Hi All,
First of all, I’m a data scientist by profession but a history major by training. So I’ve tried to cite all relevant data points with a () tag. This allows us to separate debating the data vs. the analysis. I’m also a complete newbie to real estate investing. One of the main goals in fact of this post is to organize my thoughts so far and solicit feedback from more knowledgable individuals.
As part of a balanced portfolio, I've invested passively in real estate for several years (both public REITs and a small amount in a private platform). As my assets have grown and I'm entering the age to buy a primary residence, I've been trying to educate myself on the housing real estate market. After all, even if you don't own any investment properties the purchase of a home is the largest single financial transaction you'll likely ever make. In fact, if you look at the chart linked below (1, see Sources below) you'll see housing is the single largest asset for households with net worth below 1 million dollars, i.e. ~90% of Americans (2). In fact, even in 2010 (in the midst of the Great Financial Crisis): "The primary residence represented 62% of the median homeowner’s total assets and 42% of the median home owner’s wealth" (3). In fact, reading the Economist recently (obviously in my slippers) I was surprised to discover housing is the world's largest asset class. This HSBC report (avoiding the Economist paywall) cites housing as a $226 trillion (!) asset class at the end of 2016 (4) out of a total net worth in 2018 of ~$360 trillion according to Credit Suisse.
 
Even with my casual research, it's clear that real estate is divided into multiple segments including residential, commercial, industrial, farm land, etc. Even the subsector of residential is divided into single family, multi-family, commercial, mobile homes, etc. These segments are further divided across geographies with wildly different tax, capital, and regulatory regimes. So far I’ve limited my research to the US residential sector: single family homes, multifamily, and small commercial apartment buildings. Therefore moving forward when I say real estate I will limit the scope to the above US residential housing market, i.e. acquiring individual or personal portfolio of US housing properties.
 
More formally, the purpose of my analysis below is:

• Understand my options as it pertains to real estate. E.g. is it better to consider “house hacking”, i.e. buying a primary residence and several investment units as part of a duplex, triplex, etc.
• Avoid making obvious mistakes in the purchase of my primary home
  
• To summarize what I’ve learned and start to develop opinion about real estate investing more broadly as a complement to public equities investing
  
• Broaden my knowledge professionally (my clients include large real estate companies)
  
• Learn from the community!
  

Note: I considered posting this in /realestateinvesting, but ultimately my goal is to evaluate real estate vs. other asset classes. Obviously some people will simply prefer real estate for a variety of reasons, but personally my goal is to achieve the greatest return for the least risk and work. I should stress that I love my career (data scientist) and have no intention of quitting, so the last point is particularly important.
 
Analysis
 
One thing that immediately strikes me as an investor accustomed to public securities, e.g. bonds / stocks, is how odd the real estate market (in particular housing) is in comparison. Having a margin account from a broker, i.e. getting leverage, is often a difficult process reserved for “advanced” investors. In residential real estate, it’s considered “conservative” for an individual to have leverage of 4-5 to 1 (FHA loans, for example, only require 3.5% down in some cases!) . What’s even crazier is that the loan is often issued at only 2-4% over the 10 year US treasury rate. For example today, April 26th, the 10 year treasure is 0.606% while NerdWallet has a rate of 3.3% for a prime credit score, single family home, primary residence 30 year loan.
 
Perhaps because real estate is the only avenue available for newer investors to take on large amounts leverage immediately, I've seen extreme and, in my opinion, irrational positions on the subject. Even a cursory glance at BiggerPockets, /realestateinvesting, etc. uncovers multiple posts along the lines of either "real estate investing is the best investment ever!" vs. "the real estate market is a massive bubble and will crash soon". I've summarized a few of the common tropes I've seen below with my analysis.
 

Real estate is a huge bubble, and is going to collapse any day!

As noted above, real estate / housing has numerous segments that are further divided across geographies with wildly different tax, capital, and regulatory regimes. Saying that "real estate" will crash is like saying the “food industry” will crash. What segment and where? US soybean growers? Fast Food? Argentinian ranchers? McDonalds in particular?
Limiting our discussion to US housing: the Case-Shiller national price index (7) shows that home prices dropped ~27% from peak to trough in the Great Financial Crisis over a period of almost 6 years (Mid 2006 to early 2012). The reason this was such a catastrophic event is that housing had never decreased nationally in a significant way before in the modern era (see Case Schiller home price index). Of course, it’s worth noting that housing had rarely increased rapidly against inflation before.
Let’s assume we had an equivalent event occur. The Jan 2020 index was at 212, so home prices would decrease by 27% to ~155 (mid 2008 levels). Crucially though, this price drop would be expected to play out for years! During that time vested interests (more on that later) would lobby governments extensively for support, foreign and US investors could form funds to take advantage of the situation, etc. As a reference point there is ~$1.5 trillion available in US private equity funds alone as of January 2020.
However, it is worth pointing out that this is at the national level. Local real estate markets, particularly those dependent on select industries or foreign investors, could easily see more dramatic price movements. The US census has a really cool chart (22) that shows the inflation adjusted (as of year 2000) median home values every decade by state from 1940 to 2000. We see that Minnesota home values actually dropped from $105,000 in 1980 to $94,500 in 1990, a fall of more than 10%.
 

Everyone needs a place to live, therefore housing can never go down

Everyone needs a place to eat, but restaurants and grocery stores are famously low margin businesses (5). Farms supply an even more basic need, but many go bankrupt (6). The question isn’t whether housing will go down or not, but whether it will return an attractive rate of return compared to alternative investments.
It’s also worth pointing out that for most “retail” US housing real estate investors, they are investing in a narrow geographic area. Migration and births/ deaths can play a huge role in the need for housing in a given area. Case in point, NYC may have actually begun losing population to migration in 2017 / 2018 (23). Even more interesting, NYC has experienced a substantial loss due to domestic migration which is almost balanced by foreign immigration / new births (24). If foreign immigration decreases in the post-COVID we would expect NYC’s population to decline more rapidly given current trends.
It is entirely possible for national housing prices to modestly increase while expensive coastal markets decline significantly, for example.
 

It's supply and demand. There's a nationwide housing shortage so prices can only go up!

This one has some factual basis. Freddie Mac put out a study in Feb 2020 (18) which indicated that there is a shortage of housing units between 2.5 - 3.3 million units. Some interesting notes about this study is that they consider the “missing” household formation and extrapolate interstate migration trends. As noted below, the US builds ~1.3 million housing units a year, so this reflects ~2 years of housing construction. It’s also worth noting the geographic variation, with “high growth” states like Massachusetts, California, Colorado, etc. seeing ~5% housing deficits vs. states like Ohio, Pennsylvania, etc. seeing housing surpluses of ~2-4%.
However, a Zillow analysis on our aging population (11) points to a slightly different conclusion. Based on their analysis, an additional ~190,000 home will be released by seniors between 2017-2027 compared to 2007-2017. That number increases by another 250,000 homes annually between 2027-2037. Combined, this is about ~50% of the average annual homes constructed in the US between 2000-2009 at ~900,000.
Given these slightly conflicting reports, let’s get back to basics. First, let's separate housing into single family homes, multi-family units, and large apartment buildings. Single family homes, particularly near dense and economically vibrant metros, are far more supply constrained. In contrast, multi family units / apartment towers are, barring regulatory issues (see California), less constrained by available land. See Hudson Yards in NYC, the Seaport area in Boston, the Wharf in DC, etc. It's worth noting that due to costs / market demand most of these developments cater to the entry level luxury category and above, but they are new supply.
I actually wound up looking at US Census projections to get a sense of the long term outlook. By 2030 the Census estimates the population will grow from 334.5 million to 359.4, for a total increase of 24.9 million or an annual increase of 2.49 million (8). In 2019 the Census estimated 888,000 private single family units and 403,000 units in buildings w/ 2+ units were constructed for a grand total of 1,291,000 units (9). The average number of people per US household is 2.52 (10). Some simple math suggests that if we assume each new single family home contains the average number of Americans and each apartment conservatively contains only a single person we get 888,000 * 2.52 + 403,000 = ~2.64 million.
Now, talking about averages in a national real estate market reminds me of a joke about Mars: on average it's a balmy 72 degrees. But the point still stands that at a high level, theoretical sense there is sufficient "housing" for the US population. The question, as always, is at what price and location?
 

Real estate is a safer investment than the stock market!

This one honestly irritates me. While there are many advantages to real estate I can see, safety is not one of them. It is a highly leveraged, illiquid, extremely concentrated asset when bought individually (i.e not in a REIT). Let’s use an example here. Is there a financial advisoy in the world who would recommend you put your entire investment portfolio in Berkshire Hathaway? Of course not, diversification is the bedrock of modern personal finance. And yet Berkshire Hathaway is an extremely diversified asset manager with well run and capitalized companies ranging from Geico to Berkshire Homes to Berkshire Energy. Oh, and it also has $130 billion (with a B) in cash equivalents.
I honestly think this impression stems from 3 factors:

• Almost all asset prices have gone up (barring a few 1-2 month downturns) for 10+ years. There was also a shortage of skilled labor, capital, etc. that dramatically reduced the new supply of housing
• Survivorship bias. The people who fail in real estate tend to limp away quietly. The ones who survive and succeed tout their success loudly.

 

You won’t build your wealth in the stock market

One common theme I’m already noticing listening to podcasts, reading blogs, etc. is that many people started investing in the aftermath of the Great Financial Crisis (2009 - 2011). And, in retrospect, it was clearly a great time to buy property! But it was also a great time it turns out to buy almost every investment.
I plugged in the average annual return of the S&P 500 from December 2009 to December 2019 with dividends reinvested (and ignoring the 15-20% long term tax on dividends) (12). It was 13.3%. If you managed to buy at the market bottom of Feb 2009 it was 15.8%!
The long term annual average of the S&P 500 from 1926 - 2018 is ~10-11% (with dividends reinvested). (13). The S&P has never lost money in a 30 year period with dividends reinvested, see the fantastic book Stocks for the Long Run (14). In fact, if you’re investing before 30 the worst 35 year period (i.e. when you would turn 65) is 6.1% (15).
Housing, in general, has tracked at or slightly above inflation ( 16). Even a click bait CNBC article (17) about “skyrocketing” home prices states that homes are rising 2x as fast as inflation (i.e. ~4%). If you look at the CNBC chart for inflation adjusted prices, you’ll see a compound annual growth rate (CAGR) of 2.3% from 1940 to 2000. Let’s do this same exercise again with the Average Sales Price of Homes from Fred (i.e. Fed economic data) (18). In Q1 1963 the average sales price of a house was $19,300. In Q4 2019 it was $382,300. That is a CAGR of ~5.38% over ~57 years.
Another thing to keep in mind is that while real estate does have some tax advantages, there are also property taxes, maintenance, etc.
But it’s harder than that. Because real estate is an illiquid asset. In general, illiquid assets require higher returns than the equivalent liquid asset because of the inconvenience / risk of not having the ability to transact frequently.
 
Case study of real estate purchase:
I’d like to focus the rest of my analysis on an area that many members of BiggerPockets, /realestateinvesting, etc. seem to gloss over: credit. I was surprised to see that for first time home buyers, 72% made a down payment of 6% or less according in Dec 2018 according to (27). This would imply prices only have to decrease 6% to put these new homebuyers underwater, i.e. owe more after a sale than their mortgage. But this fails to take into account costs associated with buying a property, which are substantial at 2-5% for closing according to Zillow (28). Costs for selling a property are even more substantial, ranging from 8-10% according to Zillow (29). This means that sellers only putting down 6% could be underwater (in the sense that they couldn’t sell without providing cash during the sale) with even modest price decreases when taking into account these transactional costs.
 
Obviously there are ways to reduce these costs, so let’s walk through a hypothetical example of the median valued home of ~$200,000.
 
A young, first time home-buyer puts down 10%, or $20k, and takes out a mortgage for $180,000. They also pay (optimistically) closing costs of 2% for $4000. Luckily, they bought in a hot housing market and prices increased 5% (real) over the next 5 years. Their house is now worth ~$255,000. They sell their house and again, optimistically, closing costs are only 4%. This means they pay $10,200. Consequently, after netting out costs we calculate naively that they would make $255k - $10k - $4k - $200k (original purchase price of home) = $41k. Given they only invested $20k of their own money, this is a compound annual growth rate (CAGR) of ~15.4%, which is handily above the S&P 500’s average. This is the naive calculation I first made, but as we’ll see it is deeply flawed. First, let’s look at costs.
 
