Snowflake is a technology company that develops database architecture, data warehouses, query optimization, and parallelization options. The company came public yesterday and the stock doubled from the IPO price. Snowflake, a firm we would guess many investors have never heard of, is now worth more than household names including Colgate, Deere, and TJX Stores (TJ Maxx and Marshalls). As of its closing value yesterday, Snowflake can be purchased for a mere 175X trailing 12-month sales! Despite a modest correction in technology shares this month, exuberance toward tech, cloud, and electric … [Read more...]

Stock options volume now exceeds the volume of underlying shares. Speculation is rampant in the stock market. “Investing” in stocks is being treated more like a roll of the dice than it is a long-term strategy for building wealth. Gregory Zuckerman and Gunjan Banerji report for The Wall Street Journal: The two strategies show no signs of fading despite big declines in the past week. Taken together, they will likely continue boosting volatility in markets already grappling with an uncertain economy, the coronavirus pandemic and a presidential election that may not have a conclusive result … [Read more...]

Those investors who purchased Tesla shares earlier this year and rode a massive wave of enthusiasm for the stock are now suffering the fallout as its price crumbles. Over the last five days, the shares have fallen 34%. Matthew Rocco and Richard Waters report for the Financial Times: Tesla’s stock on Tuesday fell by the most on record, in a sell-off sparked by news that the electric car pioneer was passed over for inclusion in the S&P 500. The shares were down 21 per cent, closing at $330.21, in their biggest slide since Tesla made its trading debut in 2010. The retreat pushed the … [Read more...]

Richard Henderson reports in the Financial Times that company executives are selling stock in the largest amounts in almost five years. He writes: US executives sold $6.7bn of stock in their own companies last month, cashing in on a record-breaking market rally with the biggest burst of selling in five years. The dollar value of sales by 1,042 chief executives, chief financial officers and company directors in August topped any month since November 2015, according to figures compiled for the Financial Times by Smart Insider, a data provider. The number of executives selling was the highest … [Read more...]

Robinhood Markets, a trading app that many investors flocked to during the COVID-19 shutdown, is having trouble today. It's not the first time. Bloomberg reports: Robinhood Markets has catapulted ahead of its online brokerage rivals with a smartphone app that has attracted an army of young investors. Yet with the company’s rise has come a litany of problems: trading outages, angry customers and regulatory probes. Over the first half of the year, U.S. consumer protection agencies received more than 400 complaints about Robinhood -- roughly four times more than competitors like Charles … [Read more...]

At The Wall Street Journal, Holman W. Jenkins at the bizarre case of Tesla, the auto industry, and how politicians' efforts to combat emissions have created an actual deterrent to EV startups. He writes: Until the media starts doing its job, this slide toward policy idiocy will only accelerate. Such government interventions always tend to cartelize the industry they take aim at. That’s the drift here. Mandates that result in electric vehicles being dumped on the market are a deterrent to new EV entrants. Tesla wants to shelter behind these barriers too, though you would never get Mr. Musk to … [Read more...]

There is some truth in that headline. The central bankers' focus on the performance of financial markets and specifically the stock market has turned one of America’s greatest strengths into a liability. Last time the Fed bought Treasury securities to prop up the market. This downturn, they waded into corporate bonds. Is there any doubt that during the next big down cycle, the Fed’s emergency lending powers will be used to buy stock prices directly? What a sad state of affairs. Bloomberg has more on one analyst's take on the stock market's emerging too big to fail status. Lu Wang … [Read more...]

Apple announced results last night that came in better than Wall Street was anticipating. Instead of reporting a drop of about 10% in quarterly net income on a year-over-year basis, Apple reported 10% growth. Results were driven by higher than expected sales of Macs and iPads. Shouldn’t be a big surprise with so many people working from home. But extrapolating those trends out for more than a quarter or two would be a mistake. A mistake that Wall Street analysts were of course more than willing to make. Taking a short-term trend and extrapolating forever into the future is apparently part … [Read more...]

James Mackintosh warns in The Wall Street Journal that patterns that preceded the Dotcom crash are once again taking hold of the stock market. He writes: But the forgotten story of the time was the extreme valuations reached by some very boring businesses as bond yields fell in the months before LTCM collapsed. From the start of 1997 to August 1998, the 10-year Treasury yield dropped from 6.4% to 5.4%. The fall justified higher valuations for companies with reliable earnings. The market, as usual, took it to excess. Coca-Cola led the way with a forward price/earnings ratio that almost doubled … [Read more...]