Strong Buyout Fund Returns Drive Private Equity Stocks Higher

Private equity

Over the past decade, as private equity firms like Blackstone, KKR and Carlyle Group have grown into a gargantuan size and raised buyout funds nearing or eclipsing $20 billion, one critique of their cash gusher was that it would inevitably drive fund returns lower. Now, as the U.S. economy emerges from the Coronavirus pandemic and markets soar to new record highs, recent earning results from America’s big buyout firms reveal a trend of rising returns even as funds surged in size.

Fueled by piping-hot financial markets, returns from the flagship private equity funds of Blackstone, KKR and Carlyle are on the rise. Mega funds from these firms that recently ended their investment period are all running ahead of their prior vintages and raise the prospect that PE firms can achieve net investment return rates nearing or exceeding 20%.

Carlyle, which reported first quarter earnings on Thursday morning, is the newest firm to exhibit rising performance. Its $13 billion North American buyout fund, Carlyle Partners VI, which was launched in 2014 and ended its investment period in 2018, is now being marked at a 21% gross investment rate of return and a net return of 16%, or a 2.2-times multiple on invested capital.

The fund has realized $8.8 billion of investments, like insurance brokerage PIB Group and consultancy PA Consulting, and sits on a portfolio marked at nearly $20 billion. The returns are two-to-three percentage points ahead of Carlyle Partners V, the flagship buyout fund it raised just before the financial crisis. That fund is on track to earn a net IRR of of 14%, or a multiple of 2.1-times its invested capital.

Rising fund profitability, even at scale, is helping to fuel Carlyle’s overall profitability. Net accrued performance fees from Carlyle VI ended the quarter at nearly $1.4 billion and Carlyle sits on a record $3.2 billion in such performance fees that will likely be fully realized in 2021. The firm’s once-lagging stock has recently risen to new record highs.

The trend is even more clear at Blackstone and KKR, which have both used spongy IPO markets to realize multi-billion dollar investment windfalls in recent months.

Blackstone’s flagship $18 billion private equity fund, Blackstone Capital Partners VII, was closed in May 2016 and ended its investment period in February 2020, just before the Covid-19 economic meltdown. After taking public or exiting investments like Bumble, Paysafe and Refinitiv, this fund is now marked at a 18% net investment rate of return, five percentage points better than its prior fund, which raised in the aftermath of the 2008 crisis.

In the past two quarters, the fund has been the single biggest driver of Blackstone’s record profitability, generating over $1.6 billion in combined accrued performance fees. In the first quarter, the fund was responsible for 82-cents in quarterly per-share profits, filings show. Overall, Blackstone sits on a record $5.2 billion in net accrued performance fees.

At KKR, it’s a similar story. The firm’s $8.8 billion Americas XI fund, which was raised in 2012 and ended its investment period in 2017, is generating net IRRs of 18.5%, or a 2.2-times multiple on invested capital, according to the its annual 10-k filing from February. That sets up the fund to be KKR’s most profitable buyout fund since the 1990s.

KKR’s first quarter results, set to be released in early May, may show even bigger windfalls and higher returns. Its recent public offering of Applovin looks to be one of the greatest windfalls in the firm’s history, bolstering returns and profits for its even newer $13.5 billion Americas Fund XII. Asia could also be an area of big returns as its $9 billion Asian Fund III monetizes investments.

As returns rise, PE firms have seen their stocks soar to new record highs.

Once a laggard, Carlyle is up 36% year-to-date to a new record high above $42, according to Morningstar data. The firm, now led by chief executive Kewsong Lee, has returned an annual average of 23% over the past five-years.

KKR has done even better, rising 40% this year alone and 125% over the past 12-months. It’s five and ten-year total stock returns are now 33% and 13.5%, respectively.

The top performer in the industry is Blackstone Group, which recently eclipsed a $100 billion market value. Up 39% this year alone, Blackstone’s generated an average annualized total return of nearly 19% over the past decade, which is about five-percentage-points better annually than the S&P 500 Index.

Bottom Line: With public markets hitting new record highs, buyout firms are reporting LBO returns not seen since the 1990s. Their stocks, which once badly lagged the S&P 500, are beginning to beat the market.

I’m a staff writer and associate editor at Forbes, where I cover finance and investing. My beat includes hedge funds, private equity, fintech, mutual funds, mergers, and banks. I’m a graduate of Middlebury College and the Columbia University Graduate School of Journalism, and I’ve worked at TheStreet and Businessweek. Before becoming a financial scribe, I was a member of the fateful 2008 analyst class at Lehman Brothers. Email thoughts and tips to agara@forbes.com. Follow me on Twitter at @antoinegara

Source: Strong Buyout Fund Returns Drive Private Equity Stocks Higher

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Stocks Fall Again As Experts Worry About ‘Extremely Bullish’ Market Indicators

After closing at record highs last week, stocks are falling for the second day in a row as corporate earnings—which lifted the market to new highs during the pandemic—start to show signs of weakness, all while speculative pockets of investor mania continue to rage on.

Shortly after the open, the Dow Jones Industrial Average fell 147 points, or 0.4%, while the S&P 500 also slipped 0.4%, and the tech-heavy Nasdaq, which underperformed Monday, shed 0.3%.

Far outperforming any other stock in the S&P, shares of railroad company Kansas City Southern are soaring 15% after Canada National proposed to acquire the company in a $33.7 billion deal—topping Canadian Pacific’s $25 billion bid from last month and setting the stage for a potential bidding war.

Heading up the S&P’s losses, Marlboro parent Altria Group’s stock is slumping 6% after reports that Joe Biden’s administration (which has not commented on the matter) is considering a reduction in the amount of nicotine allowed in tobacco products.

On the earnings front, shares of IBM are climbing 2.5% after the software giant surpassed first-quarter expectations with revenue of $5.4 billion—bolstered by ongoing growth in its enterprise cloud business—and adjusted earnings of $2.2 billion.

