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, try a two-week free trial to Bespoke’s premium stock market research!  You’ll be able to read our important “Equity Market Pros and Cons” report that was just published.

Here are our week 11 NFL picks vs. the spread.  We’re 77-55 (58.33%) so far this season through 10 weeks.

Social Media

Facebook Morale Takes a Tumble Along With Stock Price by Deepa Seetharaman (WSJ)

As Facebook continues to digest swirling drama around content moderation, lobbying, and other scandals, the stock price continues to lose ground and that’s having a brutal impact on employee morale. [Link; paywall]

Burned to death because of a rumour on WhatsApp by Marcos Martínez (BBC)

The horrifying story of small town rumor mills turbo-charged by instant messages which resulted in the assault and murder of two entirely innocent men in Mexico. [Link]

Sports

NBA Stars Make It Easier for You to Watch Them Play Esports by Christopher Palmeri (Bloomberg)

Fans are starting to watch NBA players play their favorite video games, and a variety of different services are lining up to help facilitate more fan-player interaction. [Link; soft paywall]

No One Has Ever Crossed Antarctica Unsupported. Two Men Are Trying Right Now. by Adam Skolnick (NYT)

Two years ago, a man lost his life trying to cross the entire continent of Antarctica on foot, but that isn’t deterring two men from attempting the near-impossible. [Link; soft paywall]

Health

The Effects of Cognitive Behavioral Therapy as an Anti-Depressive Treatment is Falling: A Meta-Analysis by Tom J. Johnsen and Oddgeir Friborg (Psychological Bulletin)

Using data from 70 different studies between 1977 and 2014, the authors reach the conclusion that cognitive behavioral therapy (talk therapy) is becoming much less effective (or perhaps wasn’t that effective to begin with). [Link; 23 page PDF]

The Flu Shot Needs Fewer Stats And More Stories by Maryn McKenna (Wired)

Last flu season, almost 80,000 people died at the hands of the flu after only 37% of adults got the flu vaccine, despite efficacy and safety that could prevent thousands of deaths. [Link; soft paywall]

Food

I Found the Best Burger Place in America. And Then I Killed It. by Kevin Alexander (Thrillist)

The darker side of those lists you read – and decide where to eat based on – which had the horrible side effect of ruining the restaurant. A cautionary tale about which kinds of customers a business should focus on. [Link]

Welcome to the Golden Age of Grocery Shopping by Clint Rainey (Grub Street)

While the grocery business has been challenged in terms of margins, the benefits have been huge for consumers in terms of choices and prices. [Link]

Weird News

Face off: Realistic masks made in Japan find demand from tech, car companies by Kwiyeon Ha (Reuters)

One small Japanese company is cashing in on the market for highly realistic face masks, which have a surprising number of uses! [Link]

Raccoons drunk on crab apples cause false rabies scare in West Virginia by Cleve R. Woodson Jr. (BHMG News/WaPo)

The denizens of Milton, West Virginia were concerned that they were being terrorized by raccoons “behaving weirdly”; thankfully, rotting crab apples were the true source of the odd behavior. [Link]

History

The Economics of the Great War: A Centennial Perspective by Stephen Broadberry and Mark Harrison (VOXEU)

A sweeping overview of the historical causes, conduct, and consequences of the First World War; this week marked the 100^th anniversary of Armistice Day. [Link]

Work Life

Cornering Your Boss, Snapping Pictures at Your Desk: It’s Take Your Parents to Work Day by Te-Ping Chen (WSJ)

In an aging society it shouldn’t really surprise us that office visits from parents rather than children are becoming a thing, but that doesn’t make it any less weird. [Link; paywall]

Mitch McConnell Guarantees Industrial Hemp Legalization by Kyle Jaeger (Marijuana Moment)

While federal decriminalization of marijuana probably isn’t happening soon, industrial hemp legalization is another story as the Senate Majority Leader has cleared the way for approval in the next farm bill. [Link]

Convenience, Consternation

The War Inside 7-Eleven by Lauren Etter and Michael Smith (Bloomberg)

Combining corporate power, federal law enforcement, and immigration law, this story is an incredible insight into the stand-off between 7-Eleven and its franchisees with significant collateral damage. [Link; soft paywall]

Hollywood

At Netflix, Who Wins When It’s Hollywood vs. the Algorithm? by Shalini Ramachandran and Joe Flint

In the race for viewer engagement, Netflix is often torn between what data tells it and the expertise it has hired to manage talent and produce content the old fashioned way. [Link; paywall]

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Have a great Sunday!

