Market Minutes for the week of August 21st:
“Things turn out best for the people who make the best of the way things turn out.” – John Wooden
Here’s what I am thinking: 1.) The eclipse was amazing to watch. 2.) Can Trump right the ship with Bannon now gone? 3.) August is always a tough month for the market. East coast vacations, slow economic news flow and low volume trading can really swing prices around in random fashion. 4.) Copper has hit $3.0015 per pound, its highest price since November 2014. This is a good signal for the global economy. 5.) Jim Cramer: “The market is completely divorced from whatever is going on. Because I think the market just says, ‘listen, we’re not going to have tax reform’ … We’re not going to have anything. We’re just going to have total chaos, so let’s just focus on the companies.” 6.) Jared Dillian: “The biggest risk for Trump isn’t that people successfully oppose him – it’s that people ignore him.” 7.) The CNN Fear and Greed indicator has fallen to 15%. A reading under 20% generally means there is some fear in the market. 8.) So far in August, we have had a correction in that 40% of the S&P 500 companies are down more than 10% from their highs. 9.) According to Bank of America Merrill Lynch, investors have pulled $30 billion out of U.S. stock funds over the past 10 weeks, the longest outflow streak since 2004. 10.) It is good to hear Senator McConnell say that there is “zero chance” that Congress will fail to raise the debt ceiling. We don’t need another round of default talk. 11.) I didn’t realize that there are only 12 days in September when Congress is actually at work. Get busy! 12.) I can’t wait for college football to start this weekend.
Morgan Stanley chief U.S. equity strategist Michael Wilson: “…our bull market check list remains intact: Economic and earnings growth, interest rates, inflation, Fed/central banks, credit markets, valuation and technicals.”
Peter Boockvar, chief market strategist at The Lindsey Group: “I said on day one 2017 that the year would be defined by the tug of war between the hopes for fiscal reform on one hand and the reversal (or moderation) of central bank easing on the other. For a broad basket of stocks, their rally ended 3 weeks after the U.S. election. I’ll repeat my belief that the biggest influence on equities this year and into 2018 will be the behavior of the Fed, ECB and BoJ, not North Korea, tax reform (will still be nice), Trump or something else. As we priced in earnings growth over the past 5 years two times over, it’s all about where multiples will go.”
The August Markit U.S. manufacturing and services composite index climbed 1.4 points to 56, the best reading in more than two years. New market orders were a driver in services, reaching a 25-month high.
The U.S. Census said that new home sales totaled 571,000 units in July, down 9.4% from June. Year to date, the monthly average of new homes sold is 609,000. The median sale price of a new home built in July was $313,700, an increase of 6% over a year ago.
The National Association of Realtors said that existing home sales fell by 1.3% in July to 5.4 million units annualized as buyers are becoming more resistant to 5% to 6% price increases.
The American Association of Individual Investors survey (a gauge of the retail investing public) most recently showed bulls and bears almost at a tie, with 34.2% bulls and 32.8% bears.
The latest Investors Intelligence survey (a gauge of professional money managers) showed a decline of bulls to 50.5% from over 60% just 3 weeks ago.
Citibank sees the price of oil hovering between $40 and $60 for the next five years with a few shocks in between. U.S shale producers will continue to cancel out OPEC production cutbacks.
Baker Hughes said that for the past week, the number of active oil rigs in the U.S. fell by 4 to a total of 759.
Black Book reports that used cars on average lost 17% of its value year-over-year to $15.3k. That’s almost twice as much as 2014’s depreciation rate. Rising car sales and an increase in leasing are to blame. When the three-year lease contracts expire, more cars hit the market. KAR Auction Services is noticing a rise in the number of repossessions. They are forecasting around 2 million in 2017 vs 1.1 million at the peak of the recession.
The five most expensive collectable cars sold at the recent Concours d’Elegance in Pebble Beach were, in order: 1.) A 1956 Aston Martin DBR1 Roadster — $22.55 million. 2.) A 1995 McLaren F1 Coupe —$15.62 million. 3.) A 1996 Ferrari 275 GTB/C Coupe — $14.52 million. 4.) A 1970 Porsche 917K — $14.08 million. 5.) A 1961 Ferrari250 GT SWB Coupe — $8.30 million. The above-mentioned Porsche was the car used in Steve McQueen’s movie “Le Mans” and set the record for the most expensive Porsche ever sold.
