[Market Madness] Edition 0087
Is It Friday Yet?
An aside
Well folks, I apologize for the hanging sentence yesterday in the opening section of Market Madness. I hold myself to a high standard of content and quality and I do not like that I have made some slip ups. We are all human, and I am certainly not free of error, so I appreciate your patience, support and continued reading of each daily edition. The support and community behind Market Madness means the world to me.
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Fundamentals
Thursday Close:
Dow Jones Industrial Avg: -0.50%
S&P 500: -0.34%
NASDAQ: -0.73%
US 10 YR: 0.622%
Crude OIL: $40.72
Market Madness Portfolio: -0.42%
COVID 19 Global Cases: 13,654,445
Indices Overseas:
FTSE 100: -0.67%
Nikkei 225: -0.76%
Hang Seng: -2.00%
TEDRATE: 0.12
LIBOR (3 month): 0.27288%
Seeing red
Economic data comes back to reel investors out of their heightened optimism. Indices overseas closed in the red, and the indices here in the U.S. opened red too. Retail sales rose in June by about 7.5% as reopening processes took place across the U.S., but the continued fear of additional closures is keeping optimism somewhat capped. Big tech companies are due to report earnings over the next three weeks, which will be an interesting time given the recent continued price target increases the FAANG (Facebook, Amazon, Apple, Netflix, Google) club has been getting.
It is no secret that big tech had their shining moments during the lockdowns that forced everyone to go digital to stay working and connected. We’ve begun noticing a trend that signals some counteraction between heightened reopening news and tech stocks. Others, myself included, are growing worried that there is a large overpricing problem happening as tech gained traction as a trend. We have seen P/E ratios boom for many tech stocks, as investors place their bets for upcoming earnings. The worrisome part is what happens when the earnings don’t deliver and investors realize they have been betting on smoke and mirrors.
The P/E ratio simply relates the price you pay for a share of stock, divided by the earnings per share reported by the company. The historic average P/E for the S&P 500 stocks has ranged between 13 and 15 times earnings. What is becoming quite common to see in the marketplace is stocks priced at 30+ times earnings. This ratio helps measure where investors are willing to pay for a share of stock from a company relative to the per-share earnings the company reports.
Other negative news came on the job(less) front. New claims for unemployment came in at 1.3 million, just above the Wall Street estimates of 1.25 million. This news was not taken kindly by the market — as this marks the 17th consecutive week of 1+ million new jobless claims — and is in part why we are seeing red today, drowning out the positive retail sales report and reopening optimism.
Elsewhere, tensions between China and the U.S. continue, with Donnie and AG Barr seeking action against China in the film and TV industries as well as considering a travel ban for Chinese ‘communist party’ members to the U.S., and sanctions targeted as retaliation for actions China took in Hong Kong. Russia also showed up in the news, as they have been blamed for cyber attacks on companies and universities that have been researching vaccines for COVID 19 in hopes to steal crucial vaccine data.
Debates continue on the stimulus front, with latest estimates suggesting a new bill could bring $1.3 trillion, but some are saying that is still not enough. As we all look toward recovery, the question on stimulus will continue. As long as the parties continue to remain so divided, the likelihood of more stimulus and something that appeases everyone is very unlikely.
There is a lot going on in the world out there, and I am amazed each day with the new developments and stories. It is really hard to keep a handle on everything, and it surely will be a rocky road to November. Today’s piece dove into the politics, and it is hard to stay away from it. There is so much out there in the economic and financial realm that is being fueled by politics. Good, bad, or otherwise, I do my best to provide the most impartial news for you all. Thank you for the understanding.
Of markets and medicine
The media has turned more attention toward the actions taking by the White House to remove the CDC from the data collection process with respect to COVID 19. Not good. We as a nation look down on nations that manipulate the access to clear, not altered information from our professional agencies. We should, as a nation stand up against this as well. We all have the right to know that the information we are reading and hearing about COVID 19 is coming from the right professionals and not being laundered to look better.
Why am I so tilted on this? Well, it does matter from an economic perspective. If we start cooking the books to make the hospitalizations and positive case tests look better than they are only to increase our ‘preparedness’ façade to reopening the economy, and more people end up getting infecting and dying as a result, who is to blame? I know that no one particularly enjoys this new ‘normal,’ but that is just what is necessary to make progress forward.
As corporations put together plans to keep their customers and employees safe, so too should our government officials. The governor of Georgia issued a ban this morning on cities that seek to enforce the wearing of masks. Not all states are the same though, with some top officials treading lightly into this ‘brave new world’ we have ahead of us. As Governor Cuomo of NY said, some leaders played politics with the virus and the lost.
With everything going on across this globe, why does it feel that being courteous to your fellow American is now a burden. Times of disaster are supposed to unite one another, not further divide us across political or ideological lines. I’m not requesting anyone to do anything, just think about each of our roles in the larger picture. At the end of the day, everything relates back to economics and economic growth. Politics and ideological tendencies aside, all our goals relate to being able to grow and work in a fruitful economy that will provide us with financial stability now and financial security down the road when we need it the most. There is a lot to think about here, and this is just my $0.02 on the matter, and I appreciate you listening and encourage further conversations with anyone interested.
Quick Takes
More on last evenings twitter hack. Oh, its finally nice to not be verified. (via CNBC)
Macy’s issued $9 million in top-exec bonus following thousands of new job cuts that were necessary to ‘reduce costs’. (via CNBC)
More on Novavax and their government funding for COVID 19 vaccine development. (via NY Times)
Retail sales jump 7.5% in June. (via WSJ)
A Texas take on COVID 19. (via WSJ)
Russia hacks aimed at stealing vaccine research. (via NY Times)
“Texas Governor Greg Abbott denies reports that he is considering statewide shutdown of Texas - Fox 4 News” (via ATOM+, headline only)
Reader’s Corner
The reader shakes their head at the editor’s mistake in yesterday’s piece. However, we only get better by making and learning from mistakes. Forward progression is ahead of us. Please continue sharing and telling your friends about Market Madness, as it is not your average financial journal.
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Behind the Madness
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