Opinion (171)

Admin

Earnings Growth Likely Peaked In Q1

Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actuals and estimates for the current and following periods, please click here>>>

Here are the key points:

•    The Q1 earnings is effectively over now, with results from 492 S&P 500 members already out. Total earnings for these companies are up +13.5% from the same period last year on +7.2% higher revenues, with 72.6% beating EPS estimates and 65.2% beating revenue estimates.

•    These results represent a notable improvement over what we have been seeing from the same group of companies in other recent periods. While growth reached the highest level in more than 5 years, a bigger proportion of companies have been able to beat estimates, particularly revenue estimates.

•    For the Retail sector, total Q1 earnings are up +1.7% from the same period last year on +3.1% higher revenues, with 60% beating EPS estimates and 50% beating revenue estimates.

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Admin

The Big Picture

First and foremost let me point out that Ray Dalio, founder of investment firm Bridgewater Associates, has joined Twitter so I encourage you to follow him here.  Secondly I suggest you grab a cup of coffee or maybe the entire pot as he gradually lays out what he sees ahead for the market.  Enjoy!

Big picture, the near term looks good and the longer term looks scary. That is because:

  1. The economy is now at or near its best, and we see no major economic risks on the horizon for the next year or two,
  2. There are significant long-term problems (e.g., high debt and non-debt obligations, limited abilities by central banks to stimulate, etc.) that are likely to create a squeeze,
  3. Social and political conflicts are near their worst for the last number of decades, and
  4. Conflicts get worse when economies worsen.

So while we have no near-term economic worries for the economy as a whole, we worry about what these conflicts will become like when the economy has its next downturn.

The next few pages g

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Admin
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While Google and Facebook are the undisputed advertising leaders online, companies are increasingly looking for other digital ways to spend their marketing budgets, according to advertising and public relations company WPP CEO Sir Martin Sorrell.

"What our clients want and what our agencies want is more competition of the space, anything that gives more competition to the duopoly of Facebook and Google," Sorrell said to CNBC.

The two tech giants account for about 75 percent of digital ad budgets, according to Sorrell. But, there are competitors ready to chip away at their dominance, including AOL and Yahoo's ad tech platforms and Snap. Even Amazon is becoming a threat, with its ad platform recently valued at $350 billion, he pointed out.

"Getting more than two solutions is important," he said.

But while Google's issue of ads appearing next to questionable content is causing companies to pull dollars right now, Sorrell doesn't think the moves will be permanent because of how big of

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Admin

rtxqye3.jpg?width=400The US pharmaceutical industry is on the brink of a new ecosystem — but it's not taking off as smoothly as expected.

Up until the past few years, biologic drugs made from living cells didn't face competition once they lost patent protection. That's been changing with the introduction of drugs called biosimilars. But their rollout hasn't exactly been the game-changing experience some had expected.

"We believe that biosimilars will capture meaningful market share, but the disappointing commercial success so far with less than $2 billion annual sales illustrates that the bar is high," Morgan Stanley analysts said in a report on Wednesday. That's in large part because of the economic challenges that biosimilars face, the report says. 

Biosimilars are a bit more complicated than your average competing medicine: Unlike generics for chemical-based drugs like antibiotics that can be interchangeable with branded versions, the copycats of biologic medications, produced using living cells, have a

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Admin

Autonomous Cars And Second Order Consequences

Grab a cup of coffee, sit back and absorb this piece which I believe, will blow your mind.  I had read a good deal on self-driving cars and the implications of what lies ahead but this piece by Ben Evans has completely re-written my belief of what life will be in ten years.  Wowsa!   I know what I'll be dreaming about tonight. *lol*  Enjoy-

There are two foundational technology changes rolling through the car industry at the moment; electric and autonomy. Electric is happening right now, largely as a consequence of falling battery prices, while autonomy, or at least full autonomy, is a bit further off - perhaps 5-10 years, depending on how fast some pretty hard computer science problems get solved. Both of these will cycle into essentially the entire global stock of (today) around 1.1bn cars over a period of decades, subject to all sorts of variables, and both of them completely remake the car industry and its suppliers, as well as parts of the tech industry. 

Both electric and a

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Admin

What Are The 7 Signs Of A Bear Market?

1291436?profile=originalWall Street pros say bull markets don’t die of old age. But after eight years of rising stock prices, being on the lookout for signs of a market peak makes good financial sense.

No bull lasts forever. Good times eventually are followed by bad ones, as investor euphoria gives way to fear and despair. The performance history of the Standard & Poor’s 500 stock index drives home the point: The 12 bull markets since the 1930s have all been followed by bear markets, or downturns of 20% or more, according to S&P Dow Jones Indices. The average bear market decline is a sizable 40%. Then there’s the mega-bears like the 2007-2009 rout during the financial crisis that knocked the S&P 500 down 57% and the nearly 50% slide after the internet stock bubble burst in 2000.

