Posted yesterday: TIME TO GET SCARED?
U.S. Pending Home Sales Strengthen
The National Association of Realtors (NAR) reported that U.S. pending home sales rose 1.5% (3.9% y/y) during September following a 1.4% August increase. The index level of sales increased to 108.7, the highest level since December 2017.
Sales were mixed last month across the country. In the Midwest sales increased 3.1% (2.7% y/y) last month after a 0.2% rise. In the South sales rose 2.6% (5.7% y/y) following a 1.3% gain. Working 1.3% lower (+3.4% y/y) were sales in the West after a 3.1% rise. In the Northeast sales eased 0.4% (+1.3% y/y) following a 1.4% increase.
- According to the Case-Shiller index, home prices declined in August. (The Daily Shot)
U.S. Consumer Confidence Unexpectedly Slips
- The Conference Board’s index that tracks consumers’ plans to purchase a vehicle has deteriorated.
Source: Pantheon Macroeconomics (via The Daily Shot)
Incoming ECB President Lagarde says big European countries aren’t spending enough: report
EARNINGS WATCH
As of Oct 25th, close to the halfway mark in reporting season, 8% of S&P 500 companies had issued 4Q guidance. Of those, 60% have been negative, 18% have been positive, and 23% have been in line. Negative pre-announcements are still high vs. history, stuck around 2013-2015’s highs, but they are admittedly tracking a little lower than last quarter. (RBC)
The price that equity investors are willing to pay for fast growth is being tested again as slumps in Beyond Meat Inc. and Shopify Inc. show they’re demanding more of companies with premium valuations.
The veggie-burger maker and e-commerce platform on Tuesday became the latest examples of firms that delivered on revenue-growth expectations only to see their stocks fall. Meanwhile, the food-delivery company GrubHub Inc. showed how damaging the fallout can be when that growth fades.
Shopify slid as much as 7.7% in Toronto despite boosting its revenue forecast for the year. The company reported an unexpected third-quarter loss after it increased spending to expand its customer network and build out fulfillment centers across the U.S. The stock was up 124% year to date through Monday’s close and has a forward price-to-estimated sales ratio of 18, compared with an average of 1.6 for the S&P/TSX Composite Index.
A higher sales forecast also proved insufficient for Beyond Meat, which saw its shares tumble as much as 24% on concerns about competition and the expiration of a lockup for early investors. Beyond Meat shares are still up 240% since their initial public offering in May, but that’s far from their 800% returns back in July. The stock trades at a forward price-to-sales ratio of 12, more than 6 times the average multiple for stocks in the S&P 500 Index, according to data compiled by Bloomberg.
GrubHub may provide a cautionary tale. Its shares plunged a record 44% after the food-delivery company gave a fourth-quarter outlook that was well below expectations, as intensifying competition and “promiscuous” customers weighed on growth trends.
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Bill Ackman says WeWork could be worth ‘zero’ Rating agency, hedge fund manager and ex-SoftBank chief warn on prospects
Vestager eyes toughening ‘burden of proof’ for Big Tech EU antitrust chief says dominant groups such as Google should face tougher obligations
How China Now Manages Money American-Style China has long been a nation of savers. Now, 40 years into the greatest accumulation of money the world has ever seen, the pattern is reversing. The impact will be felt world-wide, in ways good and bad.
(…) While Chinese families still sock away more than Americans—about five times more income—their overall savings rate is declining.
In 2010, average Chinese workers saved 39 cents of every dollar of income. Today, it is 33 cents. Many young Chinese save nothing at all. (…)
This shift toward saving less and spending more could help correct imbalances in the global economy that built up in years when Americans did much of the world’s buying, and China did much of its saving and lending. Consumer spending creates new growth momentum for China, and some foreign companies.
But it also means China will have less firepower to buy U.S. Treasurys, which helped keep U.S. interest rates low, and to use its savings to peddle influence abroad through programs like its Belt and Road development initiative. (…)
Industrial and Commercial Bank of China Ltd. and three other Beijing-headquartered banks leapt into the top four spots globally, based on capital.
The funds financed government priorities, like an 18,000-mile network of trains that can transport passengers at 200 miles an hour. Depositor savings help explain how Beijing has lifted military spending annually for around two decades, to $170 billion.
China built up $3.1 trillion in foreign-exchange reserves, including $1.12 trillion in the form of U.S. Treasurys. (…)
The wealthiest 10% of households have 80% of the savings, while 40% save nothing. Debts equal 13 times income for the bottom third of Chinese wage earners—all while Chinese lag behind Americans in earnings and wealth by big margins.
The average Chinese household controls 1.62 million yuan in real estate and other assets, or around $230,000, according to the Survey and Research Center for China Household Finance at Chengdu’s Southwestern University of Finance and Economics.
American household net worth is around $692,100, according to the Federal Reserve Board. Only about a third of U.S. household assets are real estate, while most Chinese wealth is. (…)
In a sign of how leveraged some Chinese have become, four-fifths of one firm’s loans are collateralized with used cars, according to one study. China’s central bank tracked a 19% rise in credit-card delinquencies last year, to 79 billion yuan and 10 times the 2010 level.
Default rates for some lenders have surpassed 20% on personal loans delivered online. (…)
Chateau Viking: Climate Change Makes Northern Wine a Reality
On the 61st parallel—the latitude of Anchorage, Alaska— Bjorn Bergum’s vineyard is set to become the world’s northernmost commercial wine estate, a testimony to how global warming is disrupting century-old landscapes, traditions and oenological preconceptions. (…)
When he and his wife, Haldis Nedrebø, planted the first vines in 2014, neighbors believed them crazy, he says, rotating an index finger over his temple. Last year, the temperature on his property reached 37 degrees Celsius (100 Fahrenheit), burning some grapes but helping produce wine that won a gold medal at a local blind-tasting competition.
Before, tourists would flock to the Nigardsbreen glacier. Now the glacier is receding, and the local tourist board touts Mr. Bergum’s vineyard as a new attraction. (…)