Markets

Bigger paychecks for US workers could be bad news for stocks

Business Insider — Sat, 13 May 2017 06:31:00 -0400

With the unemployment rate at its lowest level in a decade, slack in the labor market has all but evaporated. That leaves higher wages as the logical next step in the ongoing cycle of economic expansion.

It's a cruel twist of fate for S&P 500 companies that have successfully resurrected profit growth from a five-quarter recession but now face the prospect of lower margins going forward.

With margins for nonenergy companies having hovered near a record high for roughly the past three years, stock investors have seen the reckoning coming. As such, they have already begun rewarding companies with the lowest labor costs, with the logic being that they'll be able to better absorb wage hikes.

A 50-company basket of stocks with low labor costs maintained by Goldman Sachs — which includes Netflix, Exxon Mobil, Citigroup, and Facebook — has climbed 22% since July. That's more than double the return of a high-labor-cost index over the period, according to Goldman data. The latter basket features the likes of Chipotle, General Mills, Morgan Stanley, and Quest Diagnostics.

One way for companies to compensate for higher wages would be to boost revenue. To Goldman, the best-case scenario for this would be for the two to cancel out, leaving margins roughly flat. But the firm's more realistic forecast calls for each 100-basis-point acceleration in wage growth to reduce S&P 500 earnings per share by 1%, with small-cap profits shrinking by 2%.

"Although the long-term upward trend in margins may continue eventually, we expect rising wages will prevent significant further expansion in S&P 500 margins during the next few years absent corporate tax reform," a group of Goldman strategists led by Ben Snider and David Kostin wrote in a May 9 client note.

So which parts of the S&P 500 are most vulnerable to rising wages? Goldman says it's industrials and consumer discretionary — that is, the sectors that could have the biggest negative EPS impact from high labor costs:

And those companies know it. Goldman points out that during earnings calls this quarter, industries including airlines (Southwest, American, United), railroads (Norfolk Southern, Kansas City Southern, Union Pacific), restaurants (Chipotle, Darden, Yum), and retailers (Dollar Tree, Tiffany, Dollar General) all mentioned headwinds from labor inflation.

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Politics matters for economics — but maybe not in the way you think

Elena Holodny — Sat, 13 May 2017 05:00:00 -0400

A Bank of America Merrill Lynch team found that consumers' feelings about the economy were mostly tied to underlying "hard" economic data
Political uncertainty didn't seem to have much effect on those feelings
Despite that, politics — and the policies that emerge from election results — may matter

Politics and economics are often intertwined, with the winners of elections having influence over policies that can affect the lives of millions.

However, the effects of political uncertainty, like that surrounding the recent election in France that went to a runoff in which centrist Emmanuel Macron defeated far-right nationalist Marine Le Pen, on consumer confidence are not necessarily as clear cut as one might think.

In a recent report to clients, a team at Bank of America Merrill Lynch led by Gilles Moec analyzed the effect of political uncertainty on consumer sentiment in France and Italy.

They found that consumer confidence is "generally very well" explained by a handful of "hard" economic variables, like income and employment figures.

However, changes in "pure sentiment" unrelated to those hard variables don't necessarily mean a change in consumption decisions (aside from, maybe, the last few quarters in Italy).

Meanwhile, political uncertainty on its own didn't have any "obvious" effect on confidence.

That being said, this doesn't mean that politics doesn't matter for understanding a country's economy, Moec said.

"It does, but far more through the actual implementation of policies, affecting income, employment and asset prices, the 'hard' determinants of spending, than through the 'confidence channel,'" he explained.

"In short, when looking at political developments, policy implementation should remain the main focus of market attention."

Modeling sentiment

Now, let's look at the team's actual analysis. (For the sake of clarity, and in light of the recent election, we're going to stick with just the data on France.)

First up, the team attempted to estimate "pure sentiment," or changes in consumer sentiment distinct from what would be expected based on economic fundamentals. They reasoned that this component of sentiment could be most susceptible to being influenced by political uncertainty.

They estimated a model for consumer confidence by changes in income, consumer prices, employment, and equity prices, and found that these four variables together can explain 84% of the variance in consumer confidence from 2000 to 2014 in France, leaving 16% as unexplained "pure sentiment."

