(53 days ago)
Dow Companies Report Worst Revenues since 2010, Dow Rises to 20,000 (LOL?)
Wall Street hocus-pocus has done an awesome job.
The Dow-20,000 hats have come out of the drawer after an agonizingly long wait that had commenced in early December with the Dow Jones Industrial Average tantalizingly close to the sacred number before the selling started all over again.
What a ride it has been. From the beginning of 2011 through January 27, 2017, so a little more than six years, the DJIA has soared 73%, from 11,577 to 20,094. Glorious!!
But when it comes to revenues of the 30 Dow component companies – a reality that is harder to doctor than ex-bad-items adjusted earnings-per-share hyped by Wall Street – the picture turns morose.
The 30 Dow component companies represent the leaders of their industries. They’re among the largest, most valuable, most iconic American companies. And they’re periodically booted out to accommodate a changed world. For example, in March 2015, AT&T was booted out of the Dow, and Apple was inducted into it, as its ubiquitous iPhone had become the modern face of telecommunications. New blood with booming revenues replaces the stodgy old companies. In aggregate, revenues should therefore rise, right?
And there has been a huge binge of acquisitions, from mega-deals such as Verizon’s $130-billion acquisition of Vodafone in 2013, to the many dozens of smaller companies that Apple, Cisco, IBM, and others have bought. These mergers bring the revenues of the acquired companies into the revenues of the Dow components. And in aggregate, revenues of the Dow companies would therefore soar, right?
But the other day, I was asked about the revenues of all Dow components, after having lambasted the revenue debacles of two, IBM [Big Shrink to “Hire” 25,000 in the US, as Layoffs Pile Up] and Cisco [Cisco Buys 45th Company in 5 Years, Revenues Still Stagnate].
So here we go. Fasten your seatbelt.
The chart below shows total aggregate revenues as reported under GAAP by the 30 companies that are today in the DJIA. This includes Apple, for example, though it only joined in 2015; and it no longer includes AT&T. For 2016, these 30 companies reported aggregate revenues of $2.69 trillion. That’s down 4.4% from 2011 and the worst year since 2010:
(52 days ago)
ECB Assets Rise Above 36% Of Eurozone GDP; Draghi Now Owns 10.2% Of European Corporate Bonds
The ECB's nationalization of the European corporate bond sector continues. In the ECB's latest update, the six central banks acting on behalf of the Euro system provided an update on the list of corporate bonds they bought. They bought into 810 issuances with a total of €573bn in amount outstanding.
For the week ending 27th January, the bond purchases stood at €1.9bn across sectors. This increases the number of securities held by the ECB to 813, and lift the ECB's total corporate bond holdings to €58.82b, which means that as of the latest weekly data, the ECB now owns 10.2% of the total €575.42BN in European corporate debt outstanding.
Since one month ago, the ECB owned 9.2% of the corporate bond market, the rate of nationalization of the private, outstanding corporate bonds is roughly 1% per month. Tangentially, 52 or 6.4% of the 813 securities held by the ECB are negative yielding.
Which corporate bonds did Mario Draghi generously subsidize this week? According to the ECB's holdings, utilities remain the largest industry group with 215 securities, while according to Bloomberg, in the latest week the ECB bought bonds issued by Atlantia, BASF, Carmila, Enel, Fresenius, Italgas, LEG Immobilien, Linde, Legrand, RTE, Snam and Telefonica Emisiones. The complete list of ECB holdings by ISINs can be found here.
While there was some market concern in December that the ECB may be tapering its CSPP program, when it purchased just €4 billion in corporate bonds in the month, less than half the recent runrate from the September-November period, this appears to have been calendar driven, as in January the ECB is back to its aggressively purchases and through the last week, it purchased €7.8 billion in corporate bonds for January, nearly a 100% increase from the prior month.
Interpretation: This is a massive bailout of failing companies --- these failing companies load up on ZIRP cash to buy back shares... pay dividends.... cover operational costs....
Without ECB free cash --- they would crash and burn.
BUT ... this is great for the stock market!!!!