"BMT Investors" Bulletin Board

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US Federal Reserve raises interest rates to 1% in bid to hold off inflation

The Guardian  /  March 15, 2017

The US Federal Reserve has sought to head off rising inflation with a third interest rate rise since the 2008 financial crash and the second in three months, taking the base rate from 0.75% to 1%.

The central bank set aside concerns about the impact of higher interest rates on consumer spending to confirm analyst projections that it is prepared to increase rates several times this year to keep a lid on inflation as it rises above its 2% target level.

The Fed’s chair, Janet Yellen, said a wide range of indicators showed the US economy was in rude health, allowing its interest rate setting committee to push rates back towards historically normal levels. Policymakers voted nine to one to raise rates.

Speaking after the decision, Yellen said she had met Donald Trump’s treasury secretary, Steven Mnuchin, “a couple of times” but had only been “introduced” to the president himself.

“I fully expect to have a strong relationship with secretary Mnuchin,” she said. “We had good discussions about the economy, about regulatory objectives, the work of the FSOC [Financial Stability Oversight Council] global economic developments, and I look forward to continuing to work with him.” She said she had had a very brief meeting with Trump “and appreciated that as well”.

Earlier in the day the Department of Commerce said retail sales had inched up by 0.1% in February, and that they had been better than it had previously estimated in January.

US interest rates

The Department of Labor said consumer prices were 2.7% higher in February than a year earlier. After excluding the costs of food and energy, inflation was 2.2%. A housing market index from the National Association of Home Builders also surged to its highest level since 2005.

US stock markets moved up on the news, rising 90 points in the minutes after the decision, and US crude rose 2%. The increases were modest following Yellen’s signals in December that interest rates were on an upward path. Investors were also caught out by Yellen’s bullish comments in the wake of the announcement and by projections showing that 11 of her 17 policymaking colleagues saw borrowing costs rising another three times in 2017.

Dennis de Jong, the managing director of the currency trader UFX.com, said: “Given the bloating effect Donald Trump’s presidency has had on US inflation, it would have been more of a surprise had Fed Chair Janet Yellen not announced a rate hike at today’s Federal Reserve meeting.

“Trump’s grand plans for American infrastructure spending have signalled an about-turn for US economic policy – after just one rate increase in ten years, we’ve now seen two in the space of three months, and plenty more are expected for 2017.

“This all spells bad news for US borrowers, who will likely have to foot a larger bill over the coming months. With at least three more hikes on the cards by the end of the year, today’s news could hit many where it hurts the most – the pocket.”

US CPI

Some economists argue that weak wages and productivity growth in the US will limit the Fed’s rate increases to a handful before reaching a peak at around 2%.

Gus Faucher, the deputy chief economist at the stockbroker PNC, said: “I think the concern, in terms of why the Fed is raising rates now, is that inflation is picking up. The unemployment rate is 4.7% and that’s putting upward pressure on prices.”

He told the Guardian economic forces were acting against a return to interest rate levels of 4-5% seen before the 2008 crash.

“We have slower labor force growth because of the ageing of the baby boomers, [and thus] slower productivity growth in terms of output per worker,” he said. “That has reduced the potential for long-run growth, it’s reduced inflationary pressures, and I think rates in the future will be lower than they have been in the past.”

US retail sales

Faucher also said further interest rate rises could dent consumer spending, which has come to rely on cheap loans.

“I do think eventually that higher interest rates are going to have an impact on rates for car loans, so that may be a problem for automakers. It may be a problem for big-ticket durable items, home appliances, stuff like that.” There is a ceiling on those effects, though, and Faucher doesn’t think they will affect home loans.

“There isn’t much bleed over into mortgage rates; it’s mostly the short-term borrowers,” he said.

Fed policymakers are known to be concerned that the tax cuts and extra government spending Trump has demanded could overheat the economy and lead to a deep recession. Should that happen, the Fed will want to have substantial interest rates in place.

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Reuters  /  March 20, 2017

Navistar International Corp (NYSE:NAV) major shareholder Carl C. Icahn purchased 34,032 shares of the business’s stock in a transaction that occurred on Tuesday, March 14th. The stock was acquired at an average price of $25.77 per share, for a total transaction of $877,004.64.

The purchase was disclosed in a document filed with the SEC, which is accessible through this hyperlink.

Major shareholders that own 10% or more of a company’s shares are required to disclose their sales and purchases with the SEC.

Shares of Navistar International Corp (NYSE:NAV) opened at 27.49 on Monday. The firm’s market capitalization is $2.70 billion. Navistar International Corp has a 12 month low of $10.30 and a 12 month high of $33.46. The stock’s 50 day moving average price is $27.12 and its 200-day moving average price is $26.13.

Navistar last posted its earnings results on Tuesday, March 7th. The company reported ($0.76) EPS for the quarter, missing the Thomson Reuters’ consensus estimate of ($0.43) by $0.33. The business had revenue of $1.66 billion for the quarter, compared to analysts’ expectations of $1.72 billion. Navistar International Corp’s revenue was down 5.8% on a year-over-year basis. During the same quarter last year, the firm earned ($0.40) earnings per share. On average, equities analysts anticipate that Navistar International Corp will post ($0.13) earnings per share for the current fiscal year.

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Schneider National Goes Public With IPO Announcement

Heavy Duty Trucking  /  March 24, 2017

Schneider National Inc. announced on March 24 the launch of its initial public offering of 28,947,000 shares of Class B common stock at an anticipated price of $18-$20 per share.

At that price, the stocks will be worth around  $520 million to $580 million. Schneider is issuing and selling up to 16,842,000 shares and the selling shareholders named in the registration statement are selling up to 12,105,000 shares. The company’s Class B common stock has been approved for listing on the New York Stock Exchange under the symbol SNDR.

Schneider expects to grant the underwriters an option to purchase up to an additonal 4,342,000 shares of Class B common stock at the initial public offering price, less underwriting discounts and commissions, to cover any over-allotments.

