Thoughts for Thanksgiving Day

"Gratitude can transform common days into thanksgivings, turn routine jobs into joy, and change ordinary opportunities into blessings." ~ William Arthur Ward

“If you made a list of all the things you could be thankful for, the list would undoubtedly be longer than your misfortunes.” ~ Catherine Pulsifer

“If a fellow isn’t thankful for what he’s got, he isn’t likely to be thankful for what he’s going to get.” ~ Frank A. Clark

Big Day for Retail

As we head into Black Friday and the holiday shopping season, there were some bright signs for retail stocks yesterday. Among the good news:

• Best Buy posted quarterly earnings that beat analyst expectations, and raised its fiscal 2020 earnings forecast, sending its stock up more than 9 percent.
• Dick’s Sporting Goods rallied more than 18 percent on better-than-expected earnings.
• Amazon shares closed 1.3 percent higher. 
• The SPDR S&P Retail ETF, a broad-based basket of retail stocks, climbed 0.6 percent.

Worrisome Numbers for the Fourth Quarter

Consumer confidence dipped for a fourth straight month in November as economic conditions weaken toward the end of 2019, according to data released this morning by the Conference Board. The Board’s consumer confidence index dipped to 125.5 this month, down from 126.1 in October.

This is just the latest piece of data pointing to weaker economic growth to end the year. The New York Federal Reserve’s Staff Nowcast, which estimates quarterly GDP growth, points to an expansion of just 0.7 percent in the fourth quarter. The Atlanta Fed’s GDPNow measure indicates growth of just 0.4 percent.

On the other hand, expectations for the holiday shopping season are strong. The National Retail Federation expects holiday sales to grow by about 4 percent from last year.

Crash of a Highflier

Among global companies with a market cap of at least $1 billion, ArtGo, a marble mining company, had enjoyed the biggest gain of the year, according to Bloomberg. It was up an incredible 3800 percent since the beginning of the year. Until this week.

But that all went poof in a big way when New York-based MSCI dropped plans to add the company to its equity benchmarks. ArtGo, which has been losing money for two years, apparently ended up not meeting the necessary standards for MSCI listings.

So all those gains have now been wiped out. ArtGo, which is listed on the Hong Kong market, were down 98 percent Thursday. It lost $5.7 billion in market value in a single day.

Good News From the Fed

Yesterday, the Federal Reserve released the minutes from its October policy meeting, where it had cut interest rates for a third time this year. Fed officials generally agreed that they likely won’t need to cut interest rates again unless economic conditions change significantly,

Discussions at the meeting indicated that members feel the U.S. economy is in a fairly strong position. They agreed that we're enjoying a healthy labor market and strong spending appetite among consumers, whose activity accounts for about 70 percent of GDP.

However, Fed officials also see “the downside risks surrounding the economic outlook as elevated, further underscoring the case for a rate cut,” they reported. They cited reduced business investment and exports resulting from “weakness in global growth and elevated uncertainty regarding trade developments” as a concern.

A Strong Move for Housing

U.S. homebuilding rebounded in October, with permits for future home construction jumping to a more than 12-year high, the Commerce Department said yesterday. The report also showed an increase in home completions and the stock of homes under construction.

Housing starts increased 3.8 percent, with single-family construction rising for a fifth straight month. On a year-over-year basis, housing starts advanced 8.5 percent in October.

Building permits surged 5.0 percent to a rate of 1.461 million units in October, the highest levels for that category since May 2007. Permits were driven by the single-family housing segment, which increased 3.2 percent to reach their highest level since August 2007.

For Bonds, the Kids Know Best

Which generation group best understands how to invest in bonds? According to a new study by BNY Mellon Investment Management, millennials have a slightly better grasp than older investors of the role fixed income plays in retirement planning and how the asset class responds to market cycles.

Asked by pollsters when average investors should consider adding fixed income to their investment portfolios, 36 percent of millennials said they did not know, compared with 45 percent of baby boomers. Not only that, just 32 percent of boomers reported having a fixed income allocation in their portfolio, versus 43 percent of millennials.

About 80 percent of boomers insisted that fixed income investing was intended only for retirement planning, compared with 70 percent of both millennials and Gen Xers who held this view.  In addition, while 65 percent of millennials surveyed said all bonds provided the same level of risk, 76 percent of boomers believed the same thing.