Week 10 Results: 9-3, Overall: 77-55 (58.33%)

Outside of financial markets, we’re also sports fans here at Bespoke.  With new legal sports betting avenues now available across the US, we figured we’d have some fun and pick each NFL game versus the spread this season (as of Saturday evening).  Let’s see how we do…on to Week 11.  (Lines as of 10:05 PM ET on 11/17/18.)

We were 9-3 in week 10, bringing our overall record through 10 weeks to 77-55 (58.33%).

2018 NFL Week 11 Bespoke Picks:

Carolina (-4.5) at Detroit: Detroit +4.5

Dallas at Atlanta (-3): Dallas +3

Cincinnati at Baltimore (-5.5): Cincinnati +5.5

Minnesota at Chicago (-2.5): Minnesota +2.5

Philadelphia at New Orleans (-7.5): Philadelphia +7.5

Tennessee at Indianapolis (-1.5): Indianapolis -1.5

Houston (-3) at Washington: Washington +3

Tampa Bay at NY Giants (-2.5): NY Giants -2.5

Denver at LA Chargers (-7): LA Chargers -7

Oakland at Arizona (-5.5): Oakland +5.5

Pittsburgh (-5.5) at Jacksonville: Pittsburgh -5.5

Kansas City at LA Rams (-3.5): Kansas City +3.5

2018 NFL Week 10 Bespoke Results:

Buffalo at NY Jets (-7): Buffalo +7 (Win)

Atlanta (-6) at Cleveland: Cleveland +6 (Win)

New Orleans (-5.5) at Cincinnati: Cincinnati +5.5 (Loss)

Washington at Tampa Bay (-3): Washington +3 (Win)

New England (-6.5) at Tennessee: New England -6.5 (Loss)

Miami at Green Bay (-10): Green Bay -10 (Win)

Jacksonville at Indianapolis (-3): Jacksonville +3 (Push)

Detroit at Chicago (-7): Detroit +7 (Loss)

Arizona at Kansas City (-16): Arizona +16 (Win)

LA Chargers (-10) at Oakland: LA Chargers -10 (Win)

Seattle at LA Rams (-9.5): Seattle +9.5 (Win)

Dallas at Philadelphia (-7): Dallas +7 (Win)

NY Giants at San Francisco (-3): NY Giants +3 (Win)

Since reaching an all-time high back on June 18th of this year, Stamps.com (STMP) has broken its uptrend and moved straight down.  As it currently stands, the stock is down 41.5% from its high.  STMP is another name that has seen fantastic growth the past few years, but after hitting highs earlier this year, it has given up all of its momentum.  The company has consistently reported strong quarters over the years with the last revenue or EPS miss happening back in Q2 of 2014.

So why has it gotten crushed despite seemingly solid earnings?  Traders seem to be focused more on a slowdown in margins and political risks that come with the company.  Over the past several quarters, despite strong headline numbers, gross margins have steadily slowed from higher cost of revenues.  So the headline earnings reports essentially are being taken with a grain of salt.

Being so closely connected with the United States Postal Service, the company announced contract re-negotiations back in August that stoked investor concerns.  Essentially, large parts of the business rely on USPS approval, and the results of negotiations determine some of the fixed costs and pricing of the company.  For 2019, the USPS has proposed price increases around 10%.  According to the company, these may not necessarily harm the company, but investors seem to disagree.  In addition, on the political front, the United States’s potential withdrawal from the Universal Postal Union, which is an agreement that coordinates postal policies internationally, would further complicate the business, although again, in its most recent earnings report the company does not see withdrawal as a headwind seeing as most of the company’s customers interact within the United States.  At the end of the day, STMP has seen tremendous growth over the past few years, but the innards of their earnings reports and political concerns have become a major headwind, not so much within the company, but in the market, and the market determines the price.

