Daily Research Updates
Morning Briefings
Expert market analysis delivered every morning. Stay informed with comprehensive research and data-driven insights.
Follow the Leaders
(1) Fed is first among equals, but other central banks matter too. (2) Our homemade leading indicators are looking up for earnings. (3) Boom-Bust Barometer now showing more boom than bust. (4) Valuation measures showing too much exuberance. (5) CEOs/CFOs could drive P/Es higher with more buybacks and M&A. (6) Bull/Bear Ratio is neither. (7) Draghi’s “Seinfeld” (i.e., nothing happened) press conference followed by a very happening press release on corporate bond purchases. (8) ECB’s bond buying could contribute to stock melt-up scenario. (9) BOJ talking about NIRLs. (10) “Elvis & Nixon” (+ + +).
Energetic Debate
(1) Too hot for oil to freeze in Doha. (2) Oil shorts head for cover. (3) No Russian dressing for another oil-and-vinegar meeting. (4) Plunging oil rigs bullish for oil, but beware of the DUCs. (5) US + Canada oil output hits record high in March. (6) Iran refuses to play freeze with Saudis. (7) US petroleum stocks at record high. (8) Banks and brokers slash costs as revenues dive. (9) The sun will come out tomorrow, as it always does.
China’s Old Normal
(1) Chinese Zodiac says 2016 is the year to be smarter than a monkey. (2) Taking credit for calling a couple of bottoms. (3) Room 666. (4) From bad to good breadth. (5) Lots of monkey business in China. (6) The Shanghai Conspiracy. (7) Record borrowing in China during Q1. (8) Less bang per yuan. (9) No shortage of gluts in China, especially of steel and concrete. (10) Nucor CEO’s complaint. (11) Banks delay and pray. (12) China riling Washington’s protectionists.
Deflation: Myths vs. Facts
(1) Unconventional monetary policies aren’t working, and are becoming conventional. (2) So close, yet so far from 2%. (3) Why hasn’t hyper-easy monetary policy led to hyperinflation? (4) Is inflation just a monetary phenomenon? (5) There may be more insight on inflation in micro- than macroeconomics. (6) Tolstoy’s model of inflation & deflation. (7) Technology disrupts and deflates. (8) Is consumer durables deflation good or bad? (9) Demography may also be deflationary. (10) Kuroda is sure that BOJ has it right now.
Old vs. New Normal Valuation
(1) New Englanders can’t find much to buy. (2) A stock market for stock-pickers. (3) Will active managers beat the indexes for a while? (4) Analysts cut their short-term earnings growth outlook. (5) S&P 500 PEG ratio is highest since start of data in 1995. (6) Analysts remain too optimistic about longterm earnings growth, as usual. (7) PEGing the sectors: Growth is relatively cheap if you can find it. (8) CEOs & CFOs might drive P/Es higher still. (9) Valuation-led melt-up might be for profit-taking. (10) A slow, but long economic expansion would keep bull on his feet. (11) Looking soft again.
Sweet & Sour
(1) Yin & yang: China’s exports not that strong, and US retail sales not that weak. (2) Chinese holiday distorts new year data. (3) On a three-month basis, Chinese exports are weaker, while US retail sales are stronger. (4) Springtime for S&P 500 Health Care? (5) Can’t raise prices, invert, or relieve pain. (6) The upside in the downside is more attractive valuations for healthy growers. (7) Chauncey Gardner’s forecast: “In the spring, there will be green shoots.”
‘Too Slow for Too Long’
(1) What was the “old mediocre?” (2) Another downward revision by the IMF for global growth. (3) Global economy is “fragile” and full of “uncertainty.” (4) “Slower, Longer.” (5) Focusing on what could go wrong. (6) The “stalling speed” risk. (7) Eurozone and Japan remain drags. (8) EME capital outflows story not so scary. (9) The IMF sort of endorses negative interest rates. (10) The new mediocre for S&P 500 revenues and earnings. (11) Profit margins looking toppy. (12) Ask Sisyphus about valuation.
