Frustrated investors have been utterly confused by the surprise 42% rally while the nation remains in the throes of a pandemic that shows no signs of abating
I hope I can explain why the disconnect is far more rational than many believe.
bloomberg.com/opinion/articl…
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I hope I can explain why the disconnect is far more rational than many believe.
bloomberg.com/opinion/articl…
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Unemployment is at levels not experienced since Great Depression; GDP is off 40%. After a lengthy lockdown, economic re-opening was bungled.
Americans are experiencing an economy that is very negative + a market that is very positive.
No wonder investors are so confused!
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Americans are experiencing an economy that is very negative + a market that is very positive.
No wonder investors are so confused!
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The rampaging bull continues to power on. Nasdaq $QQQ are hitting new all-time highs everyday. S&P 500 $SPY is right behind it.
Both seem to ignore new record highs in coronavirus infections, economic weakness + myriad re-opening stumbles.
I have a theory why...
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Both seem to ignore new record highs in coronavirus infections, economic weakness + myriad re-opening stumbles.
I have a theory why...
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Prior explanations included Fed’s liquidity injections, Congressional stimulus, imminent Covid-19 treatment/vaccine. Another trillion $ stimulus this summer? Stock buybacks? Investors looking past 2020 to 2021 or beyond.
All of the above? Maybe not
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All of the above? Maybe not
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My explanation:
The group of stocks known as “FAANMG” -- the biggest most important stocks in the S&P500 -- are giant tech firms that derive a majority of their revenues from outside of the United States.
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The group of stocks known as “FAANMG” -- the biggest most important stocks in the S&P500 -- are giant tech firms that derive a majority of their revenues from outside of the United States.
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For the first time in a decade, world’s wealthiest industrialized countries are doing MUCH better than USA
Japan, South Korea, Germany, others not only have managed to wrestle pandemic into submission, their economies are far ahead of ours into their re-openings.
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Japan, South Korea, Germany, others not only have managed to wrestle pandemic into submission, their economies are far ahead of ours into their re-openings.
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These regions managed coronavirus better than USA.
They also are key revenue producers for FAANMGs.
Data suggest much of the world is way ahead of the U.S. not only in terms of managing their pandemics, but in their economic recoveries.
bit.ly/3fnOx8U
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They also are key revenue producers for FAANMGs.
Data suggest much of the world is way ahead of the U.S. not only in terms of managing their pandemics, but in their economic recoveries.
bit.ly/3fnOx8U
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As of July 13 Globally, there are 12.89 million confirmed cases of Covid-19 and 568,736 deaths.
USA figures are 3.30 million confirmed cases of Covid-19 and 135,205 deaths.
We have 4.2% of world’s population, but ~25% of infections + deaths.
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USA figures are 3.30 million confirmed cases of Covid-19 and 135,205 deaths.
We have 4.2% of world’s population, but ~25% of infections + deaths.
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Gross negligence / incompetence in USA worked to advantages of Big Tech.
All they require of customers is a computing device and a network connection; they are not limited by geography – either domestically or internationally. Their users do not need to go to an office.
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All they require of customers is a computing device and a network connection; they are not limited by geography – either domestically or internationally. Their users do not need to go to an office.
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Just how important are “FAANMG” stocks to US market rally?
Two thirds of the gains in the S&P500 past 5 years have been driven by just 6 U.S. companies.
thetimes.co.uk/article/is-thi…
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Two thirds of the gains in the S&P500 past 5 years have been driven by just 6 U.S. companies.
thetimes.co.uk/article/is-thi…
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The details via Times of London:
“Since 2015, the market capitalization of the S&P 500 has increased by $6 trillion. Of this, $4 trillion has come from the big six tech names: Microsoft, Apple, Amazon, Facebook, Alphabet (the owner of Google) + Netflix”
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“Since 2015, the market capitalization of the S&P 500 has increased by $6 trillion. Of this, $4 trillion has come from the big six tech names: Microsoft, Apple, Amazon, Facebook, Alphabet (the owner of Google) + Netflix”
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Here is the kicker:
FAANMG derives much more of their revenues from overseas than most stocks:
According to S&P, percentage of S&P500 company revenue from foreign countries was 42.9% in 2018 (2019 update due in August)
Its as much as 50% higher for FAANMGs
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FAANMG derives much more of their revenues from overseas than most stocks:
According to S&P, percentage of S&P500 company revenue from foreign countries was 42.9% in 2018 (2019 update due in August)
Its as much as 50% higher for FAANMGs
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Big tech overseas revenue:
$AAPL generates >55% of its revs outside USA. Some Qs, oversea revs = 60%.
$FB & $GOOG revs, its 54.5% / 53.8% respectively.
$MSFT + $NFLX, is about ~1/2 domestic + 1/2 overseas, 49.0% / 49.4% respectively.
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$AAPL generates >55% of its revs outside USA. Some Qs, oversea revs = 60%.
$FB & $GOOG revs, its 54.5% / 53.8% respectively.
$MSFT + $NFLX, is about ~1/2 domestic + 1/2 overseas, 49.0% / 49.4% respectively.
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Amazon is the only FAANMG stock that still generates a significant majority of its revenues from within the United States.
Event hat doesn't matter -- you will be hard pressed to think of many other companies that have benefitted more from US lockdown than $AMZN
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Event hat doesn't matter -- you will be hard pressed to think of many other companies that have benefitted more from US lockdown than $AMZN
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And, overseas business is growing MUCH faster than domestic for FAANMGs:
$NFLX average growth of 21% in 2019, domestic lagged at 7%.
$FB has more users in India than USA; fast growth in Brazil/Indonesia.
$GOOG Asia, Latin and South America faster revenue growth than USA.
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$NFLX average growth of 21% in 2019, domestic lagged at 7%.
$FB has more users in India than USA; fast growth in Brazil/Indonesia.
$GOOG Asia, Latin and South America faster revenue growth than USA.
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FAANMG stocks are profiting from a recovering Europe, Asia + SA AND a USA lockdown/bungled reopening.
It is a very effective one-two punch for this group of stocks. It explains a lot of the market’s gains.
Even more details at @bopinion
bloomberg.com/opinion/articl…
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It is a very effective one-two punch for this group of stocks. It explains a lot of the market’s gains.
Even more details at @bopinion
bloomberg.com/opinion/articl…
END
