Daily Research Updates
Morning Briefings
Expert market analysis delivered every morning. Stay informed with comprehensive research and data-driven insights.
Auto Imports & DNA Storage
(1) Tariff message: Baby, you can’t drive my car. (2) US is world’s largest importer of cars. (3) US tariffs are low on cars but high on trucks. (4) US autos sold in Europe are mostly made in Europe. (5) Germany may be ready for a deal on autos. France, not so much. (6) Moody’s warning. (7) S&P 500 Autos remain in a ditch. (8) DNA: Nature’s hard drive set to blow away current data storage technology.
Grazing Bulls
(1) Buybacks booming. (2) A corporate finance model explaining buybacks. (3) S&P 500 buybacks + dividends = $6.9 trillion since start of bull run. (4) Beware of fake news on trade. (5) No sign of global slowdown in S&P 500 forward revenues. (6) Forward earnings at yet another record high. (7) Animal spirits remain animated. (8) Four regional Fed surveys upbeat in June. (9) CEOs remain upbeat. (10) Small business owners say best outlook for expansion on record. (11) Mirror, mirror on the wall: Is the US the fairest trader of them all? (12) Aluminum and steel tariffs aren’t negotiable since they are a matter of national security. (13) Not just about tariffs. (14) A correction on Google’s P/E.
Protectionist Fever
(1) Beach tug of war: Yardeni vs Clinton and Patterson. (2) Trump stoking protectionist fever. (3) Bullish for the dollar. (4) Bearish for commodity currencies. (5) Even the Stay Home stocks could be hurt by a trade war, but less so than Go Global ones. (6) Bond market sends conflicting signals on recession outlook. (7) Yield curve turning more bearish on economy, but credit quality spread isn’t. (8) Fed officials may have to taper monetary normalization if trade policy turns more abnormal. (9) FANGs grow by disrupting other business models, but could be ripe for profit-taking. (10) Lots of hot spots in US stock market, though protectionist fever could cause occasional chills.
Europe’s ‘Meltdown Pot’
(1) Niall nails it. (2) Hooray, Greece is fixed (maybe)! (3) Anti-immigration fervor spreading in Europe, with talk of formation of an “axis” to combat the problem. (4) Merkel’s coalition government could uncoalesce. (5) Closing up some borders. (6) The Bavarian connection. (7) Italy’s new populist government wants to give immigrants the boot. (8) Eurozone PMIs, production, and orders looking toppy. (9) Darker days ahead? (10) Movie: “Jurassic World: Fallen Kingdom” (- -).
Weighty Matters
(1) Dropping GE. (2) IT and Health Care have been earnings-share gainers. (3) Four earnings-share losers. (4) S&P 500 Telecom Services will morph into Communication Services after September 28. (5) Time to go shopping for REITs? (6) REITs are depressed, so largest buyers in the real estate industry are snapping them up. (7) Apple hires Oprah and other celebs to catch up with Netflix. (8) Red Bull is bullish on gamers.
Tit for Tat
(1) A chronology of the US-China trade dispute. (2) Some threats, a few concessions, and some tariffs. (3) Upping the ante. (4) Risk of public tiff over tariffs is global slowdown, or a recession if tiff leads to war. (5) Will the smoke clear, or is it the fog of war? (6) Seeking peace and quiet. (7) S&P 500/400/600 continue to send strong bullish signals, which are hard to hear over all the noise about protectionism. (8) Trump risks losing mid-term congressional elections to the “resistance” if he doesn’t resolve major trade disputes soon.
Mother of All Credit Bubbles?
(1) Imaginative bears. (2) Pearlstein’s dire prophecy for the “Buyback Economy.” (3) Credit bubbles tend to be followed by a crisis, then a contagion, and finally a recession-causing credit crunch. (4) Is corporate debt the epicenter of the next economic and financial disaster? (5) Debt ratios look relatively conservative actually. (6) Corporations have extended the maturities of their debt at record-low interest rates. (7) Buybacks + dividends = 100% of after-tax profits. So what? (8) Retained earnings and buybacks are tiny compared to cash flow from tax-sheltered capital consumption allowance. (9) Capital spending looks normal, not abnormally weak. (10) Corporate credits may be junkier, but don’t ignore vultures ready to scoop them up at distressed prices. They may be credit markets’ shock absorbers. (11) Melissa does some fact checking on a few of Pearlstein’s sources.
