What we’re reading (8/16)
“Growth Prospects Are High, But Valuations Are at Nose-Bleed Levels. Here’s What Investors Can Do.” (Institutional Investor). “As early- and late-cycle indicators conflict, Neuberger Berman analysts suggest investors turn toward private debt — senior loans to private-equity-backed companies. According to a report from the investment management firm…investors are facing a central paradox in the market. Early-stage predictions show growth is coming in the near future, a signal to investors to put money to work. In fact…the Federal Reserve is forecasting U.S. GDP to be 7 percent larger in 12 months and 3 percent larger than it was before the Covid-19 pandemic shut down economies around the world. But valuations are extremely high, the mark of a mid- to late-stage economic cycle that is pushing investors to be risk averse.”
“Millennials Plowed Their Money Into Apple, Tesla, And Disney During The Pandemic. Here Are Their 10 Favorite Stocks.” (Business Insider). “Millennials' favorite stocks over the past year include Apple, Tesla, Ford, and Pfizer, according to a study by DailyFX. The financial-news website turned to Robinhood to figure out which companies were most popular among young investors. DailyFX looked at data from the trading app - whose users are predominantly aged 18 to 35 - for the 12-month period to April 1, 2021. Millennials piled into several stocks that were hammered by pandemic-related travel restrictions and lockdowns, including Disney, Delta Air Lines, and Carnival, the cruise operator. GameStop was excluded[.]”
“Carvana’s Success Rides On Used-Car Loans” (Wall Street Journal). “When Carvana makes a car loan to a buyer, it packages it with other loans and sells the debt to investors. While other auto lenders also sell loans to investors, they typically keep the debt on their books, recording gains and losses over time. Carvana, on the other hand, doesn’t retain the debt and immediately books gains on the cash sales. For now, that bolsters revenue. Critics warn the practice could leave the company vulnerable if debt-market conditions change or if the loans Carvana makes start to sour. Indeed, loan-sale revenue sank when securitization markets shut down in the first half of 2020. A linchpin of the transactions is that Carvana is able to sell its car loans to investors at a premium to their face value.”
“Don’t Let Inflation Anxiety Undermine Our Future” (Paul Kurgman, New York Times). “Much of the media coverage of the budget resolution just approved by the Senate on a party-line vote…suffers from two common problems in fiscal reporting: lack of quantitative context and failure to distinguish clearly between spending increases and fiscal stimulus, which aren’t necessarily the same thing…the fact is that America desperately needs to invest in its future — both in hard assets like roads and bridges and in its people, especially its children. And there are no good economic reasons not to make those investments. Debt isn’t a problem given low interest rates; inflation wouldn’t be a problem given the economy’s ability to absorb higher government spending. Build we can, and build we must.”
“From Saigon To Kabul: Biden’s Response To Vietnam Echoes In His Views Of Afghanistan Withdrawal” (Washington Post). “Three weeks before the fall of Saigon, top Ford administration officials pleaded with Biden and other senators for more U.S. military aid, according to newspaper accounts…[i]n a closed-door briefing, top officials at the State and Defense departments told Biden and other senators on the Senate Foreign Relations Committee that the South Vietnamese army had “a chance” to defend Saigon and the Mekong Delta area with more U.S. military aid, the newspaper accounts said. ‘I am convinced there is absolutely no chance,” Biden told reporters[.]”
