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What Are The Factors Increasing Home Values?

Since the onset of the pandemic, the U.S. housing market has been sizzling. Record-low interest rates created an unprecedented demand for housing, which only worsened a housing shortage that began before the pandemic. read more.....»»

Category: blogSource: benzingaOct 13th, 2021

GreenWood Investors 3Q21 Commentary: Defense, Offense & Conviction

GreenWood Investors commentary for the third quarter ended September 2021, titled, “Defense, Offense & Conviction.” Q3 2021 hedge fund letters, conferences and more When Defense Misfires “Offense wins games. Defense wins championships.” This past quarter, much of my curiosity has been focused on the differences between offense and defense. Given I’ve spent little time watching […] GreenWood Investors commentary for the third quarter ended September 2021, titled, “Defense, Offense & Conviction.” if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Series in PDF Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more When Defense Misfires “Offense wins games. Defense wins championships.” This past quarter, much of my curiosity has been focused on the differences between offense and defense. Given I’ve spent little time watching team sports, it’s been an interesting exploration. As my mind was occupied by defining an offensive playbook for our two coinvestments, we took our eyes off the ball of our protective, defense-oriented portfolio activities. The performance in the quarter was impacted by a 4% headwind generated by one particular short, which was the primary reason our fund underperformed indices in the quarter. While it was a painful lesson, we immediately evolved our short process in order to prevent our defensive measures from ever hurting our performance to such an extent going forward. Cutting to the chase, the performance in the quarter for the Global Micro Fund was -7.7% net (+30.5% YTD), and this compares to our benchmark MSCI ACWI index returning -1.1% in the quarter (+11.5% YTD). Without any FX headwinds, euro-denominated Luxembourg fund returned -3.3% net (+39.4% YTD). Separate account composites had similar returns, as Global Micro strategy returned -8.1% net (+15.0% YTD) and our longest-running and long-only Traditional accounts returned -6.8% net (16.5% YTD). The Builders Fund I returned -5.2% net in the quarter (+84.5% YTD) driven partially by foreign exchange. Builders Fund II, which was launched in the quarter, returned +3.0% net (+3.0% YTD). Aside from the one short mentioned, our returns were also impacted by corrections at Superdry PLC (LON:SDRY) and Peloton Interactive Inc (NASDAQ:PTON), each taking away roughly 2% from our performance in the quarter. They are both experiencing very different situations right now in the aftermath of Covid, but both are pressing their offense strategies with increased vigor. We remain undeterred with Superdry despite popular skepticism on the brand’s turnaround. Such perspectives look mismatched with a reinvigorated influencer strategy targeting a whole new generation, which have just driven same-store-sales to positive territory on a two-year stack. This is ahead of a pivotal autumn-winter season, when its jackets, coats and sweaters have traditionally shined. Having missed last winter due to Covid, we are excited to see the new product resonate with an entirely new base of consumers. We recently followed the Chairman and CEO’s insider buys, and purchased more shares on weakness. We continue to be encouraged by the progress made; and for a slightly longer discussion on where our thoughts are on Superdry, click here to see a tweet thread. Peloton has experienced a round trip of home workout demand back to pre-covid levels. Thus, while it is launching new products and new geographies, and retains an industry-leading engaged base of 6.2 million exercisers with low monthly subscription churn, this position will have to return to old fashioned marketing to continue on its path towards its incredibly ambitious goal of impacting 100 million users’s fitness routines every month.. With its customer satisfaction, as measured by the Net Promotor Score, remaining one of the highest, if not the highest, in the world, we would not bet against this heavily engaged cult of growing endorphin-filled users. We believe the company still has a very significant market opportunity to both attack and define. Revisiting The Defense Playbook “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.” Warren Buffett Stretching the offense and defense analogies over to investing, this past year has rewarded risk-taking (offensive) strategies, particularly those that are furthest out on the risk curve. But over the long-term, value-oriented investing wins the championship. That means taking a conservative underwriting approach to investment opportunities and maintaining a defensive posture when everyone else is doing the opposite. In our opinion, that also means running a short book, which allow us to remain opportunistic in periods of greater stress. It is not a good time to be reducing a defensive posture, in our opinion. Over the first 11 years of GreenWood’s existence, we have almost never been idea-constrained. Rather, we have been only constrained by the capacity we have to analyze the large opportunity set. That has typically meant, aside from the earliest years, we have had minimal cash left over. Given we have gravitated towards misunderstood assets and areas neglected by robotic index funds, not only does this portfolio tend to not carry a large cash balance, but it has exhibited more volatility than an index. Accordingly, carrying a short book is essential for us to be able to remain opportunistic in periods of stress. And quite frankly, our defense track record could use some improvement. While this defensive posture paid off in 2008, 2011, and 2018, we had few opportunistic shorts going into 2016 and 2020, right when we needed them. I’m personally committed to improving on that 3-2 market defense track record. I’m also committed to lowering any significant portfolio tilt towards specific factors, as our fundamental research capabilities are not able to be matched on a macroeconomic scale. There are too many factors and estimates to know anything on a large scale with any degree of certainty. For us, conviction is the most important function of an asset manager. It was with that intention we have been carrying a full short book ever since late 2020. And that short book largely paid off over the first half of this year, as the current environment has proved to be fertile in finding over-valued, value-less businesses. In fact, most of these shorts underperformed the market so quickly and so dramatically, that short book turnover caused Chris and I to run on a faster and faster treadmill throughout this year. When we found the short that ended up causing us so much pain in the quarter, it sounded too good to be true. It was a perfect offset to some of our chunkier portfolio factor exposures, but even more, it became clear this was not only a terrible business model, but it was likely a fraud. As Chris and I dug further into the business, there was a never-ending string of yarn that we kept pulling, and the more we pulled, the more damning the evidence was on the founder, company and target markets. In that excited process, we failed to appreciate the risk posed by the meme-trading phenomenon, in the assumption that an Italian company was unlikely to get caught up in the retail trading frenzy that has generated so many distortions elsewhere. Bypassing that debate proved to be our mistake, as the less liquid nature of the stock meant that it was more easily manipulated higher for a few months. As it was getting squeezed, I took action to eliminate that portfolio risk, even knowing that the stock would eventually go to zero. And in the wake of that experience, we also exited other shorts that had largely run their course, but that posed some possible retail trading risk. In our post-mortems, that are published on our investors-only research area, we identified one of the problems we were trying to solve for was the treadmill we found ourselves on. Because each piece of incremental evidence made it more and more compelling, we actually didn’t pause to have a proper bull-bear debate, which is what we have done for every other position. We had put too much pressure on ourselves to maintain a timely short book, and in many ways that papered over the obvious truth that the borrow was hard to obtain and liquidity was not accommodative. We revised our ranking framework to ensure there is a significantly higher bar for less liquid shorts in the future. Furthermore, we decided that any “gaps” in needed short exposure would more easily be filled immediately with index funds that could directly help offset some of the chunkier factor risks to our portfolio, namely European value stocks. We don’t intend to hold these index hedges forever, but believe it will help take pressure off of us to prematurely add new shorts to the portfolio. We have a lot of candidates in the backlog, but we are determined to ensure that we get the timing right as opposed to just the company thesis and factor exposure. At their core, our defensive moves should first do no harm. This analogy mirrors perhaps the most quoted Buffett lesson about rule number one, noted above. In that vein, our current short portfolio is comprised of large, liquid index constituents with very low short interests, cheap borrows, and are largely well-loved. Similar to most of our short positions in the past, they also have mounting liabilities as decades of unconscious behaviors or corruption have eroded the core values of the businesses. We recently published our research on two newer positions on our investor-only research site. These shorts have multiple catalysts over the next few quarters, that we believe, will cause both a material impact to their financials while also possibly downgrading the market’s behavioral narrative. More Conscious Than ESG “Sustainability is built into our business model. If we are focused on the long term, there is no conflict between profitability and the interests of stakeholders. If you are focused on the short term, there is. It’s that simple!” Sir Martin Sorrell Most importantly, these two businesses that we are short have some deeply unconscious features. While each case is different, this means that we’ve found evidence of corruption or deliberate sales of defective or toxic products for decades prior to being discontinued. All of these behaviors are only now catching up to these companies and present material downside risks to these businesses that have historically been run for short-term profit maximization as opposed to long-term value creation or innovation. These are the kinds of companies that are causing the ESG movement to gain major traction around the world. But while we applaud action being taken on protecting the environment, the ESG movement is not solving the root of the problem. The movement is addressing the symptoms rather than the causes. In a white paper that I can’t wait to publish, we’ll show evidence that the fundamental issue facing business today is one of unaccountable agents seeking immediate gratification. There’s a lack of ownership and accountability in a market that continues to outsource much of the “ratings” to agents. Large funds managed by agents with no skin in the game are relying on ratings agencies, also with no skin in the game, to dictate qualitative criteria that often don’t tie to value creation, but rather liability minimization. And that is important, but not sufficient on its own. It is defense without the offense. Or sometimes, it’s all marketing covering up flimsy foundations. Owners or founders exhibit more long-term, conscious capitalist behavior. They generally don’t give quarterly profit guidance, and instead prefer to focus on their customer satisfaction and employee morale. They invest more in their own businesses rather than paying that capital out to shareholders or to acquisition targets. Great shareholder returns are the result of a highly conscious business model, not the goal in and of itself. Exhibit 1: Builders Have Happier Customers & More Engaged Employees Source: GreenWood Investors, OO = owner operators, DC = dual share class structures, S&P = S&P 1200 Global Index But what does it mean actually to be conscious? That’s the subject that Anil Seth seeks to answer in his latest work, Being You. In seeking to demystify the mystery of consciousness, he discusses the most robust model that has been put forward for understanding and measuring how conscious an organism is. Integration information theory (IIT) postulates that consciousness is measured by the degree to which information is integrated into a system or action. Seth explains, “This underpins the main claim of the theory, which is that a system is conscious to the extent that its whole generates more information than its parts.” This concept struck me, as it has many direct parallels to well-worn concepts in investing. Of course it makes sense that the more conscious an organization is, the better it is at integrating information into action. But what really struck me here is that using this IIT framework- an organization is only conscious if the whole is greater than the sum of its parts. To me this infers that if the parts of a business don’t come together to produce something more powerful or valuable than the sum of those individual units, segments or components, the business is not a conscious business. Seth later explained how conscious perceptions are largely built from best guesses and confidence. A key insight of Bayesian inference is that perception is largely a function of updating beliefs about the world based on the precision and reliability of new information. Our minds seek to eliminate prediction errors everywhere and all the time, and we do so by converging our beliefs to the level of conviction we have in the information. In this age of ubiquitous and free information, we differentiate ourselves by the level of conviction we have in the quality and reliability of the insights we have. Conviction is the key. And as Seth later demonstrated, such insights are virtually worthless if not paired with action. This echoes the sentiment that Warren Buffett expressed in talking about getting fat pitches in one’s career, and that one must “swing big,” as they don’t happen very often. This is indeed why we are “swinging big” with Coinvestment II, as this is one of the fattest pitches we’ve ever been thrown. Moving From Defense to Offense “High expectations are the key to everything.” -Sam Walton As my mind was more occupied with offensive capital allocation strategies in the quarter, this pairing of action with insight particularly spoke to me, highly conscious offense playbook strategies are rare. Instead the norm is that most offensive actions are typically made from a defensive motive, and are not based on novel insights. As I wrote in last year’s fourth quarter letter, we endeavor to only get involved in turnaround situations where we either have a board presence, or where a founder or owner operates the business. In our view, these managers have been more resilient in defending their businesses from adversity. Simply put, they cannot just give up and move on. As Covid ripped through the world and economies, far too many managers decided to give up. In the depths of the Covid crisis, at the Presidential inauguration ceremony, National Youth Poet Laureate Amanda Gorman articulated rather eloquently that, “Your optimism will never be as powerful as it is in that exact moment when you want to give it up.” Founders are inherently optimistic, and they don’t give up. In exploring the differences between defense and offense, I’ve come to realize that it is even more important to have an owner-oriented management culture when moving from defense to offense. Defense is inherently reactive, reacting to “known knowns” or “known unknowns.” Reactions are easier than proaction. Traditional boards are typically very good at liability minimization. But as important as liability reduction is, these actions do not create value. New business and invention is inherently venturing into the unknown, seeing what others don’t, and pursuing the path untravelled. It comes naturally to a founder or owner, whose authorship imbues the business with the optimistic, entrepreneurial impulse that often started it in the first place. As my friend Bill Carey has articulated, most managers compensated via stock options act more like stock brokers as opposed to owners. Similar to brokers, their time horizons have shrunk considerably. They are simply rent-seeking for a short period of time. And as my friend Chris Mayer likes to say, “no one washes a rental.” Our research on the differences in the behaviors of owner operators and these renters, shows these renters are not very good at offense strategies either. They are very good at competitive reactions, cost cutting and margin optimization. These are important, just as any defense strategy is, but they typically fail to create any lasting value. The value that is captured from these tools generally only lasts as long as the brief period in which the manager’s stock options vest. Given 70-90% of mergers and acquisitions fail, and stock repurchases have taken a notably pro-cyclical, buy-high, sell-low, history, these renters have a typically poor track record in value-creating initiatives and capital deployment. This short-term rental behavior often results in mediocre outcomes. As the late great Sergio Marchionne regularly reminded, “mediocrity is not worth the trip.” Marchionne acted like an owner even before he was one. And he created so much value that his net worth neared $1 billion when he shuffled off this mortal coil. While much of that was indeed generated by options that he exercised, such options were struck at twice and three times the level at which he came in to rescue Fiat in 2004. His package inspired the design of CTT’s options package for top and first level managers. Sergio was very good at seeing things others didn’t. He and his venerable team of managers, to whom he dedicated so much of his energy, were very good at transforming ignored products and assets into gold. Of particular note, Jeep grew from just over 2%of the market in the US to just under 6% when he passed- and it became a truly global brand. He invented Ferrari’s Icona series, which made the irregular limited edition profits part of the regular P&L of the brand without diluting the exclusivity of such models. He and parent holding company Exor have continued to provide much of the inspiration behind our activities with both coinvestments. We endeavor to replicate their divide & conquer strategy, which allowed the Fiat Group to become stronger as stand-alone Fiat-Chrysler (now Stellantis), Ferrari, CNH, and soon to be Iveco Group. Just as Sergio advised the few believers throughout his career, investors will be “owning multiple pieces of paper” as the journey unfolds. In hindsight, we can all agree on the value creation prowess of him and his team. But we easily forget that for most of his career, he was faced mostly by skeptics and doubters. He was not afraid to look dumb. In his own words, “A lot of what I do is challenge assumptions . . . which often looks like you are asking stupid questions.” Being entrepreneurial, by definition, means taking the path untraveled, and heading into the unknown with daring boldness. Offense playbooks, by design, must take competition by surprise. Coming from a humble place with brands and companies that were ridiculed by competitors, when Sergio put medium-term plans out to the market, they were not timid. He would always aim higher than anyone, especially his competitors, believed he and his team could reach. And while not every target was always achieved, the formidable results speak for themselves. This past earnings season, as Twitter was the only social media company to deliver on guidance while also confirming the quarter ahead to be at least as good, the stock sold off materially as its monetizable daily active user (MDAU) targets in the medium-term were called into question. While founder Jack Dorsey is clearly unafraid to look foolish to the public, or even in front of congress, he also manages multiple businesses at the same time. Competitors openly make fun of him. But his team is exceptionally loyal to him, and they have set out very ambitious targets for themselves over the next few years. The recent sell-off in Twitter shares was like deja vu all over again, as I reminisced about the Fiat capital markets day in 2014, fittingly on Twitter in this tweet thread. With its product and revenue servers rebuilt, it can now innovate and launch new ad formats faster than ever before. We look forward to the Twitter team pressing its offense strategy as a major peer loses focus on its core business. Into The Unknown “Action is inseparable from perception. Perception and action are so tightly coupled that they determined and define each other. Every action alters perception by changing the incoming sensory data, and every perception is the way it is in order to help guide action. There is simply no point to perception in the absence of action.” Anil Seth, Being You What does it mean to move into offense? One thing very clear to us, is that it has to be a dynamic and reflexive approach. It cannot be built into a three or five year plan and remain fixed over that duration. As Anil Seth’s work on consciousness explains, a highly conscious being is constantly ingesting and integrating information, evolving actions based on reliability, precision and conviction. As capital-markets focused investors, we believe one of the highest values we can provide to our companies is information that can be integrated into their offense and defense playbooks. Thanks to our collaborative approach, we get nearly daily recommendations and thoughts from our investors with new information, new case studies, and new suggestions on how to continue iterating. One of the biggest differentiations between good and great investments, that is often overlooked, is the value added by good capital allocation- be it with a very well-done merger, opportunistic buyback or even more, venture-style investments that are almost in no one’s “model” or perception. Small acquisitions that bring new tools and managers can often upgrade the business model. As Clayton Christensen suggested in The Big Idea: The New M&A Playbook, these are often the most overlooked investments. But during the quarter, when posed with the question of how to best allocate capital over the long term, I found myself tongue tied. For it’s a dynamic and reflexive question to ask. It’s easy to see what to do right now, and where to build in the next few years. But sound capital allocation is a function of the opportunities that present themselves. It is also about creating new possibilities, particular ones that competitors don’t see. At CTT, with defensive, problem-solving actions becoming less of a focus, attention can now turn to offense. What that looks like in the near term, at least to me, should be continued progress and convergence on the strategy to become the Shopify of Iberia. With Portugal e-commerce order frequency at very small fractions of neighboring Spain, we believe it is CTT’s responsibility to make itself the most convenient and most cost effective way of conducting commerce. Through more parcel lockers, better digital tools, while maintaining or improving on best-in-class quality of service, we believe much of the responsibility to make online the most convenient commerce channel in Portugal will fall on CTT’s shoulders. Going further with online shop enabling, more cost effective payments tools, and an integrated fulfillment offer, that continues through to returns and customer service, it has every tool it needs to enable this digital transition. This convergence is happening at the same time EU recovery stimulus dollars will be directed towards digitalizing the economy. Case studies like Kaspi, which started as a bank, evolved into a payments company, then launched an e-commerce marketplace and then further expanded into logistics, provide more inspiration than any company in the logistics industry. This reminds me of Google’s earliest days, when its managers encouraged their teams to ignore the traditional competitors and instead go where other competitors hadn’t dared to venture- into the unknown. We believe CTT has greater competitive advantages than some “new economy” companies playing throughout the same e-commerce value chain, often trading at significantly higher valuation multiples. Whether we’re talking about fulfillment services, parcel lockers, or alternative purchase financing, it’s the customer relationship that differentiates and builds competitive advantages. That is why one of the first priorities of the new management was to improve customer satisfaction. And while some analysts that cover the company still use traditional methods to frame the opportunity, the shareholder base has largely transitioned away from income-oriented investors. More like-minded shareholders, aligned with management, can enable the team to build something truly great. Building Great Companies “The urgency of doing. Knowing is not enough; we must apply. Being willing is not enough; we must do.” DaVinci What started for us as an approach to separate the bank from the industrial company, and achieve a sum of parts valuation, has been upgraded to that of building a great compound machine. As Exor articulated in 2019, its purpose to “build great companies,” is an aspirational philosophy for us. While we certainly aren’t doing the building here, perhaps through setting the right strategic priorities, incentives, and providing timely and right information, we can assist in the build underway. Exor has provided an exemplary model of how to enable its teams to build greater value by dividing, conquering, and then often later combining with more synergistic peers. Just like Anil Seth described, the whole must be greater than the sum of the parts in a highly conscious organization. When a company’s sum of the parts is greater than the total, the organization is not conscious, and therefor not capable of adding material value. Just as Exor has executed masterfully in its portfolio companies over the past decade, the path forward is one of both dividing and one of conquering. Extending the business and commerce services that CTT provides is a natural offense-oriented positioning that further reinforces the strength of the whole. But there are other parts of this organization that aren’t adding as much to the sum total- those can, and should be separated to pursue their own offense playbooks in a more focused and agile manner. Such an approach goes well beyond ESG, and it goes well beyond most other broker-oriented management teams. It is a highly conscious capitalist approach, aligned with long term value creation and sustainability. And that process should result in considerable returns as an effect, not as a goal. As owner operators’ short, medium, and long term benchmark outperformance demonstrates, this strong alignment between management and ownership is a championship-winning combination. Exhibit 2: Owner Operators’ Stock Index Outperformance Source: GreenWood Investors In the months ahead, we anticipate thoroughly engaging with the management and board of the target at the Builders Fund II. This company is mirroring CTT’s current posture, in that it is in the process of finishing nearly a decade of defense-oriented actions. After years of strategic actions focused on fixing problematic areas, contracts or business dynamics, most of these reactive or defensive actions are increasingly passing into the rearview mirror. It is entering a new phase of life in a position to also divide and conquer, and it has exceptional assets. With both coinvestments representing a substantial portion of our net exposure, we move forward with conviction. While this quarter was a lesson that we, nor our companies, can lose sight of a strong defense strategy, we are increasingly looking forward to our portfolio pressing offense strategies moving forward. Committed to deliver, Steven Wood, CFA GreenWood Investors Updated on Nov 24, 2021, 4:37 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 24th, 2021

Deere Reports Net Income of $1.283 Billion for Fourth Quarter, $5.963 Billion for Fiscal Year

