Morning News: June 14, 2018
Posted by Eddy Elfenbein on June 14th, 2018 at 7:15 am

China Holds Fire on Rates, Posts ‘Shockingly Weak’ Activity Growth

Fed Raises Interest Rates and Signals 2 More Increases Are Coming

Here’s Why Bitcoin Is Falling—And It Isn’t Just The Coinrail Exchange Hack

Disney Under Gun to Respond to Comcast’s $65 Billion Fox Bid

Another Woman At The Top Of GM: 39-Year-Old Finance Whiz Dhivya Suryadevara Is New CFO

Microsoft Could Be Aiming At Amazon With Its Own Push For Checkout-Free Retail

Elon Musk’s Boring Co. Wins Chicago Airport High-Speed Train Bid

Domino’s is Repairing Roads, and Experts Say it Reveals a Troubling Trend in American Spending

Social Security Ran a $44 Billion Surplus in 2017 — So, Why Is the Program in Trouble?

GE Rival Siemens Is Having The Same Problems In This Hard-Hit Business

WeWork in Talks With SoftBank to Double Valuation to as Much as $40 Billion

ExxonMobil Is Spending Billions of Dollars to Solve the Permian Basin’s Biggest Problem

Lawrence Hamtil: Relative Valuation Update – US vs EM, Europe, and Foreign Developed

Michael Batnick: The Geometry of Wealth

Jeff Carter: How Term Sheets Build Community

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On the Fed Statement
Posted by Eddy Elfenbein on June 13th, 2018 at 2:12 pm

A few comments. Here are the Fed’s projections.

First, this is a mercifully short statement. This is what happens when a lawyer runs the Fed instead of economists. Powell must be taking my advice.

Second, the big headline is that the Fed is now calling for four rate hikes this year, but the median forecast has changed due to one vote. This is hardly a big change in outlook.

Officially, the median FOMC voter expects two more hikes this year, plus three more next year and one in 2020.

The Fed Hikes Rates
Posted by Eddy Elfenbein on June 13th, 2018 at 2:02 pm

For the seventh time this cycle, the Fed has hiked rates:

Information received since the Federal Open Market Committee met in May indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Job gains have been strong, on average, in recent months, and the unemployment rate has declined. Recent data suggest that growth of household spending has picked up, while business fixed investment has continued to grow strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced.

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1-3/4 to 2 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained 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 maximum employment objective and its symmetric 2 percent inflation objective. 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.

Voting for the FOMC monetary policy action were Jerome H. Powell, Chairman; William C. Dudley, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Loretta J. Mester; Randal K. Quarles; and John C. Williams.

OK…Maybe Not
Posted by Eddy Elfenbein on June 13th, 2018 at 11:59 am

In a strange development today, Stryker (SYK) said they’re not in deal talks with Boston Scientific (BSX). This comes two days after there were reports that a deal was on the table. I guess we can infer that they weren’t able to reach a deal or price.

On Monday, The Wall Street Journal reported Stryker had made a takeover approach to Boston Scientific, a move that would create a medical-device giant and would be the latest effort to consolidate a corner of the health-care industry that has produced a raft of large deals lately.

Stryker said in a filing with the Securities and Exchange Commission on Wednesday it doesn’t typically comment on these matters, but it chose to respond following market speculation about a possible deal for Boston Scientific.

Stryker’s filing didn’t dispute that it had made a takeover approach.

The Journal had reported it wasn’t clear how receptive Boston Scientific was to a deal. Boston Scientific said in a statement after the Journal reported on the advance Monday that it was aware of the report but declined to comment.

Boston Scientific declined to comment Wednesday after Stryker’s filing.

Stryker, based in Kalamazoo, Mich., is one of the largest makers of knee- and hip-replacement parts, competing with companies including Johnson & Johnson and Zimmer Biomet Holdings Inc.

Boston Scientific, based in Marlborough, Mass., is one of the largest makers of heart devices such as pacemakers and artery-opening stents, competing with Medtronic and Abbott Laboratories . It develops devices used in diagnosing and treating coronary artery disease, heart monitoring and a broad range of gastrointestinal and pulmonary conditions. The company also makes non-heart devices such as endoscopes, a type of surgical camera.

Stryker is rallying today, but it hasn’t made back everything it lost from the drop earlier this week.

Morning News: June 13, 2018
Posted by Eddy Elfenbein on June 13th, 2018 at 7:11 am

Professor Who Rang VIX Alarm Says Tether Used to Boost Bitcoin

Trump’s Trade War Could Mess Up the Fed’s Plans

What’s in a Name? Consumer Bureau to Find Out

Trump Gambles and Loses on AT&T

AT&T-Time Warner Ruling Shows a Need to Reboot Antitrust Laws

Netflix and Alphabet Will Need to Become ISPs, Fast

ZTE Shares Tank in Asian Markets After it Agrees to Pay $1.4 Billion Settlement to the US

Toyota Pumps $1 Billion in Grab in Auto Industry’s Biggest Ride-Hailing Bet

Nissan Doubles Down on Emerging Markets as U.S. Sales Slow

Musk’s Model 3 Miscalculation Culminates in Major Tesla Job Cuts

Zara Goes High-Tech in Race With Amazon

There Aren’t Enough Drivers to Keep Up With Your Delivery Lifestyle

Nick Maggiulli: It Can Happen to Anyone: On the Life-Altering Effects of Money

Roger Nusbaum: Never Underestimate the Importance of Balance

Ben Carlson: Why Do Stocks Generally Go Up Over Time?

