[Market Madness] Edition 0117
Looming danger
Weekly update
Administrative topics and a general market recap
Well folks, another whirlwind of a week in many ways. Markets had their own share of goods and bads, but, most importantly, ended the week with some gains. Not surprisingly, the markets are still weighing stimulus pretty high on the end of year “to-do” list, but still yet to no avail. Mnuchin and Pelosi are still trying to find the often neglected “middle ground” where the potential “golden deal” will fall with regard to passing stimulus.
U.S. markets had a positive week, Asia was mixed, and Europe was down. Crude held over $40 per barrel again this week and we saw a reduction in spot gold price back under $1,900 per troy ounce.
The proverbial “sauce stain on the white shirt” this week came in the form of a higher than expected weekly new-jobless claims report. The report detailed new jobless claims at levels we had not seen since August. Jobs, as we know, are such a vital metric to an economy (particularly during economic recovery). This sudden retraction in gains comes as we’re also seeing spikes in new daily cases. Putting these two together, many are beginning to wonder both if a second spike is on its way, and if the economic recovery is finally running out of steam. The answer to the first is dependent on the changing weather (colder weather seems to help the spread of COVID as well as the expectation for a scary flu season), and the answer to the second is likely to reveal itself after a few more weeks of jobless claims to know if a trend will establish or not.
In tandem with the weak jobless report, the WSJ posted a co-existing article that highlighted what companies are hiring amidst the pandemic. It is good to see that some firms are out there looking for new talent, but also highlights the inequity which the labor market is facing as a result of the pandemic.
Finally, we got a positive report from the Retail Spending world, showing a nice uptick in the month of September (up 1.9%). Many schools returned to session in September, so it makes sense to see retail spending up as preparatory materials are needed to get learning under way.
“Gregory Daco, chief U.S. economist at Oxford Economics, said September retail-sales were “very encouraging” but added, “the problem is, when we look out across the horizon, the outlook is much less rosy for consumers.” He pointed to struggling services providers and the impasse between Congress and President Trump over another trillion-dollar-plus coronavirus relief package” (excerpted from WSJ article)
Reviews on the report appear mixed, with some further suggesting a strong holiday spending season, with others worrying about the slowdown of economic recovery and the looming stimulus which could leave customers’ tightening their pockets.
Did you miss the last edition? No worries! Get it right here and catch up on the madness. Consider subscribing down at the bottom of this newsletter so you never miss another edition and read from the comfort of your inbox.
In the meantime, if you are interested in my thought process throughout the week as I collect news and ideas for the Sunday publication, please check out my Walling page where I brainstorm and mind-map each week’s edition!
Fundamentals
Where did the markets end last week?
U.S. Indices 5 Day Performance
Dow Jones: +0.07%
S&P 500: +0.21%
NASDAQ: +0.79%
Asia and Europe 5 Day Performance
Nikkei 225: -0.89%
Hang Seng: +1.14%
FTSE 100: -1.59%
DAX: -1.09%
Rates, Spot Prices, and ‘Good to Knows’
U.S. Dollar Index: 93.72
US 10 YR: 0.746%
Crude OIL: $40.74
Spot Gold: $1,898.59
Market Madness Portfolio: +12.20% YTD
TEDRATE: 0.12
LIBOR (3 month): 0.218%
COVID 19 Global Cases: 39,758,766 (updated Oct. 18, 2020)
The ‘EY’ touch?
Let’s just read the first couple paragraphs of this piece together:
This year, $2 billion is missing at a German fintech company, $300 million of sales has been found to be fabricated at a Chinese coffee chain and $5 billion in undisclosed debt has been uncovered at two related companies listed in the U.K. Together, the incidents cost shareholders of the companies roughly $30 billion.
All had been audited by Ernst & Young. Last year, EY also audited office-space company WeWork, which nearly collapsed after fumbling a planned initial public offering.
EY is one of the Big Four accounting firms, whose audits are meant to give investors confidence in companies’ figures. EY missed red flags or failed to aggressively pursue them at some of the companies ahead of their scandals, and for the most part it was outsiders who raised questions first, a review based on publicly available documents and interviews with people close to the events shows. Now, regulators are scrutinizing EY’s work.
Now, let’s not draw too many connections or conspiracies. It is, however, rather interesting to see what this report has uncovered. It feels like I am reading a piece from Hindenburg Research, with some of the details uncovered.
There is no getting around audit’s important role in every public business, particularly from the lens of information accuracy and fraud prevention. As a result, independence is vital to keeping any potential bias or influence free from the reports. But that is difficult to do, as firms often seek top accounting / audit talent from these Big Four firms to work in-house. Also, given their focus on young, fast growing companies, the data and numbers can grow really foggy with regards to reliability, requiring a greater level of elbow grease and attention from the audit team.
I am not here to tout an anti-EY message. I think that research and reporting like this is important because information transparency and accessibility in and of itself is important. Investors want to know that public firms are telling following the accounting principle guidelines and reporting their internals as accurately as possible. Without that, investors cannot reference corporate statements with any level of confidence, leading investors to choose one firm over another when investing. It also goes without saying that investors want to steer clear of firms conducting fabricated practices.
