#$emr

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.

For most of this bull market bearish sentiment has been consensus. Even while the market has risen, it's been easy to hold a negative view, and most people did (including me). Recently those negative voices have been fading though. In fact, they have been so drowned out that when I saw a CEO warn about the state of capital markets this week it actually felt genuinely contrarian. That doesn't mean that the bull market is over, but it does mean that one of its greatest assets, pessimism, is slowly melting away.  For now though, animal spirits are running strong.

The Macro Outlook:

The industrial economy has some momentum

"I think that what we’re seeing is the increased investments going on from a – just from pent-up – a situation for many years. We’re starting to see some of that flow … So I see a pretty steady recovery here. I don’t see a snap. As I’ve said, I’ve always felt that 2017 would be a good year of building that foundation and see a improvement. I see a much stronger 2018 than I see 2017. But I see right now, based on what I’m seeing from the customer base, based on what I’m hearing from some of our customers and what they’re saying they’re going to spend on capital next year, overall, I think the pressure is upward." --Emerson CEO David Farr (Industrial Components)

Some manufacturers can't keep up with orders

"Our inventories definitely on the lighter side…But every quarter we have been kind of beating the numbers and honestly not been able to build the inventories we set a target where the inventory would slightly grow and then we ship it all and the inventory does not grow. " --Microchip CEO Steve Sanghi (Semiconductors)

This has now become a truly contrarian perspective:

“I’ve been around long enough to have lived through all sorts of markets. I’ve learned to respect markets, while at the same time being skeptical of conventional wisdom. I’ve lived through a bond bear market and a gargantuan bond bull market. I’ve seen bond yields above 15% and below 2%. I’ve seen inflationary spirals, I’ve seen deflationary threats, I’ve seen deregulation and reregulation. I’ve seen the S&P 500 trade as high as 30 times earnings and I’ve seen the S&P trade as low as 7 times earnings. With all this experience, that comes with age I might add, here is what I’m seeing in the markets today. In the credit markets, spreads on the high yield securities are approaching historically tight levels, while key credit metrics such as leverage and coverage ratios are showing signs of weakening. The leverage loan market has been overrun by such massive inflows of capital that you could probably get a loan to buy a fleet of zeppelins at this point in time. With respect to rates, the 10-year treasury note is currently trading at around 2.5%, up from its recent lows, but still well below historic norms. In my view, the mood of these markets is in stark contrast with the many unknown from our current economic and political landscape, both here and abroad. For me, it’s a major disconnect, and it concerns me…The S&P 500 is trading at roughly 19 times earnings, 3 turns higher than the 50-year average of 2016. These valuations make me uncomfortable, especially given the unknowns in taxation, foreign trade, regulation and more…To sum up, in my opinion, the markets are priced for perfection, and they have been that way for quite some time, complacency reign supreme. However, my experience has shown me that this state of affairs won’t go on indefinitely. So why am I sharing these thoughts with you? Because I know that some of you have wondered why we brought back relatively few Loews shares in 2016 or why Loews hasn’t made an acquisition…It’s a tough market in which to be a disciplined buyer.” –Loews CEO James Tisch (Insurance)

But should it be contrarian?

The world is still unusually uncertain

"Looking forward, our continuing view is that the world is unusually uncertain, and perhaps even more so given the regime change in Washington and the questions surrounding the administration’s proposed agenda. " --Oaktree Chairman Howard Marks (Asset Management)

The consumer isn’t showing the same pep as industry

“I think October was a little slower and then early November was good and it kind of leveled out again. So it’s kind of up and down by weeks. Some of it’s the way the calendar falls for us this year with the coming off the 53-week year, but I would just tell you it’s a little slower out there right now” –Sysco CEO Bill Delaney (Restaurant Supplier)

The downturn in CRE in the UK is exceeding JLL's worst expectations

"it is fair to say that the Brexit vote, in particular, hasn’t created an environment which encourages our clients to take long-term decisions around their real estate portfolios...Now we are staying very close to the situation in the UK, but though the development has been clearly exceeding our most negative expectations which we got for the Brexit but at the end of the day, we are very hopeful that pragmatism will take over and that things will play out fine for the UK going forward." --Jones Lang LaSalle CEO Christian Ulbrich (CRE Broker)

Tax reform may take longer than expected

"So I’m looking for clarity by late summer, early fall and that gives me time, as I get into execution later this year, early 2018 based on if I have to change anything." --Emerson CEO David Farr (Industrial Components)

Companies are looking before they leap

“I honestly just think it’s too early to start to speculate. And we’re certainly not building anything into our plans positively or negatively for that matter related to any policies that might come out. But I can assure you that we’re watching it very closely.” –Visa CEO Alfred Kelly (Payments)

Excitement can quickly turn to animosity

"Obviously the President has said that his top priority is to stimulate growth and get people working and expand the economic pie…I can’t say what the President’s view is going to be in the future…So I can’t – I can only – I could only speculate but I don’t have obviously the crystal ball that permits me to give an accurate answer to that question. Reinforces my view that I’ve long held that I hate politicians." --Kilroy CEO John Kilroy (REIT)

If trade stops, war starts

"If trade stops, war starts…We have to actively prove that trade helps people to communicate. And we should have fair trade, transparent trade, inclusive trade." --Alibaba CEO Jack Ma (E-commerce)

Invariably there will be another down cycle someday

"Every year that goes by logically increases the probability, but there are times, like today, when people say, oh, you know, we’re in a virtuous circle. We have an accommodative Fed, we have expanding – well, the Fed’s accommodative, but not too much, and the economy is expanding, but not too much that it has to be reined in, and corporations are doing well in piling up cash, and debt has been refinanced and paid down, and they’ll give you a hundred reasons why there’s not going to be another down cycle again, but invariably there is." --Oaktree Chairman Howard Marks (Asset Management)

Not necessarily in the near term though

"There is a tremendous amount of leverage paper in the world. There is a business cycle and we feel very good about the restructuring group and what the next three years look like. But that’s not to say that I characterize it as growth in the very short-term." --Moelis and Co CEO Ken Moelis (M&A Advisory)

International:

On the one hand, Mario Draghi sounds slightly more optimistic

"On the one hand, the evidence suggests that the acute deflation risks have disappeared and that inflation is set to pick up over the coming years. And contrary to a widespread perception, euro area economic conditions have also been steadily improving…And in the last quarter, the recovery has been broadening across sectors and across countries." --ECB President Mario Draghi (Central Bank)

But on the other, not much has changed

"Looking ahead, risks to the euro area outlook remain tilted to the downside and relate predominantly to global factors. Our current monetary policy stance foresees that, if the inflation outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council is prepared to increase the asset purchase programme in terms of size and/or duration." --ECB President Mario Draghi (Central Bank)

Central bankers are on their way out anyways

"In many respects we’re coming to the last seconds of central bankers’ fifteen minutes of fame which is a good thing… In general it’s a much better balance than the only game in town being central banks and monetary policy. This is positive." --Bank of England CEO Mark Carney (Central Bank)

Financials:

M&A thrives in loose regulatory environments

"There’s a feeling that you can achieve the goals you set out that the government will not get in your way if you have a strategy to implement something and I think that’s rifling through all industries, people call it animal spirits but I think it’s the optimism that they can envision a creative way to create value and that the government might not get in their way and that’s going to motivate people to attempt and try things that will be exciting for everyone. That’s what I think is going to drive the M&A market." --Moelis and Co CEO Ken Moelis (M&A Advisory)

Consumer:

