Tag: finance

Moments ago JCP did what it does best: released results that missed expectations, with Revenues in the traditionally strongest, holiday (Q4) quarter of $3.78 billion below the $3.86 billion expected, and comp sales up 2.0% below the 2.1% expected. Additionally, the company’s profit margin was 28.4%, the second lowest in recent history, and only better than the 23.8% posted a year ago when the company was openly imploding. But the red flag was Free Cash Flow, driven entirely by inventory liquidation, was $246 million: the lowest such amount for the holiday quarter also in history. Whether or not this miss was not quite as bad as a worst case miss could be, whatever that means, is unclear but for now the traditional post-earning squeeze has pushed the stock higher. How long this particular squeeze persists is unclear, but likely depends on the longer-term viability of the company, and recent trends. To determine what these are, here are some charts showing how the company has performed in recent years.

First, here is JCP’s all important Free Cash Flow. While in Q4 JCP generated a little over $200 million in cash, it is the next three quarters that matter, as this is when the company burned the bulk of its cash. As a reference point: last year, in the Q1-Q3 period, JCP burned $3 billion.

 

JCP better not intend on burning $3 billion this year too. Why? Because as it reported, it expects its liquidity “to be in excess of $2 billion at year-end.” Really? How? Because that inventory build and $2-3 billion cash need will hardly grow on trees.

Next, we look at revenue: while this missed as we noted above, it was the only bright spot in the earnings report – the good news: it wasn’t an all out crash, even if like FCF, it was the lowest revenue for the holiday quarter in recent history.

 

Next, and perhaps most troubling, was the reason for the company’s subar free cash flow creation: in a nutshell, the company did not sell nearly enough inventory in the quarter. As the following chart shows, JCP liquidated, and thus generated “only” $812 million in inventory cash in the quarter: in prior years this number was always greater than $1 billion. This likely means even greater mark downs in coming quarters as JCP scrambles to dump even staler products.

 

Last and almost least, was JCP’s profit margin in the quarter. Surprisingly, it was a substantial 28.4%. Why? See the chart above – the company opted to not liquidate stale inventory and pull  margins down even lower. This was “good” for the profit margin, but bad for cash flow creation, and even worse for future quarter margins.

Finally, the cherry on top in the newsflow had nothing to do with JCP per se, but with the SEC: as readers will recall, it was back on September 26 when the company announced on CNBC it would not do a follow on offering only to announce, a few hours later, that it was doing precisely such a follow on equity offering. We were disgusted and appalled. We are more disgusted and appalled by the SEC which has announced the following:

• J C PENNEY: SEC NOT RECOMMENDING ACTION
• J C PENNEY: SEC NOTICE SAID AGENCY CONCLUDED INVESTIGATION

And that, in a nutshell, is all you need to know about our criminal markets.

via Zero Hedge http://ift.tt/1kj6Eua Tyler Durden

Tesla has just announced it intends to issue a $1.6 billion convertible note offering "for the development of a "Gigafactory" and a "Gen III" vehicle." While not that unusual – and of course, why not take advantage of low cost financing and a surging momentum in your stock – what we did find at least intriguing was the underwriters included Morgan Stanley. This is the same firm (though we would be very sure that Chinese walls ensured total lack of knowledge) that doubled their price target (from $153 to $320) for TSLA yesterday (following the analyst's now almost clairvoyant questions during the earnings conference call). Paging Henry Blodgett?

Four things jump out at us…

1. During the recent conference call, MS analyst Adam Jonas seems to be advancing the idea of a capital raising for this battery factory on the behalf of Musk, who just agrees with the concept…

Adam Jonas: Elon, the stock price and the results have been obviously performing very well lately. You’ve got some great investment opportunities and some growth opportunities ahead of you, not only in the auto business but also in the non-auto business and the battery business. So I’m just wondering, how are you thinking about being opportunistic and pulling in some fresh capital to help derisk the plan, plan for a force majeure, or to see some of these opportunities that you have.

