Bad Numbers And Dark Prophesies: Almost Everybody's Cutting Something

February 5, 2016

The drumbeat of bad (and sometimes just plain weird) news has risen lately -- but today's batch stands out. Here's a small sampling:

US jobless claims were higher than expected, and continue the rising trend of the past few weeks.

US layoffs surged to a six month high, while asset write-downs are up worldwide. Among today's related announcements: 6,000 layoffs from ConocoPhillips and 10,000 from Shell Oil, and a $5.75 billion write-down from Credit Suisse.

These aren't surprising given the bloodbath in oil and banks' exposure to that industry. Many, many more shocks from these two sectors are coming.

Q4 US worker productivity fell at a 3% annual rate. According to the linked article: "Economists blame softer productivity on a lack of investment, which they say has led to an unprecedented decline in capital intensity." In other words, while corporations were borrowing trillions to buy back their shares they weren't bothering to build new factories or upgrade old ones.

US December factory orders posted their biggest drop in a year. Fewer people are working and those who are are either underpaid or insecure, so they're apparently buying less stuff. And, again, companies are using all their free cash to buy back shares rather than build capacity.

Truck orders in the US fell by 48%. This also fits the commodities bust/low capital spending theme. If we're not moving as much stuff around, we don't need so many trucks.

Department store chain Kohl's reported lower-than-expected same-store sales and its stock plunged. Combine anemic consumer spending with the ascendance of e-commerce, and bricks-and-mortar department stores are TOAST. Kohl's, Macy's, JC Penney, even Wal-Mart are on the wrong side of history and will soon go the way of newspapers and bookstores. Are the mall REITs the next Big Short?

This being earnings season, the list of ominous numbers and downbeat forecasts should be longer by end of day and much longer by the end of the week.

On a brighter note, the gold miners, after a brutal few years, are starting to generate stories that are the mirror image of the above. Here's one from this morning to brighten an otherwise depressing day:

Royal Gold, Inc. (NASDAQ: RGLD; TSX: RGL) reports results for its second quarter of fiscal 2016 ("second quarter"), including record revenue of $98.1 million, up 60% from $61.3 million in the prior year quarter. Net income attributable to Royal Gold stockholders was $15.1 million, or $0.23 per share, as compared to a net loss attributable to Royal Gold stockholders of $6.5 million, or ($0.10) per share, for the prior year quarter.

Second Quarter Highlights Compared with the Year-ago Quarter:

• Record revenue of $98.1 million, an increase of 60%

• Record volume of 88,700 Gold Equivalent Ounces, an increase of 74%

• Operating cash flow of $52.1 million, an increase of 75%

• Record dividends paid of $14.4 million, yielding 3.0% at the current share price

• Adjusted EBITDA of $70.0 million, an increase of 46%

"Increased production from Mount Milligan and contributions from our recently acquired streams at Pueblo Viejo, Andacollo, Wassa and Prestea drove our record performance in the second quarter as expected," commented Tony Jensen, President and CEO. "Impressive volume growth at these properties and stability within the rest of the portfolio are yielding solid financial results and generating strong free cash flow."

Net income attributable to Royal Gold stockholders was $15.1 million, or $0.23 per share, compared to a net loss attributable to Royal Gold stockholders of $6.5 million, or ($0.10) per share for the prior year quarter.

Royal Gold's share price is up 14% on the day. (Full disclosure: DollarCollapse staffers are long this stock and are relieved to see it behaving better.)

Gold weakens on global cues and lackustre demand