Morning Briefings
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Earnings Season’s Greetings
(1) Big downward revision in Q3 earnings consensus. (2) Industry analysts turn from overly optimistic to too pessimistic as earnings reporting seasons approach. (3) 77/98 quarters of upside earnings hooks. (4) Another record high for forward earnings. (5) Global challenges for revenues growth. (6) US consumers consuming. (7) Shipments data mixed for S&P 500 Industrials and Information Technology. (8) Railroads huffing and puffing, while truckers are cruising. (9) Financials have loan demand, while margins are getting squeezed a bit. (10) Commodity producers face weak pricing.
Below the Headlines
(1) Spinning wheels to new highs. (2) Higher highs and higher lows. (3) Is Trump the pied piper for stock investors, or just the tweeter-in-chief? (4) Deal or truce? US and China stop escalating their trade war. (5) The art of the no-big-deal. (6) Forward revenues and earnings story remains resiliently bullish. (7) Profit margins reverting to the highs. (8) S&P 500 Railroads has same profit margin as lots of tech stocks. (9) Movie review: “Joker” (+ + +).
Flygskam
(1) It’s a shame to fly. (2) Will soaring flight-shaming ground airlines? (3) Environmentalism is just one of three big headwinds slamming travel-related companies. (4) Trade tensions and strong dollar are deterring foreign vacationers from US. (5) Travel analysts’ optimism is undeterred, though. (6) Will electric planes fly? (7) Mechanizing the human body. (8) The Terminator next door: New technologies equip humans with superhuman capabilities.
Helicopter Money
(1) Despite uncertainty about trade wars, small business owners remain upbeat. (2) Small business owners still want help. (3) Pricing pressures easing. (4) Earnings driving the business cycle. (5) Fewer complaints. (6) Central bankers taking helicopter flying lessons? (7) Bernanke likes the idea of monetary-financed tax cut for next recession. (8) Another round of QE could face opposition from the Left. (9) “Free” money may not be cost-free.
Cabin Fever
(1) Stay Home vs Go Global update. (2) Tactical opportunities abroad. (3) Not venturing too far. (4) US stocks are expensive, but they have better-looking revenues, earnings, and margins. (5) PMIs of emerging economies holding up well, but it would take rebounding commodity prices to warrant overweighting their shares. (6) Lots of woes in Europe, as Trump escalates trade war with the region. (7) Bad sentiment and orders. (8) German auto output may be bottoming. (9) Euro is down, which is good for exporters. (10) ECB ready and willing to fund MMT in Germany.
Depressed Purchasing Managers
(1) M-PMI distressing, while NM-PMI disconcerting. (2) Average PMI at 50.2, well above recession level of 45.8. (3) Consistent with 1.5% real GDP growth. (4) Some hard data on production and orders confirm weak average PMI; hard data on employment not so much. (5) The Fed isn’t done easing, as Powell wants to keep us in “a good place.” (6) Fed may be aiming to avert an inverted yield curve. (7) No recession in credit-quality spreads. (8) Weak PMIs bad for S&P 500 revenues growth but good for prospects of Fed easing. (9) PMIs explain Growth vs Value performance derby. (10) Emerging markets' PMIs showing some life; advanced economies not so much.
No Recession in Analysts’ Forecasts
(1) Taking no prisoners: Manufacturing gloom hits both safety and growth stocks. (2) Analysts’ 2020 earnings estimates hold firm-so far. (3) Boeing boosts Industrials’ 2020 earnings, if it can get the 737 Max in the air. (4) IPO market shows some sense by rejecting WeWork. (5) Shared office space providers will abound, with or without WeWork. (6) Landlords: Beware of SPEs. (7) Plastic Energy has one solution for the world’s plastic problem.
Looking Forward to 2021
(1) We didn’t start the fire. (2) Updating Billy Joel’s list of troubles. (3) M-PMI drops below 50.0, but not to recession level. (4) Regional business surveys also weak through September. (5) Exports index takes a dive. (6) M-PMI signaling S&P 500 revenues recession, but NM-PMI remained upbeat through August. (7) Meanwhile, S&P 500 forward revenues and earnings at record highs. (8) Forward profit margin holding steady around 12.0%. (9) Another regime change ahead: From community organizers to deal makers to central planners? (10) Catching up on Elizabeth Warren’s 45 plans.