Meanwhile, medical device company Abbott, which makes Covid-19 test kits, reported worse-than-expected revenue of $10.5 billion Tuesday morning as Covid-related sales fell nearly 10% quarter to quarter, sending shares down about 3%.

Reflecting ongoing uncertainty over the economic recovery, epicenter stocks—or those belonging to companies hard-hit by the pandemic—are also driving losses Tuesday, with chemicals firms Dupont De Nemours, cruise-liner Carnival Corp. and Delta Air Lines all falling about 2%.

Crucial Quote

“The reopening news is directionally positive, but the big problem is that many epicenter stocks have already seen their enterprise values return to pre-Covid levels, while some are well beyond where they stood in 2019,” Vital Knowledge Media Founder Adam Crisafulli said in a Tuesday morning note.

Tangent

In a break from tradition, the Bank of Japan revealed Tuesday that it opted out of buying exchange-traded funds despite weakness in Japanese stocks. Crisafulli says the move is “perhaps the most important piece of news today” because it signals the central bank is dialing back its economic support—at a time when central banks around the world, including the Federal Reserve, have revved up their accommodative policy to help the economy and usher in new stock-market highs. Japan’s Nikkei 225, the nation’s benchmark index, fell 2% Tuesday and is now down 4.5% from a February high.

Key Background

Boosted by massive fiscal stimulus, an accelerating vaccine rollout and falling unemployment, stocks have had a strong start to the year, with the S&P pulling off 23 new all-time highs in 2021, according to LPL Financial Chief Market Strategist Ryan Detrick. “Many of our favorite sentiment gauges are becoming extremely bullish, which could be a near-term contrarian warning,” Detrick says of indicators like sentiment, at a three-year high, and low cash allocations from portfolio managers increasingly piling into stocks.

Surprising Fact

The price of dogecoin is soaring Tuesday, climbing back near record territory from last week, as retail traders around the world stage a rally around cannabis holiday 4/20. The cryptocurrency, modeled after a meme and originally developed as a joke, has climbed eight-fold over the past month, nabbing a staggering $49 billion market capitalization.

Further Reading

S&P And Dow Score New Record Highs, For The Week: Health Care, Materials And Utilities Sectors Lead Gains (Forbes)

Peloton Shares Drop After It Resists Regulator Warnings About Treadmill Following Child’s Death  (Forbes)

I’m a reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism and economics while working for UNC’s Kenan-Flagler Business School as a marketing and communications assistant. Before Forbes, I spent a summer reporting on the L.A. private sector for Los Angeles Business Journal and wrote about publicly traded North Carolina companies for NC Business News Wire. Reach out at jponciano@forbes.com.

Source: Stocks Fall Again As Experts Worry About ‘Extremely Bullish’ Market Indicators

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Kansas City Southern’s stock soars after Canadian National’s ‘superior’ bid valued at $33.7 bln

 

 

Sleep Deprived Financial Traders Make Lower Stock Market Returns

Do financial traders make better returns in the stock market when they are well rested? You would intuitively assume that a trader’s level of sleep would affect their decision making.

Several studies have certainly shown that sleep affects the ability of people to make decisions in general. Though admittedly based on small samples of participants, these studies show that those who are short on sleep tend to have relatively low attention to detail, poor memory, poor performance and significant mood swings.

But when it comes to whether sleep affects financial decisions, the evidence has been mixed. The only measure of sleepiness that has been used is the annual clock changes for daylight saving that take place in many countries, since they disturb many people’s sleep. A few studies have used this to look at how stock market returns are affected on the Mondays directly after the clocks go back or forward by an hour.

One such study in 2000 concluded that returns were relatively low when traders lacked sleep, and suggested that the lack of sleep might make them more risk-averse because they were anxious and struggling to concentrate. But later studies, such as this one from 2002, suggested that the correlation between sleep and cautious investing might not be as strong empirically as initially thought.

My work

Daylight-saving time changes have the advantage that we all have to adjust them, but they are far from an ideal proxy for sleep since they only occur twice a year, and the impact on people’s sleep is relatively small since the clock only changes by an hour. This might explain why the research evidence has been mixed in this area.

To try and improve our understanding in this area, I undertook a pilot study of a fund manager in England, analysing his investment transactions in the context of sleep data that he recorded in a diary.

I found that his sleep patterns did indeed influence his investment decisions. In line with the theory from the 2000 study, the fund manager made fewer transactions when he was short on sleep.

To see whether there was a wider correlation, I sought to develop a new proxy for sleep. We know that around 80% of people search for information online about their health issues, and there is no reason to believe that investors behave any differently. I also knew that Google data has been used by researchers to measure investor attention to individual stocks.

I therefore created a sleepiness index based on the extent to which people in the US were searching Google for 28 relevant terms including “sleep deprivation”, “sleeping pills” and “jet lag cure”. Some of these terms came from allowing the Google algorithm to offer up potential sleepiness terms based on suggested autocompletes.

The more that people searched for things to do with sleepiness, the greater the indication of sleep difficulties. Unlike the time changes from daylight saving, my index has the advantage of being based on daily data, and can measure a much wider range of sleepiness. To test its validity, I checked the index against times that we would normally associate with sleepiness, including daylight-saving time changes and also sunrises and sunsets. Sure enough, sleepiness-related Google searches increase at these times.

The index confirmed that stock-market returns are indeed quite low on days that traders are short on sleep. For every 1% daily increase in sleep difficulties across the population, stock-market returns fell by 0.14%. I also found that these patterns reversed on subsequent days, which may mean that traders realise that their initial decisions were poor and take steps to correct them.

What next from a research point of view? Researchers could potentially use the data from sleep apps to get more accurate measures of the relationship between stock market returns and the population’s sleepiness over time. No doubt the better we understand this, the more that traders will be able to use it to their advantage.

