$10,000,000,000,000 Tuesday – 6 Stocks are 25% of the Market
by phil - July 27th, 2021 7:32 am
$10Tn!
That's the market cap of Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL) Facebook (FB), Microsoft (MSFT) and TSLA these days. Not only is that 25% of the S&P 500s market cap, it's closer to 1/3 of their earnings and, over at the Nasdaq, the Big 6 make up over 50% of that indexe's market cap (this chart was from earlier in the year, when they were still a bargain 49%).
AAPL, GOOGL and MSFT report today, FB tomorrow and AMZN reports on Thursday. A slip from any of them could be a disaster. TSLA reported last night and made $1Bn for the quarter which, if they can do that consistently, means their $640Bn market cap is only 160 times their earnings so, Yay!, I guess…
FB should do well judging from SNAP and TWTR's results. AAPL is a monster you don't bet against and the others are pretty much cloud companies at this point – each with a different specialty core that gives them a user base of pretty much everyone on the planet (Software, Search and Stuff). If we are heading into that Dystopian Future where a few dozen corporations control every aspect of life on this planet – it makes perfect sense that, at some point, 6 companies should be worth 1/3 as much as the other 12,000. That's just a natural progression.
Consider the entire Nasdaq is $20Tn and it was $11.2Tn 2 years ago so it's gained $8.8Tn in market cap. TSLA (left off because it broke the chart) was at $50Bn 2 years ago and is now at $640Bn so $590Bn of the Nasdaq's gain (6.7%) came from that one stock. AAPL gained $1.6Tn (20%), MSFT gained $1.1Tn (12.5%), GOOGL gained $1Tn (11.4%), FB gained $500Bn (5.6%) and AMZN gained $900Bn (10.3%).
So our Big 6 companies gained $5.7Tn, accounting for 51% of the Nasdaq's total gain in price but NONE of those companies, except TSLA, have grown either earnings or revenues over 100% to justify the move. Even AAPL, as great as they are, are "only" on track for $86Bn in profits on $355Bn in sales while in 2019, they made $55Bn on $260Bn in sales. Yet in 2019,…
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Bonds and Inflation
by ilene - July 27th, 2021 2:58 am
Bonds and Inflation
Courtesy of Michael Batnick
So this is different. Inflation has never been this high, with bond yields this low.
Rates should, in theory, be a way to gauge what market participants think about future inflation. Higher inflation would cripple today’s coupons, so again, in theory, investors would demand higher rates for that risk.
But investing isn’t about theories. At some point, we need to acknowledge reality. It’s probably time we update our models, mental and otherwise.
There are varying explanations as to why this relationship may no longer hold, and I think the most compelling one is that there are so many price-insensitive buyers.
Allison Schrager recently highlighted this, showing that 54% of U.S. debt was purchased by the fed and government last year.
Tracy Alloway has been all over this concept of “flows before pros,” first writing about it in 2017.
In a world with so much money, buyers are as important as fundamentals. This concept is widely discussed, but I think still underappreciated. It impacts everything and isn’t going away any time soon.
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Monday Market Movement – Slight Jitters Ahead of the Fed
by phil - July 26th, 2021 8:32 am
Lots of earnings this week.
We have no Fed speak until Friday as they are having their meeting this week and Powell will speak Wednesday afternoon, after their announcement and it's doubtful they do anything but fears are they will push up their timetable to combat the raging inflation they still won't admit is happening. We also have our GDP Q2 Estimate on Thursday and leading Economorons are predicting 8% growth to keep up with our 10% Inflation – as with most things in this economy – it's an illusion.
I'm in Orlando this week and, though there are plenty of people out and about, it's not summer-crowded and there are still plenty of empty store-fronts. Also plenty of help wanted sings and prices everywhere are out of control so it's clearly an economy in transition. Over at Disney (DIS), there are a lot of pissed off "cast members" because, during the pandemic, Disney laid off almost all the food service workers but kept the customer service, show and costume types – since they were harder to find. Then, when restrictions eased, they moved those workers to food jobs and now they can't find food workers so they still haven't moved the customer service types back to their old jobs.
