30 MarBen Bernanke’s Blog

Former Fed Chairman Ben Bernanke

Today Former Fed Chairman Ben Bernanke started a blog here: http://www.brookings.edu/blogs/ben-bernanke. Why now?

Here is an excerpt from Chairman Bernake’s blog explaining why:

On January 31, 2014, I left the chairmanship of the Fed in the capable hands of Janet Yellen. Now that I’m a civilian again, I can once more comment on economic and financial issues without my words being put under the microscope by Fed watchers. I look forward to doing that—periodically, when the spirit moves me—in this blog. I hope to educate, and I hope to learn something as well. Needless to say, my opinions are my own and do not necessarily reflect the views of my former colleagues at the Fed.

His first article: ‘Why are interest rates so low?‘ does and excellent job explaining why the Fed is keeping rates so low. A factor called the ‘equilibrium real interest rate’ is a factor that the fed uses to assist in balancing inflation and employment rates. He also explains why keeping interest rates so low is not throwing seniors under the bus. An excellent read.

I will be looking out for Chairman Bernanke’s future blog posts.

10 FebMCD Answering question about Food Quality with Videos

McDonald’s stock has been suffering. One reason MCD is suffering is that people question the quality of McDonald’s food such as ‘are there beaks and feet in Chicken McNuggets?’ To answer that question and others McDonald’s shares it’s food production techniques in several videos.

In these videos MCD answers a questions concerning the quality and content of its food. See videos below for examples of MCDs effort to prove its uses only the best ingredients.

From McDonald’s: Is it real Chicken? Is the whole chicken used? Those ‘pink slime’ pictures, is it really an ingredient of Chicken McNuggets? One of the biggest questions about McDonald’s food is about what goes into our Chicken McNuggets, so Grant Imahara visited Tyson Foods, one of our suppliers to get you answers. Watch to see what goes into our Chicken McNuggets

Also from McDonald’s: Why is the egg in the Egg McMuffin round? Is it sliced from a roll? Are the eggs even real? Prompted by a question from a McDonald’s skeptic, Grant Imahara heads to Herbruck’s Poultry Ranch, an egg supplier for McDonald’s USA, to find the real story about our eggs. Watch and discover if McDonald’s eggs are real.

Also from McDonald’s: Does McDonald’s USA use real potatoes? Why do the fries always taste so good? Are they mashed and formed in a mold? There are a lot of questions about our fries so Grant Imahara is going to investigate our fry making process in his own way. Watch and discover how we make our World Famous Fries.

There are several other ‘Food Quality’ videos on the McDonald’s YouTube Channel. Will these videos answer consumer questions and help customers understand that McDonald’s food is good food. (Just not gourmet)

Full Disclosure: I own MCD, I have a hold rating on this stock.

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11 DecCrude Nearing 16 yr Resistance

crude oil 1946-2014

In 1973 OPEC had an oil embargo on the US which rose to sharply higher prices.

Today the lower US Dollar coupled with rising supply from nontraditional sources such as fracking and oil sands has led to a temporary glut in the market.

Supply and Demand Adjustment Period
With oil on sale consumers are going shopping for SUV’s and larger gas guzzling vehicles. With the fast growth in consumerism in China, oil consumption will continue to increase over the next several decades.

China’s ascent marks “a new age in the history of energy,” IEA chief economist Fatih Birol said in an interview. The country’s surging appetite has transformed global energy markets and propped up prices of oil and coal in recent years, and its continued growth stands to have long-term implications for U.S. energy security. Source: WSW

Demand will meet supply on the world crude oil market the question is how long will it take to see $100 oil again? Could be in as little as a week if a terrorist attack hits a major oil producing country. Likely we won’t see $100 crude oil until 2016, that’s why for the second and third quarters of 2015 I will likely continuing to add to my energy investment portfolio.

I currently hold positions in CVX, ED, EPD, OXY, KMP, LINE, VLO, BTU and PBT.

energy

08 OctCorporate Fraud; China; Financial Development; Corporate Governance

In a March 23, 2014 whitepaper titled: “Cheating in China: Corporate Fraud and the Roles of Financial Markets” authors Minwen Li and Tanakorn Makaew reported on a study on how financial market monitoring affects corporate fraud in China. They came to the conclusion that financial markets play a crucial role in fraud prevention.

