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Shorting volatility: Rising risks mean itchier trigger fingers

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By kellepics from PixabayShorting volatility: Rising risks mean itchier trigger fingers

NEW YORK (Reuters) – A long stretch of low volatility for U.S. stocks has made betting on continued calm a popular and lucrative trade, but traders and strategists warn that risks to the trade have mounted, while the potential for profits has shrunk.

U.S. equity market volatility – the daily fluctuations in stock prices – has hovered near record lows for much of this year.

The CBOE Volatility Index .VIX, a gauge of the degree to which investors expect share prices to fluctuate, has averaged 11.4 this year. That is lower than for any comparable period over its nearly three-decade history.

Robust corporate earnings, encouraging economic growth and a view that world central banks are available to rescue markets if trouble strikes, have helped mute stock market gyrations and spell success for those betting on calm.

The VelocityShares Daily Inverse VIX Short-Term ETN (XIV.P), which makes money as long as the volatility drops or holds in place, is up about 100 percent this year.

Some traders, however, have grown more wary of increased risks to the trade.

“I think a lot of folks have gotten lulled into a false sense of security because the short trade has gone so well for so long,” said Matt Thompson co-head of Volatility Group at Typhon Capital LLC, in Chicago.

“We are still shorting volatility but we have an itchier trigger finger.”

VOLATILITY-LINKED ETPs

While there are many ways to short volatility – bet on lower stock gyrations – investors’ hunger for this trade is particularly apparent in the growth in volatility-linked exchange traded products (ETPs).

Assets under management for the top two short volatility products is at $2.8 billion and their exposure to volatility is at an all-time high, according to Barclays Capital.

But the very popularity of the trade has cranked up the risk.

These products hold first and second month volatility futures, buying and selling these contracts daily to keep their volatility exposure in line with the level of stock swings in the market.

Managers of these leveraged and inverse products are required to buy volatility futures as they go up and sell when they decline.

Strategists fear that this rebalancing – which needs be even more pronounced if a shock follows a period of unusually muted volatility, such as now – may be akin to adding fuel to fire.

“There could be a feedback effect and maybe selling begets more selling,” said Salil Aggarwal, equity derivatives strategist at Deutsche Bank in New York.

“Risk/reward considerations would imply cutting positions to more manageable levels,” he said.

RISK VS REWARD

Meanwhile, investors are not reaping as much for taking on risk as they did in the past, said Anand Omprakash, director of equity and derivative strategy at BNP Paribas, in New York.

What traders are being paid to take on the short volatility risk currently, is slightly below their average historical take since January 2013, and roughly 6 percent lower than what they were paid monthly in mid-2016, Omprakash estimates.

“You were being paid much better for much of 2016 than for much of 2017,” he said. “I don’t know if I would necessarily say the trade has run out of steam, but I don’t think it offers the kind of risk adjusted return that it offered last year.”

And the stakes are high. Strategists warn that one or two big shocks could wipe away months of profits.

The inverse volatility product XIV, while having doubled in price this year, logged an 11.4 percent decline in August as stock gyrations picked up briefly amid escalating worries about the ability of the administration of President Donald Trump to push through its economic agenda.

“The risk/reward of the trade as a buy and hold proposition is not the same as it was before the U.S. election or in the middle of the oil crisis in 2015 and early 2016,” said Stephen Aniston, president of investment adviser Black Peak Capital, in Connecticut.

Positioning in these products, primarily driven by retail players, may be more skewed to the short side than the broader market where institutional investors hold sway.

“I don’t think the risk is necessarily as big on the institutional side as it is on the retail side,” said Omprakash.

To be sure, not everyone is rushing to bet on a spike in volatility, but experts do warn that investors should tread carefully when shorting volatility from here.

Additional reporting by Terence Gabriel; Editing by Bernadette Baum

Our Standards:The Thomson Reuters Trust Principles.

Published at Sat, 23 Sep 2017 01:00:07 +0000

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Wells Fargo hires new law firm to prepare CEO for Senate appearance

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By Alicja_J from PixabayWells Fargo hires new law firm to prepare CEO for Senate appearance

NEW YORK (Reuters) – Wells Fargo & Co. (WFC.N) has hired law firm Sidley Austin to take the lead in preparing Chief Executive Tim Sloan for his appearance before the U.S. Congress next month to answer questions about a year-long sales practices scandal, according to four sources with knowledge of the decision.

Sloan will appear before the Senate Banking Committee, which writes rules for his industry, at a hearing titled “Wells Fargo: One Year Later,” on October 3.

Wells Fargo spokeswoman Jennifer Dunn declined to comment. No one from Sidley Austin was available to comment outside of office hours.

The testimony will be Sloan’s first congressional appearance since he took over as CEO in October of last year, roughly a month after Wells Fargo reached a settlement with regulators over the creation of as many as 2.1 million unauthorized accounts.

The bank has since disclosed problems with other products, including auto and life insurance, and recently revised its estimate for the number of accounts that were potentially opened without customers’ authorization to 3.5 million.

In his own congressional appearances last year, Sloan’s predecessor, John Stumpf, often lacked answers to questions posed by legislators. Massachusetts Senator Elizabeth Warren accused him of “gutless leadership.” He left the bank less than a month later and was replaced by Sloan.

The law firm that prepared Stumpf for his testimony, Gibson Dunn, will still be working for Wells Fargo, but in a supporting role, said one of the sources.

No one from Gibson Dunn was immediately available to comment outside of office hours.

Hundreds of outside law firms work for Wells Fargo on various matters, and the bank’s new general counsel, Allen Parker, recently hired a new chief operating officer for the legal team, Tom Trujillo, who is reviewing those relationships.

The hiring of Sidley Austin, however, was directed by Wells Fargo’s government affairs office, said one of the sources.

Reporting by Dan Freed; Editing by Carmel Crimmins and Mary Milliken

Our Standards:The Thomson Reuters Trust Principles.

Published at Sat, 23 Sep 2017 02:05:28 +0000

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Mortgage Equity Withdrawal slightly positive in Q2

{pixabay|100|campaign}Mortgage Equity Withdrawal slightly positive in Q2

by Bill McBride on 9/22/2017 10:23:00 AM

Note:This is not Mortgage Equity Withdrawal (MEW) data from the Fed. The last MEW data from Fed economist Dr. Kennedy was for Q4 2008.

The following data is calculated from the Fed’s Flow of Funds data (released yesterday) and the BEA supplement data on single family structure investment. This is an aggregate number, and is a combination of homeowners extracting equity – hence the name “MEW” – and normal principal payments and debt cancellation (modifications, short sales, and foreclosures).

For Q2 2017, the Net Equity Extraction was a positive $12 billion, or a positive 0.3% of Disposable Personal Income (DPI) .

Mortgage Equity WithdrawalClick on graph for larger image.

This graph shows the net equity extraction, or mortgage equity withdrawal (MEW), results, using the Flow of Funds (and BEA data) compared to the Kennedy-Greenspan method.

Note: This data is impacted by debt cancellation and foreclosures, but much less than a few years ago.

The Fed’s Flow of Funds report showed that the amount of mortgage debt outstanding increased by $64 billion in Q2.

The Flow of Funds report also showed that Mortgage debt has declined by $1.23 trillion since the peak. This decline is mostly because of debt cancellation per foreclosures and short sales, and some from modifications. There has also been some reduction in mortgage debt as homeowners paid down their mortgages so they could refinance.

With a slower rate of debt cancellation, MEW will likely be mostly positive going forward.

For reference:

Dr. James Kennedy also has a simple method for calculating equity extraction: “A Simple Method for Estimating Gross Equity Extracted from Housing Wealth“. Here is a companion spread sheet (the above uses my simple method).

For those interested in the last Kennedy data included in the graph, the spreadsheet from the Fed is available here.

Published at Fri, 22 Sep 2017 14:23:00 +0000

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Exclusive: Macquarie leapfrogs Goldman to join top tier of commodity banks

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By manfredrichter from PixabayExclusive: Macquarie leapfrogs Goldman to join top tier of commodity banks

LONDON (Reuters) – Australia’s Macquarie Group Ltd has overtaken Goldman Sachs to break into the top three banks for commodities business, having significantly expanded its U.S. energy operations in recent years while rivals cut back.