Inflation Roundup
(1) Consumer inflation remains subdued. (2) Hard to hit 2.0% inflation target. (3) No inflation in consumer nondurable goods. (4) Medical care services has lower inflation and higher weight in PCED than CPI. (5) Rent of shelter has above-average inflation rate in both PCED and CPI, but less weight in the former. (6) Why is CPI inflation higher in US than in Eurozone and Japan? (7) Nonsensical vs sensible: CPI-adjusted wages have been stagnating for 40 years, while PCED-adjusted wages have been on solid uptrend since mid-1990s. (8) Will Brexit be postponed again?
California Dreamin’
(1) Never say “never.” (2) Asking favors. (3) Trump berates China at UN. (4) Banning US investments in China? (5) Fatalistic pessimism in California: Socialism is coming. (6) Funding a Universal Basic Income with taxes on the wealthy and MMT. (7) The next financial crisis. (8) The curse of negative interest rates. (9) Happy thoughts. (10) Four alternative scenarios for the impeachment process. (11) Down and out in Beverly Hills. (12) Movie review: “Downton Abbey” (+ +).
The Utility of Utilities
(1) Political storms send investors running for cover. (2) Utilities fill the bill. (3) Safety in dividend and earnings numbers. (4) Investors take defensive refuge in other fast-growing and income-providing S&P 500 sectors too. (5) Onward and upward for technology innovation. (6) Prepare to be disrupted: the latest in quantum computing, robots, drones, and high-tech tunneling. (7) Are used cars the new new cars? (8) CarMax: not your father’s Oldsmobile dealer.
Flow of Funds (FOF)
(1) Americans collectively are richer than ever. (2) Record wealth-to-income ratio. (3) Americans own lots of equities directly and indirectly. (4) Biggest asset for households is value of their pension entitlements. (5) Homeowners and small business owners prospering too. (6) State & local pensions are 48% unfunded, while private pensions are fully funded. (7) Home mortgage debt has been flat since the Great Financial Crisis. (8) Fed data cast doubt on three common myths about nonfinancial corporations. (9) Draghi’s swan song: All he is saying is give MMT a chance.
The Dissenters
(1) Ugly data out of Germany. (2) What’s wrong with Germany’s economy? (3) German autos getting sideswiped. (4) Chinese EVs are coming. (5) Germans like budget surpluses. (6) Germany’s green new deal likely to weigh on economy. (7) Despite global economic slowdown, S&P 500 revenues continue to grow. (8) Powell sees dissent as healthy counter to groupthink at the Fed. (9) Three dissenters. (10) Rosengren makes a persuasive case against easing. (11) Not so persuasive on financial instability. (12) Is co-working model bad for real estate?
Powell’s Latest Mid-Cycle Adjustment
(1) Avoiding off-the-cuff remarks. (2) Powell repeats his mantra more often: “Fed is data dependent.” (3) More uncertainty. (4) On the same page with Powell: Yield curve’s recession signal distorted by negative bond yields overseas. (5) Powell not ready to satisfy Trump’s NIRP envy. (6) The Fed may be done for the rest of the year. (7) Trade uncertainty weighing on business spending. (8) Fed’s dot plot is a work in progress.
From Downhill to Uphill
(1) Railroads’ uphill climb. (2) Tariffs, end of margin gains, competition from truckers, and market disruption from (who else?) Amazon et al. throw rails off track. (3) Doing the Valuation Shuffle. (4) Stagnant S&P 500 P/E belies much churn among its sectors. (5) Value and Growth stocks have been mixing things up too, with Value outperforming Growth for a change. (6) Tossing stablecoin concept around, with vocal supporters and detractors.
China’s Hurting
(1) Managing China’s declining growth rate. (2) A lot of homegrown structural problems. (3) Trade war with US is weighing on China’s economy too. (4) Showing signs of wanting to make a deal with US. (5) Lots of hard data. (6) Growth of industrial production and real retail sales both fall below 5.0%. (7) Excerpts of woeful tales. (8) Another important Fed meeting. Aren’t they all?
More on Inflation
(1) Truth or dare in the Middle East. (2) Robert Hardy weighs in on latest attack on Saudi oil assets. (3) It was a professional hit job. (4) Plenty of oil reserves to cushion the blow if Saudi production is restored quickly. (5) Growing bank loans to business discredit inverted-yield-curve scare. (6) Over-weighted rent biasing CPI measures of inflation higher vs PCED measures. (7) Despite higher tariffs, import price inflation remains muted. (8) Surveys of pricing pressure showing less of it. (9) PPI inflation for trucking stuff taking a dive.