The company will receive no proceeds from the sale of stock by the selling shareholders who consist mostly of members of the Schneider family and directors and executive officers of the company, according to the Milwaukee Business Journal,

Morgan Stanley, UBS Investment Bank and BofA Merrill Lynch are acting as active joint book-running managers of the proposed offering; Citigroup, Credit Suisse, J.P. Morgan, and Wells Fargo Securities are acting as passive joint book-running managers, and Baird and Wolfe Capital Markets and Advisory are acting as co-managers.

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"The meeting next week with China will be a very difficult one in that we can no longer have massive trade deficits and job losses. American companies must be prepared to look at other alternatives."

U.S. President Donald Trump  /  March 30, 2017

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Navistar's stock rockets after analyst upgrade on belief results, truck industry on verge of a bottom

Market Watch  /  June 5, 2017

Shares of Navistar International Corp. NAV, +12.82% ran up 9% in active midday trade Monday, after RW Baird turned bullish on the commercial and military truck and truck engine parts maker for the first time in at least 2 1/2 years.

Analyst David Leiker raised his rating to outperform, after being at neutral since at least September 2014.

"We believe Navistar is nearing the end of a half-decade transformation after a near-fatal decision to internally produce heavy-duty engines," Leiker wrote in a note to clients. "We believe the transformed Navistar is on the verge of driving higher volume, profit margins and earnings that could take the stock above $50 over the next several years."

Leiker said the company's efforts have helped stabilize market share and have improved profitability, just as he expects truck industry volumes to bottom this year.

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The $1.5 Trillion Business Tax Change Flying Under the Radar

The Wall Street Journal  /  June 25, 2017

Republicans looking to rewrite the U.S. tax code are taking aim at one of the foundations of modern finance -- the deduction that companies get for interest they pay on debt.

That deduction affects everyone from titans of Wall Street who load up on junk bonds to pay for multibillion-dollar corporate takeovers to wheat farmers in the Midwest looking to make ends meet before harvest. Yet a House Republican proposal to eliminate the deduction has gotten relatively little sustained public attention or lobbying pressure.

Thanks in part to the deduction, the U.S. financial system is heavily oriented toward debt, which is cheaper than equity financing and widely accessible. In 2015, U.S. businesses paid in all $1.3 trillion in gross interest, according to Commerce Department data, equal in magnitude to the total economic output of Australia.

Getting rid of the deduction for net interest expense, as House Republicans propose, would alter finance. It also would generate about $1.5 trillion in revenue for the government over a decade, according to the Tax Foundation, allowing for investment breaks and rate cuts elsewhere in the tax code.

The dollars at stake are even more than another controversial proposal being pushed by House Republicans known as border adjustment, which would tax imports and exempt exports. The border adjustment plan has been under attack from retailers and Republican senators, whose resistance has put it on the brink of failure. But the idea of eliminating or limiting the interest deduction has generated less vocal opposition, giving it a real chance of passage, perhaps in a scaled-back form.

"The overall goal is to be pro-growth. What we're proposing is to take the tax preference from the source of funds, borrowing, and take that preference to the use of funds, business investment and buildings, equipment, software, technology," Rep. Kevin Brady (R., Texas), the author of the plan, said at The Wall Street Journal CFO network this month.

In a world with no interest deduction, debt-fueled leveraged buyouts by private-equity titans could become more expensive to finance and junk bonds less appealing. "That's not necessarily bad for society," said David Beim, a retired finance professor at ColumbiaUniversity. "We have too much systemic financial risk in our economy."

But for some debt-reliant businesses the interest deduction's demise could be a significant blow. Crop growers who depend on bridge loans to work through seasonal business fluctuations could face higher tax bills for little benefit.

Andy Hill, who farms corn and soybeans on about 600 acres in north-central Iowa, said he pays less than $10,000 a year in interest on a line of credit between $100,000 and $200,000. That loan helps him bridge gaps between his expenses and his income, between when he needs to buy seed and fertilizer and when he sells his crops.

"[Losing the ability to deduct interest] wouldn't put me in the red by any stretch of the imagination, but it makes it very debilitating as far as household income," said Mr. Hill, who added that he has spoken to both of his senators and his House member about the issue.

Midsize businesses may also get squeezed.

"The people that utilize debt, they utilize it because they don't have the cash and they don't have the access to equity," said Robert Moskovitz, chief financial officer of Leaf Commercial Capital, which finances businesses' purchases of items like copiers and telephone systems. "A dry cleaner in Des Moines, Iowa? Where is he going to get equity? He can't do an IPO."

The idea behind the Republican plan is to pair the elimination of this deduction together with immediate deductions for investments in equipment and other long-lived assets. Party leaders expect the capital write-offs would encourage more investment and growth and greater worker productivity, but not the debt often associated with it.

From an accounting standpoint, the tradeoff could hurt companies' reported earnings because immediate expensing would just shift the timing of deductions and the loss of the interest deduction would be a permanent change.

Dennis Kelleher, chief financial officer of CF Industries Holdings Inc., a fertilizer manufacturer, said at a conference in May that the most important thing for the company would be a lower corporate tax rate.

"I don't think that's a good thing," he said of repealing the interest deduction. "I suspect that won't happen because it would be rather destabilizing, just to the capital markets generally."

Unlike border adjustment, the idea of accelerating investment write-offs has broad support from conservative groups, such as the National Taxpayers Union, and some support from Democrats, including Jason Furman, who was President Barack Obama's chief economist. It was a move in the opposite direction, toward longer depreciation schedules, that helped doom a Republican tax plan in 2014.

The tax code treats equity financing more harshly than debt. While interest is deductible, dividend payments typically aren't. Corporate profits can thus be subject to two layers of tax -- once at the business level and then when it goes to shareholders in the form of a dividend.

That means the effective marginal tax rate on equity-financed corporate investments is 34.5%, according to a report released by the Treasury Department this year in the waning days of the Obama administration. The corresponding rate for debt-financed investment is negative 5%. That subsidy for corporate debt "potentially creates a large tax-induced distortion in business decision making," the report says.

