Bespoke Brunch Reads — Our Favorite Articles from the Past Week — 1/28/18

Below is this week’s Bespoke Brunch Reads linkfest, featuring some of the most interesting articles we read over the past week:

Headline Oddities (Europe Edition)

Nutella ‘riots’ spread across French supermarkets (BBC)

Apparently American Black Friday shoppers aren’t the only ones that are willing to go to extremes in order to get a good deal on a precious commodity. [Link]

Childhood Tragedy

Measles cases rise six-fold in Italy as populists pledge to scrap compulsory vaccines (The Local)

After populist the Five Star Movement (likely to win a plurality in upcoming March elections but not likely to form a government) and center-right Northern League (likely to help form a government) political parties took anti-vaccine stances in response to discredited research claiming (incorrectly) links between vaccines and autism, vaccination rates in Italy fell and long-dead diseases have started to make a comeback. [Link]

Parental Imprisonment and Premature Mortality in Adulthood by Steve G. A. van de Weijer, Holly S. Smallbone, and Valery Bouwman (Journal of Development and Life-Course Criminology)

Research from the Netherlands showing a link between the imprisonment of parents and mortality rates of their children. [Link]


China’s Rise Is Over by Daniel C. Lynch (Stanford University Press)

While there has been a long-held belief in Western circles that China is ascendant, Lynch argues that the more conservative outlook of Chinese policymakers is closer to reality. [Link]


Let Me Tell You Some More About Bitcoin—Hello? Hello? by Kirsten Grind (WSJ)

A catalog of the human toll bitcoin enthusiasm is taking on the relationships of some of its most ardent enthusiasts. [Link; paywall]

The Programmer at the Center of a $100 Billion Crypto Storm by Paul Vigna and Jim Oberman (WSJ)

One of the most-trafficked websites in the world uses algorithms and price feeds from global exchanges to give real-time market caps for the crypto space. It’s run out of an apartment in Brooklyn. [Link; paywall]


The Atlas Of Redistricting by Aaron Bycoffe, Ella Koeze, David Wasserman and Julia Wolfe (538)

A really interesting project that allows you to see maps of the country or a given state under current laws and with a variety of hypothetical redistricting priorities. [Link]

Think your country is crowded? These maps reveal the truth about population density across Europe by Alasdair Roe (The Conversation)

Where do people in Europe actually live? The answer isn’t as simple as a population density calculation, with huge variation of densities within countries or regions. [Link]


The Troubling Origins of the Skeletons In A New York Museum by Daniel A. Gross (NYer)

Museums around the world house human remains, and in some cases their origins or provenance is either disturbing or downright inhumane. [Link]

Happy Birthday!

World’s largest ETF roars past $300bn in assets by John Authers, Joe Rennison, and Robin Wigglesworth (FT)

This year the S&P 500 ETF SPY hit its 25th birthday, buoyed by billions of inflows for index-linked passive products more generally. [Link; paywall]

Health Care

2016 Health Care Cost and Utilization Report (Health Care Cost Institute)

Despite falling utilization of health care services (including a drop of 12.9% for inpatient services from 2012 to 2016), surging prices have driven strong spending gains (in the case of inpatient services, prices are up 24.3% giving an 8.3% total spending growth over those years). A succinct summary of how broken the health care system is for most people. [Link]

Apple, in Sign of Health Ambitions, Adds Medical Records Feature for iPhone by Natasha Singer (NYT)

More evidence that Apple has its eyes on the health care market: the company has introduced a feature that would allow users to import health records to their phones. [Link]


The Follower Factory (New York Times)

A close look at a company that sells social media followers to celebrities, businesses, and anyone else that wants to appear more popular than they really are. [Link]


The Tax Break That Doctors and Plumbers Both Will Miss by Ruth Simon (WSJ)

Trying to figure out what types of business qualify for the new pass-through provisions of the recent tax changes passed at the end of 2017 is an incredibly difficult process, making our complicated tax code that much more byzantine. [Link; paywall]

PR Nightmares

Walnut Hills grad’s post mocking Fox News viewers causes controversy for SCOTTeVEST by Scott Wartman (Cincinnati Enquirer)

In a Facebook post about his business, a vest company CEO made comments about customers he reaches via Fox News that don’t read very well, putting it mildly. [Link]

Read our weekly Bespoke Report newsletter by starting a two-week free trial to one of Bespoke’s premium research offerings.

Have a great Sunday!