The Strange Case of Dr. Jekyll and Mr. Hyde
(1) Trump’s split personality driving stock investors bonkers. (2) Uptrend of monthly indicators suggests Q2 real GDP growth over 4.0%. (3) Jobless claims near record lows. (4) Boom-Bust Barometer at record highs. (5) Forward earnings still rising vertically to record highs. (6) Tariffs: From saber-rattling to shooting bullets. (7) Tariffs boosting prices of steel and washing machines. (8) Stocks holding up remarkably well thanks to earnings. (9) Bonds ignoring inflationary signals that may be mostly attributable to rising oil prices, which fell sharply on Friday. (10) The Fed is neither dovish nor hawkish. It is on course. (11) ECB is both hawkish and dovish. (12) BOJ is dovish. (13) Movie review: “Gotti” (- -).
Equilibrium Oil?
(1) Tug of war in the oil patch. (2) Miracle on oil: US producing a record 10.8 mbd. (3) OPEC meets next week as Saudis and Russians up output. (4) Venezuela is a mess, and Iran is facing renewed sanctions. (5) Tipping point for renewables. (6) Cheaper batteries. (7) That’s entertainment. (8) Tug of war between cost-push inflation and robots.
Growling Bears
(1) Out of hibernation. (2) S&P 500 200-dma remains on uptrend in record territory. (3) Setting the stage for new record highs, or a bear market? (4) Bad breadth comes and goes. (5) Sentiment isn’t too hot or too cold. (6) Broken records for forward revenues and earnings. (7) SmallCaps at record highs as investors come back home. (8) Small business owners ecstatic about their earnings. (9) Fewer complaining about taxes and government regulations. (10) Three growling bears.
Do US Budget Deficits Matter?
(1) Swelling deficits are baked in the cake. (2) How to avoid shutting down the government: Spend more! (3) US budget deficit goes from automatic stabilizer to late-expansion booster. (4) Social Security trust fund is an accounting fiction. (5) From surpluses to deficits as the Baby Boomers retire. (6) Lots of retiring old NILFs. (7) Fed’s balance-sheet tapering adding to supply of Treasuries. (8) A report full of mumbo-jumbo about a fake trust fund. (9) So why aren’t bond yields higher? (10) Don’t go with the flows.
Tuning Out the Noise
(1) The most bullish and bearish President ever. (2) S&P 500 cyclical sectors performing best ytd despite protectionism. (3) S&P 500 defensive sectors notch worst performance ytd because of rising bond yield. (4) SMidCaps outperforming LargeCaps on fears about global economic outlook. (5) Yet Dr. Copper may be turning more bullish on global economy. (6) Q1 data for nonfinancial corporations shows a 36% drop in effective tax rate. (7) A short users’ guide for the GDPNow model. (8) Mary Meeker’s excellent slide show.
Vertical Earnings
(1) Handful of S&P 500 industries showing moonshot earnings. (2) Tax cut provided most, but not all, of the rocket fuel. (3) Industries with out-of-this-world earnings mostly in Tech, Consumer Discretionary, Industrials, Materials, and Energy. (4) Amazing Amazon! (5) Entertaining earnings in Movies & Entertainment industry. (6) CAT earnings expectations are hot despite threats of protectionism. (7) Rising commodity promises boosting Energy and Materials earnings, confirming solid global economy. (8) Sandra explains the art of Italian politics. (9) As shown in the opera Pagliacci, comedies can end tragically.
Around the World
(1) Trump’s monkey wrench. (2) Commodities holding their regained ground. (3) Fed’s gradual normalization and Trump’s protectionism lift dollar. (4) Higher US interest rates and stronger US dollar is a bad cocktail mix for some emerging economies. (5) Our international capital flows indicator could soon be signaling outflows from the rest of the world to the US if dollar remains strong. (6) Global M-PMI is down from recent peak, but still solid. (7) Some signs of weakness in global exports. Blame Trump? (8) Forward revenues for major MSCI global stock composites showing strength, not weakness. (9) Stay Home may trump Go Global as long as Trump goes rogue on protectionism.
Corporate Finance Extravaganza
(1) Diving into the data to see how TCJA impacts corporate finance. (2) Tax on repatriated earnings treated as capital transfer from business to Treasury. (3) Moving from worldwide to territorial corporate tax system still leaves taxes to be paid on GILTI and BEAT. (4) Tax cut and capital consumption adjustment lift after-tax profits from current production and cash flow to record highs. (5) TCJA already lifting capital spending significantly among S&P 500 companies. (6) Protectionism is a potential wet blanket.
