October 20. The poster child market

–Once again a quiet day with little movement in yields.  Curve was marginally steeper as stocks maintained a bid; red/gold euro$ pack spread was up 2.75.  Relatively large sell off in crude oil with Dec -144 to 4628.  Mixed messages from the Fed, with early comments attributed to Dudley that a rate increase might be too soon this year, and late comments from Williams opining for a near term hike and then gradual increases thereafter.

–A little over a year ago, Stanley Druckenmiller called IBM the poster child for financial engineering management, noting that sales hadn’t increased in six years, but the balance sheet was deteriorating due to increased debt used for share buybacks.  At the time, the stock was around 190.  Yesterday it closed at 149 and is down another 5% after hours, having announced earnings with a cut in the forecast and another revenue miss ($19.3b vs $19.6 expected).  Last Sept it was $22.4 for the quarter, and the Sept before that $23.3b.

–Note: more debt can make it look better for a while, but ultimately catches up.  Increased debt without capital expenditures is not a growth formula.  Speaking of catching up, Fitch downgraded Illinois yesterday…barely even makes the news any more.
–Today’s news includes Housing Starts expected 1.142m vs 1.126 last.  Also, Powell speaks at 9:15 on the evolution of the treasury market, and Yellen gives intro remarks at 11:00 at the Labor Hall of Honor Induction Ceremony.

Posted on October 20, 2015 at 5:14 am by alexmanzara · Permalink
In: Eurodollar Options

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