MOLINE, Ill., Nov. 24, 2021 /PRNewswire/ -- Fourth-quarter net income rises on net sales gain of 19%, demonstrating solid execution and benefits of operating model. UAW contract agreement shows commitment to Deere's workforce. Full-year 2022 earnings forecast to be $6.5 to $7.0 billion, reflecting healthy demand. Deere & Company (NYSE:DE) reported net income of $1.283 billion for the fourth quarter ended October 31, 2021, or $4.12 per share, compared with net income of $757 million, or $2.39 per share, for the quarter ended November 1, 2020. For fiscal year 2021, net income attributable to Deere & Company was $5.963 billion, or $18.99 per share, compared with $2.751 billion, or $8.69 per share, in fiscal 2020. Worldwide net sales and revenues increased 16 percent, to $11.327 billion, for the fourth quarter of fiscal 2021 and rose 24 percent, to $44.024 billion, for the full year. Equipment operations net sales were $10.276 billion for the quarter and $39.737 billion for the year, compared with corresponding totals of $8.659 billion and $31.272 billion in 2020. "Deere's strong fourth-quarter and full-year performance was delivered by our dedicated employees, dealers, and suppliers throughout the world, who have helped safely maintain our operations and serve customers," said John C. May, chairman and chief executive officer. "Our results reflect strong end-market demand and our ability to continue serving customers while managing supply-chain issues and conducting contract negotiations with our largest union. Last week's ratification of a 6-year agreement with the UAW brings our highly skilled employees back to work building the finest products in our industries. The agreement shows our ongoing commitment to delivering best-in-class wages and benefits." Company Outlook & Summary Net income attributable to Deere & Company for fiscal 2022 is forecasted to be in a range of $6.5 billion to $7.0 billion. "Looking ahead, we expect demand for farm and construction equipment to continue benefiting from positive fundamentals, including favorable crop prices, economic growth, and increased investment in infrastructure," May said. "At the same time, we anticipate supply-chain pressures will continue to pose challenges in our industries. We are working closely with our suppliers to address these issues and ensure that our customers can deliver essential food and infrastructure more profitably and sustainably." Deere & Company Fourth Quarter Full Year $ in millions 2021 2020 % Change 2021 2020 % Change Net sales and revenues $ 11,327 $ 9,731 16% $ 44,024 $ 35,540 24% Net income $ 1,283 $ 757 69% $ 5,963 $ 2,751 117% Fully diluted EPS $ 4.12 $ 2.39 $ 18.99 $ 8.69 Net income in the fourth quarter and full-year 2020 was negatively affected by impairment charges and employee-separation costs of $211 million and $458 million after-tax, respectively. In addition, net income was unfavorably affected by discrete adjustments to the provision for income taxes in both periods of 2020. Equipment Operations Fourth Quarter $ in millions 2021 2020 % Change Net sales $ 10,276 $ 8,659 19% Operating profit $ 1,393 $ 1,056 32% Net income $ 1,056 $ 571 85% For a discussion of net sales and operating profit results, see the production and precision agriculture, small agriculture and turf, and construction and forestry sections below. Production & Precision Agriculture Fourth Quarter $ in millions 2021 2020 % Change Net sales $ 4,661 $ 3,801 23% Operating profit $ 777 $ 578 34% Operating margin 16.7% 15.2% Production and precision agriculture sales increased for the quarter due to higher shipment volumes and price realization. Operating profit rose primarily due to price realization and improved shipment volumes / mix. These items were partially offset by higher production costs. Results for fourth-quarter 2020 were negatively impacted by employee-separation expenses.   Small Agriculture & Turf Fourth Quarter $ in millions 2021 2020 % Change Net sales $ 2,809 $ 2,397 17% Operating profit $ 346 $ 282 23% Operating margin 12.3% 11.8% Small agriculture and turf sales increased for the quarter due to higher shipment volumes and price realization. Operating profit rose primarily due to improved shipment volumes / mix and price realization. These items were partially offset by higher production costs and higher research and development and selling, administrative, and general expenses. Employee-separation expenses and impairments negatively impacted the fourth quarter of 2020.   Construction & Forestry Fourth Quarter $ in millions 2021 2020 % Change Net sales $ 2,806 $ 2,461 14% Operating profit $ 270 $ 196 38% Operating margin 9.6% 8.0% Construction & Forestry sales moved higher for the quarter primarily due to higher shipment volumes and price realization. Operating profit improved mainly due to price realization and higher sales volume / mix. Partially offsetting these factors were increases in production costs and higher selling, administrative, and general and research and development expenses. Fourth-quarter 2020 results were adversely affected by employee-separation expenses and impairments.   Financial Services Fourth Quarter $ in millions 2021 2020 % Change Net income $ 227 $ 186 22% Net income for financial services in the quarter rose mainly due to income earned on a higher average portfolio and favorable financing spreads, as well as improvements on operating-lease residual values. These factors were partially offset by a higher provision for credit losses. Results in 2020 also were affected by employee-separation costs. Industry Outlook for Fiscal 2022 Agriculture & Turf U.S. & Canada: Large Ag Up ~ 15% Small Ag & Turf  ~ Flat Europe Up ~ 5% South America (Tractors & Combines) Up ~ 5% Asia  ~ Flat Construction & Forestry U.S. & Canada: Construction Equipment Up 5 to 10% Compact Construction Equipment Up 5 to 10% Global Forestry Up 10 to 15%   Deere Segment Outlook for Fiscal 2022 Currency Price $ in millions Net Sales Translation Realization Production & Precision Ag Up 20 to 25% 0% +9% Small Ag & Turf Up 15 to 20% -1% +7% Construction & Forestry Up 10 to 15% 0% +8% Financial Services Net Income $870 Financial Services. Fiscal-year 2022 net income attributable to Deere & Company for the financial services operations is forecast to be approximately $870 million. Results are expected to be slightly lower than fiscal 2021 due to a higher provision for credit losses, lower gains on operating-lease residual values, and higher selling, general, and administrative expenses. These factors are expected to be partially offset by income earned on a higher average portfolio. John Deere Capital Corporation The following is disclosed on behalf of the company's financial services subsidiary, John Deere Capital Corporation (JDCC), in connection with the disclosure requirements applicable to its periodic issuance of debt securities in the public market. Fourth Quarter Full Year $ in millions 2021 2020 % Change 2021 2020 % Change Revenue $ 673 $ 693 -3% $ 2,688 $ 2,808 -4% Net income $ 181 $ 154 18% $ 711 $ 425 67% Ending portfolio balance $ 41,488 $ 38,726 7% Net income for the fourth quarter of fiscal 2021 was higher than in the fourth quarter of 2020 primarily due to income earned on higher average portfolio balances and improvements on operating-lease residual values. These factors were partially offset by a higher provision for credit losses. Fourth-quarter 2020 results were also negatively impacted by employee-separation expenses. Full-year 2021 net income was higher than in 2020 due to improvements on operating-lease residual values, a lower provision for credit losses, favorable financing spreads, and income earned on a higher average portfolio. Full-year 2020 results also included impairments on lease residual values. Safe Harbor Statement Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:  Statements under "Company Outlook & Summary," "Industry Outlook for Fiscal 2022," "Deere Segment Outlook (Fiscal 2022)," and other forward-looking statements herein that relate to future events, expectations, and trends involve factors that are subject to change and risks and uncertainties that could cause actual results to differ materially. Some of these risks and uncertainties could affect particular lines of business, while others could affect all of the company's businesses. The company's agricultural equipment businesses are subject to a number of uncertainties, including certain factors that affect farmers' confidence and financial condition. These factors include demand for agricultural products; world grain stocks; weather conditions and the effects of climate change; soil conditions; harvest yields; prices for commodities and livestock; crop and livestock production expenses; availability of transport for crops (including as a result of reduced state and local transportation budgets); trade restrictions and tariffs (e.g., China); global trade agreements; the level of farm product exports (including concerns about genetically modified organisms); the growth and sustainability of non-food uses for some crops (including ethanol and biodiesel production); real estate values; available acreage for farming; land ownership policies of governments; changes in government farm programs and policies; international reaction to such programs; changes in and effects of crop insurance programs; changes in environmental regulations and their impact on farming practices; animal diseases (e.g., African swine fever) and their effects on poultry, beef, and pork consumption and prices and on livestock feed demand; crop pests and diseases; and the impact of the COVID pandemic on the agricultural industry including demand for, and production and exports of, agricultural products, and commodity prices.  The production and precision agriculture business is dependent on agricultural conditions, and relies in part on hardware and software, guidance, connectivity and digital solutions, and automation and machine intelligence. Many factors contribute to the company's precision agriculture sales and results, including the impact to customers' profitability and/or sustainability outcomes; the rate of adoption and use by customers; availability of technological innovations; speed of research and development; effectiveness of partnerships with third parties; and the dealer channel's ability to support and service precision technology solutions. Factors affecting the company's small agriculture and turf equipment operations include agricultural conditions; consumer confidence; weather conditions and the effects of climate change; customer profitability; labor supply; consumer borrowing patterns; consumer purchasing preferences; housing starts and supply; infrastructure investment; spending by municipalities and golf courses; and consumable input costs. Factors affecting the company's construction and forestry equipment operations include consumer spending patterns; real estate and housing prices; the number of housing starts; interest rates; commodity prices such as oil and gas; the levels of public and non-residential construction; and investment in infrastructure. Prices for pulp, paper, lumber, and structural panels affect sales of forestry equipment. Many of the factors affecting the production and precision agriculture, small agriculture and turf, and construction and forestry segments have been and may continue to be impacted by global economic conditions, including those resulting from the COVID pandemic and responses to the pandemic taken by governments and other authorities. All of the company's businesses and its results are affected by general economic conditions in the global markets and industries in which the company operates; customer confidence in general economic conditions; government spending and taxing; foreign currency exchange rates and their volatility, especially fluctuations in the value of the U.S. dollar; interest rates (including the availability of IBOR reference rates); inflation and deflation rates; changes in weather and climate patterns; the political and social stability of the global markets in which the company operates; the effects of, or response to, terrorism and security threats; wars and other conflicts; natural disasters; and the spread of major epidemics or pandemics (including the COVID pandemic) and government and industry responses to such epidemics or pandemics, such as travel restrictions and extended shut downs of businesses. Continued uncertainties related to the magnitude, duration, and persistent effects of the COVID pandemic may significantly adversely affect the company's business and outlook. These uncertainties include, among other things: the duration and impact of the resurgence in COVID cases in any country, state, or region; the emergence, contagiousness, and threat of new and different strains of virus; the availability, acceptance, and effectiveness of vaccines; additional closures as mandated or otherwise made necessary by governmental authorities; disruptions in the supply chain, including those caused by industry capacity constraints, material availability, and global logistics delays and constraints arising from, among other things, the transportation capacity of ocean shipping containers, and a prolonged delay in resumption of operations by one or more key suppliers, or the failure of any key suppliers; an increasingly competitive labor market due to a sustained labor shortage or increased turnover caused by COVID pandemic; the company's ability to meet commitments to customers on a timely basis as a result of increased costs and supply and transportation challenges; increased logistics costs; additional operating costs due to continued remote working arrangements, adherence to social distancing guidelines, and other COVID-related challenges; increased risk of cyber-attacks on network connections used in remote working arrangements; increased privacy-related risks due to processing health-related personal information; legal claims related to personal protective equipment designed, made, or provided by the company or alleged exposure to COVID on company premises; absence of employees due to illness; and the impact of the pandemic on the company's customers and dealers. The sustainability of the economic recovery observed in 2021 remains unclear and significant volatility could continue for a prolonged period. These factors, and others that are currently unknown or considered immaterial, could materially and adversely affect our business, liquidity, results of operations, and financial position. Significant changes in market liquidity conditions, changes in the company's credit ratings, and any failure to comply with financial covenants in credit agreements could impact access to funding and funding costs, which could reduce the company's earnings and cash flows. Financial market conditions could also negatively impact customer access to capital for purchases of the company's products and customer confidence and purchase decisions, financing and repayment practices, and the number and size of customer delinquencies and defaults. A debt crisis in Europe, Latin America, or elsewhere could negatively impact currencies, global financial markets, social and political stability, funding sources and costs, asset and obligation values, customers, suppliers, demand for equipment, and company operations and results. The company's investment management activities could be impaired by changes in the equity, bond, and other financial markets, which would negatively affect earnings. Continued effects of the withdrawal of the United Kingdom from the European Union could adversely affect business activity, political stability, and economic conditions in the United Kingdom, the European Union, and elsewhere. The economic conditions and outlook could be further adversely affected by (i) uncertainty regarding any new or modified trade arrangements between the United Kingdom and the European Union and/or other countries; (ii) the risk that one or more other European Union countries could come under increasing pressure to leave the European Union; or (iii) the risk that the euro as the single currency of the eurozone could cease to exist. Any of these developments could affect our businesses, liquidity, results of operations, and financial position. Additional factors that could materially affect the company's operations, access to capital, expenses, and results include changes in, uncertainty surrounding, and the impact of governmental trade, banking, monetary, and fiscal policies, including financial regulatory reform and its effects on the consumer finance industry, derivatives, funding costs, and other areas; the potential default of the U.S. federal government if Congress fails to pass a fiscal 2022 budget resolution; governmental programs, policies, and tariffs for the benefit of certain industries or sectors; sanctions in particular jurisdictions; retaliatory actions to such changes in trade, banking, monetary, and fiscal policies; actions by central banks; actions by financial and securities regulators; actions by environmental, health, and safety regulatory agencies, including those related to engine emissions, carbon and other greenhouse gas emissions, noise, and the effects of climate change; changes to GPS radio frequency bands or their permitted uses; changes in labor and immigration regulations; changes to accounting standards; changes in tax rates, estimates, laws, and regulations and company actions related thereto; changes to and compliance with privacy, banking, and other regulations; changes to and compliance with economic sanctions and export controls laws and regulations; compliance with U.S. and foreign laws when expanding to new markets and otherwise; and actions by other regulatory bodies. Other factors that could materially affect the company's results include production, design, and technological innovations and difficulties, including capacity and supply constraints and prices; the loss of or challenges to intellectual property rights, whether through theft, infringement, counterfeiting, or otherwise; the availability and prices of strategically sourced materials, components, and whole goods; delays or disruptions in the company's supply chain or the loss of liquidity by suppliers; disruptions of infrastructures that support communications, operations, or distribution; the failure of customers, dealers, suppliers, or the company to comply with laws, regulations, and company policy pertaining to employment, human rights, health, safety, the environment, sanctions, export controls, anti-corruption, privacy and data protection, and other ethical business practices; introduction of legislation that could affect the company's business model and intellectual property, such as right to repair or right to modify; events that damage the company's reputation or brand; significant investigations, claims, lawsuits, or other legal proceedings; start-up of new plants and products; the success of new product initiatives or business strategies; changes in customer product preferences and sales mix; gaps or limitations in rural broadband coverage, capacity, and speed needed to support technology solutions; oil and energy prices, supplies, and volatility; the availability and cost of freight; actions of competitors in the various industries in which the company competes, particularly price discounting; dealer practices, especially as to levels of new and used field inventories; changes in demand and pricing for used equipment and resulting impacts on lease residual values; labor relations and contracts, including work stoppages and other disruptions; changes in the ability to attract, develop, engage, and retain qualified personnel; acquisitions and divestitures of businesses; greater-than-anticipated transaction costs; the integration of new businesses; the failure or delay in closing or realizing anticipated benefits of acquisitions, joint ventures, or divestitures; the inability to deliver precision technology and agricultural solutions to customers; the implementation of the smart industrial operating model and other organizational changes; the failure to realize anticipated savings or benefits of cost reduction, productivity, or efficiency efforts; difficulties related to the conversion and implementation of enterprise resource planning systems; security breaches, cybersecurity attacks, technology failures, and other disruptions to the information technology infrastructure of the company and its suppliers and dealers; security breaches with respect to the company's products; changes in company-declared dividends and common stock issuances and repurchases; changes in the level and funding of employee retirement benefits; changes in market values of investment assets, compensation, retirement, discount, and mortality rates which impact retirement benefit costs; and significant changes in health care costs. The liquidity and ongoing profitability of John Deere Capital Corporation and the company's other financial services subsidiaries depend largely on timely access to capital in order to meet future cash flow requirements, and to fund operations, costs, and purchases of the company's products. If general economic conditions deteriorate or capital markets become more volatile, funding could be unavailable or insufficient. Additionally, customer confidence levels may result in declines in credit applications and increases in delinquencies and default rates, which could materially impact write-offs and provisions for credit losses. The company's forward-looking statements are based upon assumptions relating to the factors described above, which are sometimes based upon estimates and data prepared by government agencies. Such estimates and data are often revised. The company, except as required by law, undertakes no obligation to update or revise its forward-looking statements, whether as a result of new developments or otherwise. Further information concerning the company and its businesses, including factors that could materially affect the company's financial results, is included in the company's other filings with the SEC (including, but not limited to, the factors discussed in Item 1A. Risk Factors of the company's most recent annual report on Form 10-K and quarterly reports on Form 10-Q).   DEERE & COMPANY FOURTH QUARTER 2021 PRESS RELEASE (In millions of dollars) Unaudited Three Months Ended Years Ended October 31 November 1 % October 31 November 1 % 2021 2020 Change 2021 2020 Change Net sales and revenues: Production & precision ag net sales $ 4,661 $ 3,801 +23 $ 16,509 $ 12,962 +27 Small ag & turf net sales 2,809 2,397 +17 11,860 9,363 +27 Construction & forestry net sales 2,806 2,461 +14 11,368 8,947 +27 Financial services 869 891 -2 3,548 3,589 -1 Other revenues 182 181 +1 739 679 +9 Total net sales and revenues $ 11,327 $ 9,731 +16 $ 44,024 $ 35,540 +24 Operating profit: * Production & precision ag $ 777 $ 578 +34 $ 3,334 $ 1,969 +69 Small ag & turf 346 282 +23 2,045 1,000 +105 Construction & forestry 270 196 +38 1,489 590 +152 Financial services 299 249 +20 1,144 746 +53 Total operating profit 1,692 1,305 +30 8,012 4,305 +86 Reconciling items ** (78) (219) -64 (390) (472) -17 Income taxes (331) (329) +1 (1,659) (1,082) +53 Net income attributable to Deere & Company $ 1,283 $ 757 +69 $ 5,963 $ 2,751 +117 * Operating profit is income from continuing operations before corporate expenses, certain external interest expense, certain foreign exchange gains and losses, and income taxes. Operating profit of the financial services segment includes the effect of interest expense and foreign exchange gains or losses. ** Reconciling items are primarily corporate expenses, certain external interest expense, certain foreign exchange gains and losses, pension and postretirement benefit costs excluding the service cost component, and net income attributable to noncontrolling interests.   DEERE & COMPANY STATEMENT OF CONSOLIDATED INCOME For the Three Months Ended October 31, 2021 and November 1, 2020 (In millions of dollars and shares except per share amounts) Unaudited  2021 2020 Net Sales and Revenues Net sales $ 10,276 $ 8,659 Finance and interest income 828 867 Other income 223 205 Total 11,327 9,731 Costs and Expenses Cost of sales 7,809 6,470 Research and development expenses 450 443 Selling, administrative and general expenses 936 1,011 Interest expense 210 278 Other operating expenses 309 414 Total 9,714 8,616 Income of Consolidated Group before Income Taxes 1,613 1,115 Provision for income taxes 330 329 Income of Consolidated Group 1,283 786 Equity in income (loss) of unconsolidated affiliates 1 (28) Net Income 1,284 758 Less: Net income attributable to noncontrolling interests 1 1 Net Income Attributable to Deere & Company $ 1,283 $ 757 Per Share Data Basic $ 4.15 $ 2.41 Diluted $ 4.12 $ 2.39 Average Shares Outstanding Basic 309.1 314.1 Diluted 311.5 317.1 See Condensed Notes to Consolidated Financial Statements.   DEERE & COMPANY STATEMENT OF CONSOLIDATED INCOME For the Years Ended October 31, 2021 and November 1, 2020 (In millions of dollars and shares except per share amounts) Unaudited 2021 2020 Net Sales and Revenues Net sales $ 39,737 $ 31,272 Finance and interest income 3,296 3,450 Other income 991 818 Total 44,024 35,540 Costs and Expenses Cost of sales 29,116 23,677 Research and development expenses 1,587 1,644 Selling, administrative and general expenses 3,383 3,477 Interest expense 993 1,247 Other operating expenses 1,343 1,612 Total 36,422 31,657 Income of Consolidated Group before Income Taxes 7,602 3,883 Provision for income taxes 1,658 1,082 Income of Consolidated Group 5,944 2,801 Equity in income (loss) of unconsolidated affiliates 21 (48) Net Income 5,965 2,753 Less: Net income attributable to noncontrolling interests 2 2 Net Income Attributable to Deere & Company $ 5,963 $ 2,751 Per Share Data Basic $ 19.14 $ 8.77 Diluted $ 18.99 $ 8.69 Average Shares Outstanding Basic 311.6 313.5 Diluted 314.0 316.6 See Condensed Notes to Consolidated Financial Statements.   DEERE & COMPANY CONDENSED CONSOLIDATED BALANCE SHEET As of October 31, 2021 and November 1, 2020 (In millions of dollars) Unaudited  2021 2020 Assets Cash and cash equivalents $ 8,017 $ 7,066 Marketable securities 728 641 Receivables from unconsolidated affiliates 27 31 Trade accounts and notes receivable - net 4,208 4,171 Financing receivables - net 33,799 29,750 Financing receivables securitized - net 4,659 4,703 Other receivables 1,738 1,220 Equipment on operating leases - net 6,988 7,298 Inventories 6,781 4,999 Property and equipment - net 5,820 5,817 Investments in unconsolidated affiliates 175 193 Goodwill 3,291 3,081 Other intangible assets - net 1,275 1,327 Retirement benefits 3,601 863 Deferred income taxes 1,037 1,499 Other assets 1,970 2,432 Total Assets $ 84,114 $ 75,091 Liabilities and Stockholders' Equity Liabilities Short-term borrowings $ 10,919 $ 8,582 Short-term securitization borrowings 4,605 4,682 Payables to unconsolidated affiliates 143 105 Accounts payable and accrued expenses 12,205 10,112 Deferred income taxes 576 519 Long-term borrowings 32,888 32,734 Retirement benefits and other liabilities 4,344 5,413 Total liabilities 65,680 62,147 Stockholders' Equity Total Deere & Company stockholders' equity 18,431 12,937 Noncontrolling interests 3 7 Total stockholders' equity 18,434 12,944 Total Liabilities and Stockholders' Equity $ 84,114 $ 75,091 See Condensed Notes to Consolidated Financial Statements.   DEERE & COMPANY STATEMENT OF CONSOLIDATED CASH FLOWS For the Years Ended October 31, 2021 and November 1, 2020 (In millions of dollars) Unaudited 2021 2020 Cash Flows from Operating Activities Net income $ 5,965 $ 2,753 Adjustments to reconcile net income to net cash provided by operating activities: Provision (credit) for credit losses (6) 110 Provision for depreciation and amortization 2,050 2,118 Impairment charges 50 194 Share-based compensation expense 82 81 Loss on sales of businesses and unconsolidated affiliates 24 Undistributed earnings of unconsolidated affiliates 2 (7) Credit for deferred income taxes (441) (11) Changes in assets and liabilities: Trade, notes, and financing receivables related to sales 969 2,009 Inventories (2,497) 397 Accounts payable and accrued expenses 1,884 (7) Accrued income taxes payable/receivable 11 8 Retirement benefits 29 (537) Other (372) 351 Net cash provided by operating activities 7,726 7,483 Cash Flows from Investing Activities Collections of receivables (excluding receivables related to sales) 18,959 17,381 Proceeds from maturities and sales of marketable securities 109 93 Proceeds from sales of equipment on operating leases 2,094 1,783 Cost of receivables acquired (excluding receivables related to sales) (23,653) (19,965) Acquisitions of businesses, net of cash acquired (244) (66).....»»

Category: earningsSource: benzingaNov 24th, 2021

Nordstrom Reports Third Quarter 2021 Earnings

SEATTLE, Nov. 23, 2021 /PRNewswire/ -- Nordstrom, Inc. (NYSE:JWN) today reported third quarter net earnings of $64 million or $0.39 per diluted share, with earnings before interest and taxes ("EBIT") of $127 million. For the third quarter ended October 30, 2021, net sales increased 18 percent versus the same period in fiscal 2020 and decreased 1 percent versus the same period in fiscal 2019. The timing of this year's Anniversary Sale, with approximately one week falling into the third quarter of 2021, had a positive impact of approximately 200 basis points on net sales compared with fiscal 2019. During the quarter, Nordstrom banner net sales increased 3 percent versus the third quarter of fiscal 2019, which included an approximately 300 basis point positive impact from Anniversary Sale timing, while net sales for Nordstrom Rack decreased 8 percent versus the third quarter of fiscal 2019. Sales in the home, active, designer and beauty categories had the strongest growth compared with the third quarter of 2019. Geographically, Nordstrom comparable store sales in the Southern regions, including Southern California, grew 8 percent versus 2019 and outperformed the Northern regions. Comparable sales in suburban area stores continued to be stronger than urban stores in the third quarter, with both improving sequentially over the second quarter. "We have long benefited from a commitment to customer service, new and compelling merchandise, innovative brand partnerships and interconnected digital and physical assets. However, we need to move faster to capitalize on these strengths and profitably grow market share. We're taking action to improve performance at Nordstrom Rack, including optimizing inventory levels, better balancing price points and increasing brand awareness. Work is also underway to improve merchandise margin across the Company and ensure we have the visibility and flexibility we need to serve our customers seamlessly, despite global supply chain challenges," said Erik Nordstrom, chief executive officer of Nordstrom, Inc. "In the third quarter, we made continued progress toward our strategic and financial goals, driven by strong digital growth, the integrated capabilities enabled by our Market Strategy and increased net sales in our Nordstrom banner stores, but we are focused on accelerating our transformation and improving results." Nordstrom continues to expand customer choice counts as part of its evolving merchandising strategy. Alternative partnership models beyond traditional wholesale arrangements grew to nearly 8 percent as a share of total sales, and the Company's recently announced partnerships with Fanatics and ASOS will provide a broader assortment in new and existing categories for customers, without a corresponding increase in owned inventory for the Company. "Taking lessons learned from this year's Anniversary Sale, the team has combined the art of merchandising with data-driven insights to put the right assortment in the right place at the right time," said Pete Nordstrom, president and chief brand officer of Nordstrom, Inc. "For the holiday season, we are excited about our plans to use our integrated network of stores and digital platforms to showcase holiday dressing, decor and gift offerings, and provide festive experiences and convenient services that make shopping easy and enjoyable for our customers." As Nordstrom continues to strengthen its financial position, the Company remains on track to reduce its leverage ratio to approximately three times, and be in a position to return cash to shareholders, by the end of 2021. THIRD QUARTER 2021 SUMMARY Total Company net sales increased 18 percent compared with the same period in fiscal 2020, during which the entire Anniversary Sale temporarily shifted to the third quarter. Net sales decreased 1 percent relative to the same period in fiscal 2019. The timing of this year's Anniversary Sale, with approximately one week falling into the third quarter of 2021, had a positive impact on net sales of approximately 200 basis points compared with the third quarter of 2019. For the Nordstrom banner, net sales increased 11 percent and 3 percent compared with the same periods in fiscal 2020 and fiscal 2019, respectively. The timing of this year's Anniversary Sale had a positive impact on Nordstrom banner net sales of approximately 300 basis points compared with the third quarter of 2019. For the Nordstrom Rack banner, net sales increased 35 percent and decreased 8 percent compared with the same periods in fiscal 2020 and fiscal 2019, respectively. Digital sales decreased 12 percent compared with the same period in fiscal 2020, during which the Anniversary Sale temporarily shifted to the third quarter of that year, and increased 20 percent compared with the same period in fiscal 2019. The timing of this year's Anniversary Sale had a positive impact on Company digital sales of approximately 400 basis points compared with the third quarter of 2019. Digital sales represented 40 percent of total sales during the quarter. Gross profit, as a percentage of net sales, of 35 percent increased 230 basis points compared with the same period in fiscal 2020 primarily due to fewer markdowns and leverage from higher net sales. Gross profit, as a percentage of net sales, increased 80 basis points compared with the same period in fiscal 2019, driven by increased leverage on lower buying and occupancy costs as well as higher merchandise margins. Ending inventory increased 13 percent compared with the same period in fiscal 2019, versus a 1 percent decrease in sales. The change in inventory levels versus 2019 was due to the Company's actions to pull forward receipts to support early holiday sales and mitigate continuing supply chain backlogs. Selling, general and administrative ("SG&A") expenses, as a percentage of net sales, of 34 percent increased 230 basis points compared with the same period in fiscal 2020 primarily as a result of labor cost pressure, partially offset by leverage on higher sales. SG&A expenses, as a percentage of net sales, increased 260 basis points compared with the same period in fiscal 2019 as a result of fulfillment and labor cost pressures, partially offset by continued benefit from resetting the cost structure in 2020. EBIT was $127 million in the third quarter of 2021, compared with $106 million during the same period in fiscal 2020 primarily due to higher sales volume and improved merchandise margins, partially offset by labor cost pressure. EBIT was $66 million lower than the third quarter of fiscal 2019 due to fulfillment and labor cost pressures, partially offset by continued benefit from resetting the cost structure in 2020. Interest expense, net, of $36 million decreased from $48 million during the same period in fiscal 2020 as a result of the redemptions of the 8.75% secured notes during the first quarter of fiscal 2021 and the 4.0% unsecured notes during the second quarter of fiscal 2021. Income tax expense was $27 million, or 30 percent of pretax earnings, compared with $5 million, or 8 percent of pretax earnings, in the same period in fiscal 2020. Last year's income tax included benefits associated with the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). Third quarter net income of $64 million increased from net income of $53 million during the same period in fiscal 2020, which included a tax benefit associated with the CARES Act of $19 million. The Company ended the third quarter with $867 million in available liquidity, including $267 million in cash. FISCAL YEAR 2021 OUTLOOK The Company is reaffirming the following financial expectations for fiscal 2021: Revenue, including retail sales and credit card revenues, is expected to grow more than 35 percent versus fiscal 2020 EBIT margin is expected to be approximately 3.0 to 3.5 percent of sales Income tax rate is expected to be approximately 27 percent Leverage ratio is expected to be approximately 3x by year-end CONFERENCE CALL INFORMATION The Company's senior management will host a conference call to provide a business update and to discuss third quarter 2021 financial results and fiscal 2021 outlook at 4:45 p.m. Eastern Standard Time today. To listen to the live call online and view the speakers' prepared remarks and the conference call slides, visit the Investor Relations section of the Company's corporate website at investor.nordstrom.com. An archived webcast with the speakers' prepared remarks and the conference call slides will be available in the Quarterly Results section for one year. Interested parties may also dial 201-689-8354. A telephone replay will be available beginning approximately three hours after the conclusion of the call by dialing 877-660-6853 or 201-612-7415 and entering Conference ID 13724527, until the close of business on November 30, 2021. ABOUT NORDSTROM At Nordstrom, Inc. (NYSE:JWN), we exist to help our customers feel good and look their best. Since starting as a shoe store in 1901, how to best serve customers has been at the center of every decision we make. This heritage of service is the foundation we're building on as we provide convenience and true connection for our customers. Our digital-first platform enables us to serve customers when, where and how they want to shop – whether that's in-store at more than 350 Nordstrom, Nordstrom Local and Nordstrom Rack locations or digitally through our Nordstrom and Rack apps and websites. Through it all, we remain committed to leaving the world better than we found it. Certain statements in this press release contain or may suggest "forward-looking" information (as defined in the Private Securities Litigation Reform Act of 1995) that involves risks and uncertainties that could cause results to be materially different from expectations. The words "will," "may," "designed to," "outlook," "believes," "should," "targets," "anticipates," "assumptions," "plans," "expects" or "expectations," "intends," "estimates," "forecasts," "guidance" and similar expressions identify certain of these forward-looking statements. The Company also may provide forward-looking statements in oral statements or other written materials released to the public. All statements contained or incorporated in this press release or in any other public statements that address such future events or expectations are forward-looking statements. Important factors that could cause actual results to differ materially from these forward-looking statements are detailed in the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 2021 and its Form 10-Qs for the fiscal quarters ended May 1, 2021 and July 31, 2021. These forward-looking statements are not guarantees of future performance and speak only as of the date made, and, except as required by law, the Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances.   NORDSTROM, INC. CONSOLIDATED STATEMENTS OF EARNINGS (unaudited; amounts in millions, except per share amounts) Quarter Ended Nine Months Ended October 30, 2021 October 31, 2020 October 30, 2021 October 31, 2020 Net sales $ 3,534 $ 3,002 $ 10,020 $ 6,806 Credit card revenues, net 103 87 283 264 Total revenues 3,637 3,089 10,303 7,070 Cost of sales and related buying and occupancy costs (2,294) (2,019) (6,646) (5,235) Selling, general and administrative expenses (1,216) (964) (3,464) (2,912) Earnings (loss) before interest and income taxes1 127 106 193 (1,077) Interest expense, net2 (36) (48) (213) (133) Earnings (loss) before income taxes 91 58 (20) (1,210) Income tax (expense) benefit (27) (5) (2) 487 Net earnings (loss)1,2 $ 64 $ 53 $ (22) $ (723) Earnings (loss) per share: Basic $ 0.40 $ 0.34 $ (0.14) $ (4.60) Diluted1,2 $ 0.39 $ 0.34 $ (0.14) $ (4.60) Weighted-average shares outstanding: Basic 159.2 157.5 158.9 157.0 Diluted 162.5 158.2 158.9 157.0 Percent of net sales: Gross profit 35.1 % 32.8 % 33.7 % 23.1 % Selling, general and administrative expenses 34.4 % 32.1 % 34.6 %.....»»

Category: earningsSource: benzingaNov 23rd, 2021

Here"s Why Lowe"s (LOW) is a Great Momentum Stock to Buy

Does Lowe's (LOW) have what it takes to be a top stock pick for momentum investors? Let's find out. Momentum investing is all about the idea of following a stock's recent trend, which can be in either direction. In the 'long' context, investors will essentially be "buying high, but hoping to sell even higher." And for investors following this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving in that direction. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.Even though momentum is a popular stock characteristic, it can be tough to define. Debate surrounding which are the best and worst metrics to focus on is lengthy, but the Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us.Below, we take a look at Lowe's (LOW), a company that currently holds a Momentum Style Score of B. We also talk about price change and earnings estimate revisions, two of the main aspects of the Momentum Style Score.It's also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. Lowe's currently has a Zacks Rank of #1 (Strong Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period.You can see the current list of Zacks #1 Rank Stocks here >>>Set to Beat the Market?Let's discuss some of the components of the Momentum Style Score for LOW that show why this home improvement retailer shows promise as a solid momentum pick.Looking at a stock's short-term price activity is a great way to gauge if it has momentum, since this can reflect both the current interest in a stock and if buyers or sellers have the upper hand at the moment. It's also helpful to compare a security to its industry; this can show investors the best companies in a particular area.For LOW, shares are up 5.59% over the past week while the Zacks Building Products - Retail industry is down 0.26% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 8.86% compares favorably with the industry's 8.86% performance as well.Considering longer term price metrics, like performance over the last three months or year, can be advantageous as well. Shares of Lowe's have increased 23.1% over the past quarter, and have gained 64.22% in the last year. On the other hand, the S&P 500 has only moved 5.79% and 33.26%, respectively.Investors should also take note of LOW's average 20-day trading volume. Volume is a useful item in many ways, and the 20-day average establishes a good price-to-volume baseline; a rising stock with above average volume is generally a bullish sign, whereas a declining stock on above average volume is typically bearish. Right now, LOW is averaging 3,131,966 shares for the last 20 days.Earnings OutlookThe Zacks Momentum Style Score encompasses many things, including estimate revisions and a stock's price movement. Investors should note that earnings estimates are also significant to the Zacks Rank, and a nice path here can be promising. We have recently been noticing this with LOW.Over the past two months, 12 earnings estimates moved higher compared to none lower for the full year. These revisions helped boost LOW's consensus estimate, increasing from $11.22 to $11.85 in the past 60 days. Looking at the next fiscal year, 12 estimates have moved upwards while there have been no downward revisions in the same time period.Bottom LineGiven these factors, it shouldn't be surprising that LOW is a #1 (Strong Buy) stock and boasts a Momentum Score of B. If you're looking for a fresh pick that's set to soar in the near-term, make sure to keep Lowe's on your short list. Zacks' Top Picks to Cash in on Artificial Intelligence In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.See 3 Artificial Intelligence Stocks With Extreme Upside Potential>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Lowe's Companies, Inc. (LOW): Free Stock Analysis Report To read this article on Zacks.com click here......»»

Category: topSource: zacksNov 23rd, 2021

How Large-Scale Bitcoin Mining Is Driving Clean Energy Innovation

How Large-Scale Bitcoin Mining Is Driving Clean Energy Innovation Authored by Marco Streng via BitcoinMagazine.com, Energy consumption from Bitcoin mining is massive, and people are taking notice. The increases have been scaling fast, with mining energy usage quickly surpassing the totals of small countries. And many see this ever-increasing carbon footprint as a threat to climate change. But it's no threat. In fact, increasing energy usage might save the planet. BITCOIN MINING ENERGY CONSUMPTION AND ITS BYPRODUCT In the early days of Bitcoin mining, you could mine with a laptop in your home. Simply set up a rig and let it run, and while it might get a little warm in the room and the energy bill might spike a bit, an early miner could be profitable. Back then, miners were only competing with other hobbyists or very small-time facilities. But gone are the days when a single person could set up a rig in their house and competitively mine for bitcoin. Today, in order to mine competitively, you need to be quick, big and powerful. This means having the most state-of-the-art hardware at scale to run algorithms the fastest. Massive data centers with thousands of rigs have now populated the competitive landscape of mining. Those with the highest-performing hardware, the most efficient software, the most well-run operations and the cheapest electricity will edge out the competition. And that level of computing is going to churn out a lot of energy. It's estimated that Bitcoin mining is producing nearly 195 TWh of energy annually, which is comparable to the energy consumption of Thailand. Such high energy production, which is required to stay competitive, means that mining operations have to keep low energy costs a priority in their operations. Because crypto mining isn’t tied to a location, many mining operations are seeking out regions to build data centers that offer cheap, and ideally renewable, energy sources. Currently, sustainable energy sources like hydro and wind are not only the cleanest but the most cost effective for mining operations to take advantage of. Mining operations also look for locations that have excess energy to spare. But when a massive amount of energy goes in, a massive amount of energy needs to come out. It's a simple law of thermodynamics: All that energy being consumed can't be destroyed, so it has to go somewhere. That excess comes in the form of heat, a byproduct of mining operations. The heat produced from computing is so substantial that data centers need to be concerned not only with hardware but with cooling systems as well. So far, heat has just been a byproduct that needed to be cooled and dispersed. But now Bitcoin miners are asking: What if something good could be done with that excess heat? How can heat generated by mining operations be recycled or reused, providing a sustainable, clean source of energy? Can data centers heat homes, for example, or greenhouses, or replace heat sources for certain industries? What about in colder climates where heat is scarce? DATA CENTER-HEATED GREENHOUSES There’s a new partnership in Northern Sweden looking for answers to those very questions. Seeking to make their region more sustainable, the Boden Business Agency is looking to partner with energy-intensive industries to create synergies between the two, and Genesis Mining has stepped in to offer computing power. The partnership also includes the Research Institutes of Sweden (RISE) and the Luleå University of Technology. Nordic countries have already attracted mining operations due to the sustainable and cheap energy sources available. But there's now an opportunity for mining operations to give back in the form of providing excess heat to greenhouses to grow food, making the local economy more productive and sustainable. According to Mattias Vesterlund, a senior researcher at RISE, “A 1 MW data center would have the ability to strengthen the local self-sufficiency up to 8% with products that are competitive on the market.” Genesis Mining is providing a 600 kW air-cooled data center container, which will feed heat to a 300-square-meter greenhouse through a specially-built air duct system. The heat would keep the greenhouse at a comfortable 25°C (77°F) year round, in a region where temperatures can fall as low as -30°C (-22°F). The project looks to focus on growing fruits and vegetables, but data center heat can be used for fish, insect and algae farming, as well as provide heat for fruit and vegetable drying. This would provide the local farming economy with the chance to increase food production. It would not only make local producers more sustainable, but it would reduce the dependence on imports, all while meeting regional energy efficiency targets. The project is also a social one that's bringing together local farmers, municipalities, scientists and the IT industry. Mining operations are solving local problems of sustainable food production scalability, and local farms are giving mining operations ways to recycle their waste and offset their carbon footprint. BOLSTERING LOCAL ECONOMIES WHILE FURTHERING DECENTRALIZATION These partnerships will also further the vision of decentralization that crypto mining values so much. With offering sustainable green energy in the form of data center heat, it's offering a use case for the decentralization of energy production. And by seeing more of these projects pop up, it's forcing mining operations to reassess their role in giving back, as they already have ready ways of providing sustainable energy to the communities around them. A connected greenhouse may seem a small scale initiative for now, but it's setting the foundation for large-scale implications. Could Bitcoin mining operations someday help heat villages, support food industries or even power whole cities? The opportunities look viable. In the meantime, don't fault Bitcoin for its energy usage. Encourage it, because it may be the path to a more sustainable future. Tyler Durden Tue, 11/23/2021 - 05:00.....»»

