Morning News: December 7, 2017
Posted by Eddy Elfenbein on December 7th, 2017 at 7:00 am

China’s Banks Need More Capital After Credit Boom, IMF Says

The FCC’s Net Neutrality Plan May Have Even Bigger Ramifications in Light of This Obscure Court Case

Trump Pick to Head Consumer Safety Board Is Seen as Too Close to Industries

Coinbase: The Heart of the Bitcoin Frenzy

Bitcoin Firm Hacked Days Before Major US Exchange Opens

There’s an Argument Brewing Over the Launch of Bitcoin Futures

What’s Driving Walmart’s Digital Focus? Paranoia, Top Exec Says

Home Depot to Launch $15 Billion Share Buyback Program

Sharp to Seek All-Japan OLED Alliance to Counter South Korea’s Samsung, LG

GE Plans 12,000 Job Cuts as New CEO Revamps Power Unit

U.S. Chip Engineers Charged in Theft Scheme for Chinese Firm

Volkswagen Official Gets 7-Year Term in Diesel-Emissions Cheating

Michael Batnick: Animal Spirits: A Random Walk Down Nowhere

Jeff Carter: Bitcoin Futures Are Coming. Are You Ready?

Howard Lindzon: The Frenzy…

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Stryker Raises Dividend
Posted by Eddy Elfenbein on December 6th, 2017 at 7:09 pm

Good news today from Stryker (SYK). The company is raising its quarterly dividend by 11%. The payout will rise from 42.5 to 47 cents per share. Stryker has raised its dividend every year since 1993.

“Our financial strength is reflected in the 11% increase in our dividend for 2018 as we continue to execute on our capital allocation strategy,” said Kevin A. Lobo, Chairman and Chief Executive Officer. “With strong organic sales growth and leveraged adjusted earnings gains, we believe we are well positioned to continue to deliver dividend increases in line with our adjusted earnings growth.”

The new dividend will be payable on January 31 to shareholders of record on December 29. Based on today’s closing price, SYK now yields 1.24%.

ADP = 190,000
Posted by Eddy Elfenbein on December 6th, 2017 at 11:29 am

The ADP payroll report came out this morning, and it showed an increase of 190,000 private jobs last month. This is a preview of the government’s jobs report this Friday.

Note that the ADP is just private sector while the NFP is total jobs. Here’s a chart of the ADP report (in blue) along with the government’s report on just private sector jobs.

Some Words of Caution About the 2/10 Spread
Posted by Eddy Elfenbein on December 6th, 2017 at 11:07 am

I wanted to say a few words about the 2/10 spread. As long-time readers know, I’m a fan of this indicator, but the 2/10 has gotten a lot of attention recently since it’s been narrowing.

That’s why I wanted to add a few notes of caution. Let me explain how the world looks through the world of economic stats.

Lagging indicators: Sure, we got plenty of those.

Coincident indicators: Eh, a few.

Leading indicators: Not much.

The 2/10 is one. As the saying goes, it’s hard to make predictions, especially about the future.

With the 2/10, we gain a rare example of a forward indicator with a decent track record but it comes at the expense of timing. To put it in clearer words, the world doesn’t automatically explode once the 2/10 gets inverted.

The key here is that the 2/10 isn’t bad news itself. The world of finance loves to fetishize numbers. Instead, we should focus on what those numbers represent. An inverted 2/10 spread is basically like all the fire trucks being down at Arby’s having lunch. When trouble does come—and it will—the response will be more difficult.

Let’s look at some history. In December 1988, the 2/10 inverted more than 18 months ahead of the recession.

In May 1998, the 2/10 briefly inverted. It fought that off, but became inverted again in February 2000. The recession began a year later.

During the last recession, the 2/10 spread first inverted in December 2005, but the recession didn’t begin for another two years.

Still, that track record beats a lot of humans. Remember that all metrics have downsides. That’s not a reason to dismiss them. It means we have to be aware of the limitations of our analytical tools.

Morning News: December 6, 2017
Posted by Eddy Elfenbein on December 6th, 2017 at 7:04 am

The 2018 Outlook for Major Central Banks

Plan to Prevent Banks From Seducing Regulators Dies Under Trump

Consumer Bureau’s New Leader Steers a Sudden Reversal

Bitcoin Surges Above $12,000 For the First Time

Canada Scraps Plan to Buy Boeing Fighters Amid Trade Dispute

Oil Producers Regain Their Sea Legs

Retailers Can Forget About Being Bought by Steinhoff Now

The Hidden Player Spurring a Wave of Cheap Consumer Devices: Amazon

Google Pulls YouTube from Amazon Devices, Escalating Spat

UnitedHealth Buys Large Doctors Group as Lines Blur in Health Care

Pizza Hut Will Now Deliver Cold Beer and Wine to Pair With Your Pie

It Just Got Easier Than Ever to Bet on the Death of Brick and Mortar Retail

Cullen Roche: Beware the Parade of Annual Stock Market Forecasts

Ben Carlson: When Small Caps Finally Joined the Party

Roger Nusbaum: Take the Under on This Time Being Different

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Talking Rotation Today On Bloomberg
Posted by Eddy Elfenbein on December 5th, 2017 at 6:43 pm

I had a nice chat today on Bloomberg with Julia Chatterley, Joe Weisenthal and Scarlet Fu.

