Each week we read dozens of transcripts from earnings calls and presentations as part of our investment process. Below is a weekly post which contains some of the most important quotes about the economy and industry trends from those transcripts. Click here to receive these posts weekly via email.

Apologies in advance: this week's post focuses on Central Banks. I promise that I am just as tired as everyone else of talking about them, but policy is the single most important medium-term macro-economic driver, so unfortunately I can't not write about it. Until Central Bankers stop trying to prove Einstein's definition of insanity, this is the hand we've been dealt.

The Macro Outlook:

Central Bankers are gravitating to the idea that they are not the cause of low rates

"Low rates are a symptom of the underlying economic situation. They reflect weak long-term growth trends and the protracted macroeconomic slump that has resulted from the crisis...the level to which real interest rates can eventually return when the economy strengthens is not determined by monetary policy. Instead, it depends on the economy’s long-term growth prospects. Productivity and demographics play a decisive role in this, and the development of these factors has not been favourable in Europe in recent years." --ECB President Mario Draghi (Central Bank)

They are sticking to their 2% inflation targets

"Sometimes people wonder whether price stability doesn’t mean inflation of 0%. It does not, because both inflation that is too high and inflation that is too low for too long can damage the economy. A steady, measured rate of inflation below, but close to, 2% in the medium term acts like a cushion that protects our economies from drifting into the dangerous territory of negative inflation even when there is just a minor economic shock." --ECB President Mario Draghi (Central Bank)

And some are calling for even more aggressive policies to get there

"We have modest growth, because there are modest policies. We are very strongly advocating for more vigorous growth, more inclusive growth, and to do that, we need to set off more vigorous and determined policies it’s doable and it requires a bit of political determination and better coordination between the players…what we need at the moment is actually more growth, not that modest growth" --IMF Managing Director Christine Lagarde (Supranational Central Bank)

Voters are running out of patience though

"the impatience with economic stagnation, especially among middle and lower income earners, is leading to dangerous populism and nationalism." --Bridgewater CEO Ray Dalio (Asset Management)

And when that happens, Politicians run out of patience too

"People with assets have got richer, people without them have suffered, people with mortgages have found their debts cheaper, people with savings have found themselves poorer...A change has got to come, and we are going to deliver it." --UK Prime Minister Teresa May (Government)

But there are signs that inflation could surprise to the upside

Wage growth is 3% as labor markets tighten

"I think that your 3% assumption for wage rate in the back half of the year is probably the right assumption. The market continues to tighten." --Darden CEO Gene Lee (Restaurants)

Micron is gaining pricing power as customer inventories tighten

"I think it’s fair to say that we’re seeing some early signs of significant price movements...I do think that the trend is positive and the bias is positive...if we think about inventory in the marketplace, certainly channel inventory I think is very, very tight" --Micron CEO Mark Durcan (Memory Chips)

Could rates finally be headed higher?

"How in the world could we be talking about rates never going up when in fact rates have bottomed?…In the investment world when you hear 'never,' as in rates are 'never' going up, it’s probably about to happen" --Doubleline CEO Jeff Gundlach (Asset Management)

"The long-term debt cycles are approaching their very late-stages...Central banks are approaching their “pushing on a string” limits both because interest rates are approaching their maximum lows, and because the effectiveness of QE is approaching its limits as the risk premiums and spreads are compressing." --Bridgewater CEO Ray Dalio (Asset Management)

That would almost certainly lead to lower asset prices

"Our financial markets have become a Vegas/Macau/Monte Carlo casino, wagering that an unlimited supply of credit generated by central banks can successfully reflate global economies and reinvigorate nominal GDP growth to lower but acceptable norms in today’s highly levered world." --Janus Mutual Fund Manager Bill Gross (Former Bond King)

