Asset Management & Market Research

Friday reads & daily charts ...

We scour the best of publications that cover the markets & economy, the world of business & finance, asset & wealth management, monetary & fiscal policy, Europe & Asia, the news & politics, science & technology … and throw in a bit of arts & entertainment, just to keep it light. Here’s what we found particularly compelling in the last 24 hours:

Gundlach reveals 2020 vision for bond market (FT)

Stream of poor Eurozone economic reports may be more than just the “Putin factor (SoberLook)

Top One Percent Has One-Third of China’s Wealth (China File)

GOP Steps Up Its Embrace of Uber (MoneyBeat)

How gender changes Piketty’s ‘Capital in the 21st Century” (Nation)

Arrogance Is Good: In Defense of Silicon Valley (Businessweek)

What the Industrials Need (

An Insider’s Account of the Yahoo-Alibaba Deal (Harvard Business Review)

Part-time workers find full-time jobs elusive (McClatchy/DC)

The charts below are courtesy of SoberLook, Business Insider and the WSJ.

SoberLook did a post about poor economic reports coming out of Europe (see reads above). “The eurozone retail sector started the second half of the year on a weaker footing. The fragility of consumer spending was exposed by the PMI, particularly in France and Italy where the data showed sharper downturns in sales. Even in Germany, the one area of relative strength, there was an appreciable slowdown from June’s recent peak. Retailers underperformed relative to their targets to the greatest extent since March 2013, leading to further accumulations of unsold stock and the prospect of greater discounting ahead.”

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BI notes that the current trailing PE of 16.9 is above the long-term average (since 1927) of about 15, but it is far from the peak of 2000, and it remains in line with the average since 1980. Nevertheless, it is approaching an important range. Since WWII, every bull market has ended with a PE between 17 and  18, with the exception of the bull market that ended in 2000, which peaked much higher. This is not to suggest the PE could not go higher than it is today. In past cycles, PEs did reach higher levels before ending up between 17 and 18 as the stock market peaked. We also note that earnings are on pace for the high-single-digit gains that we forecast for this year, and as a result, very little, if any, PE multiple expansion is required for the S&P 500 to reach our targeted return range for 2014 of 10 – 15%.

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Last week we received the advance Q2 GDP report from the Commerce Department. The WSJ addresses housing’s contribution …

“The GDP report measures two ways that housing contributes to the economy: private residential investment and consumption on housing services. Residential investment includes construction of single-family and multifamily housing units as well as home improvements and brokers’ commissions. Consumption on housing services includes gross renters and utilities. Economists are closely watching residential investment because it has been so weak for so long. It probably needs to kick into higher gear if the economy is going to hit the 3% annual growth forecast that many economists have anticipated.”

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Author: Kevin Lane

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