We started off the overnight session with various pseudo-pundits doing the count-up to a 100 in the USDJPY. It was only logical then that moments before the 4 year old threshold was breached, the Yen resumed strengthening following comments from various Japanese politicians who made it appear that the recent weakening in the currency may suffice for now. This culminated moments ago when Koichi Hamada, a former Yale professor and adviser to Japanese Prime Minister Shinzo Abe, told Reuters that level of 100 yen to dollar is suitable level from the perspective of competitiveness. The result has been a nearly 100 pip move lower in the USDJPY which puts into question the sustainability of the recent equity rally now that the primary carry funding pair has resumed its downward trajectory. Another result is that the rally in the Nikkei225 was finally halted, closing trading unchanged, and bringing cumulative gains since the morning before the BoJ’s announcement last Thursday to 8.9%. Over that the same time period, the TOPIX Real Estate Index is up an incredible 24%, no doubt reflecting the prospect of renewed buying of REIT stocks from the BoJ’s asset purchasing program.
So much for the "transformational" CEO, poached from AAPL and credited with creating the AAPL retail mystique. As per CNBC, he now effectively "out":
J.C. PENNEY TO OUST RON JOHNSON AS CEO: CNBC
J.C. PENNEY'S CEO JOHNSON `IS OUT': CNBC
At least he lasted just a bit longer than the former JCP president Mike Francis, who came, saw, collected $10 million, and quit nine months later.
- Cyprus Salvaged After EU Deal Shuts Bank to Get $13B (BBG)
- Last-minute Cyprus deal to close bank, force losses (Reuters)
- Anxious, angry Cypriots face uncertain future (Reuters)
- Spain Brings the Pain to Bank Investors (WSJ)
- First Switzerland now... U.S. Seeks Answers in Liechtenstein on Tax Cheats (BBG)
- Rebel Free Syrian Army founder loses leg in Syria blast (Reuters)
- European Stocks Rise on Cyprus Deal as Italian Bonds, Crude Gain (BBG)
- Michael Dell Likely to Sweeten Buyout Bid to Save Legacy (BBG)
- Bankers’ pay premium is narrowing (FT)
- Surgery Restoring Penis After Prostate Cancer Increasing (BBG)
- Silent or supportive, conservatives give gay marriage momentum (Reuters)
Bernanke gave more testimony on Wednesday emphasizing and defending all Fed policies. He successfully parried all questions about QE and ZIRP risks and made no mention of any policy exit dates. Bulls translation, the printing press will be on “auto” to infinity.
Interesting testimony tidbits were:
“Fed could go some time without sending profits to Treasury,” (Fed is allowed to be a deadbeat).
“Savers will benefit with economic recovery; savers won't get strong returns in a weak economy,” (So not in my lifetime?).
At what point does Bill Ackman throw in the towel and admit that his latest windmill crusade is unsalvageable? Perhaps somewhere around now:
- Q4 EPS: ($1.95), Exp. ($0.19) - No, there was no decimal comma error here.
- Q4 Revenues: $3.884 billion, Exp. $4.09 billion. This includes a "free" 53rd week in the year which generated $163 million. Ex this, Q4 revenue was $3.721 billion.
- Q4 Comp store sales excluding the 53rd week were down 31.7%
- Q4 Interent sales down 34.4% - must be the store layout's fault
- Q4 Gross margin: 23.8%, Exp. 30.9%; (30.2% last); "Gross margin was impacted by lower than expected sales and a higher level of clearance merchandise sales related to inventory reductions in 2012"
- 2012 cash burn was a gargantuan $906 million; this compares to cash flow of +$23 million in 2011.
And so on. Stock should be down much more, but someone keeps on buying it after hours to telegraph that this epic disaster was "expected"
Remember when Bill Ackman told Icahn on CNBC he should tender for the company (to a less than favorable reply)? Well, Icahn may have done just that: moments ago the belligerent billionaire just reported a 12.98% stake in Herbalife, adding that he intends "to have discussions with management of the Issuer regarding the business and strategic alternatives to enhance shareholder value, such as a recapitalization or a going-private transaction." Needless to say, the stock soars, and it remains to be seen if the epic short squeeze that we predicted, and that Icahn confirmed on TV could happen if there is not enough float to satisfy all the shorts, will be next. Volkswagen anyone?
