Just think... "The individual has always had to struggle to keep from being overwhelmed by the tribe. If you try it, you will be lonely often, and sometimes frightened. But no price is too high to pay for the privilege of owning yourself."
-- Friedrich Nietzsche |
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There's a lot here folks... read it if you have time... Skim it otherwise...
In Sum The S&P 500 and Nasdaq Composite closed at all-time highs and the Dow ended just shy of a record on a busy week that featured a band of corporate earnings, a Federal Reserve meeting, a U.S. GDP report and the October jobs report.
S&P 500 +1.5%, Nasdaq +1.7% DJIA +1.4%.
On the earnings front, although earnings are on track to decline for the third consecutive quarter, about 75% of the 342 companies in the S&P 500 that had posted results through Thursday morning had beaten expectations, according to FactSet. That's slightly above the five-year average of 72% and driving investors sentiment upward.
On Wednesday, the Federal Reserve cut interest rates for the third time this year, reducing rates by another quarter point as the economy continues to cool. The decision to lower rates came as a global manufacturing slowdown and uncertainty stemming from 45’s ongoing trade war continue to pose risks to the domestic economy. While those risks do remain, the Fed hinted that it is now shifting into a more patient mode. The central bank dropped a key line from its post-meeting statement in which it pledged to “act as appropriate to sustain the expansion,” language it had been using to signal a willingness to lower interest rates. Interest rate futures on Wednesday afternoon were putting the odds of a December rate cut at around 20% -- about what they had at the end of the day on Tuesday. The real key to December will be whether the labor market and consumer spending continue to hold up despite all worries businesses have been having.
For my 2 cents, the Fed has gotten really far from its knitting. The Fed has a dual mandate... inflation control and jobs. Nowhere is the fed given the task of making sure the expansion continues. Further, with unemployment at a 50 year low and inflation still modest, its hard to make the inference that the markets need more encouragement from even lower interest rates. I was talking to a friend last week and suggested this would ultimately be a problem. He's more sanguine and thinks things will all work out fine... just like they always have. That's actually a fairly typical response from his generation... he's 70+...
On Wednesday, the Commerce Department reported that economic growth slowed slightly in the third quarter, to an annual 1.9% clip - adjusted for inflation and seasonality - from 2% in the second quarter (but above analysts expectations of 1.7%). Domestic-facing sectors of the economy, including consumer spending, housing and government spending, all made positive contribution. Business spending was the third-quarter’s big weak spot as nonresidential fixed investment fell 3% (worst performance since late 2015 and the first back-to-back contraction of more than 1% since 2009). International trade and inventories were minor drags.
On Friday, the much anticipated jobs report showed that the economy added 128,000 jobs in October (well above expectations) and September and August were revised up by a net 95,000 jobs. The 128k was apparently not enough for 45 as he tweeted that the economy created north of 300k jobs for the period. It didn't. The unemployment rate ticked up to 3.6% (from 3.5%) as more Americans entered the workforce - 325,000 to be exact. One soft spot in the report was on the wage front where wage gains are not accelerating. There's uncertainty as to whether that's because the increase supply of workers is limiting wage pressure or because the quality of jobs being created is weak. I think it's mostly the latter.
The earnings season slows down a bit next week, but expect to see a flurry of headlines about the trade negotiations between the U.S. and China. And worth noting, Uber issues its quarterly earnings report next week and its lockup period on IPO shares expires.
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| | SPY SPY has been preparing for this move since around May of this year. The fact that it finally exploded through resistance wasn't hard to anticipate. The question, as ever, is what now? This week will go a long way toward answering that question. |
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| | | - Governor Gavin Newsom declared California in a state of emergency, as autumn winds whipped fires that continued to rage from north of the Bay Area to near San Diego.
- The U.S. spent nearly $1 trillion more in fiscal 2019 than it took in, the highest deficit in seven years. Government deficits have now increased for four years in a row, the longest such stretch since the early 1980s, a period marked by two recessions and a jobless rate near 11%. The budget gap widened 26% in the fiscal year that ended Sept. 30, to $984 billion from $779 billion deficit the previous year.