But borrowing and deducting interest are deeply ingrained in American corporate finance as a normal cost of doing business. Dislodging the traditional practice will be challenging. Some firms might look to borrow offshore instead to reap tax benefits elsewhere.

"I don't even think people think about it much," said Robert Pozen, a senior lecturer at MIT's Sloan School of Management. "It's clear that they're going to finance it by debt if they have a big acquisition or a big project."

Because so much is at stake for so many sectors, writing the law could get messy. Mr. Brady said small businesses and utilities could get exceptions or specialized rules, as would debt-financed purchases of land, which wouldn't be eligible for immediate investment write-offs.

The administration, including a president who proclaimed himself the "king of debt," has been wary of repealing the interest deduction but hasn't drawn a hard line. Treasury secretary Steven Mnuchin has said his preference is to keep it. Resistance could build among Republicans in Congress and among real-estate firms and the agriculture industry, which have formed a coalition to fight the proposal. Yet financial markets so far have registered little reaction to the prospect of the interest deduction going away. One reason: The tax change most likely would apply to new loans only.

Junk-rated bonds, issued by companies that typically carry a large amount of debt, have returned 4.6% this year -- better than the 4.3% returns of investment-grade bonds, according to Bloomberg Barclays data.

Without repealing the interest deduction, Republicans' hopes of providing full and immediate deductions for capital investment are dim. They probably wouldn't have enough money to offset the upfront fiscal cost of accelerating all those deductions.

The plus for the GOP is that this issue is more familiar and less black-and-white than the complex border adjustment plan. Limits on interest and accelerated write-offs could be dialed to a politically comfortable spot. If Republicans can't stomach full repeal of the interest deduction and immediate write-offs, they could try something short of that with, say, half of capital expenses being deductible and half of interest being deductible.

Andrea , head of global private investment research at Cambridge Associates, which advises institutions that invest in private equity, said the industry would survive a tax overhaul that removes the interest deduction.

"The effects will reverberate for sure," especially among larger firms that rely more on debt, she said. "But debt is still going to be cheaper than equity, so I don't think it's going away."

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Bill Gross warns of recession risk if highly levered economies hike rates

Reuters  /  July 20, 2017

NEW YORK - Highly levered domestic and global economies including the United States, which have "feasted" on easy monetary policies in recent years, cannot withstand a normalizing of short-term interest rates without running the risk of a recession, influential bond investor Bill Gross of Janus Henderson Investors warned on Thursday.

In his latest Investment Outlook, Gross, who runs the $2.1 billion Janus Henderson Global Unconstrained Bond Fund, said Federal Reserve Chair Janet Yellen and other global policy makers should not rely on historical models "in an era of extraordinary monetary policy.

"The adherence of Yellen, Bernanke, Draghi, and Kuroda, among others, to standard historical models such as the Taylor Rule and the Phillips curve has distorted capitalism as we once knew it, with unknown consequences lurking in the shadows of future years," Gross said.

He was referring to Yellen's predecessor at the Fed, Ben Bernanke, European Central Bank President Mario Draghi and Bank of Japan head Haruhiko Kuroda.

Economists John Taylor and A.W. Phillips devised models for guiding interest-rate policy based, respectively, on inflation and the unemployment rate. Those models disregard the importance of private credit in the economy, according to Gross.

Gross said that over the past 25 years, the three U.S. recessions in 1991, 2000 and 2007-2009 coincided nicely with a flat yield curve between three-month Treasury bills and 10-year Treasuries.

"Since the current spread of 80 basis points is far from the 'triggering' spread of 0, economists, and some Fed officials as well, believe a recession can be nowhere in sight," Gross said.

But monetary policy following the collapse of investment bank Lehman Brothers in 2008 has been abnormal, and global central banks "can’t seem to stop buying bonds, although as compulsive eaters and drinkers frequently promise, sobriety is just around the corner," he said.

Gross said most destructive leverage occurs at the short end of the yield curve as the cost of monthly interest payments increase significantly to debt holders.

"While governments and the U.S. Treasury can afford the additional expense, levered corporations and individuals in many cases cannot," he said.

Since the Great Recession, more highly levered corporations, and in many cases, indebted individuals with floating-rate student loans now exceeding $1 trillion, cannot cover the increased expense, resulting in reduced investment, consumption and ultimate default, Gross said.

"Commonsensically, a more highly levered economy is more growth sensitive to using short-term interest rates and a flat yield curve, which historically has coincided with the onset of a recession," he said.

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Volkswagen Acquires 158,026 Shares of Navistar Stock

Stock News Times  /  July 30, 2017

Navistar International Corporation (NYSE:NAV) major shareholder Truck & Bus Gmbh Volkswagen acquired 158,026 shares of the business’s stock in a transaction dated Wednesday, July 19th. The stock was purchased at an average price of $29.18 per share, for a total transaction of $4,611,198.68.

The purchase was disclosed in a document filed with the Securities & Exchange Commission, which is available at the SEC website.

Major shareholders that own at least 10% of a company’s shares are required to disclose their sales and purchases with the SEC.

Truck & Bus Gmbh Volkswagen also recently made the following trade(s):

• On Tuesday, July 25th, Truck & Bus Gmbh Volkswagen acquired 24,750 shares of Navistar International Corporation stock. The stock was purchased at an average price of $29.72 per share, for a total transaction of $735,570.00.

• On Monday, July 24th, Truck & Bus Gmbh Volkswagen acquired 106,262 shares of Navistar International Corporation stock. The stock was purchased at an average price of $29.28 per share, for a total transaction of $3,111,351.36.

• On Tuesday, July 18th, Truck & Bus Gmbh Volkswagen acquired 52,625 shares of Navistar International Corporation stock. The stock was purchased at an average price of $29.13 per share, for a total transaction of $1,532,966.25.

• On Monday, July 17th, Truck & Bus Gmbh Volkswagen acquired 43,501 shares of Navistar International Corporation stock. The stock was purchased at an average price of $29.25 per share, for a total transaction of $1,272,404.25.

