Critical information for the U.S. trading day
by Victor Rekalitis
Another day, another round of all-time highs?
The Federal Reserve and earnings-season winner Facebook easily could help deliver a trifecta of record closes like we had yesterday.
But billionaire investor Howard Marks smells something rotten, going by his latest cautionary memo — and that provides our call of the day.
The Oaktree Capital co-chairman gives plenty of reasons to worry about markets right now. Some examples: the recent exuberance over cryptocurrencies, the cheering for FAANG stocks, and the warm embrace of passive investing (index funds and ETFs).
“They show the temperature of today’s market to be elevated. Not a nonsensical bubble — just high and therefore risky,” he writes.
Regarding bitcoin BTCUSD, -0.67% and its cryptocurrency rivals, Marks says “they’re not real” and “perhaps even a pyramid scheme.”
Here, in Marks’s own words, are the red flags he lists near the end of his 23-page memo:
• Some of the highest equity valuations in history.
• The so-called complacency index at an all-time high.
• The elevation of a can’t-lose group of stocks. [the FAANG names]
• The movement of more than a trillion dollars into value-agnostic investing. [indexing]
• The lowest yields in history on low-rated bonds and loans.
• Yields on emerging market debt that are lower still.
• The most fundraising in history for private equity.
• The biggest fund of all time raised for levered tech investing. [Softbank’s fund]
• Billions in digital currencies whose value has multiplied dramatically.
So what to do now? Many market participants don’t have the option to not invest, Marks notes. Oaktree will continue to follow its “move forward, but with caution” mantra, he writes.
Key market gauges
Futures for the Dow YMU7, +0.10% , S&P 500 ESU7, +0.48% and Nasdaq-100NQU7, +1.22% are higher, after the Dow DJIA, +0.16% , S&P SPX, +0.53% and Nasdaq Composite COMP, +1.11% each achieved an all-time closing high yesterday.
See the Market Snapshot column for the latest action.
The ICE U.S. Dollar Index is touching a fresh 13-month low this morning, stretching its year-to-date decline to 8.5%.
An ETF that tracks the buck — the PowerShares DB US Dollar Index Bullish FundUUP, +0.63% — is showing a similar 2017 drop. And it’s the only currency ETF in the red for the year in the chart above from Charlie Bilello, the Pension Partners chart slinger.
Some big institutional investors look set to steer clear of Snapchat parent SnapSNAP, +0.20% after FTSE Russell announced a key decision on its indexes. The index provider plans to exclude companies that basically don’t give public shareholders a voice.
Amazon’s “secret skunkworks lab called 1492” is looking into electronic medical records and other opportunities in health care, says a CNBC report.
In five years’ time, scandal-hit Libor should be no more.
Earnings season remains in full swing. Companies on the docket before the open include Comcast CMCSA, +1.76% , Twitter TWTR, +0.27% , Verizon VZ, -0.59% , Southwest LUV, +0.01% , Dow Chemical DOW, +1.02% , P&G PG, -0.50% , UPSUPS, +0.59% and Mastercard MA, -0.04% .
In terms of economic data, reports on jobless claims and durable goods are on tap before the open.
Check out: MarketWatch’s Economic Calendar
“I’ve been saying for months we should start with what we agree on, and try to build up. The previous strategy was to start big and try to have the whole kitchen sink in there.” — Sen. Rand Paul (R., Ky.) is among those signaling support for a “skinny repeal” of Obamacare.
A ride broke apart at Ohio’s state fair, killing one person and injuring seven others.
The things each state really dislikes are random. For N.D., it’s tapas.
Sweden’s government is in trouble over its handling of a huge data breach.
Brits are having fun writing captions for new photos of their MPs.