Doing God’s Work
(1) Driving the bull. (2) Goldman is bullish on M&A business. (3) Blankfein is still doing God’s work. (4) Drivers of M&A remain healthy. (5) Melissa reviews the Treasury’s measures to close M&A tax loopholes. (6) Buybacks and dividends continue to be bullish. (7) Positive spread between forward earnings yield and bond borrowing rate fueling buybacks. (8) For S&P 500, buybacks plus dividends exceed operating earnings for first time since 2009.
The Shanghai Conspiracy
(1) Did the Chinese threaten Yellen in Shanghai? (2) A plausible conspiracy theory that has been denied. (3) China is on Yellen's global economic dashboard. (4) IMF's Lagarde's dream scenario. (5) Why have China's capital outflows suddenly stopped? (6) Another strong chair. (7) Despite split, only one dissenter at latest FOMC meeting. (8) The answer to the question "To hike or not to hike?" is asymmetrical. (9) Why does the dollar go up and down when oil goes down and up? (10) Shanghai conspiracy makes sense for US and China, not so much for Eurozone and Japan. (11) Why do stock prices go up and down when the price of oil does the same? (12) "Born To Be Blue" (+ +).
‘The New Mediocre’
(1) New Normal is so yesterday. (2) IMF’s Lagarde is on guard. (3) Yellen’s BFF. (4) The 10 plagues. (5) Inequality begets protectionism. (6) Supply-side economics once meant less, not more government. (7) Lots of mediocre economic indicators around the world. (8) Not much GDP growth now in US. (9) Forward earnings stalling for a few of S&P 500’s biggest sectors. (10) Mixed picture within Consumer Discretionary sector. (11) Technology can disrupt itself too. (12) Jackie has some questions for Elon Musk. (13) Where can I test drive a Tesla Model 3?
Bonds Having More Fun
(1) Homing in on the yield range. (2) A GDP model of bond yields. (3) From the “Age of Bond Vigilantes” to the “Age of Central Bankers.” (4) Yields are relatively very high in the US compared to the Eurozone and Japan. (5) Inflation is higher in the US, but Yellen says overshooting is fine. (6) Age Wave model still bullish for bonds. (7) Raise your hand if you are reaching for yield. (8) Nominal and TIPS yields giving mixed signals. (9) Two Fed doves with two different stories. (10) Meet the NILFs. (11) Prime-aged workers primed to work again.
Fed Policy Made In China?
(1) Fed giving more weight to global economy. (2) The chair’s speech. (3) Her two other concerns are China and commodity prices. (4) Post-recovery global expansion weaker this time than last time. (5) Global manufacturing still has a pulse according to M-PMI measures. (6) Yellen’s other dashboard has oil prices on it and earnings expectations. (7) Saudi Arabia would like to freeze Iran. (8) Does the business cycle drive the profits cycle or the other way around? (9) Earnings Squiggles showing falling annual earnings expectations, but forward earnings flat at record high. (10) Lots of negative earnings revisions around the world. (11) Bullish, but not wildly so.
Welcome Back to Work
(1) Very busy fairy godmother. (2) Yellen’s pledge. (3) Lots of good readings on Yellen’s labor market dashboard, except for wages. (4) Aiming for 3%-4% wage gains. (5) Yellen was right about slack in labor market as dropouts drop back in. (6) Broad-based jump in labor force led by prime-aged workers. (7) Slack isn’t only reason for low wage inflation. (8) The puzzling disconnect between strong employment and weak GDP.
April’s Fools
(1) Time flies. (2) No fool like an April fool. (3) The recession hoax. (4) Bullard morphs from dove to hawk, while Yellen flies with the doves. (5) Industry analysts have a foolish quarterly tendency. (6) Earnings expectations set up for another upward hook. (7) The ups and downs of crude oil. (8) US producers still pumping oil, but may be topping. (9) Pumping from the ground into a storage tank. (10) Freezes are rare in April. (11) Though unlikely, oil bears could be fooled.
