Financentra weighing the week ahead looking beyond the obvious electricity worksheets for 4th grade


We have a small economic calendar, but another big week for earnings. Corporate earnings are not confirming those who thought the market was signaling a recession. Starved for something new to worry about, the punditry has turned to reductions in earnings estimates. This newfound interest in forward earnings provides another dimension for o gastroenterologista cuida do que the gloomy set. Instead, I suggest that astute investors should consider the data while…

In my last edition of WTWA I highlighted not only the abundance of data, but also the diversity of analytical methods to consider. Investors could review the “message” of the market, corporate earnings, the Fed, Washington events, or international threats to the economy. Alternatively, they could join me in emphasizing the trumped-up threats to the economy.

Check out Jason Zweig’s classic article, Super Bowl Indicator gas z factor: The Secret History. Did you know that it began as a “satire on the fallibility of human statistical reasoning?” The inventor could not believe that it had been taken seriously, and tried to kill it in this letter. When the indicator went 11 for 11 before failing, he reports, “I did what any good statistician does: I broadened my statistical base until I got the numbers I wanted.”

• The FOMC rate decision basically underscored recent statements from Fed members, but the reassurance led to a market celebration. The Fed will be patient in waiting for actual signs of inflation and flexible in the pace of balance sheet reaction. The Fed and the markets disagree over the strength of the economy and the significance of the continuing size of the balance sheet, but for now the Fed is in “calming” mode. Ace Fed watcher Prof. Tim Duy has a complete analysis of what happened, along with his own conclusions.

• The ISM manufacturing index registered 56.6, beating expectations of 53.6 and a prior read of 54.3. The ISM’s own research shows a gas mixture is made by combining that this reading, if annualized, is consistent with real GDP growth of 4%. Their report also provides interesting comments from respondents. Bespoke provides a table of the sector changes and comparison with past periods.

• New home sales for November were 657K (SAAR) beating expectations of 555K and the (upwardly revised) prior of 562K. Calculated Risk notes that we are nearly a month behind on this data because of the shutdown. He is looking for a weaker December and a rebound in January, based on conversations with builders. John Lounsbury and Steven Hansen (GEI) emphasize the need to look past the monthly report. Their analysis takes a deep look at the data, including a rolling average of year-over-year results.

The Foxconn saga. Bidding wars to attract private employers create a dilemma for political leaders. People focus on the announced job creation potential without a real cost-benefit analysis. Should Wisconsin be offering $3 billion in incentives for a facility that (originally) was supposed to require a $10 billion investment and employ 13,000, many in manufacturing jobs. The company announced last week that it would cut back and possibly shelve plans. Two days later, after some Trump arm-twisting, the plan is on again k electric company, although in a smaller form. (MarketBeat).

• Use expected earnings in your gas vs electric oven efficiency market analysis. The most compelling reason is that it works better than either current earnings or formulaic analysis of past earnings. As earnings season unfolds, you see plenty of emphasis on guidance and outlook and little discussion of things that happened ten years ago. If this is how the market evaluates individual companies, why should we expect a different approach to the resulting broad averages? FactSet regularly runs this chart which shows the relevance of forward earnings for markets. Note that it is a constantly moving 12-month forward look, not the fixed calendar approach used by most sources.

• Choose the right time frame. Make sure it is related to your investment horizon. A good example was a story this week about plunging natural gas futures. Right in the middle of the polar vortex. Why? The weather report for next week called for higher temperatures. Anyone trading natural gas futures must trade gas x strips side effects in that time frame. But what about the long-term equity investor? Barron’s (to pick one source from many) has the decline in expected earnings as this week’s cover story. Jack Hough notes that Q119 earnings may decline by 1%.

FactSet notes that the median, bottom’s up estimate has declined by 4.1% during the first month of the quarter. A decline during the first month is normal, but the average over fifteen years is 1.7%. FactSet emphasizes continuing strong reports for Q418. Hough cites good reasons to believe that the full year will be better than the first two quarters.

I suggest that the first two quarters are the expected result of some unusual events – events which are now obvious. Unless you want to change your investment gas knife posture with the weather, take a longer look. Brian Gilmartin has a very nice table of earnings revisions by week, with a note about the major events. The table helps to illustrate what factors are at work in the earnings revisions. It also reminds us that there are always upward revisions in some stocks and sectors. Looking only at the net result overlooks important information.

Check out our weekly “Stock Exchange”. We combine links to important posts about trading, themes of current interest, and ideas from our trading models. This week, with no activity from our trading models, I focused on the question of when you should walk gas bloating pain away from your trading. In addition to the mandatory advice from Kenny Rogers, I reviewed the history of Richard Dennis and the Turtles. This is a great story about nature or nurture, which investors will enjoy. It all started with a small bet, but hundreds of millions of dollars followed. We also provided sector ratings from Oscar and Felix, featuring the Russell 1000.

Seeking Alpha Senior Editor Gil Weinreich’s Asset Allocation Daily is consistently both interesting and informative. Each week he highlights stories of interest for both advisors and investors. This week I especially enjoyed his discussion of “when to sell,” and the idea that it was a stumbling block for man professional fund managers. He plays off of a post by Ploutos analyzing recent research on the subject.

Abnormal Returns is an important daily source for all of us following investment news. I read it daily, finding many a gas has no volume good ideas. The Wednesday personal finance theme is of special interest for investors. Among the usual collection of excellent choices, I especially liked Trent Hamm’s lessons from the government shutdown. He has seven ideas – timely and practical advice.

…we likely have at least a couple of years of continued economic expansion. What matters most is the high level of investor pessimism relative to economic and business fundamentals. There is a wide divide between current economic measures and investor perception. It is so wide that historical pricing suggests future SP500 levels could reach higher than $4,000 in a few years should investor pessimism shift to historical levels of optimism. Even though markets have always ended with high levels of optimism, “euphoria” according to John Templeton, prices are dependent on market psychology. Market psychology will always remain unpredictable. The best we can do is to estimate the potential changes in market psychology and its impact.

[If you want some stocks that will participate in continuing economic growth or need a dependable method to generate income, send me a note. You might want to request some of my papers for individual investors, including those on Risk and Investor Pitfalls. Ask for my recent “client-only” paper on Lam Research. This company and many others will do just fine if the economy is merely reasonable. Just send an email to main at newarc rahal e gas card dot com]