Retailer Tesco Explains How Companies Are "Solidly Beating" Expectations In One Sentence

UK supermarket operator Tesco has suspended four executives after discovering a $408 million “serious accounting issue” in its latest financial statements. In a reflection of Walgreen’s earlier ‘forecassting errors’, it appears everyone’s optimism is now costing them their jobs as Tesco admits the executives were “early booking commercial income and delayed booking costs.” And that – in one simple sentence – is the optimistic, we-are-sure-the-income-will-be-there, way to “solidly beat” expectations quarter-after-quarter.

 

As WSJ reports,

Tesco suspended four senior executives and called in outside auditors and legal counsel to investigate a £250 million ($408.8 million) overstatement of the U.K. supermarket operator’s forecast first-half profit.

 

Tesco’s newly installed chief executive, Dave Lewis, said on Monday that the company has uncovered a “serious” accounting issue.

 

The issue involved the early booking of commercial income and delayed booking of costs, the company said, triggering a third profit warning in three months.

 

 

The accounting error puts in the line of fire a board of directors long criticized for lacking retail experience, and exposes the extent to which previous CEO Philip Clarke had lost control of Tesco before the company announced his dismissal in July.

*  *  *
What is perhaps most stunning here is: 4 people were actually held accountable for their mistake.

*  *  *

The question is – how many other firms have over-optimistically accounted for futures earnings in the latest quarter?




via Zero Hedge http://ift.tt/1uxv5IR Tyler Durden

Retailer Tesco Explains How Companies Are “Solidly Beating” Expectations In One Sentence

UK supermarket operator Tesco has suspended four executives after discovering a $408 million “serious accounting issue” in its latest financial statements. In a reflection of Walgreen’s earlier ‘forecassting errors’, it appears everyone’s optimism is now costing them their jobs as Tesco admits the executives were “early booking commercial income and delayed booking costs.” And that – in one simple sentence – is the optimistic, we-are-sure-the-income-will-be-there, way to “solidly beat” expectations quarter-after-quarter.

 

As WSJ reports,

Tesco suspended four senior executives and called in outside auditors and legal counsel to investigate a £250 million ($408.8 million) overstatement of the U.K. supermarket operator’s forecast first-half profit.

 

Tesco’s newly installed chief executive, Dave Lewis, said on Monday that the company has uncovered a “serious” accounting issue.

 

The issue involved the early booking of commercial income and delayed booking of costs, the company said, triggering a third profit warning in three months.

 

 

The accounting error puts in the line of fire a board of directors long criticized for lacking retail experience, and exposes the extent to which previous CEO Philip Clarke had lost control of Tesco before the company announced his dismissal in July.

*  *  *
What is perhaps most stunning here is: 4 people were actually held accountable for their mistake.

*  *  *

The question is – how many other firms have over-optimistically accounted for futures earnings in the latest quarter?




via Zero Hedge http://ift.tt/1uxv5IR Tyler Durden

Albert Edwards Presents "The Most Important Chart For Investors"

Which incidentally has nothing to do with stocks or bonds, and everything to do with all-important FX (which just happens to drive all correlation and risk pairs around the globe thanks to the far greater embedded leverage in FX, and is why all “modern” traders focus almost entirely on the USDJPY and EURUSD).

Specifically, as SocGen’s Albert Edwards notes “we show on the front page chart what I believe to be the key chart investors should be focusing on at present. It shows the yen breaking down against the US dollar. This may be more than just a strong dollar story on the back of Fed tightening however, as it seems the yen has now also broken key support levels against the euro. This is a weak yen story. Though there are good fundamental explanations for recent dollar strength vis-à-vis both the yen and the euro, often commentators like to find a fundamental story to fit market events even when price movements have occurred without any clear fundamental explanation ? for we teenage scribblers (as ex-UK Chancellor Nigel Lawson dismissively called us) all have to fill those column inches of commentary.”

Wait, Albert is now a chartist? So it would appear, with a few large caveats:

Sometimes it is very clear to me that instead of fundamentals driving prices, it is the charts or technicals that are important. Hence I have long been an advocate of keeping one eye on the charts to see if a major support or resistance has been broken. The very fact that the markets contain so many followers of technical analysis means that the soothsaying of chartists can actually be self-fulfilling. Nowhere is this more true than in the world of foreign exchange (FX) trading where fundamentals often play a peripheral role, even in the medium term. And in a world where momentum investing has become more ?fashionable?, FX is the one area where a clear market trend is especially seized upon with relish.

We couldn’t agree more, since we ourselves enjoy point out, more often than not, when various algos activate momentum ignition strategies in the USDJPY to push the broader S&P 500 above (never below) key resistance levels. In fact, it was on Zero Hedge where we pointed out last night the extreme oversold level of the Yen. Edwards, however says to ignore this, and instead to focus on what may be historic weakness in the Yen, which in turn will clobber the global economy.

… if I am right and the yen runs sharply lower from here, then this will spell real trouble for the global economy. (Do not be fooled if there is now a pause in yen weakness or even a partial retracement from these levels, as the rapidity of recent moves means the yen is now extremely oversold against the dollar ? i.e. the daily RSI=88. This should be the pause that reinvigorates the new trend).

Why does a rapidly weakening yen spell trouble for the global economy?

First, because the Chinese economy will see a further rise in its already strong real exchange rate, especially if other Asian currencies are pulled down with the sliding yen. This will hurt the Chinese economy which, from August data, appears to be weakening again. The strengthening renminbi will also exacerbate deflationary pressures further.