Navistar traded down 0.23% during midday trading on Friday, reaching $30.52. The company’s stock had a trading volume of 329,569 shares. The firm’s market capitalization is $3.00 billion. Navistar International Corporation has a 52 week low of $11.59 and a 52 week high of $33.46. The stock has a 50 day moving average of $27.92 and a 200 day moving average of $27.05.

Navistar last posted its quarterly earnings data on Wednesday, June 7th. The company reported ($0.73) earnings per share for the quarter, missing the consensus estimate of ($0.08) by $0.65. The company had revenue of $2.10 billion during the quarter, compared to analyst estimates of $2.08 billion. During the same period in the previous year, the company earned $0.05 earnings per share. The business’s revenue was down 4.6% compared to the same quarter last year. On average, equities research analysts predict that Navistar International Corporation will post ($0.72) earnings per share for the current fiscal year.

Several institutional investors have recently bought and sold shares of NAV.

• FNY Partners Fund LP acquired a new position in Navistar during the first quarter valued at $123,000.
• Creative Planning boosted its position in Navistar International Corporation by 7.7% in the second quarter. Creative Planning now owns 5,464 shares of the company’s stock valued at $143,000 after buying an additional 389 shares in the last quarter.
• Guggenheim Capital LLC acquired a new position in Navistar during the fourth quarter valued at $206,000.
• Bank of Montreal Can boosted its position in Navistar by 88.5% in the second quarter. Bank of Montreal Can now owns 8,659 shares of the company’s stock valued at $228,000 after buying an additional 4,065 shares in the last quarter.
• Oppenheimer & Co. Inc. boosted its position in Navistar by 2.3% in the first quarter. Oppenheimer & Co. Inc. now owns 11,720 shares of the company’s stock valued at $289,000 after buying an additional 264 shares in the last quarter.

82.68% of Navistar stock is owned by institutional investors and hedge funds.

A number of equities analysts have recently commented on NAV shares.

• UBS AG restated a “neutral” rating and issued a $31.00 price objective (up from $29.00) on shares of Navistar in a report on Sunday, June 11th.
• Royal Bank Of Canada restated a “hold” rating and issued a $28.00 price objective on shares of Navistar in a report on Tuesday, May 9th.
• Seaport Global Securities reiterated a “neutral” rating on shares of Navistar in a report on Thursday, April 6th.
• Jefferies Group LLC reiterated a “buy” rating and set a $35.00 target price on shares of Navistar in a report on Friday, July 21st.
• BidaskClub upgraded Navistar International Corporation from a “sell” rating to a “hold” rating in a report on Thursday, July 6th.

Three research analysts have rated the stock with a sell rating, nine have assigned a hold rating and three have assigned a buy rating to the stock. The company currently has an average rating of “Hold” and a consensus target price of $27.31.

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Volkswagen Increases Stake in Navistar

Transport Topics  /  August 1, 2017

Volkswagen Truck & Bus, a unit of Volkswagen AG, has purchased nearly 300,000 additional shares of stock in Navistar International Corp., adding to its multimillion-share stake, according to Navistar’s filings in mid-July with the Securities and Exchange Commission.

The transactions — totaling 293,038 shares — occurred from July 17 through July 25, with prices listed in the filings at about $29 per share, Navistar reported.

On March 1, Navistar International Corp. and Volkswagen’s Truck & Bus division completed their alliance, announced last September, with the German automotive company acquiring 16.2 million common shares, or 16.6% of equity, and Navistar getting $256 million.

The value of the latest transactions amounts to about $8.5 million, according to the filings.

[kscarbel2]

What’s behind the Dow’s stunning rise to 22,000

The Washington Post  /  August 2, 2017

The Dow surged past the 22,000 mark Wednesday for the first time.

The Dow Jones industrial average closed above 22,000 Wednesday, setting a new record high in what has become one of its longest bull markets in history.

The extraordinary rise of the stock markets since early 2009 — when the Dow was a mere 7,063 — has greatly fattened the portfolios of American investors, especially the wealthiest ones. And it has played a role in boosting the political fortunes of President Trump who on Wednesday once again took credit for the markets’ performance.

The surprisingly persistent gains this year have come courtesy of robust profits at big companies, low interest rates, and a rare alignment of developed economies in good or improving health at the same time. So far, those have been more powerful forces on stocks than world events such as North Korean nuclear missile tests, Venezuela’s economic and political meltdown, or legislative gridlock in Washington.

The markets’ most recent run-up does indeed have something to do with Trump’s win in November, several analysts said. Back then, some on Wall Street cheered the ascent of a businessman into the White House and his promises to cut taxes, invest in infrastructure and increase military spending. The Dow turned sharply up right after the election and has risen 23 percent since then.

Some companies had more to gain from Trump’s pronouncements than others and saw their stocks jump, an effect Wall Street brokers call the “Trump Trade.”

Boeing, which generates much of its profits from its Defense, Space and Security division, has seen its shares soar more than 70 percent since Trump’s election. It has accounted for 45 percent of the Dow’s rise this year, far more than any of the other 29 companies in the index.

“We’ve picked up over $4 trillion of net worth in our country, our stocks, our companies,” Trump said at a White House event on immigration Wednesday. “The stock market hit the highest level that it has ever been and the country is doing very well.”

Since becoming president, Trump has taken credit for stock market gains he once dismissed. (Meg Kelly/The Washington Post)

By the late spring, a series of reports from prominent analysts showed Wall Street was growing skeptical of Trump’s pledges on taxes and infrastructure. But the markets kept marching higher. Stock analysts attribute this to a simple fact: Big corporations, such as Apple, McDonalds and Boeing — which lean heavily on overseas sales — continue to make a lot of money.

“The market has pretty much shrugged off Washington’s dysfunction,” said Chris Gaffney, president of World Markets at EverBank. “The larger story is about the return of the consumers both here in the states and in the emerging markets of China and India.”

A weakening dollar – an unusual trend during a bull market – has only helped boost earnings at big corporations because American goods have become cheaper to overseas customers and sales to those customers have greater value when they are converted into U.S. currency.

