Promoting Useful Knowledge

  Stepping away from my normal weekly posts for a minute. I took some time to do a little research and thought I'd share my findings. All the data is sourced from either Refinitiv Eikon or DataStream.  I recently saw some posts on Twitter about how much the top five names in the large indices impacted 2021 performance. I didn’t get a chance to look at them in detail. When I started to look into this myself, I found that while the contribution to the performance was rather high compared to an equally weighted portfolio, they weren’t outlandish. The data shows when there was smaller the number of the index constituents, say the NASDAQ 100, the larger the top names overperformed their weights. Below are some screenshots showing the top 5 names by index weight and their performance for the NASDAQ 100, S&P 500, Russell 1000, and the wider Russell 3000. I couldn’t remember where I saw the original chart or what the point being made was, so I sort of gave up. Regardless of what t...

  Merry New Year to all. I’ll be honest I didn’t pay too much attention to what went on in financial markets the last couple of weeks. I didn’t read all that much either. I took some much needed time off. This week it’s a light post with only a handful of shares and my own 'best of' on the books I read last year. Coming up this week, there’s an important OPEC+ meeting on Tuesday. We’ll also get the FOMC minutes. I’m interested to see if anything “wow worthy” comes out of CES in Las Vegas, which starts Wednesday, but many companies are not doing in-person presentations. Earnings Watch I’m not going to look back this week, but we are going to start the year off with some widely followed names. Constellation Brands, whose products you might have enjoyed this holiday season, and Walgreens Boots Alliance, whose stores many of us have visited of late, are the largest two names to report. Best of the Week This discussion touches on many of the topics in Dalio’s latest book, ‘Principle...

  The Turkish Lira is basically in a free fall versus virtually all major currencies. The Lira is down over 50% this year, but 30% in the last month and 15% in just the last week against the US Dollar. Even with inflation near 20%, President Erdogan keeps lowering rates. In fact, 500bps since September. I think this one is a little under-covered in the news. Erdogan is claiming he’ll get inflation down to 4% sooner or later. What does that even mean? I'm no expert in international finance, this seems like it might be a problem, and not just for Turkey, for its trade partners as well. China, Germany, and Russia are the top three sending goods to Turkey. The beneficiaries of the falling Lira are Germany, the UK, and US.  The world of equites was mostly red for the week. The Hang Seng, Nifty 50, and NASDAQ Composite were the worst performers on the week, each down about 3%. Japan’s Topix and Europe’s Stoxx 50 were the only two major indices that ended the week in the black. ...

  Equity markets were up pretty much globally. Almost everyone was invited to the party. There were few markets in the red last week. Small cap, large cap, or sector, it didn't matter. Equities caught a bid. It was yet another all time high for the S&P 500. It just seems like equities, especially US large caps, are living the high life right now. Even when they’re knocked down, they get right back up again. That put the title song from the late 90s East Coast rap era in my head all weekend.  Even though the Earnings and Capital Markets calendars will be light, this should still be a very active week in terms of equity trading. The Federal Reserve meets this week and traders will be listening for the pace of asset purchases, looking at the dot plots, and what sort of impact Omicron might have on any of these. Also, the week ends with quad witching. So the dealers will be hedging the opex, but also that means year end rebalances for many of the big indexes. Earnings Season L...

  The Department of Corrections in New York City holds itself as New York's Boldest. Traders and investors really do have to be bold right now. Stepping in to buy at a point of inflection is hard. Are you catching a falling knife or are you buying the lows? There’s so much to write about from last week, but I haven’t had the time to really research everything, but in many ways, it was really a week of corrections. We saw a lower than expected jobs number, Fed Chair Powell saying inflation may not, in fact, be transitory, the Omicron variant making its way to the US, Jack Dorsey resigning at CEO of Twitter, huge volatility for Crude, Lumber, most equities, crypto, and volatility. It wasn’t just the downside kind of volatility either. I’m looking for that volatility to continue into this week. We’ll see a number of points where a change of opinion could come about. We have the CPI number, some big names reporting, and Rivian’s quiet period ending.  Earnings Watch Last Week Earn...