(New York)

Retail is dying, right? Brick and mortar is doomed, supposedly, but that assumption creates some opportunity. The reality is that despite the broader headwinds the industry is facing, some malls and some REITs are doing well. Macerich, for instance, is a large REIT that owns several “trophy” malls amidst its 47 properties. The stock is trading at just 7x earnings, which incredibly cheap for a REIT. Apartment REITs, for instance, are trading at 20x. Its dividend cover ratio is fairly tight, but its overall model looks solid and it is yielding 10.9%.

FINSUM: There is a lot of opportunity in retail stocks, but you need to know where to look, and it takes quite an understanding of the space to sift through the options. Macerich looks solid.

(New York)

Trump went on the record yesterday telling investors that the US and China were close to finalizing a trade deal. Markets were unconvinced. Speaking at the Economic Club of New York yesterday, Trump said “We’re close to a significant phase-one trade deal with China … It could happen soon, but we will only accept a deal if it’s good for the U.S. and our workers and our companies”. Markets held ground after the comments, but ultimately fell back as Trump offered little evidence to back up the comments of a deal being “close”.

FINSUM: In our view of this situation, a deal is never close to being done, it is perpetually on the edge of falling apart and only truly done when it is signed.

(New York)

The world’s leader in managing the ultra-wealthy’s money says that the rich are bracing themselves for a big selloff in 2020. The firm’s clients hold near record level of capital in cash—25%—and think the stock market is going to have real trouble next year. The two major concerns occupying the minds of the ultra wealthy are the US-China trade war and the 2020 US presidential election. The bank got quantitative results on the topic from a recent survey, which received 3,400 responses.

FINSUM: Nobody knows how the market will do next year, and it is never hard to find people that are bearish. This looks like the perfect wall of worry for stocks to climb.

(New York)

Bank of America has just made a bold call on the direction of yields. The bank has sharply increased its forecasts for where bond yields will be at the end of the year. Its previous forecast for the ten-year was 1.25%, but it has just moved that up to 2%. It made similar adjustments to its forecast for German and British bonds. “Relative to our more pessimistic revision in August, the US and China are working to de-escalate trade tensions, no-deal Brexit risks have been banished for now, global data have started to stabilize, and central banks have shifted from dovish to neutral policy stances”.

FINSUM: Based on the change in mood amongst investors and central banks, this forecasted change makes total sense to us.

(New York)

After rumors circulating for weeks, Ladenburg and Advisor Group have jointly announced that they plan to merge. The new company will operate under the Advisor Group name and have over 11,000 advisors. None of the two companies nine broker-dealer subsidiaries will be merged, and advisors will continue their multi-party custody and clearing set up. The deal valued Ladenburg at $1.3 bn. One senior industry commentator said “It’s a very bold transaction that could create a major new player overnight that can go toe to toe with the other biggest firms in the independent space in terms of scale and resources”.

FINSUM: With margins so low across the IBD industry, scale is the only way to improve profitability. We expect the wave of deals to continue.

(Hong Kong)

Hong Kong police have warned that the city is on the brink of collapse. A police shooting of a protester on Monday has sparked a huge wave of renewed protests that have blocked roadways and caused chaos. “Over the past two days, our society has been pushed to the brink of a total breakdown as rioters went on a rampage”. The protests have turned increasingly violent in recent days as 128 were hospitalized with injuries on Monday.

FINSUM: This has no end in sight, and with tension increasing, so too are the odds that it somehow becomes wrapped up in the US-China trade war.

(New York)

Goodbye bearishness, hello risk-on. JP Morgan took a pivot from the rest of the Wall Street research machine today and took some bold steps in its allocation recommendations. The bank said that investors should take money out of gold and other risk averse assets, like government bonds, and put it into risk assets like stocks. The bank’s strategy team said “We maintain a significant and incrementally larger tilt in our model portfolio towards risky assets, based on signs of a cyclical recovery, easing geopolitical tensions, synchronized monetary easing, and defensive investor positioning across asset classes”.

FINSUM: The clouds do seem to be parting a bit, but there are still a lot of x factors—which is exactly the reason this could turn out to be a very good call.

(New York)

Apple has been on an absolute tear lately. All the bearishness which preceded the newest iPhone launch set the company up for a great run. The stock is up a mind boggling 65% this year. To put that $450 bn of value appreciation in perspective, it is equivalent to adding the market caps of SalesForce, IBM, and SAP on top of what Apple already was at the end of 2018. So where does it go from here? The thing is, Apple usually continues a big upswing after an iPhone launch, so history is on its side right now.

FINSUM: iPhone sales may continue to surprise to the upside but the medium- to long-term question is whether investors will buy into Apple’s pivot into credit cards, gaming, and streaming.

(New York)

Any small cap investor can tell you that the end of the year is not usually a good time. Small caps historically suffer in November and December compared to the rest of the year. However, 2019 looks to be shaping up differently according to the Wall Street Journal. The reason small caps are usually weak at the end of the year is that managers sell off their holdings and mirror the market at the year-end as a way of insulating their annual bonus (which is based on outperformance). However, in years where overall stock performance has been strong, this pattern is less obvious. So, given 2019’s strong gains, it seems like small caps probably won’t suffer so much.

FINSUM: This is by no means a guarantee, but it certainly seems like a more positive structural consideration.

(Washington)

There is a currently a great deal of anxiety over the election. It is not just political either—a Democrat or Republican win would create drastically different economic environments, which will lead to very different returns. One prominent hedge fund manager commented on the whole situation, saying “I think we all wish that we could kind of go back to thinking about investing without political risks”. Despite this longing, it is clear that we will not go back to that era anytime soon. Accordingly, check out these stocks, which should thrive no matter if Trump or a far-left Democrat wins the bid. Healthcare and tech look like big risks, but interestingly, large oil companies may be a good bet. If Warren wins and bans fracking, oil prices are likely to rise, helping large integrated oil companies. Another approach is to focus on stocks that will benefit from government plans that are already happening, such as those related to state infrastructure spending, legalized sports gambling, and shipping fuel standards.

FINSUM: We are still a year out from the election, but it is certainly worth thinking about how to position the portfolio, as polls leading up to the big day will move markets a lot.