Morning News: December 8, 2016
Posted by Eddy Elfenbein on December 8th, 2016 at 7:01 am

ECB-Watchers Look to Draghi for Clues About What Comes Next

Tied to Europe, Britain’s Car Industry Is Vulnerable After ‘Brexit’

Japan’s Growth Slower Than Expected for Quarter

The Future Of The 14 Free Trade Agreements America Has Under Trump

U.S. Regulator Set to Fail Wells Fargo on Community Lending Test

Nomura Has 10 ‘Gray Swan’ Risks That Could Roil Markets in 2017

Airline Profits Set to Slide Back From Record as Oil Price

Shell Sets Deal With Iran Oil Firm

JPMorgan CEO Says Bank May Look To Pay Special Dividend

Glencore Dealmaking King Returns With Wager on Oil and Putin

Michael Jordan Owns Right to Name in Chinese Characters, Too, Court Rules

Go Long J.C. Penney As Sears Holdings Prepares To Declare Another Awful Earnings Quarter

Why Lululemon Has Wall Street Feeling Zen

Cullen Roche: Repeat After me: “Bonds Don’t Necessarily Lose Value When Rates Rise”

Howard Lindzon: The Banks are Speaking…and Scheming and Hoarding and Fleecing

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Stryker Raises Dividend by 12%
Posted by Eddy Elfenbein on December 7th, 2016 at 6:19 pm

Good news for fans of Stryker (SYK). The company just increased its dividend by 12%. The dividend rises from 38 cents to 42.5 cents per share. Stryker has raised its dividend every year since 1993.

“Our 12% increase in the dividend for 2017 reflects the strength of our balance sheet and our consistent capital allocation approach which uses acquisitions, dividends and share repurchases to drive shareholder value,” said Kevin A. Lobo, Chairman and Chief Executive Officer. “Our continued strong performance should enable us to continue to drive future dividend increases roughly at or above our earnings growth.”

The annualized dividend is $1.70 per share which comes to 1.5% based on Wednesday’s closing price. The dividend is payable on January 31, 2017 to shareholders of record at the close of business on December 30, 2016.

The S&P 500 Bursts Out to New High
Posted by Eddy Elfenbein on December 7th, 2016 at 2:08 pm

The market literally goes parabolic.

Morning News: December 7, 2016
Posted by Eddy Elfenbein on December 7th, 2016 at 7:13 am

India Unexpectedly Keeps Rates Unchanged Even as Cash Crunch Roils Economy

EU Fines Agricole, JP Morgan and HSBC $520 Million Over Euribor

Pfizer Fined $107 Million for Overcharging Britain’s National Health Service for Epilepsy Drug

Shell and Total Said to Sign Initial Oil Deals With Iran

Oil Rally Slows Ahead of Meeting of Producer Nations

Supreme Court Sides With Prosecutors in Insider Trading Case

Trade Restrictions to Redistribute Income Are Recessionary

Citing High Cost, Trump Says Boeing’s Contract to Build Air Force One Should Be Canceled

Japanese Mogul Pledges $50 Billion U.S. Investment

Americans Are Paying Apple Millions to Shelter Overseas Profits

Why It Is Still Too Early To Bet Big On AT&T’s ‘DirecTV Now’

Chipotle Mexican Grill: Don’t Catch A Falling Burrito

In News, What’s Fake and What’s Real Can Depend on What You Want to Believe

Josh Brown: Sugar Pills

Roger Nusbaum: Global Political Upheaval

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The Market is Up but Which Market?
Posted by Eddy Elfenbein on December 6th, 2016 at 12:39 pm

Bloomberg notes that the correlation between the Dow and S&P 500 is at a six-year low. This is interesting because the Trump Rally has been skewed toward industrial stocks. Those stocks have rallied much more than the overall market. We tend to forget that the Dow Jones Industrial Average is in fact, an index of industrial stocks.

For the most part, the difference between the two is tiny. Not now.

The Dow is set to outperform its broader counterpart on an annual basis for the first time since 2011, rallying 10 percent this year, while the S&P 500 has climbed 7.9 percent. The day before the election they were pretty much neck-and-neck, with the Dow up 4.8 percent in 2016 and the S&P 500 headed for a yearly advance of 4.3 percent.

Here’s the Dow in red versus the S&P 500 in blue over the last several weeks.