The best nanny job in the world? According to Childcare.co.uk, a wealthy family with homes in London, Barbados, Cape Town and Atlanta, is looking for a nanny to four children ages 2 to 15. The pay is £100,00 ($128,000 U.S.) and includes international travel, use of the family cars (Porsche, Maserati and Range Rover) and a Michelin star chef. The hours: 7:00 a.m. to 8:00 p.m. 6 days a week. The necessary qualifications: 15 years of previous nannying experience, trained in self-defense, the flexibility to travel internationally up to 3 times per week and the ability to tutor the 4 home-schooled children.
Home Depot Executive V.P. Ted Decker: “Our overall advertising spend is up, lower single digits, but as we’ve essentially made more significant pivot to digital marketing it’s over half our marketing right now.”
Footlocker CEO Dick Johnson: “The disruption taking place today in our industry and in retail in general is the most significant I’ve seen. The fact is that we’re seeing mobile technology drive shifts in consumer behavior and spending patterns at a faster pace than our industry has been able to keep up with. With constant access to new influences, trends, information, and ideas, consumers’ attention spans are getting shorter, and we’re seeing that they’re moving from one style to the next faster than ever before.”
Sushi burritos are now on the menu at Starbucks. The Chicken Maki Roll is filled with sushi rice, shredded chicken, cucumber, pickled cabbage, onions and avocado with tomatillo salsa and lime crema wrapped in a sheet nori. It’s the latest addition to their new Mercato line that includes other lunch items ready to grab and go. Right now, it is only available at select stores in Chicago and Seattle.
Facebook said it will stream 15 mid-level college football games this fall in a partnership with digital sports network Stadium. Nine Conference USA games and six Mountain West games will be broadcasted. The first game will be streamed September 2; Miami of Ohio vs Marshall and UC Davis vs San Diego State.
La-Z-Boy said it’s talking with Amazon in an attempt to reach a younger market of shoppers who are more comfortable making larger online purchases.
Recode says that former General Electric CEO Jeff Immelt is being considered for Uber’s next CEO position.
Uber (privately held) reports a 2nd quarter net loss of $645 million on revenue of $1.75 billion. The company also said that global trips rose 150% from a year ago and gross bookings hit $8.7 billion. This 17% increase is twice the bookings versus a year ago in the same period.
The state of Iowa has approved a deal that will give Apple a $208 million tax break to build two data storage centers.
Cisco will acquire Springpath, a hyperconvergence software company and existing Cisco strategic partner, for $320 million in cash and assumed equity awards.
Maersk has agreed to sell its oil unit to Total Petroleum for $7.45 billion. Under the terms of the deal, Maersk will get $4.95 billion in Total shares and Total will assume $2.5 billion of Maersk debt.
Macy’s has hired Hal Lawton, eBay’s senior vice president of North America. The company also said it will eliminate 100 jobs as it consolidates three departments into one.
Salesforce.com reports 2nd quarter earnings of $0.33 per share on revenue of $2.56 billion, an increase of 25.5% year over year.
Intuit reports fiscal 4th quarter earnings of $0.20 per share on revenue of $842 million, an increase of 11.7% year over year.
La-Z-Boy reports fiscal 1st quarter earnings of $0.21 per share on revenue of $357.1 million, an increase of 4.8% year over year.
Lowe’s reports 2nd quarter earnings of $1.57 per share on revenue of $19.5 billion, an increase of 6.8% year over year.
Williams-Sonoma reports 2nd quarter earnings of $0.61 per share on revenue of $1.2 billion, an increase of 3.4% year over year.
Next week: Earnings from: Best Buy, Lululemon and Restoration Hardware. Economic reports: U.S. Purchasing Manager’s Survey, Consumer Sentiment, ADP Private Payrolls and U.S. Non-Farm Payrolls.
WTI crude oil: $47.75 per barrel. 10-year U.S. Treasury note: 2.17%. 30-year mortgage: 3.86%.
Sources: CNBC, 361 Capital, Real Money Pro, Bloomberg, Seeking Alpha, MarketWatch, Estimize.com and ZeroHedge.
Disclosure: This publication shall not constitute an offer to sell or the solicitation of any offer to buy or sell any securities of the companies mentioned. This publication is solely a compilation of recent news releases from the sources cited above.
Ken Beach, President and Managing Partner of Cascade Investment Group, member FINRA & SIPC. Cascade Investment Group is not a tax or legal advisor. You should always consult with your tax advisor or attorney before taking any actions that may have tax consequences.