The effect of the dollar is “starting to show up in company earnings,” said Craig Birk, executive vice president of portfolio management at Personal Capital, a California investment firm with $4.9 billion under management. “It’s also provided some confidence that the strength we saw in [quarterly] earnings… can continue for the rest of the year. The dollar weakness has been pretty universal around the world. July was the fifth consecutive month of dollar declines.”

Yet not everyone has shared in the stock market’s stunning rise.

Nearly half of America has no money invested in the stock market, according to the Federal Reserve. And the rich are far more likely to own stocks than middle or working-class families, surveys show.

Eighty-nine percent of families with incomes over $100,000 have at least some money in the stock market compared to just 21 percent of households earning $30,000 or less, a recent Gallup survey found.

“Lot of people in America tragically aren’t participating in the stock market,” says Brad McMillan, chief investment officer at Commonwealth Financial Network, a financial advisory firm that works mainly with “Main Street” America.

Many ordinary investors are still sitting in the sidelines, missing out on one of the longest-running bull markets in American history because they are still scared from the financial crisis, McMillan added. Stock ownership before 2008 was 62 percent, Gallup found. Even after recent inflows, only 54 percent of Americans are invested now.

And most ordinary investors who are in the markets invest through mutual funds, retirement plans, or 529 college-savings plans. According to a 2016 paper by the Tax Policy Center, only 25 percent of Americans owned individual stocks in 2015.

Others worry that average investors have been pouring more money into the markets this year, with more than eight years of gains already passed.

Michael Farr, a Washington investment manager said the Dow’s 22,000 mark “should be celebrated. It heralds the success of the American economy.

“But,” he continued, “the individual investor should remember that the rule is buy low and sell high. This is not low. Market’s don’t say high forever. This will come down.”

The Dow’s record on Wednesday was its sixth consecutive record high.

Ed Yardeni of Yardeni Research called the most recent surge in stocks a “summertime lullaby” in a recent blog post.

“For stock investors, the living has been relatively easy since March 2009, when this great bull market started,” he said. “It would have been far easier if we all fell asleep since then and just woke up occasionally to make sure we were still getting rich.

“Now it seems that we are all getting lulled to sleep by the monotonous advance of stock prices,” Yardeni wrote. “ They just keep heading to new record highs with less and less volatility.”

[kscarbel2]

At the moment, the world is overflowing with political uncertainty.

Markets appear to have factored in more of the good news than the potential risks.

Unable to factor in one extreme outcome or another, the market has once more chosen to assume the status quo.

There are reasons to be concerned.

[TeamsterGrrrl]

I agree- look at the recent drop in car sales in the U.S. and an analysis's opinion that the market has flattened and won't see an upsurge until 2025 or so. Or consider Ford's new Cargo, built in Turkey and Brazil, both turbulent countries, especially Turkey. 

[kscarbel2]

The "deep state" that guides the markets has made a science of manipulating the ill-informed investing masses.

When one should be selling, they tell you to buy (e.g. Enron, all the way to the end).

When one should be buying bargains (e.g. Navistar - Jan 2016), they have most afraid to do so until the price has risen above bargain levels.

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Navistar International enters into a second amended and restated ABL credit agreement

Reuters  /  August 7, 2017

* On August 4, co-entered into a second amended and restated ABL credit agreement

* Amended agreement, among other things, reduces size of revolving credit facility to $125 million from $175 million

* Amended agreement also extends maturity date from May 18, 2018 to August 4, 2022

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Navistar tops Street 4Q forecasts

Associated Press  /  December 19, 2017

LISLE, Ill. - Navistar International Corp. (NAV) on Tuesday reported fiscal fourth-quarter net income of $135 million, after reporting a loss in the same period a year earlier.

The Lisle, Illinois-based company said it had profit of $1.36 per share. Earnings, adjusted for restructuring costs, were $1.43 per share.

The results exceeded Wall Street expectations. The average estimate of seven analysts surveyed by Zacks Investment Research was for earnings of 65 cents per share.

The truck and engine maker posted revenue of $2.6 billion in the period, which also beat Street forecasts. Six analysts surveyed by Zacks expected $2.32 billion.

For the year, the company reported net income of $30 million, or 32 cents per share, swinging to a profit in the period. Revenue was reported as $8.57 billion.

Navistar expects full-year revenue in the range of $9 billion to $9.5 billion.

Navistar shares have climbed 34 percent since the beginning of the year. The stock has climbed 44 percent in the last 12 months.

Video - https://www.cnbc.com/video/2017/12/19/navistar-ceo-2017-came-in-like-a-lamb-and-is-going-out-like-a-lion.html

 

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Navistar Posts Higher Results in Fourth Quarter, Fiscal Year

Transport Topics  /  December 19, 2017

CEO Troy Clarke Sees Momentum Carrying Into 2018

Navistar International Corp. reported net income and revenue rose in its fiscal-year fourth quarter and for the full year.

“Our 2017 was a breakthrough year, as we returned to profitability and grew our market share 1.5 points,” Navistar Chairman and CEO Troy Clarke said. “These results were driven by stronger sales, our steady investment in the industry’s newest product lineup, early results from our strategic alliance with Volkswagen Truck & Bus and our ongoing focus on cost.”

Quarterly net income for the period ended Oct. 31 was $135 million, or $1.36 per diluted share, compared with a net loss of $34 million, or 42 cents, in the 2016 period.

Revenues in the quarter increased 26% to $2.6 billion compared with fourth-quarter 2016. The revenue increase largely was driven by a 31% increase in the company’s Classes 6-8 trucks and bus segment volumes in the United States and Canada.

For the fiscal year, Navistar reported net income of $30 million or 32 cents versus a net loss of $97 million, or $1.19, for fiscal 2016.

Revenue for fiscal 2017 was up 6% to $8.6 billion, compared with $8.1 billion in fiscal 2016.

