FOMC September 2016 Press Conference Notes

Waiting for the time being

“We judged that the case for an increase has strengthened, but decided for the time being to wait for further evidence of continued progress toward our objectives”

Household spending driving growth

“Economic growth, which was subdued during the first half of the year, appears to have picked up. Household spending continues to be the key source of that growth. This spending has been supported by solid increases in household income as well as by relatively high levels of consumer sentiment and wealth. Business investment, however, remains soft, both in the energy sector and more broadly. ”

More people have been looking for work

“The fact that unemployment measures have been holding steady while the number of jobs has grown solidly shows that more people, presumably in response to better employment opportunities and higher wages, have started actively seeking and finding jobs. This is a very welcome development, both for the individuals involved and the nation as a whole. ”

Why didn’t we wait? Because we can deal with inflation more easily than weakness

“Returning to monetary policy, the recent pickup in economic growth and continued progress in the labor market have strengthened the case for an increase in the federal funds rate. Moreover, the Committee judges the risks to the outlook to be roughly balanced. So why didn’t we raise the federal funds rate at today’s meeting? Our decision does not reflect a lack of confidence in the economy. Conditions in the labor market are strengthening, and we expect that to continue. And while inflation remains low, we expect it to rise to our 2 percent objective over time. But with labor market slack being taken up at a somewhat slower pace than in previous years, scope for some further improvement in the labor market remaining, and inflation continuing to run below our 2 percent target, we chose to wait for further evidence of continued progress toward our objectives. This cautious approach to paring back monetary policy support is all the more appropriate given that short-term interest rates are still near zero, which means that we can more effectively respond to surprisingly strong inflation pressures in the future by raising rates than to a weakening labor market and falling inflation by cutting rates.”

Neutral rate is very low currently

“We continue to expect that the evolution of the economy will warrant only gradual increases in the federal funds rate over time to achieve and maintain our objectives. That’s based on our view that the neutral nominal federal funds rate–that is, the interest rate that is neither expansionary nor contractionary and keeps the economy operating on an even keel–is currently quite low by historical standard”

So we don’t have to raise rates much to get to it

“since monetary policy is only modestly accommodative, there appears little risk of falling behind the curve in the near future, and gradual increases in the federal funds rate will likely be sufficient to get to a neutral policy stance over the next few years”

This economy has a little more room to run that previously thought

“my assessment would be based on this evidence that the economy has a little more room to run than might have been previously thought, that’s good news. Remember that inflation continues below 2 percent, although we expect it to move up overtime. So, the Committee agrees that risks to the outlook have become roughly balanced. We expect labor market conditions to continue strengthening. And we are generally agreed that gradual increases in the federal funds rate to remove what is a modest degree of accommodation will be appropriate. But, we don’t see the economy is overheating now.”

The economy has a bit more running room

“I would characterize it as we found the economy has a bit more running room, nevertheless, we don’t want the economy to overheat. And if things continue on the current course, I think that some gradual increases will be appropriate. And mainly, what we discussed today were issues affecting the timing of such increases. ”

We’re struggling with a set of issues about what is the new normal in this economy

” we’re struggling with difficult set of issues about what is the new normal in this economy and in the global economy more generally which explains why we keep revising down the rate path. And, you know, it’s very important that in a body like ours that a whole range of views are expressed that we have independent-minded people who gather together and discuss these issues”

We don’t suffer from group think

“I think it’s a very good thing that the FOMC is not a body that suffers from group think. And you see that, you see that’s one of the, you know, real worries in an organization that everybody thinks identically”

We are an independent agency, and we don’t take politics into account

” I think Congress very wisely established the Federal Reserve is an independent agency in order to insulate monetary policy from short term political pressures. And I can say, emphatically, that partisan politics plays no role in our decisions about the appropriate stance of monetary policy. We are trying to decide what the best policy is to foster price stability and maximum employment and to manage the variety of risks that we see is affecting the outlook. We do not discuss politics at our meetings and we do not take politics into account in our decisions”

We are not seeing evidence that the economy is overheating

“we’re not seeing evidence that the economy is overheating.”

Every meeting is a live meeting

” And November, you asked about as well. Well, every meeting is live and we will again assess as we always do incoming evidence in November and decide whether or not a move is warranted.”

Factors that could contribute to evaluating a change in the neutral funds rate

” I think if you saw us revising up our growth forecast revising down, our estimates well, with an unchanged path for policy, you know. If you saw this, you would see revisions in the funds rate path. But, if unemployment were moving down faster than we had anticipated if we saw a faster growth or upward pressure on inflation that would be suggestive of the appropriateness of reevaluating whether or not the neutral funds rate had increased”

In general we do no see asset valuations as out of line with historical norms although we are a little concerned about commercial real estate

“interest rates both here and in advanced countries around the globe appeared to be very low. And that is an environment that, if we do have to live with that for a long time, we have to be aware that it does give rise to a reach for yield as individuals and investors seek to, perhaps, take on risk or lengthen maturities to seek higher yields. And I think we should be concerned about that to the extent it creates financial stability risks. And we are very aware that those are possible. We engage in regular assessments of financial stability factors that bear on financial stability. Overall, I would say that the threats to financial stability I would characterize, at this point, as moderate. Not– I mean– so, I would characterize it as moderate. In general, I would not say that asset valuations are out of line with historical norms, but there are areas my colleague President Rosengren is focused on commercial real estate where price to rent ratios are very higher, or cap rates are very low. And that’s something that has caught our attention.”