Bespoke Brunch Reads — 12/31/17

Happy New Years from Bespoke!

Below is this week’s Bespoke Brunch Reads linkfest, featuring some of the most interesting articles we read over the past week:

The Big Apple

The Most Expensive Mile of Subway Track on Earth by Brian M. Rosenthal (NYT)

Massive cost inflation on capital projects related to New York City transit is driven more by rampant fraud and excess than the admittedly significant challenges inherent to construction in the dense urban environment. [Link; soft paywall]

Crime in New York City Plunges to a Level Not Seen Since the 1950s by Ashley Southall (NYT)

Murders in the country’s largest city have fallen by nearly 90% since 1990 and are at a record low for periods with reliable data. The decline has been consistent for 27 years straight. [Link; soft paywall]


Crispr Isn’t Enough Any More. Get Ready For Gene Editing 2.0 by Megan Molteni (Wired)

5000 papers in 5 years have mentioned Crispr, the gene editing protocol discovered in 2012. Here’s a rundown of the next wave of techniques that will be used for gene editing. [Link; auto-playing video]

As World Eats More Meat, U.S. Soy Is Losing the Battle to Feed Animals by Jeff Wilson and Tatiana Freitas (Bloomberg)

The US soybean crop’s protein yield fell to 34.1% this year, a tie with 2008 for the lowest since at least 1986, putting US farmers at a disadvantage when it comes to international sales of the harvest. [Link]


Freed From the iPhone, the Apple Watch Finds a Medical Purpose by Daisuke Wakabayashi (NYT)

With the ability to receive data connections thanks to wireless transmitting capability, the Apple Watch is starting to fulfill the medical promise of the device. [Link, soft paywall]

Blockchain Pumping New Life Into Old-School Companies Like IBM by Olga Kharif (Bloomberg)

If the hype around the adoption of blockchain technology for a myriad of roles is to be believed, IBM is in an excellent position to benefit. [Link; auto-playing video]

Emerging Markets

Emerging Markets: Growing in Maturity? by Richard Barley (WSJ)

The MSCI EM stock index turned 30 this week, and over those three decades lots has changed. Now, with constituent countries at 35% of the global economy, the index looks totally different from its origins. [Link; paywall]


Ten Economic Questions for 2018 by Bill McBride (Calculated Risk)

Bill’s always excellent blog always features this annual outlook piece which sits the stage for the coming year of data. [Link]

Best Schematic Ever: Financial Frictions in Macro/Finance by Menzie Chinn (Econbrowser)

An amazing run-down of literature that details the frictions in financial and real markets which can inhibit efficiency and curtails the benefits of the construct. [Link]


Goodbye, George Bailey: Decline of Rural Lending Crimps Small-Town Business by Ruth Simon and Coulter Jones (WSJ)

Almost one-third of local rural counties have no local bank, versus less than 15% in the mid-1990s. The trend is part of a larger wave of consolidation in banking across the economy but is crimping rural communities to an especially large degree. [Link; paywall]

Long Reads

Minecraft (Alice Maz)

A fascinating read on the economy of a Minecraft server, with remarkable similarities and differences to and from the real-world version. [Link]

The Secret History Of The Russian Consulate In San Francisco by Zach Dorfman (Foreign Policy)

An almost impossible to believe story of soft espionage conducted against Silicon Valley and the US more generally from the foggy hills of San Francisco. [Link; soft paywall]

Have a great Sunday and a Happy New Year! (And don’t forget to read our 2018 outlook report!)

Bespoke Holiday Reading — Our View + Brunch Reads — 12/24/17

Happy Holidays from Bespoke!

On Friday we published our 2018 Annual Outlook report, featuring our view on markets and the economy for the year ahead.  This report is the most important piece of research we publish all year.  You can read it now with a 14-day free trial to any one of our membership levels using our 2018 Annual Outlook Sign-Up Special.  Along with the 14-day free trial, you’ll get 20% off the normal membership cost for life.  Check out the pricing options and get signed up if you’re ready at this pageRemember, the first 14 days are free, and you can cancel at any time.

