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JPM | Q3 GDP Remains Steady 5 Growth Fund Picks | U S GDP expanded at a steady clip in the third quarter The Trump administration s tax cut program was the primary force that powered expansion in the third quarter Additionally corporate profits before interest grew highest on a yearly basis in six years Although the economy encountered a few negatives it is still on track to meet the Trump administration s annual growth target of 3 With the domestic economy witnessing expansion growth mutual funds that have strong exposure in the United States have emerged as prudent investment options Q3 GDP Steady in Second EstimateThe second estimate of third quarter GDP revealed that the U S economy expanded at an annualized pace of 3 5 during the period unchanged from the first estimate released in October The economy benefitted from non residential fixed investment PCE federal government spending and state and local government spending and private inventory investment Meanwhile residential fixed investment and exports were the negative factors for the economy Additionally consumer spending which accounts for more than two thirds of all economic activity increased 3 6 Business investment in equipment advanced 3 5 while corporate profits rose 3 4 in the third quarter Also corporate profits increased 10 3 over the past one year its best such performance since 2012 Why Choose Growth Mutual Funds With the U S economy registering steady growth in recent times growth funds have become a natural choice for investors who prefer capital appreciation over the long term to dividend payouts These funds generally invest in the assets of those companies that carry an above average growth potential Here we have selected growth funds with small market capitalization and have significant exposure to the domestic market Small cap funds generally have a higher risk exposure but are good choices for investors seeking diversification across different sectors Small cap companies have lesser international exposure and are most likely to benefit from recent economic expansion Buy These 5 Growth Mutual FundsFollowing these improvements in the U S economy investors may consider growth mutual funds According to Morningstar small cap growth mutual funds have three year annualized returns of 10 9 Here we have selected five growth mutual funds that have a Zacks Mutual Fund Rank 1 Strong Buy Moreover these funds have encouraging three year annualized returns They also have minimum initial investment within 5000 and low expense ratios We expect these funds to outperform their peers in the future Remember the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers Unlike most of the fund rating systems the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund Bridgeway Small Cap Growth Fund maintains a diversified portfolio by investing a large share of its assets in small cap companies having impressive growth prospects BRSGX invests in companies that are listed on the NYSE NYSE MKT and NASDAQ The fund has an of 0 94 compared with the category average of 1 28 Moreover BRSGX requires a minimal initial investment of 2 000 The fund has three year annualized returns of 11 1 BRSGX has a Zacks Mutual Fund Rank 2 Further John N R Montgomery is one of the fund managers of BRSGX since 2003 BlackRock Small Cap Growth Fund invests a major portion of its assets in equity securities of small cap domestic companies According to CSGEX advisors companies with market cap similar to those included on the Russell 2000 index are considered small cap The fund has an expense ratio of 0 82 compared with the category average of 1 28 Moreover CSGEX requires a minimal initial investment of 1 000 The fund has three year annualized returns of 9 9 CSGEX has a Zacks Mutual Fund Rank 1 Further Travis Cooke is one of the fund managers of CSGEX since 2013 JPMorgan NYSE JPM Dynamic Small Cap Growth A seeks appreciation of capital for the long run VSCOX invests the bulk of its assets in equity securities of small cap companies that either have market cap similar to those included on the Russell 2000 Growth Index or have market cap lower than 4 billion The fund has an expense ratio of 1 24 compared with the category average of 1 28 Moreover VSCOX requires a minimal initial investment of 1 000 The fund has three year annualized returns of 17 6 VSCOX has a Zacks Mutual Fund Rank 2 Further Eytan M Shapiro is one of the fund managers of VSCOX since 2004 T Rowe Price QM US Small Cap Growth Equity invests a huge part of its assets in securities of small cap growth oriented companies Though PRDSX primarily focuses on acquiring securities of domestic companies it may also invest around 10 of its assets in securities of companies located in foreign countries The fund has an expense ratio of 0 79 compared with the category average of 1 28 Moreover PRDSX requires a minimal initial investment of 2 500 The fund has three year annualized returns of 11 2 PRDSX has a Zacks Mutual Fund Rank 2 Further Sudhir Nanda is the fund manager of PRDSX since 2006 MassMutual Select Small Cap Growth Equity Fund invests a large chunk of its assets in equity securities of companies whose market cap is similar to those included on the S P SmallCap 600 index or the Russell 2000 index The fund may also invest around one fifth of its assets in foreign companies including those engaged in emerging markets The fund has an expense ratio of 0 96 compared with the category average of 1 28 Moreover MSGSX requires a minimal initial investment of 0 The fund has three year annualized returns of 12 MSGSX has a Zacks Mutual Fund Rank 1 Further Kenneth L Abrams is one of the fund managers of MSGSX since 2001 Want key mutual fund info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing mutual funds each week |
JPM | Will 2019 Bring a Free and Fair Gold Silver Market | By Clint Siegner JPMorgan Chase NYSE JPM and a number of other bullion banks are in a whole lot of trouble Evidence detailing years of rigging markets and swindling clients is piling up Deutsche Bank DE DBKGn pleaded guilty two years ago and forked over hundreds of thousands of documents John Edmonds a former JPMorgan trader entered his own guilty plea last month and turned state s evidence The carefully cultivated system of captured regulators may not help the banks this time FBI investigators and Department of Justice attorneys are involved now This investigation is out of the hands of CFTC bureaucrats who hope to avoid rocking the boat and or land high paying jobs on Wall Street someday The DOJ might be ready to actually prosecute crimes this time around Bankers may have to explain to criminal juries what they have been doing When they have finished class action attorneys and civil juries will get in on the action Perhaps for the first time since metals futures began trading the possibility exists that crooked bankers will be held to account There is still a long way to go and there is certainly plenty of reason to doubt the Department of Justice will live up to its name But there is hope Recent Prosecutions Could Spark and End to Fake Markets for Precious MetalsIt is never too early for market participants to be thinking about what free and fair metals exchanges might look like For starters electronic metals markets need a direct unbreakable connection to physical supply and demand Banks should not be able to meet extraordinary demand for metal with an unlimited supply of paper There are days during which futures contracts purporting to represent the entire annual mine trade on the COMEX Yet once all the furious trading is over barely any actual silver changes hands That must end High frequency trading must also go away The system which allows preferential treatment for banks and institutions is predictably being seriously abused It is another way for Wall Street to divorce electronic trading in metals from physical supply and demand The metals markets need a lot more accountability Notwithstanding the impending DOJ action and any civil judgements which may follow the bullion banks and other crooked traders have been operating with impunity for decades Regulators don t seem interested or able to enforce fair play Market based solutions backed with the genuine threat of prosecution and jail for those who break the law are worth a try It should be easy to launch a metals exchange Anyone with an idea for better mousetrap should find the barriers to entry as low as possible And if they cheat they should not be able to do what Deutsche Bank did in 2016 The bank as an institution pleaded guilty Not all of the individuals involved will face charges for their crimes The fines and restitution will mostly be paid by the bank s shareholders not the actual crooks There might already be a metals exchange which offers fair treatment to participants if it weren t for the current stranglehold on financial markets The Wall Street monopoly enforced and protected by federal regulators is the fundamental problem It needs to be solved Clint Siegner is a Director at the national precious metals company named 2015 Dealer of the Year in the United States by an independent global ratings group A graduate of Linfield College in Oregon Siegner puts his experience in business management along with his passion for personal liberty limited government and honest money into the development of Money Metals brand and reach This includes writing extensively on the bullion markets and their intersection with policy and world affairs |
MS | New Media files mixed shelf for 6M shares | New Media Investment Group NYSE NEWM is launching a 6M share public offering Those shares will go from time to time on NYSE over the counter in negotiated transactions or otherwise at prevailing market prices The underwriter has a 30 day greenshoe option for up to another 900 000 shares Net proceeds are for general purposes including to fund recently announced and future acquisitions The company has recently set deals to purchase newspapers in Austin Texas and Palm Beach Fla Joint book runners are Credit Suisse SIX CSGN Securities and Morgan Stanley NYSE MS Now read |
MS | Morgan Stanley CEO James Gorman pay up 20 percent in 2017 | NEW YORK Reuters Morgan Stanley N MS Chief Executive James Gorman s overall pay rose 20 percent to 27 million last year during a period that saw the firm s net revenues rise 10 percent and pre tax profit margin rise 18 percent according to bank filings released on Friday Gorman s total compensation includes a base salary of 1 5 million plus cash bonuses of about 5 6 million awarded in the early part of 2018 deferred cash and equity awards of nearly 7 2 million and a long term incentive plan based on performance worth 12 8 million Gorman 58 has been chief executive of the Wall Street bank since 2010 New this year the bank reported the ratio between Gorman s total compensation and the median annual total pay for all other employees to be 192 to 1 with the median 2017 compensation for employees being 127 863 Gorman s pay was below that of JPMorgan Chase Co N JPM Chief Executive Jamie Dimon who made 29 5 million last year but higher than Citigroup Inc N C CEO Michael Corbat s annual compensation of 23 million
Morgan Stanley President Colm Kelleher s total compensation rose to 23 million and Chief Financial Officer Jonathan Pruzan s total pay rose to 11 5 million |
MS | Morgan Stanley Turns Bullish on Long Bonds as Equities Upstaged | Bloomberg Rate risk at its most benign in over two years is flashing a buy signal for longer dated U S Treasuries according to Morgan Stanley NYSE MS
Bank strategists including Matthew Hornbach are advising investors to load up on 10 year Treasury notes amid rising trade tensions a downturn in equity markets and subdued inflation The lender is also reiterating its call to buy longer maturity European bonds and dialing back its recommendation for long term Japanese debt
We turn bullish on duration in the U S and suggest investors buy any dip on the back of rebounding equity markets the strategists wrote in an April 6 note Global bond market duration has not looked this attractive in over two years
With a modest acceleration in inflation the path of U S interest rates is likely to undershoot the expectations embedded in longer maturity Treasuries according to the bank Meanwhile a more protectionist tilt as the U S and China lob trade threats is set to light a fire under long bonds that have lagged as stocks have surged
Whereas equity market performance was a negative factor for U S duration throughout most of the past year it has now turned into a positive factor according to the note
Duration is a measure of the sensitivity of a bond s price to changes in interest rates securities with longer duration typically gain more when rates drop but suffer stiffer losses when they climb
The principal risks to Morgan Stanley s long duration call include stocks rebounding to all time highs and a fizzling of trade tensions according to the strategists |
MS | Load up on 10 year Treasurys Morgan Stanley | Rising market volatility increasing geopolitical turmoil subdued inflation and looming trade wars are flashing a buy signal for longer dated U S Treasurys according to Matt Hornbach and team Global bond market duration has not looked this attractive in over two years they say advising to buy the dip in bonds should equity markets rebound A return to all time highs in stocks and or a fizzling in trade tensions would have the Morgan Stanley NYSE MS team revisiting its bullish thesis With stocks moving sharply higher today the 10 year Treasury yield is up 2 4 basis points to 2 801 ETFs TLT TBT TMV TBF EDV TMF TTT ZROZ VGLT TLHNow read |
JPM | U S manufacturing mired in soft patch in first quarter | By Lucia Mutikani WASHINGTON Reuters U S manufacturing output was unchanged in March after two straight monthly declines resulting in the first quarterly drop in production since President Donald Trump was elected The weakness in manufacturing reported by the Federal Reserve on Tuesday is in tandem with a moderation in the broader economy and is despite the White House s America First policies including trade tariffs aimed at protecting domestic factories from what Trump says in unfair foreign competition Soft manufacturing and slowing economic growth reflect the ebbing stimulus from a 1 5 trillion tax cut package and supply chain disruptions caused by Washington s trade war with China Manufacturing production has pivoted to the downside in the first quarter of the year showing the revival in factories and output is sputtering for the first time since the Trump economics team took office said Chris Rupkey chief economist at MUFG in New York The trade war and America First policies have not brought factories back home yet Manufacturing output last month was restrained by weak motor vehicle and wood products production after falling 0 3 percent in February Economists polled by Reuters had forecast manufacturing production edging up 0 1 percent in March Production at factories dropped at a 1 1 percent annualized rate in the first quarter That was the first quarterly drop since the third quarter of 2017 and followed a 1 7 percent pace of increase in the October December period U S financial markets were little moved by the data Motor vehicles and parts production dropped 2 5 percent in March after increasing 2 3 percent in February An inventory overhang in the automobile sector is weighing on production Factory employment declined in March for the first time since July 2017 Excluding motor vehicles and parts manufacturing output rose 0 2 percent in March lifted by increases in the production of primary metals and computer and electronic products after falling 0 5 percent in February UNDERWHELMING RECOVERY EVIDENCE While that offered some glimmers of hope for manufacturing the outlook for the sector which accounts for about 12 percent of the economy is cloudy A survey from the New York Fed on Monday showed a measure of future business activity in New York state dropped to a more than three year low in April with companies downbeat about new orders and shipments We think we could be moving past the worst of the recent soft patch for the manufacturing sector although the evidence of this improvement has not been overwhelmingly clear said Daniel Silver an economist at JPMorgan NYSE JPM in New York Manufacturing is also being hobbled by last year s surge in the dollar and softening global economic growth which are hurting exports The sector could be further strained by Boeing s decision to stop deliveries and cut back production of its troubled 737 MAX aircraft The MAX planes have been grounded indefinitely following two deadly crashes The delivery stoppage and production slowdown of the 737 MAX will be a drag on production and orders data in the near term and may subtract as much as two tenths of a percentage point from second quarter GDP growth said Tim Quinlan a senior economist at Wells Fargo NYSE WFC Securities in Charlotte While manufacturing is struggling there are signs of green shoots in the housing market after activity contracted last year A survey from the National Association of Home Builders on Tuesday showed confidence among single family homebuilders edged up this month amid optimism over sales conditions and buyer traffic The housing market is getting a lift from a fall in mortgage rates after they surged last year But housing accounts for a small fraction of the economy meaning the recovery in activity is unlikely to have a huge impact on gross domestic product Growth forecasts for the first quarter are between a 1 5 percent and 2 3 percent annualized rate The economy grew at a moderate 2 2 percent rate in the fourth quarter after expanding at a brisk 3 4 percent pace in the July September period The flat manufacturing output in March together with a 0 8 percent drop in mining led to a 0 1 percent dip in industrial production Industrial output edged up 0 1 percent in February It fell at a 0 3 percent rate in the first quarter after rising at a 4 0 percent pace in the fourth quarter Mining production was unchanged in February Oil and gas well drilling rebounded 0 3 percent in March after tumbling 1 3 percent in February Utilities output gained 0 2 percent in March after surging 3 7 percent the prior month Capacity utilization for the manufacturing sector a measure of how fully firms are using their resources slipped to 76 4 percent last month the lowest in a year from 76 5 percent in February Overall capacity use for the industrial sector fell to 78 8 percent from 79 0 percent in February
It is 1 0 percentage point below its 1972 2017 average Officials at the Fed tend to look at capacity use measures for signals of how much slack remains in the economy how far growth has room to run before it becomes inflationary |
JPM | China Economic Growth Unexpectedly Held Up in First Quarter | Bloomberg China s economy unexpectedly held up in the first three months of the year as stimulus measures kicked in helping stabilize sentiment rattled by trade tensions with the U S
Gross domestic product rose 6 4 percent in the first quarter from a year earlier exceeding economist estimates and matching the previous three months In March factory output jumped 8 5 percent from a year earlier much higher than forecast Retail sales expanded 8 7 percent while investment was up 6 3 percent in the year to date
Pro growth policies have helped arrest a slowdown that s rattled investors and cast doubt over the global expansion The stronger than expected performance spurred debate over whether more stimulus measures are needed or if the central bank and finance ministry should now begin paring back their support
The recovery has come earlier than expected on the back of policy support said Grace Ng a China economist at JPMorgan Chase Co NYSE JPM in Hong Kong Macro policy won t significantly ease further but won t tighten either in the next few months Fiscal policy may fade off approaching the end of the year after significant front loading of spending early this year
The Shanghai Composite rose immediately after the data before dropping back to trade little changed Ten year bond yields also climbed and then reversed course while the Australian dollar advanced on the bullish numbers
The better than forecast China numbers coincide with shipping data that offer the latest signs of reprieve for global trade as the U S and China inch toward an agreement
Investment by state owned firms quickened to 6 7 percent and slowed for private firms to 6 4 percent underscoring the government s role in supporting growth Economists forecast a full year growth rate of 6 2 percent in 2019 down from 6 6 percent last year
What Bloomberg s Economists Say
We expect the economy to continue to stabilize in 2Q but believe continued policy support is warranted Government led infrastructure spending has kick started the recovery What s needed still a turnaround in the private sector to drive self sustaining growth Chang Shu Bloomberg EconomicsClick here for the full note
Within the unexpectedly strong industrial output numbers car production grew in March for the first time since September showing manufacturers might be growing more optimistic after the sales slump last year China s aluminum and steel output also reached records in the first quarter as producers ramped up operations amid prospects for better demand in the world s biggest commodities consumer
It wasn t all good news The surveyed jobless rate remained over 5 percent for a third month and the nominal growth rate which is un adjusted for price trends decelerated
Updates with economist s comment details on industrial output market reaction |
MS | China s Big Difference Mechanical Tightening | The mainstream narrative as it relates to Chinese money is tightening Having survived the economic downturn last year we are to believe that the People s Bank of China PBOC is once again on bubble duty They raised their reverse repo rates considered to be their policy benchmarks three times up to mid March
The central bank also increased the rate on its Medium Term Lending Facility MLF which has been a main source of RMB liquidity but for reasons that don t conform to the narrative
The PBOC balance sheet for the month of March 2017 shows us the impacts of both its currency policy as well as at least some outward appearance of tightening There was very little change in the monetary base which for China means forex reserves It is actually consistent with Morgan Stanley NYSE MS Market Vectors Renminbi USD NYSE CNY being unusually stable well past its ticking clock meaning that the PBOC is doing other things that don t show up here Those other transactions typically result in a tightening of RMB relationships
As a purely monetary matter bank reserves in March increased as a result of winding down holiday measures including a much lower government balance The post 2015 trajectory for bank reserves remains which suggests a neutral policy rather than tight or loose
The only real drain on the asset side and therefore an intentional monetary act was for Claims on Other Depository Institutions This has been the area where rather than exhibit a negative monetary stance the PBOC has been in RMB overdrive acting hugely acquiescent instead Though the balance fell for March that wasn t unusual given typical seasonality surrounding the offside of the New Year holiday The decline on this line was actually less than it was in March 2016 suggesting that the PBOC left some additional RMB in the system
While overall Claims had declined in normal seasonality the primary source of expansion the past three years the MLF increased significantly The PBOC reported a total MLF balance of more than RMB 4 trillion for the first time last month It was an increase of RMB 303 billion double the rate of expansion in February In just the past five months going back to and including November MLF usage has nearly doubled rising an astounding RMB 1 95 trillion It is that short amount of time which is exactly the period this tightening policy has supposedly been in place according to the narrative
Not only that someone in China has been using the SLF Standing Lending Facility like the MLF a relatively new tool supposed to operate like the US Federal Reserve s Discount Window The balance at the end of March was RMB 70 billion an unusually high figure for any climate
The effects of the PBOC balance sheet transfer directly to the financial conditions of China s Big 4 State owned Banks SOB These heavyweights had been over the past few years sourcing more and more RMB from repo markets than they have been redistributing excess RMB back into them They have done this even though in parallel these banks are using the MLF and possibly the SLF to such a huge degree
In March however they scaled back dramatically from sourcing the repo market and depended instead on the MLF for marginal funding The reason is surely repo rates which have moved far out of proportion with the description of monetary policy tightening
Instead more expensive private funding to such a considerable degree meant that in March it was much cheaper even at the elevated policy rate to borrow from the PBOC which was only too happy to oblige
That should have reduced pressure in Chinese repo markets without the Big 4 absorbing such enormous spare funding
In February 2017 the total net supply from versus what was added back in repo was nearly zero meaning that these large banks were adding nothing to repo where in years past they were among the largest supply channels In March however the net to repo was the highest positive shown above since early last year as these banks switched from sourcing repo to sourcing MLF and other PBOC programs
With such an accommodative balance from the central bank you might surmise that repo rates in March were at least relatively better than in February and January They weren t
Quite the opposite actually as repo rates throughout March rose far more than the policy reverse repo benchmarks Taken together with the MLF activity and other huge accommodations especially to the Big 4 I don t see how tightening adds up to a policy direction
If anything we have to take the PBOC at its word which remains a neutral policy position Therefore the accommodation especially through the MLF makes sense as the central bank struggles through excess RMB and an enormous quantity of it just to keep to that neutral position Judging by rates in April they have yet to achieve that desired outcome
That leaves as always something else doing the tightening in RMB more mechanical than intentional |
MS | 11 Reasons Why U S Economic Growth Is The Worst That It Has Been | Those that were predicting that the U S economy would be flying high by now have been proven wrong U S GDP grew at the worst rate in three years during the first quarter of 2017 and many are wondering if this is the beginning of a major economic slowdown Of course when we are dealing with the official numbers that the federal government puts out it is important to acknowledge that they are highly manipulated
There are many that have correctly pointed out to me that if the numbers were not being doctored that they would show that we are still in a recession In fact John Williams of has shown that if honest numbers were being used that U S GDP growth would have been consistently negative going all the way back to 2005 So I definitely don t have any argument with those that claim that we are actually in a recession right now But even if we take the official numbers that the federal government puts out at face value they are definitely
Economic growth slowed in the first quarter to its slowest pace in three years as sluggish consumer spending and business stockpiling offset solid business investment Many economists write off the weak performance as a byproduct of temporary blips and expect healthy growth in 2017
The nation s gross domestic product the value of all goods and services produced in the USA increased at a seasonally adjusted annual rate of 0 7 the Commerce Department said Friday below the tepid 2 1 pace clocked both in the fourth quarter and as an average throughout the nearly 8 year old recovery Economists expected a 1 increase in output according to a Bloomberg survey
Even if you want to assume that it is a legitimate number 0 7 percent economic growth is essentially stall speed and this follows a year when the U S economy grew at a rate of just
So why is this happening
Of course the experts in the mainstream media
Economists blamed the weather It was too warm this time around rather than too cold which is the usual explanation for Q1 debacles
And they blamed the IRS refund checks that had been delayed due to last year s spectacular identity theft problem Everyone blamed everything on these delayed refund checks including the and the But by mid February a veritable tsunami of checks went out and by the end of February the IRS was pretty much caught up So March should have been awash in consumer spending But no So we ll patiently wait for that miracle to happen in second quarter
They always want us to think that boom times for the U S economy are right around the corner but those boom times have never materialized since the end of the last financial crisis
Instead we have had year after year of economic malaise and stagnation and it looks like 2017 is going to continue that trend The following are 11 reasons why U S economic growth is the worst that it has been in 3 years
1 The weak economic growth in the first quarter was the continuation of a long term trend Barack Obama was not to have a single year when the U S economy grew by at least 3 percent and this is now the fourth time in the last six quarters when economic growth has been less than 2 percent on an annualized basis So essentially this latest number signals that our long term economic decline is continuing
2 Consumer spending drives the U S economy more than anything else and at this point most U S consumers are tapped out In fact has reported that three fourths of all U S consumers have to scramble to cover their living costs each month
3 The job market appears to be slowing The U S economy only added and that was approximately half of what most analysts were expecting
4 The flow of credit appears to be slowing as well In fact this is the first time since the last recession when there has been no growth for commercial and industrial lending
5 Last month U S factory output dropped at the fastest pace that we have witnessed
6 We are in the midst of the worst in U S history The number of retailers that has filed for bankruptcy has already surpassed the total and at the current rate we will smash the previous all time record for store closings in a year
7 The auto industry is also experiencing a great deal of stress This has been the worst year for U S automakers and seven out of the eight largest fell short of their sales projections
8 Used vehicle prices are falling and Morgan Stanley NYSE MS is now projecting that used vehicle prices over the next several years
9 Commercial bankruptcies are rising at the fastest pace
10 Consumer bankruptcies are rising at the fastest pace
11 The student loan bubble is starting to burst It is being reported that of all student loans are already in default and some analysts expect that number to go much higher
And of course some areas of the country are being harder hit than others The following comes from
Four states have not yet fully recovered from the Great Recession As of the third quarter of last year the latest data available the economies of Louisiana Wyoming Connecticut and Alaska were still smaller than when the recession ended in June 2009
Other states that have recovered have seen their economic recoveries stall out Those include Minnesota North Dakota New Mexico Oklahoma South Dakota and West Virginia
We should be thankful that we are not experiencing a full blown economic meltdown just yet but it is undeniable that our long term economic decline continues to roll along
And without a doubt the storm clouds are building and many believe that the next major economic downturn will begin in the not too distant future |
MS | What We Think The Fed Really Needs | Kevin Warsh was named to Fortune Magazine s 2009 list of 40 Under 40 He had been the youngest ever appointed to the Federal Reserve Board when President Bush put forward his name in 2006 Having been a banker in the M A area of Morgan Stanley NYSE MS Warsh was reported to have been instrumental in acting the liaison between Wall Street CEO s and officials at the Fed As Fortune put it Kevin took on the role of ambassador to Wall Street during the worst crisis since the Great Depression
He was not an economist nor even a banker by training Warsh was and is in fact a lawyer Despite that when Timothy Geithner was appointed by President Obama for Treasury Secretary there was a great deal of speculation that Warsh might be nominated to take his position as head of FRBNY Given the nature of the job however and the location of the Open Market Desk within it perhaps a lawyer wasn t the best idea Still it was I suppose a credit to his mainstream reputation that he was even considered
Ultimately Bill Dudley as head of the Open Market Desk would logically succeed Geithner though Warsh s openly Republican politics surely did him no favors with the Obama administration There are also several indications that he wasn t completely synchronized with the rest of the FOMC Just four days after QE2 was voted Warsh was able an almost opposition piece in the Wall Street Journal to Bernanke s quasi official Washington Post op ed justifying the second round
After a cyclical boost early this year the current state of the U S economy is unimpressive modest growth high levels of unemployment stagnant wages low levels of consumer and business sentiment and volatile financial markets Extrapolating from recent data many predict only a middling recovery in the next several years They call it the new normal I call it the new malaise
Purportedly his objections were so robust that a few months later he would unexpectedly resign In fact he is mentioned only once in the March 2011 FOMC meeting transcripts despite him still being on the board if only to note that given his planned resignation he was for some unexplained reason absent
Several years later Mr Warsh would emerge as a leading critic of monetary policy Taking to the Wall Street Journal again in June 2014 along with Stanley Druckenmiller they together
It s taken a full 76 months for the number of people working to get back to its previous peak a discomfiting postwar record Unfortunately during the same period the U S working age population increased by more than 15 million people That s why the share of the working age population out of work is now at a 36 year high There are now more Americans on disability insurance than are working in construction and education combined
Meanwhile corporate chieftains rationally choose financial engineering debt financed share buybacks for example over capital investment in property plants and equipment Financial markets reward shareholder activism Institutional investors extend their risk parameters to beat their benchmarks And retail investors belatedly participate in the rising asset price environment
With such a seemingly populist bend it is little wonder that his name has been offered several times in the early Trump days as a possible replacement for Janet Yellen either at her scheduled time or even as some after the election speculated perhaps well before her term expires Trump at least on the campaign trail declared no special love for Dr Yellen saying of her in September 2016 she is very political and she should be ashamed of herself Who else might have to feel shame
In a speech given last week former Fed Governor Warsh went
I am confused by the Fed s normalization strategy in monetary policy Its preferred sequencing of rate increases and balance sheet reductions differ markedly from what was agreed when we conceived QE in the war room amid the crisis There might be good reason But the transmission mechanisms of rate changes and balance sheet adjustments are markedly different than projected So too are the distributional effects This merits a more robust public explanation
It is almost refreshing to hear someone of official standing finally admit that nothing is like what it was supposed to be almost For as much as Mr Warsh may sound very different than Yellen or other Fed members in truth there isn t nearly as much distance as it may seem To begin with for all his supposed opposition he never once voted against QE either the first or the second
There was to be sure enormous pressure for uniformity at that time as officials were heavily concerned about spooking already fragile markets and the economy of that new normal But that only contributes to the vacuous nature of his opposition If he really felt things were going way off course and that the Fed wasn t doing what was necessary to it turn it back playing into unanimity was the worst thing he could have done Doubt was required way back then not now
But more than that Warsh was part of the 2008 response and if press reports are to be believed a very big part Thus TBTF as well as all the ill conceived and even more poorly executed liquidity strategies fall under his name and right onto his resume He was as dazed and confused as all the rest leaving the global as well as US economy to suffer what has been so far a permanent rupture Perhaps his expertise would have been legitimately useful had it been worth enough in early 2007 rather than far too late in 2008
Despite public writings right up to the end of his FOMC tenure there was every indication he was saturated orthodox At what would be his final meeting January 2011 just a few months before the next unexpected dollar crisis that would unleash the next perhaps fatal tightening of the Warsh contributed a summation that was wholly indistinguishable from any of the rest of the internal discussions