Update: it appears Carl Icahn agrees with our assessment: CARL ICAHN SAYS CHESAPEAKE'S COLLECTION OF ASSETS "ARE THE BEST PORTFOLIO OF ENERGY ASSETS IN THE COUNTRY"
Back in May 2012, when Reuters' all out aggressive campaign against Chesapeake Energy was in full swing and the stock was trading around $14 per share but before Icahn and Loeb were publicly involved, we predicted that contrary to the endless balance sheet bashing there was, in fact, much upside to CHK. We said that the argument rests on one simple fact: its asset base, which ignoring the firm's liabilities - as in a ZIRP environment, even CHK could easily refi its debt at very agreeable terms - and the CEO's lousy industry reputation implied a far higher stock price for the company. To wit: "the company has lots of good assets, as well as quite a few legacy liabilities, combined with an industry environment that is as bad as it has ever been. And sure enough, in betting that the environment might actually improve for a change, there are quite a few big firms which may be happy to onboard the assets and the liabilities, knowing they wouldn't impair the right side of their balance sheet, while acquiring some good real estate and substantial reserves on the left, at a valuation that is the cheapest in the industry. Because in finance, once central planning is (finally) stripped away, valuation is all that matters." And even before that, a far more immediate catalyst we predicted would be a simple succession event "which eventually will culminate with the long overdue termination of the company's head." Or, said simply, the sacking or resignation of the disgraced CEO would unlock material upside value. Moments ago just this happened, as the company just announced a "succession plan" the direct result of which is that the CEO is out as of April 1. The upside value in question: just about 10% as the stock is currently soaring in the after hours session.
The most cartoonish stock of all time just came out with results that can only be characterized as ugly. To wit:
- Q4 revenue of $21.27 billion missed expectations of $22.23 billion
- Q1 EPS of $0.21 missed expectations of $0.27;
- The firm guided top-line lower, seeing Q1 sales of $15-$16 billion, below the estimate of $16.5 billion
- The firm guided operating income much lower, seeing Q1 op income of ($285)-$65 Million on expectations of $261.4 MM
- The firm said the its physical books sales had the lowest growth in 17 years
- Total employees grew by 7,000 in the quarter and 32,200 Y/Y to a record 88,400
- Worldwide net sales Y/Y growth was the slowest in years at 23%, down from 30% in Q3 and 34% a year ago
- And, last and certainly least, LTM Net Income is now officially negative, or ($49) meaning as of this moment the firm with the idiotically high PE has an even more idiotic N/M PE.
... And the stock is soaring in the after hours. Thank you DE Shaw.
- U.S. Wants Criminal Charges for RBS (WSJ)
- Bernanke Seen Buying $1.14 Trillion in Assets in 2014 (BBG)
- Irish banks at mercy of international paymasters (Reuters)
- Do badly, and we will let you do even worse: Rehn Signals EU May Ease Spain Budget Goal in Austerity Retreat (BBG)
- Too Soon to Celebrate for Europe's Banks (WSJ)
- Army says political strife taking Egypt to brink (Reuters)
- Media Firms Probed on Data Release (WSJ) - No Criminal Charges Seen
- Japan’s Government Proposes First Spending Cut in 7 Years (BBG)
- Nazi Goebbels’ Step-Grandchildren Are Hidden Billionaires (BBG)
- Goldman seeks to reduce China exposure (FT)
- More than 70% of Chinese airports generate losses (People's Daily)
Updated for the summary of MSFT, SBUX and T earnings.