Of course, the team added it might have missed some other "hard" variables and that the remainder might not be completely "pure sentiment."

They then found virtually no correlation between the "pure sentiment" residual confidence and the policy uncertainty index, which you can see on the adjacent chart.

To cross-check the possibility that they might not have been using the "correct" indicator for political uncertainty, they also tested out France's "immigration fear index," which has soared to an all-time high in the last three years. However, again, they found no link between that index and consumer confidence.

Interestingly, if anything, there was a very slight, counter-intuitively positive correlation — slightly stronger than with the policy uncertainty index.

Next, the team analyzed actual consumer behavior, estimating a model for actual household consumption using the same four "hard" variables from before. They found that those hard variables correlated quite closely with the observed household consumption data.

Again, from their report (emphasis ours):

"If 'pure sentiment' — the part of consumer confidence that is not explained by the same hard variables — has a bearing on actual consumption decisions, then we should find a significant correlation between the residuals of the two models. We don't. Since [the first quarter of 2000], periods when consumer confidence is higher than what is warranted by the fundamentals do not coincide with period when actual consumption exceed the value predicted by fundamentals.

"For instance, the persistence 'confidence excess' in France since 2015 did not coincide with any 'consumption excess': private consumption behaved exactly as the developments in income, inflation, job creation, and equity prices suggested."

Oddly enough, although the team couldn't find statistical relevance of policy uncertainty for their confidence equation, they found a very slight correlation in their consumption equation.

In other words, although policy uncertainty might not greatly affect what people say about their economic outlook, the authors wrote it might kind of "subconsciously" affect what consumers actually do.

A lesson for America

Although the authors didn't conduct a comparable analysis for the effects of political uncertainty on the US economy, they suggest "there might even be a lesson for the US there: despite the post-election jump in consumer confidence, consumer spending has slowed in recent months."

Since US President Donald Trump's election, a bunch of sentiment indicators have shot up. For example, consumers now think the government is great for business. But at the same time, we have not seen the hard data match the improving sentiment, yet. And Trump's pro-business tax cuts and deregulation agenda have not yet come into effect, meaning that some of the benefits that firms are anticipating might not actually happen.

The crux of the debate stateside has been as follows: Will these improving sentiment indicators actually translate to concrete improvements in the US business sector, or are they just a reflection of Americans' (and, more specifically, Republicans') hopes for the current US administration?

Of course, we won't know the answer until after we see what the Trump administration actually pushes through. It will also take time for the effects of those policies to show up in the hard economic data.

But, in any case, it's fascinating to study the interplay between political and economic sentiment and consumer behavior.

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A UK hedge fund made a $500+ million bet on Wells Fargo (WFC)

Rachael Levy — Fri, 12 May 2017 17:20:50 -0400

UK-based hedge fund firm Lansdowne Partners invested more than half a billion in Wells Fargo in the first quarter.

The fund invested about $544 million in the bank during the first three months of this year, according to a Bloomberg analysis of Lansdowne's 13-F filing.

The fund also increased its position in Bank of America, one of the fund's top holdings, with a value of about $1.1 billion, the analysis shows.

Investors filed 13-F documents within 45 days of each quarter's end, so the fund's positions may have since changed.

The filing also does not give a full picture of an investor's portfolio, as it only shows its long stock positions, as well as options and convertible bonds.

In other words, what appears to be a long position could be hedged out by other means.

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A pair of hedge fund giants bought Snap shares last quarter (SNAP)

Greg Hoffman — Fri, 12 May 2017 17:15:28 -0400

David Tepper's Appaloosa Asset management and Daniel Loeb's Third Point both acquired shares of Snap stock during the first quarter, filings show.

Appaloosa bought 100,000 shares representing a $2.25 million investment, while Third Point purchased 2.25 million shares for a total investment of almost $51 million.

Snap's had a disastrous run this week after the company reported earnings for the first time as a publicly traded company on May 10. The shares plunged 21% after that report, before rebounding slightly the next day.

