Cocktail Investing

Download Episode In this week's episode of the Cocktail Investing Podcast, mixologists Lenore Hawkins and Chris Versace parse the testimony from new Fed Chief Jerome Powell delivered before Congress this week. Why you ask? One reason was the investing herd's reaction as the stock market dropped a quick 300 points following Powell's comments during the Q&A session. Second, as we've been saying, the market is increasingly focused on what the Fed says and may do when it comes to monetary policy. This has made the Fed the market safety net over the last several years, but what did Powell say that might signal, as Bob Dylan sings, "the times are a-changing." We know the stock market and its investors are no fans of change, let alone a potentially abrupt one, but when Lenore and Chris look at the crop of economic data through their thematic lens, it leads to more than a few questions about the vibe that Powell was trying to lay down. While Powell sounded a bit more hawkish than his predecessor Janet Yellen, we find it a challenge to get overly bullish only the economy when the Citibank Economic Surprise Index goes negative for the first time in 18 months, and more data is missing expectations instead of knocking it out of the park. True to form, Powell once again voices the view that the lack of inflation is "transitory" but as Lenore and Chris there are several thematic reasons to think it's more of the new normal than not. Is Powell laying the groundwork for what's to come or simply using a common Fed Chairperson tactic of the last decade – jawboning to get the stock market in line and reset investor expectations? We discuss that and much more as we parse the Powell testimony, and share our views on what's really going on when viewed through the lens of thematic investing. Resources for this podcast:

• Chris Versace –@_ChrisVersace
• Lenore Hawkins –@EllesEconomy
• TematicaResearch – https://www.tematicaresearch.com
• Themes Report:https://www.tematicaresearch.com/whatisthematicinvesting
• Cocktail Investing: Distilling Everyday Noise into Clear Investment Signals for Better Returns

Books we're currently reading:

• Versace:100 Plus: How the Coming Age of Longevity Will Change Everything, From Careers and Relationships to Family and Faith
• Hawkins: Hidden in Plain Sight: The fundamental link between relativity and quantum mechanics

Download Episode Last week the S&P 500 enjoyed the biggest one-week advance since 2013, gaining 4.3%. The index began 2018 with its best start to the year since 1987 followed by a 10% decline in just 9 trading days, and then proceeded to bounce off its 200-day moving average, reversing roughly half its losses in the process. Quite a quick, volatile ride unlike anything we've seen in more than a year. We've gone from overbought to oversold and back to overbought again, but with volumes 22% lower on the move back up than during the slide down. It would seem not everyone is convinced the rebound will stick. Adding to the renewed sense of volatility, following its disappointing December quarter results, Walmart (WMT) shares fell 10% on Tuesday, as Tematica's investing mixologists Chris Versace and Lenore Hawkins discussed what is likely to drive the markets in the coming weeks and months and what data they will be looking for to confirm or refute their outlook. Tematica's dynamic duo point out that much of the enthusiasm for domestic equities is based on expectations concerning the impact of the recent tax reform legislation on the economy. A survey of Morgan Stanley analysts released last week, however, found that just 13% of companies' tax cut savings are expected to go to increasing pay, bonuses or employee benefits, while 43% is expected to go towards stock buybacks and dividends. With only 10% of households owning 84% of all stocks in 2016, the benefits of that 43% is going to a small portion of the economy. While those upsized dividend payments could provide some safety net for stock prices we find it rather unlikely the dividend payments or increase in share price will materially alter consumer spending, given those households that will benefit most are already feeling pretty great thanks to the big run-up equities have already enjoyed. Chris and Lenore also discuss some examples of Tematica's investing themes playing out in the news:

• Safety and Security gets yet another tailwind as companies look to tap into the increase in government spending.
• China sits at the intersection of the Rise of the Middle Class with Content is King.
• The intersection of Connected Society and Disruptive Technologies is on display with 5G at the 2018 Winter Olympics

