Economically, the "velocity of money" is simply considered to be the rate at which money in circulation is exchanged for both goods and services over a given period of time. Money slows down, and the economy dies on the vine. Money speeds up, and well... that's called economic activity. Rock on. The financial markets are of course, part of this ecosystem, some might say the very life blood of prosperity. What is clear to me is that currency is moving around at what looks like increased speed overall, but that speed has been lumpy -- and largely focused I think, on the tech sector.
Like lightning. Blink and you might not see it at all. Talk to your old friends from back in the day. Talk to your neighbors. They seem so uninformed, yet they also seem to get through life just as do you and I. Thirty-six hours ago, we were going to war -- and this one would be a real doozy. The uninformed worried about a military draft, as if the high-speed, low-draft crowd could find some use for those who would rather patrol the salty snack aisle at their local grocery than serve to protect others. A week ago, we were more concerned with earnings, with policy that impacts the economy -- and by extension, financial markets -- than an Iranian general whose name most did not have on the tip of their tongue. Could it be that we have returned round trip to where we were in less than a week? Safe haven assets have. For now.
In addition, if the events of the past week are not the Black Swan that market bears have been waiting on, then just what lurks beyond? Oh, there will be a correction at some point. Clearly markets remain in an aggressive uptrend, of that I have no doubt. The Nasdaq Composite closed at a record high (yet, again) just hours after Iran had launched a largely harmless missile attack in response to the loss of the already mentioned general. The S&P 500 closed within hand-holding distance of the all-time high for that broadest of large-cap indices, as well.
Trading volume, you might note, increased on Wednesday from Tuesday at both of New York's major exchanges, and for constituent companies of both of these indices as well. In fact, just eyeballing a number of charts, it becomes arguable that trading volume has been noticeably higher on up days than on down days on a regular basis since early-to-mid-December. That trend has been most pronounced for the Nasdaq Composite and Nasdaq 100.
There are those that say that "speed kills", while others say "the trend is your friend." Though always a little more cautious at the top of the charts, the hand of experience turns once trend itself does more than just zig or zag. We'll have to rely on technical signalling for that. The correction ahead, when it occurs, will likely have an identifiable (in hindsight) event as catalyst. Just not this event.
Let It Be Written
Last month, President Trump announced that on January 15, which is next Wednesday, the U.S. and China would officially sign the Phase One "trade truce" agreement, and then move on immediately to negotiating a more substantial and likely much harder-to-reach Phase Two deal. That's where structural changes to the way China does business -- and the still-denied transgressions against the laws of international commerce -- will be covered, and in all likelihood, the potential for any trend-changing headlines.
For now, though, the trade news regarding China is a positive, and I think mostly priced in. S&P futures markets received a bit of a boost early on Thursday morning, as Gao Feng, spokesperson for the Chinese Ministry of Commerce, made mention that Vice Premier Liu He, who is China's point man on trade, will lead a delegation to Washington planned to last this coming Monday through Wednesday. A big to-do? Maybe not to you and I, but to markets, official confirmation by the Chinese side that what the U.S. President had inferred last month does matter.
Phase Two will take years, and may never find compromise. That bit of negativity is not for today's consumption. In 10 years, you will look older, you will run slower and you will be less capable physically -- and that's if you're lucky. Should that make one willing to maximize the present?
Like most of you, I am never that crazy about analyst-generated comments that give reason to caution on one of my trade ideas. Even worse when two separate analysts release similar information in that regard in the same week. As readers likely know, my small-sized basket for the 5G upgrade and build-out cycle has included Verizon (VZ) , AT&T (T) , Marvell Technology (MRVL) , Cisco Systems (CSCO) and Apple (AAPL) .
Though neither analyst rates at the highest level by TipRanks, Rod Hall of Goldman Sachs, and Tal Liani this week have both issued research showing slower than hoped for capital spending across telecom this year. Both express a view that globally, this kind of spending will only grow in the low single digits percentage-wise, despite the 5G build-out and rapid adoption in China. There is also growing concern, and not just from these two, of slower-than-anticipated acceptance in the U.S. To make matters worse, Liani actually downgraded Cisco on Wednesday.
What I think is this. While spending of 5G infrastructure must increase, spending of existing networks must decrease. There is an offset there that does not necessarily hurt either Verizon or AT&T. That will not slow down the smart-phone upgrade cycle either, so in my view, Apple might be insulated. That leaves questions for me on chips, gear and network equipment dependent on the business-to-business (B2B) cycle in this space. If cell phones are where the action will be, does it not make sense to swap out of at least some Marvell and perhaps into some Qualcomm (QCOM) ? I am not yet convinced, but this is on my radar.
As for Cisco, I have to say that this name has been a disappointment. I've been in the name for most of the year, and it has returned just 6.4% to my portfolio. Not a loss, but clearly an under-performer. With a dividend yield of less than 3%, there might be a better place for some of this dough. Performing nearly as poorly as CSCO over the past year has been Interdigital (IDCC) , a designer of wireless modems and wireless infrastructure equipment that investors may need to be alert to. I was made cognizant of the name by someone else.
This past Monday, this firm took Q4 revenue guidance up to $92 million to $100 million from a consensus view of $88.3 million. Included in this guidance is $74million to $77 million in recurring revenue. The shares are what we consider to be overvalued, but a sales number like that would be a significant improvement from two years of "pure sideways" for these guys. I may initiate with a small entry if this name can take and hold its 50 day SMA. Just an idea, but an idea nonetheless.
It's a Bird, It's a Plane...
You kids see Bed Bath & Beyond's (BBBY) fiscal third quarter? Ugly does not begin to describe. Oh, they'll still pay their $0.17 quarterly dividend to shareholders of record as of March 13. There may just be a little turnover between now and then as to who those shareholders are. The firm posted adjusted EPS of $-0.38, missing expectations by $0.40. Revenue landed at $2.76 billion. That too missed consensus, and represents year-over-year "growth" of -8.9%.
Since you asked, let us take a look at comparable sales. Expectations were for an awful -4.7%. Terrible, but at least easy to beat. Right? Drumroll, please... comp sales printed at -8.3%. The company states that both sales and profitability will remain pressured throughout the current quarter, as it has also pulled its full-year guidance. Well, at least the current quarter doesn't include the holiday season or anything... oh wait. Never mind.
So where did the good citizens spend their money? It would appear that many hair dryers, kitchen tools and appliances were sold by Helen of Troy (HELE) through that company's many brands. Yeah, HELE beat EPS expectations by a mere $0.63. The stock is up 6% overnight, and little more than 2% of the float is held in short positions, meaning that this is not just the work of the nervous that you see, this is actual initiations and adds.
Oh, Be Careful
Keep your helmets on. The Fed is out in force today.
Economics (All Times Eastern)
08:30 - Initial Jobless Claims (Weekly): Expecting 220K, Last 222K.
10:30 - Natural Gas Inventories (Weekly): Last -58B cf.
13:00 - Thirty Year Bond Auction: $16B.
The Fed (All Times Eastern)
08:00 - Speaker: Reserve Board Gov. Richard Clarida.
09:30 - Speaker: Minneapolis Fed Pres. Neel Kashkari.
11:30 - Speaker: New York Fed Pres. John Williams.
12:45 - Speaker: Richmond Fed Pres. Tom Barkin.
13:20 - Speaker: Chicago Fed Pres. Charles Evans.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (AYI) (2.26)