Late Cycle Bubblicious?
I wrote a column yesterday (out tomorrow) on how to manage your investments when it is late in the market cycle. As these things so often go, when writing 800ish words to a specific topic, lots of other ideas and distractions come along. Given the…
I wrote a column yesterday (out tomorrow) on how to manage your investments when it is late in the market cycle. As these things so often go, when writing 800ish words to a specific topic, lots of other ideas and distractions come along.
Given the relative youth of the average RobinHood/Tiktok/Reddit trader, perhaps a few of these unused digressions, tangents and perspectives are worth sharing:
• Bull Markets Run Much Further Than Anyone Expects: One of the major tenets of famed Merrill Lynch technician Bob Farrell was that “Exponential rapidly rising or falling markets usually go further than you think.” I have found this is true, and to a shocking degree.
There are lots of comparisons between the current era and the 1990s dotcom implosion. Recall that then Fed Chairman Alan Greenspan’s now infamous Irrational Exuberance speech in 1996. Had you sold your tech stocks the next day, either individually or en masse, you would have left a lot of money on the table: The Nasdaq QQQs rose another 124.6% post Greenspan speech.
• FOMO YOLO COVID STONKS: Finding historical parallels is all but impossible to the pandemic ground hog day, circumstances: Stuck at home, the usual in-person socializing non-existent, much of our favored live entertainments unavailable.
What might be driving some of the behaviors we witness are very clever, potentially destructive algorithms “designed to funnel you into the most extreme, most dopamine-driving financial ideas.” Whether it is Facebook or TikTok, Reddit or Robinhood, the Gamma algo is different this time.
• Speculation versus Systemic Risk: We should pay attention to two important but very different kinds of risks: The pockets of speculation that send otherwise overlooked or undervalued or even worthless stocks soaring higher, and the risks that threaten to the entire economy.
Distinguish between the two when you are engaging in market commentary to say nothing of making broad macro trades.
When a literally worthless stub of a bankrupt company like Hertz Global Holdings (HTZGQ) soars due to traders, the risk is that those people may lose some or all of their money. The same is true for a turnaround story like Gamestop (GME) or AMC Entertainment Holdings (AMC) or whatever the Stonk of the day is.
On the other hand, when through the miracle of securitization, the entire financial system becomes festooned with defaulted junk mortgages, you have a real problem.
• What Don’t We Know: Consider the universe of things that we do not currently know today about this market & economy but will understand with great clarity 5-10 years from now. Is this a bubble? When will the market crash? How will the pandemic end? Will there be another US insurrection? What other surprises await us?
What we are incapable of answering those questions today (with any degree of confidence), but they will look obvious in the future. Worse, our hindsight bias will allow us to convince ourselves that we knew the answers all along.
• And in the End . . . How will all of this end? I have a high degree of confidence in this answer: The same way it always does.
There will be tears, massive losses by some and a big gains by handful of others. There will be lives ruined and lessons learned among the claims of a rigged market, insider trading, and fraud. Maybe even some people will go to jail. As Wall Street runs red with proverbial blood, a few clever bastards will notice the “generational buying opportunity” — the fourth such entry point over the past 20 years.
And, we won’t have any idea when that will be — it could be starting today, or just as likely, in 5 years.
Your goal throughout this is to survive with enough capital intact to take advantage whenever that opportunity presents itself . . .
Previously:
What Does the Longest Bull Market Mean? A Debate (August 29, 2018)
Bob Farrell’s 10 Rules for Investing (August 17, 2008)
See also:
Semantic Density, Algos & Gamestop: This Time It’s Different (Dave Nadig January 26, 2021)
For Better of For Worse, This is a Young Person’s Market Right Now (Ben Carlson, January 26, 2021)
Timeless Lessons From Today’s Mania (Michael Batnick, January 26, 2021)
~~~
The End: Perhaps the finest two minutes and twenty-one seconds to ever officially* end an album.
______
* The hardcore fans know why I say “officially.”
