Dana Mattioli reports in the Wall Street Journal that Amazon may have lied to both its third-party sellers and Congress regarding its data policies. Mattioli's article alleges that Amazon used information from its independent sellers to enhance its own product lineup. She writes: Amazon.com Inc. employees have used data about independent sellers on the company’s platform to develop competing products, a practice at odds with the company’s stated policies. The online retailing giant has long asserted, including to Congress, that when it makes and sells its own products, it doesn’t use … [Read more...]
The Auto Industry’s Growing Used Car Problem
Al Root reports at Barron's on the steep drop in used-car prices is doing to the auto industry. He writes: As if things weren’t bad enough for the auto industry , now used-car prices are cratering. That creates more pressure in several areas of the automotive value chain . The Manheim Used Vehicle Value Index—a key benchmark for industry pricing—has declined about 11% compared with March and is down roughly 10% year over year. The last time the Index dropped a similar magnitude was, unsurprisingly, during the 2008-09 financial crisis. The problems falling used-car prices create are … [Read more...]
Free Market Economist Asks, Where is the Outrage?
John Cochrane, a Senior Fellow at the Hoover Institute and an adjunct scholar at the Cato Institute writes of the terms of the bailout, "where is the outrage?" We would concur. Bailing out leveraged speculators and publicly traded firms that took on too much debt to juice personal and/or shareholder returns is a huge mistake. The prudent investors who stabilize the system in times of crisis and the private equity firms with as much as $2 trillion in dry powder have been told to sit down. The Fed is on the job. Hooray, the government is here to fix the price of capital. Apparently, it was … [Read more...]
The Government’s Dangerous Economic Interventions are Crossing the Rubicon
At Barron's, Randall W. Forsyth explains how today's government bailouts and interventions are crossing a Rubicon. He writes: The government has used these moneys to intervene in the private sector beyond what has ever been done before, even in the great financial crisis, arguably distorting asset values in the process. What’s more, greater intrusions seem likely in the future, so long as the spending can be paid for by the expedient of the central bank’s monetary printing press. Current government policies have been likened to those once thought dangerously radical—such as “helicopter … [Read more...]
China and America Are About to Go through a Breakup
According to reporting by Trefor Moss in The Wall Street Journal, the COVID-19 pandemic is making a breakup of the American and Chinese economies more likely. Moss notes that 16% of companies intend to take business out of China. It wouldn't surprise us to see that number skew even higher. Moss writes: The coronavirus pandemic is making the “decoupling” of the U.S. and Chinese economies a more realistic prospect, American companies in China say, as it disrupts supply chains and further strains relations between the two countries. In March, 44% of 25 large U.S. companies surveyed said … [Read more...]
Commercial Real Estate: Will the Service Industry Ever Go Back to the Office?
Erik Schatzker reports the reactions of some of Wall Street's big firms to the experiment of working from home. The coronavirus has shown many white-collar employers just how easy it is to have their employees work remotely. With more people working from home, demand for commercial real estate may be depressed. Schatzker writes: James Gorman is hesitant to make predictions about the future with so much about the coronavirus pandemic still uncertain. One thing is clear, however: Morgan Stanley will have “much less real estate.” “We’ve proven we can operate with no footprint,” Gorman, the … [Read more...]
Fed Makes a Mockery of Corporate Bond Market
Howard Marks, the notable distressed debt investor, is out with a memo questioning the Fed’s decision to intervene in credit markets. The Fed panicked when it saw investment-grade bonds sell off a few percentage points last month. It decided to intervene under the auspices of providing liquidity to the market, but liquidity was not the problem. Bond prices were down because there were questions of solvency. Shutting down the economy for an indeterminate time will do that. There was and is plenty of liquidity in the bond market at the right price. We were an aggressive buyer of corporate … [Read more...]
Goldman Sachs Strategist Called Out for Embarrassing S&P 500 Prediction U-Turn
Brian Sozzi of Yahoo! Finance took time today to call out Goldman Sachs strategist David Kostin for the quick reversal in his predictions for the S&P 500. Sozzi wrote: My oh my how a two-week long bear market rally and unprecedented stimulus actions by the Federal Reserve could change one’s thinking on stocks still dealing with the bruising coronavirus pandemic. Somewhat under the radar on Monday, veteran Goldman Sachs strategist David Kostin said his “near-term downside” scenario for the S&P 500 of 2,000 is “no longer likely.” Kostin’s call was initially made on March 22, the day … [Read more...]
The Fed Favors Wall Street over Main Street
The Wall Street Journal's editorial board explains in today's issue how the Fed's approach to coronavirus relief favors Wall Street over Main Street. They write: Financial markets reacted well to the news, but look below the price surface and the complications appear. The big winners included non-investment grade corporate bonds and real-estate investment trusts that will now qualify for Fed programs despite their credit risk. High-yield and municipal bond prices also rose. Growth companies like Amazon, Intel and Nvidia fell or were flat, and the overall market reaction was … [Read more...]
The Cost of Retirement Income is Going Up
The Fed announced this morning that it is going to spend up to $2.3 trillion helping out municipalities and companies by purchasing their bonds. Where is the $2.3 trillion going to come from? The Fed is of course just going to print the money. Yup, Jay Powell (Fed Chair) & Steve Mnuchin (Treasury Secretary) have decided to turn the Fed into a hedge fund. Munuchin will provide the capital and Powell will provide the leverage by conjuring a few trillion out of thin air. 10 to 1 leverage works for Jay. Won’t all this money printing cause inflation? Of course it will. The Fed will deny … [Read more...]
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