"we are now seeing most central bankers pushing interest rates down to make them extremely unattractive for savers and we are seeing them monetizing debt and buying riskier assets to make debt and other liabilities less burdensome and to stimulate their economies. Rarely do we investors get a market that we know is over-valued and that approaches such clearly defined limits as the bond market now. That is because there is a limit as to how negative bond yields can go. Their expected returns relative to their risks are especially bad. If interest rates rise just a little bit more than is discounted in the curve it will have a big negative effect on bonds and all asset prices...That is because with interest rates having declined, the effective durations of all assets have lengthened, so they are more price-sensitive. For example, it would only take a 100 basis point rise in Treasury bond yields to trigger the worst price decline in bonds since the 1981 bond market crash. And since those interest rates are embedded in the pricing of all investment assets, that would send them all much lower." --Bridgewater CEO Ray Dalio (Asset Management)

But Central Bankers see no risks to financial stability

"Of course, low interest rates for a long period might carry the risk of overvaluation in asset markets as a result of the search for yield. This is why we closely monitor potential risks to financial stability that might emanate for instance from local real estate markets. But at the moment we are not seeing any overheating in the euro area or the German economy as a whole." --ECB President Mario Draghi (Central Bank)

International:

Chinese consumers were boycotting Western companies over a ruling on the South China sea

"tougher laps in the second-half of the third quarter, which we built into the forecast were compounded by an international court ruling regarding claims to sovereignty over the South China Sea. The ruling triggered a series of protests and boycotts intensified by social media against a few international companies with well-known Western brands. At its peak, the demonstrations significantly impacted store traffic in certain trade zones and this was during our busiest season." --Yum Brands CEO Greg Creed (Restaurants)

Financials:

There is an important change in lease accounting coming for retailers

"IFRS 16 has got a lot of complexity, not only in terms of the going forward implication but the actual point of implication. And it will change very significantly the way that all of us look at the balance sheet and the P&L, as a result, no change to cash clearly, because it’s a no economic change…We’re spending a lot of time thinking through it." --Tesco CEO Dave Lewis (Retail)

Consumer:

Costco says they are not Amazon proof

"The internet in general is going to take its percentage of different categories. It’s going to impact different categories and different retailers of such categories at different levels. I read the reports that some of you have written about that we and maybe one or two other retailers out there that are unique are Amazon proof or Internet proof. We don’t buy that for a minute. We do believe that we do rely and we do expect we are going to be impacted loss." --Costco CFO Rich Galanti (Warehouse Store)

The restaurant business is extremely competitive right now

"I think the consumer environment, it continues to be difficult. I think there’s a lot of choices the consumer has with their discretionary income. And I think restaurants are competing against a lot of those other choices, not just restaurants. I think restaurants today have to stay — they have to stay relevant, and they need to continue to invest in the experience" --Darden CEO Gene Lee (Restaurants)

The craft beer industry may be over-populated

"we probably think craft is over SKU-ed and over-spaced. And imports – given the importance in the growth, high-end imports are under-SKU-ed and under-spaced. And premium domestics are way over-SKU-ed and over-spaced...I think we’re in a very strong position to advise our retail customer...as to ways that they can improve their velocity as well as their profit per-unit space that they’re devoting to beer" --Constellation Brands CEO Robert Sands (Spirits)

Materials, Energy:

AZZ has seen a pause in solar power plant construction

"While federal credits were approved and extended solar power activity remains somewhat slow since companies now have some time to evaluate those projects. Our volumes have drifted lower as we are focused on maintaining price levels and since we see this activity continuing that’s why we chose to take out some of our capacity in the affected areas." --AZZ CEO Tom Ferguson (Construction Materials Supplier)

Monsanto is confident that its merger with Bayer will clear anti-trust because there is little overlap

"The unique thing about this transaction is there is very little overlap. So you are bringing together a seed business and a crop protection business and I think we can bring these two businesses together with much better insight for the grower by using digital agriculture." --Monsanto CEO Hugh Grant (Agriculture)

Miscellaneous Nuggets of Wisdom:

Scale allows for a virtuous marketing cycle

"Look, the virtuous cycle. Our performance enables us to invest more in our businesses...enabling us to both leverage the P&L and achieve market share growth...So we’re over-investing. And when I say over-investing, I mean we’re investing more than we have traditionally, specifically in marketing of our wine and spirits brands" --Constellation Brands CEO Robert Sands (Spirits)

