FINSUM

FINSUM

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Tuesday, 22 January 2019 08:06

A Second Brexit Referendum Looms

(London)

If you look at it from the outside, a second Brexit referendum has had the feeling of inevitably for at least a year now. The chaos and unexpected fallout from the fraught negotiations between the EU and UK have made it seem likely that the British people would need to settle the matter with another vote. That expectation is now looking likely to turn into a reality as Britain’s opposition party, Labour is backing a plan to bring forward a second vote.


FINSUM: In our mind, the claims that holding a second vote is undemocratic are ridiculous. On the one hand, no voter back in 2016 could have known how this Brexit mess would actually progress, which means the people should get a second chance to decide on the deal at hand. On the other, how can a whole nation voting on an issue ever be considered undemocratic?

(Beijing)

Those of you who read our opinions on how the trade war with the US is affecting China will know that one of main concerns is about the relationship between the government and the people in China. This week, Xi has echoed that warning. The Chinese leader stressed the need to maintain political stability in the face of economic challenges. The warning, which came at an unusual meeting of Chinese leaders, shows the ruling party’s anxieties over the social implications of the slowing economy.


FINSUM: Chinese leadership is in a tight jam. On the one hand they have the US squeezing them with tariffs, and on the other, they have the need to maintain the economy’s strong growth to keep people happy. Remember that leaders are unelected, so their grip on control is very tied to keeping everyone satisfied.

(New York)

One of the most respected hedge fund managers, Jeremy Grantham, believes that this is a false rebound. And not only is it a false rebound, rather, it is the beginning of a big bubble bursting. The head of GMO believes as far as the fourth quarter is concerned, “The volatility is consistent with a bubble bursting”. Though he does caution that stocks could reflate before the burst continues, as they did in 1998-2000. Grantham is famous for his calls of the 2000 and 2008 downturns, but has been criticized for being overly bearish during this bull market.


FINSUM: We do not think there is going to be a further meltdown. Valuations reached their nadir at a 13.6 p/e ratio last month, down from eye popping numbers. Between earnings gains and price declines, we think the worst may be behind stocks for now.

Friday, 18 January 2019 09:29

The Best Market Start Since 1987, Ouch

(New York)

Here is potentially good news for investors—the market’s start to this year has been the best since 1987. Both the S&P and Russell have risen considerably in the first 12 sessions of the year, with the former jumping 8.8%. The best start since ’87 sounds good, except that 1987 rivals 2008 as having the worst reputation with investors (shares fell almost 23% in a single day in October 1987). Analysts are urging caution, especially on small caps, as the gains don’t seem sustainable given the huge buildup in leverage that has occurred in small companies over the last few years.


FINSUM: The parallel to 1987 is completely irrelevant, as it is really only based on the percentage gain over 12 sessions.

Friday, 18 January 2019 09:28

Why You Should Still Buy Netflix

(San Francisco)

Netflix saw a big selloff on the report of its earnings yesterday. However, don’t be fooled by the market’s reaction, the data was strong. Netflix’s big narrative right now is about whether it can expand internationally. Guess what, international subscriber numbers from yesterday’s earnings blew away expectations, with 7.3m overseas subscribers versus expectations of 6.13m. US subscribers saw a slight miss, which likely caused the price decline.


FINSUM: Netflix does seem like a good buy to us. They are raising prices and growing strongly. We don’t think the price hike will deter many customers.

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