27 Sep TRADE IS STILL TRUMPING TRUMP

Posted at 13:04h in Market Commentary by
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The S & P 500 slid for the fourth time in five sessions.  Equities were initially flat with attention focused on the impeachment drama until the announcement that the US is unlikely to extend a waiver allowing American firms to supply China’s Huawei Technologies. Led by technology, indices closed lower between 0.25% and 0.55%.

In other words trade trumps impeachment drama.

Commenting about the economy, data continued to support the view the economy remains on solid footing but such did little to impact trading.

Changing topics, there was another high profile IPO failure. Yesterday’s debut of Peloton was a disaster, falling about 11% from its offering price, the third worst trading debut in 10 years for companies that have raised at least $1 billion according to Bloomberg.

Considerable press has been given to the collapse of both Lyft and Uber. .   And then there is WeWork, an IPO that was shelved because the expected pricing was considerably lower than private valuations.

Perhaps the greater fool theory is at hand; private investors dumping overpriced and hyped shares to the unsuspecting market.  Some can apply this theory to the most owned publically traded issues.  Historically superior returns arise from discovering undervalued/under followed companies and then waiting for others to discover as the company grows and matures.

I still can’t reconcile the thought that the largest capitalized companies in the world are considered “growth companies,”   companies whose valuations in my view are stretched at best.

What will happen today?

Last night the foreign markets were mixed.  London was up 1.11%, Paris up 0.26%  and Frankfurt up 0.89%.  China was up 0.11%, Japan down 0.77%, and Hang Sang down 0.33%.

The Dow should open nervously flat. The 10-year is off 6/32 to yield 1.72%.

 

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