The rise of Macquarie marks a huge shake-up in commodity banking, typically dominated by elite U.S. and European institutions until tough regulations forced withdrawals after the global financial crisis.

Macquarie, not burdened by the stiff regulations as an Australian bank, ranked in the top three in terms of revenue from commodities trading and related businesses for the first six months of the year, industry sources said.

This is the first time a bank outside the United States or Europe has broken into the top tier in commodities, or any other capital market sector.

Macquarie ranked behind Morgan Stanley and Citigroup for the first six months of 2017, but ahead of JP Morgan and Goldman, with the top three averaging $250-$300 million each in commodities revenues, down sharply from the first half of 2016, one source said.

Macquarie declined to comment ahead of its half-year results on Sept. 30.

The bank reported net trading income in commodities of A$1.16 billion ($921 million) for the financial year to the end of March this year, marking a 66 percent increase in four years.

Comparable financial numbers were not available for rivals because most banks do not make public their revenue from commodities, incorporating the sector into a broader category of fixed income, currencies and commodities (FICC).

Analysts estimate Goldman usually averages around $500 million in commodities revenues for the half year, but that this had slid to $150 million in the first six months of 2017.

“As people have dropped by the wayside, such as Barclays, Deutsche Bank and so on, Macquarie have been able to mop up some of that business,” said Seb Walker, partner at banking consultancy Tricumen.“Macquarie is the first ‘Asian’ bank to make the top three in any capital markets product.”

Deutsche Bank and Barclays, hit with tough capital requirements during a downturn in commodities, sharply pulled back from the sector in 2013-14, while in the United States the Dodd-Frank law banned proprietary trading by banks, prompting them to curb physical commodity business.

MACQUARIE EXPANDS IN U.S. ENERGY

“We should expect more growth from Macquarie,” Walker said, noting the bank agreed in June to acquire Cargill’s North American power and gas business.

That deal came only months after Macquarie agreed to buy Cargill’s global petroleum business and marked the latest expansion by the bank of its energy franchise.

While other banks cut back, Macquarie has boosted its operations to become the largest non-producer marketer of physical gas in North America.

Trader Nick O‘Kane built up the bank’s U.S. energy business, starting off with the takeover of Los Angeles-based Cook Inlet Energy Supply in 2005.

Cook’s owner had 1/16th Inupiat Eskimo heritage and got guaranteed sales to California utilities which had to purchase 5 percent of natural gas from minorities.

In the aftermath of the global financial crisis in 2009, Macquarie acquired Constellation Energy’s downstream natural gas trading platform, a good example of the bank’s long-term commodity strategy, said a former Macquarie executive.

“That investment was at the bottom of a 10-year view from someone who plans to be there for another 10 years where as for some of the European banks it’s a year-to-year proposition.”

A banking source in Europe said Macquarie was also canny in taking advantage of its position as a non-U.S. bank.

“They use a different funding model to the U.S. banks constrained by regulations, using short-term paper so they can price more aggressively,” he said.

CHALLENGER BANKS

A wave of banks from Australia, Canada and China are grabbing market share in commodities after many big U.S. and European rivals withdrew or trimmed back, said Amrit Shahani, research director at financial industry analytics firm Coalition.

So-called “challenger” banks have boosted their market share in commodities to 28 percent last year from 19 percent in 2014, taking business away from the top 12 global investment banks, he added, declining to discuss individual banks.

The Coalition index of top investment banks does not include many of the banks such as Macquarie that are gathering steam in the commodities sector.

While Macquarie has been building up its commodities business, usual top dog Goldman Sachs faltered in the second quarter, reporting the weakest commodities results in its history as a public company.

Commodities trading among banks had been traditionally dominated by Goldman and Morgan Stanley, joined by JP Morgan and Citigroup and European banks during the commodities boom.

At its height, banks’ commodity revenue totaled about $15 billion, but has steadily slid to just over a third of that, totaling around $5.5-$6 billion last year, Shahani said.

In the first half of 2017, commodities revenues at the 12 biggest investment banks tumbled 41 percent year-on-year to its lowest since at least 2006, Coalition said this month.

“It’s been a very difficult year for the large banks. The question this year is whether the challenger banks can step into their shoes and displace them or will the global banks pop back in the second half,” Shahani said.

Additional reporting by Paulina Duran in Sydney; Melanie Burton in Melbourne; Anjuli Davies, Dmitry Zhdannikov and Fanny Potkin in London; Editing by Veronica Brown and Mark Potter

Our Standards:The Thomson Reuters Trust Principles.

Published at Thu, 21 Sep 2017 15:54:48 +0000

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Top 7 Non-Financial Skills Required in Finance

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By HOerwin56 from PixabayTop 7 Non-Financial Skills Required in Finance

Did you know that having top-notch mathematical skills and financial knowledge is only the tip of the iceberg when it comes to excelling as a financial professional?

Mitch Pisik, who has held numerous senior management positions, including CEO role of Breckwell Products and has more than 20 years of experience in business development, operations and finance, advises that, “the accounting/financial aspect of the job is the floor – not the ceiling.”

In other words, if you can’t perform the other basic functions of your job, you won’t make it. In order to stick around and get ahead in finance, you need to master these essential non-financial skills.

1. Communication Skills

Financial professionals can’t just be good at crunching numbers – they must be able to communicate their knowledge with strong speaking, writing and presentation skills.

Beverly D. Flaxington, author of “7 Steps to Effective Business Building for Financial Advisors,” says that when you are presenting to a board, an investor or a prospect, you need to know how to convey complex information in a way people can easily understand.

2. Relationship-Management Skills

The people skills you need in order to succeed as a financial professional include understanding different personality types, listening, asking the right questions, resolving conflicts, educating others and counseling clients. Ontario-based financial planner Judith Cane says that success in finance is “15% technical knowledge and 85% psychology. When people come to see me it’s because they have issues with money. They spend too much, they don’t save anything or they save everything.” What clients often need, therefore, is an unbiased advisor who can understand their needs and help them make financial decisions.

Managing relationships is an important life skill, whether you’re dealing with subordinates, co-workers, bosses or people outside your company. When people trust you, like you and feel that you respect them, they will want to help you succeed, whether it’s by speaking highly of you, promoting you or signing up to be your client.

3. Marketing and Sales Skills

Robert L. Riedl, director of wealth management for Endowment Wealth Management in Appleton, Wisconsin, says financial professionals need to be able to market their professional skills and knowledge to prospects in their niche markets. To do so, it’s imperative to have a complete understanding of both your personal strengths and your firm’s professional strengths.

He further advises that in marketing yourself to clients, you shouldn’t just communicate how much you know, but also how much you care, because “the client’s most valuable assets and their biggest daily concern is not their monetary wealth, but rather their family.”

Clients want to know that you can help them manage their money to best provide for their family’s long-term needs.

4. Project Management Ability, Organizational Skills and Attention to Detail

Any task that takes more than a few minutes is essentially a project – one that you’ll need to manage effectively in order to be profitable. You’ll need to efficiently and effectively schedule your time, manage budgets, meet deadlines and get what you need from other people in time to complete your project successfully.

Both during and after any project, staying organized and paying attention to detail are also key.

Corporate finance professional Myles Wolfe says, “For any analytical project, someone will usually have questions about the inputs and assumptions. If you can’t deliver timely backup information, even if it is 100% accurate, people will question the accuracy of the final output.”

He says that it’s critical to have both your electronic files and hard copies organized to access information quickly. You might be asked a question months after your initial analysis by a CFO who needs the information in 30 minutes for a conference call. “Especially in the financial world, sloppiness is intolerable,” he says.

5. Problem-Solving Skills

You will always encounter problems in any job, and being able to solve them rather than cracking under pressure is essential.

To get ahead, it can also be helpful to look beyond your own personal responsibilities. Pisik advises that by helping your coworkers solve their problems rather than simply reporting them to upper management, you’ll be viewed as a team player.