Companies mentioned on this podcast

• Albertson's
• Amazon (AMZN)
• Arlington Capital Partners
• CRSA
• ECS Federal
• General Dynamics (GD)
• Home Depot (HD)
• Hyundai (HYMTF)
• Integrity Applications (IGAP)
• Intel (INTC)
• KT (KT)
• Lockheed Martin (LMT)
• Macfadden & Associates
• MGM Resorts International (MGM)
• Morgan Stanley (MS)
• On Assignment (ASGN)
• Rite Aid (RAD)
• PAE
• PricewaterhouseCoopers
• Samsung (SSNLF)
• Target (TGT)
• Veritas Capital
• Walmart (WMT)
• Yum Brands (YUM)

Resources for this podcast:

• Chris Versace – @_ChrisVersace
• Lenore Hawkins – @EllesEconomy
• Tematica Research – https://www.tematicaresearch.com
• Themes Report: https://www.tematicaresearch.com/whatisthematicinvesting
• Cocktail Investing: Distilling Everyday Noise into Clear Investment Signals for Better Returns

Books we're currently reading:

• Versace: Team of Teams: New Rules of Engagement for a Complex World
• Hawkins: Leading Indicators: A Short History of the Numbers that Rule our World

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Last week the S&P 500 and the Russell 1000 briefly dipped into correction territory, but by Monday, Feb. 12th both appeared to stabilize after two consecutive closes in the green. Tuesday equities once again opened in the red as Tematica's investing mixologists Chris Versace and Lenore Hawkins broke down what pushed the major indices into the red for the year and what investors can expect in the coming months. To put the decline in context, our mixologist noted that the forward PE ratio for the S&P 500 peaked right about the same time as did the price of bitcoin, which happened to be right around when tax reform was passed in a perfect example of "Buy the rumor and Sell the news. It appears that is when asset price optimism peaked. Volatility, which had been absent for most of 2017, remains elevated well above the range that dominated last year and as Hawkins shared in last week's Weekly Wrap, it's likely to be with us for some time. Tematica's dynamic duo assess the conflicting winds of fiscal and monetary policy as the stimulative effects of tax cuts and increased government spending go head to head with the slowing effects of a Federal Reserve that is expected to raise rates at least three times and maybe even four in 2018 while simultaneously tapering its massive balance sheet. The two discuss what they are seeing in terms of inflation indicators that may impact the market's expectations of the Fed's actions in the coming year and just what data they'll be digging into for insights as this mano-a-mano between fiscal and monetary policy goes into the economic ring for Round One. Get ready to rumble! Companies mentioned on this podcast

• American Railcar (ARII)
• CSX (CSX)
• Cummins (CMI)
• Daimler (DDAIF)
• Eaton Corp (ETN)
• Freightcar America (RAIL)
• GATX Corp (GATX)
• Greenbrier (GBX)
• JB Hunt (JBHT)
• Kansas City Southern (KSU)
• Landstar (LSTR)
• Meritor (MTOR)
• Navistar (NAV)
• Norfolk Southern (NSC)
• Paccar (PCAR)
• Rush Enterprises (RUSHA)
• Ryder Systems (R)
• Trinity Industries (TRN)
• Volvo (VOLVY)
• WABCO (WBC)

Resources for this podcast:

• Chris Versace – @_ChrisVersace
• Lenore Hawkins – @EllesEconomy
• Tematica Research – https://www.tematicaresearch.com
• Themes Report: https://www.tematicaresearch.com/whatisthematicinvesting
• Cocktail Investing: Distilling Everyday Noise into Clear Investment Signals for Better Returns

Books we're currently reading: Versace: Team of Teams: New Rules of Engagement for a Complex World Hawkins: Leading Indicators: A Short History of the Numbers that Rule our World

