Fact of the Week:
Unrealized capital gains account for $6 trillion of the $11 trillion in wealth held by the richest Americans.
The Month That Was
The S&P 500 (+3.47%) and the Nasdaq (+5.96%) kept up their winning streak for the second month in a row, making it five out of six months in 2024 they've advanced. These gains were largely attributable to the hype around AI and signs of progress in the fight against inflation.
Index heavyweights like Nvidia (+12.6%) and Apple (+9.6%) really stole the show. But if you peek beyond the AI froth things weren't so rosy: the S&P 500 equal-weighted index took a dip (-0.9%), and small-cap stocks as represented by the Russell 2000 also fell (-1.08%). Overall, while tech giants soared and certain sectors thrived, the broader market's lack of participation raises concerns about the rally’s sustainability.
The best performing sectors were Technology shares (+9.29%), Consumer Discretionary shares (+4.82%), and Communication Services shares (+4.71%). On the flip side, Utilities (-5.75%), Materials (-3.26%), and Energy (-1.39%) were the laggards.
Keep an eye out for a more detailed update later this week!
Notable Reads:
The Last 72 Hours of Archegos.
https://www.bloomberg.com/features/2024-bill-hwang-archegos-collapse-timeline/
An Archegos staffer re-lived the craziness of being in an airport security line while on a call with panicked banks, trying to head off catastrophe. A Credit Suisse trader described nabbing a Citi Bike on his day off to reach the office and untangle billions tied to Bill Hwang’s family office. And in the midst of it all, a junior Goldman Sachs manager recounted a call from the dying firm as it pleaded for the return of almost half a billion dollars it accidentally sent the lender .
Wall Street’s trial of the decade has offered vivid glimpses of the 72 hours that obliterated Hwang’s $36 billion fortune. One after another, Wall Streeters told a New York jury their version of how his secretive family office — and its pileup of wild wagers on jerry-rigged spreadsheets — ultimately crumbled and saddled banks with more than $10 billion in losses…
Boyar’s Take: This Bloomberg piece gives a solid rundown of what led to Archegos' downfall. It's incredible how someone at Archegos accidentally sent half a billion dollars to Goldman Sachs (lucky break for Goldman!), and it shows how some Wall Street banks really dropped the ball on managing their risks, leading to over $10 billion in losses. This story helps prove that truth can indeed be stranger than fiction.
SoftBank Chief Rues Selling Nvidia Stake and Missing Out on $150 Billion
https://www.wsj.com/tech/softbank-chief-rues-selling-nvidia-stake-and-missing-out-on-150-billion-d05920ff
SoftBank Group founder Masayoshi Son on Friday lamented what turned out to be a $150 billion blunder: selling shares in Nvidia years before the chip maker became one of the world’s most valuable companies.
Son, known for some of the most successful investments in technology history, recalled one of his less-cherished moments at SoftBank Group’s annual shareholder meeting in Tokyo.
“It’s frustrating to remember the ones that I missed,” Son said. “I had to tearfully sell the shares” of Nvidia, he said, because at the time SoftBank’s Vision Fund investment vehicle felt it needed to lock in returns.
“The fish that got away was big,” Son said.
Boyar’s Take: Whoops! That was clearly a mistake on his part to sell. However, he still managed to walk away with $3.3 billion from his investment, and Bloomberg reports his net worth is a hefty $17 billion. Safe to say, he's probably not losing much sleep over it!
US Drives Rebound in Global M&A Deals
https://www.ft.com/content/60762c47-f6f5-4355-b232-bd1b42e77773
Global merger and acquisition deals hit $1.5tn in the first half of 2024 as a surge in US takeovers and an uptick in megamergers offset a declining number of acquisitions.
The value of deals struck was 22 percent higher than a year earlier, according to mid-year data compiled by the London Stock Exchange Group, driven by a 70 percent rise in big deals worth more than $10bn.
But the total number of deals fell 25 percent to a four-year low, with acquisitions worth $500m or less — the smaller takeovers that make up the backbone of the deal market — falling 13 percent by value.
“This year for M&A is much better than last year,” said Anu Aiyengar, global head of mergers and acquisitions at JPMorgan. “But that’s a low bar, because last year was a tough year.”
The tentative recovery comes after M&A activity slid to a 10-year low in 2023 as interest rates rose from the ultra-low levels that stoked a pandemic-era deals boom. But it remains fragile.
Boyar’s Take: It is a good sign that the M&A market is starting to recover, but it has a long way to go as 2023 was a 10-year low in terms of M&A activity. Deal volumes for the second quarter of 2024 will be below $1 trillion (for the 8th consecutive quarter). It's concerning that the "recovery" has mainly been fueled by large-scale deals rather than transactions involving small and medium-sized companies.
In our opinion, there are a great number of small and midcap companies selling significantly below their intrinsic value and the stock market simply does not seem to care. However it has been our experience (as we have been doing this since 1975) that if shares in quality companies continue to sell at low valuations, sooner or later acquirers will come along. Perhaps M&A could be the catalyst for a recovery in small and mid-sized companies.
Stephen A. Smith Is the Face of ESPN. How Much Is That Worth?
https://www.wsj.com/business/media/stephen-a-smith-is-the-face-of-espn-how-much-is-that-worth-5cc73f48
Stephen A. Smith recently gave a colleague some unsolicited career advice—on the air.
Smith, ESPN basketball analyst Andraya Carter, and others were discussing Caitlin Clark’s Olympics snub on ESPN’s “First Take,” a weekday sports debate show. When Carter said Clark—a college superstar who has been off to a rocky start as a WNBA rookie—didn’t deserve to make the USA Basketball roster and wouldn’t be in the conversation if it wasn’t for marketing considerations, Smith interjected.
“I am telling you right now you are going to be underpaid for the rest of what I believe will be an illustrious career unless you get your mind right about that marketing,” Smith said. “It matters.”
As one of ESPN’s biggest stars, Smith knows a thing or two about marketing and self-promotion. His uncanny ability to dominate the conversation—whether by weighing in on controversies or starting them himself—has helped him become a ratings juggernaut for a network that needs one.
Boyar’s Take: Whether you're a fan or not, Stephen A. Smith has become a major asset for Disney's ESPN. They're apparently willing to shell out $18 million a year to keep him on board, which is a hefty 50% increase from his last contract. Rumor has it he's pushing for $25 million, though. Seems like he's got the upper hand here, especially with ESPN focusing more on streaming and gearing up for a big NBA rights renewal. They could really use his star power to pull it off. It will be interesting to see how this plays out...
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