reports
- Barbara Gray
THE UNITED REINDEER SERVICE
Brady and Adam had just finished hanging their "stockings by the chimney with care in hopes that Saint Nicholas soon would be there" when my iPhone buzzed and I saw an email from the North Pole advising me that there may be a delivery delay as the elves had loaded their gifts onto the wrong sleigh. So, instead of settling down for "a long winter's nap", I tossed and turned all night. I woke up early Christmas morning and was dismayed to discover Santa hadn't touched the milk and cookies and, eve...
- Barbara Gray
Experience Is the New Moat
Although Amazon's acquisition of Whole Foods blows open the dam protecting the supplier and structural channels, most of the value erosion has taken place along the customer channel, as evidenced by the year-to-date performance of the 289 companies lying in the 21 sub-industries along each of the three channels: ï‚· Overall: -2.6% versus +18.3% for S&P 500 (negative delta of 2,090 basis points) ï‚· By Channel: Customer (-13.2%), Supplier (+2.6%), Structural (+7.4%) To protect themselves from the...
- Cam Hui
WHAT YOU DON’T SEE AT MARKET BOTTOMS: RETAIL STAMPEDE EDITION
It is said that while bottoms are events, tops are processes. Translated, markets bottom out when panic sets in; therefore, they can be more easily identifiable. By contrast, market tops form when a series of conditions converge, but not necessarily all at the same time. We have stated that while we don’t believe the stock market has made its final cyclical top, we are in the late stages of a bull market (see Five Steps, Where`s the Stumble?). Nevertheless, psychology is becoming a little fro...
- Cam Hui
MODELING TRUMP’S TRADE WAR
As the market looks ahead in 2018, the global economy appears to be undergoing a synchronized upturn. Our base-case scenario still calls for an equity market blow-off, followed by a Fed-induced slowdown (see our publication, Five Steps, Where’s the Stumble?). In the midst of the celebration, American trade policy is starting to appear as a risk to the equity bull. However, 2018 may bring “full Trumpâ€, with a dramatic change in policy tone after the legislative tax cut victory. Both the n...
- Cam Hui
CAN WE GET THIS PAST COMPLIANCE?
Please accept with no obligation, implied or implicit my best wishes for an environmentally conscious, socially responsible, low stress, non-addictive, gender neutral, celebration of the winter solstice holiday, practiced within the most enjoyable traditions of the religious persuasion of your choice, or secular practices of your choice, with respect for the religious/secular traditions at all…and a fiscally successful, personally fulfilling and medically uncomplicated recognition of the onset...
- Cam Hui
FIVE STEPS, WHERE’S THE STUMBLE?
The old Wall Street trader’s adage of “three steps and a stumble†refers to the stock market’s reaction to Fed rate hike cycles. At first, stock prices don’t react to the Fed raising rates, but eventually the market succumbs to the economic cooling effects of monetary policy, and a bear market usually begins after three rate hikes. Hence, “three and a stumbleâ€. The chart below from Ned Davis Research shows the effects of this rule on the Dow. Historically, the DJIA has declined a m...
- Cam Hui
HOW WORRIED SHOULD YOU BE ABOUT AN ELEVATED SHILLER P/E?
In our discussion with investors, the Cyclically Adjusted P/E (CAPE), or Shiller P/E, has come up numerous times as a risk for the U.S. stock market. The current reading of 32x is only exceeded by the peak during the NASDAQ Bubble, and it is higher than the levels seen before the Crash of 1929. Does this mean that the risk of a substantial stock market drawdown in the near future is rising? We studied the question in the context of some of the criticisms of the Shiller P/E. We made a number of ...
- Norm Kumar
KPMG predicts a decline in sedan sales, Tesla announces a truck, Googl...
KPMG forecasts significant changes to the auto market by 2030 as a result of autonomous vehicles – KPMG recently came out with a forecast that predicts the sales of sedans will drop precipitously by 2030 as a result of the emergence of autonomous vehicles. They estimate that sales of sedans in the US will drop from 5.4M annually to 2.1M as a result of the emergence of autonomous vehicles. They view the emergence of driverless vehicles with on demand mobility services such as robo-taxis. Furthe...
- Cam Hui
2018 Outlook: The Bull's Last Charge
As 2017 draws to a close, it’s time to look to 2018. The short-term outlook is very strong, but the long-term outlook is in neutral, and long leading indicators have been gradually deteriorating. A continuation of the Fed tightening cycle could see downward pressure on equities from either valuation or recessionary warnings by mid-year. Investors should watch for a number of signs of a turn, which can be divided into two categories. The first would indicate that tighter monetary conditions are...
- Cam Hui
WHAT YOU DON’T SEE AT MARKET BOTTOMS: RATIONAL EXUBERANCE
It is said that while bottoms are events, tops are processes. Translated, markets bottom out when panic sets in; therefore, they can be more easily identifiable. By contrast, market tops form when a series of conditions converge, but not necessarily all at the same time. We have stated that while we don’t believe the stock market has made its final cyclical top, we are in the late stages of a bull market (see Four Steps, Where’s the Stumble?). Nevertheless, psychology is becoming a little fr...