Navistar reported it finished 2017 strong across the board. During the quarter, the Lisle, Ill.-based company launched the International HV TM Series line of vocational trucks. The HV Series, in addition to the HX Series premium vocational truck lineup, now has the option of being powered by the International A26 engine. The company also announced plans for its next-generation powertrains with alliance partner Volkswagen Truck & Bus, including big bore diesel, as well as electric medium-duty and electric bus platforms launching as early as 2019.

“We think 2018 is shaping up to be one of the strongest industry years this decade, and we’re positioned to make it a breakout year for Navistar,” Clarke said.

[kscarbel2]

US Treasury Secretary Mnuchin backs weaker dollar in break with tradition

The Financial Times  /  January 23, 2018

Dollar falls nearly 1% against other major currencies after Treasury chief’s remarks

US Treasury secretary Steven Mnuchin has broken with tradition by declaring a weaker dollar is good for American trade in comments that have fuelled market speculation that Washington is seeking to depress the currency to boost the economy.

The dollar came under further pressure following the comments at a news conference on Mr Mnuchin’s arrival at the World Economic Forum in Davos on Wednesday, which represented a shift from previous US administrations where Treasury secretaries have resolutely extolled a strong dollar policy.

The index tracking the US currency against six peers fell to fresh three-year lows in early New York trading, down nearly 1 per cent to 89.26. The fall left it 2.6 per cent weaker over January, adding to a 10 per cent slide in 2017. Against the euro, the dollar was 0.75 per cent weaker at €0.81, a 2.8 per cent decline over January.

On the US dollar weakness in recent weeks, the Treasury secretary said: “The dollar is one of the most liquid markets. Where it is in the short term is not a concern for us at all.

“A weaker dollar is good for us as it relates to trade and opportunities. Longer term, the strength of the dollar is a reflection of the strength of the US economy and that it is, and will continue to be, the primary reserve currency.”

In an subsequent interview with the FT, Mr Mnuchin said his earlier comments were “completely consistent with what I’ve said before.” He insisted he had said many times that the dollar market is large, liquid and that it was a “factual statement” that a weaker dollar would help the US on trade in the short term.

Marc Chandler of Brown Brothers Harriman said: “While Mnuchin was only stating the obvious, Treasury secretaries since Robert Rubin have never deviated from the strong dollar mantra. That mantra has never really meant much, but to deviate from it suggests that US policymakers desire a weaker dollar.

“Rubin started this ‘policy’ after his predecessor Lloyd Bentsen used the exchange rate to pressure Japan into opening its markets. Mnuchin’s comments pack an even bigger punch coming after the US trade actions announced this week.”

Koon Chow, strategist at UBP, said that by welcoming the fall Mr Mnuchin was changing the market perception “on the policy bias, which clearly invites more depreciation”.

Mr Mnuchin brought an uncompromising message that the Trump administration’s America First policies, which include a more protectionist attitude towards trade, were good for the US and the rest of the world.

His words, ahead of president Donald Trump’s speech at the forum on Friday, marked the arrival of a huge US delegation to Davos with 10 cabinet members present, which is intended to show American strength and what the Treasury secretary called the “success that we’ve had in the first year under President Trump of the economic programme”.

Mr Mnuchin said: “This is about an America First agenda, but America First does mean America working with the rest of the world.”

He added: “What’s good for the US is what’s good for the rest of the world given we are one of the largest trading partners for the world, one of the largest investment opportunities . . . We are open for business.”

Wilbur Ross, the US commerce secretary who shared the platform with Mr Mnuchin, took a characteristically tough line on the trading policies of other countries including China, the day after the US imposed higher tariffs on washing machines and solar panels.

Mr Ross said: “Trade wars are fought every single day . . . And, unfortunately, every single day there are also various parties violating the rules and trying to take unfair advantage. So trade wars have been in place for quite a little while; the difference is the US troops are now coming to the ramparts.”

The commerce secretary criticised European finance ministers who have complained that aspects of the Trump administration’s corporate tax plans are anti-competitive and violate international rules. “You may have noticed that both the French and German finance ministers were raising the question about whether our new lower tax rates for corporations were actually trade barriers. That’s a funny concept that someone would complain about a tax reduction is somehow impeding trade.”

In conciliatory remarks, Mr Mnuchin said he was working with his European counterparts to resolve disputes over some details in the tax plan but not the overall tax rates.

He promised there would be more trade actions to come and said decisions were pending in the fields of intellectual property, steel and aluminium. “What has provoked a lot of the trade actions is inappropriate behaviour of our trading counterparts. Many countries are good at the rhetoric of free trade, but in fact actually practise extreme protectionism,” he said.

In a swipe at Justin Trudeau, the Canadian prime minister who at Davos on Tuesday urged a successful renegotiation of Nafta, Mr Mnuchin said the US needed to ensure its opportunities were equal to those of Mexico and Canada. He criticised Mr Trudeau for using the platform at Davos “to put a little pressure on the US in the Nafta talks”.

The tough US stance met with a robust response from China at the World Economic Forum. Liu He, who is President Xi Jinping’s most trusted economic adviser, reiterated his country’s “firm support” for economic globalisation.

“China has stood firm against all forms of protectionism,” he said in his speech as he praised “initiatives to increase imports” and China’s declared willingness to protect intellectual property.

Mr Liu stressed that China was seeking to open up the financial sector, manufacturing and some services, this year to mark the 40th anniversary of its economic reform programme. But he insisted the country would not act alone. “Opening up is not only for China but also for the whole world. Let’s advance economic globalisation together.”

[kscarbel2]

Cummins, Dana and WABCO all set new 52-week lows today.

http://www.wsj.com/mdc/public/page/2_3021-newhinyse-newhighs.html

 

[kscarbel2]

Since June 22, Cummins, Dana and WABCO have been posting new 52-week lows almost daily, as they did today.

Today, both Paccar and Tenneco posted new 52-week lows.

[Maxidyne]

The market is getting nervous about Trump's tariffs, and for good reason- in today's interdependent world, no matter where a vehicle is built, it'll be saddled with a heap of tariffs!