 

Second, a weak yen spells trouble for the west as a wave of deflation washes in from the rapidly devaluing east. This reverses a decade long trend. I believe that profits growth is so anaemic in the west that this monetary tightening via strengthening exchange rates could in itself be sufficient to send US and European profits into outright decline and subsequently their economies into recession (via a contraction in the investment spending). That is why this FX technical break is so important

That’s what could happen. Here is why Edwards believes, it will happen.

We have long believed that investors ignore Japan at their peril. Time and time again, investors have missed major global market trends that have been catalysed by Japan. We have felt for some time that a fragile Chinese economy could be pushed over the edge by a further yen devaluation – in many ways a replay of the Asian crisis of 1997. And just as the Chinese real economy data has taken a turn for the worse in August, the yen has slipped below a key 15-year support level against the dollar. This is probably the most important chart investors should focus on. The next phase of global currency wars may have begun.

 

We have written previously that Japan?s QE and the associated yen weakness could trigger a re-run of the 1997 Asian crisis, only this time sucking in the Chinese renminbi. The yen has just broken below a key long-term support and after a brief technical pull-back, its decline is likely to accelerate. This will trigger a wave of profit-crushing deflation flowing from east to west. Andrew Lapthorne has just written a great note on Japanese equities. He says yen weakness, not corporate self-help, is the key to Nikkei outperformance, with Germany looking particularly vulnerable. It looks as if yen weakness is what we’ve now got!

 

Staring long and hard at the Yen/$ chart, I think that, in the current circumstances, the yen/$ will head to 120 pretty quickly ? perhaps after a short reinvigorating retracement. And, if the dollar’s ascent is given extra impetus by the DXY also breaking out, a decline in the yen below Y120 will see an end to its 30-year uptrend – a trend that has relentlessly exported deflation from the west to Japan. Sound far-fetched? One of the few things I have learnt over 30 years in this industry is that when traders decide the yen/US$ starts to move it can jump by Y10 or Y20 very, very quickly indeed.

Remember that “shocking” CPI print from last week? If the SocGen strategist is right, prepare for many more such “stunners” as Japan makes deflation-exporting its only business model, one which could well crush the economies of Europe, China, and the US… and Japan! Case in point: recall what just happened to Sony last week. But the all important offset, a rising global stock market, should make it all better at least until the entire economic base is so hollowed out, not even algos can dismisses the record divergence between stock market myth and economic reality.

Edwards’ bottom line: “If a clear break in the yen downwards against both the dollar and euro is occurring, not only will this spell trouble for the beleaguered Chinese economy and exacerbate deflation in the west, but it will also break the spell of German economic dominance.




via Zero Hedge http://ift.tt/1tUEr3w Tyler Durden

Albert Edwards Presents “The Most Important Chart For Investors”

Which incidentally has nothing to do with stocks or bonds, and everything to do with all-important FX (which just happens to drive all correlation and risk pairs around the globe thanks to the far greater embedded leverage in FX, and is why all “modern” traders focus almost entirely on the USDJPY and EURUSD).

Specifically, as SocGen’s Albert Edwards notes “we show on the front page chart what I believe to be the key chart investors should be focusing on at present. It shows the yen breaking down against the US dollar. This may be more than just a strong dollar story on the back of Fed tightening however, as it seems the yen has now also broken key support levels against the euro. This is a weak yen story. Though there are good fundamental explanations for recent dollar strength vis-à-vis both the yen and the euro, often commentators like to find a fundamental story to fit market events even when price movements have occurred without any clear fundamental explanation ? for we teenage scribblers (as ex-UK Chancellor Nigel Lawson dismissively called us) all have to fill those column inches of commentary.”

Wait, Albert is now a chartist? So it would appear, with a few large caveats:

Sometimes it is very clear to me that instead of fundamentals driving prices, it is the charts or technicals that are important. Hence I have long been an advocate of keeping one eye on the charts to see if a major support or resistance has been broken. The very fact that the markets contain so many followers of technical analysis means that the soothsaying of chartists can actually be self-fulfilling. Nowhere is this more true than in the world of foreign exchange (FX) trading where fundamentals often play a peripheral role, even in the medium term. And in a world where momentum investing has become more ?fashionable?, FX is the one area where a clear market trend is especially seized upon with relish.

We couldn’t agree more, since we ourselves enjoy point out, more often than not, when various algos activate momentum ignition strategies in the USDJPY to push the broader S&P 500 above (never below) key resistance levels. In fact, it was on Zero Hedge where we pointed out last night the extreme oversold level of the Yen. Edwards, however says to ignore this, and instead to focus on what may be historic weakness in the Yen, which in turn will clobber the global economy.

… if I am right and the yen runs sharply lower from here, then this will spell real trouble for the global economy. (Do not be fooled if there is now a pause in yen weakness or even a partial retracement from these levels, as the rapidity of recent moves means the yen is now extremely oversold against the dollar ? i.e. the daily RSI=88. This should be the pause that reinvigorates the new trend).

Why does a rapidly weakening yen spell trouble for the global economy?

First, because the Chinese economy will see a further rise in its already strong real exchange rate, especially if other Asian currencies are pulled down with the sliding yen. This will hurt the Chinese economy which, from August data, appears to be weakening again. The strengthening renminbi will also exacerbate deflationary pressures further.

