The signs of investor exuberance are too many to list, but here Bloomberg points out soaring option volume as a sign of excessive optimism. The volume of options has soared to levels where the underlying shares each option contract controls are now almost equal to the total shares traded in the market. Bloomberg's Joanna Ossinger reports: A frenzy of bullish bets on the biggest U.S. tech names is captivating Wall Street and powering equities to all-time highs. It’s also sending waves through options markets. Volumes for contracts tied to single stocks have surged by 77% in the past six … [Read more...]
Are Most ESG Funds Just Tech Funds in Disguise?
At The Wall Street Journal, Akane Otani explains the tendency of ESG Funds (funds focused on investing for environmental, social or governance preferences) to invest in certain types of stocks that may not actually be the best match for the mandate they have been given. The end result may be that these funds are just closet tech funds. He writes: Companies focused on issues that the environmental, social and governance movement has come to be associated with, such as renewable energy, clean water, and racial and gender diversity, are relatively underrepresented among such funds. For instance, … [Read more...]
The Costs of A Prolonged Period of Low Rates
Bloomberg points out here that a decade of ultra-low interest rates is not helping public pension funds. Low rates increase the projected liabilities of pension plans. Low rates also make retirement much more expensive which drives up savings and helps to dampen the intended impact of providing monetary stimulus in the first place. What will pension funds do if the next big bear market occurs before rates are normalized? A woefully under-reported side effect of perpetually easy money is the impact on the pension industry. We’ve looked at this issue in the past, and unfortunately the news … [Read more...]
Is Uber About to Be Beaten on Price in London?
An Indian car-booking service named Ola is targeting Uber's business in London. The plan is to defeat Uber on price and capture the top market share within a year. Tim Bradshaw reports for the Financial Times: Ola believes it can unseat Uber as London’s top car-booking service within a year, an executive at the Indian company has said, as the two SoftBank-backed companies prepare for battle in one of the world’s toughest transport markets. Bengaluru-based Ola will make its long-awaited debut in London on Monday, six months after obtaining a permit from Transport for London. It is hoping … [Read more...]
Are Markets too Complacent about Coronavirus?
The FT reports here that China’s energy executives anticipate a 25% drop in the country’s oil demand. That equates to a 3% drop in global consumption. China accounts for 16% of the global economy and an even larger share of its growth. With the stock market back at an all-time high, are investors being too complacent? Sun Yu, Anjili Raval and David Sheppard write for FT: “The epidemic has dealt a huge blow to our business,” said one executive at a Chinese refinery, who asked not to be identified because of the sensitivity of the issue. An executive at another refinery said that if the … [Read more...]
Vanguard is Moving into Private Equity
Vanguard announced it is launching a private-equity fund. Initially, the fund will only be offered to endowments and foundations, but Vanguard plans to open its private equity fund up to wealthy individuals in the future. Is Vanguard’s move a sign of froth in the private equity space, or trouble with the hurdles required to come public? Probably both, but the number of IPOs in the U.S. has plummeted since the dotcom bust and it still hasn’t recovered. The cost and hassle of being a publicly-traded company has made staying private or going private more attractive. Dawn Lim reports at The … [Read more...]
UK Plans Forced “Market Transformation” Banning Sale of Polluting Cars
The UK government has unveiled a new plan to ban the sale of cars using petrol or diesel by 2035. Peter Campbell of the Financial Times reports: The UK government’s new target to ban the sale of petrol, diesel and hybrid cars by 2035 has been slammed as unworkable by the auto industry, which warned it would lead consumers to hold on to polluting cars for longer. Ministers had previously set a target to phase out “traditional” petrol and diesel sales by 2040, which excluded some hybrid cars that use both engines and batteries. But the move to bring forward the ban by five years — part of … [Read more...]
Private Equity Investors Pay More for the Same Return and Lower Liquidity. Why?
At The FT, Jonathan Ford reports that after 2006, private equity returns have been about the same as those from tradeable stocks. Yet, despite higher fees and lower liquidity, investors are still clamoring for private equity investments. He writes: Academics have long questioned whether the internal rate of return (IRR) calculations favoured by buyout firms overstate their performance against quoted stocks. Consequently, most recent studies favour the so-called “Public Market Equivalent” measure, which takes all the cash flows between the investors and a buyout fund, net of fees, and … [Read more...]
Did Amazon’s Value Really Increase $92 Billion in a Day?
If Amazon’s gains hold up through the close, the stock will have added $92 billion to its market capitalization in a single day. That’s the equivalent of adding a 3M, a UPS, or a Lowe’s. Or if you prefer, it's like adding GM, Ford, and Harley, the entire auto manufacturing industry in the S&P 500. Maybe Amazon and its investors have figured out a way to defy the law of large numbers. As for profitability in the core business, that still looks pretty elusive. Bloomberg's Brandon Kochkodin reports: The largest U.S. e-commerce company saw its shares jump by more than 10% after Thursday’s … [Read more...]
Microsoft Beat Wall Street: Here’s How
Microsoft's reported quarterly financial results beat Wall Street's expectations. A big part of the company's successful quarter was an impressive 62% increase in sales for its Azure cloud computing segment when compared to last year. Tae Kim reports at MarketWatch: On Thursday, Bernstein analyst Mark Moerdler reaffirmed his Outperform rating for Microsoft shares, citing the company’s stellar earnings report. He also raised his price target for the stock to $203 from $174. “This was again another strong quarter as Microsoft continues to deliver Commercial Cloud growth as well as growth in … [Read more...]
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