Bespoke Brunch Reads: 12/9/18

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.

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

Entrepreneurship Ups & Downs

Inside the $400 Million Family-Run Supermarket That Helped Launch Martha Stewart and Paul Newman by Leigh Buchanan (Inc.)

A profile of a grocery store beloved in the Bespoke offices, which has managed to gain serious ground in a very competitive market in the Tristate area. [Link]

“Everyone’s For Sale”: A Generation Of Digital-Media Darlings Prepares For A Frigid Winter by Joe Pompeo (Vanity Fair)

An overview of profitability pressures, revenue growth slowdowns, and liquidity pressures that have digital media start-ups seeking sales at 95% discounts and cutting staff. [Link]

American Entrepreneurs Who Flocked to China Are Heading Home, Disillusioned by James T. Areddy (WSJ)

American entrepreneurs and investors who flocked to China are starting to come back, grappling with worsening conditions for foreigners driven by Chinese politics and grand strategy. [Link; paywall]

Miscellaneous Stories

How missing Dubai princess practised her escape by Sanya Burgess (Sky News)

The story of Sheikha Latifa bint Mohammed bin Rashid Al Maktoum, the daughter of Dubai’s ruler. After a failed escape attempt involving scuba-diving with an underwater scooter and an abduction via helicopter from India where she was seeking asylum. [Link]

The Oral History of ‘San Junipero’ by Charlie Brooker, Annabel Jones, and Jason Arnopp (Vulture)

Black Mirror is known for its dystopian, horrifying vision of the future, but the episode entitled San Junipero offered an optimistic view of human connection and the technology that can make it easier. [Link]

Research

Gross capital flows by banks, corporates and sovereigns by Stefan Avdjiev, Bryan Hardy, Sebnem Kalemli-Ozcan and Luis Servén (BIS Working Papers)

This new paper attempts to disaggregate gross capital flows (that is, inflows and outflows, rather than the net numbers which tend to get more attention) by sector, with important empirical findings. [Link]

Japan’s age wave: Challenges and solutions by David Bloom, Paige Kirby, JP Sevilla, and Andrew Stawasz (VOX EU)

A review of the challenges and possible solutions related to aging populations, using Japan as an example for both. [Link]

Politics

Iowa Democrats Say They Want Generational Change by Reid J. Epstein and Janet Hook (WSJ)

An interesting straw poll of Iowa’s Democratic leadership suggesting that many Presidential front-runners face a significant headwind in their bids for early delegates: their age. [Link; paywall]

Busts

Titans of Junk: Behind the Debt Binge That Now Threatens Markets by Shannon D. Harrington, Sally Bakewell, Christopher Cannon and Mathieu Benhamou (Bloomberg)

Data and analysis on the massive junk bond market, which has grown dramatically in size over the last decade as global bond buyers have bid up the asset class. [Link; soft paywall]

The U.S. Housing Boom Is Coming to an End, Starting in Dallas by Laura Kusisto (WSJ)

Part of the ongoing series of worries about the US housing market, featuring unsold houses in the booming Dallas economy and price cuts on new builds. [Link; paywall]

So Far, the Corporate Tax Changes Have Been a Bust by Matthew C. Klein (Barron’s)

Benefits promised by lawmakers related to corporate tax cuts passed at the end of last year seem to be making little difference across a variety of metrics: corporate investment, dividends and buybacks, and repatriation. [Link; paywall]

Tech

Microsoft Pushes Urgency of Regulating Facial-Recognition Technology by Jay Greene and Douglas MacMillan (WSJ)

Competition in facial recognition technology has led to some unlikely outcomes, including some of the companies involved calling for regulation in the space. [Link; paywall]

The Friendship That Made Google Huge by James Somers (WSJ)

Everyone knows Larry and Sergey but another less-heralded duo also made the world’s link to information via search what it is today. [Link]

Tesla drove 7 miles using Autopilot as driver allegedly slept drunk behind the wheel by Rob Thubron (Techspot)

