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There is definitely some fallout from the DATA (and LNKD) earnings flops, ELLI amongst them:
A long list of enterprise software and security tech names are off sharply after business intelligence/analytics software upstart Tableau (down 45.3%) reported slower-than-expected license revenue growth and issued below-consensusQ1/2016 guidance.
Also possibly weighing: LinkedIn (down 39.6%), which derives a large % of its revenue from cloud-based recruiting and sales tools for enterprises, issued weakQ1/2016 guidance.
Given the magnitudes of the drops, margin calls and forced selling by funds could be playing a big role. The Nasdaq is down 2.2%.
Tableau suggested its growth slowdown has to do with softening IT spend and a need to improve sales productivity, but analysts have raised questions about competition from the likes of Microsoft, Amazon, and Qlik. LinkedIn forecast a growth slowdown for its field sales hiring solutions business, while blaming European/Asian macro pressures. The company also noted its display ad business continues declining amid weak industry growth.
Major enterprise software decliners include Splunk (SPLK -23.7%), Workday (WDAY -15.1%), Adobe (ADBE -7%), Zendesk (ZEN -15.2%), ServiceNow (NOW-13.6%), NetSuite (N -12.4%), Salesforce (CRM -11.2%), Paycom (PAYC-10.6%), Ellie Mae (ELLI -11.5%), Cornerstone OnDemand (CSOD -7.8%), Veeva (VEEV -7.7%), Ultimate Software (ULTI -9%), Luxoft (LXFT -7.5%), Manhattan Associates (MANH -8.5%), Box (BOX -6.6%), Guidewire (GWRE -13.6%), Demandware (DWRE -9.3%), Hortonworks (HDP -9.7%), and Tableau rival Qlik (QLIK -16.6%). The casualty list includes many cloud software firms, as well as several analytics software plays.
Major decliners among security tech firms: Palo Alto Networks (PANW -12%), FireEye (FEYE -8.9%), Rapid7 (RPD -8.6%), CyberArk (CYBR -8.3%), Proofpoint (PFPT -8%), Imperva (IMPV -8.3%), Fortinet (FTNT -6.9%), and Vasco (VDSI-5.1%). The selloff comes in spite of an FQ3 beat and in-line FQ4 guidance from Symantec, which has been losing share to various upstarts.
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Just out, here are the dreaded figures about China's decline of forex reserves in a bid to prop up the yuan..
China's foreign reserves fell for a third straight month in January, as the central bank dumped dollars to defend the yuan and prevent an increase in capital outflows. China's foreign reserves fell $99.5 billion to $3.23 trillion in January, the lowest level since May 2012, central bank data showed, but higher than the median forecast of $3.20 trillion from economists surveyed in a Reuters poll. The size of the drop was second only to the $107.9 billion fall in December, the largest monthly decline on record. The central bank has intensified efforts to prop up the yuan after it staged a surprise devaluation in early August. China's reserves remain the world's largest despite losing around $420 billion in the last six months. In 2015, they fell by $513 billion, the largest annual drop in history.
China FX reserves fall almost $100B to lowest since May 2012
Not as terrible as feared, but hardly reassuring
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Hadn't seen this one, from Blanchard, no less (just ended his stay as a highly successful chief economist of the IMF):
Are stocks obviously overvalued? The answer is no, and the reason is straightforward. While growth has indeed been weaker than forecast, the rate of return on bonds has also been revised downwards. And what matters for the valuation of stocks is the relation between future growth and future interest rates. Put another way, the equity premium, the difference between the expected rate of return on stocks and the expected rate of return on bonds, has if anything increased relative to where it was before the crisis.
RealTime Economic Issues Watch | Are US Stocks Overvalued?
The last two sets of rows give the equity premium, defined as the difference between the expected rate of return on stocks and the expected rate of return on bonds. In all six cases, the equity premium is higher in 2015 than in 2005. Put another way, stock prices were more undervalued in 2015 than they were in 2005, and after the decline of the past few weeks, even more so.4 You may disagree with the assumptions about dividend growth, and find them wildly optimistic. Or you may disagree with expectations embodied in the yield curve, and believe that real interest rates will be much higher in the future, reflecting higher real rates or higher term premiums.5 But, if you accept current forecasts, and you accept the notion that stocks were not overvalued in the mid-2000s, then you have to conclude that stocks are not overvalued today.
RealTime Economic Issues Watch | Are US Stocks Overvalued?
