Global Market Commentary

What is the most important aspect of the tax bill for investors?

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For Investors, Corporate Taxes Are the Most Important Part of the Tax Bill The administration is close to notching its first major policy success with the passage of a sprawling tax cut.  We will wait until the legislation is finalized before commenting on its consequences in detail.  However, for many investors, the most significant effects of the tax bill will be on the value of the stocks in their investment portfolios. That’s another way of saying that despite all the wrangling about the specifics of the tax bill that will affect individual income taxes, the lowering of corporate taxes will...
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A Tale of Two Chinas

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The skeptics and haters of the current bull market have spent the last eight years finding reasons and justifications for their skepticism.  One of the favorite reasons for pessimism has been China. Sometimes China has been a geopolitical boogeyman, with journalists fretting about China’s rise on the world stage and its potential to surpass the U.S. in military or economic power.  We have thought those fears to be baseless and have said so for years.  China has a long, long way to go before it will be able to challenge the hegemony of the U.S. either militarily or economically, even...
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U.S. Markets, Japan, and Europe

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Market Summary U.S. Markets, Japan, and Europe U.S. markets continue ahead, logging one of their longest-ever periods without a 5% correction.  We do not know what the catalyst for such a correction will be, and neither does anyone else, but there are plenty of potential culprits that everyone continues to watch, from geopolitics to the Fed to U.S. tax policy.  In any event, as we have been observing throughout 2017, such a correction will be a buying opportunity, barring an unexpected deterioration in economic or financial fundamentals.  Those fundamentals remain solid.  U.S. growth is accelerating beyond the disappointing levels that...
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What Will Push Stocks Higher?

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Productivity Growth Will Push Stocks Higher After a long slump, productivity growth is accelerating again — and the reasons for the acceleration further reinforce our view that we are in a late, bullish phase of the economic and market cycle, with more upside to come for stocks.  As we have said many times in recent months, “This bull market is not dead” — and this is further evidence to support our thesis. We’ve written a lot about productivity growth and the reasons for the slowdown of the last several years.  That slowdown has been a key component of the lackluster...
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Big Tech’s Regulatory Reckoning Coming Soon?

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Big Tech’s Regulatory Reckoning Coming Soon?  Probably Not 2017 has been a year for the big, dominant U.S. technology companies: the advertising duopoly of Alphabet [NASDAQ:  GOOG] and Facebook [NASDAQ:  FB]; the e-commerce juggernaut of Amazon [NASDAQ:  AMZN]; and the most valuable consumer products brand on the planet, Apple [NASDAQ:  AAPL].   It’s been their year in several senses.  From an investor’s perspective, their stocks have been outstanding performers.  While other parts of the stock market have also driven the rally, big tech have been the headliners — particularly as hopes for tax reform and infrastructure spending dimmed, and with them...
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Who Is Going To Be The Leading Global Power by 2050?

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Chinese As A “Leading Global Power” by 2050 — And How China’s Tech Giants Feature In That Equation With Chinese internet stocks “as hot as the sun” according to one commentator, companies such as Alibaba [NYSE:  BABA], Baidu [NASDAQ:  BIDU], Tencent [Hong Kong:  700], JD.com [NASDAQ:  JD], and TAL Education Group [NYSE:  TAL] have received a lot of attention in financial media. Headlines about China have also focused on the recent Communist Party Congress in Beijing.  This congress, held every five years, is the venue for leadership changes and for review and recalibration of party policy at the highest levels. ...
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Why The World Is Buying Japanese Stocks

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Japan’s Prime Minister Cements Power and Drives Japanese Stocks Higher On September 28, Japan’s main political opposition announced that it wouldn’t be fielding any candidates in the snap election that had been called by Prime Minister Abe.  The Japanese stock market had been having an unexceptional year, lagging other global indices but helped by a rise in the value of the yen.  It accelerated sharply after that announcement. Source: Bloomberg Abe’s popularity has recovered from allegations of insider dealing earlier in the year; his party maintained its two-thirds majority in the lower house of parliament, and his economic and financial...
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Are Markets “Efficient”?

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What Richard Thaler Has Taught Us About Economics… and Markets On October 9, this year’s economics Nobel winner was announced: Richard Thaler of the University of Chicago.   Mostly, the advances made by economists who win the Nobel can seem a little abstruse, but Mr Thaler’s contribution is different.  To understand why needs a little history.  Forgive us for this digression — we promise you’ll understand its relevance to the markets by the time we’re through. Chicago’s Richard Thaler:  Making the Dismal Science Less Dismal Source:  Xinhua Economics: Where It Came From The discipline we know as “economics” began as a...
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Is Internet Marketing Going Away?

