>>> HNI beats by $0.02, beats on revs; guides Q4 revs below consensus; lowers FY

HNI beats by $0.02, beats on revs; guides Q4 revs below consensus; lowers FY17 EPS below consensus; guides FY18 EPS below consensus (42.29 -0.57)
  • Reports Q3 (Sep) earnings of $0.82 per share, excluding non-recurring items, $0.02 better than the Capital IQ Consensus of $0.80; revenues rose 2.5% year/year to $599.5 mln vs the $585.07 mln Capital IQ Consensus.
  • Co issues guidance for Q4, sees EPS of $0.38-0.45, may not be comparable to $0.96 Capital IQ Consensus Estimate; sees Q4 revs of flat to +3% or ~$581.3-498.74 mln vs. $601.17 mln Capital IQ Consensus Estimate.
  • Co issues downside guidance for FY17, sees EPS of $1.88-1.95 (prior: $2.35-2.55), excluding non-recurring items, vs. $2.45 Capital IQ Consensus Estimate.
  • Co issues downside guidance for FY18, sees EPS of $2.15-2.65 vs. $2.98 Capital IQ Consensus Estimate.
    • Consolidated organic net sales up 2 to 5 percent.
  • "We are expecting a significant decline in our fourth quarter profit as we work through two major challenges. First, we continue to confront highly dynamic conditions in our supplies-driven office furniture business, resulting in increased investment and lower near-term sales. Second, our operational transformations have been more difficult than anticipated, resulting in higher costs. We are confident in our ability to meet these challenges. Our supplies-driven business has market access, brands, and scale unmatched by its competition, even in this new environment. We are establishing direct service capabilities which will provide economic advantages to our dealer partners with improved responsiveness and delivery. We are confident we will stabilize our transformations and return to driving cost improvements and continue to grow the top line," said Mr. Askre

>>> Intercept Pharma announces positive results from phase 2 AESOP trial evaluat

--> ICPT +2.70%

Intercept Pharma announces positive results from phase 2 AESOP trial evaluating OCA for the treatment of patients with primary sclerosing cholangitis at The Liver Meeting 2017; OCA met the primary endpoint of alkaline phosphatase reduction at 24 weeks (65.60 -1.25)
  • OCA achieved the primary endpoint of the AESOP trial: patients receiving 5 mg of OCA daily with the option to titrate to 10 mg achieved a statistically significant reduction in alkaline phosphatase (ALP) as compared to placebo at week 24 (p<0.05). The results from this dose-ranging study suggest that 5 mg may be the optimal titrated dose of OCA in this patient population. Patients in the OCA 1.5-3 mg group also achieved statistically significant reductions in ALP versus placebo as measured by LS mean percent change from baseline at week 24. By week 24, ALP increased 1% in the placebo group and decreased by 22% in both the OCA 1.5-3 mg and OCA 5-10 mg groups (p<0.05).
  • There are currently no approved medications for PSC. Some patients are treated with ursodeoxycholic acid (UDCA) even though the AASLD treatment guidelines for PSC recommend against its use. In AESOP, a significant proportion of patients used UDCA, with 48%, 48% and 46% of patients on placebo, OCA 1.5-3 mg and OCA 5-10 mg, respectively, receiving UDCA at baseline.

Reuters - Big money stays away from booming bitcoin

Big money stays away from booming bitcoin

LONDON (Reuters) - Bitcoin is booming, digital currency hedge funds are sprouting at the rate of two a week and the value of all cryptocurrencies has surged tenfold this year to more than $170 billion.


Yet for all the hype, mainstream institutional investors are steering clear of the nascent market, taking the view that it is too lightly regulated, too volatile and too illiquid to risk investing other people’s money in.

Bitcoin, the biggest and most well-known cryptocurrency, has outperformed all the world’s traditional currencies each year since 2011, except for 2014. But many investors still view it as an opaque, esoteric instrument used by gun-runners and drug-dealers on the Dark Web that should be avoided.

