Business Insider/Jessica TylerA Pier 1 store in Manhattan.<ul><li>Pier 1's market value has been almost completely wiped out over the past five and a half years, falling 97% since 2013.</li><li>Analysts say the outlook is discouraging. Of the few surveyed by Bloomberg who cover the name, none rate the stock a "buy," two carry a "sell" rating, and four say "hold."</li><li>Analysts say a combination of overwhelming store environments, offerings that don't reflect the latest trends, and expensive sourcing and supply chain costs have brought the retailer to its knees.</li></ul>Pier 1 is fighting to stay afloat.Shares of the home-furnishings retailer have gotten decimated, down 97% from their 2013 high, as the company has struggled to compete against the likes of online retailers and its turnaround strategy has yet to take hold. Additionally, investors have had to grapple with a second executive departure in two months. All of this has culminated with shares sliding below $1 last month for the first time in a decade. So what happened?Pier 1, based in Fort Worth, Texas, said last week that its chief information officer, Bhargav Shah, was <a href="https://investors.pier1.com/static-files/00fd8367-fc92-4922-b845-40482f0ccedb">terminated</a> effective in November, a change the company did not mention in its December earnings report. Last month, Pier 1 named longtime board member Cheryl Batchelder as its interim CEO after Alisdair James <a href="https://www.businessinsider.com/r-pier-1-ceo-steps-down-after-turnaround-efforts-fail-2018-12">stepped down</a> following 19 months at the helm of the company.Read more: <a href="https://www.businessinsider.com/r-pier-1-ceo-steps-down-after-turnaround-efforts-fail-2018-12">Pier 1 CEO steps down after turnaround efforts fail</a><a href="https://www.businessinsider.com/r-pier-1-ceo-steps-down-after-turnaround-efforts-fail-2018-12"></a>Executive departures were just the latest chapter in what seems to be an increasingly concerning story for the retailer. In April, Pier 1 <a href="https://investors.pier1.com/news-releases/news-release-details/pier-1-imports-announces-three-year-strategic-plan-its-analyst">announced</a> a three-year strategic plan to right the ship.At the time, James <a href="https://investors.pier1.com/news-releases/news-release-details/pier-1-imports-announces-three-year-strategic-plan-its-analyst">said</a>, "Pier 1 has a rich brand history and loyal customer base, a highly competitive e-Commerce platform and a team with the talent, experience and determination to succeed."But analysts say a combination of overwhelming store environments, offerings that don't reflect the latest trends, and expensive sourcing and supply chain costs have brought the retailer to its knees."We are both sad and angry: sad that the company's associates and customers are now at significant risk and angry at a Board of Directors that, in our view, is culpable for allowing this crisis to develop," Budd Bugatch and Bobby Griffin, analysts at Raymond James, told clients after the company's most recent quarterly earnings report in December."F3Q19 was a 'dumpster fire,' which unfortunately has become all too common for Pier 1 quarterly earnings," they wrote.Specifically, the analysts pointed to its 11.9% decline in total sales, 10.5% plunge in comparable sales, and a drop in operating income from $13.4 million last year to -$28.9 million this year.Read more: <a href="https://www.businessinsider.com/pier-1-imports-struggles-photos-2018-9">We went shopping at Pier 1 Imports and saw why it has struggled to turn things around and compete with Amazon and TJ Maxx</a>Others tracking the stock echo a dim outlook. Pier 1 is one of three stocks in UBS's 28-member hardline retail coverage universe - alongside Office Depot and Sleep Number - that analyst Michael Lasser rates a "sell." He told clients earlier this month that Pier 1 would likely see "another tough year" after reporting "significant top-line deterioration" in 2018 despite last year's relatively strong spending environment."It seemed like everything was on sale at Pier 1," Business Insider's Jessica Tyler wrote after <a href="https://www.businessinsider.com/pier-1-imports-struggles-photos-2018-9">visiting</a> a Pier 1 location in Manhattan last month."The issues raised about Pier 1's inability to keep up with trends, its overwhelming stores, and efforts to keep prices down were all clear when we visited the store. The brand has announced plans to rebrand the store and fix these issues, but it has a ways to go."Ratings agency Moody's has taken notice of the company's struggles. Following Pier 1's quarterly earnings report in December, Moody's <a href="https://www.moodys.com/research/Moodys-changes-Pier-1s-outlook-to-negative--PR_393391?WT.mc_id=AM~WWFob29fRmluYW5jZV9TQl9SYXRpbmcgTmV3c19BbGxfRW5n~20181220_PR_393391&amp;yptr=yahoo" target="_blank" rel="noopener">cut its outlook</a> from "stable" to "negative," pointing specifically to the risk the company's turnaround efforts would have a hard time gaining traction."Pier 1's third-quarter fiscal 2019 results indicate that its turnaround will be more challenging and protracted than previously anticipated," analyst Raya Sokolyanska said in a report, adding that while liquidity was expected to be adequate in the next 12 to 18 months, it would "weaken over time if earnings do not recover."Pier 1 Imports did not immediately respond to Business Insider's requests for comment.Now read:<ul><li><a href="https://markets.businessinsider.com/news/stocks/sears-bankruptcy-lamperts-bid-gets-another-chance-2019-1-1027852841">Sears is getting one last chance to save itself from oblivion</a></li><li><a href="https://www.businessinsider.com/trending-products-and-startups-2019">7 retail products that are going to explode in popularity in 2019 - and the startups making them</a></li></ul><a href="https://www.businessinsider.com/intelligence/future-of-retail-ai?IR=T&amp;utm_source=businessinsider&amp;utm_medium=ctgr&amp;utm_term=ctgr_leadgen&amp;utm_content=ecommerce_ctgr_leadgen&amp;utm_campaign=ecommerce_ctgr_leadgen_future-of-retail-ai"></a> <h3>NOW WATCH: <a href="https://www.businessinsider.com/saturn-losing-rings-faster-than-thought-nasa-2018-12">Saturn is officially losing its rings - and they're disappearing much faster than scientists had anticipated</a></h3>