What they thought was pitching in and helping out the company they loved has led to a career they never wanted (or thought they had escaped). Depressing! People come to Disney from all over the World and they stand together in huge lines etc. and no one is wearing a mask! I was very surprised at Sea World and Disney there are no mask rules at all and nowhere in Orlando were there mask requirements – unless you want to take an Uber, which still requires them to ride.
On the whole, however, I'm not too worried as peple are watching Orlando closely to see if it's a "super-spreader" zone and, so far – it hasn't happened. Most Americans are vaccinated and probably most park visitors – though it would be nice to see an actual study. Disney will, in fact, restart their cruise line on August 9th, after considering the park…
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Jeff Bezos Is Not My Astronaut
by ilene - July 24th, 2021 7:54 pm
Jeff Bezos Is Not My Astronaut
Courtesy of Scott Galloway, No Mercy/No Malice, @profgalloway
Ever since the first tribe walked out of the Great Rift Valley and crossed the Sinai into Asia, humans have been explorers. We’ve crossed continents, then oceans, and in the 20th century, left Earth itself. There’s glory in our species’ expansive nature, and as the TV show says, space is the final frontier. However, Jeff Bezos is not my astronaut.
I felt more disdain than wonder watching Richard Branson’s joyride and Jeff Bezos’s soulless flight to the Kámán Line.
Everybody Gets a “For All Mankind” Trophy
There was no ground broken here. In 1903, the Wright Brothers completed the first powered flight. In 1961, Yuri Gagarin was the first human in space. In 1969, Neil Armstrong was the first human on the moon. Those are milestones worthy of celebration. In 2004, Burt Rutan’s Scaled Composites carried the first people into space on a privately built spacecraft — a milestone of sorts.
What was accomplished on July 11 (Branson) and 20 (Bezos)? Well, one of Bezos’ passengers, Wally Funk (great name), became the oldest person ever in space. After the flight, she reminded us that when you’re 82 you have zero fucks to give. She was disappointed in both the view and the length of the flight, and she found the cabin insufficiently spacious for the “rolls and twists and so forth” she wanted to do.
Another of Bezos’ passengers became the youngest person ever in space. This sounds like something, except that he bought his way onto the flight — actually, his father, a private equity billionaire, paid for the recent high school graduate’s estimated $28 million ticket. My youngest has been acting up (if “acting up” is terrorizing all of us — he ?constantly assesses the household for weaknesses and then makes brazen attacks on his older brother and anything resembling domestic harmony). I don’t have any idea how to deal with this, so I bought him a $1,000 iPad. His mother told me I was sending the wrong message. I reminded her that the message could have been 28,000 times worse. So, there’s that.
Blue Origin’s reusable rocket is…
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Billionaire space race: the ultimate symbol of capitalism’s flawed obsession with growth
by ilene - July 24th, 2021 9:46 am
Billionaire space race: the ultimate symbol of capitalism’s flawed obsession with growth
Courtesy of Tim Jackson, University of Surrey
Mars ain’t the kind of place to raise your kids, laments the Rocket Man in Elton John’s timeless classic. In fact, it’s cold as hell. But that doesn’t seem to worry a new generation of space entrepreneurs intent on colonising the “final frontier” as fast as possible.
Don’t get me wrong. I’m no sullen technophobe. As lockdown projects go, Nasa’s landing of the Perseverance rover on the surface of the red planet earlier this year was a hell of a blast. Watching it reminded me that I once led a high school debate defending the motion: this house believes that humanity should reach for the stars.
It must have been around the time that Caspar Weinberger was trying to persuade President Nixon not to cancel the Apollo space programme. My brothers and I had watched the monochrome triumph of the Apollo 11 landing avidly in 1969. We’d witnessed the near disaster of Apollo 13 – immortalised in a 1995 Hollywood film – when Jim Lovell (played by Tom Hanks) and two rookie astronauts narrowly escaped with their lives by using the Lunar Module as an emergency life raft. We knew it was exciting up there.
I remember later going to see Apollo 13 (the film) with a friend who wasn’t born when the mission itself took place. “What did you think?” I asked as we came out of the cinema. “It was OK,” said my friend. “Just not very believable.”
