Bleeding cash and desperate to show a profit, Tesla has been asking suppliers to give back some of the money the company had given them. After news of this leaked out, investors weren't taking it well. Angus Whitley reports in Bloomberg: Tesla Inc. asked some suppliers to return a portion of its payments to them in an attempt by the electric-car maker to turn a profit, the Wall Street Journal reported, citing a memo sent to a supplier last week. The company, whose eroding cash position has alarmed investors, requested a “meaningful” amount of payments made since 2016 to … [Read more...]
The Most Crowded Trade on Wall Street
This year's most crowded trade on Wall Street is Big Tech. The FAANG stocks, as measured by the NYSE's Fang+ index have climbed by 32% year to date. According to Bank of America, the trade is the most overextended since 2015. Robin Wigglesworth writes in the FT: The New York Stock Exchange’s Fang+ index, which includes a mix of US and Chinese tech companies, has climbed more than 32 per cent this year. However, some investors think the rally in “Big Tech” shares is overdone. Betting on the Faangs in the US and China’s Bats has been identified as the most crowded trade for sixth months … [Read more...]
Is China About to Tank the Market for Metals?
There is a growing body of evidence to support the theory that China's economy is slowing down. One of the clearest signs is the recent drop in metals prices. If the Chinese economy spirals down, it could tank the market for metals and other commodities along with it. Neil Hume reports for the FT: Mining stocks were under pressure on Thursday as selling of industrial metals intensified on concerns about demand from China, the world’s biggest consumer of raw materials. Copper fell 2.5 per cent and slipped below $6,000 a tonne for the first time in a year, while zinc was off 3.9 per cent at … [Read more...]
Can Cyrpto-currency Revolutionize the News Business?
Can an initial coin offering selling "tokens" that will fund media ventures be used to revolutionize, and even save the news business? The Civil Media company is testing that model. Benjamin Mullin reports for The Wall Street Journal: The company is trying to sell a maximum of $34 million in “tokens,” digital currency that its owners can use in a new online marketplace for media ventures being created by the company. The tokens — which will be valued between $0.94 and $0.27 each — will eventually give their bearers the ability to pay freelancers, support news organizations and help resolve … [Read more...]
Netflix “Biggest Disappointment in Two Years”
Shares of Netflix are down today because reported subscriber numbers didn't increase fast enough for the Wall Street analysts covering the streaming video company. It's hard to imagine how Wall Street could have been so surprised at a slowdown in Netflix growth, given the number of competitors coming into the market. Tim Bradshaw reports: Until the abrupt reversal in fortunes, Netflix stock had more than doubled in value so far this year including having added more than $40bn in market capitalisation since April’s forecast-busting results. The latest miss on subscribers is its biggest … [Read more...]
A Facebook Killer?
Facebook is now the fifth largest business in America as measured by market capitalization. The bulls are of the opinion that Facebook’s network effect is simply too powerful for any competitor to overcome. The bears would point out that Facebook’s most promising segment today is Instagram, a startup that Facebook acquired only six years ago. Is Facebook’s moat really as impenetrable as many investors assume? We may soon find out. Openbook, a project backed by cyber security and privacy pioneers is launching a crowdfunding campaign to build an alternative to Facebook. The new platform, … [Read more...]
FOMO a Dangerous Investment Strategy
In a market where a narrow band of equities is producing the lion's share of gains, it can be tempting for fund managers to chase those stocks because of their fear of missing out, or FOMO. That FOMO can cause managers to do things they wouldn't normally. Charley Grant discusses some of this activity in the market at The Wall Street Journal. He writes: Fear of being left behind is a powerful force among fund managers, even if it means taking big risks. This year, managers not invested in tech stocks should be polishing their résumés. In the first six months of the year, technology shares … [Read more...]
Is There Enough Spare Oil Capacity?
According to the International Energy Agency, spare oil production capacity will be stretched to the limit as a result of sanctions on Iran and other supply disruptions in places like Venezuela and Libya. David Sheppard reports at the FT: The Paris-based agency said that while there were signs stronger oil prices may start to weigh on demand growth, for the moment the key risk was supply capacity, with moves by producers to raise output cutting into the thin buffer of reserve production. “Rising production from Middle East Gulf countries and Russia, welcome though it is, comes at the … [Read more...]
The S&P 500’s Balance Problem
Six stocks, four of which don’t pay a dividend, account for 99% of the YTD gain in the S&P 500. The top ten holdings in the S&P 500 account for 23% of the market capitalization of the index. Netflix, a company projected to burn $3 billion in cash this year and Amazon, a company that trades at 83X estimated earnings, have a market value that is almost as large as the entire S&P 500 Utilities and Telecom sectors. What’s more valuable to you, Prime delivery and bingeing Netflix, or electricity and phone service? The S&P 500 has become a top heavy index dominated by stocks … [Read more...]
Here’s a Better Fix than Elizabeth Warren’s Buyback Ban
The heavy hand of government wants to regulate common stock repurchases. Sen. Elizabeth Warren is calling for an outright ban. Her colleague from New York wants to give the SEC the authority to reject buybacks that hurt workers. An additional ban or burdensome regulation on common stock buybacks is of course misguided. Almost as misguided as the 1993 limit on the deductibility of executive compensation that helped spawn the surge in common stock buybacks in the first place. The problem with buybacks is not that they deprive companies of capital as some in the political class contend. The … [Read more...]
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