Daily Research Updates
Morning Briefings
Expert market analysis delivered every morning. Stay informed with comprehensive research and data-driven insights.
Neither Boom Nor Bust
(1) Jury is out. (2) Supply-side and demand-side perspectives on slowdown. (3) National and regional business surveys diverged in May. (4) Not much spring in consumer spending. (5) Meet the HENRYs, or high earners not rich yet. (6) Rising rents and health care costs squeezing consumers. (7) Meet the BBADs, or older Baby Boomers with adult dependents. (8) Building lots of new factories, or just a Gigafactory? (9) Record discrepancy between GDP and National Income. (10) Bond market’s latest economic assessment. (11) Lots of mixed PMIs in Asia and Europe.
Probing Profits
(1) Profits measures: Take your pick. (2) We pick forward earnings. (3) Is the 7% trend still our friend for profits growth, or might it be 5%? (4) How much longer can profit margins break records? (5) Cash flow stalled at record high. (6) The government should fill potholes. (7) Assessing the soft patch in the oil patch. (8) Regional surveys add up to weak May. (9) Frightful freight index. (10) Signs of life in Eurozone’s corporate earnings.
Lack of Conviction
(1) Convinced vs. unconvinced investors. (2) Ice patch vs. soft patch. (3) Chart technicians seeing bearish patterns again. (4) S&P analyst’s share count is bullish. (5) S&P 500 forward earnings recovering as Energy stops plunging. (6) Fed working to avoid tightening tantrum. (7) Regional business surveys diverging. (8) Upticks in capital goods orders and new home sales don’t put an end to soft patch. (9) BEA working on fixing GDP’s residual seasonality problem.
Easy Come, Easy Go
(1) Elvis Presley and Janet Yellen. (2) Sunken treasures recovered. (3) Why easing hasn’t worked as expected. (4) Stock gains aren’t trickling down. (5) Savers earning less so saving more. (6) Fed has enabled fiscal excesses at cut-rate rates. (7) Near-zero interest rates contributing to income inequality. (8) Fed policies causing capital misallocation. (9) Enabling financial engineering. (10) The blame game. (11) Demography is also a downer. (12) Focus on market-weight-rated S&P 500 Industrials.
Tiptoe Through the Soft Patch
(1) Tiny Tim and Janet Yellen. (2) Is the Great Recession over yet? (3) ECI wages get a footnote. (4) Yellen still worrying about underwater homes. (5) Three abating headwinds. (6) Fed sees 2.5% real GDP growth ahead. (7) Yellen is in one-and-done camp. (8) What’s the matter with Kansas? (9) Are the headwinds abating? (10) Here is how the Fed’s policies have depressed consumer and business spending, and housing activity. (11) What’s the matter with the dollar, bonds, and stocks?
Central Planners
(1) Does kicking the can beat the alternative? (2) Why can’t a series of short-term fixes be a long-term fix? (3) The Greek example. (4) Central bankers have turned into central planners. (5) The latest plan is to do more of the same to drive up stock prices. (6) China’s new plan is to pump up stock prices. (7) BOJ buying ETFs. (8) Profits finally showing signs of life in Eurozone. (9) US lags while FOMC plays Hamlet. (10) What do Fed economists do all day? (11) Fed staff attacks Piketty and other Progressives. Read all about it! (12) Fed debates seasonal distortions.
Beauty Contest
(1) Episode 42 in The Twilight Zone. (2) Different strokes: Dear Leader vs. King Kong. (3) Some pushback on valuation. (4) Irrational Exuberance Zone. (5) The 3 scenarios again. (6) Channeling the Tech bubble. (7) Record PEG for S&P 500. (8) Smithers & Co. on Tobin’s Q. (9) Does valuation matter? (10) Do interest rates matter? (11) Draghi renews his vows. (12) Front-end loaded QE. (13) Lackluster recovery in Eurozone.
Reenergized Earnings?
