Morning News: December 20, 2019
Posted by Eddy Elfenbein on December 20th, 2019 at 7:04 am

Dow Jones, Nasdaq Thumb Nose At Trump Impeachment News; Will This Growth Stock Break Out?

Repo Oracle Zoltan Pozsar Expects Even More Turmoil

Andrew Bailey Succeeds Carney Atop Bank of England

Two Deals in Pocket But No Holiday Cheer for U.S. Trade Chief Lighthizer

China’s Xi to Skip Davos, Deflating Hopes for Trump Summit

Apple Has Secret Team Working on Satellites to Beam Data to Devices

Prime Power: How Amazon Squeezes the Businesses Behind Its Store

Where Are the Tech Zillionaires? San Francisco Faces the I.P.O. Fizzle

Huawei and Deutsche Telekom Held Advanced Talks Over 5G Network Deal

U.S. Jobless Claims Slide But Miss Forecasts for Bigger Drop

Joshua Brown: Sonya Dreizler’s ‘Do Better’ Series

Howard Lindzon: Compound Capital Advisors – Hello World & More All-Time Highs for Nike

Jeff Carter: A Good Move by the SEC

Michael Batnick: Animal Spirits: Shopping Under the Influence & The Disappearing Edge

Ben Carlson: My New Goal in Life: Avoid a Mid-Life Crisis

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Morning News: December 19, 2019
Posted by Eddy Elfenbein on December 19th, 2019 at 4:03 am

Trump Impeached on Two Counts by House, Setting Up Senate Trial

SEC Proposes Giving More Investors Access to Private Markets

Longtime China Watchers Predict What’s Next for Slowing Economy

A Major Shipping Change Is Coming, and So Are Higher Fuel Prices

Tariffs, Trade Tensions Worry Fortune 500 CEOs: U.S. Chamber of Commerce

Uber Settles Federal Investigation Into Workplace Culture

After Boeing Halts Max Production, Suppliers Wait for Fallout

For Netflix, the World May Not Be Enough

Twitter and Facebook Want to Shift Power to Users. Or Do They?

Ex-WorldCom CEO Bernie Ebbers Granted Early Release From Prison

Ben Carlson: Animal Spirits: Shopping Under the Influence & Charts of the Decade

Michael Batnick: The Disappearing Edge

Jeff Carter: Parallels: History Doesn’t Repeat But It Can Rhyme

Cullen Roche: A Pragmatic View on the Existence of Billionaires & Government

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Impeachment
Posted by Eddy Elfenbein on December 18th, 2019 at 10:23 pm

President Trump has been impeached. As usual, I’ll skip the politics, but this is something that should be addressed.

The stock market has been remarkably calm lately. In fact, we came very close to a six-day winning streak. Today’s close was only slightly in the red.

Here are the last three closes for the S&P 500:
3,191.45
3,192.52
3,191.14

According to the experts, this won’t get far in the Senate. For now, there’s no need to worry about the stock market falling from today’s events.

Fannie Mae boosts 2020 housing forecast ‘significantly’
Posted by Eddy Elfenbein on December 18th, 2019 at 11:30 am

I feel like passing on positive economic news will only anger some people, but here you go:

Strong reads on the economy have researchers at mortgage giant Fannie Mae revising their 2020 housing forecast much higher.

Fannie Mae’s Economic and Strategic Research Group predicts builders will expand production more than previously expected, due to a strong labor market and robust consumer spending. Low mortgage rates will also help.

After increasing just over 1% annually this year, growth in single-family housing starts will accelerate to 10% during 2020 and top 1 million new homes in 2021, the group predicts. That would mark a post-recession high but is still far below the annual peak of about 1.7 million single-family starts in 2005 and the 1.2 million annual pace experienced in the late ’90s.

Single-family housing starts have been improving steadily since May, and building permits, an indicator of future construction, are also trending higher.

“It will likely take several years, even at a more robust pace, for new construction to address the existing pent-up demand for additional housing, as suggested by a still-increasing share of 25- to 34 year-olds living at home with their parents,” according to the report.

The shortage of existing homes for sale has pushed more potential buyers to the new-build market. Mortgage applications to purchase a newly built home were up 27% annually in November, according to the Mortgage Bankers Association. Homebuilder sentiment jumped to the highest level in 20 years in December, according to the National Association of Home Builders.

“We now expect single-family housing starts and sales of new homes to increase substantially, aided by a large uptick in new construction as builders work to replenish inventories drawn down by the recent surge in new home sales activity,” said Fannie Mae chief economist Doug Duncan.

The increase in construction, however, is unlikely to ease the overall housing shortage. Researchers at Fannie Mae are predicting a modest decline in existing home sales through the third quarter of 2020, due to the shortage of listings.