MR WARSH Let me talk about the U S economy first as if it were an island because my sense is that developments in the United States would be considered quite encouraging in that case We look a bit stronger and a bit more settled from the perspective of markets and the economy and politics Still there are encouraging signs that the Tealbook forecasts going back a couple of sessions seem to be more on point than off Having said that I m still a bit more cautious than they are Yet I m impressed by tax revenues that are flowing into the federal government and into states and municipalities and I expect the deleveraging headwind to subside materially in 2011
It makes for quite a contrast to the theme of his November 2010 Wall Street Journal writing especially in light of what he said in that January 2011 FOMC meeting about the standards for evaluating QE2
MR WARSH On what basis could we say it was a success We could I think rightly look at the change in the deflation risks and much more so than any great successes on financial markets or employment or GDP take perhaps more credit for the change in inflation risks between the time we announced the program and the time that we pivoted away from it So I think that is the way we hope that the 600 billion program is successfully accomplished and we move on
I think then as a result of much more study than just what is presented here Kevin Warsh is an exemplar for what to do about the Federal Reserve in a counterintuitive way Almost all proposed reforms and all of those proposed by anyone with any standing rely on switching personnel The real issue however is not now nor has it ever been who is running the Fed They would all do the same general things no matter if they even argued against it from time to time As much as it may at first appear there truly is no difference between Ben Bernanke or Janet Yellen and Kevin Warsh
What the Fed really needs what the global economy really needs is to be forced back to Money 101 It needs to be purged of all remnants of Positive Economics the self imposed ignorance of econometrics before anything else It can t be done so long as these same people are always in the running though Warsh is a lawyer and Wall Street veteran it s absolutely clear he looks to DSGE above competence insight and vision
I have written it many times before and I ll do so again the recovery is at this point purely political Given the past few months and the hopes that the elections here and elsewhere have inspired it hasn t been nearly political enough even in theory Until that changes we are Japan an ultimately bleak and dangerous future where economists debate R and confer at conferences about what might they be able to do during the next one even though the last one still clings to every macro variable and populist uprising while more and more adults live as a financial burden in the homes of their increasingly angry parents here and all across the world
Bernanke Yellen Warsh etc |
MS | Highlights In The Growth Of Farmland Funds | Highquest Partners and a product strategist for timber and agriculture at GMO LLC Julie Koeninger have on the history of farmland investment at its heart the story first of how farmland has grown since the late 1980s and the rebound from the farm crisis earlier in that decade from a niche investment to a mainstream asset class that is available to retail investors as well as institutions and second of how there has been a pullback more recently as commodity prices have fallen and remained law lease rates have come under pressure and so forth
Most of the white paper is presented as a simple timeline and in its simplicity it is valuable
The line begins in the 1970s time of the earliest efforts to develop retail and institutional farmlands investment products Critics at the time denounced these efforts as threatening to family farms and in the face of such complaints in 1977 the Continental Illinois National Bank of Chicago dropped a plan to invest tax exempt pension assets in an Agland Fund
In 1980 the American Agricultural Investment Managing Co came into being again with the idea of mediating between pension investors and farm properties Between 1981 and 1987 AAIM raised 16 million
In 1983 George Schwab Jim McCandless and others founded Agrivest which handled the agricultural investments portfolio of Connecticut Mutual
Stagnation Crisis Recovery
Unfortunately for investors global commodity demand went stagnant in the early 1980s This especially hit the Midwestern farm belt in the U S because a stronger dollar and increased global competition to meet that stagnant demand hurt exports Farms went bankrupt farmland fell in market value and institutions with farmland holdings had to scramble
Agriculture and related markets began to stabilize in 1985 That year too Met Life launched Met Life Agricultural LP which offered 50 000 partnership units at 1 000 apiece Each unit had a ten year term with an expected return of 5 to 6 And the underlying assets were in the Midwest Florida and California
In 1988 Barton Biggs wrote an article that proved very influential titled Buy a Farm and Get Rich Slowly Biggs who had literally invented the office of Global Investment Strategist illustrated the negative correlation between returns on financial assets and those on farmland touting farmland s power as a diversifier of portfolios Biggs argued that the United States remains the world s lowest cost ag producer and that this is promising for the future of the asset class
Biggs was the chairman of Morgan Stanley NYSE MS Asset Management at this time Soon thereafter Morgan Stanley offered investors a way of executing his advice creating a farmland investment program led by Perry Hall with property management provided by Arkansas Bronson Van Wyke
Also in the late 1980s Agrivest as a farmland investment manager was gaining institutional clients such as AT T NYSE T and Bell South It was also gaining competitors in that space
The Nineties
In 1990 with the farm crisis securely in the nation s rearview mirror Hancock Agricultural Investment Group offered a new pure equity product ACRE 2000
In 1994 AAIM s investors wanted liquidity and to give it to them AAIM sold assets to a Westchester Group LP
In 1996 the Hancock Agricultural Investment Group joined with the Hancock Timber Resource Group to form the Hancock Natural Resource Group HTRG offered investment opportunities in both farmland and timber to third party institutions as well as the Hancock General Account
But through the second half of the 1990s farmland was a tough sell because the new dotcom world and its auxiliary industries offered investors the promise of getting rich quick So it may have seemed that no one was really interested in taking Biggs advice and getting rich slowly
Nonetheless big players remained interested in the fundamentals and in 1999 Switzerland s UBS acquired Agrivest
The New Millennium
In 2004 the Alaska Retirement Management Board committed 200 million to a cropland portfolio It has subsequently added to this commitment
In 2007 as the global financial crisis was getting underway but while optimists were still talking about how it was a mere subprime crisis which could be contained Australia s Macquarie Financial Services initiated its Macquarie Pastoral Fund to own and operate beef cattle and sheep production properties in that country This was the beginning of a livestock oriented sub genre of farmland funds
In the year the broader nature of that crisis became undeniable 2008 Altima Partners created the Altima One World Agriculture Fund
By February 2009 that fund was managing 625 million and the International Finance Corporation of the teamed up with Altria to create a parallel fund the Altima One World Agricultural Development Fund with the goal of supporting farming and food production in the emerging markets
The GFC was finding its bottom but this was a moment of grave concern about famine and Malthusian pressures which were reflected in the language of the World Bank release announcing the creation of the Ag Development Fund
In 2011 Soros Fund Management invested in Adecoagro an owner and operator of farms in Brazil Argentina and Uruguay shortly before Adecoagro went public As of the midpoint of 2011 Adecoagro was SFM s largest single holding
In 2014 the Canada Pension Plan Investment Board purchased a portfolio of 115 000 acres of Saskatchewan farmland from the Assiniboia Farmland LP paying C 128 million
Last year 2016 saw the debut of the Australian Farmland Property Index which as the white paper says is comprised of property data from six anonymous qualifying property managers covering properties worth A 827 million
As Cher would say the beat goes on |
MS | Is Morgan Stanley MS A Great Stock For Value Investors | Value investing is easily one of the most popular ways to find great stocks in any market environment After all who wouldn t want to find stocks that are either flying under the radar and are compelling buys or offer up tantalizing discounts when compared to fair value One way to find these companies is by looking at several key metrics and financial ratios many of which are crucial in the value stock selection process Let s put Morgan Stanley NYSE MS stock into this equation and find out if it is a good choice for value oriented investors right now or if investors subscribing to this methodology should look elsewhere for top picks PE RatioA key metric that value investors always look at is the Price to Earnings Ratio or PE for short This shows us how much investors are willing to pay for each dollar of earnings in a given stock and is easily one of the most popular financial ratios in the world The best use of the PE ratio is to compare the stock s current PE ratio with a where this ratio has been in the past b how it compares to the average for the industry sector and c how it compares to the market as a whole On this front Morgan Stanley has a trailing twelve months PE ratio of 12 83 as you can see in the chart below This level is significantly favorable with the market at large as the PE for the S P 500 compares in at about 19 97 If we focus on the stock s long term PE trend the current level puts Morgan Stanley s current PE ratio somewhat below its midpoint which is 14 31 over the past five years Further the stock s PE also compares favorably with the Zacks classified Financial Investment Bank sector s trailing twelve months PE ratio which stands at 14 57 At the very least this indicates that the stock is relatively undervalued right now compared to its peers We should also point out that Morgan Stanley has a forward PE ratio price relative to this year s earnings of just 12 47 so it is fair to say that a slightly more value oriented path may be ahead for Morgan Stanley stock in the near term too P S RatioAnother key metric to note is the Price Sales ratio This approach compares a given stock s price to its total sales where a lower reading is generally considered better Some people like this metric more than other value focused ones because it looks at sales something that is far harder to manipulate with accounting tricks than earnings Right now Morgan Stanley has a P S ratio of about 2 17 This is considerably lower than the S P 500 average which comes in at 3 19 right now Also as we can see in the chart below this is somewhat below the highs for this stock in particular over the past few years If anything this suggests some level of undervalued trading at least compared to historical norms Broad Value OutlookIn aggregate Morgan Stanley currently has a Zacks Value Style Score of B putting it into the top 40 of all stocks we cover from this look This makes MS a solid choice for value investors and some of its other key metrics make this pretty clear too For example the PEG ratio for Morgan Stanley is just 0 94 a level that is somewhat lower than the industry average of 1 35 The PEG ratio is a modified PE ratio that takes into account the stock s earnings growth rate Clearly MS is a solid choice on the value front from multiple angles What About the Stock Overall Though Morgan Stanley might be a good choice for value investors there are plenty of other factors to consider before investing in this name In particular it is worth noting that the company has a Growth grade of F and a Momentum score of D This gives MS a Zacks VGM score or its overarching fundamental grade of D You can read more about the Zacks Style Scores Meanwhile the company s recent earnings estimates have been mixed at best The current quarter has seen two estimates go lower in the past thirty days compared to none higher while the full year estimate has seen four upward and no downward revisions in the same time period This has had a mixed impact on the consensus estimate as the current quarter consensus estimate has dipped 1 2 in the past one month while the full year estimate has risen by about 2 1 You can see the consensus estimate trend and recent price action for the stock in the chart below Morgan Stanley Price and Consensus Despite this somewhat mixed trend the stock has a Zacks Rank 2 Buy on the back of its strong value metrics and this is why we are expecting above average performance from the company in the near term Bottom LineMorgan Stanley is an inspired choice for value investors as it is hard to beat its incredible lineup of statistics on this front Boasting a decent industry rank Top 26 out of more than 250 industries and a strong Zacks Rank the company deserves attention right now In fact over the past one year the Zacks Financial Investment Bank sector has significantly outperformed the broader market as you can see below So it might pay for value investors to delve deeper into the company s prospects as fundamentals indicate that this stock could be a compelling pick The Best Worst of ZacksToday you are invited to download the full up to the minute list of 220 Zacks Rank 1 Strong Buys free of charge From 1988 through 2015 this list has averaged a stellar gain of 25 per year Plus you may download 220 Zacks Rank 5 Strong Sells Even though this list holds many stocks that seem to be solid it has historically performed 6X worse than the market |
JPM | Deutsche Bank DB Unveils Bonds Buyback Plan Worth A Look | With the aim of reducing its liquidity reserve which is maintained at a higher cost Deutsche Bank DE DBKGn Aktiengesellschaft NYSE DB plans buyback of senior non preferred bonds worth 1 billion Per Germany s largest lender the planned move will assist the bank to optimise its future interest payments and maturity structure As of Sep 30 2018 Deutsche Bank s liquidity reserves stood at 268 billion with a liquidity coverage ratio of 148 The buyback includes two long dated securities maturing in March 2025 and January 2028 with a coupon rate of 1 125 and 1 75 respectively Notably the bonds were trading nearly 92 cents and 88 cents on the euro Deutsche bank s tender offer which expires on Nov 27 if repurchased below the issue price will benefit the bank in terms of profit Using a small part of our high cash position to repurchase senior non preferred securities reflects our aim to redeploy excess liquidity without taking undue risk chief finance officer James von Moltke noted adding the move will benefit all shareholders of Deutsche Bank With strong liquidity position we believe Deutsche Bank will excel higher moving ahead So keeping this in mind is the company worth considering Let s dig deeper into its financials and fundamental strengths Stock Seems Undervalued Deutsche Bank seems undervalued when compared with broader industry Its current price to book and price to sales ratios are below the respective industry averages Earnings Strength Deutsche Bank recorded an earnings growth rate of 32 1 over the last three to five years Retaining its earnings momentum the earnings growth rate is anticipated to be around 160 for the current year and 94 4 for 2019 Prudent Expense Management Deutsche Bank s efforts in reducing expenses have started bearing fruits with reduced non interest expenses Notably adjusted costs excluding litigation impairments policyholder benefits and claims and restructuring and severance expenses declined at a CAGR of 5 1 over the last three years ended 2017 with the trend continuing into the first nine months of 2018 as well Notably cumulative OpEx program savings of 4 5 billion fully met the externally communicated target for 2015 Deutsche Bank s shares have depreciated around 23 in the past six months compared with the s decline of 10 1
The stock currently carries a Zacks Rank 3 Hold Stocks to ConsiderKBC Group SA OTC KBCSY has been witnessing upward estimate revisions for the past 60 days Also the company s shares have gained nearly 19 3 on the NYSE in the past two years It carries a Zacks Rank of 2 Buy at present You can see Oversea Chinese Banking Corporation Limited OTC OVCHY has been witnessing upward estimate revisions for the past 30 days Additionally the stock has jumped around 36 5 on the NYSE over the past two years The stock carries a Zacks Rank of 2 currently JPMorgan NYSE JPM has been witnessing upward estimate revisions for the past 60 days Further the company s shares have rallied nearly 42 in two years time Currently it carries a Zacks Rank of 2 Will You Make a Fortune on the Shift to Electric Cars Here s another stock idea to consider Much like petroleum 150 years ago lithium power may soon shake the world creating millionaires and reshaping geo politics Soon electric vehicles EVs may be cheaper than gas guzzlers Some are already reaching 265 miles on a single charge With battery prices plummeting and charging stations set to multiply one company stands out as the 1 stock to buy according to Zacks research It s not the one you think |
JPM | First Midwest FMBI Dividend Up Is The Stock Worth A Look | First Midwest Bancorp Inc s NASDAQ FMBI board of directors approved a hike in quarterly dividend The company announced a dividend of 12 cents marking an increase of 9 from the prior payout The dividend will be paid on Jan 8 2019 to shareholders of record as of Dec 21 2018 Based on yesterday s closing price of 23 09 per share the dividend yield is 2 1 Given its earnings strength the company is expected to continue enhancing shareholder value through efficient capital deployment activities However let s see whether it is worth considering First Midwest stock based on this dividend income Let s dig deeper into its financial performance and fundamentals to understand risks and rewards First Midwest s revenues have witnessed a CAGR of 16 5 over the past four years 2014 2017 Further its projected sales growth rates of 4 2 and 9 for 2018 and 2019 respectively ensure the continuation of uptrend in revenues Additionally over the last three five years the company witnessed earnings per share EPS growth of 8 2 In fact it is expected to deliver strong earnings performance as indicated by its projected EPS growth of 31 9 and 26 6 for 2018 and 2019 respectively Further its long term three five years projected EPS growth rate of 7 promises reward for shareholders Based on these two factors the stock looks worth investing in but one should consider the following downsides before taking the final decision First Midwest s debt equity ratio of 0 66 compares unfavorably with the industry average of 0 45 indicating a higher debt burden relative to the industry Further the stock looks overvalued based on its price to earnings P E and PEG ratios The company currently has a P E F1 ratio of 14 7 and a PEG ratio of 2 1 which are above the industry averages of 13 2 and 1 7 respectively Moreover First Midwest s price performance is disappointing Its shares have lost 3 8 over the past year against 3 2 growth recorded by the it belongs to Our TakeJust because First Midwest announced a dividend hike it will not be wise to bet on the stock right away Higher debt burden and a stretched valuation make us apprehensive about its prospects Notably the company s Zacks Consensus Estimate for current year earnings has also remained unchanged over the past seven days Thus the stock currently carries a Zacks Rank 3 Hold Stocks to ConsiderSome better ranked stocks from the finance space are Old Second Bancorp Inc NASDAQ OSBC Ares Capital Corporation NASDAQ ARCC and JPMorgan Chase Co NYSE JPM Each of these carries a Zacks Rank 2 Buy You can see Over the past 60 days the Zacks Consensus Estimate for Old Second Bancorp has increased 2 6 for the current year The company s share price has increased nearly 10 1 in the past year Ares Capital Corporation s shares have gained 5 4 in a year Further its 2018 earnings estimates have moved 2 5 upward over the past 60 days Over the past 60 days JPMorgan witnessed a 1 4 upward earnings estimate revision for the current year Its share price has increased 12 in the past year Will You Make a Fortune on the Shift to Electric Cars Here s another stock idea to consider Much like petroleum 150 years ago lithium power may soon shake the world creating millionaires and reshaping geo politics Soon electric vehicles EVs may be cheaper than gas guzzlers Some are already reaching 265 miles on a single charge With battery prices plummeting and charging stations set to multiply one company stands out as the 1 stock to buy according to Zacks research It s not the one you think |
JPM | Societe Generale SCGLY To Pay 1 4B Fine For Pending Cases | Societe Generale PA SOGN Group OTC SCGLY has agreed to pay nearly 1 4 billion to the authorities in the United States This comes as this French banking giant decides to settle some of its long pending legal disputes Of the total fine nearly 95 million is expected to be paid to settle a dispute over violations of anti money laundering regulations On the other hand the bank said that it will pay 1 34 billion to settle allegations that it processed billions of dollars in transactions related to countries under sanctions The authorities that issued the fines were the Federal Reserve the U S Department of Justice the U S Treasury s Office of Foreign Assets Control the New York County District Attorney s Office and the New York Department of Financial Services These authorities claimed that between 2003 and 2013 the bank implemented billions of dollars of illegal transactions to parties in countries like Iran Sudan Cuba and Libya which were sanctioned by the United States Prior to this settlement in June the bank agreed to pay a penalty to the U S and French authorities for its alleged manipulation of Libor rates and transactions involving Libyan counterparts Societe Generale s chief executive officer Frederic Oudea stated We acknowledge and regret the shortcomings that were identified in these settlements and have cooperated with the U S Authorities to resolve these matters He added These resolutions following on the heels of the resolution of other investigations earlier this year allow the Bank to close a chapter on our most important historical disputes Notably per the U S Attorney s office in Manhattan this 1 34 billion is the second largest fine that has ever been imposed on a bank for violating U S sanctions The largest was paid by another French bank BNP Paribas PA BNPP in 2014 when it agreed to pay nearly 8 9 billion for conspiring to violate sanctions that prohibit transactions with Sudan and other regimes Notably Societe Generale has also signed deferred prosecution agreements that have a probation period of three years and are subject to U S court approval Accordingly following the probation period the bank cannot be prosecuted if it abides by the terms of the agreements The bank informed that the fine was entirely covered by the provision for disputes booked in its accounts In fact the settlement will not have any additional impact on its 2018 results Shares of the company have lost 25 4 over the past year compared with 12 3 decline recorded by the it belongs to Societe Generale currently carries a Zacks Rank 3 Hold Stocks to ConsiderSome better ranked stocks from the finance space are Old Second Bancorp Inc NASDAQ OSBC Ares Capital Corporation NASDAQ ARCC and JPMorgan Chase Co NYSE JPM Each of these stocks carries a Zacks Rank 2 Buy You can see Over the past 60 days the Zacks Consensus Estimate for Old Second Bancorp has increased 2 6 for the current year The company s share price has increased nearly 10 1 in the past year Ares Capital Corporation s shares have gained 5 4 in a year Further its 2018 earnings estimates have moved 2 5 upward over the past 60 days Over the past 60 days JPMorgan witnessed a 1 4 upward earnings estimate revision for the current year Its share price has increased 12 in the past year Will You Make a Fortune on the Shift to Electric Cars Here s another stock idea to consider Much like petroleum 150 years ago lithium power may soon shake the world creating millionaires and reshaping geo politics Soon electric vehicles EVs may be cheaper than gas guzzlers Some are already reaching 265 miles on a single charge With battery prices plummeting and charging stations set to multiply one company stands out as the 1 stock to buy according to Zacks research It s not the one you think |
JPM | JPMorgan Chase JPM Stock Sinks As Market Gains What You Should Know | In the latest trading session JPMorgan Chase JPM closed at 107 64 marking a 0 75 move from the previous day This change lagged the S P 500 s daily gain of 0 3 At the same time the Dow 0 and the tech heavy Nasdaq gained 0 92
Coming into today shares of the biggest U S bank by assets had gained 3 04 in the past month In that same time the Finance sector lost 1 61 while the S P 500 lost 4 37
JPM will be looking to display strength as it nears its next earnings release which is expected to be January 11 2019 The company is expected to report EPS of 2 24 up 27 27 from the prior year quarter Meanwhile our latest consensus estimate is calling for revenue of 27 10 billion up 12 19 from the prior year quarter
Looking at the full year our Zacks Consensus Estimates suggest analysts are expecting earnings of 9 28 per share and revenue of 109 73 billion These totals would mark changes of 35 08 and 10 14 respectively from last year
Investors might also notice recent changes to analyst estimates for JPM These recent revisions tend to reflect the evolving nature of short term business trends With this in mind we can consider positive estimate revisions a sign of optimism about the company s business outlook
Our research shows that these estimate changes are directly correlated with near term stock prices Investors can capitalize on this by using the Zacks Rank This model considers these estimate changes and provides a simple actionable rating system
The Zacks Rank system ranges from 1 Strong Buy to 5 Strong Sell It has a remarkable outside audited track record of success with 1 stocks delivering an average annual return of 25 since 1988 Within the past 30 days our consensus EPS projection has moved 0 01 lower JPM is currently a Zacks Rank 3 Hold
In terms of valuation JPM is currently trading at a Forward P E ratio of 11 68 For comparison its industry has an average Forward P E of 11 34 which means JPM is trading at a premium to the group
It is also worth noting that JPM currently has a PEG ratio of 1 75 The PEG ratio is similar to the widely used P E ratio but this metric also takes the company s expected earnings growth rate into account The Banks Major Regional industry currently had an average PEG ratio of 1 16 as of yesterday s close
The Banks Major Regional industry is part of the Finance sector This industry currently has a Zacks Industry Rank of 97 which puts it in the top 38 of all 250 industries
The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors Our research shows that the top 50 rated industries outperform the bottom half by a factor of 2 to 1
You can find more information on all of these metrics and much more on Zacks com |
MS | NYSE sets Spotify reference price at 132 | Reuters The New York Stock Exchange on Monday set the reference price for shares of music streaming service Spotify Technology SA at 132 Spotify is pursuing an unusual direct listing to reach the public markets in place of an initial public offering and shares are expected to start trading on Tuesday The reference price is not an offering price for the shares nor is it the opening public price for shares of the Swedish technology company The opening public price will be determined by buy and sell orders collected by the NYSE from broker dealers the exchange said Based on those orders the opening price will be set based on a designated market maker s determination of where buy orders can be matched with sell orders at a single price But the reference price will play a part in Spotify s eventual pricing Though Spotify has not hired traditional underwriters a move that will save it millions of dollars in fees it has hired Citadel Securities as a market maker to set the opening price on the NYSE with help from Morgan Stanley NYSE MS
While their roles will be limited the reference price will be used while building the order book Early on Tuesday Citadel and Morgan Stanley will analyze investors buy and sell orders and then set an opening price for the stock |
MS | Australia s Santos to open books to Harbour Energy after unsolicited 10 4 billion bid | By Paulina Duran and Jonathan Barrett SYDNEY Reuters Australian gas producer Santos Ltd AX STO said on Tuesday it would engage with Harbour Energy after receiving a 10 4 billion takeover offer from the U S company its fourth unsolicited bid since August 2017 The bid valuing Santos at a 28 percent premium to its last close would give Harbour access to a recently revived company with a low cost of oil production and stakes in liquefied natural gas LNG in the Asia Pacific where demand is soaring News of the latest offer the biggest inbound bid for a listed Australian company since Unibail Rodamco s 16 billion buy out offer for shopping mall giant Westfield Corp sent Santos shares soaring But even if accepted by Santos this time round a deal may be fraught with political and regulatory risk Australia s lingering energy supply crisis has stoked fears that companies that come under foreign ownership may ignore domestic needs The price is definitely in the ball park of something that we will seriously consider said Andy Forster senior investment officer at Argo Investments Santo s ninth largest shareholder Investment bank RBC Capital Markets described the bid as a knock out in a note to clients on Tuesday The offer values Adelaide based Santos AX STO at A 6 50 per share a 28 percent premium to the company s last closing share price of A 5 07 Santos shares close 16 2 percent higher at A 5 89 The latest offer price is also 43 percent higher than Harbour s first attempt last year EXPANSION PLANS Harbour s chief executive Linda Cook said the plan for Santos was one of growth in Australia Papua New Guinea and beyond We are prepared to move expeditiously through the due diligence phase to immediately begin the government review and approval process Cook said in a phone interview But given the highly politicized nature of the Australian domestic gas landscape and Santos key role there analysts and investors see government approval as a key risk to any deal A takeover would be subject to government approvals and will be scrutinized by Australia s Foreign Investment Review Board FIRB which provides recommendations to the government Cook said Harbour was preparing its FIRB application Santos more sensitive assets include its interest in the Gladstone LNG project in the Australian state of Queensland and the strategically important Cooper Basin in the country s east where significant onshore oil and gas deposits are located Any buyer of Santos would need to be prepared for ongoing engagement with government and public scrutiny for many years going forward said Saul Kavonic of energy consultancy Wood Mackenzie Still for a new LNG player Santos represents an attractive target given its portfolio of LNG assets and growth options according to analysts ENGAGE FURTHER The Santos board considers that based on the indicative offer price of A 6 50 per share it is in the interests of shareholders to engage further with Harbour Santos said in a statement to shareholders The bid from Washington based Harbour a private equity backed firm led by Cook who is a former Royal Dutch Shell LON RDSa Plc executive director consists of 4 70 per share in cash and a special dividend of 0 28 per share or A 6 50 The offer would allow for majority shareholders Hony Capital and ENN to retain a stake of up to 20 percent Santos was in considerable trouble just a few years ago struggling with high debt and low oil LCOc1 and gas prices But asset sales debt reduction and cost cutting have led it back to health As a result Santos is seen to be able to produce profitably at average oil costs of just over 32 per barrel versus actual costs of around 68 a barrel The company s focus on LNG which is seen to be a bigger growth markets in coming years than oil is also seen as attractive for investors Harbour plans to fund the takeover through a combination of debt and equity with J P Morgan and Morgan Stanley NYSE MS underwriting 7 75 billion of debt
Santos is a partner in the Papua New Guinea LNG export project which was highly profitable before it got knocked out by a strong earthquake in late February It is expected to resume operations in April |
MS | Japan sees output exceed capacity the most in decade BOJ slows bond buying | By Leika Kihara TOKYO Reuters Japan s economic output exceeded its full capacity by the most in a decade in the October December quarter the Bank of Japan estimated a positive sign for the central bank as it seeks to accelerate inflation to its elusive 2 percent target A positive output gap occurs when actual output exceeds the economy s full capacity as factories and workers operate above their most efficient level to meet strong demand A growing positive output gap shows that inflationary pressure is building and thus an important indicator for central banks Japan s output gap which measures the difference between an economy s actual and potential output stood at plus 1 50 percent in October December staying in positive territory for a fifth straight quarter the BOJ estimate showed on Wednesday The result which followed a 1 14 percent positive output gap in July September backs up the BOJ s view that Japan s economy is gathering enough momentum for inflation to accelerate toward its 2 percent target But the central bank is likely to hold off on whittling down its massive stimulus with inflation distant from its target Inflation has been slow despite a tightening job market BOJ Governor Haruhiko Kuroda told parliament on Tuesday Debating an exit strategy now would cause confusion he said stressing that the BOJ will maintain its ultra easy policy until inflation is stably above its target STEALTH TAPERING PROCEEDING After three years of heavy asset buying failed to fire up inflation the BOJ switched its policy focus in 2016 to one targeting interest rates instead of the pace of money printing Under a policy dubbed yield curve control YCC the BOJ now guides the short term interest rate at minus 0 1 percent and the long term rate around zero percent It also keeps a loose pledge to buy bonds so its holdings grow at an annual pace of around 80 trillion yen 750 billion Actual purchases however have slowed recently as the BOJ s dominance in the bond market allows it to keep yields low with reduced buying The slowdown is also in response to growing criticism that the BOJ s huge purchases are drying up liquidity Separate BOJ data released on Wednesday showed the balance of the bank s bond holdings at end March were up 48 6 trillion yen from a year ago the smallest gain since November 2013 The BOJ started its huge asset buying program dubbed quantitative and qualitative easing QQE in April 2013 YCC is allowing the BOJ to steadily retreat from the bond market said Katsutoshi Inadome senior fixed income strategist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities But the BOJ s presence is still too big given the negative effect such as falling market liquidity he said Japan s economy expanded an annualized 1 6 percent in the October December quarter marking the eighth straight quarter of gains on robust global demand and capital spending
But core consumer inflation stood at 1 0 percent in February well below the BOJ s 2 percent target as slow wage growth keeps consumers from boosting spending |
MS | Morgan Stanley cuts Facebook target to 28 upside | Morgan Stanley NYSE MS maintains an Overweight rating on Facebook NASDAQ FB but lowers its price target from 230 to 200 a 28 upside to yesterday s close Analyst Brian Nowak says he s still positive after the recent ad checks but trims the target in a pragmatic near term approach Nowak spoke with eight advertisers and didn t sense any material ad spend reduction The analyst thinks Facebook s elimination of third parties is a smart strategy that will highlight FB s leading reach and first party data advantage Nowak notes upcoming catalysts Mark Zuckerberg appearance before the Senate Judiciary Committee around April 10 Q1 results April 25 and General Data Protection Regulation going live in Europe May 25 Source Bloomberg First Word Facebook shares are down 2 3 premarket to 152 60 Now read |