“People will gravitate toward you and your career will flourish,” he says.

6. Technological Savvy

No matter where you work, you will need to be proficient with computer hardware and software and able to pick up new programs related to your job quickly. The more shortcuts, keys, programs and functions you know in Excel, the better off you will be in finance. You should also get familiar with marketing and communication software tools.

7. Tenacity and Ethics

A competitive personality, passion for your work and the stamina to work long hours and go above and beyond what’s expected of you and what your co-workers and competitors are doing are all crucial to success in finance. At the same time, you can’t be so competitive that you make poor choices, or your career and reputation will suffer.

Kevin R. Keller, CAE, CEO of the Certified Financial Planner Board of Standards, says that adhering to a set of ethical standards such as those required of certified financial planners™ (CFPs) is crucial to rebuilding the trust that has been broken by financial scandals. The Certified Financial Planner Board of Standards’ Standards of Professional Conduct requires CFPs to provide professional services with integrity, objectivity, competence, fairness, confidentiality, professionalism and diligence – people who work in finance would be wise to adhere to these principles.

Anticipation

Looking ahead to what bosses or clients will need from you in the immediate or even distant future will help you rise to the top. It’s not enough to just solve the day-to-day challenges of your job; you must be able to think long term. Consider the following:

  • What skills can you develop and what accomplishments can you put under your belt that will land you a promotion at your current company, get your foot in the door at another company or get you rehired if you are laid off or?
  • How can you make your boss’s life easier by anticipating what he or she will need from you tomorrow, next week or next month, and taking care of it ahead of time?
  • How can you develop relationships with your clients by paying close attention to their situations? For example, if you notice that the woman who has come to you for help managing an inheritance is pregnant, realizing that she could need help saving and investing for her child’s college education, updating her will and possibly creating a trust can help you create a long-term business relationship with that client.

Putting It All Together: Wisdom and Interpretation

Los Angeles-based writing consultant Elizabeth B. Danziger, founder of Worktalk Communications Consulting and author of “Get to the Point!,” says, “Clients of financial-service professionals are looking for more than knowledge and numbers: they’re looking for wisdom and interpretation.”

The Bottom Line

By combining your ability to analyze numbers with skills such as communication, project management and relationship development, you’ll emerge as a leader and position yourself to rise to the top of your field.

Published at Fri, 22 Sep 2017 21:36:00 +0000

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Bed Bath & Beyond shares plunge after disappointing earnings report

Bed Bath & Beyond shares plunge after disappointing earnings report

  @dwbronner

Bed Bath & Beyond shares plunged nearly 15% in early trading Wednesday following a disappointing earnings report.

The retailer said after the closing bell Tuesday that earnings for the second quarter were $94.2 million, a significant drop from the $167.3 million it reported in the same period last year. Same-store sales fell by about 2.6% from a year ago.

 The company said that while online sales grew by more than 20%, in-store sales have dipped.

The “unfavorable impacts” of restructuring costs and the damage sustained by Hurricane Harvey contributed to the results, Bed Bath & Beyond (BBBY) said in a news release.

The home goods provider is not the only traditional retailer struggling to keep up with online competitors.

Toys ‘R’ Us just filed for bankruptcy, succumbing to mountains of debt it accrued when trying to fight off Amazon (AMZNTech30) and Walmart (WMT). The news is troubling or toy makers Hasbro (HAS) and Mattel(MAT), who saw their stocks dip when the bankruptcy was just a rumor.

Across the board, stores are closing at an alarming rate as shoppers lose interest in brick-and-mortar locations. And as bad as things are now, Wall Street thinks things are only going to get worse.

According to analysis by Bespoke Investment Group, investors are more pessimistic about the retail industry now than they have been since September 2008.

But Bed Bath & Beyond may also be facing tougher competition from traditional rivals. Williams-Sonoma (WSM), which also owns Pottery Barn and West Elm, reported earnings last month that topped forecasts.

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Will Teva Pharmaceutical Stock Close the Gap?

 

Will Teva Pharmaceutical Stock Close the Gap?

By Justin Kuepper | September 19, 2017 — 10:10 AM EDT

Teva Pharmaceutical Industries Limited (TEVA) shares fell nearly 45% over the past three months despite a brief relief rally earlier this month. The big question for traders is whether the rally was a dead cat bounce or if a base has formed at around $16.00 to $17.00. The stock has been difficult for long-term investors to value given the many changes, which has opened the door for traders to control short-term price action in the interim.

Earlier this month, the company signed two agreements to sell its specialty global women’s health business for $1.38 billion. The proceeds from these sales will help pay down debt and alleviate a major concern for investors, but the company still faces an uphill battle in turning around its generics business, which has seen intensifying competition. The positive news for the stock is that the company has finally identified a new CEO with experience in leading turnarounds. (See also: Teva Stock Jumps After New CEO Is Named.)

Technical chart showing the performance of Teva Pharmaceutical Industries Limited (TEVA) stock

From a technical perspective, the stock briefly rallied earlier this month before losing momentum by the middle of the month. The relative strength index (RSI) appears neutral with a 41.18 reading, while the moving average convergence divergence (MACD​) experienced a bullish crossover in late August. These technical indicators provide few hints as to where the stock may be headed over the coming weeks.

Traders should watch for a continued breakdown to prior lows to close the gap formed earlier this month on the downside. If shares rally from this point, traders should watch for a move higher to retest prior highs at around $20.00 or even the 50-day moving average at around $22.30 on the upside. The RSI reading implies that there is room for the stock to move higher or lower, but the MACD points to a potential rally higher. (For more, see: Can Teva Pharmaceutical Turn Around Under New CEO?)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

 

Published at Tue, 19 Sep 2017 14:10:00 +0000

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Herbalife Stock Setting Off Multiple Sell Signals

Herbalife Stock Setting Off Multiple Sell Signals

By Alan Farley | September 19, 2017 — 11:53 AM EDT

Multi-level marketer Herbalife Ltd. (HLF) may finally be ready to reward long-suffering short sellers following several years of brutal squeezes triggered by hedge fund manager Bill Ackman’s notorious short position. His endless table pounding attracted a huge population of weak hands, augmented by 2016’s “Betting on Zero,” an anti-Herbalife documentary funded by another hedge fund with a record of shorting the stock.

The price chart has held up remarkably well through all this drama and comic relief, with media outlets routinely documenting the estimated $1 billion loss incurred by Ackman’s still active short position. As it turns out, the technical outlook is now deteriorating at a rapid pace, raising the odds that the stock will finally roll over and enter a major decline that bails out the controversial fund manager while gaining considerable traction. (See also: Herbalife Sinks as FTC Regulation Stands to Thwart Growth.)

HLF Long-Term Chart (2004 – 2017)

The stock came public at $7.00 in December 2004 and ground sideways into a May 2005 breakout that generated a momentum-fueled uptrend into $20.60 in June 2006. It posted a series of nominal new highs into the April 2008 top at $25.55 and turned sharply lower during the economic collapse, dropping to an all-time low at $6.06. The subsequent bounce gained ground at the same pace as the prior decline, completing a round trip into the 2008 high in May 2010.

A breakout into mid-year caught fire, generating healthy gains into the 2012 high at $73.00, ahead of a brutal decline that relinquished nearly 50 points in just eight months. The stock then recovered in another V-shaped pattern, returning to the prior high in January 2014 and breaking out in a buying spike that posted an all-time high at $83.51 just three weeks later. It then failed the breakout, spiraling into a downtrend that tested the 2012 low in the first quarter of 2015. (For more, see: Herbalife Scrambles, Hires New Lawyer as Short Interest Booms.)

The stock spent nearly a year and a half working its way back to the 2014 high but stalled and reversed in June 2017 at the .786 Fibonacci sell-off retracement level. Price action during the recovery wave ground out three marginally higher highs in a shallow uptick that has tested the will and patience of the company’s nervous shareholder base. Meanwhile, the stock remains firmly entrenched in a trading range between the 2012 low and 2013 high.

