Sept 21-25: Ruh-Roh for Das Auto

DJIA 16315 // S&P 1931 // NASDAQ 4686 // 10-YR TRE 2.26%
EURO 1.119 // OIL 45.38 // GOLD 1145 // BIT 235

Martin Winterkorn resigned as the CEO of Volkswagen after revelations last week by the EPA that the company had installed software in VW and Audi models designed to falsify emissions standards.

$7,270,000,000

Amount set aside by VW for charges connected to emissions scandal, which is said to affect as many as 11 million vehicles.

NOTE: If article is paywalled, use Google to search for the title or try accessing via mobile

VW CEO Resigns As Carmaker Races to Stem Emissions Scandal, WSJ

Volkswagen, which has 300,000 employees and 29 plants in Germany alone, is Europe's biggest automaker and an institution in German society--where every seventh job is connected to the auto industry. Volkswagen has lost almost 30% of its market value in the past week.

Janet Yellen Say Fed Is Likely to Raise Rates This Year, NY Times

Fed chair Janet Yellen's speech this week at the University of Massachusetts-Amherst revealed, through a series of graphs and diagrams, her perspective that various indicators of slack in the economy are tightening and that inflation should gradually return to trend over time at 2%.

Diageo: What Could the SABMiller-InBev Deal Mean?, Forbes

Following news of a $100 billion dollar merger between the world's 2 biggest brewers, some wondered how Diageo, the world's biggest distiller, would jump into the deal flow. With the deal set to take years to clear antitrust hurdles, Diageo is very excited about growth markets in Africa.

Vocabulary & People:

• S&P Case Schiller HPI
• ADP Employment Report
• Factory Orders
• Martin Winterkorn

Calendar:

• Mo Sep 28: Pending home sales index; Dallas Fed survey
• Tu Sep 29: S&P Case Schiller HPI; Consumer confidence
• We Sep 30: Chicago PMI; EIA petroleum status report; ADP employment report
• Th Oct 1: PMI manufacturing index; Construction spending
• Fr Oct 2: Employment situation; Factory orders

Predictions from last time: 1/3 All-Time: 24/45

• Industrial production up: WRONG
• MANU beats: CORRECT
• MTU misses: WRONG

Weekly Predictions:

1. 10-yr yield rises on Yellen's forecast
2. CARZ ETF declines on VW news
3. Another $25 billion+ merger is announced

Feb 16-20: DuPont getting peltzed

DJIA 17998 // S&P 2095 // NASDAQ 4888 // 10-YR TRE 2.085% //

EURO 1.139 // OIL 51.27 // GOLD 1205 // BIT 240

Trian Fund Management founding partner Nelson Peltz is accusing DuPont CEO Ellen Kullman and her staff of not doing enough internally to better unlock value for shareholders.

67%

Percent over and above S&P 500 returns that DuPont stock has returned to shareholders since 2009.

Peltz's Firm, DuPont Trade Salvos, WSJ

Nelson Peltz's activist hedge fund, Trian, which already owns a 2.7% stake in DuPont, is pursuing 4 seats on DuPont's board. The US-based materials and chemicals company has been doing well recently, but Peltz insists that Trian's guidance is the leadership for outperformance--not the leadership of CEO Ellen Kullman. Peltz insists there is yet more value to unlock for shareholders.

Currency Wars: Pandering to Debase, Seeking Alpha

Tim Edwards walks through the decision-making of fictional country Atlantis: should they or should they not debase their currency? On the one hand, austerity measures aren't popular with their citizens, and stimulus would be exciting for equity investors while debt should become suddenly cheaper (in dollar terms). On the downside is the specter of inflation. What to do?

Aggregate Income Shows Consumers Ready To Take Growth Baton, Bloomberg Briefs

Economist Carl Riccadonna looks at last week's employment report and more specifically aggregate income to see if US consumers are ready to keep spending. While some pundits cite manufacturing and industrial production specifically in energy as the reason for the US' gradual recovery from crisis, there are signs that a consumption-driven surge may be on the way--or is already here.

Apple: $710 Billion and Counting, WSJ
The eye-catching graphic on the article's front page pretty much sums up the buzz: AAPL's market price is now 2 times Google's, 2.5 times Walmart's, 4 times Bank of America's, 8 times McDonald's, 12 times GM's, and 24 times Twitter's. Tim Cook cited high demand for iPhones in China as one reason for the explosion in value. Carl Icahn is calling for a valuation in excess of $1 trillion.

Convertibles Stay Hot, WSJ
US-listed convertible bond deal volume has jumped 49% since this time last year, totaling $5.7 billion. Convertible bonds get their name from paying their investors interest, like a bond, until they are converted into the company's stock at a certain predetermined strike price--much like an option. The spike in volume is attributed to low interest rates and bullishness in stocks.

Vocabulary: gathered throughout meeting, definitions from www.investopedia.com

• Convertible bond http://www.investopedia.com/terms/c/convertiblebond.asp
• Delinquent http://www.investopedia.com/terms/d/delinquent.asp
• Volatility http://www.investopedia.com/terms/v/volatility.asp
• PMI Manufacturing index http://www.investopedia.com/terms/p/pmi.asp

Calendar: from Barron's, Nasdaq Economic Calendar

• Monday: (President's Day)
• Tuesday: Empire State manufacturing survey, Housing market index; FOSL, FDP, JACK, TAXI, GT, VNO, WM
• Wednesday: Housing starts, PPI, Industrial production, FOMC minutes; ACT, ANGI, CAR, DENN, HLT, MAR
• Thursday: Jobless claims, Philly Fed survey; DTV, EQIX, INTU, LLC, PSA, TMUS, TRUE, WMT
• Friday: PMI Manufacturing index; DE

Predictions from last week: 3/3 All-Time: 10/15

• US import prices fall: CORRECT
• Zoetis beats: CORRECT
• Oil rallies: CORRECT

Weekly Predictions: gathered at conclusion of weekly meeting

1. Chinese yuan will weaken against the US dollar
2. Dow & S&P will continue record highs as Greece signals acceptance of some of EU's austerity program
3. PMI Manufacturing will indicate expansion (score of 50 or more)

Participants: T. Aygun, K. Meenan