Eq: Large Cap

(New York)

It is that time of the year again, and investors need to watch out. January is historically the top month for retail bankruptcies, and it seems likely there is going to be another cull this year. Last year saw a furious pace of retail bankruptcies, with more companies going bust than during the Great Recession. January is traditionally when most companies file, according to data going back to 1981.


FINSUM: Christmas sales were a little better than feared this year, so a couple of zombies might linger on longer than January, but this is certainly going to be another year of retail bankruptcies.

(New York)

Well-known hedge fund manager Jeremy Grantham has published an article in Barron’s considering the state of the US equity market. His piece is well-thought out and communicated and comes to a clear conclusion—the bull market has more room to run. Basing his argument on a mix of historical market data, economic info, and psychological analysis, Grantham reluctantly comes to the conclusion that the bull market may be entering its final “melt up” phase. He says that while this is one of the priciest markets in history, “strangely, I find the less statistical data more compelling in this bubble context than the simple fact of overpricing”.


FINSUM: We know Grantham personally and respect his views. He was a pioneer in the statistical study of markets, but here says he leans away from that view, which is very noteworthy.

(New York)

Consider this a warning shot across the bow on a piece of information that no one seems to see coming. The Wall Street Journal has put out a piece saying that fourth quarter earnings season, set to start soon, is going to be miserable. The reason why is that many companies are going to intentionally incur some huge expenses as occurring in the fourth quarter as a way to take best advantage of the new tax regime being brought in during 2018. This will heavily cut into fourth quarter profits, leaving some very ugly numbers.


FINSUM: The piece says this is going to be the weirdest earnings season in years, and that seems right as these losses are somewhat artificial. However, it is never good to have some very poor numbers come out, which could lead to some short-term misunderstandings and volatility.

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