Pier 1 is a 'dumpster fire' and it's fighting for its survival

<div class="KonaFilter image-container display-table"><div><div class="image on-image">iStock/Getty Images Plus</div></div></div><ul class="summary-list"><li>Chip giants have been reeling from bad news all quarter, led by the Trump ban on Huawei.</li><li>The sector is also feeling a market slump in one of their most important segments, data center equipment.</li><li>News that Trump plans to ease the Huawei ban lifted semiconductor stocks Monday.</li><li>But analysts are eager to hear what chipmakers say about their overall market in the coming weeks as they report earnings.</li><li><a href="https://www.businessinsider.com/prime?module=article&amp;area=summary">Click here for more BI Prime stories.</a></li></ul>Chipmakers are wrapping up a bumpy second quarter, pummeled by a host of bad news, including a slumping data center market and the Trump ban on Huawei.With chip giants like Intel and AMD set to report results in the coming weeks, we talked to tech experts on what the major semiconductor companies can say that would signal a rebound for the industry.Major chipmakers like Intel and Nvidia posted disappointing results in their last quarters and analysts have mixed thoughts on if they've hit rock bottom and will rebound, or not.The Philadelphia Semiconductor Index, the key barometer for chip-investing sentiment, is off about 6% from a year-to-date high of 1,589 in April.On the other hand, the sector got a lift Monday on reports that the <a href="https://www.businessinsider.com/larry-kudlow-responds-to-marco-rubio-huawei-criticism-2019-7">Trump Administration's plan to relax a ban </a>on US companies that sell to Huawei. The Philadelphia Semiconductor Index was up more than 2% in Monday trades, outpacing the Nasdaq and the Dow.This next round of quarterly reports could offer insight into what's in store for the broader tech market, too, since semiconductor companies build products ahead of any upswing in demand for end-customer goods."Thaw-wei"Bernstein Research analyst Stacy Rasgon dubbed the plan to ease the ban "Thaw-wei," even though he stressed the news did not exactly point to a resolution of the US-China trade dispute. "Monitoring Twitter as a research tool makes us somewhat morose," he said in a note, which also pointed out that President Trump's tweet said the ban would be eased only on products that "will not impact our national security."The bigger issue for chipmakers, he said, is the broader market uncertainty. "Is that general uncertainty easing or not?" he told Business Insider.General market uncertaintyThe chip industry got some upbeat news last week when memory chip giant <a href="https://www.businessinsider.com/micron-revenue-beats-sees-signs-of-improving-demand-2019-6">Micron reported </a>fiscal third-quarter results that beat expectations.Did that point to a chip rebound in the second half of 2019?"Not really," Joel Kulina, head of technology trading at Wedbush, told Business Insider. Micron said it expects capital expenditures to be "meaningfully lower" in 2020, which suggests a more cautious view of future demand. Kulina said Micron "isn't exactly bullish in terms of how they view the shape of the recovery." What major chipmakers say about the last quarter and the guidance they give will be more critical, experts say. Some are bracing for more bad news.In a note to clients, Raymond Jaymes analyst Chris Caso said he expects "most semi companies will lower expectations during the July earnings season." Others, like IDC President Crawford Del Prete, believe that "overall demand for components is still there." "While demand is not rocketing, it's settling out to be better than expectations in this case," he told Business Insider. Data center market slumpDel Prete is still expecting soft demand in one critical area: data centers. In fact, what chip giants, particularly Intel and Nvidia, say about demand for chips that power computer servers and other equipment in data centers will be in the spotlight after the two companies both pointed to <a href="https://www.businessinsider.com/intel-data-center-business-growth-rockier-than-expected-2019-4">weak demand last quarter.</a> The outlook looked so downbeat for <a href="https://www.businessinsider.com/nvidia-intel-pause-in-data-center-spending-2019-5">Nvidia when it reported its last earnings in May, that the company decided </a>not to offer a full-year guidance. Nvidia's current fiscal quarter ends this month."For data center chipmakers, I would like to see that demand in hyper-scale data centers is picking up again after these customers paused purchasing as they consumed the technology," analyst Patrick Moorhead of Moor Insights and Strategy told Business Insider.In other words, he's hoping chip companies report that they've got cloud computing customers that are steadily buying because cloud companies are growing like crazy.AMD also has a considerable data center business that could be impacted by slowing demand. But it's been doing well winning market share in other areas, analysts believe. It's received more upbeat reviews from analysts based on its news like a new,<a href="https://www.businessinsider.com/amd-cray-frontier-supercomputer-department-of-energy-2019-5"> major supercomputing deal with Cray and the Department of Energy</a>. In a June 26 note to clients, Wedbush analyst Matthew Bryson also said the company is poised "to take meaningful share from" Intel in the PC and server markets in the coming years. Bryson also believes AMD could grab share from Nvidia in Nvidia's bread-and-butter graphics chip market.Expectations remain high for AMD even though the company recently took a hit from a Wall Street Journal <a href="https://www.businessinsider.com/amd-denies-violating-us-laws-china-processors-2019-6">report that said an AMD joint venture</a> gave China access to "state-of-the-art" processors, a charge the chipmaker denied. But while the "headline was scathing, Bryson said he doesn't expect any "meaningful negative implications" for AMD's financial results this quarter. The 800-pound gorillaStill, the US-China trade tensions remain the biggest headache for the chip industry, Marty Wolfe, president of Martinwolf M&amp;A Advisors."The 800-pound gorilla is some resolution to the China tariff turmoil," he told Business Insider. It's unclear how the dispute will play out despite the news that Trump is easing the ban on Huawei. "If there is clarity and a pathway to some certainty the chip makers can be valued based upon market factors."Kulina of Wedbush said he "would love for the trade situation to be in the rearview mirror. Until then, I believe it's going to be choppy trading" for chipmakers. Got a tip about Intel, AMD, Nvidia or another tech company? Contact this reporter via email at bpimentel@businessinsider.com, message him on Twitter <a href="https://twitter.com/troywolv/">@benpimentel</a>. You can also <a href="https://www.businessinsider.com/how-to-tip-business-insider-securely-guide-signal-securedrop-2017-6">contact Business Insider securely via SecureDrop</a>.Get the latest Intel stock price<a href="http://markets.businessinsider.com/stock/intc-Quote"> here.</a> <div class="margin-top"> <h3>NOW WATCH: <a href="https://www.businessinsider.com/meek-mill-michael-rubin-criminal-justice-reform-1-million-people-2018-12">Meek Mill and Michael Rubin want to get at least 1 million people out of prison and probation</a></h3> <div> </div> </div>

Chipmakers have hit a major slump - here's how experts think Intel and Nvidia can correct course