JPM | Consider These 3 Mutual Funds From The JP Morgan Portfolio | JPMorgan NYSE JPM is one of the major mutual fund managers in the United States and prides itself for being the nation s leader in equity fund flows JPMorgan offers managed accounts and retirement products Its primary principle is to understand the needs of its clients and advice the best investment solutions for surplus returns Also JPMorgan is one of the best financial management companies in the world It has a legacy of investment management since 1865 The company pioneered innovative inflation protected municipal products J P Morgan managed 1 71 billion of assets as of Sep 30 2018 The fund family has offices in more than 30 countries Below we share with you three top ranked JPMorgan mutual funds Each has earned a Strong Buy and is expected to outperform its peers in the future Investors can JPMorgan Intrepid Value A seeks appreciation of capital for the long run The fund invests a large chunk of its assets in equity securities of large and mid cap companies that have attractive valuations JPMorgan Intrepid Value A has one year annualized returns of 5 JIVAX has an expense ratio of 0 83 compared with the category average of 1 00 JPMorgan Intrepid GrowthFund A seeks to offer growth of capital for the long run JIGAX invests primarily in a broad portfolio of equity securities of large and mid cap companies that have high quality and attractive valuations JPMorgan Intrepid Growth Fund A has one year annualized returns of 8 1 Jason Alonzo is one of the fund managers of JIGAX since 2005 JPMorgan Small Cap Growth Fund A invests the lion s share of its assets in securities issued by small cap companies These are companies with market capitalization equivalent to those listed on the Russell 2000 Growth Index stocks and below 4 billion at the time of purchase The fund seeks capital appreciation for the long run JPMorgan Small Cap Growth Fund A has one year annualized returns of 10 8 As of September 2018 PGSGX held 117 issues with 2 11 of its assets invested in Teladoc Health Inc To view the Zacks Rank and past performance of all JPMorgan mutual funds investors can Want key mutual fund info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing mutual funds each week |
JPM | Wells Fargo WFC Plans To Eliminate 1 000 Job Positions | Wells Fargo Company NYSE WFC plans to cut nearly 1 000 jobs in its consumer lending and payments and virtual solutions units The news was first reported by Reuters This move is part of the company s larger workforce reduction plan announced earlier this year Tim Sloan the bank s chief executive officer announced plans of reducing headcount by up to 10 by 2020 in order to streamline operations In fact Tom Goyda a spokesman for the company informed that these job cuts are part of Wells Fargo s effort to focus its business on evolving customer preferences the accelerating adoption of digital self service capabilities and operational excellence and efficiency Notably the majority of the employees who are likely to lose their jobs have received 60 day notices However some of those employees who have only received pre notices to date are likely to get a 60 day notice sometime next year Of the total cuts nearly 900 are in Wells Fargo s home lending unit It reflects decreases in the total volume of applications as well as the number of customers in default While these job cuts are expected to be spread across the entire United States most of these are likely to be concentrated in Des Moines IA as it is expected to witness nearly 400 layoffs Almost 111 cuts are expected to take place in Fort Mill SC Goyda stated We are committed to retaining as many team members as possible and will do everything we can to help them identify other opportunities within Wells Fargo Ultimately these job cuts will help the bank reach its final goal of eliminating 4 billion of expenses by 2020 Apart from this in order to become more efficient the bank plans to reduce its branch count by about 800 by 2020 and sell non core businesses Despite taking cost saving efforts Wells Fargo has been facing many challenges This in turn has led to continued rise in expenses over the past few years Notably non interest expenses recorded a five year 2013 2017 CAGR of 4 6 with the trend continuing into the first three quarters of 2018 as well In fact the company s bottom line is expected to continue to be hurt in the near term primarily due to higher legal expenses related to the sales scam and other litigation issues Shares of this Zacks Rank 3 Hold company have lost 13 so far this year compared with the s decline of 7 9 A few better ranked stocks from the finance space are E TRADE Financial Corp NYSE C Citigroup Inc NYSE C and JPMorgan Chase Co NYSE JPM E TRADE Financial s share price has increased nearly 54 in the past two years For 2018 its earnings estimates have been revised 6 9 upward over the past 60 days The stock currently sports a Zacks Rank 1 Strong Buy You can see Over the past 60 days Citigroup has witnessed an upward earnings estimate revision of 1 8 for the current year Its shares have gained 16 5 in the past two years It currently carries a Zacks Rank 2 Buy Presently JPMorgan also carries a Zacks Rank of 2 Its earnings estimates for 2018 have been revised 1 4 upward over the past 60 days Shares of the company have gained 41 1 in the past two years Today s Stocks from Zacks Hottest StrategiesIt s hard to believe even for us at Zacks But while the market gained 21 9 in 2017 our top stock picking screens have returned 115 0 109 3 104 9 98 6 and 67 1 And this outperformance has not just been a recent phenomenon Over the years it has been remarkably consistent From 2000 2017 the composite yearly average gain for these strategies has beaten the market more than 19X over Maybe even more remarkable is the fact that we re willing to share their latest stocks with you without cost or obligation |
JPM | Focus On 3 Small Cap Growth Mutual Funds For Solid Returns | Small cap growth funds are natural choices for investors with a high risk appetite when capital appreciation over the long term takes precedence over dividend payouts These funds focus on realizing an appreciable amount of capital growth by investing in stocks that are projected to rise in value over the long term Meanwhile small cap funds are good choices for investors seeking diversification across different sectors and companies Small cap funds generally invest in companies having market cap lower than 2 billion The companies smaller in size offer growth potential and their market capitalization may increase subsequently Also due to their less international exposure small cap funds offer higher protection than their large and mid cap counterparts against any global downturn Below we share with you three top ranked small cap growth mutual funds Each has earned a Strong Buy and is expected to outperform its peers in the future Investors can BlackRock Small Cap Growth Fund invests a major portion of its assets in equity securities of small cap domestic companies According to CSGEX advisors companies with market cap similar to those included on the Russell 2000 index are considered small cap BlackRock Small Cap Growth Fund has one year annualized returns of 6 1 CSGEX has an expense ratio of 0 75 compared with the category average of 1 29 MassMutual Select Small Cap Growth Equity Fund invests a large chunk of its assets in equity securities of companies whose market cap is similar to those included on the S P SmallCap 600 index or the Russell 2000 index The fund may also invest around one fifth of its assets in foreign companies including those engaged in emerging markets MassMutual Select Small Cap Growth Equity R5 has one year annualized returns of 10 1 Kenneth L Abrams is one of the fund managers of MSGSX since 2001 JPMorgan NYSE JPM Small Cap Growth Fund A invests a huge part of its assets in securities issued by small cap companies These are companies with market capitalization equivalent to those listed on the Russell 2000 Growth index stocks and below 4 billion at the time of purchase The fund seeks capital appreciation for the long run JPMorgan Small Cap Growth Fund A has one year annualized returns of 10 8 As of September 2018 PGSGX held 117 issues with 2 11 of its assets invested in Teladoc Health Inc To view the Zacks Rank and past performance of all small cap growth mutual funds investors can Want key mutual fund info delivered straight to your inbox Zacks free Fund Newsletter will brief you on top news and analysis as well as top performing mutual funds each week |
JPM | Top Stock Picks For The Week Of Nov 19 2018 | Planet Fitness Inc NYSE PLNT operates over 1600 fitness clubs in the United States Because it is solely a domestic play it isn t subject to the tariff or trade war issues facing other growth companies like those in technology Shares are still up 54 year to date and got a boost after the third quarter earnings report where it beat the estimate again This is a growth play as the stock has a forward P E of 44 Planet Fitness is currently a Zacks Rank 3 Hold
JP Morgan Chase Co NYSE JPM is one of the largest banks in the United States The big banks are cheap JP Morgan trades with a forward P E of only 11 9 It s not surprising that Warren Buffett s Berkshire Hathaway NYSE BRKa bought the stock in the third quarter Earnings are expected to rise 35 in 2018 and another 9 in 2019 JP Morgan is a Zacks Rank 2 Buy
Should these two companies be on your investing short list Find out in this week s video
Looking for Stocks with Skyrocketing Upside Zacks has just released a Special Report on the booming investment opportunities of legal marijuana Ignited by new referendums and legislation this industry is expected to blast from an already robust 6 7 billion to 20 2 billion in 2021 Early investors stand to make a killing but you have to be ready to act and know just where to look |
MS | Morgan Stanley prefers Associated British Foods over Inditex | Morgan Stanley NYSE MS lifts Associated British Foods LON ABF OTCPK ASBFY ASBFF to an Overweight rating due to the low valuation it says is being applied to the Primark business in comparison to Inditex OTCPK IDEXY We see AB Foods and Inditex as the quality names in our coverage universe Both have sold off significantly in recent months but we believe that it is AB Foods rather than Inditex where this has created a buying opportunity we think profits at Primark are likely to inflect positively over the next 12 months whereas we see no sign of the foreign exchange headwinds that are hampering Inditex abating Associated British Foods ended the day up 3 26 in London on the tail of the MS upgrade Now read |
MS | Japan retail sales rise in February suggest growing consumer confidence | By Stanley White TOKYO Reuters Japan s retail sales rose in February as shoppers spent more on food drinks and clothes suggesting rising wages and a tight labour market are supporting consumer confidence The 1 6 percent annual increase in retail sales in February was slightly less than the median estimate for a 1 7 percent annual increase and follows a revised 1 5 percent annual increase in January Rising consumer spending makes it more likely that consumer prices will rise in the future which could help the Bank of Japan reach its elusive 2 percent inflation target although its ultra easy monetary policy will still be in place for some time Consumer spending looks like it is at the beginning of a mild recovery said Hiroshi Miyazaki senior economist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities The labour market is improving which is supportive There is a dip in durable goods spending but spending on other items is gaining some momentum Spending on food and drinks rose 2 3 percent in February from a year ago data from the trade ministry showed on Thursday picking up from January s 2 0 percent annual increase Spending on clothes rose an annual 0 3 percent in February rebounding slightly from a 0 5 percent annual decline in January On the negative side spending on cars fell an annual 2 1 percent in February deepening a 0 3 percent annual decline in January Spending on electronics which includes durable goods such as washing machines and refrigerators rose 4 6 percent year on year in February slower than a 5 2 percent year on year increase in January Big Japanese companies agreed earlier this month at annual negotiations with labour unions to raise wages for a fifth year This wage hike could help consumer spending to boost Japan s stubbornly slow inflation but many companies likely fell short of Prime Minister Shinzo Abe s goal of increasing wages by 3 percent or more Japan s jobs to applicants ratio a measure of labour demand is forecast to have risen to the highest in four decades in February The data is due on Friday The nationwide core consumer price index which includes oil products but excludes volatile fresh food costs rose 1 0 percent in February from a year earlier matching the median estimate data last week showed
However a narrower measure of consumer prices that excludes fresh food and energy rose an annual 0 5 percent in February highlighting the snail s pace of underlying inflation |
MS | Rocket science will Inmarsat s wi fi in the sky pay off | By Tricia Wright LONDON Reuters A satellite company wants to bring reliable internet to airline passengers worldwide But some investors don t seem to be buying it Inmarsat s mission to bring wi fi to passenger jets did instill great faith in some fund managers But competition has become fierce as cheap financing funded an explosion of new capacity in the sky and the worry is the project will not be as lucrative as once hoped It is also difficult to model the payoff from Inmarsat s big investments Broker Berenberg put the firm s spend in recent years on four of its Global Xpress high bandwidth global mobile network satellites at about 1 6 billion Inmarsat established in 1979 to enable ship to shore communication and distress calls has reduced its dividend to plough money into wi fi for the world s airlines Its shares have slumped some 60 percent in the last two years more than rivals SES and Eutelsat to their lowest since late 2008 The company promises higher quality broadband internet than its competitors and seamless connectivity convinced that far more passengers will sign up if they get what they ve paid for a connection that stays strong and doesn t cut out But sceptics note free wi fi is now commonplace on the ground from coffee shops to airports and consumers could expect the same for in flight connectivity IFC once the novelty wears off It would not be the first time a communications company spent heavily on infrastructure only to see the promised returns evaporate because of weak pricing power They never get off the treadmill of capex said Eric Moore an income fund manager at Miton Moore looked at Inmarsat lots of times but says he has always been a bit phobic The bullish case for Inmarsat lies in its focus on mobility When Inmarsat s equipment aboard a moving plane goes out of range of one of its satellite beams it quickly finds the next Some services can struggle to provide a smooth handover Inmarsat s Chief Executive Rupert Pearce said on March 9 that the company had about 30 percent of the IFC market with systems on 1 300 aircraft due to go into service over the next two years We have established a strong presence from which to move forward and become the market leader he said as the company presented annual results More than 80 airlines offer in flight wi fi said Routehappy which provides information on flight amenities in January On some aircraft Turkish Airlines offers free wi fi to certain customers those flying in business class for example Passengers in economy class pay 9 99 per hour for the service or 14 99 for a 24 hour package Emirates offers 20 MB of wi fi for free On Norwegian free wi fi is available on many flights HARD TO QUANTIFY Morgan Stanley NYSE MS in a March 13 research note pointed to an Inmarsat document on illustrative cash flows from a typical IFC agreement with airlines The document forecast negative cash flow for at least three years worsening in the second and third year before turning positive in Year X However management did not comment on when Year X will materialise the broker said Jonathan Sinnatt a representative of Inmarsat in London said the company would not comment on a broker s note There are few European equities that appear to divide investors opinion like Inmarsat Simon Murphy who runs the Old Mutual UK Equity Fund exited the stock late in 2016 Allianz DE ALVG Global Investors UK Mid Cap fund sold its position last year Neither Murphy nor the co manager of AllianzGI s UK Mid Cap fund Matthew Hall are tempted to get back in Their concerns partly relate to the level of capacity in the satellite industry Views differ even within Allianz Global Investors itself Its chief investment officer for UK equities Simon Gergel has gradually added to an existing Inmarsat holding in his Allianz UK Equity Income Fund saying its optimised mobile communications network sets it apart and there was tremendous demand growth to fill the new capacity They ve got 1 300 aircraft signed up and each of these is expected to pay about 150 000 a year so you re talking about 200 million of revenue annualised at some point in the future said Gergel Despite the dividend cut Inmarsat s leverage net debt to earnings before interest taxes depreciation and amortization is still rising Morgan Stanley said The broker does not see the rebased dividend covered by free cash flow until 2021 The satellite industry is a tough area to map out Demand can change completely in the several years it takes to build a satellite put it into space and get a network going Launch failures are mostly insured against but can add complications Tech firms are scouting around for new satellite ventures or alternative airborne communications projects Softbank invested in low altitude satellite company OneWeb Google s Project Loon is exploring communications balloons and Facebook NASDAQ FB is pushing solar powered telecom drones for remote regions Inmarsat cut its final dividend for 2017 to 12 cents a share giving a total payout for the year of 33 62 cents down from 54 cents in 2016 The dividend for 2018 will be 20 cents The fear is that other people are trying to launch satellites to produce a global network but saying one thing having the capital to do it and having the timeframe to do it means that Inmarsat have got the first mover advantage in terms of their global infrastructure said David Smith who manages the Henderson High Income Trust which holds Inmarsat shares |
MS | Explainer Spotify listing could be roller coaster for retail investors | By Chuck Mikolajczak and Noel Randewich NEW YORK SAN FRANCISCO Reuters Spotify Technology SA s unusual stock market debut on Tuesday levels the playing field for individual investors who are normally at a disadvantage in traditional listings but could also make them more vulnerable to swings in the music streaming service s share price The Swedish company is skipping a conventional initial public offering and listing shares directly on the New York Stock Exchange NYSE with almost none of the safeguards provided by investment banks that would normally manage the process Spotify is foregoing the security of having bankers with a financial interest in its success which will save it millions of dollars in fees to underwriters The direct listing gives Spotify insiders a chance to sell their shares but the company will not be selling any new stock to raise money In a normal IPO underwriters promote a company to institutional investors weeks in advance using roadshows and meetings to gauge appetite for the stock They use that information to build a book and settle on an IPO price typically the evening before the shares start trading on the exchange WHO GETS FIRST DIBS Spotify s plan introduces an extra degree of uncertainty over how initial trading in its stock will unfold And a slump in shares of Facebook Inc NASDAQ FB and other technology related stocks this week means investors may be less willing to bet on the listing The direct offering should give retail investors opportunities to buy in at the same price as hedge funds and other big investors who normally get first dibs on IPOs thanks to their relationships with underwriters Spotify has warned in filings it expects the popularity of its service to attract outsized interest from individual investors which could possibly fuel volatility and set an unsustainable trading price There will be people right from the beginning who say I want to own this at any price said Tim Ghriskey chief investment strategist at Inverness Counsel in New York I think you ll see a see saw action We ll be looking for the dips In a normal IPO underwriters act as so called stabilization agents that can step in and buy shares if trading is weak AT WHAT PRICE Spotify shares traded between 95 and 127 50 in private transactions in February according to its filing giving the company a value of around 20 billion RBC analyst Mark Mahoney kicked off analyst coverage of Spotify on Friday with an outperform rating and a share price target of 220 Robinhood a smartphone stock trading app popular with young people on Thursday started letting customers place orders to buy Spotify shares but only through so called limit orders where the buyer specifies a maximum price Robinhood s clients have searched for Spotify about 14 000 times a day in recent weeks according to a Robinhood spokesman Fidelity s online brokerage plans to let clients enter orders for Spotify shares starting at 7 00 a m EDT on Tuesday 2 1 2 hours before the stock market opens a spokesman said Jake Dollarhide chief executive officer of Longbow Asset Management in Tulsa Oklahoma plans to buy shares of Spotify on Tuesday but is wary of volatility We ll buy 25 percent of what we want and then set limit orders for the rest over the next few weeks he said WHO WILL MANAGE THE OFFERING Spotify has hired Citadel Securities as a market maker to set the opening price on the NYSE on Tuesday with help from Morgan Stanley NYSE MS but their roles will be limited Early on Tuesday they will analyze investors buy and sell orders and then set an opening price for the stock
Citadel will not have the benefit of a price set by underwriters the day before as would happen in a normal initial stock offer |
JPM | Worried a recession is coming U S online lenders reduce risk | By Anna Irrera NEW YORK Reuters U S online lenders such as LendingClub Corp Kabbage Inc and Avant LLC are scrutinizing loan quality securing long term financing and cutting costs as executives prepare for what they fear could be the sector s first economic downturn A recession could bring escalating credit losses liquidity crunch and higher funding costs testing business models in a relatively nascent industry Peer to peer and other digital lenders sprouted up largely after the Great Recession of 2008 Unlike banks which tend to have lower cost and more stable deposits online lenders rely on market funding that can be harder to come by in times of stress Their underwriting methods also often include analysis of non traditional data such as education level of borrowers While platforms see that as a strength it has yet to be tested in times of crisis This is very top of mind for us LendingClub Chief Executive Officer Scott Sanborn said in an interview referring to the possibility of a recession It s not a question of if it s when and it s not five years away Sanborn and executives at some half a dozen other online lenders who spoke to Reuters said worsening economic indicators and forecasts have made them more cautious Their worries are the latest sign that fears a U S downturn is nigh are growing Economists polled by Reuters in March saw a 25 percent chance of U S recession over the next 12 months More recently some executives said a Federal Reserve decision to halt interest rate hikes reinforced those fears We were seeing economists bringing up some warning signs and we were following the Fed signals and that they were becoming more dovish said Bhanu Arora the head of consumer lending at the Chicago based lender Avant We wanted to be prepared and ready To position itself better for recession Avant came up with a plan late last year that includes tightening credit requirements for segments it identified as higher risk Arora said To be sure the executives said they are not yet seeing glaring signs of trouble in their loan books A downturn is also far from certain On Friday JPMorgan Chase Co NYSE JPM the country s largest bank by assets eased fears of a recession after it posted better than expected quarterly profits driven by what it described as solid U S economic growth If a downturn hits however it would separate the stronger online lenders from the weaker ones All these different platforms say they can underwrite in unique ways said Robert Wildhack an analyst at Autonomous Research This will be the first chance we have to see who is right and who might have been taking shortcuts TIGHTENING CREDIT In February LendingClub one of the pioneers of peer to peer lending offered growth projections for 2019 that fell short of Wall Street expectations partly a sign of growing caution LendingClub does not provide loans directly to consumers but earns fees by connecting borrowers and investors on its online marketplace Sanborn said the company has gotten more stringent about credit standards for borrowers on its platform and is attracting investors with broader risk appetites in case the more cautious participants pull back It is also outsourcing more of its back office operations and relocating some staff to Utah from San Francisco to reduce expenses he said SoFI an online lender that refinances student loans and then securitizes them has been focusing on making its portfolio more profitable even if that may mean lower origination volumes CEO Anthony Noto told reporters in late February EXTRA CUSHION Some companies are building more room on their balance sheets and trying to secure funding farther into the future Small business lender BlueVine Capital Inc for example is seeking credit facilities with extended durations Given a choice to pay 10 basis points less or get a line of credit that lasts an additional year BlueVine would choose the latter said Eyal Lifshitz the company s chief executive We are making sure we are locking in capital for longer periods of time and from providers that we trust and we know are going to be around Lifshitz said BlueVine offers invoice factoring where companies exchange future cash flows for current financing as well as lines of credit that last up to a year It is postponing the launch of longer term products because of economic concerns Lifshitz said Atlanta based Kabbage which lends to small businesses recently completed a 700 million asset backed securitization The company said it raised the funding to meet growing borrower demand but also partly as preparation in case of worsening economic conditions We have been waiting for the next recession to happen for the past five years said Kathryn Petralia co founder and president More people feel confident that it s imminent |
MS | Here s Why Barracuda Networks CUDA Stock Plunged 16 Today | On Tuesday shares of cloud enabled security provider Barracuda Networks NYSE CUDA plunged down around 16 for most of the day after the company reported fourth quarter fiscal 2017 results yesterday
Barracuda reported earnings of 8 cents per share this number excludes 2 cents from non recurring items surpassing the Zacks Consensus Estimate of 5 cents per share Revenues grew 7 year over year to 89 3 million also beating our consensus estimate of 88 million Subscription revenue increased 12 to 69 4 million representing 78 of total revenue and appliance revenue was 19 9 million
The number of active subscribers grew roughly 15 year over year to reach 321 000 Gross billings were 103 2 million compared with 95 8 million in the year ago period Billings for core products increased 21 to 63 8 million
What hurt CUDA stock though was Barracuda s disappointing guidance and a declining renewal rate During the company s it projected first quarter revenues of 90 million to 92 million on non GAAP earnings of 17 cents to 19 cents per share vs consensus of 91 1 million on earnings of 18 cents per share Barracuda also guided gross billings of 103 million to 105 million for the upcoming quarter
Barracuda s declining renewal rate is also a concern to investors For Q4 the dollar based renewal rate was 89 down from 92 in the prior year period As a result analysts at Piper Jaffray and Morgan Stanley NYSE MS to 29 from 32 and to 24 from 25 respectively
Currently CUDA is a 3 Hold on the Zacks Rank
Sell These Stocks Now Just released today s 220 Zacks Rank 5 Strong Sells demand urgent attention If any are lurking in your portfolio or Watch List they should be removed immediately These are sinister companies because many appear to be sound investments However from 1988 through 2016 stocks from our Strong Sell list have actually performed 6X worse than the S P 500 |
MS | Take Five World markets themes for the week ahead | LONDON Reuters Following are five big themes likely to dominate thinking of investors and traders in the coming week and the Reuters stories related to them 1 WAR CRIES If fears of a trade war between the world s two largest economies the United States and China weren t enough to set the nerves racing the two sides are butting against each other in the South China Sea again and Donald Trump has just tossed in the threat of another U S government shutdown Next week will probably see a drama involving all three and possibly other elements too that we don t even know about yet However some experienced analysts suggest that the rout in stocks may not point to panic over a full scale trade war GRAPHIC Global stocks sell off 2 HUNG DRAWN AND QUARTERED The first quarter draws to a close and what a quarter it has been Investors have had a lot thrown at them from the biggest ever rise in stock market volatility to rapidly escalating tensions over global trade deepening tumult in the White House and tech sector wobbles The market melt up they all talked about in January has melted away the Dow and S P are down for the year and the outlook for Q2 is a great deal more uncertain Global trade tensions are now infecting investor sentiment and risk appetite there are signs that growth has peaked particularly in Europe rising dollar interbank rates show no sign of reversing and the global liquidity pool will shrink this year Will the bears continue to gain the upper hand in Q2 or will the bulls charge again GRAPHIC Q1 returns winners losers 3 GROWING TO PLAN The final U S government read on fourth quarter GDP on Wednesday will come hot on the heels of the Federal Reserve s first interest rate hike of the year In theory it should be reassuring The United States is a fairly closed economy and in the fourth quarter Donald Trump was dishing out tax cuts not threatening trade wars The U S Commerce Department also said on Friday that new orders for key U S made capital goods rebounded more than expected last month and shipments of core capital goods saw the biggest advance since December 2016 Other realtime data though is not so encouraging An Atlanta Federal Reserve model which updates weekly is now forecasting Q1 GDP increasing at an annualized rate of 1 8 percent At the start of March it was churning out numbers around 3 5 percent GRAPHIC U S GDP 4 SELL EUROPE High expectations for European stocks in 2018 have not been met Euro zone and UK business confidence data due out next week will either inflame or soothe concerns that the region s economic momentum may be starting to wane Morgan Stanley NYSE MS equity strategists say Europe is now seeing record outflows versus the United States and even the popularity of French President Emmanual Macron elected last year with a strong mandate to reform rigid labor markets has now hit an all time low in the polls The French CAC 40 share index is now down 5 percent from when Macron won power last May though that is still better than the near 7 percent the pan European Stoxx 600 has lost GRAPHIC Economic surprises euro zone vs U S 5 UNFRIENDED The Facebook NASDAQ FB shock has been a hugely significant moment in this long running bull market Tech and internet stocks such as the fabled FAANGs and BATs have dominated and driven the equity rally of the past 2 3 years mainly because the digital revolution underlying the boom in those companies was seen as largely impervious to shifting political winds or even ebbs and flows in the economic cycle In the long run that may still be true But Facebook s travails and questions over the use of Big Data more generally or at least the advertising model underlying many of these companies has cast some doubt over whether that progress is as linear as market pricing suggests Next week may well be all about the growls coming from governments and their regulators on how far they will go to rein in the power of social networks Mark Zuckerberg already has a long list of what are not exactly friend requests to testify in front of various countries lawmakers
GRAPHIC Unfriended |
MS | Susquehanna Downgrades AMD on Bitmain Challenge | Global trading and tech company Susquehanna its rating for GPU maker AMD from neutral to negative reducing its share price target from 13 to 7 50 which is about 29 below the Friday closing price The main reason for the downgrade is strong competition from crypto mining equipment producer Bitmain Susquehanna s analysts have also cut their target price for Nvidia from 215 to 200
The Wall Street company said the share price of AMD and Nvidia would fall given that specialized cryptocurrency mining chips will be in trend this year with Bitmain leading the charge
On Monday Susquehanna analyst Christopher Rolland said in a note to clients
During our travels through Asia last week we confirmed that Bitmain has already developed an ASIC application specific integrated circuit for mining Ethereum and is readying the supply chain for shipments in 2Q18 While Bitmain is likely to be the largest ASIC vendor currently 70 80 of Bitcoin mining ASICs and the first to market with this product we have learned of at least three other companies working on Ethereum ASICs all at various stages of development
Cryptocurrency miners apply graphics processing units GPUs from AMD and Nvidia to generate new coins The mining process involves solving specific algorithms to create new blocks in the blockchain and get rewarded with new coins
Bitmain is the market leader in the Bitcoin space offering ASIC products that are more powerful than AMD s or Nvidia s GPUs
Ethereum has been considered a better alternative for using GPUs instead of the expensive ASICs but Rolland anticipates that Bitmain s specialized devices for Ethereum mining will hit demand for GPUs this year Thus he downgraded AMD and lowered the share price target and also reduced the target price for Nvidia but left its rating at neutral As Rolland put it
Nvidia has a stronger and more durable gaming franchise which would help it work through this potential Ethereum related unwind
AMD share price ended the Monday session down 1 79 while Nvidia added 4 94
Last year Morgan Stanley NYSE MS AMD on concerns that crypto mining would fade in 2018 reducing demand for its GPUs |
MS | Bright Horizons Family Solutions announces pricing of secondary offering | Bright Horizons Family Solutions NYSE BFAM announced the pricing of the previously announced underwritten public offering of 4 606 062 shares of its common stock at a price to the public of 102 70 per share The Company has agreed to repurchase from the underwriter 0 8M shares and only 3 806 062 shares of the 4 606 062 shares of common stock being sold by the Selling Stockholders will be sold to the public The Selling Stockholders will receive all of the net proceeds from this offering The offering is expected to close on March 29 Morgan Stanley NYSE MS is acting as the sole underwriter for the offering Press ReleaseNow read |
JPM | JPMorgan Rises 3 | Investing com JPMorgan NYSE JPM rose by 3 39 to trade at 109 83 by 09 32 13 32 GMT on Friday on the NYSE exchange
The volume of JPMorgan shares traded since the start of the session was 1 57M JPMorgan has traded in a range of 108 88 to 109 85 on the day
The stock has traded at 109 8400 at its highest and 104 2500 at its lowest during the past seven days |
JPM | JPMorgan s solid quarterly profit beats back recession fears | By Elizabeth Dilts and David Henry Reuters JPMorgan Chase Co NYSE JPM posted a better than expected quarterly profit on Friday easing fears that slowing economic growth could weigh on its results The largest U S bank by assets showed strength across its businesses in the first quarter driven by what Chief Executive Jamie Dimon described as solid U S economic growth moderate inflation and strong consumer and business confidence U S bank stocks have underperformed the broader market in recent months on fears of an impending recession with economists and investors citing concerns over a flattening yield curve and slowing housing market But bank executives have downplayed concerns pointing to continuing loan growth There is no law that says it has to stop Dimon said when asked if the decade long economic expansion is due to turn into a recession I wouldn t count on there having to be a recession in the short run Loans in JPMorgan s consumer banking division rose 4 percent from a year ago Overall revenue rose 4 7 percent to 29 85 billion Analysts had expected revenue of 28 44 billion according to IBES data from Refinitiv We ve been generally quite optimistic about the outlook for the economy Chief Financial Officer Marianne Lake told reporters on a call to discuss the results It doesn t diminish the fact that there are a number of risks out there Right now we don t see that playing out in the data The bank s net interest margin a key measure of loan profitability edged up only 0 02 percent point from the fourth quarter a slower pace of improvement than in the two previous quarters Investors have been concerned that net interest margins may have peaked for the banks since the Federal Reserve has signaled it is unlikely to raise short term rates this year and the spread between short and longer term rates has narrowed While Lake did not directly answer if the lending spread had peaked after fueling profit growth for years she said it will likely not get any better in the coming quarters The bank expects it to remain constant she said Unlike Wells Fargo NYSE WFC Co the other big U S bank to report earnings on Friday JPMorgan stood by its outlook for net interest income a key driver of profits which it expects to increase about 4 percent this year over 2018 Wells said it now expects its NII to decline 2 to 5 percent instead of landing in a range of plus or minus 2 percent The change sent Wells shares down as much 2 4 percent Lake also reiterated the bank s 17 percent projection for return on average tangible common equity and said she does not anticipate the bank will raise it this year Lake downplayed questions about whether the bank s 90 million provision for credit losses in its commercial banking segment in the first quarter was a reason for concern These downgrades were idiosyncratic It was a handful of names of diverse commercial and industrial borrowers she said We are not seeing signs of deterioration In the bank s capital markets business equity underwriting fell 13 percent and bond trading revenues fell 8 percent from the year ago quarter Bank executives had signaled earlier in the quarter that capital markets revenue could fall by a greater amount Shares of the bank were up 3 6 percent in morning trading The bank said net income rose to a record 9 18 billion or 2 65 per share in the quarter ended March 31 from 8 71 billion or 2 37 per share a year earlier Net interest income rose 8 percent to 14 60 billion boosted by interest rate increases since the first quarter of last year
