This Week In Markets

Friday, September 25, 2015

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:

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:

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

Wednesday, May 13, 2015

May 4-8: Activists Abound

DJIA 18060 // S&P 2098 // NASDAQ 4981 // 10-YR TRE 2.28%
EURO 1.135 // OIL 60.11 // GOLD 1213 // BIT 237

Dan Loeb, founder of Third Point Management, took a swipe a Warren Buffett at the SALT Conference in Las Vegas last week. Activists have been in the news with two big conferences: SALT in Las Vegas last Wednesday and the Sohn Conference last Monday in Lincoln Center, Manhattan.

$112,000,000,000

Total amount of assets under management controlled by activist hedge funds as of 2014, according to JP Morgan

NOTE: If paywalled, search article title and access from Google

Hedge fund star Dan Loeb trashes Warren Buffett, CNN Money

"I love how he criticizes hedge funds, but he really had the first hedge fund. I love how he criticizes activist investors, yet he was the first activist," said Dan Loeb to the sound of applause. "He thinks we should all pay more taxes but he loves avoiding them himself."

Factories sluggish but orders signal stronger outlook, Investor's Business Daily

"2015 had a rocky start: a soaring dollar shrank exports, a West Coast ports work stoppage snarled supply chains, and plunging oil prices dented energy firms' capital budgets. Yet key ISM indicators suggest that some headwinds are receding."

Europe: There's plenty of good news, and then there's Greece, CNN Money

"The quarterly growth rate of the 19 countries in the eurozone was stronger than either the US or UK managed in the first quarter. France outpaced Germany, Spain is on a roll, but Greece saw its economy shrink for the second consecutive quarter."

Vocabulary & People:

Calendar:

Mo May 11: Labor market conditions, 3-month bill auction; ACT, DISH, MBLY
Tu May 12: NFIB Small biz optimism, Treasury budget; Z, GDDY
We May 13: Retail sales, Import export prices, Biz inventories; CSCO, M, SHAK
Th May 14: Jobless claims, PPI; WB, SINA, MANU
Fr May 15: Industrial production, Consumer sentiment; MTU

Predictions from last week: 3/3 All-Time: 23/42

High consumer sentiment: CORRECT
NFLX beats: CORRECT
GS beats: CORRECT

Weekly Predictions:

Industrial production up
MANU beats on rising international popularity
MTU misses

Tuesday, April 14, 2015

Apr 6-10: The Mania Continues; Effects of Regulation

DJIA 18034 // S&P 2094 // NASDAQ 4973 // 10-YR TRE 1.904%
EURO 1.0649 // OIL 53.29 // GOLD 1192 // BIT 219

Andrew Gould of BP and Jorma Ollila of Shell shake hands during a news conference announcing their companies' merger. Shell is offering $70 billion for BP in the biggest deal so far in 2015 and would create the world's largest independent producer of liquified natural gas (LNG).

$3,700,000,000,000

Highest annual M&A deal volume on record, which occurred in 2007. So far, this year is on pace to surpass the record

NOTE: If paywalled, search article title and access from Google

M&A:

Rising Optimism Fuels Deal Rebound, WSJ

"The two latest megadeals involving Mylan and Shell underscore the forces behind the M&A surge. Boardroom confidence is a crucial ingredient for deal-making and has bounced back after the economic crisis; rock-bottom interest rates make it cheap for companies to borrow money for takeover; and the dollar's strength is suggesting to some that deals in Europe denominated in a comparatively-cheap currency are increasingly appealing."

HIGH-FREQUENCY TRADING:

Virtu restarts IPO with plan to raise up to $314 million, Bloomberg

Virtu Financial had its IPO shelved earlier in 2014 amid the furor against high-frequency traders triggered by publication of Michael Lewis' Flash Boys. Now, shares are scheduled to price on April 15 at around $17 to $19 apiece on 16.5 million shares. At the high end of the price range, the company may be worth as much as $2.5 billion.

