Daily Research Updates
Morning Briefings
Expert market analysis delivered every morning. Stay informed with comprehensive research and data-driven insights.
Killing Them Softly
(1) Bonds, stocks, and dollar relaxed about another rate hike. (2) NIRP’s gravitational pull on US bond yields. (3) Kuroda ready to do more “without hesitation.” (4) Fed officials are negative on NIRP. (5) NIRP isn’t stimulating credit-financed spending. (6) Negative interest rates force savers to save more. (7) Signs this is happening in US. (8) Is there an afterlife for life insurance companies? (9) Chopping heads to stay alive. (10) Public-sector pension funds are getting killed slowly, but surely.
NIPA Profits Stories
(1) Q2 corporate profits were both up (as reported to IRS) and down (on cash-flow basis). (2) Most profit measures bottomed at the end of 2015. (3) Cash flow stalled, but at record high. (4) Dividends stalled, but at record highs. (5) Profits receipts from abroad have stopped falling. (6) Forward earnings and revenues at record highs. (7) Profits’ share of National Income is down as workers’ share increases. (8) Profit margins holding up better for large companies (like S&P 500) than smaller ones.
Simulation & Stimulation
(1) Takeaways from Yellen’s Jackson Hole speech. (2) Yellen joins the chorus of hikers. (3) Will “fan chart” replace “dot plot?” (4) In Yellen’s ideal world, federal funds rate would rise to 3%. (5) Basic rate math: 1+2=3. (6) Fed starting to think about tools that will be needed during next recession. (7) The neutral real federal funds rate is unreal. (8) “We don’t know” is Fischer’s forward guidance. (9) Other explanations for secular stagnation and low real rates. (10) Fed simulates economy with econometric model and concludes that all will be well when stimulus is needed during next recession. (11) No mention of negative rates or helicopter money, yet. (12) “Hell or High Water” (+ +).
Home & Auto Show
(1) Fischer says all is well except for abysmal productivity slowdown. (2) Either productivity is underestimated or it really is weak. (3) Fischer thinks it’s transiently weak. (4) Home, sweet home. (5) Homebuilders have more upside for both unit sales and their stocks. (6) Toll is building more houses, while Best Buy is selling more appliances. (7) The great race to get rid of drivers. (8) Utopia: No more traffic jams.
More on Earnings
(1) Industry analysts likely soon to predict that earnings recession continued into Q3. (2) Sticking with our upbeat story for earnings. (3) Counting on the “hook” to boost Q3. (4) Oil prices still down y/y from Q3-2015. (5) Consensus annual estimates showing solid earnings growth next year. (6) Our very biased spin on active vs. passive portfolio management. (7) In the past, getting the sectors right mattered, and it will continue to do so in the future. (8) Allocating assets domestically and globally will never be a passive exercise.
Abnormal Normalization
(1) Four Fed officials suggest they are ready for another rate hike. (2) Williams issues an unusual press release advocating a rate hike. (3) Fed officials lowering their longer-run outlook for federal funds rate. (4) Setting the stage for abnormally limited and short normalization? (5) Bullard bows out. (6) Williams wants fiscal policy to be “first responder.” (7) Dudley most explicit about limited need for tightening. (8) Hilsenrath confirms that new normal is weighing on Fed policymaking. (9) A ladies’ and gentlemen’s guide to the FOMC minutes. (10) What’s the difference between a participant and a member? (11) For members only.
Earnings Recession Over
(1) Five-quarter earnings recession ended during Q4-2015. (2) Earnings rebounding this year along with oil prices. (3) Excluding Energy, S&P 500 revenues growth never turned negative. (4) Three different measures of earnings per share. (5) Profit margin continues to fluctuate around record 10% level. (6) Forward earnings and revenues moving higher, and could soon be making new record highs. (7) No recession in leading indicators. (8) Coincident indicators at record high. (9) Fed officials are split and have split personalities. (10) Williams issues an unusual press release. (11) Fischer says mission almost accomplished. (12) Waiting on Yellen to stop our heads from spinning from all the talking Fed heads.
No Shortage of Gluts
(1) Dudley and Lockhart provide a summertime jolt. (2) Dudley also says Fed may not have to tighten much. (3) Dudley sees bond bubble, and blames it on other central banks. (4) Williams advocates bigger role for fiscal policy. (5) Legacy of easy money: Lots of gluts. (6) Sinking ships. (7) The good Earth. (8) Closing stores. (9) Hard to renovate a bathroom with Amazon. (10) Six benefits of blockchain.