Below is this week’s Bespoke Brunch Reads linkfest, featuring some of the most interesting articles we read over the past week:


Some Change In Apportionment Allocations With New 2017 Census Estimates; But Greater Change Likely By 2020 (Election Data Services)

With updated Census population data released this week, EDS has made new estimates for changes in the number of House representatives in each state, a process which also effects the Electoral College. Final changes won’t be made until data from the 2020 Census is in. [Link; 15 page PDF]

Welcoming the pro-EU far-right by Mehreen Khan (FT)

While Americans may view the EU as a monolithic left-wing entity, the reality is much, much more complicated. This week’s near-literal embrace of the pro-EU right wing in Austria is a good example of the complexity. [Link]


Why so low for so long? A long-term view of real interest rates by Claudio Borio, Piti Disyatat, Mikael Juselius and Phurichai Rungcharoenkitkul (BIS Working Papers)

A new paper for the Bank of International Settlements argues that monetary policy is more responsible for large shifts in real interest rates than demographic or savings and investment based models. [Link; 73 page PDF]


How Tax Cuts Affect Revenue by Nick Timiraos and Youjin Shin (WSJ)

A nice recap of the estimated and actual changes to the federal budget based on two past major tax reforms. [Link; paywall]

How the Maker of TurboTax Fought Free, Simple Tax Filing by Liz Day (ProPublica)

A summary of the role the tax preparation industry plays in keeping your taxes complicated and hard to fill out every spring. [Link]


Facebook ditches fake news flag after admitting it was making the problem worse by Margi Murphy (Telegraph)

A program to identify news from untrustworthy sources at Facebook actually reinforced the message of the misinformation to users. [Link]

Dozens of Companies Are Using Facebook to Exclude Older Workers From Job Ads by Julia Angwinn Noam Scheiber, and Ariana Tobin (ProPublica)

Employers have used Facebook’s ad targeting features to present job ads to narrow demographic groups, a possible violation of employment discrimination law. [Link]

Law & Order

Shot By Cops And Forgotten (Vice)

A data intensive summary of police shootings in large police departments across the country. From 2010 to 2016 police shot at more that 4000 people, killing more than 1300. Rates of police shootings relative to population vary dramatically across the country with Newark, St. Louis, and New Orleans standing out on the high side while Fairfax Country, Boston, and New York are relatively low. [Link]

Natural World

The Year From Above by K.K. Rebecca Lai and Tim Wallace (NYT)

A breathtaking lineup of pictures from space including weather, economics, climate, geopolitics, and astronomy. [Link; soft paywall]

What is dead may never die by Jake Parks (Astronomy)

A star has been observed going supernova twice in the past 60 years, in a series of events astronomers had thought were impossible. [Link]

Going Viral

A Federal Ban on Making Lethal Viruses Is Lifted by Donald G. McNeil Jr (NYT)

This week federal officials ended a three year old moratorium on funding research to make viruses more lethal to humans. [Link; soft paywall]


The Crunchy Rice at the Bottom of the Pot, How Different Cultures Cook and Eat It (Bon Appetit)

Modern pots and rice cookers have made the crispy, golden rice which used to form at the bottom of pans less common, and that’s a darn shame. [Link]


AI System Detects ‘Deception’ in Courtroom Videos by Michael Byrne (Motherboard)

A new system claims high accuracy at assessing truthfulness, but the pseudo-science surrounding the traditional polygraph doesn’t exactly leave us optimistic. [Link]

Have a great Sunday!  (And don’t forget to read our 2018 outlook report!)




One of the smartest Wall Street strategists, Richard Bernstein of Richard Bernstein Advisors, recently shared his view of bitcoin. Deeming it “Bitcon,” Bernstein noted that the currency is displaying all five of his criteria for a speculative bubble, namely:

  • There’s plenty of liquidity to facilitate and encourage speculation. Gobal central banks are still providing oceans of easy money.
  • There’s increasing use of leverage. The new ‘bitcoin futures’ markets allow you to buy a lot more of the stuff with less money down.
  • There’s “democratization” of the market as normal people join in. My dad recently asked me about bitcoin. A tennis pro I know asks me about it every time I see him. Financial TV has become crypto-currency TV.
  • There are increasing “new issues” to satisfy the exploding demand for ways to play. There are more than 1,000 crypto-currencies now. And dozens of “Initial Coin Offerings” that have collectively raised billions of dollars.
  • Trading volumes are increasing. The number of crypto-trades per day continues to rise as more and more gamblers take a seat at the table.

Happily for bitcoin fans, Bernstein doesn’t think the bubble will burst anytime soon. What pops bubbles, he says, are two things:

  1. A reduction of liquidity (the Fed choking off the flow of cheap money, for example), and
  2. A sudden lack of new “greater fools” to dive into the market and drive prices higher.