 

Second, a weak yen spells trouble for the west as a wave of deflation washes in from the rapidly devaluing east. This reverses a decade long trend. I believe that profits growth is so anaemic in the west that this monetary tightening via strengthening exchange rates could in itself be sufficient to send US and European profits into outright decline and subsequently their economies into recession (via a contraction in the investment spending). That is why this FX technical break is so important

That’s what could happen. Here is why Edwards believes, it will happen.

We have long believed that investors ignore Japan at their peril. Time and time again, investors have missed major global market trends that have been catalysed by Japan. We have felt for some time that a fragile Chinese economy could be pushed over the edge by a further yen devaluation – in many ways a replay of the Asian crisis of 1997. And just as the Chinese real economy data has taken a turn for the worse in August, the yen has slipped below a key 15-year support level against the dollar. This is probably the most important chart investors should focus on. The next phase of global currency wars may have begun.

 

We have written previously that Japan?s QE and the associated yen weakness could trigger a re-run of the 1997 Asian crisis, only this time sucking in the Chinese renminbi. The yen has just broken below a key long-term support and after a brief technical pull-back, its decline is likely to accelerate. This will trigger a wave of profit-crushing deflation flowing from east to west. Andrew Lapthorne has just written a great note on Japanese equities. He says yen weakness, not corporate self-help, is the key to Nikkei outperformance, with Germany looking particularly vulnerable. It looks as if yen weakness is what we’ve now got!

 

Staring long and hard at the Yen/$ chart, I think that, in the current circumstances, the yen/$ will head to 120 pretty quickly ? perhaps after a short reinvigorating retracement. And, if the dollar’s ascent is given extra impetus by the DXY also breaking out, a decline in the yen below Y120 will see an end to its 30-year uptrend – a trend that has relentlessly exported deflation from the west to Japan. Sound far-fetched? One of the few things I have learnt over 30 years in this industry is that when traders decide the yen/US$ starts to move it can jump by Y10 or Y20 very, very quickly indeed.

Remember that “shocking” CPI print from last week? If the SocGen strategist is right, prepare for many more such “stunners” as Japan makes deflation-exporting its only business model, one which could well crush the economies of Europe, China, and the US… and Japan! Case in point: recall what just happened to Sony last week. But the all important offset, a rising global stock market, should make it all better at least until the entire economic base is so hollowed out, not even algos can dismisses the record divergence between stock market myth and economic reality.

Edwards’ bottom line: “If a clear break in the yen downwards against both the dollar and euro is occurring, not only will this spell trouble for the beleaguered Chinese economy and exacerbate deflation in the west, but it will also break the spell of German economic dominance.




via Zero Hedge http://ift.tt/1tUEr3w Tyler Durden

Key Events In The Coming Week

With the snoozer of an FOMC meeting in the rearview mirror, as well as Scotland’s predetermined independence referndum, last week’s key events: the BABA IPO and the iPhone 6 release, are now history, which means the near-term catalysts are gone and the coming week will be far more relaxed, if hardly boring. Here is what to expect.

As DB summarizes, looking at the day ahead and beyond, US existing home sales and euroarea consumer confidence for September are the main release for today although we’ll also pay some attention to any soundbites from the Fed’s Dudley at a Bloomberg summit today. Draghi will also speak before the EU parliament in Brussels at 3pm local time. Then we have PMI Tuesday with the release of the Markit/HSBC PMI manufacturing September readings for China and the Eurozone. The former should provide us with further clues in light of the recent downward momentum in China data flow. On Wednesday, we’ll get US new home sales, Italian consumer confidence, and the German IFO report. The US durable goods data in August will be a highlight on Thursday on top of the usual weekly jobless claims report. We will wrap up the week on Friday with the third revision to the Q2 US GDP data where consensus is looking for a small upward revision. On top of all, this week also sees a handful of Fedspeak (Kocherlakota, Bullard, Powell, George, Mester, Evans and Lockhart) right on the heels of the FOMC meeting last week so we should get more Fed-related news flow in the coming days.

Visually:

And a complete breakdown of the week’s events from Goldman:

In DMs, highlights of next week include US GDP and UMichigan Confidence, PMI in Euro area, Japan CPI.

  • [Monday] US Existing Home Sales.
  • [Tuesday] France GDP, DMs Composite PMI in Euro area (expect 51.8), France and Germany.
  • [Wednesday] Germany IFO Business Climate.
  • [Thursday] US Durable Goods.
  • [Friday] US GDP and UMichigan Confidence, Japan CPI.

In EMs, highlights of next week include MP Decisions in Colombia, Czech Republic, Hungary, Israel, Taiwan and Turkey.

  • [Monday] Israel MP Decision (expect 10bp cut).
  • [Tuesday] China HSBC Manufacturing PMI, Hungary MP Decision (expect rates on hold).
  • [Wednesday] Argentina GDP, Mexico Economic Activity.
  • [Thursday] MP Decisions in Taiwan, Turkey (expect rates on hold) and Czech Republic (expect rates on hold).
  • [Friday] Colombia MP Decision (expect rates on hold).