 

Elon Musk: Yes, I think that’s a good idea. I agree with that. I think that would be the smart move. We can talk more about that next week with — and also discuss the Gigafactory plans. Unfortunately, I can’t say anything [indiscernible] right now, except that I agree. I think your advice is good.

 

Adam Jonas: Okay. And I don’t want to follow up [ph] or anything, but as a follow-up to that, I guess, is a — would a capital raising be a prerequisite to launch the Gigafactory? Or is that an understatement?

 

Elon Musk: I think it’s necessary to have it occur in 3 years. It’s not necessary if we allow that time frame to expand.

2. Morgan Stanley raises their price target for TSLA by over 100%

January 25: Raising our price target to $320 from $153 previously.

We understand the change to our fair valuation of TSLA shares is significant – more than $13bn on a fully diluted share count of 142m.

 

This magnitude of value attribution is equivalent to an additional $1.7bn of after tax free cash flow by 2020, growing at 5% with a 12% discount rate. A $1.7bn NOPAT number is enormous within the scope of Tesla’s existing business path (our current forecasts call for $0.8bn of net income by 2015 and $2.1bn by 2020).

 

However, from the perspective of a global auto industry (>100 million annual unit sales and >$2 trillion of revenues by 2020) or a global electric utility industry (0.7 billion households combined in US + Europe + China out of households 1.4 billion globally) it is a tiny number. Our previous forecast of 500k complete TSLA vehicles by 2028 would account for 40bps of global market share.

 

Successful? Yes. Disruptive? Not really at all.

3. Day after Stock soars $60, Morgan Stanley underwrites a huge convertible note issue for TSLA (implicitly reducing an dilution via the stock ramp).

Tesla announced today an offering of $1.6 billion aggregate principal amount of convertible senior notes in an underwritten registered public offering. Of the total offering, Tesla will offer $800 million aggregate principal amount of convertible senior notes due 2019 and $800 million aggregate principal amount of convertible senior notes due 2021. In addition, Tesla intends to grant the underwriters a 30-day option to purchase up to an additional $120 million in aggregate principal amount of convertible senior notes due 2019 and an additional $120 million in aggregate principal amount of convertible senior notes due 2021, for a total potential offering size of up to $1.84 billion.

…

Goldman, Sachs & Co., Morgan Stanley, J.P. Morgan and Deutsche Bank Securities are acting as joint book-running managers for the offering.
 

and 4. In the disclosures, of course, Morgan Stanley admitted it would seek compensation from Tesla (which it did)…

In the next 3 months, Morgan Stanley expects to receive or intends to seek compensation for investment banking services from Autoliv, Avis Budget Group Inc, BorgWarner Inc., Dana Holding Corp., Delphi Automotive PLC, Ford Motor Company, General Motors Company, Goodyear Tire & Rubber Company, Hertz Global Holdings Inc, Johnson Controls, Inc., Lear Corporation, Magna International Inc., Tenneco Inc., Tesla Motors Inc., TRW Automotive Holdings Corp.

As long as CNBC (and everyone else in the status quo hugging mainstream media) keeps pumping every word from the sell-side as gospel, this will never end…

While we are sure this is a mere coincidence and that sell-side research which absolutely cannot pay its own way has learned its lessons, as one smart chap wrote us…

This is exactly the modus operandi of the dot-com analysts: roping retail investors in at higher and higher levels while the companies concerned massively diluted shareholders leading to an implosion… I cant remember a time apart from Dotcom where price targets were jacked up in this way right before a capital raising.

via Zero Hedge http://ift.tt/1kj6B1u Tyler Durden

Shorts were well-and-truly squeezed this morning providing (yet again) just enough ammo to push the S&P back into the green for 2014 and the Russell to new record highs as the pump-and-dump we noted earlier continued for the 3rd day. However, soon after Europe closed, the fabulous five (TSLA, AMZN, FB, AMZN, and TWTR) all stopped levitating and stocks began to drop back to JPY's reality once again. Treasuries continue to rally (-6bps on the week) to 2-week low yields (leaving stocks disconnected) and while early (and considerable) USD strength faded in the afternoon, the USD index ends up 0.2% on the week (with EUR weakness leading). Gold and Silver were monkey-hammered early on but the former recovered some of its losses to end +0.35% for the week so far. While stocks ended unchanged-ish, VIX (following last night's epiuc WTF moment) rose to 14.4% and credit spreads closed wider on the day.

