Morning News: September 15, 2017
Posted by Eddy Elfenbein on September 15th, 2017 at 7:05 am

Bitcoin Sinks as China Is Said to Order Exchange Halt This Month

Why the U.S. Government is Moving to Ban This Russian Software Company

Nestlé Targets High-End Coffee by Taking Majority Stake in Blue Bottle

Nissan, Renault, Mitsubishi Deepen Alliance in Electric Push

China Green Car Pivot Will Need State Support, GM Chief Says

Softbank Reportedly Wants a Big Discount for Uber Investment

Alphabet Considers Lyft Investment of About $1 Billion

‘Angry Birds’ Maker Rovio Is Not Worth What People Expected

Verizon Hints at Another Acquisition in Battle Against Google, Facebook

Google and Facebook Fret Over Anti-Prostitution Bill’s Fallout

Who’s Warren Buffett’s Successor? JPMorgan Thinks It’s Greg Abel

Equifax Breach Prompts Scrutiny, But New Rules May Not Follow

In Amish Country, The Future Is Calling

Joshua Brown: ESG Links: Allocating With Purpose

Jeff Miller: Stock Exchange: Do Your Trades Fit Your Style?

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Inflation Heated Up in August
Posted by Eddy Elfenbein on September 14th, 2017 at 10:52 am

The government released the August inflation report this morning, and for the first time in several months, inflation actually came in higher than expected. The headline rate rose by 0.4% which was 0.1% higher than economists had been expecting.

Obviously, Hurricane Harvey impacted some of that. Gasoline prices were up 30 cents last month. But even the “core rate,” which excludes food and energy prices, was up 0.2% last month.

I still don’t think the Fed will hike rates in December, but the futures market is now about 50-50 on that.

Here’s the headline rate:

Here’s the core rate:

Morning News: September 14, 2017
Posted by Eddy Elfenbein on September 14th, 2017 at 7:06 am

`False Peace’ For Markets? A Trader Is Betting Millions On It

What’s Driving India’s Bulls

U.K. Subjects Murdoch’s Fox to Wider Probe Over Sky Takeover Bid

Trump Blocks China-Backed Bid to Buy U.S. Chip Maker

This Is the Crazy Tax Math Trump Must Master, Fast

Thank You for Calling Equifax. Your Business Is Not Important to Us

Equifax’s Mega-Breach Was Made Possible by a Website Flaw It Could Have Fixed

Tesla To Unveil Electric Semi Truck That Elon Musk Calls A ‘Beast’

Ford’s Push For Driverless Vehicles Includes a Man Pretending To Be a Car Seat

To Fight Amazon, This Startup Offers Retailers Their Own Mini-Me

Munich Re Says It May Miss Profit Target on Irma, Harvey

Target Is Hiring Way More People for the Holidays This Year

Deutsche Börse to Pay $12.5 Million in Fines in Insider Trading Inquiry

Jeff Carter: The Chicago Bitcoin Summit

Howard Lindzon: Apple Baby

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Morning News: September 13, 2017
Posted by Eddy Elfenbein on September 13th, 2017 at 7:06 am

In China’s Hinterlands, Workers Mine Bitcoin For A Digital Fortune

Getting High On Your Own Bitcoin Supply

Act or Wait? Fed Debate Heats Up After Inflation Misses Target

Department Of Transportation Rolls Out New Guidelines For Self-Driving Cars

Mnuchin: It Might Not Be Possible to Reach 15% Corporate Tax Rate

Finance Industry’s Deregulation Drive Faces New Threat With Equifax

DowDuPont Revises Breakup Plan Opposed by Activist Investors

Seadrill Files for Chapter 11 Bankruptcy Protection in Texas

Toshiba Says It Favors Bain Group’s Bid for Microchip Business

Apple Bets on Augmented Reality to Sell Its Most Expensive Phone

Emails Show How the Food Industry Uses ‘Science’ to Push Soda

The Food Court Matures Into the Food Hall

Ben Carlson: Markets Are Hard: Seth Klarman Edition

Cullen Roche: There’s No Such Thing as a “Sin Stock”

