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Business News

No Inflation as Far as the Eye Can See

Inflation at the producer level fell 0.2% in November; a lot of the decline is driven by falling oil.  No inflation on our horizon. (Bloomberg)
The National Retail Federation says consumers are on track to meet its forecast for 4.1% sales growth this holiday season. The growth forecast comes despite a 5% decline in Black Friday sales.
American consumer confidence reached a seven-year high last week as job gains and plunging fuel costs propelled the economy and boosted spirits. The Bloomberg Consumer Comfort Index increased to 41.3, its highest since December 2007.
There could soon be one less place to shop soon. Activist investor Starboard Value wants to merge rival office-supply chains Staples and Office Depot. Analysts and investors say a merger between the two companies could generate anywhere from $1.4 billion to $2 billion in increased profits.  (CNBC)
Household net worth declined in the third quarter for the first time since the third quarter of 2011 according to the Federal Reserve. Net worth declined $141 billion to $81.35 trillion.  Declining stock prices were offset by a $214 billion rise in the value of real estate holdings.  Total debt rose 4.4%.
Join us Saturday at 10 for Financial Focus radio when we talk about the dark side of declining oil prices. 

Three Stocks Account for Half the Dows Decline From Records

Markets sold off for the 3rd straight day on Wednesday as the lack of economic growth overseas and the ripple impact of collapsing oil weighed heavy.  But you have to break things down to understand what is really going down.  In the last three trading days the Dow Jones Index is off just a little over 2% from its all-time highs.  Half the decline is due to just three stocks-- Exxon Mobile, McDonalds and Boeing.  This tells us so far this minor correction is shallow and contained. (CNBC)

November retail sales were up 0.7%, much better than expected. Lower gas prices are helping the consumer. (Bloomberg)

Costco posted quarterly profits 16.7% higher than last year on impressive comparable-store sales. Sales and membership fees climbed 7.4%. Costco currently operates 671 warehouses, with 474 in the US and Puerto Rico, 88 in Canada, 34 in Mexico, 26 in the United Kingdom, 20 in Japan, 11 in Korea, 10 in Taiwan, 7 in Australia and 1 in Spain. (Zacks)

Yum Brands, owners of Pizza Hut and KFC, lowered its profit forecast for the year for the second time, hurt by slower-than-expected sales recovery in China. The company expects full-year profit growth to be in mid-single-digits for 2014 and 10% growth in 2015. (Reuters)

Business News

Americans plan to spend more on gifts this Christmas than in any holiday season in the past five years as economic optimism hits a post-recession high. The average American plans to spend $765 this year, up 12% versus last year. Behind the Yuletide cheer is an improved outlook for expected home values, wage gains and stocks—all three are at or above their highest levels since the 2008 recession. (CNBC) 
The U.S. economy is picking up speed. That's the view of a panel of business economists, whose latest growth forecast calls for a 3.1% advance in U.S. gross domestic product in 2015—up from a 2.2% expansion this year. Global growth is seen rising 3.4% next year, with China slowing to a 7% annual pace, Europe expanding by 1.2% and Japan eking out 1% gain in GDP. (National Association for Business Economics)
When workers pass up an offer of essentially free money with no strings attached, it's hard to identify a scapegoat other than those workers. More than 56,000 Boeing employees collectively left $98 million on the table in 2013 by not taking advantage of matching funds in the company's 401(k) plan. Approximately 8,400 Boeing employees declined to participate at all in the program last year, and another 48,000 didn't contribute enough to receive the maximum company match. 
Obesity is now a threat to the world economy.  Taking together the costs of healthcare, of lost productivity and other spending needed to mitigate its impact, the annual cost of obesity now tops $2 trillion, or 2.8% of global economic output. That compares with an estimate of $2.1 trillion for war and terrorism, and for smoking, and is way ahead of alcoholism ($1.4 trillion).  (Fortune)

A Global Sell Off

U.S. small business optimism surged in November to its highest level in nearly eight years, the latest indication the economy is positioned for faster growth in 2015. Owners are very bullish about business conditions over the next six months. They are also upbeat about sales and earnings, but continue to hold back on capital spending and hiring. (Reuters)

The future of McDonald's fast food may be slowing it down. Responding to declining same-store sales, falling stock prices and a shrinking base of younger customers, the world's largest fast-food chain will expand its "Create Your Taste" program. Create Your Taste lets customers skip the counter and head to tablet-like kiosks where they can customize everything about their burger, from the type of bun to the variety of cheese to the many, gloppy toppings and sauces that can go on it. (USA Today)

A growing number of Americans in their 20s and 30s are helping reverse a three-decade decline in agriculture's supply of young farmers. The number of Americans younger than 35 who are running farms as their main occupation increased 10% to about 55,000 between 2007 and 2012. The average age of principal farm operators is 58, and about 40% are 65 and older. (USA Today)

It was a global rout last night on international markets led by a 5.3% decline in Chinese equities and Greek stocks crashed 11% percent on political strife.