WalletHub has a really nice chart that shows (conveniently) property taxes on a $205,000 home across all 50 states (30). The average American household spends $2375 on property taxes, so let’s assume a little less and go for $1500. So 5 years x $1500 = $7500.
 
For home maintenance, the consensus seems to be ~1% annually for home maintenance with wide variation. We’ll assume that’s $2000 off the base price, so $2000 * 5 = $10,000. (31).
 
For homeowner’s insurance, Bankrate (32) provides a nice graph that shows the average annual cost for a $300,000 dwelling across all states and then a separate chart for costs based on dwelling coverage. For a $200,000 dwelling coverage we have a figure of $1806 per year, so over 5 years we have $1800 * 5 = $9000.
 
Finally we need to calculate the interest on the debt. One thing that I didn’t realize until I looked at an amortization table how front-loaded the interest payments are. Case in point, I plugged in the $180,000 loan into the amortization calculator (34) using a 3.5% interest rate and saw that we pay on average ~$6000 each year in interest vs. only ~$3800 to principal.
 
So lets’s run the new numbers.
You sell your home still for $255,000. After 5 years, your mortgage is now ~$160000 (i.e. you paid off 20,000 over 5 years, or ~$4k per year). So after the sale you are left with ~$95,000. The buying and selling costs remain the same as before, so we subtract the $14k for $81,000. We also then subtract $7500 (property taxes), $10,000 (home maintenance), $9000 (homeowners insurance) which gives us $54,500.
 
We paid ~$9,700 each year in mortgage interest + principle (~6000 interest and $3700 principal). So 5 * 9700 = $48,500.
 
So, net of everything we get $255,000 - $160,000 (remaining mortgage) - $48,500 (mortgage payments over 5 years) - $14k (buying / selling costs) - $7500 (property taxes) - $10,000 (home maintenance) - $9000 (home insurance) = $6000. And we put down $20,000 as a downpayment, for a net compound annual growth rate (CAGR) of negative $21.4%.
 
That is truly an astounding result. We had 10x leverage on an asset that went up 5% each year for 5 years and we somehow lost money on our “investment” of a down payment? Keep in mind we also used fairly optimistic numbers (particularly home price appreciation) and didn’t factor in PMI, etc. On the flip side, this home provided shelter, i.e. you didn’t pay rent. That’s a massive “avoided” cost and I don’t mean to minimize it. But the point here is that many homebuyers I’ve spoken to fail to account for the substantial costs of home ownership and expect their primary resident to generate a substantial return.
 
Now, of course, for real estate investing you would likely either a) hold the property for less time and attempt to flip it via forced appreciation or b) have tenants in the property. Let’s focus on b) because frankly that’s more of my interest. From what little research I’ve done flipping houses requires much more time that’s incompatible with my day job.
 
I went ahead and used the rental price calculator I found online at (36) to calculate the return. I used a rent of $1300 monthly, a bit lower than the average national rent of $1476 (35) because our home price was also lower than the national average. I assumed a low vacancy rate of 5%, and no other expenses beyond the ones cited above (i.e. I didn’t assume property management, higher loan interest rate, higher property taxes).
 
The calculator spit back a 5 year internal rate of return (a metric in this case useful to compare against the securities markets) of 27.79% return, i.e. a profit of $63k on an initial investment of $20k. The IRR as I understand it captures the time value of money, basically accounting for when you made various returns (37). E.g if an investment over 30 years pays nothing then gives you a lump sum payment at the end that’s very different than if it pays 1/30th of that lump sum every year. It’s useful in this case for comparing against the stock market because the IRR takes all future cash flows back to a net present value of 0, i.e. as if we invested all the money immediately.
 
&Now let’s do some scenario modeling (originally we had 10% down, 3.5% interest rate for an IRR of ~28%):

• Let’s assume we have to put down 20%: now we have a 19% IRR
• 20% down payment and a 5.5% (instead of 3.5%) interest rate: 14.7% IRR
• Home price appreciation of only 3% per year instead of 5% with 10% down payment: 20%
• Home price appreciation of only 3% per year with 20% down payment: 12.65%
• Home price appreciation of 0% per year with 10% down payment: 4.26%
• Home price appreciation of 0% per year with 20% down payment: -1.28%

This scenario for me demonstrated a number of interesting properties.
 

• Owning a home for even a moderate amount of time (~5 years) will likely not build substantial wealth unless there is truly massive home appreciation. The transactional costs are too high, the ongoing costs are substantial, etc. And of course I’ve neglected to include all the remodeling, furniture, etc. that every home owner I’ve met has spent money on
• With regards to real estate investing, home price appreciation covers up a magnitude of sins, particularly if coupled with a low cost of debt. Changing nothing but the home price appreciation changes the investment from incredible (28% IRR) to about 1/2 the expected return of the S&P 500 (4.26%)
• Real estate, whether investing or owning a primary residence, has limited to negative cash flow initially. The loan is amortized so that all early payments go to interest, maintenance is expensive, etc.
• To sanity check these figures, I went and looked at the SEC filings of Invitation Homes which owns 80,000 single family homes in the US. In 2019, Invitation Homes made ~$1.764 billion on rent + other property income while spending a combine ~$730 million on property maintenance + management.(49) . That’s about ~41% of the total property income, which aligns with the rental calculator above (rent payments fo 1300 vs ~$570 for maintenance, taxes, insurance, vacancy, etc.). That honestly makes me nervous however, as Invitation Homes theoretically has the scale to centralize and minimize maintenance costs. While I could certainly substitute “sweat equity” for some repairs, it strikes me that it would be foolish to assume my costs would be lower than Invitation Homes’

 
401k analysis
As I mentioned above, one of the big questions around real estate investing that I rarely see asked is “is it an appreciably better investment than the alternatives”? For W2 workers, which is ~50% of private sector workers, this question becomes even more pertinent because 401ks have massive tax benefits. In fact, only 33% of US households own taxable accounts outside of a 401k, which means the vast bulk of US households either have no accounts, 38%, or own only a retirement account like a 401k, 29%, according to (39). Let’s assume we have a middle to upper middle class worker making ~70k (this puts them roughly at the 75% percentile). They want to invest, and see two options:

• Invest $20,000 post-tax in a downpayment on a $200,000 investment property just like in the above analysis (we’ll assume closing costs just get baked into the final net gain)
• Invest the equivalent amount of post-tax dollars into their 401k. You can probably see where I’m going with this by the use of “post-tax”.

 
At a salary of $70k and assuming you took the $12k standard deduction, you would still see much of your income fall into the 22% tax bracket. While certain states charge no income tax, they generally make it up in much higher sales / property taxes, so let’s also assume a 3% state income tax (40). This means that if you invest $19,500 in a 401k (the maximum in 2020) that’s equivalent to only $14,625 post-tax (because the $19,500 would be taxed ~25% before it got to you). That leaves almost $6000 when compared with the down payment figure above, which is coincidentally the exact IRA contribution limit for 2020! The math for deductions for the IRA gets painful, but we can assume a deduction of ~$1500 (i.e. 25% of 6000). Now, if your work offers an HSA it gets even better, because those contributions are tax-free even from social security (which is typically a 6.2% tax) + medicaid (1.45%). This means that if you contribute the $3500 limit, that’s equivalent to only $2300 post-tax.
 
This is getting rather long, so for the sake of simplicity we can basically say that in lieu of putting down a $20,000 post-tax downpayment on an investment property you could instead invest $19500 + $6000 + $3500 = $29000 into the stock market. What’s more, fees for well managed 401ks through Vanguard, Schwab are often ~0.25% (i.e. $72 annually on the $29k above).
 
If we assume the average S&P 500 index returns of 10% (we’ll ignore the $72 annually in expenses and of course there are no taxes), we would see $29k compounded over 5 years = $47,809. Since we’re investing the money all immediately, this is (I believe) more or less equivalent to the IRR rate.
 
So, what do we need to achieve to beat that return with our investment property? Well, we previously assumed a blistering 5% real home price appreciation. With inflation at ~2%, that’s a nominal 7% home price appreciation. According to both Zillow and Core logic, Idaho is the state with the fastest home appreciation values pre-COVID at ~9%. We’re essentially predicting close to this level for 5 years, which is quite rare. In August 2019, US home prices nationally were gaining ~2.6% according to (41).
Let’s plug those numbers into our rental property calculator from above. At a 10% down payment, 3.5% interest rate, and 2.6% home price appreciation we see an IRR of 18% per year. Game, set, match, real estate, right?
 
Well, sort of. Right now we are assuming optimistic projections about maintenance (1%), closing costs (2%), and selling costs (4%). What if we bump those up to the averages cited by Zillow (3% and 8%)? Uh-oh, now we’re down to 12.38%. Okay, but what if we assume rent goes up by the same amount, ~2%? Great! Now we’re back up to 14% IRR. But if we assume all the other expenses like home insurance and maintenance go up 2% a year as well, we’re back down to 11%.
 
We could go on forever, but the point is that real estate (particularly for rental properties) are extremely sensitive to assumptions you make on a number of factors. Given the risk, illiquidity, and work involved with a real estate property I would want to see a substantially higher return than the tax advantaged, hands off 10% my 401k gives me. I didn’t even include the typical 3% match for the 401k, which would have added $2100 to the initial investment amount and increased the 5 year return to $51,272.
 
The bottom line in my mind is that for most W2 workers who have access to pre-tax investments, they should max them out first. If you’re lucky enough to be able to max out all of the above pre-tax accounts + get a 3% match (i.e. $31k total) every year, after 15 years at a 10% return you’ll have $1.2 million. In 30 years you’ll have $6.8 million. And again, keep in mind that maxing out your pre-tax accounts only “costs” you ~$20k, because that’s what you would get after taxes. And you’ll have “made” those millions without spending a single hour outside of your day job working.
 
Based on the above analysis and calculations, here’s what I’ve come away with as a newbie to real estate investing:

• Real estate investing involves significant risk. Achieving high returns relies upon either significant home appreciation or accurately calculating several key inputs (rental rates, maintenance costs, etc.). The past decades strong home appreciation has likely saved some investors from faulty assumptions, simply because their highly leveraged investment increased in value
• Given the significant transaction, maintenance, tax, and other costs simply buying and living in a single family home is not guaranteed to build substantial wealth in the short term (i.e. < 10 years) even with significant price appreciation.
• The story of real estate investing is really the story of credit availability. Low interest rates, widespread credit, etc. allow investors to take on significant leverage and potentially achieve high returns. On the flip side, if credit tightens we could see substantial movements in real estate as valuations adjust to the more expensive or less available leverage
• Personally, I would want to see at least 12+% returns annually before I invested in real estate directly vs. a diversified stock portfolio. Potentially having a cash flow negative, illiquid, highly leveraged asset is a risk that I want to be compensated for by a higher return. Obviously there are many advantages to real estate I’ve not yet learned in depth about (e.g. taxes), so perhaps this premium will change slightly in my mind in the future
• If you’re a younger, W2 wage earning in the US with the access and ability to contribute to a 401k, IRA, and HSA you should do that first before even considering real estate investing. The tax advantages are immense, the time investment is essentially nothing, and historically you are guaranteed, at the absolute worst, a 6.5% annualized return if you wait for 35 years. Plus a well diversified 401k fund, like a Vanguard target retirement fund, may very well include REITs
• The exception here of course is doing something like house hacking, etc. where you are combining your primary residence with an investment. I’m not sophisticated enough yet to run the numbers there, but it seems reasonable on the surface

 
Some thoughts on the future:
Forecasting is always risky, but at the same time we all have to form an opinion on where the future is headed. My general thoughts are that crisis tend to accelerate existing trends rather than create new ones. There were already recession concerns in late 2019, and US GDP growth expectations had been downgraded to ~2.0% by the OECD even before COVID (45), albeit with slight optimism around the Phase 1 trade deal with China. Geopolitical tension and capital controls in China had led to mainland Chinese investors slowing their investments in US real estate and increasing dispositions (47).

