Daily Research Updates
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Still on V-Shaped Recovery Track
(1) September data still on V-shaped recovery track. (2) Is there enough stimulus left? (3) Doubling down on the increase in real GDP. (4) Regional business indicators up again in September. (5) Not enough new homes to meet booming demand. (6) Solving part of the puzzle on why federal tax receipts are so strong. (7) Stalling high-frequency indicators could be seasonal issue. (8) The pandemic’s impact on corporate finance. (9) Pandemic making corporations dash: from dash-to-cash credit lines to dash-to-issue bonds and stocks. (10) Why is M&A boom MIA? (11) Buybacks bust. (12) Zombies are dead and alive.
The Great Debates
(1) Let the debates begin. (2) Battle of the Septuagenarians. (3) Cognitive test. (4) Recalling the first Great Debates between Kennedy and Nixon. (5) Rooting for gridlock. (6) September and October tend to be down months except when they are up months. (7) Two months before and four months after presidential elections. (8) Republicans tend to be bullish. And so do Democrats. (9) Hard to pinpoint cause of Panic Attack #67. (10) No bear market in 200-dmas. (11) A technically correct technical correction. (12) Even the Magnificent Five FAAMGs are prone to a correction. (13) Known unknowns will soon be known. (14) Movie review: “Social Dilemma” (+ +).
Cold Warriors
(1) Trump’s and Xi’s barbs heat up cold war. (2) Xi wants China’s private businesses to kowtow. (3) China unveils plans to blacklist “unreliable” foreign companies. (4) Trump’s attempt to ban WeChat foiled for now. (5) Battle over TikTok escalates. (6) Xi won’t stand for opposition at home or in Hong Kong. (7) US finds another Chinese spy, this time in NYC. (8) US’s visible support of Taiwan irks China. (9) Chinese military on display on India’s border and in South China Sea. (10) China adopts MMT to keep its economy growing. (11) Nikola hits a bump in the road, while Tesla’s smooth sailing continues.
The Economic Consequences Of De-Urbanization
(1) The roof is rockin’. (2) Housing boom offsetting lots of busts. (3) Existing home sales are hot, especially for homes with room for an office, and a swimming pool to boot. (4) Millennials are suddenly, finally buying homes en masse. (5) 32% rebound in Q3 real GDP? (6) Inventories of existing and new home sales are historically low. (7) Residential construction plus home improvements exceed nonresidential construction, as well as public construction. (8) Housing-related economic activity should more than offset weak recovery in pandemic-challenged industries. (9) A win-win for distressed home sellers and real estate investors.
Fed Fully Embraces MMT
(1) September is the worst month for stocks. (2) Stocks weighed down by known unknowns, and too much bullishness. (3) Powell before and during the pandemic. (4) Another pivot: Powell on MMT before and after Covid. (5) A trillion dollars here, a trillion dollars there. (6) Waiting for another round of fiscal stimulus, which might be derailed by fight over SCOTUS. (7) A straight line of dots near zero. (8) FOMC inflation projection undershoots 2% through 2023. (9) Should we have faith in FAITH? (10) Maximum employment exceeds full employment. (11) Powel paints dark picture without more fiscal stimulus. (12) Inflation expectations remain relatively subdued. (13) A couple of dissenters.
The Good with the Bad
(1) We never had it so good as in 2019. (2) Even persistently pessimistic Census data now confirm that household incomes rose to record highs last year. (3) Just a coincidence that standard of living rose to new record highs under Trump? (4) It’s done so under previous pro-business presidents. (5) Can we bury stagnation myth once and for all, please? (6) Real hourly wages up more than 1.0% per year since 1995. (7) Census still using CPI, while Fed uses PCED. (8) Falling average size of households reduces their average incomes. (9) Are the rich paying their fair share yet? (10) Income inequality isn’t a myth. It’s a consequence of capitalism-driven prosperity. (11) Can a housing-led rebound take us back to Heaven on Earth? (12) Movie review: “Defending Jacob” (+ +).
Transports Cruising Along
(1) Transports benefit from pandemic-fueled online shopping. (2) Industry rebounds on business restocking and resumption of global trade too. (3) Railroads and truckers doing great, airlines not so much. (4) FedEx posts banner earnings, plans for holiday and vaccine onslaught. (5) Cruising the ocean blue using green energy. (6) Ammonia fuel cells propel a ship in Norway. (7) Ferries among first adopters of hydrogen fuel cells. (8) ExxonMobil making biofuels to propel ships. (9) Capturing ships’ carbon—possible alternative to changing fuels?
Inflation & the Pandemic
(1) Raising forecasts for GDP and for S&P 500 revenues and earnings too. (2) S&P 500 forward earnings continue to recover. (3) Mag-5 and passive investing one more time. (4) Another look at equity ETFs vs mutual funds. (5) From 666 on the S&P 500 to 0.666 on the bond yield. (6) The Fed is in control of the bond yield. (7) Disinflation losing one of the 4-Ds? (8) The Age Wave Model is still disinflationary. (9) MMT on steroids in the US since late March. (10) Japan and China have been doing MMT for a while without inflationary consequences. (11) Virus infects CPI.