Bernstein thinks the Fed will stay easy for a while. And, so far, there seem to be plenty of greater fools.

So Bernstein concludes that “the crypto-bubble will continue until the Fed and other central banks remove too much liquidity from the economy, the availability of “greater fools” decreases, and the bubble deflates.”

For what it’s worth, I generally share Bernstein’s views.


Bespoke Brunch Reads — 12/17/17

Happy Sunday!

Below is our Bespoke Brunch Reads linkfest, featuring some of the most interesting articles we read over the past week.

Machine Learning

The Future Is Bumpy: High-Tech Hedge Fund Hits Limits of Robot Stock Picking by Bradley Hope and Juliet Chang (WSJ)

A skeptical take on the viability of using machine learning to pick stocks that outperform; unlike algorithms at quant funds written by humans, only the machine knows why it’s doing what it does. [Link; paywall]

AlphaZero AI beats champion chess program after teaching itself in four hours by Samuel Gibbs (The Guardian)

While machine learning may not be working well in financial markets yet, it’s done extremely well in more bounded environments like the world of chess. [Link]

Crypto Chronicles

Crypto money-laundering bust alert [siren] by Alexandra Scaggs (FTAV)

The DoJ unsealed an indictment this week against a 27 year old long Island woman who used loans, credit cards, and crpotcurrency to attempt to fund ISIS. [Link; registration required]

EU agrees clampdown on bitcoin platforms to tackle money laundering by Francesco Guarascio (Reuters)

Following the US action earlier this week, EU nations and parliamentarians reached a deal to make money laundering via the blockchain harder. [Link]

Retail Commodity Transactions Involving Virtual Currency by Commodity Futures Trading Commission (Federal Register)

In a proposed rulemaking that could make the operation of some bitcoin exchanges subject to regulatory oversight, the CFTC takes steps to lay down ground rules for transactions in crypto. [Link; 23 page PDF]

Bitcoin Made This Man (Briefly) One of the Richest People in America by James Mackintosh (WSJ)

CEO of Crypto Co (CRCW) was a billionaire on paper when illiquidity and the crypto craze drove the pinksheets stock to nearly $4 billion overnight. [Link; paywall]

Don’t get caught up in blockchain hype by Robbie Mitchell (Apnic)

A good rundown of what blockchain is actually useful for, in plain English. The list is much shorter than you might think based on all of the hype. [Link]

Tech Company Blog Posts

AIM will be discontinued on December 15, 2017 (AOL)

Venerable and ubiquitous messaging application AOL Instant Messenger is being discontinued, the end of an era for chat apps. [Link]

Hard Questions: Is Spending Time on Social Media Bad for Us? by David Ginsberg and Moira Burke (Facebook)

In a major move, Facebook has admitted that some research shows negative effects of social media. [Link]


Tax “reform” and America’s transfer union by Matthew C. Klein (FTAV)

Some interesting data work on the effective tax rates of states, and the effective subsidies granted to state and local governments, as well as the distribution of federal employment expenditures. [Link; registration required]

Natural Disasters

Sin Luz: Life Without Power (WaPo)

A massive audio-visual assessment of the ongoing struggles for Puerto Rico, which is still undergoing the longest and largest blackout in American history. [Link; auto-playing video]


Alphabet wants to deliver Internet access via laser beams by Ron Amadeo (ArsTechnica)

Alphabet’s X Lab has signed an agreement with the state government of Andhra Pradesh in India to provide internet services via laser. [Link]


Colorized Math Equations by Kalid Azad (Better Explained)

An awesome way to think about mathematical concepts, making instruction and deduction much more intuitive. [Link]


A Premium for Velveeta? by Jeff Wilson (Bloomberg)

Bad news for processed cheese fiends: the key input (barrel cheese) trades at a 25 cent per pound premium over the traditional stuff on the CME futures markets. [Link]

Have a great Sunday!  (And don’t forget to subscribe!)


Bespoke Brunch Reads + 2018 Annual Outlook Special — 12/10/17

Happy Sunday!
Before getting to our favorite articles from the past week, take advantage of our limited time 2018 Annual Outlook special offer.  You’ll get a two-week free trial, a 20%-off LIFETIME discount, a free copy of our 2018 Market Calendar, and a free copy of our 2018 Annual Outlook report.  The report alone is worth the cost!  CLICK HERE to sign up at our secure checkout page.

