Despite all the consideration given to the argument that the stock market is in a bubble, it is important to point out that not everyone shares that view.
Few fund managers have been more successful than Cathie Wood, the CEO of ARK Invest and fund manager of the ARK Innovation ETF ARKK,
and ARK Genomic Revolution ETF ARKG,
which, according to FactSet, have generated more inflows in the past 12 months than any other actively managed publicly traded fund. In a monthly webinar, Wood argued that stocks aren’t in a bubble.
As of 2018, there has been an outflow of approximately $ 300 billion from stock, not including stock buybacks by companies. But there has been a $ 1 trillion inflow into bonds, she said. “If there’s a bubble somewhere, it’s not in the stock market, it’s in the fixed income market,” she said.
Also see: Is the stock market due for a correction in 2021? This is what some experts think
Private equity is fueling this bubble, she said. “I love looking at private equity with maturity [companies], will continue to use them so that they can enjoy private equity distribution, ”she said. Private equity owners maintain large multiple cash flows by not investing in the future. “That has become problematic for these companies and their high cash flow margins will disappear over time.”
The Phenomenon of Buying Video Game ‘Moonshots’, GameStop GME,
and AMC Entertainment AMC,
stocks have also enjoyed the bond bubble, she said. AMC bonds trading at 5 cents of the dollar have risen to 80 cents as the movie theater chain was able to issue shares. Who will hold the bag if AMC goes bankrupt? I don’t think one stock offering will change their circumstances, ”she said.
She also took a swipe at passive investing. “This move toward passive investing that we’ve seen over the past 20 years … that’s now a setup for disappointing returns,” said Wood. While she acknowledged that passive funds were inexpensive, she said they were “ cheap for a reason, ” a phrase often associated with arguments against value stocks. At the very least, get a hedge by investing in innovation, Wood said.
In the stock market, there is a split between companies that are leaders in innovation and investing and those that have not. She gave Tesla TSLA, electric vehicle manufacturer,
payment company Square SQ,
and streaming digital player maker Roku ROKU,
as examples of evolving platform companies that will be the most winners. “We think these companies will grow in their valuations, just as Amazon has done.”
The buzz
The economic calendar includes the release of consumer prices for January and 2:00 p.m. Eastern Time, a speech by Federal Reserve Chairman Jerome Powell on the job market.
Cisco Systems CSCO,
equities fell 5% in premarket trading as the network services company forecast softer results for the current quarter than the markets had expected.
Twitter TWTR,
Stocks were up 5% as the microblogging service reported higher than expected earnings and revenues, although user growth lagged expectations. Ride service Lyft LYFT,
jumped after cutting its loss, and rival Uber Technologies UBER,
reports after closing on Wednesday.
Under Armor UA,
stocks were up 5% as the apparel manufacturer’s results beat forecasts.
Other earnings on deck include General Motors GM,
which has benefited from investor interest in electric vehicles.
Former quarterback Colin Kaepernick is the latest to establish a special acquisition company, which aims to raise up to $ 287.5 million via an IPO.
Such as bitcoin BTCUSD,
increases in value, economics professor Nouriel Roubini says that “The Flintstones” had a more sophisticated monetary system.
The market
US Equity Futures ES00,
NQ00,
aiming higher, after the S&P 500 SPX,
finished a quiet Tuesday on the second highest level ever.
The return on the 10-year Treasury TMUBMUSD10Y,
was 1.16%.
The graph
Based on data from the National Multifamily Housing Council, here is the share of late rent payments, with the chart showing that it didn’t fall too much during the COVID-19 pandemic. But the dataset does not cover subsidized and affordable apartments and other low-end units. “More of these tenants are likely to have more problems paying rent,” says Wolf Richter of the Wolf Street blog.
Random reads
“Stop whining” – a supervisor’s advice to his 1,500 people at home. He later apologized.
Gorilla Glue is not a hairspray, it turns out.
House prices may be high, but sharks seem to be heading towards San Francisco.
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