Michael Batnick: A Few Charts and a Few Thoughts at All-Time Highs

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Morning News: September 12, 2017
Posted by Eddy Elfenbein on September 12th, 2017 at 7:07 am

Dollar Sports Heavier Tone As Yesterday’s Bounce Runs Out Of Steam

Bitcoin Diehards Are Undeterred by China

Theresa May Pleads With Donald Trump to Protect Thousands of Jobs in Britain

A $150 Billion Misfire: How Forecasters Got Irma Damage So Wrong

The Real Outrage Isn’t Equifax’s Arbitration Clause — It’s All The Others

How Cities Can Win the Fight for Amazon’s HQ2

Nordstrom Slides After Announcing Plans of a Smaller Store Concept With No Merchandise

SoFi Chief Executive to Step Down

GM, Cruise Unveil Self-Driving Car Ready For Mass Production

Volkswagen to ‘Electrify’ All 300 of Its Cars and SUVs by 2030

Tesla is Adding Charging Stations in City Centers

DowDuPont Alters Post-Merger Breakup Plan

Apple Set to Unveil Anniversary iPhone in Major Product Launch

Howard Lindzon: Momentum Monday – Sipping Avocado Juice and Shooting Fish in a Barrel in China

Jeff Carter: The Robo-Advisor

Joshua Brown: You Can Practically Smell It In The Air

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Crossing Wall Street 16 Years Ago
Posted by Eddy Elfenbein on September 11th, 2017 at 7:33 am

It’s been 16 years since 9/11. Since then, the stock market’s total return index has more than tripled. However, nearly all of that came in the second eight years. The first eight years came to nothing.

Here’s what the S&P 500 looked like during the second half of 2001. The market has been sliding going into September 11.

Morning News: September 11, 2017
Posted by Eddy Elfenbein on September 11th, 2017 at 7:07 am

Global Shares Return to Record High as Irma Loses Strength

Cruise Lines Send Ships to Caribbean on Hurricane Rescue Mission

Insurers Ache for Qualified Inspectors After U.S. Hurricanes

India Swaps Cheaper LNG for More Volume in 2nd Reworked Deal

Here’s Who China’s Bitcoin Exchange Ban Reportedly Won’t Affect

As China Moves In, Serbia Reaps Benefits, With Strings Attached

Electric Cars Reach a Tipping Point

Teva Picks Lundbeck’s Schultz to Revive Israeli Drugmaker

Canadian Mining Firm Threatens to Suspend Greece Investment

Amazon’s Surprise Plan for HQ2 is a Bold Experiment

What to Expect at Apple’s Biggest Event in Years

U.S. Solar Bracing for First Decline as Rooftop Demand Slumps

Jeff Miller: Have the Odds Improved for a Market-Friendly Policy Agenda?

Michael Batnick: These Are The Goods

Roger Nusbaum: Barron’s on Health Savings Accounts

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CWS Market Review – September 8, 2017
Posted by Eddy Elfenbein on September 8th, 2017 at 7:08 am

“Investing without research is like playing stud poker and never looking at the cards.” – Peter Lynch

Tomorrow will mark 8-1/2 years of the great bull market. On March 9, 2009, the S&P 500 reached its closing low of 676.53. The previous Friday, March 6, the index touched its sinister-sounding intra-day low of 666.79. To give you an idea of how bleak things were, that morning the government reported that the unemployment rate touched a 25-year high, and the non-farm payrolls report for February came in at -651,000. Yikes!

Things are quite different today. Going by Thursday’s close, the S&P 500 Total Return Index has gained 332.64% in this bull market. That’s enough to turn every $1 into $4.32. This has been one of the longest and strongest bull markets in history, but what’s fascinating is how hated it’s been. Some people just can’t stand to see the indexes rise higher and higher.

We’re constantly told that it’s a reckless bubble that’s all about to crash. Or it’s all due to manipulation from the Fed, and it’s all about to crash. Please. Predicting that the world is about to end is one of the favorite pastimes on Wall Street. Still, the bull marches on. In fact, this year may turn out to be the lowest year on record for the stock market’s volatility.

