John Ransom - Don't Bank on Banks
Posted: 1/14/2014 9:19:00 PM EST

Welcome to John Ransom’s Stocks in the News where the headlines meet the trendlines:

Stock number one: Bank of America Corporation

Bank of America's Cost Cutting Will Face Scrutiny- Yahoo Finance

Bank of America (BAC_) is set to report earnings Wednesday morning, and once again the focus will be on how well the bank is doing at cutting expenses.

Analysts are looking for the bank to earn 27 cents per share, compared to 28 cents during the third quarter and 29 cents during the fourth quarter of 2012.

"We doubt that weak Q4 results will have a significant impact on share prices with investors far more focused on core earnings trends for the year ahead," argued Atlantic Equities analyst Richard Staite in a Dec. 19 preview of the banking sector.

Note: Price to book: 0.80

Symbol: BAC

Trailing PE 25; Forward PE: 13

PEG: 1.11

Dividend: 0.20%

Estimate Trend: Flat

Ransom Note Trendline: Buy Bank of America

BAC Chart

BAC data by YCharts

Stock number two: JP Morgan Chase

The end of the mortgage party? Home lending plummets at Wells Fargo, J.P. Morgan Chase, - MarketWatch

The mortgage party is officially over.

Rising mortgage rates mean that fewer people are refinancing their homes, which bludgeoned fourth-quarter mortgage results at Wells Fargo & Co. WFC +0.42%and J.P. Morgan Chase & Co. JPM +0.40% , the country’s leading residential lenders, according to earnings reports released early Tuesday.

Note: Price to Book: 1.11

Symbol: JPM

Trailing PE: 13; Forward PE: 10

PEG: 2.20

Dividend: 2.6

Estimate Trend: Down

Ransom Note Trendline: Hold JP Morgan Chase

JPM Chart

JPM data by YCharts

Stock number three: Wells Fargo

Wells Fargo’s Mortgage Business Sputters —Wall Street Journal

Wells Fargo, the largest mortgage lender in the U.S., saw profits for its mortgage lending division drop by 49% from the fourth quarter of 2012 to $1.6 billion. The bank’s home-lending originations totaled $50 billion, compared with the $125 billion a year earlier and $80 billion in the previous quarter.

Note: Price to Book: 1.57

Symbol: WFC

Trailing PE: 12; Forward PE: 11

PEG: 1.34

Dividend: 2.6

Estimate Trend: Up

Ransom Note Trendline: Avoid Wells Fargo

WFC Chart

WFC data by YCharts

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Mike Shedlock - When Will Interest on US National Debt Exceed $1 Trillion? When Will the Fed Hike Rates?
Posted: 1/13/2014 8:35:00 PM EST

With all the talk of tapering and expected hikes in interest rates by the Fed, inquiring minds are likely interested in what happens to interest on the national debt if the Fed ever does hike.

I asked my friend Tim Wallace to graph that idea. The following charts from Wallace provide a clear answer.

In these charts we make the assumption that the Congressional Budget Office (CBO) is accurate in its assessment of future budget deficits.

Neither Wallace nor I believe those estimates, nor do we believe the Fed is going to be in a position to tighten when they suggest they might, but here are the charts for discussion.

National Debt Trendline



Projected Interest at Various Rates



Hidden Agenda

The current blended rate of interest on the national debt is a mere 2.4% according to the CBO.

The "optimistic" projection of $668 billion assumes the rate will stay below 3.1% through 2020.

With that in mind, please consider the Fed's 'hidden agenda' behind money-printing.

One of the most important reasons the Fed is determined to keep interest rates low is one that is rarely talked about, and which comprises a dark economic foreboding that should frighten us all.

Let me start with a question: How would you feel if you knew that almost all of the money you pay in personal income tax went to pay just one bill, the interest on the debt? Chances are, you and millions of Americans would find that completely unacceptable and indeed they should.

But that is where we may be heading.

But isn't it fair to ask what the interest cost of our debt would be if interest rates returned to a more normal level? What's a normal level? How about the average interest rate the Treasury paid on U.S. debt over the last 20 years?

That rate is 5.7percent, not extravagantly high at all by historic standards.

Do the math: If we were to pay an average interest rate on our debt of 5.7 percent, rather than the 2.4 percent we pay today, in 2020 our debt service cost will be about $930 billion.

Now compare that to the amount the Internal Revenue Service collects from us in personal income taxes.