- Mortgage market hits precrisis levels. Lenders extended $700 billion of home loans in the July-to-September quarter, the most in 14 years, according to industry research group Inside Mortgage Finance.
- Two-thirds of big cities predict a recession will hit in 2020 or 2021. "While the slowing economy is largely a global phenomenon, the U.S.’s trade disputes with China, Canada, Mexico and the European Union have added more uncertainty to the future. These factors are starting to affect city finances. For the first time in seven years, cities anticipate a decline in revenue as they close the books on fiscal year 2019," the National League of Cities writes in its annual “City Fiscal Conditions” report.
- Deaths in the U.S. from heart failure are surging. The death rate from the chronic, debilitating condition rose 20.7% between 2011 and 2017 and is likely to keep climbing sharply, according to a study in the journal JAMA Cardiology. The rapid aging of the population, together with high rates of obesity and diabetes in all ages, are pushing both the rate and number of deaths from heart failure higher. An estimated 6.2 million Americans suffer from heart failure, and the American Heart Association predicts that more than 8 million will have the condition by 2030.
- Li Wei, the tech chief at China's central bank, says Chinese commercial banks should step up their use of blockchain technology—the shared-ledger technology that underpins cryptocurrencies such as Bitcoin. The call comes as the People's Bank of China develops its own digital currency plans.
- A private gauge of China’s factory activity showed an expansion for the third straight month in October. The Caixin China manufacturing purchasing managers index rose to a 32-month high of 51.7, above the 50 mark that separates expansion from contraction and contrasting with the official gauge showing a fall in activity for the sixth consecutive month.
- China turned on its 5G networks ahead of schedule on Friday - after initially targeting a 2020 launch - amid an ongoing trade war with the U.S. that has turned into a battle over tech supremacy.
- China has become the latest to ban online e-cig sales, while marketing campaigns across the nation will be brought to a halt.
- The White House says it is looking for a new venue to host Trump and Xi so that the two leaders can sign a “Phase One” trade deal this month. The feuding duo were due to meet at the APEC summit in Chile, before the host nation yanked the conference.
- China announced it will issue its first Euro-denominated bond in 15 years next week seeking to raise $4.5 billion. China might be attempting to shift reliance on dollar-denominated debt as the trade war with the U.S. simmers. But, as interest rate in the Euro zone hit record lows, China might also be a sucker for a bargain.
- China’s fourth plenum—a four-day meeting of the country’s largest decision-making body—concluded Thursday. The plenary meetings are shrouded in secrecy, prompting more speculation than news, but are also times when the ruling Party devises new policy and sets future goals.
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| GLD The gold etf still looks to be forming a bull flag on the weekly chart. I expect price to push higher soon... in all likelihood at the same time as a collapse in equity prices. |
| | | - Impossible Foods has announced a partnership with DoorDash, the nation’s largest on-demand destination for door-to-door delivery. DoorDash has created a custom cuisine carousel featuring merchants that offer Impossible menu items in select US cities including San Francisco, Sacramento, Los Angeles, New York, Chicago, Miami, DC, Detroit, Atlanta, Boston, Denver, Dallas, Cleveland, Philadelphia, Minneapolis, Orlando, Houston, Pittsburgh, Bellevue, Indianapolis, Phoenix, and Las Vegas, powering the discovery of even more Impossible food.
- Thinking that Joker was not going to be a huge winner, Warner Bros. sold a substantial share of the movie to outside investors during development. Now that the film is the #1 R-rated movie of all time with a $788M gross and counting, it wishes that it could roll back the clock on that decision.
- Amazon says its Amazon Pay will enable users to pay their utility bills, either online or using the Alexa voice assistant. It discussed the plan during a Sunday keynote at the Money 20/20 conference. The e-commerce giant is partnering with Paymentus, which reached a similar bill-payment deal with Paypal earlier this year.
- Four homes in the U.S. have closed at or above #100 million so far this year. The global population of billionaires hit a record 2,754 in 2017, and accompanying this surge are home sales at prices never before seen. The properties that have sold for nine figures—and the many more that have sought such sums—paint a telling portrait of the uber-wealthy in the early 21st century, a time when massive wealth has come to be increasingly concentrated in the hands of a few. Don't get me wrong... I'm all for capitalism... It's been instrumental in my own life. But if you allow the masses to arrive at the conclusion that they don't have a shot to achieve wealth of their own... that their children won't likely do better than them, then the ongoing agreement that is the US experiment may begin to unravel.
