Archive for June, 2015

• Morning News: June 18, 2015
  Eddy Elfenbein, June 18th, 2015 at 7:14 am

  The Latest on Greece: Officials Pessimistic Ahead of Meeting

  Germany Presses Greece to Deliver as Bailout Tension Mounts

  Swiss Banks’ Profit Rises; Staff Count Down

  Nicaragua Canal Project Cloaked in Secrecy – Apparently at Government’s Behest/a>

  Banks’ Civil Forex Settlements Near $2 Billion

  Fed Holds Off On Interest Rate Hike, Downgrades Economic Forecast

  F.C.C. to Fine AT&T For Slowing Data Speeds of Some Customers

  SoftBank, Alibaba Team Up on Robot

  Apple Mines Big Profits From Watch Band

  Alibaba’s Ant Financial Valued at $45 Billion After New Funding

  Rite Aid Same-Store Sales Miss Estimates

  This ‘Barbarian’ Banker Has Turned Into a Friendly Activist

  Brian Williams to Stay at NBC, but Not as News Anchor

  Cullen Roche: Leveraged Bubbles and the Importance of Endogenous Money

  Jeff Carter: Does The Sharing Economy Create Employees?

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• Oracle Earns 78 Cents per Share
  Eddy Elfenbein, June 17th, 2015 at 4:04 pm

  Oracle (ORCL) just reported fiscal Q4 earnings of 78 cents per share. That’s nine cents below estimates. The trouble was the strong dollar. For the year, Oracle earned $2.77 per share compared with $2.87 per share last year.

  Oracle Corporation today announced fiscal 2015 Q4 results. The results were significantly impacted by the strengthening of the U.S. dollar compared to foreign currencies. Total Q4 Revenues were $10.7 billion, down 5% but would have been up 3% without the strengthening of the U.S. dollar. Software and Cloud Revenues were $8.4 billion, down 6%, but up 2% in constant currency. Cloud software as a service (SaaS) and platform as a service (PaaS) revenues were $416 million, growing 29%, and up 35% in constant currency. Cloud infrastructure as a service (IaaS) revenues were $160 million, growing 25%, and up 31% in constant currency. Hardware Systems Revenues were $1.4 billion, down 4%, but up 5% in constant currency.

  Q4 Operating Income was $4.0 billion, and the Operating Margin was 37%. Non-GAAP Operating Income was $5.0 billion, and the non-GAAP Operating Margin was 46%. Net Income was $2.8 billion while non-GAAP Net Income was $3.5 billion. Earnings Per Share was $0.62, down 23%, and down 12% in constant currency, while non-GAAP Earnings Per Share was $0.78, down 14%, and down 5% in constant currency.

  Short-term Deferred revenues were $7.2 billion, slightly down, but up 9% in constant currency compared with a year ago. Operating Cash Flow on a trailing twelve-month basis was $14.3 billion.

  For fiscal year 2015, Total Revenues were $38.2 billion, essentially unchanged, but up 4% in constant currency. Software and Cloud Revenues were $29.5 billion, up 1%, and up 5% in constant currency. Cloud SaaS and PaaS revenues were $1.5 billion, up 32%, and up 35% in constant currency. Cloud IaaS revenues were $608 million, up 33%, and up 36% in constant currency. Total Hardware System Revenues were $5.2 billion, down 3%, but up 2% in constant currency. Operating Income was $13.9 billion, and the Operating Margin was 36%. Non-GAAP Operating Income was $17.4 billion, and non-GAAP Operating Margin was 45%. Net Income was $9.9 billion, while non-GAAP Net Income was $12.5 billion. Earnings Per Share was $2.21, down 7%, but unchanged in constant currency. Non-GAAP Earnings Per Share was $2.77 down 3%, but up 2% in constant currency.

  “We sold an astonishing $426 million of new SaaS and PaaS annually recurring cloud subscription revenue in Q4,” said Oracle CEO, Safra Catz. “We expect our rapidly increasing cloud sales to quickly translate into significantly more revenue and profits for Oracle Corporation. For example, SaaS and PaaS revenues grew at a 34% constant currency rate in our just completed Q4, but we expect that revenue growth rate to jump to around 60% in constant currency this new fiscal year.”

  “Coming into Q4, we forecast selling $300 million of new SaaS and PaaS annual recurring revenue,” said Oracle CEO, Mark Hurd. “We dramatically beat that forecast by selling a cloud industry all-time-record amount of $426 million of new SaaS and PaaS business. That is a year-over-year bookings growth rate of over 200%. As our multi-billion dollar cloud business gets bigger, our SaaS and PaaS revenue growth rates are on their way up to 60% in constant currency. Compare this to our primary cloud competitors’ whose own revenue growth forecasts are on their way down to 44% and 22%.”

