Daily Research Updates
Morning Briefings
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Animal Spirits Showing Up in Earnings
(1) Happy eighth birthday. Now take a nap. (2) Trump wins whether ACA-R&R passes or fails. (3) The swamp thickens. (4) Breitbart wants to sink Ryan. (5) Small business owners think now is a good time to expand. (6) Old problems for SBOs were regulations and taxes. New one is shortage of workers. (7) Boom-Bust Barometer still boomingly bullish for earnings and stocks. (8) Forward revenues and earnings at record highs. (9) It’s not all about Trump: Global economy seems to be improving.
Go With the Flows
(1) The Fed’s world of credit. (2) Supply of equities continues to shrink, while debt continues to expand. (3) Lots of cash flow for nonfinancial corporations. (4) Move from active to passive clear in record purchases by equity ETFs. (5) Big buyers of equities not as valuation-oriented as traditional investors. (6) Treasury borrowing exceeds official deficit numbers. (7) Foreigners are biggest buyers of US corporate bonds. (8) China’s social financing blows away credit expansion in US. (9) Draghi’s policies have yet to boost Eurozone credit expansion.
Run, Bull, Run
(1) Bubba, Forrest, and the bull market. (2) Sprinting may not be healthy for aging bulls. (3) Among the best bull markets. (4) Bull market for job seekers. (5) Both soft and hard data confirming strength in labor market. (6) Another record high in full-time employment. (7) Earned Income Proxy also still rising in record-high territory. (8) Frackers have learned how to keep gushing at lower oil prices. (9) 27 Club. (10) Movie Review: “Kong: Skull Island” (- -).
Guns & Butter
(1) Entrepreneurial vs. crony capitalism. (2) Capitalism vs. corruption. (3) Adam Smith’s huge marketing mistake. (4) Are capitalists selfish or just insecure? (5) The customer is always right. (6) The butcher, the brewer, and the baker all faced cut-throat competition, until they joined a trade association. (7) Small business owners create jobs, not Washington’s politicians. (8) ADP data tell all. (9) Republican plans on spending and taxes add up to guns-and-butter. (10) Jackie discusses defense with Rick Whittington.
The Doors
(1) An untimely death of a poet. (2) Will Trump light a fire under corporate earnings? (3) Remarkable Zen-like calm of most stock investors. (4) Low VIX and bearishness agitating contrarians. (5) Behind Door #1: Nirvana. (6) Behind Door #2: Melt-up. (7) Behind Door #3: Meltdown. (8) Lowering bullish probability a notch from 90% to 80%. (9) Inflationary pressures are blowing in the wind. (10) No sign of clear and present danger of higher wage inflation.
Is Active Style Passé?
(1) A blatantly biased defense of active investing. (2) Is the deluge of passive money a contrary indicator? (3) Buffett’s last will and testament. (4) A passive melt-up. (5) Passive investors prefer low fees over cheap stocks. (6) Active managers did fine during previous two bull markets. (7) The choice is picking a passive index or actively picking the winners and losers in the index. (8) Stay Home investment strategy has beaten a passive global index. (9) Passive investing can feed on itself and distort capital allocation. (10) Passive investing is an active choice.
When Bulls Fly
(1) Everyone is happy and worried. (2) DC-PTSD. (3) Swamp’s lobbyists raking it in. (4) New odds: 10/30/60 now is 20/40/40 meltdown/meltup/normal bull. (5) Not all about Trump. (6) Bad stuff that didn’t happen can be bullish. (7) Our Boom-Bust Barometer and Weekly Leading Index are confirming vertical ascent of S&P 500. (8) Less fairy dust from Fairy Godmother. (9) But enough to keep bull flying. (10) Yellen should have been tougher on Friday.
Happy Anniversary
(1) Happy anniversary to an aging, but still hard-charging bull! (2) Group hug time? (3) Great call by BAM eight years ago. (4) Forward earnings up more than 100% since start of bull market. (5) Blue Angels show bulls can fly. (6) A kinder, gentler Trump is even more bullish than the bully Trump. (7) M-PMI soars, while public construction sags. (8) Lots of bulls to dance with. (9) Chuck Prince’s curse. (10) BAT is a full employment act for swamp dwellers. (11) BAT is bad for some, good for others. (12) Final Republican plan likely to be guns-and-butter rather than revenue-neutral.