Financial markets play a crucial role in fraud prevention.

From the report, “Corporate fraud scandals have plagued emerging markets such as China. In 2012, the China Securities Regulatory Commission (CSRC), the main regulator of security markets in China, received 380 allegations and investigated 316 cases involving financial fraud, false information disclosure, and other violations of the securities laws. Given that there are 2,494 companies listed on Mainland China’s two stock exchanges, such prevalence of fraud threatens to strain capital market activity and overall economic growth.”

Case in point, DEER, a Chinese designer, manufacturer and seller of small home and kitchen electric appliances. Back in Feb 2012, I picked a small position this stock based on the financials provided via Schwab, TD Ameritrade, Yahoo and other publications.  According to these reports, DEER has a PE ratio of 3.978, one of the lowest in the Appliance and Tool industry. DEER has a Net Profit Margin of 17.405, making it one of the most profitable in its industry. In March 2012 I bought more on the heels of yesterday’s annual report announcing record results! By August 2013 the lies caught up with DEER and the stock was halted.

This despite that fact that the National People’s Congress (NPC) began to amend the Securities Law and the Company Law in 2003, both of which took effect on Jan 1, 2006. NPC also passed Amendments to The Criminal Law (VI) in 2006 to clarify the responsibilities of listed companies related to breaches of the law, and impose heavier punishments for violations.

Lesson: I don’t know how anyone can trust financials from any company based in China.

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23 JulMCD: The Past, The Present,The Future

“As our predominately franchised business model continues to generate significant levels of cash, our priorities regarding the use of cash have not changed. After investing in our business, we’re committed to returning all free cash flow to shareholders over the long term, first through dividend and then through share repurchases. For the second quarter, we returned $1.2 billion to shareholders through a combination of dividends and share repurchases.” – McDonalds President Thompson


“…fortifying our position as our customers’ favorite place and way to eat and drink.”

by McDonald’s Don Thompson, President and CEO

I’d like to begin by briefly framing our performance using three lenses. The past, the present, and the future.

First the past, because it provides perspective and guides our present and future. Throughout McDonald’s history, we respectively grown both the top and the bottom lines to varying degrees across a variety of economic and competitive cycles. We have an iconic brand an outstanding system of owner-operators, suppliers and employees and superb real estate locations in nearly every market around the world. This provides a solid foundation from which we operate.

Second, the present. In second quarter we grew revenues, operating income and earnings per share, despite the ongoing impact of the challenging environment. This is truly a testament to the fortitude and resilience of our system, our sustainable competitive advantages, and the collective focus on execution at our restaurants.

And third the future. We expect the dynamics of this cycle should persist in the near-term, namely flat to declining informal eating out markets, increasingly less ability to take price, cost pressures throughout our P&L and heightened competitive activity.

Based on our recent sales trends, our results for the rest of the year are expected to remain challenged.

Our second quarter results tells story consistent with these lenses. Global comparable sales were up 1%, operating income was up 3% and constant currencies and earnings per share was $1.38, a 6% increase in constant currencies. And as we begin the third quarter, global comparable sales are expected to be relatively flat in July. Based on our recent sales trends, our results for the rest of the year are expected to remain challenged.

We remain committed to the plan to winning our three global growth priorities to optimize our menu, modernize the customer experience, and to broaden accessibility to brand McDonald’s around the world. This customer centric plan enables us to deliver an appealing experience by offering great tasting, affordable food and beverages, and clean and modern restaurants.

At the same time, we are diligently implementing thoughtful adjustments to our proven strategies and solutions when and where needed. This flexibility has enabled us to maintain or grow market share in most of our major markets around the world.

Let’s review ours results in every geographic business units, starting with the United States, where comparable sales for the quarter were up 1% and operating income was flat. We continue to appeal to our customers with an increased emphasis on new news across our menu, and an ongoing focus on everyday affordable value.