Analysts had estimated earnings of 2 35 per share according to IBES data from Refinitiv |
MS | Technically Speaking When Bulls Collide | Prior to the election last year I penned an article entitled which discussed the potential for a market melt up at that time To wit
As shown below the current price action continues to consolidate in a very tight range which will resolve itself in very short order A breakout to the upside will clear the markets for a further advance However while the technicals suggest a move to 2400 it is quite possible it could be much less Notice in the bottom section of the chart below Turning the current sell signal back into a buy signal at such a high level does not give the markets a tremendous amount of runway
Of course since then the market has completed the majority of that advance I have updated that chart below through Monday s open
Despite rising the off the coast of the Korean peninsula or the looming over a debt ceiling fight nothing seems to concern the markets much
The market remains in a bullish trend and short term moving averages continue to provide support against a deeper correction At the same time complacency remains high leading to Wall Street pushing estimates ever higher In fact you don t have to go far to find the bullish case now being made for S P 2700 3000 as per
The cyclical upturn that began a year ago has less to do with President Trump and more to do with the global business cycle that bottomed in 1Q 2016 Trump simply turbocharged the cycle and stoked animal spirits on Wall and Main Street with tangible effects on the real economy and markets The title of our year ahead outlook as CIO for Morgan Stanley Wealth Management on January 1st was Are You Ready for Euphoria based on Sir John Templeton s four stages of the investment cycle
Bull markets are born in pessimism grow in skepticism mature in optimism and die in euphoria
The end of the cycle is often the best Think 1999 or 2006 07 In a low return world investors cannot afford to miss it
The chart below projects the move to 2700 from current levels as euphoria takes hold A move to 3000 as suggested would only exacerbate the deviation The data in the orange box is an extrapolated price advance using historical market data The dashed black line is the 50 week moving average because BlackLinesMatter and the bar chart is the deviation of the markets from price average
Here s the problem
the predicted surge in earnings was based upon corporate tax reform which would boost bottom lines earnings per share
The expectations of a 1 31 boost to earnings for each percentage point of reduction in tax rates is also a bit squishy The premise WAS based on the expected earnings in 2017 of 131 00 for the entirety of the S P 500 The 1 31 increase is simply 1 of 131 00 in total operating earnings
Since actual earnings for 2016 was 94 54 share this implies a 0 9454 increase per point or an earnings boost of 18 91 9454 20 at best which would bring total 2017 estimates to 113 45 This is 5 38 less than what is currently estimated for 2017 and brings into serious question of 2018 estimates of 130 03
Based on this math forward valuations assuming prices don t move from yesterday s close would be 20 63x This is far more expensive than the 17x earnings expected previously But unfortunately the news is already getting worse as estimates have continued to slide just in the last month
Here s the problem
While Morgan Stanley is suggesting earnings will rocket higher to 142 share in the next 12 months to support the ongoing bullish advance to 2700 the catalyst for that surge has been put on hold for now
While there is little doubt that bullish hopes certainly remain it is worth noting in the second chart above the market has issued a weekly sell signal from a high level which has previously preceded temporary weakness in the market Given the current extension above the longer term moving average green dashed line a correction to 2250 currently would be consistent with previous corrections following a similar sell signal While such a correction would only be roughly 4 4 it would not only wipe out all of the gains of the year so far but would also feel much worse given the currently high levels of investor complacency
Bond Bulls Emerge
The most interesting note as of late has been the quiet death of the bond bears
Back in January as the 10 year Treasury rate pushed towards 2 6 based on the coming reflationary resurgence of inflation and economic growth from the Trump Agenda Wall Street trumpeted the death of bonds
This is an argument I have continued to debunk since June 2013 but
There is an assumption that because interest rates are low that the bond bull market has come to its inevitable conclusion The problem with this assumption is three fold
All interest rates are relative With more than 10 Trillion in debt globally sporting negative interest rates the assumption that rates in the U S are about to spike higher is likely wrong Higher yields in U S debt attracts flows of capital from countries with negative yields which push rates lower in the U S Given the current push by Central Banks globally to suppress interest rates to keep nascent economic growth going an eventual zero yield on U S debt is not unrealistic
The coming budget deficit balloon Given the lack of fiscal policy controls in Washington and promises of continued largess in the future the budget deficit is set to swell back to 1 Trillion or more in the coming years This will require more government bond issuance to fund future expenditures which will be magnified during the next recessionary spat as tax revenue falls
Central Banks will continue to be a buyer of bonds to maintain the current status quo but will become more aggressive buyers during the next recession The next QE program by the Fed to offset the next economic recession will likely be 2 4 Trillion which will push the 10 year yield towards zero
Not surprisingly as the current administration continues to fumble economic policy agendas the rotation out of the Trump Trade back into safety has picked up steam As shown below interest rates have now triggered a weekly sell signal or more notably a weekly buy signal for bonds
A break below support at 2 3 which will likely coincide with any type of debt ceiling showdown will likely push rates back towards 2 or lower Importantly the rotation from the reflation trade back into the risk off trade suggests a loss of confidence in the potential for fiscal policy reforms As noted by recently
More slow economic growth That is what the bond market seems to be saying about the future growth of the US economy
Of course with 2016 GDP slipping to just 1 6 annual growth and Q1 2017 targeted to just 0 6 currently there is little ability for interest rates to move substantially higher This is particularly the case with consumers currently facing a severe shortfall between wage growth and their current cost of living
At current levels even small changes to borrowing rates can have a very quick adverse effect on the 70 of the economy that borrows money to maintain their standard of living
When Bulls Collide
So with this backdrop of weakening underpinnings of the Trump Trade but exuberant hopes of a continued bull market run comes the potential collision between markets
It is highly unlikely that bond bulls and stock bulls will both be right
One thing is true as shown below prior to 2012 the direction of rates closely dictated the moves of the equity markets However as the BOJ BOC BOE ECB and the FED engaged in massive liquidity programs in an attempt to spark inflation pressures and economic growth as shown below the markets became somewhat detached from the message bonds were sending With the Fed now hiking rates and tightening monetary policy it is quite likely bonds are once again signaling a warning to stock investors
This detachment between fundamentals and monetary policy has also driven the stock bond ratio to historical heights which has previously not ended well for stock investors More importantly the acceleration of the ratio should also raise an alarm
As noted by
Over short periods of time the relative performance of stocks and bonds fluctuates around a mean of about zero When stocks outperform bonds by a large amount over a short period that period of outperformance reverts back towards zero either through time or performance While we can t possibly predict the performance of either stocks or bonds what we can fairly confidently deduce is that further stock strength relative to bonds is unlikely over the coming months
This is a very good point and my suspicion is that he will be right
So while I am still bullish on the markets short term few days to weeks I am becoming much more cautious Over the longer term few weeks to several months I am much more bearish
Hedging risk continues to remain a prudent course of action |
C | PayPal funds academic research on illegal firearms transactions | By Anna Irrera
NEW YORK Reuters PayPal Holdings Inc O PYPL is teaming up with criminologists and experts at several universities to probe the payment systems used in the trafficking of illegal firearms in the United States the company said on Tuesday
The research aims to help financial companies and law enforcement understand what types of payment methods are used to finance illegal transactions and prevent them from taking place PayPal executives said
The effort will be led by the Center on Crime and Community Resilience at Northeastern University and the University of Chicago Crime Lab
The hope is that having a better understanding of illegal gun trafficking will help eradicate gun related violence said Dave Szuchman PayPal s head of global financial crime and customer protection
There haven t been comprehensive studies done he said in an interview
The San Jose California based company bans customers from using its services including popular peer to peer payments app Venmo to buy or sell firearms
The research initiative comes as other large companies including Citigroup Inc N C and Walmart Inc N WMT have tried to address gun safety through financing or sales following numerous mass shootings across the United States in recent years
The research will be led by Dr Anthony Braga director of the School of Criminology and Criminal Justice at Northeastern and an expert on the subject of gun violence and reducing illegal access to firearms
Braga and his team are joined by experts from the University of Chicago Crime Lab the Violence Prevention Research Program at the University of California Davis led by Garen J Wintemute a professor of emergency medicine and Philip J Cook a professor of public policy at Duke University and co director of the NBER Working Group on the Economics of Crime
Among other things the research will examine prices paid for illegally acquired guns how the transactions were financed and how internet sales on the surface deep and dark web facilitate illicit sales The research will also examine international gun trafficking organizations Braga said
We hope to establish a new area of study that could have major policy implications how illegally sourced guns are financed Braga said This is a subject where researchers and policymakers understand very little |
C | Xi Vows China Will Meet Economic Goals and Defeat Virus | Bloomberg Sign up for Next China a weekly email on where the nation stands now and where it s going next
President Xi Jinping pledged that China would meet its economic and social development goals while winning the battle against the deadly coronavirus
We have the ability and confidence not only to defeat the epidemic but also to accomplish the set goals and tasks for economic and social development I believe China will be more prosperous after overcoming this epidemic he told Indonesian leader Joko Widodo in a phone call Tuesday according to the official Xinhua news agency
Xi said authorities were at an important juncture in fighting the virus which has killed over 1 000 people since emerging in December in Hubei province and fueled fears of a broader slowdown for the world s second biggest economy He had urged officials to work together to contain the virus at a rare meeting of top leaders earlier this month saying the outcome would directly impact China s social stability
The call came as Federal Reserve Chairman Jerome Powell told lawmakers that the U S central bank was closely watching the fallout from the outbreak and singled it out among the risks threatening the American and world economies
In particular we are closely monitoring the emergence of the coronavirus which could lead to disruptions in China that spill over to the rest of the global economy Powell said
The Chinese economy is now forecast to grow 5 8 in 2020 under the virus impact according to the median result in a Bloomberg survey That s down from 5 9 last month
The unknown features of 2019 nCoV such as uncertainties about the incubation period false negative results in testing and undetected channels for contagion suggest the turning point will be still days if not weeks away Citigroup Inc NYSE C economists including Yu Xiangrong wrote in a report to clients this week Citigroup has lowered its growth forecast twice in the past two weeks
Stringent and Thorough
Xi s comments to Widodo also known as Jokowi echoed those made when he appeared Monday in Beijing s Chaoyang district wearing a mask and having his temperature taken It was Xi s first time interacting with the public since widespread anger surged following the death of a doctor who had tried to raise the alarm early on about the virus before succumbing to it last Friday
Even as countries around the world suspend air travel to the mainland stop cruise ships from docking and quarantine people arriving from China Xi said in the phone call that his nation would strengthen cooperation on prevention and control measures with others including Indonesia
We hope that countries in the region will work hard to maintain bilateral exchanges and cooperation while making reasonable prevention and control efforts he said
Update with GDP growth forecast and economist comment in the sixth seventh paragraphs |
C | Short Seller Makes His Case Triggering a Rare Feud in Brazil | Bloomberg For three years reinsurer IRB Brasil Resseguros SA has been a darling of analysts and a boon for investors Then came the short seller
Asset manager Squadra Investments said Feb 2 in a 150 page report that it holds a short position in IRB triggering a 24 stock plunge and setting into motion a heated public feud that s the talk of Latin American investment circles Squadra s campaign lopped off about 10 billion reais 2 3 billion in IRB s market value
While fairly common in other parts of the world with high profile bearish cases made by the likes of Muddy Waters and Spruce Point Capital it s rare in Brazil for short sellers to publicly point the finger at a specific company and lay out their rationale so thoroughly
IRB clapped back by filing a claim with Brazil s CVM securities regulator accusing Squadra of stock price manipulation and insider trading a person with direct knowledge of the matter said The CVM confirmed that administrative processes are open without disclosing the content
Squadra founded by Brazilian investor Guilherme Ache and with 3 7 billion reais in assets under management said IRB included one offs in its recurring pre tax income figures IRB pushed back and plans to hire third party firms to vet the numbers It has declared itself the most profitable company in the global reinsurance sector and over the past 12 days has called up banks including Morgan Stanley NYSE MS and Santander MC SAN Brasil to explain how its higher than average return on equity is sustainable
Clashing Over the Numbers
The difference in calculations is stark Whereas IRB reported a pre tax profit of 1 39 billion reais for the first nine months of 2019 Squadra says it actually had a loss of 112 million reais
The recurring profitability of IRB s business is much smaller than what the market believes wrote Rio de Janeiro based Squadra There s a huge discrepancy between the price and value of IRB s shares
The public disparaging marks a change in tack and in fortunes for Squadra While the firm previously said it had shorted a company in the insurance sector it never disclosed the name But with the release of the report this month Squadra revealed that it started betting against IRB in May 2018 adding to the position until the reinsurer became the biggest short wager in its 330 million Squadra Master Long Biased Fund Until now the bet backfired as the stock nearly tripled since mid 2018 through the end of last month
At an impromptu press conference on Tuesday IRB Chief Executive Officer Jose Carlos Cardoso said he was shocked by the recent events and promised to disclose more information in its earnings release scheduled for Feb 19 The company which declined to comment because it s in a quiet period says Squadra s report includes technical errors Squadra didn t reply to requests for comment Valor newspaper was first to report IRB s securities claim against Squadra
Split Opinion
Analysts are divided Citigroup NYSE C and Morgan Stanley have reiterated their buy ratings but XP Investimentos placed the stock under review citing a lack of visibility IRB has 13 buy ratings and four holds according to data compiled by Bloomberg It s never had a sell rating since its initial public offering in 2017
What we heard suggests a buying opportunity Morgan Stanley analysts led by Jorge Kuri wrote in a note last week after reaching out to IRB management about the accusations
Squadra is sticking to its call In a second letter to investors it said new data provided by the company to refute its claims haven t altered its view |
JPM | Why Is JP Morgan JPM Up 2 9 Since Last Earnings Report | It has been about a month since the last earnings report for JPMorgan Chase JPM Shares have added about 2 9 in that time frame outperforming the S P 500
Will the recent positive trend continue leading up to its next earnings release or is JP Morgan due for a pullback Before we dive into how investors and analysts have reacted as of late let s take a quick look at the most recent earnings report in order to get a better handle on the important catalysts JPMorgan s Q3 Earnings Beat on Loans Higher RatesHigher than expected equity trading revenues and rise in demand for loans drove JPMorgan s third quarter 2018 earnings of 2 34 per share which outpaced the Zacks Consensus Estimate of 2 24 The figure was up 33 from the prior year quarter As expected Markets revenues recorded a fall A 17 rise in equity trading income was more than offset by 10 decline in fixed income trading revenues Further home lending business revenues fell 16 year over year mainly due to lower net servicing revenues and production margin compression Further operating expenses increased in the reported quarter Notably investment banking fees were relatively stable with 40 jump in equity underwriting fees offset by decline in advisory fees and debt underwriting fees Decent loan growth driven largely by improved wholesale and credit card loans and rise in interest rates aided net interest income growth The reported quarter also recorded a decline in provision for credit losses Further lower tax rate supported profitability during the quarter Among other positives credit card sales volume was up 12 and merchant processing volume grew 14 Further Commercial Banking average core balances jumped 4 and Asset Management average loan balances rose 12 The overall performance of JPMorgan s business segments in terms of net income generation was decent All segments except Corporate reported a rise in net income on a year over year basis Net income was up 24 from the prior year quarter to 8 4 billion Equity Trading Income Higher Rates Loan Growth Aid RevenuesNet revenues as reported were 27 3 billion up 5 from the year ago quarter Also the top line beat the Zacks Consensus Estimate of 27 2 billion Rising rates loan growth and increase in Markets non interest revenues were the main reasons for the improvement The positives were partially offset by a decline in mortgage banking income Non interest expenses on managed basis were 15 6 billion up 7 from the year ago quarter The rise was primarily due to higher compensation expenses investments in technology and auto loan depreciation Credit Quality ImprovesProvision for credit losses was 948 million down 35 year over year As of Sep 30 2018 non performing assets were 5 0 billion down 18 from Sep 30 2017 Also net charge offs declined 18 year over year to 1 billion Strong Capital PositionTier 1 capital ratio estimated was 13 6 as of third quarter end compared with 14 1 on Sep 30 2017 Tier 1 common equity capital ratio estimated was 12 0 as of Sep 30 2018 down from 12 5 a year ago Total capital ratio came in at 15 4 estimated as of Sep 30 2018 compared with 16 1 on Sep 30 2017 Book value per share was 69 52 as of Sep 30 2018 compared with 66 95 on Sep 30 2017 Tangible book value per common share came in at 55 68 at the end of September compared with 54 03 a year ago 2018 OutlookNII is expected to be roughly 55 5 billion up from 50 billion in 2017 benefiting from loan growth and higher rates Average core loan growth excluding CIB loans is expected to be in the range of 6 7 Further management projects C I loans to grow in the mid single digit rates The new revenue recognition accounting rule is expected to increase non interest revenues by nearly 1 2 billion with the majority of impacts on the Asset Wealth Management segment Excluding this impact non interest revenues are projected to be up 7 8 The new revenues recognition accounting rule is expected to increase expenses by nearly 1 2 billion with the majority of impacts on the AWM segment Excluding this impact JPMorgan expects adjusted expenses to be nearly 63 5 billion As a result of the Tax Cuts and Jobs Act effective tax rate is expected to be nearly 20 This lower effective tax rate is expected to reduce tax equivalent revenues and income tax expenses by 1 2 billion on an annual run rate basis
How Have Estimates Been Moving Since Then
In the past month investors have witnessed an upward trend in fresh estimates
VGM Scores
At this time JP Morgan has a subpar Growth Score of D though it is lagging a bit on the Momentum Score front with an F Following the exact same course the stock was allocated a grade of F on the value side putting it in the fifth quintile for this investment strategy
Overall the stock has an aggregate VGM Score of F If you aren t focused on one strategy this score is the one you should be interested in
Outlook
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising It comes with little surprise JP Morgan has a Zacks Rank 2 Buy We expect an above average return from the stock in the next few months |
JPM | JPMorgan Chase JPM Gains As Market Dips What You Should Know | JPMorgan Chase JPM closed at 109 59 in the latest trading session marking a 0 59 move from the prior day The stock outpaced the S P 500 s daily loss of 0 15 Meanwhile the Dow lost 0 4 and the Nasdaq a tech heavy index 0
Prior to today s trading shares of the biggest U S bank by assets had gained 2 45 over the past month This has outpaced the Finance sector s gain of 0 5 and the S P 500 s loss of 1 27 in that time
Investors will be hoping for strength from JPM as it approaches its next earnings release which is expected to be January 11 2019 On that day JPM is projected to report earnings of 2 24 per share which would represent year over year growth of 27 27 Meanwhile the Zacks Consensus Estimate for revenue is projecting net sales of 27 10 billion up 12 19 from the year ago period
Looking at the full year our Zacks Consensus Estimates suggest analysts are expecting earnings of 9 28 per share and revenue of 109 73 billion These totals would mark changes of 35 08 and 10 14 respectively from last year
Any recent changes to analyst estimates for JPM should also be noted by investors These recent revisions tend to reflect the evolving nature of short term business trends As a result we can interpret positive estimate revisions as a good sign for the company s business outlook
Based on our research we believe these estimate revisions are directly related to near team stock moves Investors can capitalize on this by using the Zacks Rank This model considers these estimate changes and provides a simple actionable rating system
Ranging from 1 Strong Buy to 5 Strong Sell the Zacks Rank system has a proven outside audited track record of outperformance with 1 stocks returning an average of 25 annually since 1988 Within the past 30 days our consensus EPS projection has moved 0 92 higher JPM is currently a Zacks Rank 2 Buy
Digging into valuation JPM currently has a Forward P E ratio of 11 74 This valuation marks a premium compared to its industry s average Forward P E of 11 6
Meanwhile JPM s PEG ratio is currently 1 76 This metric is used similarly to the famous P E ratio but the PEG ratio also takes into account the stock s expected earnings growth rate Banks Major Regional stocks are on average holding a PEG ratio of 1 22 based on yesterday s closing prices
The Banks Major Regional industry is part of the Finance sector This group has a Zacks Industry Rank of 78 putting it in the top 30 of all 250 industries
The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors Our research shows that the top 50 rated industries outperform the bottom half by a factor of 2 to 1
To follow JPM in the coming trading sessions be sure to utilize Zacks com |
MS | American Axle BorgWarner higher after double upgrades at Morgan Stanley | American Axle AXL 3 7 and BorgWarner BWA 1 9 jump to early gains after Morgan Stanley NYSE MS awards two notch upgrades of each to Overweight from Underweight with respective 21 and 61 price targets Stanley says the auto industry is going through an unprecedented period of cyclical and secular change and investors are currently skewed negative on U S autos and shared mobility stocks but it sees more road left for Auto 1 0 suppliers The firm thinks AXL shares have the potential to re rate as free cash flow is used to delever and BWA may enjoy positive guidance revisions in the near term Now read |
MS | Morgan Stanley Says Stock Market May Have Peaked | Investing com Rising volatility and declining investor sentiment will make it difficult for stocks to eclipse their January peak That s the forecast of Morgan Stanley NYSE MS In a note to investors the Wall Street firm said indicators of both institutional and retail investor sentiment suggest that the January highs will be hard to top Morgan Stanley said it does not see anything on the horizon to get investors more bullish than they were after the tax cuts All the major indices hit record highs in late January before succumbing to a 10 correction in early February marked by enormous volatility Morgan Stanley s forecast is among the more bearish of Wall Street firms BlackRock and JPMorgan Chase NYSE JPM issued bullish forecasts in the wake of the correction |
MS | Mexico s wholesale mobile network launches without major carriers | By Julia Love
MEXICO CITY Reuters Mexico s landmark wholesale national mobile network launched this week but without a single major wireless carrier on board renewing debate about how best to boost competition in the telecom sector dominated by billionaire Carlos Slim
On Wednesday President Enrique Pena Nieto and other officials gathered for the official launch of the so called Red Compartida shared network a wholesale only project written into the nation s 2013 14 telecoms reform
The government says the network will cut the costs of developing infrastructure for carriers particularly in rural areas with poor coverage and make it easier for new players to enter the market
It s a model in which everyone wins Pena Nieto said
But Mexico s three major carriers have not signed on yet raising questions about its ability to raise investment
Operated by newly created Altan Redes the network currently reaches 32 percent of the Mexican population with 4g and aims to cover over 92 percent eventually
Industry insiders thought Telefonica MC TEF which has long struggled to gain traction in Mexico could benefit from the network But the carrier has not reached an agreement to use it according to a source with knowledge of the matter
AT T NYSE T which spent billions to enter Mexico after the reform suggested it may sign on in the future
If the Red Compartida has coverage in an area where we don t we would certainly consider using it a spokeswoman for AT T said in a statement
Slim s America Movil which has Mexico s biggest network by far has no plans to use it Chief Executive Daniel Hajj says
I don t think they are going to give me something that I don t have Hajj told an earnings call last month
Officials at Altan which counts a fund managed by Morgan Stanley NYSE MS infrastructure and the China Mexico fund created by the two countries in 2014 as its largest shareholders gave no details on the network s clients
America Movil has about two thirds of mobile phone subscriptions in Mexico
In light of this Mexico had to try something unorthodox like the Red Compartida to spur competition said Roger Entner a telecom analyst in Massachusetts
But the network will initially create business for America Movil and carriers have little incentive to use it in areas where they already have coverage said Scott Wallsten president of the Technology Policy Institute a U S based think tank
The network has a roaming agreement with America Movil and will use some of the company s towers Altan said
Wallsten and other critics of the network argue Mexico would have been better served by auctioning the spectrum it uses
Altan must make a profit to keep investing in its network said Jorge Negrete CEO of think tank Mediatelecom
That could be tough without major players on board though the network could attract more mobile virtual network operators whose presence has been limited in Mexico
Though the network aims to reach rural areas experts say the initial launch is skewed toward big cities with coverage in Mexico City Guadalajara and Monterrey
Altan said the network will initially cover 5 6 million residents in under served populations surpassing its obligation of 4 7 million residents in places with fewer than 10 000 inhabitants |
MS | PetroChina Pays Full Profit as Oil Rally Keeps Cash Churning | Bloomberg PetroChina Co the country s biggest oil and gas company once again rewarded shareholders by paying out its entire net income as dividends
After a surprise payout from its half year results in August the Beijing based company said Thursday it will send investors dividends that amount to slightly more than its 22 8 billion yuan 3 6 billion in 2017 net income
Shareholders should be happy that PetroChina once again paid out all of its profit as dividend said Anna Yu a Hong Kong based analyst at ICBC International Research Ltd State owned China National Petroleum Corp holds almost 83 percent of the company
PetroChina is recovering from its worst ever performance the previous year as a rally in oil prices bolstered its exploration and production segment Global benchmark Brent crude averaged 21 percent higher in 2017 than a year ago as OPEC and its allies cut output And while the state owned giant took a 23 9 billion yuan hit from reselling imported gas domestically below cost those losses are seen having peaked
As the country s biggest natural gas producer and importer PetroChina is key to President Xi Jinping s campaign to replace coal with the cleaner burning fuel The nation s gas use surged 15 percent last year with imports satisfying around 40 percent of that demand pushing up global prices this winter while leaving some parts of the country short of supply
PetroChina will hand out dividends totaling 0 06074 yuan per share including special payments Given that free cash flow hit a record 24 billion the dividend payout was uninspiring Aditya Suresh an analyst at Macquarie Capital Ltd in Hong Kong wrote in research note
Profit in 2017 which almost tripled compares with the 23 1 billion yuan median estimate in a Bloomberg survey of 10 analysts and the company s forecast of as much as 23 9 billion yuan in January
Impairments more than doubled as the company wrote down the value of petrochemical and pipeline assets Spending which rose for the first time in five years overshot its target by 13 percent PetroChina plans to boost expenditure by about 4 percent this year
The conservative capital expenditure implies the free cash flow yield will remain excellent in 2018 Morgan Stanley NYSE MS said in a note In terms of dividend yield PetroChina is less attractive than state owned peers China Petroleum Chemical Corp and Cnooc Ltd the bank s analysts wrote
Shares of PetroChina fell 3 1 percent to HK 5 36 as of 9 44 a m in Hong Kong amid a broader equity sell off as trade tensions escalated between the U S and China The city s benchmark Hang Seng Index lost 3 4 percent
Updates with comments from Morgan Stanley in penultimate paragraph |
MS | Oil rises as Saudi talks about extending output cuts into 2019 | By Shadia Nasralla LONDON Reuters Oil prices rose on Friday after the Saudi energy minister said OPEC would need to keep coordinating supply cuts with non member countries including Russia into 2019 The rise in oil defied global stock markets which slumped on worries about a trade stand off between the United States and China Gold seen as a safe haven hit a two week high U S President Donald Trump signed a memorandum on Thursday that could impose tariffs on up to 60 billion of imports from China while China unveiled plans on Friday to impose tariffs on up to 3 billion of U S imports Brent crude futures LCOc1 were at 69 18 per barrel at 0918 GMT up 27 cents on the day but off a session high of 70 For the week Brent was up about 4 5 percent its strongest showing since October last year U S West Texas Intermediate WTI crude futures CLc1 were at 64 67 a barrel up 37 cents On the week WTI was up about 3 7 percent Saudi Energy Minister Khalid al Falih said on Thursday that OPEC members would need to continue coordinating with Russia and other non OPEC oil producing countries on supply curbs in 2019 to reduce global oil inventories Since January 2017 the Organization of the Petroleum Exporting Countries of which Saudi Arabia is the de facto leader as well as a group of non OPEC countries led by Russia have curbed output by 1 8 million barrels per day to counteract surging U S production Although analysts said the stand off between the United States and China could hit oil markets for now most said demand looked healthy Geopolitical tensions are coming to the front But global balances are relatively tight at the moment That s enough to amplify relatively small factors said Andrew Wilson head of energy research at BRS Brokers Morgan Stanley NYSE MS also cited an expected pick up in seasonal demand in the coming months We are only three four weeks away from peak refinery maintenance after which crude and product demand should accelerate Global inventories are already at the bottom end of the five year range the U S bank said
There are sufficient reasons to expect oil prices to strengthen further from here and we stick with our Brent 75 per barrel call for Q3 Morgan Stanley said |
MS | MLPX Dominion Midstream upgraded at Morgan Stanley | MPLX MPLX 1 6 is higher after Morgan Stanley NYSE MS upgrades shares to Overweight from Equal Weight with a 40 price target saying it is not affected by the Federal Energy Regulatory Commission s tax ruling on MLPs MPLX eliminated its incentive distribution rights earlier this year which allowed it to reset its financial policy which Stanley says means it is now relatively advantaged vs peers with a debt EBITDA ratio of 3 6x at year end 2017 and a financing plan that does not require equity issuance Stanley also upgrades Dominion Midstream Partners DM 0 6 to Equal Weight from Underweight with a 17 price target even though the MLP is substantially exposed to the tax changes via Questar Gas Carolina Gas and Iroquoi BUt the firm downgrades Buckeye Partners BPL 1 to Equal Weight from Overweight with a 44 target cut from 60 citing FERC s move to begin discussions on its 2021 25 liquids pipes index which could result in a negative index adjustment in the mid single digit range Now read |