Issued supervisory guidance that is leading to tightening of lending standards in CRE

” We have a variety of tools other than monetary policy to address such risks. We’ve recently issued new supervisory guidance pertaining to commercial real estate. I would say in the area of commercial real estate while valuations are high, we are seeing some tightening of lending standards and less debt growth associated with that rise in commercial real estate prices. ”

Consumer sentiment certainly seems to be solid

” Consumer sentiment is perfectly solid. We’re seeing a lot of strength in consumer spending, and consumer sentiment certainly seems to be solid. ”

Dodging Brexit/POTUS election question

“we are very focused on evaluating, given the way economy is operating, what is the right policy to foster our goals, and I’m not going to get into politics. I’m just– those are factors that we don’t consider and I don’t–I’m not going to get involved in commenting on the election. ”

I agree that there are risks to waiting too long

“I certainly agree and I’ve said myself that there are risks in waiting too long to remove accommodation, and we need to take forward-looking approach. I’ve always advocated making policy based on forecasts of where the economy is heading and taking account of risks. And there are two particular risks that we need to think about in balance. ”

There are risks to inflation running below our 2 percent objective

“On the other hand, inflation is running below our 2 percent objective, and it’s also important that we make sure we get back to 2 percent, and I have routinely indicated a number measures of inflation expectations that are running at the low ends of their historical range, and we’re watching that as well. And there would also be risks from not seeing inflation move back to our 2 percent objective. And exactly how to balance these two risks, which is more serious– which is a more serious risk, can affect one’s judgment about the appropriate timing, and we’re all struggling to understand the magnitude and nature of those two risks. ”

The Federal Reserve is not politically compromised

” The Federal Reserve is not politically compromised. We do not discuss politics in our meetings. I can’t recall any meeting that I have ever attended where politics has been a matter of discussion. I think the public, if they had been watching our meeting on TV today, would have felt that we had a rich, deep, serious, intellectual debate about the risks and the forecast for the economy, and we struggled mightily with trying understand one another’s points of view and to come out at a balance place and to act responsibly”

You will not find any signs of political motivation when transcripts are released in five years

” I have no concern that the Fed is politically motivated, and I will assure that you will not find any signs of political motivation when the transcripts are released in five years. We– I–It is important that we maintain the confidence of the public, and I do believe that we deserve it.”

Of course we’re worried about bubbles, but no one can tell what a bubble valuation is except in hindsight

“Yes. Of course, we are worried that bubbles could form in the economy, and we routinely monitor asset evaluations. While nobody can know for sure what type of valuation represents a bubble–that’s only something one can tell in hindsight–we are monitoring these measures of valuation, and commercial real estate valuations are high. Rents have moved up over time, but still valuations are high relative to rents. And so, it is something we’ve discussed. ”

We have further written down our estimate of longer run normal growth

“We have further written down or estimate of the longer run normal growth rate. And with that reflects is in assessment that productivity growth is likely to remain low for an extended time although, it doesn’t bother and expectation that it will pick up from the miserable half percent pace per year that we have seen over the last five years. ”

Tightness in the labor market is what ultimately drives inflation and pressure on resource utilization

” I think what ultimately drives inflation, both wage and price growth is that tightness in the labor market and pressure on resource utilization. And, the sad fact is that we are getting that healthy pace of job market growth with very slow growth in output.”

I’m not in favor of a whites of their eyes sort of approach because monetary policy operates with lags

” I think the notion that monetary policy operates with long and variable lags, that statement is due to Milton Friedman and it is one of the essential things to understand about monetary policy and it is not fundamentally changed at all. And that is why I believe we have to be forward looking and I’m not in favor of the whites of their eyes rights sort of approach. We need to operate based on forecasts. ”

History doesn’t always replay itself. Inflation not acting like it did in the 70s

” But the global economy and the US economy have changed a lot. History doesn’t always exactly replay itself. Many of the– those of us sitting around the table, we learned the lesson that if policy is not forward looking, that inflation can pick up to highly undesirable levels that inflation expectations can be dislodged upward and the consequence of that can be that endemically higher inflation takes place which it is very costly to reduce. And absolutely, none of us want to relive an episode like that. And so I believe and my colleagues that it is important to be forward looking. We’re going to make that mistake again. But the structure of the economy changes, things do change. The nature of the inflation process is changed I think significantly since the bad days of the ’70s when the Fed had to face this chronic high inflation problem. We’ve seen inflation respond less to the economy, to movements in the unemployment rate that sometimes said the Phillips curve has become flatter. ”