HLF Short-Term Chart (2014 – 2017)

The stock eased into a rising channel after bouncing into 2015, with that price structure still in force more than two years later. It spent more than two months testing channel resistance into August 2017 and rolled over in a failure swing that could print a lower high within the 3.5-year trading range. The sell swing filled the May 5 gap before settling at the 200-day exponential moving average (EMA), ahead of a bounce that ended on Monday with a breakdown at the 50-day EMA in the upper $60s. (See also: Herbalife, Other MLMs, Crash on Chinese Crackdown.)

This price action sets the stage for a test at the summer low, with a breakdown opening the door to additional losses into channel support in the low $50s. Aggressive short sellers can now consider opening positions while maintaining stop-losses above the September high at $69.76. A breakdown at the 200-day EMA in the lower $60s will issue the second sell signal, allowing sellers to increase position size while bringing more conservative players off the sidelines.

A channel breakdown would complete the positive feedback loop, signaling a long-term downtrend that has the power to generate healthy long-term profits. Of course, the stock could recover at any point between now and then, forcing short sellers to maintain aggressive risk management techniques that respect this security’s endless capacity to punish that side of the market. (For more, see: Herbalife Q2 Earnings Top, New FTC Rules Raise Concern.)

The Bottom Line

Herbalife has set off warning signals after topping out at a key Fibonacci retracement level and rising channel resistance, raising the odds that the long-term recovery wave is coming to an end ahead of a new downtrend. (For additional reading, check out: Herbalife Initiates Tender Offer, Indicates Going Private.)

 

Published at Tue, 19 Sep 2017 15:53:00 +0000

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A Cryptocurrency Miner is Going Public…and it’s Huge

 

A Cryptocurrency Miner is Going Public…and it’s Huge

By: Ross Pilot | Mon, Sep 18, 2017


HIVE Blockchain Technologies Ltd. will list on the TSX Venture Exchange Monday, September 18th, under the symbol TSX.V: HIVE.

The company is backed by Genesis Mining, the largest cloud Bitcoin miner in the world with 700,000 customers. Genesis owns 30% of HIVE.

HIVE’s launch transaction involves the acquisition of an initial state-of-the-art blockchain infrastructure facility in Iceland from Genesis.

The facility produces mined cryptocurrency around the clock like RIGHT NOW.

This is one of the first (I think it is the first, but I could have missed something) real and legitimate pure play in the public markets for investors.

So I expect it to be a big deal and get lots of attention.  If you’re an investor that doesn’t buy Bitcoin or Ethereum directly, this could be a simple proxy—as I’ll explain below, while this company does have growing revenue and positive cash flow, I would expect the stock to trade closely with Ethereum.

HIVE also has an option to acquire at least four additional data centres from Genesis in Iceland and/or Sweden. (This could be very important very quickly if these options get exercised; the growth rate in the public company would increase dramatically.)

HIVE has an exclusive arrangement with Genesis to operate its data centres covered by a master service agreement. That’s a fancy way of saying that’s it baked in the cake that Genesis will hand off more data centres in the future to HIVE.

“The time has come for the blockchain and cryptocurrency sector to come together with public equity markets. HIVE will become a leading infrastructure company for the blockchain era, and introduce this exciting sector to a new audience of investors. This is a strategic opportunity for Genesis to access capital and build a bigger business publicly than we ever imagined building our first home-based bitcoin mining machines five years ago.”
 
– Marco Streng, Co-founder and CEO of Genesis Group

So what is the business model? Well it looks to me like:

1.     Genesis buys the gear and builds a Crypto-mining data centre.

2.     The moment the servers are flipped on, the centre is mining crypto-coin.

3.     The crytocoin is exchanged for US dollars (or stored).

4.     The data centre can then be transferred to HIVE where the public markets will give the data centre a valuation X times cash flow proven by the number of coins it mines.

5.     Genesis uses the money from public markets to buy more gear and builds more centres.

6.     Repeat.

To me this looks like the closest thing to a legal money-printing machine outside of the US Bureau of Engraving and Printing.

Using the news release from SEDAR (the Canadian equivalent of EDGAR, where public companies have to post their news releases and quarterly financials), I am able to make some pie-in-the-sky guesses about revenue:

“Based on the computational capacity of the first Data Centre, the historical prices, and required hash rates, and using a mine and immediately sell strategy, the trailing 12 month EBITDA would have been approximately US$7 million.”

EBITDA is an acronym—Earnings Before Interest, Taxes, Depreciation and Amortization—that basically means cash flow.  EBITDA=cash flow, which is what most business valuations are based on now.

The mining facility will probably (I’m guessing) be mining mostly Ethereum.

That news release was issued in June so the $7 million shows what the centre would have mined hypothetically from June 2016 to June 2017.

Earnings for the following twelve months will be much, much higher but take a guess as revenue from this company will be strongly correlated to the price of Ethereum.

The Genesis Mining Group were much the original pioneers in mining Ethereum. Their first large-scale Bitcoin mining facility was built in 2014 using custom hardware.

This was followed up in 2016 with the construction of the world’s largest Ether mining facility — specifically built to support the Ethereum Project at an early stage of its development.

So they figured out a way to mine Ethereum for profit back in 2016 when it was under $15. Who knows how much money they have made this year.

Here’s how the share structure looks like:

Genesis Mining (the private company) received $9,000,000 and 30% of HIVE stock for the data center, which was 67,975,428 shares. The shares are subject to escrow with a hold period of four months and one from September 13th.

There was 100 million shares in the public shell, which is held almost entirely by management (see names below).  These shares are released quarterly—25% will be free trading immediately, then another 25% in November, then Feb 2018 and May 2018.

There was 55 million shares issued at 30 cents, which went to mostly Canadian institutions/fund managers.  There was very strong demand here, as there is no real legitimate way to play crypto currency.

They had to increase this financing to meet the Street’s strong demand. I think that bodes well for the stock trading tomorrow morning.

This stock is not free trading until December.  So the initial free trading amount of stock (called the “float”) that the public can buy is fairly small at 20 million or so.

There will be 226,584,760 shares out total, and once  you add in 22.6 million stock options and 700,000 warrants, there is a fully diluted 249,917,759 shares.

I expect the stock to open between 60 cents – $1 on the first day.  I will probably buy some more if that happens (I’m already long from when it was Leeta Gold Corp: TSXV:LTA. the original shell company).

I will say again it’s the first cryptocurrency miner to trade in the public markets (that I see) meaning there will be HUGE interest in the stock and not just from buyers.

As I wrote in an earlier post the cryptocurrency mining industry is currently a $7 billion a year industry and growing 100% year-over-year.

Until now, all the miners have been private, meaning NOBODY outside the owners have known just how the financial end of the business operates. You can bet that every quarterly filing that HIVE puts out, every North America analyst study it like it’s the Bible.

One confident prediction I will make is that you won’t see positive net revenue anytime, every little bit of cryptocurrency mined will be plowed right back into the business. HIVE will be adding more hash power (think computing power; CPU power) as soon as they can find room for new servers.

The management team and directors that is running HIVE is impressive (almost a complete opposite of some ICOs that I have looked at). HIVE is the result of a partnership between Hong Kong-based Genesis Mining and Vancouver-based Fiore Group, which is headed by Frank Giustra aka the founder of Lionsgate Entertainment, NYSE: LGF.A.

Other members on the board include Harry Pokrandt, Frank Holmes (CEO of US Global out of Texas), and Olivier Roussy Newton. All of these guys pass the Google and LInkedin test with flying colours (I particularly recommend Olivier’s twitter feed).

THIS IS GOING TO BE INTERESTING IN SO MANY WAYS. There has been no way for investors to get exposure to crypto directly other than through initial coin offerings (ICOs), which have had poor disclosure and vague use of proceeds.

ICOs may not be shady, but they’re not transparent like they were being closely watched by the SEC…which HIVE will be, being a public company in cryptocurrency.

In conclusion, HIVE has been gifted a solid business with revenue flowing from day one from a market leader in an industry that has seen hyper-growth in 2017 and looks set for the next decade. Even Jamie Dimon would like this deal.

