What we’re reading (1/8)
“The US Stock Market Has Never Been More Concentrated. Does It Matter?” (Financial Times). “[Owen] Lamont uses the example of AT&T’s break-up as an example of how measures of concentration can be irrelevant to the stock market’s riskiness — being split up into seven smaller companies in 1984 made the market optically less concentrated, but no less risky.”
“On Bubble Watch” (Howard Marks). “[T]o discern a bubble, you can look at valuation parameters, but I’ve long believed a psychological diagnosis is more effective. Whenever I hear ‘there’s no price too high’ or one of its variants – a more disciplined investor might say, ‘of course there’s a price that’s too high, but we’re not there yet’ – I consider it a sure sign that a bubble is brewing.”
“Why Michael Green Is Known As The Cassandra Of Passive Investing” (Institutional Investor). “For the better part of the past decade, Michael Green has been on a mission. From talking to money managers to making the rounds of hedge fund idea dinners to attending conferences geared to everyone from financial analysts to family offices, even wrangling meetings at the International Monetary Fund and the Securities and Exchange Commission, Green has had one message: The craze to invest passively — earn the returns of an entire market rather than those of individual stocks — isn’t the low-cost, risk-free future of investing that everyone thinks it is. Instead, he argues, the growing dominance of passive investing distorts capital formation, creates market instability, and carries the potential for a crash. Green calls it a passive bubble.”
“Fed Minutes Suggest Officials Will Hold Rates Steady For Now” (Wall Street Journal). “Federal Reserve officials saw risks of higher-than-expected inflation, due in part to potential tariffs by President-elect Donald Trump, when they made a ‘finely balanced’ decision last month to lower interest rates, according to minutes of the meeting published Wednesday. The written account of the Dec. 17-18 policy meeting showed officials thought inflation was likely to continue moving down to the central bank’s 2% target, but ‘the process could take longer than previously anticipated’ due in part to possible changes to trade and immigration policy.”
“US Weekly Jobless Claims At 11-Month Low Amid Labor Market Stability” (Reuters). “The number of Americans filing new applications for unemployment benefits fell to an 11-month low last week, pointing to a stable labor market, though a slowdown in hiring has led some laid-off workers to experience long bouts of joblessness.”