Rushing Bull
(1) Stock phrases. (2) The first year of presidential terms can be challenging. (3) Presidential candidates: Who is the worst of them all? (4) Is investing in stocks as fair as competing in the Olympics? (5) Central bank officials providing the steroids. (6) From irrational exuberance in stocks to rational desperation in bonds. (7) Why pessimism is bullish for stocks. (8) Global industrial production growing slowly, but doing so in record territory. (9) Judging the debate between active and passive money management. (10) A great rotation, or just another cycle?
Lifting All Boats?
(1) Liquidity must go somewhere. (2) Wealth effect: Central banks waiting for Godot. (3) Not much bang per yen as Japan’s real GDP stalls. (4) Yen devaluation isn’t boosting Japanese exports. (5) BOJ becoming Japan’s biggest institutional investor. (6) Not much bang per yuan as China’s economy slows despite lots of credit. (7) IMF alarmed by China’s corporate debt. (8) Brexit has been bullish for UK MSCI. (9) Emerging Markets benefiting from go-slow Fed and rebound in commodity prices. (10) US still bringing home the medals in global stock market competition.
Anatomy of a Melt-Up
(1) Just getting started? (2) Winning the Triple Crown in one day. (3) No disputing that there’s a melt-up in bond prices. (4) From reaching to stretching for yield. (5) Valuations flying as earnings recover. (6) Better breadth. (7) Rotating leadership. (8) Sentiment is bullish, but not excessively so. (9) A couple of setbacks for consumer-spending story. (10) Political pause? (11) Amazon’s Prime Day. (12) “Anthropoid” (+ + +).
Widgets & Productivity
(1) Lots of questions raised by weak productivity. (2) The easy answer is that output is underestimated. (3) Hard to measure output in services. (4) More likely explanation: Productive companies need more sales. (5) Too much capacity belies under-investment thesis. (6) The big shocker: No growth in factory productivity over past five years. (7) Disconnect between strong consumer spending and weak consumer stocks. (8) Competition, excess capacity, and technological disruption. (9) Amazon rules the world.
TINA’s True Story
(1) We miss you, Maggie. (2) Trennert’s TINA. (3) Druckenmiller isn’t buying. (4) Hard to find TINA in equities’ flow of funds. (5) No buying panic for equities yet. (6) Bonds are the only alternatives to zero money market rates. (7) Both bond and stock funds attracting lots of money. (8) Fed’s Stock Valuation Model is driving corporate finance decisions more than portfolio ones. (9) TINA vs. TAPA. (10) Global economic cruising speed is slow, but safe.
Wage Puzzle
(1) Yellen’s job machine. (2) Labor market dashboard showing less slack on balance. (3) There’s always room for improvement. (4) Meet the NILFs and those of them who would like a job. (5) No sign that dropouts are dropping back into labor force. (6) Global competition putting a lid on price inflation, which is moderating wage inflation. (7) Workers of the world unite! Your enemies are robots, not Chinese workers! (8) The Trauma of 2008. (9) The Fed is politically neutral, while Fed officials are either red (Republicans), white (Independents), or blue (Democrats). (10) Trump to Yellen: “You’ll be fired.”
Gold, Silver & Bronze
(1) Going for the gold again. (2) The only class that matters. (3) Winners and losers. (4) Inconvenient truth: US standard of living at record high. (5) Prosperous households. (6) Census measure of real median household income is very flawed. (7) Macro vs. micro data. (8) A huge unexplainable gap. (9) Public vs. private benefits. (10) Apples-to-apples comparison favors BEA personal income measure, hands down. (11) Classic Woody Allen: “Café Society” (+ +).
Oil’s Slippery Slope
(1) The Efficient Market Hypothesis works best in commodity pits. (2) Playing the game professionally. (3) US petroleum demand strong, led by cheap gasoline. (4) Crude and petroleum product inventories still at record high despite weakening US oil output. (5) Energy sector cuts buybacks more than dividends as cash flow dries up. (6) Health Care can still increase prices more easily than any other industry. (7) Lots of M&A driving Health Care stocks higher. (8) IBM wants to be chained to blockchain.
Sun Rises in the East
(1) Japan has been a role model for the rest of us. (2) Japan had a Great Recession, ZIRP, QE, and built bridges and roads to nowhere before the rest of us did so. (3) W.C. Fields’ advice for the Japanese government. (4) Is Kuroda having second thoughts about NIRP? (5) Is BOJ first central bank to run out of bullets? (6) Three arrows missed their target. (7) Global bond debacle unlikely to be made in Japan. (8) Latest high-tech revolution. (9) From brawn to brain. (10) What happened to horses could happen to us! (11) Will robots stage tax revolt?