<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><a href="http://pictures.reuters.com/C.aspx?VP3=SearchResult&amp;VBID=2C0FCI1MAYGF&amp;SMLS=1&amp;RW=1355&amp;RH=850#/SearchResult&amp;VBID=2C0FCI1MAS3G&amp;SMLS=1&amp;RW=1355&amp;RH=850&amp;POPUPPN=31&amp;POPUPIID=2C04080644GGO">Reuters/Mike Blake</a>A worker drives a tractor past a field of giant tecolote ranunculus flowers at the Flower Fields in Carlsbad, California.</div></div></div>FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.<a href="http://www.bloomberg.com/news/articles/2016-05-13/-i-ll-never-retire-americans-break-record-for-working-past-65">The US just hit the largest number of older workers ever</a> (Bloomberg)The latest data from the US Bureau of Labor Statistics shows that nearly 20% of Americans aged 65 and up are working right now, reports Ben Steverman. And because of the huge size of the baby boomer generation, this means the US now has the largest number of older workers ever.Folks have cited various reasons for delaying retirement. Some said they needed to keep earning money and/or benefits, while others said they enjoyed their jobs and "wanted to stay involved," reports Steverman.<a href="http://www.fa-mag.com/news/study--hnw-men-want-returns--women-want-advice-26869.html?section=43">High-net-worth men are slightly more risk-tolerant than high-net-worth women</a> (FA Magazine)A new survey from Lake Forest, Ill.-based Spectrem Group found that high-net-worth men were slightly more risk tolerant than women. 44% of men surveyed were willing to take risk on a portion of their investments in the hopes of better returns, while only 30% of women said the same, reports Christopher Robbins.Moreover, 44% of HNW men said they would invest in individual stocks, while only 37% of women said the same.<a href="http://www.businessinsider.com/online-retailers-outperforming-department-stores-2016-5">This chart sums up the biggest trend in retail right now</a> (Business Insider)A Commerce Department report Friday showed total US <a href="http://www.businessinsider.com/retail-sales-april-2016-2016-5">retail sales</a> jumped 1.3% month-on-month in April. Notably, the report also revealed that non-store retail sales - aka at places like Amazon and eBay - rose 2.1% last month, while department-store sales (excluding leased departments) rose 0.3%."But the year-over-year trend showed an even bigger outperformance gap. Online retail sales were up 10.2%, the most among major categories in the retail sales report," reported Business Insider's Akin Oyedele.The chart below shows the three-month moving average of department store and non-store sales growth or decline. Oyedele notes that since January 2009, department-store sales have fallen 61% of the time month-on-month, versus 28% of the time for online shops.<div class="KonaFilter image-container display-table"><div><div class="image">Andy Kiersz/Business Insider</div></div></div><a href="http://www.advisorperspectives.com/commentaries/20160513-franklin-templeton-investments-a-new-era-for-argentina">Argentina's undergoing a huge transformation</a> (Advisor Perspectives)"Soon after [Argentina's] new government took office, rating agencies upgraded their outlook for the country from negative to stable as a result of the swift changes from the previous government's economic policies, including the elimination of currency controls and the reduction of exporting tariffs," wrote Franklin Templeton Investment's Mark Mobius."These actions indicated the new government was rejecting the public-sector interventionism that hurt exports and reduced foreign-exchange earnings. Even more important than this vote of confidence was the ability of the new government to reach agreement on defaulted foreign debt the prior administration had refused to pay and had locked the country out of the international debt markets."<a href="http://www.financial-planning.com/news/former-ria-exec-joins-raymond-james-as-branch-manager">Raymond James scooped up a former RIA executive</a> (Financial Planning)Raymond James recruited David Richman, a former RIA market director, as a branch manager, reports Nicholas Yeap. He started his career at Morgan Stanley in 1996, where he ended up holding several positions. Ultimately, he became a complex manager in charge of 150 advisors and support staff, who oversaw about $8 billion in client assets, Yeap added. <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/absolutely-everyone-needs-prenup-marriage-divorce-lisa-zeiderman-2015-12">Why absolutely everyone needs a prenup</a></h3> <div> <div> <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="ttOGgweTp_ufF78dSmKnr_4eyRvQo7ih" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div> </div> </div> </div>

The US just hit the largest number of older workers ever

<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image">Reuters/Nir Elias</div></div></div>FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.<a href="http://www.reuters.com/article/us-usa-crime-hedgefund-conviction-idUSKBN0TN2LS20151204#rd2brTjecAvso7Cl.97">A fund manager allegedly faked his own death after he stole money to pay for plane tickets and karaoke</a> (Reuters)Moazzam Ifzal "Mark" Malik, a hedge fund manager who allegedly faked his own death in order to conceal his fraud, was convicted on Friday for stealing over $800,000 from investors, reports Jonathan Stempel.The SEC alleged that Malik created "an employee named 'Courtney' who emailed an investor seeking to redeem his money to say there would be a delay because Malik had died of a heart attack."New York Attorney General Eric Schneiderman said that Malik "never had more than $90,000 in his brokerage accounts, and spent much of what he raised on hotels, plane tickets, meals, a karaoke bar, and other personal items."<a href="http://www.thinkadvisor.com/2015/12/04/raymond-james-deutsche-deal-a-clever-recruiting-st?t=marketing-technology?ref=channel-more-news">Raymond James' acquisition of Deutsche Banks' US private wealth business is a smart recruiting strategy</a> (Think Advisor)Last Thursday, Raymond James announced that it would be acquiring the US private wealth business of Deutsche Bank. "But it did a lot more than that, according the firm and industry experts: It gives the firm an additional channel to offer to recruits, one focused on high-net-worth investors who want to work with a boutique," reports Janet Levaux."If Raymond James is successful in retaining the bulk of the 200 Deutsche Bank advisors, they can really position themselves to compete for advisors who want to work at small high-end boutiques," Mark Elzweig, an executive search consultant, told Think Advisor.<a href="http://www.investmentnews.com/article/20151204/FREE/151209951/broker-claws-back-1-2-million-from-morgan-stanley-in-significant">"That's probably the biggest defeat for Morgan Stanley all year"</a> (InvestmentNews)Finra arbitrators cut a $2.9 million claim by Morgan Stanley against a broker for allegedly failing to fulfill two promissory notes by $1.2 million, making the final award $1.7 million. This is highly unusual, as brokerages have typically won disputes involving promissory notes, reports Mark Schoeff Jr."That's probably the biggest defeat for Morgan Stanley all year," said Jeff Riffer, a partner at Elkins Kalt Weintraub Reuben Gartside, who represented the broker.<a href="http://www.financial-planning.com/news/portfolio/investing-in-art-is-no-paint-by-numbers-task-2695057-1.html?zkPrintable=1&amp;nopagination=1">It's better to look at art as a collector rather than an investor</a> (Financial Planning)After the $170.4 million sale of a Modigliani painting at Christie's in November, art is all of a sudden front and center on clients' minds. However, they should look at art as collectors, rather than as investors."It is risky, and there is a great possibility to get scammed as well. I tell clients, buy what you like for your enjoyment, but few people have the knowledge, resources or ability to know whether an interesting piece of contemporary art will skyrocket," Deena Katz, chairwoman of Evensky &amp; Katz/Foldes Financial Wealth Management of Coral Gables, Fla. told Financial Planning.<a href="http://www.schwab.com/public/schwab/nn/articles/Why-Our-Outlook-for-European-Stocks-Is-Positive">European stocks are looking pretty good right now</a> (Charles Schwab)"We think that the outlook for European stocks seems favorable, due to a combination of positive growth, low inflation and the ECB's continued monetary stimulus in 2016. Fiscal spending is likely to get a boost from spending on migrants and defense, while low oil prices, weak currencies and credit growth should also bolster economic expansion," writes Michelle Gibley."We see stocks benefiting as global growth accelerates in 2016, potentially increasing corporate revenues and earnings. Valuations could improve as deflation risks ebb. Now is not the time to give up on Europe: It has displayed evidence it can overcome its challenges," she added. <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/animated-timeline-earth-history-2015-11">This 3-minute animation will change your perception of time</a></h3> <div> <div> <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="xrY3l3eDplY8eJOQK4NibII2lNSWACxD" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div> </div> </div> </div>

