Morning News: September 27, 2019
Posted by Eddy Elfenbein on September 27th, 2019 at 7:04 am

No-Deal Brexit in 2020 Seen Dragging U.K. Economy Into Recession

The U.S. Can’t Treat China the ‘Same Way’ It Treated the Soviet Union, Warns Asian Leader

Trade War Hasn’t Stopped Wall Street’s $9 Billion China Rush

Slowing Economy and Deflation Cause China’s Company Profits to Drop

China’s Top Diplomat Says Beijing Willing to Buy More U.S. Products

Hedge Funds Struggle to Replicate Warren Buffett’s Reinsurance Success

The Great Index Apocalypse Comes for Bond Managers

U.S. Income Inequality Worsens, Widening To A New Gap

Start-Ups Like WeWork and Peloton Feel a Chill on Wall St.

SoftBank Bet Big on Disruptive Companies. Many Have Not Paid Off.

Delta Buys $1.9 Billion LATAM Stake, Snatching Partner Away from American Airlines

GM Reverses, Will Pay for Striking Union Workers’ Health Insurance; Major Issues Remain

Joshua Brown: How Will Impeachment Affect The Stock Market?

Ben Carlson: Contradictory Figures: Lessons From Uber’s Rise

Jeff Carter: A Framework For Evaluating Startups

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Inside the Compound
Posted by Eddy Elfenbein on September 26th, 2019 at 2:49 pm

I love watching The Compound with my friends Michael Batnick and Josh Brown so I was thrilled when they invited me on. Check it out:

FactSet Drops on Lower Guidance
Posted by Eddy Elfenbein on September 26th, 2019 at 12:08 pm

Shares of FactSet (FDS) are down today despite a good earnings report. The problem is lower guidance.

For their fiscal Q4, FactSet said that revenues rose 5.3% to $364.3 million. Annual Subscription Value, or ASV, rose to $1.48 billion. Earnings rose 18.6% to $2.61 per share. Wall Street had been expecting $2.47 per share.

This was FactSet’s 39th year in a row of revenue growth and 23rd year in a row of EPS growth.

“FactSet performed well in full year 2019 delivering solid revenue and strong EPS growth, despite market headwinds,” said Phil Snow, FactSet CEO. “To further our winning proposition in the marketplace, we will be accelerating critical investments over the next three years from a position of strength, capitalizing on industry trends and enhancing our core offerings. We are making investments today so that FactSet can continue to deliver long-term value for all our stakeholders.”

For the whole year, EPS rose to $10.00. Their guidance had been for $9.80 to $9.90 per share. Before that, it was $9.50 to $9.65 per share, so business has been humming along.

Now for guidance, and FactSet is being very conservative. The company sees earnings next year (ending in August 2020) ranging between $9.85 and $10.15 per share. That’s basically no growth. Wall Street had expected $10.52 per share.

Traders punished the stock. Shares of FDS are currently down about 10%.

GDP and Initial Claims
Posted by Eddy Elfenbein on September 26th, 2019 at 11:41 am

There were two economic reports this morning. The first is that initial jobless claims rose slightly to 213,000. I find it remarkable that this figure is still so low, and it’s been this way for a long time.

In April, initial claims dipped down to 193,000 which was the lowest since the 1960s.

This figure tends to bounce around so economists like to look at the four-week moving average. This also tends to track the unemployment rate so I don’t see a major uptick in the jobless rate. At least, not yet. The unemployment rate has been stuck at 3.7% for the last three months.

The other report was the final revision to Q2 GDP. This is an odd report because Q2 started six months ago and ended three months ago. Right now, the focus is on Q3 and Q2.

The initial report showed real annualized growth of 2.1% in the second quarter. Last month, that was revised down to 2.0%. This month, it was again 2.0%. Those are the smallest revisions I can remember. The takeaway is that the economy continues to grow, but modestly.

Morning News: September 26, 2019
Posted by Eddy Elfenbein on September 26th, 2019 at 7:40 am

ABN Amro Dirty Money Probe Piles Pain on Europe’s Troubled Banks

Oil Traders Rattled by U.S. Sanctions on China Tanker Firms

‘It’s a Crisis’; Lumber Mills Slash Jobs as Trade War Cuts Deep

In Michigan Steel Towns, Tariffs Meant to Revive Industry Cost Jobs

A.I. Researchers See Danger of Haves and Have-Nots

Vaping Fallout Widens as Imperial Plunges on Profit Warning

Juul Replaces Its C.E.O. With a Tobacco Executive

What the Fate of Silicon Valley’s Donald Trump Can Teach Us

EBay’s Next CEO Inherits a Confounding Puzzle

Huawei Already Producing 5G Base Stations Without U.S. Parts: CEO

Norway Will Not Ban Huawei from 5G Mobile Network

The Elusive $1 Billion Fund That’s Rattled Venture Capital

Ben Carlson: The Cost of Selling Your Home & Animal Spirits: Stockpiling Cash

Michael Batnick: QE-Distorted Markets & Re-examining Wordly Wisdom

Howard Lindzon: Catching Up On Bitcoin…and Sleep & Impeach This! and My Latest Podcast With Ben Hunt

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Morning News: September 25, 2019
Posted by Eddy Elfenbein on September 25th, 2019 at 7:33 am

