Timing & trends

 

With the second quarter of the 2020 reporting season mostly behind us, and with markets testing “all-time” highs, do earnings support the bullish thesis? Such is the fundamental question surrounding the debate over the record deviation between “momentum” and “growth.” 

No Real Surprise

As we stated before the earnings season began, the annual “beat the estimate” game would, as always, have a high “beat rate.”

“SO EXCITED! – It’s almost Millennial Soccer season on Wall Street where companies begin to beat estimates on drastically lowered expectations.” 

Why do I call it “Millennial Soccer” season? As I explained in “The Truth About Wall Street Analysis.”

Earnings season is now a ‘game’ where no one keeps score. The media cheers, and everyone gets a ‘participation trophy’ just for showing up.”

Not surprisingly, after cutting earnings estimates drastically following the first quarter, companies reported a record “beat” rate.  Full Story

It’s time to get some grown-ups in Ottawa

New Tory leader will be the beginning of the end for Justin Trudeau

Next week, a new leader of the Conservative Party of Canada will be selected, and will become the next prime minister of Canada.

I state this with such confidence for two reasons: the Bloc Québécois leader has signalled that he will support a non-confidence motion to bring about an election, and polls show that Canadians want change.

The WE scandal is strike three for Trudeau, after ethical breaches involving SNC-Lavalin and a junket to the Aga Khan’s private island. Now it’s time to send the Liberal team to the showers, and let people who have had real jobs, run companies or taken business and economics courses in school take control.    Full Story

California Set To Pass The Nation’s First Wealth Tax Targeting The Ultra Rich

 

“Any tax that is actually effective at taxing wealth, however, would be equally effective at driving wealth out of state.”

It was about about nine years ago when consulting company BCG first suggested that in a time of out of control spending and soaring debt loads, the only fiscally sustainable “solution” was to implement a wealth tax (see “There May Be Only Painful Ways Out Of The Crisis“).

While the idea was well ahead of its time in 2011, and was quickly shut down in the court of public opinion, several years later none other than the IMF resurrected the idea of a wealth tax, which has only gained momentum in recent months, and despite widespread grassroots pushback, the concept of a “wealth tax” has moved front and center and most recently the chairman of Capital Economics, Roger Bootle, said that the world’s wealthiest could be subjected to higher tax rates as governments scramble to fund spending and repair their economies amid the coronavirus crisis.

Fast forward to today when the ultra-liberal state of California is now ready to take this “socialist” idea from concept to the implementation phase, with the SF Chronicle reporting that a group of CA state lawmakers on Thursday proposed a first-in-the-nation state wealth tax that would hit about 30,400 California residents and raise an estimated $7.5 billion for the general fund.

The proposed tax rate would be 0.4% of net worth (most likely ended up far higher), excluding directly held real estate, that exceeds $30 million for single and joint filers and $15 million for married filing separately.

Billionaire investor makes sense of this market. Spoiler Alert: Its NOT A Cycle!

 

Two of the questions I get most often these days are, “What kind of cycle are we in?” and “Where do we stand in it?” My main response is that the developments of the last five months are non-cyclical in nature, and thus not subject to the usual cycle analysis.

The normal cycle starts off from an economic and market low; overcomes psychological and capital market headwinds; benefits from gathering strength in the economy; witnesses corporate results that exceed expectations; is amplified by optimistic corporate decisions; is reinforced by increasingly positive investor sentiment; and thus fosters rising prices for stocks and other risk assets until they become excessive at the top (and vice versa on the downside). But in the current case, a moderate recovery – marked by reasonable growth, realistic expectations, an absence of corporate overexpansion and a lack of investor euphoria – was struck down by an unexpected meteor strike.

People also ask what’s different about this episode from those I’ve lived through in the past.

Another frequent question is, “What shape will the economic recovery take?” Everyone has his or her favorite candidate: a W, an L, a U or maybe a Nike Swoosh. Of course, the one we hear the most about is a V. While the terminology used isn’t crucial, and may basically be just a matter of semantics, I find the label “V-shaped” misleading.

Of all the people who use the label “V-shaped” to describe this recovery, I don’t think I’ve ever seen anyone define it. To me, a “V” has to satisfy two important requirements:  Full Article

 

Falling Into the Abyss Between Wall Street and Main Street

I know this runs counter to every dominant narrative, but a vaccine doesn’t really matter, opening up doesn’t really matter, and the size of the “free money” stimulus checks doesn’t matter.

What matters is that the nation is falling into the abyss that’s opened between Wall Street and Main Street.

And nothing will stave off the collapse of the social order other than a fundamental re-ordering of the way we create and distribute money and political power, as money buys political influence.

The last economic tide with widespread benefits to Main Street was 30 years ago. Since then, the Federal Reserve and other central banks have incentivized globalization and financialization, two dynamics that favor mobile capital and financier skims and scams…CLICK for complete article

Trouble’s Coming, I Don’t Know When, But It’s Coming

Investment guru Jim Chanos warns savvy investors that the seemingly endless soaring stock market is near the end.

“Trouble’s coming, I don’t know when, but it’s coming,” the short-selling legend who just cashed in a roughly $100 million winning bet recently told the Financial Times.

Chanos just earned nine-figures by shorting Wirecard ahead of its collapse, according to sources cited in the FT story.

Chanos is a famed for helping to expose some of the most famous financial frauds, including Enron, Baldwin-United and Drexel Burnham. His firm, Kynikos Associates, just celebrated its 35th anniversary.

He claimed we’re in a “golden age of fraud,” describing the current market climate as rife with euphoria, investor fear of missing out and “post-truth” politics — “a really fertile field for people to play fast and loose with the truth, and for corporate wrongdoers to get away with it for a long time,” he said. Full Story