David Sylvain

Posts Tagged 'elegance boutique'

Musings On Markets: February 2021

Analysts, accountants and appraisers seem to still be struggling with how best to deal with the boutique -based compensation, whether in the form of options or restricted stock. And if you do believe you are in a bubble, what is your best course of action? It is seeking to trade under the symbol “KUKE”.Deutsche Bank, Tiger Brokers and AMTD are listed as the underwriters for the deal. TRADE is terrific for both beginners and fully experienced traders looking to tune their trading strategies. Last night, Aussino released the news for it’s trading halt which I believe that it wasn’t a good news and had something to do with Myanmar. Last month, Cisco announced many innovations to be released soon, such as real-time translation, immersive features, and support for huge meetings (up to 25,000 participants compared to a maximum of 1,000 participants in Zoom meetings). Environmental protection agencies anywhere in the world have most recently released bulletins urging people to be aware of the fact that no matter where you are, there is always the likelihood that some toxic substance is in your groundwater. It stems from a common phenomenon in young sectors, where investors in individual companies price their companies on overall market potential but either misassess or ignore the fact that the overall market is not big enough to support all of them (and new entrants).


There have been a few commentators who have argued it is in fact the Fed’s job to not only keep its eye on market and sector valuations and actively manage bubbles. In fact, if you buy into the Fed’s contentions that the overall market is not over valued, but that social media and biotechnology are, is there not an implicit message that there must be some other sectors that are under valued? With biotechnology companies, making judgments about overall valuation is even more fraught with danger because the pricing of these companies is a probabilistic exercise (dependent upon the drugs that are working their way through the FDA pipeline and their blockbuster potential) and comparing pricing across time is close to useless. In my post on market bubbles, I did agree with Ms. Yellen on her overall market judgment (that traditional metrics are sending mixed messages on overall market valuation) and used the ERP for the market, as she did, to back my point.


I have disagreed with those who attribute monumental powers to the Fed in an earlier post where I compared the Fed Chair to the Wizard of Oz, and argued that rates have been low for the last five years more because of the fundamentals, i.e., anemic growth and low inflation, than because of Fed policy. 2. Even if the Fed is in the business of bubble detection, let me pose the same question that I did in my earlier post on bubbles: what’s so bad about a bubble? Benjamin Strong, the governor of the New York Federal Reserve from 1914 to 1928, is said to have argued against letting interest rates rise in his time, using the analogy of investors as children and saying that raising interest rates to puncture a bubble would be like punishing all the kids because a few are misbehaving. The argument of whether the Federal Reserve should allow interest rates to rise in the face of a bubble is an age-old one that gets refought every generation.


If the Fed truly believes that it has the power to keep interest rates low and that there is a market bubble, the solution is within its reach. The Fed and banking regulators already have the capacity to monitor and restrict the investment (through risk constraints), financing (through regulatory capital needs) and dividend policies of banks (with veto power over dividend and buyback decisions) and I think that they should continue to do so. If you believe that the stock market is in a bubble, you have lots of company. Put differently, if there is a market bubble, this one is not because stock market investors are behaving with abandon but because the Fed has kept rates too low and the over valuation will be greatest in those sectors with the highest growth. If you accept the notion that the Fed controls interest rates (that many investors believe and Fed policy makers promote) or even my lesser argument that the Fed has used its powers to keep rates below where they should be for the last few years, the consequences for valuation are immediate.