The Banking and Strategy Initiative

Chillin' out till it needs to be funded

The Mid-Week Trading Update: Earnings Season proves bulls right, Chicago PMI floors the pedals at a 65.9(V:US, MA:US, FB:US, TWTR:US, PFE:US, SNY:US, MRK:US, SSNGY:US)

Of course the recovery is capped as early earnings from Banks showed housing stepping into a mire and hoarding Cash still works for R&D rich Apple and Samsung. Caterpillar’s great assays into China and US backwaters are unable to control the slow investment leg of the cycle and thus there is a reason for cautious optimism.

There is much that heartens one, however.

Even as Kathleen Sebelius faces a barrage from political opponents for what increasingly looks like a technically

English: Old Visa logo.

English: Old Visa logo. (Photo credit: Wikipedia)

challenged implementation of the first public healthcare exchange, the long arm of the law for Obamacare, Big Pharma has returned to the table with Sanofi’s continuing $8.8 Bln rate of R&D investments closely followed by now Industry leader and a well growing giant Pfizer with $6.6 Bln in R&D for this year itself as well as Merck who is not so far behind in innovation. The industry also shows global challenges in their full eccentricity as each Pharma company is hit by troubles in a different emerging market, for some Mexico, for some Brazil and even the rarest case, China proving difficult for others apart from Glaxo. The Big Pharma earnings calls, showcased how adroitly they managed issues of transfer pricing, how miniscule the problem of Venezuelan currency was  and complex issues in Clinical Trials and grew earnings in a highly challenging environment. Despite the Q3 dip for which Merck reporting first was penalised, it does seem that the industry is establishing new benchmarks for consistent performance and as Merck mentioned inventory issues can make seeming consistent growth look patchy sometimes.

August was the hard date for Sanofi where it left its big Patent Cliff led de-growth behind, and Pfizer more importantly has dealt with the big fall after Lipitor went off patent and has gone almost generic, followed by another dozen of Cardio Vascular, diabetes and Dementia meds which have become available widely thru inexpensive generics. Creditable is the improvement in Research and the progress to Phase III for more than a dozen odd Blockbuster drugs within just three big companies. Even as Healthcare costs also get controlled, anti Cancer, anti Diabetes and anti Dementia wars are being honestly won by this industry with FDA doing fine work and the Drug Development process surviving the decade of escalating costs with Pfizer especially showing how cost control is effected to improve margins and beat the innovation cost plus BARRIER with patnerships including one with Merck

English: Logo of Pfizer Incorporated.

English: Logo of Pfizer Incorporated. (Photo credit: Wikipedia)

I do have the long list of accurate insight gleaned by drug names and details of a strong pipeline shared in the Earnings reports es Pfizer as we expected but as a violently tiring week approaches an end, it would suffice for most to get on with business with this update esp as markets will hear from these outperformers very soon. Sanofi and Pfizer are also heading into a face off with the next generation anti diabetes drug. However each of the Blockbusters are unlikely to be more than $1 Bln a year

Visa, too one thought proved amazing tenacity with a double digit growth in transactions and payment volumes, International Non US business payments ( not cross border payments ) growing to 25% of Visa transactions . Importantly even as Mastercard posts record earnings and Visa stock reacts unnecessarily negatively to the same, the ratio of such transactions is still a big 90-10 i n favor of Visa with the trailing twelve month seeing Visa get 40 Bln transactions on debit cards and Master Card 5 Bln

Auto Sales will again prove their magic for October data though the JP Morgan settlement does not look like getting to the finish line with Blackrock and Neuberger proving to be tough challengers. The Central Bank made it clear with the FOMC statement that they did not think conditions were good for any reduction in Fed purchases to keep the market afloat but a section of the market still thinks tht this needed to be taken off the table entirely which is definitely not a warranted case, yet there may be a sell down in US treasuries , a threat the market and the hotm money wants to take to the Central Bankers. Meanwhile Congress has taken off the clause demanding the separation of Derivatives trading from FDIC insured business of banking as well

Samsung growth in smartphones , twice as fast as Apple brought it to 20% share of market as against 30% for Apple even as its cash pile at $40 bln still hides a sizable R&D chunk in its $22 Bln Capex for the year. Tim Cook on the other hand firmed up two unique strategies for the Post Jobs Apple, one of lower margins and higher reach and more importantly one of maximising launch events in the year even as Angela Arhendts joins from Burberry to preen the in store experience, which keeps the industry watchers and other Apple insiders almost looking the other way. Cook has also given in to Carl Icahn seemingly borrowing to pay off Apple’s cash pile faster to investors, canging fo rthe first time in two times that Apple did not have Jobs that the company has set a distinct tone for itself

Also Facebook earnings were  good outperformance score as well, but the after hours jump of over 15% proved almost fatal for the stock as the Zucker-lator remained awe-stuck around $25 Bln , with investors worried by the management report on young teens pull to the social site reducing in the US market and their recalcitrance t o pus h more advertising into the News feed. And if you have time, look up the Buffets who have written a book, authored by the grandson and which could make for some interesting reading.

Also, last but not the least Europe is going to be a battleground again for the next generation of Fixed income and Currency investors, a safe haven rather as citizens settle down to the humdrum existence of growth less decades and the currency heads off to the races.

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