My work is another example of how online search data can shed new light on old research subjects. There are surely lots of other ways in which the academic community can use it to understand other factors that influence our decisions.

By: Antonios Siganos  Senior Lecturer in Finance, University of Glasgow

Source: Sleep-deprived financial traders make lower stock market returns – new research

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An Investment in Hershey’s Stock Looks Sweeter Than Ever

Hershey’s (NYSE:HSYbecame an attractive investment last year when the COVID-driven sell-off resulted in ultra-low prices for this consumer staple. The company was not only well-positioned to weather the storm internal efforts to reposition the portfolio for longer-term sustainable growth were beginning to pay off. Over the past year, the company has finalized three major divestitures that have it in leaner shape, with a healthier balance sheet, and accelerating business.

Hershey’s, A Triple-Dip Of Good News

Hershey’s reported a very solid quarter despite headwinds related to divestitures and FX. Divestitures and FX resulted in a 0.2% and 0.4% headwind to the topline results with the takeaway being these headwinds are largely behind the company. That said, the $2.19 in reported consolidated revenue is 5.8% higher than last year and beat the consensus by 330 basis points. The gains were made on a 6.3% increase in organic sales due to a 5.75% increase in volume and a 0.6% increase in pricing. The U.S. segment was strongest with a bain of 9.06% while International saw its sales fall 13.1%.

Moving down the report, the company’s volume increase and internal efforts resulted in a significant increase in both the growth and operating margins. At the operating level, the GAAP margin increased by 470 basis points to 18.5% while the adjusted margin widened 170 basis points to 19.6% and both ahead of the consensus. The increase in revenue and margin resulted in earnings leverage and adjusted EPS of $1.49 or $0.06 better than expected.

“We delivered a strong quarter with continued share gains and volume growth to finish the year.   While the impact of key external factors on our business remains uncertain, we have good momentum going into 2021 with visibility into a strong start to the year.  We anticipate we will deliver another year of balanced sales and earnings growth in 2021,” said Michele Buck, The Hershey Company President, and Chief Executive Officer.

If the first dip of good news is the earnings beat, and the second the company’s increasing margins and earnings leverage, the third is the guidance. The company was among the first to reinstate guidance at the end of the calendar 3rd quarter 2020 and it has upped that guidance now. The company’s new projection has F2021 revenue growth in the range of 2-4% versus the previously expected 2.0% and a more robust 6-8% increase in EPS versus the $4.54 previously announced.

Hershey’s Dividend Is The Sprinkles On Top

If accelerating business, improving profitability, and earnings leverage aren’t enough to get you interested in Hershy there is also the dividend to consider. The company pays about 2.2% in yield with shares near $147 and there is a high expectation of future distribution increases. The company is paying about 48% of its earnings but that is based on a consensus figure well-below current guidance. The company’s earnings picture is backed up by a very healthy balance sheet as well, one that carries a moderate amount of cash and debt has good coverage and ample FCF. If the company follows true to form the next increase will come in later summer and could be worth as much as 10% of the current payout.

The Technical Outlook: Hershey’s Is Struggling With Resistance

Shares of Hershey’s popped on the news but resistance at the short-term moving average threatens to keep price action range-bound or moving lower. If price action cannot get above the 30 EMA a retest of the $144 level or lower becomes the most likely scenario. If, however, the bulls can rally and get above the EMA a move up to $152 or $153 looks probable.

By: Thomas Hughes

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SPACs Are A New Part Of The Same Market Story

The most unique feature of the modern market is how fast everything happens. As we wrote back in November, the 2020 stock market essentially plotted the entire seven-year journey investors endured around the financial crisis in just seven months.

And as markets have moved to more quickly and efficiently discount all future outcomes, a series of mini-bubbles have become a defining feature of market today. And it appears SPACs (Special Purpose Acquisition Company) are taking their seat at the table.

George Livadas, portfolio manager at Upslope Capital Management, wrote cautiously about the SPAC space in his fourth quarter investor letter published Wednesday. “In recent years we’ve seen a number of mini-bubbles come and go rapidly (pot stocks, short vol, blockchain, etc),” Livadas writes.

“We’ve also seen what looks like a general speeding up of broader market regimes (flash bear markets of late 2018 and early 2020). For the SPAC bubble to be exempt from this phenomenon, one must assume that SPACs really are a better, lasting mousetrap vs. traditional IPOs. This seems highly unlikely.”

Livadas also cites impending lock-up expirations and the first full run of detailed quarterly results from many companies taken public by SPAC sponsors as risks for the space. Livadas disclosed that as of the end of the fourth quarter, Upslope was short 11 SPACs and two electric vehicle stocks, all as-yet unnamed.

But even the discussion of SPACs as a sector or asset class unto itself proves the enthusiasm has gone too far. SPACs are, after all, just a financing scheme, an alternate route for companies to go public that requires fewer disclosures than a traditional IPO or direct listing process. In exchange for this easier process, the company being taken public offers a bigger part of itself for sale to the SPAC sponsor.

Traditionally, this higher level of dilution made SPACs attractive for turnaround stories. Existing shareholders in a business that is struggling are typically more willing to give up an ownership stake in exchange for fresh capital, or a new management team running the company.

Though as Goldman Sachs strategists noted back in December, the sectors now being targeted by SPAC sponsors are no longer beaten down turnaround stories but high growth areas like pharma, tech, and electric vehicles. The SPAC has shifted from being a last resort to a first choice for many companies.

What Is a Special Purpose Acquisition Company (SPAC)?

A special purpose acquisition company (SPAC) is a company with no commercial operations that is formed strictly to raise capital through an initial public offering (IPO) for the purpose of acquiring an existing company. Also known as “blank check companies,” SPACs have been around for decades. In recent years, they’ve become more popular, attracting big-name underwriters and investors and raising a record amount of IPO money in 2019. In 2020, as of the beginning of August, more than 50 SPACs have been formed in the U.S. which have raised some $21.5 billion.

