Posts by Jeff Macke
- Jeff Macke at Yahoo Finance9 hrs ago
History doesn't repeat itself on Wall Street but the mergers and acquisitions spree of the last few months has the same basic rhyme of another era. No it's not 2000 or 2007. The drumbeat today goes back the 80's and a certain pulsing beat that calls to mind Prince music, mullets and unforgettable predator's balls.
It was about 1983 that a bond trader named Micheal Milken and his firm Drexel Burnham Lambert popularized the use of so-called junk bonds as a way to finance takeovers. Formerly the source of funds of last resort for firms on hard times, junk bonds became the preferred tool for what were then called "raiders" making audacious deals. One of those pioneers was a guy named Nelson Peltz who in 1985 bought National Can, a company six times his firm's size, using Drexel junk funding. A year later Peltz doubled down on American Can. Two years after that Peltz and his partners sold his levered can conglomerate for nearly $850 million in profit.
- Jeff Macke at Yahoo Finance11 hrs ago
The headlines don’t reflect it yet but according to Brad Lamensdorf a 10 to 20% correction isn’t just possible, but has actually already started. In the attached clip the manager of the Ranger Equity Bear Fund ETF (HDGE) says he’s seeing some key breakdowns that don’t bode well for the tape as a whole in the coming months.
Like many of the bearishly inclined investment class Lamensdorf is concerned about how far the market has come without any meaningful pullback. He takes it beyond a hunch when he points out some of the flaws in the bullish argument that the public isn’t taking part in this widely despised rally yet.
Professional sentiment in the form of research from Institutional Investors is of course widely bullish. At this point the fund managers who’ve been sitting in cash for the last couple years are either out of business or simply long out of necessity. Being long defensive sectors is about as close to bearish as many are willing to get.
- Jeff Macke at Hot Stock Minute1 day ago
Dollar Tree (DLTR) is buying its larger rival Family Dollar (FDO) in a cash and stock deal valued at about $8.5 billion. "This acquisition will extend our reach to lower-income customers and strengthen and diversify our store footprint," Dollar Tree CEO Bob Sasser said in a statement.
Discount chains have been struggling to boost sales as Walmart (WMT) and other retailers invaded their space by offering more items for a buck or less to lure more low-income consumers.
- Jeff Macke at Yahoo Finance1 day ago
Over the weekend the New York Times called for the federal government to repeal its ban on marijuana. Though the more conservative among you may consider the left-leaning Times' endorsement to be damning simply given the source, that's a limited view. Legalization of marijuana on a federal basis should be a lay-up bipartisan idea. Consider the numbers:
54% of Americans polled support legalizing pot on a federal level. That's about on par with support for gay marriage with this difference: Republicans are 25% more likely to support pot legalization than gay marriage. In fact, the majority of Republicans under 50 are in favor.
70% of Americans, regardless of party, see dope as less harmful to society than alcohol. That's important but not the right comparable. It's not just liquor that marijuana competes with. It's prescription opioids and anti-anxiety medications.
Amazon.com (AMZN) shares getting hammered today after last night's earnings report. While revenue was broadly in-line with expectations, profit missed the mark badly as Jeff Bezos continues to show no regard for profitability.
The details: Amazon reported a second quarter net loss of $126 million, or 27 cents per share, while the street expected a loss of around 15 cents a share. Operating expenses for the quarter came in at $19.36 billion.
Net sales were reported to be $19.34 billion, up 23% from 2013 second quarter’s figure of $15.7 billion. Revenue closely matched analyst expectations, and basically within the company’s sales guidance range of $18.1 billion and $19.8 billion.
It was a fairly normal quarter right up until the company suggested it would lose between $410 and $810 million in the current quarter. It’s one thing to not sweat profits but quite another to idly project a potential four-fifths of a billion loss with no real explanation. The instant the guidance was issued Amazon shares dropped a quick 5% more after-hours. Nothing that was said over the balance of the call lifted investors’ skepticism.
The jury's out on Janet Yellen as a Fed Chair but if she ran a hedge fund she'd already be out of business. Last week in her semi-annual policy report to Congress, Yellen strayed from macroeconomics into stock picking, suggesting that valuations in social media, real estate and biotech seem extended. If she was worried last week she's gotta be terrified today after a more than 4% run higher in Social Media (SOCL) and Biotech (IBB) ETFs over the last week.
On the upside Yellen probably handled her setback with more stoicism than hedge fund manager Bill Ackman. Ackman got choked up during his three hour, several hundred slide attack on Herbalife (HLF) this week. Ostensibly he was saddened by the way he claims Herbalife targets low-income entrepreneurs, but the fact that shares of Herbalife went up 25% when Ackman failed to "destroy" the company as promised probably didn't help.
Earnings season rolls on and the market is liking what it hears. According to Reuters 70% of the S&P 500 (^GSPC) members reporting so far have beat analyst estimates. Even in the world of Wall Street where estimates are reliably sandbagged, broadly speaking earnings have been solid. At the very least the market seems to like what it hears, based on the Dow (^DJI) and S&P dancing with new all-time highs on a regular basis.
In the attached clip David Lefkowitz of UBS Wealth Management says he’s been impressed. “About 70% of companies are beating earnings and nearly that number are beating on sales as well so these are pretty high quality results,” Lefkowitz points out in the attached clip. ”What’s even more important is the bar wasn’t lowered as much as it normally is heading into earnings.”
- Jeff Macke at Yahoo Finance5 days ago
Facebook (FB) shares are bounding higher this morning after the company posted its fifth straight better-than-expected quarter. The metrics were beyond reproach. Revenues grew 61%, earnings more than doubled. You want "user engagement?" How about this: 829 million people used Facebook every day last quarter. That's 14% of the world. Even if you back out people who have multiple accounts dedicated to catfishing and their dog's inner monologue that's just amazing.
I'm long Facebook shares. Like most people I tend to be biased towards kids, puppies and investments that make me money so you can take all this with a grain of salt. That having been said, you very, very rarely see companies as big as this grow this fast. Two years ago it wasn't clear Facebook would ever make money on mobile ads. Right now it has 17.7% of the market and that's going to grow to 22% this year. Say what you will about mobile ads, I personally despise them, but the market is huge and insanely lucrative.
- Jeff Macke at Yahoo Finance5 days ago
The S&P 500 (^GSPC) hit yet another record on Wednesday propelled by decent earnings from Apple (AAPL) and Pepsi (PEP). For the year the total return of the S&P is approaching 10%. Since the generational lows of March 2009 the benchmark measure of the stock market has gained more than 200%.
If your first reaction to that reminder is to pitch a fit over what stocks “should” be doing you’re missing the point, and probably the rally as well. "Should" isn’t a concept that carries much weight around Wall Street. The market is about absolutes not intent. The key to getting in front of the tape isn’t figuring out what should happen but determining why a rally is taking place. Only after you’ve done that can you decide whether or not you want to get involved.
- Jeff Macke at Yahoo Finance6 days ago
Americans are becoming more discerning consumers. According to a poll from Gallup released this morning a majority of us are switching to generics, using coupons and comparison shopping on and off-line to find the best values. The question is whether this is a reflection of tight economic times or simply a function of 2014 being a particularly uninspiring year when it comes to the arts and products available for purchase.
The economic arguments are well known. Wages are stagnant and more than 1/3 of the potential workforce is simply choosing not to participate in the labor market. But there's something more at play here. We're losing interest in our old amusements.