• While there is certainly a housing shortage, even in high growth states we see housing “deficits” according to Fannie Mae of ~5%. While this is clearly substantial, shifting migration patterns, regulatory changes, household preferences (e.g. telecommuting) could easily shift the balance. It’s far from certain in my mind that housing will remain supply constrained in the medium term (i.e. > 3 years)
• In December 2019, Zillow was already forecasting slowing home price and rental appreciation to modest 2.8% & 2.3% respectively (42)
• As of March 31 2020, Zillow now forecasts home price appreciation at -1.5% nationally.
• We are seeing tightening mortgage credit, particularly for jumbo loans that are essentially for high priced real estate markets (44). Mortgage services, i.e. non-bank companies like Quicken, have been hit hard by the mortgage forbearance regulations (although relief measures have been enacted)
• The CBO is currently forecasting the unemployment rate to remain >10% until 2021 (48). Even if that proves wildly pessimistic, it’s highly probably that the tepid wage gains of the last few years will slow further or even reverse
• Ultimately with slowing wage gains and reduced credit in the short term it is hard to see how consumers retain their purchasing power to drive rents / real estate prices substantially higher.
• On the flip side, central banks globally have injected trillions of dollars of liquidity into the global economy. This has driven down yields in traditional safe havens, e.g. investment grade corporate and sovereign bonds. The question becomes, where does this money go? Does it favor real estate over stocks? Does it lead to inflation, deflation, stagflation?
• Local & state governments are facing massive budget shortfalls due to dramatically lower revenues (e.g. sales taxes) and higher costs (unemployment insurance, healthcare, etc.). If the federal government does not backstop these revenues, will we see higher state / local taxes or cutbacks in services?
• As mentioned previously, the tax law changes of 2017 dramatically affected how individuals / households approach their federal taxes. In particular, it is now far less advantageous to itemize property taxes, state taxes, mortgage interest, etc. Mark Zandi (50) of Moody’s analytics provided some interesting analysis that suggested the tax law changes had already impacted higher cost markets. It will be interesting to see if these trends continue, accelerate, or reverse post COVID.
• The question now becomes how investors, particularly those who entered late in the cycle and lack substantial equity buffers, will deal with conditions. A V shaped recovery would likely see minimal disruption as investors are able to cope with disrupted cash flows for several months. A longer recession would see over-leveraged investors forced to short-sell properties
• I’m particularly struck by the fact that according to at least one source (27) ~72% of first time home buyers put down 6% or less. These recent buyers lack the equity buffer to deal with any material decline in housing prices, while the modest down payment suggests they may also lack substantial cash reserves to deal with an economic shock.
• There also seems to me a disconnect between commercial and residential real estate I don’t fully understand. Take a well capitalized and diversified REIT like Brookfield Property Partners. This REIT is currently offering a 14%+ yield. Of course many of their properties like urban office / retail space are getting hammered by COVID. But if we’re assuming that centrally located, urban commercial office & retail spaces are substantially less valuable than pre-COVID, what does that say more broadly about dense urban real estate? After all, if people work from home and don’t go out to commercial real estate spaces, why bother paying a premium in living expenses?

From my point of view, I’m interested in seeing how the market reacts over the next 3-6 months. Do sellers react by rapidly putting properties on the market before it’s “too late”? Are there enough prime buyers given the tightening credit, particularly for expensive coastal markets, to absorb a spike in listings? As Warren Buffett once said: “"At rare and unpredictable intervals...credit vanishes and debt becomes financially fatal. A Russian-roulette equation--usually win, occasionally die--may make financial sense for someone who gets a piece of a company's upside but does not share in its downside.” We shall see.
Sources:

• (1) Asset allocation by net worth: https://www.getrichslowly.org/assets-vs-net-worth/
• (2) Net Worth: https://dqydj.com/net-worth-brackets-wealth-brackets-one-percent/
• (3) Housing Net Worth 2010: https://www.nahbclassic.org/fileUpload_details.aspx?contentTypeID=3&contentID=215073&subContentID=533787&channelID=311
• (4) https://internationalservices.hsbc.com/content/dam/hsbcis/pdf/HSBC_Global_Real_Estate_Report_July2017.pdf
• (5) https://pos.toasttab.com/blog/average-restaurant-profit-margin
• (6) https://www.forbes.com/sites/niallmccarthy/2020/02/10/us-farm-bankruptcies-reach-eight-year-high-infographic/#3ec789b77de0
• (7) https://fred.stlouisfed.org/series/CSUSHPINSA
• (8) https://www.census.gov/content/dam/Census/library/publications/2015/demo/p25-1143.pdf
• (9) https://www.census.gov/construction/nrc/pdf/quarterly_starts_completions.pdf
• (10) https://www.statista.com/statistics/183648/average-size-of-households-in-the-us/
• (11) https://www.zillow.com/research/silver-tsunami-inventory-boomers-24933/
• (12) https://dqydj.com/sp-500-return-calculato
• (13) https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp
• (14) https://www.riosmauricio.com/wp-content/uploads/2013/05/Siegel_Stocks-For-The-Long-Run.pdf
• (15) http://observationsandnotes.blogspot.com/2010/05/best-worst-35-years-in-stock-market.html
• (16) https://www.supermoney.com/inflation-adjusted-home-prices/
• (17) https://www.cnbc.com/2017/06/23/how-much-housing-prices-have-risen-since-1940.html
• (18) http://www.freddiemac.com/research/insight/20200227-the-housing-supply-shortage.page
• (19) https://www.nerdwallet.com/mortgages/refinance-rates/30-year-fixed
• (20) https://www.cnbc.com/2016/08/22/the-sp-500s-new-sector-could-be-a-really-big-deal.html
• (21) https://www.cnbc.com/2020/01/03/private-equitys-record-cash-pile-comes-with-a-new-set-of-challenges.html
• (22) https://www.census.gov/hhes/www/housing/census/historic/values.html
• (23) https://www.wsj.com/articles/new-york-citys-population-dips-for-first-time-in-over-a-decade-11555560060
• (24) https://www.nytimes.com/2019/04/18/nyregion/new-york-city-population.html
• (25) https://dqydj.com/net-worth-brackets-wealth-brackets-one-percent/
• (26) https://www.visualcapitalist.com/composition-of-wealth/
• (27) https://smartasset.com/mortgage/what-is-the-typical-down-payment-on-a-home-purchase
• (28) https://www.zillow.com/mortgage-learning/closing-costs/
• (29) https://www.zillow.com/sellers-guide/closing-costs-for-sellers/
• (30) https://wallethub.com/edu/states-with-the-highest-and-lowest-property-taxes/11585/
• (31) https://www.forbes.com/sites/juliadellitt/2018/06/20/why-you-need-to-adjust-your-monthly-budget-for-home-maintenance/#629567534a05
• (32) https://www.bankrate.com/insurance/homeowners-insurance/homeowners-insurance-cost/
• (33) https://taxfoundation.org/standard-deduction-itemized-deductions-current-law-2019/
• (34) https://www.amortization-calc.com/mortgage-calculato
• (35) https://www.rentcafe.com/blog/category/rental-market/apartment-rent-report/
• (36) https://www.calculator.net/rental-property-calculator.html
• (37) https://fundrise.com/education/blog-posts/the-limitations-of-internal-rate-of-return-irr-for-predicting-investment-su
• (38) https://www.cnbc.com/2018/03/12/how-many-americans-dont-have-access-to-a-401k.html
• (39) https://www.finrafoundation.org/sites/finrafoundation/files/A-Snapshot-of-Investor-Households-in-America_0_0_0.pdf
• (40) https://www.thebalance.com/state-income-tax-rates-3193320
• (41) https://www.corelogic.com/blog/2019/10/lower-priced-homes-had-the-highest-annual-appreciation-in-august-but-also-the-largest-slowdown-in-appreciation.aspx
• (42) https://www.zillow.com/research/2020-predictions-26100/
• (43) https://www.zillow.com/home-values/
• (44) https://www.washingtonpost.com/business/on-small-business/wealthy-mortgage-borrowers-face-cold-shoulder-from-lenders/2020/04/21/eb5a23bc-83e7-11ea-81a3-9690c9881111_story.html
• (45) https://www.oecd.org/economy/economic-outlook-weak-trade-and-investment-threaten-long-term-growth.htm
• (46) https://www.ft.com/content/3c5d0292-8c50-11e9-a1c1-51bf8f989972
• (47) https://dailyhive.com/vancouvemainland-china-real-estate-investment-forecast-2020
• (48) https://www.cbo.gov/publication/56335
• (49) http://www.snl.com/Cache/IRCache/cb52653b7-0b66-b946-8eed-1641a4c7cbd3.html
• (50) https://knowledge.wharton.upenn.edu/article/tax-changes-hurting-housing-market/

I'm 25 years old, I moved to London in March 2019 with 1k to my name, and so far have around 15k+ in savings. Investing and saving is pretty new to me and I never considered retiring early, but its dawning on me as I'm doing nothing with my money. I would appreciate what to do with my spare money rather than letting it rot in my bank account.
Of my 15k savings: I have 7.5k in the bank, 3k in wealthily S&S ISA (2019/2020 tax) and 4k on my Trading 212 ISA account (this tax year) it's in cash atm - I sold all early last month :( invested 3.5k made about £500, probably could've done more.... I also perhaps have about 1k in crypto but haven't checked in like a year (I invested around 4.5k during the bubble two years ago).
I work two jobs. My main full time job is 28k per year, take home pay is around 1.8k a month. It is an entry level position, so I imagine in a couple years time I could be on 32k at least. My freelance job is variable but I'm hoping I will get around £300-400 extra a month. This may mean working 7 days a week some months.
Currently (under normal circumstance without Covid-19) I pay a mates rates rent at £220 a month in London and travel costs are usually £100 a month. I live a frugal life. Since I moved to London in 2019, I've been a loner so don't socialize with others when I have spare time - partly a reason why I choose to work a second job actually. I probably spend £300 on food, entertainment and random crap. Probably less actually. I shop at Lidl, buy the cheapest pasta, sauces etc. Never go restaurants, only get the odd kebab here and there - and only if it's cheap! Only thing I treat myself to is videogames, and even then, I only buy when there's a good deal.
Changes in circumstance: DUE TO COVID-19 I will no longer be able to pay £220 a month, where I live as one of the people I lived with is an elderly person and does not want me in the household anymore. I've moved back up north and currently living rent-free but will be moving back down south once lockdown ends. I don't want to live in a shitehole neither do I want to live far away and commute 2 hours to work for cheap rent. So I assume after lockdown restrictions are over I will be paying around £800 per month rent.
SALARY MINUS EXPENSES (Conservative estimates)
Income (take home): £2000/month wage Expenses: £800 Rent (not yet but will be soon), £100 Travel and £300 Food/Entertainment etc. Total: £1200
Save approximately £800/month. Should save 9.6k a year, but I'm gonna be optimistic and say I should be able to get up to 10k a year actually - after all at the moment I'm saving 1.5k-2k a month until covid-19 lockdown ends (moved back uo north with parents remote working). Not to mention in a couple of years I should get a pay rise so it may jump to 15k a year.
PROJECTIONS (conservative again)
Based on current projections. If I save 10k a year for 3 years (30k). Assuming a pay rise and some passive-investing and I'm able to save around 17k per year after that over the next 12 years (204k) I should have in total 250k by the time I'm 40 years old. I come from an area where 3-bed houses are selling for 80k. Sure inflation will affect the prices, but they have risen only marginally over the last ten years.

Good Saturday morning to all of you here on stocks. I hope everyone on this sub made out pretty nicely in the market this past week, and is ready for the new trading week ahead.
Here is everything you need to know to get you ready for the trading week beginning August 26th, 2019.