JPM | Circle CEO Crypto Industry Is About Fundamental Redesign of Functioning of Civic Society | The crypto and blockchain industry is about a fundamental redesign of the basics of how civic society will ultimately function according to Circle CEO Jeremy Allaire The CEO provided his stance at a recent panel within the 2019 Spring Meetings of the World Bank Group and the International Monetary Fund IMF in Washington D C on April 10
Allaire discussed both the potential and the issues associated with crypto and blockchain related developments in a panel dubbed Money and Payments in the Digital Age Moderated by the IMF s managing director Christine Lagarde the CFO of Consumer Community Banking at JPMorgan NYSE JPM Sarah Youngwood the European Central Bank s ECB Beno t C ur and governor of the Central Bank of Kenya CBK Patrick Njoroge also participated in the panel |
JPM | Oil scores best run in three years as dollar stocks tread water | By Marc Jones LONDON Reuters Signs of a stabilisation in China s giant economy and a soggy dollar helped oil markets cement their best run for more than three years on Friday though stocks weren t buoyed much after spending most of the week treading water There was a late flurry of activity mostly from emerging markets China s data showing exports rebounded nicely last month helped offset weaker imports and reports in Europe of another cut to Germany s growth forecasts while Turkey s lira was back on the ropes amid worries about its trajectory The euro however gained despite the German growth concerns and it wasn t just going rogue with dealers gearing up for demand from Japan as Mitsubishi UFJ Financial closed in on its multi billion euro buy of DZ Bank s aviation finance business Europe s bourses slowly shook off another groggy start as had Wall Street futures which were limbering up for earnings from bulge bracket banks JPMorgan NYSE JPM and Wells Fargo NYSE WFC The Chinese data was a little mixed but the money supply numbers were a positive impulse overall said TD Securities Senior Global Strategist James Rossiter It was oil though that provided the big milestones Brent was at 71 4 a barrel having broken back through the 70 threshold this week and U S WTI was heading for a sixth straight week of gains for the first time since early 2016 Driving the rise has been involuntary supply cuts from Venezuela Libya and Iran which have supported perceptions of a tightening market already underpinned by a production reduction deal from OPEC and its allies We expect oil price to eventually move higher in Q2 as OPEC potentially runs the risk of over tightening the market by maintaining its current course of action Harry Tchilinguirian strategist at BNP Paribas PA BNPP told the Reuters Global Oil forum SUBDUED SESSION Despite a subdued Asia session Chinese blue chips managed to recover and close flat after Beijing s data blitz while higher Chinese iron ore prices helped push Australia up 0 85 percent and Japan s Nikkei gained too In bond markets Germany s 10 year government yields nudged back into positive territory but were capped by a report in Der Spiegel magazine that Berlin was set to halve its economic growth forecast for 2019 to 0 5 percent from 1 0 percent That would be more pessimistic than the current 0 8 percent estimate Germany s leading economic institutes have penciled in Worries about limp European growth also made the European Central Bank cautious at a policy meeting earlier this week Britain s sterling was a touch higher for both the day and the week Christine Lagarde International Monetary Fund managing director said on Thursday that the six month delay in the country s exit from the European Union avoids the terrible outcome of a no deal Brexit although did nothing to lift uncertainty over the final outcome Underscoring threats to the global economy IMF Deputy Managing Director Mitsuhiro Furusawa had warned that a bigger than expected slowdown in China s economy remains a key risk Gold crept higher after falling more than 1 percent on Thursday to break below the key 1 300 level following solid U S data Spot gold traded at 1 293 24 per ounce For a graphic on Falling volatility see |
JPM | Turkey s Albayrak leaves investors unconvinced in Washington sources | By Jonathan Spicer and Humeyra Pamuk ISTANBUL WASHINGTON Reuters Turkish Finance Minister Berat Albayrak offered little convincing detail of his economic turnaround plan and failed to enthuse investors at a private meeting in Washington on Thursday according to four people who attended Some 400 investors packed into a room at a Washington hotel with dozens standing at the back as Albayrak and Turkish central bank governor Murat Cetinkaya outlined the reform package that Albayrak unveiled in Istanbul on Wednesday Their upbeat view of Turkey s expected rebound from recession failed to resonate said the sources who requested anonymity One told Reuters that Albayrak pointed to a recent dip in inflation and the improving current account balance to argue that Turkey was doing much better today than in October when it was emerging from a major currency crisis I don t think he persuaded anybody it did not go well said the investor who attended the conference hosted by investment bank JPMorgan NYSE JPM as the International Monetary Fund and World Bank spring meetings kicked off in Washington The investor said the softer policy stances recently adopted by the U S Federal Reserve and the European Central Bank which have led investors to seek returns in riskier assets was helping underpin Turkish markets If it weren t the case that the Fed and ECB currently present no risk to emerging markets I would be a big seller of Turkey the investor said The Turkish lira slid 1 4 percent on Friday and the main Turkish stock index was down 1 percent Turkey s finance ministry could not immediately be reached for comment on Thursday s presentation while the central bank declined to comment Lira volatility in recent weeks has echoed last year s full blown currency crisis in Turkey which was sparked by strained U S diplomatic ties worries over central bank independence and a years long buildup of foreign currency debt The lira tumbled some 30 percent in 2018 causing the economy to tip into a recession that could last through the second half of this year The Fed and ECB s dovish pivot in recent months could offer some relief for the currency On Wednesday before traveling to Washington for the IMF World Bank meetings Albayrak pledged to inject nearly 5 billion in new capital into banks struggling with a spike in non performing loans But analysts said the long awaited reform package which also included promises on taxes and exports did not include the ambitious long term commitments needed to revive an economy plagued by high inflation and a fragile currency Three of the investors at the invitation only presentation in Washington said Albayrak who is Turkish President Tayyip Erdogan s son in law mostly restated the reform package while Cetinkaya had said little during the hour long presentation I don t think anybody left having changed their ideas about Turkey or be more hopeful about it than they were yesterday said a second investor as he left the conference A third attendee said There has been a general sense among investors that more needs to be done to restore Turkey s credibility and there was not much change from that
Late on Thursday Albayrak tweeted We explained our Structural Reform Steps package and the economic policies of the new period at the investor meeting organized by JP Morgan He also held meetings with many international funds in Washington the finance minister added |
MS | Are Optical Stocks Lighting Up Your Portfolio | I would ask you to pardon the pun but it is true the optical stocks have been lighting it up lately Ok maybe not every bulb is firing at maximum potential but there are plenty of names that have said that things are good and should remain that way going forward
Allow me to shed some light on a few names that have done well recently and then a few names that are reporting soon
Applied Optoelectronics
I have to start off with the stock that is up about 100 YTD So at about 46 the stock is up 96 but I saw it over 100 the other day AAOI is s Zacks Rank 1 Strong Buy and has been running hard all year
A day after a big conference for several fiber stocks AAOI raised guidance They moved the expected range to 0 77 0 82 from 0 46 0 51 when Wall Street was look for 0 50 Revenue was also guided higher 84 5M 84 8M while the prior range was 75M 79M vs 77 5M consensus Margins were also guided higher as well
This is what started the run for several names The run was then extended when the company beat the consensus of 0 79 by 0 05 and revenue was also slightly ahead of expectations On top of that the company guided higher again as they see the next quarter producing results of 0 80 0 88 compared to the 0 40 consensus That was a big reason the stock rallied nearly 24 in the session following the release
Acacia Communications
One name that gets a lot of ink that didn t really perform is was ACIA The stock is presently a Zacks Rank 3 Hold as estimates are a little mixed following the third straight beat of the Zacks Consensus Estimate on February 23
The beat was pretty big with the company earnings 1 55 per share compared to the 0 74 Zacks Consensus Estimate That 0 81 beat translated into a 109 positive earnings surprise
ACIA issued guidance that was below Wall Street expectations putting the EPS range at between 0 63 and 0 70 when the consensus was 0 78 Revenues also came in well below the consensus of 137M when they gave the range of 108M 114M
Lumpy demand was the reason for the lower guidance The company is speaking again on March 1 at the Morgan Stanley NYSE MS TMT Conference
Infinera Corp
INFNis a stock that I have tracked for some time The stock traded higher for a few weeks heading into the most recent report and then they beat the Zacks Consensus by a penny
Guidance on the call was inline for revenue but came in below consensus on the bottom line
Given the small number of clients it appears that Wall Street was braced for poor results Analysts believe that estimates could have bottomed out and as a result the stock rallied by more than 30 in the session following the report
The weak guidance caused estimates to slide a bit and the stock is now a Zacks Rank 4 Sell
Ciena
One of the fiber plays that has yet to report is CIEN The stock is a Zacks Rank 3 Hold and is expected to report on March 8 before the market opens
I see the Wall Street expectations at 632M on top and 0 29 on bottom
The most recent quarter was a miss on top and on bottom the first miss in about 2 years Investors gave the company a pass as the stock rallied for more than 14 following the report In the same quarter last year a small beat resulted in the stock falling 16 5 in the session following the report
Investors are pointing to the unlimited data plan being offered by Verizon as a potential reason for the company to raise guidance for the year
NeoPhotonics
This stock was a Zacks Rank 4 Sell until just a few days ago It is now a Zacks Rank 3 Hold as the 60 day life span of an estimate revision has eclipsed Most stocks are at a Zacks Rank 3 Hold
The company had not confirmed their earnings report as of yet so it could come as soon as March 1 A year ago the company reported on the first day of March which happens to be the birthday of the Great State of Ohio and beat the Zacks Consensus Estimate by 0 03 The stock rallied by 14 in the following session but since then the stock has fallen following earnings reports
Given the size of this stock a huge move either way could be in store for investors when the next report does come Along with the 14 positive move mentioned already NPTN traded lower by more than 13 following the March quarter report and 22 following the September report
Those big moves mean an options straddle might be a good bet for this stock I am a little biased on this one as I believe a solid report is coming I might be alone in that idea though as 11 of the float is sold short A big beat and this one could easily squeeze past 13 or even 14
NeoPhotonics Corporation Price and Consensus
Lumentum Holdings
My last stock to look at is LITE and it is a Zacks Rank 2 Buy The company beat earnings in early February and issued guidance that was inline with expectations It was the 6th straight beat for the company and I am seeing revenue growth accelerating which is a good signal going forward
The company is speaking again at a March 14 conference in China and then again a week later at the Optical Fiber Conference
Following the recent earnings report Stifel reiterated their buy rating and increased their target price on the stock to 57 50 from 45
LITE trades at a premium to the group at 28x forward earnings compared to a 17x industry average The price to book multiple of 5 6x is higher than the industry average of 4 1x The price sales multiple of 3x is well below the 6 5x industry average This basically tells me that on conservative measures this stock is priced somewhat aggressively while the most aggressive measure has this stock priced conservatively That is a long way of saying a mixed valuation
Lumentum Holdings Inc Price and Consensus
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MS | Moving Averages February Month End Update | The S P 500 closed February with a monthly gain of 3 72 after a gain of 1 79 in January All three S P 500 MAs are signaling invested and four of the five Ivy Portfolio ETFs Vanguard Total Stock Market ETF NYSE VTI Vanguard FTSE All World ex US ETF NYSE VEU Vanguard REIT Index ETF NYSE VNQ and PowerShares DB NYSE DBC are signaling invested In the table monthly closes that are within 2 of a signal are highlighted in yellow
The Ivy Portfolio
The above table shows the current 10 month simple moving average SMA signal for each of the five ETFs featured in We ve also included a table of 12 month SMAs for the same ETFs for this popular alternative strategy
For a fascinating analysis of the Ivy Portfolio strategy see this article by Adam Butler Mike Philbrick and Rodrigo Gordillo
Backtesting Moving Averages
Over the past few years we ve used Excel to track the performance of various moving average timing strategies But now we use the backtesting tools available on the website Anyone who is interested in market timing with ETFs should have a look at this website Here are the two tools we most frequently use
requires a paid subscription
Background on Moving Averages
Buying and selling based on a moving average of monthly closes can be an effective strategy for managing the risk of severe loss from major bear markets In essence when the monthly close of the index is above the moving average value you hold the index When the index closes below you move to cash The disadvantage is that it never gets you out at the top or back in at the bottom Also it can produce the occasional whipsaw short term buy or sell signal such as we ve occasionally experienced over the past year
Nevertheless a chart of the S P 500 monthly closes since 1995 shows that a 10 or 12 month simple moving average SMA strategy would have ensured participation in most of the upside price movement while dramatically reducing losses
Here is the 12 month variant
The 10 month exponential moving average EMA is a slight variant on the simple moving average This version mathematically increases the weighting of newer data in the 10 month sequence Since 1995 it has produced fewer whipsaws than the equivalent simple moving average although it was a month slower to signal a sell after these two market tops
A look back at the 10 and 12 month moving averages in the Dow during the shows the effectiveness of these strategies during those dangerous times
The Psychology of Momentum Signals
Timing works because of a basic human trait People imitate successful behavior When they hear of others making money in the market they buy in Eventually the trend reverses It may be merely the normal expansions and contractions of the business cycle Sometimes the cause is more dramatic an asset bubble a major war a pandemic or an unexpected financial shock When the trend reverses successful investors sell early The imitation of success gradually turns the previous buying momentum into selling momentum
Implementing the Strategy
Our illustrations from the S P 500 are just that illustrations We use the S P because of the extensive historical data that s readily available However followers of a moving average strategy should make buy sell decisions on the signals for the each specific investment not a broad index Even if you re investing in a fund that tracks the S P 500 e g Vanguard s VFINX or the SPDR S P 500 NYSE SPY ETF the moving average signals for the funds will occasionally differ from the underlying index because of dividend reinvestment The S P 500 numbers in our illustrations exclude dividends
The strategy is most effective in a tax advantaged account with a low cost brokerage service You want the gains for yourself not your broker or your Uncle Sam
Note For anyone who would like to see the 10 and 12 month simple moving averages in the S P 500 and the equity versus cash positions since 1950 here s an xls format of the data Our source for the monthly closes Column B is Yahoo Finance Columns D and F shows the positions signaled by the month end close for the two SMA strategies
Recommended Reading
In the past we ve recommended Mebane Faber s thoughtful article The article has now been updated and expanded as Part Three Active Management in his book coauthored with Eric Richardson This is a must read for anyone contemplating the use of a timing signal for investment decisions
The book analyzes the application of moving averages the S P 500 and four additional asset classes the Morgan Stanley NYSE MS Capital International EAFE Index MSCI EAFE Goldman Sachs Commodity Index GSCI National Association of Real Estate Investment Trusts Index NAREIT and United States government 10 year Treasury bonds
As a regular feature of this website we update the signals at the end of each month
Footnote on calculating monthly moving averages If you re making your own calculations of moving averages for dividend paying stocks or ETFs you will occasionally get different results if you don t adjust for dividends For example in 2012 VNQ remained invested at the end of November based on adjusted monthly closes but there was a sell signal if you ignored dividend adjustments Because the data for earlier months will change when dividends are paid you must update the data for all the months in the calculation if a dividend was paid since the previous monthly close This will be the case for any dividend paying stocks or funds |
MS | iFOREX Daily Analysis March 08 2017 | The dollar gained against most major currencies on Tuesday as markets digested the possibility of a March rate hike ahead of the Federal Reserve s monetary policy meeting next week
The U S dollar index which measures the dollar s strength against six major currencies climbed 0 05 to 101 71 after hitting a session high of 101 91
Data on Tuesday showed that the U S trade balance fell last month In a report Bureau of Economic Analysis said that U S trade balance fell to a seasonally adjusted 48 50B from 44 30B in the preceding month Analysts had expected U S trade balance to fall to 48 50B last month
In the European front euro zone gross domestic product rose in the last quarter official data showed on Tuesday In a report Eurostat said that GDP rose to a seasonally adjusted 0 4 from 0 4 in the preceding quarter a result which was in line with analysts expectations
In the week ahead markets will be looking ahead to Friday s U S jobs report which could seal the deal for a Fed rate hike later this month
Investors will also be looking to the outcome of Thursday s European Central Bank meeting for fresh clues on the future direction of its stimulus program
For today the U S is to release the ADP nonfarm payroll report and Canada is to publish data on building permits
GBP USD
The sterling fell against the dollar on Tuesday with the GBP USD down to a seven week low of 1 2170 after weaker than expected consumer spending data added to concerns that the UK economy is slowing as it prepares to trigger Article 50 the formal step required to begin the process of exiting the EU
The BoE is watching closely to see if households hold back their spending as inflation rises trying to decide whether the economy needs more monetary stimulus to spur demand or an interest rate hike to curb inflation
For Wednesday in the U K Chancellor Philip Hammond is to outline the government s budget for the year In addition the U S is to release the ADP nonfarm payroll report
Pivot 1 222Support 1 219 1 217 1 215Resistance 1 222 1 225 1 228Scenario 1 short positions below 1 2220 with targets at 1 2190 1 2170 in extension Scenario 2 above 1 2220 look for further upside with 1 2250 1 2280 as targets Comment the upward potential is likely to be limited by the resistance at 1 2220
Gold
Gold prices continue to move lower into negative territory due to the recent gains in the dollar after strong signs of a possible rate hike in the Fed meeting of March
Some analysts are also looking to the Fed policy meeting for clues on the number of rate hikes that will take place in 2017 In a research note to clients Morgan Stanley NYSE MS said it thinks this March will be the first of three hikes in 2017 and four hikes in 2018
For this week investors will be looking forward to today s ADP employment report as a first indication on the status of the U S labor market ahead of Friday s U S jobs report which would give a clear indication on whether a rate hike will take place later this month
Pivot 1219 5Support 1213 5 1211 1207Resistance 1219 5 1227 1230Scenario 1 short positions below 1219 50 with targets at 1213 50 1211 00 in extension Scenario 2 above 1219 50 look for further upside with 1227 00 1230 50 as targets Comment the RSI is mixed to bearish
WTI Oil
WTI crude oil prices edged lower once more on Tuesday following a rise in crude oil inventories and after remarks from Saudi Arabia s oil minister that production management will only go on for a restricted period of time
The American Petroleum Institute said Tuesday that crude inventories jumped 11 6 million barrels at the end of last week far more than the expected 1 66 million barrels build seen while gasoline stocks dropped 5 0 million barrels compared to a dip of 1 28 million barrels forecast
Stocks at the Cushing Oklahoma oil hub rose by 800 000 barrels
The figures will be followed on Wednesday by more closely watched official data from the U S Energy Information Administration
Pivot 53 15Support 52 54 52 33 52 1Resistance 53 15 53 38 53 56Scenario 1 short positions below 53 15 with targets at 52 54 52 33 in extension Scenario 2 above 53 15 look for further upside with 53 38 53 56 as targets Comment the RSI broke below a rising trend line
US 30
The main U S indices were lower on Tuesday as investors considered the prospect of a March rate hike while healthcare stocks tumbled after a warning from President Donald Trump
Healthcare stocks were pressured by remarks from President Donald Trump after he claimed on Tuesday that he will bring drug prices way down
The Dow posted it s first 2 day losing streak since Jan 2nd declining by 0 14 while the S P 500 fell 0 29 and the NASDAQ lost 0 26
Further losses came in the Oil Gas and Telecoms sectors as well This week s employment data remain in focus as they could seal the deal for a rate hike next week while investors will also be looking for clarity on the number of rate hikes that the Fed aims for in 2017
Pivot 20975 Support 20830 20770 20700 Resistance 20975 21025 21072 Scenario 1 short positions below 20975 00 with targets at 20830 00 20770 00 in extension Scenario 2 above 20975 00 look for further upside with 21025 00 21072 00 as targets Comment the RSI lacks upward momentum |
MS | OPEC Oil Production Cuts Mount | Committed
OPEC is committed to extending production cuts as the global oil market continues to see inventories fall While the U S oil rig count rose it plummeted in Canada offsetting the gains This comes after Morgan Stanley NYSE MS reports that crude stockpiles are less visible as supply in Asia and in floating storage have fallen by 72 million barrels this year The bears are going to have to face reality as the global market moves from oversupply to deficient You can t wait for the OPEC accord to fall apart because it is not going to happen The lack of major investment in production will start to show up and the oil cycle will go on like it always has Even as talk about a resumption of Libya oil exports make the rounds the reality is that Libya will not be a reliable supplier anytime soon
Reuters is reporting Libya s Sharara oil field resumed production on Sunday after a week long shutdown when a pipeline linking it to an export terminal was blocked a Libyan oil source told Reuters Crude from the field is due to reach the Zawiya terminal later tonight the source said declining to be identified because he was not authorized to speak to the media NOC declared force majeure on exports of Sharara crude on March 28 a day after the shutdown of the field The force majeure remains in place for now the source said but added it could be lifted as early as Monday morning
The source said the state owned National Oil Corp s Chairman Mustafa Sanalla was able to convince the group which blocked the pipeline from the field to the Zawiya terminal of the importance of resuming oil flows unconditionally
The field was producing around 220 000 bpd before the shutdown
OPEC cuts are mounting taking its toll on global supply While the market is fixated on U S supply and U S rig counts the oil world outside of the U S is tightening Oil rig counts around the globe are falling The Canadian oil rig count fell by 30 last week and by 21 the week before The U S is about the only place where oil rigs are being added and globally we are down 77 rigs and that s where we were a year ago
Gasoline RBOB Futures are rising as the summer blends will soon be taking hold Gas demand is surging and the refiners are working furiously to keep up with demand Refiners should start refining record amounts of crude oil in the coming weeks and that should start to reduce U S oil supply U S pool and product exports will rise as well We could see U S oil inventories start to fall sharply in coming weeks
Distillate demand should start to rise as farmers get ready to plant what is supposed to be the most acres of soybeans ever planted MarketWatch reports that soybean planted area for 2017 is estimated at a record high of 89 5 million acres If realized that would be an increase of 7 from last year s record 83 4 million acres according to the USDA s Prospective Plantings report Corn is still king but just barely Farmers intend to plant 90 million acres in 2017 USDA said down 4 from last year Farmers intend to plant 46 1 million acres to wheat in 2017 down 8 from the realized total in 2016 Of that 32 7 million acres are expected to be planted to winter wheat down 3 from 2016 Analysts had widely expected a shift toward soybean acres given expectations the crop would be relatively more profitable than corn in the coming year The number of acres that can be shifted between the crops can be constrained however by crop rotation practices and other factors
Natural gas is strong again as the structural problems in this market are becoming more apparent With production falling below 70bcf a day the market realizes that prices must stay strong if demand is going to be met this summer |
MS | The Next Subprime Crisis Is Here 12 Signs That A Day Of Reckoning | In 2008 subprime mortgages almost single handedly took down the entire financial system and now a new subprime crisis is here In recent years the auto industry has been able to boost sales by aggressively pushing people into auto loans that they cannot afford In particular auto loans made to consumers with subprime credit have been accounting for an increasingly larger percentage of the market Unfortunately when you make loans to people that should not be getting them eventually a lot of those loans are going to start to go bad and that is precisely what is happening now Meanwhile automakers and dealers are starting to panic as sales have begun to fall and used car prices have started to crash If you work in the auto industry you might remember how horrible the last recession was and this new downturn could eventually turn out to be even worse The following are 12 signs that a day of reckoning has arrived for the U S auto industry
1 Seven out of the eight largest automakers in the United States fell short of their sales projections in March
2 Overall U S auto sales so far in 2017 have been described as a disaster despite record spending on consumer incentives by automakers
3 Dealer inventories are now at the highest level that we have seen since the last financial crisis Why this is so troubling is because there are a whole lot of unsold vehicles just sitting there doing nothing and this is becoming a major financial problem for many dealers
4 It now takes an average of 74 days before a dealer is able to sell a new vehicle This number is also the highest that it has been since the last financial crisis
5 Not only is Ford Motor Company NYSE F projecting that sales will fall this year they are also projecting that sales will fall in 2018 as well
6 Used vehicle prices are already starting to decline dramatically
The used vehicle price index from the National Automobile Dealers Association posted a 3 8 decline in February compared to the prior month NADA also said wholesale prices fell 1 6
7 As I discussed yesterday Morgan Stanley is projecting that used car prices could crash by up to 50 over the next four or five years
8 Right now more than a million Americans are behind on their payments on their auto loans This is something that has not happened since the last financial crisis
9 In 2017 U S consumers are more underwater on their auto loans than they have ever been before
10 Subprime auto loan losses have soared to their highest level since the last financial crisis and the delinquency rate on those loans has risen to the highest level that we have seen since the last financial crisis By now I am sure that you are starting to notice a pattern in these data points
11 At this moment approximately 200 000 000 000 has been loaned out by auto lenders to consumers with subprime credit
12 Just like with subprime mortgages in the run up to the last financial crisis subprime auto loans have been bundled together and sold as securities to investors And just like last time around this has turned out to be a recipe for disaster
Many auto loans including those considered subprime are securitized and sold to investors But Morgan Stanley NYSE MS recently reported that the share of auto securities tied to deep subprime loans those given to borrowers with a FICO credit score below 550 has risen from 5 1 percent in 2010 to 32 5 percent today It said defaults on those bonds have risen significantly in the past five years
Almost a quarter of the more than 1 1 trillion in U S auto loan debt is owed by subprime borrowers and delinquency rates have hit their
In the old days you could always count on the U S auto industry to bounce back eventually because of the economic strength of average U S consumers
Unfortunately the middle class in America by long term economic trends that our leaders in Washington D C have consistently ignored
We have become a nation of economic extremes There are more millionaires in this country than ever before but meanwhile poverty is exploding in communities all over the country
If you live in a prosperous area things may be going great where you live for the moment But as an all time record high percentage of Americans are worrying a great deal about hunger and homelessness these days
Over the past two years an average of 67 of lower income U S adults up from 51 from 2010 2011 have worried a great deal about the problem of hunger and homelessness in the country Concern has also increased among middle and upper income Americans but they still worry far less than do lower income Americans
You may have plenty of money in your bank account and so for you hunger and homelessness are not very big issues But for those that are just scraping by from month to month having enough food and a place to sleep at night are top priorities Here is more from Gallup
Americans at all income levels are expressing greater concern about hunger and homelessness and it is the top worry among lower income Americans who are most likely to struggle to pay for adequate food and housing
In addition to the woes of the auto industry the retail industry is going through the worst wave of store closings in modern American history pension funds are melting down all over the nation and stocks are primed for a crash of epic proportions Things are lining up just right for the kind of scenario that I laid out in The Beginning Of The End but unfortunately most people are not listening to the warnings
The same thing happened just before the great financial crisis of 2008 All of the warning signs were there well in advance and many of the experts were warning about what was coming as early as 2005 But because it did not happen immediately a lot of people greatly mocked the warnings
But then the fall of 2008 arrived and all of the mockers suddenly went silent
As you can see from the numbers that I shared above a new crisis has already arrived
The only question now is how bad it will ultimately turn out to be
As always let us hope for the best but let us also get prepared for the worst |
C | ArcelorMittal Surges as Steel Outlook Brightens Debt Drops | Bloomberg ArcelorMittal SA AS MT shares jumped the most since 2016 after the company said it s more optimistic on the outlook for steel demand this year and reported net debt dropped to a record low
There are signs that the demand slowdown that roiled steel markets last year is starting to stabilize ArcelorMittal said The company has restarted European operations that it idled last year in response to the downturn and said it expects the coronavirus outbreak in China will have limited effect on steel
Net debt fell to 9 3 billion at the end of 2019 the lowest since the company s formation in a 2006 merger The figure is closely watched by investors because ArcelorMittal has indicated it will substantially increase dividend payments once net borrowings reach 7 billion That target may be achieved this year it said
ArcelorMittal rose as much as 11 in Amsterdam the most since April 2016
On the broader market outlook ArcelorMittal said it s more optimistic on the apparent demand outlook for 2020 The largest producer expects global steel demand a barometer of economic growth to grow by 1 to 2 this year after expanding 1 1 in 2019
The steel market is emerging from a difficult year in 2019 when the industry grappled with slumping demand from automakers trade wars and sluggish economies in Europe While prices edged higher in the past two months there s been concern the deadly virus will hurt consumption and throttle the industry s nascent recovery
For now the coronavirus will likely have a short term negative demand impact in China and to a lesser degree elsewhere ArcelorMittal said
Most of the impact on first quarter demand from the coronavirus is expected to be recovered throughout the remainder of the year the company said Still demand from China is seen weaker this year between flat and 1 higher from estimated growth of 3 2 in 2019
Though ArcelorMittal has minimal exposure to China it follows the country closely as demand there affects global steel sales and prices The company was bearish on China s demand a year ago and boosted its forecasts three times during 2019 while cutting estimates for the U S and Europe
Our perspective on the fundamentals of the Chinese steel market remain unchanged the company said Thursday
The steelmaker reported earnings before interest taxes depreciation and amortization about halved in 2019 to 5 2 billion The results were mostly better than expected and included positive guidance on cash flows leverage and the demand outlook this year Citigroup Inc NYSE C analysts said in a note |
