by Market Shadows - April 24th, 2014 10:53 am
Market Shadows Virtual Value Portfolio put most of our remaining cash reserves to work this morning in buying 38 ADRs (American Depository Receipts) of Toyota Motor Company (TM) the world’s largest seller of automobiles and trucks. We like and already own shares of Honda (HMC) as well.
The stock was down overnight due to negative action in the Japanese marketplace so we got a great entry price of just $106.57 per ADR today.
Toyota’s 52-week range has been $103.38 – $134.94. Fiscal year 2013 (ended Mar. 31, 2014) is expected to have come in at about $12.00 per ADR putting TM’s trailing multiple at just 8.9x. Its yield fluctuates with currency translations but is projected at around 2.25%.
Market Shadows' Virtual Put Writing Portfolio used today’s weak opening to short one contract of TM’s Jan. 2016, $120 put @ $22.67 per share.
We must now stand ready to buy an additional 100 shares of TM at a net cost, if exercised, of $97.33 ($120 strike price – $22.67 put premium.)
Our maximum gain on this put sale would be keeping the $2,267 received without having to buy any more shares. That will occur if TM rises to $120 or higher and remains there through the Jan. 15, 2016, expiration date.
Toyota has a solid balance sheet and expects to come to the American market next year with their first commercially available fuel-cell technology electric vehicles. During three years of road testing these cars have been getting about 300 miles on a charge. Unlike Teslas, Volts and Leaf electric vehicles Toyota’s fuel-cell vehicles can be recharged in just three minutes.
Owning TM today is a great value play with a free perpetual call on this new technology working out profitably.
Disclosure: I bought shares of TM and HMC in my personal accounts. I am short TM and HMC puts in my own accounts also.
by ilene - April 24th, 2014 8:55 am
Submitted by Tyler Durden.
Initial jobless claims surged from 304k to 329k this week, the biggest weekly rise since mid-December. From exuberance at new cycle lows, we swing to the average of the last 8 months. This is the biggest miss to expectations in over 2 months. Continuing Claims dropped further to new cycle lows at 2.68 million (beating expectations) – its lowest since Dec 2007. So this is as good as it gets for continuing claims – America is back at its best!
Initial claims surges back up to its average of the last 8 months…
As continuing claims plunges to new cycle lows not seen since Dec 2007 – as good as it gets
by ilene - April 23rd, 2014 10:06 pm
Courtesy of Pater Tenebrarum of Acting-Man
A 100% Consensus
This doesn't happen very often. Marketwatch reports that Jim Bianco points out in a recent market comment that the 67 economists taking part in a regular Bloomberg survey have a unanimous forecast regarding treasury bond yields: they will be higher 6 months from now. This is a truly striking result, and given the well-known propensity of mainstream economists to guess wrong (their forecasts largely consist of extrapolating the most recent short term trend), it may provide us with a few insights.
In fact, considering that there have been only a handful of instances since 2009 when a majority of the economists surveyed predicted a decline in yields, we can already state that their forecasts regarding treasuries are quite often (though obviously not always) wide of the mark. In fact, so far this year they are already wrong again – and so are fund managers, as they hold their lowest exposure to treasuries in seven years.
This is not the only thing there is complete unanimity about. Not a single economist taking part in a separate survey believes an economic downturn is possible.
“Economists are unwavering in their assessment of where yields are headed in the next half year.
Jim Bianco, of Bianco Research, points out in a market comment Tuesday that a survey of 67 economists this month shows every single one of them expects the 10-year Treasury yield to rise in the next six months.
The survey, which is done each month by Bloomberg, has been notably bearish for some time now, with nearly everyone expecting rising rates. In March, 97% expected rising rates. In February, 95% expected yields to climb. And in January, 97% held that expectation. Since the beginning of 2009, there have only been a handful of instances where less than 50% expected rates to rise.
Still, the fact that every single survey participant is bearish is striking. The last time the survey had that result was in May 2012, when benchmark yields were well below 2%.
“Literally there is maybe one economist in the United States straddling the bullish/bearish divide on interest rates. The rest are bearish,”
by ilene - April 23rd, 2014 8:15 pm
Courtesy of Mish.
With central bankers globally suppressing interest rates, the such for yield elsewhere is on. One of the places investors have turned is speculative junk bond offerings.
Please consider French Company Does Biggest Junk Bond Sale Ever.
Numericable (NUM), which provides cable and internet service in France and other European markets, sold a record amount of high-yield bonds Wednesday with some priced in dollars and others in euros.
It’s sold $7.78 billion and €2.25 billion in notes that yield 5% or more, according to a statement from Altice, the multinational telecom group that owns Numericable. Altice issued $2.9 billion and €2.1 billion in bonds that yield more than 7%.