FULL CALENDAR

Monday, September 22

  • Events: Speeches by ECB’s Draghi, Fed’s Dudley, US Council of Economic Advisors’ Furman, FDIC’s Gruenberg and Hoenig, Fed’s Kocherlakota and BoC’s Wilkins, Brazil Quarterly Inflation Report.
  • United States | [MAP 2] Existing Home Sales (Aug): Consensus 5.20M, previous 5.15M
  • United States | Chicago Fed Nat Activity Index (Aug): Previous 0.39
  • Hong Kong | CPI Composite YoY (Aug): Previous 4.00%
  • Israel | MP Decision: We expect a 10bp cut (in the Base Rate to 0.15%, below consensus) on the back of the very soft August inflation print, the downward revision to the 2014Q2 GDP print and the preliminary signs of a slowdown in the housing market. Market pricing suggests that there is a 50% probability of a 10bp rate cut over the next three months. The BoI surprised the market last month by cutting rates to an all-time low (0.25%), citing modest growth, a “slow” global recovery and, importantly, the soft inflation environment (e.g., inflation fell to +0.3% yoy in July). Since then, inflation has fallen to +0.0% yoy in August, the 2014Q2 GDP print was revised down to 1.5% (from 1.7%) and house prices have slowed sequentially. Therefore, we expect the ‘dovish’ central bank to surprise the market once again by implementing a modest 10bp rate cut at this month’s meeting (and to cut rates by a total of 20bp in 2014H2; see here for details).
  • Also interesting: [DM] Euro area Consumer Confidence; Denmark Consumer Confidence; Italy Industrial Orders; New Zealand Westpac Consumer Confidence [EM] Taiwan Unemployment and Export Orders; Unemployment in Israel and Mexico; Mexico Retail Sales.

Tuesday, September 23

  • Events: Speeches by Fed’s Bullard, Fed’s George, Sweden Riksbank’s Ekholm, Hungary Central Bank’s Nagy.
  • United States | [MAP 1] Richmond Fed Manufact. Index (Sep): Consensus 10, previous 12
  • France | GDP QoQ (2Q F): Previous 0.00% (0.10% yoy)
  • DMs | Markit Composite PMI (Sep P): Euro area (GS 51.8, previous 52.5), France (previous 49.5), Germany (previous 53.7)
  • DMs | Markit Manufacturing PMI (Sep P): US (consensus 58, previous 57.9), Euro area (consensus 50.6, previous 50.7), France (previous 46.9), Germany (consensus 51.4, previous 51.4)
  • DMs | Markit Services PMI (Sep P): Euro area (consensus 53.1, previous 53.1), France (previous 50.3), Germany (consensus 54.8, previous 54.9)
  • China | HSBC China Manufacturing PMI (Sep P): Consensus 50.1, previous 50.2
  • Singapore | CPI NSA MoM (Aug): Consensus 0.80% (1.20% yoy), previous -0.30% (1.20% yoy)
  • Taiwan | [MAP 4] Industrial Production YoY (Aug): Consensus 7.00%, previous 6.08%
  • Hungary | MP Decision: We expect rates on hold (at 2.10%, in line with consensus) for a second month in a row, after the central bank declared an end to a two-year easing cycle in July. Macro outlook and conditions have changed little since the previous MPC meeting. But we continue to see the risk that the MPC may cut rates further this year.
  • Also interesting: [DM] US FHFA House Price Index; Canada Retail Sales; France Manufacturing Confidence; UK Public Sector Net Borrowing; Australia Roy Morgan Consumer Confidence [EM] Hungary CA; Poland Unemployment and Retail Sales; Argentina Trade Balance; Mexico Retail Sales.

Wednesday, September 24

  • Events: Speeches by Fed’s Mester, Fed’s Evans and RBA’s Stevens, RBA’s Financial Stability Review.
  • United States | New Home Sales MoM (Aug): GS 2.0%, consensus 4.40%, previous -2.40%
  • Germany | [MAP 3] IFO Business Climate (Sep): Consensus 105.7, previous 106.3
  • Japan | Markit/JMMA Japan Manufacturing PMI (Sep P): Previous 52.2
  • Argentina | [MAP 5] GDP YoY (2Q): GS -0.8%, previous -0.20%
  • Mexico | [MAP 5] Economic Activity IGAE YoY (Jul): GS 2.6%, previous 2.73%
  • Also interesting: [DM] US MBA Mortgage Applications; Italy Consumer Confidence; Norway Unemployment; Sweden Economic Tendency Survey; New Zealand Trade Balance [EM] Czech Republic Consumer Confidence; Brazil CA, Foreign Direct Investment and Consumer Confidence.

Thursday, September 25

  • Events: —.
  • United States | Durable Goods Orders (Aug): GS -16.5%, consensus -17.00%, previous 22.60%
  • United States | Markit US Services PMI (Sep P): Previous 59.5
  • United States | Markit US Composite PMI (Sep P): Previous 59.7
  • Taiwan | MP Decision
  • Turkey | MP Decision: We expect rates on hold (Benchmark Repurchase Rate at 8.25%, in line with consensus; O/N lending rate at 11.25% and O/N borrowing rate at 7.5%). We also do not see any changes to the main parameters of CBRT’s macroprudential tools. Finally, we expect the policy statement to be carefully balanced, signaling some caution in the short term but also leaving the door open to the possibility of further easing, contingent on market conditions and the inflation o
    utlook. In this context, we expect the bank to leave the key phrase unchanged, “…the tight monetary policy stance will be maintained, by keeping a flat yield curve, until there is a significant improvement in the inflation outlook”.
  • Czech Republic | MP Decision: We expect rates on hold (Repurchase Rate at 0.05%, in line with consensus) and for the CNB Board to preserve its current, accommodative policy stance at the upcoming meeting. With this meeting falling between forecast updates, we do not expect the Board to make any strong comments on policy direction.
  • Also interesting: [DM] US Initial Jobless and Continuing Claims and Kansas City Fed Manf. Activity; Euro area Money Supply; Italy Retail Sales; PPI in Spain and Sweden; Japan PPI; UK CBI Reported Sales; Australia Job Vacancies [EM] Hong Kong Trade Balance; Philippines Trade Balance; Brazil Unemployment.

