Barron’s September 6 / Generally bullish on equities / One notable dissension

hank

This week’s Barron’s is disappointing in that Randall Forsyth is missing for the second straight week. Ben Levisohn, filling in at the Up & Down Wall Street spot isn’t nearly as good, IMHO. Levisohn addresses Friday’s disappointing jobs numbers - but I’m not quite sure where he’s going …

Generally, this week’s publication reflects a highly bullish tone. Several articles mention a continuing accommodative Federal Reserve stance. One article is titled “A Homebuilder Stock That Could Soar 65%”. Another bullish take appears in the magazine’s lead article, “The Trader” with its headline: “The Trend is Your Friend.”

One note of dissension appears from perma-bear Alan M Newman in the section featuring recent “snippets” from different market pundits. Here’s a brief excerpt:

“There are now so many parallels with history-making manias such as the South Sea Bubble, the Roaring ’20s, Tulip Mania, and even the relatively recent Tech/Internet Bubble that the present era in retrospect, may one day appear the craziest of all …. Today’s parallels are every bit as crazy, even hilarious. While the blockchain technology that many of the roughly 4,500 invented crypto currencies is based on is valid, there is ample reason to dispute valuations …

A Google search for ‘intrinsic value of Dogecoin,’ returns ‘..has no intrinsic value’. Thus, Dogecoin has turned out to be the 2021 equivalent of “carrying on an undertaking of great advantage but no-one to know what it is.’ You can’t make this stuff up, folks.” *

There’s an in-depth look at SEC Chair Gary Gensler’s efforts to overhaul equity trading platforms with the goal of making the prices paid by small investors fairer. Robinhood, particularly, is in his cross-hairs. Gensler likes to shake thing up. One may recall about a dozen years ago when he took on the mutual fund industry, publicly decrying what he considered excessive fees - at the same time his twin brother Robert managed one of T. Rowe Price’s largest equity funds.

* Excerpted passage from Barron’s - September 6, 2021


Feel free to add other opinions from Barron’s or other sources / pundits you may follow.

BaluBalu

Unlike previous cycles, most excesses in capital markets are self correcting in this cycle, except the elephant in the room - crypto. Unlike equities, which eventually have to prove with earnings, what will cause the crypto craze to go bust when your Congressmen and billionaires have invested in it and cryptos have never promised any returns (a la dividends). When crypto miners were shut down in China (environmental issues), they were welcomed to the US and Congressmen lobbied / cheered for them. Every time one asks cryptos to prove their value, they point at fiat currencies. I have no idea where the crypto craze, with multi trillion valuation, is headed. If it ends in a disaster, it will not end well for the country. So, may be we are stuck with just regulating and propping it up. The longer we wait to regulate it, the bigger the mania it is going to be, and bigger the eventual potential burst.

sma3

I found the most sobering analysis focused on the jobs report with it's huge miss of expected payroll ( 235,000 ) and the large increase in hourly wages ( 0.6%)

https://www.barrons.com/articles/economy-jobs-report-fed-stagflation-51630706928?mod=past_editions

This coupled with dramatic decreases in the expected GDP growth ( 2.5% down from 6.5%) makes me very cautious.

As soon as the Fed takes away the punch bowl, watch out. But this time Bonds are so over priced there will be little shelter there, especially if rates rise