(1) From “peak oil” to “cheap oil” to bad oil data. (2) Will the real Phil please stand up? (3) What are oil inventories doing? (4) EIA gets authority to require oil drillers to fill out a monthly supply survey. (5) Fewer railcar loadings of oil. (6) Lots in storage still. (7) World oil demand/supply ratio remains bearish. (8) Oil earnings may have stopped weighing on S&P 500. (9) Profit margins rebounding from recent dip. (10) Brighter outlook for earnings depends on soft patch as well as oil patch. (11) Focus on market-weight-rated S&P 500 Energy industries.
Wild Blue Yonder
(1) David Bowie’s scenario for stocks. (2) Valuations are flying into the wild blue yonder. (3) Blue Angels and the stunt plane. (4) Icarus and Major Tom. (5) Revenues and earnings have come back to Earth, but are still flying excluding Energy. (6) Joe confirms earnings rose 11.5% y/y during Q1 excluding Energy. (7) Not much spring in consumer’s step. (8) Four theories for why consumer spending is disappointing.
Consumers Not Registering
(1) Less “ka-ching” around the world. (2) A demographic theory of secular stagnation. (3) Older workers can’t depend on broke social welfare states. (4) May you live a long life and have lots of savings. (5) How governments depressed fertility. (6) US retail sales join the soft-patch batch. (7) China’s senior moment? (8) Japan, Italy, and Germany are at the top of median-age ranking. (9) Spotting some shoppers in Europe. (10) Bonds learning to speak Deutsch. (11) Focus on market-weight-rated S&P 500 Retail industry.
Major Tom & the Fed
(1) Ground Control has lost control of the bond market. (2) Bond yields should maintain current altitude for a while. (3) Stocks ready to go into outer space? (4) A simple theory for the backup in yields. (5) Close correlation between bond yield and oil and copper prices over past year. (6) US bond market no longer for isolationists. (7) Four Fed heads speak. (8) No big surprise in Q1 earnings season’s positive surprise. (9) Financials and Health Care sectors save the quarter. (10) Energy earnings crash and burn, but S&P 500 earnings up impressive 11.5% y/y ex-Energy.
Breaking Bad?
(1) China’s stock market turns volatile as P/Es surge. (2) The “insanity” trade in China. (3) PBOC warns about too much debt as it cuts interest rates. (4) China suffering from too much capacity, too much debt, too much deflation, too much pollution, and too many seniors. (5) Professor Copper is bullish on China and bearish on bonds. (6) Is housing turning up or down? (7) Payrolls say “up,” while lumber futures say “down.” (8) Brexit and Grexit? China’s Economy: Breaking Down? The “insanity trade” had a good day yesterday in China after the PBOC cut interest rates for the third time in six months on Sunday. Stock prices soared in China on the news. The Shanghai Composite Index jumped 3.0% on Monday, and is up 79.3% since November 7. Last week, the index had a nasty selloff of 7.4% through Thursday on bad news about China’s exports to add Chinese Stock Indexes to and imports, as discussed below (Fig. 1 and Fig. 2). (Click MyPage.) The latest rate cut was triggered by more bad news about China’s economy over the weekend. It is suffering from too much capacity, too much debt, too much deflation, and too much pollution. In addition, the population is aging rapidly. Perversely, lowering interest rates might actually exacerbate some of these problems, especially excess capacity and deflation since easier credit conditions will allow lots of China’s “zombie” companies to stay in business. Insanity is sometimes defined as doing the same thing over and over again and expecting a different outcome. (There’s no evidence that Einstein said so.) The PBOC’s action on Sunday came right after the central bank said in its monetary policy report released on Friday that the “rising debt size is forcing China to use a lot of resources in repaying and rolling over debt” while limiting the room for further fiscal expansion. Yet the PBOC eased credit conditions, which will lead to more debt! That’s insanity. I’ve recently had some push-back from a few of our accounts who believe that soaring stock prices are a significant sign of a coming economic rebound in China. After all, stock price indexes have long been regarded as leading economic indicators. Besides, Chinese stocks are not insanely expensive. They’re actually quite cheap, with the forward P/E of the China MSCI at 12.3 at the end of April (Fig. 3). Forward revenues and earnings have been flat this year, though near last year’s record highs, and both could recover along with the economy. The forward profit margin has been on an uptrend since late to add China MSCI to MyPage.)