Overall housing demand is incredibly high, especially at the lower end of the market, where builders are least active. Prices are rising fastest on the low end, sidelining some first-time buyers.

“This stronger price appreciation is also having the unfortunate effect of partially offsetting savings to potential homebuyers from lower mortgage rates,” Duncan said.

The average rate on the 30-year fixed mortgage is hovering just below 4%, a full percentage point lower than where it was a year ago. Low rates are boosting already strong demographic demand drivers in the market. Millennials, who delayed buying homes because of the recession, are now flooding into new and existing homes.

“Housing appears poised to take a leading role in real GDP growth over the forecast horizon for the first time in years, further bolstering our modest-but-solid growth forecasts through 2021,” said Duncan.

Danaher Announces Final Results Of Envista Exchange Offer
Posted by Eddy Elfenbein on December 18th, 2019 at 9:15 am

Press release:

Danaher Corporation (NYSE: DHR) announced today the final results of its previously announced offer to holders of shares of Danaher common stock to exchange their shares of Danaher common stock for shares of common stock of Envista Holdings Corporation (NYSE: NVST) owned by Danaher. The exchange offer expired at 12:00 midnight, New York City time, at the end of the day on December 13, 2019.

Based on the final count by the exchange agent, Computershare Trust Company, N.A., the final results of the exchange offer are as follows:

Total number of shares of Danaher common stock validly tendered and not validly withdrawn: 304,607,504
Shares validly tendered that were subject to proration: 303,682,229
“Odd-lot” shares validly tendered that were not subject to proration: 925,275
Total number of shares of Danaher common stock accepted: 22,921,984
Today, Danaher accepted 22,921,984 of the tendered shares in exchange for the 127,868,000 shares of Envista common stock owned by Danaher. Because the exchange offer was oversubscribed, Danaher accepted only a portion of the shares of its common stock that were validly tendered and not validly withdrawn, on a pro rata basis in proportion to the number of shares tendered. Stockholders who owned fewer than 100 shares of Danaher common stock, or an “odd-lot,” who validly tendered all of their shares, were not subject to proration, in accordance with the terms of the exchange offer. All shares validly tendered by eligible “odd-lot” stockholders have been accepted. The final proration factor of 7.2433% had been applied to all other validly tendered shares of Danaher common stock to determine the number of such shares that were accepted.

Shares of Danaher common stock tendered but not accepted for exchange will be returned to the tendering stockholders in book-entry form promptly. In addition, the exchange agent will promptly credit shares of Envista common stock for distribution in the exchange offer in book-entry form to accounts maintained by the Envista transfer agent for tendering stockholders whose shares of Danaher common stock were accepted in the exchange offer. Checks in lieu of fractional shares of Envista common stock will be delivered after the exchange agent has aggregated all fractional shares and sold them in the open market.

Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC served as the dealer managers for the exchange offer. Evercore served as an advisor to Danaher for the exchange offer.

Morning News: December 18, 2019
Posted by Eddy Elfenbein on December 18th, 2019 at 7:28 am

The Optimist’s Guide to 2020

U.S. Concedes Defeat on Gas Pipeline It Sees as Russian Threat

Trump’s Trade Deals Raise, Rather Than Remove, Economic Barriers

PG&E Reaches $1.7 Billion Deal With Regulators

Fiat Chrysler, Peugeot Owner Agree to Binding $50 Billion Merger Deal

Boeing 737 MAX Freeze Divides Suppliers Into Haves and Have-Nots

Apollo and Blackstone Are Stealing Wall Street’s Loans Business

H&M’s Different Kind of Click Bait

With Promotion Of New CMO, Coca-Cola Revisits Previously Retired Role

Bed Bath & Beyond’s New CEO Just Blew Up His Executive Circle — In the Midst of the Holiday Season

How the Immigrant Dream Died in an Automotive Shantytown

SoftBank Vision Fund Employees Depict a Culture of Recklessness

Nick Maggiulli: Climbing the Wealth Ladder

Howard Lindzon: The Rarest Of Years and Decades for Markets

Joshua Brown: The Top Performing Stocks of the Decade & Why Apple Is The Most Emblematic Stock of 2019

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Rebound in Industrial Production
Posted by Eddy Elfenbein on December 17th, 2019 at 2:34 pm

The market is up again this morning, and again, not by much. This could be the fifth daily gain in a row for the S&P 500.

We also finally got some good production news. This morning, the industrial production report for November showed an increase of 1.1%. That’s pretty good. Wall Street had been expecting an increase of 0.7%. Some of this was due to the end of the GM strike.

The Fed’s measure of the industrial sector comprises manufacturing, mining, and electric and gas utilities.