Amazon is opening more physical stores

"Probably more advanced and further along are the Amazon Bookstores. We have three physical stores; Seattle, San Diego, and Portland right now. We see adding five more this year. So we’re still in that phase where we’re testing and learning and getting better, even on the bookstore. I would say there’s other things that are physical in nature, the pop-up stores and college pickup points that we learn from as well, and think creates a great value particularly at the college pickup points." --Amazon CFO Brian Olsavsky (E-Commerce)

Nobody really worries about Wal-Mart anymore

"we were ignored for most of our history. Nobody paid any attention to us. And – but we continued to expand and grow and we got more and more successful, and then kind of the conventional supermarkets, they were – I think they were really pre-occupied with Walmart, and trying to be competitive with Walmart for a long time..." --Whole Foods CEO John Mackey (Grocery)

Over-the-top video packages could be at a tipping point

"it seems like we’re on the cusp of some significant growth for new entrants in the multi-channel marketplace. And what we like about them is they are mobile friendly or mobile first, their user interfaces tend to be very strong, and their pricing is priced substantially lower than the expanded basic bundle that most of the MVPDs are offering...we think that this wave that we’re seeing is really a signal of what is to come and what the future will be" --Disney CEO Bob Iger (Media)

Content creators benefit from more downstream competition

"we think that that proliferation of downstream competition is really, really healthy for content creators and for brands like ours that robust, that are differentiated, that can really deliver content that works for customers...we do believe that it can reverse some of these overall declines in subscriber trends in the total MVPD universe and have that go forward." –21st Century Fox CEO James Murdoch (Media)

OTT hasn't really exploded yet though

"I’d say OTT is growing at a very solid pace. It hasn’t exploded. At times people think that might happen, but that’s not taken place." --Akamai CEO Tom Leighton (Content Delivery Network)

Technology:

China has adopted digital payments faster than anyone

"I have not, from the experience around the world, seen a single country where the adoption of digital technology is at a higher level than China. It’s extraordinary how people’s lives revolve around digital technology. And particularly impressive is the transition of almost over two years from zero credit card or anything other than cash to suddenly, in some stores, cashless payment being a majority of our sales...you go to stores in China now and regularly, you will see people paying with their cell phones in a variety of retail formats." --Yum China CEO Micky Pant (KFC)

Healthcare:

Drug companies are pointing fingers at others for high prices

"If you look at the University of [California] Berkeley data showing that of $100 paid to an innovative drug company at list, only $63 on average makes it through to the company. That’s $37 out of the $100 are being paid to non-innovators in a system which thinks it’s paying high prices for innovation. So that’s really, that’s something that’s going to have to start to be addressed." --Glaxo Smith Klein CEO Andrew Witty (Pharmaceuticals)

Drug distributors are taking issue with that

"any suggestion that PBMs are causing drug prices to rise is simply erroneous. We are the solution and not the problem. And that’s why both public and private payers continue to count on PBMs as indispensable partners that help to manage their drug trend." --CVS CEO Larry Merlo (Pharmacy)

Industrials:

The best application of the internet of things is in the industrial marketplace

"So I think we’ve always believe that the industrial market is where the true strength of a IoT fits. It’s where there are very strong business models for the investments that are required in the IoT infrastructure that’s going to be put in." --Microchip CEO Steve Sanghi (Semiconductors)

Materials, Energy:

The oil industry is optimistic that the worst is behind it

"Frankly, I’m glad 2016 is behind us...we still have challenges ahead. Nevertheless, $50 oil has been a welcome relief. I attribute my gray hair to the many previous downturns I’ve been through, 1986, 1991, 1999, 2002, and 2009. They all required difficult decisions and cost reductions, but this one has been unusually grim and painful." –National Oilwell Varco CEO Clay Williams (Oil Service Equipment)

Miscellaneous Nuggets of Wisdom:

Downturns are an opportunity to become better

"downturns are an opportunity to become better...The downturn of the 1980s was also particularly severe. E&P operators faced the very same challenges they always do when oil prices plummet, how to improve cost per barrel, again, a necessity to survive and again invention followed. I credit the downturn of the 1980s with the inventions of measurement-while-drilling [MWD] systems, logging-while-drilling systems, top drives, rotary steerables, horizontal drilling technology, and PDC bits technologies that frankly enabled the shale revolution. It’s not a stretch to say that the seeds of this amazing new source of oil and gas from shale are a direct result of the downturn of the 1980s." –National Oilwell Varco CEO Clay Williams (Oil Service Equipment)

In a daily trader review or monthly trader review, often I find the words: “to take my trading to the next level.”  Traders wish to take their trading to the next level. It’s almost like we could start a cult: Next Level Trading.

The desire is there for most traders.  The question is the how.

Most traders focus on trading better in real-time to “take my trading to the next level.”  If they just execute better on a trade here and there, then their trading will be better.  If they would have just sized up on a trade, then their week would have been different.  You can feel the stress and frustration in their emails about executing better in real-time.

What if these traders are looking at their trading progress backwards?  What if this next level trading doesn’t come from their hyper-focus on real-time trading?  What if finding that next level requires a different focus?

I assert that it does.

And this report card above is a terrific first step towards changing that focus from real-time trading results to a daily improvement routine.  It relieves all that stress of executing better in real-time.  It helps you find your true goal of how good you can be.

What if you judged your day not on your PnL to reach the next level, but on whether you completed your daily improvement routine?  As I say, having “nothing special” days.  Just days where you compete a competitive daily improvement routine and sit back and enjoy the journey to wherever that leads next.

What if instead of being hard on yourself for that missed trade, you were hard on yourself in developing a competitive daily improvement routine?

Also if you make it to that next level as a trader, is that your final destination?  I would doubt it is for you.  You will want to get even better from there.  And how will you accomplish that?  Develop a daily improvement routine so you improve from this level.

Let me offer a new focus.

Why not try string together a month of “nothing special” days and watch where that takes your trading?

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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.

This week’s post: A Weak Economy

The US economy continues to be sluggish and there are signs that industry isn’t seeing the bounce that it had hoped for. One week does not necessarily make a pattern, but until we get inflation, it will be tough for businesses to show the type of top-line growth that investors are used to.

Also in this week’s post: Oil companies are now optimistic, Elon Musk sleeps at the office, and our Director of Research, Jeremy Saltzberg, was in Omaha last weekend, so there are a number of words of wisdom from Buffett.

The Macro Outlook:

The US may not be rebounding as much as hoped

“The one surprise we had is in the last couple months we’ve seen the U.S. spending rate come back down again, which bothers us…I feel a little bit more worried about sales because of the U.S. marketplace in particular…this slow to start turning that nose up really bothers me.” —Emerson Electric CEO David Farr (Industrial Components)

GDP growth has obviously weakened

“U.S. GDP has obviously weakened…consumer spending continued to be the primary economic driver in the U.S. On the other hand, industrial production has been disappointing” —UPS CEO David Abney (Logistics)

Restaurant data has shown recent weakness

“According to the National Restaurant Association, restaurant sales have been uneven during the first three months of 2016 after steadily rising throughout 2015. Both NPD and KNAPP-TRACK have also shown recent traffic and sales declines…we may be seeing a little bit of a softening out there right now” —Sysco CEO Bill Delaney (Restaurant Distributor)

Flextronics continues to see a very slow, very weak, but stable environment

“we’ve been mentioning that the macro’s been soft…for at least three quarters. We continue to see the same kind of softness…we don’t see the market getting stronger, but we see it somewhat stable. We don’t see a significant downside. We just see it very slow and very weak.” —Flextronics CEO Mike McNamara (Electronics Manufacturing)

Avis saw an “unusually weak” spring break, but does think that things are turning up

“Our soft President’s week…was the start of what turned out to be an unusually weak spring break. Coupled with the soft commercial demand, weak inbound volume and a mild winter…our view is that this unusually soft pricing event…is an anomaly, not a trend…March was better than February, April was better than March, and May bookings are indicating a continuation of the favorable pricing trend” —Avis CEO Larry De Shon (Rental Cars)

Expeditors’ customers are more cautious about their spending

“Our people…adapted to…slowing global trade and excess carrier capacity. Many of our customers are being cautious about how to spend their logistics dollar, taking advantage of abundant capacity in search of lower rates where possible” —Expeditors International CEO Jeff Musser (Freight Forwarding)

Trophy real estate assets are showing some potential price vulnerability

“particularly with regard to trophy office, we’re not seeing as many bidders in some cases…If we were going to circle some assets and say these are the ones that might be vulnerable, it clearly would be the trophy office assets.” —CBRE Group CEO Bob Sulentic (Commercial Real Estate Broker)

Markets have rallied back, but has it just been a technical bounce?