Category: blogSource: zerohedgeNov 23rd, 2021

Transcript: Edwin Conway

   The transcript from this week’s, MiB: Edwin Conway, BlackRock Alternative Investors, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS:… Read More The post Transcript: Edwin Conway appeared first on The Big Picture.    The transcript from this week’s, MiB: Edwin Conway, BlackRock Alternative Investors, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, man, I have an extra special guest. Edwin Conway runs all of alternatives for BlackRocks. His title is Global Head of Alternative Investors and he covers everything from structured credit to real estate hedge funds to you name it. The group runs over $300 billion and he has been a driving force into making this a substantial portion of Blackrock’s $9 trillion in total assets. The opportunity set that exists for alternatives even for a firm like Blackrock that specializes in public markets is potentially huge and Blackrock wants a big piece of it. I found this conversation to be absolutely fascinating and I think you will also. So with no further ado, my conversation with Blackrock’s Head of Alternatives, Edwin Conway. MALE VOICEOVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio. RITHOLTZ: My extra special guest this week is Edwin Conway. He is the Global Head of Blackrock’s Alternative Investors which runs about $300 billion in assets. He is a team of over 1,100 professionals to help him manage those assets. Blackrock’s Global alternatives include businesses that cover real estate infrastructure, hedge funds private equity, and credit. He is a senior managing director for BlackRock. Edwin Conway, welcome to Bloomberg. EDWIN CONWAY, GLOBAL HEAD OF ALTERNATIVE INVESTORS, BLACKROCK: Barry, thank you for having me. RITHOLTZ: So, you’ve been in the financial services industry for a long time. You were at Credit Suisse and Blackstone and now you’re at BlackRock. Tell us what the process was like breaking into the industry? CONWAY: It’s an interesting on, Barry. I grew up in a very small town in the middle of Ireland. And the breakthrough to the industry was one of more coincident as opposed to purpose. I enjoyed the game of rugby for many years and through an introduction while at the University, in University College Dublin in Ireland, had a chance to play rugby at a quite a – quite a decent level and get to know people that were across the industry. It was really through and internship and the suggestion, I’ve given my focus on business and financing things that the financial services sector may be a great place to traverse and get to know. And literally through rugby connections, been part of a good school, I had an opportunity to really understand what the service sector, in many respects, could provide to clients and became absolutely intrigued with it. And what – was it my primary ambition in life to be in the financial services sector? I can definitively say no, but through the circumstance of a game that I love to play and be part of, I was introduced to, through an internship, and actually fell in love with it. RITHOLTZ: Quite interesting. And alternative investments at Blackrock almost seems like a contradiction in terms. Most of us tend to think of Blackrock as the giant $9 trillion public markets firm best known for ETFs and indices. Alternatives seems to be one of the fastest-growing groups within the firm. This was $50 billion just a few years ago, it’s now over 300 billion. How has this become such a fast-growing part of BlackRock? CONWAY: When you look at the various facets which you introduced at the start, Barry, we’ve actually been an alternatives – will be of 30 years now. Now, the scale, as you know, which you can operate on the beta side of business, far surpasses that on the alpha side. For us, throughout the years, this was very much about how can we deliver investment excellence to our clients and performance? Therefore, going an opportunity somewhere else to explore an alpha opportunity in alternatives. And I think being so connected to our clients understanding, that this pivots was absolutely taking place at only 30 years ago but in a very pronounced way today, you know, we continue to invest in this business to support those ambitions. They’re clearly seeing this as the world of going through a tremendous amount of transformation and with some of the challenges, quite frankly, in the traditional asset classes, being able to leverage at BlackRock, the Blackrock muscle to really explore these alpha opportunities across the various alternative asset classes that in our mind wasn’t imperative. And the imperative, really, is from the firm’s perspective and if you look at our purpose, it’s to serve the client. So the need was coming from them. The necessity to have alternatives and their whole portfolio was very – was very much growing in prominence. And it’s taken us 30 years to build this journey and I think, Barry, quite frankly, we’re far from being done. As you look at the industry, the demand is going to continue to grow. So, I think you could expect to see from us a continued investment in the space because we don’t believe you can live without alternatives in today’s world. RITHOLTZ: That’s really – that’s really interesting. So let’s dive a little deeper into the product strategy for alternatives which you are responsible for at BlackRock. Our audiences is filled with potential investors. Tell them a little bit about what that strategy is. CONWAY: So we’re – I think as you mentioned, we’re in excess of 300 billion today and when we started this business, it was less about building a moat around private equity or real estate. I think Larry Fink’s and Rob Kapito’s vision was how do we build a platform to allow us to be relevant to our clients across the various alternative asset classes but also within the – within the confines of what they are permitted to do on a year-by-year basis. So, to always be relevant irrespective of where they are in their journey from respect of liabilities, demand for liquidity, demand for returns, so we took a different approach. I think, Barry, to most, it was around how do we scale into the business across, like you said, real estate equity and debt, infrastructure equity and debt. I mean, we think of that as the real assets platform of our business. Then you take our private equity capabilities both in primary investing, secondary et cetera, and then you have private credits and a very significant hedge fund platforms. So we think all of these have a real role and depending on clients liquidities and risk appetite, our goal was, to over the years, really build in to this to allow ourselves for this challenging needs that our clients have. I think as an industry, right, and over the many years alternatives have been in existence, this is been about return enhancement initially. I think, fundamentally, the changes around the receptivity to the role of alternatives in a client’s portfolio has really changed. So, we’ve watched it, Barry, from this is we’re in the pursuit of a very total return or absolute return type of an objective to now resilience in our portfolio, yield an income. And so things that probably weren’t perceived as valuable in the past because the traditional asset classes were playing a more profound role, alternatives have stepped up in – in many respects in the need to provide more than just total return. So, we’re taking the approach of how do you have a more holistic approach to this? How do we really build a global multi-alternatives capability and try to partner and I think that’s the important work for us. Try to partner with our clients in a way that we can deliver that outperformance but delivered in a way that probably our clients haven’t been used to in this industry before. Because unfortunately, as we know, it has had its challenges with regard to secrecy, transparency, and so many other aspects. We need to help the industry mature. And really that was our ambition. Put our client’s needs first, build around that and really be relevant in all aspects of what we’re doing or trying to accomplish on behalf of the people that they support and represent. RITHOLTZ: So, we’ll talk a little bit about transparency and secrecy and those sorts of things later. But right now, I have to ask what I guess is kind of an obvious question. This growth that you’ve achieved within Blackrock for nonpublic asset allocation within a portfolio, what is this coming at expense of? Are these dollars that are being moved from public assets into private assets or you just competing with other private investors? CONWAY: It’s really both. What – what you are seeing from our clients – if I take a step back, today, the institutional client community and you think about the – the retirement conundrum we’re all facing around the world. It’s such an awful challenge when you think how ill-prepared people are for that eventual stepping back from the workplace and then you know longevity is your friend, but can also be a very, very difficult thing to obviously live with if you’re not prepared for retirement. The typical pension plan today are allocating about 25 percent to 28 percent in alternatives. Predominantly private market. What they’re telling us is that’s increasing quite substantially going forward. But you know, the funding for that alpha pursue for that diversification and that yield is coming from fixed-income assets. It’s coming from equity assets. So there’s a real rebalancing that’s been taking place over the past number of years. And quite frankly, the evolution, and I think the innovation that’s taken place particularly in the past 10 years, alternatives has been really profound. So the days where you just invest in any global funds still exist. But now you can concentrate your efforts on sector exposure, industry exposures, geographic exposures, and I think the – the menu of things our clients can now have access to has just been so greatly enhanced at and the benefit is that but I think in some – in some respects, Barry, the next question is with all of those choices, how do you build the right portfolio for our client’s needs knowing that each one of our client’s needs are different? So, I would say it absolutely coming from the public side. We’re very thankful. Those that had a multiyear journey with us in the public side are now allocating capital to is now the private side to because I do think the – the industry given that change, given that it evolution and given the complexity of these private assets, our clients are looking to, quite frankly, do more with fewer managers because of the complexion of the industry and complexity that comes with it. RITHOLTZ: Quite – quite interesting. (UNKNOWN): And attention RIA’s. Are your clients asking for crypto? At interactive brokers, advisers can now offer crypto to their clients and you could trade stocks, options, futures currencies, bonds and more from the same platform. Commissions on crypto are just 12-18 basis points with no hidden spreads or markups and there are no ticket charges, custody fees, minimums platform or reporting fees. Learn more at IBKR.com/RIA crypto. RITHOLTZ: And I – it’s pretty easy to see why large institutions might be rotating away from things like treasuries or tips because there’s just no yield there. Are you seeing inflows coming in from the public equity side also? The markets put together a pretty good string of years. CONWAY: Yes. It absolutely has. And many respects, I think, we’ve had a multiyear where there was big questions around the alpha that can be generated, for example, from active equities? The question was active or passive? I think what we’ve all realized is that at times when volatility introduces itself which is frequent even independent of what’s been done from a fiscal and monetary standpoint, that these Alpha speaking strategies on the traditional side still make a lot of sense. And so, as we think about what – what’s happening here, the transition of assets from both passive and active strategies to alternative, it – it’s really to create better balance. It’s not that there’s – there’s a lack of relevance anymore in the public side. It’s just quite frankly the growth of the private asset base has grown so substantially. I moved, Barry, to the U.S. in 1998. And it’s interesting, when you look back at 1998 to today, you start to recognize the equity markets and what was available to invest in. The number of investable opportunities has shrunk by 40 plus percent which that compression is extraordinarily high. But yet you’ve seen, obviously, the equity markets grow in stature and significance and prominence but you’re having more concentration risk with some of the big public entities. The converse is true, though on the – on the private side. There’s this explosion of enterprise and innovation, employment creation, and then I believe opportunities has been real. So, I look at the public side, the investable universe is measured in the thousands and the private side is measured in the millions. RITHOLTZ: Wow. CONWAY: And I think part of the – part of the part of the thing our clients are not struggling with but what we’re really recognizing with – with enterprises staying private for longer, if not forever, and with his growth of the opportunities that open debt and equity in the private market side, you really can’t forgo this opportunity. It has to be part of your going forward concerns and asset allocation. And I think this is why we’re seeing that transformation. And it’s not because equities on fixed income just aren’t relevant anymore. They’re very relevant but they’re relevant now in a total portfolio or a whole portfolio context beside alternatives. RITHOLTZ: So, let’s discuss this opportunity set of alternatives where you guys at Blackrock scene demand what sectors and from what sorts of clients? Is this demand increasing? CONWAY: We’re very fortunate, Barry. Today, there isn’t a single piece of our business within – within Blackrock alternatives that isn’t growing. And quite frankly too, it’s really up to us to deliver on the investment objectives that are set forth for those clients. I think in the back of strong absolute and relative performance, thankfully, our clients look to us to – to help them as – as they think about what they’re doing and as they’re exploring more in the alternatives areas. So, as you know, certainly, the private equity and real estate allocations are quite mature in many of our client’s portfolios but they’ve been around for many decades. I think that the areas where we’re seeing – that’s called an outside demand and opportunity set, just but virtue of the small allocations on a relative basis that exist today is really around infrastructure, Barry, and its around private credits. So, to caveat that, I think all of the areas are certainly growing, and thankfully, for us that’s true. We’re looking at clients who we believe are underinvested, we believe they’re underinvested in those asset classes infrastructure both debt and equity and in private credit. And as you think about why that is, the attributes that they bring to our client is really important and in a world where your correlation and understanding those correlations is important that these are definitely diversifying assets. In a world where you’re seeing trillions of dollars, quite frankly, you’re providing little to no or even there’s negative yield. Those short falls are real and people need yield than need income. These assets tend to provide that. So the diversification, it comes from these assets. The yield can come from these assets and because of the immaturity of the asset classes, independence of the capital is flowing in, we still consider them relatively white space. You’re not crowded out. There’s much room for development in the market and with our client’s portfolios. And to us, that’s exciting because it presents opportunities. So, at the highest level, they’re the areas where I believe are most underdeveloped in our clients. RITHOLTZ: So let’s talk about both of those areas. We’ll talk about structured credit in a few minutes. I think everybody kind of understands what – what that is. What – when you see infrastructure as a sector, how does that show up as an investment are – and obviously, I have infrastructure on the brink because we’re recording this not too long after the giant infrastructure bill has been passed, tell us a little bit about what alternative investments in infrastructure looks like? CONWAY: Yes. It’s really in its infancy and what the underlying investments look like. I think traditionally, you would consider it as – and part of the bill that has just been announced, roads, bridges, airports. Some of these hard assets, some of the core infrastructure investments that have been around for actually some time. The interesting thing is the industry has evolved so much and put the need for infrastructure. It’s so great across both developed and emerging economies. It’s become something that if done the right way, the attributes we just spoke of can really have a very strong effect on our client’s portfolios. So, beyond the core that we just mentioned, well, we’ve seen a tremendous demand as a result of this energy transition. You’re really seeing a spike in activity and the necessity transition industry to cleaner technologies, a movement, not away completely from fossil fuel but integrating new types of clean energy. And as a result, you’ve seen a lot of demand on a global basis for wind and solar. And quite frankly, that’s why even us at BlackRock, albeit, 10-12 years ago, we really established a capability there to help with that transition to think about how do we use these technologies, solar panels, wind farms, to generate clean forms of energy for utilities where in some cases they’re mandated to procure this type of this type of – this type of power. And when you think about pre-contracting with utilities for long duration, that to me spells, Barry, good risk mitigation and management and ability to get access to clean forms of energy that throw off yield that can be very complementary to your traditional asset classes but for very long periods of time. And so, the benefits for us of these – these assets is that they are long in duration, they are yield enhancing, they’re definitely diversifying. And so, for us, where – we’ve got about, let’s call this 280 assets around the world that we’re managing that literally generate this – this clean electricity. I think to give the relevance of how much, I believe today, it’s enough to power the country of Spain. RITHOLTZ: Wow. CONWAY: And that’s really that’s really changing. So you’re seeing governments – so from a policy standpoint, you’re seeing governments really embracing new forms of energy, transitioning out of bunker fuels, for example, you know, burning diesels which really spew omissions into the – into the into the environment. But it’s really around modernizing for the future. So, developed and emerging economies alike, want to retain capital. They want to attract new capital and by having the proper infrastructure to support industry, it’s a really, really important thing. Now, on the back of that too, one things we’ve learned from COVID is that the necessity to really bring e-commerce into how you conduct your business is so important and I think from the theme of digitalization within infrastructure to is a huge part. So, it’s not just the energy transition that you’re seeing, it’s not just roads and bridges, but by allowing businesses to connect to a global consumer, allowing children be educated from home, allowing experiences that expand geographies and boundaries in a digital form is so important not just for commerce but in so many other aspects. And so, you think about cable, fiber optics, if you think about all the other things even outside of power, that enable us to conduct commerce to educate, there are many examples where, Barry, you can build resilience into your portfolio because that need is not measured in years. Actually, the shortfall of capital is measured in the trillions so which means this is – this is a multi-decade opportunity set from our vantage point and one of which our clients should really avail of. RITHOLTZ: Quite interesting. And I mentioned in passing, structured credit, tell us a little bit about what that opportunity looks like. I think of this as a space that is too big for local banks but too small for Wall Street to finance. Is that an oversimplification? What is going on in that space. CONWAY: I probably couldn’t have set it better, Barry. It’s – if we go back to just the even the investable universe, in the tens of thousands of companies, just if we take North America that are private, that have great leadership that really have strategic vision under – at the – in some cases, at the start of their growth lifecycles are even if they maintain, they have a very credible and viable business for the future they still need capital. And you’re absolutely right. With the retreat of the banks from the space to various regulations that have come after the global financial crisis, you’re seeing the asset managers in many respects working behalf of our clients both wealth and institutional becoming the new lenders of choice. And – and when we – when we think about that opportunity set, that is really understanding the client’s desire for risk or something maybe in a lower risk side from middle-market lending or midmarket enterprises where you can support that organization through its growth cycle all the way to some higher-yielding, obviously, with more risk assets on the opportunistic or even the special situations side. But it – it expands many things. And going back of the commentary around the evolution of the space, private credit today and what you can do has changed so profoundly, it expands the liquidity spectrum, it expands the risk spectrum. And the great news is, with the number of companies both here and abroad, the opportunities that is – it’s being enriched every single day. And were certainly seeing, particularly going back to the question are some of these assets coming from the traditional side, the public side. When we think of private credit, you are seeing private credit now been incorporated in fixed-income allocations. This is a – it’s a yelling asset. This is – these are debt instruments, these are structures that we’re creating. We’re trying to flexible and dynamic with these clients. But it really is an area where we think – it really is still at its – at its infancy relevant to where it can potentially be. RITHOLTZ: That’s really quite – quite interesting. (UNKNOWN): It’s Rob Riggle. I’m hosting Season 2 of the iHeart radio podcast, Veterans You Should Know. You may know me as the comedic actor from my work in the Hangover, Stepbrothers or 21 Jump Street. But before Hollywood, I was a United States Marine Corps officer for 23 years. For this Veterans Day, I’ll be sitting down with those who proudly served in the Armed Forces to hear about the lessons they’ve learned, the obstacles they’ve overcome, and the life-changing impact of their service. Through this four-part series, we’ll hear the inspiring journeys of these veterans and how they took those values during their time of service and apply them to transition out of the military and into civilian life. Listen to Veterans You Should Know on the iHeart radio app, Apple Podcast or wherever you get your podcast. RITHOLTZ: Let’s stick with that concept of money rotating away from fixed income. I have to imagine clients are starved for yields. So what are the popular substitutes for this? Is it primarily structured credit? Is it real estate? How do you respond to an institution that says, hey, I’m not getting any sort of realistic coupon on my bonds, I need a substitute? CONWAY: Yes. It’s all of those in many respects. And I think to the role, even around now a time where people have questions around inflation, how do substitute this yield efficiency or certainly make up for that shortfall, how do you think about a world where increasingly seeing inflation, not of the transitory thing it feels certainly quasi-permanent. These are a lot of questions we’re getting. And certainly, real estate is an is important part of how they think about inflation protection, how client think about yield, but quite frankly too, we’ve – we’ve gone through something none of us really had thought about a global pandemic. And as I think about real estate, just how you allocate to the sector, what was very heavily influenced with retail assets, high street, our shopping behaviors and habits have changed. We all occupied offices for obviously many, many years pre the pandemic. The shape of how we operate and how we do that has changed. So, I think some of the underlying investment – investments have changed where you’ve seen heavily weighted towards office space to leisure, travel in the past. Actually, now using a rotation in some respects out of those, just given some of the uncertainties around what the future holds as we come – come through a really difficult time. But the great thing about this sector is between senior living, between student housing, between logistics and so many other parts, there are ways in real estate to capture where there’s – where there’s demand. So still a robust opportunity set and it – and we do think it can absolutely be yield enhancing. We mentioned infrastructure. Even if you think about – and we mention OECD and non-OECD, emerging and developed, when I think about Asia, in particular, just as a subset of the world in which we’re living in, that is a $2.6 trillion alternative market today growing at a 15 percent CAGR. And quite frankly, the old-growth is driven by the large economic growth in the region. So, even from a regional perspective, if we pivot, it houses 57 percent of the world’s population and yet delivers 47 percent of the world’s economic growth. So, think of that and then with regard to infrastructure and goes back to that, this is truly a global phenomenon. So if we just even take that sector, Barry, you’ll realize that the way to maintain that type of growth, to attract capital, to keep capital, it really requires an investment of significant amount of money to be able to sustain that. And when you have 42 million people in a APAC migrating to cities in the year going back to digitalization, that’s an important thing. So, when I say we’re so much at the infancy in infrastructure, I really mean it. It can be water, it can be sewer systems, it can be digital, it can be roads, there’s so much to this. And then even down to the regional perspective, it’s a – it’s a need that doesn’t just exist in the U.S. So, for these assets, this tend to be long in duration. There’s both equity and debt. And on the debt side, quite frankly, very few outside of our insurance clients and their general account are taking advantage of the debt opportunity. And – and as we both know, to finance these projects that are becoming more plentiful every single day, across the world, including like, I said, in APAC in scale, there’s an opportunity in both sides. And I think that’s where the acid mix change happen. It’s recognizing that the attributes of these assets can have a role, the attributes of these assets can potentially replace some of these traditional assets and I think you’re going to see it grow. So, infrastructure to us, it’s really equity and debt. And then on the credit side, like I mentioned, again, too, it’s a very, very big and growing market. And certainly, the biggest area today from our vantage point is middle-market lending from a scale opportunity standpoint. So, we think much more to come in all of those spaces. RITHOLTZ: Really interesting. And let’s just stay with the concept of public versus private. That line is kind of getting blurred and the secondary markets is liquidity coming to, for lack of a better phrase, pre-public equities, tells little bit about that space. Is that an area that is ripe for growth for BlackRock? CONWAY: Yes. We absolutely think it is and you’re absolutely correct. The secondary market is – has grown quite substantial. If you even look at just the private equity secondary market and what will transact this year, I think it will be potentially in excess of 100 billion. And that’s what were clear, not to mention what will be visible and what will be analyzed. And that speaks to me what’s really happening and the innovation that we mentioned earlier. It’s no longer about just primary exposure. It’s secondary exposure. When we see all sort of interest and co-investment opportunities as well, I think the available sources of alpha and the flexibility you can now have, albeit if directed and advised, I believe the right way, Barry, can be very helpful and in the portfolio. So, your pre-IPO, it is a big part of actually what we do and we think about growth equity. There is – it’s a significant amount of capital following that space. Now, from our vantage point, as one of the largest investors in the public equity market and now obviously one of the largest investors and they in the private side, the bridge between – between private to public – there’s a real need. IPOs are not going away. And I think smart, informed capital to help with this journey, this journey is really – is really a necessity and a need. RITHOLTZ: So let’s talk a little bit about this recent restructuring. You are first named Global Head of Blackrock Alternative Investors in April 2019, the entire alternatives business was restructured, tell us a little bit about how that restructuring is going? CONWAY: Continues to go really well, Barry. When you look at the flow of acid from our clients, I think, hopefully, that’s speaks to the performance we’ve been generating. I joined the firm, as you know, albeit, 11 years ago and being very close to the alternative franchise as a critical thing for me and running the institutional platform. To me, when you watched this migration of asset towards alternatives, it was obviously very evident for decades now that this is a critical leg of the stool as our clients are thinking about their portfolios. We’re continuing to innovate. We’re continuing to invest, and thankfully, we’re continuing to deliver strong performance. We’re growing at about high double digits on an annual basis but we’re trying to purposeful too around where that growth is coming from. I think the reality is when you look at the competitive universe, I think the last number I saw, it was about 38,000 alternative asset managers out there today, obviously, coming from hedge funds all the way to private credits and private equity. So, competition is real and I do think the outcomes for our clients are starting to really grow. Unfortunately, some – in some cases, obviously, very good, and in some cases, actually not great. So our focus, Barry, is really much on how can we deliver performance, how can we be a partner? And I think we been rewarded with a trust and the faith our clients have in us because they’re seeing something different, I think, from us. Now, the scale of the business that you mentioned earlier really gives us tentacles into the market that I believe allows us to access what I think is the new alpha which is in many respects, given the heft of competition sourcing and originating new investments is certainly harder but for us, sitting in or having alternative team, sitting in 50 offices around the world, really investing in the markets because that – the market they grew up with and have relationships within, I think this network value that we have is something that’s quite special. And I think in the world that’s becoming increasingly competitive, we’re going to continue to use and harness that network value to pursue opportunities. And thankfully, as a result of the partnership we’ve been pursuing with her clients, like, we’ve – we’re certainly looking for opportunities and investments in our funds. But because of the brand, I think because of the successes, opportunities seeks us as much as we seek opportunity and that has been something that we look at an ongoing basis and feel very privileged to actually have that inbound flow as well. RITHOLTZ: Really quite interesting. There was a quote of yours I found while doing some prep for this conversation that I have to have you expand on. Quote, “The relationship between Blackrock’s alternative capabilities and wealth firms marked a large opportunity for growth in the coming years.” This was back in 2019. So, the first part of the question is, was your expectations correct? Did you – did you see the sort of growth you were hoping for? And more broadly, how large of an opportunity is alternatives, not just for BlackRock but for the entire investment industry? CONWAY: Yes. It’s been very much an institutional opportunity set up until now. And there’s so much to be done, still, to really democratize alternatives and we certainly joke around making alternatives less alternative. Actually, even the nomenclature we use and how we describe it doesn’t kind of make sense anymore. It’s such a core – an important allocation to our clients, Barry, that just calling it alternative seems wrong. Just about the institutional clients. It ranges, I think, as I mentioned on our – some of our more conservative clients which would be pension plans which really have liquidity needs on a monthly basis because of the liabilities they have to think about. At about 25 plus percent in private markets, to endowments, foundations, family offices, going to 50 percent plus. So, it’s a really important part and has been for now many years the institutional client ph communities outcomes. I think the thing that we, as an industry, have to change is alternatives has to be for the many, not for the few. And quite frankly, it’s been for the few. And as we talked about some of the attributes and the important attributes of these asset classes to think that those who have been less fortunate in their careers can’t access, things they can enrich their future retirement outcomes, to me, is a failing. And we have to address that. That comes from regulation changes, it comes from structuring of new products, it comes from education and it comes from this knowledge transmission where clients in the wealth segment can understand the role of alternatives and the context of what can do as they invest in equities and fixed income too. And we think that’s a big shortfall. So, the journey today, just to give you a sense, as we look at her clients in Europe on the wealth side, on average, as you look from what we would call the credited investors all the way through to more ultra-high-net worth individuals, their allocation to alternatives, we believe, stands at around two to three percent of their total portfolio. In the U.S., we believe it stands at three to five. So, most of those intermediaries, we speak to our partners who were more supporting and serving the wealth channel. They have certainly an ambition to help their clients grow that to 20 percent and potentially beyond that. So, when I look at that gap of let’s call it two to three to 20 percent in a market that just given the explosion in wealth around the world, I think the last numbers I saw, this is a $65 trillion market. RITHOLTZ: Wow. CONWAY: That speaks to the shortfall relative to the ambition. And how’s it been going? We have a number of things and capabilities we’ve set up to allow for this market to experience, hopefully, private equity, hedge funds, credit, and an infrastructure in ways they haven’t in the past. We’ve done this in the U.S., we’re doing it now in Europe, but I will say, Barry, this is still very much at the start of the journey. Wealth is a really important part of our future given our business, quite, frankly is 90 plus percent institutional today, but we’re looking to change that by, hopefully, democratizing these asset classes and making it so much more accessible in that of the past. RITHOLTZ: So, we hinted at this before but I’m going to ask the question outright, how significant is interest rates to client’s risk appetites, how much of the current low rate environment are driving people to move chunks of their assets from fixed income to alternatives? CONWAY: It’s really significant, Barry. I think the transition of these portfolios is quite profound, So you – and I think the unfortunate thing in some respects as this transition happens that you’re introducing new variables and new risks. The reason I say it’s unfortunate and that I think as an industry, this goes back to the education around the assets you own, understanding the role, understanding the various outcomes. I think it’s so incredibly important and that this the time where complete transparency is needed. And quite frankly, we’re investing capital that’s not ours. As an industry, we’re investing our client’s assets and they need to know exactly the underlying investments. And in good and bad times, how would those assets behave? So certainly, interest rates are driving a flow of capital away from these traditional assets, fixed-income, and absolutely in towards real estate, infrastructure, private creditors, et cetera, in the pursuit of this – this yield. But I do – I do think one of the things that’s critically important for the institutional channel, not just the wealth which are newer entrants is this transmission of education, of data because that’s how I think you build a better balanced portfolio and that’s a – that’s a real conundrum, I think, that the industry is facing and certainly your clients too. RITHOLTZ: Quite interesting. So let’s talk a little bit about the differences between investing in the private side versus the public markets, the most obvious one has to be the illiquidity. When you buy stocks or bonds, you get a print every microsecond, every tick, but most of these investments are only marked quarterly or annually, what does this illiquidity do when you’re interacting with clients? How do you – how do you discuss this with them in and how do perceive some of the challenges of illiquid investments? CONWAY: Over the – over the past number of decades, I think our clients have largely held too much liquidity in their portfolios. Like, so what we are finding is the ability to take on illiquidity risk. And obviously, in pursuit of that premium above, the traditional markets, I mean, I think the sentiment they are is it an absolute right one. That transition towards private market exposure, we think is an important one just given the return objectives, the majority of our clients’ need but then also again, most importantly now, with geo policy, with uncertainty, with interest rate uncertainty, inflation uncertainty, I mean, the – going back to the resilience point, the characteristics now by introducing these assets into the mix is important. And I think that’s – that point is maybe what I’ll expand on. As were talking to clients, using the Aladdin systems, and as you know, we bought eFront technologies, albeit a couple of years ago, by allowing, I think, great data and technology to help our clients understand these assets and the context of how they should own them relative to other liquidity needs, their risk tolerances, and the return expectations are really trying to use tech and data to provide a better understanding and comprehension of the outcomes. And as we continue to introduce these concepts and these approaches, by the way, that there is, as you know, so used to in the traditional side, it – it gives them more comfort around what they should and can expect. And that, to me, is a really important part of what we’re doing. So, we’ve released recently new technology to the wealth sector because, quite frankly, we mentioned it before, the 60-40 portfolio is a thing of the past. And that introduction of about 20 percent into alternatives, we applaud our partners who are – who are suggesting that to their clients. We think it’s something they have to do. What we’re doing to support that is really bringing thought leadership, education, but also portfolio construction techniques and data to bear in that conversation. And this goes back to – it’s no longer an alternative, right? This is a core allocation so the comprehension of what it is you own, the behavior of the asset in good and bad times is so necessary. And that’s become a very big thing with regard to our activities, Barry, because your clients are looking to understand better when you’re talking about assets that are very complex in their nature. RITHOLTZ: So, 60-40 is now 50-30-20, something along those lines? CONWAY: Yes. RITHOLTZ: Really, really intriguing. So, what are clients really looking for these days? We talked about yield. Are they also looking for downside protection on the equity side or inflation hedges you hinted at? How broad are the demands of clients in the alternative space? CONWAY: Yes. It ranges the gamut. And even – we didn’t speak to even hedge funds, we’ve had differing levels of interest in the hedge fund world for years and I, quite frankly, think some degree of disappointment too, Barry, with regard to the alpha, the returns that were produced relevant to the cost. RITHOLTZ: It’s a tough space to say the very least exactly. CONWAY: Exactly right. But when you start to see volatility introducing itself, you can really see where skill plays a critical factor. So, we are absolutely seeing, in the hedge fund, a resurgence of interest and demand by virtue of those who really have honed in on their scale, who have demonstrated an up-and-down markets and ability to protect and preserve capital, but importantly, in a low uncorrelated way build attractive risk-adjusted returns. We’re starting to see more activity there again too. I think with an alternatives, you’ve really seen a predominant demand coming from privates. These private markets, like a set of growths so extraordinarily fast and the opportunities that is rich, the reality too on the public side which is where our hedge funds operate, they continue to, in large part, do a really good job. The issue with our industry now with these 38,000 managers is how do you distill all the information? How do you think about your needs as a client and pick a manager who can deliver the outcomes? And just to give you a sense, the difference now between a top-performing private equity manager, a top quartile versus the bottom quartile, the difference can be measured in tens of percent. RITHOLTZ: Wow. CONWAY: Whereas if you look at the public equity side, for example, a large cap manager, top quartile versus bottom quartile is measured in hundreds of basis points. So, there is definitely a world that has started where the outcomes our clients will experience can be great as they pursue yield, as they pursue diversification, inflation protection, et cetera. I think the caveat that I would say is outcomes can vary greatly. So manager underwriting and the importance of it now, I think, really is this something to pay attention to because if you do have that bottom performing at the bottom quartile manager, it will affect your outcomes, obviously. And that’s what we collectively have to face. RITHOLTZ: So, let’s talk a little bit about real estate. There are a couple of different areas of investment on the private side. Rent to own was a very large one and we’ve seen some lesser by the flip algo-driven approaches. Tell us what Blackrock is doing in the real estate space and how many different approaches are you bringing to bear on this? CONWAY: Yes, we think it’s both equity and debt. Again, no different to the infrastructure side, these projects need to be financed. But on the – as you think about the sectors in which you can avail of the opportunity, you’ve no doubt heard a lot and I mentioned earlier this demand for logistics facilities. The explosion of shopping online and having, until we obviously have the supply chain disruption, an ability to have nearly immediate satisfaction because the delivery of the good to your home has become so readily available. It’s a very different consumer experience. So the explosion and the need for logistics facilities to support this type of behavior of the consumer is really an area that will continue to be of great interest too. And then you think about the transformation of business and you think about the aging world. Unfortunately, you can look at various economies where our populations are decreasing. And quite frankly, we’re getting older. And so, were you’re thinking of the context of that senior living facilities, it becomes a really important part, not just as part of the healthcare solution that come with it, but also from living as well. So, single-family, multifamily, opportunities continue to be something that the world looks at because there is really the shortfall of available properties for people to live in. And as the communities evolve to support the growing age of the population, tremendous opportunity there too. But we won’t give up on office space. It really isn’t going away. Now, if you even think about our younger generation here in BlackRock, they love being in New York, they love being in London, they love being in Hong Kong. So, the shape and the footprint may change slightly. But the necessity to be in the major financial centers, it still exists. But how we weighed the risks has definitely changed, certainly, for the – for the short-term and medium-term future. But real estate continues to be, Barry, a critical part of how we express our thought around the investment opportunity set. But clients largely do this themselves too. The direct investing from the clients is quite significant because they too see this as still as a rich investment ground, albeit, one that has changed quite a bit as a result of COVID. RITHOLTZ: Well, I’m fascinated by the real estate issue especially having seen some massive construction take place in cities pre-pandemic, look over in Manhattan at Hudson Yards and look at what’s taking place in London, not just the center of London but all – but all around it and I’m forced to admit the future is going to look somewhat different than the past with some hybrid combination of collaborative work in the office and remote work from home when it’s convenient, that sort of suggests that we now have an excess of capacity in office space. Do you see it that way or is this just something that we’re going to grow into and just the nature of working in offices is changing but offices are not going away? CONWAY: Yes. I do think there’s – it’s a very valid point and that in certain cities, you will see access, in others we just don’t, Barry. And quite frankly, as a firm, too, as you know, we have adopted flexibility with our teams that were very fortunate. The technologies in which we created at BlackRock has just become such an amazing enabler, not just to help us as we mention manage the portfolios, help us a better portfolio construction, understand risks, but also to communicate with our clients. I think we’ve all witnessed and experienced a way to have connectivity that allows them to believe that commerce can exist beyond the boundaries of one building. However, I do look at our property portfolios and even the things that we’re doing. Rent collections still being extraordinarily high, occupancy now getting back up to pre-pandemic levels, not in all cities, but in many of the major ones that have reopened. And certainly, the demand for people to just socialize, that the demand for human connectivity is really high. It’s palpable, right? We see it here too. The smiles on people’s faces, they’re back in the office, conversing together, innovating together. When people were feeling unsafe, unquestionably, I think the question marks around the role of office space was really brought to bear. But as were coming through this, as you’ve seen vaccine rates change, as you’ve seen the infection rates fall, as you’ve seen confidence grow, the return to work is really happening and return to work to office work is really happening, albeit, now with degrees of flexibility. So, going back to the – I do believe in certain areas. You’re seeing a surplus. But in many areas you’re absolutely seeing a deficit and the reason I say that, Barry, is we are seeing occupancy in certain building at such a high level. And frankly, the demand for more space being so high, it’s uneven and this goes back to then where do you invest our client’s capital, making sense of those trends, predicting where you will see resilience versus stress and building that into the portfolio of consequences as you – as you better risk manage and mitigate. RITHOLTZ: Very interesting. And so, we are seeing this transition across a lot of different segments of investing, are you seeing any products that were or – or investing styles that was once thought of as primarily institutional that are sort of working their way towards the retail side of things? Meaning going from institutional to accredited to mom-and-pop investors? CONWAY: Well, certainly, in the past, private equity was really an asset class for institutional investors. And I think that’s – that has changed in a very profound way. I mentioned earlier are the regulation has become a more adaptive, but we also have heard, in many respects, in providing this access. And I think the perception of owning and be part of this illiquid investment opportunity set was hard to stomach because many didn’t understand the attributes and what it could bring and I think we’ve been trying to solve for that and what you’re seeing now with – with regulators, understanding that the difference between if we take it quite simply as DD versus DC, the differences between the options you as a participant in a retirement plan are so vastly different that – and I think there’s a broad recognition now that there needs to be more equity with regard to what happens there. And private equity been a really established part of the alternatives marketplace was once, I think, really believed to be an institutional asset class, but albeit now has become much more accessible to wealth. We’ve seen it by structuring activities in Europe working with the regulators. Now, we’re able to provide private equity exposure to clients across the continent and really getting access to what was historically very much an institutional asset class. And I do think the receptivity is extraordinarily high just throughout people’s careers, they have seen wealth been created as a result of engineering a great outcome with great management teams integrate business. And I do believe the receptivity towards private equity is high as an example. In the U.S., too, working with the various intermediaries and being able to wrap now private equity in a ’40 Act fund, for example, is possible. And by being able to deliver that to the many as opposed to the few, we think has been a very good success story. And I think, obviously, appreciated by our clients as well. So, I would look at that were seeing across private equity as well as private credit and quite frankly infrastructure accuracy. You’re seeing now regulation that’s becoming more appreciative of these asset classes, you’re seeing a more – a greater level of openness and willingness to allow for these assets to be part of many people’s experiences across their investment portfolio. And now, with innovation around structures, as an industry, were able to wrap these investments in a way that our clients can really access them. So, think across the board, it probably speaks the innovation that’s happening but I do think that accessibility has changed in a very significant way. But you’ve really seen it happen in private equity first and now that’s expanding across these various other asset classes. RITHOLTZ: Quite intriguing. I know I only have you for a relatively limited period of time, so let’s jump to our favorite questions that we ask all of our guests. Starting with tell us what you’ve been streaming these days. Give us your favorite Netflix or Amazon Prime shows. CONWAY: That is an interesting question, Barry. I don’t a hell of a lot of TV, I got to tell you. I am – I keep busy with three wonderful children and a beautiful wife and between the sports activities. When I do watch TV, I have to tell you I’m addicted to sports and having – I may have mentioned earlier, growing up playing rugby which is not the most common sport in the U.S., I stream nonstop the Six Nations that happens in Europe where Ireland is one of those six nations that compete against each other on an annual basis. Right now, they’re playing a lot of sites that are touring for the southern hemisphere. And to me, the free times I have is either enjoying golf or really enjoying rugby because I think it’s an extraordinary sport. Obviously, very physical, but very enjoyable to watch. And that, that truly is my passion outside of family. RITHOLTZ: Interesting stuff. Tell us a bit about your mentors, who helped to shape your early career? CONWAY: Well, it even goes back to some of the aspects of sports. Playing on a team and being on a field where you’re working together, there’s a strategy involved with that. Now, I used to really appreciate how we approach playing in the All-Ireland League. How we thought about our opponents, how we thought about the structure, how we thought about each individual with on the rugby field and the team having a role. They’re all different but your role. And actually, even starting from an early age, Barry, thinking about, I don’t know, it’s sports but how to build a great team with those various skills, perspective, that can be a really, really powerful combination when done well. And certainly, from an early age, that allowed me to appreciate that – actually, in the work environment, it’s not too different. You surround yourself with just really great people that have high integrity that are empathetic and have a degree of humility that when working together, good things can happen. And I will say, it really started at sports. But I think of today and even in BlackRock, how Larry Fink thinks about the world and I think Larry, truly, is a visionary. And then Rob Kapito who really helps lead the charge across our various businesses. Speaking and conversing with them on a daily basis, getting their perspectives, trying to get inside your head and thinking about the world from their vantage point. To me, it’s a huge thing about my ongoing personal career and development and I really enjoy those moments because I think what you recognize is independent of how much you think you know, there’s so much more to know. And this journey is an ever evolving one where you have to appreciate that you’ll never know everything and you need to be a student every single day. So, I’d probably cite those, Barry, as certainly the two most important mentors in my life today, professionally and personally quite frankly. RITHOLTZ: Really. Very interesting. Let’s talk about what you’re reading these days. Tell us about some of your favorite books and what you’re reading currently? CONWAY: Barry, what I love to read, I love to read history, believe it or not. From a very small country that seems to have exported many, many people, love to understand the history of Ireland. So, there’s so many books. And having three children that have been born in the U.S. and my wife is a New Yorker, trying to help them understand some of their history and what made them what they are. I love delving into Irish history and how the country had moments of greatness and moments of tremendous struggle. Outside of that, I really don’t enjoy science fiction or any of these books. I love reading, you name any paper and any magazine on a daily basis. Unfortunately, I wake at about 4:30, 5 o’clock every day. I spent my first two hours of the day just consuming as much information as possible. I enjoy it. But it’s all – it’s really investment-related magazines, not books. It’s every paper that you could possibly imagine, Barry, and I just – I have a great appreciation for certainly trying to be a student of the world because that’s what we’re operating in an I find it just a very interesting avenue to get an appreciation to for the, not just the opportunities, but the challenges we’re collectively facing as a society but also as a business. RITHOLTZ: I’m with you on that mass consumption of investing-related news. It sounds like you and I have the same a morning routine. Let’s talk about of what sort of advice you would give to a recent college graduate who was interested in a career of alternative investments? CONWAY: Well, the industry has – it’s just gone through such extraordinary growth and the difference, when I’ve started versus today, the career opportunity set has changed so much. And I think I try to remind anyone of our analysts who come into each one of our annual classes, right, as we bring in the new recruits. I think about how talented they are for us, Barry, and how privileged we all are to be in this industry and work for the clients that we do. It’s just such an honor to do that. But I kind of – I try to remind them of that. At the end of the day, whether you’re supporting an institution, that institution is the face of many people in the background and alternatives has really now become such an important part of their experience and we talked about earlier just this challenge of retirement, if we do a good job, these institutions that support the many, they can have, hopefully, a retirement that involves dignity and they can have an ability to do things they so wanted to do as they work so hard over their lives. Getting that that personal connection and allowing for those newbies to understand that that’s the effect that you can have, an alternatives whether it’s private equity, real estate, infrastructure, private credit, hedge funds, all of these now, with the scale at which they’re operating at can allow for a great career. But my advice to them is always don’t forget your career is supporting other people. And that comes directly to how we intersect with wealth channel, it comes indirectly as a result of the institutions. And it’s such a privilege to do that. I didn’t envision when I grew up, as I mentioned, my first job, milking cows and back in a small town in the middle of Ireland that I would be one day leading an alternatives business within BlackRock. I see that as a great privilege. So, for those who are joining afresh, hopefully, try to remind them that it is for all of us and show up with empathy, dignity, compassion, and do the best you can, and hopefully, these people be sure will serve them well. RITHOLTZ: And our final question, what you know about the world of alternative investing today you wish you knew 25 years or so ago when you were first getting started? CONWAY: I think if we had invested much more heavily as an industry in technology, we would not be in the position we are today. And I say that, Barry, from a number of aspects. I mentioned in this shortfall of information our clients are dealing with today. They’re making choices to divest from one asset class to invest in another. To do that and do that effectively, they need great transparency, they needed real-time in many respects, it can’t be just a quarterly line basis. And if we had been better prepared as an industry to provide the technology and the data to help our clients really appreciate what it is they own, how we’re managing the assets on their behalf, I think they would be so much better served. I think we’re very fortunate at this firm to have built a business on the back of technology for albeit 30 plus years and were investing over $1 billion a year in technology as I’m sure you know. But we need to see more of that in the industry. So, the client experience is so important, stop, let’s demystify alternatives. It’s not that alternative. Let’s provide education and data and it’s become so large relative to other asset classes, the need to support, to educate, and transmit information, not data, information, so our client understand it, is at a paramount now. And I think it certainly as an industry, things have to change there. If I knew how big the growth would have been and how prominent these asset classes were becoming, I would oppose so much harder on that front 30 years ago. RITHOLTZ: Thank you, Edwin, for being so generous with your time. We’ve been speaking with Edwin Conway. He is the head of Blackrock Investor Alternatives Group. If you enjoy this conversation, please check out all of our prior discussions. You can find those at iTunes, Spotify, wherever you get your podcast at. We love your comments, feedback and suggestions. Write to us at MIB podcast@Bloomberg.net. You can sign up for my daily reads at ritholtz.com. Check out my weekly column at Bloomberg.com/opinion. Follow me on Twitter, @ritholtz. I would be remiss if I did not thank the crack team that helps put these conversations together each week. Mohammed ph is my audio engineer. Paris Wald is my producer, Michael Batnick is my head of research, Atika Valbrun is our project manager. I’m Barry Ritholtz, you’ve been listening to Masters in Business on Bloomberg Radio.   ~~~   The post Transcript: Edwin Conway appeared first on The Big Picture......»»

