1.Earnings..Highest Beat Rate and Lowest Miss Rate in 5 Years.

Meanwhile, U.S. based investors continue to benefit from rising corporate earnings.  As of August 16^th, 469 of the S&P 500 Index companies have reported Q2 earnings, of which 370 have beaten earnings (78.89%) and only 73 have missed (15.57%) earnings estimates.  In fact, this would be the highest beat rate and lowest miss rate in the past 5 years and well above the averages over the past five years (69.25% Beat rate and 21.51% Miss Rate).  Also, there are five sectors in which at least 80% of companies has beaten EPS estimates thus far.

Bluestone
Rich Farr, Chief Market Strategist
http://www.bluestonecm.com/

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1.Read of the Weekend…$700B BBB Bonds in 2008…$3Trillion 2018

Barrons

Ray Kennedy, a high-yield portfolio manager at Hotchkis & Wiley, notes that when BBB debt—more than twice the size of the $1.2 trillion in junk debt—falls, the high-yield market expands. Some investors, such as certain insurance companies, aren’t allowed to hold junk and will become “forced sellers,” he says, intensifying the downdraft. Only 10% of the junk market is composed of bonds that originally were investment-grade but later were downgraded to junk. That’s far below the median of 15.5% and the historical peak of 32% in 2002-03. So, a large influx of fallen angels would be far from unprecedented.

In a crunch, investors trying to go up the ratings scale would “have a limited pool of choices,” warns Joseph Kalish, chief global macro strategist at Ned Davis Research Group. Higher-quality credits, such as AA or AAA-rated bonds are now just some 10% of the investment-grade universe, versus 20% to 25% in 1999-2000, he says. Investors could turn to U.S. Treasuries but would have to give up over one percentage point of yield. That’s significant in the fixed-income world.

Where the Bond Market’s Next Big Problem Could Start

By
Vito J. Racanelli
https://www.barrons.com/articles/where-the-bond-markets-next-big-problem-could-start-1534536183

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1.Turkey ETF -40% YTD

The roots of Turkey’s travails are no mystery. Erdogan pumped a congenitally volatile economy full of steroids in the election run-up, restraining interest rates and pushing a large guaranteed loan program through the banks. That jolted gross domestic product growth north of 7%, but fueled a vertiginous current-account deficit at 6% of GDP. Stress is focused on the banking system, whose clients owe $180 billion in short-term foreign-currency debt, figures Timothy Ash, senior emerging markets sovereign strategist at BlueBay Asset Management. That gets more expensive in lira by the day. “Turkey’s Achilles’ heel is that its banking system is used to intermediate large-scale foreign-currency borrowing,” says Robin Brooks, chief economist at the Institute for International Finance in Washington.

Erdogan compounded his problems by stumbling into conflict with President Donald Trump’s administration over Andrew Brunson, a U.S.-born, Turkey-based Protestant pastor arrested two years ago on charges of colluding with Kurdish terrorists.

Turkey Pays a Financial Price for Its Politics

By
Craig Mellow
https://www.barrons.com/articles/turkey-pays-a-financial-price-for-its-politics-1533916009

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1. ETFs With The Lowest Valuations

Bargains Abroad

Instead, most of the bargains are found in ETFs that focus on equities outside the U.S. Of the 20 cheapest funds by valuation, the vast majority target international equities, and emerging market stocks in particular.

Of course, an ETF with a low P/E ratio doesn’t necessarily mean it’s a great investment. It simply means most of the stocks in the fund are trading at low prices compared to their recent earnings.

It’s a good starting point for value investors, but it’s just the first step in a more comprehensive due diligence process.

https://www.etf.com/sections/features-and-news/etfs-lowest-valuations?nopaging=1

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View From the Top Team

1.The Power of Compounding….Holding through 2 Massive Bear Markets.

In the past 20 years, equity investors have suffered through the two largest bear markets since the 1930’s yet ended up 300% ahead

https://twitter.com/ukarlewitz

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