Week ahead: Stocks could be rocky on trade, economy fears, as August breaks low volatility streak - (Source)

The final week of August — the bittersweet end of summer for many— could be highly volatile, as markets fret over the economy and the latest developments in trade wars.
President Donald Trump joins the G-7 leaders in France over the weekend, and markets will be watching to see if the meeting exposes new fault lines in the shaky relations among a once fairly congenial leadership group that fought the Great Recession together. Trump is expected to discuss the U.S. economy and highlight the U.S. pro-jobs, pro-growth agenda, under his leadership.
The U.S. trade war with China escalated sharply in the past week, with a new round of tariffs from China on U.S. goods announced Friday and new threats from Trump, who “ordered” American companies to find alternatives to China. That immediately triggered speculation that the trade war will be extended and more contentious, and the U.S. economy risks falling into recession.
After the close Friday, Trump retaliated against China’s tariffs by raising existing tariffs on $250 billion in Chinese goods to 30% from 25%, as of Oct. 1. In a tweet, he also said he was raising new tariffs on $300 billion in Chinese goods that have not yet gone into effect to 15% from 10%.
Friday’s trading was volatile, and stocks fell by about 2.5%, erasing what would have been a second positive week for the market. Treasury yields, which move opposite price, continued to go lower amid worries about the economy and fears the Fed will not act aggressively enough to head off a recession.
Stocks have been volatile, and the S&P 500 is down about 4.5% in the month of August.
Michael Arone, State Street Advisors chief investment strategist said the first seven months of the year were more certain for investors in terms of their expectations for Fed rate cuts and a possible trade deal. But the trade tensions have worsened, and the trade war could escalate even further.
Fed Chairman Jerome Powell spoke at Jackson Hole Friday morning, but while he left the door open for rate cuts, he did not explicitly promise rate cuts.
“The Fed has become a lot less certain. Until we get more clarity, you’re likely to see this volatility, and stocks will trade sideways,” Arone said. Even though corporate earnings weakened, “investors took a big leap of faith in the first seven months of the year, expecting both a trade deal and monetary policy easing.”
The escalation of the trade war makes a deal unlikely anytime soon. This, however, did drive market expectations for rate cuts higher Friday afternoon, and the market was expecting three more cuts this year.
Trump tied his feuds with China and the Fed together Friday, when he tweeted that the Fed is not helping with easier rate policy, along with a question about “who is the bigger enemy” — China President Xi Jinping or Fed Chairman Jerome Powell.
“I think the Fed is in uncharted territory, and I continue to have empathy for Chairman Powell. I think markets want faster and more aggressive policy. He’s dealing with challenges the Fed has never had,” said Arone.
”[Powell] is literally walking a tight rope. He has the president who is daily bashing him,” he said. “Bond markets are demanding a much greater number of rate cuts, and he’s got geopolitical challenges, whether it’s Brexit or trade. He’s also got dissension among Fed voting members. That’s a lot to balance.”
There is some important data in the coming week, including durable goods Monday and personal spending and consumption data Friday, which also includes the PCE deflator, the Fed’s preferred inflation indicator.
“The data will give us some indications on business spending. Durable goods has capital expenditure orders. It looks look consumer confidence will come out [Tuesday] as well,” Arone said. Business spending has been taking a hit from the trade wars, and economists are concerned it will continue to weaken, ultimately leading to weakness in the consumer economy.
The week ahead could see some swings ahead of the long Labor Day Holiday weekend. “Given high absentees and low volumes, my guess is it’s going to add to volatility,” said Arone.
Frank Cappelleri, Nomura executive director, said he also expects volatility, and the S&P could test the outer limits of its recent range.
Of the 17 trading days this month, nine of them saw absolute 1% moves in the S&P 500. The last time that occurred was in December, when there were 10 days with 1% moves, according to Cappelleri. The most in one month was February, 2018 when there were 12. Contrast that to the entire year of 2017, when there were just eight.
Friday’s action was volatile, and the S&P 500 was down as much as 3%.
“This is the third-biggest decline we’ve had this month. Each of them started within 10 points of each other, near the top of the range,” said Cappelleri. The top of the range is 2,943, its Aug. 13 high, and the bottom is 2,820, near the Aug. 5 low.
“We’re obviously still in a trading range that has been characterized by sharp moves and acute turns, so I think when we had that initial drop on Aug. 5, the question is where is it going to stop,” he said, adding traders are watching that Aug. 5 level to see if it will act as a floor.

This past week saw the following moves in the S&P:

(CLICK HERE FOR THE FULL S&P TREE MAP FOR THE PAST WEEK!)

Major Indices for this past week:

(CLICK HERE FOR THE MAJOR INDICES FOR THE PAST WEEK!)

Major Futures Markets as of Friday's close:

(CLICK HERE FOR THE MAJOR FUTURES INDICES AS OF FRIDAY!)

Economic Calendar for the Week Ahead:

(CLICK HERE FOR THE FULL ECONOMIC CALENDAR FOR THE WEEK AHEAD!)

Sector Performance WTD, MTD, YTD:

(CLICK HERE FOR FRIDAY'S PERFORMANCE!)

(CLICK HERE FOR THE WEEK-TO-DATE PERFORMANCE!)

(CLICK HERE FOR THE MONTH-TO-DATE PERFORMANCE!)

(CLICK HERE FOR THE 3-MONTH PERFORMANCE!)

(CLICK HERE FOR THE YEAR-TO-DATE PERFORMANCE!)

(CLICK HERE FOR THE 52-WEEK PERFORMANCE!)

Percentage Changes for the Major Indices, WTD, MTD, QTD, YTD as of Friday's close:

(CLICK HERE FOR THE CHART!)

S&P Sectors for the Past Week:

(CLICK HERE FOR THE CHART!)

Major Indices Pullback/Correction Levels as of Friday's close:

(CLICK HERE FOR THE CHART!

Major Indices Rally Levels as of Friday's close:

(CLICK HERE FOR THE CHART!)

Most Anticipated Earnings Releases for this week:

(CLICK HERE FOR THE CHART!)

Here are the upcoming IPO's for this week:

([CLICK HERE FOR THE CHART!]())

(NONE SCHEDULED FOR THIS WEEK.)

Friday's Stock Analyst Upgrades & Downgrades:

(CLICK HERE FOR THE CHART LINK #1!)

(CLICK HERE FOR THE CHART LINK #2!)

Second Half August Trading: Historically Weak Too

Following three straight days of gains, the market has recovered a sizable portion of its losses from earlier in the month. Losses earlier in the month and gains over the past three days (prior to today) have tracked August’s typical trading pattern for over the last 21-years quite closely. The magnitude of the moves this year has been larger than average, but the pattern has been tracked.
Due to the magnitude of this year’s moves, August’s performance over the past 21-years has been plotted on the left vertical axis in the chart above and 2019 is plotted on the right. From right around mid-month or now through the end of August, the historical trend has been weaker. DJIA, S&P 500, NASDAQ, Russell 1000 and 2000 have all averaged a loss in August from 1998 to 2018 and they are on track to repeat this year.

(CLICK HERE FOR THE CHART!)

Is a Small-Cap Labor Day Rally Coming Soon

In the below chart, forty years of daily data for the Russell 2000 index of smaller companies are divided by the Russell 1000 index of largest companies, and then compressed into a single year to show an idealized yearly pattern. When the graph is descending, large-cap companies are outperforming small-cap companies; when the graph is rising, smaller companies are moving up faster than their larger brethren. The most prominent period of outperformance generally begins in mid-December and lasts until late-February or early March with a surge in January. This period of outperformance by small-caps is known as the “January Effect” in the annual Stock Trader’s Almanac.

(CLICK HERE FOR THE CHART!)

In recent years, another sizable move is quite evident just before Labor Day. One possible explanation for this move is individual investors begin to return to work after summertime vacations and are searching for “bargain” stocks. In a typical year, small-caps would have been lagging and could represent an opportunity relative to other large-cap possibilities. As of Friday’s close (August 16, 2019), Russell 2000 is up 10.8% compared to the Russell 1000 being up 15.5% year-to-date. Lagging small-caps and resilient U.S. consumers could be the ideal setup for a repeat of this pattern this year. However, the small-cap advantage does historically wane around mid-September.

September Almanac: No Respite in Pre-Election Years

The start of business year, end of summer vacations, and back to school made September a leading barometer month in first 60 years of 20th century, now portfolio managers back after Labor Day tend to clean house Since 1950, September is the worst performing month of the year for DJIA, S&P 500, NASDAQ (since 1971) and Russell 1000 (since 1979). Sizable gains in September 2012, 2013 and 2017 have lifted Russell 2000 to second worst (since 1979). September was creamed four years straight from 1999-2002 after four solid years from 1995-1998 during the dot.com bubble madness. September gets no respite from positive pre-election year forces.

(CLICK HERE FOR THE CHART!)

Although the month used to open strong, S&P 500 has declined eight times in the last eleven years on the first trading day. As tans begin to fade and the new school year begins, fund managers tend to sell underperforming positions as the end of the third quarter approaches, causing some nasty selloffs near month-end over the years. Recent substantial declines occurred following the terrorist attacks in 2001 (DJIA: –11.1%), 2002 (DJIA –12.4%), the collapse of Lehman Brothers in 2008 (DJIA: –6.0%) and U.S. debt ceiling debacle in 2011 (DJIA –6.0%). However, September is improving with S&P 500 advancing in ten of the last 15 Septembers and DJIA climbing in nine.

Leading Indicators Signal Growth Ahead

U.S. leading indicators rebounded in July, a good sign for the durability of the expansion.
The Conference Board’s Leading Economic Index (LEI) rose 0.5% month over month, the biggest gain since September 2018, and above consensus expectations for a 0.3% increase. As shown in the LPL Chart of the Day, Leading Indicators Slowing But Growing, the LEI climbed 1.6% year over year.

(CLICK HERE FOR THE CHART!)

The LEI, which we include as one of the “Five Forecasters” of our Recession Watch Dashboard, has yet to turn negative this cycle. The index has fallen negative year over year before all nine recessions since 1955.
“Some investors have pointed out slowing LEI growth as a reason for caution,” said LPL Financial Chief Investment Strategist John Lynch. “However, the LEI is signaling moderate U.S. economic growth ahead, with no signs of an imminent recession.”
The LEI is calculated from 10 individual leading data sets, including weekly jobless claims, building permits, and stock prices. This year, the majority of LEI components have boosted month-over-month growth in the index, but more internationally exposed data sets have turned into net drags.
In July, 6 of 10 components rose month over month, but four components—average hours worked, manufacturers’ new orders, new orders for nondefense capital spending, and interest rate spreads—fell month over month. Historically, breadth in LEI components has deteriorated further before a recession began. In contrast, at the end of each of the past six economic cycles, more than half of the LEI components were in decline.
While evidence of slowing growth in leading indicators is disappointing, we are encouraged by what we see outside of manufacturing. Global manufacturing has been the sector hardest hit by prolonged trade tensions and weakened demand, and we don’t expect to see much improvement until a U.S.-China trade resolution is reached. Even then, a recovery in manufacturing may take some time.

Crude Oil's Descending Triangle

Earlier this week, crude oil was trading well over 2% higher than last Friday's close. Over the past few sessions, though, oil has given up all of those gains. The catalyst for today's declines are the Chinese retaliatory tariffs on US crude which are expected to dampen demand. This week's negative reversal comes as the commodity ran into multiple points of resistance. For starters, the rally began to stall out mid-week when it met the converging 200 and 50-day moving averages. This also coincided with a downtrend that traces itself all the way back to the highs from late last year. In fact, crude is down around 30% from these previous highs.
Overall, the technical picture for crude oil is not in a great place as the chart is forming a descending triangle pattern. Despite the big gains at the beginning of 2019, over the past few months, crude has been making consistent lower highs and lower lows. Given this most recent failure to retake the moving averages and break out of the downtrend, the next major support level to watch is around $50 which is a level that has held up at multiple times in the past few months. This support also draws back to late last year prior to the collapse in December.

(CLICK HERE FOR THE CHART!)

Yield Curves: Another Record Streak Bites the Dust

After the 3-month vs 10-year US Treasury yield curve first inverted earlier this year, the market has shifted its focus to the 2-year vs 10-year part of the curve which had yet to reach inverted levels. That was, until yesterday. While the 10s2s curve flirted with inverted territory for the last few days on an intraday basis, Thursday was the first time in more than a decade that the closing yield on the two-year US Treasury was above the yield on the 10-year. And with another closely watched part of the curve moving into inverted levels, recession fears increased.

(CLICK HERE FOR THE CHART!)

As the chart above illustrates, it has been a while since the 10s2s curve was inverted. In fact, the streak that just ended was the longest on record going back to 1977, and it wasn't even close. Going back to 1977, there have only been three prior streaks where the 10s2s curve was inverted for more than 1,000 days, and never before had the curve been positively sloped for more than 2,000 days. The current streak, though? 3,054 days. It was fun while it lasted!

(CLICK HERE FOR THE CHART!)