The Magnificent FiveNow & Then
(1) Our new Topical Study on P/E x E. (2) Explaining and making the case for forward earnings. (3) Practical applications. (4) The Mag-5 since 1993. (5) Today’s Mag-5 are the FAAMG stocks. (6) Are today’s Mag-5 mega because of Trump or despite him? (7) One more time with more details: Mag-5’s impact on three investment styles. (8) Are today’s Mag-5 mega because of ETFs?
What in the World Is Going On?
(1) A one-of-a-kind recession. (2) V-shaped recovery in global PMIs and leading indicators. (3) Impressive rebound in Chinese exports. (4) Copper leading the rebound in industrial commodity prices. (5) Rebound in global economy and commodity prices weighing on dollar. (6) The euro gets a boost from EU’s fiscal policy response to pandemic. (7) S&P 500 Materials confirming global economic recovery. (8) The Magnificent 5 favored LargeCap, Growth, and Stay Home investment styles until September 2. Not so much since then. (9) Asking an expert about the outlook for vaccines. (10) Lots of known unknowns need to be known before the pandemic will be over.
Survival of the Fittest In Retailing
(1) Market bounces after correction in go-go tech industries. (2) Economically sensitive industries outperformed during the correction. (3) Pace of retail bankruptcies picks up this year. (4) As more stores shut lights permanently, will the survivors benefit? (5) Technology aims to save the world from global warming. (6) Electric construction trucks replace diesel. (7) Generators switch from diesel to hydrogen. (8) Waiting for the unveiling of long-lasting aqueous air batteries.
Panic Attack #67?
(1) S&P 500’s next record high likely in 2021. (2) Vivaldi, Templeton, and Birinyi. (3) From pessimism to skepticism, optimism, and euphoria. (4) Oct. 2017: Back to the future. (5) Less exuberance would be bullish long term (6) Time to party like its 2020, not 1999. (7) Tech’s fundamentals are much more solid coming out of latest recession than previous two. (8) SoftBank unlikely to be this year’s LTCM. (9) Nasdaq includes the FAANGMs, while S&P 500 Tech sector includes only Apple and Microsoft. (10) Fiscal and monetary authorities talking about doing something about income inequality.
What If …?
(1) The tale of the whale. (2) Hard times for SoftBank, today’s LTCM? (3) The meltup of the 1990s followed LTCM’s meltdown. (4) What if everything goes right? (5) A happier and healthier tale. (6) Monster rebound in real GDP during Q3 unfolding. (7) De-urbanization is great for home and auto sales. (8) Productivity making a comeback. (9) Now for a brief consideration of what if everything goes wrong. (10) W and K economic scenarios. (11) The Fed is on the side of the bulls, which could be too much of a good thing. (12) Movie review: “The Morning Show” (+ + +)
Happy & Unhappy Earnings Hooks
(1) Tracking the recovery’s progress. (2) Global Growth Barometer bounces. (3) S&P 500 revenue and earnings estimates hooks still improving. (4) Tech and Health Care sectors earnings revisiting pre-COVID-19 levels. (5) The S&P 500 travel industry’s earnings chart is U-G-L-Y. (6) China’s domestic travelers give us hope. (7) Everyone wants to be the next Tesla. (8) EV startups do reverse mergers with SPACs to go public.
The Fed Is in Control
(1) Before and after the pandemic. (2) Is the Fed pegging the bond yield? (3) Inflationary expectations showing up in bond’s yield spread with TIPS, not in the bond yield itself. (4) Bond yield hasn’t budged despite strength in economic surprise index and M-PMI. (5) Inflationary expectations rising with copper price. (6) Is the Phillips Curve flat or dead? Yes, to both! (7) Employment gets more weight in dual mandate. (8) The unemployment rate isn’t the only labor market variable that matters. (9) De facto yield curve control is here. (10) No rush to raise rates anytime soon.
Lots of Liquidity Left
(1) A mad dash through recent events. (2) March’s mad dash for cash left plenty still available, even now. (3) Bond yields near record lows, while liquid assets remain near record highs. (4) Central banks continue pumping liquidity. (5) Government social benefits boosted personal saving, which is still boosting consumer spending. (6) Comparative MAMUs. (7) July’s consumer-spending report shows pandemic’s winners and losers. (8) Housing-related industries are clear winners. (9) Used car sales getting a lift from new suburbanites. (10) Fed likely to continue to undershoot inflation target for the foreseeable future.