CarMax 2Q17 Earnings Call Notes

CarMax’s (KMX) CEO Bill Nash on Q2 2017 Results

Testing home delivery of cars

“Lastly, we have previously mentioned that we conducted a small test of home delivery. This allows the customers to shop for and buy a car at their convenience without coming into the store. We are now conducting another larger test in Charlotte, North Carolina. Through this test we hope to learn the best ways to further operationalize this offering and deliver our hallmark exceptional customer service experience outside the store. We believe no one is in a better position to deliver as much of the car buying experience online as the customer wants. ”

Haven’t seen a big increase in supply of late model cars yet

“Yes, I think on the supply side I think the expectations were that was going to be coming back more in full force at this point and continue on later into next year and in the year after. We really haven’t seen a big, huge increase in the supply of late model cars. I think there is some coming out there but we haven’t seen the big increase that I think was originally expected and we think it will come, our external partners in the auctions think they will come later this year into next year and even the year after.”

Not surprising to see credit migrating the other way a bit

“we have been in an environment of very favorable, not just we but the overall credit markets in general, have been in a very favorable loss environment for the last few years, the last couple of years at least. And it’s not hugely surprising to see things starting to migrate a little bit differently.”

Auto lending tends to be more regional rather than national

“I think, as you pointed out, we are always looking at testing other lenders, we have got a test running right now but it’s not big enough to talk about. The interesting thing about this space is there is very few national players, it’s like much more a regional space in the financing world. So we can test additional lenders.”

Have seen a reduction in applications from customers below 600 FICO

“what we have observed in the stores is a reduction in those applications, call it the below $600 FICO level and continued increases in the volume of applications on the high end. Now I can’t speak to what other people are experiencing but we have seen some communications from other retailers that this particular segment of customers is a bit challenged today. ”

Disney at Goldman Sachs Conference Notes

Bob Iger – Chairman and CEO

Healthy consumer

“Generally speaking, we actually see a relatively healthy consumer in the United States, we see that through a few different lenses, clearly theme parks is probably the biggest one. And frankly our domestic business both Orlando and California is quite strong and we’ve seen no sign whatsoever of a consumer slowdown or issues with the consumer. And I’d say looking forward the same would be the case not just looking back, we will be more specific when we announce earnings in November but our advance bookings are relatively strong. On the other side we see is consumer products, for us that’s retail mostly that can be cyclical based on product we have in the marketplace but that’s been strong as well.”

Market could be moving to more narrow sports packages

“we think where the market could be going in terms of some of these sports is being able to buy at a very, very selectively, a specific sport, maybe even for a specific season or a specific date or a specific weekend, this is what Sky does in the UK for instance with a lot of its Premier League rights. And we think that that could be really interesting for fans that may not want to buy another bundle of sports rights but maybe want very specific sports that they’re willing to step up and pay for, again provided that gives them mobility and the ability to watch wherever they are.”

Shanghai has been successful

“We’ve had a fantastic opening for Shanghai starting with opening day. We are not updating specific numbers except I can say that had it not been for some typhoon-like weather there last week, the first 100 days of Shanghai would have delivered more in attendance than any park that we’ve ever opened. And in fact it delivered more in the first 100 days than most parks that we’ve opened over the history of our theme parks. ‘

Attracting people from outside of Shanghai

“And by the way, the other thing that we found that was interesting in the 100 days or so that we’ve been open, is we knew that Shanghai was a tourist destination for the rest of China, but our anticipation when we opened was that the attendance would be dominated by people from Shanghai and actually it was dominated by people from China, but outside of Shanghai and what that told us that was really interesting was that the marketing was really effective”

Tent-pole films strategy has worked

“when I got the job that we were going to make fewer films that we’re going to focus on quality over quantity. We had seen some very sobering returns at our studio over the prior decade in both live-action and in animation and looked at the industry and thought that returns in general across the entire US movie business were not impressive, and we thought one of the reasons for that is that too many movies were being made, too many bets being made, too much money being spent on at least at that point of the business that we didn’t think was expanding much with the volume of movies being released. So we said, simply, let’s make fewer and make bigger bets. We also thought that bigger bets, meaning tenfold films had the ability to be leveraged more across the world, particularly as new markets emerged and what’s happened over the last five years in China is a great example of that, tenfold films work really well there.”