  “We expect to book between $1.5 and $2.0 billion of new SaaS and PaaS business this fiscal year,” said Oracle Executive Chairman and CTO Larry Ellison. “That means Oracle would sell more new SaaS and PaaS business than salesforce.com plans to sell in their current fiscal year — the only remaining question is how much more. Oracle’s planned SaaS and PaaS revenue growth rate is around 60% in constant currency; salesforce.com has a planned growth rate of around 20%. When you contrast those growth rates it becomes clear that Oracle is on its way to becoming the world’s largest enterprise cloud company.”

• Barney Frank Joins Signature’s Board
  Eddy Elfenbein, June 17th, 2015 at 2:23 pm

  Presented without comment:

  Signature Bank, a New York-based full-service commercial bank, announced today the election of former U.S. Congressman Barney Frank to its Board of Directors, effective today. Frank fills the seat left vacant by the recent passing of Alfred B. DelBello, who had served on Signature Bank’s board since January 2003, and also was Lead Independent Director since December 2011.

  Frank served as a U.S. Congressman representing the 4th District of Massachusetts from 1981-2013 and also was Chairman of the House Financial Services Committee from 2007-2011. While in Congress, Frank worked to address America’s spending priorities to reduce the deficit and protect funding for important quality-of-life needs at home. He championed the interests of the poor, underprivileged and vulnerable. Frank won reelection 16 times by double-digit margins. As chair of the House Financial Services Committee, he was instrumental in crafting the short-term $550 billion rescue plan in response to the nation’s financial crisis. Later, Frank co-sponsored the Dodd-Frank Wall Street Reform and Consumer Protection Act, an extensive set of financial regulations aimed at preventing recurrence of the crisis that was signed into law in July 2010. From 2003 until his retirement, Frank was the leading Democrat on the House Financial Services Committee. Prior to serving in Congress, Frank spent eight years as a state Representative in Massachusetts and earlier, served as Chief of Staff to Congressman Michael Harrington and Chief Assistant to Mayor Kevin White of Boston.

• Today’s Fed Statement
  Eddy Elfenbein, June 17th, 2015 at 2:18 pm

  As expected, no rate hike. Here’s the latest:

  Information received since the Federal Open Market Committee met in April suggests that economic activity has been expanding moderately after having changed little during the first quarter. The pace of job gains picked up while the unemployment rate remained steady. On balance, a range of labor market indicators suggests that underutilization of labor resources diminished somewhat. Growth in household spending has been moderate and the housing sector has shown some improvement; however, business fixed investment and net exports stayed soft. Inflation continued to run below the Committee’s longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports; energy prices appear to have stabilized. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations have remained stable.

  Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of earlier declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.

  To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

  The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

  When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.

  Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams.

• Happy Fed Day!
  Eddy Elfenbein, June 17th, 2015 at 9:28 am

  Today looks to be an interesting day for the markets. The stock market is poised to open higher this morning. Later, the Federal Reserve wraps up it two-day meeting today. In the afternoon, Janet Yellen will hold a press conference. Don’t expect any rate hike yet, but the Fed may drop clues for its plans. There’s an emerging consensus that the Fed will raise rates in September or December. Personally, I think the market tends to over-read Fed policy statements.

  The mess in Greece continues. Now the Greek central bank is warning of dire consequences unless the government gets what they want. Imagine that. Alexis Tsipras, the Prime Minister, said he’s ready to shoot down a bad deal. Honestly, I don’t think he’s going to get a better one.

  Just to give you an idea of how it is in Greece, here’s a chart of the National Bank of Greece (NBG). The shares have declined from $700 to $1. The stock has had two reverse splits, 1-for-5 and 1-for-10.

  

  Oracle (ORCL) will report earnings after today’s close. Yesterday, the shares closed at their highest level since late April.

• Morning News: June 17, 2015
  Eddy Elfenbein, June 17th, 2015 at 7:23 am

  Tsipras: Greece Ready to Give ‘Big No’ to Bad Agreement

  Greek Exit Would Shake, but Most Likely Not Shatter, Eurozone

  BOE Sees Inflation Drag Fading as U.K. Wage Growth Accelerates

  Failure of Obama’s Trans-Pacific Trade Deal Could Hurt U.S. Influence in Asia

  Who Wins, Who Loses When Fed Raises Rates

  You’ve Been Warned: Central Bankers Turning Less Market-Friendly

  FedEx Posts Flat Quarterly Profit, Misses Expectations

  Under Armour Announces Creation Of New Non-Voting Class C Common Stock

  Starbucks to Close Its La Boulange Pastry Shops

  Botox Owner Allergan to Buy Maker of Double-Chin Treatment

  Target Seeking Higher Traffic & Business Consolidation With CVS Deal

  Amazon’s Next Delivery Drone: You

  How FitBit Can Avoid Becoming Another BlackBerry After Its IPO

  Ben Carlson: Will Retiring Baby Boomers Ruin Future Market Returns?

