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The Best of What They Said and I Read Week Ending 8/30/2020

Short excerpts from articles I found interesting.  I may not agree with the author and the following material is not intended as investment advice


 Barron’s – August 28, 2020 – The Stock Is a Runaway Train Nothing Can Stop – Ben Levisohn

  • “…The Dow Jones Industrial Average rose 723.54 points, or 2.6%, to 28653.87 this week, while the S&P 500 Index advanced 3.3% to 3508.01 and the Nasdaq Composite gained 3.4% to 11695.63, both closing at all-time highs. Even the small-cap Russell 2000 finished the week up 1.7% to 1578.34. Nothing has changed, not even the hierarchy.” 
  • “…So can anything stop the runaway train that is the tech sector?...The one possibility is the new monetary-policy framework offered by Federal Reserve Chairman Jerome Powell this past week. He basically said that the Fed would no longer consider strong employment a sign of incipient inflation and tighten rates because of it.   That’s good for economically sensitive stocks because it means that the Fed will let inflation rise faster—and let growth run hotter—than it might have before. There’s only one problem: It’s not clear the Fed can actually get growth to pick up enough to get inflation to rise. “Now, over the medium and long term, the Fed’s average inflation target means that when cyclicals start to outperform, and when yields begin to rise, both those rallies will last longer, and be more powerful, than they would have been before,” writes Tom Essaye of The Sevens Report newsletter. “Yet…we still need a growth catalyst to ignite the move, and the Fed’s announcement is not it.”
  • “…Unlike almost any other asset class, holding stocks for the long run increases the odds of making money in the market, observes BofA Securities strategist Savita Subramanian. You have a 46% chance of losing money if you hold the S&P 500 for just one day, but just a 6% chance of losing money if you hold on for 10 years.”

U.S. Global Investors – August 28, 2020 – Frank Holmes

  • “…More businesses are facing the grim reality of having to let employees go during the pandemic. MGM Resorts is laying off 18,000 of its 62,000 furloughed workers.  Coca-Cola is offering buyouts to 4,000 employees and noted layoffs could be coming. Capital One Financial is cutting borrowing limits on credit cards, limiting its exposure as the U.S. reduces support for millions of unemployed Americans.”
  • “…Salesforce.com was the best performing S&P 500 stock for the week, increasing 30.63 percent…Apple and Tesla's upcoming stock splits could push them 33 percent higher in the next 12 months, an analyst who looked at 60 years of data says. Retail trading firm eToro analyzed 60 years of stock splits by major US firms, and found that on average, the companies' stocks climbed a third in the following year…Amazon announced its new wearable "Halo," which it says can judge the emotion in your voice and scan your body to calculate body fat. The product could be direct competitor to smart wristbands made by Apple and Fitbit…Short bets against U.S. stocks have fallen to the lowest level since records began as the market's seemingly endless rally continues. Even the most pessimistic investors are struggling to bet against U.S. stocks at the present time. From a contrarian point of view, that could portend trouble ahead.” 
  • “…Base metals are heading for the longest string of monthly gains in more than a decade on the heels of improving economic data and tightening supplies. The LME Index tracking six base metals is on course for its fifth straight monthly gain in August and is up 28 percent since the end of March…Lumber is one of 2020’s best performing commodities – up nearly 80 percent – as consumers stuck indoors during the pandemic have spent more on home renovations. The commodity hit an all-time high last Friday, then fell by the most on record on Monday. Lumber’s 30-day volatility jumped to the highest since May.”

The Kiplinger Letter – August 28, 2020 

  • “…The recession has brought an end to the dollar’s seemingly endless rise. The weakness is likely to continue into next year. Near-0% interest rates imposed by the Federal Reserve and plunging rates on Treasuries make the dollar less attractive to foreign investors looking to earn a return on their cash. The buck is down to 2018 levels when measured against a basket of major foreign currencies.  Exporters and companies that do a lot of business overseas stand to gain from a weaker dollar, as U.S. goods become cheaper for foreigners to buy and profits earned abroad in other currencies translate into more dollars when brought home.  A weaker dollar also tends to boost prices of commodities, from oil to gold.  Imports get pricier, though, as a buck buys less of goods priced in euros, yen and other foreign currencies…a potential source of inflationary pressure later.”

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