Morning News: December 5, 2017
Posted by Eddy Elfenbein on December 5th, 2017 at 7:00 am

How AI Will Invade Every Corner of Wall Street

Why Concerns About Net Neutrality Are Overblown

How Will Consumers Fare if CVS and Aetna Merge?

Cineworld Agrees to Buy Regal in $3.6 Billion Theater Deal

Apple Wins Trademark Case Against Xiaomi

Amazon Opened In Australia, And Nothing Has Changed

World’s Biggest Starbucks to Open in Shanghai

How Dollar General Became Rural America’s Store of Choice

Japan Airlines Puts Millions Into U.S. Startup’s Supersonic Plane

Broadcom Proposes Unseating Qualcomm Board as Takeover Fight Escalates

Oprah Winfrey Sells Part of Stake in OWN Network to Discovery

ICO Scam That Raised $15 Million Halted By SEC

Joshua Brown: Afternoon Roundup

Cullen Roche: There’s (STILL) Deflation in Hyperinflation Forecasts

Michael Batnick: This Could Be The Top

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The Market Rebounds
Posted by Eddy Elfenbein on December 4th, 2017 at 1:32 pm

The stock market is rebounding nicely today on the heels of tax reform news. We’ve made back everything we lost when the (incorrect) Flynn news broke on Friday.

Interestingly, there’s been a big divergence between value and growth stocks over the last few days.

At the moment I’m writing this, the S&P 500 Growth index is down -0.23% while the S&P 500 Value Index is up 1.04%.

On our Buy List, Axalta, Alliance Data, Express Scripts and Sherwin-Williams are doing particularly well today.

Morning News: December 4, 2017
Posted by Eddy Elfenbein on December 4th, 2017 at 6:59 am

Confusion Reigns as Banks Scramble to Price FX, Bond Research Under EU Markets Revamp

China’s A.I. Advances Help Its Tech Industry, and State Security

Infosys Turns to Capgemini’s Parekh to Juggle Problems with Founders and U.S. Immigration Reform

CVS to Buy Aetna for $69 Billion in a Deal That May Reshape the Health Industry

Fox ‘Resumes Sale Talks’ With Walt Disney

Bitcoin Hits New High Above $11,500 as the Winklevoss Twins Become the First Bitcoin Billionaires

As Brokers Line Up to Offer Bitcoin Futures, Others Are Quiet

5 Bitcoin Rivals That Are Rapidly on the Rise

Introducing ‘CryptoKitties,’ the New Digital Pets Taking Ethereum by Storm

Facebook to Hire 800 New Workers in London

Here’s Why Snapchat’s Huge Redesign Could Revive Its Business, or Sink It

BlackRock and Vanguard’s $20 Trillion Future Is Closer Than You Think

Jeff Miller: A Strong Outlook Gets Even Stronger

The Seed Stage Slump…What is Next?

Jeff Carter: Can We Beat The Robots?

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Chris Hughes on Akzo’s Second Chance
Posted by Eddy Elfenbein on December 1st, 2017 at 11:27 am

Chris Hughes at Bloomberg Gadfly has some thoughts on Axalta:

Akzo Nobel NV boss Thierry Vanlancker has the chance of a second stab at a jumbo chemicals deal with U.S peer Axalta Coating Systems Ltd. He should grab it.

Axalta’s negotiating position has been weakened after it started talks with Japan’s Nippon Paint Holdings Co. Ltd. last month, having already entered into discussions with Akzo about a possible all-share merger. Maybe the U.S. company hoped to get an auction going. The snag is that Akzo withdrew, and a firm agreement with Nippon failed to materialize.

(…)

It would have been wiser for Axalta to get Akzo on the hook first before trying to extract something better from Nippon. Maybe Nippon will come back. For now, though, the Dutch company can play hardball.

The potential synergies of a combination are sizable. Analysts reckon these could be at least 250 million euros ($298 million) annually.

(…)

There remain two obstacles to a deal for Akzo. The first is relative valuation: Axalta shares trade at a steep premium to Akzo’s, so a nil-premium stock deal would see the Dutch group’s shareholders owning a smaller share of the pie than their profit contribution merited.

(…)

The second obstacle is trust. The recent shenanigans may make it hard to pursue talks in good faith. That in turn may make it more difficult to agree a role in the combined group for Axalta CEO Charlie Shaver. But this shouldn’t be a dealbreaker.

It won’t be easy for Vanlancker to strike a deal that leaves his shareholders in the money. But there’s a path to a transaction and he owes it to his investors to have another go.