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The Best of What They Said and I Read Week Ending 9/6/2020

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 – September 5, 2020 – Tech Stocks Finally Got Crushed.   Why the Stock Market is on Shaky Ground – Ben Levisohn

  • “…The S&P 500 index fell 2.3% to 3426.96 this past week, while the Dow Jones Industrial Average declined 520.56 points, or 1.8%, to 28,133.31. The tech-heavy Nasdaq Composite dropped 3.3% to 11,313.13. All in all, the Nasdaq gave back nearly half of its August gains…The week began well enough, with Tesla and Apple splitting their stocks, and all three indexes finishing August with fantastic gains. September started well enough, too, with the Nasdaq and S&P 500 hitting all-time highs on Wednesday and the Dow just 1.5% away from its own record.” 
  •  “And then the selling started. It was hard to know what caused it. A short list of possibilities would include Ciena’s earnings—it offered a poor outlook that suggested companies might be pulling back on their tech spending; Anthony Fauci expressing doubts about a vaccine approval by the election; the lack of progress on another relief bill; Labor Day; manic option activity; election fears; lower-than-expected unemployment; a chart pattern known as the hanging man…”
  •  “Buying the dips is still the fallback position for many investors. But this past week’s selloff doesn’t mean the meltup is over. “We have said for the last few weeks that the Nasdaq is in a blowoff phase,” explains BTIG strategist Julian Emanuel. “We don’t know if it’s the beginning, the middle, or the end.”  Still, we should know soon enough whether this week’s tech wreck is a buying opportunity akin to June 11, when the Nasdaq dropped 2.1% and bounced back almost immediately, or the beginning of a bigger drop. The dot-com bubble and bust, with its wild swings up and down, has been the model for many observers, but Sundial Capital Research’s Jason Goepfert notes that the Nasdaq has been more inclined to hit a top and then go down in a reverse-V—as it did in 2007, 1989, and 1972—than to make another dash for a new high, as it did in 2000.”
  •  “Either way, a reckoning is coming. The Nasdaq has gotten too far ahead of itself for it to end any other way, despite protestations that the rise has been well-deserved. Low interest rates make expensive stocks look cheap and business models look unstoppable, and the looming threat of a coronavirus second wave makes tech stocks look all the more attractive.   “We believe this is the final and more-speculative stage of our summertime melt-up scenario,” says Chris Harvey, U.S. equity strategist at Wells Fargo Securities. “Experience suggests that at the tail-end of a melt-up funny things happen.”

 

U.S. Global Investors – September 4, 2020 – Frank Holmes

  • “…The mega-cap tech shares that drove stocks to a record plunged Thursday as bearish investors reclaimed the upper hand on U.S. equity markets, at least for a day. The Nasdaq 100 sank 5.2 percent and posted its biggest rout since March. Apple, Tesla and Amazon.com, among the biggest contributors to the historic five-month rally, lost at least 4.6 percent. The index had gained in 11 of 13 sessions to notch records almost daily, defying strategists who warned that valuations had become too stretched.”
  •  “…Warren Buffett's Berkshire Hathaway has a $7 billion bet on five Japanese stocks. The company recently disclosed that it owns 5 percent of each of Japan's five biggest trading companies or "sogo shosha": Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo. The positions, which Berkshire built over the past 12 months, were worth a combined $6.9 billion as of Wednesday's close.”
  •  “…The best performing commodity for the week was coffee, up 6.05 percent…Copper hit a two-year high, topping $6,800 a ton, after strong PMI data was released out of China, the world’s biggest consumer of the red metal. Volumes in LME warehouses fell to the lowest since 2005…The worst performing commodity for the week was lumber, down 16.31 percent. Lumber has soared with the pandemic curtailing the supply chain when there is strong demand due to low interest rates. Rising lumber prices had recently added as much as $10,000 cost to build a typical home…Gas prices heading into Labor Day weekend are on average $2.22 per gallon – the lowest for this time of year in 16 years.”

 Kiplinger’s Personal Finance Adviser – September, 2020 

  • “…Three components of the Dow Jones industrial average, includ­ing its longest-standing member, were recently replaced as part of the venerable blue-chip index's biggest shake-up in years…So who's out? Energy giant ExxonMobil, which had been a part of the industrial average since 1928, as well as pharmaceutical firm Pfizer and Raytheon Technolo­gies. They are replaced by customer relationship manage­ment specialist Salesforce.com, biotech firm Amgen and industrial con­glomerate Honeywell Inter­national. The Dow has announced one-off changes over the past few years, such as Apple's replacement of AT&T in 2015. However, this is the largest multi-component swap since 2013, when Goldman Sachs, Nike and Visa replaced Alcoa, Bank of America and Hewlett-Packard.”

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