(ZH) Peak Picasso - Did The Art Market Just Flash A "Sell" Signal For Stocks

Peak Picasso - Did The Art Market Just Flash A "Sell" Signal For Stocks

"Like any trend in an unhinged market, it's next to impossible to predict when the confidence will peak. Based on previous peaks, it could (should) be any time,"warns Jason Goepfert, president of Sundial Capital Research.
As Bloomberg reports, Goepfert's recent note, analyzing the relationship between record art sales and the stock market, strongly suggests, "previous bouts of expensive art sales have indicated over-confident conditions in the stock market as well."


There is broad overlap between the markets, now more than ever. Wealth concentration is near an all-time high, and with stocks doing so well, it hashelped to fuel massive confidence in other "greater fool" markets like art.

...The market is relatively isolated and a plateau in art prices wouldn't have much affect on broader assets, though it would likely be coincident with a plateau in stock and bond markets.
With the art market hitting a new milestone last week, perhaps it is time to consider reducing exposure to the exuberance.

(AFR) Woolworths faces $1b hit from price cuts

Woolworths faces $1b hit from price cuts
2015-05-19 07:14:50.438 GMT


By Sue Mitchell
May 19 (Financial Review) -- Woolworths' plan to cut the
price of private label grocery brands to better compete with
Aldi and Coles may cost the retailer as much as $1 billion,
reducing earnings from food and liquor by almost a third,
according to brokers.
Woolworths is reviewing its private label grocery strategy
after admitting a week ago that consumers perceived the quality
of Aldi's private label brands to be on par or better than
Woolworths' Select brand and superior to its entry-level
Homebrand range.
According to analysis by Morgan Stanley, Aldi's prices are
21 per cent more expensive than Woolworths' budget Homebrand
range, but 27 per cent cheaper than Woolworths' mid-tier Select
range.
Aldi's brands are 6 per cent cheaper than Coles' own-brand
range, but Coles' brand prices are on average 34 per cent
cheaper than Woolworths' Select brand.
Morgan Stanley analyst Tom Kierath??? says the pricing
discrepancy has contributed to consumer perceptions that
Woolworths' prices are higher than those of rivals across the
board.
"Private brand strategies are critical for the Australian
supermarkets, as consumers view this as central to the overall
price positioning of each chain," said Mr Kierath.
"Put simply, if a supermarket is able to show its private
brand prices are low, consumers are more likely to believe all
of its prices are low."
Woolworths has flagged plans to add more entry-level
products to its private label range and match prices on key
private label items to "close the gap" with Aldi and Coles.
"We're not going to be beaten on price relative to our
major full line supermarket competitor," Woolworths' new Food
Group managing director, Brad Banducci???, told investors
earlier this month. "The issue we've got with Aldi is providing
the same value experience in our store as you would in an Aldi,
which requires us to rethink and re-engineer some of our entry
level products including some of our entry level own-brands."
Private label groceries are estimated to account for about
17 per cent of Woolworths' Australian food and liquor sales and
the Select brand about 9 per cent of sales. Woolworths' other
private label brands include Macro, Gold and Free From.
Mr Kierath said that if Woolworths cut the price of Select
products by 10 per cent it would reduce food and liquor margins
by 84 basis points to 6.57 per cent, cutting earnings before
interest and tax by $388 million.
If Woolworths bit the bullet and reduced the price of
Select products by 30 per cent it would reduce food and liquor
margins by 230 points to 5.09 per cent, cutting earnings before
interest and tax by $1.05 billion or 33 per cent.
This exceeds the private label investment estimated by
other analysts such as Citigroup's Craig Woolford???, who says
the investment in private label prices could cost Woolworths
$396 million and wipe 92 basis points off margins.
Woolworths has invested $125 million since January
reducing grocery prices in stores and online but conceded
earlier this month that its prices were still higher than
Coles' by "less than 100 basis points".
The retailer plans to reinvest $500 million over two years
from cost savings into reducing prices and improving service in
stores and is boosting inventories by half a day to improve
onshelf availability.
However, analysts believe Woolworths may need to invest
between $600 million and $1 billion into prices and stores to
close the gap with Coles and Aldi and regain lost market share.
The retailer also needs to improve its marketing to
convince consumers that its prices are competitive. Earlier
this week, Woolworths confirmed it had parted ways with its
fourth marketing director in as many years, with CMO Tony
Phillips stepping down after a year in the role.
"Without improved marketing, Woolworths will continue to
struggle with its value perception," said Deutsche Bank analyst
Michael Simotas???.
Coles is expected to outline its response to Woolworths'
plans at Wesfarmers' annual strategy day in Sydney on Wednesday.

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web site.

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-0- May/19/2015 07:14 GMT

FT : Energy groups take knife to $100bn of spending after oil rout


More than $100bn of spending on new projects by the world’s energy companies has been slowed, postponed or axed following the oil price plunge, evidence of the drastic industry action that will curb output in coming years.
Companies including Royal Dutch Shell, BP, ConocoPhillips and Statoil have led moves to curtail capital spending on 26 major projects worldwide, according to analysis commissioned for the Financial Times.