Because the filing represents the transactions from the first quarter, it is impossible to know if the two funds lost money in Snap's post-earnings crash or even own the shares still. If neither investor has sold any shares, then today Appaloosa's investment would be worth $1.914 million and Third Point's $43.065 million

Financial giant Fidelity also gobbled up a significant chunk of Snap stock in the first quarter, the asset manager and broker-dealer purchased 33.2 million shares valued at $748.1 million.

Click here for a real-time Snap chart.

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Seth Klarman's Baupost made a near $500 million bet (QCOM, QRVO)

Rachael Levy — Fri, 12 May 2017 16:54:03 -0400

Baupost Group invested nearly half a billion dollars in semiconductor company Qorvo in the first quarter, a regulatory filing shows.

The Boston-based hedge fund firm invested about $493 million in the first three months of this year, according to the firm's first-quarter 13-F filing.

The firm also invested $299 million in Qualcomm, the filing says.

Investors must file 13-F documents within 45 days of each quarter's end, so Baupost's positions may have since changed.

The filing also does not give a full picture of an investor's portfolio, as it only shows its long stock positions, as well as options and convertible bonds.

In other words, what appears to be a long position could be hedged out by other means.

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David Tepper made a big bet on Bank of America (BAC)

Matt Turner — Fri, 12 May 2017 16:39:48 -0400

David Tepper's hedge fund Appaloosa made a big bet on Bank of America.

The firm invested $207.2 million in the bank in the first quarter of this year. It was the biggest new bet the fund made in the period.

That info is based on a Bloomberg analysis of a regulatory filing that the firm submitted. The quarterly filing, called a 13F, lists the long stock positions of investment firms. The positions are current as of 45 days prior, so it is possible that Appaloosa has since changed its positions.

Appaloosa also:

Invested $72.4 million in CBS.
More than doubled its stake in Micron to $193.3 million.
More than doubled it stake in Southwest Airlines to $166 million.
Cut its investment in Allergan by almost a third to $701.7 million.

The five top holdings at the end of the first quarter were: Allergan, Williams Partners, Alphabet, Facebook and PNC Financial.

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STOCKS SLIP LOWER: Here's what you need to know (SPX, CCMP, INDU)

Joe Ciolli — Fri, 12 May 2017 16:02:27 -0400

Stocks slipped on Friday amid underwhelming economic data on consumer prices and retail sales.

All three major indices moved less than 0.2% as stocks stayed mired in a tight trading range. The S&P 500 declined further from record highs reached on Wednesday.

First up, the scoreboard:

Dow: 20,896.61, -22.81, (-0.11%)
S&P 500: 2,390.90, -3.54 (-0.15%)
Nasdaq: 6,121.23, +5.27 (+0.09%)
US 10-year yield: 2.34%, -0.07
WTI crude: $47.89, +0.06, (0.13%)

1. US consumer prices rebounded in April. The consumer price index, a measure reflecting price changes based on a basket of consumer good, rose 0.2% from March.

2. Retail sales missed forecasts. Sales rose by 0.4% month-over-month in April. Economists were expecting a 0.6% increase.

3. US oil rig count rose for 17th straight week, extending the longest stretch of gains since 2011. It reached the highest level since the week of April 17, 2015. The streak of gains illustrates that drillers are finding efficient ways to ramp up production in a lower oil-price environment.

4. Bigger paychecks for US workers could be bad news for stocks. Stock investors have already begun rewarding companies with the lowest labor costs, since they're seen as better able to absorb rate hikes.

5. Money is pouring into one of the world's biggest stock markets at a record pace. Investors poured roughly $6 billion into European equities last week, the most in history.

6. JC Penney tanked after a big miss on sales. Net sales totaled $2.71 billion, missing the forecast for $2.77 billion.

ADDITIONALLY:

JCPenney has hit an ugly milestone that no company wants

GOLDMAN: America's biggest companies are obsessed with these 3 themes right now

One Wall Street analyst says Snap is an 'excellent buying opportunity'

UBS: Here are the 10 stocks that are set to explode higher

Macy's has reached a 'sobering breakpoint'

$385 BILLION FUND CHIEF: There are too many fund managers on Wall Street

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What you need to know on Wall Street today

Business Insider — Fri, 12 May 2017 14:36:59 -0400

Welcome to Finance Insider, Business Insider's summary of the top stories of the past 24 hours.

