2020
Looking Forward: Tech, China & Tesla
(1) Brighter days expected in 2021. (2) The S&P 500 Tech sector’s stock price index has gone sideways for three months, outpaced by cyclical sectors. (3) Copper shines and oil rebounds. (4) Cyclical earnings expected to have strongest growth next year as economy recovers. (5) US financials given access to China’s markets, but at what price? (6) New electric vehicles racing to dealerships in 2021. (7) Europe prods consumers and companies to embrace EVs. (8) Will solid-state batteries threaten Tesla’s dominance?
The Mobility Question
(1) Income inequality is controversial. (2) The pandemic has exacerbated the divide between the Haves and Have Nots. (3) Prosperity is good for everyone, even though the rich tend to prosper more. (4) A nation of proprietors: A happy trend that should resume after the pandemic. (5) Marx and Engels were terrible forecasters. (6) Class warfare is a wrong-headed ideology. (7) Entrepreneurial vs crony capitalism. (8) The rise and triumph of passthroughs. (9) Proprietors generating almost as much income as corporations. (10) An important source of capital spending and employment. (11) Economic mobility is also a controversial subject in need of more data and analysis.
Corporate Financial Matters
(1) One more time: higher S&P 500 earnings and targets. (2) Reviewing corporate sector’s balance sheet and income statement. (3) Nice rebound in profits, but with record corporate debt. (4) Refinancing at record-low interest rates. (5) Revenues rebounding along with GDP. (6) A happy outlook for profit margin. (7) NIPA profits include S&P 500 earnings and more. (8) Undistributed profits boost cash flow to record high. (9) Capital spending rebounds with cash flow. (10) Lots more gross corporate debt issuance, some for refinancing at record-low rates. (11) Big jump in corporate liquid assets. (12) Stock issuance is hot, while buybacks are cold. (13) Popular story about buybacks has it backward.
The Bulls vs the Virus
(1) Bulls don’t love too much company. (2) Party like its 1999? (3) Signs of digital tulip mania. (4) Bitcoin as a gauge of speculative excess. (5) Beware of MBD (mad bull disease). (6) Raising our forecasts for real GDP as well as S&P 500 revenues and earnings. (7) Technology likely to boost productivity and margins, though a corporate tax hike would be a downer. (8) The third wave of the pandemic is the worst, but should be the last. (9) The ECB provides another round of PEPP. (10) Movie review: “Ava” (-).
The Margin Imperative
(1) Sowing the seeds of future profits. (2) Tech margins forecast to keep getting better. (3) Industrials and Financials margins expected to rebound in 2021. (4) Real estate margins shrinking this year and next. (5) State and local government payrolls and budgets under pressure. (6) Watching municipal bonds sold by transit systems, airports, toll roads, universities, and nursing homes for signs of trouble. (7) Consider China the US’s top national security risk. (8) Chinese scientists say their quantum computer has achieved quantum supremacy. (9) Introducing quantum cryptography.
Inflation Was Sooo 1970s!
(1) Early disinflationist. (2) Fears of post-pandemic reflation. (3) Inflation outcome will make or break portfolio strategies. (4) Recalling the Great Inflation of the 1970s, when everything went wrong. (5) Food and oil price shocks, and a wage-price spiral. (6) The 4Ds vs M1. (7) US monetary aggregates are soaring. (8) Are the 4Ds still relevant? (9) More good news on the productivity front. (10) The war-and-peace model of inflation. (11) Not much inflation in US, Eurozone, Japan, and China. (12) Reflating or abating deflation? (13) Bonds, copper, and the dollar all showing more inflation than deflation now.
The Myth of Icarus
(1) Meet Icarus, ill-fated son of Daedalus, who invented the Labyrinth. (2) Icaria may be a tourist trap. (3) Wax and the Buffett Ratio. (4) Untimely and timely valuation ratios. (5) Growth tends to fly closer to the Sun than Value. (6) Normalized P/Es looking past the pandemic. (7) Elon flying with Icarus. (8) The Sun is further from Mars than from Earth. (9) Is Tesla the Yahoo! of this bull market? (10) S&P 500 has been tracking dividends divided by 2% dividend yield. (11) A 1.00% dividend yield would put the S&P 500 at 6000 today. (12) One more time: Bond yield would be closer to 2.00% than 1.00% but for Fed’s intervention. (13) Some like it not too hot.
‘There Will Be Growth in the Spring’
(1) Some good news among the labor market’s latest disappointing news. (2) Private payrolls and full-time jobs remain upbeat. (3) Earned Income Proxy continues to recover. (4) GDPNow sees real GDP tracking at 11.2% for Q4! (5) The economic wisdom and insights of Chauncey Gardiner. (6) Labor force still down 4 million from peak. (7) Jobless tally 5 million above start of year. (8) Payrolls down 10 million from peak. (9) Both goods and services employment continued to recover in November. (10) Remarkably resilient income and payroll tax receipts. (11) Counting the unemployed. (12) Jobless claims aren’t what they claim to be. (13) Movie review: “The Undoing” (+).
Delivering Vaccines During the Holidays
(1) More holiday shopping moves online as consumers avoid stores and Covid-19. (2) Freight & Logistics and Trucking industries having a banner year. (3) Opportunities and challenges in the holiday online shopping surge for FedEx and UPS. (4) Both companies aim to deliver vaccines at Warp Speed. (5) Truckers still hiring drivers and expanding capacity. (6) Rails helped by trade and autos, hurt by coal and oil. (7) Airlines having a year to forget. (8) Much optimism priced into Transports’ earnings multiples, except for Airlines’. (9) AI seeping into everything. (10) CRM companies harness AI in battle for market share. (11) Look Mom, no driver.
The Carrie Trade
(1) Stephen King’s first horror novel. (2) Bond Vigilantes have something in common with Carrie. (3) Bond, Dow, and Dollar Vigilantes. (4) The CRB index is bullish for Emerging Markets, commodity currencies, and materials stocks. (5) Red metal is bullish on Red China. (6) Copper/gold price ratio is bearish for bonds. (7) The Fed’s Carrie trade is keeping bond yield under 1.00%. (8) Public pension funds are significantly underfunded according to Fed data. (9) A political problem that may require a political solution.
What Could Possibly Go Wrong?
(1) Too many bulls? (2) A so-so sell signal from Bull/Bear Ratio. (3) Frothy sentiment indicators. (4) No longer leading the running of the bulls. (5) Glory or gory? (6) A 9-point worry list for bulls. (7) Panic Attack #68 is up next, but when? (8) January 5 Georgia elections could make or break Biden’s agenda. (9) Donald and the Supremes? (10) Biden’s extraordinary win. (11) Meet Sidney Powell and her expert witness. (12) Fiscal stimulus cliff ahead? (13) Bearish scenarios for the dollar and bonds. (14) The Middle East is heating up again. (15) Meltdowns usually follow meltups. (16) Santa’s rally came early this year.
Dawn of a New Era?
(1) Post-election relief rally. (2) Three booster-shot Mondays. (3) Team of seniors. (4) Rocking-chair Liberals vs Progressives. (5) Still suffering from EDP (Era of Deranged Partisanship). (6) The 2020s still likely to roar. (7) Yellen beats Warren. (8) Georgia on my mind, until January 5 election. (9) Mnuchin’s Gambit: check, but not checkmate. (10) T-Fed lives to fight another day. (11) A sea of liquidity. (12) Does the FOMC know that the NY Fed is pegging the bond yield below 1.00%? (13) The post-lockdown recovery remains remarkable. (14) Movie review: “Let Him Go” (+).
Bibbidi Bobbidi Boo
(1) The Fairy Godmother is back. (2) Vaccine and Yellen news fuel S&P 500 Energy sector’s top performance so far in November. (3) Global oil production cuts and improvement in demand bringing market back into balance. (4) US companies in the Oil Patch cut costs, merge, or go bankrupt. (5) New Biden administration could shepherd in a return of Iranian production and an emphasis on renewables. (6) Solar just makes sense. (7) New materials could make solar panels far more efficient. (8) A solar panel that that works on a cloudy day. (9) Miracle molecules.
The First Thanksgiving Of the Roaring 2020s
(1) Thank you, thank you, thank you. (2) A cornucopia of vaccines for the holidays. (3) 1914-1920 were dark days indeed. (4) The 1920s was a decade of innovation, productivity, and prosperity preceded by a world war, a pandemic, and a depression. (5) Comparative pandemics. (6) A cornucopia of technological innovations for the 2020s. (7) Calvin Coolidge vs Joe Biden. (8) Raising our earnings estimates and shooting for 4000 on the S&P 500 by the end of 2021. (9) V-shaped earnings recovery. (10) Widespread rebound in the revenues and earnings of the S&P 500 sectors. (11) Net earnings revisions back in positive territory.
Broadening Bull Market
(1) Much ado about $450 billion. (2) Is T-Fed extinct already? (3) Biden likely to pick a Fed-grown Treasury secretary. (4) Warp Speed is on the fast track. (5) Vaccine could open the door to the Roaring 2020s. (6) Value stocks getting inoculated. (7) SMidCaps outperforming too. (8) Kinetic Energy stocks. (9) US MSCI underperforms rest of world. (10) Are technicals too bullish? (11) Home-buying is booming. (12) New home for the holidays. (13) Wealth inequality hasn’t worsened significantly since 1989. (14) Movie review: “The Crown” (+ + +).
Looking Beyond the Pandemic
(1) Which underperforming sector this month has some of market’s best-performing industries? Consumer Discretionary. (2) Forward-looking investors see consumers looking forward to fun times, post-pandemic. (3) Kohl’s and TJX show optimism about the future by reinstating dividends. (4) Executives calling on Congress to push through a stimulus package now. (5) Project Warp Speed expands US manufacturing of vaccines and pharmaceuticals. (6) New vaccines based on mRNA save the day and may hold the key to the development of other vaccines and drugs in the future.
The Fed’s Third Mandate
(1) Tesla is in the fast lane. (2) Back to the Future. (3) T-Fed congratulates the Fed and the Treasury for a job well done. (4) Strong recovery should support valuations, says the Fed. (5) Corporate debt bomb has been detonated, says the Fed. (6) Households are stable, and banks are in good shape too. (7) Non-banks are on regulators’ radar screen. (8) The meaning of “backstop.” (9) Record equity in homes. (10) Millennials have a lot of catching up to do with Baby Boomers and GenXers in homeownership derby.
The Banks Of Last Resort
(1) A trillion here, a trillion there adds up to $21.8 trillion. (2) Whatever it takes to “infinity and beyond.” (3) The Fed is playing by the MMT playbook. (4) Is the Fed trying to peg the bond yield below 1.00%? (5) Record-low interest rates fueling housing boom and record corporate bond issuance. (6) A pile of liquidity waiting for vaccine. (7) ECB and BOJ pumping liquidity as fast as the Fed. (8) A synergistic approach to technical and fundamental analysis. (9) Commodity prices continue to recover. (10) The copper/gold ratio is bearish for bonds, increasing odds that Fed will peg yield below 1.00%. (11) Not much more downside for the dollar. (12) Still favoring Stay Home over Go Global.
Biden’s Challenges & Choices
(1) Another record high. (2) Meet Mr. Gridlock: Joe Manchin, the conservative Democratic senator from West Virginia. (3) No “crazy stuff.” (4) Meet Lael Brainard, the Fed governor who could be the next Treasury secretary. (5) Democrats likely to push Fed to do more if their fiscal agenda is checkmated by Republicans. (6) Fed still has plenty of ammo. (7) Memo to Biden: Trickle-down economics works both ways—spreading pain, not just gain. (8) The rich tend to own S corporations and proprietorships that employ lots of people. (9) Movie review: “The Life Ahead” (-).
Ob-la-di, Ob-la-da
(1) Life goes on as playing fields shift for the pandemic, the nation, the Industrials sector, and fintech. (2) Financials, Materials, and Industrials pay catch-up. (3) Better earnings getting closer as 2021 nears. (4) Covid-19 and the US-China trade war have manufacturers looking to come home. (5) US manufacturing also benefitting from automation and connections to the cloud. (6) It’s time to pay more attention to fintech companies. (7) Fintech making inroads in personal loans, online banking, and mortgages, with their sights set on credit cards.