Anatomy of a Meltup
(1) A theme song for the meltup. (2) Was that a bear market or a correction? (3) The final stage of bull markets. (4) Bull continues to stampede, trampling even the bulls. (5) November 3 election could trip up the bull. (6) MAMU’s forward P/Es approaching 1999 tech bubble levels. (7) The valuation question when interest rates are zero. (8) Fed will keep rates near zero longer while waiting for inflation to overshoot. (9) Yield-Curve Control will be Fed’s response if bond yield keeps rising. (10) All meltups are valuation led. (11) Are 200-dmas signaling impending corrections in high-flyers? (12) Movie review: “Radioactive” (+).
Homes & Drones
(1) Low rates and fleeing urbanites send new home orders surging. (2) Millennials forming families create long-term housing demand. (3) Wedding dreams dashed by COVID-19 free up funds for home down payments. (4) Homebuilders have pricing power, but face increasing lumber costs. (5) Keeping an eye on increasing mortgage delinquencies and falling rents. (6) Chipotle drives S&P 500 Restaurants index’s return to positivity. (7) Green technology: Tree-planting drones help revive barren lands.
The Pandemic & American Demography
(1) Counting cases. (2) More births than deaths. (3) But births are falling, while deaths are rising. (4) COVID-19 baby bust? (5) Past health and economic crises led to fewer births. (6) More challenging than ever to find childcare. (7) Calculating excess deaths from the virus. (8) Pre-existing strains combined with financial ones likely to boost divorces. (9) Postponing getting hitched. (10) Home, sweet home. (11) Pandemic has been a boon for booming housing industry. (12) Housing-related retail sales getting a big boost too. (13) Moving to greener pastures.
Forward Looking
(1) GDPNow model tracking at 25.6% for Q2. (2) Citi’s economic surprise index remains surprisingly strong. (3) US flash PMIs flashier than the ones for the Eurozone. (4) NY and Philly business surveys were solid in August. (5) Leading indicators leading higher. (6) Transportation indicators in low gear. (7) S&P 500 revenues and earnings data were down sharply during Q2. (8) Weekly forward revenues and earnings show both recovering from their recent bottoms. (9) Unlike in the movie, gold and bond prices are good friends.
The Future Is Coming
(1) Lots of time to compare 2020s to 1920s. (2) Three recessions in the 1920s, and one Great Crash. (3) Beware of the 2030s. (4) Extrapolating 6% annual appreciation trend puts DJIA at 45,000 by 2030. (5) Latest round of technological innovation is just getting started. (6) Industrial Revolution was about brawn, while High-Tech Revolution is about brain. (7) More on the S&P 5-8 versus all the rest. (8) Not all FANGMAN stocks are in tech sector. (9) Movie review: “Fear City: New York vs The Mafia” (+ +).
Broadening Earnings Optimism
(1) Analysts boost earnings growth estimates for wide array of industries. (2) Cyclicals get the nod, as do any industries relating to the home. (3) Upward revisions not as strong for industries selling the staples we hoarded earlier this year. (4) Money falls from the sky in Europe. (5) ECB ups bond buying to €1.35 billion. (6) Furloughs keep European workers off the unemployment rolls. (7) EU countries show unified front with plans to sell €750 billion of bonds. (8) Eurozone July economic data have green shoots. (9) For the grass to grow, COVID-19 needs to stay at bay.
Morning Briefing 2020-08-19
(1) The Fed fights the virus. (2) Trying to get inflation right on average. (3) The whites of inflation’s eyes. (4) Kaplan and Evans weigh in. (5) Making up for misses with overshoots. (6) Yellen briefed Biden and champions average inflation targeting too. (7) Fed’s Don Quixote mission: to reach the unreachable stars. (8) Central bankers getting high on CBDC. (9) The equity mandate: Can monetary policy level the playing field? Should it?
More Comparisons of GVC and GFC
(1) Natural and man-made disasters. (2) GVC recession is shorter but deeper than GFC downturn. (3) An unprecedented lockdown recession. (4) GVC recovery should take less time than GFC did. (5) Big Q3 recovery ahead for real GDP. (6) US business sales of goods almost back to normal. (7) Big boost from inventories ahead. (8) Amazingly fast roundtrip for US auto assemblies. (9) No recession in tech output. (10) China’s NM-PMI was different this time. (11) Too many old people in China? (12) Eurozone showing partial recovery in production, but complete recovery in retail sales. (13) More oomph in Germany. (14) Submerging economies emerging again. (15) FAANGM update.
Comparing the Great Virus Crisis & the Great Financial Crisis
(1) A tale of two calamities: Lehman and the pandemic. (2) Global measures of production and exports show similar recessions during GFC and GVC. (3) U-shaped recovery back then. (4) V-shaped recoveries for PMIs and leading indicators now. (5) US forward revenues and earnings bottoming. Mixed picture overseas. (6) Much more and much faster monetary and fiscal stimulus this time. (7) Comparative credit crunches. (8) Inflation remains subdued around the world, giving policymakers room to stimulate, for now. (9) Movie review: “Summerland” (+ +).