Sanctions-Hit Iran Props Up Economy with Bartering, Secret Deals

Bitcoin, Ethereum, Ripple’s XRP, And Litecoin In Shock Meltdown

Trump’s Global Trade War Comes to Alabama

Trump Impeachment? History Suggests Wall Street Ought Not Worry

Overtime Pay Eligibility Is Widened in New Federal Rule

Unprofitable Companies Are Raising the Most IPO Cash Since the Dot-Com Era

Behind WeWork Leader’s Rise and Fall: A Wall St. Bank Playing Many Angles

Thyssenkrupp Plunged Into Turmoil as CEO Kerkhoff Set to Leave

Major Cruise Line to Abandon Plastic Water Bottles

Vox Media Acquires New York Magazine, Chronicler of the Highbrow and Lowbrow

Britain to Operate 70 Flights to Bring Back People After Thomas Cook Collapse

Collapse of Thomas Cook Is a Reality Check for China’s Fosun

Nick Maggiulli: There Are No Secrets

Jeff Carter: Must Watch if You Pay Taxes

Jeff Miller: How Big Will The Next Market Pullback Be?

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Morning News: September 24, 2019
Posted by Eddy Elfenbein on September 24th, 2019 at 7:18 am

Europe’s Top Court Limits ‘Right to Be Forgotten’ Privacy Rule

U.S.-Japan Trade Deal May Be Delayed Over Car Tariffs

China Gives New Waivers for Tariff-Free U.S. Soy Purchases

Federal Prosecutors Conducting Criminal Probe of Juul

Budweiser Brewer Raises $5 Billion in Asian Listing

Facebook to Buy Startup for Controlling Computers With Your Mind

Kraft Heinz: Two Food Giants That Haven’t Gone So Well Together

Nintendo’s Mario Takes Driving Seat in Race for Mobile Hit

HKEX ‘Thinking Big’ With $39 Billion Bid as LSE Sticks to Refinitiv Plan

Bitcoin Market Falls Sharply As Litecoin Suddenly Crashes

VW Chairman, CEO Charged With Market Manipulation in Germany

After Thomas Cook Collapse, UK PM Asks Why Bosses Got Paid Millions

Michael Batnick: The Next Recession

Joshua Brown: Green New Deal Is Inevitable

Ben Carlson: Talk Your Book: Investing in Private Companies with EquityZen

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ICE Now Trades Bitcoin
Posted by Eddy Elfenbein on September 23rd, 2019 at 9:38 am

Today is a big day for Bitcoin. It’s now traded at ICE.

Monday marks the debut of futures contracts offered by Intercontinental Exchange Inc. that can result in delivery of the digital currency, a new chapter in Bitcoin’s tumultuous 10-year history. The first federally regulated market to buy and sell Bitcoin could entice conservative investors who have so far stayed on the sidelines to begin adding the digital asset to their portfolios, according to industry analysts. It also furthers efforts to create a market structure for financial professionals to take the digital asset seriously.

“The move to centralize and create a scalable infrastructure for crypto asset investment” is “a positive step,” said James Putra, head of product strategy at TradeStation Crypto. Because the ICE contracts will deliver actual Bitcoin, an investor can potentially profit first from the rise in the futures price and then take possession of the coins, he said. “I can capture both pieces and continue to ride that upward.”

Morning News: September 23, 2019
Posted by Eddy Elfenbein on September 23rd, 2019 at 7:39 am

A Long-Despised and Risky Economic Doctrine Is Now a Hot Idea

Trump’s Fed Tweets Shown to Have ‘Significant’ Effect on Trading

Forget Stocks – Money Market Is Signaling Possible Troubles Ahead

Like Fine Whiskey, Texan Oil Exporters Tout Unblended Crude

China to Send State Officials to 100 Private Firms Including Alibaba

From Underwear to Cars, India’s Economy Is Fraying

GM Strike Heads Into a Second Week

Pressure Mounts on WeWork CEO Adam Neumann as Board Weighs Coup

British Travel Firm Thomas Cook Collapses, Leaving Hundreds of Thousands Stranded

The Slow-Burning Success of Disney’s Bob Iger

Ceconomy Eyes Deal with Heirs of Media Markt Founder

Walmart Ban Shows Vaping’s Fall From Smoking Fix to Health Scare

Ben Carlson: Can We Talk Ourselves Into a Recession? & Crazy But True

Jeff Miller: Weighing the Week Ahead: A Bigger Wall Now Under Construction

Howard Lindzon: The Broken IPO Process and More WeWork…

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Point Spreads and Stock Prices
Posted by Eddy Elfenbein on September 20th, 2019 at 1:23 pm

Point spreads of 20 or more points happen about once in every 1,000 NFL games. There are two this weekend. There’s a financial markets lesson here.

Betting markets, like financial markets, tend to be efficient, meaning it’s hard to beat them consistently. And like financial markets, they do have blind spots.

Both financial markets and betting have problems pricing extreme events. They tend to substitute conservatism for a lack of data. As a result, extreme favorites have, in aggregate, a hard time covering the spread.

For games with spreads of 19 or more points, favorites have failed to cover in 12 of those 14 games. What appears to be a safe bet probably isn’t. This is somewhat like ditching your stocks at the low.

Just a good time to remember that point spreads and stock prices aren’t set by equations but by the madness of crowds.