To find the hottest destination for stock traders, Americans must look overseas.

Investors poured roughly $6 billion into European equities last week, the most in history, according to data compiled by Bank of America Merrill Lynch. More than three-quarters of that was absorbed by exchange-traded funds, which also saw record inflows.

In related news, some of the biggest names in investing love Indian stocks. Bigger paychecks for US workers could be bad news for stocks. And you can watch the latest episode of The Bottom Line, Business Insider's weekly markets and economics show, right here.

Elsewhere in markets news, America's biggest companies are obsessed with three themes right now, according to Goldman Sachs. And there are too many fund managers, according to the CEO of a $385 billion fund.

There's a massive series of cyberattacks across the globe right now — and leaked malware developed by the NSA seems to be to blame. Ransomware, software that encrypts the victim's data and demands a ransom to unlock it, has spread across a dozen countries, from England to Japan.

It's impossible to know how President Donald Trump truly feels about Fed Chair Janet Yellen because he has both bashed and praised her depending on his whim. However, it turns out that Trump could fire Janet Yellen if he decided to do so.

An email prankster successfully duped Barclays' CEO into thinking the person was the bank's chairman.

There's a lot of news in the retail sector:

Elsewhere in company news, GE is making a huge bet on its future, and not everyone is convinced it's going to work out. And there's a huge amount of pressure on Snap's latest initiative.

Lastly, here are the 17 best cities for first-time homebuyers.

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UBS: Here are the 10 stocks that are set to explode higher

Greg Hoffman — Fri, 12 May 2017 14:22:41 -0400

In a note to clients circulated May 12, UBS equity research highlighted the bank's top stock picks for the second half of 2017.

"We asked this of all UBS Analysts in North America. Their responses are collected here, to provide you with a snapshot of our highest conviction Buy-rated investment ideas in North America today," the bank said.

Business Insider went through the list and picked out the 10 stocks with the most upside potential according to their UBS analyst price targets compared to their current prices.

10. Allergan

Ticker: AGN

Sector: Healthcare

Performance so far this year: +9.11%

Price target: $275.00

Implied upside potential: 20%

UBS says: AGN has a strong portfolio and investors should gain confidence in growth prospects.

Click here for a real-time Allergan chart.

9. Terex Corporation

Ticker: TEX

Sector: Industrials

Performance so far this year: +2.66%

Price target: $40.00

Implied upside potential: 20%

UBS says: TEX will execute changes to their crane business with a new management team in place. The company will reshape their product offerings overall.

Click here for a real-time Terex Corporation chart.

8. Adient

Ticker: ADNT

Sector: Industrials

Performance so far this year: +21.57%

Price target: $86.00

Implied upside potential: 20%

UBS says: "ADNT is the cheapest auto supplier trading at ~7.5x our 2017E EPS, yet we see a compelling margin expansion opportunity."

Click here for a real-time Adient chart.

See the rest of the story at Business Insider

Nordstrom is 'best-of-breed' (JWN)

Frank Chaparro — Fri, 12 May 2017 14:12:00 -0400

Nordstrom remains a strong player in the retail world despite the ongoing retail apocalypse.

And that has equity analysts at both Credit Suisse and UBS bullish on the stock.

On Thursday, the retailer announced quarterly results that beat on both the top and bottom lines. And while same-store sales were light, a group of analysts at Credit Suisse seemed unfazed, saying Nordstrom is "best-of-breed" in the department store space.

"Nordstrom demonstrated relative outperformance as strength in its eCommerce business (24% of sales and up double-digits) and Nordstrom Rack (30% of sales with comps up 2.3%), offset continued weakness in full line stores (53% of sales, comps down 2.8%)," the analysts, led by Christian Buss wrote.

UBS is singing the same tune. In a note out to clients on Friday, a group of analysts led by Michael Binetti praised the company for strong performance amid its industry's troubles. The bank said a sell-off in the stock on Thursday was an "over reaction" by the market.

