Today - Saturday, December 7, 2013
9:45 AMHilsenrath: Taper on table, but look for dovish guidance change
- The jobs report definitely puts the taper on the table in December, writes Jon Hilsenrath, but it's not all good news. The household survey - out of which comes the UE level - shows the jobless rate fell from 7.2% in September to 7% in November, but employment rose just 83K against a decline in the labor force of 664K. Another way of saying this is the labor force participation rate fell to 63% last month from 63.2% in September (and 63.6% a year ago).
- While this probably won't stop the taper, it could mean a change in guidance, says Hilsenrath, where the FOMC either places less emphasis on the unemployment rate (there's already evidence of this) or indicates it wants to see headline UE at less than 6.5% before considering rate hikes.
- Communication success: Markets are finally believing tapering does not equate to tightening. As investors braced for the taper in September, they also priced in the Fed's first rate hike by the end of 2014. Braced again for the taper today, futures markets aren't indicating the first rate hike until late in 2015.
- Treasury ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TTT, TMF, TLH, ZROZ, SBND, IEI, DLBS, TYO, DTYS, VGLT, UST, BIL, SHV, UBT, TLO, TBX, VGSH, VGIT, GSY, LBND, DTYL, SCHR, SCHO, TYD, ITE, TYBS, TENZ, DTUL, TUZ, SST, DTUS, FIVZ, TBZ, DFVL, DLBL, DFVS, TYNS
9:00 AMTepper to return capital for 3rd straight year
- The problem, said Frank Lopez in Scarface, isn't making money, it's what do you do with all the cash!
- With gains reportedly of more than 40% this year, David Tepper's Appaloosa is returning between $1.5B and $2B to its investors, reports Institutional Investor. Unlike Seth Klarman - who is supposedly sending cash back to investors because of a dearth of interesting values - Tepper's just making too much money. This will be the third consecutive year in which he's returned capital to investors as he seeks to keep his fund size at an optimal level (in the area of $20B).
- "We're going to get 20% (in the markets) next year," said Tepper in a recent Bloomberg appearance.
8:25 AMMerrill Lynch unveils its top 10 stocks to buy for 2014
- BofA Merrill Lynch is a more cautious buyer of stocks after this year's gains, and its top 10 large-cap stocks to buy for 2014 are mostly under-owned and unloved on Wall Street: ADM, Caterpillar (CAT), CenturyLink (CTL), Citigroup (C), Cisco (CSCO), DaVita (DVA), Exxon (XOM), GM, NextEra Energy (NEE) and Nucor (NUE).
- On CAT, the Lynch analysts point to high foreign sales prospects for 2014, and see strength in energy-related profits offsetting weakness in global mining; the firm has a $100 price target vs. ~$90 consensus.
- XOM is considered inexpensive compared to many large-cap energy names, it is expected to continue its large share buyback program and should increase the dividend; Lynch's target is $110 vs. $96 consensus.
- NUE is the ultimate contrarian play, as Wall Street is underwhelmed by steel stocks, but Lynch sees a rebound in commercial building as a big boost for 2014 earnings; the firm has a $60 target vs. $55 consensus.
Friday, December 6, 2013
10:50 PMShell cleared to expand Jack Pine oil sands project in Canada
- Canada's government approves a major expansion of the Jack Pine oil sands mine operated by Royal Dutch Shell (RDS.A, RDS.B), despite an environmental review that warned of severe and irreversible damage.
- The decision clears the way for Shell to raise production at the Alberta mine by 100K bbl/day, bringing total output at the joint venture with Marathon Petroleum (MPC) and Chevron (CVX) to 300K bbl/day; the mine is part of the larger Athabasca oil sands project, which has current production capacity of 255K bbl/day.
- Shell says it hasn't made a final investment decision on moving ahead with the expansion but is reviewing the government's terms.
7:15 PMBP cites escort service receiving $173K as abuse of Gulf spill damage claims
- Perhaps BP has a point: The court-appointed lawyer supervising the damage claims following the 2010 Gulf of Mexico oil spill disaster confirms he approved a $173K payout to an “adult escort service” BP said was filed with unsigned and undated financial documents.