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During a turbulent stock market week that featured wild gyrations in equity indices, particularly on the domestic front, Tematica's investing mixologists Chris Versace and Lenore Hawkins broke down the what and why's behind the return of market volatility. With a stock market that on the cusp of exiting January that was priced to perfection following a near 30% move over the prior 15 months that had stocks in truly rare air, the modest negative was bound to let some air out of the party balloons. What we have is a resetting of expectations, not so much for the domestic economy or inflation but rather over what the Fed is likely to do in the coming months. After several years of overpromising interest rate hikes and failing to deliver, it increasingly looks like the Fed will raise interest rates three if not four times in 2018. That's a game changer to the recent narrative, and it's given the market a bout of indigestion. Along the way, Tematica's mixologists weave in the impact of rising Treasury yields, and the Fed being a seller of Treasuries as the Treasury needs to float even more securities as it faces a rising deficit. They also address investors shifting capital to markets outside the US, and how the upcoming Federal government shutdown could weigh on the market. Finally, and to almost no one's surprise, they address the reality that rising interest rates will weigh on Cash-Strapped Consumer, continuing the Middle-Class Squeeze.

Resources for this podcast:

• Chris Versace – @_ChrisVersace
• Lenore Hawkins – @EllesEconomy
• Tematica Research – https://www.tematicaresearch.com
• Themes Report: https://www.tematicaresearch.com/whatisthematicinvesting
• Cocktail Investing: Distilling Everyday Noise into Clear Investment Signals for Better Returns

Books we're currently reading:

• Versace: Team of Teams: New Rules of Engagement for a Complex World
• Hawkins: Smashing Physics: Inside the World's Biggest Experiment

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Equities get wobbly as bond yields heat up while bitcoin continues to make headlines amidst a GDP miss for the 4Q as the greenback falls even further

Tematica's investing mixologists Chris Versace and Lenore Hawkins share some take-aways from this month's Inside ETF conference and discuss what is happening in the Blockchain/bitcoin world that has so many captivated. Chris and Lenore then breakdown last week's December quarter GDP that came in below expectations and what it means in the context of earnings estimates for 2018 that have been revised upward over the past few weeks to an unprecedented level. They point out just how much of the GDP growth was dependent on consumer spending and what that means going forward as consumer debt climbs while the personal savings rate drop to near record lows. Tematica's duo then tackle the recent market turbulence, what is likely driving it and what you need to be watching in the days and weeks ahead. We are seeing a boom in M&A of historic proportions as the S&P 500 breaks all records for the most consecutive trading days without a 5% pullback as global market volatility drops to 60-year lows. This market is breaking all kinds of records, but can that continue? Listen in to hear their take on what it all means. Companies mentioned on this podcast

• Alphabet (GOOGL)
• Amazon (AMZN)
• Apple (AAPL)
• Bank of America (BAC)
• com
• Campbell Soup (CPB)
• Capital One Financial (COF)
• Charles Schwab (SCHW)
• Citigroup (C)
• Constellation Brands (STZ)
• Pepper Snapple (DPS)
• E*TRADE Financial Corp (ETFC)
• Facebook (FB)
• Ford (F)
• Goldman Sachs (GS)
• Green Mountain
• JM Smucker (SJM)
• Kroger (KR)
• MasterCard (MA)
• McDonald's (MCD)
• Morgan Stanley (MS)
• Overstock (O)
• SAP SE (SAP)
• TD Ameritrade Holdings (AMTD)
• Uber

Resources for this podcast:

• Chris Versace – @_ChrisVersace
• Lenore Hawkins – @EllesEconomy
• Tematica Research – https://www.tematicaresearch.com
• Themes Report: https://www.tematicaresearch.com/whatisthematicinvesting
• Cocktail Investing: Distilling Everyday Noise into Clear Investment Signals for Better Returns

Books we're currently reading:

• Versace: Team of Teams: New Rules of Engagement for a Complex World
• Hawkins: Smashing Physics: Inside the World's Biggest Experiment