Don’t drink and Autopilot. A California man turned on the Tesla feature and then fell asleep as his car continued to drive, making it 7 miles before police officers intervened. [Link]

Financial Industry

The Amazing Madoff Clawback by Tunku Varadarajan (WSJ)

Bernie Madoff’s Ponzi scheme was the largest ever, and trustees trying to return investors’ money expected to get back only 5-10% of what investors had put in. At this point, claims have seen recovery rates of almost 75%, a remarkable figure all things considered. [Link; paywall]

Nasdaq moves into ‘alternative data’ with Quandl acquisition by Robing Wigglesworth (FT)

Desktop data provider Quandl proved an inviting target for the exchange company, which has started moving into non-traditional data sources. [Link; paywall]

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Have a good Sunday!

2018 Week 14

Week 13 Results: 4-11, Overall 95-79 (54.6%)

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).

On to the week 14 slate of Sunday and Monday Night games:

2018 NFL Week 14 Bespoke Picks:

NY Jets at Buffalo (-4): NY Jets +4

Carolina (-1.5) at Cleveland: Carolina -1.5

Atlanta at Green Bay (-4.5): Atlanta +4.5

Baltimore at Kansas City (-6.5): Kansas City -6.5

New England (-7.5) at Miami: New England -7.5

New Orleans (-10) at Tampa Bay: Tampa Bay +10

NY Giants (-3) at Washington: NY Giants -3

Indianapolis at Houston (-4.5): Indianapolis +4.5

Cincinnati at LA Chargers (-14.5): LA Chargers -14.5

Denver (-3.5) at San Francisco: Denver -3.5

Philadelphia at Dallas (-3): Dallas -3

Pittsburgh (-10) at Oakland: Oakland +10

Detroit (-3) at Arizona: Detroit -3

LA Rams (-3) at Chicago: LA Rams -3

Minnesota at Seattle (-3): Minnesota +3

2018 NFL Week 13 Bespoke Results:

Indianapolis (-4) at Jacksonville: Indianapolis -4 (Loss)

Carolina (-3) at Tampa Bay: Carolina -3 (Loss)

Baltimore at Atlanta (-2.5): Atlanta -2.5 (Loss)

Cleveland at Houston (-5.5): Cleveland +5.5 (Loss)

Buffalo at Miami (-3.5): Buffalo +3.5 (Loss)

Chicago (-3.5) at NY Giants: Chicago -3.5 (Loss)

Denver (-5) at Cincinnati: Cincinnati +5 (Loss)

LA Rams (-10) at Detroit: LA Rams -10 (Win)

Arizona at Green Bay (-13.5): Arizona +13.5 (Win)

Kansas City (-14) at Oakland: Kansas City -14 (Loss)

NY Jets at Tennessee (-8): NY Jets +8 (Win)

Minnesota at New England (-5): Minnesota +5 (Loss)

San Francisco at Seattle (-10): San Francisco +10 (Loss)

LA Chargers at Pittsburgh (-3): Pittsburgh -3 (Loss)

Washington at Philadelphia (-6.5): Philadelphia -6.5 (Win)

2019 Outlook Report — Housing

Our 2019 Bespoke Report market outlook is the most important piece of research that Bespoke publishes each year.  We’ve been publishing our annual outlook piece since the formation of Bespoke in 2007, and it gets better and better each year!  In this year’s edition, we’ll be covering every important topic you can think of dealing with financial markets as we enter 2019.

The 2019 Bespoke Report contains sections like Washington and Markets, Economic Cycles, Market Cycles, The Fed, Sector Technicals and Weightings, Stock Market Sentiment, Stock Market Seasonality, Housing, Commodities, and more.  We’ll also be publishing a list of our favorite stocks and asset classes for 2019 and beyond.

We’ll be releasing individual sections of the report to subscribers until the full publication is completed by year-end.  Today we have published the “Housing” section of the 2019 Bespoke Report, which focuses on the recent slowdown in housing-related data and where we think things will shake out in 2019.

To view this section immediately and all other sections as they’re published between now and December 21st, sign up for our 2019 Annual Outlook Special!

