(New York)

We bet that when you read that headline you thought we were using garbage in a metaphoric sense. We weren’t. We are actually taking about waste management stocks, which the market has been ignoring lately. The two biggest US waste haulers, Waste Management and Republic Services, are down almost 4% this month, way behind the market. Analysts have been souring on the stocks too. However, that is odd considering they have been performing well. Perhaps most interestingly, they have a strong long-term catalyst, which is the growth in the recycling business.

FINSUM: We cannot profess to have any expertise in waste hauling, but there are definitely some interesting mixed signals coming through here. Our instinct is there might be a good contrarian bet here.

(New York)

There have been a lot of bullish indicators lately, and not just in share prices rising. However, there is a big warning sign that investors need to be paying attention to. One of the challenges of assessing corporate earnings is to get a feel for where things are really headed when the whole Wall Street reporting mechanism is stacked to make you think companies are always outperforming. One way to do so is to look at spreads between GAAP earnings and so-called “adjusted earnings”, or the doctored earnings companies love to show to make themselves appear more attractive. The wider the spread, the more companies are reaching to appear as though things look good. This, therefore, makes it a bellwether for how earnings and the economy are really trending. The spread between the two types of earnings stood at $200 bn for year-end 2018, the highest level since 2010.

FINSUM: This is not a perfect proxy, but it is certainly indicative, and the indication right now is not positive.

(New York)

How does a big global housing meltdown sound? Crappy. Well, that is exactly one of the things that the IMF is currently warning investors about. Americans will already be well aware of the several month downturn in real estate, but what is likely much less well understood is that many markets around the world, including emerging markets, look at risk of a major housing bust. One of the big worries of the IMF is that a real estate downturn will spark a banking crisis in overseas markets that could then bubble over to the rest of the world.

FINSUM: We don’t tend to think of real estate as a particularly globally-correlated asset class. However, the banking industry that underpins it certainly is, so the risk is definitely there.

(New York)

The bond market took on a very strong position about the Fed in its recent rally—that rate cuts were likely this year in order to stimulate the economy. However, upon the release of the most recent Fed minutes, that view appears to be quite clearly wrong. The Fed minutes show no indication at all of cuts to come this year. Instead, those at the Fed merely indicate that hikes are likely to be put on hold for the rest of the year.

FINSUM: We don’t think there is much of a chance the Fed will cut this year. Recent economic data has been a little better, which means they seem much more likely to stand pat than to cut.

(New York)

A rising tide lifts all boats right? Well it also means credit scores get lifted alongside the economy. Goldman Sachs thinks this is a problem. The bank is arguing that credit scores have been artificially inflated by FICO, a dangerous development that could have implications for all sorts of lending. Goldman thinks that current FICO scores are not an accurate reflection of consumers’ ability to pay in an economic downturn, meaning there is much more credit risk sloshing around in the economy than is currently priced into the market.

FINSUM: The big risk here is really at the lower end of the lending spectrum. There are 15 million less consumers with scores of 660 or below than there were before the last Crisis. Therefore, the risk of borrowers in that area is probably being underappreciated.