Morning News: November 29, 2018
Posted by Eddy Elfenbein on November 29th, 2018 at 7:09 am

Oil Drops Below $50 on Concern OPEC+ Won’t Cut Output Decisively

Deutsche Bank Raided by Police in Money-Laundering Probe

South Korean Court Orders Mitsubishi of Japan to Pay For Forced Wartime Labor

Fed’s Powell, in Apparent Dovish Shift, Says Rates Near Neutral

Don’t Count on the Fed Saving Stocks Again

Trump Administration to Study Tools to Raise U.S. Tariffs on Chinese Autos

Why Ford Will Keep Plants Humming and Trump Happy

A Farmer’s Tough Choices in Coping With the Trade War

More Small Companies Avoid IPOs, Sapping U.S. Economy’s Vitality

Ad Buyers Skeptical as Snap Looks Beyond Teens for Growth

Amazon Web Services Could Soon Be Worth a Massive $350 Billion

Cash-Strapped Millennials Are Turning to Installment Plans to Pay for T-Shirts and Jeans

Jeff Miller: Stock Exchange: Did The Market Just Bottom?

Ben Carlson: Animal Spirits: Passive Income

Jeff Carter: Innovation Happens With Less Weight

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Guess What Time Powell Started Speaking
Posted by Eddy Elfenbein on November 28th, 2018 at 2:14 pm

If you look really hard, you can almost make it out.

GDP and New Homes Sales
Posted by Eddy Elfenbein on November 28th, 2018 at 12:23 pm

Two quick economic reports to mention this morning. Q3 GDP was revised to unchanged. The government says the economy grew by 3.5% during the third quarter of this year. Even down to the decimal, this report was barely changed. This report will be revised again in late December.

Now economists are looking at growth for Q4. My guess is something around 2.5%.

The new-homes sales report showed that there were 544,000 new homes sales last month (that’s an annualized number). This is down 12% from a year ago. The previous months were revised higher. There’s a good chance that new-home sales will be down for 2018.

Here’s a link to Jay Powell’s address at the Economic Club of New York. It’s long but covers the Fed’s thinking.

Smuckers Earns $2.17 per Share
Posted by Eddy Elfenbein on November 28th, 2018 at 9:41 am

Here’s the executive summary from today’s earnings report from JM Smucker (SJM):

Net sales increased $97.9 million, or 5 percent, led by the addition of Ainsworth and the Company’s growth brands.

Net income per diluted share was $1.66. Adjusted earnings per share was $2.17, an increase of 7 percent.

Fiscal 2019 second quarter results include a $26.6 million pre-tax gain related to the divestiture of the U.S. baking business. The effective tax rate of 30.0 percent reflects the tax impact associated with the sale of the baking business.

Free cash flow was $125.1 million in the second quarter and $266.8 million through the first half of the fiscal year.

The Company updated its full-year fiscal 2019 net sales, adjusted earnings per share, and free cash flow outlook.

CEO Remarks

“Our net sales increase was supported by the positive contribution from the acquired Rachael Ray® Nutrish® brand,” noted Mark Smucker, Chief Executive Officer. “We also realized strong sales gains across many of our growth brands, including Smucker’s® Uncrustables®, Nature’s Recipe®, and Café Bustelo®. We are focused on growing brands consumers love in the pet food, coffee, and snacking categories, as highlighted by the completion of the U.S. baking business divestiture during the quarter. While the income taxes related to the sale of the baking business impacted our earnings per share, we were pleased with the business results for the quarter. Ongoing execution of our strategy for both growth and core brands is essential to delivering long-term shareholder value.”

Smucker also lowered its full-year guidance. The company now expects net sales of $7.9 billion and earnings between $8.00 and $8.20 per share. The previous forecast was $8.0 billion and earnings between $8.40 and $8.65 per share.

The stock is down about 6% in today’s trading.

Morning News: November 28, 2018
Posted by Eddy Elfenbein on November 28th, 2018 at 7:18 am

Brazil Oil Tanker Collision Reveals Offshore Regulatory Gaps

New Zealand Blocks Huawei, in Blow to Chinese Telecom Giant

Trump Open to Deal with Xi at Dinner but with Conditions

Mnuchin Asked About Fed Option That Could Avoid Rate Hikes

U.S. Housing Market Seen as ‘Tough’ for Both Buyers and Sellers

What’s Behind the G.M. Cutbacks, and Why Trump Is Angry

GM Needs China More Than It Fears Trump

The $15 Billion Money Pit Dragging GE Down

United Technologies’ Split Will Create A Giant Of A Different Kind

Spotify Secures Rights to Booming Indian Music Market

“I Hereby Confess Judgment”

Energy Speculators Jump on Chance to Lease Public Land at Bargain Rates

Nick Maggiulli: What You Can’t Buy

Roger Nusbaum: A Little More Defense

Howard Lindzon: I Like Charts!

