Archive for January, 2015

• RIP: Melvin Gordon
  Eddy Elfenbein, January 21st, 2015 at 12:31 pm

  Melvin Gordon has died at the age of 95. He was the CEO of Tootsie Roll ($TR).

  People are often surprised that Tootsie Roll is its own stock. They assume it’s owned by major corporation like Cadbury or Hershey. Nope, Tootsie is all by itself and Melvin Gordon was its CEO for 53 years.

  The stock was actually a strong performer for many years. It rallied from 20 cents per share in 1980 to $30 by 1998. Since then, it hasn’t done much. It’s mostly rallied up and down between $20 and $30 per share. Tootsie has also issued 3% stock dividends every year for the last 17 years (I believe that’s correct).

  Still, I have a special place in my heart for small, oddball companies that do their own thing. I’ll miss you, Melvin.

• Morning News: January 21, 2015
  Eddy Elfenbein, January 21st, 2015 at 7:08 am

  Central Banks Dominate FX Price Action

  Is Draghi About to Massively Misfire?

  May You Live In Interesting Times – Central Banks On The Loose In 2015

  U.K. Zero Inflation Threat Quashes BOE Rate Dissent: Economy

  Netflix Shares Surge on Subscriber Growth

  The Secret to Amazon’s Success is Streaming TV

  Xiaomi Threatens Samsung’s Market Position in Chinese Low-End Smartphone Market

  Samsung Drops Qualcomm Chip From Next Galaxy Smartphone

  UnitedHealth Earnings Rise 6%, Top Wall Street Expectations

  Wal-Mart Launches Cash Pickup Option for Tax Refunds

  Morgan Stanley’s Results Miss Estimates

  Johnson & Johnson Facing Headwinds From A Stronger Dollar

  BHPB Pumping Iron – But Also Oil

  Joshua Brown: There’s More to Life Than The S&P 500

  Roger Nusbaum: Weekly Market Review – Week Ending 1/16/2015

  Be sure to follow me on Twitter.

• September Fed Funds Futures
  Eddy Elfenbein, January 20th, 2015 at 5:55 pm

  Just to show you how much things have changed, here’s a chart of the September 2015 Fed funds futures contract (click on the chart for a larger version)

  

  Not that long ago, the market thought the Fed would have interest rates at 0.5% (99.50 on the chart) by this September. Now they think the Fed will be at 0.25% by September.

• Ritholtz on Forecasting
  Eddy Elfenbein, January 20th, 2015 at 12:22 pm

  Great column by Barry Ritholtz and the absurdity of forecasting:

  Economists, market strategists and analysts alike suffer from an affinity for making big, frequently bold — and most often, wrong — pronouncements about what is to come. This has a pernicious impact on investors who allow this guesswork to infiltrate their thinking, never for the better.

  I have been beating this drum for more than a decade. What say we finally put a fork in Prediction, Inc.?

  There is a forecasting-industrial complex, and it is a blight on all that is good and true. The symbiotic relationship between the media and Wall Street drives a relentless parade of money-losing tomfoolery: Television and radio have 24 hours a day they must fill, and they do so mostly with empty-headed nonsense. Print has column inches to put out. Online media may be the worst of all, with an infinite maw that needs to be constantly filled with new and often meaningless content.

  Just because the beast must be fed does not mean you must be dragon fodder.

• High Beta Pain
  Eddy Elfenbein, January 20th, 2015 at 11:06 am

  Stocks with higher betas have been lagging badly this year. They’re doing a little better today, but it’s been a rough ride since September. Here’s the High Beta ETF ($SPHB) divided by the S&P 500.

  

• Denmark Goes More Negative
  Eddy Elfenbein, January 20th, 2015 at 10:49 am

  The dramatic move by the Swiss National Bank shook up currency traders. Now it’s Denmark’s turn. After all, they face the same pressures from the ECB. The Nationalbank, Denmark’s Fed, cut rates on CDs to -0.2% from -0.05%.

  Both the Swiss and Danish authorities, trying to keep their currencies — and exports — globally competitive, acted pre-emptively before a meeting of the European Central Bank on Thursday in Frankfurt. At that meeting, the bank’s policy makers are widely expected to announce a program of large-scale bond buying, an action that could further push down the value of the euro, which has been weakening for months.

  A weakening euro has the effect of making other European currencies, like the Swiss franc and Danish krone, relatively stronger — which effectively raises the prices of products priced in francs or kroner on the global market.