It Ain’t Over ’Til It’s Over
(1) Gridlock isn’t locked in yet. (2) Ray Charles and Chuck Schumer. (3) If the Dems win the two Senate races in Georgia on Jan. 5, a Blue Wave tsunami could still happen. (4) Trump has 70 Days of Revenge if he so chooses. (5) Next shocker: The Durham report? (6) Yogi Berra’s wisdom. (7) Vaccine countdown brings light at the end of the tunnel for pandemic-challenged companies, potentially broadening stock market rally. (8) Breadth of fresh air: The stock market starts rotating from indoors to outdoors. (9) Plenty of room to broaden bull market.
The Distribution of Corporate Equities Among US Households
(1) Can you hear the roar of the 2020s? (2) Pfizer announces vaccine that is 90% effective. (3) Trump’s Operation Warp Speed is on speed. (4) There are still several important known unknowns about Pfizer’s vaccine. (5) Other vaccines are still in the running. (6) Large Fed research team compiles impressive database on distribution of household wealth. (7) Households own about 65% of corporate equities directly and indirectly. (8) The One Percent holds about 50% of corporate equities and mutual fund shares. (9) Older generations own a larger share of equities than younger ones. (10) Education is a key contributor to financial success.
God Bless James Madison
(1) Meet the author of the US Constitution. (2) Gridlock by design is driving politicians mad, causing deranged partisanship. (3) Investors have learned to tune out the noise from Washington. (4) Awaiting final vote on gridlock in two January Senate races in Georgia. (5) Less fiscal stimulus and another looming shutdown. (6) Investors happy that Blue Wave agenda probably stymied by gridlock. (7) Still looking like V-shaped recovery in labor market. (8) Productivity growth rebounding in the Roaring 2020s. (9) The productivity-pay gap is a big myth that’s been around too long. (10) Movie review: “Queen’s Gambit” (+ + +).
Back to the Future
(1) Refreshed by selloff, tech shares bounce. (2) Semiconductor sales shine in September. (3) China steps on Ant’s IPO dreams. (4) CCP calls for tech independence and a bulked-up military. (5) Pompeo taunts China while traveling through Asia. (6) New competition in green transportation: hydrogen-powered cars and trucks.
World Tour
(1) The third wave of the pandemic. (2) Stay Home continues to outperform Go Global. (3) US MSCI forward earnings outperforming the rest. (4) US profit margin well exceeds the rest. (5) US isn’t cheap. S&P 500 Growth is expensive. (6) Forward P/Es of S&P 500 Value and ACW ex-US showing much less divergence. (7) Global economy takes two steps forward, one step back. (8) The Zombie Apocalypse has been averted, so far. (9) Zombies refinancing debt at record-low interest rates get to live to die another day.
Viral Stress Test
(1) GDP should fully recover from lockdown recession by end of 2021. (2) The third wave of the pandemic. (3) Credit/debit card spending remains on uptrend. (4) Puzzling strength in Treasury data on individual income tax and payroll tax receipts. (5) Labor compensation recovering. (6) Remarkable rebound in proprietors’ income. (7) Personal saving data suggest first round of fiscal stimulus hasn’t been all spent. (8) Consumer spending on goods at record high, led by housing-related spending. (9) Pandemic-challenged services mostly remain challenged. (10) Can restaurants survive on takeout alone? (11) Housing indicators remain strong.
And the Winner Is . . . ?
(1) Who creates jobs in America? (2) American businesses have been doing well despite Washington’s never-ending meddling. (3) Is gridlock really as bullish as widely perceived? (4) Does Powell matter more than Trump or Biden for stocks? (5) The front-cover curse. (6) Remember the Silent Majority? (7) Two pollsters explain why Trump will win in the Electoral College. (8) The pandemic could cost Biden the White House if enough voters fear he will shut down the economy more than they fear the virus. (9) Polls say Biden-led Blue Wave is likely. (10) How fast will President Biden raise taxes? (11) Civics lesson: The Electoral College. (12) Movie review: “Away” (+).
Trick or Treat?
(1) Markets get spooked. (2) Panic Attack #67 started on September 3 and should end on November 3. (3) Election uncertainty and spiking Covid-19 cases haunt the markets. (4) Markets rotate to risk off and Tech stocks stumble. (5) Next year should bring new fiscal stimulus and easier earnings comparisons. (6) Scientists trying to use Crispr to cure cancer. (7) Bayer is the latest big pharma company to buy into Crispr. (8) PPP loans affect some banks’ financials, but only temporarily.
Leaning Out
(1) Voom = V-shaped boom. (2) Another round of lockdowns more likely under Biden or Trump? (3) Coming soon: more fiscal stimulus and a vaccine. (4) Regional business surveys strong again in October. (5) Capital spending outlook improving along with durable goods orders. (6) Big drop in the unemployment rate. (7) But people are dropping out of the labor force, especially working-age women. (8) Pandemic creates major challenges for working parents. (9) Moms & dads opting to stay at home with the kids. (10) A day in the life of one of our colleagues.
Who Owns Stocks in America?
(1) From V to swoosh? (2) Setbacks on the health front of the world war against the virus. (3) October’s flash PMIs remained strong in US, but weakened in Eurozone. (4) Progress on the vaccine front. (5) We are rooting for the stock market to consolidate, not for another panic attack. (6) A simple question with a complicated answer: Who owns equities? (7) Equities come in assorted varieties: publicly traded, closely held, directly held, and indirectly held. (8) Households have been holding about 60% of all equities in US since early-1980s. (9) Proprietors’ income is comparable to corporate profits. (10) S corporations generate as much pre-tax profits as S&P 500 corporations after taxes. (11) S corporate profits taxed as dividends in personal income. (12) So who owns equities? It’s complicated.
Hot Houses
(1) Fed’s regional surveys remain V-shaped through October. (2) Velocity of money making a comeback. (3) Leading index leading higher. (4) Millennials turning into motivated home buyers. (5) Running out of housing inventory. (6) Existing home prices rising faster than for new ones. (7) Larger homes with backyards are prime properties. (8) Swooshing gasoline usage. (9) Central bankers trying to drown virus in liquidity. (10) Bond Vigilantes are the walking dead. (11) Movie review: “On the Rocks” (+).
Speed Bumps for Tech
(1) A look at what could clip the wings of high-flying tech stocks. (2) Regulators could dampen the fun. (3) Netflix, Logitech earnings may signal that the Covid-related tech-spending surge has run its course. (4) Tech IPOs looking frothy? (5) As deurbanization continues, homebuilders keep building. (6) Mortgage rates stay low while homebuilding shares fly high. (7) Introducing the zeptosecond. (8) Scientists aim to learn more about electrons and chemical reactions.
Financial Stability Could Lead to Instability
(1) Slow walking toward the fast-approaching elections. (2) Eight possible outcomes. (3) Gridlock would be bullish. (4) Market needs to mark time to buy time for earnings to catch up. (5) S&P 500 forward revenues and forward earnings remain on recovery paths. (6) The Fed’s lending facilities aren’t lending much. (7) IMF report says fiscal and monetary policies providing “The Bridge to Recovery.” (8) Policies have saved the day, but risk causing too much risk-taking. (9) Are markets disconnected from reality? (10) Some industries remain vulnerable to insolvency. (11) Banks are well capitalized for now. (12) China’s vulnerabilities get spotlighted.
Is the Fed Pegging The Bond Yield?
(1) Why isn’t the bond yield over 1.00%? (2) Copper/gold price ratio pegs yield at 1.61%. (3) Economic surprise index should be bearish for bonds, but it hasn’t been so far. (4) Same can be said of M-PMI. (5) TIPS market still open for inflation bets. (6) Fed continues to buy all the bonds that the Treasury issues. (7) Gravitational pull from bond yields in Japan and Germany. (8) Dividend-yield model remains bullish for S&P 500. (9) China’s recovery challenged by geriatric demographic profile. (10) Some bad news and some not-so-bad news on the pandemic in US. (11) Editorial: We agree with Great Barrington Declaration on the pandemic.
Stocks & the Economy: Still Connected So Far
(1) The V-versus-K debate. (2) Fed’s survey of consumer wealth shows progress was made in the right direction between 2016 and 2019. (3) 82 million Americans own homes. (4) Home prices along with owners’ equity in homes at record high. (5) Education is the major divider between the Haves and Have Nots. (6) A record 37% of Americans have a college degree. (7) NY and Philly business surveys remained strong in October. (8) Still pumping gas. (9) September’s survey of small business owners showed rebounding demand for workers. (10) September retail sales boosted once again by de-urbanization. (11) Industrial production disappointed in September, but should remain on uptrend. (12) Movie review: “Godfather of Harlem” (+ + +).
The Future of Semis, Banks & Cows
(1) Wind in semi sales’ sails. (2) Analysts forecast semiconductor earnings rebound in 2021. (3) Shares have priced in lots of good news. (4) Q2 bank loan loss reserves may have peaked if Covid-19 cases plateau. (5) Low interest rates and less net interest income weigh on bank earnings. (6) Revenues from capital markets trading and underwriting save the day. (7) Old MacDonald had … factory-grown protein molecules? (8) Fans tout the environmental benefits of returning pastures to Mother Nature. (9) Impossible Foods’ secret sauce: genetically altered yeast.
Que Sera, Sera
(1) Doris Day’s advice to investors about the election. (2) The future will bring more government spending, particularly on infrastructure. (3) 2021 unlikely to see a recession, so the bull should continue to charge ahead. (4) For stocks, Powell matters more than who occupies the White House. (5) Do investors want Trump, Biden, or just a clear winner? (6) Goldman weighs in. (7) Under Biden, higher taxes on higher incomes. (8) Biden Plan scores poorly on dynamic basis as high taxes weigh on growth. (9) Biden has a spending plan for that. (10) Biden Blue Portfolio.
’Tis the Earnings Season: Leaders & Laggards
(1) The Halloween month. (2) Remarkable rebound in real GDP after remarkable fall. (3) Mapping GDP into S&P 500 revenues and earnings. (4) The first services-led recession. (5) In the past, revenues cycle was driven more by goods than by services GDP. (6) Buybacks don’t make much of a difference to per-share revenues and earnings growth rates. (7) No change in our earnings recovery outlook. (8) Q2 earnings season had a big upside hook. (9) S&P 500 forward revenues, earnings, and profit margin all continuing to recover. (10) Drilling down to the forward earnings of sectors and industries.
Don’t Fight T-Fed
(1) Crossing the border into the fiscal realm. (2) Fed is here to help finance the debt. (3) Consolidating the Treasury and the Fed into “T-Fed.” (4) “Feddie” is still here for us too. (5) Has the Fed been capping the bond yield since MMT Day? (6) Buying all of the Treasury’s new bond issues. (7) MMT has boosted demand deposits and M2 growth. (8) Hooked on fiscal stimulus, Fed officials begging for more. (9) ECB and BOJ are on board the MMT Magical Mystery Tour along with the Fed.
Banks, Sweden & Digital Currencies
(1) A year financials want to forget. (2) Watching loan losses in commercial real estate, credit cards, and autos. (3) Next week’s earnings reports will reveal whether banks have to set aside more reserves than the market already expects. (4) Banks’ forward earnings have risen, but questions about 2021 linger. (5) How Sweden managed through the first Covid wave with restaurants open and no masks. (6) Recently, Sweden has become more restrictive in the wake of a second wave, while the rest of Europe has become less so, avoiding the blanket shutdowns it had before. (7) Central banks develop digital currencies, with Chinese in the lead.
Strategy Matters
(1) Lots of V-shaped recoveries around the world, so far. (2) New record high for volume of non-auto retail sales in Eurozone. (3) CRB raw industrials spot prices on recovery track. (4) Weekly S&P 500 forward revenues auguring well for Q3 revenues recovery. (5) S&P 500 Growth has been beating Value since early June. (6) Longer term, Value’s total return gets a bigger boost from dividends than Growth’s. (7) With or without dividends, Value has lagged Growth during the bull market since 2009. (8) A vaccine might give Value a shot in the arm. (9) Next Generation EU fund moves Europe toward more fiscal unification. (10) NGEU is also the New Green EU.
Not So Bad
(1) Late start to school year depresses September payrolls. (2) Solid gain in payrolls excluding teachers. (3) Payrolls regain 54% of jobs lost during lockdown recession. (4) Big recovery in aggregate hours worked augurs well for our Earned Income Proxy and personal income. (5) Regional business surveys correctly predicted the V-shaped recovery in national M-PMI from April through September. (6) Lots of upbeat comments from M-PMI report. (7) NM-PMI isn’t all about services. (8) Lots of upbeat comments from NM-PMI report and a few not-so-happy ones. (9) Prices-paid indexes in regional and national business surveys are rebounding. (10) Watching, but not worrying, about inflation.