SHADOW BANKING:

Post-crisis risk casts a darkening shadow, WSJ

Shadow banking, an umbrella term for institutions that provide credit without being subject to the same reserve requirements and regulations of other banks, has risen in popularity since the financial crisis. The situation is eerily similar to before the financial crisis, when lightly regulated lenders became a key feature of risky lending practices that led to economic overextension and collapse.

INTERNATIONAL:

Swiss, Mexican bond deals represent milestones for debt, WSJ

Two unprecedented events occurred last week: Switzerland issued bonds that buyers are actually paying to hold, and Mexico issued bonds maturing in 100 years--paying a yield of 4.2%. The two events are being seen as harbingers of an era of extremely easy money that has a lot of assumptions of capital markets being turned on their heads.

MONEY MARKETS:

Repo market sees a lending shift as rules bite, WSJ
Just as is happening in other forms of credit provision, alternative lenders are stepping into the $2.6 trillion repo market, which provides short-term, "overnight" loans and liquidity to companies. Lendees are turning from traditional lenders to alternatives like pension funds and other money managers, who are disintermediating from banks and issuing loans directly to a new stream of clients.

Vocabulary & People:

Calendar:

Mo Apr 13: Treasury budget; PBY, PSG
Tu Apr 14: PPI, Retail sales; CSX, INTC
We Apr 15: Industrial production, Beige book; BAC, DAL, NFLX
Th Apr 16: Housing starts, Jobless claims; AMD, AXP, GS, SLB
Fr Apr 17: CPI, Consumeer sentiment; GE, HON, SYF

Predictions from last week: 1/3 All-Time: 20/39

Chinese yuan strengthens: WRONG
AA misses: WRONG
Another candidate: CORRECT

Weekly Predictions: gathered at conclusion of weekly meeting

Higher consumer sentiment
NFLX beats estimates on higher subscriptions
GS beats estimates on trading revenue

Tuesday, April 7, 2015

Mar 30-Apr 3: More Merger Mania

DJIA 17875 // S&P 2076 // NASDAQ 4910 // 10-YR TRE 1.8930%
EURO 1.0811 // OIL 53.25 // GOLD 1208 // BIT 256

US courier service FedEx agreed to by Holland-based TNT for $4.8 billion, signaling their interest in competing with UPS in a market that the Brown Uniform Guys previously dominated. A merger between UPS and TNT was actually blocked in 2013 by antitrust regulators. FedEx is a more acceptable partner as it is stronger in air-based business, complimentary to TNT's core business on the ground.

269,000,000

The number of cases of Bud Light sold in the United States in 2012. Revenues totaled $4.45 billion, making it America's most popular beer by volume. The next most popular beer was a tie between Budweiser ("Bud Heavy") and Coors Light,each selling 102 million cases. Happy National Beer Day!

NOTE: If paywalled, search article title and access from Google

FedEx to buy TNT Express for $4.8B, WSJ

"FedEx already has a sizable air-delivery business in Europe, but it lags in ground deliveries. Executives declare that the deal is 'much better and much simpler' than the doomed merger between UPS and TNT in 2013."

Virtu restarts IPO with plan to raise up to $314 million, Bloomberg

How the Vise on US Wages Tightened, WSJ op-ed

"US automakers used to manufacture nearly all of the 15,000 parts necessary to make a car. Today, they purchase around 70% of the value-added from independent manufacturers. A battle is being staged in Washington around whether an open US market, or some kind of alternative, is the best way to bring US workers in high-paying manufacturing jobs the wage increases they've been waiting for."

Want to Reduce Inequality? Consult China, India, and Vietnam, WSJ op-ed

"The past three decades have seen a dramatic improvement in the situation for the world's poor, most noticeably in China and India. This change is the result of a move by these countries and others to the markets from a government-managed system."