“We are happy to see the fear in the market…subsiding a bit…With that being said we believe this recovery is largely technical and without a meaningful change in fundamentals, our attitude and our approach is generally unchanged.” —Ares Capital CEO Kipp deVeer (Business Development Company)

Oaktree thinks that we are about to see more distressed debt

“the credit markets’ panic attack…reminds us that market psychology is fragile, liquidity can suddenly become scarce, and capital markets can quickly shut. Moreover, we believe that signals that an upswing in defaults has finally started, and that we are a big step closer to the next expanded distressed debt opportunity.” —Oaktree CIO Bruce Karsh (Asset Management)

A large percentage of US profit growth has historically come from inflation

“There are a lot of headwind coming at us as you know that is putting downward pressure on sales, because historically in the U.S. market the growth did not come from volume. If you look back for the last number of years, it came from inflation and that inflation was based on commodities inflation. Now, we are living in an environment where there is no inflation in commodities, so it is harder to be able to say, to have a bullish approach to grow.” —Kraft Heinz CEO Bernardo Hees (Packaged Food)

And no one really knows when inflation will come back

“I wish I could tell you when we were going to cross over between deflation and inflation…I think we said that we expect it to last at least another quarter, it could be longer than that based on what we’re seeing. And so I’m not really sure when to make that call.” —Sysco CEO Will Delaney (Restaurant Distributor)

Beware market illiquidity

“One of the hallmarks of the capital markets today is that there just isn’t a lot of liquidity. And when the sellers emerge, prices drop, in many cases, well below fundamental value…In some cases, we were stymied, because there wasn’t as much supply as we would have liked of the companies that we found attractive…when the recovery came, again, some of these securities traded up 20 points or 30 points, again because of the lack of liquidity” —Oaktree CIO Bruce Karsh (Asset Management)

It would not be abnormal to go into a recession after seven years of expansion

“if we go into a recession after six-seven years of economic growth, it won’t be unusual” —Fairfax Financial CEO Prem Watsa (Insurance)”

International:

Europe has improved

“I just came back from Europe. Europe, our Western European business has continued to improve. I finally see some good momentum there. No, the economy is not going to be robust there, but they clearly are making investments.” —Emerson Electric CEO David Farr (Industrial Components)

Sentiment in China is not all doom and gloom

“I have to say, having just returned from Latin America and India and China, the consumer that you see on the ground, the behavior that you see on the ground, is really quite vibrant in India; and in China, is not doom and gloom, some concerns, but not the headlines that we read every day.” —Colgate Palmolive CEO Ian Cook (Packaged Goods)

Financials:

Tom Gayner is struggling to comprehend negative interest rates

“I remember that it was hard learning about negative numbers in fifth grade, I’m finding it even harder to understand them as a grown up as they pertain to interest rates. Fortunately, I figured out negative numbers and made it to the sixth grade eventually, and we will all do so as well with negative interest rates.” —Markel CEO Tom Gayner (Insurance)

Warren Buffett has a good way of explaining them

“We had a rule for 2600 years from Aesop…that a bird in the hand is worth two in the bush. But a bird in the hand now is worth about nine-tenths of a bird in the bush in Europe…These are very unusual times.” —Berkshire Hathaway CEO Warren Buffett (Textiles)

Extremely low rates have a real effect on business valuations

“If you ask me whether I paid a little more for Precision Castparts because interest rates were zero, than if they had been six percent. The answer is yes. I try not to pay too much more but it has an effect. If interest rates continue at this rate for a long time, if people ever really start thinking this is normal that will have an enormous effect on asset values. It already has had some effect.” —Berkshire Hathaway CEO Warren Buffett (Conglomerate)

The hedge fund space is overcrowded

“we’ve been reducing our hedge fund investments over the past year or year-and-a-half…the space has become very crowded and returns have been competed away. When 20-years-ago, there were one or two or 10 traders, market neutral hedge funds could earn very, very attractive returns. Now that there are hundreds of them, the rate of return that those hedge funds can earn has come down rather dramatically.” —Loews CEO James Tisch (Investment Company)

Reinsurance markets may be starting to improve

“there are some signs that reinsurance terms, especially ceding commissions maybe bottoming out.” —Arch Capital CEO Dinos Iordanou (Insurance)

Antitrust enforcement has gotten more intense recently

“obtaining the U.S. anti-trust approval of large complex business combinations, regardless of the industry, has become increasingly time intensive and difficult” —Halliburton CEO Dave Lesar (Oil Service)

Consumer:

Used car prices are falling because more people are leasing cars

“you can see that we have seen a decline in both 24 months and 36 months auction values versus a year ago…We have, across the industry, more units coming back from the increasing rates of lease over the last number of years.” —Ford CFO Robert Shanks (Automobiles)

Electric cars have momentum in China

“As…was reinforced in Beijing last week, customer interest in electrification is gaining momentum. Our customers increasingly see the need for electrification of the power train to close the regulatory gaps on CO2 emissions and fuel economy.” —Delphi CEO Kevin Clark (Auto Supplier)

Television is enjoying a resurgence in interest from brand advertisers

“we’re seeing some of our inventory sell for upwards of 30% to 50% higher than last year’s upfront levels…we think all signs point to, frankly, the best upfront we will have seen in years…television is experiencing resurgence in the minds of brand advertisers” —Time Warner CEO of TBS John Martin (Media)

Whole foods is trying to stay ahead of its competition with prepared foods

“our commitment around culinary is really what separates us compared to the competition…we really feel like [it is] a big, big differentiator for us as a company. Our stores are very different than our competitors, and we’re not standing still.” —Whole Foods CEO Walter Robb (Grocery)

Technology:

Tinder’s user growth is strong overall but has slowed in North America

“In terms of Tinder MAU, it continues to grow well. Again, as I’ve said, it’s slower growth in North America than in the rest of the world, which is natural just given the rollout.” —Match Group CEO Greg Blatt (Online Dating)

Apparently there is a Chinese “Alphabet” after all. Baidu appears to be a mirror image of Google.