Numericable will use the proceeds to finance its acquisition of rival cable company SFR.
Overall, the deal represents the largest sale of high-yield debt on record, according to Dealogic. It surpassed Sprint’s $6.5 billion debt sale in September.
Dollar Equivalent Junk
All told Attice issued 10.68 billion in dollar denominated bonds and 4.35 billion in euro denominated bonds. The grand total in dollar equivalent junk is an amazing $16.69 billion.
Bidding Wars for Junk
$10.89 billion of that went to buy out a rival company at an undoubtedly absurd price due to bidding wars.
The New York Times has some bidding war info in Numericable Raises $10.9 Billion in Junk Bond Offering.
The battle for SFR pitted two French billionaires against each other: Martin Bouygues, who runs the diversified industrial group that bears his name, and the French entrepreneur Patrick Drahi, who since 2002 has built Altice into a global operation with cable and cellphone assets in Europe and the Caribbean.
Bruno Lasserre, the president of the Autorité de la Concurrence, has said that the French competition watchdog would conduct a “thorough review” of the Numericable-SFR combination, but that review is not expected to preclude the deal.
by ilene - April 23rd, 2014 8:05 pm
Courtesy of Michael Snyder of The Economic Collapse
For most of Canada's existence, it has been regarded as the weak neighbor to the north by most Americans. That has changed dramatically over the past decade or so. Back in the year 2000, middle class Canadians were earning much less than middle class Americans, but since then there has been a dramatic shift. At this point, middle class Canadians are actually earning more than middle class Americans are.
The Canadian economy has been booming thanks to a rapidly growing oil industry, and meanwhile the U.S. middle class has been steadily shrinking. If current trends continue, a whole bunch of other countries are going to start passing us too. The era of the "great U.S. middle class" is rapidly coming to a bitter end.
In recent years, I have been up to Canada frequently and am always amazed at how much nicer things are up there. The stores and streets are cleaner, the people are more polite and it seems like almost everyone that wants to work has a job.
But despite knowing all this, I was still surprised when the New York Times reported this week that middle class incomes in Canada have now surpassed middle class incomes in the United States…
After-tax middle-class incomes in Canada — substantially behind in 2000 — now appear to be higher than in the United States. The poor in much of Europe earn more than poor Americans.
And things are particularly dire for those in the U.S. on the low end of the scale…
The struggles of the poor in the United States are even starker than those of the middle class. A family at the 20th percentile of the income distribution in this country makes significantly less money than a similar family in Canada, Sweden, Norway, Finland or the Netherlands. Thirty-five years ago, the reverse was true.
Even while our politicians and the media continue to proclaim that everything is "just fine", the U.S. middle class continues to slide toward oblivion.
by ilene - April 23rd, 2014 5:36 pm
Courtesy of Jay Yarow at Business Insider
Apple earnings are out!
The stock is up ~8% in immediate reaction to the news.
Apple shipped 43.7 million iPhone, up 17% year-over-year, blowing away expectations.
Revenue was $45.6 billion, growing 4% year-over-year, also beating expectations.
The iPad number was a giant miss, though. Apple sold 16.35 million, which is a 16% drop on a year-over-year basis.
In the release, CEO Tim Cook said, "We’re very proud of our quarterly results, especially our strong iPhone sales and record revenue from services … We’re eagerly looking forward to introducing more new products and services that only Apple could bring to market."
Apple also announced a 7-for-1 stock split, and an increase in its buyback program and dividend.
Here are the big numbers:
- Revenue: $45.6 billion versus $43.6 billion expected
- EPS: $11.62 versus $10.16 expected
- iPhones: 43.7 million versus 37.7 million expected
- iPhone ASP: $596 versus $610 expected
- iPads: 16.35 million versus 19.7 million units expected
- iPad ASP: $465 v $430
- Macs: 4.1 million versus 4.03 million expected
- iPods: 2.76 million versus 2.99 million expected
- Gross Margin: 39.3% versus 37.7% expected
- Q3 Revenue: $36-38 billion versus $38.1 billion expected
This post is being updated as we go, so hit refresh for the latest, or just click here.
Business Insider Intelligence
Business Insider Intelligence
Business Insider Intelligence
Business Insider Intelligence
by ilene - April 23rd, 2014 5:27 pm
Apple's board just approved a big stock split, a $30 billion boost to its share-buyback plan, and an 8% increase to its quarterly cash dividend.
"The Company expects to utilize a total of over $130 billion of cash under the expanded program by the end of calendar 2015," said management.
The stock will undergo a 7-to-1 split. Each shareholder as of June 2, 2014 will receive six additional shares for every share held. And the stock will begin trading on a split-adjusted basis on June 9.
Apple closed at $524.75 today, or $74.96 on a split-adjusted basis.
