Author Archive

  • This Morning’s Economic Reports
    , May 24th, 2012 at 8:45 am

    There were two important economic reports this morning.

    The Labor Department reported that initial unemployment claims fell by 2,000 to 370,000. The only problem is that last week’s number was revised up to 372,000 from 370,000.

    The durable goods report showed an increase of 0.2%. However, when we take out transportation orders, there was a decrease of 0.6%.

  • Morning News: May 24, 2012
    , May 24th, 2012 at 8:21 am

    Europe Shares Rebound After Sell-off, Caution Remains

    UK Recession Deepens as GDP Shrinks

    Drop in German Business Confidence May Portend Slowdown

    China Manufacturing Activity Worsens: HSBC

    Stock Futures Climb Ahead of U.S. Data

    HP Rises as Profit, Job Cuts Buoy Optimism for Turnaround

    Negative Equity Remains a Drag on Housing Market

    Costco’s 3Q Net Income Rises, Sales Climb

    French Yields Slump as Investors Seek Returns

    The Biggest IPOs In American History

  • Tuesdays Have Been the Big Winner
    , May 24th, 2012 at 6:11 am

    Here’s a look at the stock market’s return by day of the week since April 15, 2011. If we took all the Mondays and put them together, the S&P 500 has lost 8.23%. But Tuesdays have been the big winner. The S&P 500 has gained 20.05% on the second day of the week.

    On Wednesdays, the index has been down 7.72%. On Thursdays, it’s made a small gain of 3.66%. Then on Fridays, the S&P 500 has lost 5.23%.

  • The Cyclical Sell-Off
    , May 23rd, 2012 at 11:04 am

    Here’s another view of how badly cyclical stocks have underperformed since early February. The gold line is the S&P 500 while the black line is the Morgan Stanley Cyclical Index.

    The non-cylical part of the market hasn’t been damaged too badly.

  • Moody’s Raises Ford to Investment Grade
    , May 23rd, 2012 at 10:31 am

    First Fitch raised Ford‘s ($F) debt to investment grade, now Moody’s has followed.

    The upgrade allows Ford to enjoy lower borrowing costs and expands the number of potential buyers for its bonds.

    It also represents a symbolic win for Ford, which nearly collapsed six years ago before mortgaging most of its assets to borrow $23.5 billion to finance a restructuring. Ford continued to use the Blue Oval icon and the other assets. The icon is stamped on the grill of Ford’s cars and trucks.

    (…)

    Moody’s cited Ford’s improved lineup of cars and trucks, limited use of incentives to spur sales, and much lower break-even point in North America for its decision.

    In 2009, Ford could break even in North America if it sold 3.4 million cars and trucks. Now, that level has dropped 45 percent to 1.8 million in sales, according to Moody’s.

    “We concluded that the improvements Ford has made are likely to be lasting,” said Moody’s analyst Bruce Clark.

    Ford wants to cut its automotive debt to $10 billion by the middle of the decade as well as reduce the risk posed by its pension obligations.

    Ford’s automotive debt was $13.7 billion in the first quarter. Last month, Ford said it would offer lump-sum pension buyouts to current white-collar retirees, a move that may lower its U.S. pension obligation by one-third.

  • Nigel Farge: Greece Should Leave the Euro
    , May 23rd, 2012 at 8:43 am

  • 100 Million Americans Without Jobs
    , May 23rd, 2012 at 7:41 am

    The national unemployment rate gets lots of attention, and lately more attention has been paid to the workforce participation rate since more Americans have given up looking for a job, but we can also see that an astounding 100 million Americans don’t have jobs.

    Specifically, these are people who are part of the civilian over-16 non-institutional population who are either unemployed or not part of the workforce. According to the April jobs report, the number of jobless American stood at 100.9 million.

    That’s an all-time record and it’s an increase of 26.2 million over the last 12 years. It’s as if we absorbed the entire adult population of Canada and not a single person had a job.

    The numbers are staggering. The jobs-to-population ratio peaked 12 years ago. If we were to have the same ratio today, we would need 15.3 million more jobs, or 23.7 million fewer people.

    (Note: The chart above is the Civilian Over-16 Non-Institutional Population minus the seasonally adjusted Civilian Workforce.)

  • Morning News: May 23, 2012
    , May 23rd, 2012 at 7:14 am

    U.S. Stock Futures Slide; CBO Warns Of Possible Recession

    Germany Sells 2-Year, 0% Bonds Amid Greek Anxiety

    Regulators, Investors Turn Up Heat Over Facebook IPO

    Burberry Plans Retail Space Expansion As Profit Grows

    US Stock Futures Drop Ahead Of Europe Summit

    Lenovo 4th Quarter Profit Up 59%; Outpaces Industry Growth

    Toll Brothers Swings To 2Q Profit On Fewer Writedowns, More Deliveries

    Oil Boom Strikes Kansas

    Euro Drops to 21-month Low as Break Up Risks Mount

    Guessing Game Begins Over Next Treasury Chief

    The Reformed Broker: It’s Worse Than We Thought….

    David Merkel: Little Things are Important

  • “It’s Like Buying $1 For $1.98”
    , May 22nd, 2012 at 7:30 pm

    Rodrigo Campos of Reuters writes:

    Investor confidence in the shares has been damaged after Reuters reported lead underwriter Morgan Stanley cut its revenue forecasts for Facebook in the days before the offering, in part because of comments from Facebook on mobile usage.

    After pricing at $38, far more than the first estimate of $28 the company gave investors, shares have been sliding – at one point as much as 31 percent from the $45 peak hit shortly after it started trading Friday.

    “Facebook right now is going for far more than what it’s worth, it’s like buying $1 for $1.98, it just doesn’t make sense at this price,” said Eddy Elfenbein, widely followed blogger and editor at Crossing Wall Street.

    Starmine’s analysis of Google Inc’s value puts that stock at $680, assuming a growth rate of 10.1 percent for the next 10 years. That makes the Internet giant undervalued at $599 a share.

    “Just from basic modeling the stock should be around $17 to $20 dollars, and that is with a lot of variables,” Elfenbein said. “I would call that an ideal price. I would be interested in buying and I think that is a good deal for investors.”

  • Medtronic’s Earnings Call
    , May 22nd, 2012 at 3:48 pm

    From Seeking Alpha:

    Let me conclude by providing our initial fiscal year 2013 revenue outlook and earnings per share guidance. While we believe our markets have improved modestly, we estimate market growth remains in the low single digits. Based on this, as well as the expected growth from recent product launches, we believe that constant currency revenue growth of 2% to 4% is reasonable for FY ’13 and would reflect improvement from our organic growth in FY ’12. While we cannot predict the impact of currency movements, to give you a sense of the FX impact and the exchange rates were to remain similar to yesterday for the remainder of the fiscal year, then our FY ’13 revenue will be negatively affected by approximately $330 million to $337 million, including a negative $100 million to $120 million impact in Q1.

    Turning to guidance on the bottom line. Based on expected constant currency revenue growth of 2% to 4%, we believe it is reasonable to model earnings per share in the range of $3.62 to $3.70, which implies FY ’13 earnings per share growth of 5% to 7%. While we do not provide quarterly guidance, we would point out that the current consensus reflects Q1 earnings per share growth of 10%, which is outside our issued guidance, and therefore we would not be surprised to see some modest shifts — modest model shift a couple of pennies from Q1 to Q4. As in the past, my comments and guidance do not include any unusual charges or gains that might occur during the fiscal year, nor do they include the impact of the noncash charge for convertible debt interest expense.