If there’s a golden rule for long-term investing, it’s that betting on disaster is always overpriced, and betting on “it’ll all work itself out” is always a bargain. In this week’s CWS Market Review, we’ll look at some of the recent economic news. I’ll update you on some Buy List stocks. First, we’ll survey what’s in store for the Federal Reserve. Soon, the Fed will be down to just three members left on the seven-member board.

What’s Next for the Federal Reserve?

Stanley Fischer, the vice-chair of the Federal Reserve, announced this week that he’s stepping down next month. This brings us to an unusual moment for the Fed since there will be four vacancies on the Federal Reserve Board. By law, the FRB has seven slots. By my math, this means that the labor force participation rate for Fed governors is only 43%.

It will soon go even lower since Janet Yellen’s term as Fed chair ends in February. This gives President Trump a big opportunity to put his stamp on the Fed. Officially, Trump has not ruled out reappointing Janet Yellen to another term as Fed chair, but that probably won’t happen. She recently defended some of the post-crisis financial regulations which Trump has promised to repeal.

Quick side note: The appointments to the Fed and of the Fed chair are separate presidential appointments. So if President Trump doesn’t reappoint Yellen as chair, she would still be a Fed member. However, it’s generally assumed she would resign if she were no longer Fed chair.

Fed watchers had assumed that Gary Cohn was Trump’s top choice to replace Janet Yellen. But this week, the Dow Jones reported that it’s “unlikely” Cohn will get the nod due to his criticisms of the president’s response to the terrible events in Charlottesville. Jake Tapper tweeted that one White House source said that Cohn was more likely to get the electric chair than the Fed chair. Ouch.

GOP source close to WH tells me: Cohn "more likely to get electric chair than Fed Chair" https://t.co/5IGR0Db1wU

— Jake Tapper (@jaketapper) September 6, 2017

So who’s next for the position of Fed Poobah? A few names have been thrown around. I would guess that John Taylor at Stanford would be a front runner. He’s widely known for the “Taylor Rule,” which is a guideline for determining where interest rates should be. Frankly, I’m a skeptic on these rules. They’re great in theory, but I’m not sure how they work in real time. But there’s no doubt that Taylor is a highly-qualified choice. Some other contenders are Kevin Warsh, Glenn Hubbard and Jerome Powell.

President Trump has described himself as a “low-interest-rate person,” but I doubt he’s very ideological on monetary matters. This is an important time for the Fed. The central bank wants to unwind its gigantic balance sheet at the same time it’s looking to raise interest rates. It’s not an easy task. With low rates, that weakens the dollar. The euro is near a 33-month high versus the greenback.

I’ve been critical of the Fed lately because I think they’ve moved too quickly on rates. Lately, however, I think the Fed is coming around to my side (more on that in a bit). I think the Fed will remain on a pragmatic and accommodative course over the next few years, and that’s good for investors.

The U.S. Economy Is Gaining Strength

Speaking of the Fed, last Friday we got the August jobs report. It was on the weak side, but nothing too dramatic. Last month, the U.S. economy created 156,000 net new jobs. The numbers for June and July were revised downward. The unemployment rate ticked up to 4.4%, but it’s still near a 16-year low. For the most part, the U.S. economy has created an average of 200,000 jobs a month every month for the last seven years. The numbers haven’t deviated very far from that trend.

While this report wasn’t that bad, I think it finally clued in the bond market that the Fed isn’t going to move on interest rates anytime soon. The equation is simple. When someone asks, “Are stocks cheap?,” the answer is always, “Compared with what?” (Yes, we answer questions with questions.) That’s why interest rates are so important to equity valuations.

Last Thursday, the government released personal-income and spending numbers for July. That report includes the PCE price index, which is the Fed’s preferred measure for tracking inflation. The core PCE number for July rose by just 0.1%. It was the same in June. For the past year, core PCE is up 1.4%. In other words, inflation is hardly a problem. Next week, we’ll get the CPI report for August, and I expect to see much of the same.