Households & the Others
(1) No evidence in latest Census report that Millennials are moving on to marriage, kids, and houses. (2) Getting married later. (3) Housing doesn’t have to be a home. (4) One million more households since a year ago, and all renters. (5) Selfies account for half the working-age population. (6) More singles living alone or with nonfamily others as Millennials postpone families and Baby Boomers get older. (7) Nonfamily mean incomes tend to be lower than family mean incomes. (8) In other words, demographic trends depressing mean household income. (9) Bill Dudley likes to talk with both hands.
Could S&P 500 Double From Here?
(1) The answer to the question. (2) What would it take to lower the S&P 500’s dividend yield to 1.00%? (3) Two critical assumptions. (4) Buffett weighs in on valuation. (5) Dividend-led melt-up. (6) Will DDM make a comeback? (7) Bond investors like latest negative economic surprises. (8) Weak GDP had strong consumer. (9) Capital spending weighed down by oil-patch recession. (10) ECB, BOE, and BOJ all remain on easing streak. (11) Federal Open Mouth Committee less chatty than usual. (12) Waiting for Yellen to speak from the mountains. (13) “Jason Bourne” (-).
Tweets & REITs
(1) Not on my summer reading list. (2) The Art of the Tweet. (3) Recessions tend to happen around presidential elections. (4) The Fed tends to postpone rate hikes before presidential elections. (5) Since 1961, presidential elections have coincided with bear markets 5 out of 9 times. (6) REITs will have their own home in S&P 500. (7) More upside for REITs? (8) Glut of multi-family apartments for rent? (9) Good news: Industrials rallying on bad news. (10) Musk has big daydreams.
Looking Forward
(1) Industry analysts suffer from chronic optimism. (2) So why do they lower their estimates just before earnings seasons? (3) The truth is out there in forward earnings. (4) A very good leading indicator of earnings. (5) Market math adds up to higher stock prices. (6) The trend is your friend to the end, or until it ends. (7) Four previous breakouts to new record highs after one-year-plus consolidations. (8) The magic trend growth rate is 7%. (9) Raising our 2017 S&P 500 EPS estimate from $126 to $129, and posting $137 for 2018.
More Happy Stuff
(1) US economy gets an A-plus on passing all the stress tests so far. (2) Growing at “stall speed” since 2010 without stalling. (3) There is an upside to Brexit and strong dollar: low mortgage rates. (4) Doing well despite Washington’s taxes and debt. (5) No credit crunch following commodity crash. (6) Earnings recession is almost over. (7) The global economy isn’t failing, but only gets a C-minus. (8) Commodity prices holding firm after rebound since start of 2016. (9) PMIs looking better in US and Japan, and not so bad in Eurozone after Brexit. (10) EMEs’ production picking up nicely.
Some Happy Stuff
(1) Trump’s dark night in America. (2) 83% of Americans are dissatisfied with state of affairs in US, up from 70%-80%. (3) Racial tensions trump economy and terrorism as number one problem, according to Gallup. (4) Pointing fingers. (5) The bullish “Trump House” scenario. (6) Unlike Trump, stock market accentuating the positives. (7) Are stocks discounting Trump, Hillary, or none of the above? (8) Q2 was big for consumer spending. (9) Consumers increasingly happy about present, decreasingly about future. (10) Less misery. (11) The myth of household income stagnation, again. (12) “Star Trek Beyond” (+).
Paths of Least Resistance
(1) Bull goes where no bull has gone before. (2) Ahead of schedule. (3) Financials getting their NIMs squeezed. (4) Financials deliver by cutting costs and trading more. (5) YRI’s Theme Park. (6) Oil price going nowhere as summer drivers go somewhere. (7) Microsoft is ahead in the Cloud. (8) IBM’s new Blockchain service. (9) More content for viewers who only have 24 hours in a day. (10) Pokemon Go software could power next tech and productivity revolution.
Playing for Time
(1) Huge relief rally since February 11. (2) No dancing in the streets for bull’s record high. (3) Earnings need to recover to sustain bull’s lofty valuations. (4) Earnings are set to do just that. (5) Raising next year’s S&P 500 target from 2200-2300 to 2300-2400. (6) Time is money: The longer the expansion, the higher the valuation. (7) No boom, no bust! (8) Forward earnings resuming ascent into record territory. (9) Secular stagnation is bullish because rates stay low and so does recession risk. (10) A corporate finance perspective on valuation.