2019 Outlook Report — Yield Curve & Fed

Our 2019 Bespoke Report market outlook is the most important piece of research that Bespoke publishes each year.  We’ve been publishing our annual outlook piece since the formation of Bespoke in 2007, and it gets better and better each year!  In this year’s edition, we’ll be covering every important topic you can think of dealing with financial markets as we enter 2019.

The 2019 Bespoke Report contains sections like Washington and Markets, Economic Cycles, Market Cycles, The Fed, Sector Technicals and Weightings, Stock Market Sentiment, Stock Market Seasonality, Housing, Commodities, and more.  We’ll also be publishing a list of our favorite stocks and asset classes for 2019 and beyond.

We’ll be releasing individual sections of the report to subscribers until the full publication is completed by year-end.  Today we have published the “Yield Curve & Fed” section of the 2019 Bespoke Report, which focuses on financial conditions, the level of the yield curve, and the stance of the FOMC heading into 2019.

To view this section immediately and all other sections as they’re published between now and December 21st, sign up for our 2019 Annual Outlook Special!

2019 Outlook Report — Economic Cycles

Our 2019 Bespoke Report market outlook is the most important piece of research that Bespoke publishes each year.  We’ve been publishing our annual outlook piece since the formation of Bespoke in 2007, and it gets better and better each year!  In this year’s edition, we’ll be covering every important topic you can think of dealing with financial markets as we enter 2019.

The 2019 Bespoke Report contains sections like Washington and Markets, Economic Cycles, Market Cycles, The Fed, Sector Technicals and Weightings, Stock Market Sentiment, Stock Market Seasonality, Housing, Commodities, and more.  We’ll also be publishing a list of our favorite stocks and asset classes for 2019 and beyond.

We’ll be releasing individual sections of the report to subscribers until the full publication is completed by year end.  Today we have published the “Economic Cycles” section of the 2019 Bespoke Report, which focuses on where we currently are in the business cycle and the likelihood of recession in the year ahead.

To view this section immediately and all other sections as they’re published between now and December 21st, sign up for our 2019 Annual Outlook Special!

2019 Outlook Report — Seasonality

Our 2019 Bespoke Report market outlook is the most important piece of research that Bespoke publishes each year.  We’ve been publishing our annual outlook piece since the formation of Bespoke in 2007, and it gets better and better each year!  In this year’s edition, we’ll be covering every important topic you can think of dealing with financial markets as we enter 2019.

The 2019 Bespoke Report contains sections like Washington and Markets, Economic Cycles, Market Cycles, The Fed, Sector Technicals and Weightings, Stock Market Sentiment, Stock Market Seasonality, Housing, Commodities, and more.  We’ll also be publishing a list of our favorite stocks and asset classes for 2019 and beyond.

We’ll be releasing individual sections of the report to subscribers until the full publication is completed by year end.  Today we have published the “Seasonality” section of the 2019 Bespoke Report, which looks at the historical trading pattern for US indices, sectors, and other asset classes throughout the calendar year.

To view this section immediately and all other sections as they’re published between now and December 21st, sign up for our 2019 Annual Outlook Special!

Next Week’s Economic Indicators

It was a busy week in economic data with 33 releases out of the US.  Of these 33, only 10 beat estimates or the previous period’s reading while about half came in worse than expected.  Manufacturing data kicked this week off with Markit Manufacturing PMI coming in slightly below estimates and the ISM Manufacturing Index saw a healthy beat, although prices paid missed big.  Tuesday had no scheduled releases. Wednesday only saw mortgage applications and the Fed’s Beige Book release as all other releases were postponed or canceled due to the observance of President George H.W. Bush’s funeral.  Things picked up with a busy end to the week. Thursday we saw the counterparts to Monday’s releases with Markit Services PMI and ISM Non-manufacturing index both coming in strong.  The week concluded with a weaker Nonfarm Payrolls report indicating a slowdown of an extremely hot labor market.

