Daily Research Updates
Morning Briefings
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Sectors Spotting
(1) More on the gap between GAAP and non-GAAP earnings. (2) The biggest gaps are in the relatively tiny Energy and Materials sectors. (3) There’s no earnings recession among the bigger sectors. (4) Iron ore miners are consolidating and cutting production. (5) Old fashioned short-covering rallies in iron ore and oil. (6) Frackers putting Bakken output on ice. (7) Will OPEC and Russia freeze? (8) Freefalling earnings estimates in oil patch.
Wide GAAP
(1) The Oracle speaks. (2) The Omahan’s beef. (3) GAAP vs. Earnings Excluding Bad Stuff. (4) FASB and SEC require lots of information. (5) Buffett’s audience. (6) Buy-side analysts matter as much as sell-side ones. (7) Operating vs. reported earnings per share and S&P vs. Thomson Reuters. (8) Commodity prices seem to have bottomed. (9) China’s exports not as weak as widely reported. (10) Signs of strength in German output data. (11) Japanese consumer confidence falls after introduction of negative interest rates.
Is Inflation Inflating?
(1) Expected inflation in 10-year Treasuries rebounds. (2) Monetary normalization: Pause or play? (3) Next “dot plot” likely to show one less rate hike this year. (4) Inflation remains subdued in wages, and confused in consumer prices. (5) Should the Fed cheer for rent-led inflation? (6) Eurozone inflation remains near zero despite ECB’s liquidity pumping. (7) Negative interest rates have negative consequences for bank lending. (8) Bad services NM-PMI in US looks like bad data. (9) Despite manufacturing slump in US, orders for factory equipment remain strong. (10) What’s up with gold?
Meltdowns & Melt-Ups
(1) Meetings in the Mid-Atlantic. (2) Clinton vs. Trump scenario. (3) An Independent and his followers crash the party. (4) A couple of other interesting political scenarios. (5) In this bull market, meltdowns are followed by melt-ups. (6) Fears of a recession and a 2008-style financial calamity come and go. (7) The latest Da Vinci Code: 1999.99. (8) The Fed might postpone normalizing monetary policy some more. (9) Stocks could melt up in that scenario. (10) Yellen gets her dream scenario and doesn’t want to wake up too soon. (11) Labor force surge and weak wage inflation confirm there’s still slack in the labor market.
World-Class Worries
(1) The FRB-NY President’s speech. (2) No rate hike at March FOMC meeting. (3) The Fed’s none-anddone trap. (4) Dudley sees a world of trouble, but isn’t troubled much. (5) Fed officials less worried about emerging markets than IMF chief. (6) G20 ministers agree about global risks, but not what to do about them. (7) Commodity prices may have bottomed. (8) Volume of world trade growing, but barely. (9) Global factory recession? (10) Chinese leaders planning big cut in headcount at SOEs. (11) The trends are down for revenues and earnings overseas. (12) S&P 500 Financials are challenged, but cheap.
Fed Agonistes
(1) Modus operandi: Another relief rally following another panic attack. (2) Technicals improving. (3) Another merit badge for Bull/Bear Ratio. (4) Fundamental picture brighter too. (5) Orders and production components of US M-PMI back above 50.0. (6) Fischer doesn’t know what the Fed will do next. (7) Dudley having second thoughts about hiking rates again soon. (8) Is the Fed moving away from core inflation towards headline inflation? (9) The plunge in oil prices matters, Bullard says, and Fischer agrees.
The Profits Problem
(1) Economy good. Earnings not so good. (2) Google reports more searches for “recession.” (3) The profits cycle drives the business cycle. (4) Unprofitable companies are retrenching, particularly in Energy and Materials sectors. (5) Jobless claims remain surprisingly low in oil-patch states. (6) A tough earnings season. (7) Forward earnings is a good leading indicator, but misses recessions. (8) The dollar is a drag. (9) Overall revenues growth and profit margins weighed down by Energy and Materials. (10) Other sectors still showing good revenues and margins.
Happy New Year!
(1) 2016 do-over. (2) Great start for the US economy in the new year. (3) A healthy mix. (4) Consumers are doing what they do best. (5) Back to one-and-done? (6) Oil, China, and the Fed all contribute to relief rally. (7) Goldilocks is back, trailed by her bears. (8) The US standard of living is at a record high. (9) Industrial capital spending is strong despite energy bust. (10) Earnings are weak, with S&P Composite much more so than Thomson Reuters data. (11) The GAAP gap.
