The only story this morning remains Bernanke's after hours speech, which solidly trumped the FOMC minutes in market impact, and which, in addition to ramping US equity futures to just about new all time highs, sent the EURUSD soaring by almost the same amount (+300 pips) as the actual QE1 announcement on March 18, 2009. Such is the power of verbal currency warfare, when Bernanke hasn't acutally done anything and merely hinted the Fed is as confused as ever about what to do. Of course, as Commerzbank notes this morning, the U.S. economy would have to lose a lot of momentum for the Fed to cancel tapering, and the central bank would only expand the purchase program if the economy collapses, but none of that matters to the "wealth effect" for the 1% where economic destruction simply means more wealth.
"We don’t believe the Chairman’s intentions have changed. Regardless, the Chairman’s credibility is once again damaged. If the Dollar breakdown continues, it will be a sign that the market believes the Chairman has again lost control over policy. The asset clearly in the best position in such an environment is Gold. After such a notable correction in the past 9 months, the precious metal once again becomes a very attractive global asset if monetary policy in the largest economy of the world spins out of control." - Mike O'Rourke
On Monday it was Alcoa, now it is Yum! Brands' turn. The food company, best known for its KFC mystery meat, and over-reliance on a suddenly careening China just reported results which were mixed. Revenue of $2.904 billion was less than the expected $2.92 billion and was 8% lower than the $3.2 billion reported a year ago. Operating profit excluding refranchising gains and losses was $358MM, below expectations of $375MM, leading to a EBIT margin of 12.5% also substantially less than the 14.5% reported a year ago. In short, worldwide operating profit crashed 20% including a 63% drop in China. But thanks to various below the line adjustments, including a tax rate of 22.1% or lower compared to the 23.9% a year ago, the company's EPS of $0.56 beat expectations of $0.54.
In a confirmation that the S&P is starting to get worried about the drones surrounding the McGraw Hill building resulting from the ongoing litigation with Eric Holder's Department of Injustice, not to mention a reminder that US downgrades always happen after hours, while upgrades must hit before the market opens, Standard & Poors just upgraded the Standard & Poors 500 the US outlook from Negative to Stable. On what "receding fiscal risks" did the S&P raise its assessment of the US - the fact that the US is now at its debt limit, that there is no imminent resolution to the credit issue, or the 105% and rising debt/GDP - read on to find out. And of course, the countdown until the S&P wristslap settlement with the DOJ is announced begins now, as does the upgrade watch by Buffett's controlled Moody's of the US to AAAA++++.
Several moments ago, TSLA (hardly) surprised the world when it filed an open-ended S-3 (Shelf) statement, as many had expected it was only a matter of time before the company used the recent surge in its stock price to sell shares. Then, a few moments later, TSLA once again (hardly) surprised the world when it announced a joint $450 million convertible bond and 2.7 million share common stock offering. And because a dilution is not a dilution if the founder is participating in the common offering (buying his own equity at an unprecedented price to "anchor" it as a benchmark- sure why not - after all he is making much on all the other equity he has in the firm that he is not buying, as a result), the stock is trading up after hours.
On the surface, Herbalife's numbers were great. The company reported EPS of $1.27 on expectations of a $1.06 print. The company also boosted its EPS forecast for the full year from a range of $4.45-$4.60 to $4.60-$4.80, putting the Wall Street forecast of $4.66 plainly in the achievable zone. Finally, HLF reported $137MM in cash from operations (compared to $120MM a year ago), which net of CapEx of $24.8MM means Free Cash Flow by that definition of $112.7MM, above the $96MM reported a year earlier. And yet, not even all the cash generated from operations was enough for HLF to fund just its stock buyback in the quarter which amounted to $164.5 million resulting in the Diluted share count plunging from 122.4 million to 108 million. So far so good. There is, however, a "yes but...."
One look at NFLX in the afterhours and one can see the latest and greatest short squeeze in action (courtesy of 14% of the float being short) in a stock which is no stranger to epic moves up as shorts scramble to cover, and just as epic moves to the downside when reality peeks through the hopium clouds every now and then. What is the apparent catalyst? It's not revenue: the firm made $1.02 billion in sales in Q1, precisely as much as Wall Street expected. What the squeeze appears to be focused on instead, is what took the stock into the stratosphere the last time around the management realized it needed to generate some cash as well: rising subscribers, or specifically an increase in total members as of March 31 to 36.3 million, up by 3.05 million in 3 months, and more than some had anticipated. However as there is no free lunch, what is the bottom cash flow line associated with this once again rapid customer expansion? For that we go straight to the company's own definition of Non-GAAP free cash flow which starts with operating cash flow, removes cash associated with DVD content library acquisitions, removes CapEx and nets out other assets. The result...
Curious why the USDJPY is in freefall after hours? Thank Jack Lew, and the after the close release of the semi-annual "Report to Congress on International Economic and Exchange Rate Policies." Traditionally the place where many have looked to see if the US would declare China a currency manipulator (which will never happen for obvious reasons), this time there was a big Easter egg lying in wait for those who did a word search for "competitive devaluation" - namely that it was located in the section discussing Japan.
Think the great BitCoin drama is over? After plunging by over 60% intraday, touching $100 from an all time high of $265 earlier, BitCoin was just getting started, posting a just as epic rebound to $200 in mere hours... before tumbling once more to $125... before rebounding again to $180... before sliding to $140... and so on. As the vomit-inducing sequence above hints, merely following every twist and turn of the real time tragicomedy that is the minute chart of BTC is a full-time job. And with the bulk of assorted BTC price charts DDoSed into oblivion, or merely down due to record traffic, the only remaining real-time chart may be the following from Clark Moody: we suggest using 1 Minute resolution. Perhaps what is most fascinating, is that unlike regular stock, FX or commodity charts which are largely dominated by robots, algos and other electronic traders, the trading in BTC is purely carbon-form based. So for those who enjoy some seriously hypnotic after hours undulations, this chart's for you.
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"