E Pluribus Unum Shopper
(1) Notwithstanding our political differences, we are all shoppers. (2) Shopping releases dopamine. (3) The best cure for cabin fever. (4) GDPNow is tracking big Q3 recovery. (5) Working for a living should offset less government support. (6) Another round of fiscal stimulus would keep V-shaped recovery going through next year. (7) Still some extra bucks in personal saving. (8) Our Earned Income Proxy continues to recover. (9) Housing-related spending leading the “V is for Victory” parade. (10) De-urbanization great for home-related sales, including autos. (11) Services are recovering but remain challenged by social distancing. (12) Doing our part for the war effort. (13) Not much of a recession in tax-payments data.
Lots of Issues To Debate
(1) A presidential debate for the history books. (2) Mnuchin’s stimulus hint trumps debate shouting match. (3) More V-shaped indicators. (4) Hotel REITs need travelers to continue their rebound. (5) Shuttered stores hurting Retail REITs. (6) Cell towers and data centers help Specialized REITs outperform. (7) Chinese media fans the US/China cold war flames. (8) Diplomats stop talking. (9) Sinicization continues. (10) Will more Chinese professors in the US return home? (11) The Boring Company keeps on digging.
Inventory Swings
(1) Having too much inventory during a recession is a problem. So is not having enough during a recovery. (2) Companies responded rapidly to pandemic by slashing orders and production. (3) Inventory liquidation during H1 set stage for rebound during H2. (4) Pent-up saving and demand during lockdown recession triggered V-shaped recovery as restrictions were lifted. (5) Retail sales lead bungee rebound in business sales. (6) Inventories can be a big swing factor for real GDP. (7) Good for transportation. (8) Something is really not right with jobless claims data.
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.
Aug 19, 2020
Fed Watching for Fun & Profit: Inflation, Fedcoin & Inequality
(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” (+ +).
Material Information
(1) S&P 500 Materials sector’s big bounce signaling better days ahead. (2) Gold loses some luster as bond yields edge higher. (3) Dr. Copper confirms the patient is on the mend. (4) Companies that cut costs in downturn should see profitability pop as volumes improve. (5) Electric vehicle demand should boost lithium demand. (6) Eastman Chemical says demand “likely” bottomed in May. (7) Developers looking for the Holy Grail: a battery that lasts forever and doesn’t use cobalt.
Sputnik V
(1) Discounting lots of good news through the end of next year. (2) Raising S&P 500 year-end targets: 3500 this year and 3800 next year. (3) Hard to predict upside in meltups. (4) March 23 was Don’t Fight the Fed Day. (5) MMT + TINA = MAMU. (6) S&P 500 forward revenues and forward earnings on recovery road. (7) Putin’s Sputnik V moment. (8) Russian vaccine news depresses FANGMANT stocks, gold, and bond prices but boosts bank stocks. (9) Credit markets also benefitting from Fed’s QE4Ever. (10) Liquidity vs solvency. (11) More delinquencies, defaults, and bankruptcies are ahead. (12) Energy and retailing industries remain especially troubled.
Another Roaring Twenties May Still Be Ahead
(1) A precedent for our times. (2) Still lots of years left for the 2020s to roar like the 1920s. (3) Malthusians never see technological innovation coming. (4) Technology solves the problem of scarce resources. It also boosts productivity and prosperity. (5) Lots of amazing innovations during the 1920s, and since then. More ahead in the 2020s. (6) Vaccines, treatments, and cures for those pesky viruses. (7) High-tech spending on IT equipment software, and R&D now accounts for a record 50% of capital spending. (8) Silent Cal vs Loud Don. (9) Government has gotten bigger since 1920s, and will get even bigger in the 2020s. (10) Crony capitalism isn’t capitalism, but it doesn’t have to be bearish for stocks either. (11) S&P 500 has been tracking 2% Dividend Yield Model since 2010.
Stock Valuation in a Zero-Bond-Yield World
(1) Hamlet, TINA, Joe, and me. (2) Valuation isn’t a life or death issue, though paying too much for stocks can be a killer. (3) TINA is back, stronger than ever. (4) Reversion to the mean. (5) But what if the mean is a moving target, buffeted by inflation and Interest rates? (6) Blast from the past: Fed’s Stock Valuation Model. (7) FANGMAN again. (8) Buffett Ratio is off the charts. (9) Is the V-shaped recovery starting to stall? (10) Rents are disinflating. (11) Movie review: “The Last Narc” (+ + +).
Health Is the Key To Happiness
(1) COVID-19 creates winners and losers—even in S&P 500 Health Care sector. (2) S&P 500 Health Care sector expected to post positive earnings growth at the right price. (3) Political clouds quickly approaching. (4) Investors won’t like Biden’s plans to expand Medicare and limit drug prices. (5) A rundown of the latest COVID-19 breakthroughs includes bets on cloned antibodies and on lung protection. (6) Scientists playing guinea pigs.
Survival of the Fittest?
(1) Less civil civilization. (2) It’s all relative. (3) More like Darwin’s natural selection than survival of the fittest. (4) The virus picks winners and losers. (5) With interest rates near zero and a scarcity of Growth stocks, valuation multiples soar. (6) The US has the FAANGMs, and the rest of the world does not. (7) Service-providing companies remain among the biggest losers from the pandemic. (8) A brief update on the plunges and weak recoveries so far in various service industries. (9) Millennials finally have a good reason to buy homes. (10) Baby Boomers may stay put. (11) Not enough homes for sale. (12) Many tenants and their landlords are in a world of pain.
Bond Vigilantes: Rest in Peace
(1) William Shakespeare, Marc Antony, Julius Caesar, and me. (2) The noble Bond Vigilantes were killed by the noble Fed. (3) They all meant well. (4) A galloping ride down Memory Lane when the Bond Vigilantes were high and mighty. (5) Their heyday: When the Wild Bunch was feared by the Clinton Gang. (6) Subdued inflation subdues the Bond Vigilantes. (7) Fed’s post-GFC bond purchases corrals the hard riders. (8) GVC and QE4Ever buries them. (9) If inflation makes a comeback, can Bond Vigilantes come back from the dead? (10) The Fed is more than willing to tolerate higher inflation. (11) Beware of the Dollar Vigilantes.
Money, Money, Money In the Rich Man’s World
(1) Lots of fun and high-octane punch at the Fed’s MMT Ball. (2) Markets dancing to Prince and Abba songs. (3) The two wealthiest men in the world have all the money in the world, and can print more of it. (4) The Treasury has a big account at the Fed. (5) The Fed has a big pile of the Treasury’s securities. (6) Commercial banks have a pile of deposits, lots of loans, and rapidly mounting loan losses. (7) Not keen on Financials that lend money. (8) We are all monetarists now, or at least we are all watching the monetary aggregates again. (9) Powell as Daddy Warbucks. (10) Party poopers: Gold and Dollar Vigilantes.
De-Urbanization in US, Plagues Made in China
(1) Urbanites in search of home offices and backyards send home sales surging. (2) Dropping mortgage rates help too. (3) We’re betting new homeowners will need to buy a car—or two. (4) Low auto inventories should help manufacturers too. (5) The Chinese Communist Party is cursed and is a curse. (6) Watching for cracks in the Three Gorges Dam. (7) The latest accusations of Chinese stealing US intellectual property.
V-Shaped Indicators
(1) A two-month recession? (2) Millions remain unemployed. (3) Flash estimates and regional business surveys point to strong July PMIs. (4) Orders indicators rebounded in May, June, and July. (5) Economic surprise index remains elevated. (6) Dow Theory is bullish. (7) ATA Truck Tonnage Index shows more truckers on the road again. (8) Gasoline stalls in latest week. (9) Railcar loads bottoming, maybe. (10) Forward earnings bottoming for sure. (11) Debating unemployment insurance schemes. (12) Test marketing a Universal Basic Income?
Welcome to Oz
(1) So real or surreal? (2) Washington is more like Oz than Kansas. (3) The Wizard of MMT. (4) Kelton’s dreamland is a nightmare for conservatives. (5) One of the enlightened authors of the Biden-Sanders progressive manifesto. (6) Oz was about a bad dream. (7) Pay no attention to the seven reasons to worry lurking behind the curtain. (8) Precious metals join stocks as preferred alternatives to bonds. (9) Falling TIPS yield is bullish for gold and other assets. (10) The case for and against the dollar.
Maxim Gorky & The Fed’s Punch Bowl
(1) Maxim Gorky’s depressed crowd is delusional. (2) Singing a happy song. (3) Let’s give the economy and earnings a chance to recover. (4) Mounting evidence of stalling economic recovery. (5) Discounting multiple vaccines multiple times. (6) Fed keeping punch bowl full and spiked. (7) Growth stock investors are punch-drunk. (8) Profit-taking hits FANGMANT. (9) Three major investment styles all driven by the Magnificent Eight. (10) Delusional or realistic scenario? (11) China’s latest plague. (12) What if the radical left wins? (13) Movie review: “Miss Sloane” (+).
Biden’s Brave New World: Utopia or Dystopia?
(1) Another plague in China. (2) US-China Cold War heating up. (3) Dispatches from the trenches. (4) Setbacks on the health front. (5) Nice rebound in existing home sales, but gasoline usage stalling. (6) S&P 500 forward revenues and earnings bottoming. (7) Joe Biden: A man of the (left-leaning) people. (8) A crib sheet of the Biden-Sanders agenda prepared by AOC and other Illuminati. (9) Should we care if wind turbines kill birds, bats, and bugs?
A Billion Here, A Trillion There
(1) A global meltup. (2) Billions of dollars being spent on developing a vaccine at warp speed. (3) Trillions of dollars being spent and printed with abandon by fiscal and monetary policymakers. (4) EU agrees to issue “corona bonds.” (5) Japanese government writing a blank check for dealing with virus. (6) ECB, BOJ, and the Fed continue to pump massive amounts of liquidity to drown the impact of the virus. (7) Another CARES package on the way this week? (8) We are all MMTers now, including Bernanke, Yellen, and Powell. (9) MMT free-for-all: Why can’t we all stop paying taxes? (10) A trillion here, a trillion there add up to meltups in stocks, bonds, gold, commodities, and foreign currencies.
Meet the New, Improved Joe Biden
(1) “W” follows “V” in the alphabet. What about the economy? (2) Asymptomatic and unmasked virus spreaders. (3) As C-19 cases mount, Trump is falling behind Biden in the polls. (4) Trump now says masks are patriotic. (5) Big government income stimulus during April and May boosted retail sales during May and June. (6) Biden moving to the left along with the Democratic Party’s center. (7) One exception: Biden moves toward Trump’s position on China and Made in America. (8) Jail time for corporate polluters under Biden. (9) Higher taxes on higher incomes and on corporate profits under Biden. (10) Biden-Sanders task force is moving Biden further to the left. (11) Winners and losers under Biden. (12) A Biden Blue Portfolio.
US-China Cold War Heating Up
(1) December 11, 2001: Was it another Day of Infamy? (2) Unlike previous US presidents, Trump goes very public on US complaints against China. (3) A long-festering problem. (4) Meet Peter Navarro, again: America’s foremost critic of China. (5) More Cold War speeches from top US officials. (6) Phase 2 has been phased out. (7) Drawing a line in the South China Sea. (8) Banning Chinese companies and moving supply chains out of China. (9) Even the US Attorney General blasts China. (10) Chernobyl, COVID-19, and the Three Gorges Dam. (11) Update: Stay Home or Go Global? (12) Movie review: “Washington” (+ + +).
Banks Are Winning & Losing
(1) Americans are filling their tanks and hitting the road. (2) More upside surprises from the Citi Economic Surprise Index, and forward revenues and earnings too. (3) Banks reserving for lots of rainy days still ahead. (4) Capital markets and trading save the day for Q2 bank earnings. (5) Push for COVID-19 vaccines pushing possible candidates into late-stage trials. (6) Scientists also try harnessing plants to make vaccines fast and cheap. (7) Tesla’s price cuts may signal drops in its technology and production costs—not its sales.
Getting Technical
(1) Shockingly awesome Fed response to GVC. (2) Now all we need is a shockingly awesome vaccine. (3) Fed is fighting the virus. (4) No choice but to rebalance out of bonds into stocks. (5) Powell: Not even thinking about raising interest rates. (6) Powell: Not even thinking about high asset prices either. (7) YRI’s in-house COVID-19 experts are on the cases and vaccines. (8) Technology solved the food shortages Malthus predicted. Now if it could just stop the virus. (9) Operation Warp Speed is spending lots of money to stop the virus. (10) The stock market is showing both bad breadth and a golden cross. Go figure.