Tarnished Arches

Those golden arches are not shinning very bright today. McDonald's global same-store sales decreased 2.2% in November.  US performance was down 4.6%, Europe down 2.0% and Asia/Pacific, Middle East and Africa (APMEA) down 4.0%. (Reuters)

Banks are urging some of their largest customers in the U.S. to take their cash elsewhere or be slapped with fees, citing new regulations that make it onerous for them to hold certain deposits. The banks include JPMorgan, Citigroup, and Bank of America.  Clients whose cash they don’t want include large companies hedge funds, insurers and smaller banks. (Wall Street Journal)

As ski season just gets started Vail Resorts reported a quarterly loss of $64.3 million on sales of $128.3 million. Vail Resorts shares have increased 22% since the beginning of the year. (Zacks)

As the media industry continues to change Time Warner’s HBO plans to offer online-only service in the US next year, letting viewers without a cable or satellite-TV subscription tune into their programing. The number of US households that pay for broadband but not TV has climbed to 10 million and is still growing, half of those homes do pay for a streaming service online. (Bloomberg)

More Good Economic News

The Labor Department says factory productivity expanded at a 2.3% annual rate in the third quarter.  The trend in productivity, however, remains relatively weak. Productivity rose 1.0% compared to the third quarter of 2013.

Compensation measures were revised sharply lower as unit labor costs, the price of labor for any given unit of production, fell at a 1.0% rate in the third quarter. Compared to the third quarter of last year, hourly compensation rose 2.2%. (US Department of Labor)

A gauge of growth in the U.S. services sector rose more than expected in November even as its employment component dipped. The Institute for Supply Management said its services index rose to 59.3 last month, just below the post-recession high of 59.6 hit in August. A reading above 50 indicates expansion in economic activity.

WiseTech Global, has announced an integration partnership with Bend, Oregon based VelaTrack. VelaTrack tracks containers in near real-time from all major ocean carriers worldwide. The integration will allow container information from VelaTrack to automatically flow into WiseTech.  VelaTrack , CEO Chris Mergenthaler says this partnership is important for growth of his firm. (WiseTech Global Press Release)

Coke Does Milk

ADP report says the private sector produced 208,000 jobs in November. The service sector and small businesses lead the strong jobs growth.     

Chief executives at the largest U.S. companies surveyed by the Business Roundtable said 40% of its members plan to hire more workers, up from 34% in the third quarter. Nearly three-quarters project their sales will keep growing in the next six months. (Associated Press)

With soda sales sagging, Coca-Cola is moving into the dairy business. There new “Fairlife” milk is being sold as a premiumized product that tastes better and will cost you twice as much as the milk your used to buying. The milk which is being produced in venture involving 92 family-owned farms will contain 50% more protein and 30% less sugar than regular milk. A filtering process will also make it lactose-free. (USA Today)

A 30-year fixed rate mortgage printed at 4.15% last week.  But that is doing little to boost borrowing on a home.  Refinancing volume is down 16% this year and new purchase mortgages are down 4% in volume for the year. (Mortgage Bankers Association)

The digital wave just keeps coming. Viewership of traditional TV dropped nearly 4% last quarter, as online video streaming jumped 60%, according to a new report from Nielsen. (Wall Street Journal)

Where's the Beef?

Although still reasonably strong, the pace of US manufacturing sector slowed in November to its lowest rate of growth since January, while gauges of new orders and output also fell. Global manufacturing activity expanded at its weakest pace in over a year in November, with new orders rising at their slowest rate since July 2013. (Reuters)

Just 23 days till Christmas and Wal-Mart says online sales broke company records, with more than 1.5 billion pages viewed over the holiday shopping period.  Mobile sales accounted for about 70% of traffic. (CNBC)

Broadly US online sales grew a smaller-than-expected 8% on Cyber Monday, with some consumers taking advantage of Internet promotions before and during the Thanksgiving weekend. Data over the weekend showed a 32% rise in online orders on Thanksgiving and a 26% increase on Black Friday. Cyber Monday sales continued to be driven by mobile traffic which grew 38.3% this year, even as the average order value remained flat at $131.66.