- A new BP ad appearing in several national newspapers proclaims: “The IRS wouldn’t accept this claim. But the Gulf Settlement Program did.”
- At least for now, BP doesn’t need to worry about such payments, as Judge Barbier has temporarily suspended settlement payments to businesses while he reconsiders BP's arguments against compensating those that cannot trace losses directly to the spill.
7:06 PMReuters: Carlyle preparing IPO or sale of chemical company
- Sources tell Reuters Carlyle (CG) is preparing to either sell specialty chemical maker PQ Corp. for up to $3B (after factoring debt), or take it public.
- Carlyle paid $1.5B to acquire PQ in '07. Since then, the company has been merged with industry peer INEOS Silicas, and has shed its engineered glass products busines (Potters Industries). PQ is estimated to have annual EBITDA of $300M.
- Carlyle will reportedly talk with banks next week to select IPO underwriters for PQ, but will simultaneously continue exploring a sale.
6:45 PMEllington Financial reports book value per share of $23.86
- Ellington's (EFC) estimated fully diluted book value per share of $23.86 on Nov. 30 appears to be off from $24.57 at the end of October, but it includes the $0.77 dividend. Adding that back in shows book value actually grew a hair during November.
- Today's close of $22.61 puts the stock at a 5.2% discount to book and - annualized - the $0.77 quarterly payout is a yield of 13.6%.
- Press release
6:42 PMCorn traders worry as China rejects shipments said to contain GMO strain
- Corn futures (CORN) fell amid mounting concerns that export demand will suffer because China has been rejecting U.S. grain containing an unapproved genetically modified strain.
- This week, China rejected more than 120K metric tons in five separate shipments of U.S. corn after inspectors found the genetically engineered insect-resistant MIR 162 strain; regulators had rejected U.S. grain for the same reason last month.
- Traders worry the actions could herald a period of reduced shipments to China from the U.S., the world's biggest corn producer and exporter.
- Biotech company Syngenta (SYT) has resubmitted an application for the GMO strain to be allowed in China.
6:41 PMServer sales drop again in Q3, H-P takes share from IBM
- IDC estimates server sales fell 3.7% Y/Y in Q3. That's a modest improvement from Q2's estimated 6.2% drop, but hardly a figure that will bring cheer to industry players. Gartner estimates revenue fell 2.1% in Q3 vs. 3.8% in Q2.
- The embrace by Web/cloud giants of home-grown servers produced by Asian contract manufacturers (ODMs) continues to upend the industry. IDC thinks sales of such servers rose 45% Y/Y, and now make up 6.5% of industry revenue. It estimates nearly 4/5 of these sales came from the U.S., largely from Google, Facebook, Amazon, and Rackspace.
- #1 H-P (HPQ), which recently reported encouraing enterprise hardware numbers, is assigned a 28.1% share (+150 bps Y/Y). #2 IBM, whose total Q3 hardware sales fell 17% Y/Y, is given a 23.4% share (-430 bps).
- Newly-private Dell had a 16.2% share (-40 bps, a reversal from recent gains), Cisco (CSCO - still seeing strong UCS server demand) a 5% share (+170 bps), and Oracle (ORCL - hurt by SPARC/UNIX server weakness) a 4.1% share (-60 bps).
- In a positive for Intel (INTC), x86 servers took share once again, with sales rising 2.8%.
- H-P is the leader in the x86 server market (32.3% share), as well as in the growing blade server (43.6%) and density-optimized server (30.7%) markets. There's a decent amount of overlap between the x86 market and the blade/density-optimized markets.
6:29 PMComcast retains J.P. Morgan to evaluate Time Warner Cable bid
- Comcast (CMCSA +0.4%) has tapped J.P. Morgan for advice as it evaluates a bid for Time Warner Cable (TWC -1.2%), Reuters reports.
- Sources said Comcast does not intend to make a pre-emptive bid, but may jump in if it looks like Charter Communications (CHTR +0.4%) is getting close to a deal.
- TWC, for its part, considers Comcast the best suitor given its ability to make an all-cash offer and the better nature of the geographic fit between the 2 operators.
