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LIVE MARKETS-Hotel operator Ashford Trust shares soar after fee waiver

Thu, 22nd Oct 2020 18:53

* All three major indexes in green; small caps outperform
* Markets await stimulus negotiation outcome
* Tech down most among major S&P 500 sectors; energy leads gainers
* Dollar, crude up; gold down; U.S. 10-Yr T-Nt yield up to ~0.84%

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You
can share your thoughts with us at markets.research@thomsonreuters.com

Shares of Ashford Hospitality Trust Inc soared more than 40% on Thursday before paring most
of those gains after a company that manages the troubled hotel operator waived monthly fees in
what a dissident shareholder called an unexpected sign of good governance.
The rally in AHT, a real estate investment trust whose shares have plummeted this
year as the COVID-19 pandemic slams the leisure industry, comes amid a battle over an AHT
proposal to exchange all preferred shares for common stock.
AHT said in a regulatory filing after the market closed on Wednesday that the independent
board of overseer Ashford Inc agreed to a 30-day deferral of fees and expense
reimbursements for the services it provides AHT.
"It's a step, a small step, in the right direction," said Christopher Swann, chief executive
of Cygnus Capital, an Atlanta-based investor in distressed real estate. "Management at least is
thinking about trying to be more shareholder focused."
Ashford Inc's chairman and chief executive, Monty Bennett, is also AHT's chairman and the
two companies share executives.
Cygnus maintains that AHT is being run to maximize AINC's management fees and that
management running the two companies have a greater economic interest in the survival of AINC
than AHT.
There has been interest in AHT because the market sees it as a proxy for the hospitality
industry's health and potential rebound, Swann said. Cygnus has increased its stake in the
company to about 9.4% from 7.8% in late September.
AHT shares jumped to $2.30, a 42% gain on the day, before sliding to $1.87 in afternoon
trade on Thursday. About 7.5 million shares traded, or more than half its 13.1 million shares
outstanding. Shares fell to an all-time low at $1.31 a week ago.
Separately on Thursday, the S&P real estate sector is trading off about 0.3%.

(Herbert Lash)

Vanguard Group Inc is scrapping its famed ship logo.
Since 1981 reports, advertisements and other material from the mutual fund leader have
included a likeness of the HMS Vanguard, the flagship of British Admiral Horatio Nelson at the
Battle of the Nile in 1798.

Vanguard founder Jack Bogle said he named the parent of funds like the Vanguard 500 Index
Fund after the ship in order to send a message “that our Vanguard would be, as the
dictionary says, ‘the leader in a new trend',” according to a company biography of Bogle, who
died in 2019.
But the detailed image of the warship, with fine lines for its masts and rigging, “does
not display well in a digital environment” and is in the process of being retired, Vanguard
spokeswoman Dana Grosser said via e-mail. A new Vanguard iconography, developed by brand
consultant Lippincott, highlights the "V" in the company's name.

Daniel Wiener, who edits a newsletter for Vanguard investors, spotted the change in recent
fund filings and flagged it in a note to readers. "Jack Bogle's boat is gone," he wrote.
He wondered if the move might reflect the company distancing itself from the vessel since
another ship named Vanguard was involved in the slave trade.
Grosser said research backs up those facts but said the second ship's history played no part
in the decision to drop the logo. “They were two difference ships,” she said.

(Ross Kerber)

"It’s not over until it’s over," says Nicholas Colas, co-founder of DataTrek Research.
Indeed, Colas is out with some commentary on the coming election and online prediction markets.
Colas says that the average of offshore bookmaker's odds, as reported by Real Clear
Politics, give former VP Biden 63%–65% odds of winning vs 38% for President Trump.
Meanwhile, he adds that the latest PredictIt odds are similar: 65% for Biden, and 40% for
Colas believes turnout should be extremely high, saying that PredictIt’s modal estimate is
for 157 mln votes to be cast in the 2020 Presidential contest vs 129 mln in 2016.
He also points out that PredictIt users give 62% odds of the Democrats controlling both the
House and Senate in 2021.
"But...And this is a big caveat," says Colas, "Let's not forget what PredictIt users were
discounting 4 years ago today."
Colas notes that on October 21, 2016, former Secretary Clinton's odds stood at 82%. And even
in the final throes of the campaign season, Clinton was the overwhelming favorite. "And then
came November 7th…"
Colas' main takeaway is that prediction markets, like capital markets, can get things quite
wrong. "Their virtue lies in aggregating opinions from disparate and (ideally) non-correlated
sources...but it is not a flawless crystal ball."
In the end, Colas believes Trump’s surprise 2016 win will keep the PredictIt odds "tight all
the way through election day."

(Terence Gabriel)

This session was quite a ride in Europe!
The pan-European STOXX 600 lost over 1.1% in less than fifteen minutes at the open,
falling to its lowest level since September 25, but then switched on recovery mode, bouncing
back 1.4% from that bottom by early afternoon.
It then gradually fell back 0.8% before a last attempt to reach positive territory in the
last hour of trading, which failed.
"The midday rebound seemed related to good news out of the Oxford vaccine trials, with
reports that it was prompting a ‘strong immune response’ in patients", commented Connor Campbell
at Spreadex.
Yet, "the markets remain deeply worried by the scope and scale of rising covid-19 cases and
subsequent restriction measures around the world, but especially in Europe", he added.
At the end of the day, the STOXX closed 0.2% lower, which would not be much of setback if
this wasn't the fourth straight session in the red.
We're now so far set for a weekly loss of 2%, the worst performance since the end of
September. Year-to-date, it adds up: -13.4% versus +6.4% for the S&P 500.

