For all the attention given to the argument that the stock market is in a bubble, it is important to note that not everyone shares this view.
Few fund managers have been more successful than Cathie Wood, chief executive of ARK Invest and fund manager of ARK Innovation ETF ARKK,
and ARK Genomic Revolution ETF ARKG,
which, according to FactSet, attracted more inflows than any other actively traded stock market fund in the past 12 months. In a monthly webinar, Wood argued against stocks being in a bubble.
Since 2018, around $ 300 billion of shares have been withdrawn, excluding share repurchases by companies. But there were inflows of $ 1 trillion in bonds, she said. “If there is a bubble anywhere, it is not in the stock market, it is in the fixed income market,” she said.
See too: Should the stock market be corrected in 2021? Here’s what some experts think
Private capital is fueling this bubble, she said. “It is incredible for me to watch private equity, with maturity [companies], will continue to leverage them so they can enjoy private equity distribution, ”she said. Private equity owners are sustaining high multiple cash flows by not investing in the future. “This has become problematic for these companies, and their high cash flow margins will disappear over time.”
The phenomenon of buying so-called “moonshots” that video game retailer GameStop GME,
and AMC Entertainment AMC,
the shares have enjoyed also fueled the bond bubble, she said. AMC’s securities, traded at 5 cents on the dollar, skyrocketed to 80 cents because the cinema chain was able to issue shares. “Who will be holding the bag if AMC goes bankrupt? I don’t think a stock offering will change their circumstances, ”she said.
It also took a hit on passive investment. “This move towards passive investment that we’ve seen over the past 20 years … is now a setting for disappointing returns,” said Wood. While acknowledging that passive funds were cheap, she said they were “cheap for a reason”, a phrase often associated with arguments against valued stocks. At least have protection by investing in innovation, said Wood.
In the stock market, there is a bifurcation between companies that are at the forefront of innovation and investment and companies that have not. She gave electric vehicle manufacturer Tesla TSLA,
payment services company Square SQ,
and the creator of the digital streaming player Roku ROKU,
as examples of evolving platform companies that will be the winner takes maximum. “We think these companies will grow in their ratings, just as Amazon has been doing.”
The buzz
The economic calendar includes the disclosure of consumer prices for January and, at 2 pm, a speech by the Federal Reserve Chairman, Jerome Powell, about the labor market.
Cisco Systems CSCO,
stocks fell 5% in the pre-market, as the network services company predicted results for the current quarter that were smoother than markets expected.
Twitter TWTR,
shares rose 5%, as the microblogging service reported stronger than expected earnings and revenues, although user growth was below expectations. Lyft LYFT greeting service,
jumped after narrowing his loss, and rival Uber Technologies UBER,
reports after Wednesday’s closing.
Under Armor UA,
shares rose 5%, as the clothing manufacturer’s results exceeded forecasts.
Other gains available include General Motors GM,
which has benefited from investor interest in electric vehicles.
Former defender Colin Kaepernick is the last to set up a special purpose acquisition company, seeking to raise up to $ 287.5 million in an initial public offering.
Like BTCUSD bitcoin,
increase in value, economics professor Nouriel Roubini says that “The Flintstones” had a more sophisticated monetary system.
The market
US stock futures ES00,
NQ00,
pointed higher, after the S&P 500 SPX,
ended a quiet Tuesday at its second highest level ever.
The yield of the 10-year Treasury TMUBMUSD10Y,
was 1.16%.
The graph
Based on data from the National Council for Multifamily Housing, here is the proportion of arrears on rent payments, with the graph showing that it did not fall much during the COVID-19 pandemic. But the data set does not cover subsidized and affordable apartments and other low-cost units. “A larger number of these tenants may have greater difficulty paying the rent,” says Wolf Richter, of the Wolf Street blog.
Random readings
“Stop complaining” – the advice given by an executive to his 1,500 employees who stay at home. Later, he apologized.
Gorilla Glue is not a hair spray, it seems.
House prices may be high, but sharks appear to be moving towards San Francisco.
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