Friday, September 26

  • Events: Speech by RBA’s Richards.
  • United States | [MAP 4] GDP Annualized QoQ (2Q T): GS 4.7%, consensus 4.60%, previous 4.20%
  • United States | [MAP 1] Univ. of Michigan Confidence (Sep F): GS 84.6, consensus 85, previous 84.6
  • United States | Personal Consumption (2Q T): GS 3.1%, previous 2.50%
  • Germany | GfK Consumer Confidence (Oct): Consensus 8.5, previous 8.6
  • Japan | Natl CPI Ex Food, Energy YoY (Aug): GS 2.3%, consensus 2.30%, previous 2.30%
  • Singapore | [MAP 5] Industrial Production YoY (Aug): Consensus 3.60% (-1.50% mom sa), previous 3.30% (2.70% mom sa)
  • Argentina | [MAP 5] Economic Activity Index YoY (Jul): GS -0.8% (-0.3% mom), previous 0.00% (0.30% mom)
  • Colombia | MP Decision: We expect rates on hold (Overnight Lending Rate at 4.50%, in line with consensus), pausing the rate normalization cycle after five consecutive hikes. The policy statement is likely to signal that the board remains divided, with a minority of directors voting for yet another increase to the reference rate. The MPC should also deliberate on the extension of the ongoing FX intervention program. We expect the directors to either discontinue the program altogether or to extend it to the 4Q2014 while reduce its purchase ceiling to US$1.0bn from US$2.0 currently.
  • Also interesting: [DM] US Core PCE (QoQ); France Consumer Confidence; Italy Business Confidence; Sweden Trade Balance [EM] Philippines Balance of Payments; South Korea Consumer Confidence; Taiwan Leading Index; Hungary Unemployment; Argentina CA; Brazil Bank Lending; Mexico Trade Balance.

Source: Goldman, Deutsche Bank, Bank of America


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

Despite 'Record' Opening Weekend, Goldman Fears "The iPhone Effect" On Retail Sales May Disappoint

The exuberant images this weekend of lines-around-the-block at Apple stores were met with triumphant flashing red headlines this morning when Apple announced the sale of more than 10 million iPhone 6 and 6 Plus models (more than expected). Typically, new product launches do not move the needle on aggregate US economic data. Apple’s iPhone has been the most notable exception, with past launches occasionally having a substantial effect on core retail sales. However, Goldman notes, with the launch of the new iPhone 6/6+ this month, estimates (based on historical data) of a 0.1 to 0.7ppt boost to September core retail sales is highly uncertain due to seasonal adjustments that have been highly erratic, and could easily take a big bite out of the Apple effect.

  • *APPLE HAS SOLD OVER 10M NEW IPHONE 6 AND IPHONE 6 PLUS MODELS
  • *APPLE SAYS SALES FOR IPHONE 6 & IPHONE 6 PLUS EXCEEDED VIEWS
  • *APPLE’S COOK: COULD HAVE SOLD MORE IPHONES W/ GREATER SUPPLY
  • *APPLE SAYS SALES FOR IPHONE 6 & IPHONE 6 PLUS EXCEEDED VIEWS

Via Goldman Sachs,

Typically, new product launches do not move the needle on aggregate US economic data. Apple’s iPhone has been the most notable exception, with past launches occasionally having a substantial effect on core retail sales. In particular, iPhone sales show up in two categories of the report: electronics stores (representing in-store sales) and “nonstore retailers” (representing online sales). Exhibit 1 shows the behavior of these two categories of retail sales during the release month for the iPhone 4S, iPhone 5, and iPhone 5S/5C, both on an initial print (i.e. as-reported) basis, as well as the final revised estimates. The iPhone 4S and 5 launches showed up clearly, particularly in the initial print data. The iPhone 5S/5C launch did not appear to boost retail sales as notably, perhaps due to (1) the lack of a preorder period for the 5S, and (2) the fact that the 5C was not as popular as initially hoped, with many retailer orders heading into inventory.

Preorders for the iPhone 6/6+—which began on September 12—have been record-breaking, at a reported 4 million units in the first 24 hours (up from 2 million for the iPhone 5). Our IT hardware equity analysts project 8 million units for first weekend sales, which will probably be released on September 22. Exhibit 2 shows how past company sales metrics have mapped into the initial print retail sales data. Because the Census Bureau does not require standardization of how retailers report cell phone sales (by retail price, discounted price with a cellular contract, etc.), it is not possible to directly estimate the retail sales effect with a simple price x quantity calculation. In addition, preorders and opening weekend sales are reported on a global, rather than US-specific, basis. However, using the simple units to sales “translation” from the iPhone 4S and the iPhone 5, we would expect a boost of about seven-tenths of a percentage point to the September core retail sales figure. On the other end of the spectrum, looking at the experience of the 5S/5C—likely less comparable than the other examples to the 6/6+ rollout—one might expect a small boost of only one-tenth of a percentage point.

