Fact of the Week:
At the end of 2007, the Federal Reserve's balance sheet stood at roughly 0.9 trillion U.S. dollars. As of September 4, 2024, the Federal Reserve held approximately 7.11 trillion U.S. dollars in assets. The sharpest increases occurred in 2008 and the first half of 2020.
Aggressive Rate Cut Sends Markets Higher, Led by Small Caps
The headline of the week was the Fed’s long-anticipated decision to cut rates, with the central bank opting for a more aggressive 50bps reduction. Fed Chair Powell reiterated that future decisions would be data-driven and that there could be faster cuts if the labor market weakens. Some analysts see the 50bps move as a proactive step to avoid repeating past mistakes, while others are debating its timing. Powell emphasized that all decisions are made with the Fed’s mandate in mind, dismissing any speculation of political motivations.
Despite some midweek volatility after the announcement, U.S. equities finished the week on a high note. The Russell 2000 led the way, gaining 2.08%, while the Dow and Nasdaq rose 1.62% and 1.49%, respectively. The S&P 500 added 1.36%, hitting its 39th record close for the year on Thursday before trimming some gains on Friday.
Energy was the standout performer this week, up (3.79%) on rising oil prices. Communication Services (+3.70%) and Financials (+2.35%) also had strong showings, while Consumer Discretionary (+2.29%) and Industrials (+2.03%) gained from optimism around economic growth. Real Estate (-1.31%) and Consumer Staples (-1.24%) struggled, and Healthcare (+0.58%) and Tech (+0.97%) underperformed, with the latter seeing only modest gains.
From the Week:
Boyar in Barron’s
We were quoted in this bullish article on Madison Square Garden Sports by Barron’s Associate Editor Andrew Bary:
https://www.marketwatch.com/articles/toronto-knicks-rangers-dbb5c77f
A sale of a 37.5% stake in the company that owns the Toronto Maple Leafs and Toronto Raptors looks like a bullish development for Madison Square Garden Sports given the hefty price that Canada’s BCE received for that interest.
BCE, a leading Canadian telcom, sold the stake in Maple Leaf Entertainment and Sports to Rogers Communications, a top Canadian wireless and cable TV provider, for $4.7 billion (Canadian), or about $3.5 billion.
Our Take:
As we said in the article :
“This highlights how inexpensive MSGS is currently,’ says Jon Boyar, a principal at Boyar Value Group. His firm has estimated an intrinsic value on the company of more than $300 per share. Boyar would like to see MSG Sports sell a stake in one of the two teams or potentially sell the New York Rangers and use the proceeds to repurchase stock.”
A further analysis on Madison Square Garden Sports that was published in the Spanish newspaper La Vanguardia can be found here.
Notable Reads:
Wall Street Wants You to Be Manic. Be Focused Instead.
https://www.barrons.com/articles/rate-cuts-wall-street-manic-instead-strategic-09ff3561
Wall Street wants you to be a short-term event addict. If you are overly focused on daily happenings, you will often be confused, make suboptimal decisions, and likely lose lots of money because you don’t understand how to focus upon, much less find, the path that leads to consistent returns.
By obsessing over event outcomes—like this week’s Federal Reserve interest-rate decision —you are essentially wagering on costly flip-of-the-coin trades. The Street’s sophisticated practitioners, though they rarely mention this in public, consider market events to be notoriously hard to predict. But they’re all too happy to profit from amateur investors.
Our Take:
This is a piece every investor ought to read. Too often, people get caught up in the day-to-day noise of the markets, largely because the financial media thrives on it. Media companies make their money by keeping you glued to every tick of the stock market, rather than talking about the more mundane—but far more important—topics like long-term investing.
The real key to success in investing isn’t obsessing over the latest interest rate cut or what the Federal Reserve might do next. It’s finding great companies, run by capable managers, and buying them when they’re trading at attractive prices. Tune out the chatter, focus on the fundamentals, and remember: in the long run, it’s the patient investor who usually comes out on top.
SEC Bars Advisor Who Claimed $11.5 Trillion in Assets Under Management
https://www.barrons.com/advisor/articles/sec-bars-advisor-claimed-11-trillion-aum-5b3e0b31
A former financial advisor who claimed to manage nearly $11.5 trillion in assets has been banned from the industry.
The Securities and Exchange Commission formally barred Ruben Williams from associating with any advisor, broker, or other registered entities in the securities field. The SEC won a judgment against the former advisor last month in federal court, which included a civil penalty of more than $33,000. It had initially brought charges against Williams last fall, citing glaring overstatements on his firm’s Form ADV regulatory filing, the document advisors submit to the commission each year detailing aspects of their practice such as fees, services provided, and client makeup.
Our Take:
Sometimes, the financial world gives us stories that are equal parts amusing and unbelievable. This week’s winner? A financial advisor who first claimed to manage a hefty $11 billion in assets—certainly eye-catching enough to raise a few eyebrows. But by the time 2023 rolled around, his numbers grew even more… astronomically. This time, he reported managing a mind-boggling $11.5 trillion (yes, trillion with a T) in assets under management, which would have accounted for about 9% of the entire RIA industry.
It’s hard to fathom how anyone thought they could get away with such an outrageous exaggeration. If the SEC was paying attention to his $11 billion claim in 2022, surely this trillion-dollar leap was going to draw a crowd.
How Bill Ackman Is Pursuing Howard Hughes’ Real Estate Empire
https://www.barrons.com/articles/bill-ackman-hughes-real-estate-empire-a83f8b5b
Howard Hughes died in 1976, and yet the influence of this singular, enigmatic American icon still echoes through our economy and society. A pilot, aerospace engineer, business magnate, film producer, investor, and philanthropist who went from society darling to recluse, Hughes—who was once the richest man in the world—was a polymath’s polymath who makes Elon Musk seem narrow, boring, and predictable.
There are no Hollywood movies about Elon yet (although one is reportedly in the works), but there are a number of Hughes films, including The Amazing Howard Hughes, where he is played by Tommy Lee Jones; Howard and Melvin, played by Jason Robards; and most notably in Martin Scorsese’s The Aviator, where Leo DiCaprio does the honors, which is sort of how I picture Hughes (in the same way I picture George C. Scott as Gen. George Patton).
The threads that can be traced back to Hughes’ business interests are myriad, deep, and significant, with more rabbit holes than a Kansas prairie. For business genealogists, these are the richest of veins. (Trust me, you could write a whole book about each example below.)
Our Take:
Howard Hughes (HHH) is a name that has been on Boyar Research’s radar for quite some time—in fact it was the subject of our very first report on Substack. Fast forward to today, and Bill Ackman, the high-profile hedge fund manager, has indicated that he may be interested in buying the entire company.
Given that the stock is currently trading well below our estimate of intrinsic value, any successful bid by Ackman we believe would have to be significantly higher than current levels.
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Important Information: Performance Information. Past performance does not guarantee future results. The reports in this sample are for informational purposes only and the performance of the stocks selected is not indicative of the performance of all the stocks profiled in Boyar Research. The performance of the stocks selected and the performance of the stocks in Boyar Research may in fact diverge materially. Additional information regarding the performance of other companies featured in Boyar Research is available from Boyar Research upon request. This information is not a recommendation, or an offer to sell, or a solicitation of any offer to buy, an interest in any security, including an interest in any investment vehicle managed or advised by affiliates of Boyar Research. Any information that may be considered advice concerning a federal tax issue is not intended to be used, and cannot be used, for the purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter discussed herein. Clients of an affiliate of Boyar Research and employees of Boyar Research own shares in Howard Hughes Holdings.