Goldilocks’ Godmother
(1) Janet & Hamlet: To lift or not to lift? That is the question. (2) Janet & Christine: High and mighty say stocks are mighty high. (3) Yellen’s dashboard shows labor market is cruising. (4) Phillips Curve may be starting to work, pointing to bigger wage gains. (5) April retail sales may settle soft-patch question. (6) Yellen’s latest assessment of stock valuation: It’s high. (7) Addictive fairy dust. (8) Another relief rally after latest feared outcomes turn out to be nonevents. (9) On the verge of a melt-up? (10) Energy, Materials, and Financials join the rally parade. (11) ECI vs. AHE.
Bonds Away?
(1) Confused Fed heads. (2) More on the dark side than the light side. (3) Our collective conundrum. (4) A simple explanation why bond yields have surged. (5) Are bond traders expecting Fed lift-off, while forex players aren’t? (6) Wages might finally be rising faster, but gasoline prices are rising rapidly too. (7) Stocks, bonds, and currencies could be choppy through the summer. (8) FOMC members expecting much better growth may be disappointed. (9) ADP payrolls especially weak for large goods-producing companies. (10) Oil and dollar hitting capital spending on construction and industrial machinery. (11) Focus on overweightrated S&P 500 Financials.
The World Is Flat
(1) Thomas Friedman’s book. (2) The end of the Cold War was the end of the greatest trade barrier ever. (3) Has globalization improved or worsened income inequality? (4) Has globalization led to secular stagnation? (5) World export volumes and production growing slowly. (6) Not much action in exports of US and Eurozone. (7) China’s trade indicators are weak inside and out. (8) Summers and Rogoff agree on disease, but not cure. (9) Too much debt is one of the main causes of secular stagnation. (10) India’s problem. (11) Focus on market-weight-rated S&P 500 Transportation.
The World According to GAARP
(1) John Irving’s terminal cases. (2) Desperately seeking growth at a reasonable price. (3) Is looking for GAARP like waiting for Godot? (4) Global synchronized secular stagnation. (5) Industry analysts aren’t exuberant about outlook for revenues and earnings. (6) Secular stagnation rather than boom or bust. (7) Valuations aren’t cheap, but could go higher in a liquidity-driven melt-up. (8) Hard to find much GAARP in US. (9) Global M-PMIs uninspiring.
Mixed Signals
(1) May Day vs. Mayday. (2) Dancing around the maypole. (3) German bond yield backup spills over into US bonds. (4) ECI showing first sign of rising wage pressures. (5) US business surveys were relatively weak in April. (6) CPI vs. PCED. (7) It all depends on FOMC’s interpretation of the data they depend on. (8) Oil exporters selling US Treasuries and other reserves. (9) First day of month often bullish for stocks. (10) Home in the range. (11) Stocks on verge of melt-up? (12) Bonds on verge of meltdown? (13) Signs of life in commodity pits. (14) “Ex Machina” (+).
Cold Cash
(1) Everyone is bullish, but that’s not bearish. (2) We are all smart bulls now. (3) No spring chicken. (4) Hasbeen Fed Model has been working since 2010. (5) Companies set to return $1tn to investors this year. (6) Fed’s easy money enables buybacks, spinoffs, and M&A. (7) Buybacks = Corporate QE. (8) Fed depending on undependable data. (9) Dollar looking peakish. (10) Money is exiting Greece in fear of Grexit. (11) More upbeat indicators out of Eurozone.