[kscarbel2]

IHS Markit upgrades Navistar (NAV).

https://api.markitondemand.com/apiman-gateway/MOD/markit-view-report/1.0/documents/209420/full-report?version=20180712

[kscarbel2]

Moody's assigns Ba3 rating to Navistar Financial's $400 million secured term loan; Navistar International's ratings are unaffected. Outlook is positive

12 July 2018

New York, July 12, 2018 -- Moody's Investors Service ("Moody's") assigned a Ba3 rating to the secured $400 million term loan of Navistar Financial Corporation (NFC). Proceeds will be used to fund a $150 million distribution to NFC affiliates and to repay outstanding debt. Prior to this assignment, NFC's debt was unrated by Moody's. The ratings of NFC's parent, Navistar International Corporation (Navistar), are unaffected and remain at: Corporate Family Rating (CFR) -- B3; senior subordinated -- Caa2; senior unsecured -- Caa1; secured term loan (issued by Navistar, Inc.) -- Ba3; and, Speculative Grade Liquidity rating -- SGL-3. The outlook for Navistar and NFC is positive.

RATINGS RATIONALE

The Ba3 rating of NFC's term loan reflects the high quality of the company's receivable portfolio, and the considerable coverage that the resulting security package affords to the obligations. NFC's principal function is providing wholesale floor plan financing to Navistar's dealer network. For the second quarter ending April 30, 2018, NFC had $1.6 billion of total assets that consists principally of wholesale receivables. This portfolio has maintained very modest levels of past due accounts and charge-offs through the 2009 financial crisis and the 2016 decline in the North American truck market. This sound portfolio quality is supported by the strength of Navistar's dealer network which generates the majority of its profits through the sale of parts and services. In addition, dealers commonly take wholesale delivery of trucks from Navistar based on the existence of firm customer orders.

NFC's strong receivable portfolio affords adequate asset coverage for the $400 million term loan even after giving consideration for the company's approximately $900 million in asset-backed securities (ABS).

NFC's principal liquidity source is the pro forma availability of $230 million under a $269 million revolving credit facility. This facility provides weak liquidity coverage for the approximately $750 million in ABS that mature over the coming twelve months. Although these maturing obligations are self-liquidating and pose no default risk for NFC, the company requires ongoing sources of new capital in order to maintain the size of its portfolio and thereby fund new wholesale loans to dealers. The high quality of NFC's receivable portfolio facilitates its ability to access the ABS markets and thereby raise new capital as needed. Nevertheless, we view the NFC's liquidity position as weak.

The positive outlook for Navistar and NFC reflects the parent company's prospects for continuing to strengthen its credit metrics based on: 1) the renewal of its truck and bus portfolio; 2) the resulting growth in market share; and 3) the improved demand conditions for medium and heavy duty trucks in North America. The outlook is also supported by the strategic ties between Navistar and Volkswagen Truck and Bus (VWT&B) which has taken a 16.9% ownership position in Navistar.

There is a close strategic and operating relationship between Navistar and NFC, that includes a modest support agreement from the parent for the benefit of the finance operation. The agreement requires Navistar to maintain NFC's fixed charge coverage at no less than 1.25x; no payments from Navistar have been required during any of the past three years. In addition to this business and financial relationship, there are also cross default provisions in Navistar's and NFC's term loans. As a result of these factors, Navistar and NFC have equivalent levels of risk with respect to probability of default. This probability of default risk is reflected in the B3 CFR that covers both Navistar and NFC. However, the Ba3 rating of NFC's $400 million secured term loan reflects the asset coverage and recovery prospects afforded by the finance company's receivable portfolio. Conversely, the Ba3 rating of Navistar's secured $1.6 billion term loan reflects the capital structure and asset value of the manufacturing operations. NFC's Ba3 secured term loan rating is not pegged to or driven by the rating level of Navistar's secured term loan. Consequently, the ratings of these two obligations could diverge in the future.

The ratings of NFC and Navistar could be upgraded if Navistar continues to demonstrate a positive trend in earnings improvement and market share. Continued progress towards NAFTA negotiations that do not result in any significant additional burden to the company's cost position or competitiveness will help support an upgrade. Metrics that would support an upgrade include an ability to sustain an EBITA margin exceeding 4.5% and achieve EBITA/interest above 2x.

The rating could be lowered if there were material reversals in any of the key areas in which Navistar has been making progress including: market share, warranty costs, used truck inventory. An EBITA margin below 2.5% or an erosion in the liquidity position could contribute to a downgrade.

[kscarbel2]

A bubble by the rich, for the rich

Keris Lahiff, CNBC  /  July 16, 2018

Look to the stock market and you’d assume Wall Street was doing just fine. The S&P 500 has come back to March highs, the Dow is back to positive for 2018, and the Nasdaq is at fresh records.

It’s all built on shaky foundations, said longtime market bear and former Republican Congressman Ron Paul.

This market is in the “biggest bubble in the history of mankind,” and when it bursts, it could cut the stock market in half, he told CNBC’s “Futures Now” Thursday. 

“I see trouble ahead, and it originates with too much debt, too much spending,” Paul said.

This isn’t the first time Paul has made such dire warnings. During a “Futures Now” appearance in August 2017, he predicted a 50 percent drop in the market, a call he has doubled down on a number of times since. Since that appearance, the S&P 500 has rallied 15 percent.

Paul belongs to the Libertarian Party, a faction that emphasizes constrained government spending. He sees federal spending and monetary policy as dual forces inflating a market bubble.

“The Congress spending and the Federal Reserve manipulation of monetary policy and interest rates — debt is too big, the current account is in bad shape, foreign debt is bad and it’s not going to change,” he said.

Paul isn’t alone in his critique. A number of politicians have voiced concern over ballooning deficits, including current House Speaker Paul Ryan, who raised a warning on the nation’s debt in 2012.

The Congressional Budget Office estimates that federal deficits will average $1.2 trillion a year from 2019 to 2028, according to its April economic outlook. Its 2018 deficit estimates rose by $242 billion over previous forecasts made in June 2017. The federal agency said the revision was mainly owing to lower projected revenues tied to tax reform.