Key Takeaways

  • A special purpose acquisition company is formed to raise money through an initial public offering to buy another company.
  • At the time of their IPOs, SPACs have no existing business operations or even stated targets for acquisition.
  • Investors in SPACs can range from well-known private equity funds to the general public.
  • SPACs have two years to complete an acquisition or they must return their funds to investors.

How a SPAC Works

SPACs are generally formed by investors, or sponsors, with expertise in a particular industry or business sector, with the intention of pursuing deals in that area. In creating a SPAC, the founders sometimes have at least one acquisition target in mind, but they don’t identify that target to avoid extensive disclosures during the IPO process. (This is why they are called “blank check companies.” IPO investors have no idea what company they ultimately will be investing in.) SPACs seek underwriters and institutional investors before offering shares to the public.

The money SPACs raise in an IPO is placed in an interest-bearing trust account. These funds cannot be disbursed except to complete an acquisition or to return the money to investors if the SPAC is liquidated. A SPAC generally has two years to complete a deal or face liquidation. In some cases, some of the interest earned from the trust can be used as the SPAC’s working capital. After an acquisition, a SPAC is usually listed on one of the major stock exchanges.

Advantages of a SPAC

Selling to a SPAC can be an attractive option for the owners of a smaller company, which are often private equity funds. First, selling to a SPAC can add up to 20% to the sale price compared to a typical private equity deal. Being acquired by a SPAC can also offer business owners what is essentially a faster IPO process under the guidance of an experienced partner, with less worry about the swings in broader market sentiment.

SPACs Make a Comeback

SPACs have become more common in recent years, with their IPO fundraising hitting a record $13.6 billion in 2019—more than four times the $3.2 billion they raised in 2016. They have also attracted big-name underwriters such as Goldman Sachs, Credit Suisse, and Deutsche Bank, as well as retired or semi-retired senior executives looking for a shorter-term opportunity.

Examples of High-Profile SPAC Deals

One of the most high-profile recent deals involving special purpose acquisition companies involved Richard Branson’s Virgin Galactic. Venture capitalist Chamath Palihapitiya’s SPAC Social Capital Hedosophia Holdings bought a 49% stake in Virgin Galactic for $800 million before listing the company in 2019.1

In 2020, Bill Ackman, founder of Pershing Square Capital Management, sponsored his own SPAC, Pershing Square Tontine Holdings, the largest-ever SPAC, raising $4 billion in its offering on July 22.

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By: Myles Udland

Blank Check Company Definition A blank check company is a developmental stage company that has no specific business plan or has the intent to merge or acquire another firm.

moreInitial Public Offering (IPO) An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance.

moreShares Shares are a unit of ownership of a company that may be purchased by an investor.

moreSponsor A sponsor can be a range of providers and entities supporting the goals and objectives of an individual or company. moreConditional Listing Application (CLA) A conditional listing application (CLA) is an interim step in the listing process for the Toronto Stock Exchange (TSX).

moreLearn About Secondary Offering A secondary offering is sale of new or closely held shares of a company that has already made an initial public offering (IPO).

Stocks What Is a Blank Check Company? Career Advice What Is an Investment Banker? Mutual Fund Essentials Can Mutual Funds and ETFs Invest in IPOs? Private Equity & Venture Cap Understanding Private Equity (PE) Alternative Investments The Reality Of Investing In Space Exploration Company Profiles How Investment Banks Make Money

Here’s Why Stocks Are At Record Highs Following The Capitol Chaos In DC

  • The Dow Jones Industrial Average closed at an all-time high on Wednesday and reached an intraday record on Thursday, despite pro-Trump insurrectionists violently storming the Capitol and disrupting the confirmation of President-elect Joe Biden’s victory.
  • The bullish mood on Wall Street has less to do with the riots and more to do with Democrats winning Georgia’s Senate runoff elections and taking control of Congress.
  • Stocks hinge on the prospects of corporate profit growth. The soft Democratic majority in the Senate lifts Biden’s chances of passing the fiscal stimulus that experts have urged Congress to enact for months.
  • A $1 trillion relief package could “easily” boost GDP expansion in 2021 by 1 point to 6%, Michelle Meyer, the head of US economics at Bank of America, said. That would all but certainly lift investors’ hopes for near-term profit growth.
  • Visit the Business Insider homepage for more stories.

While pro-Trump insurrectionists remained illegally perched on the steps of the US Capitol on Wednesday, the Dow Jones Industrial Average closed at a record high.

The market uptick has little to do with violence on Capitol Hill. Instead of fearing the chaos and President Donald Trump’s rhetoric, investors kept their sights set on Georgia’s runoff outcomes.

Raphael Warnock and Jon Ossoff’s victories in the Senate races push Democrats’ seat count in the body to 50, allowing for Vice President-elect Kamala Harris to break any ties. The soft majority paves the way for President-elect Joe Biden to pass more progressive policy, including fiscal relief meant to drive the US out of the coronavirus recession.

Stocks move – and always have moved – on the prospects of expanding corporate profits. Experts on Wall Street, at universities, and in the Federal Reserve have spent months telling Congress that sweeping fiscal stimulus is necessary to drive a faster and more equitable economic recovery. Climbing stock prices reflect investors’ beliefs that following Democrats’ wins in Georgia, such a relief package is more likely to reach Biden’s desk. 

Another round of stimulus would be a game changer for economic growth and accelerate the rebound to pre-pandemic levels of activity, Michelle Meyer, the head of US economics at Bank of America, said in a Thursday note. The package would likely prioritize another round of direct payments, an extension of federal unemployment benefits, funds for state and local governments, and relief for healthcare workers.

