[Market Madness] Edition 0090
Babble On
Looking ahead
Well folks, we are in for a fun two weeks between this and next week. Wednesday, we will get Microsoft’s earnings (end of day) and Intel reports on Thursday to kick off the major tech company earnings. Next week, we get a more with Apple, Facebook, and Amazon. Many of these companies have been trading well above their 52 week moving average and, to some, are trading in kind with an overpriced bubble. I won’t get too much into that now until we get some hard earnings data.
Overnight, major foreign indices traded with mixed results. A lot of big global strategies are in play, with the EU working on a recovery bill, the U.S. doing the same, and all major economies continue working the drawing board to see what their recovery path will look like. Continuing with the trend the U.S. set out, the U.K. took a jab back at China with their suspension of an extradition treaty with Hong Kong.
The markets here opened down, but quickly rebounded into the green (with the exception of the Dow Jones being still down) on news from AstraZeneca and Oxford regarding their early trials of their COVID 19 vaccine. U.S. air travel has fallen for the first week since back in April, leading to a downturn in airline stocks. Elsewhere, oil is up on the day, 10 year yields are hovering around 600bps, volatility is down and gold is up.
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Fundamentals
Monday Close:
Dow Jones: +0.03%
S&P 500: +0.84%
NASDAQ: +2.51%
US 10 YR: 0.612%
Crude OIL: $40.71
Market Madness Portfolio: +1.18%
COVID 19 Global Cases: 14,604,077
Indices Overseas:
FTSE 100: -0.41%
Nikkei 225: +0.093%
Hang Seng: -0.12%
TEDRATE: 0.14
LIBOR (3 month): 0.27138%
Run the press, the printing press
All eyes return to Congress as they must address continued fiscal stimulus before returning to the sandbox for their regularly scheduled August recess. It goes without saying that additional stimulus has become a highly divisive across party lines in the past weeks. We’ve seen party politicians draw deep lines in the sand regarding their personal and party feelings for COVID 19. Members at S&P Global are seeing “no alternative” to additional stimulus efforts by the governments.
“With the coronavirus pandemic exacerbating a slowdown in the global economy, governments around the world may have no choice but to increase spending to support businesses and households well into the next year, according to an economist from S&P Global Ratings.” (excerpted from article)
There is a significant push by some members of Congress as well as the American people to get another round of checks and continued expansion of the unemployment benefits. Donnie is still pushing hard for additional stimulus and, somewhat head scratchingly, a payroll tax cut that is getting support from no one on Capitol Hill. It is not quite safe to say yet that another round of cash stimulus will hit the printing press and then the economy, but I’d venture to suggest that the markets are pricing in a high chance of some form of stimulus to come before the August recess.
Others, dismayed by the progress (or lack thereof) on the hill, are looking toward earnings and market movements to dictate the way forward. In this space, some are waving warning flags. Mark Cuban is seeing the latest stock market rally and its eerie similarities to that of the dot-com bubble in the 90s.
“‘Everybody is a genius in a bull market,’ the 'Shark Tank’ investor warned. ‘Everybody is making money right now because you’ve got the Fed put and that brings people in who otherwise wouldn’t participate.’” (excerpted from article)
I think he’s pretty spot on here. When the markets are booming, everyone wants in, and everyone looks to their friends/family/peers for what they’ve been doing to make money. What is interesting this time is the introduction of the Fed. Like Mr. Cuban said, speculative activities have been magnified by the Fed backstop that has been a large help in keeping the financial markets liquid and ‘stable.’
What is crazy though, is the level of speculation. “The ratio of bearish put options on stocks to bullish calls shows dot-com-level exuberance.” (excerpted from WSJ article) A lot of the swinging sentiment is seen in the tech-focused NASDAQ stocks. This is likely to change quite a bit in the following two weeks as we move into earnings for the big tech players. It makes sense, then, for some to draw connections between this market and the dot-com bubble, which focused heavily on speculation in big tech too.
“The difference to the dot-com bubble is that this time the highly valued stocks are mostly reliably profitable companies (again, Tesla aside). It isn’t obvious that traders are buying Amazon or Microsoft in the expectation of selling them on to a greater fool at a still-higher valuation in the future, the way they did the dot-coms.” (excerpted from article)
Needless to say, while some things look the same, this current market condition and global situation poses an entirely new challenge that none of us know the results or answers to. However, if everything were so predictable and straightforward, we would not need Market Madness. So, as long as things remain hectic, confusing and all over the place, Market Madness will be here to try and cut through the fog.
Read more here, here and here.
Quick Takes
COVID 19 vaccine trial from AstraZeneca and Oxford showing ‘positive response’ in early trial stages. (via CNBC)
Overpayment analysis. (via WSJ)
Alibaba’s payment’s arm, Ant Group, poised to be the biggest IPO of 2020. (via FT)
Florida looks to close after 5th straight day of 10,000+ new cases. (via CNBC)
Attempted assassination last night on new Epstein/Deutsche Bank Case Judge Esther Salas. Son killed, husband injured. Shooter disguised as delivery person, according to FBI and U.S. Marshalls. (via Washington Post)
U.K. suspends Hong Kong extradition treaty, continuing to raise tensions between foreign nations and China. (via CNBC)
U.S. air travel falls for first time since April in light of continued COVID 19 case spikes. (via CNBC)
Fake this, fake that… you know the song and dance. (via CNBC)
Reader’s Corner
The reader might really enjoy the film Uncut Gems. I watched it yesterday and it was a really well done and interesting take on the gem/pawn selling industry.
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