This year, though, a flood of new hedge funds focused on cryptocurrencies has offered institutional investors who might be unfamiliar with the market a potential route into the world of digital currencies.

According to Autonomous NEXT, a financial technology research house, 84 so-called crypto hedge funds have been launched this year, taking the total to 110 with about $2.2 billion in assets altogether.

But the fact most of the funds are relatively small with a limited track record - and that cryptocurrency price swings have been so pronounced - means the world’s pension funds, insurance companies and large mutual funds are staying away.

“While cryptocurrencies are probably here to stay, they are difficult to analyze, wildly volatile and some may be prone to fraud,” said Trevor Greetham at Royal London Asset Management (RLAM), part of the Royal London life insurance company.

“Diversification is a good thing but that doesn’t mean investing in everything just because it’s there. We favor assets with a long track record in producing returns or reducing risks,” said Greetham, who heads RLAM’s multi asset team.

For a graphic on top cryptocurrencies, click tmsnrt.rs/2gWgyLc

Autonomous NEXT partner Lex Sokolin said there were probably only a couple of funds worth several hundred million dollars with most in the $5 million to $20 million range - well below the threshold most institutional investors would consider.

“For many institutional, discretionary fund managers, those funds wouldn’t get cleared because the big question would be around liquidity,” said James Butterfill, head of investment strategy at ETF Securities in London.

‘BUBBLES, BOOMS AND BUSTS’

One way mainstream money managers could get exposure is by investing in a basket of hedge funds that includes a crypto fund. But the head of hedge funds at a major European bank that invests in more than 100 hedge funds said there were no crypto funds in his portfolio.

“It’s a very controversial proposition,” said the banker, who declined to be named. “It’s unlikely that the most established hedge funds will make big bets on this because you could put your core business at risk.”

Determining the value of bitcoin and other cryptocurrencies is tricky. There are almost 17 million bitcoins in existence now but the total supply is limited to 21 million, and that won’t be reached until the next century.

Bitcoin’s total value, or market capitalization, is close to $100 billion, bigger than U.S. investment bank Morgan Stanley. At the start of the year it was just $15 billion. Ethereum, the second-biggest cryptocurrency, is now worth almost $30 billion.

“If the supply is truly fixed then the price of these securities are determined purely by demand which, in turn, is determined largely by sentiment,” said Ken Dickson, investment director, money markets and FX at Aberdeen Standard Investments.

“This means huge price swings with bubbles, booms and busts. Unless the supply processes of these instruments are reformed then it is unlikely that they will play any part of an investment portfolio,” he said.

Bitcoin has been on a rollercoaster ride this year. After hitting what was then a record high just below $5,000 in early September it lost about a third of its value in less than two weeks. It has since almost doubled in price again, to new highs near $6,000.

Ethereum has been even more erratic. Its price surged almost 50 times from the start of the year to June, before falling back by about a fifth, according to industry website CoinDesk.

That kind of volatility means committees at institutional investment firms looking at the relative risks of asset classes are likely to rule out cryptocurrencies, asset managers said.

“Your risk-budgeting committee will say: you can’t hold a lot of that because of the amount it increases risk in your portfolio,” said Butterfill. “I do expect volatility to decrease over time but risk budget teams tend to look historically.”

EARLY DAYS

For now, those investing in crypto funds are high-net worth individuals, companies managing money for wealthy families, private wealth managers and some venture capital investors.

“It’s clear there’s money piling into these funds,” said Emad Mostaque, co-chief investment officer at the London office of South African hedge fund firm Capricorn Fund Managers. “There’s just not that institutional investor comfort yet.”

Alistair Milne, co-founder of the Mayfair-based Altana Digital Currency Fund, likens investment in crypto funds to the start of the hedge fund boom in the early 1990s, when wealthy individuals were the first to invest in a raft of new funds making high returns.