Small companies have to get bigger or be consolidated

"ICU went through a pretty public sales process in 2013, and I believe the concentration issues was one of the key reasons it didn’t reach completion, and I think that concern has been an issue in all strategic discussion and is the number one investor concern. Small companies either have to get bigger or get consolidated, and it’s incredibly hard for small companies to get bigger in maturing markets." --ICU Medical CEO Vivek Jain (Medical Device)

Each week we read dozens of transcripts from earnings calls and presentations as part of our investment process. Below is a weekly post which contains some of the most important quotes about the economy and industry trends from those transcripts. Click here to receive these posts weekly via email.

The Macro Outlook:

The auto industry had another strong month

“industry SAAR that we would expect to be around 18 million…This would mean that then the total vehicle industry…was likely up about 13% in September…We view the September’s industry performance as another strong sales month…it was good from beginning to end one of those really special strong months.” —Ford (Automobiles)

Vail Resorts isn’t seeing any softening of demand

“I mean again at this point, we are not seeing any softening in consumer interest…we are not seeing that in our bookings or in our pass sales.” —Vail Resorts (Ski Resorts)

Paychex is still seeing steady hiring among small businesses

“we’re seeing continued — particularly in the small business under 50, we’re seeing continued better employment growth than prerecession levels of 2004 and so — and it’s down a little bit from last year, but it’s consistently above that level. So we’re feeling like a steady improvement in small business formation and employment hiring” —Paychex (Payroll Processing)

Valuations are still high, but maybe this correction will help create acquisition targets

“I think it’s a tough market. I think everybody says that, it’s a tough market. Valuations are high but maybe that could change with this current ongoing correction, who knows but I think it is a difficult market but we are looking for things that fit our profile.” —Diamond Foods(Packaged Foods)

Inventory cycles eventually work themselves out

“I think the buying side of the market has been a little conservative in terms of how they procured PC parts over the last three to six months and I think it’s at this point, this could be interesting to watch how the next three or four months plays out in terms of the consumer and corporate behavior, because at some point they are going to start to replenish.” —Micron (Electronic Components)

International:

Companies will probably revise FX impact higher this quarter

“FX obviously is a large headwind on a reported basis…it’s gotten slightly worse on the operating income line as we’ve upped the negative impact on the total company to 4% versus the prior three.” —McCormick (Spices)

Putin assured the UN that Russia has no ambitions for world domination

“I must note that such an honest and frank approach of Russia has been recently used as a pretext to accuse it of its growing ambitions, as if those who say it have no ambitions at all. However, it’s not about Russia’s ambitions, dear colleagues, but about the recognition of the fact that we can no longer tolerate the current state of affairs in the world. What we actually propose is to be guided by common values and common interests, rather than ambitions.” —Vladimir Putin (President of Russia)

Financials:

Some parts of the lodging industry may be battling over-supply

“I think one of the benefits that we have obviously is other parts of the travel industry one of the things they are struggling with is not just the demand side, but the supply side. And so as people build new rooms obviously that starts to bring down some of their metrics and one of the benefits we have right now is that there has not been any new supply added to the mountain resort industry” —Vail Resorts (Ski Resorts)

Consumer:

Organic ingredients are fundamentally more expensive to produce

“raw material themselves are undeniably more expensive than regular spices and that’s reflected in the premium price that organic products command in the market place. It’s not just a scarcity issue, it costs more money to produce organic ingredients and products” —McCormick (Spices)

Retail has gotten increasingly competitive in the last five years

“you’re absolutely right the competition is certainly more intense than it was four or five years ago with some smaller chains rolling out nationally and the pure e-com players that you referenced…So listen you’ve got to be – in this sort of environment you got to be on your game all the time. Your product has to be spot on, your marketing has to be spot on” —Pier One (Home Furnishing)

Established retailers really want to believe that physical stores are a competitive advantage

