The Banking and Strategy Initiative

Chillin' out till it needs to be funded

It’s Monday Again!: Ford, GM earnings, Peyton Manning and New Jersey choke in the big game, (US Economy & Markets, The week ahead Feb 03 – Feb 07, 2014) US:F, US:FB , US:SBUX, US:BA, US:AMZN

Where are the investors, in bonds

Yields have drifted down to 2.62%(at Monday, 11am) despite another $10 Bln added to the Taper tab last week to $65 B in purchases now every month and likely to be 55 and 45 Bln in the next two Fed reviews. The Euro in the meantime could not really get weaker as Draghi does not seem to have room to sneak in another liquidity op(LTRO) to clean up the Augean stables still dripping negative credit on month. Deutsche Bank’s results aside, not much else was growing on the Continent though the manufacturing PMI earlier in the day today remained at highly confident 54 levels after a big dissing of data in China with the Official PMI barely 50 and the HSBC PMI staying below 50. Pending and New Home Sales , declining on all measures were still hugely positive and the Case Schiller Indices up nearly 14% for the whole year of 2013. China’s not going to be growing in 2014 but without that netted another $110 B bin FDI barely shy of the similar figure for US, a best in post crisis flows. Jos A Bank has moved on to target Eddie Bauer after another wall up at Men’s Wearhouse

What’s new in Europe

ECB has set stress test standards on par with EBA at 5.5% of Tier I capital in stressed scenarios including the stringent definition widely accepted and as of yet never seen in Europe in counting everything past the 90 day post as NPLs for the stresser as well

Last weeks Economic wins and misses(if any)

The Chicago PMI was a cool 59 and the Auto sales ticker will as usual start the new year with 12 million cars annual rate and with Ford expecting the same revenues in 2014 GM results are keenly awaited(on Feb 6) to give the 15 mln Annual rate we achieved in 2013 another buzzer at the start of 2014’s second month. Stocks are well into a decline at the end of month 1 and despite lower yields or frazzy markets both Bonds and Munis are back in demand, Puerto Rican foibles well nigh forgotten and new budgets approved in many municipal districts/MSAs including new projects. The Case Schiller Indices, Eminent domain or not hold near highs in NSA and SA series at 180 for the 10 City average and 165 for the 20 city average

A flurry of post results breakdowns reveal the best Global investments


USA-China (Photo credit: Wikipedia)

Facebook‘s positive surprise was the best from last week, Starbucks surviving the same store sales scare and Boeing and Amazon were likely sold on results more than anything else with both , ducking 2014 expectations in a true to form 4th quarter presentation, even as Caterpillar’s comeback traded had barely preceded their earnings announcements recovering lost ground.

Facebook in the meantime managed to create advertising’s first holiday season plateau with fourth quarter revenues of  $2.344 Bln from Advertising and 945 Mln Mobile users including a growing tribe of 296 mln mobile only users and a high 60% ratio of Daily users among its 1.3 Bln Monthly users

Amazon posted the best Free cash flow scores and continues to gain in new FC and North America EGM business and the record cash flows of $1,8 Bln came after a 1.4 Bln investment in Office space and others not to be scoffed at. The $239 mln profit on $25.6 Bln revenues however failed to dispel Holiday seasons blues, with analysts setting the retailer an Ask of 66 cents or nearly 100 mln dollars higher. Q1 earnings (Q2 for Apple) will be expected to stay just under $20 Bln, and currency volatility in International operations unfortunately is back with a bang for all of them.

Starbucks continued with restructuring of its CAP operations (Asia ) and better operating margins in Asia were supportive of the coffee company’s diversification into La Boulange,, Evolution and Teavana which gains further momentum in the US this year. It remains to be seen if they can set the bar higher than 5% of comparable store sales in 2014 in the US

Ford in the meantime will be posting another $145 Bln in revenues in 2014 and sold more than 4 mln units in US an China alone with 2 new plants and models coming up in China in 2014. Its per unit wholesale realisation despite leading with value riced F1 in the USA, is still more than $20,000  making it five Big investments to count this week into your portfolio, Amazon probably the best after a 10% drop to 360 levels and a grp on Prime price increases and new digital wares in the Prime service including award winning shows. In Ford’s case, probably more to come from the Europe story which they did turnaround in Q2 and Europe has been reporting better data since. Google has sold its Motorola unit to Lenovo for $2.9 Bln. GM put paid to hopes for January sales reporting 171k down 12% from a year ago, repeating a bad sales month twice in two quarters after guiding to flat sales on inflated inventories in Q2 while Ford scored $3.8 Bln increase in profits from gains in market share , Industry growth  and increase in dealer inventories (plus price/volume mix)and $3.6 Bln in Price increases for the year before giving up $5.7 Bln in incentives and Operating costs incl Manufacturing costs showing up as a wonder investment under Mullaly despite the cries for leverage hit Ford struggling in 2012 and 13