A $1 trillion relief package could “easily” boost gross domestic product growth in 2021 by 1 percentage point to roughly 6%, according to the bank. The positive economic effect could be even larger, as the estimates hinge on conservative spending multipliers, Meyer added.

Economists at Morgan Stanley and Goldman Sachs similarly linked optimistic GDP projections to Democrats’ wins in Georgia. Credit Suisse raised its S&P 500 forecast on Thursday, saying the increased likelihood of new stimulus in early 2021 could drive the index 12% higher through the year.

Concerns that the Washington riots would create a lasting risk were largely alleviated Thursday morning. Congress certified Biden’s victory after hours of debate and failed efforts to object to Electoral College vote counts. Trump pledged to conduct “an orderly transition” soon after, reversing from previous claims that he won the election and would remain in office.

The ensuring of a peaceful transition further augmented bullish sentiments. All three major stock indexes notched record intraday highs on Thursday as investors viewed the certification as a return to business as usual.

“With the political tensions easing, more stimulus expected to help boost the economy, and coronavirus vaccines helping bring a measure of calm to investors and traders, it seems that the market can now focus on earnings season,” JJ Kinahan, the chief market strategist at TD Ameritrade, said.

By: Ben Winck

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Dan Takahashi – English Channel

TWITTER: https://twitter.com/Dan_Takahashi_ INSTAGRAM: https://www.instagram.com/dantakahashi1/ FACEBOOK: https://www.facebook.com/DanTakahashiJP/ LINKEDIN: https://www.linkedin.com/in/dan-takah… I’m building a new company and recruiting team members who live in Tokyo! If you meet the criteria, please email daniel@dkocapital.net with your (1)experience and (2)education background! ■ Software engineer (1), development of iOS or Android Social Media & Business News App, over 2 years experience ■ Software engineer (2), development of iOS or Android Investing App, over 2 years of experience ■ Attorney, specialized in Japanese Financial Instruments and Exchange Law, more than 5 years of experience ■ Quants analyst, investing algorithm development, more than 3 years of experience ■ Portfolio Manager, asset management of large fund, over 5 years experience ■ Professor from Top Japan Univeristy, specializing in finance, more than 5 years of experience ■ Previous Important Videos! Create a Long Term Investment Portfolio? https://youtu.be/Vdwx4z0rJ-g Short Term Investing….Key is to Find the Trend? https://youtu.be/TMLWUjlb_wU Top ETFs for your portfolio? https://youtu.be/Yfv3PvPKeuM AVOID Leverage & Inverse ETFs? https://youtu.be/tDoQgr1OLf8 3 Secrets to CUTTING LOSSES? https://youtu.be/KA8vIaaEXYI ■ Chart Technical analysis Videos RSI – https://youtu.be/plpR2HOWyM4 BOLLINGER BAND – https://youtu.be/Hkn2F3pJyuc MACD – Find the Trend? https://youtu.be/nNt5s8PwjkQ Pivot Point Analysis – https://youtu.be/aQWotA5yT7A ■ Media Inquires please Contact: daniel@dkocapital.net ■ Dan Takahashi Profile ・560k total Followers (bit over 6 months) ・Cornell University, Honors Magna Cum Laude ・Entrepreneur, Investor, Media Commentator Born in Tokyo, half-Japanese, half-American. Have lived in 6 countries and visited over 60 countries! Started investing at 12 years old, began Wall Street when 19, created hedge fund when 26, and sold company stake at 30 years old. I love nato beans & karaoke ❤❗ ■ Japanese Channel https://www.youtube.com/channel/UCFXl…#stockmarket#dantakahashi#investing

US Stocks Climb Higher In First Trading Session of 2021

  • US stocks climbed higher in the first trading session of 2021 on Monday as investors returned from the New Year holiday.
  • Bitcoin saw a volatile trading session on Monday after it fell 17% following a surge to record highs just below $35,000.
  • Watch major indexes update live here.

US stocks gained in the first trading session of 2021 on Monday as investors returned from the New Year holiday.

Bitcoin surged and then dropped in a volatile trading session. The popular cryptocurrency hit record highs just below $35,000 on Sunday before falling as much as 17% in Monday trades to levels not seen since last week. Bitcoin’s fall was its steepest since March. 

Here’s where US indexes stood shortly after the 9:30 a.m. ET open on Monday:

Read more: GOLDMAN SACHS: Buy these 37 stocks that could earn you the strongest returns without taking on big risks in 2021 as the recovery and vaccine distribution get underway

Tesla jumped 3% after it said it delivered nearly 500,000 electric vehicles in 2020, besting Wall Street expectations and falling just a few hundred vehicles short of its delivery target.

Nio was following in Tesla’s footsteps after it reported record December and fourth quarter delivery numbers. The stock jumped as much as 5% in Monday trades.

Herbalife fell in Monday trades after billionaire investor Carl Icahn sold $600 million worth of shares in the company and gave up board seats.

Oil prices were mixed. West Texas Intermediate crude dropped 0.33%, to $48.36 per barrel. Brent crude, oil’s international benchmark, rose 0.14%, to $51.87 per barrel.

Gold jumped 2.69%, to $1,946.10 per ounce.

By: Matthew Fox

Read more: The space industry will grow by over $1 trillion in the next decade, says Bank of America. Here are the 14 stocks best-positioned to benefit from the boom.SEE ALSO:Warren Buffett’s right-hand man shapes his investing approach and keeps him disciplined, ‘Shark Tank’ star Kevin O’Leary says »READ NOW:Herbalife slides after Carl Icahn sells $600 million of stock in the company »

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Capital.com 88.6K subscribers Watch our detailed S&P 500 forecast 2021 and see where the stock market will be headed throughout the coming year. Despite all the economic turmoil that this year has brought to the world, 2020 has actually been stellar for the stock market, and many further growth for S&P 500 in 2021. So much so that many analysts have already predicted more double digit gains in their SP500 index forecast. The distribution of new COVID-19 vaccines is largely what is considered to be a strong driver for the SP500 analysis 2021 due to the lasting economic recovery that it implies.

