It’s no secret that one of the main things propping up the US stock market has been corporations’ willingness to buy back their own shares with borrowed money. The following chart illustrates the rather amazing correlation between share repurchases and share prices. This was obviously a short-lived strategy, one that would end when companies got […]
Now The Markets Themselves Are Too Big To Fail
The First Rebuttal website has coined a term that gets to the heart of an increasingly dysfunctional system: The too-big-to-fail stock market. The general thesis is that most major countries are over-leveraged to that point of maybe being unable to survive a garden variety equities bear market – and are doing whatever it takes to […]
Big Names Bailing
The list of heavy hitters who are saying bad things about this world and its financial markets — while acting aggressively on their pessimism — is growing to alarming proportions. A few examples: Stan Druckenmiller: The bull market is exhausted; move to gold (MineWeb) – Legendary investor Stan Druckenmiller, founder of Duquesne Capital Management LLC, […]
Tough Day For Tech Stocks — Tough Year For The Rest Of The Market?
Coming into this corporate earnings season, everyone seemed to expect disappointment. But they thought it would come from the energy sector and the banks that had lent that sector way too much money (see Goldman Sachs is a flattened slug). Technology was, as always, thought to be immune to the vagaries of the Old Economy. […]
The Great Unicorn Die-Off: Tech (Sort-Of) Crashes, Much More To Come
In good times, Silicon Valley is the kind of place we all fantasize about: Shiny new buildings full of genius techies rollerblading down the halls, eating free gourmet food and growing richer with each financing round. But in bad times it resembles that Florida housing subdivision in The Big Short, where the buildings remain but […]
The Bear Is At The Door, Part 1: Momentum Stocks Getting Crushed
One of the common transitions that bull markets go through as they age and die is a narrowing of leadership. As formerly strong sectors begin to stall out, investors shift into whatever is still looking good — that is, whatever still has upward momentum. Eventually capital becomes concentrated in just a few names. Then those […]
DeFANGed
Yesterday’s bulletproof stocks, led by the FANGs (Facebook, Amazon, Netflix and Google), are getting whacked today. Amazon is down 100 points from its high, 32 of those points coming today. Netflix is off by nearly 10%. Even Google, which really does seem bulletproof operationally, is down 3%. Most of these companies are and will remain […]
Stock Market’s Remaining Pillars Are Crumbling
Once every decade or so investor credulity reaches a point where even seasoned money managers buy into the notion of “one decision” stocks — that is, shares of companies so insanely great that they’re virtually guaranteed to keep going up. Valuation is irrelevant, as is the state of the economy. Nothing matters but the unbeatable […]
Junk Bond Crisis Starts To Metastasize
With junk bonds finally reverting to their intrinsic value, the question on everyone’s mind is “what blows up next?” Here’s the first in what might be a long, painful list: CLOs Hammered as Energy Rout Plays Havoc With Other Markets (Bloomberg) – The bust in commodities that’s roiling junk bonds is also taking its toll […]
The Least Surprising Stat Of The Week: Corporate Insiders Are Dumping Their Stock
Here’s one for the “actions speak louder than words” file: Massive insider selling spurs stock market concerns (CNBC) – Corporate insiders have been selling their shares at near-record levels, and according to some, this could be a sign for outside investors to start selling as well. Investment research firm TrimTabs reported on Wednesday that insider […]
The End is Near, Part 6: Individual Investors Rediscover Individual Stocks
Since their introduction in 1993, exchange traded funds (ETFs) have become a huge hit with retail (that is, small individual) investors, for a very good reason: As “passive” funds that just match a given market or sector with minimal trading and extremely low fees, ETFs offer exposure to equities without requiring a lot of judgment. […]
Internal Bleeding, Cheap Tech, And Falling Angels
Think of “market internals” as the blood pressure and insulin levels of the financial world. They operate below the surface, frequently unnoticed, but over time they have a big say in the health of the patient. And right now they’re pointing to a heart attack. Let’s start with junk bonds. These are loans to financially […]
Corporations Are Liquidating Themselves, One Buyback At A Time
In every bubble there are trends so obviously crazy that it’s hard to see how anyone, let alone mainstream money managers, can buy in. And yet buy in they do. This time around there are almost too many such trends to count. But perhaps the most obvious is corporate share repurchases. Though already a well-known […]
Another Brutal Monday
One of the challenges of managing money is the (increasingly-frequent) need to translate non-financial tragedies into action to protect clients and, yes, profit from the broader world’s troubles. So while most people react to events in Paris with stunned sympathy and/or impotent rage, the financial community is deciding what to buy and sell. And right […]
What Can’t Go On Won’t Go On, Part 1: Corporate Leverage
By now everyone knows the corporate share repurchase story, about how major companies are engineering higher per-share profits and share prices by buying back their stock and raising their dividends. But just how much they’re spending may still come as a shock. Today’s New York Times quotes Laurence Fink, CEO of mutual fund giant of […]