Company Notes Digest 12.17.16

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.

This week’s piece is a short one, all macro.  We have a larger year end piece in conjunction with this one.

The Macro Outlook:

The Fed raised by 1/4 point

“Today, the Federal Open Market Committee decided to raise the target range for the federal funds rate by 1/4 percentage point, bringing it to 1/2 to 3/4 percent. In doing so, my colleagues and I are recognizing the considerable progress the economy has made toward our dual objectives of maximum employment and price stability” —Federal Reserve Chair Janet Yellen (Central Bank)

Yellen said that they remain accommodative

“And this we said in our statement, policy remains accommodative. The degree of accommodation I would characterize as moderate. As I’ve emphasized and said in the statement, we currently judge the neutral level of the federal fund’s rate to be pretty low. So there is some accommodation.” —Federal Reserve Chair Janet Yellen (Central Bank)

She does not believe that the Fed is behind the curve

“inflation is still operating below our objective. So, I do not judge that we are behind the curve. I’ve– My judgment is that we’re in a good path to reaching our objectives. But of course the outlook is uncertain.” —Federal Reserve Chair Janet Yellen (Central Bank)

There were a lot of questions about Trump, but Yellen was evasive

“I’m not going to offer the incoming president advice about how to conduct himself in policy.” —Federal Reserve Chair Janet Yellen (Central Bank)

“…But nevertheless, let me be careful that I’m not trying to provide advice to the new administration or to Congress as to what is the appropriate stance of policy” —Federal Reserve Chair Janet Yellen (Central Bank)

“I don’t want to weigh in. I don’t intend to weigh in. I haven’t weighed in on either fiscal policy specifics of evaluating policies. I’m not going to weigh in either on the details of particular trade policies.” —Federal Reserve Chair Janet Yellen (Central Bank)

She did question whether more fiscal stimulus was needed

“I believe my predecessor and I called for fiscal stimulus when the unemployment rate was substantially higher than it is now. So, with a 4.6 percent unemployment and a solid labor market, there may be some additional slack in labor markets. But I would judge that the degree of slack has diminished. So, I would say at this point that fiscal policy is not obviously needed to provide stimulus to help us get back to full employment.” —Federal Reserve Chair Janet Yellen (Central Bank)

Her top concern is protecting the Fed’s independence

“I’m a strong believer in the independence of the Fed. We have been given the independence by Congress to make decisions about monetary policy in pursuit of our dual mandate objectives of maximum employment and inflation and that is what I intend to stay focused on and that’s what the committee is focused on.” —Federal Reserve Chair Janet Yellen (Central Bank)

The Fed shares everyone’s uncertainty

“I really can’t tell you what the Fed’s response would be to any policy changes that are put into effect. I wouldn’t want to speculate until I– we’re more certain of the details and how they would affect the likely course of the economy.” —Federal Reserve Chair Janet Yellen (Central Bank)

“we’re operating under a cloud of uncertainty at the moment and we have time to wait to see what changes occur and to factor those into our decision-making as we gain greater clarity.” —Federal Reserve Chair Janet Yellen (Central Bank)

Yellen was also evasive about the stock market

“So, you know, I really don’t want to comment on the level of stock prices. They may have been boosted by expectations about tax policy, possible cuts in corporate tax rates that have been much discussed, or by expectations about growth, possible reductions and downside risk to the economy…But I don’t– I don’t want to offer a view as to whether they’re appropriate” —Federal Reserve Chair Janet Yellen (Central Bank)

Donald Trump loves the stock market’s bounce though

“So I want to add that I’m here to help you folks do well. And you’re doing well right now and I’m honored by the bounce. They’re all talking about the bounce, so right now everybody in this room has to like me at least a little bit, but we’re going to try and have that bounce continue” —President Elect Donald Trump (Government)

Everyone is focusing on the “carrot” of Trump’s policies, but there will be a “stick” too

“we’re being stripped of our jobs…we’ve got to stop it… we’re reducing taxes very substantially for companies so they’re not going to have to leave because of taxes. We’ll be reducing regulations. Now those are the nice ways of doing it and everyone loves it and everyone’s happy…But when a company wants to move to Mexico…or another country and they want to build a nice, beautiful factory and they want to sell their product through our border, no tax…not going to happen that way. And the way you stop it is by imposing a tax…Now, I’ve come up with a number of 35%. There is no tax if you don’t leave. There is no tax at all…You know what’s going to happen?…Nobody’s going to move. They’re not going to move. They’re not going to leave. They’re going to stay here.” —President Elect Donald Trump (Government)

The US doesn’t operate in a vacuum though

“Because we fly the American flag, because we are domiciled in the United States, we are a beneficiary or victim of America’s foreign policy and position in the world. And therefore, wherever we go, the first thing they talk to us is about the United States. What I worry about is that there might be discrimination against American companies overseas, if there is protectionism in the United States” —Pepsi CEO Indra Nooyi (Beverages)

Full transcripts can be found at