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Internet Marketing’s Growth Story Is Still Strong   Last week we commented on some of the social and political pressure that has recently been building against the giants of U.S. internet tech: primarily Amazon [NASDAQ:  AMZN], Facebook [NASDAQ:  FB], and Alphabet [NASDAQ:  GOOG].  Regulators are accusing them of using opaque financial engineering to avoid taxes; politicians and pundits are accusing them of being poor corporate citizens by destroying jobs; and the public is wondering about their role in creating an increasingly polarized electorate. Add in concerns about election advertising paid for by foreign interests, and you have a potentially toxic brew...
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Is E-Commerce an Employment Wrecking Ball?

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Is E-Commerce an Employment Wrecking Ball?  Nope: It Creates More, Better-Paying Jobs and Boosts Productivity After strong stock-market performance in the year to date, several big U.S. tech firms have begun to receive some negative attention from the public, as well as from regulators and politicians.  Alphabet [NASDAQ: GOOG] and Facebook [NASDAQ:  FB] have gotten the most scrutiny, with European regulators leveling accusations of unfair search advantages against GOOG, and U.S. lawmakers drawing FB into the controversy surrounding alleged Russian efforts to influence the outcome of last year’s election. Amazon [NASDAQ:  AMZN] has not been above the fray.  The company’s...
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Which market could more than double before the bull is over?

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Why Emerging Markets Could More Than Double Before the Bull Is Over Back in April, we drew attention to the ongoing rally in emerging markets that began early in 2016, corrected sharply at the time of the U.S. election last November, and then took off again as fears of a global trade war receded. Our observation in April was primarily about the relative valuations of the U.S. and emerging markets.  Although the gap has narrowed slightly since we wrote, the valuation premium commanded by the S&P 500 over the MSCI Emerging Markets index remains high compared to its historical norm. ...
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Is brick-and-mortar retail doomed?

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Is Pure E-Commerce Really An Unstoppable Juggernaut?  Why the Future May Be Different Than You Expect The narrative of the total and relentless dominance of e-commerce over brick-and-mortar retail is beginning to break down. Above, we wrote about the big Chinese tech firms, and how they’re leveraging consumer data to build out holistic ecosystems where those consumers will want to spend more and more of their time.  One of the most interesting recent developments has been Alibaba’s [NYSE:  BABA] embrace of brick and mortar.  BABA founder and chief Jack Ma said it directly: “With new retail satisfying increasing consumer expectations… you...
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Videogames:  A Theme That’s Just Beginning

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We’ve written several times this year on themes related to videogames — trends we believe show that the 2017 outperformance of many domestic and foreign videogame companies are not a flash in the pan, but the beginning of a period of secular growth.  This week we’ll provide a brief summary of these trends.  Videogames remain one of our favored industries. As the current bull market continues to mature, many investors of our mindset have found it more and more difficult to locate “growth at a reasonable price.”  One industry where we see such inexpensive growth is biotechnology, where several major...
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The Bitcoin Fork

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  Bitcoin’s wild gyrations have this year become even wilder, driven largely by an ongoing “civil war” within the commu-nity of coders and miners who make up the cryptocurrency’s ecosystem.   So what’s the nature of this civil war, what are the stakes, and what might the consequences be? On the surface, the conflict is pragmatic; underneath, it reveals two divergent visions of what bitcoin is and what its purpose should be.   The central issue is the speed at which the bitcoin network is able to handle transactions. Readers may be aware that one of the two fundamental technolo-gies...
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Is Bitcoin a Bubble?  Probably Not

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Digital assets such as Bitcoin, Ether, and others have appreciated so much in 2017 that their interest and appeal are irresistible — not just to speculators, but increasingly to institutional investors.  Anyone who has not participated in the rally is faced with a conundrum.  At every step of the way, after every enormous move, potential speculators have found themselves lamenting that they missed it — and yet afraid that it was too late.  So as Bitcoin nears $5,000, many are asking themselves the same question — “Is this where the bubble pops?  Or will I feel like a fool when it...
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A Trade War With China? That’s Already Been Happening For Decades

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A Trade War With China? That’s Already Been Happening For Decades   During last year’s U.S. presidential campaign, we began reading discus-sions about the possible effects of a trade war with China. Since the new administration took office, such dis-cussions have become ubiquitous. But even last year, we were left scratch-ing our heads: the risks of a trade war with China? Do these pundits really not know that the U.S. and China have been in a trade war for the better part of a generation?   (The answer is, no, they probably don’t, which is no small part of the...
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Business Spending and Consumer Spending Are Strong