But we kids were glued to our black-and-white TV sets the entire week of the original mission. We watched in horror as CO? levels rose in the Lunar Module. We endured the endless blackout as the returning astronauts plunged perilously back to Earth. We held our breath with the rest of the world as the expected four minutes stretched to five and hope began to fade. It was a full six minutes before the camera finally came into focus on the command module’s parachutes – safely deployed above the Pacific…
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How food prices are affected by oil, trade agreements and climate change
by ilene - July 24th, 2021 2:45 am
How food prices are affected by oil, trade agreements and climate change
Courtesy of Wyn Morgan, University of Sheffield
Concerns about inflation rates have risen as the UK economy begins its much-needed recovery from the effects of the pandemic. The Consumer Prices Index, the measure most commonly used to measure inflation, rose by 2.5% in June 2021, the highest level for three years.
That headline rate hides differences between the various things we buy, such as clothes, cars, leisure and food. In fact, food prices have actually been falling over the past few months compared to where they were a year ago. But there are fears they could rise – steeply – soon.
In the UK, food accounts for around 10% of total household expenditure. Everyone has to eat, so everyone is affected by price changes.
That said, the impact of rising food prices varies according to income – richer households are more able to absorb rising costs. Poorer households, who spend a greater proportion of their income on food (nearer 15%), are much more affected by it.
Overall, demand for food is relatively constant – we may change our consumption patterns between shops, brands and sometimes types of item (fresh or long-life orange juice for example) but in the main, our total demand is stable. This means that price changes are often driven by supply factors. These can be short or long-term, and driven by either domestic or global factors.
A short-term cause might be the weather causing droughts or floods which reduce output from farms, forcing prices up. Long-term factors include climate change or planting crops such as coffee or cocoa which take several years to reach maturity.
But we also need to recognise that people do not generally eat the initial food products of the agricultural sector. Instead, we tend to eat products that have been through a chain of processors and retailers. This means we should be cautious about making a direct link between weather effects on agricultural output and the prices we pay in the supermarket or corner shop.
The cost of food products also includes many non-edible…
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15,000 Friday – Nasdaq Back to Record Highs
by phil - July 23rd, 2021 7:27 am
Here we are again.
It's been quite a run for the Nasdaq – up 50% since last July and it only took $8Tn (40% of our GDP) in stimulus spending to get there. 9,736 was our pre-Covid high so all this hoopla is over and above where we were. In fact, in 2019, the Nasdaq was generally at 7,500, so we're up 100% in two years – yay!
The current PE for the Nasdaq is 38.37 times earnings. The S&P 500 is at 36.6 so just as crazy and the P/E for the Russell 2,000 has now broken the meter at the Wall Street Journal – having passed 100 times earnings. Of course everyone ESTIMATES they will do better in the next 12 months and the last 12 momths were pretty bad but even the forward estimates of the Nasdaq peg them at 27.43 times forward earnings while the Russell is at 33.81 times earnings.
That's a very long time to wait for payback on your investment. In December, 2018, the PE ratio of the Nasdaq was 20.34 so going from 7,500 to 15,000 over the past 2 years has NOTHING to do with earnings growth and everything to do with price inflation. You are simply paying twice as much money for each Dollar of earnings. That is Fundamentally unsound as it's very unlikely to continue over the long-run but, in the short run – anything can happen.
Corrections can come hard and fast when the market is in a bubble so please be aware that this is NOT normal – even as "not normal" continues to be the norm. We are back to Dot Com and 2008-high levels of valuation and, if you remember, people were partying until the very last minute then as well. I have to call the Nasdaq a good short here on the /NQ Futures. Below the 15,000 line with tight stops above would be the way to play.