Ups & Downs
(1) Jokers are wild. (2) Saudi oil minister sees no chance of output cut and says Saudis can live with $20 a barrel. (3) Iranian oil minister says Saudi freeze proposal is a “joke.” (4) Dimon buys lots of JPM stock a few days before announcing bad news. (5) Fischer’s guidance: “We simply do not know.” (6) Dudley says global turmoil matters to FOMC. (7) Jackie reviews recent developments in Consumer Discretionary and Industrials sectors. (8) Melissa reviews latest developments in capital spending.
In Limbo
(1) Challenges for the latest relief rally. (2) A new batch of stagnant global indicators. (3) Commodity price rebound stalling. (4) Mixed signals from Chinese officials on the yuan. (5) Mixed signals from Fed officials on rate hikes. (6) Inflation perks up in CPI, but maybe not so much in PCED. (7) Earnings outlook more challenged. (8) So what’s the right P/E? (9) Valuation multiples have been downwardly rerated since last year. (10) Price-to-sales ratio is no bargain. (11) The Buffett Ratio started signaling trouble a year ago. (12) More negative spins on negative interest rates.
Oily Rally
(1) Stocks following the lead of oil. (2) Risk-on trades are back. (3) Materials stocks rallying despite dodgy debt issues. (4) Rig count is down for the count, but output still gushing. (5) Global oil windfall for consumers now at a $2.8 trillion annual rate. (6) Barron’s’ positive spin on oil and GDP. (7) Why isn’t oil supply responding to lower prices? (8) Oil demand at record high, but showing signs of slowing.
The Latest Relief Rally
(1) Reiterating our targets for a choppy market. (2) Bull/Bear Ratio back under 1.00, which is bullish. (3) This relief rally is more earnings-challenged than the previous ones since 2009. (4) Bad earnings season causes analysts to chop 2016 earnings estimates. (5) What’s driving the latest relief rally? (6) Several loose ends need to be tied up. (7) Still a soft patch in US manufacturing. (8) Oil outlook remains slippery. (9) Chinese stepping on the accelerator and the brakes. (10) Central banks gone wild facing wild cards. (11) “Ah-ha” moment at the Fed. (12) “Race” (+ +).
Monkey Business
(1) Chinese zodiac. (2) Not-so-clever Chinese leaders. (3) Soaring bank loans. (4) Less bang per yuan. (5) Has China gone subprime? (6) Internally financed bank debt. (7) Saudis and Russians agree to do more of the same. (8) S&P 500 Materials sector in acceptance stage of grief cycle. (9) Energy companies pumping money out of their lines of credit. (10) Banks’ rally may be weighed down by some bad energy loans and a flat yield curve.
One Last Round of Ammo?
(1) US vs. them. (2) Lots of bear tracks over there. (3) All the comforts of home. (4) Revenues are fading, and earnings are getting clipped around the world. (5) Earth to US: We need you. (6) China’s bad trade data. (7) A bad trade against the yuan? (8) Bad loans in China. (9) Abenomics’ arrows and bazookas missing their mark. (10) Challenged European banks frustrating Draghi’s QE. (11) Central bankers: Lock & load one more time? (12) Year of the Monkey: China’s latest credit numbers imply lots of monkey business.
NIRP, ZIRP, & PIRP
(1) Benefit of hindsight. (2) Fed’s “dot plot” triggered latest tightening tantrum. (3) Transportation stocks signaled trouble starting a year ago. (4) Markets freaking out about global secular stagnation and Chinese capital outflows. (5) Central bank bazookas using blanks and backfiring. (6) NIRP not working for ECB and BOJ. (7) Dudley says Fed still doing PIRP walk, and too soon to talk about NIRP. (8) A batch of happy news from the USA. (9) The negative consequences of NIRP.
Waiting for the Other Shoe
(1) Fed is also market dependent. (2) The “dot plot” connection. (3) Catch 22 for the Fed. (4) Our accounts think this correction is more serious than previous ones. (5) Plunge in Financials is cause for concern. (6) Bull/Bear Ratio down to 0.63. (7) No recession in GDPNow tracker. (8) Plenty of job openings, and lots of quits. (9) The Chinese people are mostly happy and shopping, according to Nielsen. (10) Lots of known unknowns in credit markets. (11) Some good news in S&P 400/600 revenues. (12) Lowering our S&P 500 earnings and targets. (13) Falling out of the Cloud. (14) Lots of worries weighing on Financials. (15) “Stay Home” in outperforming housing-related stocks.
