elfenbein, September 8th, 2014 at 3:04 pm

  Colgate-Palmolive ($CL) is one of my favorite boring stocks. The shares usually don’t move around much. Lately, however, CL has badly lagged the market.

  

  That may not seem like a lot but it’s a big deal for Colgate.

  What’s going on? It’s hard to say exactly what event causes a certain move, but it appears that investors may be freaked out by triclosan. Or as Newsweek phrased it, “Is Cancer Lurking in Your Toothpaste?”

  Triclosan is a chlorinated aromatic compound: very basically, two benzene rings (a sturdy hydrocarbon, with six atoms of carbon and hydrogen each) linked by an oxygen atom, with three chlorine atoms protruding like spokes, as well as a lone hydroxyl group (oxygen + hydrogen). First used in the 1970s in hospitals, it has since become a widespread antimicrobial agent. Not only is triclosan present in Colgate Total and many household soaps, but it can also be found in coolers, odor-protected shoes and makeup, according to Mae Wu, a lawyer with the Natural Resources Defense Council. She says that triclosan is “all over the place,” even if, as she notes, we had “been doing fine without it” for several centuries of human-microbial cohabitation of the planet.

  “Triclosan is 110 percent marketing,” says Michael Osterholm, who heads the Center for Infectious Disease Research and Policy at the University of Minnesota. Osterholm, who helped Minnesota become the first state to ban most uses of triclosan. He told me the compound has been superseded by superior, safer antimicrobial agents, and Procter and Gamble has begun advertising its Crest toothpaste as being “100% triclosan free.” That may also be a triumph of marketing, but one that could lead more people to question the presence of triclosan in household items, thereby forcing Colgate’s hand.

  I confess that I don’t know anything about triclosan or its effects, but I do know something investor behavior. They like to sell first and look for facts later. I’m always on the lookout for opportunities when good companies run into fixable problems.

• Ford Drops on Downgrade
  Eddy Elfenbein, September 8th, 2014 at 2:53 pm

  Shares of Ford Motor ($F) are down today after the stock was downgraded by Morgan Stanley. They cut it from from Overweight to Underweight and lowered their price target to $16 per share.

  The stock is back below $16.80 per share which is a very attractive price. Make no mistake, Ford’s business is doing very well. We’ll find out more in about six weeks when they report again. The stock is currently going for about 8.6 times next year’s earnings.

• Gold Adjusted for Inflation
  Eddy Elfenbein, September 8th, 2014 at 12:07 pm

  Here’s a look at the price of gold adjusted for inflation. We just passed the third anniversary of gold’s peak. It’s been rough since then. However, the ten years prior to that were great. Alas, things change.

  Adjusting for inflation, gold peaked at over $2,000 per ounce in 1980. The low price in 2001 would be about $350 in today’s money.

• The Bull Market Turns 2,000 Days Old
  Eddy Elfenbein, September 8th, 2014 at 11:46 am

  Bespoke Investment Group points out that the bull market is now 2,000 days old. That makes it older than SnapChat and Tinder combined. It’s also the fourth-longest bull market since 1928.

  The stock market is down in early trading today. One exception is Microsoft ($MSFT) which jumped as high as $46.80 per share. The software giant is now at a 14.5-year high. The last time MSFT was this high was March 31, 2000. The stock hit its all-time peak on December 27, 1999 when it closed at $59.56 per share.

  The all-time low came in March 1986, a few days after the IPO, when MSFT closed at nine cents per share. At the time, that was $26 per share but it needs to be adjusted for several splits totaling 288-for-1. The stock vaulted more than 650-fold within 14 years of its IPO. Only now are we within reasonable distance of that all-time high.
  

• Morning News: September 8, 2014
  Eddy Elfenbein, September 8th, 2014 at 6:05 am

  ECB’s Draghi Takes a Gamble on QE-Lite

  Scotland Split Jitters Send Sterling to 10-Month Low

  Russia Threatens More Retaliation if Western Countries Toughen Sanctions

  China’s Trade Surplus Hits New High

  Abe Recasting Cabinet Cuts Risk to Six-Year Low

  You Missed $1 Trillion Return Agreeing With Fed Naysayers

  Alibaba IPO Investors Come Third in Jack Ma’s Vision

  Electrolux to Boost U.S. Presence With $3.3 Billion General Electric Appliances Buy

  FMC To Buy Cheminova For $1.8 Billion

  Carlyle Raises $3.9 Billion For Private Equity’s 2nd Biggest Asia Fund

  Bharti Airtel to Sell 3,500 Telecom Towers in Africa to Eaton

  WeChat Helps Apple Rack Up Bonus Points in China

  G.M.’s Board Is Seen as Slow in Reacting to Safety Crisis

  Cullen Roche: The “Allocation Matters Most” Hypothesis

  Jeff Miller: Weighing the Week Ahead: Which Stocks are Best for the 2014 Homestretch?

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• August NFP = 142,000
  Eddy Elfenbein, September 5th, 2014 at 8:30 am

  This morning’s jobs report was surprisingly weak. The U.S. economy created only 142,000 net new jobs last month. We had a nice six-month streak of topping 200,000. That’s come to an end. The unemployment rate ticked down to 6.1%. If you break out the decimals, the unemployment rate was 6.14969 which rounds down to 6.1%. Less than 500 more unemployed would have pushed it up to 6.2%.

  Here’s a look at the monthly change in NFP:

  I think the precent-change-from-a-year-ago chart is interesting. You can see how steady this data series has been over the past three years.

  Here’s the unemployment rate: