November 12 Post

Hi Again,

We just got done with the two worst calendar months (historically) for the market. Looking at the scorecard you can see that we had a gain of 6.63% in August and in September and October with the market calamity we only lost 5.75%. That is not bad at all! Is the worst over? May be not. The real cause of the correction of the market was high interest rates caused by a hostile Federal Reserve who is afraid of inflation and they want to be proactive and raise rates for that purpose. Historically they always overshoot so why should this time be any different? Just wait and see.

 GE- General Electric (GE) just got its second credit-rating downgrade this month. Moody’s cut the industrial giant’s rating two notches, to Baa1 from A2. The analysts said that problems in GE’s power-generation business could cause “considerable” damage to its cash flow: “The weaker than expected performance… is not only attributable to a considerable drop in market demand and ensuing heightened competition, but also to GE’s misjudgment of financial prospects and operational missteps,” the firm wrote. This follows a similar downgrade from S&P, which cut GE’s rating to BBB+ from A on Oct. 2. Both ratings firms cut GE’s short-term credit rating from their top tier to their second-best rating. This is notable because GE used to be one of the biggest issuers of commercial paper, as we pointed out yesterday. It’s not clear that this will be the last downgrade for the troubled conglomerate, which is shedding businesses and restructuring its core power business. Fitch put the company’s rating on watch for a downgrade earlier this month. GE also announced Tuesday that it was cutting its dividend, and perhaps more importantly, that the SEC had expanded its probe of the company’s accounting practices to include a $6 billion charge from the first quarter and a $22 billion third-quarter charge.(Alex Scaggs, Bonds,10/31/18)

 GM- General Motors (ticker: GM) stock slipped a little Thursday, but analysts expect more gains now that they have digested its upbeat third-quarter earnings report. Where we were: GM has struggled year to date, but its most recent results demonstrated that tariff headwinds aren’t the whole story. Where we’re headed: The quarter reinforced analysts’ bull thesis on the auto maker. In a year that’s been tough on auto makers, GM has held up better than Fiat Chrysler Automobiles (FCAU) and Ford Motor (F). Now that it has reported better-than-expected results, bulls are even more enthusiastic about the stock. As a reminder, GM’s results handily beat bottom-line estimates, while it expects higher fourth-quarter earnings per share than analysts had expected. The company acknowledged tariffs were a headwind, but remained optimistic about its prospects through the end of the year (Teresa Rivas, Real

Time Analysis, 11/1/18)

 Exxon and Chevron- Chevron (CVX) and Exxon Mobil (XOM) are trading higher Friday following third-quarter earnings reports. Where we were: Despite higher oil prices, major energy players have lagged the market this year. Where we’re headed: Both stocks are moving higher after reporting results, capping a series of upbeat reports from oil majors. Markets turned negative midday Friday, taking the Energy Select Sector SPDR ETF’s (XLE) with it. Yet Chevron and Exxon were still notching gains thanks to upbeat results. Chevron earned $2.11 a share on revenue of $43.99 billion, while analysts were looking for EPS of $2.06 on revenue of $47.17 billion. World-wide net oil-equivalent production was 2.96 barrels a day in the quarter, up from 2.72 million barrel a year ago, a new record. Exxon earned $1.46 a share on revenue of $76.61 billion. Analysts were looking for EPS of $1.22 on revenue of $72.91 billion. Its oil-equivalent production was 3.8 million barrels per day, although that was a 2% year-over-year decline.(Teresa Rivas, Sector Focus, 11/2/18)

 IBM-  As the market digested International Business Machines ’ (ticker: IBM) $34 billion pact to buy Red Hat (RHT), a deal announced Oct. 28, investors decided they didn’t quite like it. IBM shares sank to a near-decade low on Halloween.

That was when two IBM directors pounced, buying the stock on the open market on a day it slipped to $114.09, an intraday low it hasn’t traded at since July 2009. Shares have lost nearly a quarter of their value so far this year. James Owens, retired chairman and CEO of Caterpillar, and an IBM director since 2006, bought 1,000 IBM shares for $114,673, an average of $114.67 each. Owens made the purchase through a trust. His most recent buy was on May 16, 2017, when he paid $263,180 for 1,718 shares, or $153.19 each on average. He now owns 6,000 IBM shares through the trust. Sidney Taurel, chairman emeritus of Eli Lilly, and that company’s former CEO, bought 4,311 IBM shares for $495,846, or $115.02 each, on average. Taurel has been an IBM director since 2001, but this buy was his first on the open market. IBM declined to comment. (Ed Lin, IBM Insiders,11/2/18)

 Apple- “ Apple Reduces Disclosure; Typically Not a Good Sign,” wrote one analyst about the iPhone maker’s latest quarterly earnings report. And that about sums it up. Last Thursday, Apple beat estimates for revenue and earnings, reported just OK guidance for the Christmas quarter and said it will no longer break out iPhone sales going forward. This last item, in particular, seemed to rankle investors. Apple stock (AAPL) tumbled almost 7% on Friday, and kept falling on Monday. Apple stock is now down about 10% since the report. One reading of Apple’s shift on disclosure, after all, is that Apple has so successfully saturated the globe with high-priced smartphones that it will struggle to grow unit sales from here, and would rather not point that out for investors each quarter. Consider another interpretation, however: Apple wants investors to focus on its earnings, not its units, because steady, rising earnings are the path to a higher stock valuation.(Jack Hough, “Apple changed..,11/5/18)

Have a great Thanksgiving!