• 30-Year Yield Hits All-Time Low
  Eddy Elfenbein, January 20th, 2015 at 10:39 am

  This is going to be a busy week for the stock market. Of course, earnings season is starting to heat up, and analysts have been slashing their forecasts in a serious way. For the rest of this year, we’re probably looking at growth of 3% to 5%. On our Buy List, eBay reports tomorrow and Signature Bank follows on Thursday.

  The Federal Reserve meets again next week and I’ll be curious to hear if there’s any change in direction. To put it bluntly, the strong dollar has already done a lot of the Fed’s tightening work for them. Last week’s inflation report showed that prices are falling. It’s hard to argue for higher rates when you have deflation. On top of that, the latest industrial production report was pretty weak.

  Last night, Jon Hilsenrath of the Wall Street Journal had an article saying that the Fed is on track for a rate hike later this year. I’m not so sure but it’s strongly assumed on Wall Street that Hilsenrath is the unofficial mouthpiece for the Fed.

  The latest from the futures market shows that investors are beginning to think a rate hike won’t happen this year. The futures market sees rates reaching 0.41% by the end of this year. The Fed sees short-term interest rates hitting 2.5% by the end of 2016. But the futures market says it’ll be 1.1%. Personally, I side with the futures. The five-year forward inflation expectations rate is now below 2%. Last week, the yield on the 30-year Treasury got down to 2.35%. That’s the lowest since the Treasury started issuing those bonds regularly in 1977.

  Stock markets in Europe are edging to their highest level in years on anticipation of the ECB’s big announcement on Thursday. Draghi is set to start buying some bonds. We’re going to find out the details this week. My fear is that the market is setting itself up for a disappointment if the number’s not large enough.

  Here’s the 30-year Treasury yield:

  Here’s the Five-Year Forward Inflation Expectation Rate:

• Morning News: January 20, 2015
  Eddy Elfenbein, January 20th, 2015 at 7:22 am

  IMF Lowers Global Growth Forecast by Most in Three Years

  Young People Want a Say in Davos

  China’s 2014 Economic Growth Misses Target, Hits 24-Year Low

  U.S. Solar Industry Sees Growth, But Also Some Uncertainty

  Morgan Stanley Profit Rises As Legal Costs Fall

  Shake Shack Unveils a Pricing Range For Its Planned IPO

  Johnson & Johnson’s 2014 Revenue Rose and Profits Soared

  Delta Results Helped by Falling Fuel Prices

  Halliburton Boosts Fourth-Quarter Profit

  SAP Expects Shift to Cloud to Weigh on Earnings Growth

  Facebook Says it Adds More Than $200 Billion to Global Economy

  Twitter Ups Ante to Boost India Biz; Buys Bangalore Start Up

  DreamWorks Animation’s Box-Office Flops May Result in 400 Job Cuts

  Jeff Carter: People Focus on Bitcoin Currency, But the Magic is The BlockChain

  Cullen Roche: Milton Friedman Might Have Won the Battle, But He’s Losing the War

  Be sure to follow me on Twitter.

• Morning News: January 19, 2015
  Eddy Elfenbein, January 19th, 2015 at 7:04 am

  Key ECB Meeting to Pose Test of Central Bank Unity, Power

  BOJ Showing Liquidity Trap Holds Warning for ECB

  China Cracks Nearly 8%; FIIs May Find Safe Haven in Indian Markets

  One in Five Distressed Corporate Bonds Are Made in Moscow

  Richest 1% Will Own More Than the Rest By 2016

  Oil Finally Pays Out for Bulls After First Gain of Year

  LNG to Snap 4-Year Run as Sub-$10 Price Seen Amid Oil’s Drop

  Don’t Expect Help From the Underfunded IRS

  Uber Partners With Korean Taxi Company to Comply With Local Rules

  Sharp Expects to Miss Full-Year Earnings Outlook

  Facebook Hiring Spree Hints at Ambitions in Virtual Reality

  Asia’s Richest Man Said To Be In Talks To Buy U.K.’s O2

  Jeff Miller: Weighing the Week Ahead: The Message from Fourth Quarter Earnings

  Joshua Brown: Permit Me a Few Victory Laps…

  Epicurean Dealmaker: Passing Fair

  Be sure to follow me on Twitter.

• MLK’s “Street Sweeper” Speech
  Eddy Elfenbein, January 18th, 2015 at 2:05 pm

  I’ve always felt this was one of Martin Luther King’s best and most under-appreciated speeches: