Archive for January, 2017

• Morning News: January 13, 2017
  Eddy Elfenbein, January 13th, 2017 at 6:33 am

  Davos Wonders If It’s Part of the Problem

  China December Exports Tumble More Sharply Than Expected

  Janet Yellen Gives an Economic Short Course, Beyond Interest Rates

  Trump’s Drug-Price Stance Puts Pharma on Notice

  Trump’s Pick on Trade Could Put China in a Difficult Spot

  Scaramucci Gets Respect He’s Craved by Scoring White House Post

  Billionaire George Soros Lost Nearly $1 Billion in Weeks After Trump Election

  Amazon Touts Job-Creation Plans, Patching Up Rift With Trump

  India’s Low-Cost Airline to Buy Up to 205 New Boeing Planes

  Tesla Unveils Pricing Structure for Supercharging Stations

  Drone Startup Abruptly Shuts Down Despite $34 Million in Pre-Orders

  How Takata’s Shares Reacted After Reports of a $1 Billion Faulty Airbag Settlement

  E.P.A. Accuses Fiat Chrysler of Secretly Violating Emissions Standards

  Howard Lindzon: What Could Go Wrong?

  Jeff Carter: When Stuff is Fake

  Be sure to follow me on Twitter.

• Tech Sector Nears Its High
  Eddy Elfenbein, January 12th, 2017 at 12:04 pm

  The S&P 500 Tech Sector is closing in on its all-time highs set in March 2000. It only took 17 years, and we’re still not quite there yet.

  

  This isn’t unprecedented. The Dow didn’t take out its 1929 high for 25 years.

• Healthcare Drops On Trump’s Remarks
  Eddy Elfenbein, January 12th, 2017 at 10:51 am

  Yesterday, stocks in the healthcare sector dropped lower after President-Elect Trump’s comments on healthcare reform.

  Check out the chart:

  

  I’m not trying to criticize Mr. Trump. Twice in less than a year, remarks by Hillary Clinton crushed biotech stocks.

  My only point is that in the soundbite/Twitter age, there are new risks to stocks.

• Morning News: January 12, 2017
  Eddy Elfenbein, January 12th, 2017 at 6:24 am

  German Economic Growth at End of 2016 Probably Beat Forecasts

  Oil Holds Biggest Gain in 6 Weeks on Record U.S. Refinery Runs

  Drug Stocks Plunge as Trump Threatens to Force Price Bidding

  Dollar Slumps, Bonds Rally as Trump Bets Unwind

  Treasury Nominee Steven Mnuchin Discloses Holdings and Pledges Divestments If Confirmed

  Amazon Announces a Card That’s Almost too Good to Be True

  Facebook, Nodding to Its Role in Media, Starts a Journalism Project

  China’s Anti-Teslas: Cheap Models Drive Electric Car Boom

  VW Shareholders Call For Reforms in Wake of $4.3 Billion U.S. Deal

  India’s SpiceJet To Seal $10 Billion Deal With Boeing For 737 Jets

  JPMorgan Ordered to Pay Damages for Firing Whistle-Blower

  A Scandal at Korea’s Retirement Giant

  How Netflix Is Deepening Our Cultural Echo Chambers

  Josh Brown: The Riskalyze Report: Advisors Betting on Stronger Dollar, Rising Rates

  Cullen Roche: Passive Investors – Dumb Money or Smart Money?

  Be sure to follow me on Twitter.

• Morning News: January 11, 2017
  Eddy Elfenbein, January 11th, 2017 at 7:00 am

  Venezeula’s Awful Economy Got Even Worse in 2016

  China’s Xi to Promote Globalization at Davos, Not `War and Poverty’

  Saudis Curb Oil to China, Southern Asia as Others Spared

  Supreme Court Considers Role of Free Speech in Explaining Credit Card Fees

  Trump Tax Cuts Could Jump-Start Global Economy, World Bank Says

  IRS Chief Talks Tax Season Open, Refund Delays & Trump Transition Team

  What Trump Doesn’t Know About Alibaba’s Jobs Pledge

  Walmart Cutting Hundreds of Jobs In Latest Round of Layoffs

  Valeant Sells $2.1 Billion in Assets to Ease Debt Burden

  Airbus Retains Order Lead Over Boeing With Late Sales Surge

  A Trump Tax Cut Could Add $8.2 Billion to Reynolds Price Tag

  SoftBank’s $100 Billion Investment Fund Starts to Take Shape

  Volkswagen Set to Plead Guilty and to Pay U.S. $4.3 Billion in Deal

  Roger Nusbaum: Dow 20,000! Not Yet!

  Jeff Miller: Silver Bullet Awards Part Two

  Be sure to follow me on Twitter.

• “5 Important Economic Metrics to Know”
  Eddy Elfenbein, January 10th, 2017 at 2:31 pm

  At US News, Simon Constable writes on five economic metrics you should know. Here’s a sample:

  The yield curve. A good predictor of whether economy is about to enter a recession is the difference between the yields of the 2- and 10-year U.S. Treasurys.

