Archive for October, 2019

• Morning News: October 17, 2019
  Eddy Elfenbein, October 17th, 2019 at 7:03 am

  EU and U.K. Reach Agreement to Put Brexit Within Boris Johnson’s Grasp

  China Says it Hopes to Reach Phased Trade Pact with U.S. as Soon as Possible

  G.M. and U.A.W. Reach Deal That Could End Strike

  ‘Stranger Things’ Helps Netflix Increase Subscribers

  Drug Giants Close In on a $50 Billion Settlement of Opioid Cases

  WeWork Owner Creates Committee to Decide on Financing Lifeline

  Barneys Enters Deal to Sell Assets to Authentic Brands, B. Riley for $271 Million Cash

  Nestle to Return $20 Billion to Investors

  Ex-Credit Suisse Banker Says He Hid $45 Million in Bribes

  Amazon Holiday Toy List Slots Can Cost Brands Up to $2 Million

  IBM Reports Messy Results

  Ken Fisher Client Exodus Nears $1 Billion as Boston Divests

  Howard Lindzon: Don’t Cry For Me – Commission-Free Brokers & Vaping and The Vice Matrix

  Joshua Brown: Barry and Michael on the Endowment Model Circa 2019 and Beyond

  Michael Batnick: Passive Products and Active Users

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• Vox Misleads on Share Buybacks
  Eddy Elfenbein, October 16th, 2019 at 9:03 pm

  There’s been a lot of criticism lately of share buybacks. Some politicians even want to ban them.

  I think there’s some confusion as to what buybacks are and what they can do. Some folks think buybacks are sinister and that they’re responsible for all sorts of terrible things. This isn’t the case. Ultimately, buybacks act very much like dividends. Buybacks are an odd scapegoat.

  Vox recently put out this video on share buybacks and there were a few misleading statements.

  Let me run through them.

  0:22. The video seems to suggest that share buybacks were started after the market crash in 1929. That’s not right. Share buybacks are as old at the NYSE. Jason Zweig gives the example of the Germantown & Reading Turnpike Road Co. In 1798, its charter specified share buybacks.

  0:46. The video says of buybacks, “But with this, corporations had discovered a kind of magic trick. They could jack up their stock price without really doing anything.” The corporation had already done something. It had earned the profit to fund the buyback. It would be like saying a company could pay out a dividend without doing anything.

  This one may be nitpicking but at 3:12, the video quotes Ronald Reagan saying, “government is not the solution to our problem; government is the problem.” The video leaves out the first four words, “In this present crisis.” Reagan was talking about inflation.

  3:43. “For the first time since the 1930s, companies could buy back shares of their own stock from investors.” You’ll often hear people say that buybacks were illegal prior to 1982. Again, this is misleading.

  Buybacks were legal but there were restrictions and the rules were somewhat vague. As a result, many companies avoided them, but not all. Teledyne, Crown, Cork and Seal and Dairy Queen all used share buybacks and were known to do so.

  In his 1980 shareholder letter, Warren Buffett extolled the virtues of buybacks (although he later criticized companies paying too much for the shares.) In 1982, the SEC ditched the rules.

  The video also blames share buybacks for the growth of inequality. That seems to be a stretch. I think the video confuses a tool with how it can be used.

• Eagle Bancorp Earned $1.08 per Share for Q4
  Eddy Elfenbein, October 16th, 2019 at 4:36 pm

  EagleBank announced quarterly net income of $36.5 million for the three months ended September 30, 2019, a 6% decrease from $38.9 million net income for the three months ended September 30, 2018.

  Net income per basic common share for the three months ended September 30, 2019 was $1.07 compared to $1.14 for the same period in 2018.

  Net income per diluted common share for the three months ended September 30, 2019 was $1.07 compared to $1.13 for the same period in 2018.

  Earnings in the third quarter of 2019 were impacted by two significant non-recurring expense items.

  The Company recorded $2.0 million of accelerated shared based compensation expense due to the resignation of certain directors of the Company and Bank.

  Secondly, as a result of the FDIC Deposit Insurance Fund exceeding 1.38% of insured deposits at June 30, 2019, EagleBank recognized a $1.1 million credit to its FDIC assessment expense in the third quarter of 2019.

  Excluding these two non-recurring items, net income for the third quarter of 2019 would have been $37.1 million ($1.08 per diluted share).