Download Episode

Earlier this week Tematica's investing mixologists Chris Versace and Lenore Hawkins attended the Inside ETF 2018 conference, where the proverbial who's who in ETFs were to be found. Amid a packed schedule of conference presentations and meetings with ETF issuers and other industry players, our mixologists had a number of conversations regarding new investment strategies, new ETF structures, the growing global adoption of ETFs, and Bitcoin, Bitcoin, Bitcoin as well as Blockchain. Among the conversations that we had, Chris had the opportunity to talk with both Doug Yones, the Head of Exchange Traded Products at NYSE that is part of the Intercontinental Exchange (ICE) global network of exchanges, and Jamie Wise at Periscope Capital, which is responsible for the BUZZ Indexes and BUZZ US Sentiment Leaders ETF (BUZ). The conversation with Doug centered on the rapid growth of the ETF industry, how it's maturing and innovating as we celebrate the 25th anniversary of the SPDR S&P 500 ETF Trust (SPY), and why it's likely to continue to take in assets. In the conversation with Jamie, he shared how the BUZZ US Sentiment Leaders ETF is leveraging artificial intelligence to collect social sentiment around stocks and translating that into a fund portfolio. It's not only a differentiated investing strategy that fits with our Disruptive Technology investing theme, but as Jamie shares, one that offers some surprising insights. We apologize in advance from some of the background noise during those two conversations, but it was a busy conference… our feet are still hurting and we are both haunted by the over-the-top delicious beef short ribs at the U.S. Bank dinner. We'll be back next week with Chris and Lenore's observations and takeaways from Inside ETF 2018 along with their views on the market's accelerating upward spiral. And don't forget to subscribe to the Cocktail Investing Podcast on iTunes!

Download Episode This week Tematica's investing mixologists Chris Versace and Lenore Hawkins start this week's podcast dishing on Kroger's rumored acquisition target, continuing problems at General Electric and the standout product is at this year's Detroit Auto Show. They then segue into a discussion on the ins and out of investing in small cap stocks and serve up several examples of what to look for, what to avoid and what to do to make sure you've identified the right small-cap stocks and finally how to make sure your investing thesis stays on track. Chris and Lenore then tackle one of the bigger stories investors have been focusing on – interest rates and upward pressure on treasury yields. Lenore pulls the curtain back as to why this is happening, explaining the how and why the 10-year Treasury Bond yield is out of sync with its historical relationship to GDP. We rattle off a number of flashing warning signs when it comes to the overall U.S. stock market following its continued acceleration higher, but as we move through 4Q 2017 earnings over the next few weeks odds are tax reform led EPS hikes will lead the market even higher, making these flashing signs look more and more like a Stretch Armstrong doll that is poised to dislocate one of his shoulders. We end the episode talking about credit-related problems rearing their heads for consumers, why there was something funky going on in the December CPI report and how many might be jumping the gun on inflation concerns. Companies mentioned in this podcast

• Amazon (AMZN)
• Amplify Snacks (BETR)
• American Express (AXP)
• AXT Inc. (AXTI)
• Barnes & Noble (BKS)
• Blue Apron (APRN)
• Broadcom (BRCM)
• Ford Motor Company (F)
• Fiat Chrysler (FCAU)
• General Electric (GE)
• General Motors (GM)
• GoPro (GPRO)
• Hershey (HSY)
• Kroger (KR)
• MasterCard (MA)
• Qorvo (QRVO)
• Skyworks Solutions (SWKS)
• USA Technologies (USAT)
• Visa (V)

Resources for this podcast:

• Chris Versace – @_ChrisVersace
• Lenore Hawkins – @EllesEconomy
• Tematica Research – https://www.tematicaresearch.com
• Themes Report: https://www.tematicaresearch.com/whatisthematicinvesting
• Cocktail Investing: Distilling Everyday Noise into Clear Investment Signals for Better Returns

Books we're currently reading:

• Versace: Team of Teams: New Rules of Engagement for a Complex World
• Hawkins: Sapiens: A Brief History of Humankind

