“Rule
number one: Don’t lose money. Rule number two: Don’t forget rule number one.”
Warren
Buffett
We open the weekend
with stocks racing away in a one way street, what could possibly go wrong? “Nothing,” say the stock pedlars and
promoters, plus the free money central banksters, “buy more. Don’t miss out.
You owe it to yourself to get rich”
Below, compare and
contrast America’s Wall Street and Main Street, if out of town shopping malls
can be considered Main Street. The Great Disconnect has gone extreme.
“The
four most dangerous words in investing: ‘this time it’s different.’”
Sir
John Templeton
It Was the Best Week for Stocks in a Year
By Elena Popina and Sarah Ponczek
It always looks inevitable in retrospect.
Why wouldn’t U.S. stocks rally, surging to the biggest weekly gain in a year,
amid earnings euphoria like this? With no hint of fatigue, the S&P 500
Index spent the holiday-shortened week rolling past 2,700, while the Dow Jones
Industrial Average jumped over 25,000. Ninety-eight companies in the Nasdaq 100
rose.
It happened as Wall Street stock analysts were jacking up profit
forecasts. So fast that a measure tracking the frequency of upward earnings
revisions to downward hit the highest level since 2011. The result was the best
start to a year for the S&P 500 since 1999.
“This doesn’t mean the index will go straight up from here, but the
economic fundamentals are strong enough to support the stocks,” said Phil
Orlando, chief equity strategist at Federated Investors. “Corporate earnings
growth has been solid in the last nine months, we expect another double-digits
in the fourth quarter. The party is going to continue.”
Maybe it was easier than it looked to predict a blowout week for
equities. Between the last week of December and the first week in January, the
S&P 500 has reversed direction every year since 2011. A possible
explanation is the expiration of government policies on Dec. 31.
The pattern played out this week, with the S&P 500 jumping 2.6
percent after a 0.4 drop in the last four days of 2017. The index was up in
each of the four sessions, a start matched only twice since 1990. Both times,
in 2006 and 2010, the index jumped at least 12 percent for the year.
Sideways Christmas price action shifted to an upward slope for the
S&P 500, which has been buoyed by Wall Street analysts boosting earnings
forecasts and year-end estimates. UBS’s Keith Parker was one of them, raising
his 2018 S&P year-end forecast to 3,150 and the index’s per-share earnings
to $157 from $141 amid optimism that tax cuts and stock buybacks will support
the rally. Among 17 strategists tracked by Bloomberg, the average estimate for
the S&P at the year-end stands at 2,886, up about 5 percent from Friday’s
close.
Companies in the S&P 500 will earn $148.3 a share in 2018, compared
with $128.6 in 2017, according to Wall Street analysts tracked by Bloomberg.
The implied 15 percent growth rate compares with a projection of 14 percent at
this time last year and would represent the fastest increase since 2010.
“You’re seeing an unusual outpouring or earnings estimate revisions
upward by Wall Street analysts. You could say, where were they all along?’,”
said Marshall Front, chief investment officer at Front Barnett Associates. “You
can’t really blame them. I’ve been telling people for years that there would be
a five, 10, even 15 percent correction. I’m wrong all the time.”
----For
now, the fundamental backdrop for equities remains bullish. Globally, a
synchronized economic expansion around major markets is driving appetites for
riskier assets. In the U.S., the Federal Reserve’s repeated call for a gradual
rate hike provides investors few surprises.
more
Dow logs 220-point gain to end stellar first week of 2018 for the stock market
Published: Jan 5, 2018 5:24 p.m. ET
All three main equity benchmarks posted record gains on Friday to end the
first week of 2018 on a stellar footing, marked by four straight positive
session, following lackluster jobs data.What did stocks do?
The Dow Jones Industrial Average DJIA, +0.88% rose 220.74 points, or 0.9%, to 25,295.87. The S&P 500 index SPX, +0.70% closed up 19.16 points, or 0.7%, at 2,743.15. The Nasdaq Composite Index COMP, +0.83% gained 58.64 points to 7,136.56, a gain of 0.8%.Friday’s rally meant that none of the equity indexes have posted a down day so far in 2018. For the S&P 500 and the Nasdaq, it was the fourth straight closing record, while the Dow carved out its third in a row. The broad-market benchmark has closed at a record on the first four trading days of the new year, the first time it has done so since 1964, according to WSJ Market Data Group.
