1.334 Out of 500 S&P Companies Shrank Shares Thru Buybacks This Year.

Yet unprecedentedly low interest rates have allowed the private and public sectors to borrow cheaply and seemingly without cares. U.S. corporations have been able to issue bonds to repurchase shares, arbitraging the cheaper cost of debt versus equity capital, as Nicholas Colas, co-founder of DataTrek Research, points out in a research note. Some 334 of the S&P 500 companies shrank their shares outstanding in the past year, with 115 of them cutting their share count by at least 4%. The U.S. government, meanwhile, runs a trillion-dollar annual budget deficit with the economy at full employment, and the markets barely notice.

Count on This: Next Year’s Financial Markets Won’t Be So Nice-Randall W. Forsyth

https://www.barrons.com/articles/gold-and-emerging-markets-could-make-a-comeback-in-2020-51577474233?mod=past_editions

PKW Buyback ETF +31% vs. S&P 28% 1 Year

www.yahoofinance.com

1.Ten Years Into Expansion Discretionary Spending for Consumers and Corporates is Still Below Historical Average.

Check out Torsten Slok on CNBC Monday

I will be on CNBC tomorrow at 10 am to discuss the outlook for markets in 2020. This expansion has been characterized by an extreme degree of caution among consumers and corporates. Because of the experience in 2008-2009, households and companies have been hesitant to spend too much money and take too much risk. As a result, ten years into this expansion, discretionary spending for consumers and corporates is still below its historical average. As the chart below shows, this is highly unusual compared with previous cycles. The lack of willingness to spend on consumer durables and corporate capex is also the reason why this expansion has been so weak. And it is also the reason why this expansion could continue for many more years; we are simply less vulnerable to shocks in 2020 because there are few imbalances in the economy, see again chart below and here and here.

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Let us know if you would like to add a colleague to this distribution list.

Torsten Sløk, Ph.D.
Chief Economist
Managing Director

1.Since 1928 the S&P is Up Just Over 50% of Trading Days But that Translates to a 18,000% Return.

Happy holidays from Bespoke!  Please see the bottom of this email for a great membership deal.  Also, tune in to CNBC between 12:15 PM ET and 1:15 PM ET today to see Bespoke’s Paul Hickey.

52.3%.  That’s the percentage of all trading days throughout the S&P 500’s history since 1928 that have been up days for the market.  Even though just barely more than 50% of trading days have been up days, it has translated into a price change of 18,157% for the S&P 500.

Casinos are wildly profitable using a similar format.  They only have to win slightly more than 50% of all bets made to make a tremendous amount of money.  The beautiful thing about investing in the stock market is that you get to be the casino for once!

2019 has been a great year for the S&P 500 with a gain of more than 28%.  As shown below, the index only needed to trade higher on 59.3% of days to generate a 28% gain.  But positive days occurring 59.3% of the time in a trading year is actually very rare.  Only five other years since 1928 have seen up days more consistently with the most recent coming in 1995 when 61.9% of all trading days were positive. 

(Past performance is no guarantee of future results.)

Our 2020 Outlook report is a must-read heading into the new year.  Really. 

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https://www.bespokepremium.com/interactive/posts/think-big-blog/2019-a-most-positive-year

1.Short-Term Greed at Excessive Levels.

https://money.cnn.com/data/fear-and-greed/

1.Share Buybacks Keep Humming….$770B Q3

Four Banks & Three Tech Companies Blow $56 Billion in Q3 to Prop up Their Own Shares

by Wolf Richter • Dec 18, 2019 • 109 Comments