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Aug 20, 2018

MARKETS I THE WALL STREET JOURNAL:

The Wall Street Journal.
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Markets
Good morning. I'm Ben Eisen from The Wall Street Journal. Let's get you up to speed on the markets.
This week, all eyes will be on the Jackson Hole Economic Policy Symposium, the annual confab where central bankers are known to send policy signals. The conference starts Thursday and Fed Chairman Jerome Powell speaks Friday.
The week is starting off on a quiet note, so let's take a look at President Trump's tweet about quarterly earnings from Friday, and some takeaways for public markets.
 

Markets in a Minute

Markets Data
 

Overnight Developments

 

Change Is Brewing in Public Markets

Shift from public to private markets is already upending finance.
The rise of private markets where companies are free from the constraints of quarterly reporting is already reshaping the makeup of the public stock market.
It’s sparked a secular decline in public listings. It’s led a prominent CEO to recently declare his intention of taking his company private. It could also result in a loosening of rules around what’s required of public companies.
On Friday, President Donald Trump said he instructed the Securities and Exchange Commission to study whether companies should release earnings twice a year, rather than four times. He tweeted that business leaders told him it "would allow greater flexibility & save money."
Such a practice, while potentially helping companies to move away from short-term profit goals, would also limit investors’ visibility into corporate performance, a move that echoes the more limited transparency among private companies.
It’s a clear sign that for public trading venues, private markets are tough competition. Ample venture capital funding and low rates have left firms with myriad options for raising capital without going through an increasingly expensive initial public offering process and adhering to stringent listing requirements. There are now fewer public U.S. companies than in 1976, even though gross domestic product has grown sharply, according to a Credit Suisse report from last year.
The public markets could lose one more member if Tesla chief Elon Musk gets his way and completes a take-private deal. Though the outcome of that effort is uncertain, Mr. Musk indicated in a memo last week that his thinking is influenced by a grass-is-greener view of private markets. “Basically, I’m trying to accomplish an outcome where Tesla can operate at its best, free from as much distraction and short-term thinking as possible," he wrote.
Given this backdrop, it’s not surprising that politicians want to reshape the financial markets. And it’s not just Mr. Trump tossing out ideas. Massachusetts Senator Elizabeth Warren recently proposed that large companies be required to consider the interests of all stakeholders, including workers, and not just focus on maximizing shareholder value.
The stock market is slowly transforming itself. Everyday investors should hope these changes don’t reduce the transparency and access that public shareholders have historically enjoyed.
What do you think the public stock market will be like in 20 years? Tell the author your thoughts at ben.eisen@wsj.com.

Market Facts

  • Sugar futures, which have long been sliding due to changing consumer tastes, closed Friday at 10.18 cents a pound, the lowest in a decade, according to CQG.
  • Turkey's credit rating was dropped by both of the biggest rating agencies on Friday. S&P Global cut the country's foreign currency credit rating to B+ from BB- while Moody's Investors Service cut its rating to Ba3 from Ba2.
On this day in 1932, Franklin Delano Roosevelt kicked off his presidential campaign with a fiery speech in Columbus, Ohio, putting forth a nine-point plan for economic recovery. Among his proposals: reforms of Wall Street underwriting and trading practices, increased regulation of commercial banks, a more aggressive role for the Federal Reserve, and a crackdown on utility companies.

Must Reads

Amazon trades at a lofty 85 times future earnings, and over the past three years its multiple has averaged around 115 times, according to FactSet. PHOTO: ABHISHEK CHINNAPPA/REUTERS
Some market bulls are dismissing valuation concerns. While shares of companies like Amazon.com and Netflix have surged this year to price/earnings ratios that are several times the market’s longtime average, many fans of these investments contend that such metrics can overstate risks.
At the heart of a new Fed debate: bonds or bills? Last year, the Federal Reserve began shrinking its $4.5 billion portfolio of mostly mortgage and Treasury securities. But they are now beginning an internal debate: What will the portfolio look like when they’re done shrinking it?
‘‘Green bonds’’ are a gray area: Not all are equal. Definitions can be so fuzzy that environmentally conscious investors might end up funding fossil-fueled power stations.
Venezuelan businesses are warning plans to stabilize the economy could paralyze it. The government plans a leap in the minimum wage, new taxes and a currency devaluation, even as the ideas fueled anxiety and increased an exodus of its citizens.
Greece’s international financial bailout officially ends today. But as officials in Athens and the EU pat themselves on the back, pessimism and anger prevail for many in Greek society after a decade of economic depression has left people exhausted and disillusioned.
 

What We've Heard on the Street

"Nvidia has long understood that the cryptocurrency business is one of easy come, easy go. But the last part still smarts a little."
— Heard on the Street Columnist Dan Gallagher
 

Stocks to Watch

Apple—Up 0.5%: Shares of the iPhone maker rose every day last week, including a 2% climb Friday. The stock has fallen just twice this month.
PepsiCo—Down 0.3%: PepsiCo agreed to buy SodaStream for $3.2 billion. It’s the latest move by the cola giant to diversify away from sugary sodas and salty snacks.
Sears—Unchanged: Sears CEO Edward Lampert for years has called the shots as its chief executive, largest shareholder and biggest lender. But his latest play to keep the struggling chain afloat is out of his hands.