Chillin' out till it needs to be funded
A new Janus strikes and what’s Davos again! but after SUPERBOWL XLVIII
A shorter week, but a lot more to digest early in the Monday morning (rhetorically yet on Tuesday) with the Peyton Manning Blitz shaming Tom Brady and his Patriots to the edge of the cliff. Richard Sherman jokes aside, the Seattle game was a pushover too with the Niners Defense no match since the sixth game of the season itself. 49ers did very well to have come this far, and the Seahawks could well make it 26-22 for NFC though in recent years , aided by three from Brady himself, the AFC have come to 10-6 since 98 when Broncos under Elway ( coach: Mike Shanahan) beat the drought wrought by Packers in 97 and a string of threes by the Cowboys and Niners for the NFC. Including the Giants, Redskins and the New Orleans Saints, the winning teams are still the same and Peyton faces a monumental task in the new Metlife Stadium come Superbowl Sunday with Russel Wilson and Marshawn Lynch (Skittles now $5 mln and one in free exposure)
Chobani (yogurt), Cheerios, Butterfingers(Nestle) and Heinz, show what the world will dip into in 2014, their grand spends at the Superbowl likely to compete with Autos, GoDaddy and Budweiser again. Oikos vs Chobani, Coke vs Pepsi and Jaguar vs Kia are most certainly a thing already before the big day.
We have a lot on the Earnings plate and a US Economy resurgence that never ends too, so to catch the list of Superbowl stars head over to this chart before getting lost in Superbowl glee at your work desk or if you are in the North East Janus can probably make you miss work as it strikes from Washington to Boston and disrupts work travel in Indy, Louisville, Cincy and other Ohio thru the week. Japan will remain the big investment of 2014, despite teh Sony man (Dan Loeb) and mostly a topic at Davos. We agree the first part of the European Crisis is over for Mr Draghi with the Euro bulls unwinding in 2014
The noon update: *Goldman Sachs issued a believable Overvaluation report on the S&P last week, that has set the cat among the pigeons, but this may not be more than latest of the market which we believe could still continue to invest in Large Cas and Global High Yield portfolios without harming US equity prospects
The ZH tribe declares rightly so:
Ten days ago, the few carbon-based habitual gamblers left in the market stopped and read Goldman’s report which, as we said, may have ‘just killed the music‘ with its slam of the market saying the “S&P500 is now overvalued by almost any measure.”
We are carbon based life forms, we like carbon based life forms. Dow has retreated 100 points this morning. Cat among the pigeons, well a snowball’s chance in hell ( and there is that chance for the snowball)
Deutsche Bank, PNC Financial, Starbucks and McDonalds (Unilever creeps up as JNJ sells on results)
While Deutsche Bank shot itself in the foot and is still bleeding profusely, its two Chairmen may get the clean ticket according to FT ( it’s busy season and we won’t be spending hours on the webcasts yet) with their worst ever performance in FICC and a second successive Q4 in the red earning them a seat in the gallery for diagnosing European banks , all with similar problems. I can tell you Deutsche Bank outscored again on cost cutting and rationalising measures, and I still expect Barclays not to have gone down worse then Anshu Jain’s erswhile Trading Desks at Deutsche this season. Credit Suisse is later this week/month with Deutsche Bank squeezing itself to the top of the European pile in results as its subdued Advisory desk could well spring across the pond first to return to US in the now stabilising post Volcker regime. Also they could be doing better in efficiency, esp after all that portfolio chomping that remains to be done in the next two years
In our retail lifestyle gems, Starbucks and McDonalds report on Thursday and again we do not agree with Dear Gold man Sachs for taking the coffee giant off conviction buys with 7-8% same store sales more than making up for large buys into equity portfolios. Market wide short interests are at an all time low and they should not start risking new shorts in this neck of the woods with Large Caps extremely well positioned in both Banks and retail lifestyle companies, to beat the best pass rush defense from Shorts Unilever sets a tough mark for P&G watchers this year with 2013 reports from Unilever scoring 9% growth in Emerging Markets despite China and because of India and Brazil(and without currency issues this year in Venezuela and Bolivar).
They also grew 7% against the Happy Moms with Dove and 7% in Home Care. 55% of their brands grew share and they are also behind in the US markets where they return to profits but steadily increasing Operating leverage increasing Gross Margin by 110 bp
JNJ is doing badly at the market open despite Q4 sales of $18.4 Bln with an EPS of $1.23 on $3.5 Bln profits. Global Sales of $71.3 Bln still included a negative 1.6% impact from currency moves. Their business is not to be scoffed at with a post integration profit of $15.9 Bln not only a double digit growth over 2012 but also 22.3% net profit margin no one could not want. The stock’s sell on news could be a good grossing opportunity , building positions desite its $95 share value would figure in some bigger priorities this year (Walter Buffet?) IBM and Microsoft also report this week and you can look the other way.