In fact, JPMorgan Chase has even stated that these are among the best conditions for sustained gains in years as far as the SP500 outlook 2021 goes. With that in mind, all the most prominent projections for the SP500 target 2021 range from 3,800 to 4,200. And some of these SP500 estimates 2021 are even fairly modest, as they don’t all consider a positive vaccine outcome. And if the results of the vaccine do prove positive, then there’s room for even more upside in the SP500 forecast. Hence, for SP500 investing, 2021 may actually prove to be the best year in history. But there’s also another take on the SP500 prediction 2021, which we will cover in today’s video. Stay tuned for our full SP500 forecast 2021.

And find out what the SP500 futures forecast has in store for the coming weeks. Have your own SP 500 futures forecast 2021 in mind? Let us know in the comments! Give us a thumbs up if you liked our “SP 500 Technical Analysis 2021” video, and leave us a comment down below with your thoughts on the current market situation. And for the latest updates on the SP 500 forecast analysis 2021, be sure to subscribe to the Capital.com channel! #SP500#SP500Forecast#SP500Futures

The Counterintuitive Truth About Stock Market Valuations

Market valuations aren’t mean reverting

Stock market valuations can make investors nervous when elevated above long-term averages. And valuations are very much elevated right now.

Read more: How to think about stock valuation: The full breakdown

“The forward 12-month [price/earnings] ratio for the S&P 500 is 21.7,” Factset’s John Butters observed on Friday. “This P/E ratio is above the 5-year average (17.4) and above the 10-year average (15.6).”

As we’ve written quite a bit, rich valuations alone are no reason to avoid or dump stocks. And they’ve historically revealed almost nothing about what stocks do in the next 12 months.

And as Myles Udland noted last week, valuations often spend extended periods of time far above average while spending very little time trading near their averages. (See more here, here and here.) Indeed, much of the gains you see in the stock market have been achieved while valuations appeared expensive.

It might be unsettling, but the counterintuitive truth is valuations don’t arbitrarily gravitate back to historical averages.

“The long cycles we see in the P/E ratio are driven by economic factors,” Wells Fargo analysts said in a 2016 note. “The S&P 500 P/E ratio is not stationary and not mean reverting…”

In recent years, everyone from billionaire investor Warren Buffett to Fed Chair Jerome Powell have stressed the importance of rates when considering valuations. And with rates having been at unusually low levels for years by historical standards, you could argue we’ve been in a new market regime that justifies elevated P/E ratios.

Valuation considerations for 2021

It’s with all this context that we read Wall Street’s 2021 stock market forecasts, which include a lot of strategists making the case for higher prices even as valuations remain elevated.

“Yes, valuations appear stretched at first glance, but they also need to be considered within the context of historically low interest rates and little inflation, ingredients that are likely to persist throughout 2021 and beyond, in our view,” BMO Capital’s Brian Belski wrote on Thursday. “When viewed through this lens, we believe it is not unreasonable for market valuation to sustain (or even expand slightly) from its current level.”

Belski sees the S&P 500 climbing to 4,200 next year.

On the other hand, Morgan Stanley’s Mike Wilson is a bit more cautious, forecasting the S&P to top out at 3,900.

“With respect to multiples, we expect rates moving higher will be a headwind to valuations, though falling equity risk premium in a recovering economy will provide some offset,” Wilson said. “The market has entered the phase of the economic recovery when multiples compress as earnings move higher.”

AdChoices

Wilson’s point about multiples shrinking as earnings rise is worth reiterating because it’s a reminder that prices do not have to fall for valuations to contract. It’s simple math.

That same math helps to explain why Credit Suisse’s Jonathan Golub sees the S&P climbing to 4,050 as valuations come down: “Our target suggests multiples will contract from 21.9x today to 21.3x by year-end 2021, as earnings grow into currently elevated multiples.”

We’ll see what stock prices do in 2021. But don’t be surprised prices continue to rise despite what appear to be “stretched” valuations.

By Sam Ro, managing editor. Follow him at @SamRo

What to watch today

Economy

  • 8:30 a.m. ET: Chicago Fed National Activity Index, October (0.27 expected; 0.27 in September)
  • 9:45 a.m. ET: Markit US Manufacturing PMI, November preliminary (53.0 expected, 53.4 in October)
  • 9:45 a.m. ET: Markit US Services PMI, November preliminary (55.0 expected, 56.9 in October)
  • 9:45 a.m. ET: Markit US Composite PMI, November preliminary (56.3 in October)

Earnings

Pre-market

  • 7:30 a.m. ET: Warner Music Group (WMG) is expected to report adjusted earnings of 5 cents per share on revenue of $1.11 billion

Post-market

  • 4:05 p.m. ET: Urban Outfitters (URBN) is expected to report adjusted earnings of 44 cents per share on revenue of $929.28 million
  • 4:05 p.m. ET: Agilent Technologies (A) is expected to report adjusted earnings of 92 cents per share on revenue of $1.4 billion
  • 4:05 p.m. ET: Nutanix (NTNX) is expected to report an adjusted loss of 58 cents per share on revenue of $297.27 million

Top News

Oxford-AstraZeneca COVID-19 vaccine shows over 70% efficacy [Yahoo Finance UK]

Eurozone business activity plunges as lockdowns bite [Yahoo Finance UK]

In latest China jab, U.S. drafts list of 89 firms with military ties [Reuters]

Arrival, the latest EV company set to enter the public markets [Yahoo Finance]

YAHOO FINANCE HIGHLIGHTS

Retailers are back to giving away big money to investors

Matthew McConaughey explains why he’s inspired by Marc Benioff’s ‘new capitalism’

