Morning News: August 14, 2020
Posted by Eddy Elfenbein on August 14th, 2020 at 7:02 am

Gold Fever Spurs Dollar Oddity Not Seen Since Erdogan Took Power

A Faltering U.S.-China Trade Deal Is Now The Nations’ Strongest Link

China’s Economic Recovery Underwhelms As Consumer Comeback Stays Elusive

Stimulus Talks Are Stuck in $1 Trillion Ditch Over Aid to States

America’s Retirement Race Gap, and Ideas for Closing It

Goldman Sees Room for S&P to Surpass 3,600

Trump Administration Criticizes New Fannie Mae, Freddie Mac Mortgage Fee

U.S. Faces Bumpy Antitrust Road Despite Big Tech’s Emails, Memos

Fortnite Creator Sues Apple and Google After Ban From App Stores

TikTok Looks Like a Dangerous Dance Move for Nadella’s Microsoft

A Century-Old Moving Company Says the Summer of Covid Is ‘Insane’

Trump’s Labor Chief Accused of Intervening in Oracle Pay Bias Case

Ben Carlson: The Hardest Investing Questions to Answer

Michael Batnick: Bye Bye, New York

Joshua Brown: 10 Years Ago & Dollar Plays

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Jobless Claims Drop Below One Million
Posted by Eddy Elfenbein on August 13th, 2020 at 11:35 am

This morning’s jobless claims report fell to 963,000. This is the first time in 20 weeks that it was below one million. Economists had been expecting 1.1 million.

While the sub-1 million reading marks a milestone, there’s still plenty of work to do for the job market to get back to normal. Those collecting benefits for at least two weeks, known as continuing claims, totaled nearly 15.5 million, a decrease of 604,000 from a week ago but still well above pre-pandemic levels.

“The labor market continues to improve, but unemployment remains a huge problem for the U.S. economy,” wrote Gus Faucher, chief economist at PNC Financial Services. “The number of people filing for unemployment insurance, both regular and PUA benefits, continues to steadily decline as layoffs abate. But job losses remain extremely elevated, far above their pre-pandemic level.”

Yesterday, the S&P 500 got as high as 3,387.89, which was above the highest all-time closing number for the index. However, by the closing bell, the S&P 500 came just shy of a new record. The market is mostly flat so far today.

One quick factoid: Industrial stocks (red) have slightly edged out tech stocks (blue) over the past several weeks. I would not have guessed that.

Morning News: August 13, 2020
Posted by Eddy Elfenbein on August 13th, 2020 at 7:04 am

A Collapsing Economy And A Family Feud Pile Pressure on Syria’s Assad

In China, Fears of Financial Iron Curtain As U.S. Tensions Rise

Trump, Pelosi Make Opposing Economic Bets in Stimulus Standoff

A $2 Trillion Credit Boom Leaves America’s Smaller Firms Behind

Google, Facebook and Others Broaden Group to Secure U.S. Election

Postponed College Football Games Could Disrupt $1 Billion in TV Ads

Apple Readies ‘Apple One’ Subscription Bundles to Boost Services

Staffing Woes Put U.S. Car Industry’s Remarkable Rebound at Risk

REI Built an Elaborate HQ. Because of Covid-19, the Outdoor Retailer Wants to Sell It

Norwegian Taxis, Wirelessly Charging While They Wait For A Fare

Bankrupt Brooks Brothers Finds a Buyer

Cullen Roche: Three Things I Think I Think – Moar Stuff

Jeff Miller: Investing for the Long Run: The Challenge of a Bifurcated Market

Joshua Brown: Shade of the Week & Talent

Ben Carlson: The Smart Money

Howard Lindzon: Delay The A – William Libby Of Upper 90 Joins Me On Panic With Friends

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The Stock Market and 30-Year TIPs Yields
Posted by Eddy Elfenbein on August 12th, 2020 at 9:29 pm

Here’s an update to some studies I’ve done before. I like to see how well the stock market has performed at different levels of interest rates. I’ve also done It for TIPs yields, which are inflation-protected Treasury bonds.

The problem with TIPs is that the data doesn’t go back very far. What data we do have gives us a clear picture that stocks have done better when TIPs yields are lower. This makes sense so it’s good to see the numbers bear it out.

At the St. Louis Fed’s database, they have TIPs yields data for the five-, seven-, 10- and 20-year Treasuries going back over 16 years.

However, the one I wanted to test was the 30-year. That data only starts in February 2010. I ran the numbers and compared the 30-year TIPs to the stock market. I used the Wilshire 5000 Total Return index for stocks.

As it turns out, 1% is a nice dividing line. Since 2010, the 30-year TIPs yield has been 1.00% or higher, 42% of the time. It’s been 0.99% or lower, 58% of the time.

When the 30-year TIPs yield is 1.00% or more, the stock market has averaged an annual return of 3.02%. That’s probably less than how well TIPs performed. In other words, cash was king.

But when the 30-year TIPs yield was 0.99% or less, the stock market averaged an annual return of 22.01%. That’s quite a spread.

For context, the 30-year TIPs yield has been below 1% continuously for the last 16 months. It recently struck an all-time low of -0.46%. It’s now up to -0.37%.

This relationship seems quite obvious to me. I suspect this comparison will become more popular as we get more TIPs data.