Category: blogSource: TheBigPictureNov 22nd, 2021

5 Must-Buy Stocks to Tap Nasdaq Composite"s Impressive Rally

We have narrowed our search to five Nasdaq Composite listed corporate behemoths (market capital > $100 billion). These are: GOOGL, TSLA, COST, NVDA and AMAT. Wall Street continues its dream run for 2021, with just six weeks left this year. Although the rally is broad-based, market participants are surprised with the performance of Nasdaq Composite. The tech-heavy index had an astonishing rally in the pandemic-ridden 2020. However, in the beginning of 2021, several economists and financial experts were skeptical about Nasdaq Composite due to the stretched valuation of the technology sector.The Nasdaq Composite itself has witnessed a broad-based rally so far this year. Aside from technology stocks shares of various companies from the non-technology space have skyrocketed too. Here we have selected five high-flying stocks with a favorable Zacks Rank with more upside left. These are — Alphabet Inc. GOOGL, Tesla Inc. TSLA, Costco Wholesale Corp. COST, Applied Materials Inc. AMAT and NVIDIA Corp. NVDA   Nasdaq Composite Maintains Dream RunThe technology sector helped Wall Street to exit the coronavirus-induced short bear market and form a new bull market. Consequently, the Nasdaq Composite jumped 43.6% in 2020. However, the tech-laden index had a slow start 2021 compared with its peers, the Dow and the S&P 500.Buoyed by the nationwide deployment of COVID-19 vaccination, the U.S. economy reopened faster-than-expected. As a result, investors’ preferences shifted from the overvalued technology stocks to the undervalued cyclical stocks, businesses of which suffered the most during pandemic-led lockdowns.Nevertheless, the Nasdaq Composite has slowly gathered pace primarily due to the inherent strength of the technology sector supported by continuous inventions and innovations in this space. On Nov 18, the index touched a key milestone of 16,000 for the first time. On Nov 19, it recorded a new al-time high of 16,121.12 and a closing high of 16,057.44.Year to date, the Nasdaq Composite has rallied 24.6%, marginally below the broad-market index — the S&P 500’s gain of 25.1% but well above the Dow’s gain of 16.3%. Notably, the composition of the Dow in more favorable to reopening stocks.   For Nasdaq Composite, aside from technology sector, several reopening sectors such as auto, retail, consumer discretionary and transportation also contributed significantly in 2021.Technology is the Best Bet in the Long TermWe must not forget that the growing demand for hi-tech superior products has been a catalyst for the sector in an otherwise tough environment. A series of breakthroughs in 5G wireless network, cloud computing, predictive analysis, AI, self-driving vehicles, digital personal assistants and IoT, have given a boost to the overall space.The leading emerging markets of Asia, Latin America, Africa and some European countries are still way behind in using digital technology compared with the developed world. While mobile phone penetration is nearly 90% in these countries, a large number of people are still using phones with old features, since voice communication and not data served most of their needs. Even those, who are using smartphones, rarely utilize the online digital features.   However, the outbreak of coronavirus quickly changed the lifestyle and lookout of these people. People were not entirely used to digital platforms for doing office work (work from home), ordering food and other daily needs or transferring money and making payments. Moreover, online schooling, video conferencing and virtual networking have now become essential. The countries that are more digitized have been able to minimize their losses during the pandemic. These are major lessons for the other countries.Our Top PicksWe have narrowed our search to five Nasdaq Composite listed corporate behemoths (market capital > $100 billion). These stocks have popped more than 40% year to date and still have upside left. Moreover, these stocks have seen positive earnings estimate revisions in the last 30 days. Finally, each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.The chart below shows the price performance of our five picks year to date.Image Source: Zacks Investment ResearchAlphabet Inc. has been strongly emphasizing AI techniques and the home automation space that should aid business growth in the long term. Solid momentum across search, advertising, cloud and YouTube businesses aided the results of GOOGL. Further, the growing proliferation of consumer online activities and rising advertiser spending remained as tailwinds.Alphabet's robust cloud division continues to be the key catalyst. Expanding data centers will continue to bolster its presence in the cloud space. Further, major updates in its search segment are enhancing the search results. Moreover, GOOGL’s mobile search is constantly gaining traction.Zacks Rank #1 Alphabet has an expected earnings growth rate of 84% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.9% over the last 30 days. The stock price of GOOGL has climbed 70% year to date.Tesla Inc. has acquired a substantial market share within the electric car segment. Increasing Model 3 delivery, which forms a major chunk of TSLA’s overall deliveries, is aiding its top line. Along with Model 3, Model Y is contributing to its revenues.In addition to increasing automotive revenues, Tesla’s energy generation and storage revenues boost its earnings prospects. The automaker said that its overall deliveries surged 20% in the third quarter from its previous record in the second quarter, marking the sixth consecutive quarter-on-quarter gain.Zacks Rank #1 Tesla has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 9.7% over the last 30 days. The stock price of TSLA has appreciated 61.2% year to date.Costco Wholesale Corp. operates membership warehouses in the United States, Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Korea, Australia, Spain, France, Iceland, China, and Taiwan. COST offers branded and private-label products in a range of merchandise categories.Costco’s growth strategies, better price management, decent membership trend and increasing penetration of e-commerce business reinforce its position. The strategy to sell products at discounted prices has helped Costco to draw customers seeking both value and convenience. These factors have been aiding in registering impressive sales numbers.Zacks Rank #1 COST has an expected earnings growth rate of 9.7% for the current year (ending August 2022). The Zacks Consensus Estimate for current-year earnings has improved 2.1% over the last 30 days. The stock price of Costco has surged 41.7% year to date.NVIDIA Corp. is benefiting from the coronavirus-induced work-from-home and learn-at-home wave. NVDA is also benefiting from strong growth in GeForce desktop and notebook GPUs, which is boosting gaming revenues. Moreover, a surge in Hyperscale demand remains a tailwind for NVIDIA’s Data Center business.The expansion of NVIDIA GeForce NOW is expected to drive user base. Further, the solid uptake of AI-based smart cockpit infotainment solutions is a boon. The collaboration with Daimler-owned Mercedes-Benz is expected to further strengthen NVIDIA’s presence in the autonomous vehicles and other automotive electronics spaces.Zacks Rank #2 NVDA has an expected earnings growth rate of 71.2% for the current year (ending January 2022). The Zacks Consensus Estimate for current-year earnings has improved 1.7% over the last 7 days. The stock price of NVIDIA has soared 152.7% year to date.Applied Materials Inc. is benefiting from strong momentum across Semiconductor Systems & Applied Global Services. Further, solid demand for silicon in several applications across various markets remains a tailwind for AMAT. The growing usage of OLED technology in smartphones, televisions and computers, remains positive for Applied Materials.Further, increased customer spending in foundry & logic on the back of the rising need for specialty nodes in automotive, power, 5G rollout, IoT, communications and image sensor markets, is a major positive for AMAT. Also, strong momentum in conductor etches is benefiting Applied Materials’ position in DRAM and NAND.Zacks Rank #2 AMAT has an expected earnings growth rate of 16.2% for the current year (ending October 2022). The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the last 7 days. The stock price of Applied Materials has jumped 73.9% year to date. 5 Stocks Set to Double Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report NVIDIA Corporation (NVDA): Free Stock Analysis Report Costco Wholesale Corporation (COST): Free Stock Analysis Report Applied Materials, Inc. (AMAT): Free Stock Analysis Report Tesla, Inc. (TSLA): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksNov 22nd, 2021

Inside Frances Haugen’s Decision to Take on Facebook

Blowing the whistle against a multibillion-dollar tech company is no small feat Frances Haugen is in the back of a Paris taxi, waving a piece of sushi in the air. The cab is on the way to a Hilton hotel, where this November afternoon she is due to meet with the French digital economy minister. The Eiffel Tower appears briefly through the window, piercing a late-fall haze. Haugen is wolfing down lunch on the go, while recalling an episode from her childhood. The teacher of her gifted and talented class used to play a game where she would read to the other children the first letter of a word from the dictionary and its definition. Haugen and her classmates would compete, in teams, to guess the word. “At some point, my classmates convinced the teacher that it was unfair to put me on either team, because whichever team had me was going to win and so I should have to compete against the whole class,” she says. [time-brightcove not-tgx=”true”] Did she win? “I did win,” she says with a level of satisfaction that quickly fades to indignation. “And so imagine! That makes kids hate you!” She pops an edamame into her mouth with a flourish. “I look back and I’m like, That was a bad idea.” She tells the story not to draw attention to her precociousness—although it does do that—but to share the lesson it taught her. “This shows you how badly some educators understand psychology,” she says. While some have described the Facebook whistle-blower as an activist, Haugen says she sees herself as an educator. To her mind, an important part of her mission is driving home a message in a way that resonates with people, a skill she has spent years honing. Photograph by Christopher Anderson—Magnum Photos for TIME It is the penultimate day of a grueling three-week tour of Europe, during which Haugen has cast herself in the role of educator in front of the U.K. and E.U. Parliaments, regulators and one tech conference crowd. Haugen says she wanted to cross the Atlantic to offer her advice to lawmakers putting the final touches on new regulations that take aim at the outsize influence of large social media companies. The new U.K. and E.U. laws have the potential to force Facebook and its competitors to open up their algorithms to public scrutiny, and face large fines if they fail to address problematic impacts of their platforms. European lawmakers and regulators “have been on this journey a little longer” than their U.S. counterparts, Haugen says diplomatically. “My goal was to support lawmakers as they think through these issues.” Beginning in late summer, Haugen, 37, disclosed tens of thousands of pages of internal Facebook documents to Congress and the Securities and Exchange Commission (SEC). The documents were the basis of a series of articles in the Wall Street Journal that sparked a reckoning in September over what the company knew about how it contributed to harms ranging from its impact on teens’ mental health and the extent of misinformation on its platforms, to human traffickers’ open use of its services. The documents paint a picture of a company that is often aware of the harms to which it contributes—but is either unwilling or unable to act against them. Haugen’s disclosures set Facebook stock on a downward trajectory, formed the basis for eight new whistle-blower complaints to the SEC and have prompted lawmakers around the world to intensify their calls for regulation of the company. Facundo Arrizabalaga—EPA/EFE/ShutterstockHaugen leaves the Houses of Parliament in London on Oct. 25 after giving evidence to U.K. lawmakers. Facebook has rejected Haugen’s claims that it puts profits before safety, and says it spends $5 billion per year on keeping its platforms safe. “As a company, we have every commercial and moral incentive to give the maximum number of people as much of a positive experience as possible on our apps,” a spokesperson said in a statement. Although many insiders have blown the whistle on Facebook before, nobody has left the company with the breadth of material that Haugen shared. And among legions of critics in politics, academia and media, no single person has been as effective as Haugen in bringing public attention to Facebook’s negative impacts. When Haugen decided to blow the whistle against Facebook late last year, the company employed more than 58,000 people. Many had access to the documents that she would eventually pass to authorities. Why did it take so long for somebody to do what she did? Read More: How Facebook Forced a Reckoning by Shutting Down the Team That Put People Ahead of Profits One answer is that blowing the whistle against a multibillion-dollar tech company requires a particular combination of skills, personality traits and circumstances. In Haugen’s case, it took one near-death experience, a lost friend, several crushed hopes, a cryptocurrency bet that came good and months in counsel with a priest who also happens to be her mother. Haugen’s atypical personality, glittering academic background, strong moral convictions, robust support networks and self-confidence also helped. Hers is the story of how all these factors came together—some by chance, some by design—to create a watershed moment in corporate responsibility, human communication and democracy. When debate coach Scott Wunn first met a 16-year-old Haugen at Iowa City West High School, she had already been on the team for two years, after finishing junior high a year early. He was an English teacher who had been headhunted to be the debate team’s new coach. The school took this kind of extracurricular activity seriously, and so did the young girl with the blond hair. In their first exchange, Wunn remembers Haugen grilling him about whether he would take coaching as seriously as his other duties. “I could tell from that moment she was very serious about debate,” says Wunn, who is now the executive director of the National Speech and Debate Association. “When we ran tournaments, she was the student who stayed the latest, who made sure that all of the students on the team were organized. Everything that you can imagine, Frances would do.” Haugen specialized in a form of debate that specifically asked students to weigh the morality of every issue, and by her senior year, she had become one of the top 25 debaters in the country in her field. “Frances was a math whiz, and she loved political science,” Wunn says. In competitive debate, you don’t get to decide which side of the issue you argue for. But Haugen had a strong moral compass, and when she was put in a position where she had to argue for something she disagreed with, she didn’t lean back on “flash in the pan” theatrics, her former coach remembers. Instead, she would dig deeper to find evidence for an argument she could make that wouldn’t compromise her values. “Her moral convictions were strong enough, even at that age, that she wouldn’t try to manipulate the evidence such that it would go against her morality,” Wunn says. When Haugen got to college, she realized she needed to master another form of communication. “Because my parents were both professors, I was used to having dinner-table conversations where, like, someone would have read an interesting article that day, and would basically do a five-minute presentation,” she says. “And so I got to college, and I had no idea how to make small talk.” Today, Haugen is talkative and relaxed. She’s in a good mood because she got to “sleep in” until 8:30 a.m.—later than most other days on her European tour, she says. At one point, she asks if I’ve seen the TV series Archer and momentarily breaks into a song from the animated sitcom. After graduating from Olin College of Engineering—where, beyond the art of conversation, she studied the science of computer engineering—Haugen moved to Silicon Valley. During a stint at Google, she helped write the code for Secret Agent Cupid, the precursor to popular dating app Hinge. She took time off to undertake an M.B.A. at Harvard, a rarity for software engineers in Silicon Valley and something she would later credit with helping her diagnose some of the organizational flaws within Facebook. But in 2014, while back at Google, Haugen’s trajectory was knocked off course. Haugen has celiac disease, a condition that means her immune system attacks her own tissues if she eats gluten. (Hence the sushi.) She “did not take it seriously enough” in her 20s, she says. After repeated trips to the hospital, doctors eventually realized she had a blood clot in her leg that had been there for anywhere between 18 months and two years. Her leg turned purple, and she ended up in the hospital for over a month. There she had an allergic reaction to a drug and nearly bled to death. She suffered nerve damage in her hands and feet, a condition known as neuropathy, from which she still suffers today. “I think it really changes your priorities when you’ve almost died,” Haugen says. “Everything that I had defined myself [by] before, I basically lost.” She was used to being the wunderkind who could achieve anything. Now, she needed help cooking her meals. “My recovery made me feel much more powerful, because I rebuilt my body,” she says. “I think the part that informed my journey was: You have to accept when you whistle-blow like this that you could lose everything. You could lose your money, you could lose your freedom, you could alienate everyone who cares about you. There’s all these things that could happen to you. Once you overcome your fear of death, anything is possible. I think it gave me the freedom to say: Do I want to follow my conscience?” Once Haugen was out of the hospital, she moved back into her apartment but struggled with daily tasks. She hired a friend to assist her part time. “I became really close friends with him because he was so committed to my getting better,” she says. But over the course of six months, in the run-up to the 2016 U.S. presidential election, she says, “I just lost him” to online misinformation. He seemed to believe conspiracy theories, like the idea that George Soros runs the world economy. “At some point, I realized I couldn’t reach him,” she says. Soon Haugen was physically recovering, and she began to consider re-entering the workforce. She spent stints at Yelp and Pinterest as a successful product manager working on algorithms. Then, in 2018, a Facebook recruiter contacted her. She told him that she would take the job only if she could work on tackling misinformation in Facebook’s “integrity” operation, the arm of the company focused on keeping the platform and its users safe. “I took that job because losing my friend was just incredibly painful, and I didn’t want anyone else to feel that pain,” she says. Her optimism that she could make a change from inside lasted about two months. Haugen’s first assignment involved helping manage a project to tackle misinformation in places where the company didn’t have any third-party fact-checkers. Everybody on her team was a new hire, and she didn’t have the data scientists she needed. “I went to the engineering manager, and I said, ‘This is the inappropriate team to work on this,’” she recalls. “He said, ‘You shouldn’t be so negative.’” The pattern repeated itself, she says. “I raised a lot of concerns in the first three months, and my concerns were always discounted by my manager and other people who had been at the company for longer.” Before long, her entire team was shifted away from working on international misinformation in some of Facebook’s most vulnerable markets to working on the 2020 U.S. election, she says. The documents Haugen would later disclose to authorities showed that in 2020, Facebook spent 3.2 million hours tackling misinformation, although just 13% of that time was spent on content from outside the U.S., the Journal reported. Facebook’s spokesperson said in a statement that the company has “dedicated teams with expertise in human rights, hate speech and misinformation” working in at-risk countries. “We dedicate resources to these countries, including those without fact-checking programs, and have been since before, during and after the 2020 U.S. elections, and this work continues today.” Read More: Why Some People See More Disturbing Content on Facebook Than Others, According to Leaked Documents Haugen said that her time working on misinformation in foreign countries made her deeply concerned about the impact of Facebook abroad. “I became concerned with India even in the first two weeks I was in the company,” she says. Many people who were accessing the Internet for the first time in places like India, Haugen realized after reading research on the topic, did not even consider the possibility that something they had read online might be false or misleading. “From that moment on, I was like, Oh, there is a huge sleeping dragon at Facebook,” she says. “We are advancing the Internet to other countries far faster than it happened in, say, the U.S.,” she says, noting that people in the U.S. have had time to build up a “cultural muscle” of skepticism toward online content. “And I worry about the gap [until] that information immune system forms.” In February 2020, Haugen sent a text message to her parents asking if she could come and live with them in Iowa when the pandemic hit. Her mother Alice Haugen recalls wondering what pandemic she was talking about, but agreed. “She had made a spreadsheet with a simple exponential growth model that tried to guess when San Francisco would be shut down,” Alice says. A little later, Frances asked if she could send some food ahead of her. Soon, large Costco boxes started arriving at the house. “She was trying to bring in six months of food for five people, because she was afraid that the supply lines might break down,” Alice says. “Our living room became a small grocery store.” After quarantining for 10 days upon arrival, the younger Haugen settled into lockdown life with her parents, continuing her work for Facebook remotely. “We shared meals, and every day we would have conversations,” Alice says. She recalled her daughter voicing specific concerns about Facebook’s impact in Ethiopia, where ethnic violence was playing out on—and in some cases being amplified by—Facebook’s platforms. On Nov. 9, Facebook said it had been investing in safety measures in Ethiopia for more than two years, including activating algorithms to down-rank potentially inflammatory content in several languages in response to escalating violence there. Haugen acknowledges the work, saying she wants to give “credit where credit is due,” but claims the social network was too late to intervene with safety measures in Ethiopia and other parts of the world. “The idea that they don’t even turn those knobs on until people are getting shot is completely unacceptable,” she says. “The reality right now is that Facebook is not willing to invest the level of resources that would allow it to intervene sooner.” A Facebook spokesperson defended the prioritization system in its statement, saying that the company has long-term strategies to “mitigate the impacts of harmful offline events in the countries we deem most at risk … while still protecting freedom of expression and other human rights principles.” What Haugen saw was happening in nations like Ethiopia and India would clarify her opinions about “engagement-based ranking”—the system within Facebook more commonly known as “the algorithm”—that chooses which posts, out of thousands of options, to rank at the top of users’ feeds. Haugen’s central argument is that human nature means this system is doomed to amplify the worst in us. “One of the things that has been well documented in psychology research is that the more times a human is exposed to something, the more they like it, and the more they believe it’s true,” she says. “One of the most dangerous things about engagement-based ranking is that it is much easier to inspire someone to hate than it is to compassion or empathy. Given that you have a system that hyperamplifies the most extreme content, you’re going to see people who get exposed over and over again to the idea that [for example] it’s O.K. to be violent to Muslims. And that destabilizes societies.” In the run-up to the 2020 U.S. election, according to media reports, some initiatives proposed by Facebook’s integrity teams to tackle misinformation and other problems were killed or watered down by executives on the policy side of the company, who are responsible both for setting the platform’s rules and lobbying governments on Facebook’s behalf. Facebook spokespeople have said in response that the interventions were part of the company’s commitment to nuanced policymaking that balanced freedom of speech with safety. Haugen’s time at business school taught her to view the problem differently: Facebook was a company that prioritized growth over the safety of its users. “Organizational structure is a wonky topic, but it matters,” Haugen says. Inside the company, she says, she observed the effect of these repeated interventions on the integrity team. “People make decisions on what projects to work on, or advance, or give more resources to, based on what they believe is the chance for success,” she says. “I think there were many projects that could be content-neutral—that didn’t involve us choosing what are good or bad ideas, but instead are about making the platform safe—that never got greenlit, because if you’ve seen other things like that fail, you don’t even try them.” Being with her parents, particularly her mother, who left a career as a professor to become an Episcopal priest, helped Haugen become comfortable with the idea she might one day have to go public. “I was learning all these horrific things about Facebook, and it was really tearing me up inside,” she says. “The thing that really hurts most whistle-blowers is: whistle-blowers live with secrets that impact the lives of other people. And they feel like they have no way of resolving them. And so instead of being destroyed by learning these things, I got to talk to my mother … If you’re having a crisis of conscience, where you’re trying to figure out a path that you can live with, having someone you can agonize to, over and over again, is the ultimate amenity.” Haugen didn’t decide to blow the whistle until December 2020, by which point she was back in San Francisco. The final straw came when Facebook dissolved Haugen’s former team, civic integrity, whose leader had asked employees to take an oath to put the public good before Facebook’s private interest. (Facebook denies that it dissolved the team, saying instead that members were spread out across the company to amplify its influence.) Haugen and many of her former colleagues felt betrayed. But her mother’s counsel had mentally prepared her. “It meant that when that moment happened, I was actually in a pretty good place,” Haugen says. “I wasn’t in a place of crisis like many whistle-blowers are.” Read More: Why Facebook Employees ‘Deprioritized’ a Misinformation Fix In March, Haugen moved to Puerto Rico, in part for the warm weather, which she says helps with her neuropathy pain. Another factor was the island’s cryptocurrency community, which has burgeoned because of the U.S. territory’s lack of capital gains taxes. In October, she told the New York Times that she had bought into crypto “at the right time,” implying that she had a financial buffer that allowed her to whistle-blow comfortably. Haugen’s detractors have pointed to the irony of her calling for tech companies to do their social duty, while living in a U.S. territory with a high rate of poverty that is increasingly being used as a tax haven. Some have also pointed out that Haugen is not entirely independent: she has received support from Luminate, a philanthropic organization pushing for progressive Big Tech reform in Europe and the U.S., and which is backed by the billionaire founder of eBay, Pierre Omidyar. Luminate paid Haugen’s expenses on her trip to Europe and helped organize meetings with senior officials. Omidyar has also donated to Whistleblower Aid, the nonprofit legal organization that is now representing Haugen pro bono. Luminate says it entered into a relationship with Haugen only after she went public with her disclosures. Haugen resigned from Facebook in May this year, after being told by the human-resources team that she could not work remotely from a U.S. territory. The news accelerated the secret project that she had decided to begin after seeing her old team disbanded. To collect the documents she would later disclose, Haugen trawled Facebook’s internal employee forum, Workplace. She traced the careers of integrity colleagues she admired—many of whom had left the company in frustration—gathering slide decks, research briefs and policy proposals they had worked on, as well as other documents she came across. Read more: Facebook Will Not Fix Itself While collecting the documents, she had flashbacks to her teenage years preparing folders of evidence for debates. “I was like, Wow, this is just like debate camp!” she recalls. “When I was 16 and doing that, I had no idea that it would be useful in this way in the future.” Jabin Botsford—Getty ImagesHaugen testifies on Oct. 5 before the U.S. Senate Committee on Commerce, Science and Transportation. In her Senate testimony in early October, Haugen suggested a federal agency should be set up to oversee social media algorithms so that “someone like me could do a tour of duty” after working at a company like Facebook. But moving to Washington, D.C., to serve at such an agency has no appeal, she says. “I am happy to be one of the people consulted by that agency,” she says. “But I have a life I really like in Puerto Rico.” Now that her tour of Europe is over, Haugen has had a chance to think about what comes next. Over an encrypted phone call from Puerto Rico a few days after we met in Paris, she says she would like to help build a grassroots movement to help young people push back against the harms caused by social media companies. In this new task, as seems to be the case with everything in Haugen’s life, she wants to try to leverage the power of education. “I am fully aware that a 19-year-old talking to a 16-year-old will be more effective than me talking to that 16-year-old,” she tells me. “There is a real opportunity for young people to flex their political muscles and demand accountability.” I ask if she has a message to send to young people reading this. “Hmm,” she says, followed by a long pause. “In every era, humans invent technologies that run away from themselves,” she says. “It’s very easy to look at some of these tech platforms and feel like they are too big, too abstract and too amorphous to influence in any way. But the reality is there are lots of things we can do. And the reason they haven’t done them is because it makes the companies less profitable. Not unprofitable, just less profitable. And no company has the right to subsidize their profits with your health. Ironically, Haugen gives partial credit to one of her managers at Facebook for inspiring her thought process around blowing the whistle. After struggling with a problem for a week without asking for help, she missed a deadline. When she explained why, the manager told her he was disappointed that she had hidden that she was having difficulty, she says. “He said, ‘We solve problems together; we don’t solve them alone,’” she says. Never one to miss a teaching opportunity, she continues, “Part of why I came forward is I believe Facebook has been struggling alone. They’ve been hiding how much they’re struggling. And the reality is, we solve problems together, we don’t solve them alone.” ShutterstockFacebook CEO Mark Zuckerberg recently announced the company was rebranding as Meta. It’s a philosophy that Haugen sees as the basis for how social media platforms should deal with societal issues going forward. In late October, Facebook Inc. (which owns Facebook, Whats App and Instagram) changed its name to Meta, a nod to its ambition to build the next generation of online experiences. In a late-October speech, CEO Mark Zuckerberg said he believed the “Metaverse”—its new proposal to build a virtual universe—would fundamentally reshape how humans interact with technology. Haugen says she is concerned the Metaverse will isolate people rather than bring them together: “I believe any tech with that much influence deserves public oversight.” But hers is also a belief system that allows for a path toward redemption. That friend she lost to misinformation? His story has a happy ending. “I learned later that he met a nice girl and he had gone back to church,” Haugen says, adding that he no longer believes in conspiracy theories. “It gives me a lot of hope that we can recover as individuals and as a society. But it involves us connecting with people.” —With reporting by Leslie Dickstein and Nik Popli.....»»