This week was mixed for economic data with about half of indicators coming in positive and the other half negative. The major release early in the week was CPI data. The headline number came in line with expectations while Core CPI came in slightly lower YoY.  Hourly earnings continued to accelerate; more confirmation of a tight labor market.  Thursday was the busiest day of the week.  Retail sales came in with a healthy beat.  Also on Thursday, the first two of our five Fed manufacturing indices came in with Empire beating and Philly missing, but the internals were stronger.  Today, we got one more of the five with Kansas City Fed’s manufacturing index beating estimates.  Along with higher manufacturing production, we should expect a slight uptick in the ISM PMI for October, as we mentioned in Thursday’s Closer.

Next week will be a quiet one for economic data due to the Thanksgiving holiday.  The first half of the week is all housing with the only release on Monday being the NAHB’s Housing Market Index, but more housing data follows Tuesday and Wednesday with housing starts, permits, and mortgage applications.  Manufacturing data also releases Wednesday with transportation expected to drag down durable goods.  Nothing will release on Thursday on account of Thanksgiving, but we cap off Friday with preliminary manufacturing and services PMIs.

As always you can check in on our Economic Monitor to get updated on the day’s economic releases.

To say that Nvidia (NVDA) has had a rough fall would be an understatement. The severity of this recent downturn is striking on a longer-term chart (see below).  The stock has more than erased its YTD gains at this point, falling to its lowest levels since the summer/early fall of 2017.  Since peaking on October 1st, the stock has been closing in on eliminating half of its value.  After last night’s earnings report, which missed analyst expectations for revenues and lowered guidance, the stock has fallen another 17%+ as of the time of this writing.  This was the second quarter in a row in which the company lowered guidance; a rare occurrence considering guidance had been raised the prior 11 quarters.

The weak earnings report partially comes from an excess in inventories that the company reports could take some time to wind down.  Another factor playing into the decline in revenues as well as the build-up in inventories is the winding down of the boost from the cryptocurrency craze.  It has to be noted that everyone’s desire to be a Bitcoin billionaire was not what necessarily led to Nvidia’s growth; it was more supplementary in the past year.  That exponential growth had been in place for a few years prior.  In the case of NVDA, on the backs of a few years of explosive growth—and as a result, explosive growth in expectations—this decline may simply be that investors are re-evaluating if this candle will continue to burn twice as bright.

From the chart below, the stock’s multi-year uptrend is clearly broken.

Thanksgiving week has historically been a positive time for the equity market.  Since WWII, the S&P 500 has averaged a gain of 0.64% during Thanksgiving week with gains three-quarters of the time.  Market trends heading into this Thanksgiving aren’t as positive for the bulls, though.  As shown in the table below, during years where the S&P 500 was positive but up less than 5% YTD heading into Thanksgiving week, the index’s average change during the week has been 0.00% with gains less than half of the time.

On a day to day basis, for both all years since WWII and in years where the S&P 500 was up less than 5% heading into Thanksgiving week, Monday has been the worst trading day as it is the only day of the week with negative average returns and positive returns less than half of the time.  Tuesdays and Friday, however, have been positive days, though, with average gains of 0.10% and 0.29%, respectively.  Additionally, for those years where the S&P 500 was up YTD but up less than 5%, Tuesdays and Fridays have been even stronger with average gains of 0.26% and 0.35%, respectively.

As we move past Thanksgiving, though, seasonal trends for the market based on this year’s performance so far improve.  In those years where the S&P 500 was up less than 5% YTD heading into Thanksgiving week, the average gains the week after Thanksgiving was 0.41% with positive returns 55% of the time.  For the remainder of the year, average returns were even stronger at +2.83%.  Not bad for a period of just over five weeks!