Adapt or Die

A common characteristic of most investors and traders is to always be on the lookout for patterns and connections between various asset classes. Whenever one correlated asset confirms the move in another it adds a layer of confidence to an investor's thesis. One long-held example is the Dow Transports as a leading or coincident indicator for the broader market. For decades now, many investors have followed the transports for confirmation of the broader market moves. If the transports — which move all of the physical goods in the economy — rally, it suggests that the broader market will be strong, while periods when the transports start to roll over are read as a signal that there's an underlying weakness in the economy.
As the US economy has become more service and digital-oriented in nature, there has been a valid argument made that the transports have lost some of their importance as an indicator of the broader economy. Along these lines, we have suggested that rather than transports, semiconductors may represent this century's 'transports' as they are a part of just about everything in this digital age. Whether you agree with this or not isn't important, but the important takeaway is that just because two asset classes have been highly correlated in the past doesn't mean that they will remain that way in the future. It's one thing to recognize a correlation between two asset classes, but it's much more important to understand why they are correlated and be on the lookout for factors that may change the status quo in the future.
One example of a radical change in a relationship between two asset classes is the interaction between the relative strength of growth and value stocks versus the slope of the yield curve. From 2002 through 2011, the two were closely correlated. As the curve flattened in the early part of this century, growth stocks underperformed value by a wide margin (falling blue line). Then in mid-2007, as the curve steepened and came out from inverted territory, growth stocks started to rip higher relative to value. Beginning in 2009, though, the curve stopped steepening and the relative strength of growth relative to value stalled out. The two series were so closely joined at the hip during this ten-year stretch that the correlation coefficient between the two was +0.82, which is indicative of two series moving in lockstep with each other.

(CLICK HERE FOR THE CHART!)

If the paths of the yield curve and the relative strength of growth versus value couldn't be separated from 2002 through 2011, the relationship soured in 2012 when the two came down with a case of the ten-year itch. At that point, they couldn't separate fast enough. The chart below shows the same two series from the start of 2012 through the present. Now, when one goes up the other goes down and vice versa, as the paths are nearly exact opposites. In fact, in the nearly eight years since 2012, the correlation between the two is -0.90.

(CLICK HERE FOR THE CHART!)

In the chart below we have shown the two series over the entire time period spanning 2002 through 2019. The non-shaded area represents the period covered in the first chart, while the shaded area covers the second period. Right around the time where the shaded period starts is when the positive correlation turned on a dime, and beginning in 2013 when the curve started to flatten, investors who were still hanging on to the idea that a flatter yield curve was a green light for value stocks, saw what turned out to be an extended period of misery relative to the performance of growth stocks. In the words of Intel Founder Andy Grove, "Adapt or Die."

(CLICK HERE FOR THE CHART!)

Nasdaq 100 to S&P 500 Ratio

Below is a chart of the Nasdaq 100 going back to 1990. While it took 15+ years for the index to make a new all-time closing high following its March 2000 peak, the index is currently 65% above those March 2000 highs.

(CLICK HERE FOR THE CHART!)

Below is a ratio chart of the Nasdaq 100's price versus the S&P 500's price since 1990. The ratio started well below 1 in early 1990 but quickly overtook the S&P in price by the mid-90s. As you can see, the ratio spiked dramatically above 3 during the peak of the Dot Com bubble in late 1999. The Nasdaq 100 then gave up much of that outperformance versus the S&P 500 over a 2-3 year period where the ratio got all the way back down to 1, but since then it has been steadily trending higher to its current level of 2.65. While it went through a bubble and a burst over a 5-year period, the Nasdaq has been outperforming the S&P 500 for a long time now.

(CLICK HERE FOR THE CHART!)

STOCK MARKET VIDEO: Stock Market Analysis Video for Week Ending August 23rd, 2019

([CLICK HERE FOR THE YOUTUBE VIDEO!]())

(VIDEO NOT YET POSTED)

STOCK MARKET VIDEO: ShadowTrader Video Weekly 08.25.19

([CLICK HERE FOR THE YOUTUBE VIDEO!]())

(VIDEO NOT YET POSTED)
Here are the most notable companies (tickers) reporting earnings in this upcoming trading week ahead-

• $BBY
• $MOMO
• $OKTA
• $DG
• $VEEV
• $ULTA
• $OSIS
• $BILI
• $DLTR
• $TIF
• $NTNX
• $ICLK
• $ADSK
• $SJM
• $PLAN
• $WDAY
• $ANF
• $DELL
• $BURL
• $FIVE
• $BWAY
• $JT
• $MRVL
• $BNS
• $BMO
• $HPE
• $COTY
• $TD
• $ITRN
• $HEI
• $EXPR
• $JILL
• $WMWD
• $MOGU
• $CAL
• $GES
• $CPB
• $BOX
• $PVH
• $BIG
• $CHS

(CLICK HERE FOR NEXT WEEK'S MOST NOTABLE EARNINGS RELEASES!)

(CLICK HERE FOR NEXT WEEK'S HIGHEST VOLATILITY EARNINGS RELEASES!)

(CLICK HERE FOR MOST ANTICIPATED EARNINGS RELEASES FOR THE NEXT 5 WEEKS!)

Below are some of the notable companies coming out with earnings releases this upcoming trading week ahead which includes the date/time of release & consensus estimates courtesy of Earnings Whispers:

Monday 8.26.19 Before Market Open:

(CLICK HERE FOR MONDAY'S PRE-MARKET EARNINGS TIME & ESTIMATES!)

Monday 8.26.19 After Market Close:

(CLICK HERE FOR MONDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!)

Tuesday 8.27.19 Before Market Open:

(CLICK HERE FOR TUESDAY'S PRE-MARKET EARNINGS TIME & ESTIMATES!)

Tuesday 8.27.19 After Market Close:

(CLICK HERE FOR TUESDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!)

Wednesday 8.28.19 Before Market Open:

(CLICK HERE FOR WEDNESDAY'S PRE-MARKET EARNINGS TIME & ESTIMATES!)

Wednesday 8.28.19 After Market Close:

(CLICK HERE FOR WEDNESDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!)

Thursday 8.29.19 Before Market Open:

(CLICK HERE FOR THURSDAY'S PRE-MARKET EARNINGS TIME & ESTIMATES!)

Thursday 8.29.19 After Market Close:

(CLICK HERE FOR THURSDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!)

Friday 8.30.19 Before Market Open:

(CLICK HERE FOR FRIDAY'S PRE-MARKET EARNINGS TIME & ESTIMATES!)

Friday 8.30.19 After Market Close:

([CLICK HERE FOR FRIDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!]())

NONE.

Best Buy Co., Inc. $66.21

Best Buy Co., Inc. (BBY) is confirmed to report earnings at approximately 7:00 AM ET on Thursday, August 29, 2019. The consensus earnings estimate is $0.99 per share on revenue of $9.57 billion and the Earnings Whisper ® number is $1.06 per share. Investor sentiment going into the company's earnings release has 72% expecting an earnings beat The company's guidance was for earnings of $0.95 to $1.00 per share. Consensus estimates are for year-over-year earnings growth of 8.79% with revenue increasing by 2.04%. Short interest has decreased by 10.2% since the company's last earnings release while the stock has drifted lower by 4.1% from its open following the earnings release to be 0.6% above its 200 day moving average of $65.83. Overall earnings estimates have been revised higher since the company's last earnings release. On Tuesday, August 13, 2019 there was some notable buying of 2,003 contracts of the $65.00 put expiring on Friday, December 20, 2019. Option traders are pricing in a 9.6% move on earnings and the stock has averaged a 6.1% move in recent quarters.

(CLICK HERE FOR THE CHART!)

Momo Inc. $31.83

Momo Inc. (MOMO) is confirmed to report earnings at approximately 4:10 AM ET on Tuesday, August 27, 2019. The consensus earnings estimate is $0.72 per share on revenue of $581.18 million and the Earnings Whisper ® number is $0.76 per share. Investor sentiment going into the company's earnings release has 73% expecting an earnings beat The company's guidance was for revenue of $579.00 million to $593.00 million. Consensus estimates are for year-over-year earnings growth of 22.03% with revenue increasing by 17.58%. Short interest has increased by 2.4% since the company's last earnings release while the stock has drifted higher by 13.4% from its open following the earnings release to be 2.2% below its 200 day moving average of $32.55. Overall earnings estimates have been revised lower since the company's last earnings release. On Thursday, August 8, 2019 there was some notable buying of 5,000 contracts of the $24.40 put expiring on Friday, October 18, 2019. Option traders are pricing in a 13.7% move on earnings and the stock has averaged a 10.7% move in recent quarters.

(CLICK HERE FOR THE CHART!)

Okta, Inc. $132.46

Okta, Inc. (OKTA) is confirmed to report earnings at approximately 4:05 PM ET on Wednesday, August 28, 2019. The consensus estimate is for a loss of $0.10 per share on revenue of $131.09 million and the Earnings Whisper ® number is ($0.07) per share. Investor sentiment going into the company's earnings release has 84% expecting an earnings beat The company's guidance was for a loss of $0.11 to $0.10 per share on revenue of $130.00 million to $131.00 million. Consensus estimates are for year-over-year earnings growth of 33.33% with revenue increasing by 38.59%. Short interest has increased by 13.6% since the company's last earnings release while the stock has drifted higher by 15.7% from its open following the earnings release to be 39.4% above its 200 day moving average of $95.03. Overall earnings estimates have been revised lower since the company's last earnings release. On Monday, August 12, 2019 there was some notable buying of 1,949 contracts of the $135.00 call expiring on Friday, August 30, 2019. Option traders are pricing in a 10.4% move on earnings and the stock has averaged a 9.1% move in recent quarters.

(CLICK HERE FOR THE CHART!)

Dollar General Corporation $136.99

Dollar General Corporation (DG) is confirmed to report earnings at approximately 6:55 AM ET on Thursday, August 29, 2019. The consensus earnings estimate is $1.58 per share on revenue of $6.89 billion and the Earnings Whisper ® number is $1.61 per share. Investor sentiment going into the company's earnings release has 76% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 3.95% with revenue increasing by 6.93%. Short interest has decreased by 28.9% since the company's last earnings release while the stock has drifted higher by 9.8% from its open following the earnings release to be 12.4% above its 200 day moving average of $121.87. Overall earnings estimates have been revised higher since the company's last earnings release. On Tuesday, August 20, 2019 there was some notable buying of 757 contracts of the $149.00 call expiring on Friday, September 6, 2019. Option traders are pricing in a 6.7% move on earnings and the stock has averaged a 6.1% move in recent quarters.

(CLICK HERE FOR THE CHART!)

Veeva Systems Inc. $158.13

Veeva Systems Inc. (VEEV) is confirmed to report earnings at approximately 4:05 PM ET on Tuesday, August 27, 2019. The consensus earnings estimate is $0.49 per share on revenue of $259.26 million and the Earnings Whisper ® number is $0.51 per share. Investor sentiment going into the company's earnings release has 83% expecting an earnings beat The company's guidance was for earnings of $0.48 to $0.49 per share on revenue of $259.00 million to $260.00 million. Consensus estimates are for year-over-year earnings growth of 40.00% with revenue increasing by 23.69%. Short interest has decreased by 34.5% since the company's last earnings release while the stock has drifted higher by 7.1% from its open following the earnings release to be 22.9% above its 200 day moving average of $128.66. Overall earnings estimates have been revised higher since the company's last earnings release. On Friday, August 9, 2019 there was some notable buying of 1,273 contracts of the $155.00 put expiring on Friday, September 20, 2019. Option traders are pricing in a 7.3% move on earnings and the stock has averaged a 7.2% move in recent quarters.

(CLICK HERE FOR THE CHART!)

ULTA Beauty $322.10

ULTA Beauty (ULTA) is confirmed to report earnings at approximately 4:00 PM ET on Thursday, August 29, 2019. The consensus earnings estimate is $2.79 per share on revenue of $1.68 billion and the Earnings Whisper ® number is $2.80 per share. Investor sentiment going into the company's earnings release has 83% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 13.41% with revenue increasing by 12.89%. Short interest has increased by 28.5% since the company's last earnings release while the stock has drifted higher by 2.1% from its open following the earnings release to be 1.3% above its 200 day moving average of $318.11. Overall earnings estimates have been revised higher since the company's last earnings release. On Thursday, August 15, 2019 there was some notable buying of 1,211 contracts of the $330.00 put expiring on Friday, September 20, 2019. Option traders are pricing in a 8.2% move on earnings and the stock has averaged a 6.3% move in recent quarters.

(CLICK HERE FOR THE CHART!)