 

"most shorted" were smashed higher out of the gate but faded fast this afternoon…

 

The fabulous five opened strong but faded soon after Europe closed…

 

Another day, another pump-and-dump…

 

Which left the S&P red for 2014 once again…

 

Treasuries continue to rally, notably disconncted from stocks

 

The USD soared early on but gave some back as the US session stretched on…

 

Credit markets were less exuberant than stocks once again…

 

Gold and Silver suffered as the USD surged but gold recovered some of its losses… notice the PM selling started when Europe opened and finished when Europe closed…

 

Charts: Bloomberg

via Zero Hedge http://ift.tt/1ex4xOe Tyler Durden

The report that the FBI had a human resource in direct contact with Bin Laden in 1993 – and covered it up and hid it from the 9/11 Commission and Congress – is newsworthy.  See Washington Times' report and NBC News coverage.

But that's just the tip of the iceberg:

• Top American officials admit that the U.S. armed and supported Bin Laden and the other Mujahadin – which later morphed into Al Qaeda – in the 1970s, in order to fight the Soviets

• The mainstream French paper Le Figaro alleged that the CIA met with Bin Laden himself 2 months before 9/11

• An FBI informant hosted and rented a room to two hijackers in 2000. Specifically, the Congressional Joint Inquiry discovered that an FBI informant had hosted and even rented a room to two hijackers in 2000. And see this Newsweek article and this New York Times report

• According to the large French newspaper Le Monde, the intelligence services of America’s close ally France and of other governments had infiltrated the highest levels of Al-Qaeda’s camps, and actually listened to the hijackers’ debates about which airlines’ planes should be hijacked, and allied intelligence services also intercepted phone conversations between Al-Qaeda members regarding the attacks

• According to reports from Bloomberg, an ABC News investigative reporter and others, one of the main trainers of Bin Laden and Al Qaeda worked at various times for the  CIA, FBI and Green Berets

• A high-level military intelligence officer says that his unit – tasked with tracking Bin Laden prior to 9/11 – was pulled off the task, and their warnings that the World Trade Center and Pentagon were being targeted were ignored

• Several key employees for the defense department say that the government covered up their testimony about tracking Mohammed Atta before 9/11

• The National Security Agency and the FBI were each independently listening in on the phone calls between the supposed mastermind of the attacks and the lead hijacker. Indeed, the FBI built its own antenna in Madagascar specifically to listen in on the mastermind’s phone calls

• According to various sources, on the day before 9/11, the mastermind told the lead hijacker “tomorrow is zero hour” and gave final approval for the attacks. The NSA intercepted the message that day and the FBI was likely also monitoring the mastermind’s phone calls

• Shortly before 9/11, the NSA also intercepted multiple phone calls to the United States from Bin Laden’s chief of operations

• The CIA and the NSA had been intercepting phone calls by the hijackers for years (see also this)

• According to the Sunday Herald, two days before 9/11, Bin Laden called his stepmother and told her “In two days, you’re going to hear big news and you’re not going to hear from me for a while.” U.S. officials later told CNN that “in recent years they’ve been able to monitor some of bin Laden’s telephone communications with his [step]mother. Bin Laden at the time was using a satellite telephone, and the signals were intercepted and sometimes recorded.” Indeed, before 9/11, to impress important visitors, NSA analysts would occasionally play audio tapes of bin Laden talking to his stepmother.

