Bespoke Brunch Reads: 5/6/18
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.
Economic Research
Income inequality in the United States: it’s flatter than you probably realize by Phillip W. Magness
A new data set suggests that previous claims about the extreme level of inequality were exaggerated by methodological issues in the ubiquitous Capital In The 21st Century. [Link]
Religious Competition And Reallocation: The Political Economy Of Secularization In The Protestant Reformation by Davide Cantoni, Jeremiah Dittmar, and Noam Yuchtman
The authors of this working paper convincingly argue that the Reformation created competition between religious elites, allowing non-religious (secular) elites to fill the gap, therefore tilting Europe towards secularization on a permanent basis. [Link; 74 page PDF]
Can an Emerging Economy Get Into Financial Trouble by Holding Too Many Foreign Assets? by Brad W. Setser (Council on Foreign Relations)
Usually, emerging markets run in to problems because they don’t have enough foreign currency-denominated assets. Taiwan may have managed to gobble down too much of a good thing. [Link]
Financial Developments
How Five Robots Replaced Seven Employees at a Swiss Bank by Stephan Kahl (Bloomberg)
A Swiss bank used a software-based solution instead of human beings to conduct a specific task; in many ways, this is what IT departments have been doing for a long time. [Link; soft paywall, auto-playing video]
Does the VIX Need Fixing? Sure Looks That Way by John M. Griffin (Bloomberg)
Deviations between the monthly settlement prices and opening prices a few seconds later suggest that the VIX is being manipulated, but the owner of the index claims the process is normal. [Link; soft paywall]
Why Americans Are Getting Paid to Invest Abroad by Mike Bird (WSJ)
High hedging costs for European and Japanese investors who want to own USD bonds mean US-based investors can earn a high return by taking the other side of the trade. [Link; paywall]
Retail
The Return of the Brick-and-Mortar Store by Conor Sen (Bloomberg)
The costs of operating an online-only retail businesses (ads, mostly) are rising, just as the costs of operating brick-and-mortar retail businesses (rent) are falling. [Link]
Nike
At Nike, Revolt Led by Women Leads to Exodus of Male Executives by Julie Creswell, Kevin Draper and Rachel Abrams (NYT)
Fed up with mistreatment and a lack of career opportunity, women at Nike conducted an anonymous survey to establish a pattern of abuse from male executives. The result was a rash of departures as the company purged offenders. [Link; soft paywall]
Emotion
Can You Overdose on Happiness? by Lone Frank (Nautilus)
Given that technology now exists to directly stimulate the human brain and produce happiness (albeit at great cost and typically only in situations where there’s a therapeutic need), we need to start thinking about what the upper limit of “healthy” happiness is. [Link]
A Bit Much
They’re now making vodka from San Francisco fog by Charles Passy (MarketWatch)
A distillery (which actually does quite a good job in their typical offerings, from what we’ve tasted) in San Francisco is now using the city’s famous fog to create vodka that is the essence of San Francisco. [Link]
Derby Days
The Gambler Who Cracked the Horse-Racing Code by Kit Chellel (Bloomberg)
A dive inside the shadowy world of professional horse race gambling, including the story of the men tha correctly predicted a trifecta (the top three finishers, in order) in three consecutive races. [Link; soft paywall]
Alphabet
Evolution of the English Alphabet by Matt Baker (Useful Charts)
A set of charts designed to show how the earliest written alphabets slowly evolved into the modern English alphabet. [Link]
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Have a great Sunday!
The Bespoke Report Newsletter — 5/4/18
While the S&P 500-tracking SPY ETF fell 20 basis points on the week, the Nasdaq 100 (QQQ) rallied 1.72%. Looking at sectors, most fell, while Tech (XLK) was the only area of strength with a gain of 2.63%.
Outside of the US, both Brazil (EWZ) and Mexico (EWW) fell 5%+, while Australia (EWA) was the only country to gain more than 1%. And while oil (USO) rallied, gold (GLD) and silver (SLV) declined.
We’ve just published our weekly Bespoke Report newsletter, which provides an in-depth review of recent market action and events. In this week’s report, we also provide two lists of stocks we think look attractive. One list looks at top earnings plays, while the other looks at “domestic” stocks with attractive chart patterns. To read this week’s Bespoke Report, start a two-week free trial by clicking the button below.
The Closer: End of Week Charts — 5/4/18
Looking for deeper insight on global markets and economics? In tonight’s Closer sent to Bespoke clients, we recap weekly price action in major asset classes, update economic surprise index data for major economies, chart the weekly Commitment of Traders report from the CFTC, and provide our normal nightly update on ETF performance, volume and price movers, and the Bespoke Market Timing Model. We’ve recently added a section that helps break down momentum in developed market foreign exchange crosses as well.
Below is a snapshot from today’s Closer highlighting weekly intraday price charts for major equity indices and other asset classes. If you’d like to see more, start a free trial below.
The Closer is one of our most popular reports, and you can sign up for a free trial below to see it!
See tonight’s Closer by starting a two-week free trial to Bespoke Institutional now!