Amid the deafening screams of hundreds of hedge fund managers looking for any hedging port in an AAPL storm, stock indices (expect the Nasdaq) surged to new highs from the moment the US day-session began until POMO was complete and European markets closed. Volume and block size was large as we took out S&P 500 highs up to 1500 and it appeared we ran out of the short-term proverbial great fool. In general, risk-assets and stocks were well correlated though the big disconnect today was a rising VIX. HY Credit did not play along with the exuberance early on either - as it seemed relatively clear that any and every trick in the book was being used to enable more out of the AAPL boat as we ramped up to VWAP. Once Europe had closed, AAPL slid, stocks slid (with S&P 500 dropping its most of 2013 so far), and risk-assets in general slid lower. JPY weakness and EUR strength helped support risk but Treasury yields falling back and a drop in commodities overall (Gold -0.9% on the week) had the opposite effect. The typical late-day ramp failed despite the best efforts of vol compression as stocks closed almost unch, at VWAP, in line with risk-assets (ahead of tomorrow's LTRO news). AAPL at lows as ramp failed...
While the main topic of conversation overnight was the Apple implosion after earnings (which was mercifully spared inbound calls from repo desk margin clerks who had all gone home by the time the stock hit $460), there was some macro data to muddle up the picture, which, like everything else in this baffle with BS new normal came in "good/bad cop" pairs. In early trading, all eyes were focused on Japan, whose trade and especially exports imploded when the country posted a record trade gap of 6.93 trillion yen ($78.27 billion) in 2012 and the seventh consecutive monthly drop in exports which showed that improved sentiment has yet to translate into hard economic data. Finance ministry data on Thursday showed that exports fell 5.8 percent in the year to December, more than economists' consensus forecast of a 4.2 percent drop. Trade with China was hit particularly hard following the ongoing island fiasco, which means that all the ongoing Yen destruction has largely been for nothing as organic growth markets simply shut off Japan. This ugly news was marginally offset by a tiny beat in the HSBC China manufacturing PMI which came slighly above consensus at 51.9 vs exp. 51.7, the highest print in 24 months, but as with everything else coming out of China one really shouldn't believe this or any other number in a country that will not allow even one corporate default to prevent the credit-driven illusion from popping.
A Quick Listing of My Tweets After Apple's Predicted (4th) Miss & Indisputable Signs of #MarginCompressionSubmitted by Reggie Middleton on 01/23/2013 18:10 -0500
I'll let the numbers and facts speak for themselves as the #FanBois grope for something to retort... It's "knowledge how", not "knowledge that"!!!
AAPL Meets EPS, Misses Revenues, Fails To Impress With In Line iPhone Sales, Total Cash Grows To $137.1 BillionSubmitted by Tyler Durden on 01/23/2013 17:05 -0500
The most anticipated earnings release of the quarter has come and it has been a dud, at least judging by the market's expectations and its response. Because while EPS beats just barely (a far cry from the epic EPS beats of Steve Jobs days) coming at $13.81 on expectations of a $13.53 print, revenue outright missed, coming at $54.5 billion on expectations of a $54.9 billion Q1 2013 result. Furthermore, fears about profit margins were proven correct, with total gross profit coming in at $21.1 billion, which alas was 38.6% of revenue, well below the vaunted 40% threshold (as a reference margin was 44.7% a year ago, and 40.0% a quarter ago). And finally, the breakdown by components in the iPhone 5 release quarter was just, well, meh.
One look at the headline numbers, and of course the short interest of Netflix, and one can see why the stock is being squeezed by nearly 30% after hours:
- Q4 Revenue: $945 MM, Exp. $934 MM
- Q4 EPS of $0.13, Exp. $(0.13)
- Q4 domestic contribution margin 18.5%, up from 16.4% in Q3 and 10.9$ in Q4 2011
- Total domestic subscribers 27.15 MM, paying subs: 25.47 MM
- Forecasts 28.5MM-29.2MM domestic subscribers in Q1
- Sees Q1 Revenues of $1.004 billion to $1.031 billion
- Domestic DVD subs dropped from 8.61 to 8.22 while generating $254MM in revenue and $128MM in profit
In fact, all is either just a little bit better or much better if one looks at the projection set... until one looks at the actual Cash generated by the Business. Behold the Free Cash Flow as reported by the company... no, not AMZN, although it may well be its small cousin.
The algos have gone nuts after hours, but here are the numbers:
- GOOGLE 4Q REV. EX TAC $11.34B, Exp. $12.36
- GOOGLE 4Q AVERAGE COST-PER-CLICK FELL 6% VS YEAR AGO
- GOOGLE 4Q EPS EX ITEMS $10.65, EST. $10.50