Archive for September, 2016

• Bed Bath & Beyond Earns $1.11 per Share
  Eddy Elfenbein, September 21st, 2016 at 4:40 pm

  Bed Bath & Beyond (BBBY) just reported fiscal Q2 earnings of $1.11 per share. That’s down from $1.21 per share from one year ago. Wall Street had been expecting $1.16 per share.

  For Q2, net sales were approximately $2.988 billion. That’s down 0.2% from a year ago. Comparable sales dropped by 1.2%. Comparable sales “from digital channels” were up by over 20%. In-store comparable sales fell “in the low single-digit percentage range” during Q2.

  The good news is that BBBY is standing by its previous full-year earnings forecast of $4.50 to $5.00 per share.

• The Blue Dots
  Eddy Elfenbein, September 21st, 2016 at 3:46 pm

  Here are the latest economic projections from the Fed. I think it’s interesting that the Fed sees real rates staying negative for some time.

• Today’s Fed Statement
  Eddy Elfenbein, September 21st, 2016 at 2:03 pm

  Here’s today’s Fed statement. No rate hike but three dissents!

  Information received since the Federal Open Market Committee met in July indicates that the labor market has continued to strengthen and growth of economic activity has picked up from the modest pace seen in the first half of this year. Although the unemployment rate is little changed in recent months, job gains have been solid, on average. Household spending has been growing strongly but business fixed investment has remained soft. Inflation has continued to run below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

  Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will strengthen somewhat further. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. Near-term risks to the economic outlook appear roughly balanced. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

  Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

  In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to 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. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

  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, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

  Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Jerome H. Powell; and Daniel K. Tarullo. Voting against the action were: Esther L. George, Loretta J. Mester, and Eric Rosengren, each of whom preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.

• Looking Ahead to Today’s Fed Meeting
  Eddy Elfenbein, September 21st, 2016 at 10:44 am

  This is the second day of the Fed’s meeting. The policy statement will come out at 2 pm. It’s widely expected that the Fed won’t do anything, but there may be hints of a rate hike in December.

  Not too long ago, people thought the Fed might move in September. Bloomberg has a nice summary of the data and speeches over the last two months that made September unlikely for a rate increase.

• Morning News: September 21, 2016
  Eddy Elfenbein, September 21st, 2016 at 7:00 am

  OECD Sees Growth Flounder as ‘Globalization Stalls’

  BOJ Shifts Policy Framework to Targeting Japan’s Yield Curve

  These Fed Speeches and Data Killed September Rate Hike Expectations

  Wells Fargo’s Incentives Go Awry

  VW Faces $9 Billion in Claims in Germany From Stock Drop

  SEC Probes Exxon Over Accounting for Climate Change

  Allergan to Buy Tobira Therapeutics in $1.7 Billion Deal

  This Is How Oracle Lured Top-Flight Programmers Away From Amazon and Microsoft to Build Its Next Big Thing

  I.P.O. For Postal Savings Bank of China Gets Help From Beijing

  Microsoft Plans $40 Billion Stock Buyback and Raises Dividend

  Hanjin Revival Tough If Unloading Not Expedited, Court Says

  Blame Game: The $130 Billion in Fees Mylan Says Pushes Up Prices

  Major Republican Donors Spend Big on Senate Races, Not Trump

  Cullen Roche: 21 Questions…

  Jeff Carter: The Future of Machine Learning

  Be sure to follow me on Twitter.

• Microsoft Raises Dividend by 8%
  Eddy Elfenbein, September 20th, 2016 at 5:23 pm

  Microsoft (MSFT) just announced an 8% increase to their dividend. The quarterly payout will rise from 36 cents to 39 cents per share. Based on today’s close, MSFT now yields 2.75%. The company also announced a $40 billion share buyback.