"We think JWN’s underlying fundamental story remains intact after 1Q—particularly given the significant SSS misses from [Kohl's] & [Macy's] in the qtr—and believe Thursday’s stock reaction to read-throughs from the d-stores group was overblown given the relative strength of JWN’s qtr," the analysts wrote.

UBS noted Nordstrom's "slightly worse-than-expected" same-store sales, but pointed out some bright spots for the company including solid inventory control.

Both Credit Suisse and UBS are bullish on Nordstrom. Credit Suisse has a $52 price target for the stock, and UBS thinks the stock will go to $51. Both targets are above the firm's current stock price of $41.92.

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US oil rig count rises for 17th straight week, extending the longest stretch since 2011

Akin Oyedele — Fri, 12 May 2017 13:01:53 -0400

The US oil-rig count rose this week by nine to 712, according to the oilfields-services giant Baker Hughes.

That's the highest level since the week of April 17, 2015. The increase extended the longest stretch of rig additions in six years, illustrating that drillers are finding efficient ways to ramp up production in a lower oil-price environment.

OPEC and other key producers will meet on May 25 to decide whether to extend their agreement to cut production by almost 1.8 million barrels per day. They reached the unprecedented agreement, which kicked in this year, in November to reduce the global oversupply of oil that crashed prices. But the resilience of US oil producers has helped keep a lid on prices.

West Texas Intermediate crude oil futures, the US benchmark, was on pace for a 3% weekly rise, its first increase in four weeks and the biggest in five. On Wednesday, data from the Energy Information Administration showed that crude inventories fell by 5.3 million barrels last week, which was more than analysts had expected.

WTI was down by 0.4% at $47.64 per barrel after the rig-count release.

One gas rig was taken offline, for a total of 172. With the count of one miscellaneous rig unchanged, the total rig count rose by eight to 885.

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Macy's has reached a 'sobering breakpoint' (M)

Frank Chaparro — Fri, 12 May 2017 12:33:00 -0400

Macy's is feeling the brunt of the retail apocalypse.

Stores are shutting down across the US and firms are witnessing their profits diminish as e-commerce firms such as Amazon continue to win over shoppers.

On Thursday, shares of Macy's plummeted after the firm's disappointing earnings report.

In a note written by a group of equity analysts at UBS led by Michael Binetti, the bank said the retailer was dealing with numerous issues including mall traffic hitting a "sobering breakpoint."

The department store reported that same-store sales missed consensus estimates by more than a full percentage point, contracting by 4.6% in the first quarter on an owned-plus-licensed basis; analyst forecasts anticipated a 3.5% year-over-year decline.

In addition, the cosmetics category, which has been a strong source of sales for Macy's, is struggling.

"The company saw elevated promos in the high margin/high frequency cosmetics category (cosmetics also contributed to the GM miss) — likely reflecting volumes for the category moving off-mall to pure-plays like ULTA or even offprice," the analysts wrote.

The handbag and watches categories at Macy's are also under pressure.

As such, the bank has dropped its price target for the stock to $26 from $34. That's still above the current market price of $23.80 a share.

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There's one part of this Trump-China deal that slaps a bunch of his supporters in the face

Linette Lopez — Fri, 12 May 2017 12:23:38 -0400

One part of the trade deal with China that President Donald Trump announced on Thursday is a total slap in the face to everyone who wanted him to be tough on China.

As part of the deal, the United States will send a delegation to Beijing for a forum on China's "One Belt, One Road" infrastructure initiative.

The initiative is meant to connect China to the world by building high-speed trains and highways in other countries.

China thinks of it as a modern-day Silk Road — a form of soft power that would display its ability to build modern infrastructure and connect the world.

You can see how the US getting involved in a Chinese-led pro-globalization initiative could drive nationalists like White House Chief Strategist Steve Bannon up a wall.

Until this deal — which included China giving the US access to its beef market and parts of its financial-services industry — the US had no plans to attend the forum, and Chinese media was making a big deal of it. In one series of state-sponsored videos touting the forum, Erik Nilsson, an American journalist at China Daily, explained the importance of "One Belt, One Road" to his daughter as a series of bedtime stories.