A fund manager allegedly faked his own death after he stole money to pay for karaoke and plane tickets

<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image">Thomson ReutersRaymond Dalio, Founder, Chairman and Co-Chief Investment Officer of Bridgewater Associates, speaks at the Milken Institute Global Conference in Beverly Hills</div></div></div>Finance Insider is Business Insider's summary of the top stories of the past 24 hours.To sign up, scroll to the bottom of this page and click "Get updates in your inbox," or <a href="http://www.businessinsider.com/newsletter/wall-street-career-advice">click here</a>.Bridgewater Associates has fired back at <a href="http://www.businessinsider.com/bridgewater-responds-to-new-york-times-2016-7">The New York Times for its recent story on the company's culture</a>.Bridgewater called the story a <a href="http://www.businessinsider.com/bridgewater-responds-to-new-york-times-2016-7">"distortion of reality"</a> - but only part of it. The firm has always proudly owned the part of its culture where everything is recorded, either on audio or video, in the name of "radical transparency."Bridgewater has argued this allows <a href="http://www.businessinsider.com/bridgewater-ray-dalio-succession-radically-transparent-culture-2016-3">problems and weaknesses to rise to the surface and be dealt with objectively. </a>Business Insider's Linette Lopez argues that the <a href="http://www.businessinsider.com/how-bridgewater-associates-explains-spying-on-workers-2016-7">use of that logic is even scarier than the surveillance itself</a>.In other news, a trading startup backed by <a href="http://www.businessinsider.com/trumid-bond-trading-platform-revamped-2016-7">George Soros and Peter Thiel just hit the reboot button</a>, while a <a href="http://www.businessinsider.com/owl-rock-capital-partners-hitting-1-billion-fundraising-mark-2016-7">new fund backed by Soros and Michael Dell is off to a stellar start</a>.Wall Street is <a href="http://www.businessinsider.com/facebook-earnings-round-up-of-analyst-reaction-q2-2016-7">going nuts for Facebook after its incredible quarter</a>, and Yahoo is suddenly in a <a href="http://www.businessinsider.com/yahoo-hiring-spree-after-verizon-deal-2016-7">hiring frenzy despite layoffs and the sale of its company</a>. The <a href="http://www.businessinsider.com/chessecake-factory-says-overtime-work-has-increased-2016-7">Cheesecake Factory is facing a problem with wages</a>, and Ford just <a href="http://www.businessinsider.com/ford-cfo-unexpected-risks-for-the-rest-or-the-year-2016-7">raised a big red flag about the US car market</a>.Leon Cooperman published an epic <a href="http://www.businessinsider.com/omegas-leon-cooperman-says-makerts-are-fine-in-an-epic-48-page-note-2016-7">48-page note to investors explaining why everything is fine</a>. The US homeownership rate <a href="http://www.businessinsider.com/homeownership-rate-is-at-multi-decades-low-but-may-be-bottoming-2016-7">has fallen to an all-time low</a>. And a former Wall Street banker is <a href="http://www.businessinsider.com/afp-perus-new-president-takes-office-amid-economic-woes-2016-7">taking over one of South America's fastest-growing economies</a>.Finally, here's an inside look at 'Equity,' <a href="http://www.businessinsider.com/equity-films-sarah-megan-thomas-on-wall-street-and-women-2016-7">the new movie about a badass Wall Street banker</a>.Here are the top Wall Street headlines at midday:<a href="http://www.businessinsider.com/the-real-story-behind-shinola-detroit-2016-7">The controversial and fascinating Detroit company behind Bill Clinton's favorite watch</a> - It's no surprise former President Bill Clinton has been a fixture at the 2016 Democratic National Convention. And it seems Clinton doesn't leave home without his trusty <a href="http://www.shinola.com/shop/therunwell47-leather-watch-s0111.html">Shinola Runwell 47mm watch</a>, which retails for $600 and of which he owns at least three.<a href="http://www.businessinsider.com/federal-reserve-policy-statement-july-27-2016-7">Fed holds rates and says there are now fewer reasons to be worried about the US economy</a> - There are now fewer reasons to be worried about the US economy, according to the Federal Reserve.<a href="http://www.businessinsider.com/sp-500-trading-in-a-range-2016-7">This is the 'dullest market in decades,' but get ready for some turbulence ahead</a> - The dog days of summer have brought on the "dullest market in decades," according to a note from Tom Leveroni and Shourui Tian of Nautilus Investment Research.<a href="http://www.businessinsider.com/whole-foods-quarterly-sales-whiff-shares-tank-2016-7">Whole Foods shares fall after sales miss</a> - Whole Foods on Wednesday reported quarterly sales that missed analysts expectations, as it worked to cut prices and boost traffic.<a href="http://www.businessinsider.com/ford-misses-on-q2-earnings-says-there-are-risks-to-achieving-guidance-2016-7">Ford whiffs on earnings and warns that the rest of the year will be 'weaker than normal'</a> - Ford on Thursday reported second-quarter earnings that missed analysts' expectations, also saying there were risks to achieving the company's full-year outlook.<a href="http://www.businessinsider.com/theory-about-the-apple-car-2016-7">There is no Apple Car, and there never will be</a> - As the rumor mill about the Apple Car grinds on and on and on, we keep getting little clues about what "Project Titan" may or may not be all about.<a href="http://www.businessinsider.com/bank-of-japan-preview-july-2016-2016-7">One of Notorious B.I.G.'s songs explains what's going on with the Bank of Japan right now</a> - "I don't know what they want from me / It's like the more money we come across / The more problems we see." <a href="http://www.businessinsider.com/grubhub-stock-soars-after-q2-earnings-2016-7">Grubhub's stock is up 27% after blowing away Wall Street estimates</a> - After five rough quarters, Grubhub might finally be on the rise. <a href="http://www.businessinsider.com/the-swiss-watch-industry-is-in-trouble-2016-7">This may be the end of the Swiss watch as we know it</a> - To those that lived through the "quartz crisis" of the '70s - when cheap Japanese quartz watches threatened to overtake the market, pushing Swiss watches into luxury territory - this message is going to sound a little familiar.<a href="http://www.businessinsider.com/what-the-impossible-burger-tastes-like-2016-7">We just tried the 'Impossible Burger' - the meatless burger NYC has been waiting for</a> - I have written about the <a href="http://www.businessinsider.com/more-seafood-more-women-at-del-friscos-2016-7">business of steakhouses</a>. I know that a seafood tower is actually a palate cleanser. I monitor the health of the institution that is the New York City hamburger.