C | Thiam quits as Credit Suisse CEO after split with chairman over spying scandal | By John Miller ZURICH Reuters Credit Suisse SIX CSGN Chief Executive Tidjane Thiam has quit after a power struggle with Chairman Urs Rohner at Switzerland s second biggest bank triggered by a damaging spying scandal Thiam will be replaced by Thomas Gottstein who is head of the Swiss business at Credit Suisse the Zurich based lender said on Friday His departure ends a conflict with Rohner following revelations that the bank had snooped on former executives raised questions over its culture and management Credit Suisse s spying surfaced in September when former star wealth manager Iqbal Khan after defecting to rival UBS confronted a private detective who was following him and his wife through Zurich Thiam s exit appears unlikely to draw a line under the affair potentially irking some international investors who had spoken out in favor of the CEO in his battle with Rohner while Switzerland s market supervisor is investigating the board s oversight of Thiam and his top lieutenants A period of instability will ensue as Mr Gottstein attempts to lay the foundations for further growth We would assume investor discontent following the change with any fall out unknown at this stage KBW analysts said This was reflected in the immediate market reaction with the bank s shares down 2 8 by 1115 GMT Credit Suisse s board said that Rohner had its backing to complete his term until April 2021 Thiam 57 was appointed as CEO in 2015 having never previously worked for a bank At Credit Suisse the ex Prudential boss focused on cutting costs reducing risk scaling back investment banking to focus more on wealth management and strengthening its balance sheet Engineering that turnaround led to three years of consecutive losses but the bank returned to profit in 2018 leading to plaudits for the former Ivory Coast government minister and McKinsey management consultant However what the bank initially described as a rogue spying case run by then Chief Operating Officer Pierre Olivier Bouee widened as details emerged of other instances of surveillance Swiss financial supervisor FINMA is investigating after the bank subsequently acknowledged that it had tailed former human resources head Peter Goerke Thiam again said he knew nothing of these activities I had no knowledge of the observation of two former colleagues It undoubtedly disturbed Credit Suisse and caused anxiety and hurt I regret that this happened and it should never have taken place Thiam said in the statement Graphic Credit Suisse stock under Tidjane Thiam SAFE PAIR OF HANDS Gottstein a prominent investment banker and wealth manager before taking over Credit Suisse s domestic operation had been flagged by analysts as a potential successor to Thiam Based on his deep and comprehensive experience in our business and in view of his impressive performance as head of our Swiss bank and his respect amongst our clients and employees Thomas Gottstein is excellently positioned to lead Credit Suisse into the future Rohner said in a statement Gottstein will be the first Swiss citizen to run Credit Suisse in almost 20 years The 55 year old has been at the bank since 1999 joining from rival UBS He has spent most of his career working in equity capital markets before taking over as chief of Credit Suisse s Swiss bank in 2015 Citigroup NYSE C analysts described Gottstein in a note as a safe pair of hands Thiam s resignation effective from Feb 14 after the presentation of fourth quarter and full year 2019 results came at a board meeting on Thursday During the meeting in Zurich directors backed Rohner despite calls from Swiss investment adviser Ethos Foundation for him to quit Urs Rohner has led the board of directors commendably during this turbulent time said board member Severin Schwan in the bank s statement After careful deliberations the board has been unanimous in its actions as well as in reaffirming its full support for the chairman to complete his term until April 2021 In Switzerland Credit Suisse and UBS typically have a Swiss national as either chairman or chief executive Gottstein s appointment could therefore pave the way for a non Swiss chairman One person familiar with the matter said Richard Meddings a British banker set to join the board could take over from Rohner
Andre Helfenstein now responsible for Credit Suisse s institutional clients in Switzerland will succeed Gottstein as CEO of the Swiss business and join the executive board |
JPM | Is JPMorgan Diversified Return Emerging Markets Equity ETF JPEM A Hot ETF Right Now | Launched on 01 07 2015 the JPMorgan NYSE JPM Diversified Return Emerging Markets Equity ETF JPEM is a smart beta exchange traded fund offering broad exposure to the Broad Emerging Market ETFs category of the market
What Are Smart Beta ETFs
Products that are based on market cap weighted indexes which are strategies designed to reflect a specific market segment or the market as a whole have traditionally dominated the ETF industry
A good option for investors who believe in market efficiency market cap weighted indexes offer a low cost convenient and transparent way of replicating market returns
But there are some investors who would rather invest in smart beta funds these funds track non cap weighted strategies and are a strong option for those who prefer choosing great stocks in order to beat the market
This kind of index follows this same mindset as it attempts to pick stocks that have better chances of risk return performance non cap weighted strategies base selection on certain fundamental characteristics or a mix of such characteristics
Methodologies like equal weighting one of the simplest options out there fundamental weighting and volatility momentum based weighting are all choices offered to investors in this space but not all of them can deliver superior returns
Fund Sponsor Index
The fund is sponsored by J P Morgan It has amassed assets over 220 54 M making it one of the average sized ETFs in the Broad Emerging Market ETFs This particular fund before fees and expenses seeks to match the performance of the FTSE Emerging Diversified Factor Index
The FTSE Emerging Diversified Factor Index are selected from advanced and secondary emerging markets strictly in accordance with guidelines and mandated procedures and are selected from constituents of the FTSE Emerging Index
Cost Other Expenses
Cost is an important factor in selecting the right ETF and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same
Operating expenses on an annual basis are 0 47 for JPEM making it on par with most peer products in the space
It s 12 month trailing dividend yield comes in at 4 69
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk it is still important to look into a fund s holdings before investing Luckily most ETFs are very transparent products that disclose their holdings on a daily basis
Looking at individual holdings China Mobile Ltd Common accounts for about 2 80 of total assets followed by Taiwan Semiconductor and Vale Sa Common Stock Brl
JPEM s top 10 holdings account for about 15 6 of its total assets under management
Performance and Risk
So far this year JPEM has lost about 7 94 and is down about 4 35 in the last one year as of 11 06 2018 During this past 52 week period the fund has traded between 49 44 and 64 42
The ETF has a beta of 0 92 and standard deviation of 16 48 for the trailing three year period making it a medium risk choice in the space With about 628 holdings it effectively diversifies company specific risk
Alternatives
JPMorgan Diversified Return Emerging Markets Equity ETF is a reasonable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market However there are other ETFs in the space which investors could consider
IShares Core MSCI Emerging Markets ETF IEMG tracks MSCI Emerging Markets Investable Market Index and the Vanguard FTSE Emerging Markets ETF VWO tracks FTSE Emerging Markets All Cap China An Inclusion Index IShares Core MSCI Emerging Markets ETF has 46 73 B in assets Vanguard FTSE Emerging Markets ETF has 56 07 B IEMG has an expense ratio of 0 14 and VWO charges 0 14
Investors looking for cheaper and lower risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Emerging Market ETFs
Bottom Line
To learn more about this product and other ETFs screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe please visit Zacks ETF Center |
JPM | JPM Vs C Which Bank Is A Better Choice Post Q3 Earnings | The earnings season is drawing to a close with results from nearly 400 S P 500 members already out Performance of on the index accounting for nearly 45 of the Zacks sector s total earnings in third quarter 2018 was quite impressive with 25 2 year over year earnings growth Today we are discussing two big banks in the United States JPMorgan NYSE JPM and Citigroup NYSE C with market capitalization of 362 7 billion and 164 4 billion respectively Both are part of the same industry which has a 87 top 34 Our back testing shows that the top 50 of the Zacks ranked industries outperforms the bottom 50 by a factor of more than 2 to 1 Notably the results for both JPMorgan and Citigroup improved on the back of rise in lending activities and economic stability Further improvement in equity trading activities decent investment banking performance and lower credit costs supported the results Going forward both JPMorgan and Citigroup expect lower tax rates to continue benefiting profitability Also both are influenced by almost similar economic backdrop as they have the same business operations Further the improving rate environment rise in loan demand and potential lesser regulations will be beneficial for them Both JPMorgan and Citigroup carry a Zacks Rank 2 Buy You can see Let s take a closer look at how JPMorgan and Citigroup are stacked up against each other in terms of certain key metrics Price PerformanceSo far this year shares of JPMorgan have gained 2 while Citigroup has lost 9 6 Further over the same time period the industry has declined 6 9 So JPMorgan clearly has outperformed Citigroup Year to Date Price Performance
Dividend YieldBoth the banks have been meaningfully deploying capital in terms of dividend payments and share repurchases to enhance shareholder value JPMorgan received the Fed s approval for its 2018 capital plan that includes nearly 43 dividend hike and 20 7 billion share repurchase authorization It has a dividend yield of 2 95 Dividend Yield JPM
Following the Fed s approval for its 2018 capital plan Citigroup announced a 41 dividend hike and 17 6 billion share repurchase authorization Also the bank has a dividend yield of 2 68 Dividend Yield C
As you see in the above charts JPMorgan has an edge over Citigroup here as the former s dividend yield is not onlybetter than the latter s but is also above the industry average of 2 79 Leverage RatioBoth JPMorgan and Citigroup have a higher debt to equity ratio compared with the industry average of 0 94 But JPMorgan with a leverage ratio of 1 17 has an edge over Citigroup with the same of 1 32 Return on Equity ROE ROE is a measure of a company s efficiency in utilizing shareholder s funds ROE for the trailing 12 months for JPMorgan and Citigroup is 13 91 and 9 42 respectively Further with industry s average of 11 62 JPMorgan is more efficient in using shareholders funds Hence JPMorgan holds an edge here ROE
Earnings Estimate Revisions Growth ProjectionsBoth JPMorgan and Citigroup have seen the Zacks Consensus Estimate for 2018 earnings being revised upward Over the past 30 days earnings estimates have moved 1 8 and 1 5 upward for JPMorgan and Citigroup For JPMorgan the consensus estimate for earnings per share is pegged at 9 28 for 2018 representing year over year growth of 35 1 The stock has long term expected earnings growth rate of 6 7 For Citigroup the Zacks Consensus Estimate stands at 6 69 for 2018 reflecting a year over year jump of 25 5 The stock has long term expected earnings growth rate of 11 4 Therefore this round is biased toward JPMorgan again Sales Growth ProjectionsFor JPMorgan the Zacks Consensus Estimate for sales is 109 7 billion for 2018 reflecting 10 1 rise from the prior year For Citigroup the consensus estimate for sales stands at 73 7 billion indicating growth of 3 2 year over year Therefore JPMorgan has an edge here too ValuationJPMorgan seems overvalued when compared with the broader industry Its current price to earnings F1 and price book ratios are above than the respective industry averages Citigroup on the other hand seems undervalued when compared with the broader industry Its current price to earnings F1 and price book ratios are lower than the respective industry averages So Citigroup holds the edge over JPMorgan here ConclusionOur comparative analysis indicates that JPMorgan is better poised than Citigroup post third quarter earnings when considering price performance dividend yield ROE superior leverage ratio and sales and earnings growth expectations Citigroup wins on undervaluation only Today s Stocks from Zacks Hottest StrategiesIt s hard to believe even for us at Zacks But while the market gained 21 9 in 2017 our top stock picking screens have returned 115 0 109 3 104 9 98 6 and 67 1 And this outperformance has not just been a recent phenomenon Over the years it has been remarkably consistent From 2000 2017 the composite yearly average gain for these strategies has beaten the market more than 19X over Maybe even more remarkable is the fact that we re willing to share their latest stocks with you without cost or obligation |
JPM | JPMorgan Chase JPM Gains But Lags Market What You Should Know | In the latest trading session JPMorgan Chase JPM closed at 109 60 marking a 0 47 move from the previous day This move lagged the S P 500 s daily gain of 0 63 Meanwhile the Dow gained 0 68 and the Nasdaq a tech heavy index added 0 64
Coming into today shares of the biggest U S bank by assets had lost 5 4 in the past month In that same time the Finance sector lost 3 09 while the S P 500 lost 4 95
Investors will be hoping for strength from JPM as it approaches its next earnings release which is expected to be January 11 2019 On that day JPM is projected to report earnings of 2 24 per share which would represent year over year growth of 27 27 Meanwhile our latest consensus estimate is calling for revenue of 27 10 billion up 12 19 from the prior year quarter
JPM s full year Zacks Consensus Estimates are calling for earnings of 9 28 per share and revenue of 109 73 billion These results would represent year over year changes of 35 08 and 10 14 respectively
It is also important to note the recent changes to analyst estimates for JPM These recent revisions tend to reflect the evolving nature of short term business trends As such positive estimate revisions reflect analyst optimism about the company s business and profitability
Research indicates that these estimate revisions are directly correlated with near term share price momentum Investors can capitalize on this by using the Zacks Rank This model considers these estimate changes and provides a simple actionable rating system
The Zacks Rank system ranges from 1 Strong Buy to 5 Strong Sell It has a remarkable outside audited track record of success with 1 stocks delivering an average annual return of 25 since 1988 Within the past 30 days our consensus EPS projection has moved 1 39 higher JPM is currently a Zacks Rank 2 Buy
Valuation is also important so investors should note that JPM has a Forward P E ratio of 11 75 right now This represents a premium compared to its industry s average Forward P E of 11 59
Meanwhile JPM s PEG ratio is currently 1 76 The PEG ratio is similar to the widely used P E ratio but this metric also takes the company s expected earnings growth rate into account The Banks Major Regional was holding an average PEG ratio of 1 22 at yesterday s closing price
The Banks Major Regional industry is part of the Finance sector This group has a Zacks Industry Rank of 87 putting it in the top 34 of all 250 industries
The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors Our research shows that the top 50 rated industries outperform the bottom half by a factor of 2 to 1
You can find more information on all of these metrics and much more on Zacks com |
MS | Morgan Stanley wealth customers bring more assets to bank executive | By Catherine Ngai NEW YORK Reuters Morgan Stanley N MS is starting to see some wealth management customers bring assets into the bank that they had held at other firms President Colm Kelleher said on Tuesday Morgan Stanley s retail investors have put most of their cash balances at the bank to work in the market and are bringing more money into those accounts Kelleher said at a financial industry conference in London They re bringing money from other sources into Morgan Stanley to invest he said so I don t know if that means they re fully invested or whether we re getting more share of their business In the first two months of the year which were marked by bursts of volatility Morgan Stanley s wealth unit posted very high revenue from accounts whose customers pay per trade rather than a flat fee he added That activity has since trailed off Kelleher did not provide figures to support his comments Wealth management has been a bright spot for Morgan Stanley helping to offset declines in businesses like bond trading under a business plan outlined by Chief Executive James Gorman several years ago
Kelleher who ran Morgan Stanley s trading business before taking on his current role predicted that first quarter trading across Wall Street will likely be flat compared to a year ago |
MS | BTC 12 Month Course Resembles Dot Com Bubble Morgan Stanley Notes | Sheena Shah a strategist at Morgan Stanley NYSE MS has pointed out in a note to customers that Bitcoin s price shows striking similarities with the Nasdaq index during its dot com bubble period but the cryptocurrency has moved 15 times faster
She compared a chart of the Nasdaq index from 1994 to 2002 with Bitcoin s price in the last year The lines move in parallel until a certain point where we can see that Bitcoin trends a little higher By this logic the price of the largest cryptocurrency should soon tumble
Steven Russolillo from the Wall Street Journal shared the chart via
However not everyone agrees with the accuracy and relevance of this comparison Some social media users note that the dual axes might misrepresent the data
Moreover people said this chart should be perceived as a bullish sign for Bitcoin in the medium term
Following this theory it suggests that by extending the chart NASDAQ up until today bitcoin would reach around 30 000 by next march one Twitter user
Indeed we can see that Nasdaq s 2000 peak is not the all time high the record was set quite recently
In light of that Morgan Stanley should send a bullish signal on Bitcoin rather than a bearish one It suggests the observation made in the Monday note to clients is quite irrelevant
Last year the CEO of Morgan Stanley that Bitcoin resembled a bubble but it would not unfold overnight
Something that goes up 700 percent in a year it s by definition speculative So anybody who thinks they re buying something that it s a stable investment is deluding themselves he said then
According to data from Coinmarketcap Bitcoin is now trading at 9 025 at the time of writing up 6 63 in the last 24 hours and 0 07 for the past seven days
All eyes are now on the G20 meeting of finance ministers and central bank representatives who have gathered in Argentina |
MS | FOMO Grips Wall Street Bankers as Big Uber Debt Deal Slips Away | Bloomberg For the select group of Wall Street bankers who specialize in doling out leveraged corporate loans these are exciting and anxious times
Exciting because they ve been told by regulators in the Trump administration that they re now freer to take on more risk Anxious because they re waiting for those instructions which were communicated verbally at an industry conference last month to be turned into official policy so that they can have the confidence to start pursuing the kinds of deals that used to land them in trouble
Deals like the loan expected to price in the coming days by Uber Technologies Inc With the memory still fresh in their minds of how a similar Uber loan agreed in 2016 earned them a reprimand from regulators some banks held back from the deal people familiar with the matter said Uber marketed it directly to investors Demand was so strong that the transaction was boosted to 1 5 billion on Monday before word emerged that an Uber self driving car fatally struck a pedestrian
There s a palpable sense of FOMO in the air on Wall Street When Morgan Stanley NYSE MS was named an adviser to Uber on the transaction some of its rivals fumed in private What exactly did an advisory role entail they wondered and was it just a workaround that allowed the bank to arrange and distribute the loan for Uber the way that a traditional bookrunner would A representative for Morgan Stanley declined to comment as did a representative for San Francisco based Uber
You are in a period of limbo said Michael Alix a partner at PwC and a former Federal Reserve official And it is uncomfortable for everybody
While the pace of change is quickening now in the leveraged loan market it has actually been underway for a while Ever since President Donald Trump came to office compliance with the leveraged loan guidance as it is known started to weaken helping drive debt ratios in the riskier corporate loan market to record levels That may be OK when earnings are posting strong growth like now but the concern among more cautious policy makers is how these loans perform when profits start to slump and borrowing costs climb
The lending guidance in question emerged in the aftermath of the financial crisis to prevent debt heavy buyouts that hobbled firms the effects of which are still being felt with iHeartMedia Inc filing for bankruptcy just this month The guidance has been under fierce discussion amid Trump s hands off stance on regulation which has already unraveled other post crisis rules
Debt Limit
The guidance included one particular provision to cap the debt banks could pile on to companies Lenders were limited from providing debt in excess of six times a measure of earnings knowing any such deal would likely attract regulatory scrutiny The instructions also emphasized the borrower needed to show it could repay a significant portion of the total loans over a sustained period
Uber s loan plan on the face of it would stretch at least some of those stipulations The company still does not generate positive earnings according to documents seen by Bloomberg News That makes its leverage ratio mathematically meaningless At its loan pitch in New York earlier this month it touted its growth prospects its 10 billion liquidity position as well as its 5 7 billion of pro forma cash as it sought to attract investors directly rather than going through banks
And the company s ability to boost the size of the loan is a sign it s hotly demanded by investors who ve been deprived of juicier yields as interest rates remained low
Powell Otting
What s accelerated the desire for clarity from lenders are explicit statements from two regulatory agency heads Joseph Otting the comptroller of the currency said at a Las Vegas conference in February that banks should have the right to do the leveraged lending they want as long as they have the capital and personnel to manage that and it doesn t impair their safety and soundness Federal Reserve Chairman Jerome Powell said in testimony to lawmakers that it may put the current guidance on riskier lending out to consultation Both said the instructions were not meant to be viewed as binding
The life of the leveraged lending guidance wasn t straight forward Regulators published it in 2013 though it had to be clarified in 2014 before banks understood and complied Last fall the Government Accountability Office said the more stringent guidance amounted technically to rules The distinction was important because it meant as rules they need to be submitted for Congressional review That had never happened leading some to say they shouldn t be enforced
Safe Sound
Regulators were never clear as to where the goal posts were said Mark Okada co chief investment officer of Highland Capital Management They applied the guidelines arbitrarily in an attempt to simply reduce leveraged lending in total
The guidance was issued by the Board of Governors of the Federal Reserve the Federal Deposit Insurance Corporation and the U S Office of the Comptroller of the Currency A representative for the Federal Reserve declined to comment
A representative for the FDIC said it distinguishes between the requirements of laws and regulations which are legally binding and enforceable and supervisory guidance which itself is not enforceable but sets forth information including the factors the FDIC considers when exercising its supervisory authority
The OCC provided written comment that leveraged lending must be conducted in a safe and sound manner That included maintaining appropriate policies procedures controls and personnel competency commensurate with the level of risk presented by the bank s leveraged lending activities it said |
MS | Wall Street starts to trim Facebook targets as shares fall | Reuters DZ Bank was the third Wall Street brokerage this week to make a rare cut in price targets for Facebook Inc O FB on Wednesday as the social network s shares slid for a third day in response to a row over data use by Cambridge Analytica The brokerage cut its target for the California based firm by 20 to 210 still way above the current share price of 165 but adding to signs that Wall Street analysts are waking up to the risks to the company A 1 6 percent fall in Facebook shares in premarket trading brought the losses in the company s market value this week to 57 billion or 10 5 percent a shock for a company that has risen more than 550 percent in value in the past five years The suspended chief executive of Cambridge Analytica said in a secretly recorded video broadcast on Tuesday that his UK based political consultancy s online campaign played a decisive role in U S President Donald Trump s 2016 election victory CEO Alexander Nix s comments which could not be verified were potentially a further problem for Facebook as it faces U S and European scrutiny of Cambridge s improper use of 50 million Facebook users personal data to target voters nL1N1QZ02Q We anticipate that the stock will be subject to further headline risk in the coming weeks as senior management is summoned to DC for hearings with lawmakers Credit Suisse SIX CSGN analyst Stephen Ju wrote in a note Many analysts have now raised concerns that the incident will have a negative impact on user engagement with Facebook potentially eating into its clout with advertisers There are mixed views however on whether an aggressive regulatory response will materialize So far U S and European lawmakers have demanded an explanation of how Cambridge Analytica gained access to user data in 2014 and why Facebook failed to inform its users raising broader industry questions about consumer privacy Cowen and Co analyst Paul Gallant said that Congress is unlikely to act on the issue He said that despite allegations of Russian interference a bill requiring Internet companies to disclose foreign buyers of political advertising is going nowhere We don t expect Congress to enact online privacy legislation anytime soon even if Democrats win the House this fall Gallant said On Tuesday another brokerage Evercore ISI cut their target by 20 to 205 their biggest reduction ever Macquarie Research also trimmed its by 5 to 200 the first reduction since Oct 2012 five months after Facebook stock market launch Investors now have to consider whether or not the company will conclude that it has grown in a manner that has proven to be untenable or whether it needs to significantly improve how it is managed said Pivotal Research Group analyst Brian Wieser
Morgan Stanley NYSE MS analysts said they expected Facebook to bring changes to how data are made available to app developers and third parties adding it could have a negative impact on Facebook Audience Network s ability to scale although minimal |
MS | Bitcoin s Boom Bust Cycle Reminiscent of Dot com Era | Investing com Comparisons to the dot com era are rarely good And that s the case with Morgan Stanley NYSE MS s analysis which says bitcoin is behaving the way the Nasdaq did two decades ago In a note to clients the Wall Street firm identified general similarities between the price movements and trading volumes of the Nasdaq in late 1999 and early 2000 and bitcoin in late 2017 and early 2018 Both the Nasdaq and bitcoin posted rallies of more than 250 before entering sharp downturns Once the downturns began both suffered multiple waves of weakness with average declines of about 45 In both cases there were multiple bear market rallies with average gains of about 40 Finally trading volume was much higher during the downturn periods than the rally periods indicating what Morgan Stanley calls a a rush to get out There is one main difference though The bitcoin rally played out in a much shorter period of time |
MS | Morgan Stanley to hire 80 in Paris after Brexit source | By Lawrence White and Maya Nikolaeva LONDON PARIS Reuters Morgan Stanley NYSE MS plans to add 80 jobs in Paris after Britain s exit from the European Union a source familiar with the matter said on Thursday on top of around 200 the U S bank is set to transfer to its Frankfurt hub The potential transfer or creation of roles by the U S bank in France was first reported by French newspaper Les Echos without giving a timeline for when they might be completed Morgan Stanley already employs around 120 bankers in Paris and Reuters reported last July the bank has chosen Frankfurt to be its main base for its EU operations after Brexit Its move to transfer some staff there follows a similar pattern to other banks which have picked one EU center to be their main regional subsidiary in the bloc but then locating other parts of their businesses in several countries Swiss bank UBS earlier this month said it would pursue a decentralized approach with staff mainly moving to Frankfurt and other locations where their clients are based
U S and European banks are starting to execute contingency plans after British Prime Minister Theresa May ruled out retaining passporting rights for financial services |
MS | Trump set for China tariff announcement on Thursday trade war fears grow | By David Chance and Steve Holland WASHINGTON Reuters President Donald Trump will announce tariffs on Chinese imports on Thursday a White House official said in a move aimed at curbing theft of U S technology and likely to trigger retaliation from Beijing and stoke fears of a global trade war There was no indication of the size and scope of the tariffs which U S Trade Representative Robert Lighthizer said on Wednesday would target China s high technology sector and could also include restrictions on Chinese investments in the United States Other sectors like apparel could also be hit Tomorrow the president will announce the actions he has decided to take based on USTR s 301 investigation into China s state led market distorting efforts to force pressure and steal U S technologies and intellectual property the official said The White House said Trump would sign a presidential memorandum targeting China s economic aggression at 12 30 p m 1630 GMT on Thursday The investigation by the United States under Section 301 of the 1974 Trade Act has identified theft from and coercion of U S companies to disclose their intellectual property as well as purchases by Chinese state funds of U S companies for their technology knowledge Lighthizer told the House of Representatives Ways and Means Committee a top economic panel that the aim would be to minimize the impact of any tariffs on U S consumers China has threatened to retaliate by hitting U S agricultural exports if tariffs on Chinese imports worth up to 60 billion are announced by Washington The remedies in my judgment at least would be one doing something on the tariff front and two doing something on the investment front and then perhaps other things said Lighthizer a lawyer and veteran trade negotiator The United States runs a hefty goods trade deficit with China of 375 billion Estimates of the cost of counterfeit goods pirated software and theft of trade secrets could be as high as 600 billion according to one study Talk of a global trade war emerged earlier this month when Trump announced hefty tariffs on steel and aluminum imports aimed at hitting Chinese overproduction but which could also affect key allies like members of the European Union Lighthizer conceded that China would likely hit back with measures on U S agricultural exports particularly soybeans and said if that happened Washington would impose counter measures although he said that nobody wins from a trade war a stance that appeared to put him at odds with Trump who has termed trade wars good and easy to win Since taking office Trump has taken a hard line on trade abandoning a 14 nation Pacific trade pact and threatening to pull out of the North American Free Trade Agreement with Canada and Mexico He has also attacked Germany saying it hides behind tariffs to win an export advantage for its car industry The administration has been forced to walk back some of its steel and aluminum measures granting exemptions to Canada and Mexico and entering talks with the European Union and others to discuss potential exemptions CHINA STEELS ITSELF FOR RESPONSE China has already identified agriculture as a U S weak point and has said it would target soybeans a 14 billion a year business America s farm states heavily backed Trump in his presidential election win China does not want to fight a trade war with anyone But if anyone forces us to fight one we will neither be scared nor hide Foreign Ministry spokeswoman Hua Chunying said If in the end the United States takes actions that harm China s interests then China will have to take resolute and necessary steps to respond to protect our legitimate interests The European Union s response to the threat of steel and aluminum tariffs also targeted areas where Republicans are vulnerable threatening Harley Davidson motorcycles which are made in House Speaker Paul Ryan s home state of Wisconsin While China has stepped up its rhetoric it is far from clear that Beijing is ready to take the next step and move to an economic confrontation that would pit the world s two leading economic powers against each other Financial markets reacted to the Trump steel and aluminum tariffs with an initial sharp sell off although they have since regained their poise A global trade war would have much harsher economic consequences possibly hitting the dollar U S stock markets and currencies as varied as the Mexican peso and the Australian dollar according to analysis from investment bank Morgan Stanley NYSE MS A targeted use of Section 301 that covered 60 billion of Chinese high tech products could see a response from China that is relatively muted the bank said in a report with agriculture and transport equipment being hit in return This would have a moderate impact on growth in both the U S and China it said
The risk of an escalation in which there were a broad based tariff across a range of Chinese goods followed by a response from Beijing that was commensurate with that would cause a hit to U S and Chinese growth a rise in U S inflation and possibly prompt China to take domestic action to boost growth |
MS | Credit Suisse CEO says Global Markets revenue slowed in February shares fall | ZURICH Reuters Revenues in Credit Suisse s S CSGN Global Markets trading division have fallen since mid February Chief Executive Tidjane Thiam said on Thursday helping spur a drop in the Swiss bank s shares in trading in Zurich Nothing to be alarmed about It s going to be a profitable quarter but more slow after six weeks than in the full year Thiam said at a Morgan Stanley NYSE MS conference in London
Credit Suisse shares fell 2 8 percent at 1212 GMT |
JPM | Fed Is Likely Unswayed by Clamor for Rate Cuts Minutes Preview | Bloomberg As financial markets and the Trump administration clamor for lower interest rates in the face of a slowing economy the Federal Reserve is refusing to see any rush
Analysts will be seeking clues to the limits of that patience on Wednesday when minutes from the Federal Open Market Committee discussions of March 19 20 are due out The FOMC kept rates steady at the meeting forecast no additional hikes this year and said it would halt the process known as quantitative tightening essentially the shrinking of the Fed s bond portfolio in September
Markets drew the conclusion that a rate cut is likely by January and President Donald Trump and his advisers quickly endorsed the idea But FOMC forecasts still suggest a hiking bias with six participants projecting higher interest rates this year while 11 see no change And two prominent doves St Louis Fed President James Bullard and Neel Kashkari of Minneapolis both said after the meeting that it s premature to talk about cutting rates
Fed officials over the last week or two have been emphasizing that they are a long way from a cut said Stephen Stanley chief economist at Amherst Pierpont Securities LLC That seems like a candidate for something meaningful coming out in the minutes
Here are some key points Fed watchers will be looking for
Rate Cut Threshold
Chairman Jerome Powell has said the Fed is no hurry to move with the economy likely to grow at a solid pace and inflation low Along with most committee members he s been vague on what it would take to end the pause
My sense is that the threshold for cutting is very high and would involve something going seriously wrong with the outlook for example a risk of recession and not simply inflation that fails to reach target said Roberto Perli a partner at Cornerstone Macro LLC in Washington and former Fed economist To me this is the most important aspect of the minutes
Growth and Inflation
Since its last rate hike in December the FOMC has trimmed its forecasts for economic growth seeing smaller contributions from household spending and business investment While Powell and Fed officials have stressed their positive outlook the minutes could give some indication of why their views shifted so quickly
They haven t done a great job explaining what is so different between December and March said Michael Feroli chief U S economist at JPMorgan Chase Co NYSE JPM in New York This could provide an opportunity to do so
What Our Economists Say
An important focal point of the minutes will be to determine the extent to which Fed officials expect the sources of recent economic weakness to be transitory Carl Riccadonna Yelena Shulyatyeva and Tim Mahedy
Attention will likely be paid to any FOMC comments about a flattening yield curve especially because the curve inverted after the March meeting with 3 month Treasury yields rising above 10 year yields Some economists take that as a serious recession warning
There s also been a reassessment of inflation among some committee members I don t feel that we have kind of convincingly achieved our 2 percent mandate in a symmetrical way Powell told reporters last month He says he s not worried about a tight labor market fueling higher wages The minutes could provide some elaboration of these views