  Joshua Brown: The Riskalyze Report: Advisors Blow Out of Long-Term Treasurys

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• Morning News: June 16, 2015
  Eddy Elfenbein, June 16th, 2015 at 7:28 am

  Greek Deadlock Has Leader Hoping for Miracle to Avoid Default

  Asia To Surpass North America As Wealthiest Region In 2016; Fintech Set To Change Wealth Management

  Siena Tries to Regain Its Financial Footing, and Its Identity

  EU-U.S. Trade Deal Seems Distant Dream After Early Optimism

  Janet Yellen’s Prediction Last Month Is Already Being Vindicated

  US Judge Gives Partial Victory to Ex-AIG CEO in Bailout Case

  Even the Oil Rout Can’t Stop Houston’s Economic Boom

  Swiss Trader to Pay $2.8 Million Over Apple-Linked Insider Case

  Honda to Discontinue CNG and Hybrid Civic Models

  How Millenial Shoppers Have Made Gap’s ‘Basic’ Look Obsolete

  Fitbit Raises Price Range for I.P.O.

  Kleiner Perkins Launches New Seed Fund to Lure Youth

  Goldman Plans to Offer Consumer Loans Online, Adopting Start-Ups’ Tactics

  Cullen Roche: Interest Rate Hike – It’s Different This Time Edition

  Roger Nusbaum: Yes, Markets Were Actually Open Last Week

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• Industrial Production Falls Again
  Eddy Elfenbein, June 15th, 2015 at 10:08 am

  This morning, the Federal Reserve reported that Industrial Production fell again last month. Thanks to revisions, we can’t say that IP is down six months in a row. In the last six months, IP has dropped four times and risen very, very slightly twice.

  U.S. industrial production declined in May, a sign weak global demand and a strong U.S. dollar continue to hold back output.

  Industrial production, which measures the output of U.S. manufacturers, utilities and mines, decreased a seasonally adjusted 0.2% from the prior month, the Federal Reserve said Monday.

  Capacity utilization, a measure of slack in the industrial sector, fell two-tenths of a percentage point to 78.1% in May. With the decline, capacity utilization is two percentage points below its long-run average recorded since 1972.

  Economists surveyed by The Wall Street Journal had forecast a 0.2% increase in industrial production and a capacity utilization rate of 78.3%.

• The Mess in Greece
  Eddy Elfenbein, June 15th, 2015 at 9:22 am

  The Greek Crisis has reached the boiling point. Talks collapsed yesterday and now the Greek government has until Thursday to reach a deal. Greece owes the IMF $1.7 billion, and the rest of Europe has run out of patience. This mess has gone on for a long time and the Germans now seem fine with having Greece leave the EU.

  Germany’s EU commissioner said it’s time to prepare for a state of emergency. Markets in Europe are down today, and the damage is severe in Greece:

  Greek bank stocks, which have fallen 99 percent from their pre-crisis peak, plunged as much as 17 percent and traded 8.7 percent lower at 1:51 p.m. in Athens. The yield on Greece’s 2017 bonds jumped 241 basis points to 28.45 percent.

  So far, the Greek drama has had little impact on our markets. It’s not that Greece affects us that much, but Greece affects people who affect us (like the Germans). This has helped the strong dollar get even stronger.

• Morning News: June 15, 2015
  Eddy Elfenbein, June 15th, 2015 at 7:12 am

  Greece Contagion Sweeps Euro Zone Bond Markets, Hits Shares

  Out of Options and Time, Tsipras Faces Greece’s Moment of Truth

  Alibaba Plans to Create China’s Version of Netflix, HBO

  Fed Hones Tricky Message as It Nears Boosting Rates

  Tale of Two Job Markets Makes Fed’s Liftoff Timing a Tough Call

  Homebuilders Standard Pacific, Ryland Group to Merge

  United Technologies Says It Will Exit Sikorsky Helicopter Business

  Colt Files for Bankruptcy, Seeks August Auction

  GM to Return to U.S. Medium-Truck Market

  CVS to Buy Target’s Pharmacy, Clinic Businesses For $1.9 Billion

  EasyJet Chief Carolyn McCall Leads Airline Through Turnaround

  With CEO Shakeup, Twitter Under Pressure to Please Advertisers

  Geneva Whodunit Has Chinese Up in Arms Over $1.2 Billion Lost in Alleged Scam

  Jeff Carter: Is A Cyber Attack An Act of War?

  Jeff Miller: Weighing the Week Ahead: A Market Message for the Fed?

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