Counting Chinese Yuan & US COVID-19 Cases
(1) Still in Rod Serling’s The Twilight Zone. (2) The fifth dimension of the imagination. (3) A FANGMANT of our imagination. (4) From MAMU to MAMD, and back to MAMU again. (5) Joe Biden, soon to be the most progressive president since FDR? (6) A surreal future scenario: Fed pushes the federal funds rate below zero and buys stocks. (7) “Wizard of Oz” was Dorothy’s Twilight Zone nightmare. (8) The Chinese government is inflating credit and stock prices. (9) Updates on challenged and challenging COVID-19 stats.
Bad Earnings & Good Yearnings
(1) The seasons, they go round and round. (2) Magnificent Six leading the way. (3) Discounting better earnings. (4) Bank managements will have some good and bad news. (5) Banks will have to boost loan-loss reserves some more. (6) Business borrowers cash in lines of credit. (7) Credit-card debt declines as delinquencies rise. (8) Commercial real estate is in a world of trouble. (9) Investment bankers are fully employed. (10) Unlike most recessions, this one has some winners in addition to plenty of losers. (11) From FANG to FANGMANT. (12) Opting to benchmark to S&P 500 equal-weighted index rather than market-weighted one. (13) Movie review: “Greyhound” (+ +).
TGI Thursday: Accentuating Some Positives
(1) Good to see Americans on the road again. (2) Surprising surge in Citi’s Economic Surprise Index. (3) S&P 500 forward earnings starting to rebound. (4) Improvement in worldwide semi sales expands to US and Japan. (5) Nvidia and AMD power S&P 500 Semiconductors index higher. (6) Some positive news on the semiconductor earnings front. (7) Another chip manufacturer considers expanding its US manufacturing. (8) TuSimple continues developing its autonomous trucks, while others have tougher road.
Modern Monetary Theory: In Theory & In Practice
(1) Meet Stephanie Kelton. (2) A manifesto for the people’s economy. (3) A champion of big government. (4) Resource allocation debate: government vs markets. (5) The magic of printing money. (6) Fiscal policy should take the lead in creating full employment. (7) Economic deficits matter more than budget deficits. (8) MMT is the New Deal on steroids. (9) Fighting inflation by raising taxes. (10) Public service jobs for all. (11) The Wiz is a Utopian. (12) Big-government politicians on both sides of the aisle embrace MMT. (13) Trump administration unites fiscal and monetary policy in MMT alliance to fight the GVC.
More on MAMU & MAMD
(1) No rest for the wary as meltup refuses to rest. (2) Forward earnings just starting to recover. (3) Comparing MAMU now and MAMU in 1999. (4) Greenspan’s 1996 question about irrational exuberance. (5) Fed forcing everyone out of bonds and into stocks. (6) If MAMU is followed by MAMD, will Fed buy stocks and push yields below zero? (7) Chinese officials are stock-market cheerleaders. (8) Services economy rebounding in China and US. (9) Buffett is back at the M&A buffet. (10) No contest between bond yield and dividend yield. (11) Real rates turn negative, which is good for gold and maybe for other commodities too. (12) Fed officials want to make sure we know they will accommodate us.
The Fed & the FAANGMs That Ate the Market
(1) Crossing red lines. (2) Powell chooses to leap first, look later. (3) Fed starts buying bonds of corporations that don’t need help. (4) No Asset Left Behind: How the Fed’s bond buying boosts stock prices and P/Es. (5) Saving fallen angels before they turn into zombies. (6) Dalio’s complaint. (7) Central bankers’ firehoses still pouring lots of liquidity even though the fire sales are over. (8) Fair-value P/E: 15 or 30? (9) Yield Curve Targets. (10) The Magnificent Six viral stocks: expensive for a reason. (11) FAANGMs are dominating all the major investment-style categories. (12) Movie review: “Chernobyl” (+ + +).
Mostly Good News
(1) Watching improved gasoline usage to gauge the road to recovery. (2) Good news from employment and manufacturing data, too. (3) Boeing 737 MAX flies closer to approval. (4) United adds planes as air travel slowly takes off. (5) Analysts stop slashing forward earnings forecasts for Industrials, and most other sectors too. (6) Surveying the status of COVID-19 treatments and vaccines in the wake of Pfizer’s good vaccine news.
Warning: Hazardous Data
(1) KDDD: Known Data Deficiency Disorder. (2) Definition of “good” data. (3) Lots of good economic data suggesting economy bottomed in April. (4) Economic Surprise Index goes from record low to record high in the past few weeks. (5) Mortgage applications and pending home sales show strong housing recovery. (6) Industry analysts have stopped cutting their earnings estimates for 2020 and 2021. (7) S&P 500 forward earnings up for the past six consecutive weeks. (8) Gasoline usage rebounding as Americans drive more to work and to shop. (9) But are they also driving more because they don’t want to take mass transit and can’t travel overseas? (10) Hard to count the unemployed. (11) Lots of issues with pandemic data.
Stress Tests
(1) A bank stress test with additional sensitivity to the virus. (2) A group of 34 lenders get tested for V/U/W scenarios. (3) A freeze on buybacks and a cap on dividends. (4) Awash in deposits and making lots of loans. (5) Provisioning for more losses. (6) GFC was much worse for Financials than GVC so far. (7) Large corporations in better position to survive GVC than small businesses. (8) Financials led dividend cuts during GFC. This time, Energy more likely to lead the way. (9) Tech firms and Financials are the big repurchasers of their own shares. (10) Buybacks data confirm that most are to offset dilution from employee stock compensation plans rather than to boost EPS.
Natural & Man-Made Disasters
(1) Self-inflicted collateral damage in the fog of war. (2) A five-part plan for avoiding lockdowns next time. (3) Learning to live with the virus now in case a vaccine can’t be found. (4) Reagan, Emanuel, Obama, and Trump. (5) Why didn’t Centers for Disease Control and Prevention with a $6.5 billion annual budget control and prevent COVID-19? (6) Generous government unemployment benefits may be boosting unemployment and weighing on recovery. (7) Return-to-work benefits? (8) Consumer spending getting a post-lockdown boost from all the saving done during lockdown. (9) Movie review: “Irresistible” (+).
Wall of Worry
(1) Market meltup meets Wall of Worry. (2) COVID spike lengthens list of investor concerns. (3) NY roads get crowded as COVID restrictions lift. (4) Price of crude drops on COVID spike, but still up sharply from April low. (5) A look at how COVID has affected oil supply and demand. (6) Surge in oil inventory should peak this quarter. (7) Honeywell joins the ranks of companies offering quantum computers. (8) A quantum Internet is being developed to link quantum computers.
Cooped-Up Demand
(1) A simple way to get rid of cabin fever. (2) Cash-fueled CUD vs usual old PUD. (3) Gasoline usage continues to recover in US. (4) Jumping jack flash PMIs. (5) Three regional economic rebounds. (6) Commodity prices moving in the right direction. (7) S&P 500 consensus forecasts for 2020 and 2021 revenues and earnings starting to bottom. (8) Why aren’t revenues down more? (9) Forward revenues and earnings also bottoming. (10) How broad is bottoming in S&P 500 forward earnings? (11) The worst may be over for downward earnings revisions. (12) What’s worse for freedom: lockdowns or masks?
Party Like It’s 1999
(1) Prince was an amazing prognosticator. (2) Defying doomsayers by throwing a party. (3) Countering the pessimists, but acknowledging that they could be right someday about the End of Days. (4) Fed deploys B-52s rather than helicopters to fight latest crisis. (5) Two alternative 1999-like party scenarios. (6) Who are all those unmasked men and women? (7) Nasdaq party may just be getting started. (8) Agreeing with Santoli. (9) Smart money is bearish. (10) It’s record-low corporate bond yields, Smarty! (11) Robinhood is a bit player in this party. (12) Unlike Greenspan, Powell is no cheerleader. (13) The Great Disconnect, then and now.
Huge Windfall For Corporate America
(1) The Fed’s D-Day. (2) A very successful shock-and-awe campaign. (3) Time to declare mission accomplished? (4) MMT + TINA = MAMU. (5) The MAMUs of 1999 and now. (6) Powell Put aimed at supporting both stocks and bonds. (7) Slicing and dicing forward P/Es now and then. (8) Robinhood for the young and the restless. (9) Fed stoking moral hazard by saving fallen angels from turning into Zombies. (10) Record corporate bonds outstanding and record gross new issuance at record-low interest rates. (11) Movie Review: “Da 5 Bloods” (+ + ).
Don’t Sell US Consumers Short
(1) American shoppers once again live up to their reputation. (2) A pile of personal saving helps fuel a V-shaped spending recovery. (3) Trump wants US manufacturing to come home. (4) Complex supply chains may make reshoring difficult. (5) Manufacturing in the US may increase costs and turn former Chinese suppliers into competitors. (6) Down on the farm: Robots killing weeds and picking fruit. (7) Autonomous tractors can work day and night.
Fed vs Virus Waves
(1) The meltup of the day. (2) Is a two-month lockdown recession a recession or just a natural disaster? (3) Index of Coincident Economic Indicators peaked during February, troughed during April. (4) Both S&P 500 forward revenues and forward earnings seem to be bottoming already. (5) Powell’s Put dwarfs predecessors. (6) Corporate bond investors get a Fed Put too. (7) Fed pumping waves of liquidity to offset virus waves. (8) The Fed: Savior of Fallen Angels and Zombies. (9) Now we know how Powell intended to fix corporate debt crisis. (10) Five characteristics of virus-proof companies.
Sensitive Prices
(1) Commodities showing less manic depression than stocks. (2) Less dramatic swings in commodity prices than in stock prices. (3) Commodity prices have actually held up surprisingly well under the circumstances. (4) Boom-Bust Barometer goes bust. (5) Copper didn’t crash along with global auto production. (6) S&P 500 forward revenues is down, but not out. (7) Gasoline demand leading the rebound in petroleum usage, but inventories continue to build. (8) Lumber price prospects turning bullish. (9) Why isn’t gold soaring even higher?
Crazy Year
(1) 2020: Is it over yet? (2) Longest expansion followed by shortest recession. (3) Monetary and fiscal responses for the record books. (4) Huge pile of savings could finance V-shaped recovery in consumption. (5) Record-setting meltup follows record-setting meltdown. (6) Sentiment turns too bullish too fast. (7) Rooting for churning. (8) Biden’s nightmares. (9) Biden’s savior. (10) Second wave already, or more of the first wave? (11) Viral statistics can be sickening and misleading. (12) Mobility stats showing more mobility. (13) Vaccines to the rescue? (14) Movie: King of Staten Island (+ +).
Green Shoots
(1) Cooped-up Americans hit the road and buy homes. (2) Vacationers cancel overseas travel plans and see the US instead. (3) Forward earnings may be bottoming. (4) Tech earnings push Nasdaq across the 10,000 threshold. (4) Vegas opened its doors, and people walked through. (5) Battle over the electric vehicle market breaks out. (6) Tesla becomes most valuable car company as it pushes forward with electric trucks. (7) Nikola bets on fuel cells. (8) Ford is in the EV game too.
The Shortest Recession On Record
(1) Free Kindle book on the Fed. (2) Meet the Dating Committee. (3) The longest economic expansion followed by the shortest recession on record. (4) Did the economy bottom in May or in June? (5) Tracing out a swoosh. (6) Tracking mobility as the economy reopens. (7) Bull market broadening in recent days. (8) Remarkable rebound for both LargeCaps and SMidCaps. (9) Value doing some catching up to Growth. (10) Growth’s natural advantage is growth.
Across the Pond
(1) Free Fed Kindle book. (2) TINA is driving meltup. So is rebalancing. (3) TINA + MMT = MAMU. (4) Fed and ECB join forces to carpet-bomb their economies and financial markets with cash. (5) Lagarde’s whatever-it-takes moments: APP-Forever + PEPP two-step. (6) Going down the credit-quality curve. (7) PEPP rally in Eurozone credit spreads and stock prices. (8) Eurozone economic indicators remain depressing, while business surveys may be bottoming. (9) 2021 has to be better than 2020.
