Carnegie Market Blog

Brent Luce

Brent Luce Senior Portfolio Manager Cleveland, OH. Brent serves Carnegie Investment Counsel as Senior Portfolio Manager. Brent manages custom portfolios for select clients and is an integral part of Carnegie’s investment selection and portfolio structuring processes. He is also author of the “Carnegie Market Blog”. Email Brent at bluce@carnegieinvest.com.

Big Data in Ohio and Energy Divergence

Posted by Brent Luce on Aug 24, 2017 4:15:00 PM

Oil Prices and Energy Stocks (Year-to-Date)

Energy Stock Divergence

The energy sector has been weak all year, and is now down about 17% year-to-date. As one would expect, energy stocks generally move with the underlying price in oil. Recently, this relationship has diverged. Since June, oil has recovered from $42 to $48 a barrel. Meanwhile, energy stocks have continued to fall to new lows. To me, this reflects a somewhat bearish sentiment in these stocks as investors have given up on them and pursued other opportunities. The lower prices have, of course, driven up dividend yields. Exxon Mobil, for example, is now paying a 4% dividend yield, which is at the high end of its 20-year range. Divergences like this usually correct themselves, so it will be interesting to see how this plays out. WATCH: Time To Buy Energy Stocks?

North Korea and Electric Cars

Posted by Brent Luce on Aug 10, 2017 3:04:31 PM

Market Weakness

Fears related to North Korea have knocked stocks out of the relatively flat range they have been in over the past few weeks. This fear is evidenced by the fact that almost all stocks are down, while defense stocks and gold are climbing higher. Although this is the biggest drop the market has seen since May, this “North Korea thing," is barely a blip on the radar screen (so far) as far as the market is concerned. Looking back, it has been almost a year and a half since the market has seen even a five percent correction. We know that the market dislikes uncertainty, so stay tuned…

Shark Week, All-Time Highs and Dollar Weakness

Posted by Brent Luce on Jul 27, 2017 9:25:09 AM

Shark Week

As some of you know, I was away on my annual family trip to Cape Cod last week, which is why it has been longer than usual since you received your last blog from me. This is not market related, but since it is “Shark Week”, I thought I would share my own shark related story. Back in 1972, after a dramatic decline in population, the U.S. government banned the killing of seals. Since then, not surprisingly, the seal population in Cape Cod has blossomed. Cape Cod is a perfect place for them because the entire outer beach is protected by the National Seashore, and as such, there are no houses and only sparsely populated beaches with miles of empty beach in between. In the past several years, as more and more seals are on the beaches, it has attracted a new wonder of nature – the Great White Shark. I guess what is happening is sort of like the market or economy, except it is Mother Nature’s economy. Humans have altered the supply and demand equation, and now that we are protecting the seals, we have increased supply to the point that the consumer (Great White Sharks) have identified an easy to attain product that they demand.

Just a few years ago, seeing or hearing about a Great White in these waters was uncommon. Today, there are verified sightings of them virtually every day on the Cape. Anyhow, on one of the “perfect” beach days we had last week, as we were boogie boarding on the relatively small waves, the lifeguards sounded off three blasts of an air horn. The result was a scenario right out of the movie “Jaws”. Everyone frantically ran out of the water as quickly as humanly possible – I wish I had recorded it, as that video would have gone viral. Sure enough, there was a Great White Shark only 50 yards offshore spotted by the shark plane; they actually fly planes up and down the coast looking for sharks. The sighting was followed by a tagging boat from which a scientist was throwing what looked like a spear into the water in effort to tag the Great White. So far, they have tagged almost 200 of these things off the Cape and they are constantly tagging more of them. The screenshot from my phone below shows a map of the confirmed unique Great White Shark sightings just in the past month:

1st Half Performance, Solar Boom, iPhone Disruption

Posted by Brent Luce on Jul 5, 2017 4:55:44 PM

First Half Market Behavior

Despite the political drama and other fear-inducing events that have occurred this year, the stock market has been fairly strong this year. This strength, however, has not been uniform. MORE: Year to Date Market Summary Below are some charts illuminating some of the trends and dispersion within the market so far this year:

-- Dividend paying stocks have lagged this year, while growth stocks have outperformed. I believe this is due to several factors, including an increased appetite for risk, dividend heavy sectors experiencing fundamental weakness and the perception of higher interest rates on the horizon.