Category: topSource: timeNov 22nd, 2021

Returning To Sound Money

Returning To Sound Money Authored by Alasdair Macleod via GoldMoney.com, With the threat of dollar hyperinflation now becoming a reality it is time to consider what will be required to stabilise the currency, and by extension the other fiat currencies which regard the dollar as their reserve. This article takes its cue from Ludwig von Mises’s 1952 analysis of what was required to return to a proper and enduring gold standard —metallic money, particularly gold, having been sound money for thousands of years, to which everyone has always returned when government fiat currency fails. When Mises wrote his 1952 article the dollar was nowhere near the state it is in today. But Mises had had practical experience of what was involved, having advised the Austrian government during and after its hyperinflation of the early 1920s, making his analysis doubly relevant. As a remedy for the developing collapse of the dollar, this article can do little more than address the major issues. But it shows how an economic and monetary collapse of the dollar can be turned to advantage - the opportunity it creates through the destruction of Keynesian and other inflationist fallacies to secure long-term economic and monetary stability under which economic progress can be maximised. Introduction There are two charts which sum up why the dollar and fiat currencies tied to it will collapse if current monetary policies persist, shown in Figure 1. The growth in the M1 quantity since February 2020 has been without precedent exploding from $4 trillion, already an historically high level, to nearly $20 trillion this September. That is an average annualised M1 inflation of 230%. It is simply currency debasement and has yet to impact on prices fully. Much of the increase has gone into the financial sector through quantitative easing, so its progress into the non-financial economy and the effects on consumer prices are delayed — but only delayed — as it will increasingly undermine the dollar’s purchasing power. The more immediate impact on the High Street is also alarming, shown in the second chart. A combination of the covid lockdowns and Federal Government money ending up in consumers’ pockets has driven their liquidity relative to goods purchases to unprecedented and unaccustomed heights. This is the more worrying chart because it quantifies the immediate fuel for a potential crack-up boom. A crack-up boom is the condition whereby consumers finally discard the currency, spending it to just get rid of it. We are not there yet, but clearly, if consumers take the view en masse that prices will continue to rise, then they will attempt to reduce their cash balances all at once by bringing their future purchases forward, thereby driving prices up even further and more rapidly, and therefore the purchasing power of the currency down. But for the moment, it is mostly creating a scramble for real assets, such as housing, which for the moment can be bought with mortgage finance fixed at deeply suppressed interest rates. Given supply constraints, rising commodity prices, and other production costs rising as well as unaccustomed levels of consumer liquidity, the rise in prices can only accelerate. Unless there is a fundamental change in monetary policy, which requires the expansion of currency to be stopped completely, there will come a point where consumers finally realise that it is not prices rising but the purchasing power of the currency falling. This is a difficult concept for most people to grasp because they are used to regarding currency as always possessing the objective value in their transactions. The history of monetary inflations confirms that ordinary folk have always been reluctant to understand that the currency is declining until too late. But today, a significant minority of the population has already been alerted to this development by their participation in or observation of cryptocurrencies such as bitcoin. And if the wider population learns the same lesson and acts accordingly all hope for the currency will be lost. The reason that changes in the quantity of currency recorded by narrow measures such as M1 must be closely watched is that it is the underlying base upon which bank credit is expanded. When interest rates inevitably begin to rise, rates paid to bank depositors are likely to lag, improving lending margins for banks. Improved lending margins will encourage the banks to expand credit, for the benefit of government and agency bonds, and for speculators such as hedge fund managers looking to arbitrage the difference between borrowing rates and the dollar’s future purchasing power. The narrow currency quantity therefore has a multiplier effect with respect to bank credit when it begins to expand. A dispassionate consideration of these established facts leads the independent observer to conclude that unless today’s fiat currency system is secured with a sound money regime a collapse of everyone’s circulating medium is inevitable. Putting to one side minor central banks, the most egregious debaser of currency is the Fed, as the charts above attest. But with the dollar as the world’s reserve currency, where the dollar goes, so will all the other western currencies. Fixing the dollar must be the priority. In a revised 1952 edition of his The Theory of Money and Credit, Ludwig von Mises added a section on The Return to Sound Money. Mises, who had cut his teeth as an economist dealing with Austria’s 1920s inflation made proposals which are still relevant. Under the influence of Keynesianism, the monetary situation facing America today is rapidly deteriorating towards the circumstances faced by Austria in 1920-22, but with technical differences. This article attempts to update Mises’s section on the return to sound money for current conditions to provide a framework for the benefit of monetary stability and long-term prosperity. The intractability of current inflationism Central banks and their governments like to say that the reasons for an acceleration of monetary expansion are short-term and justified by being expedient. But these policies, often termed extraordinary measures to validate them, become normal as we have seen with quantitative easing. We can reasonably assume therefore that no meaningful attempt to rein in currency debasement will occur, more extraordinary measures will be invented, and that the explosion in the M1 quantity is far from over. Changing the official mindset is proving an impossible task so long as currency expansion is available. The Federal Government relies on it as a growing source for its funding, which allows it to ignore budget deficits. The state employs bureaucrats who agree with this policy and is advised only by economists who are prepared to justify it. The whole establishment is in groupthink mode and brooks no criticism over its inflationism. Furthermore, the administration has been democratically elected on a platform of continuing to provide free and easy money. This is not a sudden phenomenon, being progressively ingrained in the establishment’s mindset for a century. It commenced with the establishment of the Fed before the First World War, which then fuelled an artificial boom in the 1920s after the brief post-war recession. The American state gradually subsumed control over money, removing it from transacting individuals and finally replacing it with completely fiat dollars in 1971. The course that the state had set itself was bound to lead to where we are now; the expansion of dollar currency getting out of control. Nowhere in the Fed’s regular FOMC statements is there any mention of monetary policy per se. It is as if the quantity of currency in circulation is irrelevant to its purchasing power. It is an important cover-up, because if the relationship between the quantity of money and its purchasing power was admitted, then the Fed would have to exercise control over it. And not only would an admission of the relationship be a public acknowledgement of currency mismanagement, not only would the US Treasury come down on the Fed like a ton of bricks for jeopardising its source of non-fiscal revenue, but inflation of the currency would no longer be freely available as a policy tool. One likes to think that there are policy makers with an understanding that inflation is of the quantity of dollars in circulation and not its effect on prices. But for a long time, it has not been in anyone’s interest to think this way — anyone who did so has been re-educated, sacked, or left the building. This is the essence of groupthink. It is worth noting that elsewhere, Jens Weidmann who is a well-known inflation hawk is resigning from the Bundesbank. And Andy Haldane has resigned as Chief Economist from the Bank of England, with a parting shot on inflation. Both these gentlemen appear to have decided it is a fight they cannot win. The only chance of reform is from circumstances leading to the final abandonment of the neo-Keynesian policies that have promoted statism over free markets. And that is unlikely to occur before economic and currency destruction has become too obvious for anyone in control of economic and monetary policy to ignore. We cannot be certain that this realisation in official circles will occur before the public finally loses all confidence in the currency. But so long as any hope for its recovery lingers, it seems unlikely that monetary policy will be reformed. To statist economists, the argument for sound money and its adoption would not only be a negation of everything they have come to believe, but it will be seen as destroying all their so-called scientific progress, particularly since the adoption of Keynes’s General Theory as the economists’ vade mecum. Additionally, the use of statistics to guide policy, particularly of GDP and CPI, will have been found to have badly misled policy makers and markets. Along with statist management of the dollar, they must be abandoned. They are primarily tools for imposing state control on economic activity. The objective of the reformed approach is to return to free markets and sound money, which means handing responsibility for their actions back to economic actors, those who divide their labour and use money as the bridge between their production and consumption. These are a volte-face from current policies and are sure to be strongly resisted even in the face of contrary evidence. Monetary reform is bound to be delayed until the last possible moment. The state’s preference is always to retain and build on the control it already has. This is why there are plans to introduce central bank digital currencies, which, it must be noted, are designed to continue with inflationary stimulation by other means. But as revolutionary France discovered, the substitution of one fiat (the assignat) by another (mandat territoriaux) merely leads to the more rapid failure of the second. Once public trust in the state to not debauch the first currency is gone, it cannot be restored for a succeeding unbacked state currency. We can only assume that at some point in the dollar’s descent towards worthlessness the US Treasury will be prepared to mobilise its gold reserves to stop it becoming completely worthless. We shall now look at the measures that are required from that point to return to sound money, that is to back the dollar credibly with metallic money, only gold and silver coinage — anything less will not be a permanent solution. Initial actions to stabilise the currency At the time when monetary stabilisation becomes a practical proposition, interest rates and bond yields will have already been driven to previously unimagined levels, reflecting the currency’s collapse thus far. Write-offs from non-performing loans and losses on bond valuations will have almost certainly wiped out all the equity of weaker banks, and the survivability of the stronger ones will have become questionable as well. The Federal deposit insurance limit of $250,000 will have become meaningless and a banking crisis will become integral to the currency collapse as depositors attempt to flee from bank deposits into goods and gold. A collapse of the fiat banking system was not a material factor when Mises tackled the problem in 1952. He was absorbed with preventing the currency’s collapse in the future, a future which was some way off but is now almost upon us. The first action must be for the Fed to cease expanding the quantity of money and to introduce regulations to stop the expansion of total bank credit. The former is a simple task. In practice, controlling bank credit is also not difficult. If one bank increases its balance sheet, the increase must be matched by a decrease in the balance sheets of the other banks. This means that new loans can only be extended with the permission of the central bank centralising the information on bank and other licenced credit providers’ balance sheets. And net drawdowns of existing credit facilities must similarly be matched by repayments of others. This is intended as an interim measure pending further reform of the banking system. But the consequences for surviving banks will be significant and immediate. The stabilisation of the currency will lead to increased savings. The allocation of these increased savings to investment capital will be routed through bond markets instead of across the collective balance sheets of the banking system. It will be up to savers and their agents to decide individual borrowing terms. And all taxes on savings must be removed to enable them to recirculate into productive investment. However, these measures will be consistent with the plans for subsequent bank reform described below. The US Treasury will be competing for savers’ savings and will no longer have unrestricted access to bank credit. A bank wishing to increase its exposure to Treasury stock be able to do so by disposing of other assets, Alternatively, if other banks reduce their balance sheets permission might be obtained from the Fed on the lines described above. Whether buying Treasuries is a sensible commercial decision must be left to the individual bank, and Basel-originated regulations designed to give preference to government bills and bonds over other classifications of assets must be repealed. The objective is to permit the government and its agencies to borrow but only on a non-inflationary basis, with the investment decision purely decided by investors, their agents, and bankers making their own risk assessments without regulatory bias. It is doubtful at this stage of the hyperinflation that economic activity would suffer overall from the loss of state intervention. The economy will already be in the deepest slump in living memory, with interest rates at unimaginable heights and beyond the Fed’s control. Anyone going bust will have most probably done so already. In these conditions there cannot be a better time to ensure the state withdraws from economic and monetary intervention and to introduce plans to stabilise the currency. But on their own measures to halt currency and credit expansion would be insufficient to stabilise the dollar and dollar interest rates beyond a temporary basis without further measures, which must be our next consideration. The return to a gold standard To stabilise the dollar the US Treasury must recognise that gold is money and the dollar an inferior currency. Accordingly, all taxes on physical gold and silver must be removed, and both metals be permitted to be freely exchanged by the public for dollars. Given that the circumstance of the reintroduction of a gold standard are likely to be those of a last resort, we can assume that the market will have already repriced the dollar in gold terms. That being the case, the exchange ratio between gold and the dollar can be fixed along with the arrangements permitting gold coin and the dollar to circulate together, with the dollar and dollar-credit being converted into reliable gold-backed substitutes. Legislation would have to be enacted to enshrine gold convertibility as an inalienable property right, never to be taken away from the public in future. This must also remove future devaluations as a government option, and even in the event of a crisis, such as a war, full convertibility must be maintained. A new body must be established, or the role of the Exchange Stabilisation Fund amended to act only as the custodian for the relationship between dollars and gold, with the nation’s gold reserves transferred to its control. We shall call this fund the Exchange Stabilisation Fund (ESF) hereafter. Dealing in foreign currencies and SDRs by the ESF must cease, and no other government or central bank entity be permitted to deal in gold. After acquiring its initial reserve from the Treasury, the ESF cannot be permitted to initiate gold transactions. Only dealings initiated by the public, exchanging gold for dollars or dollars for gold are to be permitted. Thenceforth, the expansion of dollars in circulation must be backed 100% by gold to be held transparently in a special account for that purpose. The basis of convertibility must be on coins freely demanded by holders of dollars without limitation. Legislation must be passed for gold coins to be struck in suitable currency denominations to ensure their practical circulation. Silver coins must also be reintroduced by law for smaller amounts, and the issuance of paper notes suited for smaller purchases must be rescinded to ensure that silver coins and the smaller gold coins circulate. The purpose of coin circulation is to permit the public to continually vote on the government’s adherence to the new rules. The slightest indication that it is considering breaking them will, in accordance with Gresham’s Law, drive the good money out of circulation: in other words, gold coin will be hoarded, and its paper substitutes disposed through spending. The knowledge that this is so will discourage politicians from considering watering down the standard. The gold/silver ratio should be struck to give silver coins a minor premium over their bullion value to ensure they remain in circulation and are not diverted for industrial use or arbitraged into gold. This will avoid the pitfalls that plagued bimetallic standards in the past. The introduction of a working gold coin standard on these lines will lead to a rapid fall in borrowing rates from their hyperinflation highs. The sooner it is operating and the currency stabilised, the quicker the economy can return to normality, which will be an obvious benefit for those persuading the public the merits of sound money. Interest rates will then correlate with the general level of wholesale prices. The reason for this correlation is that sound money allows producers to calculate for their business plans with a high degree of certainty about final prices. With that certainty in mind, they can then assess the rate of interest they are prepared to pay savers for an enterprise to be profitable. The disciplines of a working gold coin standard will also require other changes to take place. Government reform The time during a currency collapse when it might be adapted into a proper gold standard is also the most dangerous politically. The population will be suffering real hardships and dangerously disaffected from the establishment that steered them onto the economic and monetary rocks. The middle and professional classes will have lost nearly everything. It is a political situation ripe for violent revolution. It drove the French revolution and following the First World War drove Germany into Nazism. It is the setting described by Hayek in his The Road to Serfdom. The departure from proper economics and the move towards increasing state control over the people militates for yet more socialism and violence, with a total monetary collapse being the excuse for total oppression of the people by the state. If that happens, the outcome is a different course of events from the constructive one proposed here. But we must assume that the great American nation, for all its recent faults and having lost its way with economics and socialist drift, pulls back from the brink of the abyss. Unlike Germany following its hyperinflation of the 1920s, America’s population is ethnically diverse, comprised in the main of the descendants of refugees from political and economic oppressions elsewhere. We should accept that when the outlook is darkest, a Hayekian-described dictator might not emerge, but a statesman instead, like an Erhardt, who emerged for Germany in the late 1940s. Paradoxically, public support for a reform of the American currency system probably offers a better chance of success than similar measures taken elsewhere. We must proceed with that assumption. The popular mandate for the role of government in the economy to be radically revised will therefore become available. Without the cover of inflationary financing, an economy based on sound money is more obviously incompatible with a high-spending government, which must then reduce its burden on the productive economy to the minimum possible. At its most fundamental, its obligation to provide mandated welfare must be strictly curtailed. The ambition is to reduce the role of government to framing and upholding the law and maintaining national defence — not to be confused with funding military adventures abroad. Foreign policy must return to that of Britain in the days of Liverpool, Castlereagh, and Wellington following the Napoleonic Wars: never to interfere in another nation’s internal affairs. And regulations must be rescinded to permit free markets to regulate themselves. It will require economic understanding, statesmanship and perhaps a few years to fully achieve all these objectives. But given that the purchasing power of the dollar will have already depreciated substantially, the costs of welfare, such as state pensions and unemployment benefits, will have already degenerated in real terms. Furthermore, the population will be staring into an economic and monetary abyss, reducing their opposition to substantial cuts in state spending. Only in these circumstances will it be possible to take the necessary action, and the opportunity will be there. An initial target of reducing Federal government spending to under 20% of GDP and cutting taxes accordingly should be followed by a target of less than 15% of GDP in due course. Banking reform Following extensive debate between the currency and banking schools, England’s Bank Charter Act of 1844 was the watershed that validated bank credit cycles. The destabilising effect of these cycles led to Walter Bagehot’s concept of the role of The Bank of England being the lender of last resort, the excuse for central banks in the future to increase their powers of intervention. By the time of the 1844 Act, banking law and double entry bookkeeping had established the method of credit creation, which is different from that which is commonly understood. A bank commences the expansion of bank credit by making a loan to a customer, which appears on its balance sheet as an asset. At the same time, double entry bookkeeping demands a contra entry, which is achieved by the bank crediting the customer with a matching deposit, which continues to balance as the loan is drawn down. The bank’s balance sheet has expanded without its own capital being involved. The expansion of credit is monetary inflation, which eventually feeds through to rising prices, leading to increasing interest rates. Economic calculations made earlier in the credit cycle begin to go awry, and bankers eventually become cautious, contracting their balance sheets mindful of the gearing ratio between their equity and total liabilities. Alternatively, carried away by the apparent improvement in trading conditions, banks speculate in areas where they lack expertise or became overexposed and lack an exit. These were the respective reasons that Overend Gurney in 1866 and Barings in 1890 failed. Whatever the cause of their contraction, these cycles of bank credit lasted about a decade on average. A reformed gold coin standard must be complemented by the elimination of bank credit cycles. To eliminate it entirely would require banking to be segregated into two distinct functions, one to act as a custodian of deposits with ownership remaining with the depositor, and the other to act as an arranger of finance for fees or commission. This would eliminate bank credit entirely. The evolution of modern finance has led to the development of shadow banking, some of which has led to the creation of credit off-balance sheet by the banks or by unregulated entities. Measures should be taken to identify and end these practices. But given that shadow banking is the product of the interaction between the growth of fiat money and purely financial activities, shadow banking is likely to decline, or possibly even disappear with the end of fiat and the introduction of a gold standard. Furthermore, the speculative bubble in cryptocurrencies, whose rationale is purely to hedge against the relative expansion of fiat currencies, will lose the reason for their existence beyond the purely technical innovations, such as the blockchain, that they bring. The ending of these speculative activities generally will reduce even further the perceived need for bank credit expansion, particularly for those banks funding purely financial activities. Once the public and foreigners are confident that the dollar’s gold standard is firmly established it is likely that gold will flow back into the Exchange Stabilisation Fund, giving it yet more cover for future dollar redemptions and therefore credibility for the standard. The benefits and workings of a new gold standard With the dollar on a credible gold standard, there can be little doubt that other fiat currencies will develop similar monetary policies. The whole world works with the dollar as the international currency, even Russia whose energy earnings are paid to her in dollars, and China whose raw materials from abroad are sourced nearly entirely in dollars. The replacement of fiat dollars with dollar-denominated gold substitutes will change currency priorities for all other nations. They will confront the same issues that faced the European nations in the second half of the nineteenth century, when Britain with her empire dominated global trade. Not only was there a drift towards free trade (for example, the Cobden-Chevalier Trade Treaty between France and Britain in 1860) but the European nations adopted similar gold standards. If America establishes a credible gold standard, any nation not following suit is likely to see its currency collapse. Critics may say that instead of operating their own gold standards, other nations will simply operate dollar currency boards, throwing the burden on America to provide a global monetary standard. This would not be a problem, so long as the rules of 100% backing are followed by America. A country adopting a dollar standard for its own currency will have to acquire dollars, which it can only do for gold submitted to the Exchange Stabilisation Fund. By providing a simple solution to other national currency problems the ESF would therefore see substantial gold inflows, further securing its domestic and international currency position. The key is for the ESF to administer the new monetary rules, enshrined in law, to the letter. Once the new gold standard is fully established, demand for circulating dollars will be set by markets and can be met by the ESF issuing dollars only on a 100% gold backed basis. Imports must be paid for in gold-backed dollars, and because monetary discipline will force government deficits to become a thing of the past, trade deficits will tend to be as well. Changes to gold’s domestic purchasing power might be expected through changes in the savings rate, being the allocation between consumption and deferred consumption. Variations in the savings rates may be expected to drive price differentials between nations, but this would be an error. This is because a rise in domestic savings will tend to reduce domestic prices and increase exports, leading to an importation of gold. But the extra gold or gold-backed dollars in circulation from an export surplus will have a contrary effect, supporting prices so that there would be little change. By way of contrast, a fall in the savings rate would be expected to lead to a tendency for domestic prices to rise and therefore to an increase in imports, and a corresponding outflow of gold. But the outflow of gold will then tend to act to reduce domestic prices, thus stabilising the effects of increased domestic consumption. In terms of cross-border trade, the benefit of a gold standard and its associated rules is to eliminate trade imbalances and price differentials as a cause of economic disruption, depoliticising global trade and promoting overall price stability. The peoples of individual nations can therefore set their savings preferences without affecting the general price level. It permits producers to make business calculations with a high degree of certainty of output prices, not only for domestic markets, but international ones as well. Gold supply factors Unlike proposed distributed ledger cryptocurrencies acting as the future form of money, the merits of a working gold standard are found in its flexibility. The growth of the amount of above-ground gold has tended to match the increase in the world’s population over time. But not all gold is held for monetary use, with more than half of it being estimated to be in jewellery, and a smaller amount allocated to industrial use. But much of the gold jewellery is quasi-monetary, being regarded as a reserve store of monetary value particularly among the populous Asian nations. There is, therefore, a flexible stock of non-monetary gold available through market mechanisms to support a global monetary standard. The difference between a gold or gold exchange standard and fiat currencies is that the allocation of gold between its uses is determined by people through markets, and not by governments and their monetary policies. This means that the course of prices both generally and for individual products are set only by supply and demand. Price stability is the outcome, with competition, improved production methods and technology tending to reduce prices over time and rising living standards for all. This is the background which encourages savers to put aside some of their earnings, knowing that their savings’ purchasing power will be maintained, and even likely to increase over time. For these savers, financial asset values will no longer be driven by excessive quantities of fiat currency. With the infinite feed of fiat currency removed, outright speculation will become a thing of the past, replaced by genuine risk assessments of individual bond issuers and of equity participations. The expansion of fiat currency will no longer be available as the principal fuel driving financial asset values. It will be a different monetary environment, where capital will be scarce and therefore valued. Capital will be less wasted on spurious projects. It will be the basis for recovering economic progress, so sadly lost at an increasing pace since the dollar became purely a fiat currency. It is apt to end by quoting von Mises’ concluding paragraph to his 1952 addition on currency reform in his The Theory of Money and Credit, the inspiration for this article: “Cynics dispose of the advocacy of a restitution of the gold standard by calling it utopian. Yet we have only the choice between two utopias: the utopia of the market economy, not paralysed by government sabotage on the one hand, and the utopia of totalitarian all-round planning on the other hand. The choice of the first alternative implies the decision in favour of the gold standard.” Tyler Durden Sat, 11/20/2021 - 08:10.....»»

Category: blogSource: zerohedgeNov 20th, 2021

Airline ticket prices for this holiday season are skyrocketing

Travelers should buy their flights by Thanksgiving at the latest because airfare will continue to increase as Christmas gets closer. Photo by Bob Riha/WireImage Airfare is increasing as the holidays draw nearer, with ticket prices up 55% over Christmas compared to 2020. Airfare tracking app Hopper says travelers should book their Christmas travel no later than Thanksgiving. Experts say increased bookings and rising fuel costs have contributed to the spike in ticket prices. The holiday season is here again and after nearly two years of the COVID-19 pandemic, people are eager to see loved ones in person again, but it won't be cheap.During the pandemic, airlines were desperate to fill planes and offered highly discounted fares to entice people to travel despite ongoing restrictions and the risk of the virus. However, now that vaccination rates are up and the US border is open, demand has skyrocketed, and so have ticket prices.Hopper, an airfare tracking app, published its yearly Holiday Travel Guide to give travelers an idea of what to expect in terms of ticket prices over Thanksgiving and Christmas. According to the company, domestic airfare this Thanksgiving is an average of $300 roundtrip, up 23% from 2020, though still 11% below 2019 levels. Christmas travel will burn an even bigger hole in travelers' wallets this year. Hopper revealed domestic airfare around the holiday is $390, which is 55% higher than 2020 and on par with 2019. Atlanta-resident Candace Driver complained on Twitter about rising airfare. She told Insider she flies home to California every year for Christmas, but fares were double what she paid for three people in 2020."It was $1200 for tickets home this year. Last year we got out of here for around $600," she said. Insider also spoke with Twitter user Bailey Bond who said she spent hours looking for a cheaper flight from Portland to Texas after prices soared to $900. She ended up paying $800 for one ticket."Every year for Christmas we have spent about $360 per person for round trip flights to Texas," she said. "What we usually spend getting two of us home round trip wouldn't even buy 1 person a round trip ticket this year."With the stark increase in airfare from the previous year, airlines are likely anticipating a stronger Christmas travel period compared to Thanksgiving, according to Hopper. So, for travelers who have not yet bought their tickets, this could put a dent in the budget, but it is not too late to avoid the biggest price spikes.Hopper suggests travelers should buy their flights by Thanksgiving at the latest because airfare will continue to increase as Christmas gets closer. The company expects domestic ticket prices to rise 7% to $460 by December 11, and another 11% to $510 in the week leading up to the holiday. Rising airfare is a result of two main factors: increased demand and rising fuel prices, experts say. An Adobe report revealed bookings are 3.2% higher than 2019 and up 78% compared to 2020. Meanwhile, according to CNBC, fuel is up 63% compared to the same time in 2020, and airlines are preparing to take a hit because of it. In their respective earnings calls for Q3, CEOs for both Delta Air Lines and Frontier Airlines said the rising costs would impact their Q4 bottom line.Moreover, United Airlines CEO Scott Kirby told CNBC in an interview that fuel prices directly impact airfare."Jet fuel prices go up usually because demand is strong, and that's going to be true again," Kirby said. "Right now supply is still swamping demand, but ultimately, higher jet fuel prices lead to higher ticket prices."Henry Harteveldt, president and travel industry analyst of Atmosphere Research Group, echoed industry executives."Rising fuel costs are going to play the role of Scrooge to anyone hoping to find an inexpensive flight for the Christmas holiday," he told Insider.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 20th, 2021

What to Expect Ahead of Dollar Tree"s (DLTR) Q3 Earnings?