Of course, once first weekend sales are available, we may be able to refine this figure. Notably, China will not be included in first weekend sales due to delays with regulatory approval, meaning that any given unit level of sales probably represents more US sales than historical comparisons would suggest. However, the level of sales reported by Apple is not the only variable in play. The retail sales data are reported on a seasonally-adjusted basis, and the idiosyncrasies of seasonal adjustment can often be a source of volatility. Specifically, the expected September seasonal for nonstore retail has been highly erratic (Exhibit 3). Although the Census Bureau provides indicative seasonal factors for data not yet released—shown as striped columns at the far right of the exhibit—these are subject to considerable revision at the time the data is reported.

Nonetheless, the indicative seasonal adjustments provided by Census do look like a tougher hurdle this year than in prior years. This could reflect a number of factors: (1) the tendency for fall product launches from Apple may be starting to be incorporated into “normal” seasonality, (2) the early timing of Labor Day could be a factor, or (3) shifting seasonality in areas completely unrelated to the iPhone could be driving the higher expected seasonal gain. The first possibility would represent the most downside risk to our earlier estimate of a 0.1 to 0.7% boost to September core retail sales. At this point, it is too early to have an explicit forecast for the September retail sales report, and we will refine our estimate of the iPhone effect further in coming weeks, but our early analysis points to September upside relative to the recent trend on core retail sales.


via Zero Hedge http://ift.tt/1mBaN2r Tyler Durden

Despite ‘Record’ Opening Weekend, Goldman Fears “The iPhone Effect” On Retail Sales May Disappoint

The exuberant images this weekend of lines-around-the-block at Apple stores were met with triumphant flashing red headlines this morning when Apple announced the sale of more than 10 million iPhone 6 and 6 Plus models (more than expected). Typically, new product launches do not move the needle on aggregate US economic data. Apple’s iPhone has been the most notable exception, with past launches occasionally having a substantial effect on core retail sales. However, Goldman notes, with the launch of the new iPhone 6/6+ this month, estimates (based on historical data) of a 0.1 to 0.7ppt boost to September core retail sales is highly uncertain due to seasonal adjustments that have been highly erratic, and could easily take a big bite out of the Apple effect.

  • *APPLE HAS SOLD OVER 10M NEW IPHONE 6 AND IPHONE 6 PLUS MODELS
  • *APPLE SAYS SALES FOR IPHONE 6 & IPHONE 6 PLUS EXCEEDED VIEWS
  • *APPLE’S COOK: COULD HAVE SOLD MORE IPHONES W/ GREATER SUPPLY
  • *APPLE SAYS SALES FOR IPHONE 6 & IPHONE 6 PLUS EXCEEDED VIEWS

Via Goldman Sachs,

Typically, new product launches do not move the needle on aggregate US economic data. Apple’s iPhone has been the most notable exception, with past launches occasionally having a substantial effect on core retail sales. In particular, iPhone sales show up in two categories of the report: electronics stores (representing in-store sales) and “nonstore retailers” (representing online sales). Exhibit 1 shows the behavior of these two categories of retail sales during the release month for the iPhone 4S, iPhone 5, and iPhone 5S/5C, both on an initial print (i.e. as-reported) basis, as well as the final revised estimates. The iPhone 4S and 5 launches showed up clearly, particularly in the initial print data. The iPhone 5S/5C launch did not appear to boost retail sales as notably, perhaps due to (1) the lack of a preorder period for the 5S, and (2) the fact that the 5C was not as popular as initially hoped, with many retailer orders heading into inventory.

Preorders for the iPhone 6/6+—which began on September 12—have been record-breaking, at a reported 4 million units in the first 24 hours (up from 2 million for the iPhone 5). Our IT hardware equity analysts project 8 million units for first weekend sales, which will probably be released on September 22. Exhibit 2 shows how past company sales metrics have mapped into the initial print retail sales data. Because the Census Bureau does not require standardization of how retailers report cell phone sales (by retail price, discounted price with a cellular contract, etc.), it is not possible to directly estimate the retail sales effect with a simple price x quantity calculation. In addition, preorders and opening weekend sales are reported on a global, rather than US-specific, basis. However, using the simple units to sales “translation” from the iPhone 4S and the iPhone 5, we would expect a boost of about seven-tenths of a percentage point to the September core retail sales figure. On the other end of the spectrum, looking at the experience of the 5S/5C—likely less comparable than the other examples to the 6/6+ rollout—one might expect a small boost of only one-tenth of a percentage point.

Of course, once first weekend sales are available, we may be able to refine this figure. Notably, China will not be included in first weekend sales due to delays with regulatory approval, meaning that any given unit level of sales probably represents more US sales than historical comparisons would suggest. However, the level of sales reported by Apple is not the only variable in play. The retail sales data are reported on a seasonally-adjusted basis, and the idiosyncrasies of seasonal adjustment can often be a source of volatility. Specifically, the expected September seasonal for nonstore retail has been highly erratic (Exhibit 3). Although the Census Bureau provides indicative seasonal factors for data not yet released—shown as striped columns at the far right of the exhibit—these are subject to considerable revision at the time the data is reported.