Morning News: December 6, 2016
Posted by Eddy Elfenbein on December 6th, 2016 at 7:04 am

German Government Must Compensate Utilities for Nuclear Law, Court Rules

How China Could Hurt the U.S. in a Trade War

RBA Holds Key Rate as Commodity Upswing Outweighs Slowdown

Venezuela Struggles to Tame Triple-Digit Inflation

OPEC’s Agreement Is a Step Toward Stabilizing Oil Markets

Fed Officials Eyeing Rate Hike See Path Tied to Fiscal Policies

House G.O.P. Signals Break With Trump Over Tariff Threat

Want to Bring Back Jobs, Mr. President-Elect? Call Elon Musk

Amazon Working on Several Grocery-Store Formats, Could Open More Than 2,000 Locations

Lego Restructures With Eye to Expansion

GoDaddy to Buy Host Europe Group

Apple Watch Sales to Consumers Set Record in Holiday Week, Says Apple’s Cook

The Hunt for Hatchimals, the Elusive Toy of the Holiday Season

Cullen Roche: The Global Financial Asset Portfolio is DOWN Since Trump Won

Jeff Carter: The Real Fin Tech Revolution

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Irrational Exuberance 20 Years On
Posted by Eddy Elfenbein on December 5th, 2016 at 8:25 am

It was 20 years ago today that Alan Greenspan made his famous “irrational exuberance” speech. Here’s the money paragraph from that speech:

Clearly, sustained low inflation implies less uncertainty about the future, and lower-risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? And how do we factor that assessment into monetary policy? We as central bankers need not be concerned if a collapsing financial asset bubble does not threaten to impair the real economy, its production, jobs, and price stability. Indeed, the sharp stock market break of 1987 had few negative consequences for the economy. But we should not underestimate or become complacent about the complexity of the interactions of asset markets and the economy. Thus, evaluating shifts in balance sheets generally, and in asset prices particularly, must be an integral part of the development of monetary policy.

It doesn’t seem that dramatic, but at the time, it was taken very seriously. The next day, the Dow dropped 144 at its open. That may not sound like much today, but it was a loss of 2.2%. That’s equivalent to 430 points today. However, the Dow soon recovered some lost ground, and by the closing bell on December 6, it had shed 55 points (all the way down to 6,381.94).

Greenspan’s famous phrase came from Robert Shiller. I can’t confirm if Shiller was referring to his cyclically adjusted price/earnings ratio, also known as CAPE. Instead of using trailing earnings for one year, CAPE goes back ten years.

I’m not a big fan of CAPE. It’s shown the market to be overpriced for almost all of the last 25 years. I’m also not a big fan of trying to time the market based on any valuation measure. The stock market continued to rally for another three years after Greenspan’s speech. Incidentally, Shiller later came out with a book titled Irrational Exuberance.

I get complaints every time I say this, but I’ll repeat that market bubbles are actually quite rare. A bubble is not when p/e ratios go from 15 to 18. A bubble is when they go to 30 and beyond, and the IPO market goes nuts.

Here’s a look at how the market has done over the last 20 years. This is the Wilshire 5000 Total Return Index, which includes dividends. The red line is the Consumer Price Index:

Since Greenspan’s speech, the total return of the Wilshire 5000 has been 346.5%. That’s 7.77% annualized. I’m reminded of Peter Lynch’s words: “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”

Morning News: December 5, 2016
Posted by Eddy Elfenbein on December 5th, 2016 at 7:07 am

Oil Advances to 16-Month High as Focus Shifts to Non-OPEC Cuts

British Services PMI Hits 10-Month High, Points to Solid Fourth Quarter Growth

What Italy’s Referendum Means for Monte Paschi

Greenspan’s Irrational Exuberance Looks Entrenched, 20 Years On

How Trump Plans To Punish Firms That Leave US

Trump Advisors Aim to Privatize Oil-Rich Indian Reservations

Silicon Valley’s Culture, Not Its Companies, Dominates in China

Automotive Tech Flying Off the Lot

Aixtron Sees Slim Path to Save China Sale After Obama Order

Hong Kong’s CKI Returns to Australia With $5.4 Billion Bid For Duet Group

SoftBank’s Masayoshi Son Chases First Place With Tech Deals

RBS Will Pay Up to $1 Billion Over 2008 Rights Issue Claims

Israeli Businessman Nochi Dankner Gets Jail Term for Stock Fraud

Josh Brown: Chart o’ the Day: Unemployment Plunges

Howard Lindzon: AngelList and Product Hunt…Smart!

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How One Trader Made Big Money By Betting on Trump
Posted by Eddy Elfenbein on December 4th, 2016 at 9:14 am

20th Anniversary of “Irrational Exuberance”
Posted by Eddy Elfenbein on December 3rd, 2016 at 5:38 pm