“We have invested in AI for many, many years. We believe we are leading in this sector not only in China, but around the world. This enables us to do disruptive things like autonomous driving. And it’s kind of early for us to talk about this model because right now our focus is to solve those technical problems; the first to make that autonomous driving fully autonomous” —Baidu CEO Robin Li (Chinese Google)

Healthcare:

CVS’ front of store is primarily a tool to drive Pharmacy sales

“ultimately we see the role of the front store as essentially a door into the pharmacy. This is where consumers get connected to CVS, and ultimately over time, they start using us for prescription” —CVS Pharmacy EVP Helena Foulkes (Pharmacy)

Emergency rooms and Urgent Care are filling a gap caused by a shortage of primary care physicians

“you see urgent care, freestanding emergency rooms, and even hospital-based emergency rooms, providing the solution that patients are looking for when they can’t get into a physician clinic because of physician shortages, or because of payer dynamics.” —HCA COO Samuel Hazen (Hospital)

Industrials:

Manufacturers may be nearing the end of their inventory liquidation

“We completed the inventory correction back in December quarter” —Microchip CEO Steve Sanghi (Semiconductors)

A shift to a 48 volt electrical system could create opportunities for auto suppliers

“things like 48-volt, where you can get a significant benefit at a fraction of the cost, it’s a great value proposition. It’s a terrific value proposition.” —Delphi CEO Kevin Clark (Auto Supplier)

Materials, Energy:

The oil industry is feeling better than it did 90 days ago

“I think it almost goes without saying that things feel better today than they did 90 days ago…The very fragile energy capital markets…appear to be stabilizing, the outlook for commodity prices are improving and I think for industry our operating environment is definitely strengthening.” —Anadarko CEO R. A. Walker (Oil E&P)

Companies are starting to talk about expanding their capital budgets again

“if the current oil price environment prevails, it’s more likely that we will maintain or even increase drilling and completion activity from current levels, which would result in increased capital spending…At this point, the environment’s getting much better. I mean, we like the direction on the cost, we like the direction on the oil price, so I think we’re at a point where things are starting to look pretty darn attractive.” —Apache CFO Stephen Riney (Oil E&P)

People are expecting oil companies to move cautiously

“I do think commodity prices have to go up and they have to stay there a while before you really see activity and purchasing follow, as customers repair balance sheets and basically get comfortable that commodity prices are going to stay high” —National Oilwell Varco CEO Clay Williams (Oil Equipment)

But producers have maintained their ability to increase production quickly

“Apache has maintained the organizational capacity and personnel to operate a significantly higher number of rigs and we are well prepared to ramp-up activity when appropriate.” —Apache CEO John Christmann (Oil E&P)

And they have cut costs significantly

“in key areas of North America where Apache was actively drilling, our average drilled and completed well costs were down approximately 45% in the first quarter compared to average 2014 levels. Notably in the Delaware Basin, our most recent well costs are now down approximately 60%.” —Apache CEO John Christmann (Oil E&P)

High levels of storage could be an overhang on the market for some time too

“While production in the U.S. peaked several months ago, oil storage is proving quite stubborn and is rivaling levels from over 80 years ago. Until production declines translate into meaningful oil inventory storage reductions in the U.S., I believe we will continue to operate in a challenging upstream environment.” —Distribution Now CEO Robert Workman (Oil Service)

Recovery may not come until 2017

“We continue to believe that the upturn is really a 2017, not a 2016 story, i.e. the oil and gas market upturn.” —Ecolab CEO Douglas Baker (Services)

In the meantime, oil companies are confident that they’ll have access to capital if they need it

“I think what we’ve seen is they’ll be able to get the money to do that either through commodity prices, or through going back into the equity markets or the debt markets. So, yeah, they are feeling better and I think they’re trying to survive to 2017 and then get on with things.” —Halliburton CEO Dave Lesar (Oil Service)

Cliff’s Natural Resources’ CEO is one of a kind…

“Analyst: Yes, hi, Lourenco. My question was answered already. Lourenco Goncalves: But mine was not, what’s the current price expectation of the desk of JPMorgan for iron ore, Mike? Analyst: Well, let me just say they’re below your expectations. I realize that our commodity team… Lourenco Goncalves: When are you guys going to fire these guys at the desk; they are making your company look ugly.” —Cliff’s Natural Resources CEO Lourenco Goncalves (Iron Ore)

Miscellaneous Nuggets of Wisdom:

Crystal balls tend to break

“One of my favorite sayings is he who lives by the crystal ball must learn to eat ground glass.” —Loews CEO James Tisch (Investment Company)

Dedication means being willing to sleep at the office, even if you’re a billionaire

“I’m personally spending an enormous amount of time on the production line…I have a sleeping bag in a conference room adjacent to the production line, which I use quite frequently.” —Tesla CEO Elon Musk (Automobiles)

Move your desk from time to time

“I move my desk around to wherever the most important place is for the company. And then I sort of maintain a desk there over time to sort of come and check in on things.” —Tesla CEO Elon Musk (Automobiles)

Management works on the system, employees work in the system

“We always say that management works on the system and employees work in the system.” —Microchip CEO Steve Sanghi (Semiconductors)

Know what you’re good at and stick to it

“I think one of the smartest things we’ve done for 10 years is have a very small to-do list and a big don’t-do list…we stayed to our knitting…We stayed core to our business and that’s why 10 years later we are the best in the world at what we do.” —Livenation CEO Michael Rapino (Ticketmaster)

Never hire people you don’t need

“Tom Murphy had the best approach. He never hired a person they didn’t need, and therefore they never had layoffs. The idea that you give up your staff…because business has slowed down, if you don’t need them now then you didn’t need them in the first place.” —Berkshire Hathaway CEO Warren Buffett (Textiles)

Government always has been and always will be a big factor in business and business has always found a way to adapt

“Government is a very big factor in our business and in all businesses. There’s the very broad policies that affect practically everybody and sometimes there can be some pretty, specific policies…We’ve operated under price controls. We’ve had 52% federal taxes applied to our earnings for many years. I mean they were higher at other times but we’ve had regulations come along and in the end business in this country has done extraordinarily well for a couple of hundred years, and it has adapted to the society and the society has adapted to business” —Berkshire Hathaway CEO Warren Buffett (Textiles)

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.

This Week’s Post: Inventories Destocked?

An industrial recession typically ends when excess inventories have been depleted. We’re probably not there yet, but we’re getting closer. That’s a good sign for the second half of 2016, but tightening conditions in capital markets could create problems of their own.

The Macro Outlook:

Industrial companies have been in recession for four quarters now

“we are now basically in our fourth quarter of the recession…I see at least one more quarter, maybe another quarter.” —Emerson CEO David Farr (Industrial Components)

Eventually they will hit bottom, the question is when

“This too will bottom we’ve lived through a bunch of these. It just our view that we’re not going to see that end in ’16″ —Eaton CEO Sandy Cutler (Diversified Industrial)

Inventory depletion typically creates a bottom for manufacturers

Where are we in the inventory cycle? It’s difficult to say

“Destocking has always been difficult for us to see, the magnitude…I would expect destocking to continue through the next quarter. And beyond that, I couldn’t comment.” —Kennametal CEO Donald Nolan (Machine Tools)

Inventory data is still elevated

“the U.S. inventory sales ratio has come down slightly but it still remains elevated, certainly indicating we got continued overhang of inventories in the economy. And customers are obviously attempting to work them down.” —UPS EVP Alan Gershenhorn (Delivery)

A lot of companies are starting to sound more optimistic though

Microchip was one of the first companies to enter the downturn and may be one of the first out

“We believe that our business has stabilized and that the majority of the inventory correction is behind us…the December quarter marks the bottom for us for this correction.” —Microchip CEO Steve Sanghi (Semiconductors)

LyondellBasell’s CEO noted that inventories are low and we’re approaching a seasonal uptick in demand

“my sense is inventory is very low…coming into a March, April, May timeframe, it will bring a seasonal uptick in demand, likely inventory restocking.” —LyondellBasell CEO Bhavesh Patel (Plastics)

Emerson’s CEO said the inventory downward draft is probably over with

“I would say what my knowledge is right now, inventory levels within the channel including ourselves, our levels that, they are pretty good levels, low…I don’t see much of a downward draft on that now. I think it’s pretty well over with, probably very minor downward draft.” —Emerson Electric CEO David Farr (Industrial Components)

