Heading into the first full trading week of February, major index trends are looking quite different from the extremely oversold conditions of one month ago.  With last week’s gains adding to the list of overbought names, currently, there are 9 ETFs in this group that are overbought while the remaining 5 are all still neutral; though it won’t take much of a move higher to allow these neutral ETFs to join their peers and vice versa.  Only the Russell Mid-Cap (IWR) is firmly sitting in overbought territory as it is coming off of strong momentum over the past week, rallying over 2%.  The next best performer is the Russell 1000 (IWB) at 1.68%.  The Russell 2000 (IWM) still leads the pack YTD with a gain of 11.41%.

Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.

While you’re here, join Bespoke Premium for 3 months for just $95 with our 2019 Annual Outlook special offer.

Health Care

ER doctors agree it’s time to tackle surprise emergency room bills by Sarah Kliff (Vox)

Surprise emergency room bills – the practice of in-network emergency rooms staffed by out-of-network practitioners leading to huge costs for patients not covered by insurance who are trying their best to comply with coverage requirements – is getting attention from both Congress and the private sector. [Link]

Apple & Aetna team up for health-tracking ‘Attain’ program by Mike Wuerthele (Apple Insider)

One of the country’s largest health insurers is partnering with Apple to provide incentives for patients to engage in healthy activity, with rewards that include gift cards and an Apple Watch. [Link]

Failure Of Justice

Taken: How police departments make millions by seizing property by Anna Lee, Nathaniel Cary, and Mike Ellis (The Greenville News)

A massive investigation of the practice of civil asset forfeiture, a practice of seizing property connected to criminal activity. In many cases, including those documented at length by this story, the practice is used to fund police departments regardless of whether the claims of connection to activity are legitimate. [Link]

He was accused of killing a Portland teen. Feds believe the Saudis helped him escape by Shane Dixon Kavanaugh (The Oregonian)

The Kingdom of Saudi Arabia has been implicated in the orchestration of a 21-year-old Saudi student who was awaiting trial for the hit-and-run killing of a Portland woman. [Link]

Media Matters

1 big thing: The future of media is niche by Sara Fischer (Axios)

Loyalty to a specific subject matter and coverage of it appears to be the only way to make money in digital media thanks to distribution costs nearing zero. [Link]

For Bill Simmons’s the Ringer, Podcasting Is the Main Event by Benjamin Mullin and Joe Flint (WSJ)

The Ringer was founded with a focus on podcasting from the very beginning, which may give it room to make up ground on much larger sports properties. [Link; paywall]

Telegraph to Pay Melania Trump ‘Substantial’ Damages for Article by Kelly Gilblom (Bloomberg Quint)

A British newspaper published an article that relied on “a number of false statements” which resulted in the paper paying substantial damages to the First Lady. [Link; soft paywall]

Michigan teen who made 700 BuzzFeed quizzes for free: No more by JC Reindl (Detroit Free Press)

After learning that her work was effectively allowing Buzzfeed to lay off paid staff, a Michigan teen who was the fifth-highest driver of traffic to the site has sworn off creating quizzes. [Link]

Environment

Chemours Is Using The U.S. As An Unregulated Dump For Europe’s Toxic GenX Waste by Sharon Lerner (The Intercept)

Chemical giant Chemours is shipping byproducts from the production of a chemical used in Teflon to North Carolina, making NC a dumping ground for toxic waste. [Link]

Earth system impacts of the European arrival and Great Dying in the Americas after 1492 by Alexander Koch, Chris Brierley, Mark M. Maslin, and Simon L. Lewis (SinceDirect)

Prior to the arrival of Europeans in North America, large scale activity by First Peoples kept growth of forests in check. For more on this subject, we also recommend the excellent history 1491 by Charles C. Mann (Amazon link). After the huge population declines related to disease exchange, enough plant life grew back that plausible estimates show carbon dioxide extraction from the atmosphere may have led to mini-ice ages. [Link]

China

Can China Turn the Middle of Nowhere Into the Center of the World Economy? by Ben Mauk (NYT Mag)

A spotlight on one of the largest infrastructure projects in history and the role it may play in the expansion of globalization. [Link; soft paywall]

The People’s Bank Capital of China by Thomas Hale (FTAV)

A look at a new PBoC program which allows for steal recapitalization of banks via the central bank, thanks to a facility which allows funding for holders of perpetual bonds issued by banks. [Link; soft paywall]

The Great Chinese Bank Bailout by Frances Coppola (Forbes)

More on the PBoC’s effort to stimulate demand for – and ultimately subsidize – central bank perpetual bonds which are helping keep the country’s banking system afloat. [Link]

Construction halts on $1-billion mixed-use complex in downtown L.A. by Roger Vincent, Emily Alpert Reyes, and David Zahniser (LAT)

A massive real estate development project in downtown LA is on pause thanks to a lack of funds from the Beijing-based company funding the project. [Link]