There was a 12.4% jump in the production of motor vehicles and parts in November. Overall, production rose 2.1% for consumer goods and 1.7% for business equipment, the Fed said.

Utilities output increased 2.9% compared to a decline of 2.4% in the previous month.

The manufacturing sector, which makes up about 11% of the U.S. economy, has been weakened by a 17-month trade war between the United States and China.

Last Friday, the world’s two largest economies announced a “Phase one” agreement that reduces some U.S. tariffs in exchange for increased Chinese purchases of American farm goods.

Chart of the Year
Posted by Eddy Elfenbein on December 17th, 2019 at 2:30 pm

The Fed’s recent cuts have impacted the mortgage market. The average rate on a 30-year fixed-rate mortgage in the U.S. is 3.73%. Mortgage rates are already 1% below where they were one year ago, and I think it is very likely that interest rates will stay low. That’s good for the economy and the housing sector.

This is really the culmination of a dramatic yield curve story that played out all year. Let’s take a look at one of my top candidates for Chart of the Year.

The chart above shows the yield on the three-month Treasury (in red) along with the 30-year Treasury (in blue). You can see how both were trending downward during the first half of this year. However, starting in the summer, the gap between the two narrowed dramatically. By August, the ten-year yield briefly dipped below the three-month yield. That was the dreaded inverted yield curve that made headlines for about 36 hours.

It was almost like a cry for help from the bond market. The Federal Reserve heard the pleas and moved to act. The Fed slashed rates three times in three months.

At the time, a lot of folks on Wall Street, especially the bears, thought this was the beginning of a rate-cutting cycle. The Fed said that their moves were merely mid-cycle adjustments. The Fed held firm and it appears that Jerome Powell and his friends on the FOMC have prevailed again the bond market.

What makes me say that? Notice how the 10-year yield (the blue line) has started to stabilize in recent weeks. The yield is actually above the lows from a three months ago. This probably hints at a re-accelerating economy. Also, inflation continues to remain low.

Morning News: December 17, 2019
Posted by Eddy Elfenbein on December 17th, 2019 at 6:49 am

China May Buy Ethanol, Divert Hong Kong Trade to Hit U.S. Pledge

Mortgage Rates Below 1% Put Europe on Alert for Housing Bubble

Liquor Taxes Could Go Up 400%, Thanks to Congressional Dysfunction

Fed Alumni Fear Crisis Risk in Simultaneous Cuts to Rules, Rates

Boeing to Temporarily Shut Down 737 Max Production

Boeing’s Production Pause Will Not End 737 Max Cash Burn

Roche to Complete $4.3 Billion Spark Deal as Regulators Give All Clear

Disney Bets on Nostalgia to Pull ‘Star Wars’ Saga Out of Decline

Amazon Blocks Sellers From Using FedEx Ground for Prime Shipments

Two Men Admit to Working on Illegal Streaming Sites that Rivaled the Size of Netflix and Hulu

Visa Warning: Hackers Ramp Up Card Stealing Attacks At Gas Stations

Cullen Roche: Intangible Returns

Michael Batnick: The Twitter Types

Jeff Miller: Stock Exchange: Intuition or Intu Wishing?

Ben Carlson: Jimmy Hoffa & General Motors: When Labor Ruled the World & Talk Your Book: The Case For Tactical Equity

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Homebuilder Confidence Hits 20-Year High
Posted by Eddy Elfenbein on December 16th, 2019 at 1:11 pm

From CNBC:

A stronger economy and a severe housing shortage have the nation’s homebuilders feeling better than they have in two decades.

Builder confidence in the newly built, single-family home market jumped 5 points in December to 76, the highest reading since June 1999, according to the National Association of Home Builders/Wells Fargo Housing Market Index. Anything above 50 is considered positive.

November’s reading was also revised higher by 1 point. The index stood at 56 last December. At the worst of the housing crash, in 2009, builder sentiment hit a low of just 8.

“Builders are continuing to see the housing rebound that began in the spring, supported by a low supply of existing homes, low mortgage rates and a strong labor market,” said NAHB Chairman Greg Ugalde, a homebuilder and developer from Torrington, Conn.

Builders’ confidence is clearly based on what they’re seeing in their showrooms. Of the index’s three components, current sales conditions rose 7 points to 84, sales expectations in the next six months rose 1 point to 79 and buyer traffic increased 4 points to 58.

All, however, is not perfect in the homebuilding market. Builders could likely be doing even better if they didn’t face so many headwinds.

“While we are seeing near-term positive market conditions with a 50-year low for the unemployment rate and increased wage growth, we are still underbuilding due to supply-side constraints like labor and land availability,” said NAHB chief economist Robert Dietz. “Higher development costs are hurting affordability and dampening more robust construction growth.”