Erstwhile JNJ competitor in the stents business Boston Scientific reports later on February 04 and doing very well this morning For quick earningscast access and uncomplicated commentary I prefer the Marketwatch Earnings Wall ( not to be confused with things paywalled or part of divorce settlements) PNC Financials, which reported well on a busy Earnings Thursday for Banks and faces off directly with Chase as it creates a new footprint in Florida, runs with the usual borrowing costs of $200 odd mln for $2.2 Bln Interest Income in the quarter, making it easy to outscore advisory income which is still a $1.8 B.
For the full year its $16 Bln revenues are matched by a competitive $9.8 Bln in Non Interest expenses , Efficiency of 61% suffering in the last two quarters and Earnings a massive $7.50 for the year. Its RocE and RoA are also best in industry at 1.4% and 10.8% 30 day and 90 day ‘portfolios are down almost a third in 2013 and Non interest income has risen after a bad Q1 score.
These smaller banks are also well advised to continue a higher quest for Tier I Capital near 10% despite regulatory asks being much less. Including asset management fees of $364 for the year, most fees is accrued at the branch including Deposits, Mortgages and other ‘Consumer Services’ ( probably easy enough once one sits down to investigate)
Signature Bank reports today and US Bank is reports before 8 am tomorrow. Don’t switch on Bloomberg its mostly the holiday feed from Davos. Whats with these guys in snow season!!
The Economic Carousel
China homes grossed to $1.1 T in New Home Sales or 27% higher than 2012, concentrated in just 2 cities from all data available and the GDP increase of 7.7% was as expected met by a small dip in Shanghai on Monday because of the US holiday before Tuesday morning showed a 18 point start on the index. Existing Home prices rose 20% earlier. New Home Sales volumes accounted for 18 of the 27% increase.
Bloomberg quotes a Chinese real estate brokerage for a 30% CAGR in Home sales since 1998 , from all accounts the reason for increasing watchfulness on the Asset Bubble front as the liquidity squeeze remains in force through the year Gold and Oil head down, but Private investors could be taking their chances with the dollar remaining strong in 2014.
News of a deeper Taper might well be welcomed by markets as investors make a beeline for Low Duration High Yield and Multi strategy funds (unconstrained for Blackrock) rushing to accrue Dividends and Interest in a stable Economic picture centered in the US and its Global trade partners
US Existing Home Sales report on Thursday , with the manufacturing PMI go around starting with China tomorrow
The Korean GDP is set for a big score and that would be a big letdown from recent reports in Seoul. Singapore’s Q4 performance was not out of the ordinary but Foreign home buyers have almost totally withdrawn except for some from Indonesia. British Conference Board data will be a big confusing score for those expecting the turnaround to stay, as it is again commercial property markets without Jobs or trade expectations and a see saw mortgage approvals score. More importantly BOJ comes out with ts monthly report on Thursday and the Argentinian GDP is looking to Industrial production improvements in the afternoon report . Mexicans do share their non eventful Retail Sales pop that continues with China’s annual 12% increase so one wonders if there is more iin Mexico despite the recent bank reversals there with Brazilian Economic Data looking to continue the shaky jazz down below on the printer The Chicago and CB Leading Indices are due for a dip and the Hopi index(FHFA Housing prices) not about to let up Friday January 24th will also be a Holiday for many in MLK week celebrations. Italy’s struggles continue to under pin the European underperformance story this year.
The Winter is freezing in here!
Richard Meddings’ departure from the CFO post at StanChart has managed to bring the bank’s valuation down to 1.2x according to an FT report. With strong presence in Asia and despite the pressures in Trade Finance or in India where its lending portfolio has been deprioritized for the majority of the crisis ( lending at 12%) Meddings was obviouslly turned down for the Top Post but Risk management defense apparently failed with regulators last quarter
Apparently StanC , that bought ANZ here in India in 1995 may well go to the Aussie lender in its new avatar and I was not early in making this recommendation to the US players. The bank is listed on mutiple Asian stock exchanges but is headquartered in London with a Market Capitalisation of USD 50 Bln after the year’s battering shares 20% lower in 2013
Temasek holds an important stake in the bank which it bough on with the overvalued real estate investments at the start of the crisis. The Nomura note floated in Asia looks for a near 40% premium on the transaction, but a deterring list of eager buyers is only likely to protract negotiations and those looking for a stock only transaction ( easiest , earliest, everyday) unlikely to be the fell swoop for buyers ( not necessarily because they are increasingly dogged by activist shareholders )
The winner takes the best Transaction Finance franchise in Asia and EMEA behind HSBC wth HSBC also taking clients at competitive rates back from the bank in 2013