Balance Sheet
Powell said the balance sheet shrinkage would end in September but left lots of questions unresolved
One detail is when the Fed might start expanding its portfolio again even if it s only in order to keep it constant relative to a growing economy according to Jonathan Wright a professor at Johns Hopkins University and former Fed economist
Another is related to the composition of holdings Wright said They want an all Treasuries program in the long run but I don t think that they have been clear on whether the maturity is to be roughly proportional to Treasuries outstanding he said That would be my working assumption But it would be significant if they went to a shorter duration portfolio |
JPM | Stocks Wall Street Treads Water Ahead of Earnings Deluge | Investing com U S stocks were little changed in early trading on Wall Street following economic data that served to support the current status quo without changing the overall game plan for risk sentiment
At 9 40 AM ET 13 40 GMT the Dow Jones held steady at 26 153 58 points the S P 500 hardly moved at 2 889 39 points while the Nasdaq Composite stuck to 7 962 06 points
Weekly jobless claims released ahead of the open continued to show the strength of the U S labor market hitting their lowest level since 1969
Meanwhile a slowdown in producer price inflation excluding food and energy appeared to support the Federal Reserve s current outlook that interest rates would likely remain on hold for the rest of the year
In a speech delivered at the market open Fed Vice Chairman Richard Clarida proclaimed that the U S economy is in a good place and operating close to both of the Federal Reserve s dual mandate objectives of maximum employment and price stability
Construction supplies group Fastenal stood out after early trading rising 4 2 and leading the Nasdaq 100 after reporting better than expected earnings for the first quarter
By contrast drugstore chain Rite Aid was down 9 1 after reporting it swung to a loss in the quarter after suffering a 0 3 drop in sales The company also said it expects further weakness in drug reimbursement rates and lower savings from generic drugs
The first quarter earnings season begins in earnest on Friday with reports from JP Morgan Chase NYSE JPM and Wells Fargo NYSE WFC ahead of the open
Outside of equities the U S dollar index which measures the greenback against six rival currencies rose 0 1 to 96 69 by 9 43 AM ET 13 43 GMT while the while the yield on the 10 year Treasury advanced 1 3 basis points to 2 49
In commodities gold futures fell 0 9 to 1 301 55 a troy ounce while crude oil traded down 0 8 at 64 11 a barrel
Reuters contributed to this report |
MS | S P 500 Futures Positive Price Action And A Potential RIP | We are not sure why but the bears have been getting excited lately After a few down days and a small pick up in volume the S P 500 futures ESH17 CME index started making a series of higher lows The futures rallied late in the day on Tuesday sold off on Globex Tuesday night then sold off and triple bottomed at the 2281 00 level Guess what happened next The ESH rallied up to 2291 00 completing another MrTopStep 10 handle rule
Whether you like the S P s don t like the S P s or do not have an opinion the futures are only 10 handles away from from the big 2300 milestone
While the stock market may be expensive the overall price action has not changed Europe doesn t see to be in as bad a shape as it was While we can credit the most recent move up to the new US administration we do not think it s all about the new president The banks that have been out of favor are now one of the favorite sectors Morgan Stanley NYSE MS has doubled in price since last year
So what is driving the S P higher With hedge funds exposure at the highest level in over 12 months and a no place to go but stocks mentality it seems like the big investment firms that were not fully vested at the end of last year have employed billions of stock purchases This feels right in line with bullish sentiment being at an 18 month high and my idea that with a full 10 1 2 months left in the year that 1 there will be some big moves down and 2 the VIX will see some extreme volatility
While You Were Sleeping
Overnight global equity markets continued their rally both in Asia and Europe The S P made an early low at 2287 75 just before the Tokyo open From there the futures traded sideways to higher before taking off higher after the Euro open pushing up to 2296 25 and has last printed 2295 50 up 5 25 handles on volume of 86k as of 5 52 am cst
In Asia 9 out of 10 open markets closed higher Shanghai 0 51 and in Europe 8 out of 11 markets are trading higher this morning DAX 0 45 Today s economic calendar includes the Weekly Bill Settlement Jobless Claims Bullard Speaks Bloomberg Consumer Comfort Index Wholesale Trade EIA Natural Gas Report a 30 Yr TIPS Announcement a 3 Month Bill Announcement a 6 Month Bill Announcement a 30 Yr Bond Auction Charles Evans Speaks Fed Balance Sheet and Money Supply
Barclays LON BARC Fed Speak Preview
St Louis Fed President Bullard FOMC voter speaks We look to Bullard s remark for any hint on the evolution of the FOMC s thinking on near term trade and fiscal policy from the administration We continue to believe the FOMC will be largely reactive to the administration s policies
Chicago Fed President Evans FOMC non voter speaks Evans seems comfortable with two or three hikes this year We will be attentive to any shift in his views on near term administration policies
Our View
I think ES 2300 00 is on TAP I am not sure what will stop it I just do not see any change to indicate a trend change Our view remains UNCHANGED You can sell the early to mid day rallies and buy weakness or just go with the trend and buy weakness You make the call
As always please use protective buy and sell stops when trading futures and options
In Asia 9 out of 10 open markets closed higher Shanghai Comp 0 51 Hang Seng 0 17 Nikkei 0 53
In Europe 8 out of 11 markets are trading higher CAC 0 68 DAX 0 45 FTSE 0 33 at 6 00am ET
Fair Value S P 3 76 NASDAQ 1 79 Dow 47 98
Total Volume 1 28m ESH and 3 1k SPH traded |
MS | Morgan Stanley Has FX Reserves On Its Mind | US bank Morgan Stanley NYSE MS has forex reserves on its mind on Friday The US firm feels that if reserve managers are rethinking asset allocations they may also be considering the risk profile of the currencies they hold Morgan Stanley notes that in the middle of 2016 63 of global reserve allocations were in the USD 20 in the EUR and only 4 in GBP
Given that commodity prices remain supported and the USD is no longer strengthening at its former pace we believe there will be room for total FX reserves to rise Indeed weekly USD security holdings held at the Federal Reserve suggest that FX reserves may have stopped falling recently Of course if global foreign exchange reserves are going to tick up which currencies are held might well influence the direction of forex markets
It is Morgan Stanley s view that the euro might not necessarily be a beneficiary and that indeed eurozone political risk events and related EUR bond volatility may provide incentive for reserve managers to reallocate away from the EUR
Instead the US bank argues that GBP seems a good alternative as the Brexit uncertainties are baked into the price and we believe GBP is an undervalued G10 currency Morgan Stanley has thus added short EUR GBP to their portfolio
All financial products traded on margin carry a high degree of risk to your capital Any forecasts given are not a reliable indicator of future performance and the decision to act on any ideas and suggestions presented is at the sole discretion of the reader |
MS | Aramco Looks For JPM MS Assistance | Saudi Aramco looks to JPMorgan NYSE JPM and Morgan Stanley NYSE MS for financial assistance while tapping HSBC NYSE HSEB for Legal assistance along with its Asian market influence
Oil giant Saudi Aramco has been working on a possible partnership with JPMorgan Chase Co NYSE JPM and Morgan Stanley The two banks will be looking to assist the oil company s gigantic initial public share offer and Aramco is still looking to add another bank to handle its Chinese investors
The role is very much fought for and has been eluding a lot of banks to assist Aramco The specifics of the role is that JP Morgan and Morgan Stanley would be helping Saudi Aramco s planned initial public offering and since Saudi officials have been valuing the company at 2 trillion and the expected IPO is most likely to raise 100 billion from investors At this rate Saudi Aramco is on the track to overtake apple as the world s most valuable listed company
Saudi Aramco s IPOThe Saudi government has been long planning ambitious and an ambiguous plan called Vision 2030 The IPO would be the grandiose centerpiece to diversify the economy breaking the walls of the what one oil classed economy to a freer and expandable one There are also estimated 50 or more percent of the world s largest oil producer to be listed on both the Saudi stock exchange in Riyadh and on one or more international market
The deputy crown prince of Saudi Arabia Mohammed bin Salman on an interview last year said that the company has been considering investing proceeds from the IPO in non oil industries Saudi Aramco who was once called Saudi Arabian Oil Co has been dodging every interview with the recent negotiations JP Morgan and Morgan Stanley declined to comment as well
White Case Aramco RelationshipThe international law firm based in New York was also tapped by the Saudi Arabia to be their legal advisor for its IPO White Chase has been known to have a long established relationship with the state oil giant Saudi Arabia is also pondering on the options for the shape of Aramco when it sells shares in the national oil giant next year it will be either global industrial conglomerate or specialized international oil company
JP Morgan Morgan Stanley RolesJP Morgan has been the longstanding commercial banker for Saudi Aramco s they would be holding the position as a global coordinator and book runner for the planned sale of the 5 stake in the state controlled company in 2018
While Morgan Stanley will also be joining JP Morgan as coordinator and book runner on the listing on the other hand HSBC is also a potential candidate for an underwriting role in the Saudi Aramco listing The reason behind is HSBC has the potential to tap on Asian investors due to its origin in Hong Kong and its well reputable presence in the middle east
Today the Saudi Arabia is strongly looking to look for New York to list Saudi Aramco while the country is still weighing between London and Toronto While Aramco has been holding discussions with the Singapore exchange for the purpose of a potential secondary listing sources have reported |
C | Citi Doesn t See Oil Recovering From Virus Until Fourth Quarter | Bloomberg Citigroup Inc NYSE C slashed its oil forecasts for the first three quarters of this year as it said the impact of the coronavirus on global crude markets looks much worse than it initially thought
The bank cut its first quarter Brent oil estimate to 54 a barrel from 69 noting the outbreak had drastically shifted the Chinese and global economic outlook analysts including Ed Morse wrote in a note Reductions in projections for the following two quarters are based on its view the virus will have a longer and deeper impact than previously anticipated
Chinese government measures amount to a major shutdown of the economy Morse the global head of commodities research said in the note Even with a deeper OPEC production cut it will drive weaker oil balances he said
Oil demand in the world s biggest importer has dropped by around 3 million barrels a day or 20 of total consumption according to people with inside knowledge of the country s energy industry The Wuhan virus looks set to be the biggest demand shock for oil markets since the global financial crisis more than a decade ago with OPEC considering an emergency meeting
Citi cut its second quarter crude forecast to 50 a barrel from 68 and its estimate for the following three months to 53 from 63 It revised up its fourth quarter projection to 58 a barrel from 57
Brent the global crude benchmark has fallen 13 since Jan 20 when financial markets first took notice of the magnitude of the crisis in China It was trading around 56 a barrel on Monday
See also Commodity Prices Collapse in China as Demand Fears Spook Market
The bank said it sees Chinese passenger and freight traffic falling by about 70 for two or more weeks followed by a gradual recovery Due to the much larger size of China s economy compared with during the SARS outbreak in 2003 there could be a 1 million barrel a day demand hit in the first quarter it said
Timing wise the impact of the demand shock on commodity prices should peak in the first quarter the analysts wrote Although there remains plenty of uncertainty with much still depending on how far the virus spreads and the duration of the outbreak they said |
C | Citi names Peter Crawley treasury and trade head for Britain and Europe | Reuters Peter Crawley has been appointed as Citigroup Inc s N C treasury and trade solutions TTS head for Britain and Europe based in London and will move into his new role with effect from April 6 according to a memo seen by Reuters Crawley who was the TTS head for Sub Saharan Africa since 2013 will be responsible for driving business strategy new business development product innovation client experience agenda and the delivery of the financial plans for TTS in Britain and across Europe the memo said Under the new role Crawley will report to Ebru Pakcan TTS head EMEA and will remain a member of the executive committee of TTS EMEA
Esther Chibesa TTS head for East Africa and Sub Saharan Africa payments receivables head will be the interim TTS Sub Saharan Africa head the memo added |
JPM | Itau Unibanco ITUB Receives Approval For 50 Stock Split | On Friday Itau Unibanco Holding S A ITUB received the Central Bank of Brazil s approval to move ahead with the 50 stock split of common stock that the company had announced on May 24 Also it commits to maintain its dividend level and double payouts
The company s common stock is expected to begin trading on a split adjusted basis from Nov 26 Shares of Itau Unibanco closed at 13 66 in last day s trading session on the NYSE
Stock split increases the number of outstanding shares of a company without changing its market capitalization A higher number of shares outstanding translates into lower stock price making it affordable for shareholders In fact shares of Itau Unibanco are currently trading at a discount to the industry
The company s price to book the best multiple to value insurers because of large variations in their earnings results from one quarter to the next is 2 27 below the S P 500 s average of 3 14 Also the stock has a Value Score of A Strong fundamentals coupled with favorable industry trends make shares dearer as they trade at a premium Following a stock split value of the same shares falls which in turn increases a stock s liquidity
In the recently reported quarter the company displayed impressive performance on the back of higher revenues lower provisions improved managerial financial margin and a solid balance sheet position However elevated expenses were headwinds
Itau Unibanco remains focused on building its operations either through strategic acquisitions or with plans to strengthen operations by introducing new products However elevated expenses and stressed conditions in Brazil keep us apprehensive
Shares of Itau Unibanco have gained 9 9 over the past three months against 5 4 decline of the
Currently the stock carries a Zacks Rank 3 Hold
Some better ranked stocks in the financial space are JPMorgan Chase Co NYSE JPM Webster Financial Corporation NYSE WBS and Popular NASDAQ BPOP All these stocks are carrying a Zacks Rank 2 Buy You can see
JPMorgan s earnings estimates have been revised upward by nearly 1 for the current year in the past 30 days Also its share price has jumped 7 6 over the past year
Webster s Zacks Consensus Estimate for current year earnings has been revised 2 8 upward over the past 30 days Further its shares have rallied 9 9 over the past 12 months
Popular has witnessed 4 3 upward earnings estimates revision for the current year in the past 60 days Moreover its shares have gained 54 7 over the past year
Looking for Stocks with Skyrocketing Upside Zacks has just released a Special Report on the booming investment opportunities of legal marijuana Ignited by new referendums and legislation this industry is expected to blast from an already robust 6 7 billion to 20 2 billion in 2021 Early investors stand to make a killing but you have to be ready to act and know just where to look |
MS | China New Home Prices Rise in Fewest Cities in Five Months | Bloomberg China s home prices rose in the fewest cities in five months in February as the government s almost two year campaign to curb property speculation started to bite
New home prices excluding government subsidized housing gained in 44 of 70 cities tracked compared with 52 in January the National Bureau of Statistics said on Monday Prices fell in 16 cities from the previous month and were unchanged in 10 The increase is the fewest since September according to Bloomberg calculations
The slower growth comes as authorities sent a stronger signal at the National People s Congress on efforts to curb property speculation and tame runaway prices Earlier this month an NPC spokesman said a property tax bill is being drafted and the head of the nation s banking regulator again called for steps to reduce household debt That followed home buying restrictions in at least 125 cities according to data provider Fang Holdings Ltd
As long as President Xi Jinping wants deleveraging of the economy I think the property market is on a long term downward trend Andy Xie an independent analyst and a former chief Asia economist at Morgan Stanley NYSE MS told Bloomberg TV
Chinese developers fell in Hong Kong trading China Evergrande Group shares fell 2 7 percent China Vanke Co dropped 1 9 percent and and Country Garden Holdings Co declined 2 2 percent
Top cities led the price declines leading values to drop from a year ago Prices in Shenzhen had the biggest decline in three quarters falling 0 6 percent from a year earlier Values slid 0 4 percent in Guangzhou 0 3 percent in Beijing and 0 2 percent in Shanghai
Adds city price breakdown in final paragraph
To contact Bloomberg News staff for this story Emma Dong in Shanghai at edong10 bloomberg net
To contact the editors responsible for this story Sree Vidya Bhaktavatsalam at sbhaktavatsa bloomberg net Peter Vercoe Jeanette Rodrigues
2018 Bloomberg L P |
MS | Japan PM takes blame for loss of trust over scandal as polls dive denies involvement | By Kaori Kaneko and Elaine Lies
TOKYO Reuters Japanese Prime Minister Shinzo Abe his popularity plunging amid a cronyism scandal took responsibility on Monday for a loss of trust in his government but denied he or his wife had intervened in a land sale to a school operator with ties to his wife
The finance ministry s announcement last week that documents about the discounted sale to educational body Moritomo Gakuen had been altered have sparked a political crisis for Abe as suspicions swirl about a cover up and opposition parties call for both the premier and Finance Minister Taro Aso to resign
Interrogated by a parliamentary panel on Monday Abe denied directing changes to the documents in which references to Abe his wife and Aso were removed from the finance ministry s records of the land sale He told the panel he had not even known of the documents existence
I did not direct that the documents be altered he said
In fact I didn t even know that they existed at all so how could I have done that
Two opinion polls published over the weekend showed Abe s support diving to its lowest since he took office in December 2012 and others showed a majority of Japanese believed he bore some responsibility for the scandal
In an apparent nod to those polls several of which showed his support sinking into the 30 percent level Abe acknowledged that public trust had been shaken
As head of the government I keenly feel my responsibility in the matter of the people losing their trust in the administration he added
Ultimately the responsibility lies with me as prime minister I would like to apologize once again
Opposition lawmakers said answers to their questions were unlikely to come from the premier or Aso and renewed their call for Nobuhisa Sagawa who had headed the division that submitted the documents before he became tax agency chief in July to testify in parliament Sagawa resigned 10 days ago
A majority of people in the opinion polls backed the calls for Sagawa to testify as well as Abe s wife Akie But Abe said on Monday that he would answer any questions on her behalf
The scandal could dash Abe s hopes of winning a third three year term as head of his Liberal Democratic Party LDP in a September leadership election
LDP lawmaker Seichiro Murakami a long time Abe critic called for Abe to resign last week
Worries about political instability briefly sent the Nikkei share average to its lowest point in more than a week on Monday but market players are waiting to see what comes next
The point from here on in is whether or not there is proof that Prime Minister Abe or those near him directly ordered the alteration of the documents If that comes out the risk of Abe s resignation will rise said Naomi Muguruma senior market economist at Mitsubishi UFJ Morgan Stanley NYSE MS Securities
Abe has fallen behind his main rival in a survey of who voters would like to see as premier
According to a Nippon TV poll 24 percent thought former defense minister Shigeru Ishiba was most appropriate
Ishiba was followed by 21 2 percent for Shinjiro Koizumi the telegenic son of former prime minister Junichiro Koizumi
Abe drew 14 percent while the biggest percentage 25 percent said they didn t know |
MS | European shares sink Micro Focus plummets | By Helen Reid LONDON Reuters European shares fell on Monday as investors remained cautious ahead of an expected Fed rate hike while earnings and M A took center stage with software company Micro Focus sinking and a bid for Hammerson boosting commercial real estate stocks Micro Focus L MCRO dropped 55 percent to a three year low after it cut its annual revenue forecast and its CEO quit Revenue was hit by lower license income and issues with its purchase of Hewlett Packard Enterprise assets The firm s shedding of more than half its market value caused Europe s tech sector index SX8P to tumble 2 4 percent its worst fall since early February when global markets sank A scuppered cross border commercial real estate deal also made waves on Monday with Hammerson L HMSO soaring 27 percent to the top of the STOXX 600 after saying it had rebuffed a takeover offer from France s Klepierre PA LOIM The offer which strategists said would have helped Klepierre gain a foothold in the UK market valued Hammerson s shares at a 40 7 percent premium to Friday s closing price Before today s surge Hammerson s shares were down 19 8 percent year to date making them attractive to potential suitors The rejection sent Klepierre shares down 3 5 percent Klepierre owns and operates 100 shopping centres in 16 countries across Europe and the quality has been improved over the past 5 years with the UK the missing part of the jigsaw the same could be said of Unibail said Liberum strategists referring to Klepierre competitor Unibail Rodamco AS UNBP Europe s main benchmark the STOXX 600 STOXX index fell 0 7 percent as investors held their breath ahead of Wednesday s U S Federal Reserve meeting which marks the debut for new Fed Chair Jerome Powell and a likely interest rate hike Eyes were also on a news conference on Brexit negotiations hastily scheduled by the European Commission for 1145 GMT as speculation swirled over a potential interim deal ahead of the EU Summit later in the week Disappointing results weighed on German consumer goods firm Henkel DE HNKG p which fell 5 1 percent after it said the first quarter was off to a slow start due to delivery difficulties in North America While Hammerson s surge higher drove the European real estate sector index SX86P up 0 8 percent to the top spot tech stocks were the worst performers Even before Micro Focus dramatic drop European investors sentiment had been turning more cautious on the tech sector which has led stellar gains across global markets Unicredit MI CRDI analysts on Monday said they had downgraded the tech sector to neutral and upgraded utilities to overweight arguing investors should increase their share of defensive sectors with economic indicators at elevated levels German food processing machinery maker GEA Group DE G1AG gained 4 percent after the firm said its CEO Juerg Oleas was to step down in April 2019 after more than a decade in office
Sweden s Dometic ST DOMETIC fell 3 5 percent after the recreational vehicle products firm was downgraded to underweight by Morgan Stanley NYSE MS whose strategists said the U S RV market is overheating |
MS | Morgan Stanley Says Trade War Inflation Threats Won t Hold Back Stocks | Investing com Trade wars Inflation Don t worry says Morgan Stanley NYSE MS The Wall Street firm says both threats have been overblown leaving the stock market free to set new highs In a note to investors Morgan Stanley said the Trump administration would not want to destabilize global equity markets with a trade war because it could lead to a GOP defeat in the midterm election later this year Meanwhile worrisome signs of inflation that surfaced in January failed to appear again in February allowing the yield on the 10 year Treasury note to stabilize below the psychologically important 3 00 level Both JPMorgan Chase NYSE JPM and BlackRock have also issued bullish market forecasts since the February correction |
MS | Morgan Stanley Emerging Markets Domestic Debt Fund declares 0 15 dividend | Morgan Stanley NYSE MS Emerging Markets Domestic Debt Fund NYSE EDD declares 0 15 share quarterly dividend in line with previous Forward yield 7 67 Payable April 13 for shareholders of record March 29 ex div March 28 Now read |
MS | Morgan Stanley Emerging Markets Debt Fund declares 0 14 dividend | Morgan Stanley NYSE MS Emerging Markets Debt Fund NYSE MSD declares 0 14 share quarterly dividend in line with previous Forward yield 5 89 Payable April 13 for shareholders of record March 29 ex div March 28 Now read |
MS | The Weakest Base Metal of 2018 Is Morgan Stanley s Top Pick | Bloomberg Aluminum is Morgan Stanley s preferred base metal with supply reforms in China as well as higher costs and stronger demand poised to push prices higher over the second half
The metal will average 2 114 a metric ton this year and while prices may ease to 2 072 a ton next quarter amid continued oversupply they ll rise to 2 094 in the third and reach 2 116 in the final three months analysts including Susan Bates said in a note Aluminum last traded at 2 081 50
Last year s top performing base metal has flipped to become this year s worst falling last week to a three month low amid concerns about stubbornly high supply in China even as the government presses on with a drive to limit capacity growth and combat pollution In addition investors have been tracking the fallout from President Donald Trump s planned tariff on imports with Morgan Stanley NYSE MS saying the impact is reflected in rising premiums in the U S
Although the post winter restart of capacity in China and U S trade barriers are headwinds the price has fallen to a level that reflects this and risks deterring necessary investment in new capacity ex China the analysts wrote Demand in China is set to recover as infrastructure construction picks up including spending on the electricity grid she said
For commodities generally the outlook is for weaker prices through the second half the analysts wrote While the bank raised 2018 forecasts for zinc nickel and copper by 9 percent 8 percent and 6 percent respectively the forecast averages are below or in line with current prices
Updates LME price in second paragraph
To contact Bloomberg News staff for this story Martin Ritchie in Shanghai at mritchie14 bloomberg net
To contact the editors responsible for this story Jason Rogers at jrogers73 bloomberg net Jake Lloyd Smith
2018 Bloomberg L P |
MS | RBS Chief McEwan hopes to resolve Justice Department case in 2018 | LONDON Reuters Royal Bank of Scotland L RBS hopes to reach a settlement with the U S Justice Department over alleged mis selling of toxic mortgage backed securities this year its chief executive said on Tuesday although it has no news on the timing of any deal I ve got the timing of this completely wrong for the last 15 months I thought we would ve had it tidied by end 2017 all I d say is it will be in hopefully in 2018 Ross McEwan said at the Morgan Stanley NYSE MS European Financials conference in London
The expected multi billion dollar settlement would be a key milestone for the state owned lender allowing it to resume paying dividends to shareholders and paving the way for the British government to resume selling its shares in the lender |
JPM | Wall Street bull run hinges on earnings | By April Joyner NEW YORK Reuters Optimism that the United States and China will soon reach a trade deal has helped propel stocks close to new highs but the decisive factor in whether the bull market runs much further may be this year s corporate earnings Earnings season begins in earnest on Friday when JPMorgan Chase Co NYSE JPM and Wells Fargo NYSE WFC Co report quarterly results Profit forecasts have been falling and beating these lowered expectations could provide a catalyst for sustaining the rally that began a decade ago investors say The S P 500 has risen 14 8 so far this year and is now just 1 8 below its record closing high of 2 930 75 on Sept 20 and even closer to the 2 900 median year end forecast from market strategists polled by Reuters in February Rising expectations that a U S China trade agreement is imminent have driven much of this year s gain in stocks a reversal of the sharp sell off in the fourth quarter of 2018 The Federal Reserve s move to pause interest rate hikes has also helped fuel the run up outweighing concerns that the global economy is slowing Yet those factors may not be enough to sustain the bull run if corporate earnings are underwhelming Risks remain on trade too with U S trade official Clete Willems telling Reuters on Monday that the White House is not satisfied yet about all the issues standing in the way of a deal to end the U S China trade war While earnings are expected to fall 2 5 year over year in the first quarter and register tepid growth in the second and third quarters according to Refinitiv consensus estimates have them rebounding in the fourth quarter rising 8 9 Whatever trade deal may come to fruition may cause a small short term spike in markets but it s largely priced in said Oliver Pursche chief market strategist at Bruderman Asset Management in New York Corporate earnings and economic data are much more critical Especially worrying for investors is the potential of a corporate earnings recession defined as at least two quarters of falling year over year profits in 2019 First quarter earnings are already projected to fall from 2018 figures and further downward revisions to second quarter estimates currently at 2 5 year over year growth could put them in negative territory as well Almost all the earnings growth is backloaded into the end of the year said Emily Roland head of capital markets research at John Hancock Investments in Boston We re going to need a positive surprise in earnings to keep the engine running for strong market returns Some believe that with lowered expectations companies have ample room to surprise to the upside in their quarterly reports Even if first quarter profits decline upbeat outlooks for the rest of the year could lift stocks Earnings estimates do not reflect the positive effect of lower interest rates said John Carey portfolio manager at Amundi Pioneer Asset Management in Boston Lower rates also bode well for consumer confidence Carey said With a more benign interest rate outlook we could go back to more positive earnings projections he said It s a fairly major development TRADE DEAL COULD PLAY ROLE IN EARNINGS While many investors believe a U S trade agreement with China would provide only a limited boost to equities at this point the effects of such a deal could play a significant role in earnings outlooks for the second half of the year Investors have sought to pinpoint how much of a slowdown in China s economic growth can be attributed to the effect of U S tariffs If China s economy continues to slow even after a trade deal is reached that malaise could inflame global economic fears once again said Shannon Saccocia chief investment officer at Boston Private That could trigger a flight away from shares of U S multinationals with high China exposure similar to what occurred in the spring of 2018 But several market watchers expect a rebound in Chinese economic growth as the country s stimulus measures take root and trade pressures are alleviated Such a recovery would bode well for U S corporate earnings particularly in the technology sector The Philadelphia Semiconductor Index for instance has risen 26 8 this year on the expectation that demand for chips will rebound as China s pace of economic growth is restored
If earnings growth firms up a little bit that can drive the market higher said James Ragan director of wealth management research at D A Davidson in Seattle If we have a good U S economy and get China stimulus you could make the argument that the environment for corporate earnings is positive |
MS | The Central Bank Of Turkey Rate Decision Today | The Central Bank of Turkey CBRT will announce the results of its latest monetary policy committee meeting at 1100GMT on Tuesday As US firm Morgan Stanley NYSE MS wrote on Monday this is much anticipated and expected to result in hikes but the key question remains by how much The US firm French bank Societe Generale PA SOGN anticipates that anticipate that the CBRT will hike the benchmark one week repo rate by 50bp to 8 50 and hike the overnight lending rate by 100bp to 9 50
It is likely that the central bank will want to expand and lift its interest rates corridor particularly at the top end to retain more flexibility to tighten monetary conditions during difficult times SocGen believes that the CBRT s efforts may be sufficient to slow the rate of Turkish lira EUR TRY TRY JPY USD TRY deterioration even if insufficient to reverse the bearish market momentum
Morgan Stanley thinks it would make sense for the Turkish central bank to rely on the late liquidity window given the flexibility it affords them and is expecting to see 100 basis point hike in the late liquidity window If the CBRT is willing to continue funding the market at this higher rate the US bank added we think the TRY will gradually stop underperforming
Morgan Stanley believes that market concerns over monetary policy credibility have been a key reason for TRY weakness in contrast to say Mexico and so progress here should help though the US firm does throw in the proviso that as their view is that the rest of the policy rates will be lifted by only 25 basis points it is possible that the lira will weaken immediately following the meeting
Either way traders who look at the Turkish lira might feel the need to pay even closer attention than usual to the details of tomorrow s CBRT meeting The devil may be in the detail
Leveraged products carry a high degree of risk to your capital and forecasts are not a reliable indicator of future performance |
C | Citigroup unveils free robo adviser for customers with at least 50 000 at the bank | Citigroup is making a push for investors dollars with a new digital robo advisor that s free for customers with at least 50 000 in deposits or investments at the bank That s the threshold needed to qualify for the bank s Citi Priority bundle of banking services which will soon include access to an automated investing program according to documents viewed by CNBC Users answer a few questions related to risk appetite and investing timelines and the software puts them into a premade portfolio of ETFs |
C | The Fed s Key Yield Curve Inverted Again Watch Out | Bloomberg Opinion I m not an alarmist when it comes to the yield curve
However it can t go unremarked that the spread between three month and 10 year U S Treasuries inverted on Thursday for the first time since October The curve has flattened toward zero all month Short term rates have stayed steady with Federal Reserve policy while longer term yields have tumbled amid mounting evidence that the deadly coronavirus is harming the outlook for global economic growth
Just in case you missed the yield curve mania over the past few years the significance of this spread dropping below zero is that the same thing has happened in the lead up to each of the past seven recessions It s such a reliable indicator in fact that both the New York Fed and the Cleveland Fed calculate the probability of a downturn in the coming 12 months based on the slope of the yield curve The odds dipped toward the end of last year but BMO Capital Markets estimates that the models now imply a 30 to 35 chance of a formal contraction by this time in 2021
As always if you look hard enough you can find reasons to convince yourself that this is the beginning of the end of the economic cycle Just on Thursday Commerce Department data showed consumer spending slowed to a 1 8 pace below estimates and the weakest since the first quarter the Fed s key inflation gauge rose less than expected and nonresidential business investment fell for the longest stretch since the last recession