- The Stanford Institute for Human-Centered Artificial Intelligence released guidelines for a national A.I. policy that called for the U.S. to invest at least $120 billion over the next 10 years on education, research, and entrepreneurship initiatives intended to strengthen the U.S. in artificial intelligence. The hefty investment that the center of the proposal contrasts with the White House’s far smaller plan to spend $1 billion in A.I.-related research and development in 2020.
- Researchers from the Mayo Clinic released a study showing that Microsoft’s facial-recognition software identified patient faces in photos that were created using MRI imagery. The article stated that the study’s findings underscore “privacy threat that will increase with technology improvements and the growth of health-care data, experts in medical imaging and facial recognition said.”
- Psychologists have a new directive for anxious teens: Post on Instagram and Snapchat. Most teens, it can seem to grown-ups, need to be pulled away from social media. Teens with anxiety disorders, however, might need to be pushed toward it. Social media and texting can be a minefield for any teen, but it is particularly daunting for those who struggle with anxiety. Those who dodge digital communications might lose opportunities to make important social connections. Hmmm... Hard pass.
- The NCAA cleared the way for college athletes to begin profiting from their name, image and likeness, a landmark decision that could dramatically alter the economics of college sports. The move came amid growing pressure from legislators and a month after California passed a law requiring schools in the state to allow college athletes to earn endorsement money. A North Carolina legislator immediately tweeted that he would put forth a bill requiring the scholarships of those who earn endorsement money
- Former Juul global finance chief Siddharth Breja is suing the company for allegedly retaliating against him when he raised concerns about a contaminated shipment of e-cigarette pods. Breja claims a million contaminated pods were shipped to customers and never recalled. He also says former Juul CEO Kevin Burns' reaction to Breja's concerns about shipping almost year-old pods ran thusly: "Half our customers are drunk and vaping like mo-fos, who the f--- is going to notice the quality of our pods?”
- Twitter will ban political ads—both for candidates and for specific issues—starting November 22, according to CEO Jack Dorsey.
- Around 9,120 barrels of oil have spilled from TC Energy’s Keystone crude pipeline in North Dakota, making it one of the biggest onshore crude spills in the past decade and the largest for Keystone. The leak comes at a time of increased regulatory scrutiny of oil pipeline development. TC Energy has faced many regulatory and environmental hurdles as it seeks to expand its pipelines linking Western Canadian oil fields to U.S. refineries via Keystone XL.
- J.C. Penney is plotting a comeback. The struggling retailer is testing ideas at a remodeled Texas store featuring a fitness studio, a videogame lounge and style classes.
- SoftBank Masayoshi Son has evidently been so overworked of late that he actually fell asleep on stage earlier this week at the Future Investment Initiative conference, held in Saudi Arabia. We get it. Jet lag plus four people on a panel? It's a nightmare scenario.
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| | - China's ByteDance, the company behind video app TikTok and news app Jinri Toutiao, is reportedly planning an IPO in Hong Kong rather than New York. Hong Kong may be in continuing turmoil, but the U.S. is risky ground as lawmakers have called for a probe into TikTok's "national security risks." ByteDance was a year ago valued at $75 billion, in a funding round led by SoftBank.
- The Players’ Tribune, a New York-based digital media sports website co-founded by Derek Jeter, is exploring a potential sale, according to Bloomberg. Although nothing has been finalized, The Players’ Tribune could be the latest to join the recent flurry of digital media mergers. The Players’ Tribune has raised approximately $58 million in venture funding from investors including GV, IVP, NEA, and GenTrust.
- Tiffany receives $14.5 billion takeover offer from LVMH. The jeweler has received a takeover approach from the French luxury behemoth, which is seeking to add the iconic company to its portfolio of upscale brands.
- Alphabet’s Google reached a deal to buy Fitbit for roughly $2.1 billion, an acquisition which would extend the internet-search giant’s reach in consumer electronics.