In 2012, that amount was $1.1 trillion, meaning that if interest rates went back to a more normal level of, say, 5.7 percent, 85 percent of all personal income taxes collected would go to servicing the debt. No wonder the Fed is worried.

The above article did not show the charts, but we just did.

Shifting Goalposts

Really think the Fed is going to hike? They know they can't, and the Fed is disingenuous as to why.

A year ago the Fed was discussing 6.5% as a trigger point.

In December, the Wall Street Journal noted the Fed’s Shifting Unemployment Guideposts

Now, in the wake of a massive collapse in the labor force in which unemployment rate just dropped to 6.7% it's easy to understand why the goalposts shifted.

The Fed pretends its interest rate policy is about a dual mandate of jobs and GDP growth.

The above charts show the real reason for the shift: the Fed is in a box of its own making and it has no freaking idea how to get out of the box.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Read more at http://globaleconomicanalysis.blogspot.com/2014/01/when-will-interest-on-us-national-debt.html#mqzF4MsRTmyvmbtf.99

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John Ransom - Earnings Dominate...and That's Good Regardless of Market Direction
Posted: 1/13/2014 8:30:00 PM EST

Welcome to John Ransom’s Stocks in the News where the headlines meet the trendlines:

Stock number one: lululemon athletica inc

Lululemon shares dogged downward by another warning- Yahoo Finance

Lululemon (LULU) getting bootstomped this morning after the company guided estimates lower for the fourth quarter. It’s hard to call the news a shock given the recent trends in the business except for the fact that it blamed the miss on traffic and sales in January. How one of the slowest months of the year could be so bad as to justify a warning less than two weeks into the new year is a mystery.

Symbol: LULU

Dividend: 1.50%

Forward PE: 22; Trailing PE 27;

PEG: 1.66

Estimate Trend: Down

Ransom Note Trendline: Sell Lululemon

LULU Chart

LULU data by YCharts

Stock number two: Ericsson

Peace initiative launched in Mexico with Forest Whitaker, Ericsson, UNESCO, - Thompson-Reuters

Blah, blah, blah, UN, blah, blah, blah, peace…..

Symbol: ERIC

Dividend: 2.5

Forward PE: 14 Trailing PE: NA

PEG: .77

Estimate Trend: Flat

Ransom Note Trendline: Hold Ericsson

ERIC Chart

ERIC data by YCharts

Stock number three: The Wendy's Company

Why Wendy's (WEN) Is Up Today —The Street.com

Wendy's Co.(WEN_) was rising 7.6% to $9.09 Monday morning after the fast-food chain offered investors its 2014 earnings forecast that beat analysts' expectations. The Dublin, Ohio-based company projected full-year adjusted earnings of 34 to 36 cents per share, well above the average analyst projection of 29 cents per share. Wendy's also announced that it expects company-owned same-restaurant sales to increase by 2.5% to 3.5% for the full year.

Symbol: WEN

Dividend: 2.4

Forward PE: 31; Trailing PE: 95

PEG:

Estimate Trend: UP

Ransom Note Trendline: Avoid Wendy’s

WEN Chart

WEN data by YCharts

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Nick Sorrentino - Raise the minimum wage and get replaced by robots. That’s the harsh reality.
Posted: 1/13/2014 8:15:00 PM EST

A couple of days ago we wrote about robots developed by Boston Dynamics – funded by DARPA – which may some day soon be deployed as an adjunct and perhaps even one day as a replacement for human soldiers. Scary stuff.

On the flip side (so to speak) comes this story of how robots will soon make our lives better. (At least for those of us who like burgers.) A company in California has developed a machine which which makes 360 high quality hamburgers an hour. It makes these burgers perfectly each time in clean conditions and without fry cooks sneezing on the food.

Please note that these robots are only cost effective if the minimum wage is raised significantly.

So keep calling for a higher minimum wage unions. I know it’s tempting to try to bring all of these folks under the organized labor banner. It would be a huge prize if it were not for the fact that many who currently work in fast food will soon find themselves without a job at all if the minimum wage is raised.

(From The Libertarian Republic)

But don’t think that the makers of the burger machine are necessarily anti-worker. Their website reads: “The issue of machines and job displacement has been around for centuries and economists generally accept that technology like ours actually causes an increase in employment. The three factors that contribute to this are 1. the company that makes the robots must hire new employees, 2. the restaurant that uses our robots can expand their frontiers of production which requires hiring more people, and 3. the general public saves money on the reduced cost of our burgers. This saved money can then be spent on the rest of the economy. We take these issues very seriously so please feel free to tell us how we can help with this transition.”