So I think the business is going to do well, given the management team’s intimate knowledge of the business partnering up with one of the top junior finance teams in North America.  And you can be sure I’ll be keeping everybody updated on how they’re doing.

If it opens up under 80 cents, I am probably a buyer. There are very few quality ways for investors to play the crypto space in the public markets, and I think this company will attract a lot of attention in its first few months.  It will have a honeymoon for at least a couple quarters.

Please note I own shares in HIVE.


Ross Pilot is not his real name.

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Published at Mon, 18 Sep 2017 08:13:21 +0000

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NVIDIA Breakout Bodes Well for AMD Stock

 

NVIDIA Breakout Bodes Well for AMD Stock

By Alan Farley | September 18, 2017 — 9:29 AM EDT

Video graphics powerhouse NVIDIA Corporation (NVDA) rocketed higher on Friday, posting heavy volume during a breakout above three-month resistance at $170 and closing at an all-time high above $180. The uptick should gain traction in the coming months, lifting the high-tech market leader well above $200. It also bodes well for Advanced Micro Devices, Inc. (AMD) stock, which has attempted to mimic its larger rival’s bullish behavior in the past two years.

AMD shares rose nearly 400% in 2016, tracking a historic NVIDIA uptrend triggered by growing speculation on virtual reality gaming hardware. AMD stock topped out just above $15 in February and dropped into a long-overdue correction that has held relatively close to resistance in recent months. Its rival’s breakout could now generate fresh buying power, lifting AMD stock off a six-week test at the 200-day exponential moving average (EMA) and into an uptrend that targets the low $20s. (See also: AMD vs. NVIDIA: Who Dominates GPUs?)

AMD Long-Term Chart (1990 – 2017)

The Sunnyvale, California-based chipmaker ended a multi-year decline at $1.82 in 1990, giving way to a volatile uptrend that stalled out at $19.63 in 1995. A steep pullback into the single digits got bought in 1996, triggering a two-legged rally that topped out at an all-time high just above $48 in 2000, at the same time the dotcom bubble was bursting. It plunged with other tech stocks in the next two years, dropping to an 11-year low at $3.10 in October 2002.

The subsequent recovery wave unfolded at the same trajectory as the prior decline, lifting in a V-shaped pattern that stalled within six points of the 2000 high in 2006. That peak marked the highest high in the past 11 years, ahead of a decline that picked up steam during the 2008 economic collapse. It undercut the 1990 low in November, posting an all-time low at $1.62, while the subsequent bounce failed to attract substantial buying interest, topping out at $10.24 in 2010. (For more, see: AMD Surges on Bitcoin-Fueled Earnings.)

A bounce following a 2012 test at the 2008 low stalled in 2013, generating a year-long topping pattern followed by a decline that reached the prior decade’s low once again in 2015. Aggressive buyers emerged in the first quarter of 2016, generating a momentum-fueled uptrend that mounted the 2010 high in January 2017. The rally ended at a 10-year high less than two months later, yielding a trading range that is still under development as we near the fourth quarter.

AMD Short-Term Chart (2015 – 2017)

The 2016 rally broke the 10-year string of lower lows when it mounted the 2013 and 2014 highs in June. Momentum then accelerated, generating a series of rally waves that ran out of gas in the first quarter of 2017. Price action since that time has held support at the 200-day EMA, while a July breakout attempt triggered a major reversal. The subsequent decline settled below $12 in August, giving way to a basing pattern that could now support a trip back to range resistance. (See also: AMD Stock Could Break Out or Break Down.)

On-balance volume (OBV) hit an all-time high in June 2017, but the stock failed to break out, generating a minor distribution wave that has settled into a holding pattern, indicating that shareholders are hanging tough but failing to get paid for their efforts. A rally above $14 is needed to avoid growing frustration and support another test at range resistance above $15. Conversely, a failure to bounce strongly in the next week or two could trigger a capitulative selling event that breaks support and drops the stock into a deeper correction.

The Bottom Line

AMD has settled at the midpoint of a six-month trading range, while its larger rival has broken out to an all-time high. That wake-up call offers a golden opportunity to attract sponsorship lost during six months of corrective action and generate a trend advance that could reach the lower $20s. (For additional reading, check out: Why AMD’s Stock Is Not Worth $20.)

 

Published at Mon, 18 Sep 2017 13:29:00 +0000

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McDonald’s Stock at Key Support After Expiration Swoon

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McDonald’s Stock at Key Support After Expiration Swoon

By Alan Farley | September 18, 2017 — 11:27 AM EDT

Dow component McDonald’s Corporation (MCD) is struggling to recover from a brutal expiration week decline that dropped the fast food giant nearly six points in two hours. A bearish research report was blamed for the rout, but triple witching’s quarterly influence offered a more logical explanation, with the swift decline forcing many short-dated calls to expire worthless.

Research firm M Science claimed on Sept. 12 that hurricane disruptions could force McDonald’s to miss third quarter expectations, sending the stock into a tailspin that reached a five-week low at $155.77. The stock has held three-month channel support and the 50-day exponential moving average (EMA) into the new trading week, raising the odds for a recovery wave that re-establishes McDonald’s strong leadership role. (See also: McDonald’s Has a Long-Term Growth Problem.)

MCD Long-Term Chart (1990 – 2017)

An uptrend starting after the October 1987 crash gained traction throughout the 1990s, lifting the stock to $47.38 in the first half of 1999. It pulled back to the mid-$30s and bounced, testing the high in December and turning lower in a double top pattern that broke to the downside in January 2000. That decline signaled the start of the most bearish period in the stock’s long history, relinquishing more than 75% of its value into the March 2003 low at $12.12.

It took four years for the subsequent bounce to complete a round trip into the 1999 high, yielding a late 2007 breakout that eased into a narrow trading range during the 2008 economic collapse. That resilience lifted the stock into a market leadership role after the bear market ended, generating a 2010 uptrend that posted a series of new highs into 2012, when it topped out just above $100 and dropped into a shallow trading range with support in the mid-$80s. (For more, see: If You Had Invested Right After McDonald’s IPO.)

A persistent sideways pattern denied trend followers into an October 2015 breakout that caught fire, lifting the stock to $132 in May 2016. A pullback into the November election found committed buyers, yielding a strong recovery wave and secondary breakout in April 2017. Price action added points at a rapid pace into last week’s all-time high at $161.72, ahead of a nasty reversal that could presage even lower prices in coming weeks.

MCD Short-Term Chart (2016 – 2017)

Price action after the 2012 top carved a holding pattern generated by weaker-than-expected same-store sales growth. The company then introduced the “all-day breakfast,” an immediate hit that added to the bottom line while supporting franchisee reorganization and other cost-cutting initiatives. Those measures have now taken hold, allowing the stock to break out and post a fresh series of new highs. (See also: McDonald’s Is Desperate to Modernize Its Franchisees.)

The stock eased into a rising channel in June 2017, posting four higher highs, but on-balance volume (OBV) has failed to respond, topping out in July and entering a distribution phase that could signal a longer-term top. However, minimal technical damage to this point has issued few sell signals, allowing bulls an opportunity to reload positions and lift the stock back to last week’s high.

The stock spent the past four sessions grinding out a possible bear flag pattern, but it is too early to predict a rollover to weekly lows. More likely, the recovery wave will lift into broken range support at $158.50, with aggressive sellers making a stand at that level. On the flip side, a channel break would also signal new resistance at the 50-day EMA, favoring continued downside that could reach the 200-day EMA, which is currently rising through the low $140s. (For more, see: How McDonald’s Makes its Money.)

The Bottom Line

Red flags are waving after McDonald’s shares sold off nearly six points in a few hours in reaction to a bearish research report. While bulls have a golden opportunity to lift the stock back to the rally high, clearly delineated resistance could attract aggressive short selling interest that triggers an intermediate breakdown. (For additional reading, check out: Why McDonald’s Shares Could Fall 20%.)

