What You Need To Know This Week — February 8th, 2020

What You Need To Know This Week

A weekly recap to keep you informed on the most important events this week impacting markets, business, tech and the global economy.

Shares in the electric car maker have more than tripled since September as market participants have become enamored with the stock. Theories abound to explain the price action, including short covering, ESG allocations, and outright retail trader speculation. Despite producing a small fraction of the output of competitors, Tesla’ market capitalization now exceeds the combined values of GM, Ford and Fiat Chrysler.

The Intercontinental Exchange (ICE), owner of the New York Stock Exchange and other financial product exchanges, announced that it made a takeover approach for e-commerce company eBay. The market reacted poorly to the proposed deal, with Intercontinental Exchange’s stock declining -7.5% on the news. After the stock got hit, ICE quickly dropped the takeover proposal.

Streaming company Spotify announced the acquisition of Bill Simmons’ podcast company, The Ringer, which has more than 30 podcasts in its network. This continues Spotify’s strategy to capitalize on the growth of podcasts, expanding its offering since it acquired three podcast companies last year. The terms of The Ringer deal were not disclosed.

After being beaten down for a number of years, value stocks staged a brief face-ripping rally on Wednesday as some value funds rallied by over 4% on the day. Value stocks had outperformed glamour stocks by a substantial margin over many decades, but the last decade has been challenging for cheap stocks. Does this green shoot signify a potential turnaround for the value factor?

Recommended Articles, Podcasts, Books and Tweets

Listen to the story of the poster child for the new economy’s multi-billion dollar unicorn startups, WeWork, and its dramatic fall from grace on the podcast “WeCrashed: The Rise and Fall of WeWork”.

The monthly Canadian jobs numbers, as shown in the Statistics Canada’s Labour Force Survey (LFS), are “at best very rough, and perhaps totally useless.”

After revising its IPO price down by nearly -37%, Casper’s stock jumped over 20% in its first day of trading after its initial public offering. Its valuation at its IPO was down nearly -50% from where it was valued in the private markets in 2019.

With the goal of expanding access to alternative investments, Vanguard is joining the fray and offering private equity funds.

The divergence between S&P 500 GAAP earnings and adjusted earnings has reached $200 billion and GAAP earnings are 15% lower than reported numbers.

A look inside Brookfield, the secretive $500 billion investment firm.

Hedge fund honcho Ken Griffin believes that U.S. markets are “utterly and completely unprepared” for the potential of an inflationary environment.

Venture capital firms and start-ups are increasingly dealing with professional athletes largely due to their social media presence and marketability.

The California State Teachers’ Retirement System is reducing its allocation to public market equities from 50% to 42%. This capital will be allocated to private equity, real estate and “inflation-sensitive real assets.”

Private equity faces pressure over ‘mark-to-myth’ valuations. My thoughts on private asset marks: “The net result of marking your assets to what you want? Unrealistic smoothing of returns and material misrepresentation of inherent volatility and risk of private equity portfolios.”

There is ravenous demand for fixed income but investors are overexposed to duration risk. Nonetheless, bond funds appear to be hotter than even Tesla stock these days.

One reason why value investing has not been working lately? The significant fund flows into ESG funds, which have been boosting richly valued stocks.

The growth of systematic investment strategies are the main reason why superstar investors are a dying breed.

Private equity firms have been killing retailers. A look at Payless ShoeSource, a buyout gone wrong and why investors should consider private equity replication through liquid public equities instead.

Eugene Fama and Kenneth French, the quant duo credited with identifying the value premium in 1992, can’t tell you if value investing has stopped working.

The Chinese stock market reopened from an extended lunar holiday and fell as much as -9.1%.

Canadian jobs numbers in January beat expectations, coming in at 34,500 compared to 17,500 forecast.

-The Accelerate Team