The Dollar Menu remains a foundational component of our strategy

The Dollar Menu remains a foundational component of our strategy to consistently deliver value across the menu, rather than implementing aggressive short-term discounting tactics. At the same time, our focus on enhancing core classics and offering additional premium products, continues to provide customers with even more variety and choices across day parts and price points.

Premium McWraps launched in April, the Blueberry Pomegranate Smoothie and Egg White Delight debuted in May and last month we added fresh new taste to our Quarter Pounder Burgers with three new flavorful recipes, Bacon Habanero Ranch, Lettuce Tomato Deluxe and Bacon & Cheese.

This quarter we introduce new items across all four key growth categories, chicken, beef, breakfast and beverages. Premium McWraps launched in April, the Blueberry Pomegranate Smoothie and Egg White Delight debuted in May and last month we added fresh new taste to our Quarter Pounder Burgers with three new flavorful recipes, Bacon Habanero Ranch, Lettuce Tomato Deluxe and Bacon & Cheese.

From a comparable sales standpoint, these new menu additions individually met or exceed its targeted performance levels. However, softer IEO environment and comparisons against prior-year promotion was chicken and beverage activity offset the sales driven by the new menu news. And while June comparable sales were slightly negative in the U.S., we continue to outpace the competitive set.

In June, I met with our leadership franchisees while they were in Oak Brook for one their regularly scheduled meetings. While the challenges of operating a small business today are many, it is clear that we’re aligned and focused on what’s most important and that’s the customer. It’s that commitment to remaining customer centric, along with the assertive plans and vision we have in place, that enables all three legs of the McDonald’s system to grow sales and profitability for the long-term.

Let’s shift to Europe, where comparable sales were down 10 basis points for the quarter and operating income was up to 5% in constant currencies. The U.K. and Russia continue to deliver positive results, while weak performance in Germany and France persist. The UK’s business remain solid. Second-quarter results and continued market share growth were driven by a balanced focus across value core new products, and promotional offers.

The U.K. launch blended ice beverages in June, just in time to satisfy customers’ craving for something cool and refreshing during the summer months. The lineup includes two delicious fruit smoothies, strawberry and banana and mango and pineapple, and a line of frappes including Carmel and Iced Mocha.

Inspired by the U.S., these new products expand the overall beverage lineup and further validate blended ice as a proven system solution that can be deployed across markets worldwide. Russia also delivered positive performance for the quarter on top of last year’s strong results. In addition to a focus on the Big Mac, two seasonal premium offerings, the Royal Cheeseburger and The Big Tasty with Bacon, contributed to Russia’s performance and demonstrated the strong ongoing appeal of our brand in this growth market. We expect the lower inflationary environment in Russia to continue dampening our pricing power, pressuring near-term sales momentum compared to last year.

France, comparable sales in guest count performance remain negative as the recession continues

Moving over to France, comparable sales in guest count performance remain negative as the recession continues to pressure the informal eating out industry. However, we’re growing market share by balancing value in premium products across the menu. For example, France recently added two new recipes to the popular Casse-Croute entrée and drink combo, they contributed to market share growth during the lunch day part. This value offer was complemented by a strong focus on two premium beef burgers, Le M and Le 280.

Germany negative comparable sales and traffic trends persist.

In Germany negative comparable sales and traffic trends persist. Our traffic has declined at a faster rate than the IEO industry, which also continues to contract. It’s critical that our initiatives resonate with consumers in this environment and in this marketplace. So to reestablish our momentum, we are leveraging recent consumer insights and continuing to adjust our plans.

market share improved in China, Australia and Japan, comparable sales were negative for our big three markets. Positive performance in other markets like South Africa, Singapore and South Korea partially mitigated the overall segments decline.

Let’s shift to Asia Pacific, Middle East and Africa or APMEA. Comparable sales were down 30 basis points for the quarter and operating income increased 3% in constant currencies. Although market share improved in China, Australia and Japan, comparable sales were negative for our big three markets. Positive performance in other markets like South Africa, Singapore and South Korea partially mitigated the overall segments decline.

