Despite all the attention given to the argument that the stock market is in a bubble, it is important to point out that not everyone shares the view.
Few fund managers have been more successful than Cathie Wood, CEO of ARK Invest and fund manager of the ARK Innovation ETF ARKK,
an ARK Genomic Revolution ETF ARKG,
which, according to FactSet, has drawn more inflows over the past twelve months than any other actively traded fund. In a monthly webinar, Wood argued that stocks are in a bubble.
Since 2018, there has been an outflow of approximately $ 300 billion from shares, excluding the repurchase of shares by companies. But there was an inflow of $ 1 billion in bonds, she said. “If there’s a bubble somewhere, it’s not in the stock market, but in the fixed income market,” she said.
See also: Should the stock market be corrected in 2021? Here’s what some experts think
Private equity feeds this bubble, she said. ‘It’s great for me to look at private equity, with adults [companies], will continue to utilize them so that they can enjoy the private equity distribution, ”she said. Private equity owners maintain multiple cash flows by not investing in the future. “It has become problematic for these companies and their high cash flow margins will disappear over time.”
The phenomenon of ‘moonshots’ that retailer GameStop GME buys on video games,
and AMC Entertainment AMC,
shares enjoyed, also fed into the bond, she said. AMC bonds trading at 5 cents on the dollar shot up to 80 cents because the chain was able to issue shares. ‘Who will hold the bag if AMC goes bankrupt? “I do not think a single share offer will change their circumstances,” she said.
She also took a look at passive investments. “This shift to passive investing has seen us for the past 20 years … it’s a setup for disappointing returns,” Wood said. Although the recognition of passive funds was cheap, she said it was ‘cheap for a reason’, a phrase often associated with arguments against value stocks. Keep at least one hedge by investing in innovation, Wood said.
In the stock market, there is a dichotomy between the companies at the forefront of innovation and investment, versus the companies that do not. She has Tesla TSLA,
payment services company Square SQ,
and streaming digital player manufacturer Roku ROKU,
as examples of developing platform businesses that will be the best. “We think these companies will grow in their valuations, just like Amazon did.”
The buzz
The economic calendar includes the launch of consumer prices for January and at 2pm Eastern, a speech by Federal Reserve Chairman Jerome Powell on the labor market.
Cisco Systems CSCO,
The stock fell 5% in pre-traded trading as the network services firm predicted softer results in the current quarter than the markets expected.
Twitter TWTR,
The shares rose 5% as the microblogging service reported stronger revenue and revenue than expected, although user growth lagged behind. Rydiens Lyft LYFT,
jumped after reducing its loss, and rival Uber Technologies UBER,
reported after Wednesday’s closing.
Under Armor UA,
the shares rose by 5% as the clothing manufacturer’s results were above forecasts.
Other earnings on deck include General Motors GM,
which benefits from investors’ interest in electric vehicles.
Former quarterback Colin Kaepernick is the latest company to set up a special-purpose acquisition company that wants to raise up to $ 287.5 million in an initial public offering.
As bitcoin BTCUSD,
increase in value, says Professor Nouriel Roubini in economics ‘The Flintstones’ have a more sophisticated monetary system.
The market
US futures contracts ES00,
NQ00,
higher, to the S&P 500 SPX,
ends a quiet Tuesday at its second highest level ever.
The yield on the ten-year treasury TMUBMUSD10Y,
Was 1.16%.
The graph
Based on data from the National Multifamily Housing Council, here’s the share of late rent payments, with the graph showing that it did not fall too much during the COVID-19 pandemic. But the data set does not cover subsidized and affordable apartments and other cheap units. “More of these tenants may have greater difficulty making rent payments,” says Wolf Richter of the Wolf Street blog.
Random reading
“Stop complaining” – the advice one manager gave to his 1,500 home workers. He later apologized.
Gorilla Glue is not a hair spray, it seems.
House prices can be high, but sharks seem to be moving to San Francisco.
Need to start starting early and being updated to the opening clock, but sign up here to have it delivered to your inbox once. The version by e-mail is sent in the Eastern direction at about 07:30.
Want more for the day ahead? Subscribe to The Barron’s Daily, a morning investor briefing including exclusive comments from Barron’s and MarketWatch