Archive for August, 2018

• Warren Buffett Interview
  Eddy Elfenbein, August 31st, 2018 at 1:47 pm

• Morning News: August 31, 2018
  Eddy Elfenbein, August 31st, 2018 at 7:51 am

  Lira Gets a Helping Hand as Turkey Raises Tax on Dollar Deposits

  What’s a Peso Worth? All Bets Are Off as Argentina Pain Spreads

  Too Many Chinese Children Need Glasses. Beijing Blames Video Games.

  Trump Makes Clear EU Won’t Escape His Ire Over Trade for Long

  Coke Makes $5.1 Billion Bet on Coffee Market With Costa Purchase

  Apple, Oracle Dump Bonds and Create $300 Billion Hole in Market

  Stryker Agrees to Buy Spinal-Device Maker K2M

  Walmart Wants to Replace Toys ‘R’ Us

  Dollar Tree Is No Dollar General

  Elon, What Were You Thinking?

  Modi’s Cash Crackdown Failed, Indian Bank Data Shows

  Why Helios and Matheson Stock’s Latest 22% Surge Is Truly Ridiculous

  Cullen Roche: Why Political Extremism Will Get Worse

  Howard Lindzon: Men Who Wear Hats and LULU

  Blue Harbinger: Stock Exchange: You Can Make It As A Trader, If You Do It Right

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• Personal Income and Spending
  Eddy Elfenbein, August 30th, 2018 at 12:25 pm

  We don’t have much in the way of data for Q3, but we got a nice hint today with the personal income and spending data for July. This data usually comes right after the GDP report.

  The BEA said that personal income rose by 0.3% last month while personal spending rose by 0.4%. Those are pretty good numbers, but bear in mind that it only covers the first third of the third quarter.

  Here’s the recent history:

  The New York Fed’s Nowcast sees Q3 GDP growth coming in at 1.96%. The Atlanta Fed is at 4.1%.

• Buyout Thursday
  Eddy Elfenbein, August 30th, 2018 at 10:47 am

  Apparently, the Thursday before Labor Day is a popular time to make strategic acquisitions. Two of our Buy List stocks announced deals today.

  First up, Moody’s (MCO) said they’re buying Reis (REIS), a firm that deals in real estate data. It’s an all-cash deal that values Reis at $278 million or $23 per share. The stock closed yesterday at $17.40 per share.

  The transaction will be funded through a combination of cash on hand and commercial paper. Moody’s expects the acquisition of Reis to be accretive to earnings per share on a GAAP basis in 2020. On an adjusted EPS basis, which excludes purchase price amortization, the transaction will be accretive in 2019. Moody’s continues to expect share repurchases for 2018 to be approximately $200 million, subject to available cash, market conditions and other capital allocation decisions.

  The deal is expected to close in Q4.

  Today’s other deal is that Stryker (SYK) is buying K2M Group Holdings (KTWO) at $27.50 per share. That works out to $1.2 billion. KTWO closed yesterday at $21.82 per share.

  Stryker said K2M Chief Executive Eric Major will become head of the division upon the completion of the deal.

  Stryker said the deal wouldn’t affect earnings this year. It expects to report adjusted earnings of $7.22 to $7.27 this year.

  Earlier this year, Stryker completed its acquisition of Entellus Medical Inc., a manufacturer of devices for various ear, nose and throat diseases.

  K2M, which was founded in 2004, has become a prominent player in the $10 billion spinal market, Stryker said, through its development of minimally invasive and complex spinal support systems.

• Morning News: August 30, 2018
  Eddy Elfenbein, August 30th, 2018 at 6:29 am

  Macron and Merkel Are Signaling They’ve Finally Had Enough of Trump

  The Biggest Legacy of the Financial Crisis Is the Trump Presidency

  Trump’s Tariffs on Canadian Newsprint Are Overturned

  Bernie vs. Bezos: Amazon and Sanders Are Duking it Out Over Warehouse Working Conditions

  Roku Is the Latest Victim of the “Amazon Effect”

  Ford Teeters Toward Junk With Moody’s Warning of Restructuring Risks

  Coca-Cola’s Got Moxie, the Quirky New England Soda

  Toyota Joins Uber On Its Tortuous Journey to Robocars

  The Long, Monstrous Reign of the Red Delicious Apple is Ending

  Pressures on Didi Intensify After Latest Passenger Killing

  `Overtourism’ Worries Europe. How Much Did Technology Help Us Get There?

  Papa John’s Independent Board Members Dispute Founder’s Claims

  Joshua Brown: Defeating Short-Termism with More Data, Not Less

  Michael Batnick: Animal Spirits: When Hitler Took Cocaine

  Jeff Carter: California Tells Publicly Traded Companies to Submit or Leave

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• Q2 GDP Revised to 4.2%
  Eddy Elfenbein, August 29th, 2018 at 10:32 am

  This morning, the Feds revised upward their estimate for Q2 GDP growth. They now say the economy grew in real annualized terms of 4.2% during the second three months of the year. The initial report, released a month ago, said the economy had grown by 4.1%. The report will be revised again in late September.

  From the WSJ:

  The second-quarter growth rate’s revision partly reflected stronger business investment than earlier forecast and a slight downward revision to consumer spending. The 4.2% rate still marked the strongest pace of growth in nearly four years.