The current bull run, the second-longest in history and one that's generated a fourth-best gain of 254%, will eventually tire out, hit one final peak and head lower like all the rest.

The only question is when?

James Stack, a mark

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Admin

Iff you're hesitant to make stock purchases at these levels, you're not alone.

Last week I updated the Warren Buffett yardstick, market cap-to-GNP. The only time it was ever higher than it is today was for a few months at the top of the dotcom mania.

However, when you look under the surface of the market-cap-weighted indexes at median valuations they are currently far more extreme than they were back then. As my friend John Hussman puts it, this is now “the most broadly overvalued moment in market history.”

Another way to look at stock prices is in relation

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Admin

I found this interesting (the rise) however I have my own reservations because of the possible change in rates and inflation in 2017.  When inflation rises, interest rates also normally rise to maintain real rates within an appropriate range. PE ratios need to decline to reflect the increase in the earnings discount rate. Another way to look at it is that equities then face more competition for money from fixed income instruments. The cost of equities must therefore decline to keep or attract investors.  Then there is the Rule of 20 to consider.  Rule of 20 equals P/E + long term interest rates (average of 10 and 30 yr bond rates).  If at or below 20 minus inflation -- the market is a buy.  If above 20 minus inflation -- the market is a sell. Today we're at just about 20.  I think I'll keep my cautious side up.  Keep moving up my alerts and stick to only brief swings.  Something tells me it's going to be an interesting year.  All focus on the Fed and inflation.  

During the past week (

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Admin

1291471?profile=originalRules and regulations exist to let us know what behaviors we should expect from the people we do business with. Sometimes, good sense or social convention overtake these rules — and they don’t matter so much. Just about everyone wears seat-belts these days (we all know how much they improve our odds of survival in an accident); the ranks of underage smokers have plummeted (it’s no longer cool). Once the toothpaste is out of the tube, as they say, there’s no cramming it back in.

Such is the case with the Department of Labor’s fiduciary rule. On Friday, President Trump asked the Labor Department to review the rule, which requires brokers working with retirement savers to put the interest of their clients ahead of their own. After years of work on it, the regulation was finalized last year by the Obama administration.

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Admin

President Donald Trump signs an executive order aimed at reducing regulations at the White House earlier this week.In a high-profile attack on growth-killing red tape, President Donald Trump this week ordered that any agency issuing a new rule find two to repeal.

He will likely discover that the only thing harder than getting something done in Washington is getting it undone.

Vast swaths of rules are untouchable because Congress ordered them to be written or the president himself demanded them. Finding rules to repeal is a tedious and time-consuming affair that usually yields tiny savings, mostly in reduced paperwork. Ultimately, rules are passed because they have benefits, from cleaner air to fewer terror attacks, that voters or presidents aren’t willing to forgo.

The first president to tackle the leviathan was Jimmy Carter who proposed a “regulatory budget” to limit the financial burden of new rules. Every president since has tried the same. George W. Bush invited suggestions from the public on rules to repeal. Barack Obama trumpeted two executive orders requiring federal agencies to “look back”

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Admin

S&P500 Earnings With Trump Over The Shoulder

Before I present the insight on expected earnings ahead, there is one point I wish to make; that being Trump.  If you're not following our President elect on Twitter, you should get with it now.  Some may say it's not "Presidential" to be on TWTR but our commander and chief does what he wishes, and he wishes to scare whomever he can.  At the very least, throw him up as a column on TweetDeck and watch the charts fly when he mentions a name. 

Now while AMZN and GM were formerly expecting good growth in 2017, you will notice that both are now on Trumps radar for taxation and import/export fees which explains their recent trading action.  There seems to be no love lost between AMZN owner Jeff Bezos.  Even Trumps comments on taxation such as “If @amazon ever had to pay fair taxes, its stock would crash and it would crumble like a paper bag." should leave investors more than a tad concerned.  At this point, I feel we'll see quite a bit of this concern over China/Mexico/taxation/tariffs in th

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Admin

Wall Streets Top Picks For 2017 With Trump

new-years-day-1924608_1920.jpg?width=300We are into the homestretch of 2016, and the markets have seen strong upside this year, benefiting from the domestic economy's resilience and the election of Donald Trump.

With just four sessions to go, the Dow Jones Industrial Average has been a up a solid 14.4 percent, the S&P 500 has risen 10.8 percent and the NASDAQ Composite is 9.1 percent higher — with all the three major averages trading off their all-time closing highs.

Among the ten S&P sectors, eight have been in the green. Old economy stocks such as energy, material, industrial, financial, utility and telecom are all up by double-digit percentages. Technology stocks are also up decently. However, the healthcare sector has taken a hit.