More regarding this report is likely to surface, and I know EY won’t go out without a fight or putting in more strong words of defense for themselves. A follow-up to this is likely to come in the future.
Quick Takes
To fill in the gaps
JP Morgan’s earnings flexed on the COVID downturn. (via WSJ)
Here is some background on the SCOTUS confirmation hearings. (via WSJ)
COVID 19 clinical trials are pausing. (via CNBC)
Third-party sellers on Amazon rake in about $3.5 billion during Prime Day. (via CNBC)
And the PPP drama continues. (via WSJ)
The iconic diet soda, Tab, is being discontinued after 60 years. (via WSJ)
Recapping Apple’s iPhone event. (via WSJ)
Movie theater company, AMC, worried about running out of cash by year’s end. (via WSJ)
Twitter in the political hot seat again. (via WSJ)
A look into the CDC. (via WSJ)
Popular children’s game, Roblox, confidentially seeks IPO. (via CNBC)
Disney undergoes a major reorganization. (via CNBC)
Best Western’s take on the industry’s future: “it’s really bad.” (via CNBC)
The U.S. budget gap exploded. (via WSJ)
Investors are watching the election, at least as far as their portfolios are concerned. (via FT)
General Banter
What’s on my mind
Politics aside, this winter is going to be scary. Please everyone do your part to be safe to yourself and those around you. Wear a mask and get a flu shot, please. This is no longer about individuals anymore, it is about being kind and respectful to the other humans we share this earth with.
Reader’s Corner
A place for suggestions
The reader might enjoy these weekly research publications from Darqube. Check out this week’s release here. Also, here is a nice WSJ video talking about the current state of ESG funds.
Do you like what you have read? Consider subscribing so that Market Madness is hand-delivered to your inbox each day! If you know of anyone missing out on Market Madness, save them the trouble and share it with them!
Behind the Madness
You’ve made it through the madness. I’ve worked really hard to ensure that you leave this page having learned something, and I hope that benefits you in your daily adventure. Thank you again for checking in.
Publishing Schedule: every Sunday
In the meantime, if you are interested in my thought process throughout the week as I collect news and ideas for the Sunday publication, please check out my Walling page where I brainstorm and mind-map each week’s edition!
Connect with Market Madness
For more Madness, check out the archive.
Some Sign-ups
That are definitely worth your time
Atom Finance: “Atom’s platform offers an ever-growing arsenal of powerful research and portfolio monitoring tools to anyone…” Sign up for a FREE account here.
Robinhood Sign Up: You get a stock, and you and you and you, and me! Follow my Robinhood link (if you’ve not signed up before) and we both get a randomly picked stock! A great way to get a jump start on investing, especially if you are hesitant to invest your own money at first. Your free stock is waiting for you here.
Koyfin: Financial websites have basic data and are cluttered with advertisements. Professional tools like Bloomberg are very expensive and difficult to use. Koyfin was created to provide investors with affordable and intuitive analytical tools to research stocks and understand market trends. Read more and join for FREE here.
TOGGLE: TOGGLE puts hedge-fund grade analytics within reach of every investor. Sign up for a FREE account here. Also, grab a FREE daily briefing for some tickers here.
Dirty Dozen Chart Pack (from Macro Ops): Good intelligence is vital. Great intelligence is priceless… Sign up to receive my weekly chart pack of the 12 most important and actionable charts that’ll make sure you kick your week off right. Sign up here.
Morning Brew: Become smarter in just 5 minutes. Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free. Sign up here. Grab their other, new, newsletters too: Emerging Tech Brew, Retail Brew, and Marketing Brew.
Investor Amnesia: a cool new email distribution for “your financial history fix through reading my articles, or those that I link to in my weekly ‘Financial History: Sunday Reads’.” Sign up here.
Axios News Sign Up: News worthy of your time. Get newsletters featuring news, scoops & expert analysis by award-winning Axios journalists like Mike Allen, Dan Primack and Ina Fried. View and sign up for their newsletters here.
The Hustle: Bold business and tech news. We cut through the noise with the most impactful headlines. Sign up here.
Wall Street Breakfast: Wall Street Breakfast, Seeking Alpha's flagship daily business news summary, is a one-page summary that gives you a rapid overview of the day's key financial news. Get today’s piece here.
The Water Coolest: The Water Coolest is a daily business news and professional advice email newsletter for young professionals. Biz news. Financial advice. Unfiltered commentary. One daily email. In 5 minutes or less. Sign up here.
DISCLAIMER ON SIGNUPS: I am not sponsored by any of these sites, companies, or individuals.
GENERAL DISCLAIMER: All rights reserved to respective sources where I pull my information. I do not own or have vested interests in the websites where I get my news and information. Links are provided as credit and to provide additional context where reader’s might want more information outside of what is printed here on these sheets.