Keep on Trucking
(1) So far this year, S&P 500 has held up reasonably well despite lots of bearish noise. (2) Cyclical sectors mostly outperforming, while interest-rate-sensitive mostly underperforming. (3) SmallCaps at record high because they are less exposed to the global economy, which may be challenged by the strong dollar and protectionism. (4) Sounding the retreat alarm: Going back to Stay Home investment recommendation. (5) GDPNow now predicting 4.8% growth this quarter. (6) Record-high truck freight index belies shortage-of-truckers scare, as does truckers’ modest pay gain. (7) Our Earned Income Proxy at record high again. (8) Movie Review: “Adrift” (+ +).
Soap & Apple Chips
(1) Lots of soaps and stocks to choose from. (2) Consumer Staples got cheaper as bond yield rose this year. (3) Lots of M&A in the Consumer Staples space. (4) Getting hipper. (5) Pepsi goes organic. (6) Others going to the dogs. (7) This is your brain on stem cells. (8) Meet the organoid.
The Italian Job
(1) The same Old Normal for Italian politics. (2) Eurosceptics ascending in Italy. (3) How much more can Draghi do to save the euro? (4) ECB likely to postpone monetary normalization till next year. (5) ECB has failed to revive inflation and to stimulate much lending…and now this! (6) TARGET2 payments system shows mounting imbalance between Germany’s surplus and PIIGS deficit. (7) Italian crisis flattens US yield curve in a way that might pause the Fed’s gradual normalization. (8) Another summertime crisis in Eurozone.
Recession Watch List
(1) Second longest day’s journey into the longest day. (2) Fielding questions in North Carolina and Texas. (3) Is it monetary “normalization” or tightening? (4) In the past, rising interest rates rose until they caused a financial crisis, a credit crunch, and a recession. (5) Slicing and dicing the yield curve. (6) Will credit markets start to crack in the corporate bond sector this time? (7) Trump makes a deal with the Saudis by breaking Obama’s Iran deal. (8) Rounding up the usual troublemakers in the Eurozone. (9) Trade war…yada, yada, yada. (10) Fed officials worrying about flattening yield curve. (11) Is it the third mandate?
Surviving In Amazon World
The next Morning Briefing will be sent on May 29. (1) Widening 2018 performance gaps among the sectors. (2) Kohl’s, Macy’s, and TJX repairing their business models. (3) Zuckerberg goes to Brussels. (4) Zuck beats the clock in bizarre one-hour session with EU legislators. (5) EU’s General Data Protection Regulation aims to protect online privacy. (6) Facebook giving European users take-it-or-leave-it option.
Focusing on the Signal
(1) Backward vs forward looking P/Es. (2) Too bearish vs too bullish. (3) Stay bullish as long as no recession in sight. (4) Stripping down the Blue Angels into a noise-to-signal model. (5) Fed’s Williams is passionate about r-star, and wouldn’t mind higher inflation. (6) Fed Chairman Powell claims he isn’t worried about impact of tightening US monetary policy on EMEs. (7) So why did he give a speech on the topic?
Some Like It Hot
(1) Another relief rally following another panic attack? Probably. (2) Declaring a ceasefire before trade war has even started! (3) Chatter about shortage of liquidity is drying up. (4) Going forward, profits earned abroad will no longer be taxed in US. (5) Record year ahead for sum of buybacks and dividends. (6) Q1 S&P 500 earnings up 24%! (7) Latest economic indicators indicating no boom, no bust.
Bond Market’s Message
(1) Fed, not inflation, is driving bond yields higher. (2) Fed isn’t behind the curve on inflation. (3) Peak bond yield likely to be 3.50% over next 12-18 months. (4) Bond Vigilantes Model compares nominal GDP growth and bond yield. (5) Fewer reasons to be vigilant since 2008 as central bankers eased to avert deflation. (6) Inflation Premium Model based on unmeasurable r*. (7) Yield Curve Model posits that shape of yield curve indicates outlook for short-term interest rates. (8) Bond yield discounting not only investors’ inflationary expectations but also Fed’s perceived inflationary expectations and policy response. (9) Does the federal budget deficit matter? (10) Foreign bond yields matter.
Google’s World
(1) AI: The good, the bad, and the ugly. (2) Want a robot personal assistant to schedule your appointments? Just don’t get it mad. (3) Fear grips Industrials sector after a CAT call—buying opportunity? (4) Korean deal far from a done deal.
Capital Ideas
(1) From giddy about tax cut to confused about full impact, while worrying about trade war. (2) Short wait-and-see period? (3) CEO survey is more bullish for capex than are capex indicators. (4) Capex as a percentage of cash flow is down from previous highs. (5) Business spending on high tech is flying high, not counting computer hardware, stalled by the cloud. (6) Plenty of cash for capex and buybacks. (7) Will NAFTA exist mañana? (8) Italy remains ungovernable and a thorn for EU.