MAMU! (Mother of All Meltups)
(1) A trillion here, a trillion there; it adds up to real money. (2) Fed’s B-52 bombing campaign killed the bear market. (3) Was it really a bear market, or just Panic Attack #66? (4) From meltdown to meltup in a heartbeat. (5) Is the stock market heartless, or just optimistic at heart? (6) May’s employment report fits the V-shaped recovery scenario, sort of. (7) PPP might have brought back some paychecks, but not jobs in May. (8) Lots of unemployed expecting to get their jobs back soon. (9) Still a long way to go to repair damage in labor market. (10) BLS bean counters admit that counting beans has been hard during pandemic, resulting in a “misclassification error.” (11) Were nonworking PPP workers employed or unemployed? (12) The billion-dollar question: Will jobs be there when PPP isn’t?
The Great Reopening
(1) Could it be a V? (2) The worst may be behind Visa. (3) Jamie strikes an optimistic note. (4) The dice are rolling again in Vegas. (5) Aerospace & Defense investors betting on next year. (6) Semis get good news from Microchip. (7) Trump administration aims to lure semis back to US shores. (8) Exoskeletons overcoming disabilities.
OK, Zombies?
(1) Ugly followed by uglier earnings data. (2) Looking past the bad news. (3) RPS and EPS should start recovering during Q3, but new highs unlikely until 2022. (4) Consensus earnings estimates for 2020 and 2021 getting cut at slower rate. (5) S&P 500 forward earnings up for the past two weeks following weekly drops since early March. (6) Analysts may not be pessimistic enough about revenues, thus exaggerating likely drop in profit margin. (7) Flash credit crunch in March followed by surge in corporate bond issuance ytd! (8) That’s despite a wave of downgrades and defaults. (9) Warren Buffett thanks the Fed. (10) The biggest Fed Put of all times.
Swoosh
(1) A few podcasts when you have a few minutes. (2) Alphabet soup for economic recoveries. (3) There are also the square root and Nike’s swoosh. (4) V is the old normal. (5) Swoosh may be the new normal. (6) Late 2022 might be when we revisit peak GDP. (7) The first recession for services industries is a killer. (8) Feedback loops and aftershocks. (9) Auto output falls to zero, nada, zilch in April! (10) Cash stash update. (11) Studying virology online isn’t healthy.
The Twilight Zone: Free Money Theory
(1) The outer limits of MMT. (2) The Plunge Protection Team is back with lots of free money. (3) Ending a meltdown with a meltup. (4) Stocks are cheap compared to bonds. (5) Is there really a disconnect between stock prices and the economy? (6) Earnings expectations could bottom in the next few weeks. (7) GVC is more like a natural disaster than another great depression. (8) HUGE increase in personal saving. (9) From March’s dash for cash to April’s cash stash, which could fuel consumer-led V-shaped recovery in coming weeks. (10) MMT is Heaven on Earth. (11) Is cash on banks’ balance sheets really cash? (12) Movie review: “Grant” (+ + +).
US Declaration of (Cold) War
(1) Cyclical stocks rebound as economy reopens. (2) P/Es rising faster than Es are falling. (3) Progress on both the health and economic fronts of the war against the virus. (4) Cold war with China has the potential to replace hot war against virus as the new worry for investors. (5) China, not the US, started it, and the US is now declaring it. (6) China, not the US, has been upsetting the post-WWII global order. (7) Real vs wishful-thinking geopolitics. (8) A report that connects the dots. (9) Hong Kong Syndrome. (10) The market’s next worry. (11) Robots with hands evolving quickly.
Discounting a Vaccine
(1) Lots of important known unknowns about the virus. (2) One big known known about the Fed. (3) People are starting to socialize and party like the virus is gone. (4) Stock market is rallying like a vaccine is coming soon. (5) Q2 is so yesterday even though June hasn’t even started. (6) Railcar traffic remains depressed. (7) TSA screening more passengers. (8) Urbanites seeking suburban homes. (9) Signs of a bottom in NY, Philly, and Dallas. (10) Copper price moving up recently. (11) Woodstock and the flu of 1969.
Rebalancing Versus The Second Wave
(1) Throwing caution to the wind? (2) The second wave is the big risk ahead for the economy that could stall stock market rally. (3) Lots of money in cash and bonds available to rebalance into stocks. (4) On the same page: Savita’s story doesn’t conflict with our story. (5) After mad dash for cash, individuals are buying bond funds but still selling stock funds. (6) Institutional investors are natural-born rebalancers. (7) Record amount of liquid assets earning nothing. (8) Central bankers are natural-born buyers of bonds, enabling investors to rebalance into stocks. (9) Comparative epidemiology: 2020 vs 2009. (10) Waiting for a vaccine.
From Cabin Fever To Dopamine Rush
(1) Betting on dopamine to recharge retail sales. (2) Household debt levels pushed to new records by auto and student loans. (3) Low interest rates keep a lid on debt service. (4) Unemployment rising, incomes falling. (5) Have consumers been scared into saving more? (6) US and Chinese officials trade more barbs as manufacturers exit China. (7) Chinese companies may need to clear higher hurdles before listing shares in the US. (8) Tesla hopes to have a battery with a million-mile life expectancy. (9) Are peak sales of gas-fueled cars in the rearview mirror?
Parallel Universe
(1) Headlines for tabloids. (2) An antenna named “ANITA” finds a parallel universe. (3) Surreal developments. (4) Will killing the economy save lives? (5) Trump takes antimalarial drug against swamp fever. (6) Fed chair is now MMT’s biggest booster. (7) Fed can print ammo. (8) Powell won’t be entering negative universe for now. (9) Forward P/Es soar as stock prices rebound while earnings expectations dive. (10) Joe normalizes forward P/Es using 12-month forward EPS ending 18 months from now. (11) An update on Growth versus Value.
OK, Zoomers!
(1) Vaccine on the fast track. (2) Genetic sequencing to the rescue. (3) Messenger RNA bearer of good news. (4) Copy-and-paste approach to killing viruses before they kill us. (5) Using digitization and robots to speed up production of vaccines. (6) Phase 1 passed, on to Phases 2 & 3! (7) A vaccine that could cure the economy. (8) Tracing the outlook for real GDP. (9) How long will it take for a new high in real GDP? (10) Work-from-home may be more popular with employers than employees. (11) Productivity booster. (12) Unhappy hours for commercial landlords.
Awakenings
(1) Hearing more good things about Gilead’s anti-viral drug. (2) Will the US economy awaken from its government mandated catatonia? (3) Revising our real GDP forecast: Much worse in Q2, but recovery starts during Q3. (4) Small business survey full of bad news with one exception. (5) Consumers showing some tentative signs of leaving their cabins. (6) Gasoline demand is picking up. (7) Reopening for business, though not business as usual. (8) Inflation outlook: the 4Ds versus the 3Ts. (9) Fed would welcome and accommodate a temporary awakening of inflation. (10) Setting the stage for another Cold War. (11) Joe Biden?
Bumpy Road for Transports
(1) Powell to politicos: Be ready to step up. (2) Transports sending bearish signals. (3) Trucking one of few industries in positive ytd territory. (4) May railroad data show deterioration continues. (5) Investors help trucking and railroads stocks bounce, but still avoiding airlines. (6) April numbers out of China show economy starting to percolate. (7) Marriott says Chinese consumers starting to travel again. (8) Under Armour Chinese stores open, but sales still down y/y. (9) Will US follow China’s economic trajectory?
Looking for Bottoms
(1) The race for the cure. (2) Is remdesivir COVID-19’s Tamiflu? (3) Even Howard Stern is a virologist now. (4) Mixed message from commodity pits. (5) Professor Copper signaling a bottom in global manufacturing? (6) More gasoline will be pumped as lockdowns wind down. (7) M-PMIs: China is up, while the rest of the world is down. (8) Comparing S&P 500 fundamentals in 2020 to 2009. (9) As each day passes, 2020 becomes less important and 2021 becomes more important for stock market outlook. (10) S&P 500 forward revenues, earnings, and profit margin could bottom by mid-year.
VWW-II
(1) WW-I was followed by VWW-I. (2) Far fewer casualties so far during VWW-II than VWW-I, but the economic toll from lockdowns is mounting rapidly now. (3) If the stock market is the scorekeeper, then there will be peace in our time from the virus. (4) 2900 or so might be a good place for the S&P 500 to consolidate for a while. (5) Opening season could be full of hits and misses. (6) Brief update on COVID-19 tests, cures, and vaccines. (7) Q2 real GDP tracking down 34%. (8) Head count: 46 million distressed workers during April. (9) Government unemployment benefits are generous while they last, beating many workers’ usual pay.
The Best Things In Life Are Free
(1) Crosby, Sinatra, Vandross & Jackson sing about life’s freebies. (2) Stock investors singing about free money. (3) Jerome, Christine, Haruhiko & Spanky. (4) B-52: the bombers and the band. (5) The Fed is covering the Treasury’s deficit. (6) Fed’s policies great for distressed assets, not so great for liquid assets. (7) Band of central monetary planners. (8) Forward P/Es of FAANGM and distressed S&P 500 industries boosted by free money. (9) Most of the unemployed expect to be going back to work soon. (10) Movie review: “Driveways” (+ +).
FAANGMs & Drugs
(1) Passing time with Puccini. (2) Economic data dropping like a rock. (3) COVID-19 keeps us investing at home. (4) FAANGMs prove asymptomatic. (5) FAANGM products keep us sane while isolating, as their uptrending earnings attest. (6) Struggles to obtain PPE reignite US push to onshore critical manufacturing, including drugs and medical equipment. (7) US & China swap blame-game barbs. (8) The first country to develop COVID-19 vaccine may win more than bragging rights.
Earnings Fizzles & Fiscal Fireworks
(1) The big losers are boosting the P/E! (2) Industry analysts chopping earnings estimates. (3) An optimistic outlook for 2021 and 2022 could drive S&P 500 to new highs next year. (4) The CBO sees a depression during Q2 followed by a recovery during H2-2020. (5) YRI vs CBO. (6) CARES Act shows Washington really cares with big bucks. (7) Treasury expecting to get its money back from Fed’s lending programs. (8) Round and round we go with more rounds of free money. (9) MMT’s magical mystery tour. (10) No constituency left behind.
American Magic
(1) Entrepreneurial vs crony capitalists. (2) Big Business and Big Government are natural born allies. (3) The lobbying industry is their love child. (4) Coolidge, Reagan, Emanuel, and Machiavelli. (5) Airlines weighed down by bailouts and on flight plan to be nationalized. (6) Buffett isn’t taking any more flyers on airlines. (7) Buffett’s search for value halted by Fed’s QE4ever. (8) The Sage of Fort Knox. (9) Globalization under attack by viruses, tariffs, and border controls. (10) Stay Home vs Go Global update.
Liquidity & Distress
(1) Many fire sales extinguished by central bankers’ fire hoses. (2) As stores closed, personal saving rate soared. It will likely remain high after a short dip when lockdowns end. (3) GVC aftershocks reduce likelihood of V-shaped recovery. (4) Did you get out on February 19 and back in on March 23? Should you go away in May? (5) Shock absorbers: Distressed asset funds are like kids in a candy store again. (6) Jump in S&P 500 P/E led by most distressed industries. (7) Game changers on health front of the war against the virus. (8) Chinese government’s bullying approach raising resistance. (9) Meet China’s bat woman. (10) Planet of the Viruses: Imperiled animals are taking their revenge on pushy humans.
What Is the Market Thinking?
(1) Obsessing over the P/E. (2) Pricing stocks for normal earnings and abnormally low interest rates. (3) Don’t fight the Fed, especially when it teams up with the Treasury. (4) A trillion here, a trillion there adding up to serious money. (5) Twilight Zone: Falling S&P 500 forward earnings boosting P/E. (6) Three US companies talk about China’s recovery. (7) PPG reporting paint sales improving in China. (8) Starbucks brewing more coffee again in China, and soon in US. (9) CAT is open for business in China. (10) Fortnite hosting crossover events.
Not Much Confidence Among Consumers & Analysts
(1) Rebound in S&P 500 to 2900 well ahead of schedule. (2) Forward P/E of 19.7 is a bit rich under the circumstances. (3) A hard road back to “normalized” earnings. (4) Lots of uncertainty on health front, and more bad news on economic and earnings fronts. (5) Due for some consolidation with less volatility. (6) Consumer Optimism Index falls off a cliff, and so do regional business indexes. (7) Industry analysts are adrift with no compass. (8) IMF working on assessing the damage from GVC. (9) Add another trillion to the rescue pot.
P/Es in The Twilight Zone
(1) Epidemiologists are like economists, but not in a good way. (2) Models versus common sense and empirical observation. (3) My pandemic prescriptions: required mask-wearing, temperature-taking, and COVID-specific field hospitals. (4) Public health: the seven steps forward followed by Taiwan. (5) Opening up is hard to do, but needs to be done without a second wave. (6) Back to The Twilight Zone: As earnings estimates dive, P/Es soar. (7) Misery Index Model isn’t working, so far. (8) Buybacks falsely accused again.
