(New York)

If that headline seems like a head scratcher, it is meant to be. Barron’s ran a curious article today which argues that weak forecasts for earnings might actually be a good catalyst for higher stock prices. That seems to defy logic, but would be a continuation of a trend that has been in place for a few years. When companies broadcast weak earnings to come, it tends to make investors nervous, leading to oversold conditions. As you might expect, oversold markets tend to lead to bull runs.

FINSUM: This is a tenuous relationship, but when that has been apparent for the last few years. Stocks do like to climb a wall of worry, and this would be a good wall.

(New York)

Stocks are off to a very strong start this year, but it is hard to remember a time that they looked so vulnerable. Investors may be happy with the 10%+ gains in the S&P 500, but the reality is that stocks could nosedive at any moment. In a sign of how grave the risk is, we challenge you to ask yourself—what is a risk that could make stocks plunge 10% in a day? We are willing to bet 90% of you said “the Fed suddenly restarting hikes”. The core of this rally has largely been predicated on the Fed suddenly reversing course, letting investors breathe a sigh of relief that the central bank won’t hike the economy into recession.

FINSUM: The truth is that the Fed could reverse its position at any moment, which would probably cause a big downturn in markets. That said, we don’t think they will do anything so drastic.

(New York)

As part of our ongoing coverage of the best funds we found and met with at the recent Inside ETFs conference, we want to today suggest our readers take a look at TTAC, TrimTabs Asset Management’s US-focused quality ETF. The fund is predicated on providing investors with the highest quality stocks. In order to do so, TrimTabs focuses on free cash flow, strong balance sheets, and reducing share count. Free cash flow is a particularly important component as it is one of the hardest for companies to doctor, meaning it is a reliable indicator of quality. In order to implement this strategy, the fund uses a quantitative rules-based approach with human overlays that allow for flexibility in terms of sectors, industries, and market caps. TTAC seeks to outperform the Russell 3000 by holding the 100 companies in the index which best embody its investment criteria. The fund has about $125m in AUM and has an expense ratio of 0.59%.

FINSUM: We were very impressed by the folks at TrimTabs. Not only does the CIO, Theodore (Ted) Theodore have the best name in the business, but their enduring passion for their strategy was compelling. We feel this fund has a smart approach and is very competently managed. Definitely worth a look.

(Washington)

Michael Cohen, Trump’s former lawyer, is set to hold his first and only public hearing on Thursday, when he will testify in front of the House about his dealings with President Trump. Cohen is reportedly going to directly accuse Trump of criminal activity in addition to testimony regarding “lies, racism, and cheating”. He will not be speaking about Russia matters under the purview of the Mueller investigation. The White House commented that “Sadly, he will go before Congress this week and we can expect more of the same … It’s laughable that anyone would take a convicted liar like Cohen at his word, and pathetic to see him given yet another opportunity to spread his lies”.

FINSUM: This is either going to be a media firestorm or a dud. If Cohen doesn’t say anything new, it will be hard for the media to make much of it.

(London)

The journey of Brexit has been long, winding, and utterly confusing at times. However, it is all headed for a dramatic conclusion. PM May has called for a Parliamentary vote on her plan on March 12, just a couple of weeks before the UK is supposed to formally depart the EU. However, the pushback on the left has been so strong that opposition leader Jeremy Corbyn now looks poised to call for a second referendum on EU membership. He announced the position yesterday, marking a major change in position.

FINSUM: We absolutely dismiss the view that holding a second referendum is “undemocratic”. The vote was almost three years ago now and no one could have foreseen the deal Britain might get, so it only makes sense to have another vote.

(New York)

Investors seem to have stopped worrying about it, but a recession is still in the cards. Ever since the Fed backed off, the market seems to have forgotten that we are likely at the very end of an economic cycle. However, most economists are differing from investors, as the majority are still calling for a recession by 2021. That is the view of over 75% of US business economists, with most still saying the Fed will continue hiking this year. 52% of those surveyed said a recession would start this year or next.

FINSUM: It is interesting to see how out-of-touch economists and investors are. A recession by 2021 sounds very reasonable to us, but the Fed continuing to hike this year does not.

(San Francisco)

Have you been upset about missing out on some of the big tech companies in the last decade? Well, your chance to buy in is coming; or at least that is what Wall Street’s bankers want you to think. A string of big tech IPOs appear to be in the works. From Lyft, to Uber, and featuring Pinterest, Airbnb, Slack, and WeWork, a big Silicon Valley roadshow is coming to the market this year and next. The major question is how the companies will fair once public. The tech market has been hurt recently, and public market valuations have been wounded.

FINSUM: These companies have massive private market valuations, and it seems like they will underperform a bit when they do finally debut (at least in the short-term). That said, a couple of them will likely turn into incredible long-term holds.

(Washington)

Several weeks ago the Fed slammed the brakes on more rates rises. The market has taken a deep sigh of relief to the tune of major gains in stock indexes. But within the pause is a more sophisticated, and perhaps more consequential, rethink of the Fed’s goals. The Fed is puzzled by weakness in inflation. With the labor market so tight, inflation should be rising strongly. Yet it has failed to reach the Fed’s two percent goal and appears to be weakening again. Accordingly, there are discussions going on internally at the Fed, about the disconnect and how to approach it.

FINSUM: There is a major question here—will the Fed revise its target higher and take a more aggressive approach to boosting the economy, or will it leave the target at 2% and be content. In either scenario, rates look unlikely to rise soon.

(New York)

One of the best ways to pick stocks is to look at insider purchases. When those in-the-know on a company are buying stock with their own money, it is a probably a good time to pay attention. Well, one well-known but dormant stock (in terms of insider purchases) just saw a significant move—Goodyear. One of the rubber company’s board members just spent about $650,000 to buy 35,000 shares of the company. There has not been an insider purchase that large at Goodyear since at least 2004.

FINSUM: We obviously don’t know the catalyst for this buy, but the chatter about how tire companies will benefit in the long-term from self-driving cars (i.e. more miles driven because it is cheaper to keep the cars moving than park them) seems like a strong fundamental.

(New York)

Next week is going to be a media circus, as the odds of real Trump fireworks look likely to surge. The reason why is that Michael Cohen is going to testify at an open public hearing before the House Oversight Committee next Thursday. The committee, seemingly defending its actions, commented that “Congress has an obligation under the Constitution to conduct independent and robust oversight of the Executive Branch, and this hearing is one step in that process”. The questions Cohen will answer will concern hush money payments, potential Trump conflicts of interest etc, but will not touch on Mueller’s probe into Russian interference.

FINSUM: No matter how you feel about Cohen, or whether you think this is just political theatre, the odds of a media bombshell, true or not, seem high.