Another Record for the Bull

By one measure, this current bull market in history is now the best ever. The current market boom has recorded a whopping 472 percent gain for the S&P 500. That makes this the biggest-returning bull run since World War II, according to research from the Leuthold Group.

The previous record was set by the bull market from 1949 to 1956, which scored a 454 percent gain for the S&P 500. The explosive bull run in the 1990s saw the S&P 500 rally 391 percent, while the bull market of 2002–2007 pulled off a 121 percent gain for the index.

The current run has already been recognized as the longest bull market in history. The S&P 500 bottomed out on March 9, 2009, which means we have been in a bull market for more than ten and a half years now.

Uber vs. New Jersey

A few weeks ago, we mentioned the rough quarter Uber had, losing more than a billion dollars. Now they're in trouble here in New Jersey: Uber Technologies Inc. owes the state about $650 million in unemployment and disability insurance taxes because it has been misclassifying drivers as independent contractors.

Uber and subsidiary Rasier LLC were assessed $523 million in past-due taxes over the last four years, the state Department of Labor and Workforce Development said in a pair of letters to the companies. There's another $119 million due in interest and penalties on the unpaid amounts.

The state’s decision is limited to unemployment and disability insurance, but it could also end up meaning that Uber is required to pay drivers minimum wages and overtime under state law. Uber’s costs per driver (as well as those of Lyft) could jump by more than 20 percent if they are forced to reclassify workers as employees.

Where the Inflation Is

The Labor Department said on Wednesday its consumer price index increased 0.4 percent last month, the largest gain in the CPI since March. Energy accounted for more than half the increase, but Americans paid higher prices for gasoline, used cars, medical treatment and recreation in October.

Gas prices surged 3.7 percent in October, but Americans are still paying less to fill up now than they did a year ago, with the cost of gas about 7 percent lower. Prices for medical care rose 1 percent in October, marking the biggest increase in more than three years. The cost of recreation — ticket prices, cable TV and the like — also posted an increase of 0.7 percent, the biggest monthly gain since 1996.

The increase in the cost of living over the past 12 months edged up to 1.8 percent from 1.7 percent. But that means it’s still well below last year’s peak of nearly 3 percent.

The Rare Flat Dow

Here's an anomaly for you: The Dow Jones Industrial Average closed at precisely 27,691.49 yesterday, which means the index produced its flattest finish since April 24, 2014, according to Dow Jones Market Data. The Dow had closed at 27,681.29 on Friday, which means it rose just over 10 points yesterday, which rounds off to 0.00 percent.

Finishing a session virtually unchanged is a rarity; before that date in 2014, it hadn't happened in 12 years. The last time the index finished flat after a record close was 1994, according to Dow Jones Market Data.

Flat finishes were more common for the Dow before 2001. That's the year that the New York Stock Exchange converted to the decimalization quote system, allowing investors to trade in increments of pennies, rather than the old system of eighths or sixteenths of a dollar.

Where Volatility Is Headed

Has the volatility washed out of this market? The CBOE Volatility Index, or VIX, which is widely considered to be the best volatility gauge in the market, hit its lowest level since July at the end of last week.

Moreover, short bets on VIX futures contracts hit a record high last week. Typically, when markets are at a record high, traders tend to load up on VIX calls to bet on a downturn. But this time, they are betting on further stock gains and even lower volatility.

This isn't necessarily good news. A lot of market-watchers see this as a contrarian indicator, thinking that when you see a huge amount of excessive optimism in the market, you often tend to get a snap back in the other direction.

Thoughts for Veterans Day

“To us in America, the reflections of Armistice Day will be filled with solemn pride in the heroism of those who died in the country’s service and with gratitude for the victory.”  ~ Woodrow Wilson

“Only the dead have seen the end of war.” ~ George Santayana

“Veterans know better than anyone else the price of freedom, for they’ve suffered the scars of war. We can offer them no better tribute than to protect what they have won for us.” ~ Ronald Reagan

A Little More for the 401(k)

There's a little good news for taxpayers out this week from the IRS: The amounts that people can contribute to retirement plans have, for the most part, inched up for 2020. Employees in 401(k) plans would be able to contribute as much as $19,500 in 2020, up from $19,000.

