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Friday, March 29, 2024

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  1. phil

    Good morning!  

    We're kind of flat to the close after being lower overnight.  Europe is just now turning green so we'll see what sticks.  China was closed and Japan officially fell 5% to 16,000 but /NKD is already back to 16,300 (+2%) this morning.

     

    Global Bond Rally Near `Panic' Levels With Japan Yield at ZeroThe yield on benchmark 10-year Japanese government bonds dropped to zero for the first time as a flight to haven assets drove a measure of global yields to the lowest in more than a decade.Treasury yields dropped to a one-year low as investors sought refuge from a continued slump in stock markets worldwide. Traders pared the odds that the Federal Reserve will raise interest rates this year to 30 percent, before Chair Janet Yellen begins her two-day semiannual testimony to Congress on Wednesday. The yield on the Bank of America Merrill Lynch World Sovereign Bond Index slid to 1.29 percent, the least in data to 2005. “It’s almost like a panic,” said Hideo Shimomura, the chief fund investor in Tokyo at Mitsubishi UFJ Kokusai Asset Management. “The flight to quality is exaggerated.”The yield on Japan’s 10-year notes was at 0.005 percent at 11:35 a.m. in Tokyo after earlier dipping to zero, a first for a Group-of-Seven economy.

    Global Stock Rout Extends in Japan; Credit Risk Climbs With YenAnxiety over the global economy intensified, with equities in Tokyo sliding the most since August and index futures indicating U.S. stocks will add to declines that sent the Standard & Poor’s 500 Index to a 22-month low. The yen reached its strongest since 2014 and corporate bond risk climbed. Stock gauges in Japan and Australia slumped and U.S. index futures slid at least 0.9 percent. Markets from China to South Korea remained closed for Lunar New Year holidays. Evidence of mounting distress in global credit markets boosted government debt, with yields on New Zealand notes sliding to a record, while 10-year Japanese bond rates shed as much as four basis points to zero. Gold was on track for its longest rally since 2011 as the yen extended gains to surpass 115 per dollar for the first time since 2014, strengthening with the euro. U.S. oil traded above $30 a barrel. “We had a bubble in people’s expectations of the power of central banks,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd. “And now we’re seeing that bubble burst.” Japan’s Topix index tumbled 5 percent in Tokyo, falling the most since Aug. 24 as banks and financial shares led losses. The Nikkei 225 Stock Average dropped 4.9 percent, on course for its biggest decline since June 2013The yen strengthened past 115 per dollar for the first time in more than a year and climbed against all its major peers. Global currency volatility rose to 11.77 percent, according to a JPMorgan Chase & Co. gauge. 

    German industrial production falls in December

    • German industrial production unexpectedly fell for a second month in December, in a sign that Europe's largest economy ended 2015 on weaker footing.
    • Output, adjusted for seasonal swings and inflation, fell 1.2% from November, when it declined by a revised 0.1%.
    • The pullback comes at a time when record-low unemployment and low fuel costs bolster consumer spending, but a slowdown in major export markets counteract these positive trends to rein in production.

    Genworth slides for second day after restructuring

    Diamond Offshore CEO: Oil industry in a "severe and prolonged down cycle"

    • The oil industry nightmare will not end anytime soon, and "it seems clear that the oversupply of drilling capacity may persist well into 2017 and possibly beyond," Diamond Offshore (NYSE:DO) CEO Marc Edwards said in today's earnings conference call.
    • "Deepwater drilling will recover… What I can't tell you is when," the CEO said; in the meantime, DO is not only eliminating its dividend, but also considering mergers and/or acquisitions, buying distressed assets, and other crisis measures.
    • Analysts like DO's new service agreement with GE, which is expected to help lower idle time for rigs on hire – crucial for drillers struggling to lease out offshore rigs and cut costs as oil and gas producers scale back spending.
    • DO loses up to $500K of revenue each day a rig is down, while the oil and gas producing customer also loses as much money, Edwards says, calling downtime the industry's "Achilles' heel."
    • Evercore ISI analyst James West says the service model will create a much more visible stream of cash flow for equipment providers compared with the cash flow from selling equipment, "which is very cyclical and very lumpy."
    • Among companies that could adopt a similar model are offshore rig providers such as Noble Corp. (NYSE:NE), which could tie up with oilfield equipment manufacturers such as National Oilwell Varco (NYSE:NOV) and Cameron (NYSE:CAM), analysts say.
    • The MLP sector needs to "absorb more pain" before it can represent a "compelling investment," Hedgeye's Kevin Kaiser said in a Barron's weekend profile of the controversial analyst, adding that the "pain" can come in but one form: a reduction in distributions that investors cherish.
    • The longtime MLP bear disagrees with the analysts and MLP investors who think the sector is deeply undervalued now that the benchmark Alerian MLP index is down 45%, countering that “we’re in the early innings of the MLP down-cycle. We had a 15-year up-cycle, and now we’re a year and a half into the downturn.”
    • Kaiser first gained Wall Street attention as the only bear among more than 20 analysts that covered Kinder Morgan (NYSE:KMI); while most of the damage has been done, Kaiser thinks KMI could fall further, to below $10, as he sees KMI still overleveraged with $41M of net debt, more than 5x annual cash flow.
    • On Linn Energy (LINELNCO) and Chesapeake Energy (NYSE:CHK), "we said those stocks could be going to zero, and I think we’re going to be right," Kaiser adds
    • Exxon Mobil (NYSE:XOM) climbed 1.4% in today's trade despite broader equity market losses, and shaking off an analysis from Bespoke that its payment ratio just moved past 100%.
    • Analysts are forecasting XOM's 2016 net income to drop 35% to $10.5B; for the sake of comparison, total dividends paid for 2015 will total $12.1B – at that level, even if the company only keeps its dividend level this year, XOM's 2016 payout ratio would spike above 100% for the first time in at least 32 years, Bespoke says.
    • The firm views a dividend cut at XOM as unlikely in the near term, but notes that if even such a relatively conservative company is in a situation where dividends paid are now forecast to exceed earnings, "one can only imagine the nightmare this bust has been for less established players in the sector."
    • Chesapeake Energy (NYSE:CHK) is in survival mode, but investors have reacted with undue alarm to steps it has taken to stay afloat, writes Heard On The Street's Spencer Jakab.
    • Shares closed one-third lower today on reports that CHK had hired a restructuring adviser, setting bankruptcy alarm bells ringing, before the company denied it was preparing a filing; shares also sank last month when it suspended preferred dividends, and the previous month when it issued second-lien notes to redeem some debt at a discount.
    • Each of these cash-preserving moves was predictable, Jakab argues, and despite a mountain of debt, CHK is "likely to hang on while many smaller companies fail this year," although "between now and then, brace for more bouts of panic selling."
    • Baker Hughes (BHI -4.3%) is downgraded to Equal Weight from Overweight with a $47 price target at Morgan Stanley, which notes that the North American rig count is entering a free fall phase with further contractions expected in the near future.
    • The firm points to growing risks related to the pending deal between BHI and Halliburton (HAL -1.1%), and believes the market is not pricing in the necessary risk associated with a potential failed deal.
    • BHI's weak 4Q results raise concern around the company’s ability to execute as a standalone company, Morgan Stanley says.