29 films from acquisitions have averaged $800m at box office

“I mentioned a statistic like this, but we bought Pixar and closed the deal in 2006. Since then, after we bought Marvel and Star Wars, we released 29 films; make sure I get this right, under the Disney Animation because we turned Disney Animation [indiscernible] bought Pixar. Disney Animation, Pixar, Marvel and Lucas, 29 films since then. The average global box office of each of those films is a hair and I mean a hair under $800 million. So the returns that we talk about and not due to consumer products, but due to the success the direct success of those films and the fact that we’ve figured out not perfect science, obviously, and we have made some mistakes, but we figured out how to improve the odds of making good films and we also have a, you know, we’ve got great talent at our studio led by Alan Horn, but then what we’ve done is we’ve created these individual sub studios, Pixar, and John Lasseter and Catmull and they run Disney Animation, Marvel under Kevin Feige, and Kathy Kennedy running Lucasfilm”

General Mills 1Q17 Earnings Call Notes

General Mills’ (GIS) CEO, Ken Powell on Q1 2017 Results

Sales performance did not meet expectations

“our net sales performance did not meet our expectations due to the challenging macro environment, a difficult year-over-year comparison, and a slower start to the year on certain businesses.’

Total food and beverage retail sales have slowed because price appreciation has decelerated

“We have seen total U.S. food and beverage retail sales slow over the last few quarters. Units have held stable, but net price appreciation has decelerated from adding two points of growth a year ago to adding less than 50 basis points of growth in our first quarter.

12% growth in natural and organic food portfolio

“Now let’s turn to our natural and organic portfolio, where we’ve seen our top line results accelerate recently behind excellent ideas and great execution. For the most recent three-month period, our nine natural and organic brands posted 12% retail sales growth across natural and traditional channels. Annie’s and Larabar have been leading our growth so far this year. Retail sales for the Annie’s categories that existed at the time of acquisition, like mac ‘n cheese, crackers, and fruit snacks, were up 20% in the first quarter driven by continued distribution expansion and progress we’ve made moving Annie’s SKUs into the main aisle.”

Don Mulligan

Sales results did not meet expectations

“our organic net sales results did not meet our expectations. We expect our sales growth to improve in the balance of the year as we see continued growth in certain businesses as we execute a number of consumer first actions across our portfolio. We’ll also lap easier net sales comps in the remainder of the year.”

Tough comparisons

“Over the course of our remarks this morning, we’ll note the businesses that saw particularly challenging comparisons this quarter. ”

Sales down 7%

“Net sales totaled $3.9 billion, down 7% as reported. Organic net sales declined 4%. Total segment operating profit totaled $787 million, down 4% on a constant currency basis.”

Net sales down 8%, 5% excluding green giant divestiture

“U.S. retail net sales declined 8%. The snacks operating unit posted 2% net sales growth driven by excellent performance on Annie’s and Larabar. This was offset by declines in the other operating units. Organic net sales were down 5% from year-ago levels that were up 1%. The difference between reported and organic net sales results in U.S. retail primarily reflects the divestiture of Green Giant in fiscal ’16.”

Jeff Harmening

Focused on things we can control

Well David, this is Jeff. I think as we–as Ken started out his comments, the macro environment is tough. It’s tough globally, but our focus really is on what we control. One of the things that we’ve seen time and again is that when we focus on the things that we can control, we can have a lot of success. Gluten-free is a great example of that in the cereal category.

EGg prices account for a lot of deflation

“Big picture, we see in Nielsen data and certainly I have heard from a lot of our retailers over the last month in my direct conversation with them, is that we see prices deflationary, or the inflation reducing in the store over the course of the last quarter or so. As we look, and Ken shared with you earlier, as we look at the items in grocery that contain the UPC code, we have about half a percent growth – I think it’s 0.4%. A big portion of that is really reduction in egg pricing from a year ago, so if you strip out the pricing on eggs, it’s about 1% inflation, which is pretty consistent with the last couple of quarters. So we had the flu last year and the price of eggs was really high, and it’s a lot lower now, so that accounts for a lot”

Seeing appreciation in our categories though

“I’ve also heard from a lot of retailers about deflation in other parts non-UPC, so the perimeter of the store in things like dairy and meat, but what we’re seeing in our categories really is about 2.5% price appreciation in the first quarter, and that’s what we’re seeing in our Nielsen in our categories as well. “

CBS at Goldman Conference Notes

Les Moonves

More people are watching TV they are just watching it differently

“I appreciated what the gentleman from comScore said, which we wholeheartedly endorse, that more people are watching television today than were watching 15 years ago. They are just watching it in different ways. They are watching it digitally, they are watching it through DVRs and once again we are now accounting them, we are getting paid for them. So the prospects for all those things I mentioned are very good.”

Have 2m OTT subs

“OTT we hit as we mentioned 2 million subs between the two of them this year. We also said by 2020, we expect to have 8 million, 4 million apiece. I think it’s very possible that number could be larger than that. A lot of it is going to be dependent on original content, which we have coming to All Access.”