(Julien Ponthus)

Thursday data showed jobless claims falling to a level of merely dreadful and existing home
sales surging to heights last seen during the housing bubble.
The number of new unemployment claims dropped last week to 787,000 according to
the Labor Department, 73,000 fewer than analysts expected.
Still, layoffs remain at a bruisingly high level - 18.3% higher than the darkest week of the
Great Recession - suggesting a sputtering recovery in the labor market as the stimulus well runs
Ongoing claims reported on a one-week lag, also beat consensus, falling to
8.373 million. The decline likely reflects a mix of rehiring and the expiration of benefits.
But some analysts see these declines potentially reversing in the coming weeks.
"We doubt (falling claims) will continue as Covid infections spread rapidly, pushing down
demand for discretionary consumer services, especially in the hospitality sector," writes Ian
Shepherdson, chief economist at Pantheon Macroeconomics. "We would not be at all surprised to
see claims start head higher over the next few weeks."

In a separate report from the National Association of Realtors (NAR) sales of pre-owned
homes jumped 9.4% in September to 6.54 million units on a seasonally-adjusted
annualized basis, the highest level since May 2006.
The size of the increase blasted past the 5% economists forecast, and further illustrates
the housing market's meteoric rebound from the pandemic recession. The sector is clearly on the
upward trajectory of what many are calling a K-shaped recovery.
Record low mortgage rates and an exodus to the suburbs in search of lower density population
and home office space have shifted demand into overdrive.
But tight supply - down 19.2% from a year ago - has driven home prices higher and could
prove to be a headwind for the sector going forward.
"The combination of tight inventories and strong demand pushed median home prices to a
record high," says Nancy Vanden Houten, lead U.S. economist at Oxford Economics. "The rise in
home prices will hurt affordability, all else equal, and price some buyers out of the market."

The major U.S. stock indexes took an abrupt U-turn in mid-morning trading, diving into the

(Stephen Culp)

In the movie "Cocktail" the character of "young Flanagan" offered sage words: "Everything
ends badly, otherwise it wouldn't end."
When looking at charts, there is a pattern that argues that there may be a bad end coming,
and that's a parabolic rise.
A parabolic rise is an exponential move, where the angle of ascent increases to such a
point, it becomes unsustainable. This can lead to a very sharp reversal once the parabolic curve
is broken.
A parabolic rise can be the result of extreme greed, and/or manic behavior, on the part of
investors and traders.
An example of a parabolic rise, and its end, can be seen in the daily chart of Bitcoin
leading up to its late-2017 top:

From early in 2017 to late 2017, Bitcoin rallied nearly 2000%. However, once its thrust
exhausted, it lost more than 80% of its value into its late 2018 low.
There is another chart that now appears to be showing a parabolic rise. That's a daily chart
of the WilderHill Clean Energy Index / Point Bridge GOP Stock Tracker Index

The ECO reflects the market performance of clean energy and climate-change solutions'
stocks. This group is clearly seen as benefiting from a Biden/Democratic Presidential election
win. The MAGA index is made up of 150 companies from the S&P 500 index whose
employees and political action committees (PACS) are seen as highly supportive of Republican
Of note, the ratio bottomed in early-November 2012, just after the re-election of President
Obama. From its early 2014 top, it declined before bottoming just after the election of
President Trump in late November 2016.
Since then, the ratio has risen, perhaps as the result of a developing longer-term global
trend in favor of renewable energy. That said, since odds maker PredictIt showed a Biden Victory
in early June, the ratio appears to have launched into a parabolic rise.
The sheer force of the ratio's rise can reflect the market's belief in a blue-wave
. That said, the parabolic rise can also suggest that the ECO's relative rise vs the
MAGA can be at risk for an especially severe reversal in the event of a surprise.

(Terence Gabriel)

It looks like it has become too expensive for speculative-grade (non financial) companies in
EMEA to borrow fresh cash. As a result, they are increasingly opting to roll up existing debt
with lenders, a recent report suggests.
The total debt of those companies jumped by nearly half since 2019 to $1.6 trillion, but
only a portion of this increase is due to fresh cash borrowed during the pandemic, says rating
agency Moody's
This is because "speculative-grade companies have increasingly relied on revolving credit
facilities with banks during the pandemic".
"This is exemplified by the higher level of drawings under these facilities. The trend
suggests that bond issuance became too expensive and unattractive for many," the rating agency

(Joice Alves)

On October 12, the Nasdaq Composite ended around 1.5% shy of resistance at its
September 02 record closing high at 12,056.443, and its record intraday high of 12,074.065.
With this, the Nasdaq daily Advance/Decline (A/D) line, or a cumulative measure of
net advancing stocks in the index, went into battle with a number of major chart barriers. So
far, the Nasdaq breadth measure has turned tail and run, while the Nasdaq Composite has been
beaten back. (Click on chart below)
Indeed, on October 12, the A/D line essentially touched the resistance line from its summer
2018 high. It also came close to both its January 2020 top and its 2018 peak. It has since
declined to a more than 2-week low, as the IXIC has given up slightly more than 3%.
A continued retreat in the A/D line may see the Composite surrender to spreading internal
weakness. In that event, the tech-laden index can be vulnerable to a much deeper
decline. Therefore, it may be critical for the A/D line to quickly recover and clear its
Meanwhile, for the Nasdaq 100, is volatility of volatility about to vault?
And given the S&P 500's froth, that index may be at risk for a greater spill.

(Terence Gabriel)


(Terence Gabriel is a Reuters market analyst. The views expressed are his own)

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