Download Episode

This week Tematica's investing mixologists Chris Versace and Lenore Hawkins are back to discuss the technology-infused CES 2018, an annual tradeshow, and how the products and services revealed at the event reflect our Connected Society, Disruptive Technologies, Aging of the Population, Affordable Luxury, Aging of the Population and Safety & Security investing themes. Our Connected Society theme could be found in products ranging from Travis the Translator to Alphabet's robot Buddy to voice-controlled appliances and even faucets to Alexa getting embedded into more and more cars. The release of the iPhone X has spurred an acceleration in wireless charging solutions, but as of yet, the dominant technology used by most all is Qi, which remains position dependent and not all that speedy. Disruptive Technology is getting more personal with technology that can create customized hair and skin care products emerging and even a tiny dot you can wear on a fingernail to help make sure you don't catch too many rays this summer. We're also seeing the TV market adopt organic light emitting diode displays as well as virtual assistants from Amazon, Alphabet, and Apple. Our Safety & Security theme also saw personalization trends with security cameras that can recognize faces to help protect your home and review mirrors that can scan an iris to ensure that the person in the driver's seat ought to be there. Chris and Lenore wrap it all up by highlighting the technologies and associated companies that are making these advancements possible, pointing out that investors might consider buying the bullets rather than the latest technological "gun." Companies mentioned on this podcast

• Apple (AAPL)
• Alcatel Lucent (ALU)
• Alphabet (GOOGL)
• Amazon (AMZN)
• Applied Materials (AMAT)
• AXT Inc (AXTI)
• AT&T (T)
• BMW (BMW)
• Dycom (DY)
• Ericsson (ERIC)
• FedEx (FDX)
• Finisar (FNSR)
• Ford (F)
• Fortune Brans Home & Security (FBHS) – Moen Products
• Forward X
• Gentex Corp (GNTX)
• Henkel AG & Company (HEN3:ETR) - Schwarzkopf
• Hyundai (KRX)
• iRobot (IRBT)
• Johnson & Johnson (JNJ)
• Kohler
• Kroger (KR)
• L'Oréal S.A. (OR:EPA)
• LinkSquare
• Nissan Motor (NSANY)
• Nokia (NOK)
• Qualcomm (QCOM)
• Romy Paris
• Skyworks (SWKS)
• Starbucks (SBUX)
• T-Mobile USA
• Tata Motors (TTM)
• Toyota (TM)
• Travis
• Universal Display (OLED)
• Verizon (VZ)
• Walmart (WMT)
• Whirlpool (WHR)

Resources for this podcast:

• Chris Versace – @_ChrisVersace
• Lenore Hawkins – @EllesEconomy
• Tematica Research – https://www.tematicaresearch.com
• Themes Report: https://www.tematicaresearch.com/whatisthematicinvesting
• Cocktail Investing: Distilling Everyday Noise into Clear Investment Signals for Better Returns

Books we're currently reading:

• Versace: Astrophysics for People in a Hurry
• Hawkins: Sapiens: A Brief History of Humankind

Download Episode

The potential earnings expectations discrepancy between tax reform, GDP, and stocks

Coming off the holidays, entering 2018, and despite the disruption from snow bomb cyclone Grayson, Tematica's investing mixologists Chris Versace and Lenore Hawkins are back with a short recap on 2017 and discuss what market watchers are focusing on over in January. Next week brings the technology-infused CES 2018, an annual tradeshow that blurs the lines between our Connected Society and Disruptive Technologies investing themes. With a sense of humor, Chris and Lenore discuss several new technologies from 5G to haptic virtual reality (VR) that are poised to make headlines during the show and further transform our digital lives. After the Martin Luther King holiday, 4Q 2017 earnings season gets underway and while the market is focused on tax reform-laden EPS upside to be had, Lenore and Chris offer a sobering take on what some of the potential shortfalls are that could weigh on both the economy and the stock market. Along the way, our mixologists discuss the yield curve, remind us about the monetary policy and the Fed, and share the view that quality – be it for a company's dividends or balance sheet – should remain a priority for investors. Looking toward the end of January, the conversation shifted back to Washington and the expectation for President Trump to release his rebuilding U.S. infrastructure framework ahead of his Jan. 30 State of the Union Address. From roads to bridges, tunnels, dams, airports to the electric grid and all that falls in between, the domestic infrastructure has increasingly become a sore spot as well as a drag on the economy. As much as they are bullish on rebuilding our infrastructure and like the trend in recent nonresidential construction data, Chris and Lenore point out some rebuilding hurdles that need to be cleared out before the machines are running, the rebar is laid and the concrete is poured. Companies mentioned on this podcast