Nonetheless, the indicative seasonal adjustments provided by Census do look like a tougher hurdle this year than in prior years. This could reflect a number of factors: (1) the tendency for fall product launches from Apple may be starting to be incorporated into “normal” seasonality, (2) the early timing of Labor Day could be a factor, or (3) shifting seasonality in areas completely unrelated to the iPhone could be driving the higher expected seasonal gain. The first possibility would represent the most downside risk to our earlier estimate of a 0.1 to 0.7% boost to September core retail sales. At this point, it is too early to have an explicit forecast for the September retail sales report, and we will refine our estimate of the iPhone effect further in coming weeks, but our early analysis points to September upside relative to the recent trend on core retail sales.


via Zero Hedge http://ift.tt/1mBaN2r Tyler Durden

G-20 Post Mortem: Hopes, Fears, & Dashed Exepctations

We, like Bloomberg's Richard Breslow, were bemused this weekend by the communiques from the wisest men in the room at the G-20 meeting. On one side of their mouths they warned of "excessive risk-taking," in markets noting that there were "mounting economic risks" also. On the other hand, stories continue to print of US equity strength implying optimism over global growth – despite the ongoing collapse in consensus GDP expectations. However, away from this hope and fear, it was the almost coordinated responses of the PBOC (Chinese Finmin Lou Jiwei signaling not to get carried away with stimulus expectations), ECB (Visco saying may not need additional QE step since EUR had dropped 'enough'), and finally the BOJ (Iwata saying Abenomics misunderstood, USDJPY 90-100 'fair); all dashing market expectations of a smooth hand over from a feckless Fed to a free-printing rest-of-the-world. Stocks (and carry) responded by selling off.

 

As Bloomberg's Richard Breslow notes,

I was amused/bemused this weekend when I saw two stories literally next to each other on my newsfeed.

 

FEARS – The first said “global finance chiefs said to warn of mounting economic risks.”

 

HOPE – The next story, same dateline: U.S. stocks increase for week over optimism on economic growth.

 

 

 

Unfortunately, that’s the sort of talking out of both sides of their mouths that’s done whenever it suits them, so we need to be careful of the shelf life of these commentaries, who is speaking in what venue and what is the sound bite meant to satisfy.

 

G-20, we talked at end of last wk on how the G-20 mtg was an opportunity to do something special, but what came out of it was the French and Germans telling everyone to chill, while the Italians said the TLTRO takeup means nothing until we see what happens in December.

 

The overall conclusion was that the ministers agree on many goals, with little agreement on the means to those ends.

 

DASHED EXPECTATIONS – Probably the most interesting and actionable of the economic comments came from the Chinese Finmin Lou Jiwei, who signaled not to get too carried away with the stimulus China implemented last wk, this isn’t the start of a major ongoing program. That comment is what really got equity mkts to swoon over the weekend and people to be a little bit dour.

*  *  *

Add to that ECB's warning not to expect QE… (as Bloomberg reports)

The European Central Bank may not need to add stimulus measures after steps in the past three months pushed down the euro, said Governing Council member Ignazio Visco

 

“Inflation expectations have to be back where they were,” Visco said in an interview in Cairns, Australia, where he is attending a meeting of Group of 20 finance chiefs. “This doesn’t mean that there will be a next step. We have been bold enough to reduce interest rates to a level that was unexpected to the market.”

 

The single currency has dropped about 6 percent since early June, when the ECB introduced a negative interest rate on excess reserves and presented a four-year lending program to fuel credit. Policy makers reduced borrowing costs further earlier this month and committed to buying asset-backed securities and covered bonds to boost the ECB’s balance sheet by as much as 1 trillion euros ($1.3 trillion).

 

 

The extent of the exchange rate’s fall is “more or less, given the moves that were done between June and September, the right response,” said Visco, who also heads Italy’s central bank. The ECB isn’t targeting any exchange-rate level, he said.

*  *  *

And The BOJ's warning not to expect more QQE…

  • *FORMER BOJ DEPUTY GOVERNOR KAZUMASA IWATA SPEAKS IN INTERVIEW
  • *DAMAGE TO JAPAN FROM WEAK YEN MAY OUTWEIGH MERITS: IWATA
  • *WEAK YEN PUTS JAPAN AT RECESSION RISK: EX-BOJ'S IWATA
  • *DOLLAR/YEN AT 90-100 REFLECTS JAPAN FUNDAMENTALS: IWATA
  • *CURRENT YEN WEAKNESS SLIGHTLY EXCESSIVE: IWATA

Are the world's central banks re-co-ordinating on a tightening path as various bodies from the IMF to BIS warn that they have gone too far?

*  *  *

And the markert reacted with risk-off despite the G-20's best efforts to happy-talk the future.


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

G-20 Post Mortem: Hopes, Fears, & Dashed Exepctations

We, like Bloomberg's Richard Breslow, were bemused this weekend by the communiques from the wisest men in the room at the G-20 meeting. On one side of their mouths they warned of "excessive risk-taking," in markets noting that there were "mounting economic risks" also. On the other hand, stories continue to print of US equity strength implying optimism over global growth – despite the ongoing collapse in consensus GDP expectations. However, away from this hope and fear, it was the almost coordinated responses of the PBOC (Chinese Finmin Lou Jiwei signaling not to get carried away with stimulus expectations), ECB (Visco saying may not need additional QE step since EUR had dropped 'enough'), and finally the BOJ (Iwata saying Abenomics misunderstood, USDJPY 90-100 'fair); all dashing market expectations of a smooth hand over from a feckless Fed to a free-printing rest-of-the-world. Stocks (and carry) responded by selling off.

 

As Bloomberg's Richard Breslow notes,

I was amused/bemused this weekend when I saw two stories literally next to each other on my newsfeed.

 

FEARS – The first said “global finance chiefs said to warn of mounting economic risks.”

 

HOPE – The next story, same dateline: U.S. stocks increase for week over optimism on economic growth.