China is opening up as a real media market

“the opening of China, frankly, before two years ago we were getting nickels and dimes and we used to fondly say that The Big Bang Theory is the number one watched show in China except nobody over here got paid a nickel for it. That it was just out and about and neither Warner Bros. nor CBS got any money for it. Now that marketplace really is opening up and, obviously, it’s a very, very large market.”

Trump isn’t spending as much on ads as people may have thought

“, we have no revenue warnings here. They are probably, to generalize, there’s probably not as much of the top of the ticket because Mr. Trump doesn’t appear to be spending as much as people may have thought. But down below in terms of senatorial, gubernatorial, congressional issues we have five stations in California, five TV stations. The issue spending is tremendous.”

Investors are always nervous that’s what they do

“Investors are always nervous. That’s what they do. They are nervous.”

Categories of spending don’t matter for aggregate advertising

“There’s 99 things that could be good and then let’s talk about the one category that’s – when people ask me about categories like I hear auto is down or pharma is down, I swear to God I don’t pay that much attention to it. Because I’ve been doing this a long time and when auto is down retail is up and pharma – you know what I mean? It’s categories aren’t important. And I think from my vantage point, and we’re still about 50% advertising, the economy is doing great and we’re doing great.”

wall between linear and digital advertising is breaking down

” the wall is breaking down between linear and digital advertising and more and more people want the complete package. We’ve always said if you have a product, certain products are time constrained but that’s a very small percentage of your product. If you are buying Kraft macaroni and cheese it doesn’t matter if the people are watching the show 60 days from now it’s still the same package and still the same macaroni and cheese. At least last I saw it was.”

Basic cable re-run marketplace has come down a bit but that’s more than made up for by SVOD players

” you take most basic cable networks that are doing original, they are doing three or four hours of original programming. So it doesn’t cover a week. So they are still buying a great deal from us. And some of those shows, you turn on Turner, there’s a lot of Big Bang Theory, there is a lot of Big Bang Theory. You turn on USA, NCIS is all over the place over there. So a lot of them are still reliant on that programming. Having said that, yes, the marketplace has come down a bit but more than made up for by the SVOD services who want everything. Who you are able to make the competitiveness of the marketplace because of Netflix and Amazon and Hulu and all those people vying for it makes the backend domestically so much better than it used to be when it was just a basic cable sale.”

Twice as many scripted series today as five years ago and that makes it harder to market

“There are 500 scripted series today and five years ago there were 200. So it’s a lot tougher. 90% of our promotion for our network comes from our network. In other words, you sell to people who watch television. You do buy some outside. So that hasn’t really changed. Is it more competitive? Yes. Are the results harder to qualify? Absolutely. You shouldn’t look at overnight ratings anymore. You shouldn’t even – as I said, the backend becomes more important than the front-end. It’s hard to tell what a real hit is than before and there’s a lot of stuff out there.”

Investors are fickle

“The same and investor one month why are you buying back so much to why didn’t you buy back more. It’s very fickle. We’re going to continue with the same basic plan as we have and as I said we are going to receive some capital from the radio deal and we will use some of that for buyback and some of it to invest back in the business. ‘

KB Home 3Q16 Earnings Call Notes

KB Home’s (KBH) CEO Jeff Mezger on Q3 2016 Results

California reflects ongoing strength along the cost

“The dynamics of the California real estate market continue to reflect ongoing strength along the coast, with rising prices in those areas driving higher demand to the inland areas as buyers seek affordable alternatives. California is a large and diverse economy, one that is showing an accelerating recovery”

Houston market stabilized

“In Houston, as we discussed, we pulled back on our investment in early 2015 until we had more clarity on the impact on demand from falling oil prices, and our community count is now lower as a result. We are now seeing the market stabilize with demand solid at price points below $250,000. We are well-positioned today in Houston with an average selling price of about $230,000 and our net order growth for the quarter returned to positive territory in spite of fewer opened communities.”

Interest rates low and credit availability is expanding

“Economic indicators continue to show general improvement and we remain encouraged by the housing market’s steady recovery. Interest rates remain low and credit availability is expanding, contributing to healthy demand. And with existing home inventory limited and new home starts well below normalized levels, the new home industry is positioned to benefit for the foreseeable future.”

We are seeing strengthening demand in the B submarkets

” we are seeing strengthening demand in what I’ll call the B submarkets. We’re really not looking at the Cs yet, don’t know that we ever will, as long as there’s opportunity in the B. So we’re, within each city, we have a strategy. We’ll target the median income and that submarket. We try to get to the most desirable submarkets with the best balance of demand supply and a median income that can get a mortgage, and that’s where we’ll spend our attention. So we hug the coast in California but we are seeing more business in the inland areas as they recover.”

Biggest order growth areas in inland empire and central cal

” our two biggest order growth areas were Inland Empire and Central Cal. So the inland area is the more affordable place, typically more first time buyer or more affordable first move-up demand in those regions, and that’s what we’re seeing. It’s also where we, in a year ago, had more what I’ll call underperforming communities, whether reactivations or things that just weren’t working that well. So we’re, if you want to say there’s a mix shift going on, I think there is because we’re holding our business in the coastal zones of California, and lifting it inland.”