The post Late Cycle Bubblicious? appeared first on The Big Picture.
nasdaq stocks pandemic fedInternational
United Airlines adds new flights to faraway destinations
The airline said that it has been working hard to "find hidden gem destinations."
Since countries started opening up after the pandemic in 2021 and 2022, airlines have been seeing demand soar not just for major global cities and popular routes but also for farther-away destinations.
Numerous reports, including a recent TripAdvisor survey of trending destinations, showed that there has been a rise in U.S. traveler interest in Asian countries such as Japan, South Korea and Vietnam as well as growing tourism traction in off-the-beaten-path European countries such as Slovenia, Estonia and Montenegro.
Related: 'No more flying for you': Travel agency sounds alarm over risk of 'carbon passports'
As a result, airlines have been looking at their networks to include more faraway destinations as well as smaller cities that are growing increasingly popular with tourists and may not be served by their competitors.
United brings back more routes, says it is committed to 'finding hidden gems'
This week, United Airlines (UAL) announced that it will be launching a new route from Newark Liberty International Airport (EWR) to Morocco's Marrakesh. While it is only the country's fourth-largest city, Marrakesh is a particularly popular place for tourists to seek out the sights and experiences that many associate with the country — colorful souks, gardens with ornate architecture and mosques from the Moorish period.
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"We have consistently been ahead of the curve in finding hidden gem destinations for our customers to explore and remain committed to providing the most unique slate of travel options for their adventures abroad," United's SVP of Global Network Planning Patrick Quayle, said in a press statement.
The new route will launch on Oct. 24 and take place three times a week on a Boeing 767-300ER (BA) plane that is equipped with 46 Polaris business class and 22 Premium Plus seats. The plane choice was a way to reach a luxury customer customer looking to start their holiday in Marrakesh in the plane.
Along with the new Morocco route, United is also launching a flight between Houston (IAH) and Colombia's Medellín on Oct. 27 as well as a route between Tokyo and Cebu in the Philippines on July 31 — the latter is known as a "fifth freedom" flight in which the airline flies to the larger hub from the mainland U.S. and then goes on to smaller Asian city popular with tourists after some travelers get off (and others get on) in Tokyo.
United's network expansion includes new 'fifth freedom' flight
In the fall of 2023, United became the first U.S. airline to fly to the Philippines with a new Manila-San Francisco flight. It has expanded its service to Asia from different U.S. cities earlier last year. Cebu has been on its radar amid growing tourist interest in the region known for marine parks, rainforests and Spanish-style architecture.
With the summer coming up, United also announced that it plans to run its current flights to Hong Kong, Seoul, and Portugal's Porto more frequently at different points of the week and reach four weekly flights between Los Angeles and Shanghai by August 29.
"This is your normal, exciting network planning team back in action," Quayle told travel website The Points Guy of the airline's plans for the new routes.
stocks pandemic south korea japan hong kong europeanInternational
Walmart launches clever answer to Target’s new membership program
The retail superstore is adding a new feature to its Walmart+ plan — and customers will be happy.
It's just been a few days since Target (TGT) launched its new Target Circle 360 paid membership plan.
The plan offers free and fast shipping on many products to customers, initially for $49 a year and then $99 after the initial promotional signup period. It promises to be a success, since many Target customers are loyal to the brand and will go out of their way to shop at one instead of at its two larger peers, Walmart and Amazon.
Related: Walmart makes a major price cut that will delight customers
And stop us if this sounds familiar: Target will rely on its more than 2,000 stores to act as fulfillment hubs.
This model is a proven winner; Walmart also uses its more than 4,600 stores as fulfillment and shipping locations to get orders to customers as soon as possible.
Sometimes, this means shipping goods from the nearest warehouse. But if a desired product is in-store and closer to a customer, it reduces miles on the road and delivery time. It's a kind of logistical magic that makes any efficiency lover's (or retail nerd's) heart go pitter patter.
