4 ms·

Regardless if it fits to FT’s thesis or not, note that the S&P recent gains can be attributed to 7 tech companies https://www.forbes.com/sites/dereksaul/2023/0

Regardless if it fits to FT’s thesis or not, note that the S&P recent gains can be attributed to 7 tech companies https://www.forbes.com/sites/dereksaul/2023/04/10/these-7-tech-stocks-command-almost-90-of-the-sp-500s-gains-signaling-market-rally-may-not-be-so-healthy/ https://www.forbes.com/sites/dereksaul/2023/04/10/these-7-te... Everything else is still down and recession likely glooming. And when the recession hits the massive gainers are likely getting same-size correction.

miohtama 4y ago
Also it’s always sad to see Meta (Facebook) to success - They are making $40/year avg. off a user by selling users data - They announced massive stock buybacks Not sure if this is the best capital allocation for society - would love to see less parasitic platforms to success.
- nordsieck 4y ago
  > They announced massive stock buybacks Not really sure why people complain so much about stock buybacks. They're tax advantaged dividends.
  - biohax2015 4y ago
    Because they indicate that a company cannot do anything more creative with their capital than use it to inflate their stock price.
    - nordsieck 4y ago
      > Because they indicate that a company cannot do anything more creative with their capital than use it to inflate their stock price. OK. So they are returning that money to their shareholders. Which is kind of the point of a company. Does that mean the company is no longer a growth stock? Probably. But not being a growth stock isn't exactly a crime against humanity.
      - MrMan 4y ago
        [dead]
    - missedthecue 4y ago
      Companies doing contrived "creativity" can be worse for the company than reducing the number of outstanding shares with a buyback which when done appropriately is a healthy reorganization of the capital stack. How many mergers and acquisitions have we seen epically blow up? How many billions down the drain on projects like the windows phone or Google+? Hindsight is 20-20 but when it comes to pouring tons of money into new products we're not exactly blind either. Metaverse comes to mind.
    - danielmarkbruce 4y ago
      The idea that there are lots of places lying around to put 10's of billions to work at high returns, and the company just isn't being creative enough, is preposterous.
      - jimbob45 4y ago
        How are these companies going to defend outsourcing with a straight face when they’re content to light their money on fire with buybacks?
        danielmarkbruce 4y ago
        No one who understands buy-backs would call it lighting money on fire. It's just giving money back to shareholders. Nothing more, nothing less.
    - deleted 4y ago
      [deleted]
    - kevinventullo 4y ago
      Oh you mean like dumping tens of billions of dollars into a “VR” pipe dream motivated by dystopian cyberpunk science fiction?
    - mardifoufs 4y ago
      As opposed to dividends?
    - ianai 4y ago
      Glad somebody gets it. Stock buybacks were outlawed for decades as insider trading. At some point it became legal, people made money, and all sorts of verbiage piles on when people make money. It’s still insider trading and insider trading does things like mucking up actual market valuations and adds leverage for a later correction to unwind, dramatically. Companies that issue dividends usually have that dividend as a prominent feature within their business case. As in “we send out 90% of our profit as dividends after all costs/maintenance are paid.” They’re also usually almost cookie cutter businesses like REITs or mines. (Cookie cutter as in there’s well established business models already in place for decades/centuries. There’s differences one company to another but it’s characteristics of the assets of that company which change not fundamental components like renting out owned assets or digging up rocks from the ground.) Compare that with returns to technological innovation. Econ defines tech innovation as “growth in profit not attributable to any other traditional business operation.” In a sense, a “tech company” retiring cash to their market cap is saying they can’t think of any other thing to do with that cash, including growth of their bottom line ie technology. Quitters mindset. The obviousness of it being insider trading probably becomes even more glaring if we could see the machinations of a stock buyback. They’re probably timing the market to make sure the price increase is most pronounced or meets some metric that’s dubious. Further, it’d be interesting to see how the stock market would respond to a company class defining themselves as stock-buy backers ala “we use 90% of our profits to buy back stocks” like the more traditional dividends. Would the stock value reflect today all the expected stock buybacks in the future at a time value discount? Stock buybacks are not dividends. Dividends are paid out to shareholders at a declared date and come from a defined source of funds. The separation of the source of funds for a dividend and the rest of the companies accounts is clear cut. Buybacks are murky in comparison. If the market or stock has a bad day on the day of executing the buyback the actual buyback could be negated by the overall trend. Further, a company would logically not buyback their stock on such a day unless it fit their criteria otherwise. Ie insider trading. It’s not possible to call dividends insider trading in the same sense because dividends are paying out shareholder income.
  - danielmarkbruce 4y ago
    The people complaining don't understand them. It's that simple.
  - dumbotron 4y ago