  Notwithstanding the negative impact that very low interest rates and a flat yield curve are having on our revenues and net interest margin, we are pleased to report a continued quarterly trend of both loan and deposit growth, together with solid asset quality and favorable operating leverage. Additionally, our capital base remains very strong, with ratios well in excess of the requirements for well capitalized status,” noted Susan G. Riel, President and Chief Executive Officer of Eagle Bancorp, Inc. Ms. Riel added that “period end loan growth in the quarter was 2.3%, and average loans were 13% higher in the third quarter 2019 as compared to the third quarter of 2018. For the third quarter of 2019, period end deposit growth was a very strong 6.5% and average deposits were 13% higher as compared to the same period in 2018. Total revenue for the third quarter of 2019 was $87.3 million compared to $86.9 million for the third quarter of 2018 and was 4% higher for the first nine months of 2019 over the same period in 2018.

  Here’s the bit about legal expenses:

  Legal, accounting and professional fees and expenses for the three months ended September 30, 2019 increased to $3.6 million from $2.1 million for the same period in 2018, a 70% increase. Legal, accounting and professional fees and expenses for the nine months ended September 30, 2019 increased to $8.1 million from $7.3 million for the same period in 2018, an 11% increase. The increased expenses for both the quarter to date and year to date 2019 periods were primarily associated with government agencies investigations previously disclosed in the second quarter 2019 earnings press release. The Company expects to incur elevated levels of legal and professional fees and expenses for at least the remainder of 2019 as it continues to cooperate with these investigations. Other than these increased costs, we do not believe at this time that the resolution of these investigations will be materially adverse to the Company. As a result of these ongoing investigations, there have been no regulatory restrictions placed on the Company’s ability to fully engage in its banking business as presently conducted. We are, however, unable to predict the duration, scope or outcome of these investigations.

• Retail Sales Fell Last Month
  Eddy Elfenbein, October 16th, 2019 at 12:35 pm

  This morning’s retail sales report showed a surprising decline for September. This could indicate weakness in consumer spending. This was the first drop for retail sales in seven months,

  For September, retail sales fell by 0.3%. Economists had been expecting a gain of 0.3%. On the bright side, the figure for August was revised up from 0.4% to 0.6%.

  Auto sales fell 0.9% in September, the most in eight months, while receipts at service stations fell 0.7% in what likely reflects cheaper gasoline.

  Withholding automobiles, gasoline, building materials and food services, retail sales were little changed in September after climbing 0.3% in August. The so-called core figure corresponds more closely to the consumer spending component of U.S. economic activity.

  Last month’s drop and August’s unedited gain in core sales hint at a marked slowdown in consumer spending in the third quarter that economists had been anticipating after a surge in the prior quarter. Consumption, which comprises about 66% of the U.S. GDP activity, increased at a 4.6% annualized rate in the second quarter, the most in 1½ years.

  At the end of October, we’ll get our first look at Q3 GDP.

• Morning News: October 16, 2019
  Eddy Elfenbein, October 16th, 2019 at 7:12 am

  ECB Should Consider a Better Inflation Measure, S&P Says

  Undercover Entrepreneurs: Fearful Mexican Tech Startups Shun Spotlight

  Turkish Markets Sell Off After U.S. Charges Bank With Money Laundering

  What’s Really in the Trade Deal Trump Announced With China

  U.S. ‘Deeply Concerned’ About Untrackable China Ships Carrying Iran Oil

  Citigroup Offers Rare Pound Bond as Brexit Deal Prospects Fade

  Google, Reddit Defend Tech Legal Protections Ahead of Congress Hearing

  Barneys Bidding Starts, and It’s a Bet on the Future of Shopping

  Ad Giant Wins Over Disney With Big Data Pitch

  MGM to Sell Bellagio, Circus Circus Resorts for About $5 Billion

  Overrun by Tourists, American Cities Are Taking Aim at Hotels

  Goldman Profit Drops 26% as Deals Slow, Tech-Stocks Struggle

  Nick Maggiulli: Money Blinders

  Michael Batnick: Look Away & Animal Spirits: The Undies Indicator

  Roger Nusbaum: Another Crypto ETP…To Be Wary Of

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• Ross Stores Opens 42 New Locations
  Eddy Elfenbein, October 15th, 2019 at 10:21 am

  Good news from Ross Stores (ROST). The company is opening 42 new locations.

  Ross Stores, Inc. announces the recent opening of 30 Ross Dress for Less® (“Ross”) and 12 dd’s DISCOUNTS® stores across 19 different states in September and October. These new locations complete the Company’s store growth plans for fiscal 2019 with the addition of 98 new stores.

  “This fall, we continued to expand our Ross and dd’s footprints across our existing markets as well as expansion in our newer market – the Midwest. The 42 locations we added this fall included nine stores in our newer Midwest markets of Illinois, Indiana, Kentucky, Nebraska, and Ohio. In addition, dd’s DISCOUNTS entered the state of Virginia with the opening of one new store and now operates in 19 states,” said Jim Fassio, President and Chief Development Officer. “Looking ahead, we remain confident in our ability to grow to 2,400 Ross Dress for Less and 600 dd’s DISCOUNTS locations over time.”