The average price for a pound of ground beef climbed to another record high -- $4.16 per pound -- in October.  A year ago the average price for a pound of ground beef was $3.39 per pound. That is a 22.6% jump in one year. Five years ago the average price for a pound of ground beef was $2.18. (

Oil Falls Off A Cliff - May Help Shoppers

The U.S. stock market closes at 10am today in a shortened holiday trading session. As oil prices plunge oil stocks are falling and airlines are soaring.

It is still 27 days till Christmas but OPEC is giving everyone an early present at the pump.  On Thursday OPEC decided not to cut oil output to support prices. Oil stands at its weakest levels since July 2010 and is headed for its steepest monthly decline since November 2008, after falling more than 15% this month. (Bloomberg)

Your Christmas tree likely will cost a little more this year. Six years of decreased demand and low prices have put many growers out of business. Growers this year will see about $20 per tree, $2 more than the last several years.  (Associated Press)

That turkey may have cost you more yesterday as production is at its lowest level in nearly three decades and wholesale prices are at an all-time high. This year's anticipated stock is 235 million turkeys — the lowest since 1986. October wholesale prices for live turkeys jumped 12% from 2013. (Associated Press)

Before the big Civil War Game on Saturday join us at 10 for a brand new edition of Financial Focus Radio.  A great way to start your holiday weekend.

A Feast Of Economic Data

Lots of economic data: (Bureau of Labor Statistics)

US Durable Goods, a measure of company equipment investment was up 0.4%, but if you take out planes and cars was down 0.3%.

October personal income was up 0.2% and consumer spending was also up 0.2%.

Applications to refinance a mortgage decreased 4% and applications to purchase a home fell 5% last week.  Purchase application volume is now off 10% from a year ago. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.15%. Americans who lost their homes to foreclosure will be able to buy them back at current market value if the properties are owned by housing finance giants Fannie Mae and Freddie Mac. (CNBC)

Deere & Co. projected a 20% decline in farm equipment sales in 2015, warning again that lower commodity prices and falling farm incomes are putting pressure on demand for agricultural machinery. In the most recent quarter, equipment sales fell 6.7% from a year earlier to $8.04 billion, while operating profit dropped 14% to $1.17 billion. (Wall Street Journal)

The S&P 500 is up 3 and the NASDAQ is up 8. The MSCI, a measure of international markets is up 0.17%.

Oil is flat at $74.13 a barrel. OPEC leader Saudi Arabia signaled today it's unlikely to push for a major change in output at the oil cartel's meeting tomorrow, a day after Russia refused to cooperate in any production cut. (CNBC)

Never Had a Budweiser?

Worldwide business confidence slumped to a five-year low, with company hiring and investment intentions at or near their weakest levels in the post-global financial crisis era. The number of companies expecting their business activity to be higher in a years' time exceeded those expecting a decline by 28%. This was below the net balance of 39% recorded in the summer, the Markit Global Business Outlook Survey showed. (CNBC)

In the wake of 10 Barrel Brewing selling to Anheuser-Busch InBev, we find some 44% of 21- to 27-year-old drinkers today have never tried Budweiser, according to the company. After years of developing advertising and marketing that appeals to all ages, AB InBev plans to concentrate future Budweiser promotions exclusively on that age bracket. (Wall Street Journal)

With just 30 days left till Christmas here are some tech facts that show some wild macro trends.  (US Chamber of Commerce)

The amount of data generated in two days is as much as all data generated in human history before 2003. In 1985 it cost $100,000 to store a gigabyte of data.  It costs 5 cents today.

