Friday, 16 March 2018 11:24

Big Scandal Pending for Walmart?

(New York)

Walmart stockholders beware, the company might be in for a big scandal. A whistleblower internal to the company has come out claiming that Walmart is using misleading ecommerce results to make investors believe it is catching up to Amazon. A former director of business development says he was fired after raising concerns at the company about its “overly aggressive push to show meteoric growth in its e-commerce business by any means possible -- even, illegitimate ones.” “Wal-Mart sacrificed and betrayed its founder’s key principles of integrity and honesty, pushing those core values aside in its rush to win the e-commerce war at all costs”, said the whistleblower.

FINSUM: So reading these claims, we do not see any evidence of the claimant saying Walmart actually falsified financial results, only that it used aggressive tactics (such as underpaying vendors), so the damage may not be that bad.

Published in Equities
Friday, 16 March 2018 11:20

Why Gunmakers May Plunge

(New York)

Gun stocks may be in for a deep fall. For many years gunmakers have been protected by a legal precedent which keeps them from being held liable in cases of gun violence. However, a novel new argument in a court case may bring that crashing down. Families of the victims in the Sandy Hook shooting in 2012 have brought a case against Remington which argues that the gunmaker should be held liable because it made the choice to distribute its rifles to a dealer who illegally sold weapons. Essentially, the case holds Remington liable for its distribution channels.

FINSUM: If this argument holds it would defeat the 2005 precedent that has protected gunmakers and open the door to unknown levels of legal action.

Published in Equities
Wednesday, 14 March 2018 14:08

Yields Above 3% Will Spell Doom for Stocks

(New York)

Investors beware of yields. That is the message from one of Wall Street’s most respected names in fixed income. In particular, Jeffrey Gundlach is warning that if ten-year Treasury yields get to over 3% then it will spell doom for stocks. Yields are currently at 2.84%, down from a peak on February 21st of 2.95%. “My idea that the S&P would go down on the year would become an extraordinarily strong conviction as the 10-year starts to make an accelerated move above 3 percent”, says Gundlach.

FINSUM: So the argument here seems to be based on the idea that stocks would become less attractive as investors could earn more from bonds given rising yields. That makes some sense given the increasing size of the retirement population.

Published in Equities
Wednesday, 14 March 2018 14:05

Why The Bears Need to be Afraid

(New York)

In a refreshing article given the relative doom and gloom over the last month, Barron’s has published a piece arguing that it is the bears, not the bulls, that need to be afraid of the equity market right now. The view is based on technical analysis. Many might be interested to learn that rather than the technical indicators showing a bull market at or near its peak, signs are suggesting a move upward may be in store. The piece is also quick to point out that despite the shallow correction a month ago, the bull trend for the market has continued unabated.

FINSUM: We don’t put a great deal of stock in technical analysis and only view it as useful as a companion to fundamental analysis. Nonetheless, it is good to stay abreast of this information.

Published in Equities
Tuesday, 13 March 2018 10:11

Goldman Says Market Havens are Collapsing

(New York)

Market volatility is back in a big way. This has made investors nervous and has re-ignited interest in traditional safe havens such as bonds and gold. However, Goldman Sachs has just note put out a note saying those asset classes have evaporated as safe havens. “No safe havens -- and no assets or equity sectors -- have had a positive beta to the VIX recently, and few have had a positive beta to 10-year yields, leading to diversification desperation”, say Goldman Sachs strategists. Rates, which look to be heading higher, have been a major culprit in the decline of safe havens, as have changing strategies, such as at the Bank of Japan.

FINSUM: This is one of the main reasons the market might end up falling further than it otherwise would have. Since there is no easy place to put cash, the overall panic level may be higher in a situation of serious volatility.

Published in Macro
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