The Twilight Zone: Where Is Everybody?
(1) “[B]etween the pit of man’s fears and the summit of his knowledge.” (2) A world of fear. (3) Mad-cash-cow disease. (4) From reach for yield to dash for cash, to rebalancing into stocks, to snapping up distressed assets. (5) A pandemic of cabin fever. (6) MMT and QE on steroids. (7) Death-defying deficits. (8) From Weimar to Tokyo. (9) The Cold War between the US and China. (10) Investing in an era of crony capitalism. (11) Hooray: The shortage of distressed assets is over! (12) The lower depths from Maxim Gorky to Jules Verne.
Down & Up
(1) Tech saves the S&P 500, while Energy hardly hurts it. (2) Cooking fatigue helps restaurants’ takeout biz. (3) Investors overlook Energy sector’s miserable Q1 results, seeing only the production cuts that will eventually heal the market. (4) Necessity proves it is the mother of invention in the race for COVID-19 cures and vaccines.
A View to a Kill
(1) James Bond and Jerome Powell. (2) The Fed created and exacerbated the zombie problem. (3) The IMF wrote the script for the current version of “Zombie Apocalypse.” (4) Fed recognized that half of investment-grade bonds were BBB. (5) Fed is now scrambling to save them from Zombieland. (6) Powell saw the problem coming and made it worse. (7) T-Fed’s spiffy new SPVs. (8) Fed sets up two homeless shelters for corporate bonds, including the “fallen angels.” (9) Saudi prince gets a new French palace. (10) Pelosi: “Let them eat ice cream.” (11) Industry analysts scrambling to cut their earnings forecasts. (12) Can FAANGMs lead the way higher?
Small Companies Are Beautiful & Distressed
(1) Oil demand and prices plummet along with global economy. (2) When was the last time you were at a gas pump? (3) Running out of oil storage capacity. (4) Industrial commodity prices ex-oil are down but not plunging like oil so far. (5) The Fed is bailing out BBB fallen angels, not the other zombies in the junk pile. (6) LargeCaps, Growth, and Stay Home stocks have been outperforming, and may continue doing so. (7) ADP numbers show small-sized companies account for about a quarter of employment and paychecks. (8) Unintended consequences: Government’s Paychecks Protection Program runs into some snags. (9) Not enough lifeboats.
S&P 500 Flying, Economy Diving
(1) 1987, 2008, & 2020. (2) Shortest bear market in history? (3) Rebalancing made the bottom. (4) The Fed: bombs away! (5) S&P 500 revenues and earnings growth before and after Lehman. (6) Revenues and earnings before and after COVID-19. (7) Assessing the health, economic, and financial fronts of the war against the virus. (8) The last are first since March 23, but over the long run companies in digital and biological technologies should outperform. (9) Recovery pattern: V at first, followed by a U. (10) US economy losing altitude at lightning speed. (11) China as a role model for other economies? (12) Movie review: “Resistance” (+ +).
Here & There
(1) Economic data getting downright ugly. (2) Consumers buying food and toilet paper, not much else. (3) Banks boosting loan-loss reserves, anticipating defaults. (4) JPM warns Q2 could be worse than Q1. (5) BofA says loan deferral requests may have peaked a week or two ago. (6) For banks, lower interest rates offset the benefit of more commercial loans. (7) Bank stocks already reflect lots of bad news. (8) Diversified Banks’ P/Es climb as earnings fall. (9) A look at how China reopened its economy. Is it relevant to US?
Taking Stock
(1) The Age of Future Shocks. (2) From reaching for yield to dashing for cash to rebalancing into equities, all in two months. (3) Retesting the February 19 high rather than the March 23 low? (4) Some more numbers on the dash for cash. (5) Stock prices soar as P/Es jump more than earnings dive. (6) Record drop in S&P 500 forward earnings last week. (7) Chinese social financing at record-setting pace during March. (8) Fed’s balance sheet up $1.8 trillion in past four weeks to record $6.0 trillion. (9) A primer on some of the Fed’s lending facilities.
Investing in the Post-GVC World
(1) Three Marketeers: Mnuchin, Rubin, and Fink to the rescue. (2) A brief history of Fed Puts. (3) The Fed is playing whack-a-mole again with more moles and bigger hammers. (4) From the Fed to Feddie to T-FED. (5) BlackRock will manage the Fed’s corporate bond portfolio for a small fee. (6) GVC aftershocks will shock the post-GVC world. (7) Globalization is at risk. (8) Bringing supply chains home and working from home. (9) Cash was trash, then came the mad dash for cash. Now cash-rich corporations are like kids in a candy store. (10) M&A boom is on the way. (11) Online shopping, warehousing, logistics, and trucking are likely to continue to boom. (12) Stay away from GVC’s basket cases. (13) A couple of freefalling economic indicators.
Feddie’s Free Money: No Asset Left Behind
(1) Bernanke used bazookas; Powell is using B52s. (2) Carpet-bombing the economic and financial fronts of VW-I with free money. (3) Over $1 trillion raised in dash for cash during March. (4) Businesses tapping lines of credit like never before. (5) Future shock: from QE4 to QE4ever to NALB (no asset left behind). (6) Fed keeping zombies from getting buried. (7) Fed indirectly supporting stocks by enabling rebalancing from bonds to stocks. (8) Bull/Bear Ratio is very bearish, which is very bullish. (9) The Fed is on a buyback binge in the credit markets. (10) The Fed has become the Bank of the United States, with capital provided by the US Treasury. (11) In Powell and Mnuchin we trust. (12) You ain’t seen nothing yet!
Tech Is Going More Viral
(1) US death-count methodology could exaggerate COVID-19’s lethality, leading to policy overkill. (2) Lockdowns are taking a toll on economy. (3) We are all germophobes—and tech addicts—now. (4) Stocks benefitting from pandemic-altered reality include names in the outperforming S&P 500 Tech and Communication Services sectors. (5) Cloud-computing and gaming industry companies are among the winners. (6) Here come the robots—and contactless financial transactions.
The Great Rebalancing: No Asset Left Behind
(1) Working on Chapter 13 of the second edition of my Fed book. (2) A work in progress. (3) The Fed’s remarkable pivot on March 23 marks end of B-GVC, beginning of A-GVC. (4) Weekly data confirm dash for cash during March. (5) Credit spreads confirm March 23 was a major turning point on the financial front of war against the virus. (6) The Fed is the buyer of last resort for bonds, providing cash for rebalancing into stocks. (7) The Fed’s balance sheet is vaulting to new record highs. (8) ECB joins Fed and BOJ with no-asset-left-behind PEPP (Pandemic Emergency Purchase Programme). (9) BOJ doing much more of the same.
The Way Forward
(1) A happy Monday for a change. (2) A list of positives. (3) Getting worse at a slower pace. (4) CVS offering Abbott’s test in two cities. (5) Bill Ackman and Neil Diamond don’t have much in common. (6) Pandemic’s theme song offers the way forward. (7) Analysts just got the GVC recession memo. (8) Bear-market rally or looking past the doom and gloom to good times again? (9) B-52 money: Bazooka and helicopter analogies seem so yesterday and puny. (10) The Great Rebalancing.
Analyze This
(1) Neil Diamond’s song may be a good antidote. (2) Industry analysts tend to be too optimistic during good times. (3) They don’t see recession coming and turn too pessimistic as economy starts to recover. (4) Our Earnings Squiggles Framework shows it all. (5) Biggest downward earnings revisions occur during recessions. (6) Modeling earnings now using 2008-09 experience. (7) Lehman Moment: March 16 White House Guidelines set stage for shutting down the economy. (8) Focus on 2021. (9) Forward earnings just starting to take a dive. (10) Bad versus Ugly scenarios for S&P 500. Bad is the new Good. (11) B-52 money will pour into numerous industries. (12) A few industries are already booming as a result of GVC. (13) Joe’s daughter’s university has a vaccine for COVID-19.
Buddy, Can You Spare $2 Trillion?
(1) The government shows it CARES. (2) Health providers get virus-related expenses reimbursed. (3) Airline industry gets grants and loans. (4) Government may ask for equity in exchange for its helping hand. (5) Companies taking government funding can’t pay dividends or buy back shares. (6) No life preservers for cruise lines. (7) Fed can provide loans to companies large and small. (8) Small businesses can keep the money for free if they hold onto their employees through September. (9) Virus-infected industries cutting dividends and eliminating stock buybacks. (10) Many other industries will do the same as recession hits their profits and cash flow.
After the Pandemic
(1) After the Great Virus Crisis, how will the economy be different? (2) A steep global recession with massive fiscal and monetary stimulus. (3) Demand likely to remain in shock longer than supply after GVC. (4) Moving supply chains closer to home is necessary and costly. (5) From just-in-time to just-in-case. (6) Aggregate demand is in shock. (7) Roundtrip for China’s M-PMI. (8) As parts supplies increase in China, demand for them falls everywhere else. (9) Massive job losses and plunging consumer confidence ahead. (10) Fiscal and monetary policies to the rescue, again?
More on Earnings & Valuation During the Great Virus Crisis
(1) Slashing revenues and earnings estimates. (2) The Great Disruption. (3) Industry analysts have lots of downward revisions to work on from their home offices. (4) Blue Angels show the way forward. (5) Forward earnings going down. (6) Analysts will probably be too pessimistic on 2021 by the end of this year. (7) Refusing to give in to viral bearishness, we think market bottomed a week ago and are seeing some blue in the sky. (8) B-52 money is thawing the credit freeze. (9) Please keep your distance and wear a mask.
P/E x E in a Bear Market
(1) Fed Chair Buzz Lightyear: “QE4ever, to infinity and beyond!” (2) Pandemic of fear triggered by virus pandemic triggered a mad dash for cash. (3) Massive flows out of bond funds caused credit spreads to spike. (4) Fed had lots of practice playing Whac-a-Mole in the credit markets. (5) The buyer of last resort is now buying investment-grade corporate bonds and ETFs. (6) New record high of over $5 trillion for Fed’s balance sheet, with more record highs ahead. (7) Fed set to lend $4 trillion above and beyond QE4ever. (8) More like B-52 money than helicopter money. (9) The deficits of last resort. (10) Last week’s “bull market” is facing a major earnings abyss in coming weeks. (11) Using 2007-09 to benchmark 2019-21. (12) There is a path forward to ending the GVC.
Monitoring Earnings & Valuation During the Pandemic
(1) Analysts break out the shears. (2) Profit margins losing their Trump tax-cut bump. (3) Confidence in earnings estimates crumbles to 2010 lows. (4) Forecasting earnings depends on guessing when businesses can get back to business. (5) Most sectors’ valuations have sunk to lows not seen since the GFC. (6) Will forward P/Es rebound as earnings estimates get cut? (7) Hey, big spender: Handful of S&P 500 CEOs gobble up their companies’ stock at March’s depressed prices. (8) Energy sector sees the most buying, followed by COVID-19-infected businesses. (9) The Simons buy Simon shares, the Icahns double down on Newell Brands.
Searching for Silver Bullets
(1) The Lone Ranger. (2) A horse named “Silver” and a gun full of silver bullets. (3) Cure worse than the disease? Social distancing crushing global economy. (4) Make millions of masks, and make us wear them when we go out of the house. (5) Eight other steps to free us from house arrest. (6) We disagree with the CDC’s case against surgical masks. (7) Don’t fight the Fed. (8) China’s economy may be recovering, but their overseas customers are falling into a severe recession. (9) Good news: Busts are followed by booms. (10) Imperial College COVID-19 Response Team’s report may be too alarmist.
The Lender of Last Resort
(1) Let’s not get depressed. (2) Martial law for seniors and others. (3) Great Virus Crisis versus Great Financial Crisis. (4) Social distancing should work. (5) Mass testing would help. (6) Adding makeshift hospital capacity. (7) The Fed is flying the money helicopter to infinity and beyond. (8) Commodity prices tanking now. (9) S&P 500 revenues growth estimates getting cut. (10) S&P 500 earnings growth estimates getting slashed for Q1-Q4, but remain too optimistic. (11) US railcar loadings bearish for industrial production and merchandise trade.