 

Published at Mon, 18 Sep 2017 15:27:00 +0000

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Boeing flies high. Dow’s top stock up 60% this year

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5 stunning stats about Boeing
5 stunning stats about Boeing

Boeing flies high. Dow’s top stock up 60% this year

  @lamonicabuzz

Boeing may be in a bitter battle with rivals Airbus, Bombardier and Embraer for global domination in the sky, but the airline maker and defense giant is the undisputed king of Wall Street this year. Its stock is in the stratosphere.

Shares of Boeing(BA) are up more than 60% so far in 2017, making it the top performer in the Dow Jones Industrial Average by far. Yup, Boeing is even ahead of Apple(AAPL, Tech30), which ranks second among Dow stocks with its 38% gain.

Boeing has soared along with other defense companies this year. In fact, it’s a continuation of a surge that began last year.

The iShares U.S. Aerospace & Defense ETF(ITA), which has Boeing as its top holding, is up 23% this year. That follows a nearly 20% surge in 2016.

Wall Street was betting before the U.S. presidential election that a win by either Hillary Clinton or Donald Trump would be good for defense stocks since both talked about boosting military spending during the campaign.

Since Trump’s victory, defense stocks have continued to shine. North Korea’s nuclear threats have investors even more interested in the sector. Two recent mergers are helping to keep the sector firmly on Wall Street’s radar as well.

Fellow Dow component United Technologies(UTX) announced earlier this month that it planned to buy Rockwell Collins(COL) for $23 billion. And Northrop Grumman(NOC) said Monday that it intends to acquire Orbital ATK(OA) for nearly $8 billion.

Boeing has expressed some doubts about the United Technologies-Rockwell Collins merger plan since that deal would unite two key Boeing suppliers and potentially lead to higher prices on some aircraft parts.

But the deal also shows the intense interest among aerospace and defense companies to find merger partners and take advantage of booming demand in the industry.

And Wall Street loves merger activity, which tends to boost stock prices as investors bet on who might be next to get bought.

Boeing, with a market value of about $150 billion and annual sales of more than $90 billion, is more likely acquirer than takeover target of course.

Still, investors are clearly betting that Boeing may not need to buy any of its rivals to stay on top. Orders are coming in for Boeing’s new 737 MAX and 787 (aka Dreamliner) commercial jets.

On the defense side, Boeing continues to see demand for its Apache helicopters as well as its missile defense systems.

The combination of Boeing’s commercial and military clout is a key reason why analysts expect profits to rise nearly 40% this year and grow at an annual rate of almost 20%, on average, for the next few years.

So it’s no wonder why Boeing stock is flying so high.

 

Published at Mon, 18 Sep 2017 15:40:18 +0000

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Toys ‘R’ Us bankruptcy fears hit Mattel and Hasbro

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These toys are made in the U.S.
These toys are made in the U.S.

Toys ‘R’ Us bankruptcy fears hit Mattel and Hasbro

  @lamonicabuzz

Christmas is still more than three months away. But it looks like investors in several toy makers may be left with lumps of coal in their stockings thanks to concerns that one of their biggest customers could be in trouble.

Shares of industry leaders Hasbro and Mattel as well as smaller toy company Jakks Pacific all fell Monday due to reports suggesting that Toys ‘R’ Us is considering filing for bankruptcy sometime this week.

The speculation comes after a report on CNBC earlier this month that said Toys ‘R’ Us has hired law firm Kirkland & Ellis to consider restructuring options. Toys ‘R’ Us was not immediately available for comment. Kirkland & Ellis had no comment.

But investors clearly are nervous. Shares of Hasbro(HAS) dipped more than 1%. Mattel and Jakks Pacific tumbled 6%. Mattel(MAT) is now trading at its lowest level since the spring of 2009, while Jakks Pacific(JAKK) is at an all-time low.

Hasbro, Mattel and Jakks Pacific each generated nearly 10% of their overall sales from Toys ‘R’ Us in their most recent fiscal years.

Toys ‘R’ Us, like the rest of the retail industry, has been hurt by the dominance of Amazon(AMZN, Tech30) as people increasingly buy toys online. Jeff Bezos might as well be Santa Claus for my two young boys.

Walmart(WMT) and Target(TGT) have both emerged as big players in the toy market too.

Toys ‘R’ Us was acquired for $6.6 billion in 2005 by a group that included affiliates of private equity firms KKR(KKR) and Bain Capital, as well as the real estate investment trust Vornado(VNO).

But it has continued to struggle since then. Toys ‘R’ Us reported a more than 4% drop in same-store sales in the first quarter and a bigger loss than a year ago. The company will report its second quarter results on September 26.

Toys ‘R’ Us closed its gigantic store in New York’s Time Square at the end of 2015. It recently opened a temporary (and smaller) store for the holidays in another part of the popular Manhattan tourist spot though.

Still, the troubles facing Toys ‘R’ Us aren’t just about competition from Amazon and Walmart. A lackluster summer at the box office might be hurting the entire toy industry — not to mention movie theater chains AMC(AMC), Regal(RGC), Cinemark(CNK) and IMAX(IMAX).

The big toy companies increasingly rely on Hollywood, as hit movies (particularly for kids) drive sales of licensed toys. Hasbro has held up better than its competition thanks to the success of Disney films, which include the Pixar, Marvel and Lucasfilm studios.

Outside of Disney(DIS), the rest of the box office was weak. There are hopes for a fall rebound, thanks largely to the upcoming “Star Wars Episode VII: The Last Jedi.” However, that would largely benefit Hasbro more than the rest of the industry.

September is off to a hot start too. But that’s because of the success of the movie based on Stephen King’s “IT.” Good luck selling toys based on Pennywise the clown.

Toy companies also have to deal with the fact that many kids are increasingly playing games on consoles, phones and tablets and not with old-school action figures, dolls and other toys.

Even Lego has been struggling lately. And Mattel, acknowledging the threat from tech, recently hired a new CEO who used to be an executive at Google(GOOGL, Tech30).

Electronic Arts(EA, Tech30) has soared more than 50% in 2017. Nintendo(NTDOF) has surged 70%. Activision Blizzard(ATVI, Tech30) is up more than 75%. And Take-Two Interactive(TTWO) has doubled.

Toys ‘R’ Us and traditional toymakers may just not be able to compete for the short attention spans of 7 year-olds addicted to playing Geometry Dash on the iPad. I can tell you that from firsthand experience.

 

Published at Mon, 18 Sep 2017 18:36:27 +0000

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Top And Bottom Performing Stocks For Week #38

 

Top And Bottom Performing Stocks For Week #38

by THE MOLE

It is Sunday afternoon and that means we get to review the performance of last week’s historical top and bottom stock symbols in the S&P 500. As you may recall these symbols are the result of parsing a database containing over 50 years worth of statistical performance data. The idea is to extract the prospective top ten winners and losers of the coming week purely based on historical statistics. The result is then sorted by liquidity and any symbol that is scheduled to report earnings or pass ex-dividend is being excluded.

How To Trade Along

Although being no guarantor of success, the long and short candidates posted here each week are intended to perform along their respective historical bias. One way of trading along would be to simply create a small one-week portfolio by buying the long candidates and selling the short candidates on Monday morning shortly after the open. There are no official stops or targets and all transactions are reversed Friday afternoon right before the bell.

Results For Week # 37

The way we keep track is to record the respective relative performance of each week’s long and short portfolio in percentage points. For example CSCO rose by 3.05%, which is considered its relative performance and thus added to the long profits total. BMY however lost 0.22% and is therefore deducted from the total. It works inversely on the short side and since PFE rose by 3.7% it’s considered a loss on the short side and thus deducted from the short profits total. EFX dropped 24.55% and has been added as a winner.