“It always starts with the high-net worth individuals,” he said. “It wasn’t until 2004-2005 that institutional investors started getting involved in those.”

The new crypto hedge funds take a variety of approaches, betting on new coins issued to raise funds via so-called initial coin offerings (ICOs), price direction or differentials between rates on the many cryptocurrency exchanges.

One new fund, the London-based BitSpread, says its $25 million market-neutral fund - which trades on price differentials alone - gives major investors a way into the market without exposing them to violent price swings.

The fund is up 32 percent so far this year, having managed to exploit the kind of arbitrage possible in a young market where large price gaps exist.

“(Institutional investors) haven’t invested in this ecosystem yet because they haven’t yet found the right vehicle,” said Cedric Jeanson, BitSpread’s founder.

(ZH) Ray Dalio: "This Is The Most Important Economic, Political And Social Issue

Ray Dalio: "This Is The Most Important Economic, Political And Social Issue Of Our Time"

Every quarter, the Fed's Flow of Funds report discloses - among many other things - the total U.S. household net worth, and every quarter for the past two years this number has steadily gone up, hitting fresh all time highs with every new release, most recently $96.2 trillion, to widespread cheers from both the financial press and the public, as well as the administration.
However, as we show every quarter, this aggregate number is largely meaningless in providing a status update on the financial state of the broader US population, as it masks a gaping chasm between the haves, or the top 10% of US society - those who benefit the most from this mostly financial-asset based increase in net worth, and the have nots, or bottom 90%, who remain largely locked out from such gains.