- Wag, the dog-walking and pet-sitting startup, could sell itself to pet giant Petco, according to ReCode. The two companies have reportedly held talks over the last few weeks about a potential deal.
- Fiat Chrysler Automobiles (FCA) and Groupe PSA have agreed on a plan to merge the companies. Under the proposal, existing shareholders of each company would own 50 percent of the combined entity, with Oscar Tavares serving as the joint company’s CEO and John Elkann serving as chairman. As a part of the agreement, FCA shareholders would receive a cut of $6.1 billion in dividends and a share in FCA’s robotics unit Comau, while PSA would distribute its stake in auto parts company Faurecia, which is reportedly worth about $3.3 billion.
- Scopely, a mobile game publisher and fast-growing member of the unicorn club, raised $200 million in a Series D financing round led by NewView Capital. The Culver City, Calif.-based company, which is already profitable, will use the financing for acquisitions and to expand its portfolio of games across new genres and titles.
- Revolution, a venture firm that invests in startups located outside the major tech hubs, announced the close of its second Rise of the Rest Seed Fund, amounting to $150 million.The first fund of the same amount, which closed in late 2017, has backed close to 130 companies in nearly 70 cities.
- Shares in Saudi Aramco, the world's biggest oil producer, will start trading in Saudi Arabia on December 11, state broadcaster Al Arabiya announced, citing sources at the Future Investment Initiative in Riyadh (a.k.a Davos in the Desert.) Aramco hopes to raise up to $100 billion through its offer of a 5% stake. Is it just me? $100 billion for 5%?
- Chinese bitcoin hardware company Canaan Creative is aiming to raise $400 million in a U.S. initial public offering. The company's IPO filing reveals shrinking profits and diminishing revenues, even as operating expenses grew.
- China Feihe Limited, a Beijing-based infant formula maker, relaunched its Hong Kong IPO that could raise up to $1.14 billion, Reuters reports, citing sources.
- Crunchbase just closed a $30 million dollar Series C funding round led by CMERS Ventures .
- Some investors in high-valuation startups are taking substantial paper losses. Tobacco giant Altria wrote down its $12.8 billion investment in troubled e-cigarette maker Juul by more than a third. Earlier, Fidelity Investments cut the value of one of its funds' WeWork stake by 35 percent following the office-sharing startup's failed IPO.
- Drone maker Ehang has filed for an IPO in the U.S., seeking to raise a placeholder amount of $100 million through listing on Nasdaq. The listing comes as Senators pile pressure on the government to ban Chinese drones and is a snub to Shanghai’s new STAR Board—an exchange launched this year to attract local tech talent.
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| | Interesting Stocks From Last Week |
| | The charts below are referenced in 1 way or another above. GS prices reference previous posts... |
| Uber [UBER] -- Uber reports on Monday and a lot of stock comes free on lockup expiration. |
| | Amazon [AMZN] -- Amazon looks to be gearing up for another run. |
| | Microsoft [MSFT] -- Mr. Softee exploded out of a multiweek congestion area following numbers. |
| | Altria Group [MO] -- JUUL is apparently no jewel for Altria. |
| | Twitter [TWTR] -- Twitter put in a double top and fell apart following earnings. |
| | JCPenny [JCP] -- If JCPenny is looking for a comeback, it's gonna have to travel quite a long way. |
| | Tiffany [TIF] -- Tiffany has been approached as a buyout candidate. |
| | | Select Economic Announcements: - Monday - Factory Orders
- Tuesday - Int'l Trade, PMI Services, Redbook, ISM Non Mfg, JOLTS
- Wednesday - Productivity Costs, EIA Petro Status, 10 Yr Note Auction
- Thursday - Jobless Claims, EIA Nat Gas Report
- Friday - Consumer Sentiment, Wholesale Trade
Select Earnings Announcements: - Monday: UBER, MAR, SYY, PRU, ED, O, WTR
- Tuesday: AGN, REGN, NEM
- Wednesday: QCOM, CVS, EOG, HUM, TRIP, NYT
- Thursday: DIS, JCI, MNST, SYMC
- Friday: ENB, DUK, STWD, MSG
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| | | | As always, make up your own mind and, more important, minimize your risk no matter what you do.
KIS,
The Trader
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