Eaton said that people have got their hatches buttoned down tight

“I think people have got their hatches buttoned down tight and they too are trying to live through a period of time when growth is less than they’d hoped it might be a couple of years ago” —Eaton CEO Sandy Cutler (Diversified Industrial)

End markets are shaky though

Praxair’s CFO doesn’t see many things getting better

“When I look around at the current industrial state of the world, I don’t see many things getting better, and a few are getting a little worse. The combination of excess supply and reduced demand, continues to put strain on several industrial end markets.” —Praxair CFO Matt White (Industrial Gasses)

Eaton is not counting on an economic rebound in the second half

“I don’t think we’re seeing anything at this point that causes us to think that markets are better than what we’re forecasting here…as we put the plans together this fall were not counting on an economic rebound in the second half.” —Eaton CEO Sandy Cutler (Diversified Industrial)

Sysco mentioned “deflation” 40 times on their conference call

“we currently believe that deflation headwinds will persist for at least the remainder of the fiscal year…deflation impacts the P&L…the reality is, it’s not a great environment because you end up with fewer dollars to pay your expenses with.” —Sysco CEO William DeLaney (Food Distributor)

At best, it’s a slow growth environment

“there’s no doubt, it’s a slow growth environment.” –Honeywell CEO David Cote (Conglomerate)

“We do think that we are in this frustratingly slow environment that can often cause people to use the recession word, but I think that’s almost a more of a kind of an emotional issues than it is a the factual basis” —Eaton CEO Sandy Cutler (Diversified Industrial)

And it’s a long year

“there is so much time between now and the fourth quarter” —Eaton CEO Sandy Cutler (Diversified Industrial)

International:

Consumer related industries are relatively strong in China

“Consumer related industries are still performing well in China, as we continue to see good demand for things like transportation fuels, food, healthcare, environmental solutions and plastics.” —Praxair CFO Matt White (Industrial Gasses)

But consumer spending is definitely being impacted

“Domestic spending is certainly impacted in China. I was in China last week and you could see it there.” —Mastercard CEO Ajay Banga (Payment Processing)

“Our China Chocolate fourth quarter net sales results were less than our expectations…category performance is being impacted by macro economic issues and the related impact it’s having on consumer shopping behavior and confidence.” —Hershey CEO John Bilbrey (Chocolate)

Industrial markets are very weak

“Industry demand for medium and heavy duty trucks in China decreased by 24% for the full year as the industrial economy slowed.” —Cummins CEO Thomas Linebarger (Truck Engines)

The Chinese are looking to shut down steel capacity equal to US output

“Clearly, you have a situation of excess capacity across most infrastructure supporting industries, like steel, glass and cement…the Premier recently here announced their goal to take out about 100 million to 150 million tonnes a year capacity. And just to put that in perspective, that’s like the entire capacity of the United States.” —Praxair CFO Matt White (Industrial Gasses)

The weakness in China is in lower tier cities

“Our view is that customers in lower tier cities have been more significantly impacted by the softening economy, particularly around the industrial cities, which have been more heavily affected by China’s slowing export trade.” —Yum! CEO Greg Creed (Restaurants)

“the services and technology companies are tending to focus in the largest cities…demand for retail, logistics and office space in those major cities actually being quite robust. Where there’s stress in China is in the peripheral tier two cities and in the tier three cities where the industrial base was focused and where you see a clear decline in activity.” —Jones Lang LaSalle (Commercial Real Estate Broker)

AGCO’s CEO had some very negative things to say about Brazil and Venezuela’s governments

“the government in Brazil is in very bad shape. They don’t know what they are doing, they don’t have a strategy, they are corrupt, and this damaging not only our business but business in general… I think Venezuela is close to complete bankruptcy, the political system doesn’t work at all, you can’t travel there without being killed. So that’s really, really a very, very difficult market.” —AGCO CEO Martin Richenhagen (Farm Equipment)

Financials:

Capital markets look increasingly tight

Widening spreads have affected companies’ ability to issue debt

“In total, global bond issuance declined 26%…In January, we saw a continuation of that trend…where we see spreads going, there’s a lot of volatility right now. We think that also plays into it, people’s appetite for going out. It’s not really related to the base rate. It’s related to the spread.” —McGraw Hill CEO Douglas Peterson (Ratings Agency)

Volatility is likely to affect M&A activity this year

“the volatile market conditions at the start of this year could affect our 2016 performance…In our M&A business, while we’re off to a good start, it’ll be several months before we know whether volatility has affected deal announcements for the year.” —Lazard CEO Ken Jacobs (Investment Bank)

There has been some cooling in demand at the high end for real estate

“What we did see is something of a cooling in demand at the high-end, in particular, our investment sales markets, a bit more selective purchasing, buyers not chasing risk as much as they might have done earlier in the cycle.” —Jones Lang LaSalle CEO Colin Dyer (Commercial Real Estate)

It’s a terrible environment to sell assets out there

“I think your point is spot-on. I think it’s a terrible market to be trying to sell most assets out there, particularly obviously oil-related assets. And that’s why I’ve been pretty circumspect around asset sales.” —Chevron CEO John Watson (Integrated Oil)

Sellers are expecting to receive higher prices than buyers are willing to pay

“sellers’ expectations of price have continued to kind of push upwards whilst buyers’ willingness to pay those continuing increased prices have become slightly more hesitant.” —Jones Lang LaSalle CEO Colin Dyer (Commercial Real Estate)

“We have seen a couple of things where the pricing was so over the moon for the outset or the location that they had to backup and ask for a different bid or lower bid. But those are properties, that in my mind — its like — somebody says they are going to sell you a Volkswagen Bug for $80,000, you are probably not going to get a lot of bids. So there is some of that.” —Kilroy CEO John Kilroy (Office REIT)

“I would tell you on the – on down – in down cycles, having been through a few, it’s really hard to get the bid and the ask to converge on the way down.” —National Oilwell Varco CEO Clay Williams (Oil Service)

VC investors are marking down portfolio positions

“I personally spend a lot of time…with the VCs, the angel investors…and a lot of those folks…there are some people that have been burnt, where the company went from $4 billion to $10 billion, $6 billion or whatever it might be. Feel bad for those investors.” —Kilroy CEO John Kilroy (Commercial REIT)

If capital markets freeze some early stage companies are probably not going to survive

“Some companies will fail and deserve to fail, let’s just be honest about this. The nature of technology is that, it rapidly evolves or even increase the revolution, and sometimes that obsoletes some other things.” —Kilroy CEO John Kilroy (Commercial REIT)

Many poor performing retailers weren’t able to survive the fourth quarter

“we did experience in ’15 a number of bankruptcies of kind of the really poor performing retailers. There was clearly a slowdown in retail sales in the back half of the year. And then when you couple that with the tourism issue, you couple that with the normal weather, I mean it was so to speak a perfect storm, and it took a lot of retailers out.” —Simon Property Group CEO David Simon (Mall REIT)

Consumer:

There are signs of continued strength in labor markets

“we’re simultaneously dealing with pickier clients and pickier candidates. Candidates are getting more counteroffers. Candidates are getting competing offers. Candidates are turning down offers that our clients give them.” —Robert Half CFO Keith Waddell (Staffing)

Casual dining gets hit harder by macro pressure than Quick Service

“we’ve seen this not just in China, but outside that casual dining is impacted by macro…it always has a bigger impact on casual dining when macros are volatile and changing than it does on the QSR business..” —Yum! CEO Greg Creed (Restaurants)

The perimeter of a grocery store is growing much faster than the center of the store

