5 charts from the past week that tell an interesting story in markets and investing…
1) Great Expectations
Tesla reported earnings this week with high expectations going in.
A year ago, the stock was trading at less than 2x sales. Before earnings, it was trading at an incredible 12x sales, with its stock up over 500% in the past year.
At such a high multiple, one would assume that Tesla was about to report a blockbuster quarter, showing its immunity to recession.
And what did the results say?
Revenue down 4.9% over the prior year.
In true 2020 fashion, investors initially cheered the revenue decline, with the stock gapping higher. It would subsequently reverse course to end the day lower.
Is the Tesla mania coming to an end? Stay tuned.
2) Big Blue Buybacks
Over the past 20 years, IBM has bought back $140 billion of its stock.
Its current market cap: $118 billion.
IBM reported revenues down 5.4% over the past year. Revenue for the company was higher 20 years ago than it is today.
3) 0 for Longer…
In December 2018, the Fed was forecasting a Fed Funds Rate of 3.125% by the end of 2020.
By December 2019, they had lowered that to 1.625% after cutting rates 3 times last year.
Today, the market (via Fed Fund Futures) is pricing in a 0% Fed Funds Rate at year-end and for the next 3 years at least.
4) No Country for Old Yields
The one-way trend in Treasury yields over the past 40 years…
US 10-Year Treasury Yield…— Charlie Bilello (@charliebilello) July 23, 2020
July 1980: 10.1%
July 1985: 10.5%
July 1990: 8.5%
July 1995: 6.5%
July 2000: 6.0%
July 2005: 4.3%
July 2010: 3.0%
July 2015: 2.3%
July 2020: 0.6%
Starved for yield, investors continue to bid up riskier securities, with investment grade bond yields moving below 2% for the first time.
5) Hospitalization Highs
COVID-19 hospitalizations in the US hit a new high this week (59,628), surpassing the prior high from April 15 (59,260).
On April 15 the highest number of hospitalizations by a wide margin were in New York, the 4th largest US state.
This time, its more evenly distributed, with the 3 largest US states all hitting new highs…
- California: 8,681
- Texas: 10,858
- Florida: 9,520
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And that’s it for this week. Thanks for reading.
Have a great weekend everyone!
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