Nilsson said in the videos that while 65 countries would attend the two-day event, the United States had not yet signed on. He shared his belief that this, of course, was a mistake, since the project is about globalization and is China's gift to the world.

"It's good for people. We live happier lives when we cooperate," he said. "That's why countries want to join the Belt and Road."

Cue Bannon grabbing his smelling salts.

This project isn't just a love song for globalization — it flies in the face of the "Buy American, Hire American" ideology Trump has touted. The entire point of "One Belt, One Road," after all, is China helping to build infrastructure projects in other countries.

And this is important to China not just because it wants to promote a globalized world — the country has tons of excess capacity in commodities like steel and aluminum, and a big international infrastructure push could help use some of that excess. Both the Trump and Obama administrations have been tough on China subsidizing those industries, or dumping excess capacity into US markets illegally.

It already was clear the tough-on-China Trump we met during the 2016 campaign was no longer with us. The first sign was when he let go of naming China a currency manipulator, finally admitting the country was no longer depressing the value of the yuan — though his timing on when that stopped is still wrong.

The second was his friendly meeting at his Mar-a-Lago resort in Florida with Chinese President Xi Jinping. After that, the Trump administration announced it would work on a 100-day trade cooperation initiative with the Chinese. That's where the new deal came from — and, in reality, deals like this fit the Trump ideology of bilateral trade deals that expand US market access.

The deals Trump has made so far mostly are ones the Obama administration would have pursued, too — but not this "One Belt, One Road" forum. That's Trump going above and beyond.

And some people who supported him probably aren't happy about that.

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Here are the 17 best cities for first-time homebuyers

Raul Hernandez — Fri, 12 May 2017 12:01:00 -0400

Zillow, a leading real estate and rental marketplace, has put out a list of the top housing markets for first-time homebuyers.

"These markets have more favorable conditions for first-time buyers to become homeowners. More challenging metros aren't out of reach for new buyers, but they should be prepared to face a more competitive buying environment," said Zillow Chief Economist Dr. Svenja Gudell.

The rankings are based on Zillow Real Estate Research's housing data and research covering more than 450 markets.

Here's the list of first-time homebuyers' best housing markets:

17. Riverside, CA

Breakeven Horizon 1Q 2017: 2 years, 5 months

Inventory: 14,462

Households: 1,343,526

Annual Forecasted Home Value Appreciation: 3.8%

Share of Listings with a Price Cut: 13.4%

Source: Zillow

16. Philadelphia, PA

Breakeven Horizon 1Q 2017: 2 years, 7 months

Inventory: 26,597

Households: 2,233,752

Annual Forecasted Home Value Appreciation: 2.3%

Share of Listings with a Price Cut: 17.3%

Source: Zillow

15. Houston, TX

Breakeven Horizon 1Q 2017: 2 years, 4 months

Inventory: 24,960

Households: 2,292,992

Annual Forecasted Home Value Appreciation: 1.5%

Share of Listings with a Price Cut: 17.9%

Source: Zillow

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RANKED: The 20 most successful fast-food chains right now (MCD)

Kate Taylor and Diana Yukari — Fri, 12 May 2017 11:44:00 -0400

Fast-food chain are raking in billions of dollars every year.

But which chain rises above the rest?

QSR Magazine tracks the earnings of the biggest brands in the business, compiling data on chains' revenue for 2015. We used that information to create a graphic, ranking the 20 most successful restaurant chains around.

Unsurprisingly, when it comes to sales, no one is able to beat fast-food giant McDonald's.

Here's how the rest stacked up:

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JCPenney has hit an ugly milestone that no company wants (JCP)

Akin Oyedele — Fri, 12 May 2017 11:43:23 -0400

JCPenney shares are at an all-time low, below where they first traded publicly early in 1978.

Retailers sold off for a second day after earnings results again confirmed the brick-and-mortar industry is in trouble.

JCPenney fell by as much as 10% on Friday, to a record low of $4.73 a share. That's nearly 50% below its debut price. The stock has been split at least twice, in the late 1980s and early 1990s.

