For all my bearishness, the FED is coming to the rescue. M2, up $43 billion, for latest week and now up 10.5% annualized rate the last 10 weeks-up from 9.5% annualized rate last week.
I think the FED recognizes recent slowness and doesn't want the economy to stall. So even though the currency markets are forecasting massive liquidity coming out of the Euro-zone-it hasn't happened yet as I track the ECB's balance sheet it has remained flat in recent weeks-the FED, as measured by M2, has been juicing US markets since mid Oct. Now monetary base, FED balance sheet, excess reserves, and money velocity are all important but M2 growth is impressive. The FED wants to raise (normalize) rates starting mid year. The highest probability way is for the economy to have some momentum coming out of the 2ndQ. The first Q is going to be slow.
So far the DXY has not responded to recent M2 growth as it continues to make new 12 year highs-today was 96.42. Frankly, it should and soon. For me, other than a few stocks, the broader averages are way over-valued. But with 30 or so central bank "easings" YTD-insuring fiat currency growth will be greater than 10%, but new gold and silver supplies will be less than 2%, both gold and silver will be relatively scarce vs all fiat currencies. That is a bullish scenario. Don't know when it starts, but mathematically it has to. Perhaps when we get into the middle of the year when longer term forecasters start looking into 2016 supply, both gold and silver will be down again vs 2015 supply, then some "prudent buys" will come out creating some upside momentum and bringing some momentum money. If gold goes up 25%, later in the year, silver should go up 50%.
Steel production is cratering. For the week end 2/28 production was 1657 million tons a 5 year low and down 9.2% y/y. For the 2nd week in a row, RR car loadings were down y/y only 3/10 catagories were up y/y. Last week only 1/10 catagories were up. Lumber prices are at 18 month lows in the mid $280s. Also, Atlanta FED has been coming out with 1st Q GDP estimates of 1.2%-1/2 half the current consensus in the mid 2% range-some analysts are still at 3%.
Because of the strong $, US companies are exporting into a negative GDP world and facing very tepid growth domestically. As March progresses, I expect many earnings warnings for the 1st Q. With the DXY hitting another 12 year high today at 96.06-the FED is going to have to "ease" faster than its trading partners. In the interim, companies with import competition exposure will continue layoffs, companies that export will have earnings and guidance issues.
For me, harvest your gains and only hold on to stocks that you are comfortable and happy to buy more 10-20% lower. I only have 4 currently: PCTI, CTG, LTRX and KTCC. Otherwise quietly increasing gold/silver exposure.
Greece, successfully sold 1.4 billion Euro of t-bills today at 2.97 interest rate. What is interesting is there were no foreign or domestic bank buyers. The only buyers was government pension SS funds-basically the government is financing itself with the "surpluses" of its own workers's savings. Since 750 million of Euros will be paid out on Friday to Foreign bill holders-foreign investors will have reduced their exposure to Greece by 750 Euros worth of t-bills this week.
Implications, Greece will find it hard to self-fund at future t-bill auctions as government pension fund surpluses are a finite source of funds and perhaps a dubious one. As foreigners reduce their exposure to Greek paper, the "cost" of a Greek exit from the Euro will be more easily handled by Euro-zone banks. Still the process of Greece exiting will be "messy" with the ECB erring on the side pf providing more liquidity during the transition.
More liquidity, without a similar growth in goods and services, is bullish for gold/silver.
Expected to do $21-$22 million for 2015, according to my calc from CC details.
In a nut shell for PCTI revenue estimates 2015:
Engineering Svs will be up 15-20%
Antennas will be up 5-8%
NexGen will be up 10-15%
The wild card is always "scanners" which is the most lumpy and has the greatest gross margins.
If scanners are up 5-10%, PCTI will beat consensus. If flat, PCTI will miss by a few cents/share. With recent acquisitions, PCTI is getting further away from "scanners" being such a big swing impact. Bottom line, PCTI well positioned, well run but subject to wireless capX spending cycles for earnings upside-otherwise the business is getting more "steady" with long term growth in the 10-12% range. In today's market this business should sell for at least a 15PE.
From the CC and my calc-alot of numbers thrown around I'm getting new estimates for 2015 should come in with revenues around $135 million and EPS of $.60-$.62-so PCTI gaining top line for 2015, but EPS very much the same vs consensus of $.60/share.
If I back out the acquisition, the core PCTI business would come in short of consensus revenues around $117 vs $120 million consensus-perhaps why the stock is net/net down today so far.
Bottom line, I like the deal, it adds a 10-15% CAGR business with 35-37% gross margin for about 1X sales. But, do to the initial costs and integration risks, I'm not a buyer of PCTI until it sells off into the mid $7s. Some shareholders, that may have been pushing for a special dividend, may sell putting down ward pressure, which could present an opportunity for bargain hunting in the mid $7s.
Won't be a special dividend. Hopefully the acquired business will generate $10+ million in revenue and be profitable in 2015. Otherwise, PCTI will be over paying. Consensus for 2015 is currently $120 million revenue and $.60/share earnings. Guidance at CC will indicate Mgt's expectation for NexGen.
At first glance the acquisition is probably the right thing to do, the issue will be, did mgt pay too much?