Down is up and up is down at this point in earnings season.
Take, for instance, the flight to bonds after the latest Federal Reserve statement garnered a significant amount of attention. In my view, it reflected several things that led to one conclusion: The Fed may not raise rates at all this year, and is actually more accommodative than its "patient" guidance depicts.
For starters, the nod to international macro volatility suggested the Fed may not want to deviate too far from the European Central Bank's QE actions last week. Sure, wiping up international messes is not part of the Fed's mandate, but it's how the market interprets the musings from the governing body that are important. In fact, I think it was an outright signal that if dreadful macro trends in Europe persist, and slowing demand in China gets slower, both of which could blow back on our shores, the Fed stands ready to re-launch a small-scale QE program.
Compounding this is the deflationary death spiral we find ourselves in here at home due to Apple's (AAPL) technological advances (read that earnings call from Tuesday night, they are increasingly making the workplace more productive, the deal with IBM (IBM) will be a big boost) and the creation of minimum-wage and temporary jobs. The market honestly does not buy into inflation coming anywhere near the Fed's 2% goal in 2015, and that means either no rate hike this year or, yes, additional QE is possible to reignite asset prices and prime the inflationary pump.
The Fed basically acknowledged that its inflation target is garbage:
Inflation has declined further below the Committee's longer-run objective, largely reflecting declines in energy prices. Market-based measures of inflation compensation have declined substantially in recent months; survey-based measures of longer-term inflation expectations have remained stable.
Inflation is anticipated to decline further in the near term, but the Committee expects inflation to rise gradually toward 2% over the medium term as the labor market improves further and the transitory effects of lower energy prices and other factors dissipate.
How Apple Is Influencing Retail
Talking to Whole Foods' (WFM) CEO Walter Robb in mid-November (full interview here), I should have paid more attention to his bullishness on Apple Pay. The mobile checkout platform is seriously benefiting average check size and line through-put (at least that was my interpretation). It got me to thinking how Apple is changing the retail business beyond its fancy, giant stores outside the mall.
Apple Pay: The system is making it easier for people to pay at the aforementioned Whole Foods and other early adopters (step up, Wal-Mart (WMT), and adopt Apple Pay). That ease of use is improving one's perception of customer service, and raising the likely future purchase intent. Furthermore, Apple Pay is removing physical interaction with cash and debit cards, which leads to higher amounts spent at retailers. Wait until Apple removes the need to scan an iPhone, iPad or Apple Watch to access pay via Apple Pay.
Apple Watch: The fancy smartwatch will force retailers to rethink their marketing plans to reach people in real time on their wrists. Expect retailers to come out with alerts that trigger sensory movements on your body. Creepy, I know.
Apple retail stores: The newer stores being opened by Apple's retail chief, Angela Ahrendts, will likely be infused with real-time experiences (think digital walls, streaming content), causing other retailers in the mall and off mall to rethink their store designs and layouts. In other words, Apple is causing a higher rate of capex spending by retailers that have the funds, and wherewithal, to invest in their futures.
Shake Shack IPO
I know you are lusting for a taste of the Shake Shack IPO when it opens for trading. In your mind, the burger chain is the next Chipotle (CMG), a pioneering company with a surging share price five years down the line. Although Shake Shack shares will probably be bid up aggressively on IPO day due to historically hearty appetites for new restaurant issues that offer growth, be advised that the company is not the next Chipotle or McDonald's (MCD).
Shake Shack enters an industry chock-full of better burger businesses and chains doing healthier fast food, such as Chipotle and NYC's Dig Inn. Competition is much fiercer than when Chipotle, Starbucks or McDonald's burst onto the scene.
Tupperware 2.0
I had a great conversation with Rick Goings, the longtime CEO of Tupperware (TUP), for a piece now live on TheStreet's homepage. Very interesting company, and very engaged executive. The company will be hosting an analyst event in NYC on Feb. 25 where it intends to showcase a host of new products and share insights on its revised approach to direct selling. I think you have to be long the stock into the event, in spite of the earnings-related pop on Wednesday, especially because the dollar could weaken a little post-Fed decision. Tupperware expects a whopping 83 cents a share head wind to earnings this year from a stronger dollar; a weakening may lead to the Street perceiving an upside to guidance later on in the year.