The delays and cancellations, many disclosed quietly in recent weeks and months, come amid a wider retrenchment by the industry that has seen thousands lose their jobs and led to a slowdown in the US shale boom.
The research by consultancy Rystad Energy shows that producers have targeted some of the highest-cost areas as they have trimmed spending, with nine Canadian oil sands projects put back, each ranging from $1bn to $10bn in planned expenditure.
“Things are moving to the right and the particular area that is suffering is western Canada,” said Alastair Syme, energy analyst at Citigroup.
“It is one area of the world outside US shale, where companies are actually stopping investment in train.”
After reaching $115 a barrel last June, the price of oil plummeted to a low of $45 in January, as surging output of US shale oil and softening demand in Asia stoked a glut in the market. The decline accelerated after Opec, led by Saudi Arabia, decided not to cut production to support prices. Crude has since rebounded to around $66.
While the $118bn total expenditure would be spread over several years, the impact of deferring investment on such projects would be to delay future production, with as many as 1.5m barrels a day — nearly 2 per cent of global oil output in 2013 — to come two years later than planned, said Rystad.
The project deferrals that have already been announced could be just the start of a big wave of delays. Goldman Sachs has identified 61 new projects, more than half of those awaiting final approval, as uneconomic at an oil price of $60 a barrel, putting more than $750bn of capital expenditure at risk and 10.5m barrels a day of peak production.

Seventeen countries, including Angola, Nigeria, Australia and Algeria, were likely to see investment in projects fall by more than 50 per cent between now and 2020 assuming prices stayed low, Goldman’s Michele della Vigna said.
Calgary-based Cenovus Energy said it had deferred work on its 130,000 barrels a day Narrows Lake oil sands development “due to the substantial decline in crude oil prices”. It added: “We are taking advantage of the slower pace of development to optimise our engineering and execution strategy.”
Other “heavy” oil projects, where extraction is closer to mining than conventional drilling, have been halted. Carlos Cabrera, executive chairman of Ivanhoe Energy, told the FT that its Pungarayacu project in Ecuador had been suspended in part because “the precipitous drop in the oil price” had rendered uneconomic production of a possible 2bn-3bn barrels.
US-based Conoco, meanwhile, confirmed it had “stopped” developing the Tommeliten Alpha discovery, southwest of the Ekofisk field in the Norwegian North Sea. Nils Andersen, chief executive of Denmark’s Maersk Group, said last week it was “renegotiating” supply deals for its “challenged” deepwater Chissonga project in Angola.

“The oil situation has changed due to low oil price and we aim to reduce the investment level as a result of that,” he said.
One of the biggest developments to be shelved, Shell’s Arrow liquefied natural gas plant in Australia, accounted for almost a quarter of the spending Rystad said had been put back or cut. The consultancy examined projects with reserves of at least 50m barrels of oil equivalent.
Other data illustrate the speed with which oil companies have reacted to the crude price collapse. According to Morgan Stanley, which has looked at capex guidance for 2015 from more than 120 companies, their investment is expected to drop by a quarter this year, from $520bn to $389bn.

The severity of the capex cuts could lead to a substantial rebound in Brent crude. The bank expects oil to rise from $66 a barrel to $85 in 2017. “The longer oil prices remain low, the more prices may rise longer term, given that current weakness discourages future investment.”

(GS) Richemont Added to Conviction Buy List - Quality Asset at a Discount

* Source of opportunity
We reiterate our Buy rating and add Richemont to the Conviction List on 16% underperformance vs. the retail sector ytd. We see concern about slower growth as overdone, and our estimates are above consensus. Richemont remains a luxury goods leader, offering global consumer exposure against a favourable global macro backdrop (low interest rates and inflation), high CROCI (FY14 21% vs. sector avg. 17%) and a strong balance sheet. Cyclical catalysts (global wealth creation) should support a return to growth and a rerating, with the shares on the same sector- and market-relative multiples as during the financial crisis. Our 12-month price target implies 33% upside.

* Catalyst
FY15 results are on May 22, 2015 (headline financials have already been reported). We expect the focus to be on April trading (pre-announcement on April 22, 2015 showed no slowdown in growth for the period up to March) and cost guidance for FY16. We expect management to give a positive update on the business, highlighting the continued growth potential and margin upside from organic opportunities (e.g. channel mix shift to retail), as well as cost control in spite of FX headwinds from Swiss franc appreciation. In our view, this should underline Richemont’s credentials as one of the highest-quality assets in luxury; in addition, delivery of compound top-line, bottom-line and cash flow growth with balance sheet optionality should catalyse upgrades to consensus estimates (our FY16-17 EBIT forecasts are 9/11% above I/B/E/S consensus) and a re-rating

* Valuation
We cut FY15E EPS to reflect losses on financial instruments announced on April 22, and FY16/17E EPS for FX. Our unchanged 12-month price target of SFr111.8 is still based on a lease adj. 12m fwd EV/EBITDAR multiple of 13.5x.

* Key risks
Key risks to our view and price target include slower than expected demand, unfavourable FX moves (Swiss franc strength) and dilutive M&A.