- Previous: FCC commissioner doubts Comcast-TWC merger would be approved
6:21 PMInterOil shares slashed by more than a third as deal uncertainty to linger
- InterOil (IOC) fell 37% today after agreeing to sell Total (TOT) a majority stake in its Papua New Guinea natural gas discoveries for a price that won’t be known for at least a year.
- IOC priced the deal at $1.5B-$3.6B, but it won’t receive a definitive price until at least 2015, Raymond James analyst Pavel Molchanov says, adding there are "some elements of uncertainty/ambiguity" still to be resolved.
- On the other hand, Papua New Guinea has substantial gas resources, and the deal "brings in a world-class LNG operator,” one energy consultant says, which "will give people confidence that these reserves can now be monetized."
6:04 PMFCC delays major spectrum auction until mid-2015
- FCC chairman Tom Wheeler discloses a much-anticipated auction of broadcast TV spectrum to mobile carriers won't take place until mid-2015. Under prior chairman Julius Genachowski, the commission had set a June 2014 target date for auctioning the airwaves, which reside in the rural-friendly 600MHz. band.
- Sprint (S) and T-Mobile (TMUS), who badly need more low-frequency spectrum to expand their rural coverage, have been hoping the auction would happen sooner rather than later. Verizon (VZ) and AT&T (T), who own ~75% of all sub-1GHz. U.S. mobile spectrum, currently offer better rural coverage in many regions.
- Earlier this week, Wheeler hinted the FCC's auction rules will favor the likes of Sprint and T-Mobile, who have been calling for restrictions to be placed on how much spectrum Verizon and AT&T can purchase.
5:48 PMCheniere's new export deal sent shares 13% higher this week
- Cheniere Energy (LNG) jumped more than 13% this week after it announced its first deal to liquefy and ship natural gas from a planned facility in Corpus Christi to Indonesia, with components that were more lucrative than the company's prior liquefied natural gas contracts.
- The fixed rate for the contract of $3.50/Mbtu was higher than LNG's prior contracts to ship natural gas from the Sabine Pass export facility under construction in Louisiana that is scheduled to be the first to ship U.S. natural gas overseas.
- A variable component of the deal was less lucrative, however, with LNG agreeing to charge Pertamina an 11.5% premium on any gas it liquefies and ships, down from the standard 15% it had so far secured in other contracts.
5:44 PMCampbell Soup rises most in 5 years on outsized bull option bet and M&A speculation
- Campbell Soup (CPB +5.9%) shares notched the largest point and percentage gains in more than five years after a trader purchased at least 12K Dec. $43 call options in the early afternoon. An average of 2.9K options contracts are traded across all strikes and dates daily.
- The rise may have been catalyzed by the broker on the other of the side hedging the short position and rumors "that the options trade was linked to takeover speculation, leading other investors to buy shares and options in the soup maker," MoneyBeat writes.
- The trade was self-fulfilling, with the contracts in question opening trading at $0.15/share and reaching highs of $0.80/share on the day.
5:43 PMDisney acquires Indiana Jones marketing/distribution rights
- Disney (DIS) has acquired the marketing/distribution rights for future Indiana Jones films for Paramount. The media giant already had ownership rights to the films through the Lucasfilm acquisition.
- Paramount will maintain distribution rights for the first four Indiana Jones films, and will financially benefit from the release of future films.
5:34 PMGoogle Nexus set-top reportedly could launch in 1H14
- The Information reports Google (GOOG) is working on an Android-based Nexus set-top, and could launch the device in 1H14. The device is said to support YouTube/Netflix/Hulu streaming (like many other boxes) and (more interestingly) the ability to play certain Android games. It also reportedly comes with a touchpad remote.
- The WSJ reported in June Google is working on an Android console, and that it could launch this fall (it doesn't look as if that'll happen). If/when it arrives, Google's set-top could face competition from a next-gen Apple TV supporting game controllers and pay-TV content.
- Google's reported set-top efforts might have much to do with the failure of Google TV to live up to the Web giant's lofty ambitions. Its $35 Chromecast HDMI streaming stick has been faring much better.