The Great Virus Crisis
(1) GVC is a world war, but not WWIII. (2) Mobilizing resources to fight the virus. (3) Scrambling for cures and vaccines. (4) US case counts by states: Why is Washington so high, while Florida is so low? (5) The Kirkland outbreak. (6) Good news in China, South Korea, Indonesia, and Mexico. (7) Bad news in Europe and US trigger social distancing responses, which should work. (8) The similarity between virologists and economists. (9) From the Good to the Bad and the Ugly in two weeks. (10) Soaring unemployment, plunging GDP. (11) Start of the Zombie Apocalypse in the credit markets? Or can Fed rescue corporates and munis? (12) This too shall pass…if we all stay home and flatten the infection curve. (13) Fiscal and monetary policies should buy us some time. (14) Movie reviews since 2005.
Collateral Damage from the War Against the Virus
(1) COVID-19 ripple effects and plummeting oil prices slam Financials. (2) Life insurers hurt by low rates, falling investments, and fears of higher mortality. (3) Crash in oil hurts some regional banks. (4) Large banks’ stock buybacks on hold. (5) Companies hit hardest draw on revolvers. (6) Market correction makes investment banking business uncertain. (7) Travel industry needs a vacation. (8) Cruise lines, airlines, and hotels all visit the White House. (9) A deal with Uncle Sam may mean dilution for shareholders.
Helicopter Money May Help To Unlock the Economic Lockdown
(1) Trump’s pivot from relaxing to social distancing. (2) The invisible enemy is very contagious. (3) Flattening the infection curve. (4) False and true rumors. (5) Official and voluntary lockdowns. (6) Fiscal and monetary math: TARP2 + QE4 = helicopter money! (7) So is 2020 the same as 1987-88, 2008-09, or 2015-16? (8) Witch’s brew: health, economic, and financial crisis. (9) Pandemic earnings and valuations.
March 17, 2020
Declaration of War
(1) The panic question. (2) Fear is the cure. (3) Lowering GDP and earnings estimates again. (4) Ranges make more sense than point estimates. (5) Fed is running out of ammo and shock-and-awe. (6) The Fed’s Zombie problem. (7) Mobilizing the troops during wartime. (8) The zero-immunity problem. (9) The R0 Factor. (10) Listen to Dr Fauci. (11) Six feet apart beats six feet under. (12) Flattening the curve. (13) Case studies. (14) Stay healthy, please!
The Best Cure for a Viral Pandemic Is a Viral Panic
(1) Panic may be a healthy response to viral pandemic. (2) Blaming the kids for the seasonal flu. (3) The benefits of online education and work. (4) The weather theory makes sense, but is controversial. (5) It’s getting warmer in Wuhan. (6) China vs Italy. (7) Is the H1N1 outbreak of 2009 relevant? (8) Mad dash for cash caused widespread market illiquidity last week. (9) VIX and credit spreads blew out last Thursday. (10) Commodities signaling a less bad outcome? (11) Germany and US policy responses helped to boost stocks on Friday.
Fear for All
(1) It’s officially a pandemic. (2) Global recession is underway as both healthy and sick people stay home. (3) Lowering our US GDP forecast to a growth recession for Q2 & Q3, but also raising odds of outright recession from 35% to 45%. (4) No change in our earnings recession forecasts for Q1 & Q2. (5) S&P 500 target: Pushing 3500 to mid-2021, while aiming for 2900 by year-end. (6) The kids are home. (7) Governor Cuomo and Chancellor Merkel saving us or scaring us? (8) Credit-quality spreads signaling credit crunch. (9) Waiting for a policy response: Helicopter money? (10) Fed, running out of ammo, may ask Congress for permission to buy corporate securities. (11) Clash of the Titans in the Oil Patch.
All About Earnings
(1) Q4 S&P 500 revenues and earnings are out. (2) Revenues rose 6.8% y/y during Q4 to new record high. (3) Earnings dipped in Q4, rising only 2.0% y/y. (4) Profit margin also dipped, but in record-high territory. (5) Utilities and Financials lead the earnings gainers, while Energy and Materials lead the losers. (6) IT leads in the profit margin derby. (7) Industry analysts cutting their Q1 & Q2 earnings forecasts, which remain too high relative to our forecast. (8) Record dividends.
Pandemic Pandemonium
(1) Fear continues to spread faster than reported virus cases. (2) Balance of good vs bad news on virus tips toward the former. (3) Virus stats in China and South Korea improve as those in Italy and France worsen. (4) Panic Attack #66 is the most fearful of them all. (5) It all depends on whether the virus goes away or stays. (6) Was that a capitulation bottom yesterday? Maybe not. (7) Putin and MBS playing chicken in the oil patch, with both hoping to hurt each other along with US frackers. (8) Flight to quality has turned into a panic in Treasury market. (9) Reaching for safety instead of yield. (10) Credit quality spreads widening. Signs of a credit crunch? (11) Déjà vu: Energy-related junk bonds in distress, as in 2015
Three Coins in the Fountain
(1) Spooky bond market. (2) Nostalgia. (3) Coronavirus math: What if lots more people are infected but with mild symptoms? (4) Coronavirus worldometer. (5) The relevance of Tom Hanks, Kelly Clarkson, and Clint Eastwood. (6) Putting subjective probabilities on the Good, the Bad, and the Ugly: 65%/25%/10%. (7) Good: Panic Attack #66 ends soon as pandemic of fear recedes too—65%. (8) Stocks are cheap compared to bonds. (9) S&P 500 forward revenues and earnings remain amazingly resilient at record highs. (10) Bad: Excessively high Fear Factor causes a recession and a bear market—25%. (11) Ugly: Zombie Apocalypse—10%; to avert, the Fed will ZIRP and QE again, and rev up the monetary helicopters. (12) Movie review: “The Invisible Man” (+).
‘We Are Very Much Alive!’
(1) COVID-19 pushes scientists to find solutions fast. (2) Big money is being thrown at the problem. (3) Novel vaccines using mRNA are being tested. (4) Mice helping out. (5) Chinese using CTs and blood tests to better diagnose the illness. (6) Gilead’s drug, remdesivir, is being tested as a treatment. (7) Health care stocks celebrate Biden’s Super Tuesday win. (8) Moderate Dems lining up like good soldiers. (9) Health care sector stocks have underperformed while still delivering earnings.
The BS Virus
(1) Investors prefer Biden over Sanders. (2) Centrists uniting against Sanders in Democratic party. (3) Socialism is a virus that won’t go away. (4) From Rousseau and Robespierre to Castro and Sanders. (5) Fed’s medicine cabinet doesn’t include any vaccines for viruses. (6) Analysts chopping Q1 and Q2 earnings estimates. (7) Lots more earnings warnings coming soon. (8) No sign of a pickup in inflation.
Back to Business
(1) Viral lyrics: Getting to know you, getting to know all about you. (2) May or may not be highly contagious, lethal, and seasonal. (3) Mild symptoms might be undercounted, exaggerating the death rate. (4) Time to consider extreme measures to stop auto accidents? (5) Tech to the rescue? (6) Shaving GDP outlook. (7) Virus bad for capital spending and exports, good for residential investment. (8) M-PMI around 50 corresponds to 2.1% real GDP growth, but also to low-single-digits S&P 500 revenues growth. (9) Truck tonnage index in record-high territory, but truck sales taking a dive recently. (10) Growth in railcar loadings of containers is still weak, reflecting Trump’s deescalated trade wars. (11) Now global health crisis is infecting global trade. (12) Swedes leading the way in e-currency.
COVID-19: The Plot Sickens
(1) We are all virologists now. (2) Most of us can breathe easy. (3) Staying healthy. (4) P/E-led meltup followed by P/E-led meltdown. (5) The previous four seven-day freefalls occurred in bear markets. (6) No longer overbought. (7) FAANGMs cheaper, but not cheap. (8) A bad week for Stay Home as people stay home. (9) Lowering our earnings estimates, but the sun will come out later this year. (10) Industry analysts still too optimistic about earnings. (11) Extreme measures may contain virus while depressing global growth. (12) Really ugly Chinese PMIs. (13) Powell ready to provide a shock-and-awe rate cut? Would it help or hurt? (14) Let’s hope cover-story curse kills COVID-19 as it did previous viruses.
Damage Assessment
(1) Flu vs COVID-19: More alike than different. (2) Keep your distance, don’t touch your face, and wash your hands. (3) COVID-19 less deadly than flu so far, based on number of deaths. (4) S&P 500 down, but not yet in correction territory. (5) Travel-related stocks hit hardest. (6) Valuations getting more reasonable. (7) Beware of cuts to earnings that may be in the near future. (8) Bonds and oil not convinced all the bad news is out.
Government Measures To Stop COVID-19 Triggering Pandemic of Fear
(1) Updating our assessment of COVID-19 crisis. (2) Government actions and warnings to stem virus making Panic Attack #66 the most fearsome of them all. (3) Quarantines and fears of quarantines around the world raising risk of global recession and bear market in stocks. (4) In US, CDC official warns public to prepare for school closings even though she says virus risk is low! (5) Government measures should stop virus, but risk killing us with fear. (6) Flu kills people of all ages, while COVID-19 kills old people (numerous in China) and has spared children younger than 10 so far. (7) Sick happens. (8) COVID-19 can be spread by people with no symptoms. (9) US consumers have nothing to fear but fear about COVID-19 coming to our neighborhoods.
Anatomy of a Virus
(1) Panic Attack #66 hit investors hard yesterday. (2) A viral panic attack. (3) In the spring, there should be healthier weather. (4) Counting on the flu model. (5) Travel and tourism industries are sick. (6) P/E-led correction following P/E-led meltup. (7) The man from WHO isn’t ready to call it a pandemic despite spread to Iran, Italy, and Korea. (8) Getting harder to breathe for millions of small businesses. (9) Fed may need to deliver a couple more rate cuts to keep US economy in a good place. (10) Wuhan Institute of Virology may be China’s Chernobyl.
Snorting vs Sneezing Bull
(1) Known unknown and known knowns. (2) Fed’s policy report mentions COVID-19 as a risk, but Clarida says US economy remains strong and uninfected. (3) China is a weak link in global supply chains. (4) Impressive rebound in February’s manufacturing activity according to NY & Philly Fed surveys. (5) US factories getting a boost from strong housing starts. (6) Consumer optimism lifted by lots of jobs. (7) LEI and CESI confirm economy still expanding. (8) February’s flash PMIs weakened in US and Japan, improved in Eurozone. (9) Bull sneezed on Friday. (10) Investors reaching for yield in bond and stock markets. (11) Tech accounts for nearly half of capital spending. (12) Outperforming stocks include those of the Stay Home, LargeCap, and Growth varieties. (13) Movie review: “The Traitor” (+ + +).
Small World
(1) China’s quarantine disrupts global supply chains. (2) Chinese factory workers are staying home. (3) Coronavirus hits Apple’s demand for phones and supplies of parts. (4) Some auto companies facing parts shortages too. (5) Flying parts on jets. (6) At new highs, stocks still taking it all in stride. (7) Global MSCI forward earnings and revenue estimates holding up. (8) However, industry analysts are starting to cut their S&P 500 earnings estimates for Q1-Q3. (9) Musk’s hyperloop getting bored toward reality in Vegas.
In a Good Place?
(1) Some light reading. (2) From good to very good. (3) Beware of Fed mantras. (4) US beats China currently in the health department. (5) Soft patch in US manufacturing not worrying Fed. (6) Powell is pleased to see labor force participation rate rising. (7) Housing and consumer spending looking good, while capital spending is not so good. (8) Advanced economies should advance as trade tensions ease. (9) Fed worrying more about subdued inflation than feverish virus. (10) Submerging emerging economies are a concern. (11) China’s virus mentioned several times in Fed’s report. (12) Lots of risky businesses in the corporate debt markets. (13) Running out of room to lower interest rates.
Valentine’s Day: Investors Still Love Stocks
(1) Love (for stocks) conquers all (including viruses). (2) Our 3500 target on S&P 500 is 3.5% from here. (3) SuperCaps leading the way. (4) Latest weekly proxies show revenues and earnings growth picking up—but that was before the virus outbreak. (5) Stocks remain on a liquidity diet catered by the major central banks. (6) Fed’s balance sheet expanding again. (7) GDPNow still tracking north of 2.0% for Q1. (8) Consumers may be stuffed with stuff. (9) Online shopping accounting for over a third of GAFO sales. (10) More single than married people in US. (11) Consumers are saving more.
