Company Financing
A recent chart reminded us of another reason why many investors prefer the US markets. Securitization, while often maligned, forces a mark to market transparency for assets, such as bank loans, that might otherwise distort reporting values as reported by the accounting principles known as GAAP. European and US companies finance themselves quite differently:
How Companies Get Financed: US vs Europe https://t.co/2HPLhDdoWF pic.twitter.com/ffb1kSQw3o
— Barry Ritholtz (@ritholtz) October 15, 2020
We suspect the large amount of loans, as opposed to bonds, used by European companies works against price discovery. Bonds that are marked to market, at times viscously, hold companies accountable and render a quick judgement on future prospects. Bank valuation is also improved and perhaps for this reason US banks command a higher valuation.
Good Morning from #Germany where German banks index got another hit by new corruption allegations. Dropped a further 10% in the past 3 trading days. All listed German banks have a combined mkt cap of ridiculous €21bn. pic.twitter.com/jatY6r5a3F
— Holger Zschaepitz (@Schuldensuehner) September 23, 2020
Related to this discussion on asset values is a current discussion on intangibles. The US market is home to more companies whose valuation is increasingly composed of intangibles. Investors relying on valuation frameworks reliant on inadequate measures of book valuation will be challenged.
Shipping Stocks
Some investors appear to have a growing affinity for using ESG criteria in the choice of stocks though we are suspect of the exact metrics. The reports we have seen, such as those from Dimensional Fund Advisors, show little additional information provided in the relationship between expected returns and carbon prices. This analysis, though, is backwards looking and we wonder if an aversion to energy related stocks, coupled with an affinity to other stocks whose valuation we struggle to understand, might present opportunities.
A video chat is more valuable than the world’s biggest oil explorer and producer pic.twitter.com/MxeGXwVmnS
— zerohedge (@zerohedge) October 29, 2020
Next, we will look at NextEra Energy, which provides energy generation and distribution services.
Earlier this year, shipping stocks found some support as oil arbitragers sought to sell oil futures at forward dates while storing oil at sea. Additional support might be expected from additional growth now being signaled from the bond markets. Some shipping stocks such as Teekay Tankers (TNK) and Scorpio Tankers (STNG) are reported to trade at prices below their assert values, and investors may wish to look closer at these measures.
Chinese stocks crushed the S&P 500 YTD so far; almost 20% outperformance. pic.twitter.com/qRKplwgIZm
— Lyn Alden (@LynAldenContact) November 2, 2020
$JPM now has $2 trillion in deposits, which is $439 billion more than they had 9 months ago. The growth alone is about the size of US Bancorp, and larger than all but 3 banks in the US. pic.twitter.com/EDWpeJG0DH
— John Huber (@JohnHuber72) October 13, 2020
Wells Fargo. Multi-year low.
More like Not-so-wells Fargo.
LOL pic.twitter.com/0nlFqncTiZ
— Eddy Elfenbein (@EddyElfenbein) October 28, 2020
Vontier looking to replicate the Danaher Business System to create shareholder value $VNT pic.twitter.com/FcisBuPHW1
— In Practise (@_inpractise) October 17, 2020
Ball Corp, a sleepy can manufacturer based in Colorado has compounded at 18% since 2015 (versus the S&P at 11%).
As they say, “you can mine for gold or you can sell pickaxes.”
Sustainability + consumer trends, combined with an EVA capital allocation discipline. Will outperform. pic.twitter.com/iWv3SemXpS
— Post M. (@Post_Market) October 7, 2020
prolly useless but there it is pic.twitter.com/hE58i1RDQy
— HedgedIn (@noalpha_allbeta) October 7, 2020
Phillips 66 Is The Best Refinery Play$PSXhttps://t.co/I4ffzcN0t5
— HFI Research (@HFI_Research) October 7, 2020
The deal would nearly double the assets that Morgan Stanley manages on behalf of pension funds, insurance companies and other clients https://t.co/NiRjesvkt4 via @WSJ
— Paul Blinn (@PaulBlinn) October 8, 2020
It really IS different this time.
This expansion will be powered by capex, not the consumer.
Don’t be distracted by negative leisure/travel news.
Watch rails and steel.
We’ve not seen this in decades, and it’ll catch the unwary by surprise.#economics #economy #GDP #capex pic.twitter.com/QTjuXt21qA
— Nancy R. Lazar (@NancyRLazar1) October 5, 2020
Here’s the S&P 500 in black with trailing operating earnings in blue. Trailing earnings are expected to trough in Q4. The two lines are scaled at a ratio of 18 to 1. pic.twitter.com/gVov6CKJb7
— Eddy Elfenbein (@EddyElfenbein) September 22, 2020
South Sea Stock Price Bubble Is Good Reminder, Even 300 Years Later https://t.co/XfcaLZJZi5
— zerohedge (@zerohedge) October 4, 2020
— RΛMIN NΛSIBOV (@RaminNasibov) October 4, 2020
”Value is short duration. If inflation returns, value stocks will be rewarded” pic.twitter.com/yN6FYf8NCD
— In Practise (@_inpractise) September 27, 2020
To those of you who guessed U, V, W, or L: thanks for playing, but the answer was “K.”
It was a “K-shaped” recovery. pic.twitter.com/mvL1kdDFFV
— Corey Hoffstein 🏴☠️ (@choffstein) October 2, 2020
It’s not a surprise to see America on top of this list of the countries with the most firearms in civilian hands, but the sheer amount is a bit shocking. The U.S. had an estimated 393m (known) privately-owned firearms – 120.5 for every 100 citizens. https://t.co/364P98IUoa pic.twitter.com/NTVnpVE3Yw
— Statista (@StatistaCharts) October 14, 2020
cc: @PlanMaestro https://t.co/CEzAaOJ8bg
— Amit Kumar Goyal (@akgoyal) October 6, 2020
These are the countries with the highest proportion of robot workers https://t.co/31GKArqGE8 #AI #manufacturing pic.twitter.com/YABDitI0Zj
— World Economic Forum (@wef) October 3, 2020
They’re not here to help you. They only exist so that they can distract you. Don’t let them. It’s your choice. pic.twitter.com/72qTVNzxHD
— J.C. Parets (@allstarcharts) October 1, 2020
A history of NYFed comic books, which date back to the 1950s. pic.twitter.com/WMT1drP4rm
— New York Fed (@NewYorkFed) September 30, 2020
An interesting look at largest brands around world … no surprises here in U.S.; but Europe’s & Asia’s less discussed @howmuch_net @YahooFinance pic.twitter.com/xsMRt6AOAk
— Liz Ann Sonders (@LizAnnSonders) September 30, 2020
I’ve updated & posted this a couple times/yr since 2014.
A couple interesting observations:Russia’s monetary base is essentially gold backed at current prices (although hasn’t helped the Ruble much)#Gold at $18k would back the MB of both China & USA
Canada is still screwed pic.twitter.com/OtW6ndR5F0
— Santiago Capital (@SantiagoAuFund) October 13, 2020
Musings: if we were even half the the people our dogs thought we were, the world would be a better place…
— stella (@stellabystar1) October 6, 2020