Populism Popping Up in Europe Too
(1) A bunch of small countries. (2) US election widened yield spreads in Eurozone. (3) Madame Frexit is likely to win first round, but second round maybe not. (4) Lots of fake news in Europe too. (5) Old news: Italy may be a bigger problem than France. (6) Blonde Geert is Netherlands’ Orange Don. (7) Robots taking over Rotterdam. (8) Signs of life in Eurozone economy. (9) EMU MSCI is relatively cheap, but populist politics may be more troublesome in Eurozone than in US.
Buffett’s Rules & Ratios
(1) On the cheap side. (2) Buffett betting on and against Trump. (3) The Oracle sees diluted tax reform and no BAT. (4) The President’s speech. (5) Guns and butter? (6) Buffett Ratio suggests stocks aren’t so cheap. (7) Forward P/E and P/S ratios are also awfully high, unless Trump delivers earnings-boosting corporate tax cuts. (8) A protectionist-triggered recession is possible, but not likely. (9) More likely is that the economy will run very hot, or not so hot. (10) Dallas Fed survey shows regional energy recession is over. (11) Animal spirits roaming throughout the land.
Timing Isn’t Everything
(1) On the verge of civil, trade, and cyber wars? (2) The curse of Cain on Little Kim. (3) Stocks staying focused on setting record highs. (4) Saber-rattling at the FOMC. (5) Bond yield remains in our 2.00%-2.50% range. (6) S&P 500 revenues rise to record high during Q4-2016. (7) More evidence that the earnings recession is over. (8) Margins remain at record levels, frustrating reverting-to-the-mean bears. (9) CEO of Dow Chemical says Trump administration is the most pro-business ever. (10) Bull market may remain resilient even if Trump’s bullish agenda falls behind schedule. (11) Movie Review: “Bitter Harvest” (- -).
Swamp Waters
(1) Declaration of reconciliation. (2) No gabbing aloud allowed. (3) With or without dynamic scoring, “revenue-neutral” tax reform plans look like tax cut plans. (4) Trump plan omits revenue gained from border adjustment and revenues lost from ACA repeal. (5) Hard to estimate impact of deregulation and infrastructure spending in budget projections. (6) Guns and butter, again? (7) Why are analysts so bullish on profit margins? (8) Jackie explains the ins and outs of Pentagon spending. (9) Increasing defense outlays in three steps could trip sequestration. (10) Europe will have to spend more on weapons, which is why the stocks of defense companies are flying high.
Hard To Reconcile
(1) Easy to believe Trump reviving animal spirits in US. (2) Hard to imagine he is doing that overseas. (3) The recovery from the Energy recession explains some of the recent global upturn. (4) China still addicted to credit, which soared $2.7 trillion over past 12 months through January. (5) Flash PMIs are flashing green. (6) Retail sales strong in Europe. (7) Two-step: Reconcile Trump-Cohen and Ryan-Brady bills then get merged one fast-tracked through Congress with reconciliation process. (8) A couple of hurdles such as border adjustment tax and R&R of ACA. (9) Bismarck’s sausage warning.
Rules for Paranoids
(1) Historic times, maybe. (2) Paranoids vs. paranoids out to get one another. (3) Alinsky’s rule book for middle-class revolutionary youths. (4) Hillary’s 1969 senior thesis now available online. (5) OFA organizing to keep Obama’s status quo. (6) Historian Hofstadter wrote the book on “paranoid style” in American politics. (7) Rahm tells Trump to cut taxes post haste. (8) More animal spirits in the zoo. (9) Blanchard says secular stagnation wasn’t so secular after all.
Game of Thrones
The next Morning Briefing will be sent on Tuesday, February 21. (1) Trump trip. (2) Bullish plans vs. bearish bluster. (3) Declarations of war lead to wars. (4) Obama’s throne in DC and his supporters around the country. (5) OFA all the way? (6) The first casualty. (7) The shoe is on the other foot. (8) Time to fast-track tax and regulation reform. (9) Catch-22: Too much of a good thing. (10) Tech is leading the pack. (11) Jackie explains the media industry’s Game of Thrones.
Running Hotter
(1) Small Business Optimism Index goes vertical. (2) Reagan, Volcker, and now Trump. (3) Small business owners don’t like big government. (4) Business owners saying jobs are hard to fill, while workers are saying jobs are plentiful. (5) Let’s see how far China’s rooster can fly in the new year. (6) China’s trade data, PPI, and stock prices all are upbeat. (7) Yellen is pleased and signaling more rate hikes coming. (8) No more talk about hysteresis.
