We were out of town and in Transit when we heard of Trump's Syrian raid. We held our breathe. The timing looked too good to be True. Worst Approval ratings ever. That would change. About to meet China for the first time. Nothing like bringing a smoking gun to a Knife fight. To our surprise Mr. Market doesn't care.
Earnings season is more important. The 10 year Treasury at 2.39% is more important. Gold slid below $1250. US Hedgies have gone massively bullish on Nat Gas. More bullish than at any time during the Past 3 years. The highest level since May 2014. The Long to Short ratio of 3.6 : 1 is up from 2.2 : 1 at the end of February. (Recent high 4.2 : 1 January 2017). US gas Exports hit a record high of 270 Bcf that month. January 2016 was 169 Bcf. Nat Gas is not what we think of when people are concerned.
Conclusion that it's earnings. Two thirds of companies beat estimates. That's after they've guided the analysts down. Based on that, our expectation of a +10% quarter isn't out of line. Energy will be a large contributor. Oil price got as low as $26 in February of 2016. The Industry was reporting losses. The Oil price at almost $53 is double that level.
The markets are going to pay attention to the Banks earnings. Thursday Citi, JPM and Wells Fargo report. 10% growth would be good. Merrill's Bank of America is supposed to earn 35 cents up from 21 cents a year ago. Goldman is looking for $5.25 up from $2.68 last year. Despite what anyone might say, this looks like a cornerstone investment. Blood Sucking Octopus and All.
Several clients have sent us the FT article about Investment Banks charging clients $75K to have complete access to their research departments. Integrity Research polled 161 research providers. Their Charges ranged from $1.5mm to as low as $1500. Asset mangers spent $40K to access Independent providers. Euro Rules next year mandate that Managers disclose to their Investors how they pay for Research. The practice of doing trades with a bank or broker and then getting the Research for Free will end. The analysts are getting ready. Some clients are being asked to pay $10K for a single phone call. The iPhone would have to be thrown in for Free.
We read a lot of commentary over the weekend.I t struck us that the overwhelming body of opinions are in fact Historical Relationships. They lack Causality. Just because I've been married before doesn't mean I will do it again. Apologies to my Fiancee.
Invest the Money.
Edward Pennock CFA, Founding Partner
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