Foot Locker’s Revenue Is Loving The Athleisure Trend, Plus Trump’s First Budget Proposal Is Coming Soon

morning brew

Enjoy your February 27th hand-crafted Brew!

QUOTE OF THE DAY

“Our Spanish friends, for example, say: ‘Hang on—that wouldn’t be fair: we carry out reforms and get no haircut and now you’re talking about giving Greece one?!'” — German politician Jens Spahn, arguing against giving Greece a haircut on its (massive) debt. The Germans ain’t no hypocrites, that’s for sure.

Market Snapshot

  • Can’t keep me down: U.S. markets finished higher on Friday despite weaker-than-expected U.S. new home sales and a drop in consumer sentiment. What’s more, the Dow Jones has now posted its longest winning streak since 1992
  • Bond yields fell on Friday to late-November levels. Higher bond prices (which implies lower yields) could signal that some investors believe markets are overvalued

High Kicks

…For Foot Locker (+9.38%) as shares jumped after the company reported Q4 and same-store sales that beat analyst expectations. While the retail industry seems to be slowing down these days, the athletic specialty retailer has been helped by the athleisure trend, with customers buying trendy sneakers for fashion rather than function. The company did note, however, that compared to this time last year, it’s been facing slower sales.

One Big Mess

…For RBS. The Royal Bank of Scotland, one of the UK’s “big four” banks, reported a net loss of $8.7 billion in its earnings release on Friday. This is the bank’s ninth straight year without a profit. How’d it get so bad? Legal bills, flawed takeovers, bad lending…most of these damages come from—surprise!—the aftermath of the 2008 financial crisis, when it required a state bailout. There is light at the end of the tunnel, as many believe that there’s potential for RBS to become a profitable bank again—but, first it needs to clean up this mess.

The Good, the Bad and the Ugly

…Featuring J.C. Penney (-5.83%). First up, the good: on Friday, J.C. Penney reported its first annual profit since 2010. Here’s the bad: it was only a million dollars, mixed in with falling same store sales this quarter. Ending with the ugly: J.C. Penney is joining the ranks of Macy’s and Sears (not exactly a great list right now) as another struggling retailer forced to slash stores. How many? About 140 will bite the dust over the next few months to help J.C. Penney focus its investments in stronger markets.

Get Ready

…Trump’s first budget proposal is coming soon. The long-awaited proposal will be previewed in a policy speech to Congress this Tuesday. What to expect? Here’s a preview of the preview: first, Treasury Secretary Steven Mnuchin said key benefit programs (think Social Security and Medicare) would remain untouched for now. Next, Mr. Trump is expected to cut taxes for the middle class. Finally, the Donald is likely to simplify the current tax code. According to Mnuchin, that means trimming down the number of tax brackets, which theoretically could help “create a level playing field for U.S. companies to be able to compete in the world.” Stay tuned on Tuesday to see how it actually plays out.

Phone Roundup: Commence

…Samsung extinguishes its past struggles. After struggling with malfunctional Galaxy Note 7s, Samsung (+1.89%) plans to release the Galaxy S8 on March 29. Company execs hope to put last year behind them with their first new phone since last February. Best of luck, Samsung.

Apple Explodes

…Well, maybe. After a video of an iPhone 7 Plus (which had spontaneously caught fire) went viral, Apple (+0.10%) has responded by launching an investigation. Whether the concerns with the iPhone are real or fake, Apple’s stock has been trading at record prices. So it’s mostly good news for Apple.

The Keyboard Lives

…And we have BlackBerry to thank. That’s right, Blackberry (+1.12) is making a comeback (another?) with the release of its newest smartphone, the KeyOne. With a subtle mix of a physical keyboard and a touchscreen, the KeyOne is definitely different. Whether or not a physical keyboard is practical—and, perhaps more importantly, will sell—is an entirely different question.

Other Stories

Economic Calendar

  • Monday: Apollo, Hertz, Priceline Earnings; Durable Goods; Pending Home Sales
  • Tuesday: Dominos, Salesforce, SeaWorld, Target Earnings; Case-Shiller HPI; Consumer Confidence
  • Wednesday: American Eagle, Best Buy, Office Depot Earnings; Beige Book; ISM Mfg
  • Thursday: Abercrombie & Fitch, Sears Holding Earnings; Jobless Claims
  • Friday: Staples Earnings; PMI

Water Cooler

Some Hathaway Humor

There were some great highlights from this weekend. Gonzaga was handed its first loss of the NCAA basketball season, the Oscars rolled out their red carpet…and Warren Buffett sent out his annual letter to Berkshire Hathaway shareholders. The 29-page report outlined Berkshire’s performance this year, highlighting $17.6 billion in earnings and $6.5 billion in capital gains. As expected, the 86-year-old billionaire also put his classic twist on the shareholder letter. Here are some highlights:

  • Buffett apparently has a soft spot for Berkshire’s reptile–themed insurance company: “Finally, there is Geico, the company that set my heart afire 66 years ago (and for which the flame still burns).”
  • Berkshire is headquartered in Nebraska, and Buffett seems to have an affinity for the Midwest: “When it comes to wind energy, Iowa is the Saudi Arabia of America.”
  • Finally, in what might be the most notable takeaway, Buffett addresses Berkshire’s worst acquisitions, which were often financed by issuing shares of Berkshire stock: “Today, I would rather prep for a colonoscopy than issue Berkshire shares.” Well said, Warren.

The Breakroom

Trivia Answer

The correct answer is c) Limit Order, and in this case, we’re talking about a Limit Buy Order.

Quick example: if you place a limit order to buy five shares of Apple stock at $100/share, and Apple stock is currently trading at $136/share, the stock price would need to fall to $100 for you to execute your order, or else you would not buy the shares.

If these strategies, the markets and trading get you going, boy are you in for a treat. Our friends over at Flow Traders (a $1.5 billion, Amsterdam-based liquidity provider) are looking for Junior Traders in their New York, Amsterdam and Singapore offices. If you’re interested in trading or working internationally, learn more about them HERE.

Interview Question of the Day

Why are P/E ratios generally higher during times of low inflation? (Answer)

Business Term of the Day

Warren Buffett has warrants to purpose 700 million shares of Bank of America’s common stock at $7.14. So what’s a warrant? A warrant is similar to an option, but unlike an option, it’s issued by a company. An option is an instrument of the stock exchange. They both give the holder the right to buy an underlying security at a certain price, quantity and time, and since the prices of warrants are low, their leverage is often high, meaning that there’s more potential for larger capital gains and losses.

Food for Thought

Fight! Enter Zelle, a real-time payments network working with large banks like JPMorgan Chase and Bank of America. In the other corner: Venmo, which processed $17.6 billion in transactions last year. Zelle has one clear advantage: speed. The money you send to your friend shows up in their bank account in minutes, whereas currently with Venmo, the money is held in their Venmo account. Then again, Venmo is completely free. You decide.

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