• Morning News: September 20, 2016
  Eddy Elfenbein, September 20th, 2016 at 7:16 am

  Japan’s Negative Interest Rates Explained

  Oil Drops as Prospects Fade for OPEC Deal

  The Old Fed Is Dead

  House GOP’s ‘Better Way’ Tax Plan A Much Better Way For Richest 1%

  Wells Fargo’s John Stumpf Takes Center Stage at Senate

  Bayer Boss, Bullish on Growth, Defends Monsanto Deal

  Jack Ma’s Finance Business May Be Worth More Than Goldman Sachs

  Unilever to Buy Cleaning-Products Company Seventh Generation

  Lennar Beats Estimates as Low Interest Rates, Jobs Boost Demand

  Bitcoin is Money, U.S. Judge Says in Case Tied to JPMorgan Hack

  Google is Facing a $400 Million Tax Bill and a Criminal Case in Indonesia

  Grab’s Record Funding Shifts Uber Battleground to Southeast Asia

  Love, Friendship and Public Accounting Don’t Mix

  Roger Nusbaum: The FOMC Meets to Determine the Fate of the Galaxy

  Howard Lindzon: Twitter TV is Amazing… But …

  Be sure to follow me on Twitter.

• It’s a First Step
  Eddy Elfenbein, September 19th, 2016 at 6:57 pm

  John Stumpf, the CEO of Wells Fargo (WFC), will testify before Congress tomorrow. His plan is to be very contrite. That’s a good first move. Another good move would be to resign:

  The chief executive of Wells Fargo, John G. Stumpf, will say in testimony Tuesday morning that he is “deeply sorry” for selling customers unauthorized bank accounts and credit cards and that he takes “full responsibility” for the unethical activity, according to a copy of the remarks prepared for a Senate Banking Committee hearing.

  In his testimony, which was obtained by The New York Times, Mr. Stumpf strikes a decidedly contrite tone about the scandal over the fake accounts, which has engulfed Wells Fargo since it reached a $185 million settlement with regulators on Sept. 8.

  Mr. Stumpf has been criticized for publicly attributing the illegal activity to approximately 5,300 employees who were fired as a result of the sham accounts. Former employees say that workers felt enormous pressure to bend the rules to meet unrealistic sales goals set at the highest levels of the bank.

  

• From the Department of Poor Incentives
  Eddy Elfenbein, September 19th, 2016 at 12:49 pm

  Here’s a story I find interesting from an economics/regulatory perspective.

  The NFL has been trying to limit the number of kick returns in football. Obviously, when you have very large men running at each other at top speed, that causes a disproportionate number of injuries.

  A few years ago, the league moved the kickoff line from the 30 to the 35-yard line in an attempt to limit the number of kick returns. It worked. Last year, only 41% of kickoffs were returned.

  For this season, the NFL made another change: after touchbacks, offensive teams started at the 25 instead of the 20-yard line. This new rule is being given a one-year trial run. The idea is that would give returning teams an extra benefit to take a knee.

  But it appears the new rule is causing the opposite to happen. Now, kicking teams are trying to kick it short. The kicker is aiming to make the returner start as close to the goal line as possible without tipping into the endzone. That’s forcing a return.

  For the kicking team, it’s a winning move if they can stop the return any more than an inch from the 25. The odds for that aren’t bad.

  This is a classic story we see in the economy time and time again. The regulators have their heart in the right place. They’re trying to do something positive. Their first attempt to limit returns works, so they might as well try again. Yet the real world outcome of the new policy causes the exact opposite to happen.

  NFL Commissioner Roger Goodell has said it’s possible the NFL may ditch kickoffs entirely.

• Stericycle Drops to Four-Year Low
  Eddy Elfenbein, September 19th, 2016 at 11:51 am

  Today, the Royal Bank Of Canada reiterated its Sell recommendation on Stericycle (SRCL). RBC also lowered their price target to $77 per share.

  Interestingly, the stock bounced off $77 earlier today. That marked SRCL’s lowest price since January 2012.