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...]

At Bloomberg, Sarah Ponczek and Michael P. Regan report on the comments of Rob Arnott, who calls "buying bubble assets" an "insanely stupid" thing to do. Despite seeing bubble valuations today, Arnott cautions that "bubbles can continue longer than you can possibly imagine." Ponczek and Regan write: Rob Arnott has a warning for everyone who is confident they’ll know when it’s time to sell a soaring stock like Amazon.com Inc. or Tesla Inc.: getting out before the crash is much harder than it looks. “People buying bubble assets will make money until they don’t,” the Research Affiliates … [Read more...]

Just how much is Jeff Bezos worth? Theron Mohamed explains the wealth of the Amazon CEO in terms of how many other Dow companies it eclipses at Fortune Entrepreneur, writing: Jeff Bezos is personally worth more than some of the US' biggest companies, including Nike, McDonald's, and Costco. Amazon's stock price has surged 65 percent this year, boosting its founder and CEO's fortune to $186 billion as of Tuesday's close, according to the Bloomberg Billionaires Index. Bezos owns almost 55.5 million Amazon shares, giving him an 11.1 percent stake in the e-commerce giant. His Amazon stock … [Read more...]

At Bloomberg, Lu Wang explains why some industry insiders are selling stocks. Wang writes: Corporate insiders, whose buying correctly signaled the bottom in March, are now mostly sellers. Almost 1,000 corporate executives and officers have unloaded shares of their own companies this month, outpacing insider buyers by a ratio of 5-to-1, data compiled by the Washington Service showed. Only twice in the past three decades has the sell-buy ratio been higher than now. Data from InsiderInsights.com showed a similar trend. Over the past four weeks, companies with insider selling have outnumbered … [Read more...]

At MarketWatch, Barbara Kollmeyer, reports on Nordea senior macro strategist Sebastien Galy, who says tech investors have entered the "forest of make believe." She writes: Our call of the day, from Nordea’s senior macro strategist Sebastien Galy, says it is time to get more cautious on those highflying growth stocks. A drop for the Nasdaq COMP, 1.05% on Monday, followed by signs of some recovery in Nasdaq futures on Tuesday, “is a shot across the bow that we have crossed the Rubicon, past the valley of common sense into the river of hope to the forest of make believe. When optimists start … [Read more...]

At the Financial Times, Michael Mackenzie suggests that earnings season could put an end to the current stock market strength. He writes: Global and US economic data are beating forecasts and there is growing optimism that corporate profits will do likewise, as the second-quarter earnings season plays out in coming weeks. One strong theme supporting equity markets since the worst of the pandemic panic in March is that the shock to companies’ profits will be brief. Before long, the thinking goes, growth in net income will resume its upwards trend. Granted, that rebound is expected to … [Read more...]

Retail investors flocked to markets during coronavirus volatility. Many were lured to trading by platforms like Robinhood, offering "free" trades. It turns out that trading still comes at a cost. Richard Henderson reports for the Financial Times: Citadel Securities and its majority owner Ken Griffin are among the big winners from a boom in retail investing, cashing in on the zero-fee trading that has lured huge numbers of first-time investors to the US stock market. Chicago-based Citadel Securities accounts for 40 of every 100 shares traded by individual investors in the US, making it the … [Read more...]

The trading app, Robinhood, which has become a sensation among young (and some old) retail investors, is "throwing jet fuel on the speculative fires of coronavirus-era equity markets." That's according to Annie Mass and Sophie Alexander who write in Bloomberg: Rich hedge fund managers are talking about it. So are not-so-rich millennials. And fast-twitch gamers, and bored sports fans and -- in all likelihood -- some 15-year-olds you know. The “it” is Robinhood Financial’s trading app, which is throwing jet fuel on the speculative fires of coronavirus-era equity markets. Not since the … [Read more...]