The Bank of England left their rates and financial market activities unchanged, and appear poised to continue along that line for the foreseeable future. We expect the entire European continent to continue with their easy money policies for as long as needed (notice the ECB took rates to 0.25% from 0.50% today which sent the Euro lower), but at least until the end of their stress tests on the banks are completed and the market has had ample time to react to those results. Whereas the US Fed has to wait until the next battle in Washington is fought, Europe must wait until the stress tests are completed. It is looking as though 2014 will be an event driven year with many events already becoming apparent in 2013.
Chart of the Day:
We have seen a lot of improvement in the Initial Claims figures over the past few years, however it is our guess that we hang around the 300-350k figure for the foreseeable future as the weak economy continues to be a major drag for companies. Many have left the job market altogether, and that has been well documented, but we think that the Obamacare program might create a spike in unemployment as companies reposition their human capital portfolios to take advantage of what is best for the company.
We have economic news today and it is as follows:
- Initial Claims (8:30 a.m. EST): Est: 335k
- Continuing Claims (8:30 a.m. EST): Est: 2863k
- GDP - Adv (8:30 a.m. EST): Est: 1.9%
- Chain Deflator - Adv (8:30 a.m. EST): 1.4%
- Natural Gas Inventories (10:30 a.m. EST): N/A
- Consumer Credit (3:00 p.m. EST): $11.0 Billion
Asian markets finished lower today:
- All Ordinaries -- down 0.20%
- Shanghai Composite -- down 0.48%
- Nikkei 225 -- down 0.76%
- NZSE 50 -- down 0.44%
- Seoul Composite -- down 0.48%
In Europe, markets are mixed this morning:
- CAC 40 -- up 0.06%
- DAX -- up 0.06%
- FTSE 100 -- down 0.15%
- OSE -- down 0.51%
To Leave or Not To Leave...
That is most certainly the question these days for Ford's (F) Alan Mulally. Ford's Board is probably asking themselves daily, "will he stay or will he go now," especially as more and more reports have Mr. Mulally making the short list of candidates for the Microsoft (MSFT) CEO position. If we were bettors we would be placing our money on Mr. Mulally leaving Detroit for (not so sunny) Redmond, Washington. The money is there to pay him whatever he would demand and he would have the opportunity to turn another American icon around, although this name is far less damaged than some of the other names he has accepted that task for.
One should not discount Mr. Mulally's willingness to take a job in Redmond because he did spend a good portion of his career at Boeing (BA) where he served as President and CEO. Boeing has a large portion of its production centered around the Seattle area and had its headquarters there before moving them to Chicago a few years back. The draw is real.
At the end of the day, when someone says they are not taking a job and are interested only in the job they currently have, yet their name continues to appear on the short list it usually means but one thing: that they are quite likely to be getting a new office. Where there is smoke there is fire and although Mr. Mulally has tried his best to put this one out, the fact that his name has not been removed from consideration indicates that he thinks he might be interested in the opportunity or that he has not conveyed his intentions in a strong enough manner to convince Microsoft that no amount of money will persuade him to leave his current position at Ford.
Microsoft is trading at roughly 10 year highs on speculation Ford's Mulally will join the company as its next CEO. It looks like a perfect situation for him as the company's shares have remained stagnant for a decade as the company consolidated its market position and grew into its valuation.
Source: Yahoo Finance
We like the outlook for Ford, and have for some time, but if Mr. Mulally were to leave and go to Microsoft we think that he could do some wonderful things. He is excellent with streamlining operations and would in our opinion fix the R&D spending at Microsoft in a way that would maximize returns while also focusing on innovation. Microsoft would most likely also allocate capital more efficiently via increased buybacks and dividends. Although we would be sad to see Mr. Mulally leave the American icon that is Ford, he would have a huge impact were he to accept the CEO job at Microsoft.
We think there is an 80% chance that Mr. Mulally takes the Microsoft job, and as such believe that he is going to be the next CEO of Microsoft. The market is almost dictating it, and with his name continuing to pop up it seems that his time in Detroit is drawing to a close.