Twitter reports earnings this week , Linked In on a heavy Thursday with GM and sneaks in a couple of real revenue plans again but the Broncos were surely shut out again in a dead Newark neighbourhood with New York walking away with the host honors and despite a scoring 43 from Seattle, Wilson’s heroes counted Chris and Cliff (2 interceptions agst Denver Tackles) , and Sherman and Maxwell on the outside against their famed receivers  Knowshen Moreno probably did not even get a chance with Seattle Defense Malcolm Smith MVP and linebackers Wright and Wagner also in the hunt(courtesy:, certainly a wonderland for Pete Carroll‘s fabled Seahawks, a new terror in NFC West

Turkey raised interest rates by 4% midweek and South Africa by a 50 bps which was not a small move either to stem a big rush on Thursday

The ISM Manufacturing data is due in two hours and employment(consistently weak in the freezing cold), Prices (jumped to 60) and Manufacturing per se will remain healthy in the mid 50s after a high 59 from the Chicago PMI and Domestic Car Sales as expected above 5.3 Mln of the 15.5 mln record breaking score again confirmed before the market open today. The Jobs Report would be another expected high but may not move markets out of the stupor as Bond investors continue to surprise and the Yen stays up near 102 levels throwing all economic plans everywhere into a tizzy and hot money losing again in the up and down moves choosing Turkey and Argentina and expecting South Africa or Mexico to be another India or China. Factory orders tomorrow follow the Durable Goods into negative 2% territory. The NFP score would be p to 184000 again after December bucked the trend in the snow but even if it does not the Participation rate has settled down a good 2% lower at 62 and the unemployment rate will continue to breathe near the 6.5% target before the snow clears and real economic activity starts back in n exected 4% year for the US with Q4 GDP remaining near 3.2% after a 4% Q3 in inventories that counted for $180 Bln in just the last two quarters. The Consumer credit report follows on  Jobs Report Friday after the market open

IBD sentiment indices will confirm investor sentiment to be the most bullish from the end of 2013 and January’s Trade Data comes in on Thursday The Invisible Ad/Single from Bono on BofA here 

Earnings season hopefuls after the big rush of the first four weeks include HSBC and StanChart in Asia but also Marathon Oil, Archer Daniels Midland, Disney, Aetna  and Credit Suisse with Dassault and many more from Europe after the year end filings. Friday would also see Activision(Thursday), Cigna and Moodys while Monday sees Charteris (erstwhile AIG), Dun & Bradstreet and YUM (pizza and pepsi) with Sirius XM(great pick) UBS, Allstate  and  Baidu making also rans

FIFA and Madden NFL were among sports franchises up 60% for EA as they posted respectable $125 mln from mobile up 25% on year and  expect full year revenues (till March) to be just shy of $4 Bln making one hopes a clean break from their past console era troubles. Their titles led by the new BF4 and NFL counted for more than a third of software on the PS4 and X Box one platforms. Legacy packages sold 33% lesser ($370 mln from $570) even as Digital revenue jumped 25% ($410 from $321) and Non GAAP earnings will hit $1.30 guided for the full year.

AT&T fell to a poor third behind T Mobile and Verizon with less than 500k new iPhone contracts in Q4 last Tuesday with 566,000 new subscribers for the quarter nearly half of T Mobile in the US but churn was a slow 1.11%. It’s now paying $450 to T Mobile subscribers switching (Forbes) and Sales were a good 2.3 mln less than the 10 mln it sold in December 2012 quarter. It added 1.2 mln smartphones to its network including upgrades for 53 cents earnings on $33 Bln sales up 20% in profit terms in a defining year as Apple franchise has moved one and it is relying on Next upgrades to keep customers. Thats $5.2 Bln in prfit, wonder how long we have to wait for a good buyback from them?

Payment specialists Mastercard and Visa also grew Pament volumes and income in double digits over 2012 levels but were not rewarded in the case of Mastercard as investors selling post results for another rally in the rest of 2014 with growth having returned to normal post reform ad technology upgrades on target

Retailers like GAP, Macy’s and JC Penney report for the three months ended January at the end of the month and Walgreens for the quarter ended February in March after its last quarterly report in December 2013

Kohl’s, Radioshack and Sears also report in the week of Feb24 around Wednesday and Thursday

Yum continues to suffer in KFC China, sales and profits down 15% with Pizza Hut expectedly scoring high in the Superbowl Ad sweepstales with “Go for Greatness” The Pizza Hut franchise and Yum Restaurants international Sales were up 5% . The China Division including 6% growth in Pizza Hut totted up a 11% decline but Restaurant counts saw  a big 450 unit jump most additions from Pizza Hut YRI reports for restaurants outside the China , India and US markets for 5% uptick in Sales including 11% in other EMs. 1200 restaurants in India were 24% higher reporting a 20% uptick in System sales while FRanchise owned stores in the US yielded $596 mln in FRanhise fees for the quarter and the highest 24% Op Margin

O Yes! The Right wing is cooperating on the Debt Ceiling standoff this time for sure after its lowest ratings of all time having taken down Congress for good.

Dow is still at the 15700 levels it ended last week a big fall from 16500 levels at the start of January, most of the breakdown coming after January. Berkshire HAthaway was down 5% in January and Bank of America bucked the trend with another 7.5% jump


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