What we’re reading (9/13)
“U.S. Stock Market Faces Risk Of Bumpy Autumn, Wall Street Analysts Warn” (Wall Street Journal). “Analysts at firms including Morgan Stanley, Citigroup Inc., Deutsche Bank AG and Bank of America Corp. published notes this month cautioning about current risks in the U.S. equity market…[S]everal analysts said that they believe there is a growing possibility of a pullback or, at the least, flatter returns. Behind that cautious outlook, the researchers said, is a combination of things, including euphoric investment sentiment, extended valuations and anticipation that inflation and supply-chain disruptions will weigh on corporate margins.”
“Stocks Look Dangerously Overvalued And Are At Risk Of A Sharp Correction As Investors Misjudge The Sustainability Of Explosive Earnings Growth, DB Says” (Insider). “US stocks are priced for perfection following a robust year of post-pandemic earnings growth, but high valuations suggest a sharp market sell-off could be imminent, according to a Thursday note from Deutsche Bank. On nearly every valuation metric, US stocks are trading at "historically extreme" levels, according to the bank. Trailing and forward price to earnings, enterprise value to EBITDA, and cash flow valuation metrics are well into the 90th percentile, Deutsche Bank highlighted.”
“The Stock Market Fails A Breathalyzer” (Wall Street Journal). “Joby Aviation, which plans to begin an electric air taxi service in 2024, is worth more than Lufthansa, EasyJet or JetBlue. Does that seem right? In this market, why not? Heck, earlier this year, Tesla was worth more than the next nine car manufacturers combined, though now only the next six. Beyond Meat, made with pea protein, is worth more than the entire market for peas eaten globally—like the bumper sticker says: Imagine whirled peas. Do fundamentals even matter? I can go on. Used-car sales platform Carvana is worth more than Volvo, Honda, Ford or Hyundai. Airbnb is worth more than Marriott and Hilton combined. Crypto-exchange Coinbase is worth more than the Nasdaq.”
“A Perfect Storm For Container Shipping” (The Economist). “A giant ship wedged across the Suez canal, record-breaking shipping rates, armadas of vessels waiting outside ports, covid-induced shutdowns: the business of container shipping has rarely been as dramatic as it has in 2021. The average cost of shipping a standard large container (a 40-foot-equivalent unit, or FEU) has surpassed $10,000, some four times higher than a year ago…[t]he spot price for sending such a box from Shanghai to New York, which in 2019 would have been around $2,500, is now close to $15,000. Securing a late booking on the busiest route, from China to the west coast of America, could cost $20,000.”
“What Did Institutions Really Do?” (Economic History Research). “Landowners [in 18th/19th century Britain] remained the paramount faction in national politics and, until the end of the nineteenth century, they were the economic winners of industrialization. Already buoyed by rising land values around coal and water power sites, they continued to extract significant rents from their legislative dominance. As tax receipts accelerated—five times faster than national product—during the eighteenth century, the land tax barely changed. The aristocracy passed on the costs of fighting Britain’s wars to the commercial middle class through the excise and customs, the extraction of which was aided by a quadrupling in the size of the fiscal bureaucracy.”