OSI Systems Inc. $100.83

OSI Systems Inc. (OSIS) is confirmed to report earnings at approximately 9:00 AM ET on Monday, August 26, 2019. The consensus earnings estimate is $1.05 per share on revenue of $303.70 million and the Earnings Whisper ® number is $1.11 per share. Investor sentiment going into the company's earnings release has 62% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 2.94% with revenue increasing by 5.70%. Short interest has increased by 13.3% since the company's last earnings release while the stock has drifted higher by 6.1% from its open following the earnings release to be 9.9% above its 200 day moving average of $91.73. Overall earnings estimates have been revised higher since the company's last earnings release. Option traders are pricing in a 6.6% move on earnings and the stock has averaged a 9.2% move in recent quarters.

(CLICK HERE FOR THE CHART!)

Bilibili Inc. $14.70

Bilibili Inc. (BILI) is confirmed to report earnings at approximately 7:00 PM ET on Monday, August 26, 2019. The consensus estimate is for a loss of $0.12 per share on revenue of $212.73 million and the Earnings Whisper ® number is ($0.14) per share. Investor sentiment going into the company's earnings release has 65% expecting an earnings beat The company's guidance was for revenue of $211.00 million to $217.00 million. Consensus estimates are for earnings to decline year-over-year by 200.00% with revenue increasing by 37.16%. The stock has drifted lower by 11.9% from its open following the earnings release to be 10.7% below its 200 day moving average of $16.47. Overall earnings estimates have been revised lower since the company's last earnings release. On Tuesday, July 23, 2019 there was some notable buying of 6,011 contracts of the $12.50 put expiring on Friday, October 18, 2019. Option traders are pricing in a 20.4% move on earnings and the stock has averaged a 9.1% move in recent quarters.

(CLICK HERE FOR THE CHART!)

Dollar Tree Stores, Inc. $95.16

Dollar Tree Stores, Inc. (DLTR) is confirmed to report earnings at approximately 7:30 AM ET on Thursday, August 29, 2019. The consensus earnings estimate is $0.96 per share on revenue of $5.72 billion. Investor sentiment going into the company's earnings release has 69% expecting an earnings beat The company's guidance was for earnings of $0.64 to $0.73 per share. Consensus estimates are for earnings to decline year-over-year by 16.52% with revenue increasing by 3.52%. Short interest has decreased by 16.6% since the company's last earnings release while the stock has drifted lower by 1.1% from its open following the earnings release to be 3.3% below its 200 day moving average of $98.41. Overall earnings estimates have been revised lower since the company's last earnings release. On Wednesday, August 7, 2019 there was some notable buying of 3,596 contracts of the $80.00 put expiring on Friday, September 20, 2019. Option traders are pricing in a 7.9% move on earnings and the stock has averaged a 9.8% move in recent quarters.

(CLICK HERE FOR THE CHART!)

Tiffany & Co. $81.32

Tiffany & Co. (TIF) is confirmed to report earnings at approximately 6:40 AM ET on Wednesday, August 28, 2019. The consensus earnings estimate is $1.05 per share on revenue of $1.07 billion and the Earnings Whisper ® number is $1.06 per share. Investor sentiment going into the company's earnings release has 49% expecting an earnings beat The company's guidance was for earnings of up to $1.16 per share. Consensus estimates are for earnings to decline year-over-year by 10.26% with revenue decreasing by 0.55%. Short interest has increased by 28.9% since the company's last earnings release while the stock has drifted lower by 13.6% from its open following the earnings release to be 13.3% below its 200 day moving average of $93.75. Overall earnings estimates have been revised lower since the company's last earnings release. On Wednesday, August 14, 2019 there was some notable buying of 3,129 contracts of the $80.00 put expiring on Friday, September 20, 2019. Option traders are pricing in a 7.9% move on earnings and the stock has averaged a 7.8% move in recent quarters.

(CLICK HERE FOR THE CHART!)

DISCUSS!

What are you all watching for in this upcoming trading week?
I hope you all have a wonderful weekend and a great trading week ahead stocks.

Good Saturday morning to all of you here on wallstreetbets. I hope everyone on this sub made out pretty nicely in the market this past week, and is ready for the new trading week ahead.
Here is everything you need to know to get you ready for the trading week beginning August 26th, 2019.

Week ahead: Stocks could be rocky on trade, economy fears, as August breaks low volatility streak - (Source)

The final week of August — the bittersweet end of summer for many— could be highly volatile, as markets fret over the economy and the latest developments in trade wars.
President Donald Trump joins the G-7 leaders in France over the weekend, and markets will be watching to see if the meeting exposes new fault lines in the shaky relations among a once fairly congenial leadership group that fought the Great Recession together. Trump is expected to discuss the U.S. economy and highlight the U.S. pro-jobs, pro-growth agenda, under his leadership.
The U.S. trade war with China escalated sharply in the past week, with a new round of tariffs from China on U.S. goods announced Friday and new threats from Trump, who “ordered” American companies to find alternatives to China. That immediately triggered speculation that the trade war will be extended and more contentious, and the U.S. economy risks falling into recession.
After the close Friday, Trump retaliated against China’s tariffs by raising existing tariffs on $250 billion in Chinese goods to 30% from 25%, as of Oct. 1. In a tweet, he also said he was raising new tariffs on $300 billion in Chinese goods that have not yet gone into effect to 15% from 10%.
Friday’s trading was volatile, and stocks fell by about 2.5%, erasing what would have been a second positive week for the market. Treasury yields, which move opposite price, continued to go lower amid worries about the economy and fears the Fed will not act aggressively enough to head off a recession.
Stocks have been volatile, and the S&P 500 is down about 4.5% in the month of August.
Michael Arone, State Street Advisors chief investment strategist said the first seven months of the year were more certain for investors in terms of their expectations for Fed rate cuts and a possible trade deal. But the trade tensions have worsened, and the trade war could escalate even further.
Fed Chairman Jerome Powell spoke at Jackson Hole Friday morning, but while he left the door open for rate cuts, he did not explicitly promise rate cuts.
“The Fed has become a lot less certain. Until we get more clarity, you’re likely to see this volatility, and stocks will trade sideways,” Arone said. Even though corporate earnings weakened, “investors took a big leap of faith in the first seven months of the year, expecting both a trade deal and monetary policy easing.”
The escalation of the trade war makes a deal unlikely anytime soon. This, however, did drive market expectations for rate cuts higher Friday afternoon, and the market was expecting three more cuts this year.
Trump tied his feuds with China and the Fed together Friday, when he tweeted that the Fed is not helping with easier rate policy, along with a question about “who is the bigger enemy” — China President Xi Jinping or Fed Chairman Jerome Powell.
“I think the Fed is in uncharted territory, and I continue to have empathy for Chairman Powell. I think markets want faster and more aggressive policy. He’s dealing with challenges the Fed has never had,” said Arone.
”[Powell] is literally walking a tight rope. He has the president who is daily bashing him,” he said. “Bond markets are demanding a much greater number of rate cuts, and he’s got geopolitical challenges, whether it’s Brexit or trade. He’s also got dissension among Fed voting members. That’s a lot to balance.”
There is some important data in the coming week, including durable goods Monday and personal spending and consumption data Friday, which also includes the PCE deflator, the Fed’s preferred inflation indicator.
“The data will give us some indications on business spending. Durable goods has capital expenditure orders. It looks look consumer confidence will come out [Tuesday] as well,” Arone said. Business spending has been taking a hit from the trade wars, and economists are concerned it will continue to weaken, ultimately leading to weakness in the consumer economy.
The week ahead could see some swings ahead of the long Labor Day Holiday weekend. “Given high absentees and low volumes, my guess is it’s going to add to volatility,” said Arone.
Frank Cappelleri, Nomura executive director, said he also expects volatility, and the S&P could test the outer limits of its recent range.
Of the 17 trading days this month, nine of them saw absolute 1% moves in the S&P 500. The last time that occurred was in December, when there were 10 days with 1% moves, according to Cappelleri. The most in one month was February, 2018 when there were 12. Contrast that to the entire year of 2017, when there were just eight.
Friday’s action was volatile, and the S&P 500 was down as much as 3%.
“This is the third-biggest decline we’ve had this month. Each of them started within 10 points of each other, near the top of the range,” said Cappelleri. The top of the range is 2,943, its Aug. 13 high, and the bottom is 2,820, near the Aug. 5 low.
“We’re obviously still in a trading range that has been characterized by sharp moves and acute turns, so I think when we had that initial drop on Aug. 5, the question is where is it going to stop,” he said, adding traders are watching that Aug. 5 level to see if it will act as a floor.

This past week saw the following moves in the S&P:

(CLICK HERE FOR THE FULL S&P TREE MAP FOR THE PAST WEEK!)

Major Indices for this past week:

(CLICK HERE FOR THE MAJOR INDICES FOR THE PAST WEEK!)

Major Futures Markets as of Friday's close:

(CLICK HERE FOR THE MAJOR FUTURES INDICES AS OF FRIDAY!)

Economic Calendar for the Week Ahead:

(CLICK HERE FOR THE FULL ECONOMIC CALENDAR FOR THE WEEK AHEAD!)

Sector Performance WTD, MTD, YTD:

(CLICK HERE FOR FRIDAY'S PERFORMANCE!)

(CLICK HERE FOR THE WEEK-TO-DATE PERFORMANCE!)

(CLICK HERE FOR THE MONTH-TO-DATE PERFORMANCE!)

(CLICK HERE FOR THE 3-MONTH PERFORMANCE!)

(CLICK HERE FOR THE YEAR-TO-DATE PERFORMANCE!)

(CLICK HERE FOR THE 52-WEEK PERFORMANCE!)

Percentage Changes for the Major Indices, WTD, MTD, QTD, YTD as of Friday's close:

(CLICK HERE FOR THE CHART!)

S&P Sectors for the Past Week:

(CLICK HERE FOR THE CHART!)

Major Indices Pullback/Correction Levels as of Friday's close:

(CLICK HERE FOR THE CHART!

Major Indices Rally Levels as of Friday's close:

(CLICK HERE FOR THE CHART!)

Most Anticipated Earnings Releases for this week:

(CLICK HERE FOR THE CHART!)

Here are the upcoming IPO's for this week:

([CLICK HERE FOR THE CHART!]())

(NONE SCHEDULED FOR THIS WEEK.)

Friday's Stock Analyst Upgrades & Downgrades:

(CLICK HERE FOR THE CHART LINK #1!)

(CLICK HERE FOR THE CHART LINK #2!)

Second Half August Trading: Historically Weak Too

Following three straight days of gains, the market has recovered a sizable portion of its losses from earlier in the month. Losses earlier in the month and gains over the past three days (prior to today) have tracked August’s typical trading pattern for over the last 21-years quite closely. The magnitude of the moves this year has been larger than average, but the pattern has been tracked.
Due to the magnitude of this year’s moves, August’s performance over the past 21-years has been plotted on the left vertical axis in the chart above and 2019 is plotted on the right. From right around mid-month or now through the end of August, the historical trend has been weaker. DJIA, S&P 500, NASDAQ, Russell 1000 and 2000 have all averaged a loss in August from 1998 to 2018 and they are on track to repeat this year.

(CLICK HERE FOR THE CHART!)

Is a Small-Cap Labor Day Rally Coming Soon

In the below chart, forty years of daily data for the Russell 2000 index of smaller companies are divided by the Russell 1000 index of largest companies, and then compressed into a single year to show an idealized yearly pattern. When the graph is descending, large-cap companies are outperforming small-cap companies; when the graph is rising, smaller companies are moving up faster than their larger brethren. The most prominent period of outperformance generally begins in mid-December and lasts until late-February or early March with a surge in January. This period of outperformance by small-caps is known as the “January Effect” in the annual Stock Trader’s Almanac.

(CLICK HERE FOR THE CHART!)

In recent years, another sizable move is quite evident just before Labor Day. One possible explanation for this move is individual investors begin to return to work after summertime vacations and are searching for “bargain” stocks. In a typical year, small-caps would have been lagging and could represent an opportunity relative to other large-cap possibilities. As of Friday’s close (August 16, 2019), Russell 2000 is up 10.8% compared to the Russell 1000 being up 15.5% year-to-date. Lagging small-caps and resilient U.S. consumers could be the ideal setup for a repeat of this pattern this year. However, the small-cap advantage does historically wane around mid-September.