In fact, it was the Fed's own Triennial Survey of Consumer Finances which disclosed just how skewed this net worth distribution had become:
Today, none other than Bridgewater's Ray Dalio focuses on this topic, which he calls "the most important economic, political and social issue of our time", and defines it as "the two US economies"...
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I wrote about what I see as the most important economic, political & social issue of our time: The Two US Economies. http://bit.ly/2yCofhf
3:07 PM - Oct 23, 2017
Our Biggest Economic, Social, and Political Issue The Two Economies: The Top 40% and the Bottom 60%
To understand what’s going on in “the economy,” it is a serious mistake to look at average statistics. This is because the wealth and income skews are
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... that of the top 40% and the bottom 60%.
In an article published on LinkedIn this morning, Dalio writes that the Federal Reserve should more closely monitor the economic struggles of the bottom 60% of the economy when making policy since “average statistics” are camouflaging what’s really occurring in the U.S., precisely what this site has claimed quarter after quarter.
Dalio's argument focuses on the wide disparities in factors including labor, retirement savings, health care, death rates and education between the top 40% and bottom 60% of the country, and how average statistics fail to capture this increasingly bimodal distribution. And, echoing what we said most recently a month ago, the Bridgewater founder said it would be a “serious mistake” for the Fed to just focus on a national average as it could lead the policy makers to see a brighter economic picture than the reality.
Or, as we phrased it, "And there is your "recovery": the wealthy have never been wealthier, while half of America, some 50% of households, own just 1% of the country's wealth, down from 3% in 1989, while America's poor have never been more in debt."
Back to Dalio, who writes in his Daily Observations report that “because the economic, social, and political consequences of an economic downturn would likely be severe, if I were running Fed policy, I would want to take this into consideration and keep an eye on the economy of the bottom 60%." He adds that “similarly, having this perspective will be very important for those who determine fiscal policies and for investors concerned with their wealth management."
Dalio hardly breaks new ground when he then writes that the difference in the financial conditions for the two groups - largely due in part whether they can take advantage of the market rally or not, and for most of the US population, it is the latter - is a major cause of slowing growth. Furthermore, the gap between the two economies will only intensify over the next five to 10 years, as changes in demographics will challenge the government’s ability to meet pension and healthcare demands, while changes in technology will continue to impact employment.
The disparities he listed include:
  • The top 40 percent now has on average 10 times as much wealth as those in the bottom 60, up from six times as much in 1980
  • Just a third of the bottom 60 percent saves any of its income, compared to about 70 percent of the top 40
  • Premature deaths among those in the bottom 60 percent are up 20 percent since 2000, and the odds of a premature death within that group are twice as high as the top 40
His conclusion: "We expect the stress between the two economies to intensify over the next 5 to 10 years because of changes in demographics that make it likely that pension, healthcare, and debt promises will become increasingly difficult to meet and because the effects of technological changes on employment and the wealth gap are likely to intensify. For this reason, we will continue to report on the conditions of “the top 40%” and “the bottom 60%” separately (as well as on the averages), and we encourage you to monitor them too. "
* * *
His full note is below (link):
Our Biggest Economic, Social, and Political Issue The Two Economies: The Top 40% and the Bottom 60%
To understand what’s going on in “the economy,” it is a serious mistake to look at average statistics. This is because the wealth and income skews are so great that average statistics no longer reflect the conditions of the average man. For example, as shown in the chart below, the wealth of the top one-tenth of 1% of the population is about equal to that of the bottom 90% of the population, which is the same sort of wealth gap that existed during the 1935-40 period.
To give you a sense of what the picture below the averages looks like, we broke the economy into two economies—that of the top 40% and that of the bottom 60%.* We then observed how conditions of the majority of Americans (the bottom 60%) are different from the conditions of those of the top 40%, as well as different from the picture conveyed by the average statistics. We focused especially on the bottom 60% because that’s where the majority of Americans are and because the picture of this economy is not apparent to most people in the top 40%.
The Bottom 60% Compared with the Top 40% and the “Average”
We will start off looking at income and the economic picture and then turn to some related lifestyle and political differences.
  • There has been no growth in earned income, and income and wealth gaps have grown and are enormous. Since 1980, median household real incomes have been about flat, and the average household in the top 40% earns four times more than the average household in the bottom 60%. While they’ve experienced some growth recently, real incomes have been flat to down slightly for the average household in the bottom 60% since 1980 (while they have been up for the top 40%). Those in the top 40% now have on average 10 times as much wealth as those in the bottom 60%. That is up from six times as much in 1980.
  • Only about a third of the bottom 60% saves any of its income (in cash or financial assets). As a result, according to a recent Federal Reserve study, most people in this group would struggle to raise $400 in an emergency.