BlackRock to close or combine some money-market funds, Reuters via Yahoo Finance
"BlackRock, the world's largest money manager, is considering changing its funds lineup to comply with new SEC regulations issued in July. The reforms will require "prime" money funds used by institutional investors to float their values, instead of maintaining a stable value of $1 per share. The goal is prevent investors from getting spooked by the fund breaking the buck, where net asset value falls below $1 per share."

Vocabulary & People:

Calendar:

Mo Apr 6: Bill Dudley speaks, ISM non-mfg index
Tu Apr 7: Gallup US ECI, JOLTS
We Apr 8: Mortgage apps, FOMC minutes; AA, BBBY, FDO, WDFC
Th Apr 9: Jobless claims, Wholesale trade; WBA
Fr Apr 10: Import export prices, Treasury budget

Predictions from last week: 1/3 All-Time: 19/36

Increasing trade imbalance: WRONG
Rising consumer confidence: CORRECT
Strong employment numbers: WRONG

Weekly Predictions: gathered at conclusion of weekly meeting

Chinese yuan strengthens against dollar
AA misses earnings
Another presidential candidate declares

Participants: R. Niu, C. Cooper, J. LaSala, S. Ballantyne, K. Meenan

Sunday, April 5, 2015

Mar 23-27: Merger mania

DJIA 17712 // S&P 2061 // NASDAQ 4891 // 10-YR TRE 1.948% //

EURO 1.089 // OIL 48.43 // GOLD 1198 // BIT 245

Products from Kraft Foods, above, and Heinz sauces, below. With price being kept down as Kraft executives fight lower margins and flat sales amid changing tastes of consumers, 3G Capital and Berkshire Hathaway saw value to unlock in combining the two historic companies.

$28 billion

Approximate annual sales of a merged Heinz and Kraft foods company. With a market valuation north of $80 billion, the new company will be one of the largest standalone food companies in the world. Eight brands in the combined company have +$1 billion in sales, while 5 others have between $500 million and $1 billion in sales.

NOTE: If paywalled, search article title and access from Google

Kraft and Heinz to merge in deal backed by Buffett and 3G Capital, NYT Dealbook

Jorge Paulo Lemann and Warren Buffett have come together on yet another food & beverage deal, creating one of the world's biggest F&B companies with the merger of Kraft and Heinz--this year's largest merger so far. With complimentary product lines--imagine Heinz mustard and Oscar Meyer hot dogs--analysts expect the company to use Heinz's global footprint to expand Kraft sales beyond North America.

Dow Chemical (DOW) to separate chlor-alkali unit, merge it with Olin (OLN), Street Insider

Divesting itself of a chlor-alkali business that many analysts suggest was making performance track very closely with that of oil's in recent months, Dow is streamlining itself from a strategic and tax standpoint while Olin projects being able to unlock $200 million in synergies from the merger in the next 36 months.

Oil prices rise as dollar weakens, WSJ

An industry newsletter attributed 87% of the move in US oil prices since Thanksgiving to the move in the dollar, noting "the Federal Reserve will have as much of a role as Tehran and Riyadh" in determining oil prices. Oil is traded in dollars, so a drop in the dollar's value makes oil less expensive to buyers using foreign currencies.

Bank of China posts slower profit growth amid rising bad loans, WSJ
Bank of China's net profit rose 8% in 2014, to 169 billion yuan ($27 billion), thanks to higher interest and fee income. As compared to global growth numbers, these relatively-robust metrics represent the slowest annual growth BOC has experienced since going public in 2006. China Agricultural Bank also listed its lowest numbers since going public in 2010. Allowances for nonperforming loans was 187% of total loan losses in 2014, down from 229% a year earlier.

Google hies Morgan Stanley's Ruth Porat as new CFO, TechCrunch
Behind David Viniar at Goldman Sachs, Ruth Porat is one of the longest-standing big bank executives remaining at the same firm, having worked at MS continuously since 1987. The former head of Technology Investment Banking and California native's defection to the tech ranks is yet another suggestion of the rising significance of the technology sector in the modern US economy.