Bada-Bing, Bada-Boom
(1) Sonny and Michael Corleone. (2) Improv. (3) Knowing when to walk out. (4) Is this the melt-up? (5) Sell on the tax news, or just go away in May? (6) Consensus 2018 earnings estimates are steady and bullish. (7) Going vertical: Stock prices, our Boom-Bust Barometer, and YRI Weekly Leading Index. (8) From “The economy, stupid!” to “Populism, stupid! (9) Bond spreads widening in Europe. (10) What if Brexit is a success? (11) Le Pen will bring crowbar to Frexit door. (12) ECB getting bada-chinged.
Good Rotation
(1) Dictionary definitions. (2) Chump change, chunk of change, and Trump change. (3) QE was terminated in late 2014, yet equity bull continues to charge ahead. (4) No Great Rotation so far, but maybe the start of a Good Rotation. (5) Piling into savings deposits. (6) December was a good month for equity funds. (7) China’s rooster starts the new year with a loud crow. (8) UK factories booming. (9) No sign of zerosumitis. (10) Movie Review: “A Dog’s Purpose” (+ +).
Here Come the Jetsons
(1) Correction time yet? (2) Bulls dwarf bears—but sell signals were never the Bull/Bear Ratio’s forte. (3) Investors putting trust in earnings and Trump’s bullish plans for now, while ignoring his bearish ones. (4) We’d prefer to see fewer bulls and less bullying. (5) Jackie goes for a drive in the auto industry. (6) Subprime is making a comeback in auto loans. (7) Autonomous cars may change almost everything. (8) Uber drones. (9) S&P 500 Automobile Manufacturers’ single-digit P/E reflects concerns more so than promise at this point.
Holey Walls
(1) Practical issues with a wall on US border with Mexico. (2) Maybe it needs to be south of Mexico rather than south of the US. (3) Believe it or not: Chinese believe in free markets! (4) Not when it comes to capital flows, as they slap controls to stem outflows. (5) China’s international reserves fall to $3 trillion. (6) Railway freight traffic improving. (7) A billionaire disappears. (8) The Silk Route project is rolling down the tracks.
A Winning Scenario
(1) Second place is for losers. (2) Might “America First” be a winning strategy for the world? (3) America’s gift to the world: $700bn trade deficit. (4) Group hug overseas? (5) Time for emerging economies to emerge. (6) Remarkable recovery for commodity prices. (7) Emerging market currencies stable over past year despite Fed’s rate hikes. (8) EM stock prices rallying. (9) Global PMIs were solid in January. (10) Is owning gold a bet for or against Trump?
Entrepreneurial vs. Crony Capitalists
(1) Trump takes credit for latest strong jobs report. (2) Does anyone in Washington really “create” jobs? (3) Keynes vs. Bastiat on buried bottles and broken windows. (4) Small and medium-sized companies do most of the hiring as they grow. (5) Crony capitalists tend to run big companies that want to protect what they’ve got. (6) Are Trump’s billionaires populists or cronies? (7) Goldman doing God’s work again. (8) Demographic impediments to Trump’s goal of 25 million new jobs. (9) Can the Phillips Curve be saved? (10) The Fed is lying low. (11) Movie review: “Fences” (+ +).
Panning for Gold
(1) Looking for good buys. (2) Looking for earnings outperformers. (3) A simple screen. (4) Industrials benefitting from end of energy recession. (5) Railroads hauling more fracking sand, again, and even coal. (6) Lots of Financials making the grade. (7) Some Tech industries stand out. (8) Specialty Chemicals are special. (9) Surprising finds among consumer-related industries. (10) Mexicans who lose their factory jobs will be shovel-ready. (11) We reckon there are only 900,000 jobs to bring back from Mexico.
Now the Hard Part
(1) Trump hits the (muddy) ground running. (2) Mud is key feature of Washington’s terrain. (3) Hill Republicans want 200 days to implement Trump’s 100-day agenda. (4) Running out of momentum, for now. (5) Earnings picture remains bright. (6) Impressive rebound in commodity prices. (7) European economies looking better. (8) Consumer Optimism Index holds post-election gain in January. (9) The best and the brightest wheeler-dealers. (10) Let’s make a deal!
Devilish Details
(1) Politics is a blood sport. (2) Aneurin Bevan and Ivanka Trump say so. (3) The cradle of civilization is no longer so civilized. (4) Mexico is Trump’s piñata. (5) Noise-to-signal ratio rising. (6) Bond Vigilantes Model says bond yield should be 3.50%, not 2.50%. (7) Despite upturn, bond yields remain near zero in Germany and Japan. (8) Record highs for S&P 500 forward revenues and earnings, as well as for our Boom Bust Barometer and Weekly Leading Index. (9) Spirited animals.