September Almanac: No Respite in Pre-Election Years

The start of business year, end of summer vacations, and back to school made September a leading barometer month in first 60 years of 20th century, now portfolio managers back after Labor Day tend to clean house Since 1950, September is the worst performing month of the year for DJIA, S&P 500, NASDAQ (since 1971) and Russell 1000 (since 1979). Sizable gains in September 2012, 2013 and 2017 have lifted Russell 2000 to second worst (since 1979). September was creamed four years straight from 1999-2002 after four solid years from 1995-1998 during the dot.com bubble madness. September gets no respite from positive pre-election year forces.

(CLICK HERE FOR THE CHART!)

Although the month used to open strong, S&P 500 has declined eight times in the last eleven years on the first trading day. As tans begin to fade and the new school year begins, fund managers tend to sell underperforming positions as the end of the third quarter approaches, causing some nasty selloffs near month-end over the years. Recent substantial declines occurred following the terrorist attacks in 2001 (DJIA: –11.1%), 2002 (DJIA –12.4%), the collapse of Lehman Brothers in 2008 (DJIA: –6.0%) and U.S. debt ceiling debacle in 2011 (DJIA –6.0%). However, September is improving with S&P 500 advancing in ten of the last 15 Septembers and DJIA climbing in nine.

Leading Indicators Signal Growth Ahead

U.S. leading indicators rebounded in July, a good sign for the durability of the expansion.
The Conference Board’s Leading Economic Index (LEI) rose 0.5% month over month, the biggest gain since September 2018, and above consensus expectations for a 0.3% increase. As shown in the LPL Chart of the Day, Leading Indicators Slowing But Growing, the LEI climbed 1.6% year over year.

(CLICK HERE FOR THE CHART!)

The LEI, which we include as one of the “Five Forecasters” of our Recession Watch Dashboard, has yet to turn negative this cycle. The index has fallen negative year over year before all nine recessions since 1955.
“Some investors have pointed out slowing LEI growth as a reason for caution,” said LPL Financial Chief Investment Strategist John Lynch. “However, the LEI is signaling moderate U.S. economic growth ahead, with no signs of an imminent recession.”
The LEI is calculated from 10 individual leading data sets, including weekly jobless claims, building permits, and stock prices. This year, the majority of LEI components have boosted month-over-month growth in the index, but more internationally exposed data sets have turned into net drags.
In July, 6 of 10 components rose month over month, but four components—average hours worked, manufacturers’ new orders, new orders for nondefense capital spending, and interest rate spreads—fell month over month. Historically, breadth in LEI components has deteriorated further before a recession began. In contrast, at the end of each of the past six economic cycles, more than half of the LEI components were in decline.
While evidence of slowing growth in leading indicators is disappointing, we are encouraged by what we see outside of manufacturing. Global manufacturing has been the sector hardest hit by prolonged trade tensions and weakened demand, and we don’t expect to see much improvement until a U.S.-China trade resolution is reached. Even then, a recovery in manufacturing may take some time.

Crude Oil's Descending Triangle

Earlier this week, crude oil was trading well over 2% higher than last Friday's close. Over the past few sessions, though, oil has given up all of those gains. The catalyst for today's declines are the Chinese retaliatory tariffs on US crude which are expected to dampen demand. This week's negative reversal comes as the commodity ran into multiple points of resistance. For starters, the rally began to stall out mid-week when it met the converging 200 and 50-day moving averages. This also coincided with a downtrend that traces itself all the way back to the highs from late last year. In fact, crude is down around 30% from these previous highs.
Overall, the technical picture for crude oil is not in a great place as the chart is forming a descending triangle pattern. Despite the big gains at the beginning of 2019, over the past few months, crude has been making consistent lower highs and lower lows. Given this most recent failure to retake the moving averages and break out of the downtrend, the next major support level to watch is around $50 which is a level that has held up at multiple times in the past few months. This support also draws back to late last year prior to the collapse in December.

(CLICK HERE FOR THE CHART!)

Yield Curves: Another Record Streak Bites the Dust

After the 3-month vs 10-year US Treasury yield curve first inverted earlier this year, the market has shifted its focus to the 2-year vs 10-year part of the curve which had yet to reach inverted levels. That was, until yesterday. While the 10s2s curve flirted with inverted territory for the last few days on an intraday basis, Thursday was the first time in more than a decade that the closing yield on the two-year US Treasury was above the yield on the 10-year. And with another closely watched part of the curve moving into inverted levels, recession fears increased.

(CLICK HERE FOR THE CHART!)

As the chart above illustrates, it has been a while since the 10s2s curve was inverted. In fact, the streak that just ended was the longest on record going back to 1977, and it wasn't even close. Going back to 1977, there have only been three prior streaks where the 10s2s curve was inverted for more than 1,000 days, and never before had the curve been positively sloped for more than 2,000 days. The current streak, though? 3,054 days. It was fun while it lasted!

(CLICK HERE FOR THE CHART!)

Adapt or Die

A common characteristic of most investors and traders is to always be on the lookout for patterns and connections between various asset classes. Whenever one correlated asset confirms the move in another it adds a layer of confidence to an investor's thesis. One long-held example is the Dow Transports as a leading or coincident indicator for the broader market. For decades now, many investors have followed the transports for confirmation of the broader market moves. If the transports — which move all of the physical goods in the economy — rally, it suggests that the broader market will be strong, while periods when the transports start to roll over are read as a signal that there's an underlying weakness in the economy.
As the US economy has become more service and digital-oriented in nature, there has been a valid argument made that the transports have lost some of their importance as an indicator of the broader economy. Along these lines, we have suggested that rather than transports, semiconductors may represent this century's 'transports' as they are a part of just about everything in this digital age. Whether you agree with this or not isn't important, but the important takeaway is that just because two asset classes have been highly correlated in the past doesn't mean that they will remain that way in the future. It's one thing to recognize a correlation between two asset classes, but it's much more important to understand why they are correlated and be on the lookout for factors that may change the status quo in the future.
One example of a radical change in a relationship between two asset classes is the interaction between the relative strength of growth and value stocks versus the slope of the yield curve. From 2002 through 2011, the two were closely correlated. As the curve flattened in the early part of this century, growth stocks underperformed value by a wide margin (falling blue line). Then in mid-2007, as the curve steepened and came out from inverted territory, growth stocks started to rip higher relative to value. Beginning in 2009, though, the curve stopped steepening and the relative strength of growth relative to value stalled out. The two series were so closely joined at the hip during this ten-year stretch that the correlation coefficient between the two was +0.82, which is indicative of two series moving in lockstep with each other.

(CLICK HERE FOR THE CHART!)

If the paths of the yield curve and the relative strength of growth versus value couldn't be separated from 2002 through 2011, the relationship soured in 2012 when the two came down with a case of the ten-year itch. At that point, they couldn't separate fast enough. The chart below shows the same two series from the start of 2012 through the present. Now, when one goes up the other goes down and vice versa, as the paths are nearly exact opposites. In fact, in the nearly eight years since 2012, the correlation between the two is -0.90.

(CLICK HERE FOR THE CHART!)

In the chart below we have shown the two series over the entire time period spanning 2002 through 2019. The non-shaded area represents the period covered in the first chart, while the shaded area covers the second period. Right around the time where the shaded period starts is when the positive correlation turned on a dime, and beginning in 2013 when the curve started to flatten, investors who were still hanging on to the idea that a flatter yield curve was a green light for value stocks, saw what turned out to be an extended period of misery relative to the performance of growth stocks. In the words of Intel Founder Andy Grove, "Adapt or Die."

(CLICK HERE FOR THE CHART!)

Nasdaq 100 to S&P 500 Ratio

Below is a chart of the Nasdaq 100 going back to 1990. While it took 15+ years for the index to make a new all-time closing high following its March 2000 peak, the index is currently 65% above those March 2000 highs.

(CLICK HERE FOR THE CHART!)

Below is a ratio chart of the Nasdaq 100's price versus the S&P 500's price since 1990. The ratio started well below 1 in early 1990 but quickly overtook the S&P in price by the mid-90s. As you can see, the ratio spiked dramatically above 3 during the peak of the Dot Com bubble in late 1999. The Nasdaq 100 then gave up much of that outperformance versus the S&P 500 over a 2-3 year period where the ratio got all the way back down to 1, but since then it has been steadily trending higher to its current level of 2.65. While it went through a bubble and a burst over a 5-year period, the Nasdaq has been outperforming the S&P 500 for a long time now.

(CLICK HERE FOR THE CHART!)

STOCK MARKET VIDEO: Stock Market Analysis Video for Week Ending August 23rd, 2019

(CLICK HERE FOR THE YOUTUBE VIDEO!)

STOCK MARKET VIDEO: ShadowTrader Video Weekly 08.25.19

(CLICK HERE FOR THE YOUTUBE VIDEO!)

Here are the most notable companies (tickers) reporting earnings in this upcoming trading week ahead-

• $BBY
• $MOMO
• $OKTA
• $DG
• $VEEV
• $ULTA
• $OSIS
• $BILI
• $DLTR
• $TIF
• $NTNX
• $ICLK
• $ADSK
• $SJM
• $PLAN
• $WDAY
• $ANF
• $DELL
• $BURL
• $FIVE
• $BWAY
• $JT
• $MRVL
• $BNS
• $BMO
• $HPE
• $COTY
• $TD
• $ITRN
• $HEI
• $EXPR
• $JILL
• $WMWD
• $MOGU
• $CAL
• $GES
• $CPB
• $BOX
• $PVH
• $BIG
• $CHS

(CLICK HERE FOR NEXT WEEK'S MOST NOTABLE EARNINGS RELEASES!)

(CLICK HERE FOR NEXT WEEK'S HIGHEST VOLATILITY EARNINGS RELEASES!)

(CLICK HERE FOR MOST ANTICIPATED EARNINGS RELEASES FOR THE NEXT 5 WEEKS!)

Below are some of the notable companies coming out with earnings releases this upcoming trading week ahead which includes the date/time of release & consensus estimates courtesy of Earnings Whispers:

Monday 8.26.19 Before Market Open:

(CLICK HERE FOR MONDAY'S PRE-MARKET EARNINGS TIME & ESTIMATES!)

Monday 8.26.19 After Market Close:

(CLICK HERE FOR MONDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!)

Tuesday 8.27.19 Before Market Open:

(CLICK HERE FOR TUESDAY'S PRE-MARKET EARNINGS TIME & ESTIMATES!)

Tuesday 8.27.19 After Market Close:

(CLICK HERE FOR TUESDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!)

Wednesday 8.28.19 Before Market Open:

(CLICK HERE FOR WEDNESDAY'S PRE-MARKET EARNINGS TIME & ESTIMATES!)

Wednesday 8.28.19 After Market Close:

(CLICK HERE FOR WEDNESDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!)

Thursday 8.29.19 Before Market Open:

(CLICK HERE FOR THURSDAY'S PRE-MARKET EARNINGS TIME & ESTIMATES!)

Thursday 8.29.19 After Market Close:

(CLICK HERE FOR THURSDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!)

Friday 8.30.19 Before Market Open:

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Best Buy Co., Inc. $66.21

Best Buy Co., Inc. (BBY) is confirmed to report earnings at approximately 7:00 AM ET on Thursday, August 29, 2019. The consensus earnings estimate is $0.99 per share on revenue of $9.57 billion and the Earnings Whisper ® number is $1.06 per share. Investor sentiment going into the company's earnings release has 72% expecting an earnings beat The company's guidance was for earnings of $0.95 to $1.00 per share. Consensus estimates are for year-over-year earnings growth of 8.79% with revenue increasing by 2.04%. Short interest has decreased by 10.2% since the company's last earnings release while the stock has drifted lower by 4.1% from its open following the earnings release to be 0.6% above its 200 day moving average of $65.83. Overall earnings estimates have been revised higher since the company's last earnings release. On Tuesday, August 13, 2019 there was some notable buying of 2,003 contracts of the $65.00 put expiring on Friday, December 20, 2019. Option traders are pricing in a 9.6% move on earnings and the stock has averaged a 6.1% move in recent quarters.