Snow White
(1) Yellen is the best. (2) Fed’s new key word: “uncertainty.” (3) Traumatized doves. (4) Fed is marketdependent. (5) Yellen says that oil could fall again and the dollar could strengthen again too. (6) Beware of financial tipping points. (7) Fed chair says inflation might turn down after turning up. (8) Fed oath: First, do no harm. (9) A mish-mash of US economic indicators. (10) SEC isn’t happy with non-GAAP hypesters.
Demography & Inequality
(1) Good and bad news for home builders. (2) Record number of households. (3) Renters’ uptrend may be flattening. (4) More middle-aged adults may be starting to buy homes. (5) Millennials are still more inclined to rent than own. (6) Big increase in labor force and household measure of employment bullish for housing. (7) Misleading Census data show stagnating real median household income for the past 20 years. (8) Lots of other measures of household income and spending show solid gains and record high in standard of living. (9) There aren’t enough rich people to skew real consumption per household. (10) The internal contradiction of Progressive programs to redistribute income. (11) More “selfie” households exacerbate apparent income inequality. (12) A short primer on EITC. US Demography I: More Homebuyers? The Bureau of Census released December data on the number of US households recently. There may be some good news for builders of both single-family and multi-family homes. Consider the following: (1) Record number of households. The number of households remained near October’s record high at 117.7 million (Fig. 1). That’s an increase of only 191,000 y/y, but that’s because there was a spike in the series during fall 2014 (Fig. 2). Over the past two years through December, household formation has totaled 2.4 million (Fig. 3). (2) Renters flattening. The Census Bureau also reports on the number of owner-occupiers vs. renters on a quarterly basis. At the end of last year, the former edged up to 75.2 million households, but has yet to exceed the record high of 76.5 million during Q4-2006 (Fig. 4). More noteworthy, the number of renters seems to have flattened out during the second half of last year around 42.6 million households. Nevertheless, renters increased 300,000 y/y, while owner-occupiers were little changed (Fig. 5). In fact, since the record high in owner-occupiers at the end of 2006, this series is down 1.4 million, while the number of renter households is up 8.0 million. (3) More 35- to 44-year-old homebuyers? The homeownership rate overall edged up to 63.8% of all households, still well below the peak of 69.2% during Q2-2004 (Fig. 6). The flip side of this series shows that renters as a percent of households edged down to 36.2% at the end of last year from its cyclical peak of 36.6% during Q2-2015 (Fig. 7). Still, that’s near the percentages prevalent during the 1980s before the homeownership boom depressed the renters’ percentage down to a record low of 30.7% during Q2-2004. By age group, the homeownership rate turned up slightly at the end of last year for 35- to 44-year-olds (Fig. 8).
Deep Blue Sea of GDP
(1) Diving suits. (2) NIPA’s treasure trove. (3) GDP cruising at stall speed. (4) Private sector cruising along at faster speed. (5) Health care spending accounts for consumers’ rising share of GDP. (6) Five million workers could drop back into labor force. (7) The profits cycle turns south, but trend remains north. (8) Less fiscal drag. (9) Trade continues to weigh on growth. (10) If GDP matters, Fed should postpone next rate hike. (11) “Eye in the Sky” (+ +).
Spring Forward
(1) US economy has pedal to the metal. (2) Seasonal factors and year-ago port strike might explain some of trucking and imports strength in February. (3) But average of three regional business surveys soared in March. (4) A brief chronology of FOMC’s recent conflation of headline and core inflation. (5) Bullard morphs from dove to hawk on inflation. (6) Jackie reviews developments in the Industrials sector. (7) Technology is disrupting more and more industries. (8) FAQ on McD’s app: Do you want fries with your order?
