Company Notes Digest 9.18.15

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Each week we read dozens of transcripts from earnings calls and presentations as part of our investment process. Below is a weekly post which contains some of the most important quotes about the economy and industry trends from those transcripts. Click here to receive these posts weekly via email.

The Macro Outlook:

We talked it over, and we decided not to raise rates

“The recovery from the Great Recession has advanced sufficiently far, and domestic spending appears sufficiently robust, that an argument can be made for a rise in interest rates at this time. We discussed this possibility at our meeting. However, in light of the heightened uncertainties abroad and a slightly softer expected path for inflation, the Committee judged it appropriate to wait for more evidence” —Federal Reserve (Central Bank)

This doesn’t mean we’ve changed our outlook

“Now, I do not want to overplay the implications of these recent developments, which have not fundamentally altered our outlook. The economy has been performing well, and we expect it to continue to do so.” —Federal Reserve (Central Bank)

We just would feel a lot more comfortable if we saw 2% inflation

“I think our credibility hinges on defending our inflation target..So let be clear. 2% is our objective. We want to see inflation go back to 2%.” —Federal Reserve (Central Bank)

But we don’t want to push the economy so far that it gets overheated either

“But there are lags in the impact of monetary policy on our economy. And if we waited until inflation is back to two…we might be faced within having to tighten policy in a way that could be disruptive to the real economy. And I don’t think that’s a desirable way to conduct policy… eventually we will find ourselves with a substantial overshoot of our inflation objective. And then we’ll be forced into a kind of stop-go policy. We will have pushed the economy so far it will have become overheated…I don’t think it’s good policy to then have to slam on the brakes and risk a downturn in the economy.” —Federal Reserve (Central Bank)

So we’re still hoping to start raising rates this year

“I think you can see from the SEP projections that most participants continue to think that economic conditions will call for or make appropriate an increase in the Federal funds rate by the end of this year” —Federal Reserve (Central Bank)

I know everyone is hanging on our every word, and I’m sorry for that

“we’re well aware that there’s been a huge focus on the decision today…I do understand that during this intermeeting period, that every word that an FOMC member has said has been parsed for its potential implications for what our decision will be. I think that’s an unfortunate state of affairs.” —Federal Reserve (Central Bank)

But we’re doing the best we can

“I would ask you to appreciate that there are a lot of cross currents in economic and financial developments that we need to take into account in deciding on what the appropriate course of policy is. And we don’t make continuous decisions every single day about our policy. We meet periodically. We do our darnedest to pull together the best analysis we can.” —Federal Reserve (Central Bank)

Meanwhile in the real economy…

Wells Fargo has given up on waiting for higher interest rates

“Obviously, the subject of interest rates remains very topical and in our own view it has evolved over the last year to more of a lower for longer expectation than in prior periods for both short-term and for long-term rates. As a result, we’ve been adding duration to our balance sheet…We still remain asset sensitive and we’ll benefit from higher rates, but we stopped waiting for higher rates in order to grow net interest income.” —Wells Fargo (Banking)

The Fed’s indecision is inducing real uncertainty for companies

“I think the thing we worry about like everybody worries about is, market instability. What happens with interest rates? What happens with the market? The high end of the food chain you’ve got people heavily invested in the markets. And if markets are in stable, I think that that’s something we’ll worry about. And not a lot we can do about it, just be prepared to deal with it and what’s going to be the effect of rising interest rates? Will it effect big ticket? Will it expect the home buying? We don’t know” —Restoration Hardware (Home Furnishing)

FedEx saw weaker than expected economic conditions

“FedEx Corporation is performing solidly given somewhat weaker than expected global economic conditions, especially in manufacturing in global trade.” —FedEx (Delivery)

Citi is increasing loan loss provisions due to the macro environment

“we do expect cost of credit to be higher versus last quarter driven by additional loan loss reserve bills given the macro environment, although we do not expect to see an increase in net credit losses.” —Citigroup (Bank)

Kroger saw inflation turn slightly higher at the end of the quarter

“actually if you were to look at the very end of the quarter was a slight bit of inflation in the last several weeks. Nothing to write home about. But it was deflationary for the quarter but got less and actually turned a bit towards the end of the quarter.” —Kroger (Grocery)


The Fed is keeping a close eye on China

“with respect to global developments we reviewed developments in all important areas of the world but we have focused particularly on China and emerge markets…The question is whether or not there might be a risk of a more abrupt slowdown than most analysts expect.” —Federal Reserve (Central Bank)

United Technologies isn’t expecting China to improve in 2016

“China, it’s a challenge. I think next year you could China — business in China could be down 10%. Now that’s a big number” —United Technologies (Industrial Conglomerate)