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Momo Inc. $31.83

Momo Inc. (MOMO) is confirmed to report earnings at approximately 4:10 AM ET on Tuesday, August 27, 2019. The consensus earnings estimate is $0.72 per share on revenue of $581.18 million and the Earnings Whisper ® number is $0.76 per share. Investor sentiment going into the company's earnings release has 73% expecting an earnings beat The company's guidance was for revenue of $579.00 million to $593.00 million. Consensus estimates are for year-over-year earnings growth of 22.03% with revenue increasing by 17.58%. Short interest has increased by 2.4% since the company's last earnings release while the stock has drifted higher by 13.4% from its open following the earnings release to be 2.2% below its 200 day moving average of $32.55. Overall earnings estimates have been revised lower since the company's last earnings release. On Thursday, August 8, 2019 there was some notable buying of 5,000 contracts of the $24.40 put expiring on Friday, October 18, 2019. Option traders are pricing in a 13.7% move on earnings and the stock has averaged a 10.7% move in recent quarters.

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Okta, Inc. $132.46

Okta, Inc. (OKTA) is confirmed to report earnings at approximately 4:05 PM ET on Wednesday, August 28, 2019. The consensus estimate is for a loss of $0.10 per share on revenue of $131.09 million and the Earnings Whisper ® number is ($0.07) per share. Investor sentiment going into the company's earnings release has 84% expecting an earnings beat The company's guidance was for a loss of $0.11 to $0.10 per share on revenue of $130.00 million to $131.00 million. Consensus estimates are for year-over-year earnings growth of 33.33% with revenue increasing by 38.59%. Short interest has increased by 13.6% since the company's last earnings release while the stock has drifted higher by 15.7% from its open following the earnings release to be 39.4% above its 200 day moving average of $95.03. Overall earnings estimates have been revised lower since the company's last earnings release. On Monday, August 12, 2019 there was some notable buying of 1,949 contracts of the $135.00 call expiring on Friday, August 30, 2019. Option traders are pricing in a 10.4% move on earnings and the stock has averaged a 9.1% move in recent quarters.

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Dollar General Corporation $136.99

Dollar General Corporation (DG) is confirmed to report earnings at approximately 6:55 AM ET on Thursday, August 29, 2019. The consensus earnings estimate is $1.58 per share on revenue of $6.89 billion and the Earnings Whisper ® number is $1.61 per share. Investor sentiment going into the company's earnings release has 76% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 3.95% with revenue increasing by 6.93%. Short interest has decreased by 28.9% since the company's last earnings release while the stock has drifted higher by 9.8% from its open following the earnings release to be 12.4% above its 200 day moving average of $121.87. Overall earnings estimates have been revised higher since the company's last earnings release. On Tuesday, August 20, 2019 there was some notable buying of 757 contracts of the $149.00 call expiring on Friday, September 6, 2019. Option traders are pricing in a 6.7% move on earnings and the stock has averaged a 6.1% move in recent quarters.

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Veeva Systems Inc. $158.13

Veeva Systems Inc. (VEEV) is confirmed to report earnings at approximately 4:05 PM ET on Tuesday, August 27, 2019. The consensus earnings estimate is $0.49 per share on revenue of $259.26 million and the Earnings Whisper ® number is $0.51 per share. Investor sentiment going into the company's earnings release has 83% expecting an earnings beat The company's guidance was for earnings of $0.48 to $0.49 per share on revenue of $259.00 million to $260.00 million. Consensus estimates are for year-over-year earnings growth of 40.00% with revenue increasing by 23.69%. Short interest has decreased by 34.5% since the company's last earnings release while the stock has drifted higher by 7.1% from its open following the earnings release to be 22.9% above its 200 day moving average of $128.66. Overall earnings estimates have been revised higher since the company's last earnings release. On Friday, August 9, 2019 there was some notable buying of 1,273 contracts of the $155.00 put expiring on Friday, September 20, 2019. Option traders are pricing in a 7.3% move on earnings and the stock has averaged a 7.2% move in recent quarters.

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ULTA Beauty $322.10

ULTA Beauty (ULTA) is confirmed to report earnings at approximately 4:00 PM ET on Thursday, August 29, 2019. The consensus earnings estimate is $2.79 per share on revenue of $1.68 billion and the Earnings Whisper ® number is $2.80 per share. Investor sentiment going into the company's earnings release has 83% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 13.41% with revenue increasing by 12.89%. Short interest has increased by 28.5% since the company's last earnings release while the stock has drifted higher by 2.1% from its open following the earnings release to be 1.3% above its 200 day moving average of $318.11. Overall earnings estimates have been revised higher since the company's last earnings release. On Thursday, August 15, 2019 there was some notable buying of 1,211 contracts of the $330.00 put expiring on Friday, September 20, 2019. Option traders are pricing in a 8.2% move on earnings and the stock has averaged a 6.3% move in recent quarters.

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OSI Systems Inc. $100.83

OSI Systems Inc. (OSIS) is confirmed to report earnings at approximately 9:00 AM ET on Monday, August 26, 2019. The consensus earnings estimate is $1.05 per share on revenue of $303.70 million and the Earnings Whisper ® number is $1.11 per share. Investor sentiment going into the company's earnings release has 62% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 2.94% with revenue increasing by 5.70%. Short interest has increased by 13.3% since the company's last earnings release while the stock has drifted higher by 6.1% from its open following the earnings release to be 9.9% above its 200 day moving average of $91.73. Overall earnings estimates have been revised higher since the company's last earnings release. Option traders are pricing in a 6.6% move on earnings and the stock has averaged a 9.2% move in recent quarters.

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Bilibili Inc. $14.70

Bilibili Inc. (BILI) is confirmed to report earnings at approximately 7:00 PM ET on Monday, August 26, 2019. The consensus estimate is for a loss of $0.12 per share on revenue of $212.73 million and the Earnings Whisper ® number is ($0.14) per share. Investor sentiment going into the company's earnings release has 65% expecting an earnings beat The company's guidance was for revenue of $211.00 million to $217.00 million. Consensus estimates are for earnings to decline year-over-year by 200.00% with revenue increasing by 37.16%. The stock has drifted lower by 11.9% from its open following the earnings release to be 10.7% below its 200 day moving average of $16.47. Overall earnings estimates have been revised lower since the company's last earnings release. On Tuesday, July 23, 2019 there was some notable buying of 6,011 contracts of the $12.50 put expiring on Friday, October 18, 2019. Option traders are pricing in a 20.4% move on earnings and the stock has averaged a 9.1% move in recent quarters.

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Dollar Tree Stores, Inc. $95.16

Dollar Tree Stores, Inc. (DLTR) is confirmed to report earnings at approximately 7:30 AM ET on Thursday, August 29, 2019. The consensus earnings estimate is $0.96 per share on revenue of $5.72 billion. Investor sentiment going into the company's earnings release has 69% expecting an earnings beat The company's guidance was for earnings of $0.64 to $0.73 per share. Consensus estimates are for earnings to decline year-over-year by 16.52% with revenue increasing by 3.52%. Short interest has decreased by 16.6% since the company's last earnings release while the stock has drifted lower by 1.1% from its open following the earnings release to be 3.3% below its 200 day moving average of $98.41. Overall earnings estimates have been revised lower since the company's last earnings release. On Wednesday, August 7, 2019 there was some notable buying of 3,596 contracts of the $80.00 put expiring on Friday, September 20, 2019. Option traders are pricing in a 7.9% move on earnings and the stock has averaged a 9.8% move in recent quarters.

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Tiffany & Co. $81.32

Tiffany & Co. (TIF) is confirmed to report earnings at approximately 6:40 AM ET on Wednesday, August 28, 2019. The consensus earnings estimate is $1.05 per share on revenue of $1.07 billion and the Earnings Whisper ® number is $1.06 per share. Investor sentiment going into the company's earnings release has 49% expecting an earnings beat The company's guidance was for earnings of up to $1.16 per share. Consensus estimates are for earnings to decline year-over-year by 10.26% with revenue decreasing by 0.55%. Short interest has increased by 28.9% since the company's last earnings release while the stock has drifted lower by 13.6% from its open following the earnings release to be 13.3% below its 200 day moving average of $93.75. Overall earnings estimates have been revised lower since the company's last earnings release. On Wednesday, August 14, 2019 there was some notable buying of 3,129 contracts of the $80.00 put expiring on Friday, September 20, 2019. Option traders are pricing in a 7.9% move on earnings and the stock has averaged a 7.8% move in recent quarters.

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DISCUSS!

What are you all watching for in this upcoming trading week?
I hope you all have a wonderful weekend and a great trading week ahead wallstreetbets.

Hi, I just want to share some tips about trade in Anno 1800, some things I've discovered after some time playing the game and which I wish I knew when I started.
If you're like me you may have started the game questioning the trade system and trying to understand how it can be exploited to it's full potential, as you can otherwise mistake trade as functioning merely as a method of facilitating the sharing of resources between your own islands. Unfortunately the game makes this very difficult to understand as profits vary greatly between the sale of different resources and in most cases will generate a net loss, so ultimately you need to know which resources generate profits and to avoid selling goods which net you a loss. This is generally calculated by taking into account the cost per minute of maintaining a production line vs the value per tonne of a resource.
A general rule of thumb is to know that any requested resources from NPC's generate profits providing your production lines are running at full efficiency, and that the profit margins will increase as the value of the goods increase. I'll give you some examples;
At Tier 1
You can sell potatoes at the requested price for a net profit of $10 per tonne, this may not seem like much, however it is worth noting that selling work clothes at the basic price nets you a loss of $19 per tonne. Therefore if you're going to overproduce a product in the early game you're better off producing potatoes over work clothes.
At Tier 2
The profit margins increase greatly with soap netting you $87/t, so almost 9 times the profits vs potatoes, but more notably weapons which net you a massive $158.5/t profit but requires you to ships them to the new world for sale.
This trend continues through to Tier 3 where you want to be selling fur coats at the requested price, as well as the new world, until Tiers 4 & 5 where goods are no longer requested. There is however still the opportunity to make profits from non requested goods via passive trade from your harbours or via direct trade to npc's, however as I've said, you need to first calculate the profit margins on the goods before selling otherwise you risk losing money on the transaction. For example at Tier 3 (artisans) you can overproduce windows and set them to sell at your harbour, and npc's will pic them up at a tidy $129.5/t profit, however if you set canned food to passive sell you'll lose $212.5/t profit. It is maybe a bit annoying that you can't effectively exploit trade, at least not passive trade, unless you calculate the profit margins, which is quite a tedious process. It is however rewarding for someone who does want to delve deeper into the game and get more out of it. And if you don't want to go into such detail you can still stick to selling requested goods to make profits.
Another exploit is regarding the selling of ships, although it's not so cut and dry as you might think. This is calculated by taking the maintenance costs of producing the goods required for construction as well as the upkeep of the shipyard and dividing by the construction time to give a value per minute against the sale price, which gives you the following;
A schooner will net you appx. $550 profit, plus another $100 if you construct is with cotton sails instead of wool
A gunboat will net you appx. $960 and another $200 will cotton sails
And a ship-of-the-line appx $1100 plus $70 with cotton sails
There is however one further cost you need to take into account when selling ships, which is that you need to pay the upkeep cost on the ships between the time that you construct them to when you sell them. This means that you're paying a whopping £250/m on your ship-of-the-line which moves very slowly, all the way to the harbour to sell it, which could easily negate the $1100 profit that you'd make on 1 ship. Gunboats however which sell for a tasty $960 as soon as you hit worker tier, only cost $25/m upkeep, so these are what you want to be selling even through to artisan tier where they even net you double the profits than what you'd make selling fur coats.
With regard to buying goods, I haven't looked into so much depth as of yet, but from what I understand is that you could be paying as much as double on offered goods which means that you're generally better off producing your own goods where possible over purchasing them. This changes however once you progress to higher tiers, as purchasing iron ore at double the price to produce weapons might not be worth it, however by the time you're producing penny farthings, the purchase cost of iron ore vs producing it would be marginal. With this in mind I think it would be a viable strategy to replace some of your older production lines in the late game and replace them with the purchase of certain goods since your economy will be far stronger by then.
There is however one last thing to keep in mind concerning the value and sale of goods, which is that trade in this game always comes second to profits made from taxes. This means that you should always provide your population with goods before selling any excess, and that expanding your population and providing them with more goods as opposed to selling them to npc's is going to be the far stronger strategy. This means that the selling of goods should only be used as a secondary source of income to turn an excess of workforce into profits, and a way to make further profits when you've run out of space to place houses.
I hope this clears things up for some of you that may have been a bit lost with trade in Anno 1800, and let me know what you guys think of this guide and if it's really popular then maybe i'll make a more in depth guide.