Weekly Update, Oct 22, 2017

This week was filled with a bunch of noise and the real start for the earnings season.  I was also focused on learning more on technical analysis with a bit of real money on the table to really drill in the lessons.  That experience will be a complete post in itself.

  • Some interesting executive quotes from http://avondaleam.com
    • Is consumption really up as much as BoA claims?  … “Consumers are spending, whether it is checks written, cash taken out of the ATM’s, P2P payments, and all the debit and credit cards, 5% more through the first nine months of 2017 than they did in the first nine months of 2016. That’s a faster growth rate than it has been in prior years.” –Bank of America CEO Brian Moynihan (Bank)
    • So i should disregard all those comments about all the ‘cash on the sidelines’ … “we saw more cash go into the markets, particularly the equity markets as those markets rose around the world. And we’ve seen cash in our clients’ accounts at its lowest level.” –Morgan Stanley CEO James Gorman (Broker)
    • this is just straight out marketing spin imho … “The pipeline…is strong also in our conversations with clients on the advisory side. There’s no sense of slowdown. We’re seeing a pickup in client dialogue, particularly I would note in technology, media, telecom, as well as industrials and natural resources. And so, it’s strong for all of the reasons that you would expect that CEOs are confident, equity market support valuations and acquisition currencies, the financing markets are open, the overall levels of financing costs are relatively low by historical standards.” –Goldman Sachs CFO Marty Chavez (Broker)
    • The impact to real estate from rising interest rates (and all of us who make money in that market) … “Rising rates to the real estate market are troublesome. They impact cap rates, they — if — as rates go up in the front end, since most of the borrowings on the projects are floating rate, you expose coverage ratios in those loans…at the margin, I would expect higher rates are going to cause greater delinquencies in real estate, and it’s one of the reasons we have at the margin, dialed back our growth.” –PNC CEO Bill Demchack (Bank)
    • I was one that thought infrastructure investments, especially water, would continue to outpace average demand – not so much? … “Although utility metering sales were relatively flat, we have seen an overall softening in the utility market over the past six months” –Badger Meter CEO Rich Meeusen (Water Meters)
  • Investment dilemnas of the week = FIT, GE and O
    • FIT(will post Monday morning)
    • GE – what a merry-go-round! … i went from wanting to buy more below $23, to watching the drama and deciding to wait until Flannery actually updates the Street on his strategy … my cost basis is<$18.  I am still waffling on the Oil / Gas business expansion in the overall GE footprint, so that may be reason for a complete liquidation if the strategy is not compelling.  a moral/ethical compromise could be made
    • O – Currently, i own O in 3 different portfolios:  core, trading and IRA.  i sold 50% of my medium position in my IRA to free up capital for possible additional investments in PEGI or BEP / BIP.  my confidence in O stock valuation expansion for near term (6-12 months) is low given the current hatred for anything brick / mortar and as well the potential rising interest rates.  I will continue to hold in ‘core’ portfolio which is the largest position, and will look to either exit in trading or continue my practice of writing 60 day out of money calls when the prices are compelling.
  • Euphoria … short post using GE’s Friday experience as the model … it’s compelling narrative and continuation of my bearish bias … but the wall of worry is one of the factors keeping multiple expansion alive  https://seekingalpha.com/article/4115273-friday-ge-fiasco-exposes-fluff-fueled-market
  • Jeff Miller / Doug Short weekly snapshot … one week bull rampage  (Here is Doug’s post)
  • These next two charts show how context and data type can really change the interpretation of the VERY same data … this is a comparison of 1987 and 2017 which has been a popular topic this past week … i was a broker in 1987 and remember that day (week) like it was yesterday … we as consumers of more and more visual data need to be reminded every so often that “how” the data is presented needs to be as evaluated as the data itself … else we risk error, big time.  (thanks to Jeff Miller for pointing this out)
    • non-normalized data
    • normalize data (percentage)
  • Jeff’s weekly indicators
  • A truck-load of treasury data from Doug Short https://seekingalpha.com/article/4115250-treasury-snapshot-10-year-yield-2_39-percent
    • this is probably the key graphic for me as i try to answer:  top 10yr rate will be xx in next 2-3 years?  
    • regardless around the 3.4% 10yr i am back looking at 10yr investment corporates where i can get >3.7% with low / no capital risk … my eTrade screen this morning did not surface any bonds that hit my criteria  … here’s Baird’s commentary (i did not find helpful)
  • Or, just maybe … earnings are really supporting the multiple expansions (in a general sense) https://seekingalpha.com/article/4115248-s-and-p-500-forward-earnings-curve-tells-good-story
    • My own thought here is that index investments will ride this generalization / averages … but the ride will be both directions when the tides turn

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