Tiffany Stock Tumbles After Revenue And Profit Drops, EPS Slide 16%; Forecast Cut; Strong Dollar BlamedSubmitted by Tyler Durden on 08/27/2015 07:58 -0400
Even the rich are starting to feel the pinch, at least according to the favorite jeweler of the upwardly mobile middle-to-upper class (especially in China and Japan), Tiffany & Co., which earlier today reported Q2 EPS of $0.86, below the $0.91 expected, with GAAP EPS of $0.81 some 16% below the $0.96 record last year. Like other retailers, TIF was quick to blame the surging dollar (which isn't going anywhere if the Fed indeed proceeds with a rate hike), blaming it for lowering the value of the Tiffany’s sales overseas, where the company gets most of its revenue. Currency fluctuations also have kept tourists from making purchases at U.S. stores, dealing a second blow to revenue.
The Fed has basically borrowed from the future to improve today. The intention of Fed policy over the past 30 years has been to self-correct business cycles into a ‘steadier state’ by easing interest rates into weakness and hiking them into strength. Unfortunately, there is political-asymmetry between easing and hiking which has resulted in the stair-stepping of official interest rates down to the zero lower bound. Monetary policy has reached the practical limits of what it can do. Thus, the multi-decade credit era is coming to an end... Bad companies should be allowed to fail. Creative destruction is beneficial in the long run.
And it's far from over.
The Fed’s zero interest rate policy has provided a subsidy to investors for the past 7 years. The lure of easy profits from cheap money was wildly attractive and readily accepted by investors. The Fed “put” gave investors great confidence that they could outperform their exceptionally low cost of capital. These implicit promises by central banks encouraged trillions of dollars into ‘carry trades’ and various forms of market speculation. Complacent investors maintain these trades, despite the Fed’s warning of a looming reduction in the subsidy, and despite a balance sheet expected to shrink in 2016. It has been a risk-chasing ‘game of chicken’ that is coming to an end. Changing conditions have skewed risk/reward to the downside. This is particularly true because financial assets prices are exceptionally expensive...There are warning signs and visible market stresses beyond those mentioned yesterday.
If the US economy is truly firing on all four cylinders, then how are events such as the repeat bankruptcy of America's first national supermarket chain, supposed to happen?
As with all data, none of these data points suggests that the economy, or the markets, will immediately plunge into a recessionary contraction. However, what is important to consider is that many of these data points are now converging and suggesting that risk is more elevated now than at any point since the financial crisis. It is at least worth thinking about.
"It will be appropriate at some point this year...to raise the Fed funds rate and normalize monetary policy," Yellen recently explained but given recent comments from Fed heads and the FOMC Minutes, it appears the real meme is "everything is awesome, we promise and as long as it stays that way we will hike rates just a little bit, stand back and watch the implosion, then stand ready to step back in to save the world... oh, and if Greece, China, US Shale, or LatAm blow up contagiously, we won't normalize policy ever again." Yellen speaks on the US economic outlook at The City Club of Cleveland.
Greek end hogame is at hand. US economy is gaining momentum--consumption, capex, and housing. Several equity markets are at cross-roads.
The world is on the brink of the longest-lasting oil glut in at least three decades and OPEC’s quest for market share makes it almost unavoidable. Oil supply has exceeded demand globally for the past five quarters, already the most enduring glut since the 1997 Asian economic crisis, International Energy Agency data show. But as WolfStreet.com's Wolf Richter warns, if Iran and world powers reach an accord on the Islamic Republic’s nuclear program by their June 30 deadline, we’ll be watching the most magnificent oil glut ever building up into next year.
US Empire Fed Manufacturing Survey Plunges To Lowest Since January 2013 As Inventory Optimism Crashes By Most EverSubmitted by Tyler Durden on 06/15/2015 08:38 -0400
Empire Fed Manufacturing has now missed expectations for 8 of the last 9 months. June's -1.98 print (against hopes for a post-weather bounce to 6.00 from 3.09) is the lowest since January 2013. With only 26% of respondents saying conditions had improved, New orders tumbled, Prices Received slid, shipments dropped and inventories fell... but employment and workweek increased? What hope for the future - less! General Business conditions 6-month ahead fell for the 2nd consecutiuve month with th emost crucial aspect being a total and utter collapse in future inventories from 3.13 to -17.31
Corporate executives offer three main reasons for share repurchases: 1. Buybacks are investments in our undervalued shares signaling our confidence in the company’s future; 2. Buybacks allow the company to offset the dilution of EPS when employee stock options are exercised or stock is granted to employees; or 3. The company is mature and has limited investment opportunities, therefore we are obligated to return unneeded cash to shareholders. The logic behind each of these explanations is in the vast majority of cases is flawed, to be kind, and deceptive to be blunt.
The age of propaganda is now upon us; where perception trumps the truth, until that is, the house of cards burns and falls, which it always does. With such blatant data manipulation going on, why shouldn’t we question the extent of stated “glut” in oil? The longer perception is distorted to create a false reality, the worse things will get in the end. We saw this before in 1999/2000 with the internet bubble and in 2008/2009 with the housing bubble, and it will not end well. If producers are dumb enough to get roped in to turning the spigot on when oil does rise (just as they appear to have done this morning) then, once again, prices won’t hold.
How is it that the company's GAAP EPS declined by a whopping 17%, from $0.66 to $0.55, and yet its non-GAAP EPS dropped by a tiny 1% from 0.88% to 0.87%? This is how...
Having plumbed the depth of 2-year lows in April, May's Empire Manufacturing printed a disappointing 3.09 (against expectations of a bounce to 5.00 from -1.19). This is the 4th miss in a row and for context is the same level as we dropped to in January 2008. Number of employees and prices paid (and received) tumbled, new orders edged higher but crucially 'hope' plunged back to 3-month lows. Furtures expectations for CapEx and Tech Spending also collapsed.
With the Federal Reserve now indicating that they are "really serious" about raising interest rates, there have come numerous articles and analysis discussing the impact on asset prices. The general thesis, based on averages of historical tendencies, suggests there are still at least three years left to the current business cycle. However, at current levels, the window between a rate hike and recession has likely closed rather markedly.