What you need to know on Wall Street right now

<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image">Reuters/Gary CameronU.S. Federal Reserve Board Chair Janet Yellen testifies at the House Financial Services Committee in Washington February 10, 2016.</div></div></div>Federal Reserve chair Janet Yellen's appearance on Capitol Hill on Wednesday was the main event on Wednesday as stocks had a volatile day but ultimately closed little changed though the Dow fell about 100 points. First, the scoreboard:<ul><li>Dow: 15,913, -100, (-0.6%)</li><li>S&amp;P 500: 1,852, 0, (-0.03%)</li><li>Nasdaq: 4,282, +14, (+0.3%)</li><li>WTI crude oil: $27.40, -2%</li></ul><h2>Janet Yellen</h2>Federal Reserve chair Janet Yellen is watching the markets. Closely. Here's Yellen on Wednesday <a href="http://www.businessinsider.com/janet-yellen-congress-testimony-february-2016-2">before the House Financial Services Committee</a> (emphasis ours):Financial conditions in the United States have recently become less supportive of growth, with declines in broad measures of equity prices, higher borrowing rates for riskier borrowers, and a further appreciation of the dollar. These developments, if they prove persistent, could weigh on the outlook for economic activity and the labor market, although declines in longer-term interest rates and oil prices provide some offset. Still, ongoing employment gains and faster wage growth should support the growth of real incomes and therefore consumer spending, and global economic growth should pick up over time, supported by highly accommodative monetary policies abroad[...]As is always the case, the economic outlook is uncertain. Foreign economic developments, in particular, pose risks to U.S. economic growth. Most notably, although recent economic indicators do not suggest a sharp slowdown in Chinese growth, declines in the foreign exchange value of the renminbi have intensified uncertainty about China's exchange rate policy and the prospects for its economy. This uncertainty led to increased volatility in global financial markets and, against the background of persistent weakness abroad, exacerbated concerns about the outlook for global growth. These growth concerns, along with strong supply conditions and high inventories, contributed to the recent fall in the prices of oil and other commodities. In turn, low commodity prices could trigger financial stresses in commodity-exporting economies, particularly in vulnerable emerging market economies, and for commodity-producing firms in many countries. Should any of these downside risks materialize, foreign activity and demand for U.S. exports could weaken and financial market conditions could tighten further.So we have basically have a two-handed economist. Which you'd expect. Or as Ian Shepherdson at Pantheon Macroeconomics said, "Overall, though, Dr. Yellen did not sound dovish enough for the doves or hawkish enough for the hawks, so we are inclined to believe her when she says '...monetary policy is by no means on a preset course.'"Neil Dutta at Renaissance Macro said Yellen, "The tone of Yellen's speech was more dovish relative to the median dot but hawkish relative to the current expectations baked into financial markets ... June is likely the earliest the Fed would move rates again."And again, stocks were all over the place on Wednesday and didn't really appear to be taking a sign from Yellen's commentary, though futures declined modestly after the prepared remarks were released at 8:30 a.m. ET. <h2>Congress</h2>The real exciting part of the morning came when <a href="http://www.businessinsider.com/yellen-financial-services-committee-testimony-2016-2">Yellen fielded about 2.5 hours of questions from Congress</a>, with the first couple queries wondering why the Federal Reserve pays interest on excess reserves to financial institutions that park money at the Fed.Yellen's argument was, basically, that this is how it works.The Fed targets a Fed Funds range between its reverse repo floor - currently at 0.25% - and its IOER ceiling, which is currently 0.50%.Yellen noted that while Committee chair Jeb Hensarling (R-Texas) seemed concerned the IOER was basically a subsidy to big banks, these reserves fund the Fed's balance sheet, which returns an amount far in excess of the reserve interest that is paid out. These returns, which Yellen said total about $600 billion since the beginning of QE, have been returned to Treasury, a win for shareholders, not a subsidy.Which is one way to see it.&amp;<h2>Negative rates</h2>Yellen was also asked about negative interest rates and whether the Fed believes it has the legal authority to take this IOER rate into negative territory, which would in effect tax the banking system.It's unclear.Yellen <a href="http://www.businessinsider.com/janet-yellen-on-negative-interest-rates-2016-2">told Rep. Patrick McHenry</a> (R-North Carolina):In the spirit of prudent planning we always try to look at what options we would have available to us either if we needed to tighten policy more rapidly than we expect or the opposite. So we would take a lot at [negative rates]. The legal issues I'm not prepared to tell you have been thoroughly examined at this point. I am not aware of anything that would prevent [the Fed from taking interest rates into negative territory]. But I am saying we have not fully investigated the legal issues.This line of questioning followed reporting from Bloomberg News' Matt Boesler that revealed the Fed itself was unsure back in 2010 if it did indeed have the authority to make deposit rates negative.It appears this hasn't been clarified.Of course, were the Fed ever compelled to make interest rates negative in any form or fashion you would imagine that the economic and, by extension, political environment would be quite different either making any legal considerations a non-issue or making negative rates a total non-starter.So, we'll cross that bridge when we get there, I guess, but there's either going to be a bridge or there isn't.<h2>Kyle Bass</h2>Julia La Roche got her hands on Kyle Bass' <a href="http://www.businessinsider.com/kyle-bass-china-does-not-have-enough-money-2016-2">latest letter to investors</a> in which he outlines why he's loaded up on his bet against the Chinese yuan."We have been vigorously studying China over the last year, with the view that the rapid credit expansion in the Chinese banking system will result in significant credit losses that will require the recapitalization of Chinese banks and materially pressure the Chinese currency," Bass wrote.Adding, "This outcome will have many near-term and long-term effects on countries and markets around the world. In other words, what happens in China will not stay in China."Bass argues that the losses in China's banking system could exceed 400% of the US banking losses seen during the financial crisis, which seems bad. As it stands right now, <a href="http://www.businessinsider.com/kyle-bass-china-does-not-have-enough-money-2016-2">Bass already thinks China's banking system</a> is undercapitalized and challenges the idea that China "has years of reserves to burn through."Most of the money in his Hayman Capital funds, La Roche notes, is devoted to his yuan short. <h2>Recession watch</h2>Does the yield curve predict recessions anymore? Societe Generale isn't sure. "Given the yield curve's many distortions, a number of clients have asked whether it is still a useful recession indicator. Although we see some value in the yield curve's current message, we agree that its inability to invert under current circumstances makes it an unreliable recession indicator," wrote Societe Generale's Aneta Markowska and Subadra Rajappa.Basically, the central banks ruined this, too. Traditional economics would say that when you have an inverted yield - that is, when short-term bonds yield a higher rate than long-term bonds - you're heading towards recession. But with central banks having "distorted" the yield curve, such a clean reading from financial markets is unlikely in the future. Either way, SocGen sees about a 15% chance of recession in the next year.Meanwhile, Scott Brown at Raymond James outlined how a spooked consumer can make a <a href="http://www.businessinsider.com/recession-becomes-self-fulling-prophecy-2016-2">US recession a self-fulfilling prophecy</a>.The basic idea is that if consumers sense the labor market is slowing they'll hoard cash while corporates that see stock prices call could halt spending bringing economic activity to a halt. It's a pretty standard view on how financial markets can cause real-economy stress, but it's a view at least.<h2>Disney</h2>Shares of Disney fell almost 4% on Wednesday after the company reported earnings and revenue that beat expectations though earnings from its cable networks segment fell 5% due to struggles at ESPN.In a note to clients following the report Ben Swinburne at Morgan Stanley said pressure on ESPN's subscriber base remains a concerns, writing, "While Disney noted a recent increase in ESPN subs, we continued to believe ~2% annual sub losses are a good base case."And while it may be the case that specific concerns about ESPN are being overplayed in the market, it seems like there's no good pure play way to short the sports-industrial-complex, which just sort of feels too big. Take Bob Iger's conference call comments for example (emphasis ours):So I actually believe -- and I know you want to know about the floors in terms of our agreements -- but I actually believe that this notion that either the expanded basic bundle is experiencing its demise or that ESPN is cratering in any way from a sub perspective is just ridiculous. Sports is too popular. And it's not just at ESPN. Look at how the Super Bowl did, as a for-instance which I realize is a penultimate event, but day after day, week after week, month after month, year after year, live sports ends up being among the highest rated programs across television. And ESPN has this incredible, as you know, incredible set of license agreements with all the major sports. It's got the best menu of live sports that is out there.All of this is true but is sports going to be the biggest thing for all time? Who knows. If you don't think so, betting against Disney is at least one way to do it. <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/cam-newton-carolina-panthers-press-conference-nfl-denver-broncos-super-bowl-2016-2"> Here's the question that prompted Cam Newton to storm out of his postgame press conference</a></h3> <div> <div> <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="VoZG5yMDE6VHP_GWa6so3qlVcSAMa9_y" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div> </div> </div> </div>