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Inflation Is Up 2.8% in the Last Year
Posted by Eddy Elfenbein on June 12th, 2018 at 10:51 am

The government reported the CPI numbers for May this morning. In the last month, headline inflation is up just 0.21% while the headline core rate rose 0.17%.

Over the last year, headline inflation is up 2.80%. That’s the fastest rate in more than six years.

The core rate is up 2.24% in the last 12 months. That’s close to the fastest rate since late 2008. The current title holder is 2.33% from February 2016. We might be able to break that soon. Year-over-year core inflation has been over 3% since 1995.

Here’s the real Fed funds rate based on core inflation. The Fed funds will likely rise tomorrow by 0.25%. It looks like it will take two more hikes to bring us to 0%.

Morning News: June 12, 2018
Posted by Eddy Elfenbein on June 12th, 2018 at 7:17 am

Oil: Short-Term Pain For Long-Term Gain

Draghi Learns Lesson From Fed as ECB Stays Vague on Rate Outlook

FAA’s Safety Rules for Commercial Drones Are Overly Strict, Report Says

The $1.4 Trillion U.S. ‘Surplus’ That Trump’s Not Talking About

North Korea Open For Business? Some See Hope in Trump Talks

Trump May Doom the Medium He Loves

Senators Set Deadline for Ajit Pai’s FCC to Open Up About Its DDoS Attack Claims

3 Social Security Myths You Can’t Afford to Believe

China Phone Giant Xiaomi May Be Twice as Expensive as Apple

Building-Materials Firm USG Agrees to Knauf’s $7 Billion Buyout

Wendy’s and Other Burger Chains Are Slamming IHOP for Its ‘IHOb’ Rebrand

Jaguar Land Rover Preps for Electric Era Moving SUV From UK

Howard Lindzon: Momentum Monday…Are We Too Extended?

Michael Batnick: What Do Clients Want?

Cullen Roche: Tariffs Won’t Make America Great Again

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Smucker’s Rebound
Posted by Eddy Elfenbein on June 11th, 2018 at 4:06 pm

This is quickly becoming a theme for our Buy List stocks. They drop after earnings and then quickly make back all they’ve lost. Now it’s Smucker’s turn:

In the last four says, SJM has gained four cents.

Signature Bank and the Trumps
Posted by Eddy Elfenbein on June 11th, 2018 at 3:33 pm

USA Today recently ran a story detailing some real estate deals by Jared Kushner or Michael Cohen. The deals were financed by Signature Bank (SBNY), a member of our Buy List.

I want to make it clear that SBNY merely financed these deals. This doesn’t mean they organized the deals. USA Today describes Signature as a “bank tied to the Trump family.” That’s disingenuous. Ivanka Trump was on their Board from 2011 to 2013. Barney Frank, hardly a Trump fan, is currently on the Board.

Stryker Looking at Boston Scientific
Posted by Eddy Elfenbein on June 11th, 2018 at 12:18 pm

The Wall Street Journal is reporting that Stryker is looking at buying Boston Scientific. If this deal happened, it would be huge.

Stryker has recently made a takeover approach to rival Boston Scientific, a move that would create a medical-device giant with a combined value of more than $110 billion, according to people familiar with the matter.

It is unclear whether Boston Scientific is receptive to the approach, and it is far from guaranteed there will be a deal. It comes amid a flurry of deal activity in the health-care sector as companies respond to industry and regulatory changes, demands for lower medical costs and the pressure to find new sources of growth.

A deal, should one be inked, would be one of the biggest of the year, given Boston Scientific’s market value of $44 billion Monday morning.

A combination of the two medical-device giants would bring together Stryker’s expertise in orthopedics, neurotechnology and spinal procedures with Boston Scientific’s operations in cardiovascular and so-called rhythm management, which develops implantable devices that monitor the heart and deliver electricity to treat cardiac abnormalities.

Stryker, based in Kalamazoo, Mich., had a market value of about $67 billion Monday morning before The Wall Street Journal reported news of the approach and its stock dipped. It is one of the biggest makers of knee- and hip-replacement parts, competing with companies including Johnson & Johnson and Zimmer Biomet Holdings Inc. The company develops a range of medical devices that are used in orthopedics, neurotechnology and other surgical procedures. Last year, it generated global net sales of $12.4 billion, up almost 10%. Profits slumped 38% to $1.02 billion, hurt by one-time charges stemming from changes in the U.S. tax code. Excluding this impact, earnings rose by 12% to $2.5 billion.

A takeover of Boston Scientific would diversify Stryker’s business into other areas of the medical-technology market and allow both companies to reach new customers.

Boston Scientific, based in Marlborough, Mass., is one of the biggest makers of heart devices such as pacemakers and artery-opening stents, competing with Medtronic PLC and Abbott Laboratories . It develops devices used in functions such as diagnosing and treating coronary artery disease, heart monitoring and a broad range of gastrointestinal and pulmonary conditions. The company also makes non-heart devices such as endoscopes.

Last year, Boston Scientific had net sales of $9.05 billion, up 7.9%. Profit fell to $104 million from $347 million.

Boston Scientific has had some victories and stumbles in launching newer heart products in recent years. Last year, it recalled its new heart-valve replacement product, Lotus, over manufacturing defects. Analysts say it is uncertain whether the product, once viewed as having big sales potential, will come back to the market. But the company has notched increased sales of its Watchman device, designed to prevent strokes in people with an irregular heartbeat.

There have been a number of big medical-device transactions in recent years as industry shifts prompt some of its biggest players to seek greater scale and diversity. Last year, Becton Dickinson & Co. acquired C.R. Bard Inc. for $24 billion. In 2015, Medtronic did a $49.9 billion deal to buy Covidien PLC.