Click here for the article.

This article is reprinted by permission of Against Crony Capitalism.org

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John Ransom - Biotech Leads the Way
Posted: 1/8/2014 9:25:00 AM EST

Welcome to John Ransom’s Stocks in the News where the headlines meet the trendlines:

Stock number one: Neurocrine Biosciences

Neurocrine shares keep climbing- AP

Shares of Neurocrine Biosciences Inc. surged in premarket trading Tuesday morning, a day after the drug developer surprised some analysts with positive results from a mid-stage study of one of its experimental drugs. The San Diego company had said Monday that a potential treatment labeled NBI-98854 fared much better than a placebo, or fake drug, in reducing the symptoms of tardive dyskinesia, an illness that causes involuntary movements and spasms.

Symbol: NBIX

Dividend: NA

Forward PE: NA; Trailing PE NA;

PEG: NA

Estimate Trend: NA

Ransom Note Trendline: Avoid Neurocrine Bioscience

NBIX Chart

NBIX data by YCharts

Stock number two: Pharmacyclics Inc.

Pharmacyclics shares soar after panel says cancer drug met goals- MarketWatch

Pharmacyclics Inc., a company developing cancer treatments, saw its shares soar 18% Tuesday after an independent committee recommended that Phase 3 tests on its Imbruvica drug be stopped because the therapy had already met several goals.

The drug, used to treat particular forms of leukemia and lymphoma, showed “statistically significant” improvement in survival rates for patients using Imbruvica versus another drug, Ofatumumab, Pharmacyclics

Symbol: PCYC

Dividend: NA

Forward PE: 705; Trailing PE: 214

PEG: 1,113

Estimate Trend: NA

Ransom Note Trendline: Hold Pharmacyclics

PCYC Chart

PCYC data by YCharts

Stock number three: Rally Software Development Corp.

Rally Software initiated with an Overweight, named a Top Pick at Stephens—Fly on the Wall

Stephens initiated Rally Software with an Outperform and named it an 2014 Best Idea given its best in class product, high customer satisfaction, strong management, and improving end markets. Price target is $30. Target $30.

Symbol: RALY

Dividend: NA

Forward PE: NA; Trailing PE: NA

PEG: NA

Estimate Trend: None

Ransom Note Trendline: For Aggressive, experienced Investors, Buy at pullback to $18.

RALY Chart

RALY data by YCharts

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John Ransom - Is the Beer Boom Over?
Posted: 1/2/2014 11:47:00 PM EST

Stock number one: General Electric.

And the headline says: Clean Coal Technology is a Necessity & These 3 Companies Know It- Motley Fool

Coal gasification is just one part of what GE and Siemens do, too. Both industrial giants are big players in other key energy areas like natural gas and wind turbines. So not only will they benefit from increasing demand for cleaner coal in high growth markets, but also from increased use of other clean power sources, too. That's partly tied to the environment, but also to the mainstreaming of new technology. New power plants generally use the cleanest technology they can afford.

Symbol: GE

Dividend: 3.10

Forward PE: 16; Trailing PE 21;

PEG: 1.87

Estimate Trend: Flat

Ransom Note Trendline: Sell General Electric

GE Chart

GE data by YCharts

Stock number two: Trina Solar Limited.

Report: Solar wafer prices to rise to nearly $1, DigiTimes says - Yahoo Finance

Solar-grade crystalline silicon wafer prices have risen to 98c-99c due to strong demand and high-efficiency wafers have exceeded $1, reports DigiTimes, according to a Chinese-language Economic Daily News report. Prices are also likely to rise by another 5% in January 2014.

Symbol: TSL

Dividend: NA

Forward PE: 41; Trailing PE: NA

PEG: NA

Estimate Trend: Up

Ransom Note Trendline: Sell Trina Solar

TSL Chart

TSL data by YCharts

Stock number three: Boston Beer Co. Inc.

Must-know: 4 things that could negatively impact Boston Beer Co.—Yahoo Finance Market Realist

Investment in Boston Beer Company doesn’t come without risks. There are four major risks that could negatively impact returns for investors: financial valuations, poor economic growth, increased industry competition, and higher input costs.

