Morning News: May 29, 2020
Posted by Eddy Elfenbein on May 29th, 2020 at 7:03 am

Banks Told by EU to Take Climate Change Into Account in Lending

With ‘Main Street’ In View, Fed Weighs Risks of Job, Productivity Shocks

Mnuchin’s $29 Billion Loan Fund Untapped as Airlines Eye Rebound

Millions Relying on Pandemic Aid Can See Its End, and They’re Scared

Americans Have Stopped Thinking the Economy Is Getting Worse

Twitter Places Warning on a Trump Tweet, Saying It Glorified Violence

Pandemic Forces Car Dealers to Do the Unthinkable: Sell Online

Japan Backs Nearly a Third of $6.6 Billion Loans to Nissan

C.D.C. Recommends Sweeping Changes to American Offices

Elon Musk Earns First Performance-Based Payout From Tesla, Worth More Than $700 Million

SAT and ACT May Never Regain Their Role in College Admissions

Roger Nusbaum: Exchange Traded Endowment Portfolios Not Ready For Prime Time?

Joshua Brown: Explaining How Bank Loans Work

Howard Lindzon: The Shoulda Coulda’s…

Ben Carlson: A One-of-a-Kind Market Environment

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Wall Street’s Consensus
Posted by Eddy Elfenbein on May 28th, 2020 at 1:25 pm

Here’s the S&P 500 (black line) along with its trailing earnings (blue line). The two lines are scaled at a ratio of 18 to 1. That means that whenever the lines cross, the P/E Ratio is exactly 18.

The future part of the earnings line is Wall Street’s consensus.

A few things to mention. I don’t mean to imply 18 is the correct P/E ratio. It just makes the chart look the most readable.

Wall Street sees year-over-year earnings bottoming in Q4, then rising sharply in 2021.

I’m also very skeptical of earnings forecasts that far out in the future, but it’s interesting to see what other people think.

Job Losses, Stocks Soar
Posted by Eddy Elfenbein on May 28th, 2020 at 11:02 am

This morning’s jobless claims report came in at 2,123,000. Remarkable, this is the eighth improvement to that number in a row.

Also, the Q1 GDP report was revised lower. The initial report had been for -4.8%. Today that was revised down to -5%.

Economists believe the lockdowns that shut wide swaths of the economy and triggered the layoffs of millions of workers will send the GDP sinking at an annual rate of 40% in the current quarter. That would be the biggest quarterly decline on records that go back to 1947. It would be four times the size of the previous decline set back in 1958.

Many forecasters believe growth will rebound sharply in the July-September quarter with the Congressional Budget Office predicting GDP will rise at an annual rate of 21.5%. Still, that gain would not be nearly enough to make up for the economic output that was lost during the first and second quarters.

At the end of July, we’ll get our first look at the Q2 GDP report. It will be historically terrible.

We also got the durable goods report this morning, and for the second straight month we saw a large drop. For April, durable goods fell by 17.2%. That’s on top of a 16.6% drop for March.

The stock market is up again today. The S&P 500 has been as high at 3,052 this morning.

Morning News: May 28, 2020
Posted by Eddy Elfenbein on May 28th, 2020 at 7:10 am

Will the U.S. Soon Treat Hong Kong Like China? Much Is at Stake.

Trump-China Feud Is Increasing Risks for Markets and Economy

Should We Fear Post-Pandemic Inflation?

Big Bankruptcies Sweep the U.S. in Fastest Pace Since May 2009

Why The Small Business Rescue Program Has Slowed Way Down

U.S. States, Cities May Snub Fed Lending Program Over High Rates

Furious at Twitter, Trump Aims Executive Order at Tech Giants

‘Just Sitting in Limbo.’ For Many Professionals, Careers Are on Hold.

Alibaba Extends Its Reach In China As Coronavirus Outbreak Opens Doors

GM, Ford Turn to Fast-Payment Programs to Aid Suppliers Hit By Shutdowns

American Airlines to Cut 30% of Management and Administrative Staff & EasyJet To Cut Workforce By 30% As Coronavirus Pandemic Weighs

Michael Batnick: Animal Spirits: Valuations Don’t Matter

Ben Carlson: How Much of the Bear Market Losses Have Been Recovered?

Jeff Carter: A Trade Made is A Trade Made

Joshua Brown: Thank You

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ATH…Almost….Kinda…Well, Not Really
Posted by Eddy Elfenbein on May 27th, 2020 at 4:51 pm

Ready for some serious cherry-picking of data?

Here goes.

The S&P 500 closed at an all-time high today outside of one minor exception.

Just one day. March 16 to be exact.

If you had invested in the S&P 500 but avoided March 16, then you’d be at an all-time high today.