    These were different because they were funded with a bond.
- dumbotron 4y ago
  > They are making $40/year avg. off a user by selling users data People need to stop parroting this. Meta targets ads with user data. That's very different than selling user data.
antibasilisk 4y ago
>recession likely glooming Just to be clear, we're in a recession and have been for a while now, despite government administrators attempts to change the definition.
- reducesuffering 4y ago
  Last two quarters of GDP growth were 3.2% and 2.6% positive. By what possible criteria are you using to assert we’re currently in a recession?
  - ForHackernews 4y ago
    There's a Democrat in the White House, haven't you heard? Terrible for the economy. What other criteria do we need?
    - antibasilisk 4y ago
      the person sitting in the white house doesn't control the economy. The recession started when trump was still in office and is continuing under biden
      - ForHackernews 4y ago
        Sorry, I thought my sarcasm was obvious enough to not need a "/s". But see above, there is no "recession". The economy is growing. Interesting reading: https://www.economist.com/briefing/2023/04/13/from-strength-to-strength https://www.economist.com/briefing/2023/04/13/from-strength-...
        antibasilisk 4y ago
        The economy has not grown substantially since 2020, it's been stopping and starting like a busted engine
  - antibasilisk 4y ago
    Look at January-July 2020 and January-July 2022, and look at GDPC1
Zetice 4y ago
The point is that there's no way to know which "7" companies will carry the bulk of the growth, so you grab some representation of "all" of them. So yeah, what you're saying is exactly how it's meant to go. Also, "recession is looming" is easy to say at literally any time in history. Eventually, you'll be right. The trick is to know precisely when it will take place.
throw0101b 4y ago
> Regardless if it fits to FT’s thesis or not, note that the S&P recent gains can be attributed to 7 tech companies Exxon Mobil (XON) was the #3 company in 2001, but not even in the top twenty in 2021: * https://www.bespokepremium.com/think-big-blog/largest-25-stocks-in-the-sp-500-now-vs-20-years-ago/ https://www.bespokepremium.com/think-big-blog/largest-25-sto... <5% of companies have driven most of the returns of equities: > We study long-run shareholder outcomes for over 64,000 global common stocks during the January 1990 to December 2020 period. We document that the majority, 55.2% of U.S. stocks and 57.4% of non-U.S. stocks, underperform one-month U.S. Treasury bills in terms of compound returns over the full sample. Focusing on aggregate shareholder outcomes, we find that the top-performing 2.4% of firms account for all of the $US 75.7 trillion in net global stock market wealth creation from 1990 to December 2020. Outside the US, 1.41% of firms account for the $US 30.7 trillion in net wealth creation. * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3710251 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3710251 > Four out of every seven common stocks that have appeared in the CRSP database since 1926 have lifetime buy-and-hold returns less than one-month Treasuries. When stated in terms of lifetime dollar wealth creation, the best-performing four percent of listed companies explain the net gain for the entire U.S. stock market since 1926, as other stocks collectively matched Treasury bills. These results highlight the important role of positive skewness in the distribution of individual stock returns, attributable both to skewness in monthly returns and to the effects of compounding. The results help to explain why poorly-diversified active strategies most often underperform market averages. * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2900447 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2900447 The trick is knowning which company(ies) will be that 5% and when: some do well for a time and then fade away: you would have to know when to jump in and out of them. Also, the S&P 500 being concentrated is not new and has been the case for 40+ years: * https://awealthofcommonsense.com/2020/02/5-companies-make-up-18-of-the-sp-500-should-investors-care/ https://awealthofcommonsense.com/2020/02/5-companies-make-up... It's just the companies have changed (and there's no way of easily of predicting which ones did / will rise and fall).
canucker2016 4y ago
It goes back further... The article was written in mid-2022. from https://get.ycharts.com/resources/blog/whats-the-sp-500-without-its-faangs/ https://get.ycharts.com/resources/blog/whats-the-sp-500-with...: Given the sheer size of “mega cap stocks”—being Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOG & GOOGL), Meta Platforms (FB), Tesla (TSLA), NVIDIA (NVDA), and formerly Netflix (NFLX)—most portfolios carry noteworthy exposure to these companies. When stripping out the entire cohort of Mega Cap Stocks, the S&P 500’s annualized performance in the five-year period ending February 28, 2022 would have fallen to 6.98% from 15.17% annually—a reduction of more than half. The index’s standard deviation would have seen an improvement of 4 percentage points, but the lost returns seem to sting more than the reduced volatility. The pattern persists in each full calendar year since 2015. When each Mega Cap Stock is hypothetically excluded from the S&P 500’s total return, the index suffers. Notably, 2020’s 18.4% total return for the S&P 500 would have been a mere 3.3% had the eight Mega Cap Stocks been excluded, by our calculations. Only in 2022 (year-to-date, through February 28, 2022) would removing the Mega Cap Stocks have actually boosted the S&P’s growth.