Symbol: SAM

Dividend: NA

Forward PE: NA; Trailing PE: 45

PEG: NA

Estimate Trend: Flat to Up

Ransom Note Trendline: Sell Boston Beer

SAM Chart

SAM data by YCharts

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Mike Shedlock - Obamacare Support at Record Low 35%; Meltdown Coming?
Posted: 12/23/2013 11:01:00 PM EST

It's been a while since I commented on Obamacare. Given news comes out every day, nearly all of it negative, I have shown restraint. Tonight, here's a recap of what you may have missed.

Obamacare Support at Record Low 35%

Today, December 23, a CNN poll finds Obamacare support at all-time low.

Poll Details

  • 35% support the healthcare law, a 5 percentage point drop in less than a month
  • 62% oppose the law, up 4 percentage points from November.
  • 60% of women oppose Obamacare, up 6 percentage points from November
  • 43% oppose Obamacare because it is too liberal
  • 15% Oppose Obamacare because it isn't liberal enough
  • 63% believe the new law will increase what they will have to pay for medical care
  • 42% believe they will be worse off under Obamacare personally.


I have gathered a huge number of Obamacare links in the past few weeks that I did not have time to comment on. Here are a few of them. This is by no means a complete list.

Obamacare Roundup, Last Two Weeks


The final link above is interesting. The URL title is "obama-administration-secretly-extends-health-care-enrollment-deadline".

I guess it's not much of a secret.

Please note the political spectrum in the above links encompasses everything between the Huffington Post and Fox News. That's quite an accomplishment!

Meltdown Coming?

Let's finish up with a highlight from the Washington Post:

Sen. Joe Manchin (D-W.Va.) says Obamacare could suffer ‘complete meltdown’

Sen. Joe Manchin (D-W.Va.) said Sunday that Obamacare could be headed for a "complete meltdown" if costs rise too fast and people are unhappy with their coverage.

“If it’s so much more expensive than what we anticipated, and if the coverage is not as good as what we've had, you’ve got a complete meltdown at that time,” Manchin said on CNN’s “State of the Union.”

The senator said such a situation would result in the law collapsing under "its own weight."

Manchin has been pushing for a one-year delay in the individual mandate -- the requirement that people carry health insurance or pay a penalty. He said that delay would allow the product some time to work its way into the market.

Even Democrats are distancing themselves from this disaster.

Mike "Mish" Shedlock
Read more at http://globaleconomicanalysis.blogspot.com/2013/12/obamacare-support-at-record-low-35.html#Jv1jX4YHzfKTZo7E.99

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John Ransom - Another Big Christmas List
Posted: 12/23/2013 10:43:00 PM EST

Welcome to John Ransom’s Stocks in the News Christmas edition where the headlines meet the trendlines meets the wish list.

We’ve taken the wish list from CNN/Fortune of top tweets to @Santa and looked at the companies behind the top wished for presents in 2013.

First the @Santa list of top gifts from CNN/Fortune:

Stock number one: Apple Computers. (IPHONE, IPAD)

And the headline says: The Apple-China Mobile iPhone deal: What analysts are saying- Fortune

Brian White, Canter Fitzgerald: Apple & China Mobile Saddle Up the iPhone for the Year of the Horse -- Giddy Up! "Sunday evening, Apple and China Mobile finally tied the knot with a multi-year agreement announced. This long-awaited agreement includes Apple's new iPhones that will be available on the China Mobile 4G & 3G networks on January 17, 2014. In our view, this agreement is well timed for the Chinese New Year that begins on January 31, 2014, the year of the "horse". In our view, this has been the most difficult carrier agreement for Apple to negotiate in its history; however, we believe the opportunity for the iPhone to expand its reach within China Mobile's wireless subscriber base will prove to be well worth the wait." Rating: Buy. Price target: $777

Symbol: AAPL

Dividend: 2.2o

Forward PE: 12; Trailing 14 NA;

PEG: .88

Earnings Trend: UP

Ransom Note Trendline: Buy AAPL

<AAPL Chart

AAPL data by YCharts

Stock number two: Sony Corporation. (PS4)

PS4 vs Xbox One: 3 Key Takeaways After 1 Month of Sales- Motley Fool

The Playstation 4, which debuted a week earlier than the Xbox One, appears destined to finish 2013 on a high note. Meanwhile, Nintendo's (NASDAQOTH: NTDOY) struggling console, the Wii U, surged 340% month-over-month in November thanks to the September price drop to $299 and the eagerly anticipated release of Super Mario 3D World. According to new survey data provided by GameSpot Trax, it appears that the Playstation 4 is definitively beating the Xbox One in several key aspects. GameSpot's survey consists of data from a CBS Interactive audience comprised of core gamers and early adopters, collected between Dec. 5 and Dec. 10.