YELLEN SPEAKS, DOW FALLS 100: Here's what you need to know

The bad news just keeps on coming for Apple: Pacific Crest analysts Andy Hargreaves and Evan Wingren just published a note that estimates iPhone device sales will go into a 20% decline in the March quarter of 2016. They also say that Apple has been "deliberately overstating underlying trends" on a previous earnings call. Here is their chart:<div class="KonaFilter image-container display-table click-to-enlarge"><div><div class="image"><a title_source="Pacific Crest" title_caption="" class="zoomin" href="https://static-ssl.businessinsider.com/image/568fad52dd08956c0d8b4571-960/screen shot 2016-01-08 at 11.01.50.png"></a>Pacific Crest</div></div></div>That's the lowest estimate of units sold we have seen so far. It would be an historic, unprecedented decline for Apple.About half a dozen analysts now believe iPhone sales are in decline and that Apple is in for a rough fiscal 2016. Their predictions come on the back of several negative reports from Apple's iPhone supply chain. Those include:<ul><li>Qorvo (radio frequency tech) reported reduced revenues.</li><li>Cirrus (audio products) also warned that revenues would decline.</li><li>Largan Precision (camera lens and casing) <a href="http://blogs.barrons.com/asiastocks/2016/01/05/apple-iphone-production-cuts-suppliers-largan-catcher-miss-december-sales/">said sales fell 30%.</a></li><li>Catcher Technology (camera tech) said <a href="http://blogs.barrons.com/asiastocks/2016/01/05/apple-iphone-production-cuts-suppliers-largan-catcher-miss-december-sales/">sales dropped 17%.</a></li><li>Apple: Nikkei reported that <a href="http://uk.businessinsider.com/apple-expected-to-cut-iphone-6-production-by-30-percent-2016-1">Apple cut its supply-chain orders</a> for the iPhone 6s and iPhone 6s Plus by 30%.</li><li>Foxconn (iPhone assembly plant) <a href="http://uk.businessinsider.com/foxconn-facing-layoffs-due-to-weak-iphone-demand-report-2016-1">denied rumours that it was laying off staff</a>.</li></ul>These are the crucial year-ago numbers of iPhone units sold that Apple needs to beat:<ul><li>Full-year FY 2015: 231,218,000</li><li>December quarter FY 2015: 74,468,000 (this will be the year-ago quarter Apple will report at the end of this month) </li><li>March quarter FY 2016: 61,170,000 (this will be the year-ago quarter Apple will report against next, probably in April 2016).</li></ul>Anything below those numbers - 231 million, 74.5 million, and 61 million - looks bad. So here is a summary of what analysts are saying about those numbers right now:<ul><li>Pacific Crest, Andy Hargreaves and Evan Wingren: December: 72.7 million (down 2%) March 49.5 million (down 20%) full year FY 2016 213 million (down 8%)</li><li>Kulbinder Garcha and his team at Credit Suisse: December: 76.9 million (up slightly) March 51.9 million (down 15%)</li><li>Stifel, Aaron Rakers and team: December 74.7 million (flat) March 56 million (down 8%)</li><li>UBS, Steven Milunovich and Peter Christiansen: December 75 million (flat) March 50 million (down 18%) full year FY2016 220 million (down 5%)</li><li>Morgan Stanley, Katy Huberty: December 74 million (down 0.6%) March 52 million (down 15%) full year FY2016 218 million (down 6%)</li><li>Raymond James, Tavis McCourt and Mike Koban: full year FY2016 224 million to 229 million (down 7.2% on the low end).</li></ul>We have never seen numbers for iPhone look that bad. Of course, Apple has a history of surprises. Only fools bet against the success of the iPhone. And all these analysts say the long-term outlook for the company is rosy - once Apple gets through the iPhone 7 upgrade cycle, its loyal customers will come back in heaps. But that period of renewed growth may be as far away as fiscal 2017, these analysts say.The Pacific Crest note is particularly harsh as it accuses CEO Tim Cook's team of "deliberately overstating underlying trends" on its September 2015 conference call:Confidence in Management Commentary Is LowDespite significant and credible concern about iPhone unit declines in the 6s cycle, management was adamant that units would grow in its FQ4 (Sept.) conference call. To our fault, we read management's commentary as an indicator that underlying demand in countries that are difficult to track was much stronger than we expected and would allow Apple to sustain a higher level of ongoing iPhone sales than we thought.Management's confidence now looks highly likely to be misplaced, which suggests that it was either ignorant of the challenges it faced or deliberately overstating underlying trends. The former seems unlikely, which suggests that management has taken a much more aggressive tone as growth in the high-end smartphone market has slowed. This reduces our confidence in Apple's commentary going forward.<div class="KonaFilter image-container display-table float_right click-to-enlarge"><div><div class="image on-image"><a title_source="Sedak" title_caption="Tim Cook, looking down." class="zoomin" href="https://static-ssl.businessinsider.com/image/56828b1bdd0895d9568b459c-960/tim-cook_aktuelles.jpg"></a>SedakTim Cook, looking down.</div></div></div>UBS went slightly easier on Apple, but nonetheless suggested that Apple had incorrectly estimated the number of its customers who would upgrade into iPhone 6s. Upgrades have "stalled significantly in recent months and is failing to meet Apple's own expectations," according to Milunovich and Christiansen:We now believe Apple is experiencing weaker than expected iPhone demand. News of worker reductions at key EMS and component vendors can't be ignored. This revelation runs contrary to past survey data indicating record gains from Android switchers as well as the fact that only 31% of iPhone installed base has upgraded to a big screen, leaving a large swath of roughly 300mn users yet to upgrade. The mix of new users-to-upgraders has been climbing, last quarter reaching a high of roughly 45%. In the Sep quarter, new customers as a percentage of iPhone 6 sales were an impressive 53% in China, 21% in the US, 19% in the <keyword id="6354868" type="COUNTRY" weightage="60" keywordseo="UK">UK</keyword>, and 28% in Germany.Given these positive data points from the last three months, we are surprised by the degree of negative news flow from the supply-chain. We think the most likely reason for a shortfall is that the upgrader portion of unit demand has stalled significantly in recent months and is failing to meet Apple's own expectations. The other reason would be slowing in China beyond tough comparisons, which we don't think is happening.If these guys are right, AAPL will be in for a very long year. But don't count Cook out. He has some <a href="http://uk.businessinsider.com/how-apple-might-avoid-reporting-a-decline-in-iphone-sales-2015-12">tricks up his sleeve that might surprise people</a>.<div id="categorypromo" style="border:1px solid silver; min-height:114px; padding:10px;"><a href="http://www.businessinsider.com/intelligence/research-store?IR=T&amp;utm_source=House&amp;utm_term=CtgrPr-SmPh&amp;utm_campaign=CtgrPr#!/THE-MID-YEAR-SMARTPHONE-UPDATE-REPORT/p/54794091/category=11987291"></a> Get THE MID-YEAR SMARTPHONE MARKET REPORT now! A comprehensive look at the global smartphone market from BI Intelligence by platform, vendor, country and more. Insights into the power struggles between the biggest platforms and the underdogs. <a href="http://www.businessinsider.com/intelligence/research-store?IR=T&amp;utm_source=House&amp;utm_term=CtgrPr-SmPh&amp;utm_campaign=CtgrPr#!/THE-MID-YEAR-SMARTPHONE-UPDATE-REPORT/p/54794091/category=11987291">Get the Report Here »</a></div> <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/samsung-galaxy-s6-apple-iphone-6s-comparison-features-2015-12">7 ways the Samsung Galaxy S6 is better than the iPhone 6s</a></h3> <div> <div> <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="RvcmIyeDrz5o1xUM5hqpulpdksh9vTWQ" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div> </div> </div> </div>