miohtama 4y ago

Also it’s always sad to see Meta (Facebook) to success - They are making $40/year avg. off a user by selling users data - They announced massive stock buybacks Not sure if this is the best capital allocation for society - would love to see less parasitic platforms to success.

nordsieck 4y ago
> They announced massive stock buybacks Not really sure why people complain so much about stock buybacks. They're tax advantaged dividends.
- biohax2015 4y ago
  Because they indicate that a company cannot do anything more creative with their capital than use it to inflate their stock price.
  - nordsieck 4y ago
    > Because they indicate that a company cannot do anything more creative with their capital than use it to inflate their stock price. OK. So they are returning that money to their shareholders. Which is kind of the point of a company. Does that mean the company is no longer a growth stock? Probably. But not being a growth stock isn't exactly a crime against humanity.
    - MrMan 4y ago
      [dead]
  - missedthecue 4y ago
    Companies doing contrived "creativity" can be worse for the company than reducing the number of outstanding shares with a buyback which when done appropriately is a healthy reorganization of the capital stack. How many mergers and acquisitions have we seen epically blow up? How many billions down the drain on projects like the windows phone or Google+? Hindsight is 20-20 but when it comes to pouring tons of money into new products we're not exactly blind either. Metaverse comes to mind.
  - danielmarkbruce 4y ago
    The idea that there are lots of places lying around to put 10's of billions to work at high returns, and the company just isn't being creative enough, is preposterous.
    - jimbob45 4y ago
      How are these companies going to defend outsourcing with a straight face when they’re content to light their money on fire with buybacks?
      - danielmarkbruce 4y ago
        No one who understands buy-backs would call it lighting money on fire. It's just giving money back to shareholders. Nothing more, nothing less.
  - deleted 4y ago
    [deleted]
  - kevinventullo 4y ago
    Oh you mean like dumping tens of billions of dollars into a “VR” pipe dream motivated by dystopian cyberpunk science fiction?
  - mardifoufs 4y ago
    As opposed to dividends?
  - ianai 4y ago
    Glad somebody gets it. Stock buybacks were outlawed for decades as insider trading. At some point it became legal, people made money, and all sorts of verbiage piles on when people make money. It’s still insider trading and insider trading does things like mucking up actual market valuations and adds leverage for a later correction to unwind, dramatically. Companies that issue dividends usually have that dividend as a prominent feature within their business case. As in “we send out 90% of our profit as dividends after all costs/maintenance are paid.” They’re also usually almost cookie cutter businesses like REITs or mines. (Cookie cutter as in there’s well established business models already in place for decades/centuries. There’s differences one company to another but it’s characteristics of the assets of that company which change not fundamental components like renting out owned assets or digging up rocks from the ground.) Compare that with returns to technological innovation. Econ defines tech innovation as “growth in profit not attributable to any other traditional business operation.” In a sense, a “tech company” retiring cash to their market cap is saying they can’t think of any other thing to do with that cash, including growth of their bottom line ie technology. Quitters mindset. The obviousness of it being insider trading probably becomes even more glaring if we could see the machinations of a stock buyback. They’re probably timing the market to make sure the price increase is most pronounced or meets some metric that’s dubious. Further, it’d be interesting to see how the stock market would respond to a company class defining themselves as stock-buy backers ala “we use 90% of our profits to buy back stocks” like the more traditional dividends. Would the stock value reflect today all the expected stock buybacks in the future at a time value discount? Stock buybacks are not dividends. Dividends are paid out to shareholders at a declared date and come from a defined source of funds. The separation of the source of funds for a dividend and the rest of the companies accounts is clear cut. Buybacks are murky in comparison. If the market or stock has a bad day on the day of executing the buyback the actual buyback could be negated by the overall trend. Further, a company would logically not buyback their stock on such a day unless it fit their criteria otherwise. Ie insider trading. It’s not possible to call dividends insider trading in the same sense because dividends are paying out shareholder income.
- danielmarkbruce 4y ago
  The people complaining don't understand them. It's that simple.
- dumbotron 4y ago
  These were different because they were funded with a bond.
dumbotron 4y ago
> They are making $40/year avg. off a user by selling users data People need to stop parroting this. Meta targets ads with user data. That's very different than selling user data.