Rebounding & Submerging
(1) Encouraging rebound in CRB index. (2) Global exports and production remained on uptrends through November. (3) Gold tends to show the trend of industrial commodity prices. (4) Petroleum demand slowdown in the US led by heating oil due to warm weather, not weaker economy. (5) IMF & BIS have been warning that Fed tightening would mean trouble for EMEs. (6) BIS lecture sees links between credit, commodities, & currencies. (7) Dollar debt of foreigners has stopped growing. (8) Oil & dollar as “risk amplifiers.” (9) EME dollar debt is a known unknown. (10) IMF & BIS give Fed conflicting advice.
Choppier
(1) Rising risks of recession overseas. (2) US likely to come out of this mess in best shape. (3) Tsunami of pessimism. (4) Turmoil in European financial markets. (5) Barron’s plausible oil price scenario: More downside now ($20), then $55 later this year. (6) Though not drilling, US oil producers still pumped up. (7) A cautionary tale from natural gas. (8) China depleting currency reserves to defend yuan. (9) Could the strong dollar cause a US recession? (10) Yellen’s testimony likely to be: “We simply don’t know.”
Recalculating Route
(1) GPS: Shortcuts and U-turns. (2) The longest correction. (3) Consolidation in a secular bull market? (4) Really bad breadth among S&P 500 industries. (5) Can the US resist and moderate a global recession? (6) US consumers still spending, but are saving more too. (7) Reliving the Trauma of 2008. (8) Is there a bullish way out of this mess? (9) Second-guessing Fed officials who are having second thoughts. (10) Will US manufacturing recession spread? (11) Our favorite commodity price index is showing signs of life! (12) “Hail, Caesar!” (- - -).
Dollar Pains
(1) From blockchain to bitcurrencies. (2) Is FinTech a threat to central banks? (3) Jamie is going digital. (4) Underdogs have their day. (5) The strong dollar takes some spare change from earnings. (6) Who is exposed the most and the least to the strong dollar? (7) Tech hardware more exposed than Internet services. (8) Construction Machinery is a big loser all around. (9) Financials have other issues. (10) Health Care facing congressional scrutiny.
Subprime World?
(1) Cutting earnings forecasts again on oil, dollar, and global growth. (2) Why bad news is no longer good news. (3) Negative interest rates repudiate effectiveness of QE. (4) Fischer has second thoughts on rate hikes. (5) Drowning in oil. (6) Analysts expecting a second consecutive down quarter in Q1-2016. (7) Consensus earnings estimates sinking. (8) How dangerous are global credit markets?
The Big Short II?
(1) Hedge funds betting against China. (2) Bass says China is bigger than subprime crisis. (3) Soros has been warned by the authorities. (4) A good bet as long as you don’t get shot. (5) It’s all about China’s capital outflows. (6) A reassuring article about China’s banks with an alarming headline. (7) China’s bank loans are all backed by deposits. (8) Are the rating agencies making the same mistake? (9) Taking the global economy’s temperature: No hot spots, a few warm spots, and getting colder elsewhere.
Below the Zero Bound
(1) Short-covering and relief rally. (2) January Barometers and Presidential Cycles. (3) BOJ crosses the zero bound. (4) Bernanke says negative interest rates could be a Fed tool. (5) Williams says normalization should be slowed a “smidgen.” (6) The horror of negative rates driving investors back into stocks? (7) Measuring how much the Fed has already tightened. (8) Dudley’s faith in economy not so sound. (9) GDP adding up to more of the same slow growth in 2016 as every year since 2010. (10) “Room” (+ +).
New Items on the Worry List
(1) Stumbling bull. (2) Getting chopped in a choppy market. (3) A longer worry list with all items checked. (4) Lots of new worries since the start of the year. (5) China’s capital outflows not a sign of good fortune. (6) Apple getting baked in China. (7) Texas starting to show some pain. (8) More companies complaining about strong dollar, but analysts aren’t showing the pain yet in their numbers. (9) FOMC still expecting to raise rates again. (10) Three cheery indicators in the US.
Reconciling Earnings
(1) Lots of chatter about a profits recession. (2) The business and profits cycles are on a two-way street. (3) Profits reported to IRS still on uptrend. (4) Corporate cash flow at record high. (5) Two widely followed measures of EPS diverging sharply. (6) SP’s EPS much weaker than TR’s measure mostly due to Energy sector. (7) GAAP accountants are tough. (8) “Unusual” adjustments. (9) SP’s EPS seeks comparability across industries. (10) TR’s EPS measure aligned with analysts’ approach, and majority rule. (11) SP compares apples and oranges, unlike TR. (12) Apache as an example. (13) More power in de-energized S&P 500 forward revenues and earnings.