(New York)

Tesla is a hard stock to figure at the moment. No one is quite sure how likely it is that the company will be taken private at $420. Many are trying to handicap the odds, with Barron’s guessing they are less than 50%. The stock has given up much of the initial gains it got from Musk’s fateful tweet, but the big question is where it will go next. The answer is that it likely won’t move much until there is more information to digest. The SEC is investigating the company, but there is little word on any potential deal.

FINSUM: We think Tesla is going to be quite banded until more information about a potential deal comes out.

(New York)

If you hold luxury retail stocks or are thinking of doing so, think again. With all the fears over a trade war, many luxury stocks look vulnerable. While Gucci owner Kering and Louis Vuitton owner LVMH look insulated, look out for weakness in Burberry, Salvatore Ferragamo, and Swatch. The first two look particularly weak because they are trying to regain traction with consumers at the same time as facing trade tensions (as opposed to Gucci, which is very hot at the moment). Most luxury stocks are currently trading at a premium relative to the market.

FINSUM: In our view, the brands that are already hot are going to stay on the shelves, but ones that haven’t been selling as well will be more impacted by trade tensions as wholesalers can more easily just stop stocking them.

(Washington)

The markets had a scintillating day yesterday. The Dow surged almost 400 points. Why? The reason was simple—the market stopped worrying so much about a US trade war with China. The two countries are planning further high level talks on trade and that alleviated the market’s fears. Barron’s proclaimed that “This is what happens when the market’s not worried about trade”, obviously referring to the strength of the economy and earnings. The market was also more optimistic on Turkey.

FINSUM: There does seem to be a lot of upside that has been stifled by geopolitical worries. Perhaps there is a nice run to be had if the US and China can come to an agreement.

(Istanbul)

Most sources, including FINSUM, have been concluding that the emerging markets flare up centered on Turkey, would not develop into a correction or financial crisis for developed markets. Today that position is looking weaker, as stocks fell sharply across the world yesterday, and commodity markets got routed. Emerging market stock indices have fallen back into a bear market. While EMs fell big, global markets saw share plunges exacerbated by a dismal earnings report for one of China’s big tech companies, which then seeped into tech shares globally.

FINSUM: The narrative here is that Turkey sparked a big selloff and now fears over China will continue to drag EMs down. This could be the start of a global recession, but perhaps it will not be accompanied by huge losses in developed markets.

(Houston)

For those paying attention, the metals market is sending some very worrying signs. Copper and other metals have been going through a rough patch, but yesterday seemed to really spell doom. Copper plunged into a bear market, zinc plummeted, and even gold took a big hit despite the panic across markets. Industrial commodities are a good bellwether for economic activity, and while the markets are partly plunging on worries over the Chinese economy, the big drops signal that the whole world could be in for a recession.

FINSUM: We are growing increasingly concerned about the message that metals markets are sending. The big drop across the board in industrial commodities is quite worrying. Hopefully it is a short-term overreaction to the trouble in emerging markets.

(New York)

One of the most famous hedge fund managers just made what seems a bold and countercyclical move. That manager is David Einhorn, and the move is to ditch all tech stocks and buy retail instead. In its most recent quarterly filings, Einhorn’s Greenlight Capital bought shares of Gap, Best Buy, Dollar General, TJX Companies, and Dollar Tree, all while significantly pairing holdings of Apple and Micron Technology.

FINSUM: Retail has had a good run over the last year, but the industry is still facing some major headwinds. We think buying retail now seems like a macro bet that the US economy will stay strong.

(New York)

Dividend stocks are in an odd place right now. The yield curve looks likely to invert as short-term rates have risen and long-term yields continue to fall. This has made the average S&P 500 yield look quite weak relative to bonds. However, there are some really good picks out there. All the stocks listed here have dividends of 2.8% or more, and most have dividend growth rates of 20% or more. These stocks include AbbVie, LyondellBasell Industries, Broadcom, Regions Financial, and Starbucks.

FINSUM: What an interesting mix of companies and industries. These definitely seem worth a look. Starbucks is an interesting case for us.

(New York)

Well it finally happened. Investors had been waiting anxiously to see if the SEC would act over Elon Musk’s highly unusual way of announcing his buyout intentions last week. Musk tweeted out his plans to take the company private at $420 per share. The SEC has been looking into whether this is a violation of disclosure rules or even intentionally misleading information. The big question is whether Musk actually had the “funding secured” as he said, because if not, it could be the basis for a market manipulation charge. At least two lawsuits have been filed against Tesla since the tweet.

FINSUM: So the SEC says companies are allowed to announce material info over social media, so this case is really just about whether the statement was misleading.

(New York)

A lot of investors are worried about the potential for an inverted yield curve, and not just because of what it could mean for markets and the economy. If you are holding long-term bonds that will be yielding less than shorter-term bonds, you are likely going to be incentivized to reshuffle your holdings. Accordingly, Citigroup has come out with a first of its kind product that allows retail investors to fully redeem the principal on their bonds if the yield curve inverts. According to Bloomberg the “30-year constant maturity swap rate can sink as much as 10 basis points below the two-year rate before holders start incurring losses”. Continuing, “The products pay a coupon and return full principal as long as the spread remains greater than that level”.

FINSUM: This seems a bit sophisticated for most retail investors, but it is definitely an interesting product and potentially a good one for hedging.

(New York)

Stocks have done very well over the last month and a half. The correction—one of the longest on record—ended and stocks are back near an all-time high. But where do we go from here? One Wall Street analyst says the S&P 500 is in for major gains, with the index set to rise 12% before the end of the year. The analyst, from Cannacord Genuity, sees surging corporate earnings and rising consumer confidence as key to the market expansion. He sums up his view this way, saying “There is no doubt the unpredictable news backdrop of a potential trade war with China and a rise back to 3 percent in the 10-year U.S. Treasury yield can cause increased volatility, but the fundamental backdrop commands using it as an opportunity to add risk”.

FINSUM: The principal components of the argument seem sound, but we will admit we are a bit concerned about an earnings peak even though history tells us not to be.