With so little happening with inflation the Fed may be convinced to back down. The FOMC is set to meet again on September 20, and I strongly doubt they’ll do anything. The futures market thinks there’s only a 26% chance the Fed will raise rates before the end of the year. I’d say that’s about 20% too high. The Fed funds futures are now priced to show a 54% chance of no rate hike in the next 12 months. That’s a stunning reversal of sentiment. Late last year, the Fed was calling for three hikes this year, plus three more in 2018 and three more in 2019. All that’s gone now.

One potential roadblock for the economy could be the impact of Harvey and Irma. We don’t know yet the full measure of these events. On Thursday, we got our first glimpse of what Harvey could mean. Initial jobless claims soared to 298,000. That’s a rise of 62,000. As a metric, initial jobless claims have the benefit of being early, but that’s at the expense of being noisy. We saw similar jumps with previous storms.

The recent economic numbers look quite good. Q2 GDP came in at 3%. Last week, we learned that personal income rose by 0.4% in July while personal spending rose by 0.3%. That’s quite good. Also, Friday’s ISM report was the best in six years. This suggests the economy got off to a strong start for Q3. The Atlanta Fed’s GDPNow model now says that Q3 GDP grew by 3.3%. I’m wary of such models, but I hope that number is right.

Buy List Updates

Cinemark (CNK) got trashed for a 5% loss on Thursday. What happened? Disney came out with details on its streaming service. Marvel and Star Wars will be exclusive to Disney and not on Netflix. This was a rough summer for the movie biz, but as far as earnings go, Cinemark is doing well. They missed earnings last quarter by one penny per share, yet the stock has been hammered. Cinemark is now going for less than 14 times next year’s estimate. As of now, there’s no evidence that the recent news is hurting CNK’s business. I’m looking for a turnaround for shares of CNK.

Cerner (CERN) broke out to a new 52-week high this week. CERN is still shy of its all-time high of $75 from two years ago. The stock is having a great year for us (+45.7%). I’m going to hold off raising my $68 Buy Below price for now. Cerner could turn into a big winner for us.

I’m ready to declare Signature Bank (SBNY) a very good bargain. The shares are now down to $122. The bank has basically erased nearly everything it gained in the post-election boom. Yes, SBNY has its issues, but the numbers have been solid. I think it’s possible SBNY can earn $10 per share next year.

That’s all for now. There’s not much in the way of economic news next week. I’ll be keeping an eye out for Wednesday’s report on the Federal Budget. The deficit is shaping up to be worse than originally thought. This comes after years of decreasing deficits. On Thursday, we’ll get the CPI report for August. Inflation has been quite tame for the last few months. Let’s see if that trend continues. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

– Eddy

Morning News: September 8, 2017
Posted by Eddy Elfenbein on September 8th, 2017 at 7:01 am

Why Europe’s Central Bank Shouldn’t Worry About the Euro

Will Saudi Aramco Deliver World Record Profit For Next Year’s IPO?

Oil Steady as Irma Heads For Florida, Saudi Arabia Cuts Supply

In World of Supposed Bubbles Here’s What Investors Fear Most

Equifax Says Cyberattack May Have Affected 143 Million Customers

Amazon Plans Second Headquarters, Opening a Bidding War Among Cities

Who Will Win the Great Airfare War of 2017?

F.D.A. Accuses EpPen Maker of Failing to Investigate Malfunctions

Amazon Shoppers Complain of Price-Gouging During Hurricane Irma

Comcast Stock Plunges On Video Subscriber Losses, Hurricane Impact

Using Silicon Valley Tactics, LinkedIn’s Founder Is Working to Blunt Trump

Hedge Fund Wannabes Busted for Trading on Illegal Amazon Tips

Howard Lindzon: Identity…Here We Go Again

Jeff Miller: Are You Trying To Win Every Trade?

Cullen Roche: Yes, Getting Rid of the Debt Ceiling is Smart

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The Impact of Harvey
Posted by Eddy Elfenbein on September 7th, 2017 at 11:03 am

There’s been a lot of talk about the economic impact of Hurricane Harvey. Much of this we simply don’t know yet. This morning, we got one of our first looks. Notice the jump in initial jobless claims.

Jobless claims came in at 298,000. That’s enough to keep our sub-300,000 streak going. The last time jobless claims printed over 300,000 was in February 2015.