“it’s the perimeter of the store where you are seeing a tremendous amount of growth versus the center of the store…listen, whether it’s Whole Foods or other retailers, they don’t want the center of the store to die. So they are all looking for innovation and working with us on innovation there.” —Hain Celestial CEO Irwin Simon (Consumer Packaged Goods)

UPS delivered 612 million packages during the holidays

“certainly, it was a solid peak season. We delivered more than 612 million packages over the peak period. It’s the most in the company history, up about 7%.” —UPS EVP Alan Gershenhorn (Delivery)

Peak shipping demand is so high that Amazon has needed to build its own infrastructure to accommodate it

“what we’ve found is in order to serve – properly serve our customers at peak. We’ve needed to add more of our own logistics to supplement our existing partners. That’s not meant to replace them. And those carriers are just not – no longer able to handle all of our capacity that we need at peak. They have been and continue to be great partners. And we look forward to working with them in the future. It’s just we’ve had to add some resources on our own” —Amazon CFO Brian Olsavsky (E-Commerce)

Chipotle said it may take 4 or 5 quarters to recover from its food safety issues

“When we looked at other events, other companies that have gone through something like this, the recovery typically takes four or five quarters or so.” —Chipotle CFO John Hartung (Restaurants)

Technology:

Alphabet says that it has made great strides in AI

“On AI, we are obviously seeing incredible progress in this field. We make great strides…It’s always tough to predict what happens over a five-year timeframe, but I do see us making significant strides. Even a year ago, I wouldn’t have predicted that we would be in a strong position to mount a serious challenge to the world champion in Go this year. So looking at the pace of progress, I think we will have AI in a form in which it benefits a lot of users in the coming years, but I still think it’s early days, and there’s a long-term investment for us.” —Google CEO Sundar Pichai (Internet)

Companies are seeking cyber-security in the cloud

“Security is now a major driver of the cloud adoption. As threats become more frequent and sophisticated, Azure’s unique technology like machine learning empower customers to adapt to these new realities.” —Microsoft CEO Satya Nadella (Technology)

Marissa Mayer is on the defensive

“In a turnaround, you must literally turn around declining revenue and get it to grow.” —Yahoo CEO Marissa Mayer (Internet)

Healthcare:

Aetna said that is has “serious concerns” about the sustainability of public health insurance exchanges

“we continue to have serious concerns about the sustainability of the public exchanges. Specifically, we remain concerned about the overall stability of the risk pool, including enforcement of standards related to special election period enrollment, where CMS has made some recent changes, but more needs to be done.” —Aetna CEO Mark Bertolini (Health Insurance)

Industrials:

The investment community is concerned about auto sales, but production is expected to stay high

“we understand the concern that people in the investment community have with respect to where we are in the cycle and what production schedules look like. We see none. I mean we’ve seen absolutely no change in production schedules from when we gave guidance originally a month ago…we’ve seen no change.” —Delphi Automotive CEO Kevin Clark (Auto Parts)

The auto industry has been known to overproduce before though and dealers usually end up suffering

“We’ve taken steps to begin to bring in our inventories. But even if we do that if the industry overproduces and keeps inventory at a high level that means the overall environment is still very difficult.” —Autonation CEO Mike Jackson (Auto Dealer)

There has also been concern about the aerospace industry, but Eaton was positive

“A lot of discussion over the last couple of weeks about what’s happening in the commercial aerospace activity…we continue to see that outlook being strong as we move into 2016 and 2017.” —Eaton CEO Sandy Cutler (Diversified Industrial)

Honeywell also pointed out that flight hours are still increasing

“if you take a look at what’s happening in the aerospace industry, the biggest thing for us is that flight hours increase. And flight hours last year were up 4% or 5%. They’re likely to be up 4% to 6% again this year.” —Honeywell CEO David Cote (Conglomerate)

PACCAR was upbeat about prospects for truck production in North America

“2016 will be another good year for the U.S. and Canadian Class 8 industry truck market…Cancellation activity in our operations are very normal. There’s nothing unusual that is happening in that arena. And in terms of where we’re at in the cycle, I think that’s to be determined. The economic fundamentals are positive, and we see that we’re going to track what the demand is, and we think the demand is going to be a good market for 2016.” —PACCAR CEO Ronald Armstrong (Truck Manufacturer)

Materials, Energy:

Companies in the oil space are becoming more realistic

“It has been challenging and sometimes frustrating to reach agreement with potential sellers. But as the downturn lengthens, everybody in this space is becoming a lot more realistic.” —National Oilwell Varco CEO Clay Williams (Oil Service)

This environment could last for longer than anyone expected

“we do think the current environment that we’re in will probably be protracted…until we see events stabilize and we see oil prices…take on a new supply-demand dynamic than it’s currently in the market or anticipated in the near future, we will continue to be a very cautious investor in this environment.” —Anadarko CEO R. A. Walker (Oil E&P)

The oil industry may not recover until 2017

“We are looking at a situation, in my opinion in the oil and gas marketplaces, that will not recover until well past middle of ’17, maybe late ’17.” —Emerson Electric CEO David Farr (Industrial Components)

Hedging is no longer attractive in this environment

“at $30 and $2, just to use big round numbers, I don’t think any company has got a motivation to hedge until it’s probably a negative cost of replacement. So I’m not sure we or anybody else would find ourselves motivated to lock in prices that are lower than the marginal cost in order to develop.” —Anadarko CEO R. A. Walker (Oil E&P)

Rating Agencies are likely preparing to downgrade oil companies

“the rating agencies need to do what the rating agencies need to do and they have conservative oil price scenarios out there and I think that’s understandable…if a downgrade does occur, and I think they’re moving in that direction…we would not be the only one that that would happen to. I don’t see it materially impacting our cost of funds or materially impacting our ability to secure financing.” —Chevron CFO Patricia Yarrington (Integrated Oil)

Companies are cutting spending where they can, including dividends

“I mean, the dividend, it is costing us about $550 million a year currently. Obviously, there are other things we could do with that cash in the current environment…I certainly do not expect us to eliminate the dividend…I don’t think that’s an appropriate step, but the current yield is certainly higher than we would have targeted in a much higher stock price environment.” —Anadarko CEO R. A. Walker (Oil E&P)

“We have decided to reduce our quarterly dividend by 34%. We believe this level, which represents a payout ratio of close to 100% of 2016 earnings remains highly competitive, but also protecting the long-term financial health and financial flexibility of the company. ” —Potash CEO Jochen Tilk (Fertilizer)

Miscellaneous Nuggets of Wisdom:

Never enter into a deal that you don’t feel like you can walk away from

“The way we look at it is, we don’t look at any of the acquisition that is a must for us. We have not preceded any of the past acquisitions we have done with the eye towards that it’s an acquisition that we must do. We have done them because we found them, we were able to get them either at a reasonable price or we’re able to build a model where it would make sense but you’ve seen us walk away from acquisition, like we’ve walked away from CSL, we walked away from many, many other that did not come in the public domain.” —Microchip CEO Steve Sanghi (Semiconductors)

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:

We are in a global industrial recession

"It’s been a very challenging year. And as we know, we are in a global industry recession for our businesses right now. We just incurred our third negative underlying sales growth and we will have two more" --Emerson (Diversified Industrial)

But just because we're in a recession doesn't mean that the economy has to fall apart

"we don’t see this very slow grinding recession that doesn’t have a monetary crisis attached to it, we don’t see a reason why that goes dramatically negative. But it is a difficult, frustrating, grinding environment" --Eaton (Diversified Industrial)

In fact, there may already be some signs of stabilization

"we’re starting to see the stabilization of some of the markets." --Emerson (Diversified Industrial)

Usually inventory recessions last 5-6 quarters

"it’s not unusual to see historically a company like Emerson...have a little bit of recovery coming in that sixth type of quarter." --Emerson (Diversified Industrial)

