Today - Wednesday, March 12, 2014
- Michele Foresti departs Deutsche Bank - where he was a top exec in fixed-income sales and trading - to take the helm of Bank of America's (BAC +0.1%) FICC trading in EMEA, reports the WSJ, citing a bank memo.
- Previous FICC trading chief Bernard Mensah will take over a newly combined FICC emerging markets business, according to the memo. The new unit combines the emerging markets (ex-Asia) operation already under Mensah's responsibility with the bank's Asia Pacific emerging market local currency unit. Its formation reflects “the growth and increased importance” of BAML's emerging markets franchise, says the memo.
- Consolidated Edison (ED -1.3%) is underperforming other utility and electric names following today's NYC apartment fire and explosion; ED received a report of a suspected natural gas leak before the explosion and collapse of two buildings in Harlem.
- ED sent a crew in response to a caller reporting the smell of gas at 9:13 a.m., according to a company spokesman, and the explosion occurred ~15 minutes later.
- Building on the success on the SPDR Barclays High Yield Bond ETF (JNK), State Street Global Advisors will roll out the SPDR Barclays International High Yield Bond ETF (IJNK) tomorrow.
- Much like JNK, IJNK will track an index of high yielding corporate bonds, but with a focus on ex-U.S. global market.
- This market sector is relatively under represented in the ETF universe and the addition of IJNK will round out SSgA's exposure to high yielding bonds.
- Other high yielding global corporate bond ETFs: IHY, HYXU, PGHY
- President Obama paid a surprise visit to a Gap (GPS -1.8%) store in New York City yesterday and spent a reported $150 on his wife and kids.
- The retailer was rewarded after striking out on its own to raise the minimum wage for 65K of its employees to $10.10 per hour.
- Most retailers are fighting for a more modest minimum wage hike from the current $7.25/hour level than what Gap instituted.
- Canadian National Railway (CNI +1.4%) issues a notice to forestry customers that it is unable to take all their lumber shipments because of a backlog building at west coast container terminals.
- The lumber has been stuck in warehouses along British Columbia's coast after hundreds of truck drivers that drive containers filled with forestry products to Port Metro Vancouver walked off the job Monday.
- Lumber prices have not yet been affected, but the bottleneck means softwood lumber and other forestry products won't make it to market in the U.S. and Asia on schedule and companies who can't fulfill contracts to customers will forego revenue.
- Forestry producers already were seeing a slowdown in shipping: CNI has seen a 9.3% decline in forestry goods YTD, while smaller rival Canadian Pacific Railway (CP +1.5%) shipments have dropped 17%.
- The cash bonus pool grew to $26.7B in 2013, pushing the average cash bonus to $164,530, according to New York state's comptroller office. The boosted payouts came as profits at broker-dealer operations fell 30% to $16.7B (so cash bonuses exceeded profits?).
- The office's estimate is not exact as it only includes bonuses paid in NYC, and excludes stock options and other forms of deferred compensation.
- Related ETF: IAI
- Two underwriters tell Reuters King Digital's (KING) IPO will price on March 25, and begin trading the next day. The company is looking to raise $326M-$372M by selling 15.5M new shares, and is offering 6.7M shares on behalf of existing holders.
- King's $21-$24 price range implies a valuation range of $6.7B-$7.6B, or a fairly conservative 3.4x-3.8x 2013 bookings of $1.98B. The pricing undoubtedly reflects concerns about King's heavy dependence on Candy Crush Saga (responsible for 78% of Q4 bookings and 73% of December DAUs), in spite of the popularity achieved by several of the company's other titles.
- The New Yorker's James Surowiecki: "The company didn’t make eighty times more in 2013 because it had cracked a code; it just caught lightning in a bottle ... Development costs in the game-app world are very low ... As a public company, King will have to show shareholders consistent results and ever-growing profits."
- Peers Zynga (ZNGA +2.4%) and Glu Mobile (GLUU +4.2%) are moving higher today. Excluding cash/investments and the impact of the pending NaturalMotion deal, Zynga, whose bookings have nosedived over the last several quarters, trades at 4.9x 2013 bookings.
- Previous: King's Q4/2013 numbers
- Mebane Faber's Cambria ETF Trust has introduced the Cambria Global Value ETF (GVAL), the newest addition to its lineup.
- GVAL will track an index of global funds based on systematic quantitative screens and hopes to avoid overvalued markets.
- Other broad global ETFs: VT, ACWI, IOO, ONEF, DGT, FIGY, RWV, TOK, IEIL
- The National Retail Federation calls on Congress to pass legislation that would require online and remote sellers to collect local and state taxes.
- Top NRF exec David French told a House committee that out-of-state sellers sometimes have a 10% price and market advantage over brick-and-mortar local merchants.
- The Senate already passed legislation that would give each state the right to require sales tax collection, but legal battles have gone both ways. In Illinois, the State Supreme Court invalidated an online tax law.
- Related stocks: AMZN, OSTK, NILE, SALE, ECOM, EBAY.
- It's time to buy Rio Tinto (RIO +1.6%) after shares have dropped 8% in the past week thanks to falling iron ore prices, Societe Generale analysts say as it sees potential gains of more than 30%.
- The recent fall in iron ore prices, even if not reversed, should result in downward revision to near term consensus earnings forecasts but should not put meaningful downside pressure on longer term earnings forecasts for RIO, the firm says.
- RIO shares are trading on an implicit 2015 estimated P/E of 9.4x, well below BHP Billiton's (BHP) 13.8x, Antofagasta's (ANFGY) 18.9x, and Vedanta Resources' (VDNRF) 90.3x; the firm recommends investors buy RIO shares and hedge the risk by selling more steeply priced base metals producers.
- Moving forward with promised initiatives (35 of them) for partnerships between its investment bank and brokerage, Morgan Stanley (MS -1.3%) will combine the municipal bond trading desks or its institutional and wealth-management units, reports Bloomberg, citing an internal memo.
- "The joint venture will provide the broadest possible inventory and unmatched purchasing power," says the memo. "Combining our municipal inventory in a single balance sheet will enable us to enhance our risk-management discipline across the organization.”
- These partnerships are one plank of CEO Gorman's hope to double firm ROE this year.
- Goldman Sachs analyst Robert Jones adds his Buy-rated McKesson (MCK) to the firm's list of projected market-beating picks.
- MCK's recent acquisition of Celesio is the main reason for his enhanced outlook.
- His EPS estimates for 2014 and 2015 are $8.21 and $11.40, respectively. The consensus targets are $8.18 and $10.69.
12:15 PM| Comment!
- General Motors (GM -1%) will offer the 1.6M owners of the cars recalled due to an ignition switch issue a $500 cash allowance if they want to trade into a new vehicle.
- The cash allowance offer expires on April 30.
- All indications are that the automaker will be dealing with the backlash over its delayed disclosure of the issue for quite a while.
12:03 PM| Comment!