Strongest Core Inflation in 30 Years
Posted by Eddy Elfenbein on August 12th, 2020 at 10:30 am

This morning’s CPI report showed that consumer prices increased by 0.6% last months. That’s on top of a 0.6% increase in June. Wall Street had been expecting an increase of 0.3% for July. The increase for July was the strongest in 11 years.

The “core rate,” which excludes volatile food and energy prices, also rose by 0.6%. That’s the largest increase since January 1991.

A few news items. AFLAC (AFL) increased its buyback authorization by 100 million shares. That’s on top of the previous authorization which was down to 21.9 million shares.

Hormel Foods (HRL) said it will release its earnings before the market opens on August 25. The stock is at a new high today along with FactSet (FDS), Stepan (SCL) and Sherwin-Williams (SHW).

Here’s a Bloomberg article on Disney’s (DIS) new CEO.

Intercontinental Exchange (ICE) said last week that it will buy Ellie Mae, a mortgage services provider, for $11 billion.

Morning News: August 12, 2020
Posted by Eddy Elfenbein on August 12th, 2020 at 7:03 am

UK Enters Recession After GDP Plunged By A Record 20.4% In The Second Quarter

Gold’s Wild Ride Continues as Prices Bounce Back

Trump Pledges Big Tax Cuts That May End Up Nowhere as Stimulus

Investors Revalue Chinese Tech Giants After U.S. Ban

U.S. Ban On TikTok Could Cut It Off From App Stores, Advertisers

Disney’s CEO Is Scrapping Once-Sacred Businesses

Tesla Splits Stock to Make Lofty Shares Attainable Again

In Victory for Qualcomm, Appeals Court Throws Out Antitrust Ruling

Games Help Tencent Smash Second-Quarter Earnings Expectations As Potential WeChat Ban Looms

Coronavirus Tests the Leadership Style of Goldman Sachs’s C.E.O.

Kodak Raised Spending On Lobbying Government In Months Before Loan Awarded

Six Things You’re Doing Wrong When Buying Stocks On Your Own

Ben Carlson: The Pros and Cons of Miniscule Savings Account Yields

Nick Maggiulli: The Definitive Guide to the All Weather Portfolio

Joshua Brown: Nasdaq Is The New S&P 500

Michael Batnick: The Investor’s Dilemma

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Broadridge Beats Earnings and Hikes Dividend
Posted by Eddy Elfenbein on August 11th, 2020 at 11:29 am

This morning, Broadridge Financial Solutions (BR) released a solid earnings report. For its fiscal Q4, BR’s earnings rose 25% to $2.15 per share which beat estimates by six cents per share. Recurring revenue, which is a key stat for them, rose 14% to $930 million.

Let’s look at guidance. For the new fiscal year, which ends on June 30, Broadridge expects earnings growth of 4% to 10%. Since the company made $5.03 per share last year, that implies earnings this year between $5.23 and $5.53 per share. Wall Street had been expecting $5.44 per share.

The company also increased its quarterly dividend from 54 cents to 57.5 cents per share. That’s a 6.5% increase. This is BR’s 14th consecutive annual dividend increase.

The stock has been up as much as 5.8% today and it reached a new 52-week high.

Q2 2020 Earnings Calendar
Posted by Eddy Elfenbein on August 11th, 2020 at 8:05 am

Twenty-two of our 25 Buy List stocks have reported their Q2 earnings during this earnings season. Here’s a list of reporting dates, Wall Street’s consensus estimates and actual reported results.

Morning News: August 11, 2020
Posted by Eddy Elfenbein on August 11th, 2020 at 7:07 am

An 1,100% Stock Gain Is Hong Kong’s New Protest Rallying Cry

China Is Ditching Expensive Brazilian Soybeans for U.S. Supplies

S&P 500 Futures Hit Record High on Stimulus Bets

Millions Turn To Stock Trading During Pandemic, But Some See Trouble For The Young

Trump Says He’s Considering Capital Gains Tax Cut

Trump’s COVID Orders Too Little, Too Late To Help U.S. Economy, Experts Say

To Withhold or Not: Trump’s Order Gives Employers a New Dilemma

Dimon, Bezos Among CEOs Pledging to Hire 100,000 New Yorkers

Black Finance Workers in London Face ‘Dire’ Prospects Despite CEO Pledges

SoftBank Touts Vision Fund Gains, Ditches Operating Profit As Yardstick

Delta Air Lines Bought an Oil Refinery. It Didn’t Go as Planned.

Start-Ups Braced for the Worst. The Worst Never Came.

After a Flop, Amazon Makes Another Foray Into Video Games

Ben Carlson: Which Investments Benefit From a Weaker Dollar?

Howard Lindzon: Starting a Company? Let’s Do A Priced Round

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Getting Closer to an All-Time High
Posted by Eddy Elfenbein on August 10th, 2020 at 10:35 am

The S&P 500 is up again today. We’re not that far from an all-time high. This morning, the index got as high as 3,362. The all-time intra-day peak is 3,393 from February 19. That’s almost exactly six months ago.

Goldman Sachs made news this morning by raising its growth estimate for next year to 6.2%. The Wall Street investment house said it sees a vaccine being approved before the end of the year. Goldman sees unemployment falling to 6.2% by the end of 2021. I hope they’re right.

Shares of Stepan (SCL) are up to a new high today. We now have a 13% gain in this stock. A few weeks ago, the chemical company reported earnings of $1.65 per share. Expectations were for $1.20 per share.