JCPenney's first-quarter earnings, released Friday, showed that sales at stores open for at least one year fell 3.5% from Q1 2016, steeper than the 0.7% drop that analysts expected.

Shoppers who flocked to malls in the past are now doing most of their buying online at places like Amazon that can be more convenient and make returning easier.

Some consolidation in physical retail was plausible, since the US has the highest amount of retail space per person worldwide — 23.5 square feet — according to a Morningstar Credit Ratings report from October.

Over 3,000 stores are expected to close this year.

There are bright spots in a few areas, like home improvement and off-price retailing, said Craig Sterling, the head of US equity research at Pioneer Investments. "But everybody else I won't go near because you don't know how bad it's going to get," he told Business Insider on Thursday.

"The discounting has gotten a little better, but they cannot compete with e-commerce," he added. "They have not figured out how to profitably deal with returns" of purchases.

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Here are the most popular baby names in the US

Andy Kiersz — Fri, 12 May 2017 11:43:00 -0400

Noah and Emma are extremely popular names for newborns.

Every year around Mother's Day, the Social Security Administration publishes statistics on the popularity of baby names for the previous year, based on their comprehensive records of births in the US.

We took a look at how the popularity of the 10 most common boys and girls names in 2016 has changed over the last decade.

For boys, the most common name, Noah, has steadily gained in popularity since 2007, while the second-most popular name, Liam, has had a much sharper rise from just the 89th most popular name in that year. The rest of the top ten are all fairly close to each other:

Emma was the most popular name for baby girls for the third year in a row, although its frequency has been slowly declining and it maintains only a narrow lead over second-place Olivia. The fifth most popular name, Isabella, dominated in 2009 and 2010, around the same time as the peak popularity of the Twilight series and its protagonist Bella Swan.

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$385 BILLION FUND CHIEF: There are too many fund managers on Wall Street

Frank Chaparro — Fri, 12 May 2017 10:54:52 -0400

Investors have been pouring their money into low-cost index funds at a clip, leaving some people wondering if the active management business is dead.

Warren Buffett, the billionaire every investor looks to for advice, has repeatedly said anyone who gives their money to someone to manage is essentially throwing money away.

Business Insider recently asked Martin Gilbert, the head of Aberdeen Asset Management, a $385 billion dollar money manager, whether criticism against active management had any teeth.

In a wide-ranging interview with Business Insider, Gilbert said he agreed with Buffett in some cases.

"I think for some investors, just buying an index fund is the right way to go," Gilbert said."Good active fund managers can outperform indices consistently, so if you do find the right active fund manager it's clearly better than a passive fund."

He also said that "there are probably too many asset management companies in the world." Aberdeen has announced a merger with UK peer Standard Life, in a deal that would create a group with a combined £581 billion ($750 billion) in assets under management. Gilbert is due to be co-CEO of the combined group.

Here's what Gilbert had to say:

Gilbert: I think for some investors, just buying an index fund is the right way to go. Good active fund managers can outperform indices consistently, so if you do find the right active fund manager it's clearly better than a passive fund. In areas like US large cap, which are becoming more and more commoditized, even the Warren Buffett's of this world would buy an active fund rather than passive.

BI: Where does it make sense to invest in active management?

Gilbert: It still makes sense to invest with active fund managers in areas like emerging market equities, global equities, Asian equities, emerging market debt. Any of these areas, there is still huge scope to outperform because of the inefficiencies in these markets. An example would be, you could underweight Russia, overweight India, or underweight India, overweight China. There's a huge asset allocation opportunities, and huge opportunities in stock picking because the markets are relatively inefficient compared to the very efficient large cap markets.

BI: How do active managers fight back?

Gilbert: Asset management CEOs globally are looking at their business models. They're looking at costs, they're looking at making their businesses more efficient, because they're seeing revenues under pressure all over the world.

BI: Is the problem that there are just too many asset managers?

Gilbert: I think there are probably too many asset management companies in the world, and I think the place to be is either big or small. The area where it is probably more difficult to be is in the middle ground, where you've got that cost of regulation, you've got the cost of buying your own research, you've got all the costs of running an asset management company without the benefits of a big income producing asset.