  • The rates of income and wealth changes of the middle class have been worse than those changes in any of the other groups, once you account for the social safety net and taxes. The charts below show income, adding in the impact of taxes, tax credits, benefits, and transfers (including non-monetary government transfers like Medicaid and employer health insurance). Unlike the picture of real earned incomes shown earlier, all the quintiles had seen some growth until 2008. This was primarily driven by increases in transfers, benefits, and social programs (especially medical benefits). It also lights up some differences within the bottom 60%. Note that while the conditions of those in the bottom quintile of society are terrible, and worse than those of the middle class by most measures (e.g., income, health, death rates, incarceration rates, etc.), the rate of change in these conditions has been worse for the middle class. More specifically, the middle class has experienced less post-tax and transfer income growth than the bottom quintile since 1980 (see chart on the right), partially because government support to the bottom has provided more of a cushion—though in both cases, income growth has been very low.
  • The middle class has been especially hard-hit by manufacturing jobs declining about 30% since 1997, which is shown in the below chart.
  • Those in the top 40% have benefited disproportionately from changes in asset values relative to those in the bottom 60%, because of their asset and liability mix. The balance sheets of these two groups, shown below, are sharply different. Though the bottom 60% has a small amount of savings, only a quarter of it is in cash or financial assets; the majority is in much less liquid forms of wealth, like cars, real estate, and business equity. For the bottom, debt is skewed toward more expensive student, auto, and credit card debt.
  • The increasing disparity in financial conditions is a major cause of the slowing of growth, because those in lower income/wealth groups have higher propensities to spend than those in higher income/wealth groups. Said differently, if you give rich people more money, they probably won’t spend much of it, whereas if you give poorer people more money, they will probably spend more of it, each motivated by the extent of their unmet needs and desires.**
  • Retirement savings for the bottom 60% are not even close to adequate and aren’t much improved as the economy and markets have recovered. Only about a third of families in the bottom 60% have retirement savings accounts—e.g., pensions, 401(k)s—which average less than $20,000. Further, as we do projections of pension finance, it appears unlikely that pension retirement benefits will be fully met.
  • Death rates are rising and mental and physical health is deteriorating for those in the bottom 60%. For those in the bottom 60%, premature deaths are up by about 20% since 2000. The biggest contributors to that change are an increase in deaths by drugs/poisoning (up two times since 2000) and an increase in suicides (up over 50% since 2000). The odds of premature death for those in the bottom 60% between the ages of 35 and 64 are more than two times higher, compared to those in the top 40%.
  • The US is just about the only major industrialized country with flat/slightly rising death rates.
  • The top 40% spend four times more on education than the bottom 60%. This creates a self-perpetuating problem, because those at the bottom get a much worse education than those at the top.
  • The bottom 60% increasingly believe others will take advantage of them: the percentage is 49% today versus 40% in 1990.
While conditions for the lowest income groups have long been bad, conditions of non-college-educated whites (especially males) have deteriorated significantly over the past 30 years or so. This is the group that swung most strongly to help elect President Trump. More specifically:
  • Now, the average household income for main income earners without a college degree is half that of the average college graduate.
  • The share of whites without college degrees who describe themselves as “not too happy” has doubled since 1990, from 9% to 18%, while for those with college degrees it has remained flat, at around 7%.
  • Since 1980, divorce rates have more than doubled among middle-age whites without college degrees, from 11% to 23%.
  • Prime working-age white males have given up looking for work in record numbers; the number of prime-age white men without college degrees not in the labor force has increased from 7% to 15% since 1980.
  • More broadly, men ages 21 to 30 spend an average of three fewer hours a week working than they did a decade ago; most of that time is spent playing video games.
  • The probability of premature death for whites without college degrees between the ages of 35 and 64 is nearly three times higher than it is for whites with college degrees, and the rate of premature deaths is up by about 25% since 2000 (while it is down for virtually every other demographic group). The US white population is unique among large groups in the developed world for seeing increases in their death rates. Below, we show premature deaths among working-age whites between the ages of 35 and 64. Again, the average obscures the picture. America’s non-white population isn’t seeing such a rise in premature deaths.
The polarity in economics and living standards is contributing to greater political polarity, as reflected in the below charts.
It is also leading to reduced trust and confidence in government, financial institutions, and the media, which is at or near 35-year lows.
In Summary
Average statistics camouflage what is happening in the economy, which could lead to dangerous miscalculations, most importantly by policy makers. For example, looking at average statistics could lead the Federal Reserve to judge the economy for the average man to be healthier than it really is and to misgauge the most important things that are going on with the economy, labor markets, inflation, capital formation, and productivity, rather than if the Fed were to use more granular statistics.
That could lead the Fed to run an inappropriate monetary policy. Because the economic, social, and political consequences of an economic downturn would likely be severe, if I were running Fed policy, I would want to take this into consideration and keep an eye on the economy of the bottom 60%. By monitoring what is happening in the economies of both the bottom 60% and the top 40% (or, even better, more granular groups), policy makers and the rest of us can give consideration to the implications of this issue. Similarly, having this perspective will be very important for those who determine fiscal policies and for investors concerned with their wealth management.
We expect the stress between the two economies to intensify over the next 5 to 10 years because of changes in demographics that make it likely that pension, healthcare, and debt promises will become increasingly difficult to meet (see “The Coming Big Squeeze”) and because the effects of technological changes on employment and the wealth gap are likely to intensify. For this reason, we will continue to report on the conditions of “the top 40%” and “the bottom 60%” separately (as well as on the averages), and we encourage you to monitor them too.