Though it is tough to replicate the performance of 2016, given the tougher comparisons and the uncertainty around policies amid the political leadership transition, Wall Street does see some opportunities that are compelling.

Here is a compilation of some top picks recommended by Wall Street an

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Admin

Is The Fed About To Experience A Repeat Of 2016?

In the most recent Summary of Economic Projections, Fed officials penciled in three 25bp rate hikes for 2017. The reality, however, could be very different. We all remember how “four” became “one” in 2016. The median dots are neither a promise nor an official forecast. As 2016 progressed, forecasts associated with a lower path of SEP “dots” evolved as the consensus view of policymakers. Will the same happen this year? I don’t think so; it is hard to see the Fed on pause for another twelve months.

As a starting point, I think it best to assume the US economy is near full-employment. But the US economy was near full-employment at this time last year as well. I think the key difference between then and now is that then the after-effect of the oil price slide and dollar surge placed a drag on the US economy sufficient to ease hiring pressure. At the same time, labor force participation perked up, setting the stage for a flat unemployment rate for most of the year. Inflationary pressures e

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Admin

It's Not What You Think. Market Myths Debunked

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"A lie told often enough becomes the truth" - Vladimir Lenin

Imagine for a minute you lived centuries ago when people believed the earth was flat, or the earth revolved around the sun, or that planets were Gods, or that disease was angry spirits or supernatural powers. You'd have an explanation for everything ... only it would be wrong. And that "wrongness" would stand in the way of true understanding and true progress until they were discarded as falsehoods.

And so it is with the Stock Market. Let me explain.

First, let me be perfectly clear. I'm a statistician so I'm not referring to philosophical or political or gut feelings or anything other than Statistical Misrepresentations. Fact, not opinion.

I can hardly go a day without reading an article or hearing a TV pundit or someone regurgitate misconceptions that are so integrated in our minds ... we believe them to be the truth.

These misconceptions cause us to make investing mistakes because we take them as axiomatic when they are

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Admin

The Run In Small Caps. Will It Continue In 2017

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The stock market went on quite a tear in the 3+ weeks immediately following the election, with the month of November especially beneficial for small-cap stocks.

Before delving into what it all might mean for small-cap investors, here's a quick rundown to help contextualize just how dynamic a month it was:

  1. This was the best November in the history of the Russell 2000 Index. featuring its highest monthly return since October 2011 when small-caps were just emerging from a precipitous decline.
  2. The performance spread between small-cap and large-cap was the widest in 14 years (since April 2002). The Russell 2000 gained 11.2% for the month versus respective gains of 3.9% and 3.7% for the large-cap Russell 1000 and S&P 500 Indexes.
  3. Small-cap value enjoyed a good year's worth of results in one month! During November, the Russell 2000 Value advanced 13.3% compared to 9.0% for the Russell 2000 Growth.
  4. Small-cap value earned an even bigger advantage quarter-to-date, thanks to better performanc

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Admin

Remembering The Impetus Of Irrational Exuberance

1291328?profile=originalIn December of 1996, Greenspan was clearly beginning to worry about the economic fallout of a bursting asset bubble. Back then he had a front row seat and, in fact, a strong hand in creating the dotcom bubble, whether he admits it or not. He was so worried about the consequences of “irrational exuberance” that he declared these concerns “must be an integral part of the development of monetary policy.” And this was before he had even witnessed any of the actual economic consequences we have now lived with for two decades. Clearly, his worries were well founded but he wasn’t quite worried enough.

The financial well-being of entire generations has been permanently damaged. Think of the Baby Boomers whose retirement dreams turned to nightmares through two stock market crashes in less than a decade. Think of the Generation Xers whose dreams were shattered by the housing bubble and the mortgage crisis. As a group these latter folks, even though they are now entering their peak earnings year

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Admin

Tactically Cautious On Global Equities

A December Fed rate hike, uncertainty regarding the U.S. presidential elections, weak earnings growth, diminished buyback activity and concerns about European banks pose near-term risks to global equities.  Comments in italics are mine.

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The summer rally has left equity valuations looking stretched. The median U.S. stock now trades at a higher P/E ratio than even at the 2000 peak. The Shiller P/E ratio stands at 27, but would be 37 if profit margins over the preceding ten years had been what they were in the 1990s. The fact that interest rates are low gives stocks some support, but with the Fed likely to hike rates in December, that tailwind will begin to fade.

Lackluster earnings growth remains another concern. S&P 500 and economy-wide profit margins have rolled over. Granted, the collapse in profits in the energy sector has been the major culprit, and this headwind should wane if oil prices edge higher over the next 12 months, as we expect. Nevertheless, faster wage growth and a f

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