The Wall Street Journal ran a feature on Apple yesterday which included the chart below. The article highlighted the transformation of Apple from a purveyor of personal computers to the largest mobile phone manufacturer in the world. The chart shows the percentage of revenue that comes from various apple products. As you can clearly see, in the span of ten years Apple has completely transformed itself into a company almost entirely reliant on mobile phones. Apple should be applauded for its success over the last decade, but if there is any industry where the past is rarely prologue, it … [Read more...]

For four years MSCI has talked with Chinese regulators about including Chinese "A-shares" in its Emerging Markets index. Until now the restrictions on access to Chinese markets have prevented MSCI from including the shares. But yesterday MSCI announced that it would include Chinese shares in the Emerging Markets index, with a selection of 222 large cap stocks making the cut. Reuters reports: The bulk of the shares will be financial and industrial companies, many state-owned. According to Credit Suisse, among the 222 stocks on the simulated list of constituents for the new proposal of China … [Read more...]

The proliferation of the no-thought required approach to investing (index investment) along with other quantitative and algorithmic based strategies has created some disturbing cross-currents for the dwindling group of fundamental investors. Here J.P. Morgan (via Zerohedge) estimates that only 10% of trading volume originates from fundamental discretionary investors. That is a truly stunning statistic If 90% of the volume in stocks is driven by value-agnostic investors, the obvious implication that we see is bigger booms and much bigger busts that are far removed from underlying … [Read more...]

Janus Global Unconstrained Bond Fund manager and market guru, Bill Gross, sounds scared of today's stock market. At the Bloomberg Invest New York summit on Wednesday, Gross said "If there’s a common factor it’s the expansion of credit. And the credit that’s being generated by central banks. Money is being pumped out into the system and money that is yielding less than nothing seeks a haven not only in bonds that are under-yielding but in stocks that are overpriced." … [Read more...]

Here’ s an interesting chart from Bespoke Investments that may go a long way toward explaining the exuberance among some sectors of the stock market today (think FAANG type stocks). This shows the share of Millennials who say they are taking more or much more risk with their investment assets now compared to last year. The Millennials are of course too young to have any battle scars from the dotcom bust. They may not appreciate the damage that can be done in the investment markets when valuations reach pie-in-the sky levels. If the history of markets is any guide, it looks like … [Read more...]

Germany's equity market has traditionally been resistant to pressures from activist investors. But recently the country's big corporations are feeling some pressure to maximize stock prices. Some investors are suggesting that big German auto companies spin out their truck manufacturing businesses, which appear undervalued compared to pure-play competitors. Stephen Wilmot writes at The Wall Street Journal: It is the classic conglomerate problem: Daimler Trucks, which dominates U.S. highways with the Freightliner brand, is trapped within the Daimler automotive empire. The fearsome challenges … [Read more...]

The FT reports how tech stocks have electrified the stock market, overtaking the so-called Trump trade. The performance has been driven by FANG stocks. Mutual funds that have been lagging for years are now jumping on the bandwagon to try to outperform the S&P 500. If you have been active in the markets for more than the bull phase of this market cycle, you already know how this ends. Emphasis is mine. The US stock market climbed another 1.4 per cent last week to close at a fresh record high but the tech industry has been the rally’s dominant fuel, particularly the “FAANGtastic five” — … [Read more...]

Here, "stocks are advanced on hopes and expectations” - Robert Rhea When will this bull market end? Because it will end. The market is simply a collection of people’s emotions. How stable can that be? Over the weekend I re-read The Dow Theory Today by the late Richard Russell. It’s a collection of twelve articles which were written and published in Barron’s during the period of December, 1958, through December, 1960. This is not a history lesson because the articles were written, much like writing about today’s markets, while taking on live fire. The future was not known. That’s the life … [Read more...]

Do you remember Polaroid? It was a "Nifty-Fifty" stock back in the 70s. It constructed a huge headquarters building to signify its greatness. Below are some pictures of just how run down Polaroid's Waltham, MA location was before demolition in 2008. Apple, Facebook, Amazon, and Google are also putting up structures of their own. How will this movie end? I’ll point out that these four companies, plus Microsoft, are responsible for a huge chunk of this year’s advance in the markets, especially NASDAQ.     … [Read more...]