  “When it’s gone negative – the 2-year is higher than the 10-year – that’s often been an early warning sign of a recession,” says Eddy Elfenbein, author of the Crossing Wall Street blog. “It’s been a much better forecaster than a lot of highly paid Wall Street economists.”

  The 10-year T-note is yielding 2.42 percent and the 2-year is yielding 1.21 percent. That means the current difference between the yields of the two bonds is a positive 1.21 percent. “Which means we are in the safe zone, for now,” Elfenbein says.

  I agree with myself. Note how the spread has gone negative before recessions (the gray areas).

• Small Business Optimism Surges
  Eddy Elfenbein, January 10th, 2017 at 12:28 pm

  I normally don’t write about the Small Business Optimism Index, but today’s release was noteworthy because it soared. Actually, “soared” might be understanding it; it skyrocketed. Small business optimism had its biggest rise since 1980.

  Optimism among America’s small businesses soared in December by the most since 1980 as expectations about the economy’s prospects improved dramatically in the aftermath of the presidential election.

  The National Federation of Independent Business’s index jumped 7.4 points last month to 105.8, the highest since the end of 2004, from 98.4. While seven of the 10 components increased in December, 73 percent of the monthly advance was due to more upbeat views about the outlook for sales and the economy, the Washington-based group said.

  Obviously, this is a group that skews Republican. But still, that optimism is real and can translate into more spending and more jobs.

  Fifty percent of respondents, the biggest share since March 2002, said they expect better business conditions in the next six months. That was 38 percentage points higher than in November. The net share of firms projecting higher sales jumped by 20 points to 31 percent. Some 29 percent say they will boost capital outlays within six months.

  “We haven’t seen numbers like this in a long time,” Juanita Duggan, president and chief executive of the NFIB, said in a statement. “Small business is ready for a breakout, and that can only mean very good things for the U.S. economy. Business owners are feeling better about taking risks and making investments.”

• The Growth/Value Cycle
  Eddy Elfenbein, January 10th, 2017 at 12:17 pm

  Every so often, I like to see where we are in the Growth/Value Cycle. This is a simple chart. I take the S&P 500 Value Index and divide it by the S&P 500 Growth Index.

  

  Let me caution you that this isn’t some deep metric of where the market is going. Instead, it’s a very general read on what the market has done.

  The important point for investors to see is that the stock market generally moves in multi-year periods of favoring growth over value; then the opposite happens. Understanding this is important in beating the market. For the most part, growth leads when things are optimistic, and value becomes popular when people get scared. That’s pretty much basic human psychology.

  This relationship has gotten a little out of balance lately because many banks were lumped in with value stocks. You can see how value did very well when the the Tech Bubble burst (making up for their lagging performance). But value never had its day in the sun following the financial crisis.

  Value peaked against growth in May 2007, and it bottomed out last January. There were several false starts along the way. Now that value has been leading for nearly a year, I’m still not convinced that the value cycle has turned. Again, it was the bank rally that spurred the Value Index after the election, and that probably reflects newfound optimism for the economy. In other words, I’m not sure this metric measures what it used to.

• Morning News: January 10, 2017
  Eddy Elfenbein, January 10th, 2017 at 7:07 am

  Dollar Retreats as Trump Euphoria Ebbs, Gold Gains

  Tillerson Must Answer for Trump, Big Oil, Even Putin in Hearing

  Donald Trump and Alibaba Founder to Create ‘1 Million’ U.S. Jobs? Unlikely.

  Alibaba to Help China Retailer Intime Go Private in $2.6 Billion Deal

  Marissa Mayer to Leave Yahoo Board; Yahoo to Change Name to Altaba

  Snap Makes U.K. Tax Hub as Part of International Expansion

  Valeant to Sell Dendreon Unit to China’s Sanpower for $820 Million

  China is Finally Able to Manufacture Its Own Ballpoint Pens

  Better Known for Candy, Mars Makes a Big Bet on Pets

  Takeda Expands Cancer Business With $4.66 Billion Ariad Deal

  UnitedHealth Group to Buy Outpatient Surgery Chain for $2.3 Billion

  The Limited Suddenly Shut Down All of Its Stores and Laid Off Thousands of Workers

  Volkswagen Executive’s Trip to U.S. Allowed F.B.I. to Pounce

  Cullen Roche: The Cash Freeze

  Jeff Carter: Is It A Tool or a Platform?

  Be sure to follow me on Twitter.

• Earnings Cycle For The New Buy List
  Eddy Elfenbein, January 9th, 2017 at 3:05 pm

  In a few days, I’ll post the earnings calendar for our Buy List.

  Twenty of our 25 Buy List stocks follow the March/June/September/December reporting cycle. That means they’ll report their earnings (for the most part) between mid-January and early-February.

  Four of our Buy List stocks, Smucker (SJM), Ross Stores (ROST), Hormel (HRL) and HEICO (HEI), follow the January/April/July/October cycle.

  One stock, RPM International (RPM), followed February/May/August/November. RPM just reported earnings last week.

  I do the best I can with listing the earnings dates, but some companies are, shall we say, less forthcoming than others.