Underwriting standards continue to migrate towards normal

“Well, if you look at credit profiles of Fannie Mae bonds being sold, the FICO score continues to move down a little bit. So you’re seeing they’re still well above the regulations and guidelines but they are coming down from where they were a year ago or certainly two or three years ago. I think as more submarkets get into a position where more of the homeowners and loans have equity, that the banks are feeling more comfortable in getting back to more normalized underwriting as well. But I would start by looking at the Fannie and Freddie bonds that are being sold because the credit profile is migrating more towards normal underwriting.”

Not going to talk about this quarter yet but solid demand in the last quarter

“The color on the quarter that just finished is pretty consistent through the quarter. We saw solid demand, we saw good traffic levels. And as you could tell by our comments, across the Company, our sales per community were better than they were a year ago. So it’s encouraging, but we’ll speak to the fourth quarter later this year.”

Jeff Kaminski

Very tight labor conditions across the country

Right. What we’re seeing across most of the markets, there’s been very tight labor conditions across the country in most of the markets, particularly in framing labor category and dry wall I guess secondarily. And as the demand ticks up for those services, as we get later in the year, we’re seeing more and more pressure on that side. And we’ve had instances in some of our divisions where some contractors are coming back to us and basically saying they’re going to have to work over time with their folks or that they’re going to need to see some price increases in order to stay on the job. It’s been a very competitive environment out there and we’re trying to hold our build times and obviously complete our homes and deliver those for our expectations. So those are and they have been continuing to be headwinds for us for quite some time.”

FedEx 1Q17 Earnings Call Notes

FedEx’s (FDX) CEO Frederick Smith on Q1 2017 Results

TNT’s express freight capabilities were a key attraction

“The attraction of TNT was many-fold but I have to tell you that one of the key attractions was their unduplicated express rate network in Europe. And of course Europe is a high density of population and their ability to move these pallets very fast throughout Western Europe was a tremendous advantage.”

Thoughts on effects of autonomous vehicles

” In terms of UAVs in particular, we have five separate, I think it would be not fair to call all of them projects but work streams or projects in both aviation and automated vehicles. The difference with us and a lot of other people we’ll just prefer to keep working those issues and tell you about them when they make a meaningful difference in the company. I will say this much. I think our philosophy and we know a lot about these technologies. After all, our auto pilots in our 777 airplanes are among the most sophisticated robots in the world. They can take off, land the plane and taxi to the gate and turn themselves off if that’s what we chose to do so. But it’s very difficult in the foreseeable future to substitute for the well trained pilot or driver or person. And we look at the use of automation more as an opportunity to improve the productivity of those types of experts within our system to make their job more comfortable and easy and above all to increase safety. So those five work streams are underway. You’ll hear a lot about them I’m confident in the next few years. But important in our philosophy maybe slightly different than a lot of other people that think that right over the horizon, everything is going to be an automated vehicle or some sort of UAV. We think that is unlikely and that this technology like most technologies particularly aviation technology will evolve incrementally over time with a great emphasis on safety first.”

T. Michael Glenn

Moderate growth in the global economy

On the economic front, we see moderate growth in the global economy. Our U.S. GDP growth forecast is 1.6% for calendar ’16, 20 basis points lower than our last forecast in the last quarter and 2.3% for calendar ’17 led by gains in consumer spending. Our global GDP growth forecast is 2.2% for calendar ’16, 10 basis points below last quarter and 2.6% for calendar ’17. We expect industrial production to decline 0.7% in calendar ’16, 10 basis points lower than last quarter and increase 2.2% next year.

Raising rates by 3.9%

” we will be raising rates effective January 2, 2017. FedEx Express rates will increase by an average of 3.9%. Rates for FedEx Ground and FedEx Freight will increase by an average of 4.9%. We will also change the dimensional weight divisor for FedEx Express and FedEx Ground from 166 to 139.”

Shift in peak delivery to Mondays

“Beyond just the dramatic rise in volume, there are several other shifting industry dynamics. Holiday promotions and buying patterns have increasingly shifted which has resulted in heavy demand for package delivery on Mondays during the peak. The intensity for demand on Monday has accelerated in recent years, as more and more retail locations have started serving as fulfillment centers for e-commerce orders. We expect each of the four Mondays during the upcoming peak period to be among the busiest in our company’s history.”

Increased demand for larger and heavier packages

“We have also experienced increased demand for transportation of larger and heavier packages. As e-commerce grows, there is demand for online ordering and delivery of everything from large screen TVs to mattresses and trampolines. We’ve engineered our network’s sortation and delivery capacity for these larger packages, including entire temporary facilities dedicated to the sortation of oversized packages, which will be critically important this upcoming peak season.”