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Elfenbein Correct, Internet Wrong
Posted by Eddy Elfenbein on November 27th, 2018 at 1:55 pm

Yesterday, I posted this on Twitter:

If you had invested $10,000 in Apple on June 6, 1983, by April 17, 2003, you'd be sitting on $8,400.

— Eddy Elfenbein (@EddyElfenbein) November 26, 2018

My point is that even with a revolutionary business like Apple, its stock may not be a winner in the very long term. Markets are inherently dynamic and as such, they can be very frustrating.

The tweet got a lot of attention, and I think my point was clear. Being the internet, however, I got a few unusual responses.

For example:

1-not true 2-you picked the exact bottom of the dot com crash and still didn't prove your point 3-in 2018 to you would be rich. Buy and hold works.

— John Herndon (@JohnHer04901688) November 26, 2018

Oh boy.

1. No, it’s not wrong. It’s accurate.
2. Of course I picked the exact high and low. That’s my point.
3. Of course I’d be wealthier. Again, that’s the point. Even an amazing company like Apple can be dead money for a long time. Plus, I’m an odd person to lecture on the merits of buy-and-hold.

Some people pointed out that I didn’t include dividends.

If you count in the dividends you would get a much bigger number.

— CubicAngstrom (@cubicangstrom) November 26, 2018

In my defense, I never claimed they were dividend-adjusted returns. Apple did pay a modest dividend from 1987 to 1995. That dividend wasn’t raised after 1990. It was discontinued and eventually brought back in 2012.

The dividend would have helped returns, but not by much, and certainly not “much bigger.” Unfortunately, the numbers at Yahoo Finance don’t adjust the dividends for splits. As a result, the adjusted returns look much larger than they really are.

Here’s an example:

Very wrong. Adjusted for dividends and stock splits[1], it'd be worth almost $125,000. That's an annualized return of more than 13%.

[1] Based on Yahoo Finance's adjusted close value.

— Tentacular Economist (@TentacularEcon) November 27, 2018

No, no, no. You can tell Yahoo Finance’s numbers are wrong because it means Apple would have had a double-digit dividend yield over 20 years even though it only paid a dividend for eight years. That, or Yahoo Finance’s numbers are wrong. They have the dividend right, they just didn’t split it.

According to this website, with dividends, the $10,000 would have become $9,137.76, which sounds about right. The dividends would have added about 9% to the total haul.

Many more responses, including the uninformed:

Curve narrative to fit bias

— Веnјаmіn Fortuna (@fortunabvr) November 27, 2018

Are you on drugs ? Apple did a lot of splits

— Edi (@edixonve) November 27, 2018

Nope, not on drugs and they only did two splits in those 20 years.

These numbers are definitely wrong..

— Alex Martinez (@amarty310) November 27, 2018

He probably doesn’t even know what a stock split is given such an ignorant tweet.

— DC ⚡️ (@bitcoinization) November 27, 2018

ADS Weighs Sale of Epsilon Marketing Business
Posted by Eddy Elfenbein on November 27th, 2018 at 9:41 am

From the Wall Street Journal:

Alliance Data Systems (ADS) is exploring a potential sale of its Epsilon marketing-services business, the company said Tuesday.

The company said it will review strategic alternatives for the business, which generated revenue of $2.2 billion in the year ended Sept. 30, though there is no guarantee a transaction will occur. Alliance Data said that it will make disclosures as appropriate and that its board will make a final decision on any specific action.

The move was the result of an internal review of operations, Alliance Data said. The company said that if it divested the business it would use proceeds to reduce debt and return capital to shareholders through stock buybacks or dividends.

Analysts had viewed a sale of the Epsilon business as a possible result of the review. Susquehanna Financial Group analysts said in a note last month that Acxiom Corp.’s ]deal in July to sell its marketing-solutions business to Interpublic Group of Cos. for $2.3 billion likely “opened the eyes” of Alliance Data management to prospects for Epsilon.