 

 

 

Unfortunately, that’s the sort of talking out of both sides of their mouths that’s done whenever it suits them, so we need to be careful of the shelf life of these commentaries, who is speaking in what venue and what is the sound bite meant to satisfy.

 

G-20, we talked at end of last wk on how the G-20 mtg was an opportunity to do something special, but what came out of it was the French and Germans telling everyone to chill, while the Italians said the TLTRO takeup means nothing until we see what happens in December.

 

The overall conclusion was that the ministers agree on many goals, with little agreement on the means to those ends.

 

DASHED EXPECTATIONS – Probably the most interesting and actionable of the economic comments came from the Chinese Finmin Lou Jiwei, who signaled not to get too carried away with the stimulus China implemented last wk, this isn’t the start of a major ongoing program. That comment is what really got equity mkts to swoon over the weekend and people to be a little bit dour.

*  *  *

Add to that ECB's warning not to expect QE… (as Bloomberg reports)

The European Central Bank may not need to add stimulus measures after steps in the past three months pushed down the euro, said Governing Council member Ignazio Visco

 

“Inflation expectations have to be back where they were,” Visco said in an interview in Cairns, Australia, where he is attending a meeting of Group of 20 finance chiefs. “This doesn’t mean that there will be a next step. We have been bold enough to reduce interest rates to a level that was unexpected to the market.”

 

The single currency has dropped about 6 percent since early June, when the ECB introduced a negative interest rate on excess reserves and presented a four-year lending program to fuel credit. Policy makers reduced borrowing costs further earlier this month and committed to buying asset-backed securities and covered bonds to boost the ECB’s balance sheet by as much as 1 trillion euros ($1.3 trillion).

 

 

The extent of the exchange rate’s fall is “more or less, given the moves that were done between June and September, the right response,” said Visco, who also heads Italy’s central bank. The ECB isn’t targeting any exchange-rate level, he said.

*  *  *

And The BOJ's warning not to expect more QQE…

  • *FORMER BOJ DEPUTY GOVERNOR KAZUMASA IWATA SPEAKS IN INTERVIEW
  • *DAMAGE TO JAPAN FROM WEAK YEN MAY OUTWEIGH MERITS: IWATA
  • *WEAK YEN PUTS JAPAN AT RECESSION RISK: EX-BOJ'S IWATA
  • *DOLLAR/YEN AT 90-100 REFLECTS JAPAN FUNDAMENTALS: IWATA
  • *CURRENT YEN WEAKNESS SLIGHTLY EXCESSIVE: IWATA

Are the world's central banks re-co-ordinating on a tightening path as various bodies from the IMF to BIS warn that they have gone too far?

*  *  *

And the markert reacted with risk-off despite the G-20's best efforts to happy-talk the future.


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

This Is How Italy “Fixes” Its Unsustainable Debt Problem

Earlier today, Morgan Stanley released a report titled “Debtflation – One Shock Away?”, which we will review more in depth shortly, but here is the gist: “Because public (and private) sector leverage is very high in parts of [Europe], this unstable situation is better described as debtflation. With bond yields already very low, when inflation is so subdued the challenge for debt sustainability is whether real growth is enough to cushion any shock. Several euro area economies look vulnerable, we think.”

Of these, Italy, which recently just returned into economic contraction and hence, a triple-dip recession, is the most vulnerable.  To wit:

Italy – debt stock problem… We expect a primary budget surplus of about 2.3% of GDP this year. Yet, with nominal GDP growth close to zero, this would not be enough to stabilise the debt trajectory. What’s more, 2014 debt/GDP and interest expenses/GDP – which we estimate at over 135% and 5.3%, respectively – are so high that a descending debt trajectory would only be achieved with a primary budget surplus higher than 5% of GDP, which should be maintained over time, thus requiring a permanent austerity drive.

 

…requiring an ambitious combination of real growth and inflation: Or, alternatively, government debt could come down, assuming an unchanged primary budget surplus (2.3% of GDP) as in the exercise above, if nominal growth were to accelerate to at least 3%Y. Yet this would require substantially higher inflation, which doesn’t seem to be very likely in the near term, or stronger real growth – which is unlikely to materialise too, unless a long period of political stability and structural reforms were to come through.

 

Of course, there is a “hard way” of doing, as in fixing, things and then there is… the European way.

Below we show how Italy’s debt/GDP for 2013 just was “reduced” by 5% making the country appear far more “sustainable” and attractive to debt investors (the ECB?).

As Bloomberg reports, Italy’s 2013 public debt was revised to 127.9% of GDP from a previous estimate of 132.6% of GDP, the country’s statistics agency Istat says in report. From the report.

The National Institute of Statistics releases the estimates of Gross Domestic Product (GDP) and General Government debt in accordance with the definitions of the European System of Accounts (ESA2010) and Council Regulation (EC) n. 549/2013.

 

In 2013, GDP at current prices decreased by -0.6% (to 1,618,904 million euro) compared with the previous year.

 

The chain-link volume measure of GDP fell by -1.9%, after a decrease by -2.3% in 2012.

 

The fall in GDP was due to a sharp contraction in Gross fixed capital formation (-5.4%) and in Final consumption expenditure (-2.3%). Imports decreased by -2.7%.

 

General Government net borrowing was -45,358 million euro (-2.8% of GDP), comparing with -3.0% of GDP in the previous year, while General Government debt went up to 2,070,165 million euro (127.9% of GDP).

And that’s how stuff is done in Europe.




via Zero Hedge http://ift.tt/1mB2hQX Tyler Durden