Dollar Tree's (DLTR) Q3 results are expected to reflect gains from improved store traffic and introduction multi-price points at stores, while higher freight costs still remain a worry. Dollar Tree, Inc. DLTR is likely to register an increase in the top line when it reports third-quarter fiscal 2021 results on Nov 23, before the market opens. The Zacks Consensus Estimate for revenues is pegged at $6.42 billion, indicating an improvement of 4% from the prior-year quarter.The bottom line of this operator of discount variety retail stores is expected to decrease year over year. The Zacks Consensus Estimate for third-quarter earnings is pegged at 95 cents per share, suggesting a decline of 31.7% from the year-ago period. The figure has been unchanged in the past 30 days.The company has a trailing four-quarter earnings surprise of 13.8%, on average. In the last reported quarter, this Chesapeake, VA-based company outperformed the Zacks Consensus Estimate by a margin of 19.4%.Dollar Tree, Inc. Price and EPS Surprise Dollar Tree, Inc. price-eps-surprise | Dollar Tree, Inc. QuoteKey Factors to NoteDollar Tree’s fiscal third-quarter results are expected to reflect gains from its decision to introduce additional multi-price points to its Dollar Tree Plus! stores and plans to expand Combo stores. The company has been witnessing strong momentum at the Combo and Dollar Tree Plus! stores, which feature multi-price assortments. Expansion of these stores is likely to have contributed to incremental sales in the to-be-reported quarter. The company’s store rationalization and renovation efforts, backed by the success of the H2 program and Crafter’s Square, might have favored the to-be-reported quarter’s top line.The company’s digital and omni-channel endeavors, same day delivery service with Instacart and introduction of Chesapeake Media Group are also expected to have driven traffic trends in the fiscal third quarter.Industry experts believe that discretionary category, including apparel, home décor, beauty care and floral, is likely to have performed well. The company has been witnessing encouraging results at stores that added fresh produce and frozen meats to their assortment.Clearly, aforementioned factors instill optimism regarding the outcome of the results. On the last reported quarter’s earnings call, management predicted consolidated net sales for third-quarter fiscal 2021 to be $6.40-$6.52 billion, with comps growth in low-single digits. It anticipated earnings of 88-98 cents per share.However, margins still remain an area to watch. The company has been witnessing elevated freight cost, which has been plaguing the industry for a while now. The increased freight cost has been denting the company’s gross margin to a large extent.On the last quarter’s earnings call, management stated that it anticipates the elevated freight cost environment across the industry to continue through the year. The company predicted regular carriers to now fulfill only 60-65% of their commitments. It noted that the spot market rates for ocean freight from China have been trending higher than the all-time highs, increasing more than 20% since the first-quarter earnings report in May. The company also informed that it expects the volatility in the ocean carriers’ ability to fulfill commitments to continue in the near term.The company’s Dollar Tree banner is extremely sensitive to higher freight costs due to its one-dollar price point. The company has been taking several steps to mitigate the impacts of freight and otherwise improve gross merchandise margin. However, impacts from these headwinds are likely to get reflected in the fiscal third-quarter results.What the Zacks Model UnveilsOur proven model does not conclusively predict a beat for Dollar Tree this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.Dollar Tree has a Zacks Rank #3 and an Earnings ESP of 0.00%.3 Stocks With a Favorable CombinationHere are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat.Abercrombie & Fitch ANF currently has an Earnings ESP of +8.27% and a Zacks Rank of 3. The company is expected to have registered top-line growth in third-quarter fiscal 2021. The Zacks Consensus Estimate for ANF's quarterly revenues is pegged at $894.4 million, which suggests growth of 9.1% from the figure reported in the prior-year quarter.You can see the complete list of today's Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Abercrombie's quarterly earnings moved up 4.7% in the last seven days to 67 cents per share. However, the figure suggested a 12% decline from the year-ago quarter's reported number. However, ANF has delivered an earnings beat of 510.9%, on average, in the trailing four quarters.Nordstrom JWN currently has an Earnings ESP of +0.40% and a Zacks Rank #3. JWN is anticipated to have registered top and bottom-line growth in third-quarter fiscal 2021. The Zacks Consensus Estimate for quarterly earnings of 56 cents per share moved up 3.7% in the last seven days and suggests growth of 154.6% from the year-ago quarter's reported number.The Zacks Consensus Estimate for Nordstrom's quarterly revenues is pegged at $3.54 billion, indicating an improvement of 14.5% from the prior-year quarter. JWN has delivered an earnings beat of 557.3%, on average, in the trailing four quarters.DICK'S Sporting Goods DKS currently has an Earnings ESP of +27.97% and a Zacks Rank #3. DKS is likely to register top-line growth when it reports third-quarter fiscal 2021 numbers. The Zacks Consensus Estimate for its quarterly earnings moved up 3.3% in the last 30 days to $1.88 per share. The figure suggested a decline of 6.5% from the year-ago quarter.The Zacks Consensus Estimate for DICK'S quarterly revenues is pegged at $2.42 billion, which suggests growth of 0.4% from the figure reported in the prior-year quarter. DKS has delivered an earnings beat of 117.4%, on average, in the trailing four quarters. More Stock News: This Is Bigger than the iPhone! It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market. Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.Click here for the 4 trades >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Dollar Tree, Inc. (DLTR): Free Stock Analysis Report Abercrombie & Fitch Company (ANF): Free Stock Analysis Report Nordstrom, Inc. (JWN): Free Stock Analysis Report DICK'S Sporting Goods, Inc. (DKS): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksNov 19th, 2021

Post Holdings (POST) Q4 Earnings Miss Estimates, Sales Up Y/Y

Post Holdings' (POST) fourth-quarter performance reflects gains from acquisitions and net sales growth across all the reporting segments. However, cost inflation is a headwind. Post Holdings, Inc. POST reported mixed fourth-quarter fiscal 2021 results, with the top line increasing year over year and beating the Zacks Consensus Estimate. The bottom line declined year over year and missed the consensus mark.Performance during the quarter gained from consistent volume demand recovery in the Foodservice unit, solid growth of BellRing Brands and pricing actions. Input and freight inflation along with increased manufacturing costs is a concern. Supply chain disruptions and labor shortages caused manufacturing inefficiencies, denting the company’s top line to some extent in the quarter under review.Post Holdings, Inc. Price, Consensus and EPS Surprise  Post Holdings, Inc. price-consensus-eps-surprise-chart | Post Holdings, Inc. Quote Q4 in DetailAdjusted earnings of 44 cents per share declined from earnings of 77 cents reported in the prior-year quarter. The bottom line missed the Zacks Consensus Estimate of 79 cents.The company registered sales of $1,695.6 million, up 20.1% from $1,411.3 million reported in the prior-year quarter. The figure exceeded the consensus mark of 1,662.2 million. The upside can be attributed to an increase in Post Consumer Brands, Weetabix, Foodservice, Refrigerated Retail and BellRing Brands.The top line included $99.8 million in net sales from acquisitions made in fiscal 2021. This includes; Private label ready-to-eat (PL RTE) cereal business, Egg Beaters liquid egg brand, Almark Foods business and related assets as well as Peter Pan nut butter brand.Gross profit amounted to$428.5 million, down 2.7% from $440.3 reported in the year-ago quarter. Gross margin contracted from 31.2% to 25.3% in the quarter under review.The company’s SG&A expenses increased 5.2% year over year to $241.7 million. SG&A expenses, as a percentage of sales, came in at 14.3%, down from 16.3% reported in the year-ago quarter.Operating profit of $137.8 million fell 23% year over year. Adjusted EBITDA inched down 0.8% to $272.5 million from $ 274.8 million in the prior-year quarter.Segment DetailsPost Consumer Brands: Sales in the segment increased 10.6% year over year to $521.7 million in the quarter under review. Segment sales included $66 million generated from the PL RTE Cereal Business and Peter Pan.Volumes rose 7.4%, including 1,270 basis points (bps) benefits from the aforementioned acquisitions. Excluding the gains from buyouts, volumes fell on persistent softness in value and private label cereal products as well as losses from the decision to exit specific low-margin private label business and licensed brands. Segmental profit was $66.5 million, down 28.4% from the prior-year quarter’s levels.Weetabix: Segmental sales rose 11.9% year over year to $127.2 million. Gains from favorable foreign currency movements of nearly 710 bps aided sales.Volumes were in line with the year-ago quarter’s levels, as gains from new product launches, private label as well as drink products were offset by softness in all other products. The downside in other products was caused by the lapping of higher purchases in the year-ago quarter amid increased at-home consumption. Segmental profit of $32.8 million increased 17.1% year over year.Foodservice: Sales increased 42.5% to $456.8 million in the quarter under review, including benefits of $13.1 million from the Almark acquisitions.Volumes rose 23.1%, which includes a 180-bps benefit from the Almark buyout. The upside in volumes can be attributed to higher away-from-home demand. Egg volumes rose 21.1% (including a 230 bps benefit from Almark) and potato volumes rallied 34.3%. Segmental profit was $14.2 million, up from the year-ago quarter’s levels.Refrigerated Retail: Sales in the segment were $251.1 million, up 12.4% from the year-ago quarter’s figures. Segment sales included $20.6 million generated from Egg Beaters and the Almark acquisition.Volumes moved up 9.7%, which includes 810 bps benefits from Egg Beaters and the Almark buyout. The uptick in volumes was driven by growth in side dish and egg products. This was offset by softness in sausage and cheese products. Segmental profit declined 86.3% year over year to $3.7 million.BellRing Brands: Sales amounted to $340 million, up20.3% year over year. Sales in the Premier Protein brand gained from the RTD (ready-to-drink) shake distribution in existing and new products, strong velocities as well as higher average net selling prices. Sales in the Dymatize brand increased 41.3% year on year and the same for all other products increased 7.6%. Segmental profit of $53.1 million increased 8.4% in the quarter under review.Financial DetailsPost Holdings ended the fiscal fourth quarter with cash and cash equivalents of $817.1 million, long-term debt of $6,922.8 million and total shareholders’ equity of $2,754.2 million.Cash provided by operating activities was $588.2 million for the yearended Sep 30, 2021. During the fiscal fourth quarter, Post Holdings repurchased 0.7 million shares for $78.3 million. In fiscal 2021, management repurchased 4 million shares for $393.6 million.Business DevelopmentThe company entered into an agreement with BellRing. Per the terms, Post Holdings will buy and develop land to build an aseptic manufacturing unit to produce RTD shakes for BellRing.Post Holdings and BellRing Brands also signed a transaction agreement. The deal is related to Post Holding’s earlier-announced plan to distribute a major portion of its interest in BellRing to shareholders. The deal is aimed at providing BellRing an improved market position to undertake strategic growth, enhance trading liquidity and manage its capital structure. The distribution is likely to be completed during first-quarter 2022.Pandemic ImpactsThe company continues to monitor the impact of the COVID-19 pandemic on its operations. During the first half of fiscal 2021, products sold through retail channels witnessed an uptick in sales, courtesy of increased at-home consumption amid the pandemic. During the back half of fiscal 2021, most of the company’s retail channel product categories shifted toward growth rates and were in line with pre-pandemic levels.Post Holdings highlighted that volumes in certain channels and product categories in the foodservice business have almost fully recovered to pre-pandemic levels. In aggregate, overall foodservice volumes are still below pre-pandemic levels. Management expects foodservice business to return to pre-pandemic profitability during fiscal 2023. Volume growth in the refrigerated retail business is likely to be constrained till supply chain performance has not returned to normalcy.The company is facing challenges related to labor shortages, input and freight inflation as well as other supply chain disruptions, like input availability. These factors are exerting pressure on the company’s supply chains across all segments. These headwinds are leading to lower sales and increased manufacturing costs, primarily in foodservice and refrigerated retail.Image Source: Zacks Investment ResearchOutlookPost Holdings anticipates fiscal 2022 adjusted EBITDA between $1.16 and $1.20 billion, including BellRing. Management highlighted that it expects fiscal 2022 to be more weighted toward the second half of the year, as the company battles price inflation and navigates through lingering supply chain disruptions. The company expects the fiscal first quarter to be particularly impacted, while performance is expected to improve sequentially in the next quarters. The company expects fiscal 2022 capital expenditures in the range of $250-$300 million.For BellRing Brands, the company expects fiscal 2022 net sales in the range of $1.36-$1.41 billion. The projection suggests an increase of up 9-13% year over year. Fiscal 2022 adjusted EBITDA for the segment is expected to be $255-$265 million, calling for 9-13% increase year over year.Shares of the Zacks Rank #4 (Sell) company have fallen 7.5% in the past three months compared with the industry’s decline of 0.7%.Upcoming Earning Releases in the Consumer Staples SectorHormel Foods Corporation HRL is slated to report earnings on Dec 9, 2021. The company is likely to register a bottom-line increase when it reports fourth-quarter fiscal 2021 results. The Zacks Consensus Estimate for quarterly earnings per share (EPS) has remained unchanged in the past 30 days at 50 cents. The figure suggests an increase of 16.3% from the year-ago quarter’s reported number.Hormel Foods’ top line is also expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $3,216 million, which suggests an increase of 32.9% from the figure reported in the prior-year quarter. HRL presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.The J. M. Smucker Company SJM is slated to report earnings on Nov 23, 2021. The company is likely to register a decline in the bottom line when it reports second-quarter fiscal 2022 results. The Zacks Consensus Estimate for quarterly EPS has remained unchanged in the past 30 days at $2.04. The figure suggests a slump of 14.6% from the year-ago quarter’s reported number.The J. M. Smucker’s top line is expected to decline year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $1,966 million, suggesting a decline of 3.1% from the figure reported in the prior-year quarter. SJM carries a Zacks Rank #4.Campbell Soup Company CPB is slated to report earnings on Dec 8, 2021. The company is likely to register a bottom-line decline when it reports first-quarter fiscal 2022 numbers. The Zacks Consensus Estimate for quarterly EPS has moved down a penny in the past 30 days to 80 cents, suggesting a fall of 21.6% from the year-ago quarter’s number.Campbell Soup’s top line is expected to fall year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $2,278 million, suggesting a drop of 2.7% from the figure reported in the prior-year quarter. CPB carries a Zacks Rank #4. More Stock News: This Is Bigger than the iPhone! It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market. Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.Click here for the 4 trades >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Campbell Soup Company (CPB): Free Stock Analysis Report The J. M. Smucker Company (SJM): Free Stock Analysis Report Hormel Foods Corporation (HRL): Free Stock Analysis Report Post Holdings, Inc. (POST): Free Stock Analysis Report To read this article on Zacks.com click here......»»

Category: topSource: zacksNov 19th, 2021

Gift These 5 Top-Ranked ETFs This Holiday Season

Take a look at some top-ranked ETFs that might help strengthen your portfolio and rake in some good returns. Investors can play it differently this holiday season and gift some top-ranked handpicked ETFs that can enhance the portfolio returns of their loved ones. Here we have highlighted five such options like iShares U.S. Technology ETF IYW, First Trust Nasdaq Semiconductor ETF FTXL, The Industrial Select Sector SPDR Fund XLI, Invesco S&P MidCap Momentum ETF XMMO and SPDR S&P Retail ETF XRT.Currently, the environment in Wall Street seems to be a little cautious due to the hot inflation readings. Otherwise, several factors can keep the rally moving like encouraging economic data releases, recovering U.S. economy from the pandemic-led slump, accelerated coronavirus vaccine rollout along with President Biden signing the more than $1-trillion infrastructure bill.Against this backdrop, let’s take a detailed look at the ETF options that are looking good:iShares U.S. Technology ETF Technology plays an instrumental role amid the COVID-19 uncertainty in aiding people to maintain safe-distancing norms. The major technology companies’ resilience to the coronavirus crisis have supported the tech-heavy index amid the pandemic in 2020. However, the sector’s long-term story remains intact with the emergence of cutting-edge technology such as cloud computing, big data, Internet of Things, wearables, VR headsets, drones, virtual reality, AI and machine. The deployment of 5G technology — the next wireless revolution — is creating more opportunities. The wave of mergers and acquisitions is also providing impetus to the space.iShares U.S. Technology ETF seeks to provide investment results that before expenses generally correspond with the price and yield performance of the Russell 1000 Technology RIC 22.5/45 Capped Index.iShares U.S. Technology ETF has AUM of $9.31 billion. IYW charges investors 41 bps in annual fees, as stated in the prospectus. iShares U.S. Technology ETF currently sports a Zacks ETF Rank #1 (Strong Buy), with a Medium-risk outlook (read: 4 Sector ETFs & Stocks for Bountiful Returns in November).First Trust Nasdaq Semiconductor ETFThe semiconductor industry has been increasingly gaining investors' attention backed by its bright prospects. The coronavirus-induced work-from-home and web-based learning trends have spurred demand for chips from PC manufacturers and data-center operators. The increasing importance of Hybrid cloud among enterprises is attracting investments from large public cloud providers, including Amazon Web Services, Microsoft Azure, Google Cloud, International Business Machines and Oracle. The data-center chip providers will likely gain from this trend.First Trust Nasdaq Semiconductor ETF follows the Nasdaq US Smart Semiconductor Index.First Trust Nasdaq Semiconductor ETF charges 60 bps in fees a year from investors and has AUM of $98 million. It flaunts a Zacks ETF Rank #1 (read: Semiconductor ETFs Flying High on Slew of Q3 Earnings Beat).The Industrial Select Sector SPDR Fund        The latest data on U.S. industrial output appears to be encouraging as recoveries from the damages caused by Hurricane Ida are apparent. Per the Fed’s recently-released data, total industrial production increased 1.6% in October after declining about 1.3% in September. There was a 1.2% rise in manufacturing output (hitting its highest level since March 2019). Going on, there was a 1.2% uptick in utility production and a 4.1% upside in mining production.The Industrial Select Sector SPDR Fund seeks to provide investment results that, before expenses, match the performance of the Industrial Select Sector Index. The fund seeks to provide precise exposure to companies in the following industries: aerospace and defense; industrial conglomerates; marine; transportation infrastructure; machinery; road and rail; air freight and logistics; commercial services and supplies; professional services; electrical equipment; construction and engineering; trading companies and distributors; airlines; and building products.The Industrial Select Sector SPDR Fund has AUM of $18.39 billion and its expense ratio is 0.12%. The Industrial Select Sector SPDR Fund carries a Zacks ETF Rank #1, with a Medium-risk outlook (read: Wall Street Still Has Room to Run: ETFs to Play).Invesco S&P MidCap Momentum ETF Wall Street has been loudly cheering the third-quarter earnings season. There have also been certain upbeat economic data releases that have raised investor optimism. The coronavirus vaccine rollout is gradually helping control the spread of the outbreak across the globe. Accordingly, the global demand and economic growth levels are on the path of recovery from the pandemic-led slump. Investors and vaccine makers like Moderna and Johnson & Johnson have reasons to cheer the latest update concerning the application of COVID-19 booster shots. Investors have rotated back into growth-oriented market areas in recent weeks on optimism surrounding the economic recovery.Invesco S&P MidCap Momentum ETF follows the S&P Midcap 400 Momentum Index, designed to identify mid-cap firms with the highest momentum scores.XMMO has AUM of $1.07 billion and an expense ratio of 0.33%. Invesco S&P MidCap Momentum ETF flaunts a Zacks ETF Rank #1 (read: High Momentum ETFs to Buy on Wall Street's Winning Streak).SPDR S&P Retail ETFInvestors looking for attractive opportunities to park their money to rake in good returns can zero in on the retail sector. Market pundits are anticipating an impressive retail sales figure in 2021 along with a strong holiday season. In an encouraging development, the retail sales data was remarkable. The metric rose 1.7% in October (the largest surge since March), beating economists’ estimate of a 1.4% rise. This, in turn, marks a 16.3% increase from the year-ago figure (according to a Reuters article). The metric rose for the third consecutive month. Online sales surged 10.2% from the year-ago level.With AUM of $1.17 billion, SPDR S&P Retail ETF tracks the S&P Retail Select Industry Index, holding 107 securities in its basket, with each accounting for not more than 1.68% of assets. Apparel retail, Internet & direct marketing retail, specialty stores and automotive retail are the top four sectors with a double-digit allocation each.SPDR S&P Retail ETF charges 35 bps in annual fees. SPDR S&P Retail ETF carries a Zacks ETF Rank #1, with a Medium-risk outlook (read: ETFs to Buy on Fund Managers' Big Bet on U.S. Stocks). Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Industrial Select Sector SPDR ETF (XLI): ETF Research Reports SPDR S&P Retail ETF (XRT): ETF Research Reports iShares U.S. Technology ETF (IYW): ETF Research Reports First Trust NASDAQ Semiconductor ETF (FTXL): ETF Research Reports Invesco S&P MidCap Momentum ETF (XMMO): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksNov 19th, 2021

A beginner"s guide to trading futures contracts

Futures are financial contracts where buyers and sellers agree to exchange an asset at a predetermined price and date. Here are 4 steps to trading futures. Business InsiderTypically, a trader will become familiar with one or two contract types and specialize in a particular strategy based on their goals, risk tolerance, and comfort level.d3sign/GettyTable of Contents: Masthead Sticky Futures contracts allow traders to speculate on the direction of price movements on asset classes such as livestock, oil, and soybeans. Investing in futures can provide an additional layer of diversification to a portfolio. Futures are more complex and carry more risks than trading stocks or ETFs because of low margin requirements and volatility. Visit Insider's Investing Reference library for more stories. Futures are contracts in which the buyer agrees to buy a commodity or financial instrument at a specified date and quantity at a later point in time, and the seller agrees to sell or deliver the asset as specified in the contract. These contracts were initially created to help businesses navigate unexpected costs.For example, profits in the airline industry can be heavily dependent on the price of fuel. To protect against a sudden surge in prices, an airline company can use a futures contract to lock in current prices, thus nullifying the impact of increasing fuel prices. Futures contracts can be settled in cash or with physical goods. For traders, the settlement is in cash, while some businesses may opt for physical delivery. A futures contract can derive its value from various asset types. The most common types are commodities like wheat, corn, and crude oil. Precious metals like gold and silver, currencies, US Treasuries and stock indexes like the S&P 500. But to trade futures, you'll want to understand the risks and investment strategies before moving forward. Here are four key areas that you'll want to get familiar with.Note: Futures are known as derivatives. Derivatives are contracts that obtain their value from an underlying asset, index, or security.Step 1: Understand how futures work — and the risks Futures work differently from more mainstream investing options like stocks. Other than speculation, some investors prefer futures trading because it can offer a few benefits that are not available with stocks. For example, futures contracts trade at different hours than the stock market. Instead of 9:30 a.m. to 4 p.m. ET, the futures market is open nearly 24 hours a day, six days a week.Another benefit to futures trading are the short-selling requirements and tax benefits. Short selling is the process of selling assets that you've borrowed with the intent on buying it back later for less money. For stocks, short selling has a higher margin requirement but futures contracts have the same margin requirement on long and short positions making it a bit more conducive for traders who are looking for this high-risk, high-reward tactic. As for taxes, some futures trades may qualify for preferential tax rates. "Typically, gains from short-term stock trades are taxed as ordinary income. However, gains from futures contracts are taxed at a 60/40 rate which is 60% long-term and 40% short-term. Currently long-term capital gains tax rates range from 0-20% depending on your federal income tax bracket," says Moswen James, an enrolled agent at Get Help Tax.Futures can also help an investor diversify and participate more directly in certain asset classes. For example, the stock price for a company like Exxon Mobile (XOM) will at-times be dependent upon the price of crude oil because of the nature of the company — and other factors like management and competitors. A futures contract on the other hand can be based directly on the price of crude oil without the added risk factors that a company may bring. That does not mean however that futures contracts are less risky, they are still highly complex financial instruments. One of the largest risk factors with futures is related to the margin requirements and price sensitivity. "Futures contracts are inherently very leveraged because the underlying valuation is very sensitive to the amount of funds invested as margin or collateral," says Chester Spatt, professor of finance at Carnegie Mellon University's Tepper School of Business.Margin is the practice of borrowing money from your brokerage to invest. Current margin requirements for futures contracts are between 3% and 12%. This means an investor could spend $5,000 of their own money to control a $100,000 position, which represents only 5%. If this trade goes in the favor of the investor, there would be a significant windfall. But a negative move could result in serious losses. Before using debt to enter a trade it is wise to carefully consider your risk tolerance. Step 2: Choose a futures contract type and market to trade in There are different types of futures contracts to choose from. Because each market can be so distinct from each other, a futures trader typically focuses on one or two areas, similar to how a chef may specialize in baking or desserts. This allows the trader to have a deeper understanding of that market and may help inform their trading decisions. Below are the most common categories. Precious metals: Gold and silver are the most common metals in this category. Investors who choose these types of futures contracts are generally looking to hedge against inflation or financial uncertainty but precious metals can also be used for more practical applications like platinum for semiconductor chips. Stock index: These contracts derive their value from a stock index like the S&P 500, Nasdaq, or Dow Jones. Investors try to use these types of futures to profit from anticipated movements or announcements from the Federal Reserve. Energy: Futures contracts that are based on energy would include oil and natural gas. These contracts can also serve as a benchmark for oil prices worldwide. Agriculture: Agriculture contracts in this category are usually based on things like soybeans, corn and wheat. These contracts are a bit more unique due to the fact that weather patterns and seasonality play a much bigger role in impacting prices and risk. US Treasury/interest rates: Futures contracts based on interest rates and Treasury bonds play a significant role in international financial markets. Investors in this category closely watch the moves of the Federal Reserve. Livestock: Traders can even speculate on the prices of livestock like cattle and hogs. Price movements here are subject to consumer tastes and supply and demand pressure in addition to standard risks associated with futures.Note: Each type of futures contract is denominated in different values. For example, futures contracts for gold are denominated in 100 troy ounces but wheat contracts are 5,000 bushels.Step 3: Choose your investing strategyThere are several investing strategies to choose from, typically a trader will become familiar with one or two contract types and specialize in a particular strategy based on their goals, risk tolerance, and comfort level. Common futures trading strategies include going long or short in a position and calendar spreads which could be bullish or bearish. Going long: This means that you are buying the contract and you're expecting the underlying asset to rise. The obvious risks with this strategy occur if the underlying asset drops in value. Going short: This strategy involves selling the contract in anticipation that the underlying asset will fall in value. This strategy however is risky because losses can be unlimited should the underlying asset rise in value since there is no true limit to how high prices can rise. Calendar spreads: A calendar spread is a strategy in which the trader takes both a long and short position on the same asset but with two separate expirations. The profit is generated by the spread which is the profit between the contract that was sold and the contract that was purchased. In a bull calendar spread, the trader will go long on the shorter expiration date and go short on the contract with the longer expiration. In a bear calendar spread, the positions are flipped and the trader will sell the shorter expiration contract and buy the longer one. Step 4: Place your futures trade and manage it A best practice for any trade is to understand the risks and price targets prior to entry. Because of the increased risks of trading futures, contracts should be carefully monitored. This is where the different order types to buy and sell may come into play and help manage the trade. A limit order offers control over the entry and exit prices. If you know the levels in which to enter and exit a trade these limit orders, as well as a stop loss can help traders execute their strategies more efficiently. The financial takeawayFutures trading is not suitable for every investor due to its complexity and risk. "Futures contracts have tremendous price sensitivity compared to the amount that needs to be deposited as margin or collateral. If the investor does not want to close his position after an adverse price move he should have substantial reserves available," adds Spatt.What to know about derivatives and how they allow investors to hedge, leverage, and speculateAlternative investments are exotic assets that can diversify your portfolioHow to hedge against inflation with investments that keep pace with rising pricesTrading and investing are two approaches to playing the stock market that bring their own benefits and risksRead the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 18th, 2021