Next week will be a bit lighter but still busy economic slate. The JOLTS report will start off the week as the only indicator on Monday. Tuesday we will get small business optimism data as well as producer prices which are both expecting downticks. Consumer prices will follow up on Wednesday with the Treasury’s monthly federal government budget statement coming later in the day. Import and export price indices come out on Thursday alongside jobless claims, which has now seen multiple weeks of increases off historic lows. It will be an end loaded week with retail sales, industrial production, capacity utilization, preliminary Markit PMIs, and inventories all releasing Friday morning.

Trend Analyzer – 12/7/18 – Intraday Recovery Staves Off Oversold

Despite intraday recovery yesterday which helped to salvage the major index ETFs in our Trend Analyzer from moving into oversold territory, each member of the group has moved closer to oversold, and all of them are well below their 50-DMAs.  Currently, there are only four ETFs that are oversold while the rest are neutral and moving towards oversold territory.  Long-term trends are still firmly biased towards the downside. The widespread declines over the past few days have also erased almost half of these ETFs’ YTD gains.  Six are now negative on the year.

While the Nasdaq (QQQ) has fared the best recently only falling 1.07% in the past week, Mid-Caps and Small-Caps have taken it on the chin.  The Core S&P  Small-Cap (IJR), Micro-Cap (IWC), and Russell 2000 (IWM) are all down the most in the past week with double or more the losses of most of the other members of this group.

Morning Lineup – Treasury Bid Continues

Treasuries continue to catch a bid this morning as investors don’t want to stick their necks out on the risk curve ahead of today’s jobs report.  Given all the volatility in markets and other events swirling around recently, it seems as though this morning’s report has taken a backseat, and let’s hope that it is uneventful enough to stay that way!  In a speech at a housing conference in DC yesterday, FOMC Chair Powell continues to see the economy humming along and described the labor market as “very strong.”  The market is only hoping that it’s not too strong.  Read today’s Bespoke Morning Lineup below for major macro and stock-specific news events, updated market internals, and detailed analysis and commentary:

Bespoke Morning Lineup – 12/7/18

Yesterday’s ‘moral victory’ rebound for US equities was impressive and most so in the Nasdaq which actually finished the day in the green.  The index still has a lot to prove from a technical perspective, and the first task at hand is to break the string of lower highs.  The most recent of those was at 7,490, which is just below the 200-day moving average.  What is encouraging, though, is the fact that the index did make a higher low yesterday and could be in the later stages of an inverse head and shoulders pattern.  We don’t put a lot of weight into these formations, but many do, so it’s important to at least be cognizant of it.

Also positive is the fact that the Nasdaq’s leading group for much of this year-Software & Services- has also shown signs of stabilizing.  After last week’s higher high just above the 50 and 200-DMAs, the group managed to make a higher low in yesterday’s trading.  That’s definitely worth watching.

Finally, while not related to the Nasdaq specifically, homebuilder stocks also look to be carving out a bottom. The group has also managed to make a higher high and two higher lows in the last few weeks.  In addition to that, the fact that PulteGroup (PHM) just announced a dividend increase indicates at least some level of confidence on the part of one company in the group.  We would note that back in the early stages of the housing crisis, the last homebuilder dividend increase was all the way back in August 2006.

Start a two-week free trial to Bespoke Premium to see today’s full Morning Lineup report. You’ll receive it in your inbox each morning an hour before the open to get your trading day started.

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The Closer — Green Shoots, Banks vs Credit, US Data, Trade War Troubles — 12/6/18

Log-in here if you’re a member with access to the Closer.

Looking for deeper insight on markets?  In tonight’s Closer sent to Bespoke Institutional clients, we note some recent outperformance from market laggards but much weaker price action in the term structure of the oil market. We also discuss credit spreads and their relevance to banks’ performance versus the S&P 500. We then move on to US economic data: factory orders, sales, and inventories as well as the US trade balance. Speaking of which, we close with a look at the impact of tariffs on bilateral US-China trade activity. Bottom line: it’s not going well.

See today’s post-market Closer and everything else Bespoke publishes by starting a 14-day free trial to Bespoke Institutional today!

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