Without further ado, here are the results for week #37 ending 9/15/2017:

Long Profits: T=4.24, CSCO=3.05, MSFT=1.8, VZ=3.8, KEY=7.82, SBUX=2.21, QCOM=5.14, TGT=4.7, BMY=-0.22, BBT=0.39

Long Profits Total: 32.93

Short Profits: PFE=-3.7, EFX=24.55, PPL=0.61, PCG=0.51, WEC=0.86, SHW=1.04, SNA=0.23

Short Profits Total: 24.1

Combined Profits Total: 57.03

Top 4 performing stocks for week #38

It’s expected to be a bearish week for the S&P 500, so we only found 4 long symbols for this week. If you want to see more comprehensive statistics on a particular symbol then simply click on either the chart or the symbol name which will launch its Evil Speculator Statistics Report.

 

Published at Sun, 17 Sep 2017 21:03:04 +0000

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Tesla Stock Breaks Out Toward All-Time Highs

 

Tesla Stock Breaks Out Toward All-Time Highs

By Justin Kuepper | September 15, 2017 — 8:20 AM EDT

Tesla, Inc. (TSLA​) shares rose more than 3% on Thursday, breaking out from near-term resistance levels at around $370.00. The move comes after Tesla CEO Elon Musk indicated that the company would unveil its semi-truck on Oct. 26. At the same time, The American Trucking Association expressed interest in including trucks in any legislation passed on autonomous vehicle development in a move that could signal the high level of demand.

Morgan Stanley analysts believe that the trucking sector – including companies like Schneider National, Inc. (SNDR​) and Ryder System, Inc. (R) – could benefit from electric vehicles and autonomous driving capabilities. In addition, the analysts believe that Tesla could start taking orders immediately after the event with a $5,000 deposit, which could lead to near-term revenue and an early sign of the level of demand in the market for such products. (See also: Tesla Could Be Biggest Catalyst in Trucking in Decades: Morgan Stanley.)

Technical chart showing the performance of Tesla, Inc. (TSLA) stock

From a technical standpoint, the stock broke out from trendline resistance at $370.00 to R1 resistance at $380.19. The relative strength index (RSI) has moved closer to overbought territory at 65.04, but the moving average convergence divergence (MACD) experienced a bullish crossover that could signal the start of an uptrend. Traders should maintain a bullish bias on the stock given the recent strength over the past few sessions.

Traders should watch for a breakout from R1 resistance levels at $380.19 to retest prior all-time highs at around $386.99. With RSI levels approaching overbought levels, traders could see some consolidation either before or after the breakout, but the MACD indicator suggests that the stock will continue to move higher. Traders will also be keeping an eye on the company’s next earnings report, which is due out on Oct. 25, 2017. (For more, see: Tesla to Unveil ‘Unreal’ Semi Truck on October 26.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

 

Published at Fri, 15 Sep 2017 12:20:00 +0000

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Nordstrom buyout; Apple aftermath; Toshiba’s sale

 

Nordstrom buyout; Apple aftermath; Toshiba’s sale

  @AlannaPetroff

premarket stocks trading futures
Click chart for in-depth premarket data.

1. Nordstrom sale: Shares in Nordstrom(JWN) were surging by about 10% premarket following reports that the company could soon be taken private.

CNBC, citing unnamed sources, said that private equity firm Leonard Green & Partners could partner with the Nordstrom family on a buyout.

The Nordstrom family owns more than 30% of the retailer’s shares. Leonard Green & Partners would reportedly provide roughly $1 billion in equity to help finance the deal.

This comes as the retailer experiments with smaller stores and specialized customer services in an effort to compete with online outlets, including Amazon(AMZN, Tech30).

2. Apple aftermath: Investors will continue to focus on Apple(AAPL, Tech30) after the company unveiled its new iPhone X, iPhone 8 and iPhone 8 Plus on Tuesday.

Shares dipped a tad following the announcement. Futures suggested the stock could drop further when trading starts Wednesday.

The big question: Will consumers pay nearly $1,000 for a phone?

3. Toshiba deals with Bain: Beleaguered tech giant Toshiba(TOSYY) has signed a memorandum of understanding to negotiate a deal to sell its business unit — Toshiba Memory Corporation — to Bain Capital.

Bain Capital is working with a larger consortium on the deal.

Toshiba is trying to recover from billions of dollars in losses stemming from the collapse of Westinghouse Electric, its now bankrupt U.S. nuclear unit.

Before the Bell newsletter: Key market news. In your inbox. Subscribe now!

4. Global market overview: Global stock markets are looking soft following two days of strong gains.

U.S. stock futures were dipping a bit, alongside many European markets.

Asian markets ended the day with mixed results.

The Dow Jones industrial average, S&P 500 and Nasdaq all gained 0.3% on Tuesday.

5. Earnings and economics:Cracker Barrel(CBRL) will announce earnings before the open on Wednesday.

New data shows the U.K. unemployment rate dropped to 4.3% in the second quarter, its lowest level in more than 40 years.

It’s not all good news: Prices are rising at a faster rate than British wages, meaning workers are feeling poorer.

Download CNN MoneyStream for up-to-the-minute market data and news

6. Coming this week:

Thursday — Bank of England rate decision
Friday — Samsung(SSNLF) releases Galaxy Note 8

 

Published at Wed, 13 Sep 2017 09:25:12 +0000

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Sell GE, Earnings Won’t Matter: Deutsche Bank

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Sell GE, Earnings Won’t Matter: Deutsche Bank

By Shoshanna Delventhal | September 12, 2017 — 10:09 PM EDT

As Boston-based multinational industrial conglomerate General Electric Co. (GE) struggles to revamp its business, instating a new CEO after facing pressure from activist investors who lost patience with its turnaround, one team of analysts on the Street has joined the growing number of bears now doubting whether the company can even manage to maintain its praised dividend payout. (See also: The Future of General Electric: The Red or Blue Pill?)

Analysts at Deutsche Bank issued a downbeat research note on GE this week, cutting their price target from $26 to a “Street low” of $21, well ahead of the company’s earnings, slated for October. Deutsche Bank’s John Inch wrote to clients that “2017 results would no longer appear to matter as much.” Given the new CEO’s pending review, including the “assumed earnings reset lower coupled with an updated strategic playbook,” the analyst expects the next two quarters to have less share price significance, given that the expected results of the upcoming review are “likely to dominate investor sentiment.”

Diminished Dividends?

As the review is scheduled after the upcoming earnings report in November, Deutsche Bank anticipates “substantial subsequent charges and potential portfolio re-classifications” that will overshadow fourth-quarter results and make them difficult to compare and analyze. As a result, although it may seem that many are focused on anticipating the absolute level of the 2018 EPS reset, the investment bank expects the outlook, and “investor conviction” to be the main drivers of GE’s future share price.

“For a variety of reasons, including GE’s large size and complexity hurdles, a scenario of rapid growth in the foreseeable future seems off the table,” concluded Inch, who also doubts that GE’s dividend will remain intact. “Cash pressures, challenged business outlooks and substantial pension underfunding could still result in a dividend cut,” wrote the analyst. “While GE could continue to sell off businesses and other assets to raise capital, eventually this source of funding should run out.”

Trading up 0.2% on Tuesday afternoon at $23.76, GE stock reflects an approximate 25% decline year-to-date (YTD), versus the SP 500’s 11.4% gain over the same period. (See also: GE Tanks, Fundamentals ‘Worse Than We Think’: JPM.)

 

Published at Wed, 13 Sep 2017 02:09:00 +0000

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Whole Foods Foot Traffic Up 25% After Amazon Deal

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Whole Foods Foot Traffic Up 25% After Amazon Deal

By Donna Fuscaldo | September 11, 2017 — 7:13 PM EDT

Amazon.com Inc.’s (AMZN) acquisition of Whole Foods Market has already resulted in an increase in foot traffic to the tune of a 25% rise since closing the deal on Aug. 24.

Foursquare Labs, the location intelligence technology company, complied location data during the first two days after Amazon became the owner of the organic food supermarket chain and found that price cuts lured more shoppers to the stores. The data, which is analyzed anonymously, was compared to the same time frame a week earlier, reported Bloomberg. The 25% uptick is good news for the e-commerce giant, which is trying to transform how we shop in physical stores. While a portion of that increased foot traffic could be more about curiosity than eating healthier, the lower prices are also likely helping. (See also: How Amazon Benefits From Lower Prices at Whole Foods.)