Analysts: iPhone sales will decline 20% and Apple has been 'deliberately overstating underlying trends'

<div class="KonaFilter image-container float_right"><div class="image on-image"><a href="http://www.bloomberg.com/video/jeffrey-saut-dan-haugh-on-strategy-market-outlook-TGXd3cSyStmAvmbFCHzrzw.html">Bloomberg TV</a>Jeff Saut</div></div>"Year-end letters are difficult to write because there is always a tendency to discuss the year gone by or, worse, attempt to forecast the coming year," said <a href="http://www.raymondjames.com/inv_strat.htm">Raymond James' Jeff Saut earlier this week</a>.
But perhaps begrudgingly, Saut offered his forecast anyway.
He warms into it by first reminding us of the various psychological hurdles in recent years:
Speaking to the news backdrop, consider this. For the past two years the markets have been confronted with numerous issues. The debt downgrade, the fiscal cliff, the sequester, the government shutdown, Dodd-Frank, rumors China would implode, the call that interest rates would skyrocket, Europe's debt crisis, a potential U.S. debt default, Fukushima, the Arab Spring, Iran, North Korea, Iran, Egypt, Syria, etc., yet the equity markets traded higher. In contrast, except for Obamacare, this year could be relatively, news-wise, trouble free. Moreover, bond yields have already risen and are unlikely to move much higher in the short/intermediate term, tapering has been announced, GDP and earnings guidance has been raised, there is more political cooperation (budget deal, Yellen, WTO deal, EU bank accord, bailouts over, Mexico reform, etc.), the American Industrial Renaissance is alive and well, our oil independence is almost assured, and the central banks remain accommodative. To this accommodative point, it has been proven that quantitative easing lifts stock prices; and despite the taper announcement, the Fed's balance sheet should still expand by some $435 billion in the new year (front-end loaded).
...there has been a very tight correlation (R2) between the expansion of the Fed's balance sheet and stock prices since 2009. If the Fed expands its balance sheet by another 12% over the coming year, it is conceivable the SPX could increase by another 12%. That would also be consistent with the S&amp;P's bottom-up, operating, earnings estimate increase of ~13% year-over-year ($122.11e vs. $107.40e).
And it's not just about Fed balance sheet expansion. Saut sees plenty of bullish fundamentals driving stocks higher.
Plainly, the U.S. macro uncertainty is falling with the budget deficit falling to a six-year low. That glide path should extend into 2014 with the CBO projecting a further drop in 2015 to a deficit of only 2.1% of GDP. Accordingly, I think a lot of things could indeed go right in 2014. The slowdown in housing, due to the increase in mortgage rates, should reverse now that mortgage rates have stabilized. A recent data point would be Lennar's (LEN/$39.55/Strong Buy) admission - best month of the quarter was November in terms of sales and pricing. The capital equipment cycle (cap ex) should strengthen in 2014. In talks with companies' senior management teams, they are telling me "We have put off investments in cap ex as long as we can because 'things' are just plain wearing out." Furthermore, credit conditions are improving, loan demand is slowly picking up, M&amp;A activity is increasing, dividends and buybacks are on the rise, profits are decent, inflation is contained, money is rotating out of most bond funds and (at the margin) into equity funds (given the amount of money that has flowed into bonds since 2008, this rotation has a lot further to go), the bad performance figures for 2008 are about to disappear from asset managers' five-year track records, and the list goes on. All of this should make for interesting discussions in the new year when financial advisors meet with their clients to talk about future asset allocations. Unsurprisingly, most investors remain underinvested in equities...
Saut thinks it's possible we go straight up without a meaningful sell-off for a while.
As we begin 2014, I think the rally extends without much of a pullback. In fact, my sense is we could travel into the 1900 - 2000 zone on the SPX before succumbing to any meaningful correction. Right now the inflation-adjusted all-time high for the SPX is around 2060, but I doubt if we can make it there before getting some kind of "hiccup." Currently, the SPX is better by 31.3% YTD and up about 40% from the June 2012 low without any meaningful correction. The historical median drawdown following such a rally is between 6% and 7% over the next three months and between 10% and 12% sometime during the next 12 months.
And since it's <a href="http://www.businessinsider.com/category/profit-margins">one of the hottest debates in the market these days</a>, Saut offered his position on record high profit margins.
Price/Earnings (P/E) multiple expansion has contributed heavily to the upward path of the equity markets over the past few years and there has been a lot written about that. In 2014 it is doubtful P/Es will expand very much because of the tapering announcement and fears interest rates will rise. Yet even if the SPX just trades at its current P/E multiple (17x), it suggests an SPX price target of 2076 by the end of 2014 if the earnings estimates are anywhere close to the mark. Of course that brings about cries that elevated profit margins cannot remain where they are, and therefore must revert to their historic mean hurting earnings, an argument from the negative nabobs we have heard since 2010; and I just don't believe it. Many companies are moving their IT needs to the "cloud," which saves a huge amount of money permitting margins to stay wide. Then there is the change in the composition of goods produced in this country that has moved from low margined goods to higher margined goods like jet engines. Or, how about the accounting term "income from affiliates," which means a parent company has a minority stake in another company that brings in income but doesn't record revenues associated with that stake, suggesting 100% margins. So, no, I do not buy the margin compression in 2014 argument.
So overall, he's bullish.
Read his whole outlook at <a href="http://www.raymondjames.com/inv_strat.htm">RaymondJames.com</a>.