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GOLDMAN: America's biggest companies are obsessed with these 3 themes right now

Akin Oyedele — Fri, 12 May 2017 10:46:49 -0400

Roughly 93% of all the companies in the S&P 500 had reported their first-quarter earnings by Friday.

After combing through earnings calls, three big themes stood out to David Kostin, Goldman Sachs' chief US equity strategist: economic growth, regulation, and wage growth.

The first two of these themes largely tie to the economic agenda of President Donald Trump's administration.

But mentions of one theme suddenly dimmed on the radar compared to the peak of election season in the fourth quarter: Trump himself.

Goldman published its quarterly S&P 500 Beige Book on Thursday, borrowing the concept from the Federal Reserve's similar release of anecdotes on the economy.

Here's a sampling of quotes on these three themes:

Economic growth

Most companies acknowledged that confidence in the economy has spiked since the election, but that hasn't translated to stronger consumer spending, or demand for their products.

"The first thing I’d say is that through March 31, as we look at our results, it’s hard for us to see anything that’s suggestive of a material uptick in consumer confidence or consumer or commercial spending," said Jeffrey Campbell, the chief financial officer of American Express.

"While we have been gaining momentum, as we look at the many different areas gaining momentum, we can see a change that we have made in how we’re running the business and what value propositions we’re offering, et cetera, that seems to be what is driving the change, as opposed to us getting the benefit of just a generally stronger economic environment."

Regulation

Business confidence rose partly on the back of expectations that the Trump administration would roll back expensive regulations.

"Animal spirits were obviously awaken[ed] by the policy direction of the new administration, policy direction that I personally endorse when it comes to regulation of business; less regulation," said Evan Greenberg, the CEO of Chubb. "God, get government out of our way."

However, the exact timing of deregulation is uncertain.

"We would have expected sometime over the last couple weeks to have gotten clarity," Visa CEO Alfred Kelly said during an earnings call. "There was supposed to be clarity no later than the end of March on the next chapter of regulation or guidance in terms of how things would have to go forward. And there hasn’t been, and we’ve been told that it will be delayed likely into early May."

Labor inflation

With the unemployment rate at a pre-recession low, the labor market appears to be near full employment. That's causing wage pressure at the company level, and on minimum wages in several states including California and Washington.

Higher wages could hurt margins and stock prices, but are great news for workers.

"Once you start making money, you’ll give more to labor than you did when you were making less money, and they’ll take some of the upside that should go to shareholders," said William Douglas Parker, the CEO of American Airlines.

"This is getting to a level of compensation across the industry that needed to occur. And once you get to that level, I think you’ll see, as you do in other mature businesses, that labor costs, certainly one, you get efficiencies over time, as good businesses do ... but all of us had to get to a point where we got to what, really, team members in this business deserve."

See the rest of the story at Business Insider

Trump could fire Janet Yellen — Comey-style

Pedro Nicolaci da Costa — Fri, 12 May 2017 10:45:00 -0400

It's impossible to know how President Donald Trump truly feels about Federal Reserve Chair Janet Yellen because, as he does so often, he has both bashed and praised her depending on his whim.

During his campaign, Trump said that Yellen was doing a good job but that he would not renominate her because she is a Democrat, a clear violation of the basic principle of central-bank independence from politics.

Later, when the campaign was heating up, Trump accused Yellen of keeping interest rates low to help President Barack Obama.

Since taking office, Trump has reverted to liking her, saying he might keep her in the job when her term expires early next year after all. "I do like a low-interest-rate policy, I must be honest with you," Trump said.

After Trump's incendiary firing this week of James Comey, who as FBI director was leading the bureau's investigation into Trump and his associates' ties to Russia, a smart market analyst asked me a question over lunch that I did not have the answer to: Could he do the same thing to Yellen if, say, she decided to keep raising interest rates and Trump wasn't happy with the policy?

So I contacted a few smart folks with deep knowledge of the Federal Reserve, and they pointed me to the specific language showing that, yes, the president does have the power to fire Yellen, despite the central bank's ostensible independence.

Read the relevant statute below:

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