Posts by Aaron Task
The egg. It's incredible. It's edible...and it's getting more expensive. Because of a bird flu outbreak, wholesale prices for eggs have risen to over $2.00 a dozen, up a whopping 71% since late April. Retail prices haven't risen nearly as fast -- up 17% in the past month according to The Guardian...but grocers can only hold off passing on the price increase to consumers for so long. The avian flu has forced American farmers in 16 states to kill 40 million birds so far, the vast majority of them egg-laying hens. More than 10% of the entire U.S. egg supply has already been affected by the outbreak, according to The Washington Post, with Iowa farms particularly hard hit. The impact of this bird flu outbreak goes far beyond your breakfast table. The price of liquid, dried and frozen eggs used by food manufacturers has risen nearly 30% in the past month. And a potential shortage of these so-called breaker eggs is forcing corporations like McDonald's, Unilever, Panera and General Mills to scramble to find alternative suppliers and substitute ingredients. If the bird flu does lead to shortages, expect to pay more for all kinds of egg-rich products like mayonnaise, baked goods and ice cream in the weeks and months ahead. And this Thanksgiving could be more expensive too. Hormel Foods says its Jennie O Turkeys might be in short supply because of the avian flu outbreak, which has forced farmers to euthanize over 3.3 million turkeysin Minnesota, which produces nearly 20% of America's turkey flock. "The U.S. market -- suppliers [and] buyers -- are most certainly very nervous about the evolution of this unprecedented problem," says Andrew Rosenzweig, international sales manager at OvoMarket Espana, an egg exporting company that represents Spanish egg farms. "Given that the influenza has also affected breeding farms...the production forecast is disconcerting. A hen does not start laying eggs until it’s [about] 20 weeks old, but the big question is how long will it take for the USA to replace the layers that have been lost?" Just how 'unprecedented' is this problem? The Egg Industry Center, which closely follows the egg market, says "a large fluctuation such as the loss of millions of laying hens was never considered in the design of the [pricing] model that is currently in use." A 100-year flood, in other words. The U.S. only exports about 5% of the eggs produced here, The NYT reports, but the American bird flu epidemic is already having global implications. European egg processors are "in full production to take up the U.S.’s global slack," Rosenzweig says, noting his firm has received inquiries about eggs from Mexico and asked whether OvoMarket can serve clients in Hong Kong. The good news is the current avian flu outbreak has been contained to just birds so far...but there's still a public health risk, even if it doesn't spread to humans: Eggs are also used to make vaccines for diseases such as measles, mumps and rubella. Eggs are also used to make vaccines for diseases like influenza...meaning this coming flu season could be one for the birds.
Update: The IRS said Tuesday that cybercriminals obtained prior-year tax returns for over 100,000 U.S. households using information stolen from other sources, including Social Security numbers. An additional 100,000 attempts to access prior-year returns were blocked, the agency said. The IRS sent nearly $50 million in fraudulent refunds before detecting the scam, the NYT reports. In 2013, the agency paid $5.8 billion in falsely claimed refunds. The article below provides a guide for steps individuals can take to try and protect themselves from the risks of ID theft and tax fraud.
"While this probably won’t be very comforting for you, the rest of the missing documents were likely too damaged to garner identifiable information to be returned," a USPS spokeswoman told me via email. " For what it’s worth, it’s not very common and our employees go above and beyond to get mail like this home when it does happen."
The U.S. stock market has been in a fairly tight trading range this year and pretty much has gone sideways, with Tuesday's slide bringing the S&P back to within 2% of break-even for 2015. It's been a very different story in China, where stocks have been on a tremendous winning streak. The Shanghai Composite is up 175% in the past year while the small-cap Shenzen Composite is up 140% and has more than doubled year-to-date as of Tuesday's close. The Chinese market entered Wednesday's session on a torrid six-day winning streak, which notably occurred as the U.S. market suffered through one of the quietest weeks in recent memory, punctuated by Tuesday's post-holiday sell-off. After peaking in 2007, Chinese stocks struggled for several years, lagging the S&P 500 and other major Asian markets from 2010-2013. With China's economic growth slowing into single-digit territory, many prognosticators declared the China boom over. But those expecting a "hard landing" in China have been left waiting. Those short stocks have been steamrolled by a rally that began in earnest in mid-2014 when state-run media outlets published a series of articles and television specials that encouraged individuals to invest in stocks.