Markets across APMEA are taking a holistic approach to stimulating demand. Across day parts there are offering limited time and innovative products alongside established price value platforms. In Australia, we continued to grow market share by balancing our focus on the core with new product introductions and promotional activities. Strong performance in 2012 including the launch of our Loose Change menu along with external pressures in 2013 from lower levels of consumer spending and high competitive activity have contributed to weaker performance.

Japan, consumers remain extremely price sensitive

In Japan, consumers remain extremely price sensitive. Comparable sales have been positive the last two months and we continue to grow share by leveraging limited time offerings like the Chicken Teritama and sharing options such as the Mega Potato to keep customers coming back to our restaurants and to build our average check.

China, comparable sales were down 6.1%

In China, comparable sales were down 6.1% for the second quarter reflecting the negative impact from avian influenza which continues to dissipate. We remain focused on leveraging promotional activities to showcase the diversity of our menu beyond chicken and strengthening our connection with customers through our ongoing brand trust campaign that focuses on the quality and the safety of our food.

We remain confident in our ability to drive future performance in China. Going forward, comprehensive plans for our key growth areas particularly beverages, the family business and the late night day part remain our top priorities.

Around the world and across our system we are focused on ensuring our strategies and tactics resonate with customers. That’s the key, the key to our performance, today and for the long term. As I mentioned earlier, our market teams continue to strategically and thoughtfully adjust their plans in response to local consumer dynamics and growth opportunities.

At the same time, we remain committed to prudently investing our capital and resources in those initiatives that will further differentiate us from the competition for the long term. We’re broadening accessibility by adding new restaurants, we’re modernizing our existing restaurants with reimages and remodels and we continue to deploy technology and convenience initiatives.

our predominately franchised business model continues to generate significant levels of cash, our priorities regarding the use of cash have not changed

As our predominately franchised business model continues to generate significant levels of cash, our priorities regarding the use of cash have not changed. After investing in our business, we’re committed to returning all free cash flow to shareholders over the long term, first through dividend and then through share repurchases. For the second quarter, we returned $1.2 billion to shareholders through a combination of dividends and share repurchases.

In closing I want to reiterate my confidence in our business and in the growth opportunities that exists. We are diligently focused on executing the proven strategies within our plan to win. We have a resilient business model and aligned and talented system and an experienced management team.

We’re leveraging these strengths and making deliberate, continued progress toward winning this battle for market share and fortifying our position as our customers’ favorite place and way to eat and drink.

Source

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11 JanDEER Suspended from NASDAQ

The NASDAQ Stock Market (Nasdaq:NDAQ) announced that Deer Consumer Products, Inc. (DEER), which has been subject to a trading halt since August 13, 2012, will be suspended from the NASDAQ Stock Market effective January 11, 2013. As a result of the suspension, Deer Consumer Products may be eligible to resume trading in the over the counter market. The suspension is the result of a final determination to delist the Company’s shares issued by the Panel after a hearing on the matter. NASDAQ will file a Form 25 Notification of Delisting with the Securities Exchange Commission upon the expiration of applicable appeal periods.

For news and additional information about the company, please contact the company directly or check under the company’s symbol using InfoQuoteson the NASDAQ Web site.

For more information about The NASDAQ Stock Market, visit the NASDAQ Web site at http://www.nasdaq.com.

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06 NovAKS Shares Up Today

One Month Chart of AKS

AK Steel (NYSE: AKS) shares are up 6.39% after the company announced late Monday that it will increase current spot-market base prices for all carbon flat-rolled steel products by $50 per ton immediately.

“The move was consistent with our near-term bullish steel call, which was predicated on a second increase, supported by increasing raw-material prices, extending lead times and firming global prices,” analysts at Dahlman Rose & Co. wrote in a note.

Current position: Long AKS

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10 SepThree Buys: JCI, CAT, INTC

JCI Buy at $25.82
CAT Buy at $80.oo
Buy INTC at $22.00


Johnson Controls Inc NYSE:JCI is yielding 2.59% with a low pe ratio of 11.06 at the time of this publication according to TD Ameritrade. This will be a new position in JCI if the stock ever hits my strike price of $25.82. JCI has a peg ratio of .6289 which is low compared to the auto parts industry. I believe the automotive industry is on a rebound worldwide as more people in the US need new cars as the average age of cars hit a record 10.8 years old in 2011.