  Together, Ross Dress for Less® and dd’s DISCOUNTS® currently operate 1,811 off-price apparel and home fashion stores in 39 states, the District of Columbia, and Guam.

  For fiscal Q3 (ending in October), Ross expects earnings of 92 to 96 cents per share. For Q4 (ending in January), which is their biggest, Ross sees earnings of $1.20 to $1.25 per share. That adds up to full-year guidance of $4.41 to $4.50 per share.

• Alpha Trader Podcast
  Eddy Elfenbein, October 15th, 2019 at 8:38 am

  I was the guest of the premiere episode of Alpha Trader, the new podcast from Seeking Alpha. Check it out.

• Morning News: October 15, 2019
  Eddy Elfenbein, October 15th, 2019 at 7:12 am

  A Swiss Bank Keeps Cropping Up in Venezuelan Corruption Cases

  Swiss Talk of Annexing Italy’s Former CIA Spy Nest Roils Rome

  U.S. Pension Funds Took Positions in Blacklisted Chinese Surveillance Company

  Wall Street’s Sky-High Expectations Are About to Collide With Reality

  How Amazon.com Moved Into the Business of U.S. Elections

  WeWork Prefers JPMorgan Lifeline to a Rescue by SoftBank

  The New Makers of Plant-Based Meat? Big Meat Companies

  AMC Theater Chain Gets Into Streaming With On-Demand Movies

  She Fined Tech Giants Billions of Dollars. Now She Wants Sharper Tools.

  Inside a Brazen Scheme to Woo China: Gifts, Golf and a $4,254 Wine

  No Choice But to Invest in Oil, Shell CEO Says

  Elite M.B.A. Programs Report Steep Drop in Applications

  Ben Carlson: Terrible Business Plans, Wonderful Businesses & Re-Kindled: Malcolm Gladwell

  Jeff Carter: Economics of Patents & Regulators Jointly Speak Out About Crypto

  Joshua Brown: BAML’s Trade War Tracker & Here’s How the Brokers Will Make Money Now That Trading is Free

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• Morning News: October 14, 2019
  Eddy Elfenbein, October 14th, 2019 at 5:26 am

  WTO Clears U.S. to Target EU Goods With Tariffs Over Airbus

  With No End to Unrest in Sight, Hong Kong’s Economic Pain Deepens

  Trump’s China Handshake Fails to Lift Economic Gloom

  Chinese Shoppers and Investors Are Losing Their Appetite for Gold

  Wall Street’s Sky-High Expectations Are About to Collide With Reality

  ‘Broken System’ Starves U.S. Oil Boom of Immigrant Workers

  WeWork Said to Weigh Bailout That Hands Control to SoftBank

  Tencent Airs NBA Games as Chinese State TV Blackout Persists

  Russia’s Pizza King Wants to Use the Cloud to Take Over the World

  ‘This Did Not Go Well’: Inside PG&E’s Blackout Control Room

  Boeing’s Board Acted After Months of Mounting Pressure

  ConocoPhillips Quits Northern Australia in $1.4 Billion Sale to Santos

  Howard Lindzon: Weed Kills…Portfolios

  Jeff Miller: Weighing the Week Ahead: A Defining Moment for Financial Markets

  Roger Nusbaum: Markets Don’t Care About Your Politics

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• Shareholders Approve Raytheon and UTX Merger
  Eddy Elfenbein, October 11th, 2019 at 9:35 am

  It’s official:

  Raytheon Company (RTN) and United Technologies Corp. (UTX) announced that, at their respective special meetings of shareowners held today, Raytheon and United Technologies shareowners voted overwhelmingly to approve all of the proposals necessary to complete the merger of equals transaction combining United Technologies’ aerospace businesses, comprised of Collins Aerospace and Pratt & Whitney, with Raytheon. The merger would create Raytheon Technologies Corporation, a premier systems provider with advanced technologies to address rapidly growing segments within aerospace and defense.

  The transaction is expected to close in the first half of 2020, subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals, as well as completion by United Technologies of the separation of its Otis and Carrier businesses.

  “I am pleased that the shareowners of Raytheon and UTC voted in favor of our powerful strategic combination,” said Tom Kennedy, Raytheon Chairman and CEO. “Today’s vote reflects a significant step on our path to unite two world-class companies with complementary technologies and supports our view that this merger of equals will create additional growth opportunities while delivering benefits to our shareowners, customers and employees.”

  “Today is an important milestone in our transformational merger, which will define the future of aerospace and defense. With our technological and R&D capabilities, Raytheon Technologies will deliver innovative and cost-effective solutions aligned with the highest customer priorities for decades to come,” said Greg Hayes, United Technologies Chairman and CEO.