US Stocks With Immunity
(1) Markets feeling better after shaking off the coronavirus. (2) Even the most sickly industries bounced on Wednesday. (3) Investors still loving FAANGMs and LargeCap Growth stocks. (4) Look, Ma, no steering wheel! Feds give first approval for autonomous car. (5) Nuro and many other players fighting for the autonomous vehicle delivery business. (6) Waymo’s AV taxi service offering limited rides around Phoenix. (7) GM and Ford have a long road ahead. (8) Musk says AV coming, but playing defense on Autopilot crashes. (9) Chinese food prices soaring, while retail sales may fall to Earth.
Powell’s Vaccine
(1) So far, coronavirus is a minor panic attack for stocks. (2) Investors betting virus will soon go away or that Fed will inject liquidity if it infects global economic growth. (3) Powell is “closely monitoring” the situation. (4) No sign of virus in forward revenues or earnings, yet. (5) Industry analysts are cutting Q1-Q3 earnings, but boosting Q4. (6) FAANGMs remain immune to the virus and are leading the meltup. (7) There’s no place like S&P 500 Homebuilders during the coronavirus outbreak. (8) Millennials starting to turn into homeowners.
China’s Chernobyl?
(1) Three Mile Island, Chernobyl, and China’s syndromes. (2) The collapse of corrupt regimes. (3) Will Dr. Li’s death lead to the China Spring? (4) Autocrats are sickening. (5) Another reason to leave China. (6) The Great Quarantine of China. (7) Signs of life in global PMIs during January, just before the virus made headline news. (8) Eurozone sentiment may have bottomed, though German auto production has not. (9) US productivity growth is moving in the right direction
Hysteria vs Hysteresis
(1) Pessimism vs optimism. (2) Timeline of the viral impact on DJIA. (3) A major known unknown. (4) Online dashboard showing rising body count. (5) Monitoring financial markets for clues. (6) Chinese stocks, copper/gold price ratio, and bond yield signaling risk-off. (7) S&P 500 Energy and Materials have been infected. (8) Stay Home again until virus crisis blows over. (9) Homebuilders and video games outperforming cruise lines, casinos, hotels, and air freight. (10) The US labor market is hot, yet wage inflation is not. (11) Powell says there is room to run as long as labor force participation rate continues to rise.
Social Insurance Is Inflating
(1) Comparing and contrasting. (2) Ford vs Tesla. (3) Insurance brokers vs insurance companies. (4) Rising premiums help the top line. (5) Low interest rates are a drag. (6) Social inflation translation: juries on the war path and attorneys on the hunt. (7) Anti-solar panels generate electricity while the moon shines.
Central Bankers Agonistes
(1) The sun is shining brighter in the US still. (2) Healthier to Stay Home during coronavirus outbreak. (3) Stocks aren’t cheap in the US compared to elsewhere in the world. (4) US revenues and earnings fundamentals look better than elsewhere in the world. (5) Fed is on hold for now, but the next rate move might be lower rather than higher. (6) inflation remains stubbornly below central bankers’ 2.0% target. (7) Powell’s list of six major uncertainties. (8) ECB and BOJ sticking with negative official interest rates, while buying more assets. (9) PBOC injecting liquidity to combat the virus. (10) Waiting on Fed and ECB reviews of their monetary policies.
The NABNAB Scenario
(1) Taking a break from the virus, and DC too. (2) The secret formula is NABNAB 2-2-2. (3) Failing to stall. (4) The Trauma of 2008 is still boosting profit margins today. (5) Productivity could be a game changer. (6) Consumers continue to spend, especially on health care. (7) Real wages at record high and rising along a trend line of 1.2% real annual growth. (8) Capital-spending growth falls along with CEO confidence. (9) Tech-related capital spending at record high. (10) Some evidence of Millennials turning from renters to homeowners. (11) Other possible sources of GDP strength in 2020: defense, infrastructure, and trade.
Made in China
(1) On the road again. (2) Unmasked man. (3) Coronavirus going viral. (4) Not as bad as the flu? (5) Great Quarantine of China. (6) Wet markets full of weird and tainted meats. (7) Coronavirus makes it into the Panic Attacks record book as #66. (8) Before the virus hit the tape, forward revenues and forward earnings rose to new record highs. (9) LargeCaps dropping less than SMidCaps. (10) Why is Growth beating Value again? (11) Stay Home beating Go Global during health crisis. (12) Movie review: “Little Women” (+).
Content Wars
(1) Crowded streaming market makes grabbing eyeballs harder. (2) Netflix growing fastest but spending more cash than it has. (3) Netflix says good-bye to departing Friends and relocating Office. (4) Competitors start hoarding content; Netflix responds by developing its own. (5) Comcast proud of Peacock; AT&T bets on HBO Now. (6) UK bids adieu to EU, now has lots to do. (7) UK’s stock market lags other countries’ in price performance and valuation.
Climate for a Change
(1) LargeCap’s forward revenues & earnings beat the SMidCaps. (2) Profit margins lower for stocks of all sizes. (3) No new high for SmallCap index price. (4) Valuation for SMidCaps worsened compared to LargeCap. (5) Coronavirus fears spread through markets. (6) FAANGMs causing P/E divergence between LargeCap and SMidCaps. (7) Global elite and youth activists debate climate change in Davos. (8) Global prosperity linked to carbon emissions? (9) IPCC says eight years left before planet gets too hot. (10) Corporate CEOs focused on sustainability for good. (11) Capital reallocated to sustainable investments.
Something To Fear
(1) When wishes come true. (2) P/E-led meltup increases risk of correction. (3) From nothing to fear to fearing a pandemic. (4) We are all virologists now. (5) China’s autocrats: part of the solution or part of the problem? (6) China syndrome: a major health crisis has been waiting to happen. (7) Has technical picture been too bullish? (8) Too many winners? (9) Valuation models: different strokes for different folks. (10) Misery Adjusted P/E is neutral. (11) Sticking with 3500 S&P 500 target by year-end.
Going Viral?
(1) Panic attacks vs bear markets. (2) Going for a ride with the Blue Angels. (3) Will latest virus outbreak be Panic Attack #66, or something much worse? (4) SARS, MERS, EVD, and now nCoV. (5) We are all virologists now. (6) Bad start to the Year of the Rat in China. (7) Signs of global life in commodity prices and flash M-PMIs. (8) Housing-led growth in US during 2020? (9) US leading indicators may have run out of room to signal economic expansion. (10) Railcar loadings are depressing, while truck tonnage is upbeat. (11) Neither boom nor bust in global forward revenues and earnings. (12) What’s the message from the bond market? (13) Movie review: Jojo Rabbit (+).
Staying Defensive in a World of Danger
(1) Dangerous world means more defense spending. (2) Boeing shares grounded, but most other aerospace & defense stocks flying high. (3) Mergers, spending on aircraft, missile defense, and space all help. (4) If Dems win Oval Office, there may be trouble for defense stocks ahead. (5) Venture capital funding a bit soft in Q4 but strong for 2019 as a whole. (6) Internet companies are receiving the most funding, especially software as a service.
Happy Chinese New Year
(1) Pigs, rats, and politicians. (2) Pandemics and plagues. (3) China rapidly becoming the world’s largest nursing home as a result of ongoing urbanization and previous one-child policy. (4) Real retail sales growth cut by over two-thirds in past 10 years. (5) Less bang per yuan of monetary easing. (6) Soaring food prices depressing retail sales too. (7) China’s PPI is a good indicator of global growth, and is deflating slightly. (8) Vehicle sales weak in China. (9) Trump’s trade deal with China looks good on paper. (10) Tariffs won’t be eliminated until Phase 2 deal is done. (11) IMF sees modest pickup in global economic growth ahead. (12) Commodity prices are showing signs of life, as are European auto sales.
Love Songs for Investors
(1) To the moon. (2) Sinatra’s stock market. (3) Powell gets blame for Q4-2018 meltdown and credit for meltup since then. (4) Fed giving more weight to inflation indicators; so should investors. (5) Fed is back in patient mode as inflation remains subdued. (6) The CPI has an upward bias relative to PCED. (7) Trump is the stock market’s rainmaker. (8) Trump morphing global multilateral trade system into bilateral one. (9) GDP growth: more of the same. (10) Wage gains aren’t inflationary if driven by productivity. (11) Real wages suggesting faster productivity growth. (12) Movie review: “Bombshell” (+).
Banking on the Trade Deal
(1) Analysts following Financials have low expectations for 2020. (2) Financials stocks rallied last year. (3) JPM/Citi blow past Q4 estimates. (4) Trade deal may boost lending and open Chinese market. (5) Yield curve has reversed its inversion. (6) Q4 fixed-income trading surge will mean tougher comps in 2020. (7) CECL keeps accountants busy. (8) Rally means happy investors but pricey stocks. (9) China gets closer to introducing a digital yuan; Fed’s Brainard suggests more gradual change in US.
Lots of Good News
(1) Tough comps for 2019 earnings. (2) 2020 should be better for earnings. (3) S&P 500 forward revenues and earnings at record highs. (4) Forward earnings implies a 9% increase in earnings this year. (5) Last year’s worries are so yesterday. (6) The Mullahs are cornered, and must fear the US after their top general was droned. (7) Is there method to Trump’s madness? (8) Trump’s favorite popularity poll is the stock market. (9) Valuation multiples are flying closer to the sun.
The Fed: Rounding up the Usual Suspects
(1) Running out of basis points. (2) Bernanke’s presidential address. (3) Bernanke promotes QE as permanent tool for Fed. (4) QE plus forward guidance = 300bps cut in federal funds rate, according to Big Ben. (5) Yellen and Powell agree with Bernanke. (6) Summers sees “last hurrah” for central banks. (7) FOMC’s annual rotation still leaves the Fed on hold. (8) A roundup of the views of Fed officials. (9) “In a good place.” (10) Powell is patient again. (11) The global economy remains relatively weak, and is on Fed’s radar screen.
Stocks & Bonds: In the Fast Lane
(1) Back to the future: forward P/E back at 18.4. (2) Getting closer to 3500 too fast, too soon. (3) S&P 500 forward revenues at new high, while forward earnings has stalled. (4) Is the stock market discounting a productivity growth rebound in the decade ahead? (5) Technology: from jets to main frames to PCs to a brave new world. (6) Reach-for-yield driving stock and bond prices higher. (7) Falling high yields. (8) Counting the number of jobs versus the number of workers. (9) Percentage of full-time workers highest since March 2008. (10) Movie review: “1917” (+ +).
The Vegas Show
(1) 2030 is only 10 years away. (2) A future full of futuristic gadgets. (3) Elon Musk on our roofs. (4) Elon Musk’s new battery. (5) Microbes as household pets. (6) A Crispr future. (7) Smart toilets. (8) 3-D plus one. (9) Musk in our brains. (10) Flying cars. (11) We will all be Jetsons. (12) What’s cheap, what’s not cheap in the S&P 500. (13) Paying up for safety.
Will Inflation Make a Comeback in 2020?
(1) Another 2%+ quarter for real GDP. (2) Good news and not-so-good news in trade. (3) Purchasing managers are upbeat in services, still depressed in manufacturing. (4) No growth in factory orders. (5) Truck and rail traffic are on the weak side. (6) Auto sales are cruising at the same speed. (7) Employment indicators still showing a strong labor market. (8) Big issue in 2020: Will rising wage inflation boost price inflation? (9) More wage inflation in services than in goods industries. (10) Competitive pressures should keep a lid on price inflation and stimulate productivity.
More Happy Dividend Returns in 2020?
(1) Is the market high on a sugar high provided by the central banks? (2) Investors should not be preachers. (3) The problem with P/E-led meltups. (4) The Fed’s balance sheet is expanding again. (5) The ECB’s balance sheet is expanding again. (6) The BOJ’s balance sheet never stopped expanding. (7) The PBOC has cut reserve requirements 7 times since early 2018. (8) Dividends growing solidly despite earnings growth recession. (9) Dividends’ CAGR trend is around 6% still. (10) Latest bull market in S&P 500 hugging 2% dividend yield valuation model. (11) Compounding dividends are the 8th Wonder of the World.
Nothing To Fear But Nothing To Fear (and Iran)
(1) Iran again. (2) Executive action in Baghdad. (3) The ’20s vs the ’70s. (4) Is there more upside left in stocks following the Roaring ’10s? (5) The wall of worry. (6) Less to worry about? (7) Will Iran be Panic Attack #66? (8) The meltup could be on hold depending on geopolitical developments in the Middle East. (9) The valuation question. (10) The earnings question. (11) The global growth question. (12) Global manufacturing remained depressed according to December’s M-PMIs. (13) Movie review: “Richard Jewell” (+ +).