And we may be nearing the end of this inventory correction

"we began this inventory correction earlier than most companies and believe that we are nearing the end of it." --Microchip (Semiconductors)

"My inventories in Europe are – I look at our channel and it’s pretty good...I look at my channel in North America, I would say it’s in decent shape right now" --Emerson (Diversified Industrial)

There may be a little more work to do before inventories are optimally sized

"Our feedback is they’ve got little bit more to do before they’re going to really feel optimally sized." --Eaton (Diversified Industrial)

But by spring/summer of '16 companies should be ready to re-stock

"just like we see the effects of the industry events earlier and began this correction earlier, we can also see that we are ending this correction earlier, and we are now poised to resume growth in the March quarter." --Microchip (Semiconductors)

"I anticipate as we get into the spring and early summer of 2016, some of the companies that have been cutting back on capital and cutting back on...necessary investments are going to have to let the money go." --Emerson (Diversified Industrial)

This is all assuming that the broader environment doesn't get worse, but no one expects that it will

"the risk would be if we truly went into a global broad recession, then you clearly say okay, the industrial space will be a little bit weaker than I’m thinking. But I don’t see any indication we’re going to go to a global broad recession at this point in time.' --Emerson (Diversified Industrial)

Banks have been well behaved this cycle. There haven't been significant bubbles created

"We don’t see significant bubbles having been created out of this very long, low grinding growth rates. The banks are in awfully good shape and a lot of the regulations are ensuring very fulsome capital ratios in that regard. We have not yet seen any form of inflation and the prospect that we could get a couple of quarter point interest rate increases doesn’t feel like the thing that will derail an economic growth at this point." --Eaton (Diversified Industrial)

But capital markets do feel like they've entered a late cycle phase

"In terms of quality, late in the cycle it tends to be low. I mean, my own personal view I am sure if you looked around our investment table, people might disagree a little bit. I perceived the quality would be pretty low today." --Ares Capital (Business Development Corp)

Skyscraper construction is a classic late cycle indicator

"the construction market in New York is inflating aggressively and cost are rising. And even more important than that is there is there are enormous number of cranes in the sky...which are exceeding the capacity of the construction industry to deliver services. So there are handful of contractors who are expert in each traits and those guys are running out of capacity. So there is a bidding premium to get timely delivery of products and services." --Vornado (Commercial REIT)

Is there another shoe to drop?

"does it get any worse than that? Is there another shoe to drop or driven by anything. That we don’t know. That kind of view we don’t have. This is based on what we are able to see today." --Microchip (Semiconductors)

For what it's worth, Stan Druckenmiller thinks the dollar will start strengthening again

"I"m shorting the euro again...I have never seen a currency move of this intensity last 11 months. the nice thing about currency moves is that they tend to last 2-3 years. But they usually take a timeout somewhere in the middle. If you remember the yen went from 80 to 105 and then took a timeout for 8 or 9 months. I have thought we're in a timeout like that for the Euro and now look at what's happening..." --Stan Druckenmiller (Broke the Bank of England)

And the strong dollar is what started all this in the first place

"let me just say that exchange rates wreaked havoc on our 2015 results. Currency driven price erosion had a huge impact on our imaging components business." --Varian (Medical Capital Equipment)

International:

The worst may be behind us in China

"We are planning for a down 2016 in China...I fundamentally believe there has been a destocking going on. Basically what we can tell...I think the worst of that is behind us. I do believe we will have a challenging first quarter...But I personally don’t think it’s getting worse. I think that they are trying to reposition." --Emerson (Diversified Industrial)

The consumer side of China is doing very well

"the reported numbers that what we see on both fuels and chemicals tells us that the consumer side of China is doing very well." --Phillips 66 (Chemicals)

As China attempts to move from a "manufacturing" to a "consumption" economy, global brands could benefit

"I think what’s happening in China at this point is that there is a big change from an economy that was all lead by exports and heavy investments in fixed assets...to now an economy that’s...more consumption, more consumer spending...the segments that are more high priced are growing ahead of the ones that are lower price. And that’s exactly where we have most of our business and most of our brands position. So I think this change, while it may be bad for the industry, is not bad for us." --Anheuser-Busch (Beer Conglomerate)

But it's important to remember that China has formidable local competitors too

"In regards to China, we are impacted by increasing local competition." --Novo Nordisk (Pharmaceuticals)

And those competitors don't always like to play by international rules

"the negotiations with a handful of these licensees are taking longer than we previously expected. In some of these cases, although the licensees acknowledged they need to pay royalties to QUALCOMM, we believe in connection with the negotiations they have stopped reporting certain of their sales and royalties or did not report their sales and royalties in a manner that allows us to record revenue." --Qualcomm (Smartphone Components)

Europe continues to be a positive surprise

"So emerging markets turtled early this year if not late last year. U.S. economy has not been in any great shape, so I think the only positive surprise you could point to economically in the world would be Europe. And our Europe business is reflecting it." --Ecolab (Facilities Maintenance)

"we will expect our business in China and Asia to be sequentially down. But we make up for that elsewhere with a very, very strong Europe' --Microchip (Semiconductors)

All of Asia's industrial base has slowed, not just China

"I’d say if you go down through Indonesia, Malaysia, wherever else, clearly the oil situation is acting as a depressant in that particular area. You get up into Korea and of course there’re not a whole lot of ships being built currently and you’re seeing this back up again." --Eaton (Diversified Industrial)

Financials:

International credit markets tightened up a lot during last quarter's volatility

Asia and Latin America issuance decreased by 58% and 72%, respectively. This led to a 20% decline in global issuance overall. To put that in perspective, both Asia and Latin America had their lowest quarterly issuance since 2008...quarterly revenue from China experienced a decline for the first time in the last five years. In addition, this was Europe’s lowest issuance quarter since the third quarter of 2013." --McGraw Hill

As spreads have tightened capital markets have opened back up

"So it is possible that with spreads coming back in and only being 5 bps up from August, that we could continue to see heavier issuance as we move into November out of the blackout period, and in fact the pipelines look pretty good for next week." --Moodys (Credit Rating Agency)

Despite concern over VC capital, Vornado is still seeing good vibrancy in SF

"Listen there has been a lot of chatter in the marketplace that with some VC capital potentially drawing up and the IPO marketplace not being as open as it was that we’re seeing some pull back in terms of the tech tenancy and the San Francisco market. Our own experience has been that while there has been a lot of chatter and discussion about this we’re still seeing very good vibrancy in the marketplace." --Vornado (REIT)

Companies can still borrow for 30 years at 3.5%

"we expect to issue $15 billion to $16 billion of debt with maturities from 2 years to 30 years. We’re putting in place a long-term capital structure. The weighted average cost of this debt could be around 3% to 3.5% depending on market conditions." --Visa (Payments)

With low interest rates, it's not hard to find an accretive deal, but returns are low

"with the low interest rates right now, it’s not that hard to have an accretive deal. I think what we’re trying to be is also very careful about what types of returns these businesses are going to generate over the medium and long-term. And we’re going be disciplined there." --Ecolab (Facilities Maintenance)

Many companies find that accretion is easiest through share buybacks

"We think Whole Foods is a compelling buy at these prices. Stock buybacks are going to be accretive in the short-term and the long-term. And it doesn’t preclude us from making further stock buybacks in the future if necessary...It’s sort of a perfect situation...with interest rates being what they are and the long-term debt market being what it is and our trading metrics – stock price trading metrics, relative to history being what they are." --Whole Foods (Grocery)

