Be in the know. 8 key reads for Wednesday

  1. Likely Fed nominee Stephen Moore thinks rates should be cut by half a percentage point (CNBC)
  2. Turkey On Verge Of Collapse As Overnight Swaps Hit 700%, CDS Soar (ZeroHedge)
  3. One Way Stocks Go Up Is if Wall Street Sets the Earnings Bar Really, Really Low (Barron’s)
  4. Here’s Why U.S. Bond Yields Plunged So Much Over the Past Week (Bloomberg)
  5. US efforts to cut trade deficit show biggest win in almost a year (CNBC)
  6. Lennar, KB Home Earnings Boosted by Falling Mortgage Rates (Bloomberg)
  7. Top Analyst Upgrades and Downgrades: Alcoa, Apple, Autodesk, BB&T, Bed Bath & Beyond, Camping World, Nvidia, Vertex, Voya and More (24/7 Wall Street)
  8. Neiman Marcus, in Debt Talks, Makes It Easier to Bet It Will Fail (Wall Street Journal)

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Insider Buying in Revlon, Inc. (REV)

From March22-25, 2019, Billionaire Ronald Perelman – Director of Revlon, Inc. (REV) – purchased 115,000 shares of REV at ~$21.21.  His out was $2,439,723.

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Be in the know. 7 key reads for Tuesday…

  1. Home prices in January see smallest gain in nearly 4 years: S&P Case-Shiller (CNBC)
  2. US auto sales are falling, and cars are more expensive than ever (CNBC)
  3. Housing starts drop 9% in February and show little sign of perking up (MarketWatch)
  4. Pentagon authorizes $1 billion for Trump’s border wall (MarketWatch)
  5. Top Analyst Upgrades and Downgrades: Alcoa, Apple, Autodesk, BB&T, Bed Bath & Beyond, Camping World, Nvidia, Vertex, Voya and More (24/7 Wall Street)
  6. World of Negative Debt Expands to One-Fifth of Global Market (Bloomberg)
  7. Hedge Funds Boost Shorts as Gains in March Reward Caution (Bloomberg)

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Be in the know. 7 key reads for Monday…

  1. Survey shows German business mood brightening (MarketWatch)
  2. Yields Below Zero Spell Trouble for Hedge Funds (Bloomberg)
  3. Mueller finds no Trump collusion with Russia (Business Insider)
  4. Theresa May’s future in doubt as MPs prepare to seize control of Brexit (Business Insider)
  5. Companies all across America are warning business is slowing down (Business Insider)
  6. Trump push for China trade reform draws wide support at home, abroad (Reuters)
  7. JPMorgan: “A Bad Omen For Risky Markets Is Resurfacing” (ZeroHedge)

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Be in the know. 17 key reads for Sunday…

  1. Goldman Just Put On The Next “Big Short” Trade (ZeroHedge)
  2. Don’t Panic Over Inverted Yield Curve; Here’s The Key Chart For Dow Jones (Investor’s Business Daily)
  3. THE RICHEST PEOPLE IN THE WORLD (Forbes)
  4. How to take the ‘outside view’ (McKinsey & Company)
  5. The Risk of Low Growth Stocks Part 2: Prestige Brands Case Study (Intrinsic Investing)
  6. How an App for Gamers Went Mainstream (The Atlantic)
  7. Was Starboard Value’s Jeffrey Smith Wrong about Newell Brands (NWL)? (Insider Monkey)
  8. Roger Ibbotson Discusses the History of Finance (Podcast) (Bloomberg)
  9. Film Review: ‘The Dirt’- A Mötley Crüe biopic on Netflix (Variety)
  10. Why Your Next Cocktail Will Be Premixed (Fortune)
  11. This 150-Day Dry Aged Beef Burger Shows How the Luxury Hamburger Has Simplified (Robb Report)
  12. ECRI Weekly Leading Index Update: All Measures Up Again (Advisor Perspectives)
  13. Formula 1 is putting data in the driver’s seat, and not all racers are happy (Digital Trends)
  14. Yes, It’s All Your Fault: Active vs. Passive Mindsets (Farnam Street)
  15. Money-losing companies that went public in 2018 did better than profitable ones (recode)
  16. The Complex Fortune Growing Inside World’s Most Valuable Startup (Bloomberg)
  17. Richard Branson calls for new Brexit vote (BBC)

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Be in the know. 15 key reads for Saturday…

  1. Jaguar And Audi Beating Tesla Model S And X Sales In Europe (ValueWalk)
  2. Week in review: How Trump’s policies moved stocks: (TheFly)
  3. Papa John’s announces Shaquille O’Neal as new ambassador (New York Post)
  4. Stephen Moore, Trump’s pick for Fed, will be lightning rod for president’s opponents (MarketWatch)
  5. Warren Buffett Hates It. AOC Is for It. A Beginner’s Guide to Modern Monetary Theory (Bloomberg)
  6. Robert Mueller’s report is finally finished. This is what we know about his probe so far (CNBC)
  7. A $1.6 trillion credit market could batter the global economy. And you will take the hit if it implodes, not Wall Street (Business Insider)
  8. Opinion: Pinterest’s IPO filing: 5 things investors should know (MarketWatch)
  9. Economic Models Predict a 2020 Wipeout (Vanity Fair)
  10. China Is Building up to 20 Floating Nuclear Power Plants (Futurism)
  11. Olive Garden owner posts solid jump in sales (CNN)
  12. Homebuyers to get springtime boost from lower-than-expected mortgage rates (USA Today)
  13. Trump Administration Strikes Tougher Stance Ahead of China Talks (New York Times)
  14. Lyft, Uber, and Slack are the IPOs getting all the attention — but a different corner of the market is heating up (Business Insider)
  15. Investing Lessons From the Activist Playbook (Barron’s)

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Earnings Update: Why Q1 is “Make or Break” (-3.7% expectations for Q1)

Source: FactSet

Not much has changed in the last couple of weeks on the earnings front (expectations have dropped from -3.4% to -3.7%).  The good news is that Q1 2019 earnings expectations are very low and will likely be beaten.  The risk (in my view) as laid out in this article I wrote 2 weeks ago is if Q1 2019 S&P 500 operating earnings come in below $34.98 (Q4 2018 Operating Earnings).

Yield Curve vs. Earnings: Bull vs. Bear DEATH MATCH!

If we get a second quarter of sequential operating earnings drop, it would potentially signal an underlying deterioration in the economy last seen only in 2007 and 2000 (and preceded major lower lows in the stock market). I do not think we will get a 2nd sequential drop in Operating Earnings (Q4 2018 to Q1 2019) but it will come in close.

If we avoid the second sequential drop in operating earnings (which would require a > 4.26% drop in operating earnings yoy), that would imply the lows of December should hold for some time and if past is any prologue the peak of the market should be 1.5-2yrs after the 2yr Treasury and 10yr Treasury inverts (getting close).

Factset: “The percentage of companies issuing negative EPS guidance is 73% (77 out of 105). This percentage is above the 5-year average of 70%, as more companies have issued negative EPS guidance than average and fewer companies have issued positive EPS guidance than average.  At the sector level, the Information Technology and Health Care sectors are the main contributors to the above average negative sentiment in EPS guidance for the first quarter.”

Earnings guidance for 2019 remains aggressively back-end loaded (factset):

As I said in the above-posted article Q1 earnings will be “make or break” for the market.  Expectations are extremely low which creates the possibility for positive surprise but we don’t count our chickens before they hatch.