Monthly Archives: December 2015

Nike Business On Fire; China Accelerates

December 23, 2015
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Nike Business On Fire; China Accelerates

Nike (NKE) is in the midst of a strong 3-year run; operating trends are at cycle-high growth rates, health & wellness as a category is growing around the world, and Nike’s brand stewardship is incredibly on point across all major sports. The stock price followed results this year, up over 37% ytd, and the 35th best performer in the S&P 500. Nike’s earnings are expected to grow 16%, so part of the strong return has been valuation re-rating. Nike’s forward P/E multiple reached the 30s, uncharted waters for the firm relative to its history. Keys to the successful Nike business model:   The outsourcing of manufacturing to China enables a capital light business model, allowing Nike to focus on the truly value added aspects of design, innovation, and branding. Nike...

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The Fed Awakens; Creates Negative Global Market Backdrop

December 21, 2015
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The Fed Awakens; Creates Negative Global Market Backdrop

At the widely anticipated December 16th Fed meeting, the Board of Governors did the expected, and finally raised the US federal funds rate by 25 basis points. The rate-hike failed to surprise markets; the move was telegraphed and written about in advance by Jon Hilsenrath in an article on the front page of the Wall Street Journal, Wednesday morning, before the actual hike. So why did markets soar in anticipation of the hike, soar some more after the hike, and subsequently mini-crash on Thursday and Friday? No good answer on market action from CJF, but the volatility, exaggerated moves, and declining breadth, are all bearish indicators going forward. CJF takes a contrarian view to the initial goldilocks interpretation of the Fed hike; the Fed action is hawkish, creating a major obstacle...

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Policy Driven Markets are Treacherous

December 10, 2015
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Policy Driven Markets are Treacherous

Volatility in the stock market is rising, intraday swings more violent, and high-to-low ranges increasing. The lurching action of the market is not driven by fundamentals, it’s difficult to profit from, and disconcerting. There isn’t a single item to pinpoint with respect to market angst, rather, a combination of factors, leading to manic sentiment changes. The sweeping issue of late-2015 is the extent to which global financial markets remain policy driven. During the financial crisis and subsequent few years, the degree of governmental and regulatory involvement in the economy and markets was prudent. Letting a crisis flare served no one. However, it’s worrisome that markets are still sooooo policy dependent 7-years into a recovery. One shudders to think what will happen if the economy really slows. China markets sit...

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ISM sinks to post-2009 lows; Industrial Economy Recession a Catch 22 for Fed

December 2, 2015
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ISM sinks to post-2009 lows; Industrial Economy Recession a Catch 22 for Fed

November ISM sank to the lowest level since 2009. Stunning, that the ISM (Institute for Supply Chain Management) survey, formerly known as NAPM (National Association of Purchasing Managers), printed 48.6, the lowest level since the throes of the financial crisis. For perspective, the last time the ISM printed sub-48, in June 2009, the S&P was 900. Today, at 2,100+, the market is a cool 134% higher. The S&P is up by 1,200 handles, after having earned approximately 620, the cumulative EPS for the market from 2010-2015. The market is up at a much faster pace than earnings as the multiple swelled from 12x to 17x. What a 6-years. Awkward that December marks the potential lift-off, delayed that is, of a sea change in Fed policy: the end of ZIRP (zero interest rate...

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