Topics: Technology

Amazon buys Whole Foods - The Cost of Solar Power is Dropping

Posted by Brent Luce on Jun 21, 2017 4:26:31 PM

Quote of the Day

“It is better to know some of the questions than all of the answers” – James Thurber

Tons of Pigs, Data and Boxes

Posted by Brent Luce on Jun 7, 2017 4:41:37 PM

Factoid

Each year, the people of China consume 600 million pigs and that number grows every year. While this may seem random, there are interesting demographic forces and investment implications behind this factoid. MORE: Expanding Chinese Pig Production is no Black Swan

Retail Is Struggling Financially - Current Inflation Numbers are Out

Posted by Brent Luce on May 12, 2017 3:02:33 PM

Retail Death Spiral

If you have not noticed, brick-and-mortar retailers have not been doing so well. Value investors who have been trying to “bottom-fish” in the space have continued to suffer. As we know, Amazon and other companies using and benefiting from new technologies have been perhaps the most disruptive force ever to affect consumer buying behavior. As I have mentioned before, we seem to be arriving at the breaking point where the weak can no longer fight the battle. This is just one example of how new technologies are changing the way we live and affecting every business and sector. When looking at investments, I think there are two types of companies – those poised to benefit from these disruptive forces and those who are likely to suffer from it. The table below, which I am borrowing from MKM, shows the number of store closings announced just this year – this is just major stores, and does not include the hordes of smaller retail stores that have closed. Amazon has been taking over fifty cents of every new dollar moving into retail e-commerce, so we can guess that 50% of these sales are going right into Amazon’s pocket. At the bottom you will see the stock price charts of traditional retailers versus Amazon; it is self-explanatory. Deep Dive: The New Retail Ecosystem

Topics: Technology

Disruption and Active with Passive

Posted by Brent Luce on Apr 20, 2017 4:48:00 PM

Getting Active with Passive Investments

The battle between active and passive investing has been a topic for years. There are arguments for both and there are varying ways to successfully deploy these strategies. I have blogged before about the proliferation of ETFs and that many investors seek ETFs because they believe they are passive, but in many cases the ETFs they are investing in are specialized and, therefore, not passive. There is even a Whiskey ETF, which I blogged about back in October. Not only are people investing in non-passive ETFs, but they then trade in and out of these not-so-passive ETFs, thereby executing a very active approach. I have yet to meet an individual investor who successfully held passive ETFs through a bear market without making changes or reacting emotionally at the wrong time. There are some truly passive ETFs in existence, but as the table below illustrates, even those are not being used as passive investments. SPY, which is the best known and a truly passive ETF has an average holding period of only 15 days – investors are using this to adjust market exposure on a short-term basis.

Finances Show Us Retail Is Dying in 2017

Posted by Brent Luce on Apr 10, 2017 4:58:28 PM

Retail Death Watch

I could probably write a book on this subject since it is such a powerful technology-based disruption taking place, but then what would I talk about in future blogs? As you know, the shift to online purchases continues and it is severely disrupting brick-and-mortar retailing. Watch: Retail is a Mess to Say the Least

Here are a couple of interesting charts:

As you can see from the above chart, while it is still early, it appears we have reached a tipping point where retailers are all scrambling to reduce their footprint. Just a quarter or two ago, many were happy with their footprint but now they are saying that they need to aggressively close stores. What this means is that they are all doing the same thing at the same time – looking closely at their weakest locations and eliminating them. This has a viral effect, since the smaller mall-based retailers and those that locate adjacent to malls all depend on a handful of big retailers to keep things afloat. Not only that, but the retailers will be looking at the exact same locations to eliminate, so entire shopping areas will suddenly just go dark. If the large retailers are closing stores, which they are, many others will follow. Read More: America's Stores Are Closing Stores Faster Than Ever

China Used More Cement in 3 Years than the 20th Century

Posted by Brent Luce on Mar 14, 2017 3:24:52 PM

Amazing Cement Statistic

This is a bit old, but I just read about how China used more cement in three years than the U.S. used in the entire 20^th century. Cement is one of the most important substances in human history and its usage is a perfect indicator for growth and construction. The fact that China used that much cement is a testament to the explosive growth they experienced. The alleged “fake cities” they built probably did not hurt this growth either. Related: U.S. Will be Bright Spot for Cement Demand in 2017

Topics: Artificial Intelligence

Brent Luce

Recent Posts

Big Data in Ohio and Energy Divergence

Energy Stock Divergence

North Korea and Electric Cars

Market Weakness

Shark Week, All-Time Highs and Dollar Weakness

Shark Week

1st Half Performance, Solar Boom, iPhone Disruption

First Half Market Behavior

Amazon buys Whole Foods - The Cost of Solar Power is Dropping

Quote of the Day

Tons of Pigs, Data and Boxes

Factoid

Retail Is Struggling Financially - Current Inflation Numbers are Out

Retail Death Spiral

Disruption and Active with Passive

Getting Active with Passive Investments

Finances Show Us Retail Is Dying in 2017

Retail Death Watch

China Used More Cement in 3 Years than the 20th Century

Amazing Cement Statistic

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