Vocabulary & People:

Calendar:

Mo Mar 30: Pending home sales, Fed mfg survey
Tu Mar 31: S&P Case-Shiller EPI, Consumer confidence
We Apr 1: ADP employment, PMI Mfg, Construction spending
Th Apr 2: International trade, Jobless claims
Fr Apr 3: Employment situation

Predictions from last week: 1/3 All-Time: 18/33

Lululemon misses: WRONG
Another president candidate: WRONG
Consumer confidence up: CORRECT

Weekly Predictions: gathered at conclusion of weekly meeting

Increasing trade imbalance
Rising consumer confidence
Strong employment numbers Friday

Participants: J. O'Brien, R. Niu, S. Shah, K. Meenan

Tuesday, March 24, 2015

Mar 16-20: Fedspeak reigns

DJIA 18051 // S&P 2097 // NASDAQ 5004 // 10-YR TRE 1.887% //

EURO 1.092 // OIL 47.69 // GOLD 1191 // BIT 246

Fed chair Janet Yellen spoke last week, removing the "patience" wording from FOMC minutes, but remaining cagey about specifics of when the Fed might raise the target rate. Markets interpreted the report bullishly, sending stocks skyrocketing.

5132.52

Highest-ever level of the Nasdaq, set on March 10, 2000 during the "Tech Bubble." The tech-heavy index has seen a tremendous run-up recently to within several percent of its all-time high, attributed to lower borrowing rates and the renaissance of the technology sector in the US.

Some incredible facts about the Nasdaq's latest run, Yahoo Finance

Despite having a down day on Wednesday, the Nasdaq Composite is still thisclose to breaking 5,000 and ever nearer to breaking its Tech Bubble record

Dollar bulls take it on the chin as Yellen says Fed won't rush to raise rates, Forbes

If there's been one bet on Wall Street that seems common of late, its putting money on continued strength of the US dollar. That presumption got turned upside down last Wednesday, when the Fed issued its latest policy statement and tempered expectations about US growth.

Starbuck's CEO Howard Schultz says Race Together "the right thing to do", CNN Money
Starbuck's CEO is not one to back down about an issue he cares about and last Wednesday he staunchly defended the company's much lampooned effort to improve race relations.

Problem: the bond "conundrum" is back, CNN Money
The 10-year Treasury started last week at 2.11% and tumbled to 1.94% during Janet Yellen's comments, as bond prices (inversely related to yields) we pushed up. But as the Fed move towards raising rates, bond yields should be moving up. What gives?

Vocabulary & People:

Calendar:

M 3/23: Chicago Fed, Existing home sales
T 3/24: CPI, PMI Manufacturing, New home sales, Richmond Fed
W 3/25: Durable goods orders, EIA petroleum status
T 3/26: Jobless claims, PMI services, Kansas City Fed
F 3/27: GDP, Consumer sentiment

Predictions from last week: 2/3 All-Time: 17/30

"Patient" removed: CORRECT
Euro slide against dollar: WRONG
Oil back above $45: CORRECT

Weekly Predictions:

Lululemon misses earnings
Another US presidential candidate declares
Consumer sentiment positive

Monday, March 16, 2015

Mar 9-13: Happy St. Patrick's Day

DJIA 17977 // S&P 2081 // NASDAQ 4929 // 10-YR TRE 2.098% //

EURO 1.057 // OIL 43.68 // GOLD 1154 // BIT 292

Calendar:

Mo Mar 16: Industrial production, Housing market index
Tu Mar 17: FOMC meeting begins, Housing starts
We Mar 18: FOMC meeting announcement, forecasts, chair conference
Th Mar 19: Jobless claims, Leading indicators
Fr Mar 20: Atlanta Fed business inflation