In our Short-Term Portfolio, which we reviewed last week, we're going to take advantage of this Nasdaq high to roll our 200 SQQQ Jan $10
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PhilStockWorld’s LIVE Weekly Webinar 07-21-2021
by clarisezoleta - July 22nd, 2021 10:00 am
PSW's LIVE Weekly Webinar 07-21-2021
Major Topics:
00:00:04 – EIA Report
00:02:22 – Crude Oil WTI
00:03:50 – VLO
00:06:07 – Crude Oil WTI
00:08:31 – EIA Report | OPEC Oil Production Chart
00:21:48 – LTP: TTE
00:26:12 – Trading Techniques
00:33:12 – Bargain Hunting
00:55:01 – VTRS
01:03:36 – ATH | APO
01:09:51 – WBA
01:20:31 – VIAC
01:26:58 – LTP
01:27:09 – STP
01:27:52 – CMG
Phil's Weekly Trading Webinars provide a great opportunity to see what we do at PSW. For LIVE access to all our webinars, join us at PSW!
Subscribe to our YouTube channel and view our past weekly webinars here.
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Thrill is Back Thursday – Markets Recover Ahead of the Fed Next Week
by phil - July 22nd, 2021 8:34 am
I don't know what people think is going to happen?
The Fed meets next week and they certainly aren't going to LOWER rates, are they? According to Powell and others, they are in no hurry to raise them but, as you can see from this chart, inflation is rising about twice as fast as wages so our workers are falling further and further behind in buying power. This effect is, however, masked by stimulus checks that boost spending power – that's the key to our "great" economy this year.
Labor supply shortages are still evident across all sorts of industries. The latest survey of manufacturers from the Institute for Supply Management cites complaints from makers of furniture, chemical products, machinery and electrical products about the difficulties of fulfilling demand and that hurts growth and growth is what the economy is all about, right?
Rents are starting to rise sharply, according to a range of data sources. And businesses facing higher prices for Supplies and Labor may be in the early stages yet of passing on those higher costs to consumers. The Producer Price Index, which tracks the costs of the supplies and services that companies buy, rose 1% in June, an acceleration from April and May. This is a signal that inflationary forces may still be working their way through the economy.
It is supposed to be the Fed's job to prevent prices from going up more than 2% by raising rates but, with inflation up 4% in the first 6 months of the year, the Fed is too busy lying to us about how strong (but weak) the economy is, which gives them the excuse to keep printing up $120Bn per month and distributing it to their Bankster Buddies (keep in mind the Fed is not a Government body but a banking cartel that is blessed by the Government – after many contributions from Banksters).
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Integrated Apple and App Store Risk
by ilene - July 21st, 2021 10:15 pm
Integrated Apple and App Store Risk
Courtesy of Ben Thompson, Stratechery
[Originally published June 8, 2021]
Apple acquired Dark Sky, the popular weather app and weather API provider, in March of 2020; the Android version was shut down in July, and the API in December. The real storm, though, arrived in yesterday’s WWDC keynote, when Senior Vice President of Software Engineering Craig Federighi spent 49 seconds previewing iOS 15’s new weather app, filled with new features and wrapped in a gorgeous interface featuring real-time weather elements like accumulating snow and bouncing raindrops.
What made these 49 seconds notable is that they came at a developer conference, and yet Apple’s acquisition of Dark Sky and iOS 15’s new weather app are quite clearly focused on obviating 3rd-party weather apps built by the developers WWDC is theoretically for. This isn’t a complete surprise — the public WWDC keynote is focused on consumers, while the afternoon Platforms State of the Union is for developers — but the new Weather App was only the most extreme example of Apple deciding what part of the iPhone user experience was theirs, and what was left for developers.
The Dark Side of Weather Apps
There is another way of thinking about Apple’s new Weather app; in 2019, a year before the Dark Sky acquisition, the city of Los Angeles sued the IBM-owned Weather Company for collecting and selling location information from its popular Weather Channel app; the company eventually settled with an agreement to better disclose that it was leveraging user location data for more than delivering weather reports.
The problem for users is that it is not as if they could turn location data off: unless a user wanted to manually enter their location every time they used a weather app the app would be fairly useless for its intended function — displaying the weather wherever the user was. The challenge for weather app makers, though, is that weather information is a commodity that costs money: app makers had to pay for the data, but that data was open to anyone willing to pay. The result was a race to the bottom, with user privacy as the casualty: AccuWeather was shown…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW.