Good Economic Data

US stocks, gold, and oil got are getting a big boost today, as ECB President Mario Draghi recommitted to   monetary easing to spur growth in Europe.  Then China’s central bank added more fuel to the fire when it announced a surprise interest rate cut to keep their economy growing above 7%. (Fox Business News)

Consumer sentiment in the US advanced to its highest level since January 2008 as Americans grow more optimistic about their financial well-being. While the monthly measure tracking the economic outlook fell in November from a two-year high, the share of respondents saying the economy is improving matched the second-highest since June 2013. (Bloomberg)

Inflation remained very tame in September as the Consumer Price Index rose 0.1% during the month.  For the year inflation is running at a 1.8% rate.  Falling gas prices should apply even more downward pressure in coming months. (Reuters)

The leading economic indicators index, used to predict the future of the economy's health in the next 6-9 months, rose 0.9% in October, topping the 0.7% increase in September.  (CNBC)

Join us Saturday at 10 for Financial Focus Radio when we will talk about portfolio diversification and China.

Shopping Just a Week Away

Best Buy reported quarterly earnings with profits up almost 78% on sales that were essentially flat. Same store sales were up 2.2%. (Reuters)

With 35 days till Christmas and Black Friday only a week away, 31.6% of shoppers say they will wait to see if the deals are worth it before they decide to shop, up 2% from last year. Over 60% of consumers who are not planning to shop on Black Friday may change their mind if the Thanksgiving Day newspaper inserts grab their attention. It is expected 140 million people will shop on Thanksgiving Day and Black Friday. (CNBC)

Falling oil prices may cut investment in U.S. shale oil by 10% next in 2015. US oil production has risen by 1 million barrels per day over the past year with the boom in shale oil production through fracking. Production is set to grow by an additional 963,000 barrels per day in 2015. (Reuters)

Oregon has fewer mortgage and nonmortgage loan brokers than it has had at any time during the last 13 years, and less than a third that were employed at the peak of the housing bubble. Currently there are about 1000 mortgage brokers in Oregon. (Oregon Live)

Over the past 100 years, the best three-month stretch for stocks has been November through January. On average, the S&P 500 since 1928 has risen an average 3.4% over the three months, nearly double its 1.86% average gain for three-month periods in general. (Wall Street Journal)

Another Record Close

Wall Street continued its string of record highs yesterday with the Dow chalking up its 26th new high of the year and the S&P 500 registering its 43rd record close of 2014. (CNBC)

Lowe's, the nation's No. 2 U.S. home-improvement retailer, raised its full-year profit and sales forecast as home owners boosted spending on renovations. The company posted third-quarter earnings up almost 26% on sales of $13.70 billion. Same-store sales were up 5.1%. (CNBC)

Target’s third-quarter profits slipped 3.5% as sales rose 2.7% to $17.73 billion. Target has 1,801 stores in the US and 133 in Canada and is expected to hire 70,000 workers for the holiday shopping season. (Reuters)

Total mortgage applications rose 4.9% this week. The increase was driven almost entirely by applications to purchase a home – a turnaround from recent months. Purchase applications leapt 12% to the highest level since July. (CNBC)

The private equity owners of Hostess Brands are planning to put the maker of Twinkies and Ding Dongs up for sale in early 2015, potentially valuing it at more than $1.7 billion.  They bought the company out of bankruptcy for $410 million in 2013.  Hostess Brands currently has annual earnings before interest, tax, depreciation and amortization of around $170 million. (Reuters)

Business News

Stocks barely squeezed out gains yesterday but the gains were enough to push the S&P 500 to a 42nd record close for the year.

Oil Field Service Company Halliburton plans to spend $35 Billion to buy rival Baker Hughes.  Without this merger and oil prices at $75/barrel both companies would have to shrink their workforce to react to the lower spending of their customers.  The combined company is expected to save $2 Billion per year because of synergies.

OPEC knows it must cut production to lift oil prices but it is far from clear whether its individual members will agree.  Saudi Arabia doubts that the 11 other countries will actually cut production.  A production cut would certainly boost oil prices, but most OPEC members cannot afford to limit production.  So OPEC members are in a stand-off while oil continue to decline.  This has certainly been good news for the US consumer.  For every $1 that gasoline prices go lower Americans have $100 Billion more in the collective pockets.

Home Depot reported earnings this morning that beat analysts' expectations sending the stock higher.  The company said sales rose 5.4% in the latest quarter driven by sales of bigger ticket items.  The company did warn that future costs will be higher in the aftermath of a widespread customer data breach.  

And shares of Tyson foods fell more than 4% after the company reported 4th quarter earnings that were half of what Wall St. had been expecting.  The company pointed to higher costs after their merger with Hillshire Brands.


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