Walmart rolls out answer to Target's new membership tier
Walmart has certainly had more time than Target to develop and work out the kinks in Walmart+. It first launched the paid membership in 2020 during the height of the pandemic, when many shoppers sheltered at home but still required many staples they might ordinarily pick up at a Walmart, like cleaning supplies, personal-care products, pantry goods and, of course, toilet paper.
It also undercut Amazon (AMZN) Prime, which costs customers $139 a year for free and fast shipping (plus several other benefits including access to its streaming service, Amazon Prime Video).
Walmart+ costs $98 a year, which also gets you free and speedy delivery, plus access to a Paramount+ streaming subscription, fuel savings, and more.
If that's not enough to tempt you, however, Walmart+ just added a new benefit to its membership program, ostensibly to compete directly with something Target now has: ultrafast delivery.
Target Circle 360 particularly attracts customers with free same-day delivery for select orders over $35 and as little as one-hour delivery on select items. Target executes this through its Shipt subsidiary.
We've seen this lightning-fast delivery speed only in snippets from Amazon, the king of delivery efficiency. Who better to take on Target, though, than Walmart, which is using a similar store-as-fulfillment-center model?
"Walmart is stepping up to save our customers even more time with our latest delivery offering: Express On-Demand Early Morning Delivery," Walmart said in a statement, just a day after Target Circle 360 launched. "Starting at 6 a.m., earlier than ever before, customers can enjoy the convenience of On-Demand delivery."
Walmart (WMT) clearly sees consumers' desire for near-instant delivery, which obviously saves time and trips to the store. Rather than waiting a day for your order to show up, it might be on your doorstep when you wake up.
Consumers also tend to spend more money when they shop online, and they remain stickier as paying annual members. So, to a growing number of retail giants, almost instant gratification like this seems like something worth striving for.
Related: Veteran fund manager picks favorite stocks for 2024
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Comments on February Employment Report
The headline jobs number in the February employment report was above expectations; however, December and January payrolls were revised down by 167,000 combined. The participation rate was unchanged, the employment population ratio decreased, and the …
Prime (25 to 54 Years Old) Participation
Since the overall participation rate is impacted by both cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.
The 25 to 54 years old participation rate increased in February to 83.5% from 83.3% in January, and the 25 to 54 employment population ratio increased to 80.7% from 80.6% the previous month.
Average Hourly Wages
The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees from the Current Employment Statistics (CES).
Wage growth has trended down after peaking at 5.9% YoY in March 2022 and was at 4.3% YoY in February.
Part Time for Economic Reasons
From the BLS report:
"The number of people employed part time for economic reasons, at 4.4 million, changed little in February. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs."The number of persons working part time for economic reasons decreased in February to 4.36 million from 4.42 million in February. This is slightly above pre-pandemic levels.
These workers are included in the alternate measure of labor underutilization (U-6) that increased to 7.3% from 7.2% in the previous month. This is down from the record high in April 2020 of 23.0% and up from the lowest level on record (seasonally adjusted) in December 2022 (6.5%). (This series started in 1994). This measure is above the 7.0% level in February 2020 (pre-pandemic).
Unemployed over 26 Weeks
This graph shows the number of workers unemployed for 27 weeks or more.
According to the BLS, there are 1.203 million workers who have been unemployed for more than 26 weeks and still want a job, down from 1.277 million the previous month.
This is close to pre-pandemic levels.
Job Streak
Headline Jobs, Top 10 Streaks | ||
---|---|---|
Year Ended | Streak, Months | |
1 | 2019 | 100 |
2 | 1990 | 48 |
3 | 2007 | 46 |
4 | 1979 | 45 |
5 | 20241 | 38 |
6 tie | 1943 | 33 |
6 tie | 1986 | 33 |
6 tie | 2000 | 33 |
9 | 1967 | 29 |
10 | 1995 | 25 |
1Currrent Streak |
Summary:
The headline monthly jobs number was above consensus expectations; however, December and January payrolls were revised down by 167,000 combined. The participation rate was unchanged, the employment population ratio decreased, and the unemployment rate was increased to 3.9%. Another solid report.
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