Doug Kass, the famed author of “The Edge” column at Jim Cramer’s Street.com, and a noted bear who gave the bearish perspective on Berkshire-Hathaway the stock (BRKB), to Warren Buffett and Charlie Munger a few years ago at Berkshire’s Omaha Woodstock, used to say in the late 1990’s and early 2000’s that whenever a company put their name on a stadium, it usually meant the top for the stock. All the dot-com’s threw their names up on football/baseball stadiums in the late 1990’s only to be trading on the pink sheets within a few years. (As a hockey fan, the Consol Energy Center was named after the coal and gas company, after they paid big bucks near the top of the commodity boom in 2008. However the most famous collapse of all was probably Houston Astro’s Enron Field.)
Works like clockwork, Mr. Kass.
Late this week it was announced – in Chicago, with great fanfare – that “US Cellular Field” i.e. The Cell, the South Side home of the Chicago White Sox, was going to be re-named Guaranteed Rate Field.
Guaranteed Rate is a phenomenally successful mortgage company here in Chicago. A long-time friend of mine works there and I’ve refi’ed my mortgage through GR a few times over the years.
Remember, this is a mortgage company.
The top for the Treasury market has now been called.
SP 500 Weekly Earnings Data (by the numbers):
- Forward 4-quarter estimate: $125.88 vs last week’s $125.82. The forward 4-qtr estimate rose sequentially this week. Doesn’t happen that often, so somewhat noteworthy.
- P.E ratio: 17.23(x)
- PEG ratio: 10,36(x)
- SP 500 earnings yield: 5.80% vs last week’s 5.76%.
- Year-over-year growth rate of the forward estimate: +1.66% vs last week’s +1.46%.
Conclusion: the next 6 weeks of the quarter see sporadic earnings reports from those companies with an August quarter end. The ‘big’s” like Nike, Accenture, Fed-Ex, Micron, Walgreen’s and assorted others start to report their August quarters in a few weeks. (Long NKE, FDX, MU)
Each week, you’ll find on this blog a tangential earnings topic for you to consider when thinking about the topic of SP 500 earnings since the earnings news and trends are now mainly behind us until mid-October ’16.
This past week, the big news – in my opinion – was the breakout in the 10-year Treasury yield above its 2-month trading range, between 1.49% on the downside and 1.61% on the top end. The 10-year Treasury yield close on Friday 8/26/16 at 1.635%, was a clear breakout of that range.
A strong August ’16 payroll report to be reported Friday morning, September 2nd – at least according to Fed Vice-Chair Fischer on Friday from Jackson Hole – will likely cement another 25 bp’s move higher by the FOMC. That would be a nice surprise. (Long TBF, small TBT positions and a lot of cash. Sold all the high yield in the last few weeks, both municipal and taxable.)
SP 500 earnings are improving, both the revisions (more on that in the next post) and the forward estimates. We can get a 3% – 5% correction (or more) in the SP 500 at anytime, but given the continued persistence in bearish sentiment around the US stock market, it is my opinion, that SP 500 corrections should be bought.
In terms of the US Treasury market and bond fund inflows, I’ve been wrong and sitting with too much cash for 7 years now, but the painful lesson of the past 16 years is that things can change in a hurry.
Sunday morning, I’m headed out to do my 2nd Chicago Triathlon (Sprint Division) along Chicago’s beautiful lakefront. Wish me luck. If this blog isn’t updated for a while I either drowned in Monroe Harbor or was knocked off on the bike course.)
Thank you for reading.