Online Activity

A “gold standard” study finds deleting Facebook is great for your mental health by Nicole Karlis (Salon)

A Stanford/NYU study showed that when users of Facebook deactivated their accounts, they spent more time socializing, had less polarized political views, and experienced higher subjective well-being. [Link]

Craigslist Reduced Violence Against Women by Scott Cunningham, Gregory DeAngelo, and John Tripp (Working Paper)

The passage of FOSTA in 2018 eliminated virtually all online forums which had allowed sex workers to screen clients, raising the prospect that a perverse effect of efforts to protect women from sex traffic may make violence against them more prevalent. [Link; 50 page PDF]

Product Innovation

iRobot’s Long-Awaited Terra Robot Does the Lawn Mowing for You by Don Reisinger (Fortune)

The maker of the Roomba has finally rolled out an automated solution to the problem of keeping your grass clipped and presentable. [Link]

Purina Wants to Feed Your Dog Crickets and Fish Heads by Corinne Gretler and Deena Shanker (Bloomberg)

The pet food company wants to use invasive species in pet food to both clean out the interlopers and provide viable protein for pups across the country. [Link; soft paywall]

Transit Tragedy

A Mother’s Fatal Fall on Subway Stairs Rouses New Yorkers to Demand Accessibility by Michael Gold and Emma G. Fitzsimmons (NYT)

A 22-year-old Stamford woman fell when trying to navigate the stairs at Seventh and 53^rd with a stroller containing her 1 year old daughter. The daughter survived the fall, her mother did not. [Link; soft paywall]

Crypto

An Interest Rates Primer for Cryptocurrency Folks by Josh Giersch (Josh.sg)

Interest rates implied by the bitcoin futures market are starting to get very attractive indeed, despite the crypto market collapse. [Link]

Investors

The Best Hedge Fund Manager of All Time Is… by Stephen Taub (Institutional Investor)

A London-based firm has ranked hedge funds performance and discovered that after fees the top 20 funds earned $23.2bn for clients last year compared with a $64.2bn loss for the rest of the industry. [Link]

Generation Studies

The Fleecing of Millennials by David Leonhardt (NYT)

A data-driven review of the economic prospects of the largest generation in American history, with some staggering results. [Link; soft paywall]

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Have a great weekend!

After three declines in the last four months, the ISM Manufacturing Index for January showed a nice rebound rising from 54.3 up to 56.6 versus expectations for a decline to 54.0.  Commentary in the report was also generally positive. While there was some caution with statements like, “Unlike in the last few years, we are experiencing a first-quarter slowdown,” the majority of comments were more along the lines of this one from the Machinery sector: “We continue to enjoy the benefits of a strong general economy. We are busy and maintain a backlog of sales orders.”

As far as the internals of the report were concerned, relative to last month things were generally skewed positive with six components rising and four declining.  On a year/year basis, things remain weaker as Business Inventories and Employment are the only components that were up versus their levels last January.

Perhaps the most notable trend in this month’s report was the decline in Prices Paid which fell to 49.6 from 54.9, which indicates falling price trends.  The last time this component was below 50 was coming out of the Energy price crash in February 2016.

The trend of falling commodities prices is also evident in the monthly commodity price survey found in each month’s ISM report.  In this month’s report, respondents noted price increases in 11 commodities and declines in 15.  This is also the first time since February 2016 that there were more commodities falling in price than rising.

Comparing the results of the monthly Commodities survey to trends in y/y CPI shows that inflation is more likely than not to continue to trend lower in the coming months.  The chart below shows the three month average of the monthly net number of commodities rising in price.  With this average currently at +2.7, it is the lowest since March 2016 when y/y CPI was running at a rate of 1.1% versus the most recent reading of 1.9%.

7%? Bulls will take it!  After an abysmal December, the S&P 500 is currently set to finish the month with its best January return since 1987.  This month’s gain will mark the 16th time since the lows of the Financial Crisis in March 2009 that the S&P 500 has rallied more than 5% in a given month.  The table below highlights each of the 15 prior months where the S&P 500 rallied more than 5% and shows how much the S&P 500 gained on the month as well as its performance on the last trading day of the month and the first trading day of the subsequent month.

When looking at the table, a few things stand out.  First, the first trading day of a month that follows a month where the S&P 500 rallied more than 5% has been extremely positive as the S&P 500 averages a gain of 0.84% (median: 1.01%) with positive returns 13 out of 15 times!  In addition to the positive tendency of markets on the first day of the new month, there has also been a clear tendency for the S&P 500 to decline on the last trading day of the strong month.  The average decline on the last trading day of a strong month has been 0.09% with positive returns less than half of the time.  This is no doubt related to the fact that funds are forced to rebalance out of equities to get back inline with their benchmark weights.  However, on those five prior months where the S&P 500 bucked the trend and was positive on the last trading day of a 5%+ month, the average gain on the first trading day of the next month was even stronger at 1.52% with gains five out of six times.