For the week, the Dow rose 2.3%, the S&P 500 gained 2.6%, while the Nasdaq is up 3.4%. The Dow notched the biggest weekly gain since the period ended Dec. 1, 2017, the S&P 500 recorded its best weekly rise since Nov. 11, 2016, and the Nasdaq logged its best climb over the same period since Dec. 9., 2016.
More
A tsunami of store closings is about to hit the US — and it's expected to eclipse the retail carnage of 2017
Hayley Peterson
Jan. 1, 2018, 1:20 PM
- More than 12,000 stores are expected to close in 2018 — up from roughly 9,000 in 2017, according to Cushman & Wakefield.
- A rash of bankruptcy filings and announcements to close stores are expected at the start of the year, when retailers are flush with cash from the holiday season.
- Among the companies most likely to file for bankruptcy within the next year are Sears, Bon-Ton Stores, Bebe Stores, Destination Maternity Corp., and Stein Mart.
- The closings would push hundreds of shopping malls to the brink of death.
Retailers are bracing for a fresh wave of store closings in 2018 that is
expected to eclipse the rash of closings that rocked the industry last year.
"Landlords are panicking," said Larry Perkins, the CEO and
founder of the advisory firm SierraConstellation Partners. "The last year
was pretty apocalyptic from a retail standpoint, and the macro issues haven't
changed. There will continue to be a high degree of bankruptcies and store
closures."
2017 was a record year for both store closings and retail bankruptcies.
Dozens of retailers including Macy's, Sears, and J.C. Penney shuttered an
estimated 9,000 stores — far exceeding recessionary levels — and 50 chains
filed for bankruptcy.
But there's still a glut of retail space in the US, and the fallout is
far from over.
The number of store closings in the US is expected to jump at least 33%
to more than 12,000 in 2018, and another 25 major retailers could file for
bankruptcy, according to estimates by the commercial real estate firm Cushman
& Wakefield.
Nearly two dozen major chains including Walgreens, Gap, and Gymboree have
already announced plans to close more than 3,600 stores this year. Many more announcements on closures and bankruptcies are expected in the coming months.
The start of the year is a popular time to announce store closings and bankruptcies because retailers are typically flush with cash after the busy holiday season — and closing stores and filing for bankruptcy are costly.
Among the companies most likely to file for bankruptcy within the next year are Sears, Bon-Ton Stores, Bebe Stores, Destination Maternity Corp., and Stein Mart, according to S&P Global Market Intelligence.
Mass store closings will force shopping malls out of business
When combined with last year's record-high store closings, an even higher rate of closings in 2018 would push hundreds of low-performing shopping malls to the brink of death.The commercial real estate firm CoStar has estimated that nearly a quarter of malls in the US, or roughly 310 of the nation's 1,300 shopping malls, are at high risk of losing an anchor tenant.
Anchor tenants are retailers like Macy's and J.C. Penney that occupy the large, multistory buildings at mall entrances.
The loss of even one anchor tenant can trigger a multidecade downward
spiral for mall owners.
That's because the malls don't only lose the income and shopper traffic
from that store's business; such closings often trigger clauses that allow the
remaining mall tenants to exercise their right to terminate their leases or
renegotiate the terms, typically with a period of lower rents, until another
retailer moves into the vacant anchor space.
That's good news for retailers looking to grow their physical assets —
it means they are more likely to score low rent and favorable lease terms.
But it's terrible news for retail landlords, some of whom are now trying
to stop the bleeding by suing the companies that are closing stores.
More
Next everywhere we
look, it’s boom time. Don’t miss out, get on the millionaire mania bandwagon. Forget
a Presidential civil war. Forget an Ice Age covering much of North America.
Forget about “Little Rocket Man. Forget about bitcoin and all the other manias.
You owe it to yourself to get stinking rich! “Buy more!!!”