• Apple (AAPL)
• Alcatel Lucent (ALU)
• AT&T (T)
• Dycom (DY)
• Ericsson (ERIC)
• FedEx (FDX)
• iRobot (IRBT)
• Qualcomm (QCOM)
• Nokia (NOK)
• T-Mobile USA
• Universal Display (OLED)
• Verizon (VZ)

Resources for this podcast:

• Chris Versace – @_ChrisVersace
• Lenore Hawkins – @EllesEconomy
• Tematica Research – https://www.tematicaresearch.com
• Themes Report: https://www.tematicaresearch.com/whatisthematicinvesting
• Cocktail Investing: Distilling Everyday Noise into Clear Investment Signals for Better Returns

Books we're currently reading:

• Versace: Astrophysics for People in a Hurry
• Hawkins: How Money Got Free

A Look at the Official Kick-Off to the 2017 Holiday Shopping Season Download Episode Coming off the Thanksgiving holiday, this week Tematica's investing mixologists Chris Versace and Lenore Hawkins discuss the meaning of the litany of data points for online shopping on Thanksgiving as well as overall results for Black Friday. Expectations were running high for continued wallet share gains by digital shopping, a key aspect of our Connected Society investing theme, and they did not disappoint. What was surprising was the percentage of holiday shopping done via smartphones. Both the objective data, and as Chris and Lenore share, the anecdotal evidence, point to brick & mortar retail traffic over the holiday shopping weekend that was hardly robust. Per data from ShopperTrak, brick & mortar retail sales fell just under 2% year over year. No wonder retailers like Kohl's (KSS) and JC Penney (JCP) were trying to put a positive spin on things by talking up their digital shopping. We continue to see brick & mortar retailers as challenged and remain bearish on mall operators. While the holiday shopping season is off to a stronger start than last year, we still have some reservations about the final tally matching the National Retail Federation's typically overly optimistic holiday shopping forecast calling for 3.6%-4.0% growth over last year. On the one hand, we've had tepid wage growth, ballooning credit card debt and student debt, which tells us the Cash-Strapped Consumer will be out in force this holiday shopping season. As we point out, roughly two-thirds of shoppers over the Thanksgiving to Cyber Monday period were looking to capitalize on retailer deals and promotions. To hammer the point home, Cyber Monday is expected to be the biggest stand-alone day of the shopping long weekend. Expectations call for $6.6 billion to bought on Cyber Monday, up 16.5% year over year. To us, however, the real context is that's not only looking like another record year, but it's 32% greater than Black Friday online sales this year. Which companies are best positioned to capitalize on our Connected Society, Cash-Strapped Consumer, Rise & Fall of the Middle Class and Affordable Luxury investing themes this holiday season? You'll have to listen to the podcast to find out. Along the way, you'll learn what the number two gift item will be this year and we'll mention a sleeper gift card company that is a contender for our Cashless Consumption investing theme as well. Companies mentioned on this podcast

• Adobe Systems (ADBE)
• Amazon (AMZN)
• Apple (AAPL)
• Best Buy (BBY)
• Blackhawk Networks (HAWK)
• JC Penney (JCP)
• Kohl's (KSS)
• Macy's (M)
• MasterCard (MA)
• National Retail Federation
• Simon Property Group (SPG)
• Shopify (SHOP)
• ShopperTrak
• Starbucks (SBUX)
• Target (TGT)
• Visa (V)
• Wal-Mart (WMT)

Resources for this podcast:

• Chris Versace – @_ChrisVersace
• Lenore Hawkins – @EllesEconomy
• Tematica Research – https://www.tematicaresearch.com
• Themes Report: https://www.tematicaresearch.com/whatisthematicinvesting
• Cocktail Investing: Distilling Everyday Noise into Clear Investment Signals for Better Returns

Books we're currently reading:

• Versace: The Innovation Blind Spot: Why We Back the Wrong Ideas—and What to Do About It
• Hawkins: How Money Got Free