(New York)

Well the stock market finally stabilized yesterday with a solid rally (who knows where it will end up today), which may let many breathe a sigh of relief. However, one of the most prominent names in investing, in his typically unemotional way, says that stocks are currently very dangerous as they look like the definition of a bubble. Investors are still buying the market even though they think it is overpriced, saying Schiller. According to him, “that's almost the definition of a bubble. If you think it's overpriced but think it still has time to go, that's the definition of a bubble”.

FINSUM: So our view is that there is still a good deal to be positive about, but that if you really think we are in for a correction, then what just transpired was not nearly enough to “correct” the market.

(Washington)

We don’t run a whole lot of news on the geopolitical and military fronts, but we think we found a story today that everyone needs to be wary of. Bloomberg reports, along with confirmations from the US military, that US troops engaged and killed around 100 Russian soldiers, injuring 200 to 300 hundred. The soldiers were reportedly mercenaries fighting for the Assad regime in Syria who attacked a US held refinery/base. Russia says it had nothing to do with the attack and that it would not engage US forces.

FINSUM: This seems like it could spark a very tense geopolitical situation, but luckily it looks like Russia distanced itself very quickly and is not seeking any confrontation.

(New York)

One of the biggest names on Wall Street is warning investors that a recession is coming. Ray Dalio, head of the world’s biggest hedge fund, says that we are likely in for a recession as the Fed has to navigate a tricky tightening cycle. Dalio says the economy is in a hard-to-navigate period of tightening rates that will be hard for the Fed to get right. Rates are likely to rise quickly, which could spark a recession. The view is a reversal for Dalio, who had been until very recently saying that it was foolish to be wary of the stock market.

FINSUM: Dalio’s calls from Davos just a few weeks ago look foolish now, but he does make a good point that this will be a tricky period for the Fed to navigate well.

(New York)

Until the market downturn over the last couple of weeks, the oil price had been rising strongly for a period of several months. OPEC’s strategy to cut supply to the market seemed to have balanced supply and demand, which boosted prices. However, one big beneficiary of the cuts was the US shale industry, which has been boosting output to the highest levels ever. This big surge might be the ultimate unwinding of the price rise, however, as US output is surging to levels not seen since oil was at $100 per barrel. This is likely to once again flood the market with supply, sending prices back downward.

FINSUM: We think this oil output growth is unsustainable, both because it will lead to oversupply, but also because it will eventually crack OPEC’s resolve to contain their own output (as the benefits are disproportionately flowing to the US).

(Seattle)

Last week Amazon made big news as it became clear that the company had plans to launch its own full scale delivery network both for its own shipments and for any retailer. The big players in the space are FedEx and UPS, and Amazon sees an opportunity to grab market share. However, the Wall Street Journal has published a “sense check” type of article showing that it would take a massive amount of investment and many years to gain the delivery scale to truly compete with UPS and FedEx. The WSJ reports that “FedEx has roughly 650 aircraft, 150,000 trucks, 400,000 employees and 4,800 operating facilities globally to handle about 12 million shipments a day”. Amazon has just a tiny fraction of that sort of infrastructure.

FINSUM: It is going to take Amazon several years, and a lot of patience from investors, to get in a position to compete with UPS and FedEx. We would never count the company out, but it is a distant goal.