Futures Rise To 4,700 "Max Gamma" As Oil Slide Accelerates

Futures Rise To 4,700 "Max Gamma" As Oil Slide Accelerates U.S. index futures rose again, trading on top of the massive 4700 "max gamma" level despite downbeat data out of Chinese tech names, as investors awaited the latest batch of unemployment data and taking comfort from signals that central banks will stay far behind the curve and keep pledges to overlook faster inflation rather than rush into rate hikes. European stocks were steady and Asian equities fell as Chinese tech stocks tumbled after poor results from Baidu and Bilibili. Treasury yields edged higher, the dollar was little changed and gold declined. Bitcoin retreated for a fifth straight day. Oil prices skidded to a six-week low on concern about a supply overhang and the prospect of China, Japan and the United States dipping in to their fuel reserves, with Brent futures last at $79.77, more than 8% off last month's three-year high. Nasdaq futures rose 86.25 points or 0.53% outperforming S&P 500 futs which were up 11.50 points or 0.25% to 4697.75, after chip giant Nvidia jumped 7% after a sales forecast by the world’s largest chipmaker. Elsewhere in premarket trading, Cisco dropped 6.6% after the computer networking equipment group’s growth and earnings forecast fell short of expectations while Alibaba slid after reporting sales that missed analyst estimates for a second straight quarter. Some other notable premarket movers: EV makers are mixed in U.S. premarket trading, with Rivian Automotive (RIVN US), Lucid (LCID US) and Canoo (GOEV US) all declining and newly-listed Sono (SEV US) extending its bounce Nvidia (NVDA US) shares gain 7% in U.S. premarket trading, with analysts saying the chipmaker delivered a strong enough quarter to justify its punchy valuation Amtech (ASYS US) fell 22% in post-market trading after reporting fourth quarter revenue that missed estimates from two analysts. The semiconductor stock has risen 139% this year through Wednesday’s trading. Kraft Heinz (KHC US) fell 1.6% in postmarket trading on Wednesday after announcing one of its top holders was selling a portion of its stake. Victoria’s Secret (VSCO US) shares gain 13% in U.S. premarket trading as analysts highlight “better-than- feared” 3Q results for the lingerie retailer. JD.com (JD US) shares advanced 2.2% premarket after it reported net revenue for the third quarter that beat the average analyst estimate. “While companies are managing to report solid third-quarter numbers, the ability to do so is being tempered by concerns about slimmer margins,” said Michael Hewson, chief market analyst at CMC Markets in London. “One positive thing, aside from the concern over rising inflation, has been the resilience of labor markets, on both sides of the Atlantic.” The Stoxx Europe 600 Index was little changed with most cash indexes giving back early gains or losses to trade flat as travel and consumer companies gained while the energy and minings industries retreated. FTSE 100 underperformed slightly. Oil & gas was the weakest sector followed by mining stocks. European metals and mining stocks fall 0.8%, the second worst performing sub-index on the benchmark Stoxx 600, amid sinking iron ore futures and copper prices. Iron ore retreated as investors weighed a top producer’s forecasts of a balanced market next year and the impact on miners amid a price collapse in recent months. Diversified miners drop, Glencore -0.8%, Anglo American -1%, BHP -0.7%, Rio Tinto -1.1%; the four stocks account for more than 60% of the SXPP. Earlier in the session, Asian stocks fell, on track for a second day of losses, as Baidu helped lead a slump in Chinese technology giants.  The MSCI Asia Pacific Index dropped as much as 0.4%, extending its two-day slide to about 0.9%. The Hang Seng Tech Index lost about 3%, as search engine giant Baidu tumbled on worries over the advertising outlook and video-streaming firm Bilibili dropped after posting a larger-than-expected loss. Hong Kong’s Hang Seng Index and China’s CSI 300 benchmark were the worst performing national benchmarks Thursday, while Taiwan’s Taiex managed a small gain. Alibaba also fell, ahead of its highly awaited earnings report later today that may show the impact of Beijing’s regulatory curbs. Japan's Nikkei was down 0.6% in early trade. "We do seem to have stalled somewhat as we head into the year end," said Jun Bei Liu, a portfolio manager at Tribeca Investment Partners in Sydney. "Investors perhaps are just taking a bit of pause," she said, in the wake of a strong U.S. results season, but as inflation and China's slowdown loom as macroeconomic headwinds. “With a bout of earnings having been released and put behind the market, we’re in an environment where investors are inclined to take profits,” said Takashi Ito, an equity market strategist at Nomura Securities in Tokyo. “Investors are likely to cherry pick stocks that have high earnings and ROE and have strong momentum for growth.”  The region’s equities are now poised for a weekly drop after wiping out gains from earlier this week. Anxiety over global inflation has weighed on sentiment as investors search for clues on when central banks will start raising interest rates. Indonesia and the Philippines kept borrowing costs unchanged, as expected, to aid two economies that bore the brunt of Covid-19 outbreaks in Southeast Asia this year. In rates, treasuries were slightly cheaper across long-end of the curve after S&P 500 and Nasdaq 100 futures breached Wednesday’s highs. Yields are higher by ~1bp in 30-year sector, with 2s10s steeper by ~1bp, 5s30s by ~0.5bp; 10-year is ~1.60%, trailing bunds by ~2bp as traders push back on ECB rate-hike pricing. Focal points Thursday include several Fed speakers and a potentially historic 10-year TIPS auction at 1pm ET - at $14BN, the 10Y TIPS reopening is poised to draw a record low yield near -1.14%; breakeven inflation rate at ~2.71% is within 7bp of Monday’s YTD high. Elsewhere, Gilts outperformed richening ~2.5bps across the curve. Peripheral spreads tighten, semi-core widens marginally. In FX, the U.S. dollar erased an earlier modest loss and was flat, with majors mostly range-bound. Treasury yields stabilized from overnight declines; the greenback traded mixed versus its Group-of-10 peers, though most were confined to tight ranges, New Zealand’s dollar led G-10 gains after two-year ahead inflation expectations rose to 2.96% in the fourth quarter from 2.27% in the third, according to survey of businesses published by the Reserve Bank of New Zealand. Support in euro- Swiss franc at 1.0500 holds for now and consolidation for risk reversals this week suggests that a breach of the key level may not see a big follow through. The pound inched up and is on its longest winning streak in nearly seven months after this week’s jobs and inflation data fueled confidence that the Bank of England will hike rates. The Turkish lira plunged to a new all time low, with the USDTRY rising to 10.93 after the central bank cut rates by 100bps. Currency traders are also assessing a sharp downdraft in the Aussie/yen cross, often a barometer of market sentiment. It fell through its 200-day moving average on Tuesday and has lost almost 4% in a dozen sessions . "You've got the perfect storm there for bears," said Matt Simpson, senior analyst at brokerage City Index. "Fundamentally and technically Aussie/yen looks pretty good with lower oil prices." In commodities, crude futures remained in the red but bounce off worst levels as the potential for SPR releases remains center stage. WTI finds support near $77, recovering toward $78; Brent regains a $80-handle. Spot gold gives back Asia’s small gains, dropping ~$7 to trade near $1,860/oz. Base metals trade poorly, LME zinc and lead underperform. Looking at the day ahead now, and data releases from the US include the weekly initial jobless claims, the Philadelphia Fed’s business outlook for November, the Kansas City Fed’s manufacturing index for November, and the Conference Board’s leading index for October. Central bank speakers include PBoC Governor Yi Gang, the ECB’s Centeno, Panetta and Lane, and the Fed’s Bostic, Williams, Evans and Daly. There’ll also be a number of decisions from EM central banks, including Bank Indonesia, the Central Bank of Turkey and the South African Reserve Bank. Finally, earnings releases include Intuit, Applied Materials and TJX. Market Snapshot S&P 500 futures up 0.4% to 4,703.25 STOXX Europe 600 up 0.1% to 490.50 MXAP down 0.3% to 199.31 MXAPJ down 0.6% to 650.79 Nikkei down 0.3% to 29,598.66 Topix down 0.1% to 2,035.52 Hang Seng Index down 1.3% to 25,319.72 Shanghai Composite down 0.5% to 3,520.71 Sensex down 0.4% to 59,755.91 Australia S&P/ASX 200 up 0.1% to 7,379.20 Kospi down 0.5% to 2,947.38 Brent Futures down 0.1% to $80.18/bbl Gold spot down 0.2% to $1,863.45 U.S. Dollar Index little changed at 95.75 German 10Y yield little changed at -0.26% Euro little changed at $1.1327 Top Overnight News from Bloomberg More Wall Street banks are wagering that the Federal Reserve will hike rates at a faster-than-expected pace, with Citigroup Inc. joining Morgan Stanley in backing trades that will profit if the central bank does just that China is releasing some oil from its strategic reserves days after the U.S. invited it to participate in a joint sale, suggesting the world’s two biggest oil consumers are willing to work together to keep a lid on energy costs European countries are increasingly forcing reluctant companies to let employees work from home in an effort to break the rapidly spreading fourth wave of the coronavirus pandemic A more in depth look at global markets courtesy of Newsqauwk Asia-Pac stocks traded mostly negative with sentiment in the region subdued amid a lack of significant macro drivers and following the uninspired lead from the US - where the major indices finished a choppy session in the red and the DJIA gave up the 36k status. Nonetheless, the ASX 200 (+0.1%) remained afloat with notable strength in gold miners, as well as some consumer stocks, although advances in the index were limited by losses in the financial and energy sectors after similar underperformance stateside amid a decline in yields and oil prices. The Nikkei 225 (-0.3%) was initially dragged lower by unfavourable currency inflows which overshadowed reports that Japan wants to enhance tax breaks for corporations that raise wages, while shares in Eisai were hit after EU regulators placed doubts regarding the approval of Co. and Biogen’s co-developed Alzheimer’s drug and SoftBank also declined after the US regulator raised concerns regarding Nvidia’s acquisition of Arm. However, the index then briefly returned flat in late trade on reports that the Japanese stimulus package is to require JPY 55.7tln of fiscal spending which is higher than the previously speculated of around JPY 40tln. The Hang Seng (-1.3%) and Shanghai Comp. (-0.5%) weakened after another liquidity drain by the PBoC and with the declines in Hong Kong exacerbated by tech selling, while the losses in the mainland were to a lesser extent with China said to be mulling additional industrial policies aimed to support growth and SGH Macro sources suggested the US and China agreed there would be some substantial progress on trade such as the removal of some punitive tariffs by the US and increased purchases of US products by China, although the report highlighted that it was unclear if this would be from a high-profile announcement or a discrete relaxing of tariffs. Finally, 10yr JGBs were initially flat as prices failed to benefit from the subdued risk appetite in Japan and rebound in global peers, while firmer metrics at the 20yr JGB bond auction provided a mild tailwind in late trade although the support was only brief and prices were then pressured on news of the potentially larger than anticipated fiscal spending in PM Kishida's stimulus package. Top Asian News China Property Stocks Sink, $4.2 Billion Rush: Evergrande Update Japan’s Kishida Eyes Record Fiscal Firepower to Boost Recovery China Property Firm Shinsun’s Shares and Bonds Slump JD.com Sales Beat Estimates as Investments Start to Pay Off Major bourses in Europe are choppy, although sentiment picked up following a subdued APAC session but despite a distinct lack of fresh catalysts. US equity futures have also been grinding higher in early European hours, with the NQ (+0.6%) outpacing the ES (+0.3%), RTY (+0.2%) and YM (+0.2%). Back to European cash – broad-based gains are seen across the Euro bourses – which lifted the CAC, DAX and SMI to notch record intraday highs, whilst upside in the UK's FTSE 100 (-0.2%) has been hampered by hefty losses in today's lagging sectors– the Energy and Basic Resources - amid price action in the respective markets. Tech names also see a strong performance thus far as chip names cheer NVIDIA (+6% pre-market) earnings yesterday. Overall, sectors have maintained a similarly mixed picture vs the cash open, with no overarching theme. In terms of individual movers, Swatch (+2.8%) and Richemont (+0.6) piggyback on the increase in Swiss Watch Exports vs 2020 and 2019. Metro Bank (-20%) plumbed the depths after terminating takeover talks with Carlyle. Top European News Royal Mail Hands Investors $540 Million Amid Parcel Surge German Coalition Plans Stricter Rent Increase Regulation: Bild HSBC Sees ECB Sticking With Easy Stance Despite Record Inflation Astra Covid Antibody Data Shows Long-Lasting Protection In FX, the Kiwi has extended its recovery on heightened RBNZ tightening expectations prompted by significant increases in Q4 inflation projections, with some pundits now assigning a greater probability to the OCR rising 50 bp compared to the 25 bp more generally forecast and factored in. Nzd/Usd is eyeing 0.7050 and the 50 DMA just above (at 0.7054 today) having breached the 100 DMA (0.7026), while the Aud/Nzd cross is probing further below 1.0350 even though the Aussie has found some support into 0.7250 against its US rival and will be encouraged by news that COVID-19 restrictions in the state of Victoria are on the verge of being completely lifted. GBP/EUR/DXY - Notwithstanding Kiwi outperformance, the Dollar has lost a bit more of its bullish momentum to the benefit of most rivals, and several of those that compose the basket. Indeed, Cable has popped above 1.3500, while the Euro is looking more comfortable on the 1.1300 handle as the index retreats further from Wednesday’s new y-t-d peak and away from the psychological 96.000 level into a 95.840-642 range. Ahead, IJC and Philly Fed are due amidst another decent slate of Fed speakers, while Eur/Usd will also be eyeing the latest ECB orators for some direction and Eur/Gbp is back around 0.8400 where decent option expiry interest resides (1.1 bn), but perhaps more focused on latest talks between the UK and EU on the NI dispute. CHF/CAD/JPY - The Franc has pared more declines vs the Buck from sub-0.9300 and remains firm against the Euro near 1.0500 in wake of Swiss trade data showing a wider surplus and pick-up in key watch exports, but the Loonie looks a bit hampered by a more pronounced fall in the price of oil as the US calls on other countries for a concerted SPR tap and China is said to be working on the release of some crude stocks. Usd/Cad is tethered to 1.2600 and highly unlikely to threaten 1.1 bn option expiries at the 1.2500 strike in contrast to the Yen that stalled above 114.00 and could be restrained by 1.4 bn between 113.90 and the round number or 1.3 bn from 114.20-25, if not reports that Japan’s stimulus package may require Jpy 55.7 tn of fiscal spending compared to Jpy 40 tn previously speculated. In commodities, WTI and Brent front-month futures are off worst levels but still under pressure amid the prospect of looming crude reserves releases, with reports suggesting China is gearing up for its own release. There were also prior source reports that the US was said to have asked other countries to coordinate a release of strategic oil reserves and raised the oil reserve release request with Japan and China. Furthermore, the US tapping of the SPR could be either in the form of a sale and/or loan from the reserve, and the release from the reserve needs to be more than 20mln-30mln bbls to get the message to OPEC, while a source added that the US asked India, South Korea and large oil-consuming countries, but not European countries, to consider oil reserve releases after pleas to OPEC failed. This concoction of headlines guided Brent and WTI futures under USD 80/bbl and USD 78/bbl respectively with early selling also experienced as European players entered the fray. On the geopolitical front, US National security adviser Jake Sullivan raised with his Israeli counterpart the idea of an interim agreement with Iran to buy more time for nuclear negotiations, according to sources. However, two American sources familiar with the call said the officials were just "brainstorming" and that Sullivan passed along an idea put forward by a European ally. Next, participants should continue to expect jawboning from the larger economies that advocated OPEC+ to release more oil. OPEC+ is unlikely to react to prices ahead of next month's meeting (barring any shocks). Elsewhere, spot gold and silver have been choppy within a tight range. Spot gold trades under USD 1,875/oz - with technicians flagging a Fib around USD 1,876/oz. Spot silver trades on either side of USD 25/oz. Base metals are on a softer footing amid the broader performance across industrial commodities – LME copper remains subdued under the USD 9,500/t level, whilst some reports suggest companies are attempting to arbitrage the copper spread between Shanghai and London. US Event Calendar 8:30am: Nov. Initial Jobless Claims, est. 260,000, prior 267,000; Continuing Claims, est. 2.12m, prior 2.16m 8:30am: Nov. Philadelphia Fed Business Outl, est. 24.0, prior 23.8 9:45am: Nov. Langer Consumer Comfort, prior 50.3, revised 50.3 10am: Oct. Leading Index, est. 0.8%, prior 0.2% 11am: Nov. Kansas City Fed Manf. Activity, est. 28, prior 31 Central banks 8am: Fed’s Bostic Discusses Regional Outlook 9:30am: Fed’s Williams speaks on Transatlantic responses to pandemic 2pm: Fed’s Evans Takes Part in Moderated Q&A 3:30pm: Fed’s Daly takes part in Fed Listens event DB's Jim Reid concludes the overnight wrap After 9 weeks since surgery, yesterday I got the green light to play golf again from my consultant. Yippee. However he said that he’ll likely see me in 3-5 years to do a procedure called distal femoral osteotomy where he’ll break my femur and realign the leg over the good part of the knee. Basically I have a knee that is very good on the inside half and very bad on the outer lateral side. He’s patched the bad side up but it’s unlikely to last more than a few years before the arthritis becomes too painful. This operation would be aimed at delaying knee replacement for as long as possible! Sounds painful and a bit crazy! Meanwhile I also have a painful slipped disc in my back at the moment that I’m going to have an injection for to hopefully avoid surgery after years of managing it. As you might imagine from reading my posts last week I don’t get much sympathy at home at the moment for my various ailments. In terms of operations and golf I’m turning into a very very poor man’s Tiger Woods! Markets have been limping a bit over the last 24 hours too as the inflation realities seemed to be a bit more in focus. Those worries were given additional fuel from the UK CPI release for October, which followed the US and the Euro Area in delivering another upside surprise, just as a number of key agricultural prices continued to show significant strength. Oil was down notably though as we’ll discuss below. To add to the mix, the latest global Covid-19 wave has shown no sign of abating yet, even if some countries are better equipped for it than others. Starting with inflation, one of the main pieces of news arrived yesterday morning, when the UK reported that CPI came in at +4.2% year-on-year in October. That was above every economist’s estimate on Bloomberg, surpassing the +3.9% consensus expectation that was also the BoE’s staff projection in their November Monetary Policy Report. That’s the fastest UK inflation since 2011, and core inflation also surprised on the upside with a +3.4% reading (vs. +3.1% expected). In response to this, our UK economist (link here) is now expecting that CPI will peak at +5.4% in April, with the 2022 annual average CPI still at +4.2%, which is more than double the BoE’s 2% target. The release was also seen as strengthening the case for a December rate hike by the BoE, and sterling was the second best performing G10 currency after being top the day before in response, strengthening +0.45% against the US dollar. Even as inflation risks mounted however, the major equity indices demonstrated an impressive resilience, with the STOXX 600 (+0.14%) rising for the 17th time in the last 19 sessions. This is the best such streak since June this year, when the index managed to increase 18 of 20 days. We’ll see if that mark is matched today That was a better performance than the S&P 500 (-0.26%). 342 stocks were in the red today, the most in three weeks. Energy (-1.74%) and financials (-1.11%) each declined more than a percent, on lower oil prices and yields, respectively. Real estate (+0.65%) and consumer discretionary (+0.59%) led the way, driven by a +3.25% increase in Tesla. In line with the broad-based retreat, small-caps continued to put in a much weaker performance, with the Russell 2000 shedding -1.16% as it underperformed the S&P for a 4th consecutive session. Sovereign bonds also managed to advance yesterday, with yields on 10yr Treasuries (-4.5bps) posting their biggest decline in over a week, taking them to 1.59%. Declining inflation expectations drove that move, with the 10yr breakeven down -3.2bps to 2.71%, which was its biggest decline in over two weeks. For Europe it was a different story however, with yields on 10yr bunds only down -0.3bps, just as those on 10yr OATs (+0.1bps) and BTPs (+0.5bps) both moved higher. Most of the Treasury rally was after Europe closed though. Those moves came against the backdrop of a fairly divergent performance among commodities. On the one hand oil prices fell back, with WTI (-2.97%) closing beneath $80/bbl for only the second time in the last month as speculation continued that the US would tap its strategic reserves. On the other hand, there was no sign of any relenting in European natural gas prices, which rose a further +0.79% yesterday to bring their gains over the last 7 days to +31.57%. That follows the German regulator’s decision to temporarily suspend certification for Nord Stream 2, which has added to fears that Europe will face major supply issues over the winter. And while we’re discussing the factors fuelling inflation, there were some fresh moves higher in agricultural prices as well yesterday, with wheat futures (+1.48%) hitting an 8-year high, and coffee futures (+4.75%) climbing to their highest level in almost a decade. Central banks will be watching these trends closely. There’s still no word on who’s going to lead the Fed over the next 4 years, but yesterday’s news was that President Biden will make his pick by Thanksgiving. For those keeping track at home, on Tuesday the guidance was within the next four days. So, while it appears momentum toward an announcement is growing, take signaling of any particular day with a grain of salt. On the topic of the Fed, our US economists released their updated Fed outlook yesterday (link here) in which they brought forward their view of the expected liftoff to July 2022, with another rate increase following in Q4 2022. And although it’s not their base case, they acknowledge that incoming data could even push the Fed to speed up their taper and raise rates before June. They don’t see the choice of the next Fed Chair as having much impact on the broad policy trajectory, since inflation next year is likely to still be at high levels that makes most officials uncomfortable, plus the annual rotation of regional Fed presidents with an FOMC vote leans more hawkish next year. So that will constrain the extent to which a new chair could shift matters in a dovish direction, even if they wanted to. Overnight in Asia stocks are trading mostly in the red outside of a flat KOSPI (+0.01%). The Shanghai Composite (-0.13%), CSI (-0.64%), Nikkei (-0.77%) and Hang Seng (-1.35%) are being dragged down by tech after a bout of Chinese IT companies missed earnings continuing a theme of this earnings season. Elsewhere in Japan, the Nikkei reported that the new economic stimulus package could be around YEN 78.9 tn ($691 bn). Prime Minister Fumio Kishida will announce the package on Friday. Elsewhere S&P 500 (+0.08%) and DAX futures (+0.01%) both fairly flat. The House of Representatives is slated to begin debate on the Biden social and climate spending ‘build back better’ bill. Word from Congress suggested it could be tabled for a vote as soon as today, though the House has been as profligate missing self-imposed deadlines to vote on the bill as President Biden has been with the announcement of Fed Chair. In addition to the Build Back Better package, there’ll still be plenty of action in Congress over the next month, with another government shutdown looming on December 3, and then a debt ceiling deadline estimated on December 15. The House Budget Chair echoed Treasury Secretary Yellen’s exhortation, and urged Congress to raise the debt ceiling to avoid a government default. Treasury bills are pricing increasing debt ceiling uncertainty during December; yields on bills maturing from mid- to late-December are around double the yields of bills maturing in November and January. Turning to the pandemic, cases have continued to rise at the global level over recent days, as alarm grows in a number of countries about the potential extent of the winter wave. In Germany, Chancellor Merkel and Vice Chancellor Scholz are taking part in a video conference with state leaders today on the pandemic amidst a major surge in cases. And Sweden’s government said that they planned to bring in a requirement for vaccine passports at indoor events with more than 100 people. In better news however, the UK’s 7-day average of reported cases moved lower for the first time in a week yesterday. Moderna also joined Pfizer in seeking emergency use authorization from the FDA for booster jabs of its Covid vaccines for all adults. Looking at yesterday’s other data, US housing starts fell in October to an annualised rate of 1.520m (vs. 1.579m expected), whilst the previous months’ reading was also revised lower. Building permits rose by more than expected however, up to an annualised rate of 1.650m (vs. 1.630m expected). Finally, Canada’s CPI inflation reading rose to +4.7% in October as expected, marking the largest annual rise since February 2003. To the day ahead now, and data releases from the US include the weekly initial jobless claims, the Philadelphia Fed’s business outlook for November, the Kansas City Fed’s manufacturing index for November, and the Conference Board’s leading index for October. Central bank speakers include PBoC Governor Yi Gang, the ECB’s Centeno, Panetta and Lane, and the Fed’s Bostic, Williams, Evans and Daly. There’ll also be a number of decisions from EM central banks, including Bank Indonesia, the Central Bank of Turkey and the South African Reserve Bank. Finally, earnings releases include Intuit, Applied Materials and TJX. Tyler Durden Thu, 11/18/2021 - 08:05.....»»

Category: blogSource: zerohedgeNov 18th, 2021

Will ETFs Gain From Upbeat US Homebuilder Confidence in November?

The U.S. housing sector scenario seems to improve with strength in housing demand amid persistent supply-chain constraints that can impact affordability. The U.S. housing sector continues to see strengthening demand, which has improved for the third straight month. However, increasing construction costs and persistent material supply-chain worries along with rising home prices remain in place. Per the monthly National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder sentiment for the newly-built single-family homes rose three points to 83 in November from 80 in October, 76 in September, 75 in August and 30 in April (the lowest since June 2012). The reading looks strong as any number above 50 signals improving confidence.The upbeat data can be a positive for ETFs like iShares U.S. Home Construction ETF (ITB), SPDR S&P Homebuilders ETF (XHB), Invesco Dynamic Building & Construction ETF (PKB) and Hoya Capital Housing ETF (HOMZ), which have high exposure to companies belonging to the housing space.The current sales conditions index increased three points to 89 in November. The metric measuring traffic of prospective buyers also saw a three-point rise to 68. Sales expectations for the next six months remained steady at 84, per the NAHB press release. The three-month moving averages for regional HMI scores in the Northeast declined by a couple of points to 70. However, the South and Western Index rose by four and one point, respectively, to reach 84. The Midwest increased by four points to 72, per the release.Going by the press release, NAHB Chairman Chuck Fowke reportedly said that, “The solid market for home building continued in November despite ongoing supply-side challenges. Lack of resale inventory combined with strong consumer demand continues to boost single-family home building.”How’s the US Housing Market Placed?The U.S. housing sector had earlier delivered an impressive performance despite the tough pandemic times. However, rising softwood lumber, material and labor costs remained a major hurdle for homebuilders. The supply-chain disturbances, majorly at sawmills and ports caused by the lockdown to contain the coronavirus outbreak, also bumped up concrete, metal products, appliances and other expenses, as mentioned in a FOX Business article.Moreover, there was a sharp rise in plywood prices. Scarcity in copper supplies and tariffs on steel imports are bumping up building costs. The scanty global supply of semiconductors shrank the supplies of some appliances, per a Reuters article. These factors are affecting the affordability as prices of existing and new homes are soaring.The U.S. housing space might have to grapple with rising interest rates in the near term as the Fed will begin the tapering process.Meanwhile, consumers seem to be looking forward to buying homes, motor vehicles and major household durables. In fact, the buying attitude for vehicles and homes is expanding. The survey also showed that the proportion of the population planning to go on vacation has shot up to the highest level since February 2020, as mentioned in a Reuters article.Commenting on the current housing market scenario, NAHB Chief Economist Robert Dietz, has also reportedly said that “In addition to well publicized concerns over building materials and the national supply chain, labor and building lot access are key constraints for housing supply. Lot availability is at multi-decade lows and the construction industry currently has more than 330,000 open positions. Policymakers need to focus on resolving these issues to help builders produce more housing to meet strong market demand.”Housing ETFs That Might GainAgainst such a backdrop, here are a few housing ETFs that might gain on a slight improvement in the housing sector scenario:iShares U.S. Home Construction ETF ITBiShares U.S. Home Construction ETF provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index.With AUM of $2.72 billion, iShares U.S. Home Construction ETF holds a basket of 46 stocks, heavily focused on the top two firms. ITB charges 41 basis points (bps) in annual fees. iShares U.S. Home Construction ETF carries a Zacks ETF Rank #2 (Buy) with a High-risk outlook (read: 5 ETFs to Win Despite Downbeat U.S. GDP Growth).SPDR S&P Homebuilders ETF XHBA popular choice in the homebuilding space, SPDR S&P Homebuilders ETF, follows the S&P Homebuilders Select Industry Index. SPDR S&P Homebuilders ETF holds about 35 securities in its basket.XHB has AUM of $2.13 billion. SPDR S&P Homebuilders ETF charges 35 bps in annual fees. SPDR S&P Homebuilders ETF carries a Zacks ETF Rank #2 with a High-risk outlook (read: Will Housing ETFs Gain as US New Home Sales Rise in September?).Invesco Dynamic Building & Construction ETF PKB  Invesco Dynamic Building & Construction ETF follows the Dynamic Building & Construction Intellidex Index, holding a basket of well-diversified 31 stocks, each accounting for less than a 5.4% share. The index is comprised of companies that are primarily engaged in providing construction and related engineering services for building and remodeling residential properties, commercial or industrial buildings, or working on large-scale infrastructure projects, such as highways, tunnels, bridges, dams, power lines, and airports.Invesco Dynamic Building & Construction ETF has amassed assets worth $289.4 million. The total expense ratio is 0.60%. Invesco Dynamic Building & Construction ETF carries a Zacks ETF Rank #3 (Hold) with a High-risk outlook (read: 5 Sector ETFs to Play Robust October Jobs Data).Hoya Capital Housing ETF HOMZHoya Capital Housing ETF seeks to provide investment results that before fees and expenses, generally correspond to the total return performance of the Hoya Capital Housing 100 Index, a rules-based Index designed to track the 100 companies that collectively represents the performance of the U.S. housing industry.Hoya Capital Housing ETF has AUM of $79.4 million. HOMZ charges 30 bps in annual fees. Hoya Capital Housing ETF carries a Zacks ETF Rank #3 (see all the Materials ETFs here). Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report SPDR S&P Homebuilders ETF (XHB): ETF Research Reports iShares U.S. Home Construction ETF (ITB): ETF Research Reports Invesco Dynamic Building & Construction ETF (PKB): ETF Research Reports Hoya Capital Housing ETF (HOMZ): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksNov 18th, 2021

Long Time ‘Coming

    Prices change moment to moment, but the underlying factors that drive the economy and markets are often decades in the making. We tend to overlook this, caught up as we are in the Here & Now. When forces that have been accumulating for a long time — and are supported by institutional momentum and… Read More The post Long Time ‘Coming appeared first on The Big Picture.     Prices change moment to moment, but the underlying factors that drive the economy and markets are often decades in the making. We tend to overlook this, caught up as we are in the Here & Now. When forces that have been accumulating for a long time — and are supported by institutional momentum and widespread consumer beliefs — are in play, it is difficult to shift in an instant. Forces that have been building for decades may be getting overlooked by some. Yet they have contributed to the current state of flux, and are drivers of growth, inflation, politics, and the economy: –Great Financial Crisis (GFC) response: It’s hard to imagine that almost a decade and a half after the GFC, we are still – STILL – wrestling with the fallout from that event. The mostly monetary response combined with a milquetoast fiscal aid led to slow growth, a low-wage recovery that lagged historical precedents. The impact of this was twofold: First, the weak GFC rescue result led to perhaps an overcompensation in the CARES Act, via a massive set of fiscal stimuli. Second, a poor, subpar GFC recovery helped to pave the way for the rise of popularism, both here and abroad. –Just in time inventory and lean supply chain: The efficiencies and profitability of not having to maintain a substantial inventory of goods is catnip to retailers and logistical companies. But it also makes a nation less resilient, with greater fragility to interruptions like a pandemic. This was revealed in Q1 2020 when everything from PPE / masks to Purel to Lysol to toilet paper became scarce. Solutions to this include local manufacturing and incentive changes for stoorage and inbventory, but those shidfts take time. –NIMBYism + Housing: The insufficient supply of single-family homes traces itself in part to the overbuilding pre-GFC and the subsequent collapse of new home building in the years that followed. But there is a much broader issue that has existed for nearly the entire post-war era, and that is the concept of Not In My BackYard. Sure, everybody says they wants affordable housing, but not if it’s in their neighborhood and could impact property values. We gentrify entire neighborhoods, but fight zoning rules that would allow for greater density. The result is not just too little affordable housing, but too few housing options at too great an expense. This is true regardless of partisan affiliation although yesterday I mentions why this has become especially bad in blue states. Build a lot more houses is a solution but this will take time. –Embedded Technology: PCs, Internet, mobility, apps, broadbands, created a set of circumstances that allowed easy access to the full suite of work tools for a broad swath of professionals to easily work from home. This includes creatives, finance professionals, legal, accounting, media, etc. Those groups all have an enormous amount of flexibility to where and how they do their jobs. Is it surprising that hospitality, food service, health care, retail workers are fleeing those fields to enter the white collar workforce? It’s more than just money: It represents autonomy and a measure of control to feel less like a serf and more like a self-determined professional. Part of the problem we discussed on the Bogleheads podcast boils down to our conception of the world, and the flawed model we create in our heads. We fail to market weight stocks, underappreciating both the strength and rarity of the biggest winners. And we equal weight news, putting way too much emphasis and credence on stories that are ephemeral, temporary, and not very meaningful. The current state of affairs has been a long time coming. Our instinct is to do something (anything!) to stop the short term pain.But the reality is that the worst of it will work itself out over time. This too shall pass. But to address the underlying long term issues, it will take more than tapping the strategic petroleum reserve or changing Fed Chiefs. That means discussing fundamental changes to how we approach housing, employment, manufacturing, capital. I am not sure how much of an appetite there is for that sort of rethink.     Previously: How Everybody Miscalculated Housing Demand (July 29, 2021) Faster / Better / Cheaper (November 11, 2021) Deflation, Punctuated by Spasms of Inflation (June 11, 2021) Inflation   The post Long Time ‘Coming appeared first on The Big Picture......»»

