It is a short week without much new data. Even FedSpeak is on holiday. The big story will continue to be the Trump transition. I expect the punditry to be asking a dual question:

How much economic stimulus and how to pay?

Last Week

Once again, last week’s economic news was nearly all good, but not the focus of discussion.

Theme Recap

In my last WTWA, I predicted that it would be “all Trump, all of the time”. And so it was. Speculation about the effect of Trump policies is rampant, usually wrong, and revised daily. This is profitable for media sources and the punditry, so we can expect it to continue.

The Story in One Chart

I always start my personal review of the week by looking at this great chart from Doug Short. He captures the continuing rally as well as the late-week weakness (despite options expiration).

Doug has a special knack for pulling together all the relevant information. His charts save more than a thousand words! Read his entire post where he adds analysis grounded in data and several more charts providing long-term perspective.

The News

Each week I break down events into good and bad. Often there is an “ugly” and on rare occasion something very positive. My working definition of “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too!

This week’s news was quite good. If I missed something for the “bad” list, please feel free to suggest it in the comments.

The Good

  • Jobless claims decreased to 235K, the lowest since 1973 despite a larger labor force. (Eddy Elfenbein) Amazingly, some are looking for any modest uptick in this series to be some sign of disaster.
  • Heavy truck sales slump over? (Calculated Risk)
  • OPEC might be on track for a deal on production limits. The market is skeptical, so this would be a real plus for oil prices. Daniel Dicker at explains the rationale. MarketWatch also notes the possibilities. (See also OPEC news below under “bad”)
  • Earnings continued to show the strength we have been reporting for several weeks. The earnings recession is over.
  • Small business optimism is higher. Since uncertainty and weak confidence has been cited as a drag on business investment, it will be interesting if this indicator starts to show more strength.

  • Housing starts beat expectations with a shift from multi-family to single-family. Calculated Risk has been right on target with this trend, as well as the overall growth rate.
  • Retail sales were strong up 0.8% on top of upward revisions for the prior month. The reports handily beat expectations. See Doug Short’s Big Four update in the Quant Corner.


The Bad

  • Industrial production continues to lag with a flat report instead of the small expected increase.
  • Pre-OPEC actions. The market still seems to appreciate higher oil prices. Iran and Iraq continue to increase production in front of the meeting. (But see OPEC above).

The Ugly

Fake News – and the reaction. The bogus news sites had more traffic than legitimate ones during the election campaign. This led Google and Facebook to change policies, prohibiting sites that traffic in lies to make money.

Do we need social media sites as editors, deciding what is fake and what is not? Izabella Kaminska explains the consequences:

The rot at the core of media has little to do with the propagation of fake news on the fringes. Alternative news sites and underground press with questionable journalistic practices have been a phenomenon since forever. In free societies, the public sphere tolerates single-issue publishers, special interest groups or anti-establishment newsletters, because we know that for every outlet which propagates nonsense there’s another that might be ahead of the curve on a topic of great cultural, commercial or political significance.

Accepting the fringes — which includes fake news — is what liberty and a free press is about. It’s our greatest strength, especially when positioned within the constructs of a fair and reasonable slander, libel and defamation framework. Suppressing marginal views is not the answer.

Tyler Cowen observes that this is little different from misleading forwarded emails.

There is no easy answer, but we must start by asking whether it is really a problem. We expect consumers of information to discriminate.

The investment world has seen an avalanche of lies and deceptive information from the most popular sites. The lesson from losing money does not seem to have much effect. This is a bad omen for issues where there are less direct financial consequences.


The Silver Bullet

I occasionally give the Silver Bullet award to someone who takes up an unpopular or thankless cause, doing the real work to demonstrate the facts. No award this week. Nominations are welcome.
The Week Ahead

We would all like to know the direction of the market in advance. Good luck with that! Second best is planning what to look for and how to react. That is the purpose of considering possible themes for the week ahead. You can make your own predictions in the comments.

The Calendar

We have a normal week for economic data, with most of the reports concentrated on two days before the holiday.

The “A” List

  • New home sales (W). Important sector for improved economic growth.
  • Michigan sentiment (W). Strength continuing after the election?
  • FOMC minutes (W). Probably no surprise. Confirmation of a tilt to a hike in December?
  • Initial claims (Th). The best concurrent indicator for employment trends.

The “B” List

  • Existing home sales (T). Not as important as new homes, but still a good read on the market.
  • Durable goods (W). Volatile series. Any signs of strength in a sluggish sector?
  • Crude inventories (W). Recently showing even more impact on oil prices. Rightly or wrongly, that spills over to stocks.


Earnings season is ending. The limited Fedspeak is early in the week.

Next Week’s Theme


This should be a very quiet week. There is little data. Most of the A-Teamers will be taking some time off. (Not me. A competitor used to suggest “Talk to Chuck.” He must have been hard to get on the line, but you can still “Talk to Jeff.”) We can expect more Trump speculation from the B-Team. It can’t be worse than we have already seen.

Analyzing the Trump effects requires a good analytic framework and a non-political approach. I hope these concepts will be familiar to regular readers. I was delighted to read a great piece from Prof. Aswath Damodaran, covering both themes. He produces this excellent diagram:

That is a lot on the plate for the punditry. It is all requiring some digestion. (Sorry, I can’t help it. At least I took it out of the title!)

I expect the initial focus to be on taxing and spending.

How large will the stimulus be, and how will it be financed?

I am always delighted when a theme I am working on is delivered to me in Barron’s on Saturday morning. Their cover story is Taming Federal Debt: The Case for 100-Year Bonds. The argument is very good and this chart is especially helpful:

Barry Ritholtz joins in,

1, 234  - View Full Page