The World’s Ups & Downs
(1) Crosscurrents in the spring. (2) Europeans carrying on despite recurring terror attacks. (3) EMU revenues and earnings remain depressed. (4) Eurozone’s production data still mixed, but retail sales and car registrations are looking good. (5) Minor uptick in Germany’s Ifo. (6) Japan goes negative in more ways than one. (7) Brazil is imploding. (8) US regional surveys looking up. (9) Supply and the dollar driving commodity prices more than demand. (10) Oil price outlook debatable, though fundamentals still look mostly bearish.
Back on Track?
(1) Sick and tired. (2) Help wanted: Outsider with no experience preferred. (3) Anti-trade tirade. (4) The stock market bull has been a populist for quite some time. (5) Trump could trip the bull. (6) Chart technicians seeing bearish patterns have been trumped by central bankers and CFOs. (7) CFOs looking at E/P relative to bond yield, not P/E, when buying back shares and doing M&A. (8) Transports doing roundtrip. (9) Breadth improving. (10) Sentiment still bearish, which is bullish. (11) Melissa explains TLTRO II.
Fairy Tales Can Come True
(1) The Godmother who keeps on giving. (2) Sayings of market sages. (3) From “Don’t fight the Fed” to “Don’t fight the market.” (4) With all due modesty, we did nail latest FOMC meeting. (5) Very dovish Fed weakens dollar and lowers bonds yields, while boosting stocks and commodities. (6) Only one member of FOMC remains data dependent. (7) Yellen sees slack in labor market and “room for improvement.” (8) The Phillips Curve has flattened. (9) Yellen on inflation: Overshoots can happen. (10) Giving more weight to dollar and foreign economies. (11) No NIRP. (12) “Remember” (+ +).
Jekyll & Hyde
(1) The bull market’s split personality. (2) Manic depressive disorder and the Trauma of 2008. (3) Central banks injecting mood-altering liquidity. (4) Draghi shows his ammo. (5) There is another side to Trump, unless power has thoroughly corrupted him already. (6) Yellen’s tug of war. (7) A very dovish FOMC meeting. (8) Yellen: Room for improvement in labor market. (9) Yellen: Inflation overshoots happen. (10) Jackie reviews the wild ups and downs of Q1. (11) Jackie explains why auto stocks may be cheap for a reason.
The More Things Change
(1) Lots of news since last FOMC meeting. (2) Fed policy depends on interpretation of data. (3) Will Yellen say normalizing interest rates should be postponed while labor market is normalizing? (4) Financial conditions have improved greatly since last FOMC meeting, but could turn south quickly on rate-hike guidance. (5) What about inflation, the oil price, and expected inflation? (6) Betting on a dovish Fed. (7) Retail sales report lowers Q1 GDPNow forecast. (8) West Coast ports traffic showing more imports and fewer exports. (9) A primer on central banks’ negative interest rates.
Go With the Flow
(1) Ominous articles about buybacks. (2) Sensationalism boosts click-throughs. (3) The link between buybacks and bonds. (4) Nonfinancial corporations reporting record cash flow and liquid assets. (5) Mind the gap between earnings yield and bond yield. (6) Institutional investors having been selling equities. (7) ETFs remain big buyers of stocks. (8) Tobin’s Q shows stocks fairly valued. (9) Buffett’s ratio is bearish. (10) Is Buffett overvalued?
Whatever It Takes
(1) The first economist worked for a pharaoh. (2) A Biblical seven-year cycle. (3) Seven fat and seven lean cows, and a seven-year bull. (4) Leaner gains ahead for stocks. (5) Draghi fattens up QE and provides more shock-and-awe. (6) Eurozone banks get free money plus a toaster if they lend. (7) Signs of life in the Eurozone. (8) China aims to cut capacity while converting debt to equity. (9) Fewer rate hikes in Fed’s March dot plot? (10) Commodity bubble bursts, yet still no financial contagion. (11) US fundamentals and technicals surprisingly bright.