Category: blogSource: TheBigPictureNov 17th, 2021

2021 wasn"t a "return to normal" but rather the birth of a "new normal" — and the world of work will never look the same

In a post-pandemic world where people have drastically re-thought their values and priorities, the "future or work" is still being formed. BI GraphicsThe world of work will never look the same, and the future of it depends on how people embrace this change.FG Trade/Getty The "Great American Burnout," "Great Resignation," and "Great Reshuffle" will shape the labor force for decades.  2021 saw record-breaking job openings and resignation levels — with job openings peaking in July at 10.9 million. The job market remains competitive as more and more people hunt for remote roles.   Visit Insider's Transforming Business homepage for more stories. When COVID-19 shut down offices around the world in March 2020, many employees anticipated a swift return. They left their favorite mugs and personal calendars, with the expectation that after a few weeks of lockdown, they would be back in their cubicles and conference rooms. That return never happened, of course. As 2020 bled into 2021, some companies and employees believed vaccinations would re-open office doors. While some did bring back workers despite risks like the Delta variant, many companies opted for remote or hybrid schedules.As the physical workplace is changing, the ways in which people think about their job is evolving as well — the "Great American Burnout," morphed into the "Great Resignation," and later the "Great Reshuffle" — as we collectively grapple with changing demographics, demands, and expectations. Throughout all of these changes one thing is certain: The world of work will never look the same, and the future of it depends on how people embrace this change. The vision of a "return to normal," has been all but erased — replaced by a new normal that is a labyrinth of vaccine mandates, re-designed office spaces, and updated workplace protocols that are giving some workers more freedom to choose.Business Insider identified 10 people transforming the future of work for the publication's annual list of 100 people transforming business. From burnout expert and psychologist Christina Maslach to Slack CEO Stewart Butterfield, these executives, union leaders, professors, and researchers are trailblazers — molding what work will look like at their own places of work and beyond.The workplace and the growing digital divideTo the relief of some, and the disdain of others, work remained virtual through most of this year.After adapting to working from home, some employees embraced the flexibility of the new arrangement and resisted returning to an office. For the actual office, it meant buildings have to be refitted or future buildings need to be designed with new criteria in mind such as environmental sustainability and features like touchless elevator buttons and increased ventilation. Critically, they will also be built around the idea that most workers won't be using them full-time. As for employees, due to various academic studies on the effects of remote and hybrid work, companies are making decisions intended to give their employees a better experience, and a reason to stay in their jobs.However, as the digital revolution takes shape, the digital divide grows. The hybrid work model may be the best of both worlds for employees who want the freedom to choose their schedule. But for leaders, fostering a culture of fairness between online and in-person workers is a difficult balancing act. And leaders at large finance firms and technology businesses recognize that increasing automation is bound to push some employees out of the workplace. This is why some are prioritizing reskilling and re-educating employees to use these technologies.A workforce marred by burnout The "future of work" partially lies in the hands of industry leaders, but it is also being steered by the masses. This is evident in the growing number of resignations across the country, as people scramble out of their jobs — the hospitality, food service, and retail industries are facing the biggest losses. This was a record-breaking year in the United States, with the number of job openings reaching the highest it has been in 20 years at 10.9 million openings in July. But this "Great American Burnout" cannot be blamed solely on the pandemic. From the re-invigorated fight for equitable access to healthcare to the increasingly devastating effects of climate change, workers' priorities have changed for more than one reason. Previously, employees were taught to keep their personal lives away from the office, but that mindset doesn't fly in a work-from-home world. When employees show up to work they are entitled to bring their entire self. But the events of the last year haven't only changed the individual mindset, they've also shaped company policy.Labor strikes have spread across every industry, as people working in food services, healthcare, and television and film defend their values and demand better pay, better conditions, and to be treated like human beings, and not just workers. Read the full list of transformers to learn more about the leaders who are listening to laborers and shaping the future of our workplace and workforce.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 17th, 2021

Futures Flat Amid Fresh Inflation Jitters; Yen Tumbles To 5 Year Low

Futures Flat Amid Fresh Inflation Jitters; Yen Tumbles To 5 Year Low Price action has been generally uninspiring, with US index futures and European stocks flat after UK inflation climbed faster than expected to the highest in a decade, heaping pressure on the Bank of England to raise interest rates, while Asian markets fell as investors fretted over early rate hikes by the Federal Reserve after strong retail earnings dented the stagflation narrative.  Ten-year Treasury yields held around 1.63% and the dollar was steady. Cryptocurrencies suffered a broad selloff, while oil extended losses amid talk of a coordinated U.S.-China release of reserves to tame prices. Gold rose. At 7:30 a.m. ET, Dow e-minis were down 14 points, or 0.04%. S&P 500 e-minis were up 1.25 points, or 0.0.3% and Nasdaq 100 e-minis were up 24.75 points, or 0.15%, boosted by gains in Tesla and other electric car-makers amid growing demand for EV makers. Target Corp was the latest big-name retailer to report positive results, as it raised its annual forecasts and beat profit expectations, citing an early start in holiday shopping. But similar to Walmart, shares of the retailer fell 3.1% in premarket trade as its third-quarter margins were hit by supply-chain issues. Lowe's rose 2.2% after the home improvement chain raised its full-year sales forecast on higher demand from builders and contractors, as well as a strong U.S. housing market. Wall Street indexes had ended higher on Tuesday after data showed retail sales jumped in October, and Walmart and Home Depot both flagged strength in consumer demand going into the holiday season. While the readings showed that a rise in inflation has not stifled economic growth so far, any further gains in prices could potentially dampen an economic recovery. Indeed, even as global stocks trade near all-time highs, worries are rising that growth could be derailed by inflation, the resurgent virus, or both. The question remains whether the jump in costs will prove transitory or become a bigger challenge that forces a sharper monetary policy response, roiling both shares and bonds. The market now sees a 19% probability of a rate hike by the Fed in their March 2022 meet, up from 11.8% probability last month. “The markets are still driven by uncertainty regarding how transitory inflation is,” according to Sebastien Galy, senior macro strategist at Nordea Investment Funds. “The market is assessing the situation about inflation -- what is in the price and what is not.” On the earnings front, Baidu reported a 13% jump in sales after growth in newer businesses such as the cloud helped offset a slowdown in its main internet advertising division. Nvidia and Cisco Systems are scheduled to report results later today In premarket trading, Tesla inexplicably rose as much as 2.4% in U.S. pre-market trading, extending a bounce from the previous session after CEO Elon Musk disclosed even more stock sales. Peers Rivian and Lucid added 0.9% and 8.8%, respectively. Here are some of the biggest U.S. movers today: Electric-vehicle makers Rivian Automotive (RIVN US), Lucid (LCID US) and Canoo (GOEV US) all move higher in U.S. premarket trading on heavy volumes, extending their gains and after Rivian and Lucid notched up milestones in their market values on Tuesday. The gains for Rivian on Tuesday saw its market capitalization surpass Germany’s Volkswagen, while Lucid’s market value leapfrogged General Motors and Ford. Tesla (TSLA US) shares rise 1.3% in U.S. premarket trading, extending the bounce the EV maker saw in the prior session and after CEO Elon Musk disclosed more share sales. Visa (V US) shares slip in U.S. premarket trading after Amazon.com said it will stop accepting payments using Visa credit cards issued in the U.K. starting next year. Boeing (BA US) gains 1.9% in premarket trading after Wells Fargo upgrades the airplane maker to overweight from equal weight in a note, saying the risk-reward is now skewed positive. Citi initiates a pair trade of overweight Plug Power (PLUG US) and underweight Ballard Power Systems (BLDP US), downgrading the latter to neutral on weak sales in China and likely delay in meaningful fuel cell adoption. Ballard Power falls 3.4% in premarket trading. La-Z-Boy (LZB US) climbed 7% in postmarket trading after it reported adjusted earnings per share for the fiscal second quarter of 2022 that beat the average analyst estimate and boosted its quarterly dividend. StoneCo’s (STNE US) shares fall as much as 9% in postmarket trading Tuesday after the fintech reported a weaker-than-expected adjusted results for the third quarter. Chembio Diagnostics (CEMI US) rose 11% in extended trading after saying it submitted an Emergency Use Authorization application to the U.S FDA for its new DPP SARS-CoV-2 Antigen test. European stocks treaded water with U.S. equity futures as the worst outbreak of Covid infections since the start of the pandemic held the rally in check. In the U.K., inflation climbed faster than expected to the highest in a decade, heaping pressure on the Bank of England to raise interest rates, pressing on the FTSE 100 to lag peer markets. Asian stocks fell, halting a four-day rally, as investors factored in higher Treasury yields and the outlook for U.S. monetary policy to assess whether the region’s recent gains were excessive.   The MSCI Asia Pacific Index slid as much as 0.7%, pulling back from a two-month high reached Tuesday. The banking sector contributed the most to Wednesday’s drop as the Commonwealth Bank of Australia reported cash earnings that were below some estimates. South Korea led the region’s decline, with the Kospi falling more than 1%, weighed down by bio-pharmaceutical firms. Asia’s stocks are taking a breather from a run-up driven by expectations for earnings to improve and economies to recover from quarters of pandemic-induced weakness. The benchmark is coming off a two-week gain of 1.5%.  “Shares are correcting recent gains, although I’d say it’s not much of a correction as the drop is mild,” said Tomo Kinoshita, a global market strategist at Invesco Asset Management in Tokyo. “The relatively solid economic performances in the U.S. and Europe signal positive trends for Asian exporters,” which will support equities over the long term, he said.  U.S. stocks climbed after data showed the biggest increase in U.S. retail sales since March, while results from Walmart Inc. and Home Depot Inc. showed robust demand. The 10-year Treasury yield hit 1.64%, gaining for a fourth day. Japanese equities fell, cooling off after a four-day advance despite the yen’s drop to the lowest level against the dollar since 2017. Service providers and retailers were the biggest drags on the Topix, which dropped 0.6%. Recruit and Fast Retailing were the largest contributors to a 0.4% loss in the Nikkei 225. The yen slightly extended its decline after tumbling 0.6% against the greenback on Tuesday. The value of Japan’s exports gained 9.4% in October, the slowest pace in eight months, adding to signs that global supply constraints are still weighing on the economy. Indian stocks fell, led by banking and energy companies, as worries over economic recovery and inflation hurt investors’ sentiment. The S&P BSE Sensex fell 0.5% to 60,008.33 in Mumbai, while the NSE Nifty 50 Index declined by 0.6%. The benchmark index has now dropped for five of seven sessions and is off 3.7% its record level reached on Oct. 18. All but five of the 19 sector sub-indexes compiled by BSE Ltd. declined, led by a gauge of real estate companies.  Fitch Ratings kept a negative outlook on India’s sovereign rating, already at the lowest investment grade, citing concerns over public debt that’s the highest among similar rated emerging-market sovereigns.  While high-frequency data suggests India’s economic recovery is taking hold, central bank Governor Shaktikanta Das said at an event on Tuesday that the recovery is uneven. “Feeble global cues are weighing on sentiment,” Ajit Mishra, a strategist with Religare Broking, said in a note. He expects indexes to slide further but the pace of decline to be gradual with Nifty having support at 17,700-17,800 level. Shares of Paytm are scheduled to start trading on Thursday after the digital payment company raised $2.5b in India’s biggest initial share sale. Local markets will be closed on Friday for a holiday.  Reliance Industries contributed the most to Sensex’s decline, decreasing 2.1%. The index heavyweight has lost 5% this week, headed for the biggest weekly drop since June 27. In rates, Treasuries were steady with yields slightly richer across the curve and gilts mildly outperforming after paring early losses. Treasury yields except 20-year are richer by less than 1bp across curve with 30-year sector outperforming slightly; 10-year yields around 1.63% after rising as high as 1.647% in early Asia session. Focal points for U.S. session include 20-year bond auction -- against backdrop of Fed decision to not taper in the sector, made after last week’s poorly bid 30-year bond sale, and seven Fed speakers scheduled. The $23BN 20-year new issue at 1pm ET is first at that size after cuts announced this month; WI yield at 2.06% is 4bp richer than last month’s, which tailed the WI by 2.5bp. In Europe, gilts richen slightly across the short end, short-sterling futures fade an open drop after a hot inflation print. Peripheral spreads are marginally wider to core. In FX, the Bloomberg Dollar Spot Index drifted after earlier rising to its highest level in over a year, spurred by strong U.S. retail sales and factory output data Tuesday; the greenback traded mixed versus its Group-of-10 peers though most currencies were consolidating recent losses against the greenback. The pound reached its strongest level against the euro in nearly nine months after U.K. inflation climbed faster than expected to the highest in a decade, heaping pressure on the Bank of England to raise interest rates. The Australian dollar hit a six-week low as third quarter wage data missed the central bank’s target, prompting offshore funds to sell the currency; the three-year yield fell back under 1%. The yen declined to its lowest level in more than four years as growing wagers of quicker policy normalization in the U.S. contrasted with the outlook in Japan, where interest rates are expected to be kept low. Super-long bonds fell. Volatility broke through the recent calm in currency markets, where the cost of hedging against volatility in the euro against the dollar over the next month climbed the most since the pandemic struck in March 2020. The move comes as traders bake in bets on faster rate hikes to curb inflation. The Turkish lira extended the week’s downward move, weakening another 2% against the dollar after comments from Erdogan sent the USDTRY hitting record highs of 10.5619 The Chinese yuan advanced to its highest level since 2015 against a basket of trading partners’ currencies following the dollar’s surge. Bloomberg’s replica of the CFETS basket index rises 0.3% to 101.9571, closer to the level that triggered a shock devaluation by the PBOC in 2015, testing the central bank’s tolerance before stepping in with intervention. In commodities, crude futures dropped as the market weighs the potential for a join U.S.-China stockpile-reserve release. WTI is down more than 1%, back on a $79-handle; Brent slips back toward $81.50, trading near the middle of this week’s range. Most base metals are under pressure with LME copper down as much as 1.4%. Spot gold adds $10 near $1,860/oz. European gas surged to the highest level in a month as delays to a controversial new pipeline from Russia stoked fears of a supply shortage with winter setting in. Cryptocurrencies remained lower after a tumble, with Bitcoin steadying around the $60,000 level. Looking at the day ahead now, and data releases include October data on UK and Canadian CPI, as well as US housing starts and building permits. Central bank speakers include ECB President Lagarde and the ECB’s Schnabel, the Fed’s Williams, Bowman, Mester, Waller, Daly, Evans and Bostic, and the BoE’s Mann. Finally, the ECB will be publishing their Financial Stability Review, and earnings releases today include Nvidia, Cisco, Lowe’s and Target. Market Snapshot S&P 500 futures little changed at 4,696.00 STOXX Europe 600 up 0.1% to 489.79 MXAP down 0.5% to 200.06 MXAPJ down 0.4% to 656.01 Nikkei down 0.4% to 29,688.33 Topix down 0.6% to 2,038.34 Hang Seng Index down 0.2% to 25,650.08 Shanghai Composite up 0.4% to 3,537.37 Sensex down 0.4% to 60,064.33 Australia S&P/ASX 200 down 0.7% to 7,369.93 Kospi down 1.2% to 2,962.42 Brent Futures down 0.8% to $81.79/bbl Gold spot up 0.5% to $1,859.93 U.S. Dollar Index little changed at 95.95 German 10Y yield little changed at -0.25% Euro little changed at $1.1310 Top Overnight News from Bloomberg Bond traders are bracing for a key test Wednesday as the Treasury looks to sell its first long-dated debt since inflation worries spooked buyers at last week’s poorly received 30-year auction Increasingly stretched prices in property and financial markets, risk-taking by non-banks and elevated borrowing pose a threat to euro-area stability, the European Central Bank warned Germany is giving investors a rare chance to grab some of Europe’s safest and positive-yielding debt. The country will sell one billion euros ($1.13 billion) of its longest-dated debt at 10:30 a.m. London on Wednesday. The country’s 30-year notes are currently trading with a yield 0.09%. It’s a paltry rate, but probably the last time for a while that Germany will offer the maturity ECB Governing Council member Olli Rehn says euro- area inflation is accelerating due to increasing demand pushing up the price of energy and supply bottlenecks, according to interview in Finland’s Talouselama magazine The yuan’s advance to a six-year high versus China’s trading partners this week has investors asking how far the central bank will let the rally run. The yuan extended gains on Wednesday against a basket of 24 currencies of the nation’s trading partners, bringing it close to the level that triggered a shock devaluation by the People’s Bank of China in 2015 Turkish President Recep Tayyip Erdogan vowed to continue fighting for lower interest rates, sending a clear signal to investors a day before the central bank sets its policy. The lira weakened A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded mixed and struggled to sustain the positive lead from the US where better than expected Industrial Production and Retail Sales data spurred the major indices, in which the S&P 500 reclaimed the 4,700 level and briefly approached to within four points of its all-time high. ASX 200 (-0.7%) was led lower by underperformance in the top-weighted financials sector amid weakness in the largest lender CBA despite a 20% jump in quarterly cash profit, as operating income was steady and it noted that loan margins were significantly lower. Mining related stocks also lagged in Australia due to the recent declines in global commodity prices amid the stronger USD and higher US yields. Nikkei 225 (-0.4%) retraced its opening gains after disappointing Machinery Orders and miss on Exports which grew at the slowest pace in eight months, while the KOSPI (-1.2%) suffered due to virus concerns with daily infections at the second highest on record for South Korea. Hang Seng (-0.3%) and Shanghai Comp. (+0.4%) were varied with Hong Kong dragged lower by tech stocks including NetEase post-earnings, while the mainland was choppy as markets continued to digest the recent Biden-Xi meeting that was described by President Biden as a 'good meeting' and in which they discussed the need for nuclear “strategic stability” talks. US and China also agreed to provide access to each other’s journalists, although there were also comments from Commerce Secretary Raimondo that China is not living up to phase 1 trade commitments and it was reported that China is to speed up plans to replace US and foreign tech. Finally, 10yr JGBs were flat with demand hampered following the declines in T-notes, although downside was stemmed amid the flimsy sentiment across Asia-Pac trade and with the BoJ also in the market for JPY 925bln of JGBs mostly concentrated in 1-3yr and 5-10yr maturities. Top Asian News Asia Stocks Set to Snap Four-Day Advance as Kospi Leads Decline Gold Rises as Fed Officials Feed Debate on Inflation Response Deadly Toxic Air Chokes Delhi as India Clings to Coal Power PBOC May Start Raising Rates by 10bps Every Quarter in 2022: TD European equities (Stoxx 600 +0.1%) trade with little in the way of firm direction as the Stoxx 600 lingers around its ATH printed during yesterday’s session. The handover from the APAC session was mostly a softer one after the region failed to sustain the positive lead from the US which saw the S&P 500 approach within four points of its all-time high. Stateside, US futures are just as uninspiring as their European counterparts (ES flat) ahead of another busy day of Fed speak and pre-market earnings from retail names Target (TGT) and TJX Companies (TJK) with Cisco (CSCO) and NVIDIA (NVDA) due to report after-hours. Markets still await a decision on the next Fed Chair which President Biden said will come in around four days yesterday; as it stands, PredictIt assigns a circa 65% chance of Powell winning the renomination. Sectors in Europe have a marginal positive tilt with Media names outperforming peers alongside gains in Vivendi (+1.0%) after Italian prosecutors asked a judge to drop a case against Vivendi's owner and CEO for alleged market manipulation. Travel & Leisure names are the notable underperformer amid losses in sector heavyweight Evolution Gaming (-9.6%) who account for 14% of the sector with the Co. accused of taking illegal wagers. In terms of individual movers, Siemens Healthineers (+4.6%) is one of the best performers in the region after the Co. noted that revenues are on track to grow 6-8% between 2023 and 2025. UK Banking names such as Lloyds (+1.3%) and Natwest (+1.1%) have benefitted from the favourable rate environment in the UK with today’s inflation data further cementing expectations for a move in rates by the BoE next month. Conversely, this acted as a drag on the UK homebuilder sector at the open before moves were eventually scaled back. SSE (-4.5%) underperforms after announcing a GBP 12.5bln investment to accelerate its net zero ambitions. Top European News Epstein’s Paris Apartment Listed for $14 Million, Telegraph Says Volkswagen Shares Stall as Analysts Doubt Its EV Street Cred Germany to Move Ahead With Tighter Covid Curbs Amid Record Cases U.K. Urges EU Not to Start Trade War If Brexit Deal Suspended In FX, the Greenback extended Tuesday’s post-US retail sales and ip gains to set new 2021/multi-year highs overnight when the index hit 96.266 and several Dollar pairs probed or crossed psychological round numbers. However, the latest bull run has abated somewhat amidst some recovery gains in certain rival currencies and a general bout of consolidation ahead of housing data, another raft of Fed speakers and Usd 23 bn 20 year supply that will be of note after a bad debut for new long londs last week, not to mention tepid receptions for 3 and 10 year offerings prior to that. NZD/AUD - A marked change in the tide down under as the Aud/Nzd cross reverses sharply from around 1.0450 to sub-1.0400 and gives the Kiwi enough impetus to regain 0.7000+ status vs its US peer with extra incentive provided by NZ PM Ardern announcing that the entire country is expected to end lockdown and move to a new traffic light system after November 29, while Auckland’s domestic borders will reopen from December 15 for the fully vaccinated and those with negative COVID-19 tests. Conversely, the Aussie is struggling to stay within sight of 0.7300 against its US counterpart in wake of broadly in line Q3 wage prices that leaves the y/y rate still some way short of the 3% pace deemed necessary to lift overall inflation by the RBA. GBP/CAD - Sterling is striving to buck the overall trend with help from more forecast-topping UK data that should give the BoE a green light for lifting the Bank Rate in December, as headline CPI came in at 4.2% y/y, core at 3.4% and PPI prints indicate more price pressure building in the pipeline. Cable printed a minor new w-t-d peak circa 1.3474 in response before waning and Eur/Gbp fell below the prior y-t-d low and 0.8400, but is now back above awaiting more news on the Brexit front and a speech from one of the less hawkish MPC members, Mann. Elsewhere, the Loonie is hovering around 1.2550 vs the Greenback and looking toward Canadian inflation for some fundamental direction as oil prices continue to fluctuate near recent lows, but Usd/Cad may also be attracted to decent option expiry interest between 1.2540-55 in 1.12 bn. CHF/EUR/JPY - All straddling or adjacent to round numbers against the Dollar, but the Franc lagging below 0.9300 on yield differentials, while the Euro has recovered from a fresh 2021 trough under 1.1300 and Fib support at 1.1290 to fill a gap if nothing else, and the Yen just defended 115.00 irrespective of disappointing Japanese machinery orders and internals within the latest trade balance. In commodities, WTI and Brent benchmarks are pressured this morning but the magnitude of the action, circa USD 0.70/bbl at the time of writing, is less pronounced when compared to the range of the week thus far and particularly against last week’s moves. Newsflow has been slim and the downside action has arisen without fresh catalysts or drivers; note, participants are cognisant of influence perhaps being exerted by today’s WTI Dec’21 option expiry. To briefly surmise the morning’s action, Vitol executives provided bullish commentary citing limited capacity to deal with shocks and on that theme, there were reports of an explosion at an oil pipeline in Southern Iran, said to be due to aging equipment. This, alongside reports that Belarus is restricting oil flows to Poland for three-days for maintenance purposes, have not steadied the benchmarks. Elsewhere, last night’s private inventories were mixed but bullish overall, with the headline a smaller than expected build and gasoline a larger than expected draw. On gasoline, some desks posit that this draw may serve to increase pressure for a US SPR release, and as such look to today’s EIA release which is expected to print a gasoline draw of 0.575M. Moving to metals, spot gold and silver are firmer this morning but, in a similar vein to crude, remain well within familiar ranges as specific catalysts have been light and initial USD action has largely fizzled out to the index pivoting the U/C mark. More broadly, base metals are pressured as inventories of iron ore are at their highest for almost three years in China as demand drops, with this having a knock-on impact on coking coal, for instance. US Event Calendar 7am: Nov. MBA Mortgage Applications, prior 5.5% 8:30am: Oct. Building Permits, est. 1.63m, prior 1.59m, revised 1.59m 8:30am: Oct. Building Permits MoM, est. 2.8%, prior -7.7%, revised -7.8% 8:30am: Oct. Housing Starts MoM, est. 1.5%, prior -1.6%; Housing Starts, est. 1.58m, prior 1.56m DB's Henry Allen concludes the overnight wrap Even as inflation jitters remained on investors’ radars, that didn’t prevent risk assets pushing onto fresh highs yesterday, as investor sentiment was bolstered by strong economic data and decent corporate earnings releases. In fact by the close of trade, the S&P 500 (+0.39%) had closed just -0.02% beneath its all-time closing record, in a move that also brought the index’s YTD gains back above +25%, whilst Europe’s STOXX 600 (+0.17%) hit an all-time high as it posted its 16th gain in the last 18 sessions. Starting with the data, we had a number of positive US releases for October out yesterday, which echoed the strength we’d seen in some of the other prints, including the ISMs and nonfarm payrolls that had both surprised to the upside in the last couple of weeks. Headline retail sales posted their biggest gain since March, with a +1.7% advance (vs. +1.4% expected), whilst the measure excluding autos and gas stations was also up by a stronger-than-expected +1.4% (vs. +0.7% expected). Then we had the industrial production numbers, which showed a +1.6% gain in October (vs. +0.9% expected), though it’s worth noting around half of that increase was a recovery from Hurricane Ida’s effects. And that came against the backdrop of solid earnings results from Walmart and Home Depot as well earlier in the session. They saw Walmart raise their full-year guidance for adjusted EPS to around $6.40, up from $6.20-$6.35 previously, whilst Home Depot reported comparable sales that were up +6.1%. To be honest it was difficult to find much in the way of weak data, with the NAHB’s housing market index for November up to a 6-month high of 83 (vs. 80 expected). Amidst the optimism however, concerns about near-term (and longer-term) inflation pressures haven’t gone away just yet, and the 5yr US breakeven rose again, increasing +1.1bps yesterday to an all-time high of 3.21%. Bear in mind that just 12 days ago (before the upside CPI release) that measure stood at 2.89%, so we’ve seen a pretty sizeable shift in investor expectations in a very short space of time as they’ve reacted to the prospect inflation won’t be as transitory as previously believed. The increase was matched by a +1.3bps increase in nominal 5yr yields to a post-pandemic high of 1.27%. The 10yr yield also saw a slight gain of +1.9bps to close at 1.63%, and this morning is up a further +0.7bps. Against this backdrop, the dollar index (+0.58%) strengthened further to its highest level in over a year yesterday, though the reverse picture has seen the euro weaken beneath $1.13 this morning for the first time since July 2020. Speaking of inflation, there were fresh pressures on European natural gas prices yesterday, which surged by +17.81% to €94.19 per megawatt-hour. That’s their biggest move higher in over a month, and follows the decision from the German energy regulator to temporarily suspend the certification of the Nord Stream 2 pipeline, adding further short-term uncertainty to the winter outlook. UK natural gas futures (+17.15%) witnessed a similar surge, and their US counterparts were also up +3.19%. Elsewhere in the energy complex, Brent crude (+0.46%) oil prices moved higher as well. Overnight in Asia, equity indices are trading lower this morning including the CSI (-0.05%), the Nikkei (-0.45%) and the Hang Seng (-0.55%), though the Shanghai Composite (+0.19%) has posted a modest advance. There were also some constructive discussions in the aftermath of the Biden-Xi summit the previous day, with US national security adviser Jake Sullivan saying that the two had spoken about the need for nuclear “strategic stability” talks, which could offer the prospect of a further easing in tensions if they do come about. Looking forward, futures are indicating a muted start in US & Europe later on, with those on the S&P 500 (-0.03%) and the DAX (-0.15%) pointing to modest declines. Elsewhere, markets are still awaiting some concrete news on who might be nominated as the next Fed Chair, though President Biden did say to reporters that an announcement would be coming “in about four days”, so investors will be paying close attention to any announcements. Senator Sherrod Brown, who chairs the Senate Banking Committee, who earlier in the week noted a pick was imminent, followed up by proclaiming he was “certain” that the Senate would confirm either of Chair Powell or Governor Brainard. Staying on the US, as Congress waits for the Congressional Budget Office’s score on Biden’s social and climate spending bill, moderate Democratic Senator Manchin noted continued uncertainty about the bill’s anti-inflationary bona fides. Elsewhere, the impending debt ceiling has worked its way back into the spotlight, with Treasury Secretary Yellen saying that she’ll soon provide updates on how much cash the Treasury will have to pay the government’s bills. The market has started to price in at least some risk, with yields on Treasury bills maturing in mid-to-late December higher than neighbouring maturities, and the Washington Post’s Tony Romm tweeted yesterday that the new deadline that the Treasury was expected to share soon was on December 15. Turning to Germany, coalition negotiations are continuing between the centre-left SPD, the Greens and the liberal FDP, and yesterday saw SPD general secretary Lars Klingbeil state that “The goal is very clear, to have a completed coalition agreement in the next week”. We’ve heard similar comments from the Greens’ general secretary, Michael Kellner, who also said that “We aim to achieve a coalition agreement next week". One issue they’ll have to grapple with is the resurgence in Covid-19 cases there, and Chancellor Merkel and Vice Chancellor Scholz (who would become chancellor if agreement on a traffic-light coalition is reached) are set to have a video conference with regional leaders tomorrow on the issue. Staying on the pandemic, it’s been reported by the Washington Post that the Biden administration will announce this week that it plans to purchase 10 million doses of Pfizer’s Covid pill. The company will submit data for the pill to regulators before Thanksgiving. It’s not just the US that will benefit from Pfizer’s pill however, as the pharmaceutical company will also license generic, inexpensive versions of the pill to low- and middle-income countries, which should be a global boost in the fight against the virus. Looking at yesterday’s other data, the main release came from the UK employment numbers, which showed that the number of payrolled employees rose by +160k in October, whilst the unemployment rate in the three months to September fell to 4.3% (vs. 4.4% expected). That release was better than the Bank of England’s MPC had expected in their November projections, and sterling was the top-performing G10 currency yesterday (+0.06% vs. USD) as the statistics were seen strengthening the case for a December rate hike. In response to that, gilts underperformed their European counterparts, with 10yr yields up +2.7bps. That contrasted with yields on 10yr bunds (-1.4bps), OATs (-1.8bps) and BTPs (-2.6bps), which all moved lower on the day. Interestingly, that divergence between bunds and treasury yields widened further yesterday, moving up to 188bps, the widest since late-April. To the day ahead now, and data releases include October data on UK and Canadian CPI, as well as US housing starts and building permits. Central bank speakers include ECB President Lagarde and the ECB’s Schnabel, the Fed’s Williams, Bowman, Mester, Waller, Daly, Evans and Bostic, and the BoE’s Mann. Finally, the ECB will be publishing their Financial Stability Review, and earnings releases today include Nvidia, Cisco, Lowe’s and Target. Tyler Durden Wed, 11/17/2021 - 07:50.....»»

Category: dealsSource: nytNov 17th, 2021

Target"s (TGT) Superb Black Friday Offers to Lure Customers

Target (TGT) announces its Black Friday week deals including exciting offers for several items at best prices available online and in stores. Target Corporation TGT is leaving no stone unturned to make the most of the holiday season. In a latest development, the omni-channel retailer unveiled the preview of its Black Friday week deals, with exciting offers for several items at the best prices available online and in stores. The company will be bringing a lot more Black Friday offers versus last year, accessible through same-day services including free Drive Up and Order Pickup. To avail these deals, no membership is required.Target's Black Friday offers will run from Nov 21 through Nov 27, wherein guests can avail huge savings on electronics, toys, kitchen appliances, apparel and more. The top deals include Apple offers with savings worth $60 on Apple Watch and AirPods, $99.99 PowerXL Air Fryer Square Dual Basket, nearly 30% discount on beauty gift sets, and free $50 gift card on purchase of Oculus Quest 2 Virtual Reality Headset, among othersThe company looks to add more deals from Nov 25 through Nov 27, wherein customers can make savings across Target's entire assortment. These include 30% off on outerwear and cold weather accessories, 50% discount on boots, up to 50% off on select kitchen, living, and dining room furniture and more.We note that all the company’s outlets will remain shut on Thanksgiving Day. Meanwhile, the majority of the stores will reopen at 7 a.m. on Black Friday. Last month, the retail biggie announced an array of additional features and functionalities to make deliveries and pickups more convenient for consumers. These include adding features like ‘Shopping Partner’, increasing the number of Drive-Up spots, and enhancing same-day delivery with Shipt and more. Such efforts are likely to help the retailer rake in higher revenues and consumer traffic this season.Target looks forward to augmenting Same-Day Delivery with Shipt that will allow consumers to get door-step delivery in as soon as an hour. Enhancement to same-day services includes the addition of more than 18,000 assigned spaces for curbside pickup. The new 'Shopping Partner' feature enables customers to send someone else to pick up their Drive Up or Order Pickup order through the Target app or Target.com. Through the ‘Forgot Something’ feature, customers can order more items even after placing an order for Drive Up or Order Pickup. Guests can also avail the backup item option for food and beverage pickup on Target.com or in the Target app, excluding adult beverage items.What’s More?Target has been deploying resources to enhance omni-channel capacities, including same-day delivery of in-store purchases and acceleration of technology improvements. The company has been aggressively adopting strategies to provide a seamless shopping experience through miscellaneous channels. TGT’s loyalty program, Target Circle, has been gaining traction. Overall, it has been making multiple changes to its business model to adapt and stay relevant in the ever-evolving retail landscape.Image Source: Zacks Investment ResearchSo far this year, shares of this Zacks Rank #3 (Hold) company have surged 49.7%, outperforming the industry’s 22.3% rally. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Other Players That Disclosed Black Friday DealsWalmart Inc. WMT announced the return of its "Black Friday Deals for Days” event. From announcing additional hiring to manage the season rush well to offering great deals and easy shopping options, the retail behemoth is doing everything to make the most of this significant selling period.This year, Walmart has come up with something extra for paying Walmart+ members, who will get access to online Black Friday events all through November. Members can also continue enjoying the perks associated with the Walmart+ such as free shipping on no minimum order, Rx for Less, free delivery from store, and the Scan and Go option. Hence, WMT is doing every bit to enhance customers’ holiday season experience.Renowned consumer-electronics retailer, Best Buy Co., Inc. BBY kicked-off the festive season with earlier Black Friday deals and Black Friday prices guaranteed. The company looks to offer several Black Friday deals on technology, from headphones to laptops and many more.Management stated that its Black Friday deals at Best Buy will kick off a week earlier on Nov 19. Customers can shop through contactless curbside pickup that is available at all the company’s locations. Majority of the orders will get ready within an hour. In addition, store pickup will be available at all BBY’s outlets, in addition to same-day delivery, next-day delivery (free on orders of $35 or more), alternative pickup locations and ship-from-store facility.BJ's Wholesale Club Holdings, Inc. BJ has revealed its earlier Black Friday deals at an unbeatable price for the festive season. The company brings “Early Bird Savings” available from Nov 4 through Nov 29, 2021, “Black Friday Savings” from Nov 16 through Nov 29, “5-Day Deals” from Nov 25-29 and “Cyber Week” starts Cyber Monday on Nov 29.Members can check their wish lists either on the company’s site or in club, and get a chance to shop big-ticket articles like TVs, appliances and more at special values. They can buy items through BJ's Wholesale Club’s easy shopping alternatives like in-club shopping, same-day delivery, ship-to-home and curbside pickup. Also, BJ’s buy now, pay later payment option is available this holiday on purchase of more than $99. Members can also avail the treasure hunt experience in-club and online on gifts like outdoor patio sets, winter accessories and trendy toys, among others. Zacks' Top Picks to Cash in on Artificial Intelligence In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.See 3 Artificial Intelligence Stocks With Extreme Upside Potential>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Target Corporation (TGT): Free Stock Analysis Report Walmart Inc. (WMT): Free Stock Analysis Report Best Buy Co., Inc. (BBY): Free Stock Analysis Report BJ's Wholesale Club Holdings, Inc. (BJ): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksNov 16th, 2021