  That followed a growth rate of 2.2% in the first quarter. Output expanded 2.9% in the second quarter compared with the same quarter a year earlier.

  Growth in U.S. corporate profits moderated in the second quarter compared with the first, according to the government’s initial broad estimate of profits at U.S. companies in the second quarter.

  After-tax corporate profits with inventory valuation and capital consumption adjustments, a measure of profits from production that quarter, rose 2.4% in the second quarter from the prior quarter after rising 8.2% in the first quarter. After-tax profits without inventory valuation and capital consumption adjustments rose a seasonally adjusted 3.7% from the prior quarter after rising 8.5% in the first quarter.

  Here’s a look at the year-over-year change in nominal GDP:

• Morning News: August 29, 2018
  Eddy Elfenbein, August 29th, 2018 at 4:49 am

  U.S. to Stress Friday Nafta Deadline as Canada Joins Talks

  The Treasury Yield Curve Is Finally Going Mainstream

  U.S. Consumer Confidence Surged in August to Near 18-Year High

  U.S. Bank Regulator Moves to Modify Lending Rules for Poorer Communities

  Amazon’s Whole Foods Strategy Is Working

  Best Buy Cautions on Profit Growth, Even as Sales Swing Higher

  Yum China Rejects Private Buyout Offer at $46 a Share

  Yahoo, Bucking Industry, Scans Emails for Data to Sell Advertisers

  To Boost Growth, Buffett Now Looks To The Start-Up Sector

  Elon Musk’s Public Reckoning

  Ermenegildo Zegna to Buy Thom Browne in a Bid for Younger Customers

  Aston Martin Makes Long-Awaited Move for IPO in London

  Nick Maggiulli: What Will Always Be True

  Lawrence Hamtil: The Inflation Advantage of Equal-Weight

  Ben Carlson: Why Doesn’t The Stock Market Care About the News?

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• Morning News: August 28, 2018
  Eddy Elfenbein, August 28th, 2018 at 5:03 am

  Japan Auto Makers, Facing Uncertain Road in U.S., Look to China

  State Of The Economy Part 5: Fed Threatens To Hike U.S. Into Recession

  Trump Dents Hopes for a China Deal After Agreement With Mexico

  The Trump Tax Cuts Were Supposed to Depress Housing Prices. They Haven’t.

  Toyota Investing $500 Million in Uber in Driverless-Car Pact

  Nestle to Take on 500 Starbucks Employees in Coffee Alliance

  Netflix Hires Facebook Exec to Lead Communications Efforts

  As Sears Withers, Its Former Stores Fuel a New Fortune

  Tesla Convinces Judge to Dismiss Model 3 Production Lawsuit

  Report on Volkswagen’s Changes Since Emissions Scandal Cites Lack of Transparency

  FCC Clears Ajit Pai of Wrongdoing in Sinclair’s Failed Takeover of Local News

  Transamerica’s Entities to Pay $97.6 Million to Misled Retail Investors

  Howard Lindzon: Nirvana – Momentum Monday

  Roger Nusbaum: An Argument Against Living Below Your Means?

  Joshua Brown: Just Asking…

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• Ross Stores Bounces Back
  Eddy Elfenbein, August 27th, 2018 at 10:55 am

  On Thursday, Ross Stores (ROST) reported what I thought were decent earnings. The guidance was low, but that’s what Ross always does. The numbers shouldn’t have surprised anyone. Yet the shares dropped sharply in the after-hours market. The lowest I saw was that Ross was off 7% after the bell.

  

  This was a little frustrating for me since I always send the newsletter out on Fridays before the opening so I couldn’t see how the market reacted. Ross had a chaotic open on Friday. It surged and plunged. Later in the day, Ross calmed down and the stock actually closed the day higher by a few pennies per share.

  This is a good lesson on why it’s important to not get too stressed about short-term moves in the stock market. It’s also why I’m not a fan of stops. Normal market moves can throw you out of a good stock.

• Morning News: August 27, 2018
  Eddy Elfenbein, August 27th, 2018 at 7:19 am

  The Time Is Ripe to Buy China Sovereign Debt, Analysts Say

  EU Looking to Sidestep U.S. Sanctions With Payments System Plan

  Turkish Lira Tumbles as Volatility Returns After Holiday Week

  Mexico, U.S. Closing In On NAFTA Deal, Talks to Resume Monday

  ‘Economy Is Strong,’ Fed Chairman Says, Urging a Policy of Risk Management

  Venezuela’s PDVSA Files Appeal Against Crystallex Court Ruling

  Tesla Slides After Musk Scraps ‘Take Private’ Drive Following Investor Revolt

  Why Elon Musk Reversed Course on Taking Tesla Private

  Amazon’s Whole Foods Is Starting to Steal Trader Joe’s Shoppers

  Did Juul Lure Teenagers and Get ‘Customers for Life’?

  Sinopec Is Planning the Wrong Spinoff

  Are Superstar Firms and Amazon Effects Reshaping the Economy?

  Jeff Miller: Weighing the Week Ahead: Should Investors Worry about the Yield Curve?

  Ben Carlson: 10 Things You May Not Know About the Great Depression

  Michael Batnick: The Bad Actors

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