Adding 50,000 seasonal workers

“Across the FedEx portfolio, we expect to once again add more than 50,000 seasonal positions to help the holidays arrive. Based upon growth expectations and network expansion, many of these seasonal team members will have an opportunity for full-time work at FedEx after the holidays.”

Alan Graf

Earning projected at $12.35 in FY 17

“According to our corporate outlook based on the moderate economic forecast that Mike discussed and the momentum we have, we project adjusted earnings to be $11.85 to $12.35 per diluted share for FY ’17, which excludes TNT integration, outlook restructuring costs, TNT intangible asset amortization and year-end mark-to-market pension accounting adjustments.”

David J. Bronczek

TNT’s crown jewel was the best ground network in Europe

Yes, this is Dave again. The jewel in the crown always at TNT was the very best ground road network in all of Europe. It’s great service. They have great people, great cost structure. So with that now in our portfolio around the world, customers have always asked us for a solution for e-commerce to move across the world and mainly into Europe. Now we’ll have that opportunity to do that very successfully. Thank you.

Adobe Systems (ADBE) 16Q3 Earnings Call Notes

Adobe had record revenues this quarter

“Adobe delivered another record quarter, with revenue of $1.46 billion; GAAP earnings per share of $0.54; and non-GAAP earnings per share of $0.75. These strong results are a reflection of our market leadership and momentum we have with Creative Cloud, Adobe Document Cloud, and Adobe Marketing Cloud.” Shantanu Narayen – President and Chief Executive Officer

 

Adobe also had a record 23 trillion data transactions this quarter

“Adobe managed a record 23 trillion data transactions. Our customers in every major category of business are utilizing our machine learning algorithms to predict customer behavior and drive their business.” Shantanu Narayen – President and Chief Executive Officer

 

ADBE is at the center of the tailwind that is the digital disruption of marketing

“I mean, people are still talking about digital disruption and how do they help create more personalized experiences for customers, and we are right in the center of that particular tailwind. With respect to the second half of the year, again, it’s playing out as we expected. We told you at the end of Q2 that we had a strong pipeline, which gave us confidence to grow approximately 20% for the year.” Shantanu Narayen – President and Chief Executive Officer

 

The digital marketing space is shifting to multi-solution deals

“Given the breadth of existing customer base, certainly we are up selling all of them to multiple solutions. But whether it’s a new logo acquisition or whether it’s renewals, most of the deals are now multi-solution deals and much larger revenue to Adobe and value to the customer. So hopefully that gives you some color in terms of the number of solutions that they are all adopting and how that’s certainly migrating. To your point, it is a competitive advantage for us most definitely.” Shantanu Narayen – President and Chief Executive Officer

 

Mobile continues to be a key market trend

“Mobile remains a key market trend for this business. Mobile data transactions grew to 52% of total Adobe Analytics transactions in the quarter” Mark Garrett – Executive Vice President and Chief Financial Officer

 

83% of revenue is recurring, which has been a boon to margins

“in 83% recurring revenue model, particularly on the creative side, you are going to over time have less cost of acquisition and you can drive more margin.” Mark Garrett – Executive Vice President and Chief Financial Officer

 

AI and machine learning are becoming an industry buzz, which ABDE has been invested in for years

“there is a lot of conversation right now about machine learning and AI. It’s something that we have invested in for years… And the reality is when we think about Marketing Cloud, it’s not about data collection, it’s all about how we are driving insight and predictive, which is another form of machine learning and that’s what’s really fueled our Marketing Cloud business… It’s going to become something that becomes the industry buzz. We have partly been executed against that for quite a while now.” Shantanu Narayen – President and Chief Executive Officer

 

Sprint (S) at Goldman Sachs Conference 2016 Notes

Every employee has been given equity based incentive, that triggers only if the stock price reaches $8

“Every single employee — over 30,000 employees, we did 30,000 grants. So every single employee has the exact copy of what I — of my incentive package, meaning no equity until the stock hits $8”. Marcelo Claure – President and CEO

 

Prime families are the ideal customer

“Now just putting perspective, a prime customer will stay with you about two and half times more than a subprime customer… And if you could capture that which is what we want, prime families that come more than individuals with a single line, you start seeing the business provide a very different customer life value and profitability changes.” Marcelo Claure – President and CEO

 

Wireless communication industry is aggressively competitive

“I think we’re living in a pretty competitive environment. If you look at Verizon’s advertising, it’s turned a bit aggressive. They hire people to talk about the Sprint network and for also you would be following Verizon, they have not done that I think.” Marcelo Claure – President and CEO

 

iPhone war results in free iPhones

“There is once a year where there is a big launch of iPhones and we all try to basically put up the best offer. I think this year, we are very little creative. I think we all went with a free iPhone. So therefore there is no competitive advantage. So it’s interesting to see Verizon and AT&T react fast” Marcelo Claure – President and CEO