This NYC restaurant is requiring a $50 on-site COVID-19 test before you dine

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CNBC Television

Robert Shiller, Sterling professor of economics at Yale University and a Nobel Prize winner, and Ed Clissold, chief U.S. strategist at Ned Davis Research Group, discuss how rising fear levels and high stock prices could impact markets. With CNBC’s Bob Pisani. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi » Subscribe to CNBC TV: https://cnb.cx/SubscribeCNBCtelevision » Subscribe to CNBC: https://cnb.cx/SubscribeCNBC » Subscribe to CNBC Classic: https://cnb.cx/SubscribeCNBCclassic Turn to CNBC TV for the latest stock market news and analysis. From market futures to live price updates CNBC is the leader in business news worldwide. The News with Shepard Smith is CNBC’s daily news podcast providing deep, non-partisan coverage and perspective on the day’s most important stories. Available to listen by 8:30pm ET / 5:30pm PT daily beginning September 30: https://www.cnbc.com/2020/09/29/the-n… Connect with CNBC News Online Get the latest news: http://www.cnbc.com/ Follow CNBC on LinkedIn: https://cnb.cx/LinkedInCNBC Follow CNBC News on Facebook: https://cnb.cx/LikeCNBC Follow CNBC News on Twitter: https://cnb.cx/FollowCNBC Follow CNBC News on Instagram: https://cnb.cx/InstagramCNBChttps://www.cnbc.com/select/best-cred…#CNBC#CNBCTV

Stock Market Crash: The End Game And Down The Rabbit Hole

For a stock market to crash, prices must fall. That is obvious. But what if stocks rise and the value of money falls? Is that a crash? If the value of money drops 30% but the market rises a little, is that a bull market?

Not many people would argue against the premise that it is the Federal Reserve’s liquidity actions that have levitated the U.S. stock market. Sadly, in an attempt to keep the whole economy from imploding it has inflated stock asset values to ridiculous levels. Jay Powell, the Fed Chairman, made it clear in a recent interview that they were committed to supporting the U.S. economy and to protecting it from the effects of anti-Covid measures, for as long as necessary and for as much as needed, and clearly indicated that would be for a long time.

This is the trend of that Federal Reserve support:

The Federal Reserve's total assets
The Federal Reserve’s total assets Credit: Federal Reserve

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(Chart courtesy of the Federal Reserve’s website)

This QE or however you want to brand this liquidity provision (liquidity equals cash, provision equals printing assets that turn into money) is clearly going to run and run for a long time because every time the Fed slackens its swapping of fresh government-backed quality assets for other people’s sketchier assets, down flops the stock market and then up pops more QE to keep the market from crashing Hindenburg-like in flames.

When the Fed tapered in 2019, down went the market and crash went peripheral global economies as U.S. dollars were sucked from the global economic plumbing. The U.S. and the world economy is hooked on the Federal Reserve’s money printing. By swapping golden government debt for other parties’ riskier, perhaps very risky, debt the Fed yanks the world’s dodgy assets holders out of the mire by their hair, thus avoiding a spiral of insolvency. The potential damage of that terrifying comeuppance is what sparks all bailouts, allowing broken companies and economies to stagger on, most likely towards even greater fragility.

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The weird thing is this: If these liquidity operations keep going on, the Federal Reserve will in effect own all its citizens’ homes and all its creditworthy (and not so creditworthy) corporate debt and thus have liens on most of the economic assets of its citizens and producers. It will have in effect nationalized, though probably by accident, the country, having bought it with government paper. 

However, if it brings this process to a halt the market will crash and everyone will instantly be a lot poorer, while if it carries on at some point it will glut the market for its paper, up will go interest rates and down will go the value of bonds and the reality of a much poorer economy will bite.

However, it seems that the Federal Reserve is not going to let the stock market crash whatever the outcome.

But if a dollar in 2023 or 2024 buys significantly less and the market hasn’t rocketed accordingly, you are getting your reset in a chronic way rather than through an acute event of a 30% retrenchment on your portfolio. This will be the aim, once again to smooth the process by spreading it out over a decade or two rather than take the pain in an awful three or so years of restructuring.

Yet make no mistake, the U.S. stock market is a house of cards, and as the Malaysians discovered when they propped up the price of tin, there is a finite nature to keeping a market away from its natural equilibrium and you must spend increasing amounts to do it. At some point you run out of credit and down goes the market to its correct level.

How long the U.S. can continue to debase its credit while maintaining its credibility is the key question in this ongoing drama and every country in its time has gone beyond that point and sunk into crisis. If the U.S. chooses to corner its markets, that time will approach rapidly. With continued QE the system will become more fragile still so to the catalyst needed to breach that fixed market corner will get smaller and smaller until the slightest of nudges will break the spell.

Inflation solves all these problems as it gives the flexibility for economic activity to rebalance as few can keep up with all the different developing prices. It creates impetus for people to get their money moving and crushes debt with negative real interest rates and also stealthily rebalances the actual value of those debts. Switching inflation on and off is a known, even though central banks ludicrously claim otherwise.

But will the stock market crash now? Hearing Jay Powell speak it appears they are prepared to die on the hill of QE. So the market will not be allowed to take its natural course. This means the market will crash but only when and if there is a downfall moment. There has to be a readjustment for a global economy that has lost at least 10% of its output with still more damage to come.

Some governments will aim for a chronic economic development while some will go for an acute one if they can shift its blame onto someone or something else.

As such, investors should pray that the new incoming U.S. administration doesn’t find a neat scapegoat to blame a reset on, to get that out of the way early in their term.

For anyone who is not a diehard buy and holder, the near future must be one where an investor’s fingers should stay hovering near that sell button because the tightrope walk the Fed is walking for the sake of the U.S. and world economy is going to be a precarious one.

Clem Chambers is the CEO of private investors website ADVFN.com and author of 101 Ways to Pick Stock Market Winners and Trading Cryptocurrencies: A Beginner’s Guide.

