Yesterday, the market sold off on disturbing news out of Canada. A lone psycho who recently converted to Islam decided to take matters into his own hands. He murdered a soldier and grazed a solemn monument, not unlike our Tomb of the Unknown Soldier. The frantic search and realization ISIS and other terrorists can reach North America directly or through sympathizers is unsettling. Yet, it is something we have come to understand and hopefully become more prepared. Not all such attacks will be carried out by drug- addicted losers, so vigilance and preemptive police work is crucial.

On that note, I can only hope its influence on the stock market does not spill over into today's session. In the end, terror is only successful when people live in fear.

That's a lot of Dough for a Broke Country?

Let's revisit a potential spending boom... there are intriguing signs that Main Street is tired of austerity and is ready to join their rich friends and live a little.

Tuesday, Harley Davidson posted strong earnings in part to a 3% jump in sales of hogs in America.

Harley Davison’s earnings were followed by a report from Polaris yesterday which had great results across the board.

• Off-road business $823 million, +17%
• Snowmobiles $163 million, +13%
• Motorcycles $63 million, +28%

Fewer things speak of "play money" compared to an off- road vehicle and snowmobiles.

For consumers to start buying these things, they will either throw caution to the wind or feel better about their economic circumstance.

FedEx reported this morning that it expects to ship 290 million packages between Black Friday and Christmas Eve, up 8.8% from a year ago.

The question is, where is all this cash coming from? Well, people are going to have to dip into their savings; however, we could be on the cusp of another refinancing boom? In 2012, home refinancing added $1.2 trillion to the economy, which declined to $818 million last year, and until recently, was estimated to tumble to $358 million this year.

Look at what is happening; the last couple of weeks, refinancing (refi) applications are soaring again at the same point they turned in 2002, 2006, and 2009.

Investing 101 (Income Statement)

How to Read Income Statements & Peer Review

Mattel vs. Hasbro

The market and investing is all about trends, and it is pretty clear in the toy business which company has the wind in its sails. Hasbro (HAS) beat earnings estimates in three of the last four quarters, including a huge beat on Monday, while Mattel (MAT) has missed consistently.

• Always begin with top-line growth and the cost of revenue.
• Global success is critical to most large publicly traded companies these days.
• Make sure companies are not cutting back on advertising or in certain industries, or in research and development. In Mattel’s presentation to analysts, they bragged about lower advertising and called it savings.
• I’m all about margins – not the absolute number, but rather the direction they’re moving in… Mattel’s margins are better than Hasbro, but the latter’s are improving rapidly while Mattel’s are spiraling lower.
• This takes us to earnings per share, the ultimate check on the checklist.

 

Peer Review Income Statement	Hasbro	Mattel
Earnings Trend	Beat 3/4 Quarters	Missed 4/4 Quarters
Revenue	+7%	-7%
Cost	41%	49.5
US/Canada	+4%	-7%
International	+11%	-7%
Advertising	+8%	-12%
Operating Margin	19.4/14.5	20.3/23.9
Earnings Per Share	$1.40 +46%	($0.24) -20%

Interesting Trends

Business with boys is fueling Hasbro, while Mattel’s old standby, Barbie is floundering big-time and its recent hit, The American Girl, may have run out of steam.  

Peer Review Income Statement	Hasbro	Mattel
Girls	+5%	Barbie -21% American Girl -7%
Pre-School	-7%	Fisher Price -16%
Boys	+22%	-12%

Today’s Session

Today is the busiest day of the week for earnings releases. There were many companies able to deliver on both the top and bottom lines including Alaska Air, Caterpillar, and Dr. Pepper Snapple. The strongest earnings reports from this morning should help boost the market in this session. With earnings beats from 3M Company and Catepillar, the Dow is indicating higher by triple digits. The markets should also be boosted by a stronger-than-expected weekly jobless claims report.

Company	Ticker	EPS (Actual)	EPS (Est)	Rev (Actual $M)	Rev (Est $M)
AT&T**	T	0.63	0.64	$32,957.00	$33,174.81
Cheesecake Factory	CAKE	0.48	0.57	$499.10	$497.03
Logitech International*	LOGI	0.31	0.17	$530.30	$526.22
Skechers USA*	SKX	1.13	0.91	$674.30	$626.64
Weatherford	WFT	0.32	0.33	$3,877.00	$3,983.46
Yelp	YELP	0.05	0.03	$102.50	$98.95
3M**	MMM	1.98	1.96	$8,137.00	$8,223.70
Alaska Air*	ALK	1.47	1.42	$1,470.00	$1,463.40
American Airlines	AAL	1.66	1.64	$11,140.00	$11,136.15
Arctic Cat*	ACAT	1.44	1.17	$262.50	$253.26
Cabela's	CAB	0.81	0.86	$886.00	$928.46
Caterpillar**	CAT	1.72	1.34	$13,549.00	$13,187.01
Celgene	CELG	0.97	0.94	$1,982.20	$1,954.53
Comcast	CMCSA	0.73	0.71	$16,791.00	$16,821.61
Dr Pepper Snapple*	DPS	0.98	0.88	$1,580.00	$1,541.02
Dunkin Brands	DNKN	0.49	0.47	$192.60	$197.05
Eli Lilly	LLY	0.66	0.67	$4,876.00	$4,836.28
General Motors	GM	0.97	0.93	$39,300.00	$38,592.84
JetBlue	JBLU	0.24	0.26	$1,529.00	$1,543.15
Lorillard	LO	0.90	0.89	$1,424.00	$1,325.33
Mead Johnson Nutrition	MJN	0.93	0.90	$1,090.70	$1,079.98
Potash*	POT	0.38	0.42	$1,641.00	$1,570.05
PulteGroup	PHM	0.37	0.36	$1,594.70	$1,594.03
Raytheon	RTN	1.65	1.60	$5,474.00	$5,610.93
Royal Caribbean	RCL	2.20	2.19	$2,390.00	$2,401.94
Southwest Air	LUV	0.55	0.53	$4,800.00	$4,796.03
Under Armour	UA	0.41	0.40	$937.91	$924.21
Union Pacific	UNP	1.53	1.52	$6,182.00	$6,102.38
United Continental	UAL	2.75	2.68	$10,563.00	$10,586.82
Yandex N.V.*	YNDX	0.31	0.28	$331.50	$327.51

                                                * = Open WSS Idea        ** = Dow Component

Jobless Claims

Though jobless claims came in lower than expected at 283,000 (vs consensus at 285,000) for the week ended October 18^th, this may not be the greatest sign for the October employment report. Initial jobless claims rose approximately 6.0% from lows of an upwardly revised 266,000 the week before. Prior to today’s readings, initial jobless claims were steadily trending lower in October, which can be observed in the 4-week average which is at a 14-year low after falling 3,000 to 281,000. Continuing claims data which lag by a week fell by 38,000 to 2.341 million, also at a 14-year low.

The 4-week average also decreased, down 23,000 to 2.381 million. As a result, the unemployment rate for insured workers remains steady at a recovery low of 1.8%. Overall, the report is a good sign for the economy, but lowers expectations for the October employment report.

 

We would like to see the rebound hold, but out of the gate, we’re not too sure where it will go.

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