• And according to CBS News, at 9:53 a.m on 9/11, just 15 minutes after the hijacked plane had hit the Pentagon, “the National Security Agency, which monitors communications worldwide, intercepted a phone call from one of Osama bin Laden’s operatives in Afghanistan to a phone number in the former Soviet Republic of Georgia”, and secretary of Defense Rumsfeld learned about the intercepted phone call in real-time (if the NSA monitored and transcribed phone calls in real-time on 9/11, that implies that it did so in the months leading up to 9/11 as well)

Indeed, former counter-terrorism boss Richard Clarke theorizes that top CIA brass tried to recruit the hijackers and turn them to our side, but were unsuccessful. And – when they realized had failed – they covered up their tracks so that the FBI would not investigate their illegal CIA activities , “malfeasance and misfeasance”, on U.S. soil.

And former FBI translator Sibel Edmonds – deemed credible by the Department of Justice’s Inspector General, several senators (free subscription required), and a coalition of prominent conservative and liberal groups –  alleges that the U.S. worked with Bin Laden right up to 9/11 … and for months afterwards.

Whether or not she's right, it's indisputable that 9/11 was entirely foreseeable … as was Al Qaeda flying airplanes into the World Trade Center and Pentagon.

As is the fact that the U.S. has backed the world's most dangerous and radical Muslim terrorists for decades.

via Zero Hedge http://ift.tt/1hhxTFA George Washington

Having threatened Russia that “any military move would be a grave mistake” and sounding awefully like a “line” to be crossed, US Secretary of State John Kerry told reporters that the US is ready to bail out Ukraine…

• *KERRY: RUSSIA MILITARY MOVE ON UKRAINE WOULD BE GRAVE MISTAKE
• *KERRY SAYS U.S. PLANNING $1 BLN LOAN GUARANTEE FOR UKRAINE
• *KERRY SAYS U.S. WORKING WITH IMF, OTHERS ON AID TO UKRAINE

One has to wonder how many US jobs this will create (or save)? Or will Ukraine offer unlimited vodka to citizens of Detroit (or Puerto Rico for that matter)?

 

As Reuters headlines show:

• U.S. CONSIDERING UNSPECIFIED BUDGET SUPPORT FOR UKRAINE ON TOP OF POSSIBLE $1 BILLION LOAN GUARANTEE – KERRY
• KERRY SAYS POSSIBLE MILITARY INTERVENTION BY RUSSIA IN UKRAINE WOULD BE A COSTLY DECISION, GIVES NO DETAILS

Via AP,

Secretary of State John Kerry says the United States is planning to provide Ukraine with $1 billion in loan guarantees and will consider additional direct assistance to the former Soviet republic.

 

Speaking to reporters at the State Department on Wednesday, Kerry said it was “urgent to move forward” in assisting Ukraine following the ouster of its Russian-backed president. But he said it was also urgent for Ukraine’s interim authorities to enact reforms, curb corruption, and prepare free and fair elections.

 

The U.S. aid would be part of a planned massive international assistance package that was expected to include European contributions as well as loans from global financial institutions.

via Zero Hedge http://ift.tt/1hhxTFi Tyler Durden

The TOTUS is at it again, creating more jobs and repaving old freeways on paper, as transcribed by the president… but why bother? The US is so fixed, America is now issuing bailout loans to the Ukraine.

via Zero Hedge http://ift.tt/1jB0N3q Tyler Durden

Study: Online Content Creators Outnumber Consumers 2,000 To 1

WASHINGTON — According to a study published Monday by the U.S. Bureau of Labor Statistics, for every person who reads, listens to, or watches some form of media on the internet, there are approximately 2,000 individuals engaged in creating new online content.

“In terms of web-based entertainment, journalism, and personal opinion pieces, creators now outnumber consumers by a factor of several hundred thousand percent—meaning that for every one viewer, there are dozens of fully staffed companies churning out articles, videos, blogs, vlogs, and countless social media posts hoping to lure that person to click,” said bureau commissioner Erica Groshen, adding that during each minute of online video streamed by a consumer, another whole lifetime’s worth of video content is uploaded.