FT : Netflix to finance new shows from $1.6bn bond sale

Netflix to finance new shows from $1.6bn bond sale
Deal lands in market judged by some investors to be frothy

Netflix was finalising plans to raise $1.6bn on Monday to fund its investment in original movies and television shows, in what will rank as the company’s biggest bond sale.

The deal, following stronger than expected subscriber growth in the third quarter, will help finance a growing $7bn to $8bn budget for original content next year as the streamed entertainment provider behind shows such as Stranger Things and House of Cards expands its movie and TV line-up.

Bankers pitching the offering were expected to price the new 10.5 year bonds, which mature in 2028, with a yield of between 4.75 and 5 per cent, according to two portfolio managers following the sale. At those levels, the deal would price roughly in-line with its existing dollar-denominated debt that matures in 2026, which changed hands on Monday with a yield of 4.4 per cent.

“The timing is perfect,” said Rahim Shad, a senior analyst with Invesco. “They are coming off of very strong numbers. The market is completely open. It is a great deal for the company and equity investors if they can tap the bond market at these levels but as a creditor you always think about the underlying risk.”

The deal lands in a market that several high profile investors have judged to be frothy, as benchmark stock indices hit new records and risk premiums on low-quality debt approach levels rarely seen since the financial crisis.

“We have been concerned about valuations for a while,” Mr Shad added. “Valuation is just one common concern that you’ll hear no matter where you go these days.”

Companies have raised more than $1.4tn in the US so far this year, a record pace, according to Dealogic. But the heady headline figure — boosted by large banks raising capital — belies the lacklustre new issuance in the junk bond market, where companies have raised $215bn in 2017. That is the second-slowest clip since 2011.

While flows into high yield funds have been volatile, investors have shown a strong preference for fixed-income assets this year. US bond funds have counted $182bn of inflows this year, according to EPFR.

Kapil Singh, a portfolio manager with DoubleLine Capital, added that with redemptions and upgrades of high-yield bonds out of so-called speculative territory, the market for junk debt has shrunk.

“We are underweight high yield for various reasons, valuations being the main one,” Mr Singh said. “As a firm [our] belief is rates are rising. Risk assets could potentially get more volatile.”

Although Netflix’s stock has rallied more than 50 per cent this year, its B1 rating from Moody’s and B-plus opinion from S&P Global put it squarely in junk territory. Neil Begley, an analyst with Moody’s, warned that measures of Netflix’s indebtedness would continue to rise this year before falling by the end of 2018. Mr Begley said he expected earnings growth to outpace the company’s rising debt levels next year as Netflix begins to profit from its expansion outside of the US.

S&P analyst Jawad Hussain, by contrast, said his assessment of the risks of Netflix’s business had “improved due to its strong subscriber growth.” But he cautioned that the “company’s comfort with growing negative free cash flow from its large original content investments” weighed on its rating. If subscriber growth slowed or margin improvement stagnated, it would imply that the company’s spending on programming was “outpacing its ability to grow its subscriber base, which could hamper its access to capital markets and pressure liquidity,” Mr Hussain said.

Netflix said last week that it anticipates free cash outflows of up to $2.5bn in 2017. As some media groups that were once partners, such as Walt Disney, stop licensing their content to Netflix, the Silicon Valley-based company must invest in new TV shows and movies to keep subscribers loyal. The cost of that content is borne before it airs, and amortised based on estimated viewing over time, usually between six months and five years.

That model leaves Netflix with high upfront capital requirements and it has warned investors that it expects to see cash outflows for “many years” to support its growth around the world.

It is presently pushing hard into full-length movies, expecting to release 80 films next year, up from just eight in the most recent quarter and many more than most traditional Hollywood studios, as well as TV shows in new languages, including Italian and German.