That is somewhat reassuring, but only somewhat. We see many risks in the world economy:
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Deflationary forces like excessive debt levels and accompanied deleveraging, large and persistent output gaps leading to hysteresis effects (the decay of future production capacity as a result of a reduction of the quality and quantity of production factors due to idleness)
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No obvious motor for the world economy, China's growth deceleration, oil not turning out as a net benefit
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Central bank policies being ineffectual as even in the US, the private sector has a huge financial surplus despite zero interest rates
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Eurozone an accident still waiting to happen
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Processes are feeding on themselves. Low growth and lowflation worsening debt dynamics, leading to more delevaraging, larger output gaps, worsening balance sheets, etc.
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New article, agreed, the title is a bit dramatic..:
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Debt has exploded almost everywhere.
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Combined with low inflation and low growth, it risks ratcheting up further, greatly increasing the risk of debt-deflationary cycles.
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Debt deflation and other forces are threatening the long-term dynamism of economies, not a conducive environment for investors.
Capitalism Is Grinding To A Halt | Seeking Alpha
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Maybe these Chinese capital outflows are not all bad news:
While estimates of the sources of the hard-currency outflows differ, much of the total is thought to be pay-downs of foreign debt. A much bigger threat -- "the dam that the PBOC must make sure doesn’t break," according to Frederic Neumann at HSBC Holdings Plc -- would be an exodus of funds from domestic investors. "The worst fears of cascading capital flight have not come to pass," Tom Orlik, a Bloomberg Intelligence economist, wrote after the reserves report on Sunday, noting that the drop was less than some had anticipated. "Households are not maxing out their $50,000 annual quota for FX purchases." That puts a premium on maintaining confidence in the outlook
Holding Back China's Capital Flight ‘Dam’ Is Key - Bloomberg Business
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New article:
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The unprecedented leveraging up of the world economy is unsustainable and threatens to unravel or at least produce protracted slow growth in the world economy.
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The resulting deleveraging is also rendering monetary policy ineffective.
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As one of very few countries, the US has managed to deleverage at least to some extent, and relatively painless.
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But the US is merely the cleanest dirty shirt around, and not immune from the deleveraging elsewhere in the world.
The U.S., The Cleanest Dirty Shirt, But For How Long? | Seeking Alpha
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Perhaps some countervailing power against all the pessimism, from Goldman Sachs:
Tell-tale signs of late-cycle excess have yet to emerge in the US or Europe. There is plenty of economic slack and credit growth is muted. The US investment bank said the global stock market rout and the credit tremors this year are sending off false signals, insisting that underlying indicators of economic health show little sign of a sudden rupture in Europe, the US or across the OECD bloc of rich states. An array of “alarm” indicators - based on the experience of 20 countries since 1970 - suggest that the current business cycle is still in full swing and far from exhaustion, even if risks have been ratcheting up over recent months... Credit ratios are high but they have not been spiking higher in most OECD states, and there is still plenty of slack left in the economy. This allows central banks to take their time before having to slam on the brakes – the time-honoured cause of recessions. Jan Hatzius, Goldman’s chief US economist, cited a string of episodes where markets were gripped by fear and emotion yet the storm passed without doing much damage.
Goldman Sachs sees near-zero risk of UK recession despite market tantrum - Telegraph
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From Zacks:
Here is the roll call of world markets already in bear territory:
-21.0% England
-23.2% Japan
-24.3% France
-28.3% Germany
-32.5% Hong Kong
-46.7% China
I know what you are saying. The US is healthier than these other guys. So let me show you what US stock indices are already in bear market mode.
-24.1% Dow Jones Transportation
-25.6% Russell 2000
-26.1% KBW Nasdaq Bank Index
So yes, the S&P 500 is only down -13.2% from the peak.
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Sketchers (SKX), one of the companies we're holding here has just produced figures:
Record Annual Sales of $3.147 Billion Record Fourth Quarter 2015 Net Sales of $722.7 Million, an Increase of 26.8 Percent Fourth Quarter 2015 Earnings from Operations of $54.7 Million, an Increase of 65.7 Percent Fourth Quarter 2015 Net Earnings of $29.4 Million Fourth Quarter 2015 Diluted Earnings Per Share of $0.19
SKECHERS Announces Fourth Quarter and Fiscal Year 2015 Financial Results | Seeking Alpha
They are pretty good, but will do little to lift the stock price. Earnings slightly below, revenue firmly above expectations. Guidance or special items could move the needle
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Taxes and especially foreign currency losses responsible for the slight earnings miss by Sketchers, but all in all solid figures.
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