There
is a disconnect between the performance in stock market and the performance in
many companies.
John
Paulson
Oil Scores Best Opening Week in Half a Decade as Supply Tightens
By Meenal Vamburkar
Updated on 6 January 2018, 05:00 GMT
Oil had its strongest opening week for any year since 2013 as refiners
and exporters whittled away at crude inventories tucked away in U.S. storage
tanks.
Futures rose 1.7 percent this week in New York. The pull on oil
stockpiles in the world’s biggest economy accelerated to 7.42 million barrels
last week, a level last seen in early August. U.S. inventories are shrinking at
a time when OPEC and allies producers including Russia are working to trim a
global glut that triggered the 2014 market crash.
“We have supportive elements in the market that didn’t exist before,” said
Bob Yawger, director of futures at Mizuho Securities USA Inc. in New York. With
supplies declining and a healthy global economy, “all the pieces are in place.”
Oil in New York has reached a level where profits are high enough to encourage a further expansion in U.S. drilling, compounding speculation that Organization of Petroleum Exporting Countries’ effort to tame the oversupply may prove self-defeating.
West Texas Intermediate crude for February delivery fell 57 cents to settle at $61.44 a barrel on the New York Mercantile Exchange. The contract’s Thursday settlement at $62.01 was the highest close since December 2014.
Brent for March settlement lost 45 cents to close at $67.62 on the
London-based ICE Futures Europe exchange.
U.S. oil output rose to 9.78 million barrels a day last
week, near a record high, according to the Energy Information
Administration. Gasoline inventories jumped by 4.81 million barrels and
distillates increased by 8.9 million.
More
But Caveat Emptor. We
don’t always get what we want, but usually get what we deserve.
The
main purpose of the stock market is to make fools of as many men as possible.
Bernard
Baruch
Opinion: Dow 25,000 only brings the bull market closer to a painful end
Published: Jan 5, 2018 9:03 a.m. ET
Stock investors should finally be worried about valuation
The U.S. stock market is extremely overvalued by almost any measure.I know that pointing this out is raining on the bull market’s parade, with the rest of Wall Street giddy over the Dow Jones Industrial Average DJIA, +0.88% climbing its latest 1,000 points in record time, and erstwhile bear Jeremy Grantham of Boston-based investment firm GMO warning of a possible “melt up” for the market.
But valuations do matter, sooner or later. And it’s a key feature of investors’ psychology at bull market tops to ignore valuations. So this column is important precisely to the extent you’re likely to dismiss it.
Dennis Gartman addressed this psychology in a communication earlier this week to clients of his institutional service The Gartman Letter: “One gets the sense that we’ve now entered that strangest of investment/speculative arenas when all news is bullish; when bad news is shrugged off; when good news is embraced with enthusiasm and when common sense is cast off and cast down… Rationality is about to be cast aside. The silly season is upon us… It will end and it will end badly.”
Read: This 1 chart shows the U.S. stock market is the most expensive in the world
Consider the stock market’s valuation today compared to where it stood at each of the bull market tops of the last 120 years. Depending on which valuation metric used — I focused on six of the best-known — equities currently are more overvalued than they were at between 86% and 100% of past bull market tops. (See chart.)
Unless the law of gravity no longer applies, it’s difficult to reach any conclusion other than Gartman’s: “It will end and it will end badly.”
To be sure, the stock market has been overvalued for several years now, and it has nevertheless continued upwards. So investors with short memories can dismiss valuation concerns by pointing out how poor a job they do at market timing.
But that doesn’t mean valuations are useless. It’s just that valuations have their biggest impact over many years. Over shorter-term periods of a couple of years, valuations exert only a very weak gravitational pull on the market.
Ben Inker, co-head of the asset-allocation team at GMO and a colleague of Grantham’s, draws an analogy to a leaf in a hurricane: “You have no idea where the leaf will be a minute or an hour from now. But eventually gravity will win out and it will land on the ground.”
More
The
techniques I developed for studying turbulence, like weather, also apply to the
stock market.
Benoit
Mandelbrot
No comments:
Post a Comment