The Epsilon business this year has been hurt by weaker-than-expected revenue from its agency services and site-based displays in addition to client bankruptcies, Alliance Data executives told analysts on an earnings conference call in October. Last year Epsilon accounted for roughly 30% of Alliance Data’s total revenue.

Alliance Data bought Epsilon in 2004 to help it expand into different industry sectors in providing loyalty-marketing services and bolster its private-label credit-card business. Epsilon in 2014 bought Conversant for $2.3 billion in cash and stock in a bid to bolster its digital-marketing capabilities.

Epsilon employs over 8,000 people in 70 offices world-wide, according to Alliance Data. Plano, Texas-based Alliance Data has about 20,000 employees across its businesses.

Shares in Alliance Data, which have fallen 9.3% over the past 12 months, rose 0.5% to $202 in low-volume premarket trading.

Morning News: November 27, 2018
Posted by Eddy Elfenbein on November 27th, 2018 at 7:17 am

What Oil at $50 a Barrel Means for the World Economy

‘Sleepwalking’ Markets Woke Up This Year. That’s a Good Thing.

Pre-I.P.O. Deals Add to Exodus From Public Markets

The U.S. Housing Boom Is Coming to an End, Starting in Dallas

Trump Signals U.S. Likely to Go Ahead With China Tariff Increase

G.M. to Idle Plants and Cut Thousands of Jobs as Sales Slow

Amazon Says Cyber Monday Was the Biggest Shopping Day in Company History

Little Known to Many Investors, Cryptocurrency Reviews Are For Sale

United Technologies to Split Into 3 Companies, Each With a Sharper Focus

Tesla China Sales Plunge 70% in October

Don’t Look Now, But Microsoft Is Overtaking Apple

The Ghosn Inquisition

Michael Batnick: The Nifty Fifty

Ben Carlson: When Cash Outperforms Everything

Jeff Carter: Crypto Breakdown; Crypto Regulation

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Morning News: November 26, 2018
Posted by Eddy Elfenbein on November 26th, 2018 at 7:10 am

How Cheap Labor Drives China’s A.I. Ambitions

Venezuela Settles $1.2 Billion Creditor Claim to Protect Citgo

Bitcoin, Ripple (XRP), And Ethereum Got Roasted Over Thanksgiving – Here’s Why

Pay Taxes With Bitcoin? Ohio Says Sure

Goldman Predicts Commodities Will Soar in 2019

Buy Emerging Markets, Avoid Credit: Morgan Stanley’s 2019 Plan

The Plug-In Hybrid Car Hits Its Stride, Just in Time to Die

In China’s Hinterland, Car Market Growth Engine Sputters

VW, Ford Alliance Borne Out of Need to Adapt to Fragmented Markets

GM Plans Closure of Canada Plant With 2,200 Workers

Carlos Ghosn Is Removed As Chairman of Mitsubishi Motors

Campbell Soup and Third Point Near Deal to Settle Proxy Fight

Jeff Miller: Weighing the Week Ahead: Do Plummeting Oil Prices Signal a Weak Economy?

The Economics of Le’Veon Bell’s Gamble

Joshua Brown: The Year No One Made Money & The End of the Beginning

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Morning News: November 23, 2018
Posted by Eddy Elfenbein on November 23rd, 2018 at 7:52 am

Big Oil Digs North Sea’s ‘Final Frontier’

India and Australia Move to Tighten Bonds to Counter China’s Rise

China Wants Trade Talks with United States to Be Equal, Mutually Beneficial

A Creator of the U.K.’s Libor Replacement Says It’s Still Too Complex

Holiday Looks Set to Be a Shopping Blowout: Black Friday Update

Black Friday is Starting Earlier Than Ever — and Companies Like Walmart and Lululemon Weren’t Ready

Trump’s Tariffs Haven’t Really Transformed Trade. Yet.

Apple to Defend iPhone App Fees at U.S. Supreme Court

Washington Asks Allies to Drop Huawei

Ghosn Arrest Exposes Stress in Japanese-French Auto Marriage

Amazon Workers Strike in Germany, Spain on Black Friday

German Court Rules Volkswagen Must Reimburse Owner Full Price of Car

D&G’s Racism Row Shows the Worst of Fashion

Howard Lindzon: Nasdaq 5,000? …Nasdaq 10,000 Still Inevitable

Ben Carlson: Ben’s Holiday Spending Tips

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