FANGs: More Lives Than a Cat
Can a group of stocks be any more resilient than the FANG stocks? It seems like any time the stocks in this group have their backs against the ropes, they come bouncing back. It happened again this week when a very poor start quickly turned around. Adding even more irony to the story — who would have thought that Warren Buffett would have a hand in providing a boost to the group!
The graph below is from our Trend Analyzer tool and shows the current levels of the stocks that make up the FANG+ Index using the Custom Portfolio feature of this tool. Led by Apple (AAPL), after Warren Buffett told CNBC that he purchased an additional 75 million shares of the stock during the first quarter, the FANG+ stocks had a monster week, rising an average of 3.25% with every stock besides Tesla (TSLA) in the green. Forget about TSLA, though, because who has time for “boring, boneheaded” stocks that go down anyways? Besides AAPL, Twitter (TWTR) and Alibaba (BABA) also had strong weeks with gains of 7.4% and 6.3%, respectively.
The only three stocks in the FANG+ index that are below their 50-DMAs are Alphabet (GOOGL), TSLA, and TWTR. Of these three stocks, the weakness in GOOGL is probably the most surprising. Along with Facebook (FB), the company has a near monopoly with a lot less of the baggage, yet while FB is still up YTD, GOOGL is down by over 2% and underperforming every single stock in the FANG+ group except for TSLA.
When it comes to their trading ranges, after AAPL moved from deeply oversold territory to very overbought in the span of a week, its “Timing” score is the only one in the group that is classified as Poor, while Booking (BKNG), Netflix (NFLX), and NVIDIA (NVDA) all still have Good Timing scores.
The Closer — No Resolution Yet — 5/3/18
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Looking for deeper insight on markets? In tonight’s Closer sent to Bespoke Institutional clients, we discuss the technical set-up for the S&P 500 along with economic data released today in the United States.
See today’s post-market Closer and everything else Bespoke publishes by starting a 14-day free trial to Bespoke Institutional today!
Chart of the Day: Staples of A Bear Market
Bespoke Consumer Pulse Report — May 2018
Bespoke’s Consumer Pulse Report is an analysis of a huge consumer survey that we run each month. Our goal with this survey is to track trends across the economic and financial landscape in the US. Using the results from our proprietary monthly survey, we dissect and analyze all of the data and publish the Consumer Pulse Report, which we sell access to on a subscription basis. Sign up for a 30-day free trial to our Bespoke Consumer Pulse subscription service. With a trial, you’ll get coverage of consumer electronics, social media, streaming media, retail, autos, and much more. The report also has numerous proprietary US economic data points that are extremely timely and useful for investors.
We’ve just released our most recent monthly report to Pulse subscribers, and it’s definitely worth the read if you’re curious about the sustainability of economic growth in the US. Start a 30-day free trial for a full breakdown of all of our proprietary Pulse economic indicators.
Bespoke’s Sector Snapshot — 5/3/18
We’ve just released our weekly Sector Snapshot report (see a sample here) for Bespoke Premium and Bespoke Institutional members. Please log-in here to view the report if you’re already a member. If you’re not yet a subscriber and would like to see the report, please start a two-week free trial to Bespoke Premium now.
Below is one of the many charts included in this week’s Sector Snapshot, which highlights the year-to-date percentage change of the eleven S&P 500 sectors. At this point, just three sectors are still in positive territory, while eight are in the red. Consumer Staples and Telecom are down the most with declines of more than 13%.
To find out what this means and to see our full Sector Snapshot with additional commentary plus six pages of charts that include analysis of valuations, breadth, technicals, and relative strength, start a two-week free trial to our Bespoke Premium package now. Here’s a breakdown of the products you’ll receive.
April Employment Report Preview
Heading into Friday’s Non Farm Payrolls (NFP) report for April, economists are expecting an increase in payrolls of 193K, which would be a big improvement from March’s dismal reading of 103K, in what was the biggest NFP miss relative to expectations since the September 2017 report. In the private sector, economists are also expecting a similar increase of 190K. With these increases, the unemployment rate is expected to fall to 4.0%. The big area of focus, however, will come from average hourly earnings. With so much concern around inflation, any stronger than expected reading in wage measures will be a negative for the market.
Ahead of the report, we just published our eleven-page preview of the April jobs report. This report contains a ton of analysis related to how the equity market has historically reacted to the monthly jobs report, as well as how secondary employment-related indicators we track looked in April. We also include a breakdown of how the initial reading for April typically comes in relative to expectations and how that ranks versus other months.
One topic we cover in each month’s report is the S&P 500 stocks that do best and worst from the open to close on the day of the employment report based on whether or not the report comes in stronger or weaker than expected. In other words, which stocks should you buy, and which should you avoid? The table below highlights the best-performing stocks in the S&P 500 from the open to close on days when the Non-Farm Payrolls report has been better than expected over the last two years.
Of the 25 top performing stocks on days when the NFP beats expectations, eight sectors are represented, and Consumer Discretionary leads the way with nine. Vornado (VNO) has been the best performing stock with an average open to close gain of 2.86%. In terms of consistency, CH Robinson (CHRW) has been up every time, while another six stocks have been positive nine out of ten times.
For anyone with more than a passing interest in how equities are impacted by economic data, this report is a must-read. To see the report, sign up for a monthly Bespoke Premium membership now!