Inflation Warming Up?
(1) Iran attacks Saudi Arabia. (2) Arrivederci, Draghi. (3) Draghi’s gift to his successor. (4) Whole enchilada: more of whatever it takes. (5) Draghi’s MMT plea to Eurozone governments: Take the ECB’s free money and spend it. (6) German bond market worrying it might work. (7) Going more negative. (8) APP will monetize €240 billion per year in Eurozone governments’ debts to infinity and beyond. (9) Lagarde is no Tinker Bell. (10) Core CPI inflation is heating up, while core PCED inflation rate remains cool. (11) Why are they diverging? (12) Not alarmed by latest CPI’s alarm. (13) Movie review: “Luce” (+ +).
No Shortage of Gluts
(1) There’s no business like show business. (2) Lots of streams for streamers. (3) Bingeing on “Grey’s Anatomy.” (4) Big bucks for content. (5) Fee wars. (6) Gloom in Frankfurt Auto Show. (7) Too many car companies as tech disrupts the auto market. (8) Comparing market-cap shares to earnings shares of S&P 500 sectors. (9) Robots running wild on college campuses.
Yields Backing Up
(1) Despite another round of easy money, bond yields move higher. (2) It’s more about German recession than no-deal Brexit. (3) German fiscal policy may provide more oomph. (4) Draghi’s parting plea. (5) Recession fears abate as CESI rebounds, depressing bond prices. (6) Quits at record high. (7) Small business owners can’t find help. (8) Fed’s favorite inflation measure remains under 2.0%, while alternative measures show somewhat higher inflation.
More Easing
(1) Try, try again. (2) PBOC cuts reserve requirements again. (3) BOJ concerned about strong yen, thinking negative thoughts again. (4) Fed acting appropriately as usual. (5) Draghi’s last act. (6) A package deal coming from the ECB. (7) Germans finding it harder to criticize ECB’s easy money. (8) Lagarde is in Draghi’s camp. (9) Lots of low-octane fuel not working well in global economic engine. (10) Dull Beige Book with weak spots. (11) Lots of uncertainty about trade. (12) Lots of labor shortages.
Bottom Line on Top Line
(1) Another geopolitical crisis, another buying opportunity. (2) The Chinese may actually want a deal, while Boris Johnson’s no-deal Brexit may be on ice. (3) PMI picture not great, but not bad for S&P 500 revenues. (4) Upbeat services industries offsetting downbeat manufacturing in the US, and overseas too. (5) Weak auto sales in Europe and China are a big part of global manufacturing’s woes. (6) Latest batch of labor indicators is a very mixed bag. (7) Our Earned Income Proxy jumps to another record high. (8) Consumers are in good shape.
Winners & Losers
(1) Stock market looks great ytd. Not so great y/y. (2) Despite record volumes, trucking industry tapping on the brakes as trade war hits spot freight market. (3) Lots of challenges for auto industry. (4) Tech stocks doing relatively well. (5) A bottom in world semiconductor sales? (6) The US capital markets remain wide open for business. (7) A big year for IPOs. (8) No credit crunch in the bond market.
Industry Analysts’ World Tour
(1) Industry analysts remain upbeat on revenues despite depressing headline news. (2) Forward revenues are at record highs in both the US and overseas. (3) Forward revenues rising among developed economies, stalling at record high among emerging economies. (4) Latest US M-PMI is bad news for revenues growth, though consistent with 1.8% growth in real GDP. (5) A world of mostly sub-50.0 M-PMIs. (6) Based on MSCIs, forward earnings has been stalling in US and weakening overseas since early last year. (7) Unintended consequences beat intended ones from negative-interest-rate policies.
FONIR Down South
(1) Fearing negative interest rates more than yield-curve inversion. (2) ECB’s Governing Council likely to go more negative at next meeting. (3) A world of NIRPs and NIRBs. (4) From TINA to FOMO to FONIR. (5) Bullish vs bearish fears. (6) S&P 500 forward earnings yield and dividend yield exceeding bond yield. (7) FONIR driving outperformance of dividend-yielding stocks and boosting their valuation multiples. (8) S&P 500 real yields remain solidly positive as real bond yield turns negative. (9) The US stands out in all sorts of ways, including GDP growth, energy production, and profit margins. (10) Movie review: “Blinded by the Light” (+ +).