“the physical stores remain central to serving our customers and provide us a tremendous opportunity to be close to them. The ability to consult with our knowledgeable and solutions-oriented sales associates coupled with our in-store services, encourage customers to visit and spend time in our stores. Options such as reserve online, pickup in-store, buy online and return to store and online appointment scheduling highlight various points of interactions we have with our customers across our channels.” –-Bed Bath and Beyond (Home Furnishing)

Pier One said that its operating-level margins from e-commerce sales are higher than in store sales

“I think what we have said consistently Denise, is that the contribution from operations level or fulfilled sales has a higher margin than the store sale” —Pier One (Home Furnishing)

Costco hopes that there’s room for everyone

“There is room for all of us. We’ve got to keep, it’s a big play out there in terms of market share and we think that we’ll be able to take our share of that. Some little departments you lose a little, others you make a little, certainly we want people to still come into our warehouses.” —Costco (Warehouse Retail)

Technology:

PC Markets are weak, but a recovery wouldn’t take much

“Well I think the PC is about where it’s been. I can’t advertise there’s been a major uptick in PC demand. The only data point that I would say that is new for us is that as we sit today the relative channel inventory in PCs is not a huge burden to a recovery.” —Micron (Electronic Components)

Blackberry’s CEO feels like he has stabilized the company but now needs to stabilize revenue

“Remember, we all said about a year ago, we were talking about stabilizing the company, the business, and focusing on cash flow from operation. I think we have accomplished that. This year, as we said, we’re going to stabilize the revenue, and unfortunately, we have a really low point here.” —Blackberry (Feature-phones)

Materials, Industrials, Energy:

IHS expects energy customers to make modest budget cuts in 2016

“There are some smaller players in the U.S. upstream that will be under pressure, but we do think most of the big companies have made most of their cost reductions and the IOCs and major independents are in the process, while they’re in the process of deciding their capital budgets for 2016 and we expect some modest trimming.” —IHS (Consultant)

Electric utilities have not added much capacity this cycle

“The electric utility market in the U.S. remains sluggish but we have benefited from strong international opportunities and a solid backlog.” —AZZ (Electrical Equipment)

It is really difficult to be a small manufacturer in a down cycle

“We are still noticing that the dealers are struggling as well and they are definitely not wanting to stock any of our inventory. So we do anticipate that the sales that we have, we need to have inventory on hand in order to capitalize on those sales.” —Arts Way Manufacturing(Farm Equipment)

Miscellaneous Nuggets of Wisdom:

Be mindful of economic volatility, but focus on what you can control

“we’re very mindful of the macroeconomic volatility in the marketplace. But we continue to really focus on the things that we can control” —Nike (Apparel)

Never underestimate someone who you are negotiating with

“no doubt you are dealing with rough and cruel people, but they’re in no way primitive or silly. They are just as clever as you are, and you never know who is manipulating whom” —Vladimir Putin (Ex-KGB)

You may have heard it put many ways.  Long consolidation periods yield big moves.  The bigger the base the higher into space.  This is one of the Wall Street sayings that is worth focusing on.  A good case in point is AZZ Incorporated ($AZZ).  AZZ has done nothing but move in a range for almost 3 years.  

Yes for 3 years it has moved back and forth between about 36 and 49.  Nothing guarantees it will break this range, but its past behavior suggests it is tie to watch closely.  You see, it went through one of these 3 year consolidations before.  And when it finally broke it moved up 150%.  Do I have your attention now?

The chart above shows that rising channel it broke to jump up to the current range.  It also shows the current consolidation.  This one is an ascending triangle, so it gives a projection to the upside if it breaks higher to 64.  Not 150% but well worth the ride.  

The rest of the indicators are what suggest that now is the time to watch more closely.  As the price approaches the top of the triangle, the momentum indicators are supportive of more upside.  The MACD is rising, and no where near the peaks where it has reversed in the past.  The RSI is also rising and bullish, but at its lowest level for a touch at resistance.  Translation: there is room to run from the momentum.  

But that is not all.  The Bollinger Bands® are also opening up to allow the move to continue.  This has happened before, and it failed.  But remember this time the RSI and MACD are at lower levels.  Keep an eye on this one for a break out.  Because when it does happen the move will likely be fast again.