EQUITIES ENDED THE WEEK LOWER

Led by technology, equities traded lower.  Some are pointing to yet another reduction in We Work’s valuation to under $8 billion.  Several weeks ago it was valued around $47 billion.  Others were pointing to Chinese data.  While others suggested it was earnings and economic concerns.

As I noted the other day the 200 day moving average line is flat since July 2018.  Many conclusions can be drawn from such action.  I will take the most simplistic one; the markets have become co-opted by technology based trading where everything else is essentially meaningless.

With the above written, will the We Work implsoion be viewed in the same manner as Long Term Capital Management (LTCM) fiasco?  To remind all LTCM was a hedge fund that was staffed with the smartest people in finance; Nobel Prize winners, Federal Reserve Bank Presidents and Vice Chairman, marquee CEOs.  LTCM imploded in 1997 and almost crushed the financial system.

We Work was once viewed as The Way business was evolving.  The smartest private equity funds had invested billions.

Reality always returns but the question is when and at what price.

Speaking of the lack of reality, Bloomberg writes the total capitalization of Europe’s 36 largest banks with $28 trillion in assets and employing more than 2 million people is now less than Microsoft or Apple’s capitalization.

As recently as 2014 the combined valuations of several firms were worth more than $1 trillion as Apple.

As with any data point, many conclusions can be drawn.   I will write the most simplistic ones.  European banks are not competitive, negative interest rates are destroying margins, regulatory fiat is crushing new business generation, all amplified by the myopicy of the equity markets that has a mono variable of capitalization.

Earning season accelerates this week.  Results released to date have been regarded as “mixed.”

The economic calendar is comprised of various home and manufacturing data as well as sentiment surveys.

Last night the foreign markets were up.  London was up 0.13%, Paris up 0.14% and Frankfurt up 0.70%.  China was up 0.05%, Japan up 0.25% and Hang Sang up 0.02%.

The Dow should open nominally higher as all await fresh development on trade and this week’s slew of earnings.   The global chaos, chaos in Lebanon, Chile, Hong Kong, Barcelona, Central America and the Middle East is not yet affecting psychology.  It is just noise but will it rise to something of significance?   The 10-year is off 5/32 ot yield 1.78%.

kent
The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.