Worldwide demand is growing for transportation as economies are bringing more of the population into a economic level where a car or small truck may be purchased. Additionally Johnson Controls is in every facet of our lives with HVAC systems and controls, energy management and overall far reaching engineering capabilities.

The stock got hit in July, if it gets hit again before the election I am sure to pick up my first 1/4 of my target position in JCI.


Caterpillar Inc. NYSE: CAT is yielding 2.36% and has a pe under 10 at the time of this publication according to TD Ameritrade. I already own 1/4 of my target position in CAT, this will add another 1/4%. Currently Credit Suisse and The Street have their highest ratings, Outperform and Buy respectively.  CAT is undervalued with a PEG of .5631. Hopefully it will move even lower with more bad news from the world economic conditions hurting short term results. I expect CAT to trade in the low $100s once positive economic signs begin to appear.


Intel NYSE: INTC is yielding nearly three and three quarters percent. I own INTC in my trading account and my tax sheltered retirement account. I hope to add more at $22. per share for my retirement account. INTC has a low .95 peg ratio cheap compared to the industry 1.52 peg.

JP Morgan lowered its price target from $25 to $22 per share. The lagging PC sales are sure to disappoint this quarter too so a $22 price target is possible.

Next quarter with the launch of Windows 8 devices, along with the Christmas shopping season I expect INTC to bounce back to over $100 per share.

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29 AugSell 1/2 Position In WMT

It’s been a long good run with WMT purchasing 1/4 of my holdings on 1/22/09 for $48 and another 1/4 on 4/24/09 for $47.90. That’s an average of 50%+ return. Time to take a little of this off the table. I’m leaving half my position in tact and may consider buys and sells in the future.

Why am I selling half?

1. The stock appears it is running out of gas with major resistance at $75, it could pull back to the $60 or $65 level. But if it breaks $75 that would be bullish.

2. Walmart was range bound bouncing from $50 to $55 until the fall of 2011. Now with a bounce to the mid to low $70, booking a 50% profit makes sense.

3. PEG ratio of 1.7 is high. Stock appears fully if not over valued compared to the industry PEG of 1.1.

4. Earnings growth has outpaced top like sales growth. Not sustainable.

5. Revenue per employee is only average for the industry $209K

Overall I like WMT and on a pullback to the low $60s, I might add to my position. As of now, I’m happy to book my 50% profit.

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14 AugIs DEER Fed Up with NASDAQ?

According to an AP article, Chinese companies are pulling out of US stock markets amid complaints about price, and accounting scrutiny. This may include DEER, a NASDAQ small cap appliance maker I invested in earlier this year.

This was my first foray into the Chinese market. Perhaps my last if politics and attacks from short sellers are the norm.

To assist with making US markets whole the article reports that an unnamed Chinese business magazine said a state bank has provided $1 billion in loans to help companies with listings abroad move them to domestic exchanges.

The withdrawals follow accusations of improper accounting by some companies and a deadlock between Beijing and Washington over whether U.S. regulators can oversee their China-based auditors.

DEER may be pulling out of U.S. markets because their low share price fails to reflect the strength of their business. Withdrawing also will save DEER money because it eliminates the high cost of complying with the SEC.

Source: Chinese companies pull out of US stock markets

DEER continues to be under attack by Alfred Little. In his most recent article, “Deer Consumer Products Shares Halted After Factories Idled” he continues to accuse DEER of lying to it’s investors.

DEER had filed a lawsuit against Alfred Little earlier this year. There was a motion to dismiss that lawsuit in the latest 10Q from the company, other than that no other information is available about DEER and its lawsuit against Mr. Little.

Mr. Little shows photos of a closed facility he claims is DEERs. I asked, “What if DEER has a second facility? DEER claims it no longer does non-domestic manufacturing and is totally focused on the domestic market. It would be logical to shut down a facility.”

As of this writing Mr. Little has failed to respond.

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