Below is our Bespoke Brunch Reads linkfest, featuring some of the most interesting articles we read over the past week.


Private equity investors are paying through the nose for midsize companies by Matthew C. Klein (FTAV)

An update on the P/E market, which looks a little bit excessive these days given huge war chests and extreme valuations. [Link; registration required]

Bloomberg’s rising terminal count signals hope for the beleaguered bond trader by John Detrixhe (Quartz)

After recording only its second subscriber count decline in history last year, Bloomberg’s terminal business saw its customer count rise in 2017. [Link]

Millions Are Hounded for Debt They Don’t Owe. One Victim Fought Back, With a Vengeance by Zeke Faux (Bloomberg)

Debt collectors are hounding consumers for payments on debts they never incurred, but one man they chose to threaten over an invented balance decided to fight back. [Link]


Long Online/Short Stores ETF (ProShares)

Just in time for a huge rally in traditional retail stores over the last few weeks, ProShares has created a custom index of traditional retailers to short and online retailers to be long, similar to Bespoke’s Death By Amazon index (link to more information). [Link]

Judge bars Starbucks from closing 77 failing Teavana stores by Lisa Fickenscher (NYP)

Starbucks has been ordered to keep stores open under the theory that closing them is a bigger burden on their landlord (Simon Property Group) than it is on Starbucks to keep the stores open. [Link]


Want a Vintage Metallica T-Shirt? That’ll be $1,000 by Jacob Gallagher (WSJ)

Vintage t-shirts from across the musical spectrum are flying off the shelves of stores that specialize in digging up old tour merch for a new generation. [Link; paywall]

Design (Motiv)

A new fitness tracker that’s fully waterproof, lasts days without a charge, and is worn around…your finger. [Link]


Napoleon was the Best General Ever, and the Math Proves it. by Ethan Arsht (Towards Data Science)

Using methods that will be familiar to any hard-core baseball fan, Arsht ranks generals and attempts to determine how well they performed relative to the typical general. [Link]

The Conflict in Jerusalem Is Distinctly Modern. Here’s the History. by Mona Boshnaq, Sewell Chan, Irit Pazner Garshowitz, and Gaia Tripoli (NYT)

Background on the history of Jerusalem, helpful in the context of President Trump’s decision to move the US embassy to that city this week. [Link; soft paywall]


I Made My Shed the Top Rated Restaurant On TripAdvisor by Oobah Butler (Vice)

In a frankly hilarious stunt, a journalist listed their shed as a restaurant then gamed TripAdvisor to make it the highest ranked restaurant in all of London. [Link]


This Mining Company Soared 159% After Saying It’s Buying a Crypto Firm by Camila Russo (Bloomberg)

All a company needs to do these days is change a part of its name to something bitcoin-related. [Link; auto-playing video]

There’s an $814 Million Mystery Near the Heart of the Biggest Bitcoin Exchange by Matthew Leising (Bloomberg)

In any investing fad there is inevitably fraud, and it looks like the combination of tether and the crypto exchange Bitfinex are gunning for the poll position in the blockchain’s tally. [Link; auto-playing video]

SEC Targets Initial Coin Offering ‘Scam’ by Paul Vigna (WSJ)

The first enforcement action against an initial coin offering has been dropped by the SEC, and it could be important in setting precedent for how ICOs are handled by US regulators. [Link; paywall]

Bitcoin miner: ‘I haven’t paid for heat in three years’ by Krystal Hu (Yahoo Finance)

A North Carolina man who mines bitcoins hasn’t needed to turn on his heat thanks to the huge volume of heat thrown off by CPUs on rigs he uses to mine. [Link; auto-playing video]

A Bitcoin Frenzy Like No Other Is Gripping South Korea by Kyungji Cho, Yuji Nakamura , and Narae Kim (Bloomberg)

Roughly 21% of trading in bitcoin globally takes place in Korean won, and thousands of speculators in the relatively small country have piled in to the surge. [Link; auto-playing video]

Meet CryptoKitties, the $100,000 digital beanie babies epitomizing the cryptocurrency mania by Evelyn Cheng (CNBC)

An explainer on the strangest fad you’ll read about this weekend. [Link; auto-playing video]

Economic Research

A prince not a pauper: the truth behind the UK’s current account deficit by Stephen Burgess and Rachana Stanbhogue (BoE Bank Underground)

An argument that rather than incurring new liabilities, the UK’s current account deficit is a spending-down of accumulated national wealth. [Link]