Aaron Task at Yahoo Finance 7 days ago
The Comcast-Time Warner Cable merger may be dead but cable M&A is alive and well -- and now featuring some international flair. Cable stocks jumped Wednesday in an otherwise lackluster tape after Luxembourg-based Altice (ATC.AS) announced plans to acquire a controlling stake in Suddenlink Communications from its private equity owners for $9.1 billion. The deal is relatively small and with 1.5 million subscribers, St. Louis-based Suddenlink is only the seventh-largest cable operator in the U.S. But the Suddenlink deal is widely viewed as a beachhead for Altice and founder Patrick Drahi's plans to tap the American cable industry. The Moroccan-born, French-bred Drahi is viewed as the John Malone of Europe, having built an empire largely via debt-financed acquisitions. In just the past year, Altice spent $35 billion on France's SFR and Portugal Telecom, according to Breaking Views. The company also has cable and telecom operations in Belgium, Switzerland, Israel and the Dominican Republic. The allusions to Malone are no accident as Drahi once worked for the American cable billionaire. After the Suddenlink deal, about 12% of Altice's portfolio would be based in America and "the goal is to be fifty-fifty," Altice CEO Dexter Goei said on a conference call with analysts Wednesday. "This is a very attractive market for us that'll be consolidating for many years to come." Goei noted Europe is about two times ahead of the U.S. in terms of broadband penetration, viewing that as an opportunity for the industry moving forward. "The churn numbers across U.S. cable are significant" relative to European counterparts, he said. "That, in our mind, has a lot to do with processes and customer care on the way to approach the retention of subscribers who tend to disconnect and reconnect, which is a very expensive proposition for an operator. And we think we can operate that and do a lot better." Getting to 50-50 would require Altice buying much bigger fish than Suddenlink and, sure enough, various news outlets report the firm is interested in acquiring Time Warner Cable (TWC). If true, that could put Drahi on a collision course with his former mentor. Malone's Liberty Broadband (LBRDA) is the biggest shareholder of Charter Communications (CHTR) and the two firms tried to acquire Time Warner Cable last year. Meanwhile, Charter is moving ahead with plans to acquire Bright House Networks, the nation's sixth-largest cable company. Just to keep things really interesting (or is it confusing?) Malone's other company, Liberty Global (LBTYA) is rumored to be in merger talks with Britain's Vodafone (VOD). "If you listen to the conference call today, it's pretty clear [Altice] didn't want to stop with this first acquisition; they want to buy more," said Walt Piecyk, a tech and telecom analyst at BTIG. "They've executed quite well in Europe -- buying companies and finding synergies. They've been doing this in Europe for a while...and the U.S. market offers robust monthly payments." Amid all this dealmaking and deal-rumoring, Time Warner Cable shares rose 5% Wednesday while Cablevision (CVC), another potential target, soared 18%.
Aaron Task at Yahoo Finance 8 days ago
Kids say the darndest things...and so do central bankers. In a recent sit-down with Yahoo Finance's editorial team, San Francisco Fed President John Williams was asked about the risks of a bubble in the tech sector generally, and the Bay Area specifically. After saying he wasn't particularly concerned about a bubble in the SF Fed's district, Williams added: "On the West Coast we invent things without leverage, and on the East Coast you create [mostly] leverage." The implication, of course, is that while Wall Street titans are busy inventing derivatives and other such speculative financial tools that depend on leverage, California’s innovators are creating useful, tangible things that serve consumers and corporations – without the need for massive amounts of debt.
Williams didn't quite go that far but he also didn't back away from the comment in a follow-up conversation.
Williams demurred when I asked if Volcker's perspective represented the prevailing outlook at the Fed, saying, "I can only speak for myself."
'Masters of the Universe' No More
Aaron Task at Yahoo Finance 9 days ago
When Richard Thaler and Werner De Bondt published a 1985 study in the Journal of Finance called "Does the Market Overreact?," it was borderline heresy to suggest the markets weren't completely rational and efficient. Anyone who's paid even passing attention the past 20-odd years knows financial markets are prone to bouts of what Alan Greenspan called "irrational exuberance" and it's pessimistic counterpart. And, yet, "there are still people clinging to the belief markets are perfectly rational all the time despite what we've seen the last 20 years," Thaler tells me in the accompanying video. Ironically, the idea that supposedly learned people would believe something despite mountains of contrary evidence is something behavioral economics, the field Thaler and De Bondt helped birth, would at least try to factor into the analysis. Thaler's last book, Misbehaving, is an attempt to explain the origins of behavioral economics and "to explain some of the things we learned along the way." Among those lessons are two the University of Chicago Booth School professor says are particularly relevant to investors:
Aaron Task at Yahoo Finance 13 days ago