antibasilisk 4y ago

>recession likely glooming Just to be clear, we're in a recession and have been for a while now, despite government administrators attempts to change the definition.

reducesuffering 4y ago
Last two quarters of GDP growth were 3.2% and 2.6% positive. By what possible criteria are you using to assert we’re currently in a recession?
- ForHackernews 4y ago
  There's a Democrat in the White House, haven't you heard? Terrible for the economy. What other criteria do we need?
  - antibasilisk 4y ago
    the person sitting in the white house doesn't control the economy. The recession started when trump was still in office and is continuing under biden
    - ForHackernews 4y ago
      Sorry, I thought my sarcasm was obvious enough to not need a "/s". But see above, there is no "recession". The economy is growing. Interesting reading: https://www.economist.com/briefing/2023/04/13/from-strength-to-strength https://www.economist.com/briefing/2023/04/13/from-strength-...
      - antibasilisk 4y ago
        The economy has not grown substantially since 2020, it's been stopping and starting like a busted engine
- antibasilisk 4y ago
  Look at January-July 2020 and January-July 2022, and look at GDPC1

Zetice 4y ago

The point is that there's no way to know which "7" companies will carry the bulk of the growth, so you grab some representation of "all" of them. So yeah, what you're saying is exactly how it's meant to go. Also, "recession is looming" is easy to say at literally any time in history. Eventually, you'll be right. The trick is to know precisely when it will take place.

throw0101b 4y ago

> Regardless if it fits to FT’s thesis or not, note that the S&P recent gains can be attributed to 7 tech companies Exxon Mobil (XON) was the #3 company in 2001, but not even in the top twenty in 2021: * https://www.bespokepremium.com/think-big-blog/largest-25-stocks-in-the-sp-500-now-vs-20-years-ago/ https://www.bespokepremium.com/think-big-blog/largest-25-sto... <5% of companies have driven most of the returns of equities: > We study long-run shareholder outcomes for over 64,000 global common stocks during the January 1990 to December 2020 period. We document that the majority, 55.2% of U.S. stocks and 57.4% of non-U.S. stocks, underperform one-month U.S. Treasury bills in terms of compound returns over the full sample. Focusing on aggregate shareholder outcomes, we find that the top-performing 2.4% of firms account for all of the $US 75.7 trillion in net global stock market wealth creation from 1990 to December 2020. Outside the US, 1.41% of firms account for the $US 30.7 trillion in net wealth creation. * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3710251 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3710251 > Four out of every seven common stocks that have appeared in the CRSP database since 1926 have lifetime buy-and-hold returns less than one-month Treasuries. When stated in terms of lifetime dollar wealth creation, the best-performing four percent of listed companies explain the net gain for the entire U.S. stock market since 1926, as other stocks collectively matched Treasury bills. These results highlight the important role of positive skewness in the distribution of individual stock returns, attributable both to skewness in monthly returns and to the effects of compounding. The results help to explain why poorly-diversified active strategies most often underperform market averages. * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2900447 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2900447 The trick is knowning which company(ies) will be that 5% and when: some do well for a time and then fade away: you would have to know when to jump in and out of them. Also, the S&P 500 being concentrated is not new and has been the case for 40+ years: * https://awealthofcommonsense.com/2020/02/5-companies-make-up-18-of-the-sp-500-should-investors-care/ https://awealthofcommonsense.com/2020/02/5-companies-make-up... It's just the companies have changed (and there's no way of easily of predicting which ones did / will rise and fall).

canucker2016 4y ago

It goes back further... The article was written in mid-2022. from https://get.ycharts.com/resources/blog/whats-the-sp-500-without-its-faangs/ https://get.ycharts.com/resources/blog/whats-the-sp-500-with...: Given the sheer size of “mega cap stocks”—being Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOG & GOOGL), Meta Platforms (FB), Tesla (TSLA), NVIDIA (NVDA), and formerly Netflix (NFLX)—most portfolios carry noteworthy exposure to these companies. When stripping out the entire cohort of Mega Cap Stocks, the S&P 500’s annualized performance in the five-year period ending February 28, 2022 would have fallen to 6.98% from 15.17% annually—a reduction of more than half. The index’s standard deviation would have seen an improvement of 4 percentage points, but the lost returns seem to sting more than the reduced volatility. The pattern persists in each full calendar year since 2015. When each Mega Cap Stock is hypothetically excluded from the S&P 500’s total return, the index suffers. Notably, 2020’s 18.4% total return for the S&P 500 would have been a mere 3.3% had the eight Mega Cap Stocks been excluded, by our calculations. Only in 2022 (year-to-date, through February 28, 2022) would removing the Mega Cap Stocks have actually boosted the S&P’s growth.