Acquisition candidates are priced for perfection

"I think right now, things are generally priced for perfection. And as I continuously say, we kick a lot of tires, but we just haven’t found the right thing." --Loews (Investment Company)

Vornado says that the easy money has been made and it's time to prepare for the next cycle

"Trees don’t grow it in the sky and pricing has – the easy money clearly been made, pricing is very aggressive, I don’t know which way interest rates are going but people think that they are going up. I don’t know which way cap rates are going but 50% they can’t go much lower. So it seems that this is the time to begin to think about prepared for the next cycle. If you are in a position like we are running company like ours and you don’t stop thinking like that you are not being responsible." --Vornado (Commercial REIT)

Consumer:

TV networks were generally pleased with their performance despite cord cutting concerns

"I think we’re all seeing that the dire predictions of cord-cutting are overblown, but the good news for CBS is, no matter where distribution goes, no matter how or where you want your content, we are in a perfect position." --CBS (Network Television)

"despite all the talk about domestic secular concerns, our U.S. Networks grew revenues an impressive 8% this quarter" --Discovery (Cable Network)

Everyone is investing in content

"Programming remains by far the most significant area of investment for the company. As you all know, we have plans to invest aggressively in content in 2016 and beyond." --Time Warner (Media)

Les Moonves says that there can never be too much content

"we are a content company, we believe the world can have more content, we don’t believe the guy who says oh, there’s too much content. There never can be too much content and we want more of it." --CBS (Network Television)

A benefit of OTT television is that advertising can be more targeted

"One of the great characteristics of an IP streaming TV business in the future is the ability to have that data, the ability to use that to improve your products and services and monetize the viewership and the audience in the right way with respect to pricing, the attention of the audience correctly either for them or for advertisers" --FOX (Media)

One in seven Americans received a Starbucks gift card last year for Christmas

"You may recall that last year, one in seven Americans received a Starbucks Gift Card over the holidays, generating over $1.6 billion in card loads in our first quarter of fiscal year 2015." --Starbucks (Coffee Shop)

Retail is about detail

"I mean retail ultimately always comes down to how satisfied the customer is. So it’s about retail is detail is the cliché, and it’s a very appropriate one." --Whole Foods (Grocery)

Prepare to hear retailers talk a lot about warm weather when they report earnings

“We saw accelerated growth in footwear, although the warm weather tempered boot sales in the quarter. The watch business continues to remain under pressure in retail and wholesale." --Kors (Fashion)

There's a lot of competition entering off-price retail

"If you look at the department store model, it’s completely changed. The off price concept has been a vehicle for growth. So a perfect example is Nordstrom. Nordstrom is one where the department store is still doing quite well but the vehicle for growth has always been the Nordstrom Rack and they continue to try to add store count and up their expansion plans. I think Macy’s and others are actually taking a page out of their playbook" --Kimco (Retail REIT)

But as the economy has gotten better, consumers have gotten a little less sensitive to price

"At the same time, we’ve seen a decline in private label shares in many of our categories indicating the consumers preference for branded products and respect of our equities." --Colgate Palmolive (Soap)

Technology:

Tesla's autopilot cars have already logged several hundred thousand miles of live driving

"This has gone out to the whole fleet of Autopilot enabled cars, and those are racking up miles extremely quickly. At this point, I don’t have the exact number at the tip of my tongue, but it’s, I believe, several hundred thousand miles of driving." --Tesla (Automobiles)

Within 15-20 years owning a manually driven car will be like owning a horse

" I think it will be quite unusual to see cars that don’t have full autonomy... in the 15-year to 20-year timeframe...It will be like owning a horse or not – you’re really owning it for sentimental reasons." --Tesla (Automobiles)

Mark Zuckerberg tried to temper expectations for Oculus

"I can start off talking about Oculus and virtual reality. So the first thing that I want to stress here is that these kind of new platforms take a long time to develop. So we’ve said often that we think that virtual reality and augmented reality could be the next big computing platform. But just to put that in perspective and compare it to the development of previous computing platforms like phones and computers, I think the first smartphones came out in 2003, and in the first year, I think BlackBerry and Palm Treo were the initial smartphones that came out. And I think they each sold in the hundreds of thousands of units. So just to kind of give a sense of the timeframe that we’re thinking about this and how we expect this to develop, that’s how we’re thinking about that" --Facebook (The Social Network)

Ginny Rometty had an interesting analogy for the new architecture of cyber security

"There is a different paradigm to think about security...the days are over...where you could think of a castle with a moat around it and you could keep bad guys out...the way we have approached it is it's a big data analytics problem, just like your body has an immune system" --IBM (Big Blue)

AIG sees a lot of its workforce eventually being replaced by automation

"I think that there will be fewer people, because a lot of those jobs will eventually be replaced by automation...our technology would be a bigger part of the spend and the scalable infrastructure that gives us, will lower our unit costs substantially." --AIG (Insurance)

Materials, Industrials, Energy:

This may be the worst energy decline since the 1980s

"Regarding the market environment, we are in a decline like no other I have experienced, not only in my 24 years in this business, but also as a kid growing up in the energy industry. I was born and raised in a small town in the Permian Basin where my parents owned an oilfield service company. I never thought the market could decline again as sharply and severely as it did in the 1980s while I watched my parents struggle to make payroll, but I have clearly been proven wrong. We continue to see rig counts being reduced, projects being canceled, budgets being slashed, and inventory being cannibalized." --Distribution Now (Industrial Distributor)

The oil decline may finally be leaking into the broader Texas economy

"all of us are now being impacted in parts of Texas because of oil prices there" --Kors (Fashion)

We may be getting closer to seeing the real benefits of cheap natural gas

"we’ve almost all forgotten about is with natural gas dropped two-three years ago, people speculated on the reindustrialization in United States. We cautioned at that time that that’s going to take five years because designing these plants and building these plants and putting them into production is a five year cycle. Guess what, end of ‘16 and early ‘17 is when a lot of that starts." --Eaton (Diversified Industrial)

Domestic Steel production has structural issues that have been building for decades

"Extremely high levels of imports, much of which we believe are unfairly traded, continue to negatively impact order rates for domestic steel producers...you have to realize that what we’re fighting here is a very well-structured approach that over decades has been improved on the part of the foreign importers into the U.S. And so, it’s nothing simple...We have structural issues in this industry that are not temporary but enduring" --US Steel (The Corporation)

Miscellaneous Nuggets of Wisdom:

Think of your investments like your children

"I love all my children, I love all our businesses, and I think each one of them is doing well within the context of their industry." --Loews (Investment Company)

Building a brand is about building a story and an experience

"the customer wants something special, and it has to be unique and there has to be a story. And you hear a lot of brands speaking about story telling. And then you can look back at what Ralph and the team has done. It’s been years before anybody else in telling real stories, inviting customers into movie, sharing a dream of a better life." --Ralph Lauren (Apparel)

"I think the equity of the Starbucks brand throughout our public life has been defined by the culture and values and guiding principles. I said from day one that we are in the experience business, and our brand is defined by the people who wear the green apron." --Starbucks (Coffee Shop)

...as futures were broadly lower (Dow futures fell more than 100 points overnight), led by energy shares. The old “bad news is good news” was back for major averages again today, as the weaker jobs data on Friday was seen more as a reason to keep “loose” monetary policy in place longer for the U.S. (helping market sentiment) then a negative for the economy.

In addition, investors received more “dovish” commentary from NY Fed President Dudley, while an in-line ISM services report was perceived as positive (guess good news is also good news). Crude oil prices weighed on transports, but lifted energy stocks (which pushed major averages higher), while lower bond yields kept financial gains in check. Note S&P futures touched a low of 2,044 at about 8:00 AM this morning, but up more than 30 handles from that level.