| Wednesday's Headlines 1. US markets rally behind big tech stocks 2. Gold hits a multi-year high 3. Wall St. is throwing darts 4. Tesla has more than tripled its market cap in one year 5. Brooks Brothers files for bankruptcy Markets Closed
 Image courtesy k5hu/Getty
Markets Today U.S. markets got back on track today, rallying behind big tech stocks ripping to record highs. Indeed, Apple, Amazon, and Netflix hit new all-time highs as investors stay with the stocks that have worked all year. Oil and gold prices also returned to recent trends, bouncing higher without any economic news to derail them.
The U.S. has now recorded 3 million coronavirus cases, and the curve is pointing in the wrong direction in many states. The economic fallout continues as more legendary companies filed for bankruptcy, closed stores, or warned of mass layoffs.
It's hard for individual investors to wrap our heads around rising markets in the midst of economic destruction, but institutional investors aren't having an easier time of it, either. Their forecasts for market returns for 2020 are all over the place, which shows the lack of visibility and certainty at the highest levels of finance. They get paid to do this. Maybe they should just follow these stocks.  chart courtesy YCharts
Headlines:
 They Don't Know Either One of the investing industry's favorite games is to forecast the year-end targets for indexes. In normal years, those forecasts are all typically clustered in a tight range, since strategists are looking at mostly the same data. 2020 is not a normal year.
According to Sentiment Trader, the standard deviation for Wall Street strategists year-end price targets has never been wider, ever. As Sentiment Trader notes, "...What's even more notable is that strategists aren't giving the S&P much room to rally. On average, they have a year-end target of 2,998, about 2% below where the S&P is trading. That's tied for the lowest-ever year-end target relative to where the S&P was trading at the end of June."
Why We Have the Advantage In crazy markets like this one, I am often reminded of the wise words of Barry Ritholtz, one of the original financial bloggers, and founder of his own RIA. "The biggest advantage of being a 'retail' small investor is you are NOT competing with any index. You are in charge of your time frame and money. You never have to short a stock and you don't need to own a stock of a company you would not buy for your kids. Keep it simple."  chart courtesy DogsoftheDow.com
The Big Get Bigger, Tesla Edition Continuing our theme of "The Big Stocks Get Bigger," this week, we bring you Tesla. It has seen its market cap swell over 380% in just the past year as its faithful shareholders and many new ones have piled into the stock. Last week it became the largest automaker in the world by market cap even though its sales and profits are far smaller than its legacy competitors. (Zoom into the chart above.)
The giant tech stocks like Apple, Microsoft, and Amazon have also seen sizable increases in their market value, but when that already exceeds $1 trillion, it's harder to see meaningful increases.  Heavy Metal Gold has been the shiny object in capital markets all year, and the ETF crowd is really into it. Gold spot prices crossed the key $1,800 an ounce level for the first time today since 2011. Its all-time record of $1,921.17 was set in September of that year. The global net inflow into gold ETFs was $39.5 billion in the first half of this year, according to the World Gold Council. This already exceeds the record set for highest annual inflows set in 2016 ($23 billion).
As the price of gold rose 17% over the first half of the year, global gold ETF holdings (in tonnage terms) increased by 25%. Global daily trading volumes reached a record $233 billion per day in March and were at $156.9 billion per day in June, comfortably above the 2019 daily average of $145.7 billion. By the end of June, gold-backed ETFs held 3,620 tonnes of gold worth $206 billion.
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(chart courtesy YCHARTS)  Shares of Kohl's are up by over 9.5% after Bank of America upgraded the department store chain to a Buy. Twitter's stock price rose by more than 7.5% amid hints that the social media platform is currently hiring for a subscription management platform called "Gryphon."  Shares of flooring manufacturer Mohawk Industries are down by nearly 5% amid recent fraud accusations from an analyst with Deutsche Bank. Allstate's stock price fell by almost 4.5% today following news that the insurance company will acquire rival National General. Word of the Day The dividend yield, expressed as a percentage, is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. The reciprocal of the dividend yield is the dividend payout ratio. The dividend payout ratio is the ratio of the total amount of dividends paid out to shareholders relative to the net income of the company.  Today in History July 8, 1932: In the icy grip of the Great Depression, the Dow Jones Industrial Average closed at 41.22—its lowest price since June 1897—on total volume of 720,000 shares. Since its peak on Sept. 3, 1929, the Dow had lost 89.2% of its value. The average stock traded at 0.49 times book value and 9.7 times reported earnings; the average dividend yield, among stocks that could afford to pay one, was 12.5%.
Source: Phyllis S. Pierce, ed., The Dow Jones Averages 1885–1980 (DowJones Irwin, Homewood, IL, 1982)
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Wednesday, July 8, 2020
Shoots and Ladders
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