 

Consumers are confused by data plans, and prefer a fixed bill

“And the vast majority say, give me one bill, with a fixed amount that I don’t need to try to figure out how many gigabytes, how many megabyte — maybe you guys are smarter than me, but I don’t know how to use a gigabyte. I don’t know what it really means” Marcelo Claure – President and CEO

 

After years of bashing, PC Magazine gives Sprint some favorable coverage

“I thought the editors of PC Magazine really hated us, they were bashing Sprint for years and if you read PC Magazine today, they have done an awesome piece that basically shows why, yet Sprint is not better than Verizon yet, but we are the story. We’re the comeback story. We’re more reliable than Verizon in certain markets. We’re faster than Verizon in other markets.” Marcelo Claure – President and CEO

 

Sprint believes it has a cost advantage in network structure

“Every single structure comes into a control tower in which we basically figure out what is the most cost efficient and the fastest speed that you can deploy a structure…. We believe that we have a competitive advantage in how we’re deploying our network and what is our cost to basically put a new gear and what’s our cost to operate a network that we feel is not being good but just basically exposing our plan. It’s very different than the way our competitors have deployed networks.” Marcelo Claure – President and CEO

 

Building a network is no longer extremely expensive

“Look at our network today, it’s the lowest CapEx. Now as we densify our network, yes we’re going to increase our CapEx and yes we’re going to increase our OpEx. But never to the tune of the way it’s been done in the past. There is way too many new technologies today. We have way too much spectrum and we’ve been real smart on how we deploy our network.” Marcelo Claure – President and CEO

 

Smaller companies like Sprint favor net neutrality, while its bigger competitors oppose it

“Sprint was the first one that endorsed net neutrality because we believe that when you’re a smaller company, it is not such a bad thing to have the government look over and in many competitive practices that or bigger competitors do.”Marcelo Claure – President and CEO

 

Sprint plans to use its spectrum to get financing

“We have a lot of spectrum and we’re right now — our goal would be that before the end of the year we’re able to potentially basically be able to use spectrum in order to finance the company.” Marcelo Claure – President and CEO

Bank of Japan Monetary Policy Statement 21st September 2016

The bank seeks to control the yield curve

“…the Bank decided to introduce “QQE with Yield Curve Control” …The new policy framework consists of two major components: the first is “yield curve control” in which the Bank will control short-term and long-term interest rates; and the second is an “inflation-overshooting commitment” in which the Bank commits itself to expanding the monetary base until the year-on-year rate of increase in the observed consumer price index (CPI) exceeds the price stability target of 2 percent and stays above the target in a stable manner.”

 

…By influencing both short term and long term rates

“The guideline for market operations specifies a short-term policy interest rate and a target level of a long-term interest rate…The Bank will apply a negative interest rate of minus 0.1 percent to the Policy-Rate Balances in current accounts held by financial institutions at the Bank. The Bank will purchase Japanese government bonds (JGBs) so that 10-year JGB yields will remain more or less at the current level (around zero percent).”

Bond purchase program to continue at current pace

“With regard to the amount of JGBs to be purchased, the Bank will conduct purchases more or less in line with the current pace — an annual pace of increase in the amount outstanding of its JGB holdings at about 80 trillion yen — aiming to achieve the target level of a long-term interest rate specified by the guideline.”

ETFs and REITS are next

“The Bank will purchase exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) so that their amounts outstanding will increase at annual paces of about 6 trillion yen and about 90 billion yen, respectively.”

Easy monetary policy will continue until inflation is sustainably above 2%

“The Bank will continue with “QQE with Yield Curve Control,” aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. The Bank will continue expanding the monetary base until the year-on-year rate of increase in the observed CPI (all items less fresh food) exceeds the price stability target of 2 percent and stays above the target in a stable manner.”

They have more options left

“With regard to possible options for additional easing, the Bank can cut the short-term policy interest rate and the target level of a long-term interest rate, which are two key benchmark rates for yield curve control. It is also possible for the Bank to expand asset purchases as has been the case since the introduction of QQE. Moreover, if the situation warrants it, an acceleration of expansion of the monetary base may also be an option.”

Their outlook going forward: A moderately expanding Japanese economy

“…sluggishness is expected to remain in exports and production for some time, and the pace of economic recovery is likely to remain slow. Thereafter, domestic demand is likely to follow an uptrend, with a virtuous cycle from income to spending being maintained in both the household and corporate sectors, and exports are expected to head toward a moderate increase as overseas economies move out of their deceleration phase. Thus, Japan’s economy is likely to be on a moderate expanding trend. The year-on-year rate of change in the CPI is likely to be slightly negative or about 0 percent for the time being, due to the effects of the decline in energy prices, and, as the underlying trend in inflation steadily rises, accelerate toward 2 percent.”
Full transcript at: http://www.boj.or.jp/en/announcements/release_2016/k160921a.pdf