The global economy is undergoing such a major transformation it takes not one...not two...but three directors of the McKinsey Global Institute to write a book about it. But seriously folks... No Ordinary Disruption: The Four Global Forces Breaking All the Trends is that book. One of its co-authors, Richard Dobbs, joins me in the accompanying video to explain why he beleves these forces will have 3,000 times the impact of the Industrial Revolution. "We've built up an intuition about how the world works over our lives... we're now getting these disruptions happening at speed and scale we've never seen before," Dobbs says. "And they're all happening at same time. Such that our intuition about how the world works...a lot of that intuition could be wrong." The four 'global forces' detailed in the book are: Emerging markets growth and urbanization: McKinsey predicts that emerging markets will grow 75% faster than the rest of the world in the next decade. Between now and 2025, just 440 emerging market cities -- such as China's Tianjin, India's Surat and Brazil's Porto Alegre -- will generate nearly 50% of additional global GDP growth, the authors estimate. Technological breakthroughs and disruption: One example of the rapid pace of technological adoption; it took radio 38 years to get to 50 million users vs. just nine months for Twitter. McKinsey predicts 140 million service sector workers could be replaced by computers by 2025 and 75 million (more) jobs will done by robots. Realignment of global trading: 'Interconnectivity' isn't just about mobile communications and social networks. The global trading system is expanding far beyond the traditional post-War hubs of Europe and Asia, with China's plans to build a 'New Silk Road' through Central Asia to Europe being one obvious example. McKinsey predicts Central Asia will be the world's center of economic activity by 2025, "just north of where it was in the year 1 A.D." Aging global population: It's not just Russia, Japan and Western Europe...China's population is aging too and McKinsey predicts the global workforce will shrink two-thirds by 2030. By 2050, the book projects developed countries will have twice as many elderly people as children, a mirror image of the trend in 1950. These trends have major potential implications "for policymakers, investors, families, for how long you have to work, your children's education," Dobbs says. The bad news is most businesses, policymakers and individuals "know it's happening but [are] not reallocating resources or efforts nearly enough given the scale" of the transformation, he continues. Furthermore, many workers are ill-trained for the coming shifts and the U.S., particularly, faces a shortage of grads in the fields of science, technology, engineering, and mathematics, aka STEM.
Aaron Task at Yahoo Finance 14 days ago
President Obama's effort to pass the Trans-Pacific Partnership (TPP) hit a temporary roadblock earlier this week as Senate Democrats blocked debate on Trade Promotion Authority (TPA), which the President says he needs to finalize the massive trade deal between the U.S. and 11 other nations. But what many in the press called a "stinging rebuke" for the President indeed turned out to be a mere "procedural snafu", as the White House dubbed it.
Late Wednesday, Senate Democrats agreed to a compromise under which a seperate vote will be held on a bill designed to discourage alleged currency manipulation.
Rick Helfenbein, chairman of the board of the American Apparel and Footwear Association, says Democrats like Sen. Chuck Schumer (D-NY) were "holding out for more sugar in the coffee" but predicts TPP and TPA "absolutely will pass" in the end.
"Senator Schumer has been fighting for currency manipulation [legislation] for a long time - he wants to see it passed," Helfenbein says. "But do you really need it for TPP countries? Is New Zealand or Australia manipulating their currency? It's absurd."
Aaron Task at Yahoo Finance 16 days ago
Will they or won't they? It's the biggest parlor game on Wall Street: Will the Fed raise rates this year or remain at zero into 2016? San Francisco Fed President John Williamsis a voting member of the Federal Open Market Committee and thus presumably has better insight on the answer to that question. "At some point later this year is my forecast given how much the data has improved and the fact the economy is in much better condition than it has been last few years," he tells me in the accompanying video. Specifically, Williams cited the "progress we've made on the [full] employment mandate," as evinced by the unemployment rate falling to a seven-year low of 5.4% in April. That is "close to full employment," he says, forecasting the unemployment rate "will get down to 5% by year-end." At that juncture he expects "faster wage gains" and says the economy will be "running a little bit hot," citing a belief that "inflation has [already] stabilized and I think moving back to 2%." Having said that, Williams concedes the unemployment rate "overstates somewhat the strength of the labor market," noting still-elevated levels of individuals working part time who'd prefer full-time jobs and the lackluster labor participation rate, which remains mired in the low 60% range. But "with the economy continuing to grow and with job gains continuing to be pretty good we'll see broader measures of a full strength economy next year," he predicts.
Aaron Task at Yahoo Finance 16 days ago
When Fed Chair Janet Yellen said "equity-market valuations at this point generally are quite high” last week, a lot of veteran market participants recalled Alan Greenspan's infamous "irrational exuberance" comment in December 1996. If the pattern repeats, stocks will struggle a bit in the immediate aftermath of such Fed speak before racing higher to truly outrageous valuation levels. Among others, San Francisco Fed President John Williams is hoping a repeat performance isn't in the offing, as he recalls the "bad affects" of the eventual bursting of the 1990s stock bubble. Suggesting higher asset prices are "normal" in a low interest rate environment, Williams says "I don't think stock valuations are a huge risk [to the economy] but of course if it would continue [like in the late 1990s] it's something we'd pay close attention to." For the moment, at least, the SF Fed President is more concerned about "what would happen if long-term yields went up rapidly...what would it mean for the economy and thinking through risk scenarios for that." Chair Yellen expressed similar concerns in her speech last week, saying "there are potential dangers" in bonds and warning yields “could see a sharp jump” if (and when) the Fed starts to raise rates.