Participants in 403(b), most 457 plans and the federal government’s Thrift Savings Plan will also see their contribution increased to $19,500. The catch-up contribution limit for employees 50 and older who participate in these plans will increase to $6,500 from $6,000.

One that didn't step up: The limit on annual contributions to an IRA remains unchanged at $6,000. The additional catch-up contribution limit for individuals aged 50 and over also remains $1,000.

Peak Buyback

Corporations are on pace to provide $480 billion in bids for S&P 500 stocks this year, according to an analysis by Goldman Sachs. That means that stock buybacks will have provided more demand for equities than any other source in 2019, including households, mutual funds or exchange-traded-funds.

How much money is that? Look at it this way: In 2019, S&P 500 companies paid out more than 100 percent of their free cash flow in the form of dividends and buybacks.

But this key source of market support may have already peaked. One study shows that Russell 3000 small-cap companies have announced $795 billion in buyback authorizations in 2019, a 12 percent decline from the roughly $900 billion authorized last year. Overall, Goldman Sachs predicts that share repurchase authorizations will fall another 5 percent in 2020.

The New Face of Charitable Giving

Tax reform has prompted many taxpayers to change the way in which they make charitable donations, according to a new study from Fidelity Charitable. Half of surveyed taxpayers reported that they had made at least one change in their charitable giving strategy since the new tax law went into effect, such as donating appreciated stock, “bunching” several years of charitable gifts into a single year or contributing to a donor-advised fund.

The good news is, these changes haven’t affected the sums that people are able to give to charity. According to the survey, 76 percent of taxpayers said they had donated about the same amount to charity in 2018 as they had the previous year, and 15 percent gave more.

Why do people give more? Thirty-two percent of respondents who gave more than they had in 2017 cited a request from a nonprofit or involvement in a pledge or campaign. Thirty-one percent said their increase was due to a salary increase or to interest in a charitable cause.

How to Lose a Billion Dollars

It takes a very special kind of company to lose a billion dollars in a quarter, but Uber proved yesterday that it was up to the challenge. Uber reported a net loss of $1.16 billion in the third quarter, topping its $986 million loss during the same quarter last year.

For the three months ended September 30, Uber posted a loss of $0.68 per share, better than the average estimate of $0.81 per share loss analysts surveyed by Yahoo had forecast. Revenue rose 30 percent from a year earlier to $3.81 billion, also beating the average analyst forecast of $3.69 billion.

All this is a step up from the second quarter. For the three-month period ended June 30, Uber posted a loss of $4.32 per share, far below the $3.19 per share loss analysts expected. All told, in the second qaurter, the company lost $5.2 billion.

The Decline of Manufacturing

Here's an indication of how the American economy has changed in recent decades: Once a powerhouse of the U.S. economy, making up about a quarter of GDP in the 1960s, the manufacturing sector has steadily declined in importance, and now represents its smallest share of the U.S. economy in 72 years.

Manufacturing made up 11 percent of gross domestic product in the second quarter, according to figures out from the Commerce Department last week. That's its smallest share in data going back to 1947, and down from 11.1 percent in the prior quarter.

It's also very telling what has replaced manufacturing as the stalwarts of our economy. The 11 percent for manufacturing compares with 13.4 percent for real estate, 12.8 percent for professional and business services and 12.3 percent for governments.

October's Jobs Report

The American economy added 128,000 jobs in October, and the headline unemployment rate ticked up to 3.6 percent, the U.S. Bureau of Labor Statistics reported this morning. Job growth has averaged 167,000 per month thus far in 2019, compared with an average monthly gain of 223,000 in 2018.

There were some headwinds for job numbers in October: The number of Census workers fell by about 20,000, and 20,000 striking workers at GM were also counted as unemployed. Meanwhile, job gains for August and September were revised up by 95,000.  August’s additions were bumped from 168,000 to 219,000 and September’s from 136,000 180,000.

In October, food services and drinking places added 48,000 jobs. Job growth in that industry has averaged 38,000 over the past three months, compared with an average monthly gain of 16,000 in the first seven months of 2019. Employment in financial activities rose by 16,000; the financial industry has added 108,000 jobs over the last 12 months.