To Paul the decision-making arm of the Fed is equally at fault in creating a market bubble.

“The Fed will keep inflating, and that distorts things,” Paul continued. “Now they’re trying to unwind their balance sheet. I don’t think they’re going to get real far on that.”

The Fed is more than two years into its rate-hiking cycle. In conjunction with rate hikes, the Fed is also unloading assets from its balance sheet, which expanded to $4.5 trillion during its post-financial crisis quantitative-easing program.

Paul is not confident much will change to divert from the disaster he predicts.

“The government will keep spending, and the Fed will keep inflating, and that distorts things,” said Paul. “When you get into a situation like this, the debt has to be eliminated. You have to liquidate the debt and the malinvestment.”

Paul reiterated his call on Thursday for a potential 50 percent sell-off on the stock market.

[kscarbel2]

Carpocalypse descends on Detroit after nightmare day of earnings

David Welch, Bloomberg  /  July 26, 2018

DETROIT -- It felt so 2009.

First, General Motors and Fiat Chrysler Automobiles reported weak earnings, with both reining in profit forecasts for the year. That sparked sharp sell-offs of their stocks.

Then it really got ugly. Ford Motor Co. took the stage and projected $11 billion in charges linked to a restructuring plan that will take as long as five years to play out. The already-struggling company that had touted plans to cut $25.5 billion in costs in the coming years left analysts wanting more detail and subjecting CEO Jim Hackett to harsh questioning.

Not since the financial crisis and Carpocalypse have Detroit automakers had so much bad news in one day.

To be clear, all of the companies are solidly profitable and nowhere near the edge of survival like they were in 2009. But what made the headlines all the more confounding was that the downbeat results and outlook came at a time when the U.S. auto market is solid, the economy is humming and China is buying more cars every month.

“To have a quarter like this is striking,” said James Albertine, an auto equities analyst with Consumer Edge Research. “Every time they turn over a rock, they find more problems.”

GM’s profit issues were mostly caused by external forces, namely President Donald Trump’s steel and aluminum tariffs and depressed currencies in Argentina and Brazil. Fiat Chrysler will have to sort out slumping sales in China under a new CEO after the death of Sergio Marchionne announced early Wednesday. And Ford’s problems stem from bloat and stale models.

Ford’s China woes

Ford missed estimates by posting adjusted profit of 27 cents a share, less than half what it earned on that basis a year earlier. The company said it will make between $1.30 and $1.50 a share instead of as much as $1.70. It lost a combined $467 million in Asia and Europe in the second quarter.

In China -- still a reliable source of growth for many other major automakers -- Ford’s sales fell by 25 percent in the first half. Beijing’s retaliatory tariffs against the U.S. that include higher levies on cars will cost the company $200 million to $300 million this year, Chief Financial Officer Bob Shanks said.

Ford’s problems in the market are manifold: models including the Focus and Escort cars are old and will be replaced late this year and into 2019. Its dealers aren’t making adequate profits, burdened by a glut of sedan inventory and not enough crossovers or SUVs.

Cagey call

The company has other deep structural issues. On its earnings call, analysts asked for more detail on the costly and protracted restructuring, and Hackett gave little clarity. The company also said that it will postpone an investor meeting that had been set for September, saying it would be rescheduled for when it had more specifics to share.

That sparked a tense exchange with Morgan Stanley analyst Adam Jonas, who criticized Hackett and Shanks for the lack of communication. “I really do hope you can reconsider the communications strategy, because it’s just not good enough, Bob,” Jonas said.

The stock sank below $10 a share in after-hours trading, a level it hasn’t closed at since 2012, when former CEO Alan Mulally was still restructuring the company.

Jeep’s China struggles

Fiat Chrysler isn’t in nearly the bind Ford is, but new CEO Mike Manley has plenty of problems, too. The much-heralded Jeep brand hasn’t caught on in China -- a key element of the growth strategy laid out only a matter of weeks ago.

The redesigned Jeep Compass that’s been a hit in the U.S. has struggled going up against local Chinese brands that are on the ascent in the countries mass market segments.

As a result, the company’s Asian operations lost 98 million euros ($115 million) in the second quarter. Its luxury brand Maserati also slumped as customers waited for a July duty reduction to take delivery of Levante SUVs. Fiat Chrysler’s U.S.-listed shares plunged 12 percent, their worst one-day drop since June 2016.

Hard luck

GM is telling more of a hard-luck story. Trump’s steel and aluminum tariffs have driven up metals prices and contributed to commodities adding $300 million to costs in the quarter and $500 million in the first half. The company had been expecting that sort of a headwind for the whole year. Instead, it’s now seeing about a $1 billion blow to annual earnings.

Add in a $100 million hit from devalued Argentine peso and Brazilian real and GM had to lower its forecast for adjusted earnings to $6 a share. The company had been expecting to make as much as $6.50.

GM has new pickups going on sale next month, though they won’t be available in substantial supply until the fourth quarter. And while the China market is getting tough, GM is growing luxury sales with Cadillac and its local Baojun brand is winning over the nation’s new middle class.

Don’t want to hear it

But investors may not be interested in hearing the company make its case for a while, said Morningstar Inc. analyst David Whiston.

“It was a really bad day,” Whiston said. “There are a lot of factors beyond their control. In addition to all of that, we’re at the top of the auto cycle and investors just aren’t interested.”

Indeed, Ford’s stock “will be in purgatory for some time,” Albertine said.

In what was perhaps a sign of just how fed up Wall Street was by the end of the day, the first questioner on Ford’s Wednesday evening earnings call was Jonas, who asked whether Hackett expected to still be in the job once the company is ready to have its investor day.

“Hell yes, I expect to be in front of everybody declaring where we’re going and what we want to get done,” Hackett responded. “There should be zero question around that.”

.

[Maxidyne]

They all need to quit wasting billions on fringe market electric and self driving cars and get back to building cars and trucks that customers actually want to buy!