Putting a Value on the Ecosystem Services Provided by Forests in the Eastern United States: Case Studies on Natural Capital and Conservation by Dan Kraus and Brian DePratto (The Nature Conservancy)

An attempt to demonstrate the economic value of forests across the East Coast of the United States, with a range of values per acre and methodology for how biological resources were assigned financial worth. [Link; 29 pages]

Tax Reform and the Trade Balance by Brad W. Setser (Council on Foreign Relations)

A rundown on likely macroeconomic account impacts from tax reform, focusing on the shifts in foreign taxation that will drive a re-alignment of the current account including the trade balance. [Link]

Have a great Sunday!  (And don’t forget to subscribe!)


CWS Market Review – December 8, 2017

CWS Market Review

December 8, 2017

“People calculate too much and think too little.” – Charlie Munger

Before I get to today’s newsletter, I wanted to let you know that I’ll be announcing the 2018 Buy List in the December 22th newsletter. That’s in two weeks.

The new Buy List will have 25 stocks. I’ll be adding five new stocks and deleting five old ones. We like to keep our turnover low. The new list won’t take effect until the start of trading in the new year. I like to let investors know what the changes are a few days before they go into effect. I’m very excited for our new Buy List (our 13th!).

Now let’s turn to this week’s newsletter. On Thursday, the S&P 500 finally halted its four-day losing streak. The damage was very minor, and the major indexes are still very close to all-time highs. I have to say that the recent market environment has been nearly picture-perfect; interest rates and inflation are low, corporate profits are growing and consumer confidence is soaring. The S&P 500 has traded above its 200-DMA continuously for 18 months. I’ll warn you—this won’t last!

Lately, some big-name tech stocks have been getting knocked about. At the same time, Wall Street has been favoring cyclical stocks. The Dow Transports, for example, recently broke 10,000 for the first time ever. This could be the start of a major rotation. I’ll tell you what it all means.

We also have a big Fed meeting coming our way next week. Expect another rate hike. I think it’s a mistake, but alas, they didn’t ask me. Later on, I have some Buy List updates for you. Stryker, one of our stalwarts, just raised its dividend, as it has every year since 1993. But first, let’s see what this rotation is all about.

Wall Street Turns from Tech to Cyclicals

While the stock market has remained strong, quietly there’s been a changing of the guard. Recently, big tech stocks have been lagging the market. Bear in mind what a good year it’s been for them. The tech sector has made up nearly half the S&P 500’s gains this year. If you lump Amazon in with the techs, then it’s more than half.

Tech first started to lag the market last Tuesday, November 28. It then got much worse for tech on Wednesday, November 28. After that, tech stocks appeared to stabilize, but lagged again this past Monday. On our Buy ListMicrosoft (MSFT) has been a victim of this shift. We can’t say yet if the trend is over.

Overall, the impact hasn’t been earth-shaking, but it’s interesting because it’s been so new. For so long, large-cap tech was such an easy trade. (There was a brief hiccup in June, but that didn’t last long.)

Here’s what’s important: The flip side of lagging tech is a buoyant environment for cyclical stocks. By cyclicals, I mean stocks whose businesses are heavily tied to the economic cycle. You may own a wonderfully run homebuilder or chemical maker, but their prospects are always at the mercy of where we are in the cycle. Investors need to understand that.

We can see a good example of this by looking at the Consumer Discretionaries ETF (XLY). This sector was a giant winner at the start of this bull market. Their outperformance lasted for years, but starting about two years ago, the consumer discretionaries started to lag. Not badly, but they did fall behind. Lately, however, they’ve been rock stars.

Similarly, the Dow Transports (^DJT) have been popping. This is an old-time index of 20 stocks involved in the business of moving people and things about. For the first time ever, the Transports broke 10,000. I wonder how many investors are aware that CSX Corporation (CSX), a boring old railroad, is up 56% this year. That’s more than all the FAANG stocks.

If we drill down a little, one of the best-performing sectors of the cyclicals has been the homebuilders. NVR (NVR), for example, is a $3,400 stock that’s more than doubled this year. After a long brutal stretch, things are finally looking up for the housing market. Home prices are rising at their fastest pace in three years. Last week, we learned that new-home sales jumped to a 10-year high. It’s all about the cycle.

We’re also seeing new-found strength in financial stocks. On our Buy List, you can see that in stocks like AFLAC (AFL) and Signature Bank (SBNY). The theme seems to be stocks that do the financing, and stuff that’s bought via financing.