And the share repurchase authorization has been increased to $90 billion from $60 billion.
The board also approved an 8% increase in the quarterly cash dividend to $3.29 per share, up from $3.05.
"We are announcing a significant increase to our capital return program," said Tim Cook, Apple’s CEO. "We’re confident in Apple’s future and see tremendous value in Apple’s stock, so we’re continuing to allocate the majority of our program to share repurchases. We’re also happy to be increasing our dividend for the second time in less than two years."
"Agree completely with AAPL's increased buyback and extremely pleased with results," tweeted investor Carl Icahn. "Believe we’ll also be happy when we see new products."
by ilene - April 23rd, 2014 3:29 pm
By John Mauldin
In today’s Outside the Box, Lacy Hunt and Van Hoisington of Hoisington Investment have the temerity to point out that since the Great Recession officially ended in 2009, the Federal Open Market Committee (FOMC) has been consistently overoptimistic in its projections of US growth. They simply expected QE to be more stimulative than it has been, to the tune of about 6% over the past four years – a total of about $1 trillion that never materialized.
Given that dismal track record, our authors ask why we should believe the Fed’s prediction of 2.9% real GDP growth for 2014 and 3.4% for 2015 – particularly with QE being tapered into nonexistence.
A big part of the reason the Fed has been so steadily wrong, say Lacy and Van, is its overreliance on the so-called “wealth effect,” which posits that an increase in consumer wealth – through higher stock prices or home values, for instance – will lead to increased consumer spending.
The wealth effect has been both a justification for quantitative easing and a root cause of consistent overly optimistic growth expectations by the FOMC. The research cited below suggests that the concept of a wealth effect is in fact deeply flawed. It is unfortunate that the FOMC has relied on this flawed concept to experiment with over $3 trillion in asset purchases and continues to use it as the basis for what we believe are overly optimistic growth expectations.
The effect isn’t completely absent, say the authors, but their research suggests that it may five to ten times weaker than the Fed assumes. Go figure.
Hoisington Investment Management Company (www.Hoisingtonmgt.com) is a registered investment advisor specializing in fixed-income portfolios for large institutional clients. Located in Austin, Texas, the firm has over $5 billion under management and is the sub-adviser of the Wasatch-Hoisington US Treasury Fund (WHOSX).
It is been a busy day for me here in Dallas. Besides nonstop meetings and conversations and my usual reading, I had the privilege of going to the Dallas branch of the Federal Reserve and watching President Richard Fisher make loans to a group
by ilene - April 23rd, 2014 3:14 pm
Facebook’s first-quarter announcement this evening promises a small moment of reflection following a frenetic few months for the company. Philosophical mysteries abound. We don’t know yet if Facebook will turn Oculus Rift into a tacky branded headset or if it will subsume WhatsApp into some evil plan to own the world. Will Facebook Paper end up on the same dust heap as its Home operating system? Is forcing Facebook users to download a separate Messenger app madness?
What we do know, is that outside of all long term pontifications and protestations of doom, the money-making engine at Facebook is purring smoother than ever. Released today, Adobe’s Q1 2014 Social Intelligence Report gives us a peek under the hood in time for tonight’s announcement, capturing a sample of 260 billion ad impressions and 226 billion post impressions to gauge how we’re using the site.
by ilene - April 23rd, 2014 2:42 pm
Courtesy of Jesse's Cafe Americain
Sometimes when I just don't have the words someone more articulate than me on the subject says it all.
Bernanke: QE Was For “The Man On The Street”
(Wall Street, That Is!) and Their Electrical Parade
By Anthony B. Sanders
Zero Hedge has an amusing story today based on former Federal Reserve Chairman Ben Bernanke’s speech to the Economic Club of Canada (for a cool $250,000).
*BERNANKE: FED ACTIONS DIDN’T FAVOR WALL STREET OVER MAIN STREET (QE Was For “The Man On The Street”)
* Bernanke Says US Economy Is Heading Towards Complete Recovery
Huh? The lime colored box shows the rewards of Quantitative Easing to the Man on the Street. In Kingman Kansas, perhaps. Stagnant real household income, employment to population ratio and YoY growth in hourly wage income. And flat-lined mortgage purchase applications.
But for Wall Street, it has been roses, cigars and snifters of cognac.
Of course, retirement funds for workers and investors in the stock market do benefit from The Fed’s quantitative easing. Yet, the jobs market remains stalled while creating low-paying and part-time jobs.
Perhaps Bernanke wants Disney World to rename the Main Street Electrical Parade as the Wall Street Electrical Parade!
Fed policy under Greenspan and Bernanke in two and one half minutes.
Presenting the 'Truman Sparks Award' for Orthogonal Banking Regulation and Obtuse Monetary Policy. – Jesse