- Barbara Gray
The Shopping Race
As we look to 2018, I am becoming more and more convinced that the secret for companies to survive the retail apocalypse will be for them to advance beyond the four traditional economic moat factors (i.e., low-cost producer, intangible assets, switching costs, network effect) to the experience moat. For as Amazon continues to innovate and push the edges of the consumer value frontier in terms of pricing, convenience, and variety of choice, companies are discovering they can no longer compete on ...
- Barbara Gray
The Experience
One of my favourite movies is the 1961 classic "Breakfast at Tiffany's", especially the famous opening scene in which Audrey Hepburn, dressed elegantly in a black gown and pearls, stands in front of Tiffany & Co. on Fifth Avenue, gazing wistfully through the store windows while eating a bagel. Hoping to avoid the fate of Lord & Taylor, which just surrendered its flagship Manhattan store to WeWork, Tiffany & Co. is opening a "Breakfast at Tiffany's" themed cafe at its flagship store while Chanel ...
- Norm Kumar
KPMG predicts a decline in sedan sales, Tesla announces a truck, Googl...
KPMG forecasts significant changes to the auto market by 2030 as a result of autonomous vehicles – KPMG recently came out with a forecast that predicts the sales of sedans will drop precipitously by 2030 as a result of the emergence of autonomous vehicles. They estimate that sales of sedans in the US will drop from 5.4M annually to 2.1M as a result of the emergence of autonomous vehicles. They view the emergence of driverless vehicles with on-demand mobility services such as robo-taxis. Furthe...
- Cam Hui
What you don't see at Market Bottoms: Halloween Edition
It is said that while bottoms are events, tops are processes. Translated, markets bottom out when panic sets in; therefore, they can be more easily identifiable. By contrast, market tops form when a series of conditions converge, but not necessarily all at the same time. We have stated that while we don’t believe the stock market has made its final cyclical top, we are in the late stages of a bull market (see Four Steps, Where’s the Stumble?). Nevertheless, psychology is becoming a little fr...
- Cam Hui
What the Market is missing about the Powell FED Nomination
The market breathed a sigh of relief last Thursday when Donald Trump announced that he was nominating Jerome Powell to be the next Chairman of the Federal Reserve. Powell is viewed as the centrist and status quo candidate. Unlike John Taylor, who was the other leading candidate, he is unlikely to take the Fed in a more radical direction on monetary policy. That said, there are a couple of key differences between how a Powell Fed might operate compared to the Yellen Fed that the market seems to b...
- Cam Hui
The Challenges of a late Bull Cycle
In the past, every recession has been accompanied by a bear market, though not every bear market has seen a recession. The question is: “How far away is a recession?†We answer that question by focusing on the following three components of the economy using leading indicators: - The household sector; - The corporate sector; and - Monetary conditions. We find that the economy is the late stages of an expansion and the stock market is showing the typical characteristics of a late cycle bull....
Beware the Expiry of the 19th Party Congress Put Option
Commodity prices have been on a tear lately, driven by Chinese demand. On the other hand, China is currently holding its 19th Party Congress. It doesn’t take a genius to understand that any bureaucrat who creates conditions that cause either a growth slowdown or financial instability during this critical period will have made his own life very difficult. In effect, Beijing has given a 19th Party Congress put option to the market, where nothing bad would be permitted to happen to the economy ah...
- Barbara Gray
Movement
When I published my LinkedIn article, Ford No Longer Sees Its Future as Just an Auto Company, in early 2016, discussing how Mark Fields (the now ex-CEO) saw Ford's future as an auto and mobility company, I never dreamed that less than two years later we would see a major OEM re-brand itself from just a car manufacturer to a human movement company. But that's just what Toyota did — it wants to expand its capability into technologies that can help people move not just around town, but also acros...
- Barbara Gray
Canvas
On October 26, Amazon received approval for wholesale pharmacy licenses in 12 states (cnbc.com). Since then, prices of U.S. pharmacy stocks have plummeted by an average of 8%: Rite Aid (-14%), McKesson (-10%), Cardinal Health (-10%), CVS Health (-9%), AmerisourceBergen (-9%), Walgreens (-2%) and Express Scripts (-1%). As a foreshadowing of how Amazon could leverage AI to disrupt the pharmacy ecosystem, pharmacists could be the next professionals at risk of being displaced by robots. In China, Mi...
- Barbara Gray
The End of the Line
I remember first hearing about the automotive legend Bob Lutz when I joined Deutsche Bank's global auto research team in NYC in 2000. So when I came across the November 5 article he penned for Automotive News, I paid close attention. And I'm glad I did, as the candid views on the future of the auto industry he expresses in his article, Kiss the good times goodbye, make it a must-read for all investors.
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