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Morning Briefings
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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” (+ +).
Running Out of Gas
(1) Setting the record straight on stock buybacks. (2) The Fed acknowledges that data on employee stock compensation plans are MIA. (3) Lots of traffic as car sales slow around the world. (4) Ridesharing is having an impact. (5) Why are German autos in a ditch? (6) Greener autos. (7) Chinese supply of autos accelerating, while Chinese demand is slowing. (8) Tougher emission standards. (9) Brexit again. (10) Carney has some thoughts on cryptocurrencies.
Abnormal Times
(1) Former Fed head Dudley joins the resistance. (2) Exploding heads. (3) Depressing global economic headlines. (4) Fiscal and monetary stimulus losing their effectiveness as trade policies increase uncertainty. (5) In US, tax-cut boost to growth is wearing off already. (6) What’s the matter with Germany? (7) Yet: S&P 500 forward revenues and earnings at record highs. (8) CBO predicting trillion-dollar budget deficits for the next 10 years, with Treasury debt rising to $21 trillion by 2029. (9) Lots of assumptions. (10) A hard Brexit may be too hard to swallow.
Fed’s New Obsession with ELB
(1) Is ELB the same as zero, or something south of that? (2) Slippery slope. (3) Should the Fed have done more? (4) Wondering what to do if ELB goes to zero? Ask the ECB and BOJ! (5) Recalling Powell’s recent ELB nightmare speech. (6) The Fed has become the world’s central bank of last resort. (7) Three reasons why the Fed eased at the end of July. (8) A few by-the-way comments on financial stability. (9) Fed’s pirouette puts focus back on ELB. (10) History lesson: QE2 was the alternative to negative rates.
Morning Briefing 2019-08-26
Morning Briefing is also available. (1) Trump is playing game of chicken with Powell and Xi. (2) Trump’s enemies list. (3) Turning more reckless. (4) Stay Home still beats Go Global. (5) More rate cuts ahead. (6) Recalling “Rebel Without a Cause.” (7) Is Trump trumping Powell, Xi, or Trump? (8) Powell’s “favorable place” is less so. (9) Trump’s risky game plan: Powell turns chicken first, then Xi follows.
Consumers Still Consuming
(1) The issue for consumer spending isn’t one of whether but where. (2) Wallets are cracking open in many a retail channel, just not department or electronics/appliances stores. (3) Broad spending indicators are flashing green, as consumers’ jobs outlook is rosy. (4) Saving rates are up too. (5) Target and the home improvement retailers are in the right place at the right time. (6) The greenback may get a run for its money as digital currencies spring up.
Bonds in Neverland
(1) Unconventional monetary policies become conventional. (2) From the Old Normal to the New Normal to the New Abnormal. (3) Fed aborts normalization. (4) ECB reverses course. (5) BOJ never even considered leaving Neverland. (6) PBOC continues to inflate greatest credit bubble in history. (7) Negative mortgage rates in Denmark. (8) The tether gets tighter in global bond market. (9) TIPS on the verge of going negative? (10) Negative real rates may have more to do with geriatric demographic outlook than with productivity.
Searching for Growth
(1) Weekly S&P 500 forward revenues remain impressive, still making new highs. (2) No recession in quarterly S&P 500 revenues, which also rose to new high during Q2. (3) Corporate managers managing to find solid revenues growth in slow-growing global economy. (4) Small spread between growth rates in aggregate and per-share revenues. (5) Lots of cyclically weak growth indicators. Are they nearing bottoms? (6) Intermodal railcar traffic is in a recession. (7) Soft patch for earnings, or just tough y/y comps? (8) Forward earnings at record high. (9) Doing the math on S&P 500 targets.
Productivity Could Frustrate Endgamers
(1) Dueling leading indicators: The yield curve vs the S&P 500. (2) Trump doesn’t like inverted yield curves. (3) Meetings in the Heartland. (4) No recession evident in retail sales or GDPNow estimate. (5) Predicting 10 out of 7 recessions. (6) No sign of a credit crunch. (7) The endgame doomsters love bad news. (8) Labor shortages should stimulate productivity. (9) The beginning of a major rebound in productivity growth? (10) Real compensation growth is really making a comeback. (11) Unit labor cost inflation based on ECI remains subdued, which is subduing price inflation. (12) Revisions don’t change the productivity story. (13) Movie review: “One Child Nation” (+ + +).
Another Curve Ball
(1) Inverted yield curve panics algos. (2) Our research shows it’s credit crunches that cause recessions, not inverted yield curves. (3) So far, credit is flowing freely and the Fed is easing. (4) Inverted yield curves don’t invert net interest margins for the banks. (5) China’s version of Amazon thrives despite slowing growth. (6) Semis get battered on global growth fears. (7) Tesla’s stock going nowhere, but its business is still growing. (8) Plummeting battery prices and tough European regulations making renewable energy and electric cars viable.
China, China, China
(1) Growing old before growing rich. (2) Dazzling infrastructure. (3) Ghost trains and ghost airports? (4) Bordering on PPI deflation again. (5) M1 growth weak, while M2 growth heading lower. (6) Less bang per yuan. (7) Trump’s Christmas present. (8) Hong Kong is a no-win for Beijing. (9) Meet Xi Jinping. (10) Meet Hu Xijin.
Less Than Zero: From FOMO to FONIR
(1) Long trip to Boston. (2) Like the weather, the stock market is volatile this summer. (3) More nervousness about recession scenario. (4) Credit crunches cause recessions. (5) Is the Fed listening to the yield curve, Trump, or both? (6) Sentiment remains bullish on balance. (7) TINA, FOMO, and FONIR. (8) Trump has NIRP envy. (9) NIRP not doing much to revive Eurozone and Japan. (10) US bond yields tethered to yields in Germany and Japan.
What’s the Matter With Profits?
(1) Record Chinese exports despite global slowdown. (2) OECD economies bottoming? (3) US labor market remains strong. (4) Annual revisions don’t change big picture on GDP, but profits are weaker than before. (5) Compensation revised higher. (6) S&P 500 aggregate earnings don’t get revised and are in record-high territory. (7) So why the downward revision in NIPA profits if S&P 1500 earnings remains strong? (8) Sub-chapter S corporations have a big impact on profits-related comparisons. (9) Profits’ share of National Income down, while compensation’s share is up. (10) S&P 500 profit margin and comparable NIPA measure diverging in recent years. (11) Fruit cocktail vs orange juice. (12) Warning label.
World Woe I
(1) Trump is a disruptor. (2) Trump may outsmart himself. (3) Lots of huffing and puffing. (4) Trump needs the Fed to lower interest rates to offset delayed China deal. (5) Commodity prices falling. (6) Germany is the gasping canary in the factory. (7) Energy is the biggest loser. (8) China has lots of dollar-denominated debt. (9) Technology continues to disrupt.
Tariff Man vs Mao Man
(1) Deal or no deal? (2) Hardliners in China and in the US have the upper hand. (3) Escalating trade war. (4) Chinese checkers is a game with winners and losers. (5) Trade works best when there are no losers. (6) China has more at risk than US. (7) Currency war unlikely. (8) Xi wants Trump to lose the next election. (9) Trump expects Xi to do a deal once he wins another term in the White House. (10) Trumping the Fed. (11) Xi’s homegrown problems. (12) For Trump, the endgame may be simply to push supply chains out of China, which is happening already.