Symbol: SNE

Dividend: 1.40

Forward PE: 16; Trailing PE: 22

PEG:

Estimate Trend: Down

Ransom Note Trendline: Sell SNE

SNE Chart

SNE data by YCharts

Stock number three: Microsoft Corporation. (XBOX)

Why Microsoft Won't Spin Off Xbox- Seeking Alpha

Today, the growth prospects for consoles aren't as prosperous as they were 10 years ago. Instead it has become much more important for Microsoft to be present in the smartphone and tablet market. So one may question Steve Ballmer's decision to reposition Microsoft as a hardware company with the Xbox as the largest revenue driver

Symbol: MSFT

Dividend: 3.00

Forward PE: 13; Trailing PE: 14

PEG: 1.26

Estimate Trend: UP

Ransom Note Trendline: Sell MSFT.

MSFT Chart

MSFT data by YCharts

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Nick Sorrentino - Al Sharpton’s Chicago Town Hall Erupts into Anti-Political Machine Revolt (Awesome Video)
Posted: 12/23/2013 1:17:00 PM EST

One of the best videos I have seen in a long time. This is what I’m talking about. Al Sharpton (the MSNBC designated African-American mouth piece for this White House) goes to Chicago and gets an earful from a vastly African American audience which is fed up with the Chicago political system, with Al Sharpton, and to at least some degree with this president.

I found this video deeply encouraging. See more at Against Crony Capitalism.org

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John Ransom - Robots Take Over the Market
Posted: 12/17/2013 2:19:00 PM EST

Welcome to John Ransom’s Stocks in the News where the headlines meet the trendlines:

Stock number one: Adept Technology.

And the headline says: Adept Technology joins rally in robot space, shares up 6% - Yahoo Finance

Shares of intelligent robot maker Adept Technology (ADEP) are benefiting from increased interest in the space following Raymond James upgrade of peer iRobot (IRBT) and Google's (GOOG) purchase yesterday of Boston Dynamics, an engineering company that has designed mobile research robots for the Pentagon. Shares of Adept are up 6%, or 76c, to $12.45 in late morning trading.

Note: The stock has had a really good run since rallying in August 2012. If you have profits take them. Small market-cap; lack of earnings visibility are problems

Symbol: ADEP

Dividend: N/A

Forward PE:NA; Trailing PE NA;

PEG: 0

Estimate Trend: UP

Ransom Note Trendline: Sell Adept Technology

ADEP Chart

ADEP data by YCharts

Stock number two: iRobot Corporation.

iRobot surges after analyst upgrades to Strong Buy Fly on the Wall

Shares of robot maker iRobot (IRBT) are climbing after research firm Raymond James upgraded the stock in a note to investors earlier today. WHAT’S NEW: iRobot’s new vacuum robot, the Roomba 800, should boost iRobot’s sales in 2014, Raymond James analyst Brian Gesuale wrote in a note to investors. Also likely to boost the company in 2014 are the expansion of the company’s mopping robot, the Braava, into new markets and the higher gross profits that the additional Braava sales will generate, the analyst added.

Note: Gesuale’s price target is $39 and the stock has printed today at $37.10

Symbol: IRBT

Dividend: NA

Forward PE: 58; Trailing PE: 32

PEG: 3.66

Estimate Trend: Up

Ransom Note Trendline: Hold iRobot

IRBT Chart

IRBT data by YCharts

Stock number three: Gogo Inc.

5 of Last Week's Biggest Losers — Motley Fool

Gogo soared 23% a week earlier after announcing certification for deploying its Ku-satellite technology in Boeing 747-400 aircraft. The move allows the in-flight Wi-Fi provider to make an international push. Gogo gave back roughly half of those gains this past week. There was legislation introduced in Congress to block voice calls -- something that could be seen as detrimental to the value of Gogo's airborne connectivity -- but the sell-off was probably more a case of profit-taking after the prior week's rally.

Symbol: GOGO

Dividend: NA

Forward PE: NA; Trailing PE: NA

PEG: NA

Estimate Trend: Flat

Ransom Note Trendline: Sell GOGO

GOGO Chart

GOGO data by YCharts

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