    More on Chipotle's all-employee meeting

    • Co-Chief Executives Steve Ells and Montgomery Moran laid out plans to improve restaurant safety, such as central processing and increased testing of ingredients, while discouraging sick workers from coming to the restaurant by offering paid sick leave.
    • Chipotle (NYSE:CMG) also said it would spend about $10M to help local suppliers adhere to the company's new safety measures.
    • CMG shares have lost nearly a third of their value and sales have plunged about 30%since November, following reports of E. Coli sickness and two separate norovirus outbreaks.
    • Previously: Highlights from Chipotle's all-employee meeting (Feb. 08 2016)

    GoPro delivers 10.1% gain after Microsoft deal, less bearish Barron's column

    • Though the Nasdaq closed down 1.8%, beaten-up and heavily-shorted GoPro (NASDAQ:GPRO) rallied today on volume of 15.1M shares, well above a 3-month daily average of 8.4M.
    • The gains followed news of a Microsoft patent licensing deal on Friday afternoon. They also came after Barron's, which has been issuing bearish columns on the action camera maker since 2014, published a somewhat less downbeat piece over the weekend. The paper once more highlights GoPro's sales pressures and voices skepticism about Apple M&A speculation, but also declares the company's $474M cash balance gives it "some financial cushion to regain its footing," and suggests Sony or Under Armour could make a bid.
    • Shares are now slightly above where they traded before GoPro provided light guidancelast Wednesday. They're still down 39% YTD and 83% from the start of 2015.

    Applies to DIS too:  Comcast gets upgrade from Argus; cord-cutter fears 'overblown'

    • Comcast (NASDAQ:CMCSA) shares pulled off a good Monday, finishing just a penny down from yesterday while the broader market slipped 1.4%.
    • Argus upgraded the company to Buy after saying cord-cutting worries seem "overblown" with a look at the metrics. The firm's analyst Joseph Bonner set a price target of $72, 21% upside from today's close of $59.40.
    • Comcast added 89,000 net video subscribers, its best result in that metric in nine years. Combined with braodband strength and rising ARPU, it's an indicator of the health of the company's cable business, Bonner says.
    • "Comcast has been in the cross-hairs of investors concerned about the secular strength of the 'cord-cutter/cord-never' phenomenon among millennials; however, based on the company’s recent subscriber metrics, we believe that these concerns are overblown," he writes.
    • NBCUniversal has changed into a growth engine, he says, and shareholder returns are in focus with a dividend CAGR of 21.5% over the past two years and strong buybacks.
    • Twenty-First Century Fox (FOXFOXA) A shares have slid 5.4% after hours after it provided some dimmer overall earnings guidance due to film shortfalls and forex following its Q2 report.
    • The company met profit expectations for fiscal Q2, but a decline in its movie business led to a revenue miss.
    • Revenue by segment: Cable Network Programming, $3.7B (up 9.4%); Television, $1.7B (up 5.7%); Filmed Entertainment, $2.36B (down 14.2%); Other, corporate, eliminations -$405M. Comps are also affected by the discontinued Direct Broadcast Satellite business ($663M in 2014).
    • In OIBDA: Cable Network Programming, $1.25B (up 7.9%); Television, $279M (down 3.8%); Filmed Entertainment, $302M (down 10.1%).
    • Press Release

    Obama targets funding to combat Zika virus

    • Seeking to head off the spread of the Zika virus, President Obama is planning to askCongress for $1.8B in emergency funding to combat the disease associated with birth defects in Latin America.
    • "We have to take this very seriously," Obama said during an interview with CBS. "We're going to be putting up a legislative proposal to Congress to resource both the research on vaccines and diagnostics but also helping in terms of public health systems."



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