Chambers won Journalist of the Year in the Business Market Commentary category in the State Street U.K. Institutional Press Awards in 2018. Follow me on Twitter or LinkedIn. Check out my website.

Clem Chambers

 Clem Chambers

I am the CEO of stocks and investment website ADVFN . As well as running Europe and South America’s leading financial market website I am a prolific financial writer. I wrote a stock column for WIRED – which described me as a ‘Market Maven’ – and am a regular columnist for numerous financial publications around the world. I have written for titles including: Working Money, Active Trader, SFO and Technical Analysis of Stocks & Commodities in the US and have written for pretty much every UK national newspaper. In the last few years I have become a financial thriller writer and have just had my first non-fiction title published: 101 ways to pick stock market winners. Find me here on US Amazon. You’ll also see me regularly on CNBC, CNN, SKY, Business News Network and the BBC giving my take on the markets.

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George Gammon

Stock market crashes and the 👉QUESTION ON YOUR MIND IS 👈..Are we now in the “end game?” This has been the fastest stock market crash, as measured by a 10% decline from a market high, in history. Worst week since 2008 global financial crisis. As we all know, the system now is much more levered and precarious. So what happens now? Does the stock market crash further? Is this the next 2008 style financial crisis? Will this lead to a recession or even a depression?

These are the questions everyone has, and they’re the questions I’ve been asking myself. In this video I’ll do my best to outline the systemic risks in the current system, why the federal reserve doesn’t have as much control as people think, and why this maybe the black swan event people have been expecting. If you’re interested in the future of the economy THIS IS A MUST WATCH VIDEO!

In this stock market crash end game video I’ll discuss the following: 1. The current systemic risks. 2. Jeff Snider’s work showing the Fed isn’t in control. 3. Is this the end game? I give you my opinion and what is the deciding factor for me. Link to Peter Schiff video from clip. Peter is one of my favorites, I’d strongly recommend checking out his channel and podcast! https://youtu.be/NjzYRtK6i_M For more content that’ll help you build wealth and thrive in a world of out of control central banks and big governments check out the videos below! 👇 🔴 Subscribe for more free YouTube tips: https://www.youtube.com/channel/UCpvy… Do you wanna see another video as incredible as this? Watch “Kyle Bass Predicts HSBC Collapse In 2020! (Here’s Why)”: https://youtu.be/QwjiIIht0bw Watch “Repo Market Bailout: TERRIFYING Unintended Consequences Revealed!”: https://youtu.be/-2wJWzoSjRo Watch “2008 GFC: Everything You Know Is Wrong! (Truth Revealed)”: https://youtu.be/Ku58GQ5dcKU#StocksPlummet#MarketChaos#GettingWorse?

Credit Suisse Bullish On Stocks In 2021 Because It’s Bullish On 2022

NEW YORK, NEW YORK – JULY 23: People walk along Broadway as they pass the Wall Street Charging Bull statue on July 23, 2020 in New York City. On Wednesday July 22, the market had its best day in 6 weeks. (Photo by Michael M. Santiago/Getty Images)

Credit Suisse analyst Jonathan Golub introduced his 2021 price target for the S&P 500 (^GSPC) of 4,050, implying 12.2% upside from Tuesday’s closing levels. Underpinning this upbeat call is his assumption that two years from now, the post-virus economic recovery will have already hit a peak.

“Our 2021 forecasts are designed to answer a simple question: what will the future (2022) look like in the future (end of 2021),” Golub said in a new note Wednesday. “From this perspective, we are forced to de-emphasize the near-term, focusing instead on the return to a more normal world.”

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“As we look toward 2022, the virus will be a fading memory, the economy robust, but decelerating, the yield curve steeper and volatility lower, and the rotation into cyclicals largely behind us,” he added.

Based on Golub’s analysis, economic activity as measured by GDP growth will renormalize at levels slightly above trend, or with quarterly annualized growth rates just over 3%, starting in the second half of 2021.

And the labor market — which as of October was still 10 million payrolls short of pre-pandemic levels — will likely reach “full employment” by the second half of 2022, Golub added.

Since the stock market discounts future events, each of these prospects for further improvement down the line should translate into a higher S&P 500 as investors price in these events.

Analysts have already begun to account for an anticipated improvement in corporate profits, as S&P 500 earnings per share (EPS) have on aggregate sharply topped consensus expectations so far for each of second and third quarter results this year.

“We expect 2020 estimates to rise, 2021 to remain stable and 2022 to moderate,” Golub said.

His 2021 S&P 500 price target of 4,050 is based on earnings per share of $168 next year, for an improvement of 20% over the expected aggregate EPS this year. He expects EPS will then rise to $190 in 2022.

Sector leadership

On a sector basis, Golub rates technology stocks as Overweight for 2021, given their “faster sales growth, superior margins, robust FCF [free cash flow], and low leverage. He also rated financials, one of the laggard sectors so far for the year-to-date, as Overweight, given their propensity to lead during recoveries.

“Consistent with a typical recovery, banks should benefit from improving credit conditions, increasing transaction volumes, and a steepening yield curve,” Golub said. “The group is adequately reserved, likely. resulting in a greater return of capital.”

Golub designated cyclicals with a Neutral rating for next year, saying he is “positively inclined toward economically-sensitive groups and believe[s] their momentum should persist over the near-term.” But he added that he thinks the largest quarter-over-quarter improvements in economic activity have already come and gone, leaving more tepid further upside potential for stocks with profits closely tethered to economic growth.

He rated non-cylicals like consumer staples as underweight, while giving health care specifically an Overweight rating.

“Non-cylicals should lag in an improving economy as falling volatility supports higher P/Es (price-earnings multiples) for riskier assets, and rising rates make their high dividend yields less appealing,” he said. “The one exception is health care, which should outperform given a more robust earnings trend.”

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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