JEFF SAUT: I Don't Buy The Profit Margin Compression Argument, I Think The S&P 500 Can Go To 2,000

<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image">REUTERS/Lucas JacksonA trader works on the floor of the New York Stock Exchange shortly before the end of the day's trading in New York, July 31, 2013.</div></div></div>NEW YORK (Reuters) - It's a good time to be a stock picker.
Some 57 percent of U.S. funds run by active managers are beating their benchmark indexes this year, according to fund-tracker Morningstar. That is the best overall performance for the industry since 2009 and well above the 37 percent of funds that typically top the indexes.
Stock pickers are doing well in part because after more than four years of marching higher en masse, <keyword id="6354298" type="ORGANIZATION" weightage="60" keywordseo="stocks">stocks</keyword> have started to separate themselves into leaders and laggards. The lines of demarcation became more pronounced during the past few weeks as U.S. companies reported their recent quarterly results.
Nearly 69 percent of companies are beating analyst estimates in the third-quarter - that's typical, but this season the misses are not concentrated in any particular sectors. Each sector has had its share of high-profile shortfalls.
Look no further than technology: Thomson Reuters data shows that 84 percent of the 55 tech companies reporting so far surpassed earnings forecasts. Yet investors sent IBM <IBM.N> to a 2-year low on weak sales figures, and several chipmakers took a hit after issuing disappointing forecasts.</IBM.N>
Implied correlations - a measure of how closely the performance of individual stocks mirrors that of the index itself - have fallen to their lowest since October 2007 after peaking in 2011, according to a research note from Cantor Fitzgerald. That means that instead of the returns of most stocks clumping close to the index returns, there is a much broader spread on how individual shares are performing.
That's a sign that investors are picking winners and losers. It also suggests the bull market - which has carried the S&amp;P nearly 170 percent higher since March 2009 - is starting to show its age. The S&amp;P 500 has set 33 new highs this year after failing to reach record levels since 2007. Now there are fewer beaten-down stocks that offer the chance for a quick pop higher.
Instead of searching for screaming bargains, fund managers are turning their focus to well-run companies that have sustainable advantages and may hold their value during a downturn, however unlikely that may seem at the moment.
"Ultimately as any recovery ages you start to see a selection process where better executing companies are afforded more attention. The general 'trade the group' strategy does not quite hold as well and you have to be more careful," said Michael Sansoterra, the manager of the $289 million Ridgeworth Large Cap Growth fund <STCIX.O>.</STCIX.O>
<h3>THE EARNINGS SEASON REVEAL</h3>
There are several reasons for the growing disparity in corporate performance. For the past four years, companies benefited from the rising tide, and some were able to use stock buybacks and dividend hikes to fuel share prices even when operating performances was not up to snuff. The Federal Reserve's economic stimulus program, which has put a lid on interest rates and allowed companies to refinance their debt cheaply, also helped lower-quality companies shine.
Now, as third-quarter earnings reports reveal which companies have stronger or weaker sales prospects and profit margins, choosy investment managers are rewarding stronger companies and walking away from those that display weakness.
Shares of United Continental Holdings <UAL.N>, for instance, fell as much as 4 percent on October 24 after the airline operator missed analyst estimates because of high costs and unused seats. Analysts from JP Morgan,Raymond James and Evercore Partners cut their outlooks for the company, citing its poor results, while revenues are growing at other airlines.</UAL.N>
Shares of Delta Air Lines <DAL.N> and Southwest Airlines <LUV.N> have continued to rally as a result of a pickup in business travel and thinner competition. For the year, Delta is up 123 percent, compared with United's 45 percent rise.</LUV.N></DAL.N>
Among clothing companies, VF Corp <VFC.N> rose 5 percent on October 21 to an all-time high after it beat estimates on strong demand for its Timberland, Vans and the North Face brands.</VFC.N>
VF Corp is up 42 percent for the year, while competitors like Gap Inc., Ralph Lauren and Abercrombie &amp; Fitch Co have lagged the broad market after missing sales targets and relying on heavier discounts during the back-to-school shopping period. Gap, for instance, is up 19 percent for the year, while Abercrombie is down 22 percent.
<h3>'HARDER' MARKET</h3>
Managers complain that finding hidden gems is increasingly challenging as the most promising companies are already pricey and there are no obvious bargains.
"It gets harder now that the market has gone up and you have to avoid overpaying for growth," said Craig Watson, a portfolio specialist who works on the $19.8 billion T. Rowe Price Blue Chip Growth fund <TRBCX.O> and the firm's other large-cap funds. The fund is up 32.5 percent for the year, or about 7 percentage points more than the S&amp;P 500.</TRBCX.O>
His Blue Chip Growth fund added to its position in Amazon.com despite its 43 percent gain for the year because of its strong management and earnings potential, Watson said.
"If you are taking a longer-term view like we are, then something that may look expensive today won't look like it is in two or three years because the company is so well-managed," Watson said.
John Fox co-manages the $902 million FAM Value Fund <FAMVX.O>, whose 28 percent gain for the year puts him 2 percentage points ahead of the S&amp;P 500. He said the rush to equities by investors looking for yield has stretched valuations. The fund, which has 42 stocks, has added only four new positions this year, compared with the 12 Fox bought "in only a few weeks" during the fall of 2011, he said.</FAMVX.O>
Fox's most recent purchase: Forest City Enterprises Inc <FCEa.N>, a commercial real estate developer that is up 25 percent for the year. Fox likes its plan to sell some of its assets and focus on the higher-end New York and Washington, D.C., markets, and estimates that the stock could jump 15 percent from its current price of about $20.26.</FCEa.N>
Bill Smead, who has steered his $530 million Smead Value Fund to a 30 percent gain for the year, is optimistic that the gains in the U.S. housing market will keep pushing stocks higher. He has been adding to his position in Walt Disney Co <DIS.N>, for instance, because he expects that more families will opt for vacations at its amusement parks as their home values rise. Shares of Disney are up 37.8 percent for the year.</DIS.N>
Still, he longs for the volatility - and subsequent correlations - of the market of the past few years.
"You don't like to see people going on TV talking about how great stocks are," he said. "That stuff bothers you when you're picking stocks. You want to be in an environment where no one agrees with you."
(Editing by Linda Stern and Frank McGurty)

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