Forward Thinking
(1) Six degrees of separation. (2) LinkedIn and the kindness of strangers. (3) Correlations and divergences. (4) Industrial commodity prices aren’t confirming oil rally. (5) The oil price might have bottomed and peaked. (6) The dollar might have peaked. (7) Don’t buy into A$, C$, and gold rallies. (8) Expected inflation rebounding. (9) Forward earnings flagging, and so is economy. (10) Profitable companies expand. Unprofitable ones don’t. (11) Neither boom nor bust. (12) Focus on now underweight-rated S&P 500 housing-related industries.
Great Debates
(1) The link between easy money and secular stagnation. (2) Summers vs Rogoff. (3) Debt super-cycle. (4) Time heals all wounds. (5) Asia’s debt binge. (6) Glut of gluts. (7) Will China solve its debt problem with a stock bubble? (8) Lots of burdensome debt burdens in Japan, Eurozone, and China. (9) US corporations borrowing for financial engineering. (10) A cold spring following an icy winter. (11) Dallas slipping on oil. (12) Are robots bending the Phillips Curve? (13) Lots of debatable subjects including Fed, oil, dollar, Grexit, MENA, and the meaning of life.
Conspiracy Theories
(1) Compelling narratives without any proof. (2) The central bankers are doing it in broad daylight. (3) Bonds and stocks achieve “escape velocity,” while economies don’t. (4) Connecting the dots in Chicago. (5) Fed’s bunker in Chicago. (6) Bernanke’s new job in Chicago. (7) Spoofing the CME in Chicago. (8) Crash Boys: Michael Lewis has some questions for CME & CFTC. (9) Meet Sarao and Aleyniko. (10) Goldman’s sinister algorithm. (11) The stock market is high on life. (12) More soft-patch indicators in the US. (13) Flash-fried PMIs. (14) “House of Clinton” (+ + +).
Go Away or Go Global?
(1) Nice melt-up overseas. (2) Days of Infamy: May Day to Halloween. (3) Two wicked corrections. (4) Three choices: Stay Home, Go Global, or Go Away. (5) Sunrise in Japan? (6) Can central banks overcome secular stagnation? (7) Not much fun in the commodity pits. (8) Unusual divergence between stock prices and commodity prices. (9) Lumber trading like lead. (10) China’s international reserves depressed by depreciations of euro and yen. (11) China’s capital outflows story still rings true.
Paths of Least Resistance
(1) Going nowhere fast. (2) Tug of war. (3) From “anxiety fatigue” to “bull market fatigue.” (4) Still too many bulls. (5) Home on the range. (6) Sector-neutral strategy beating many active managers. (7) Melt-up anxiety. (8) Hard to find anything bullish in crude oil’s demand/supply balance. (9) Maybe it’s geopolitical. (10) Saudis playing for keeps. (11) Focus on market-weight-rated S&P 500 Energy.
Uneven Growth
(1) Ups and downs in IMFs latest forecast. (2) Redistributing the same growth. (3) Draghi’s push. (4) Rising in the EZ: production, exports, and car sales. (5) Fischer and Dudley expect more. (6) Weakening in the US: production, orders, and starts. (7) Stepping on the gas and the brakes in China. (8) Data suggest massive capital outflows from China. (9) India is looking up, while Brazil is looking down. (10) Industrial commodities yet to confirm oil’s rebound. (11) Has the dollar peaked because oil has bottomed, or vice versa?
The Twilight Zone
(1) Valuations on the border of the Irrational Zone. (2) Three fears hit market: Greek exit, China bubble, and inflation uptick. (3) Recapping stretched valuations. (4) Institutional investors remain skeptical. (5) Outperforming SMidCaps less exposed to dollar. (6) Shortage of bargains. (7) Buybacks = Corporate QE. (8) Corporate execs comparing earnings yield to borrowing rate when buying back shares. (9) Warning: Inflation may be warming.