Often when companies are experiencing troubling financial times, you'll see more adjustments to earnings. According to Ben Foldy in The Wall Street Journal, the use of that financial tool is increasing. He writes: Business slowed last year for Google’s parent, Alphabet GOOG -1.02%decrease; red down pointing triangle. The tech giant still beat earnings expectations in this year’s first quarter, in part because it said that its computer servers would last longer than expected. The shift reduced its depreciation expense by nearly $1 billion and helped push per-share earnings ahead of … [Read more...]

In The Wall Street Journal, Jack Pitcher discusses the big outflows in stocks and the potential for a turnaround. He writes: Investors have a sour outlook on U.S. stocks. Contrarians say that is good news for the market. Turmoil in the banking sector has dragged fund managers’ enthusiasm for stocks to a 2023 ebb, according to Bank of America’s most recent monthly survey. The stress adds to worries including lingering inflation, higher interest rates and a slowing economy that have driven them to cut their stockholdings to their lowest levels relative to bonds since 2009. Institutions have … [Read more...]

The Boom in blank check companies has turned into a bust. According to the WSJ, many blank check firms or SPACs, are down more 90% or more from their IPO price. The SPAC boom took hundreds of risky companies to the stock market. The next stop for many is bankruptcy court. Dozens of companies that merged with SPACs are running out of cash, joining at least 12 that have already gone bankrupt after combining with special-purpose acquisition companies. More than 100 companies, including electric-scooter firm Bird Global Inc., smart-sock baby-monitor maker Owlet Inc., and electric-car … [Read more...]

Despite efforts by the Federal Reserve, European Central Bank, and the Bank of England to decrease global liquidity, it is increasing instead and driving investors into riskier assets. Joseph Adinolfi reports for MarketWatch: Gains for global equities have left many on Wall Street perplexed as stocks — especially high-risk growth names with little or no profits — have rebounded from last year’s punishing selloff, resisting both the pull of more attractive bond yields, and the threat of higher interest rates. But some Wall Street analysts say they’ve found an explanation that has little to … [Read more...]

The recent rally in tech shares has given hope to investors who have made money in them for the last decade, but Ruchir Sharma suggests in the Financial Times that the rally is just an echo. He writes: The recent surge in tech stocks has true believers buzzing that the downturn of late last year is over and the boom of the past decade is back. But the opposite case is more likely. This surge had all the hallmarks of an echo bubble — a brief rebound of the kind that has punctuated the long decline of every major bubble in the past century. Over the past decade, driven by record-low interest … [Read more...]

Long positions on Chinese equities have become the "most crowded trade" amongst fund managers, according to a Bank of America survey. Chris Flood reports on the survey's findings in the Financial Times, writing: Global fund managers are becoming increasingly nervous about the durability of the rally in Chinese equities, with one in five of the view that it has become the market’s “most crowded trade”. Allocations by global fund managers to emerging market equities, including China, increased for a third straight month in February, according to a widely watched monthly Bank of America … [Read more...]

In the Financial Times, Robin Wigglesworth calls the recent market rally "trashy." He writes: Markets have started the year where they ended 2021, rallying on hopes that inflation has peaked, central banks are about to pivot and the global economy is doing a lot better than feared. This has lifted most boats, both in equities and fixed income. The MSCI All-Country World Index climbed 7 per cent in January, while the Bloomberg Global Aggregate bond index is up 3.3 per cent. In terms of breadth, this is the best start to a year since 2019, according to Deutsche Bank. And this is a proper … [Read more...]

Originally posted December 14, 2022. Short-selling hedge funds are celebrating 2022 as falling stocks, tight money, and an energy crisis create prime opportunities for them. Laurence Fletcher reports for the Financial Times: “Recently we’ve been getting more absolute return from the short book,” said Chris Crawford, who runs a long-short hedge fund for Eric Sturdza Investments. “The reality is setting in for these companies,” he said, referring to unprofitable groups that investors rushed into during the bull market. Higher interest rates have ratcheted up the pressure on firms whose … [Read more...]

  Bloomberg's Bob Van Voris reports that meme stock gurus Edward Constantinescu and Perry Matlock have been indicted, along with six others involved in what prosecutors call a pump-and-dump scheme. Van Voris writes: Social media influencer @MrZackMorris and several others active in last year’s meme-stock frenzy were charged by federal prosecutors with engaging in a $144 million “pump and dump” scheme. Edward Constantinescu, known on Twitter as “@MrZackMorris,” and Perry Matlock, whose Twitter handle is “@PJ_Matlock,” were among the defendants charged in an indictment unsealed … [Read more...]