There’s a lot of risk taking going on in the banking industry right now

“frankly there’s a lot of risk taking going on in the industry today and we’re trying to be very, very careful…the one area that I’m particularly concerned about is multifamily. We don’t have a bubble yet but we have an impending bubble…there has been too much risk taking and my view would regard to leverage lending.” —BB&T (Bank)

The riskiest financing is happening outside of regulated banks

“in leverage lending, I think the – the regulatory impact has been that fewer of us in the regulated banking community both Fed and OCC regulated banks are participating in the most aggressive activity.” —Wells Fargo (Bank)

This cycle has seen its fair share of financial engineering

“I think we’ve been rather than creating new cash flows mainly new factories and new products and services, we’ve been spending a lot of time recapitalizing businesses through levered buyouts and that’s long term – that’s not the healthiest thing for the country” —BB&T (Bank)

The Fed is well aware of the effect it could have on housing markets

“of course we recognize that the housing market is sensitive to mortgage rates it is an important factor” —Federal Reserve (Central Bank)

Mortgage credit is just finally opening up again

“So the purchase market has improved, jobs picture has improved, availability has improved, credit I think is widely available” —Wells Fargo (Bank)


It’s really hard to be a CMO today as audiences have fragmented

“There’s so many ways to address marketing spend today. And I’d say that the hardest job in America today, and in any company is probably going to be the Chief Marketing Officer. It’s probably why we don’t have one.” —Restoration Hardware (Home Furnishing)

40% of millenials do not have TV and another 20% are thinking of cutting the cord

“40% of millennials do not and have never had a TV in their home and another 20% have said they have got it, but they don’t use it that much and they are considering cutting it.” –Verizon (Telecom)

Disney’s COO thinks the market has overreacted to disruption in the media space though

“I think the short answer to your question is yes, I think the market overreacted. We are confident in our programming services ability to thrive” —Disney (Media)

Ford is repositioning it’s European branding to have more emotional appeal as features become less of a differentiator

“On the brand side, we want to really move to brand much more to emotional space. In the past, we’ve been trying to compete on technology. And although that’s very important for customers in Europe, it’s become less of a differentiator in the space that is unique to Ford.” —Ford (Auto)


Cable companies will be able to increase internet speeds as bandwidth is repurposed from TV to broadband

“There is a roadmap as television goes more IP. And you reclaim analog and digital bandwidth and apply it to broadband. We have a roadmap where we recently have announced we are going to go to 2 gigabits a second in certain locations.” —Comcast (Media)


States are more likely to expand medicaid coverage after 2016 once the issue isn’t so politically charged

“I don’t see much movement until post-2016 election, once we have someone else as President and the office maybe Medicaid expansion becomes something that’s more state-driven rather than considered Obama Care.” –HCA (Hospitals)


GM is taking costs out of production by reducing material use

“We are actually working hard to take mass out of the vehicle and talk is interesting, but on the Chevy Malibu, we pulled 300 pounds old Malibu to new Malibu out, less weight, in most cases, equals less cost.” —General Motors (Auto)

A manufacturer is only as good as its worst supplier

“People always ask what’s the one thing that keeps you up at night, it’s the ramp. The technology, I’m very confident we’ve got that right but you’re only as good as your worst supplier. When you got 8,000 parts in an engine, one of those aren’t there, you’re not building the engine.” —United Technologies (Industrial Conglomerate)

A recent NLRB decision could affect small businesses all over the US

“I have to say the recent actions by the NLRB are concerned and should be of concern to every business in America, whether it’s a large business or small business…The BFI decision if it stands will discourage companies from contracting with many small and minority owned businesses. And these are the businesses that are the very heart of the U.S. economy.” —FedEx (Delivery)

Materials & Energy:

There are a lot of investors searching for bargains in basic materials companies

[analyst comment] “Yesterday was a big day for us actually for what it’s worth, those keeping track, I mean, the rooms are certainly more full than we’ve seen them actually. We are – attendance was up about 45% for our first day, yesterday. So apologize if there are logistical issues, because it’s a bigger crowd than even we had expected, but it’s a nice problem to have.” –Credit Suisse (Investment Bank)

Miscellaneous Nuggets of Wisdom:

There is no single magic metric that you can use to manage a business

“I think if you get overweigh to only managing your business on one metric or another you are going to run into trouble.” —Citigroup (Bank)

Devote yourself to a pursuit in which you will either succeed or die trying

“If we do one thing or die trying what would we do, we debate a hell out of that and then we pick one, and we align on that as an organization, as a team.” —Restoration Hardware (Home Furnishing)

Full transcripts can be found at