What Does This Rotation Mean for Us?

What does this shift to cyclicals mean? I suspect that this is the market’s confirmation of some recent good news for the economy. As we’ve noted before, consumer confidence is at a 17-year high. Inflation is still low. Housing is coming back. GDP growth for Q2 and Q3 were pretty good, and it looks like Q4 may even top those two. Simply put, the economy is doing well, and the market’s rotation is reflecting that.

Another reflection of the improving economy is the flattening of the yield curve. The spread between the 2- and 10-year Treasury yields recently fell to just 53 basis points. That’s down from 130 basis points less than a year ago, and 260 basis points four years ago.

The yield curve is going to get flatter soon. The Federal Reserve is getting together next week, and it seems certain that they’ll raise interest rates again. The central bank has said it sees three more rate hikes next year, plus another three in 2019. I think three hikes in 2018 has a good chance of happening, but I’m not so sure about 2019. At the upcoming Fed meeting, the Fed will update its projections. I won’t be surprised if they walk back their 2019 forecast.

The reason is the key part of the flattening yield curve—long-term rates aren’t moving that much. In fact, long-term yields are lower than where they were at the start of the year. Frankly, I’m not sure why that is.

Fortunately, we’re not economists, and we don’t have to overly concern ourselves with why something is happening. As investors, it’s good enough to know that it’s happening. Shortly after the election, we saw a similar rotation away from tech and towards cyclicals. However, that move was matched by a sharp drop-off in long-term bonds. We’re not seeing that this time.

This means that bonds are still pretty weak competition against stocks. While stock valuations are elevated (but not extreme), you can still find good deals. On our Buy List, there are several stocks poised to benefit from a continued rotation into cyclicals. For example, I like Sherwin-Williams (SHW), the paint people. Also, Signature Bank (SBNY) continues to look good. Another cyclical that looks good now is Wabtec (WAB). Now let’s look at a nice dividend boost from Stryker.

Buy List Updates

We got some good news this week from Stryker (SYK). The orthopedics company said it’s raising its quarterly dividend by 11%. The payout will rise from 42.5 to 47 cents per share.

With all those artificial hips and limbs, Baby Boomers are gradually turning bionic. This is great news for Stryker. The company has raised its dividend every year since 1993.

“Our financial strength is reflected in the 11% increase in our dividend for 2018 as we continue to execute on our capital-allocation strategy,” said Kevin A. Lobo, Chairman and Chief Executive Officer. “With strong organic sales growth and leveraged adjusted-earnings gains, we believe we are well positioned to continue to deliver dividend increases in line with our adjusted earnings growth.”

The new dividend will be payable on January 31 to shareholders of record on December 29. Based on Thursday’s closing price, SYK yields 1.24%.

Shares of Express Scripts (ESRX) have been acting much better recently. Since mid-October, the stock is up nearly 19%. The company is benefiting from an improved environment. Someone could make an offer for ESRX. Thanks to the CVS-and-Aetna deal, there’s a belief that Amazon may jump in, or possibly, Walgreens Boots Alliance. Bernstein recently upgraded the stock, and raised its target price from $51 to $65 per share. It also said that Express could greatly benefit from tax reform.

Shares of Cinemark (CNK) got some welcome news this week. First, Cineworld said it’s buying Regal Entertainment for $3.6 billion. Whenever there’s one buyout in an industry, it usually bodes well for other companies. Perhaps someone will make an offer for CNK. The theater chain also announced it’s jumping into the subscription business.

For $8.99 per month, you’ll be able to see one film per month, plus get a 20% discount on concessions, and bring a friend along for $8.99 for a movie. I think this is a good idea. It’s probably not a game-changer, but it fights back against services like Movie Pass.

That’s all for now. The big news next week will be the Federal Reserve meeting. It will be a two-day meeting, on Tuesday and Wednesday. After the meeting, Janet Yellen will be holding a press conference. The Fed will also update its economic projections for the next few years. Then on Thursday, we’ll get the retail-sales report, and on Friday, the industrial-production report comes out. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

– Eddy

Here’s an interview I did this past week on Bloomberg.

Named by CNN/Money as the best buy-and-hold blogger, Eddy Elfenbein is the editor of Crossing Wall Street. His free Buy List has beaten the S&P 500 eight times in the last ten years. This email was sent by Eddy Elfenbein through Crossing Wall Street.