I am a big fan and regular reader of The Wall Street Journal’s “Heard on The Street” column. I was even fortunate enough to have its global editor, Spencer Jakob, on The World According to Boyar Podcast. This week they published two great articles that I wanted to share with you.
Sorry Stock Bulls, the ‘Wall of Cash’ Isn’t All Headed Your Way
https://www.wsj.com/finance/sorry-stock-bulls-the-wall-of-cash-isnt-all-headed-your-way-abb55150
Trillions of dollars are seemingly available to move out of cash funds and be put to work in the stock market. That possibility has had stock-market bulls salivating, but they are probably in for disappointment.
Despite the expectation that the Federal Reserve’s next move is to cut rates, money-market-fund assets have continued to grow at a fast pace. They are now around $6.5 trillion, according to industry tracker Crane Data. While the S&P 500 is up 8% year to date, total money funds added more than $150 billion in assets through the first two months of 2024, or about $50 billion more than they did in the same period last year, according to Crane.
Boyar’s Take: The article argues that the bull case (that the large amount of cash on the sidelines will propel the stock market higher) is, for a lack of a better word, bull. It points out that, of the $1.5 trillion of growth in money market assets since 2022, $1.2 trillion has come either right before or in the aftermath of the collapse of Silicon Valley Bank (implying a lot of that spare cash is just extra money corporations and individuals have that they want to earn a decent return on without taking risks), suggesting this money will most likely not eventually be earmarked for riskier investments. While certainly some of that money could end up placed into stock and bonds, Barclays estimates that number to be about $400 to $600 billion. However, Barclays points out that history argues much of that money will be put into fixed income and not equities. The article makes some good points, and, in our opinion, there are plenty of reasons to be bullish, just not for the reasoning that there is a lot of cash on the sidelines waiting to be put in the stock market.
Other worthwhile reads:
How to Invest? More Than Ever, It Depends on Who You Are
“There is no alternative” to stocks was the consensus among financial advisers not long ago, no matter who you were. Now, your specific financial needs should very much determine how you invest.
Stocks are still the default investment in a strong economy. At the same time, bond yields remain the most attractive in 16 years. And if you are searching for elevated returns, cash is even better: Money-market funds pay 5%.
Investment horizons are an important consideration when setting an asset allocation strategy. And it’s a consideration many fail to take into account (or revisit). This can be an easy fix, and this article is a great starting point (or a gentle reminder, if it’s been a while for you).
Trend-Chasing Quants Roar Back on Wall Street as Gains Reach 45%
Trend-following quants are soaring once again on Wall Street, posting their best start to a year since 2008, thanks to relentless stock market gains and sharp moves across the commodity complex.
Winners like Mulvaney Capital Management Ltd., founded by a former Merrill Lynch options trader, have notched a 45% gain in February alone by riding strong trends in niche markets such as agriculture, while equities have soared day in, day out amid the artificial-intelligence euphoria. It’s a similar story for DUNN Capital Management LLC, whose flagship $930 million fund has jumped a bumper 31% this year, according to a person familiar with the matter.
While I am (naturally) a big believer in our style of investing (buying higher quality businesses at a discount to intrinsic value, that also have a catalyst for capital appreciation), I recognize there are many ways to invest. It is always interesting to see how other people approach investing.
MicroStrategy Up 180% this Year After Debt Sale for More Bitcoin
Whenever Michael Saylor utters the word “bitcoin,” MicroStrategy shares pop. He has been doing a lot of uttering lately.
On Monday, the MicroStrategy founder posted on social media platform X that his company had just purchased another 12,000 bitcoins for close to $822 million “using proceeds from convertible notes & excess cash.” That brings MicroStrategy’s total holdings to 205,000 bitcoins, which are now worth more than $15 billion, as the cryptocurrency continues to hit fresh highs.
Bitcoin rose 2.7% on Wednesday, topping $73,400.
The part of the article that caught my eye is that MicroStrategy said on Monday that it had completed an offering of 0.625% convertible notes due in 2030, with net proceeds of about $782 million. The fact that someone is willing to lend them money at less than 1% to buy bitcoin (not a typo) boggles my mind.
It Isn’t Just Big Tech Propelling Gains in the Stock Market Anymore
Strong U.S. growth is prompting investors to scoop up a broader set of stocks, rather than just the handful of giant technology companies that drove indexes to record heights.
With heavyweights including Apple and Tesla sinking this year, a larger group of companies has helped power recent gains. The equal-weighted S&P 500, which measures each company equally rather than by its market capitalization, rose to a record this past week. Almost one-fifth of the stocks in the index hit new 52-week highs on a recent day, the largest share since May 2021, according to research by Bespoke Investment Group.
It is good to see a broadening in terms of stock market leadership. It is a sign of a sustainable rally.
Jamie Dimon Warns US Recession ‘Not Off the Table’ Yet
Jamie Dimon said he wouldn’t take the prospect of a recession in the US “off the table,” but that the Federal Reserve should wait before it cuts interest rates.
“The world is pricing in a soft landing, at probably 70-80%,” the JPMorgan Chase & Co. chief executive officer said via video link at the Australian Financial Review Business Summit in Sydney on Tuesday. “I think the chance of a soft landing in the next year or two is half that. The worst case would be stagflation.”
While he certainly has been wrong before on economic forecasts, it pays to listen to what Jamie Dimon has to say as CEO of JP Morgan Chase. He has a unique insight into the global economy that few can match.
One Day, Israeli Tech Founder Was Closing Deals. The Next, He Was Near Death on a Gaza Battlefield.
TEL AVIV—The last email Israeli tech executive Itamar Ben Hemo sent before a bullet ripped through his ribs, diaphragm and intestine was a note to a colleague. Ben Hemo wanted to know how close the startup he founded was to signing on a new client.
For weeks, Ben Hemo—an Israeli army reservist who returned to active duty after Hamas’s deadly Oct. 7 attack on southern Israel—had been using breaks in combat to fire up his laptop, messaging investors and working on making his next sales.
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