“Furthermore, our analysis found that the massive increase in internet usage over the past two decades was due almost entirely to people going online to publish text or images they themselves had produced and then repeatedly hitting the refresh button to see if anyone else has looked at their work.”

Reports later confirmed that the six people who worked on this article are the only ones currently reading it.

Source: The Onion

via Zero Hedge http://ift.tt/1kiCo2y Tyler Durden

When a hypertotalitarian banana republic takes another turn for the gigasurreal, even Elon Musk is speechless.

In the most glaring example of how farcical idiocy has become the new normal, we will remind readers (especially those who do not follow us on twitter), of the following blurb from last night:

Obama Weighs Four Options for Revamping NSA Surveillance – WSJ. Will pick the fifth one that makes it even bigger

— zerohedge (@zerohedge) February 26, 2014

Sure enough, this attempt at comedy has just failed once more, as less than 24 hours later, it describes an increasingly surreal reality. Just out from the WSJ:

The Obama administration has asked a special court for approval to hold onto National Security Agency phone records for a longer period–an unintended consequence of lawsuits seeking to stop the phone-surveillance program.

 

The Wall Street Journal reported last week that the Justice Department was considering such a move, which would end up expanding the controversial phone records database by not deleting older call records.

 

Under the current system, the database is purged of phone records more than five years old. The Justice Department, in a filing made public Wednesday, said it needs to hold onto the older records as evidence in lawsuits brought by the American Civil Liberties Union, Electronic Frontier Foundation, and others.

 

Under the proposal made to the Foreign Intelligence Surveillance Court, the older data would continue to be held, but NSA analysts would not be allowed to search it.

The gruesome irony of course is that after his so heartfelt, if completely scripted and rehearsed, appearance before the US public one month ago, when Obama promised he would do everything in his power to reform the NSA, including the ending of the Section 215 metadata collection, and the retenion of bulk phone records, the president certainly kept his promise. Just not quite in the way that everyone had assumed.

via Zero Hedge http://ift.tt/1kiy3fA Tyler Durden

Submitted by Mike Krieger of Liberty Blitzkrieg blog,

Just in case you thought for a second that the sorry discipline we call economics couldn’t stoop any further into the gutter of academic idiocy and irrelevance, think again. It’s now being reported that ex-Goldman Sachs trader Fabrice “Fabulous Fab” Tourre (recently convicted on six counts of securities fraud) will be teaching an honors economics class at the “prestigious” University of Chicago.

There’s nothing like an esteemed University setting the already culturally accepted example that ethics are for suckers. Stealing, cheating and corruption are the values most exalted in today’s world. It doesn’t matter how you achieve your wealth, as long as you attain it. After all, it’s not as if you’ll ever get in trouble for it as long as you work for a “Too Big to Jail” bank.

From the UK’s Independent:

Fabrice Tourre, the former Goldman Sachs trader convicted on six counts of securities fraud six months ago, will teach an honours class in economics at the University of Chicago this spring.

 

Mr Tourre’s weekly Thursday afternoon seminar, called “Elements of Economic Analysis”, is part of his studies for a PhD in economics, after he completed a masters in operations research at Stanford University.

 

Last August, a federal court found “Fabulous Fab”, as he famously styled himself in emails to his girlfriend, liable for six of seven counts of securities fraud relating to the Abacus 2007-AC1 mortgage-linked collateralised debt obligation.

 

At the time, The New Yorker magazine wrote that Mr Tourre was the “only Wall Street banker to be found guilty of any charges having to do with the financial crisis” of 2008.

Don’t worry Fab, modern economics essentially bases its principles on your behavior. A match made in crony heaven.

Full article here.

via Zero Hedge http://ift.tt/N4iMEi Tyler Durden