Ok, Ok. Now for the bad news. On March 16, the S&P 500 fell 11.98% for one of its worst days in history.

Going by today’s close, the S&P 500 is down 10.34% from its all-time reach on February 19. That was all covered by just one day of trading.

Here’s the S&P 500 over the last four years (data may be incomplete).

Middleby Soars
Posted by Eddy Elfenbein on May 27th, 2020 at 10:06 am

The stock market is having another good day. Yesterday the S&P 500 cracked 3,000 although it couldn’t close above it. This morning, the index has been as high as 3,021. Hopefully we can close above 3,000 today.

The Russell 2000 index of small-cap stocks is doing especially well while the Nasdaq Composite is down for the day.

The European Commission just unveiled a very large stimulus package aimed at helping countries struggling through the economic slowdown. The plan still needs to be approved but the total price tag could be 750 billion euros.

We’ve seen a growing split in this market. “High Beta” stocks, meaning those with greater risk, have been performing much better than the rest of the market. That’s to be expected in a rising market, but it’s been especially dramatic lately. This tells me that the market is becoming more open to risk-taking which is a good thing.

One stock that’s been doing very well lately has been Middleby (MIDD). That’s interesting because it had been such a poor performer before now. At one point, MIDD was down 60% on the year. Since then, it’s up over 70%. That’s still a big YTD loss, but it’s certainly a lot better than before.

Morning News: May 27, 2020
Posted by Eddy Elfenbein on May 27th, 2020 at 7:03 am

EU Plans $823 Billion Fiscal Stimulus Package to Fund Recovery

Dismal Earnings, Bullish Stock Investors and the Fed’s Invisible Hand

The Fed Boldly Saves Markets. Now It’s Worrying About Main Street Business

Hedge Funds Pay Up in U.S. to Poach From Rivals Stung by Turmoil

Salaries Get Chopped for Many Americans Who Manage to Keep Jobs

How Zoom Downed the Airlines

Volkswagen In Final Talks to Seal Biggest M&A Deals In China EV Sector

Renault and Nissan Rule Out Merger As They Unveil Survival Plan

Tesla Cuts Prices By As Much As 6% in North America to Boost Demand

HBO Max Wants to ‘Crush’ Netflix. Is It Too Late?

Tired of Plastic? These Businesses Have Ideas for You

Nick Maggiulli: Nobody Knows Nothing

Ben Carlson: The Diversification Drag & The Management of Luck

Joshua Brown: Pop Culture As An Edge In Business

Howard Lindzon Welcoming Ross Hoffman – Venture Partner at Social Leverage

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The S&P 500 Breaks 3,000….Again
Posted by Eddy Elfenbein on May 26th, 2020 at 10:49 am

I hope you had a relaxing Memorial Day weekend. Wall Street, apparently, needed some time to regroup. The S&P 500 opened this morning above 3,000. This is the first time in nearly three months that the index has traded above 3,000.

The NYSE also reopened its trading floor today. Governor Cuomo rang the opening bell.

Today looks to be a good example of what’s called a “counter-trend” day. That’s a fancy way of saying that the stocks that had been doing terribly are doing the best, and the ones that had been doing well are now lagging the pack.

It’s not necessarily a bad omen. It simply means that there’s some pushback against the dominant theme. The S&P 500 is also above its 200-day moving average. That’s a key technical indicator that a lot of chart-readers like to follow.

Morning News: May 26, 2020
Posted by Eddy Elfenbein on May 26th, 2020 at 7:09 am

BOE Isn’t Close to Implementing Negative Rates, Haldane Says

Treasury Yields Rise As Coronavirus Vaccine Hopes Drive Risk-On Sentiment

U.S. Small Firms Leave $150 Billion in Coronavirus Stimulus Untapped

Wealthiest Hospitals Got Billions in Bailout for Struggling Health Providers

‘How About Next June?’ Small Meat Processors Backlogged As Virus Idles Big Plants

‘This Could Be The One That Gets Me,’ Says Oilfield Service Veteran

A Florida Toy Importer Braces For Retail Upheaval

Remember the MOOCs? After Near-Death, They’re Booming

Latin America’s Largest Airline, LATAM, Files for Chapter 11 Bankruptcy

Scared Americans Desperate to Travel Are Buying Up ‘Covid Campers’

Travel And Leisure Stocks Rejoice On Summer Holiday Hopes

German Court Orders VW to Compensate Customers Over Diesel Emissions Scandal

Can’t You Just Fire Me? Man Paid to Do Nothing Wanted $2 Million

‘King of Gambling’ Who Propelled Macau Past Las Vegas Dies at 98

Joshua Brown: Under Pressure

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Thanks Vets
Posted by Eddy Elfenbein on May 25th, 2020 at 9:16 am