Or you can fall in the camp of those like Brian Rose at UBS AG who wrote recently that some of the risks that we have been worried about have diminished recently and that it is possible that the U S can avoid a recession for several more years Citigroup Inc NYSE C s U S economic surprise index is still positive after all in contrast to its persistently negative reading from February through August last year
Regardless this crucial yield curve first inverted in March and now 10 months later the U S is nowhere near meeting the formal definition of a recession gross domestic product expanded at a 2 1 annualized rate in the fourth quarter Instead for bond traders the most important thing to consider is how the Fed reacted to the inversion throughout last year
March The curve continued flattening Policy makers quickly shifted their dot plot to forecast no interest rate increases in 2019 down from two in their previous forecast As I wrote at the time the move managed to clear traders already high dovish hurdle May The curve inverted in earnest By June Fed Chair Jerome Powell was indicating that the central bank was prepared to cut interest rates at its July meeting August The curve lurched deeper into inversion as recession fears reached a peak Powell and the Fed showed no hesitation in dropping the fed funds rate in September and didn t push back on an October rate cut either even though he characterized the July move as a mid cycle adjustment October After three quarter point interest rate cuts the yield curve was no longer inverted Simply put the Fed has obviously felt compelled to act when the yield curve inverts Policy makers came into 2019 expecting to raise interest rates twice and ended up dropping them three times instead This year officials have reiterated that the U S economy and monetary policy are both in a good place and that the central bank will probably keep interest rates steady throughout the year That certainly seemed reasonable at the end of the year when the slope of the curve was 35 basis points But now
My hunch is that it s probably still too soon to extrapolate the coronavirus driven rally in Treasuries into another Fed rate cut even if the futures market indicates it s likely sometime in 2020 and the 10 year yield is approaching 1 5 As BMO pointed out a big drop in the term premium is the main reason longer term yields have plunged this year not necessarily a shift in monetary policy expectations Then again the term premium plunged in August too
Bond traders ought to stay vigilant There are times when market moves start to nudge the Fed toward action even if their public comments suggest otherwise This might just be one of them |
JPM | Higher Rates Will Hurt Stocks More Thank You Think Part 2 | In my previous week s commentary I explained why higher interest rates will hurt stock assets more than many might think Naysayers pointed to the fact that rate levels are still quite low on a historical basis Unfortunately these folks are neglecting to place their comprehension of borrowing costs in context
Take a look at the last 20 years of U S monetary policy via the Federal Funds Rate FFR The Federal Reserve s tightening phase from the 4 level up to the 6 5 level pricked the tech bubble in 2000 In turn dramatic stock losses alongside dot com pandemonium led to massive layoffs across the corporate landscape The 2001 recession followed
The Federal Reserve s response to the 2001 recession was to lower the FFR more than 500 basis points Committee members then kept the overnight lending rate too low for too long encouraging an environment that matched irresponsible borrowers with unscrupulous lenders
What happened next The housing balloon burst stocks cratered subprime mortgages ravaged the financial system millions lost their jobs and the Great Recession slammed the economy
As if too low for too long wasn t bad enough the Fed double downed on economic stimulus Leaders dropped the FFR more than 500 basis ponts once again They also incorporated emergency measures a k a quantitative easing and QE keeping them in place for six years alongside zero percent rate policy Only recently did they begin attempting to remove ultra easy accommodation
The implications are threefold
1 With interest rates relativity matters Ever lower borrowing costs correspond to the amount of total debt that must be serviced For example when keeping asset appreciation or depreciation constant a 4 mortgage 2010s for a primary residence that goes along with 17 mortgage debt servicing is inferior to a 10 mortgage 1980s for a primary residence that goes along with 12 mortgage debt servicing
Talk to anyone in the home building business and ask them if they re excited about today s 5 30 year fixed If absolute rates mattered they d be ecstatic that mortgages are still half what they were in the 1980s Yet real estate prices have rocketed affordability is being stretched and home builder stocks reflect lousy forward prospects
2 Way too low for way too long Fed policy is creating problems for all major asset types
Some investors may be scratching their heads Why has the Dow dropped 800 points
Perhaps they re asking the wrong question Rather why hasn t it happened sooner
Developed international stocks emerging market stocks bonds precious metals All have been noticeably negative on the year And the losses continue to mount
Fed tightening has meant a stronger dollar hurting the prospects for gold and foreign currencies The higher borrowing costs have also had a dire effect on overseas corporations that have been borrowing in dollars and now find themselves having difficulty with debt servicing
U S stocks are still doing well on the year you counter That is the case yes Yet weakness in market internals appear to be indicating that U S stocks will have difficulty maintaining a pristine image
For instance the New York Stock Exchange High Low Index is showing that there are more U S securities hitting new lows than new highs Readings below 50 indicate that market breadth is decidedly poor
3 When borrowing costs are manipulated far too low for far too long a favorable pace and desirable amount of tightening is nearly impossible to determine
Enthusiasm for U S economic might has obscured a global economic slowdown Combine services and manufacturing all around the world and one sees global economic output at 2 year lows
Granted the Global PMI above 50 means that it is still expansionary Nevertheless monetary stimulus from foreign central banks is either waning or being kept at the same levels Meanwhile the Fed s rate hiking path is causing foreign borrowers to toil with debt difficulties either because dollar denominated debt is becoming more costly or because foreign yields are being pulled higher
Perhaps ironically there are no major tax reform packages abroad Additionally tariffs and trade spats may be taking a toll
Bottom line While I will maintain an allocation to U S equities for my clients as long as the monthly close on the 10 month simple moving average is above its trendline we have been raising a fair amount of cash throughout the year
Where have those dollars gone Cash equivalents Specificially we use a variety of ultra short term exchange traded trackers like JPMorgan NYSE JPM Ireland ICAV USD Ultra Short Income UCITS ETF USD dist MI JPST PIMCO Enhanced Short Maturity Active Exchange Traded NYSE MINT Guggenheim Enhanced Short Duration NYSE GSY
Disclosure Statement ETF Expert is a web log blog that makes the world of ETFs easier to understand Gary Gordon MS CFP is the president of Pacific Park Financial Inc a Registered Investment Adviser with the SEC Gary Gordon Pacific Park Financial Inc and or its clients may hold positions in the ETFs mutual funds and or any investment asset mentioned above The commentary does not constitute individualized investment advice The opinions offered herein are not personalized recommendations to buy sell or hold securities At times issuers of exchange traded products compensate Pacific Park Financial Inc or its subsidiaries for advertising at the ETF Expert website ETF Expert content is created independently of any advertising relationship |
JPM | JPMorgan Chase Options Bulls Eye Record Highs After Earnings | Third quarter earnings season is about to get underway with big cap bank JPMorgan Chase Co NYSE JPM set to take its turn in the spotlight ahead of the open tomorrow Oct 12 The financial stock has been relatively quiet over the last two months per its 60 day historical volatility of 15 in the low 15th percentile of its annual range The options market however is pricing in a bigger than usual swing for tomorrow s trading
Most recently Trade Alert pegged the implied daily earnings move for JPM at 4 6 much larger than the 1 1 next day move the stock has averaged over the last two years The bulk of this action has occurred to the downside with the equity closing lower in the session immediately following earnings in six of the last eight quarters However not one of these last eight earnings reactions was large enough to exceed the expected move the options market is currently pricing in for JPM
Options traders appear to be betting on a rare post earnings pop for the bank stock At the International Securities Exchange ISE Chicago Board Options Exchange CBOE and NASDAQ OMX PHLX PHLX JPMorgan s 10 day call put volume ratio of 3 34 ranks in the 94th annual percentile meaning calls have been bought to open over puts at a quicker than usual clip
The November 120 call has seen a notable rise in open interest over this two week time frame and data from the major options exchanges confirms significant buy to open activity at this out of the money strike In other words speculators are betting on JPM to break out to new heights above 120 by the close on Friday Nov 16 when the back month options expire
Short term bets are pricing in elevated volatility expectations at the moment per JPM s 30 day at the money implied volatility IV of 26 9 in the 94th percentile of its annual range Meanwhile the equity s 30 day IV skew of 32 9 ranks in the 99th percentile of its 12 month range meaning near term calls have rarely been cheaper than puts on a volatility basis
Looking at the charts the highest JPMorgan Chase stock ever traded was 119 33 back on Feb 27 The shares went on to hit a year to date low of 102 20 on July 6 JPM rallied back up near 118 by mid August and spent the next two months chopping around this region However the broad market sell off this week has the bank shares now trading near levels not seen since mid July with JPM down 2 1 today at 109 07 |
MS | Ford rallies after two notch Morgan Stanley lift | Ford NYSE F revs higher in early trading after catching a two notch upgrade from Morgan Stanley NYSE MS to Overweight on a call tied to valuation Analyst Adam Jonas calculates that the F 150 franchise may be worth more than 150 of Ford s enterprise value and calls out the potential for the automaker to see benefits from strength in U S vehicle sales and restructuring savings The price target on Ford is hiked by MS to 15 from 10 The PT reps 39 upside potential from last night s closing price Ford is up 3 90 premarket to 11 20 vs a 52 week trading range of 10 14 to 13 33 Now read |
MS | U S retail sales falter inflation creeping higher | By Lucia Mutikani WASHINGTON Reuters U S retail sales fell for a third straight month in February as households cut back on purchases of motor vehicles and other big ticket items prompting analysts to downgrade their first quarter economic growth forecasts Despite signs of cooling in consumer spending inflation pressures are steadily building which should allow the Federal Reserve to raise interest rates next week Other data on Wednesday showed underlying producer prices rose solidly in February driven by strong gains in the cost of services such as hotel accommodation airline fares and hospital inpatient care The sustained decline in retail sales is surprising as consumer confidence is at a more than 17 year high in the wake of a 15 trillion income tax cut package and a labor market that continues to churn out jobs Economists said consumers boosted spending in the fourth quarter in anticipation of the lower taxes Looking at consumer fundamentals there appears to be nothing sinister going on among America s households said Ellen Zentner chief economist at Morgan Stanley NYSE MS in New York We posit that the anticipation of the widely publicized tax cuts pulled forward spending into the fourth quarter of 2017 The Commerce Department said retail sales slipped 0 1 percent last month January data was revised to show sales dipping 0 1 percent instead of falling 0 3 percent as previously reported It was the first time since April 2012 that retail sales have declined for three straight months Economists polled by Reuters had forecast retail sales rising 0 3 percent in February Retail sales in February increased 4 0 percent from a year ago Excluding automobiles gasoline building materials and food services retail sales edged up 0 1 percent last month after being unchanged in January These so called core retail sales correspond most closely with the consumer spending component of gross domestic product As a result of the weak core retail sales at the start of the year economists lowered their first quarter GDP growth estimates The Atlanta Fed slashed its forecast to a 1 9 percent annualized rate from a 2 5 percent pace Data forecasting firm Macroeconomic Advisers cut its estimate by four tenths of a percentage point to a 1 7 percent rate also taking into account revisions to January retail inventory data The economy grew at a 2 5 percent pace in the fourth quarter the government reported last month But revisions to December data on construction spending factory orders and inventories have suggested the fourth quarter growth estimate could be raised to a 3 1 percent pace The government will publish its third estimate for fourth quarter GDP growth later this month In a separate report the Labor Department said a key measure of underlying producer price pressures that excludes food energy and trade services rose 0 4 percent last month matching January s gain That boosted the year on year increase in the so called core PPI to 2 7 percent the biggest gain since August 2014 from 2 5 percent in January The increase in underlying wholesale prices supports views that consumer inflation will pick up this year STRONG INFLATION HYPOTHESIS We firmly believe that core consumer price inflation is rising and the March CPI report will be the acid test of that hypothesis said John Ryding chief economist at RDQ Economics in New York U S financial markets largely shrugged off the weak retail sales report and investors focused instead on the wholesale inflation data The dollar initially firmed against a basket of currencies before giving up gains to trade little changed Prices for U S Treasuries rose Stocks on Wall Street fell with the Dow Jones Industrial Average DJI shedding more than 250 points as domestic manufacturers continued to suffer from worries over the impact on trade from tariffs announced last week The Fed has forecast three interest rate increases this year Many economists expect the U S central bank will raise its projection to four rate increases because of a robust labor market and firming inflation Economists believe that a tightening labor market weak dollar and fiscal stimulus in the form of the tax cuts and increased government spending will lift inflation toward the Fed s 2 percent target this year The Fed s preferred inflation measure the personal consumption expenditures PCE price index excluding food and energy has undershot its target since May 2012 The massive tax cut package is part of a Tax Cuts and Jobs Act TCJA which came into effect in January Fed officials view the labor market as being near or a little beyond full employment The economy added 313 000 jobs in February giving analysts confidence that retail sales could rebound as soon as April Also keep in mind that most folks tax withholding schedules were probably not reduced lower to reflect the TCJA rates until later in February so that support to consumption may not be apparent until the springtime said Michael Feroli an economist at JPMorgan NYSE JPM in New York Auto sales fell 0 9 percent in February after a similar drop in January There were also declines in sales at gasoline stations furniture health and personal care and electronics and appliance stores
But there were some pockets of strength Sales at building material stores surged 1 9 percent last month Receipts at clothing stores gained 0 4 percent and sales at online retailers jumped 1 0 percent Consumers also spent more at restaurants and bars and splurged on sporting goods and hobbies |
MS | Gold Prices Tumble as Federal Reserve Meeting Draws Closer | Investing com Gold prices traded sharply lower amid dollar strength as focused shifted to the Federal Reserve s monetary policy decision next week while easing fears of a global trade war lessened safe haven demand
Gold futures for April delivery on the Comex division of the New York Mercantile Exchange fell by 8 90 or 0 67 to 1 316 a troy ounce
Gold prices suffered their biggest one day drop in nearly week as investors fret the Federal Reserve at its meeting March 21 could adopt a slightly more hawkish outlook on future monetary policy
Morgan Stanley NYSE MS said the FOMC s rate projections will show a pronounced upward drift though the median dot will stay at three hikes this year
The bank also said there is a risk of a fourth rate being added to the Fed s rate hike projection should Powell adopt a hawkish tilt persuading three or more FOMC members to favor tighter monetary policy measures sooner rather than later
Investor expect the Federal Reserve to hikes rates next week with a further two rate hikes forecast for this year
Gold is sensitive to moves in U S rates which lift the opportunity cost of holding non yielding assets such as bullion
Also weighing on gold was a drop in safe haven demand as trade war fears eased after the director of the White House National Trade Council Peter Navarro played down the prospect of a global trade war
In other precious metal trade silver futures fell 0 92 to 16 39 a troy ounce while platinum futures lost 0 79 to 955 30 an ounce
Copper fell 0 70 to 3 13 while natural gas fell 1 94 to 2 69 |
MS | New York fund manager pleads guilty to Ponzi scheme charges | By Brendan Pierson NEW YORK Reuters A New York hedge fund manager on Thursday pleaded guilty to federal charges that he defrauded investors through a nearly 22 million Ponzi scheme Michael Scronic 46 entered his plea to one count of securities fraud before U S District Judge Catherine Seibel in White Plains New York federal prosecutors announced A lawyer for Scronic Rachel Martin declined to comment Prosecutors said Scronic of Pound Ridge New York sent investors in his Scronic Macro Fund bogus account statements from 2010 to 2017 showing large positive returns In fact they said he lost or spent all but about 27 000 of the 21 8 million he told investors the fund had Prosecutors said Scronic spent hundreds of thousands of dollars on himself while managing the fund including on rent fees for beach and country club memberships and mortgage payments for a vacation home near Stratton Mountain in Vermont Scronic used new money to repay earlier investors but began refusing to honor some investors redemption requests when money became tight in the summer of 2017 They said Scronic blamed a vacation a relative s medical condition email issues and a new quarterly redemption policy for refusing one investor s Aug 8 redemption request despite having earlier promised that investor quick and painless redemptions on demand Scronic worked for Morgan Stanley NYSE MS from 1998 to 2005 including on an equities trading desk and has degrees from Stanford University and the University of Chicago according to court papers Morgan Stanley was not accused of wrongdoing in the case Scronic also faces related civil claims from the U S Securities and Exchange Commission |
JPM | JPMorgan Sees Violent Markets on Volatility Liquidity Loop | Bloomberg Marko Kolanovic is blaming a negative feedback loop between volatility and liquidity for topsy turvy markets
The negative correlation between volatility and liquidity has been getting stronger over time according to the JPMorgan Chase Co NYSE JPM global head of macro quantitative and derivatives research As volatility rises market depth declines exponentially exacerbating price moves he said
Why was the Q4 2018 sell off and subsequent rally so violent Kolanovic wrote in a note last week The answer lies in market liquidity
A shift from slower human market makers who often rely on valuations to faster programmatic liquidity that rely on volatility measures to determine risk taking and position sizing can strengthen momentum and reduce day to day price swings according to Kolanovic However it increases the risk of market disruptions such as that seen in October he noted
READ JPMorgan s Kolanovic Says Bad Liquidity Is Behind Stock Chaos
Volatility has become an increasingly important factor in markets in recent years with an explosion of products designed to help investors hedge risks or boost exposure to various asset classes That can leave markets vulnerable to spikes such as that seen in February 2018 when the Cboe Volatility Index jumped to over the 50 level intraday and some products went into meltdown
During times of high volatility the VIX starts to dwarf other factors as a driver of market liquidity according to Kolanovic Recently up to around 80 percent of liquidity variations were explained by the volatility gauge he said
READ Marko Kolanovic Has Concerns About Fragility in the Marketplace
The shift to passive investing from active management specifically the decline of active value investors reduces the ability of the market to prevent and recover from large drawdowns according to the strategist Active managers would often be stabilizing forces because they might buy into weakness but fundamentally driven single name trading now accounts for only about 10 percent of trading volume he said
Investors added 222 million to exchange traded funds that protect against stock volatility in the past week pushing assets of funds focused on VIX derivatives to more than 3 billion
The depletion of market reversion forces was driven by a decline of value investors as money moved to passive and systematic strategies he wrote Liquidity has become to a large extent driven by market volatility
Adds fund flows in penultimate paragraph |
JPM | M A Fever Has Yet to Break in the Gulf | Bloomberg From Dubai s Burj Khalifa to Kuwait s Al Hamra Tower oil rich Gulf economies built up their skylines in a hurry in the few years preceding the financial crisis Now as the price of the region s most precious commodity languishes a similarly frantic pace is on to merge some of the region s banking and industrial behemoths
Banks across the Gulf are leading a record wave of mergers and acquisitions as governments look for ways to stay competitive and battle slow growth About a dozen lenders are involved in mergers or takeovers The flow of deals has been gathering speed ever since the megamerger between two of Abu Dhabi s largest banks in 2017 and the combination of three of the emirate s investment firms that was completed last year
In Saudi Arabia the first bank merger in 20 years is under way as well as what s set to be the kingdom s largest M A deal the acquisition of Saudi Basic Industries Corp Sabic by Saudi Arabian Oil Co Saudi Aramco from the country s sovereign wealth fund This follows Saudi International Petrochemical Co s agreement last year to acquire Sahara Petrochemical Co in an all share deal valued at about 2 billion
Surging oil prices over more than a decade helped many Gulf states which include the world s biggest exporters of crude and liquefied natural gas expand aggressively at home and abroad After crude prices nosedived in 2014 countries including the United Arab Emirates Saudi Arabia and Qatar pulled the plug on spending Over the course of the first quarter of this year the price of crude has settled at a level that s barely high enough for Gulf Arab monarchies to balance their budgets Governments which play a significant role in M A decision making in the region have set this recent consolidation frenzy into motion to make the financial sector more competitive Abu Dhabi which sits on 6 percent of global oil reserves has been particularly keen on consolidation
While the 2014 oil crash didn t prompt M A activity immediately it did spark a broader appraisal of spending and profitability of partially and fully state owned entities says Allison Wood Middle East and North Africa analyst at Control Risks Group Holdings Ltd a strategy firm It also made governments and companies more attuned to the potential longer term benefits of merging with or acquiring other entities to give them an advantage in key markets
Overbanked
There s almost no sector in the region that isn t affected by oil Most banks for instance are heavily reliant on government deposits which have been dwindling in sync with crude prices Lenders have also faced damped demand for credit and weakened loan performance as governments cut spending after oil s slump
Yet a bearish oil market isn t the only driver behind this M A spurt The Gulf region is also heavily overbanked with about 70 listed institutions serving a population of roughly 50 million putting smaller lenders under pressure As a rough comparison there are only about a dozen listed banks in the U K a country of about 65 million people Most lenders in the Gulf Cooperation Council member nations are at least partly owned by arms of their national governments making consolidation easier The restructuring is part of the GCC states larger plan to make their economies less dependent on crude as a source of long term growth
The recent merger mania in the U A E banking sector follows a relatively quiet decade for such deals The U A E s first bank merger in 2007 brought together Emirates Bank International PJSC and National Bank of Dubai PJSC The combined entity Emirates NBD PJSC has more than trebled its profit since then while net income has increased at a compound annual rate of 11 percent from 2008 to 2018 despite some turbulent years after the global financial crisis In 2017 the consolidation of Abu Dhabi s largest lenders First Gulf Bank and National Bank of Abu Dhabi created the region s second largest bank First Abu Dhabi Bank PJSC and has since prompted a flurry of talks among competitors Abu Dhabi Commercial Bank PJSC is in the process of merging with Union National Bank PJSC and Al Hilal Bank Abu Dhabi is considering combining Abu Dhabi Islamic Bank PJSC with First Abu Dhabi Bank PJSC to create the Middle East s largest lender according to people with knowledge of the matter who asked not to be identified because the discussions are private
In Saudi Arabia HSBC Holdings LON HSBA Plc s local unit is close to acquiring Royal Bank of Scotland Group LON RBS Plc s local venture in a 5 billion stock deal while the kingdom s biggest lender National Commercial Bank started initial talks late last year with Riyad Bank for a merger In Bahrain Kuwait and Oman merger talks are also under way among banks
The catalyst for what we are seeing now was the impact of lower oil prices which squeezed liquidity in the banking sector and put pressure on profitability says Redmond Ramsdale head of GCC banks at Fitch Ratings The most obvious way to increase shareholder value is to create market leaders or strong players in the market who are in a better position to compete for deposits and find growth opportunities
Sovereign funds
Banks aren t the only entities that are merging Last year Abu Dhabi combined Mubadala and the Abu Dhabi Investment Council to create a wealth fund with about 230 billion in assets just a year after Mubadala merged with International Petroleum Investment Co another government backed investment firm
After pushing back its much anticipated initial public offering to 2021 Saudi Aramco agreed last month to buy 70 percent of petrochemical giant Sabic from the Public Investment Fund in a deal worth about 70 billion It would give the PIF as the sovereign fund is known the financial firepower it needs to carry out ambitious investment plans at home and abroad as Aramco s own share sale stalls
We see globally and certainly in the region a pursuit of improved performance as the outlook turns less optimistic says Miguel Azevedo Citigroup Inc NYSE C s regional investment banking head We also see as quite possible that large industrial groups team up and potentially engage in M A with other strategic players always as a tool to improve performance in a more challenging economic environment
Growth outlook
While the price of oil has rallied about 25 percent this year through mid March the Gulf s biggest economies remain a long way off the growth rates reached before the 2014 oil crash Efforts by OPEC and its allies to curb a global glut mean they won t benefit as much from an improving outlook for crude Consumer demand also remains sluggish Saudi Arabia suffered the deepest growth revision among major economies in the International Monetary Fund s latest projections for this year matched only by Germany
Shareholder attitudes toward M A are also changing With each successful deal governments and companies are becoming more comfortable with the idea of consolidation The recent track record of M A transactions is creating a strong set of precedents in the region for regulators to lean on and for potential merging companies to replicate says Karim Tannir JPMorgan Chase Co NYSE JPM s head of investment banking in the Middle East and North Africa The more transactions the region will witness in the short to medium term the easier it will be to encourage public and private companies to consider the M A route as a path for growth |
MS | Can Morgan Stanley Extend Its Winning Streak | Morgan Stanley NYSE MS Financials Capital Markets Reports January 17 Before Market Opens
Key Takeaways
The Estimize consensus is calling for earnings per share of 71 cents on 8 60 billion in revenue roughly 5 cents higher than Wall Street on the bottom line and 100 million on the top
Institutional Securities and Wealth Management will once again carry financial performance as it did in the third quarter
Greater macroeconomic uncertainty from geopolitical events and ongoing dollar appreciation pose trouble for Morgan Stanley s international operations
A huge weight has been lifted off the financial sector after years of underperforming a majority of the overall market Trump s intent to repeal parts of Dodd Frank coupled with the notion of multiple rate hikes throughout 2017 helps Wall Street s biggest banks heading into earnings season Investment banks will see the biggest boost from greater trading revenue associated with higher volatility improving M A activity and the possibility of more IPOs in 2017 This upside plays to the strength of Morgan Stanley which coincidentally reports fourth quarter earnings tomorrow morning
According to the Estimize data it s very likely that Morgan Stanley extends its winning streak to 5 quarters Consensus estimates are calling for earnings per share of 71 cents nearly 60 higher than the same period last year That estimate increased by 15 since Morgan Stanley s most recent report in October Revenue for the period is forecasted to climb 9 to 8 60 billion marking a second consecutive quarter of positive growth Typically shares tend to increase by 2 immediately through an earnings report adding to the stock s 52 gains over the past 12 months
Morgan Stanley currently derives a majority of its revenue from two major businesses Institutional Securities broken down into advisory equity sales and trading and fixed income and Wealth Management In the third quarter overall Institutional Securities generated 4 6 billion in revenue up from 3 9 billion a year earlier A majority of these gains came from fixed income sales and trading which jumped from 583 million to 1 9 billion Revenue from Wealth Management services on the other hand grew by 300 million to 3 9 billion coming from increases in net interest income and transactional revenues
Other sectors such as Investment Management and Capital made comparable gains thanks to the improving market and trading trends As with the third quarter analysts expect Morgan Stanley to see ongoing improvement in many of its core offerings
While Morgan Stanley is looking pretty good there remains a couple of near term headwinds that could hamper growth The strength of the U S dollar along with greater macroeconomic uncertainty put pressure on Morgan Stanley s vast international operation These issues only appear to be worsening amidst a shifting geopolitical landscape |
MS | Morgan Stanley Stock Profits Hit Levels Not Seen Since Financial Crisis | Morgan Stanley NYSE MS
Morgan Stanley Earnings Numbers
On Monday morning before the market opened financial service company Morgan Stanley released fourth quarter earnings that surprised investors and sent shares higher in pre market trading The company announced profits of 1 67 billion or 0 81 per share on 9 02 billion in revenues while analyst were expecting 0 65 on 8 48 billion in revenue Shares are up over 25 since election results in early November
MS Technicals
Looking at the 2 minute chart above you will see that shares are active this morning and bringing in decent volume following their fourth quarter earnings release Shares are looking to gap over Friday s close and over the big resistant level at 44 We will want to see if shares can hold that level and make a move for higher prices but with the overall market looking soft we may be in for a pop and drop Keep this one on your radar today as shares will be active and should provide plenty of opportunities for active traders
CEO Comments
James P Gorman Chairman and Chief Executive Officer said
Our quarterly results reflect consistent strong performance while our annual results show meaningful earnings growth over 2015 We reported solid results in Sales Trading and Advisory and record revenues in Wealth Management while managing expenses prudently We are optimistic about opportunities in 2017 and beyond and remain focused on serving our clients and achieving our strategic objectives
Company Profile
Morgan Stanley provides investment banking products and services to its clients and customers including corporations governments financial institutions and individuals It operates through the following business segments Institutional Securities Wealth Management and Investment Management The Institutional Services segment provides financial advisory capital raising services and related financing services on behalf of institutional investors
The Wealth Management segment offers brokerage and investment advisory services covering various types of investments including equities options futures foreign currencies precious metals fixed income securities mutual funds structured products alternative investments unit investment trusts managed futures separately managed accounts and mutual fund asset allocation programs The Investment Management segment provides equity fixed income alternative investments real estate and merchant banking strategies The company was founded by Harold Stanley and Henry S Morgan on September 16 1935 and is headquartered in New York NY |
C | British bank Lloyds plans cuts to FX business sources | By Saikat Chatterjee and Thyagaraju Adinarayan
LONDON Reuters Britain s Lloyds Banking Group L LLOY plans to scale down its foreign exchange business by the end of the year stung by low profitability and rising competition from its rivals three sources familiar with the matter said
As part of a global strategic review announced in early 2018 Britain s biggest mortgage lender which is widely seen as a bellwether for the UK economy announced plans to focus more on its digital offering and the small and medium sized sector
A source familiar with the situation said the bank would restrict its directly managed FX offering to G10 currencies such as the dollar pound and euro
Most cuts will come in the corporate FX sales division said the person adding that the FX business would for the most part go electronic
About 10 jobs are at risk one ex employee said noting that Lloyds had already been trimming its foreign exchange team especially on the corporate sales desk
A spokeswoman said the bank remained committed to servicing their clients for their foreign exchange needs across the major and emerging market currencies and had no plans to change their offering
No figures were immediately available on the actual number of people employed in Lloyds FX business or how many jobs would ultimately be lost
But a third source said job losses were a certainty with the cuts likely to be completed before June
Lloyds last week warned its 60 000 staff to expect a cut in bonus payments after the bank took a 1 8 billion pound 2 35 billion hit on mis sold loan insurance payouts The Guardian reported citing an internal staff memo
While no data was available on how big Lloyds currency trading business was one influential industry consultancy estimated it at around 200 million tiny compared to 3 billion to 4 billion at Citigroup N C
But even if Lloyds is a minor player in the global 6 6 trillion a day foreign exchange market its retreat would be part of a broader trend whereby many lenders have exited FX trading due to relentlessly shrinking margins
Years of record low volatility have made it hard to generate profits from currency trading and the retreat of small players has seen top five banks tighten their grip on the market holding as much as 50 of the business |
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