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Market Summary The U.S. Economy U.S. economic data for the second calendar quarter came out yesterday, and they were very strong. According to the latest revision, U.S. GDP grew by 3% in the quarter, and was far above the estimates of almost all economists. For the third quarter, the most accurate predictor of U.S. economic growth, the Atlanta Fed’s Nowcast, is calling for 3.4% GDP growth in the third quarter. In spite of Hurricane Harvey, we anticipate strong growth in Q3 2017. Business spending and consumer spending are strong, and this bodes well for corporate profits and for stock prices....
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When Investing, We Must Keep the Big Picture In Mind

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The U.S. and many global stock markets have continued to move ahead. Even rising tensions on the Korean peninsula, and the theoretical prospect of nuclear war, were met by markets with a brief shrug — and this during a seasonal period when markets are often unsteady and experience corrections. As we write, the S&P 500 index is just 2.4% down from its all-time high of 2490.87 set on August 8.   Markets are showing resilience in the face of geopolitical concerns, turmoil and gridlock in U.S. politics, and poor seasonals. That resilience is leading many market participants, analysts, and observers...
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What You Need To Know About Bitcoin And Digital Currencies

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What Are Digital Currencies — And What Do They Mean For Gold? Guild Investment Management June 22, 2017 Bitcoin is in the news, once again driven by a price spike that makes speculators and would-be speculators start counting their unhatched chickens.  This time, the granddaddy digital currency has competitors — “altcoins” — which are also attracting attention.  Ripple, ether, dash, monero, and hundreds of other currencies have sprung up (as of this writing, a total of 888, with a combined market capitalization of about $115 billion).  Some promise technical refinements and improvements to the bitcoin system; others offer institutionally friendly...
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What Kills Bull Markets?

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When Investing, We Must Keep the Big Picture In Mind The U.S. and many global stock markets have continued to move ahead.  Even rising tensions on the Korean peninsula, and the theoretical prospect of nuclear war, were met by markets with a brief shrug — and this during a seasonal period when markets are often unsteady and experience corrections.  As we write, the S&P 500 index is just 2.4% down from its all-time high of 2490.87 set on August 8. Markets are showing resilience in the face of geopolitical concerns, turmoil and gridlock in U.S. politics, and poor seasonals.  That...
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Second-Quarter U.S. Earnings Come In Strong

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93% of S&P 500 companies have reported second-quarter earnings; the remainder will continue into early Sep-tember. As of this writing, bottom-up earnings for the S&P stand at $32.63, representing a 5.9% quarter-over-quar-   ter increase and a 10.6% year-over-year increase. In short, earnings are strong — and with four quarters of earnings growth under our belts, we can say that the 2015–2016 “earn-ings recession” is firmly behind us.   Earnings growth has been led by energy, technol-ogy, financials, and healthcare; the sectors with the most companies beating estimates have been tech, healthcare, industrials, and financials. On average, operating margins have...
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Second-Quarter U.S. Earnings Come In Strong

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Second-Quarter U.S. Earnings Come In Strong 93% of S&P 500 companies have reported second-quarter earnings; the remainder will continue into early September.  As of this writing, bottom-up earnings for the S&P stand at $32.63, representing a 5.9% quarter-over-quarter increase and a 10.6% year-over-year increase.  In short, earnings are strong — and with four quarters of earnings growth under our belts, we can say that the 2015–2016 “earnings recession” is firmly behind us.  Data Source:  Bloomberg Earnings growth has been led by energy, technology, financials, and healthcare; the sectors with the most companies beating estimates have been tech, healthcare, industrials, and...
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Is China Doomed? Breath

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From time to time, coverage of China rises to a crescendo in the popular media. China coverage reflects some of the same schizophrenia that afflicts much of the media’s output. At many points in the past several years, accord-ing to the media, China has been a tot-tering giant whose economy is a bubble fantasy that threatens to pop and take the rest of the world with it. At other points, China has been an unstoppable economic powerhouse with ravenous geopolitical appetites, ready to take down the current global hegemons, fill Africa with military bases, conquer the South China Sea, and...
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Is China Doomed?

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Is China Doomed?  Don’t Hold Your Breath  Bitcoin’s from time to time, coverage of China rises to a crescendo in the popular media.  China coverage reflects some of the same schizophrenia that afflicts much of the media’s output.  At many points in the past several years, according to the media, China has been a tottering giant whose economy is a bubble fantasy that threatens to pop and take the rest of the world with it.  At other points, China has been an unstoppable economic powerhouse with ravenous geopolitical appetites, ready to take down the current global hegemons, fill Africa with...
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