Price and Value

When the Seattle-based online retailing giant announced the closing of the deal, it revealed plans to slash prices for popular products at Whole Foods. It is also planning to expand its Amazon Prime rewards program to Whole Foods customers and is establishing lockers for e-commerce deliveries at the retail chain. Prices for popular Whole Foods products, such as organic salmon, baby kale and bananas, were lowered on day one and expectations are high that more of the same is coming. According to Bloomberg, price cuts were as high as 43% on a range of items on the first day under Amazon.

“We are determined to make healthy and organic food affordable for everyone,” said Jeff Wilkes, CEO of worldwide consumer at Amazon, in statement at the time. A strategy consultant who worked at Amazon earlier said that prices for popular products could go down by as much as 25%. (See also: Amazon Announces Lower Prices for Whole Foods Products.)

An uptick in foot traffic this early on is seen as a confirmation that Amazon can successfully operate physical stores. Foursquare found foot traffic was up 35% in Chicago, reported Bloomberg. What remains to be seen, however, is if shoppers will continue to purchase organic food from the chain. “A lot of people went to see what they could see,” said Jennifer Bartashus, an analyst at Bloomberg Intelligence, in the report. “The question is if they think the prices are low enough to change their shopping behavior—it takes a very long time to change a consumer’s perception of prices and value.”

 

Published at Mon, 11 Sep 2017 23:13:00 +0000

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Disney CEO Talks M&A, and Snap Shares Surge

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Disney CEO Talks M&A, and Snap Shares Surge

By Donna Fuscaldo | Updated September 10, 2017 — 2:04 PM EDT

The Walt Disney Co. (DIS) is talking mergers and acquisitions, which had the effect of boosting shares of Snap Inc. (SNAP), the beleaguered social media company.

During the Bank of America Merrill Lynch Media Communications Conference in New York this week, Disney Chief Executive Bob Iger told investors and analysts that its recent M&A activity will continue as the company aims to enhance its digital presence and take on the competition, which increasingly includes the likes of Facebook Inc. (FB) and Alphabet Inc.’s (GOOG) Google. Those comments sparked speculation with some investors betting one of the targets will be the maker of the disappearing-message app Snapchat, reported Markets Insider. Shares of Snap ended Thursday’s trading session up 10% and was recently trading an additional 2.4% higher to $15.52. The stock is still under its initial public offering price of $17 a share from back in March. (See also: Snap Founders Lose Net Worth on Stock Decline.)

For months now, some on Wall Street have been calling on the Burbank, Calif.-based entertainment company to engage in some game-changing buys. In May, longtime Disney analyst Richard Greenfield argued management at the company should be using its strong balance sheet and free cash flow to “strategically reposition” it for future growth. In order to do that, he thinks the company should stop repurchasing shares and instead use the money for acquisitions. “Buying back stock appears to be a very short-term decision that shows management’s lack of urgency to reposition Disney,” wrote BTIG media and tech analyst Greenfield at the time. (See also: Disney Should Buy Twitter or Spotify: BTIG)

Wither Twitter?

“Given the strength of Disney’s earnings and free cash flow, especially if buybacks​ stopped, we believe they have tremendous firepower to make a series of acquisitions over the coming 12-24 months.” Back then, the analyst pointed to micro blogging website operator Twitter Inc. (TWTR) as a target. Snap and Twitter share similar characteristics that could make the latter attractive to Disney. Both have stocks that are under pressure, with Snap at historic lows, and while they aren’t making money, they have huge user bases that Disney can tap to offer them a suite of products, services and content.

And it’s not like others haven’t been interested in the maker of Snapchat. In August, Business Insider reported that Google bid at least $30 billion in 2016 for the company. The offer, which was rejected by Snap, remained on the table after it went public. It’s not clear if Google is still interested in acquiring the company. Facebook also made an offer for Snap a few years ago, and that, too, was rejected. (See also: Snap Turned Down a $30B Offer From Google: Report.)

 

Published at Sun, 10 Sep 2017 18:04:00 +0000

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Stocks Move Lower Amid Growing Risks to the Rally

Stocks Move Lower Amid Growing Risks to the Rally

By Justin Kuepper | September 8, 2017 — 6:18 PM EDT

The major U.S. indexes moved lower over the shortened trading week. On Sunday, North Korea conducted a nuclear test with an explosion estimated to be greater than 140 kilotons – or 10 times stronger than anything it has tested before. By Friday, investors had shifted their attention to a massive cyberattack exposing the personal information of 143 million people, as well as Hurricane Irma, which appears on track to hit Florida’s south coast as a Category 4 storm.

International markets were mixed over the past week. Japan’s Nikkei 225 fell 2.12%; Germany’s DAX 30 rose 1.33%; and Britain’s FTSE 100 fell 0.81%. In Europe, the European Central Bank (ECB) indicated that it is considering how to wind down its easy money policies, with details set to emerge in October’s meeting. In Asia, Chinese exports continue to experience a slowdown, but its domestic economy has been resilient. (See also: China Is Slowing: Here Are the Investing Implications.)

The SPDR S&P 500 ETF (ARCA: SPY) fell 0.51% during the shortened trading week, making it the best performing major index. After dragging along lower trendlineresistance in August, the index rebounded past its pivot point at $246.58 in recent sessions. Traders should watch for an ongoing move higher to R1 resistance at $250.32 or a move lower to retest trendline support at around $244.00. Looking at technical indicators, the relative strength index (RSI) moved back to neutral levels of 53.96, while the moving average convergence divergence (MACD) continues to trend higher. (For more, see: The S&P 500 Is 300 Days Above Its 200-Day Moving Average.)

Technical chart showing the performance of the SPDR S&P 500 ETF (SPY)

The SPDR Dow Jones Industrial Average ETF (ARCA: DIA) fell 0.76% over the shortened trading week. After briefly rallying to the middle of its price channel, the index fell back to trendline support at around $218.00 this week. Traders should watch for a rebound to R1 resistance at $221.96 or a breakdown from trendline support to S2 support at $213.39. Looking at technical indicators, the RSI appears neutral at 51.33, and the MACD remains in a bearish downtrend.

Technical chart showing the performance of the SPDR Dow Jones Industrial Average ETF (DIA)

The PowerShares QQQ Trust (NASDAQ: QQQ) fell 0.93% over the shortened trading week. After breaking out toward upper trendline resistance late last month, the index moved lower to pivot point support levels at $144.21. Traders should watch for a rebound to upper trendline and R1 resistance at $148.21 or a breakdown to the 50-day moving average at $142.51 or lower trendline support just below that level. Looking at technical indicators, the RSI appears neutral at 52.79, while the MACD remains in a tenuous uptrend. (See also: 3 Reasons Apple Will Keep Beating the Market: Bernstein.)

Technical chart showing the performance of the PowerShares QQQ Trust (QQQ)

The iShares Russell 2000 Index ETF (ARCA: IWM) fell 1.23% over the shortened trading week, making it the worst performing major index. After briefly breaking out from the 50-day moving average earlier this month, the index fell to the pivot point at $138.68. Traders should watch for a breakout toward R1 resistance at $143.25 or a breakdown to the 200-day moving average at $137.02. Looking at technical indicators, the RSI appears neutral at 53.36, while the MACD remains in a bullish uptrend after hitting lows in late August.

Technical chart showing the performance of the iShares Russell 2000 Index ETF (IWM)

The Bottom Line

The major indexes moved lower over the past week, which helped bring RSI readings back to neutral levels. Next week, traders will be closely watching several economic indicators, including jobless claims and consumer price index data on Sept. 14 as well as retail sales and consumer sentiment data on Sept. 15. Traders will also be keeping a close eye on the impact of Hurricane Irma and any new developments in North Korea. (For additional reading, check out: 9 Stocks to Own for a U.S. Recession.)

Note: Charts courtesy of StockCharts.com. As of the time of writing, the author had no holdings in the securities mentioned.

 

Published at Fri, 08 Sep 2017 22:18:00 +0000

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