Carnegie Market Blog


The New Algorithm of Value

Posted by Brent Luce on Feb 9, 2018 9:45:54 AM


On Tuesday, Jamie Dimon, Warren Buffett and Jeff Bezos announced that they are forming a new company, “free from profit making incentives and constraints”, to address the healthcare costs of their employees and “potentially all Americans”.  This news pushed most healthcare stocks downward and sparked a lot of buzz on what exactly this could mean.  The reactions varied from dismissive to “wow”, but in my opinion, this is another example of the biggest disruptive forces identifying a weakness and using their skills and means to try to solve a problem.  I certainly would not want to bet against a trio of Jamie Dimon, Jeff Bezos and Warren Buffett – it is like entering Lebron James, Michael Jordan and Wilt Chamberlain in a three-on-three basketball tournament.  They referred to healthcare costs as being a “growing tapeworm” feeding on the U.S. economy.  Many are excited about this trio attacking the tapeworm versus a group of bureaucrats.   MORE:  CEO Perspective On Healthcare Announcement 

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Topics: Oil Prices, Interest Rates, The Four, health care

Happy Anniversary Stock Market

Posted by Brent Luce on May 20, 2016 4:46:44 PM

Happy Anniversary!

Today marks a one-year anniversary for the market.  One year ago today, the S&P 500 hit its all-time high.  As I just typed “Happy Anniversary!”, I am reminded that today is my 16th wedding anniversary too.  What a coincidence!  Anyhow, looking at the table below, you will see that while the S&P 500 is slightly down in the year since its peak, sector performance is quite dispersed, and the Russell 2000 – an index of smaller capitalization stocks – is down considerably.  So, investors’ returns over the past year have been much more about which parts of the market they were invested in rather than just being invested in the market.  MORE: An Unhappy Anniversary for the Market

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Topics: Recession, Oil Prices, Market Peak, Capacity Utilization

Perceived Risk and Human Nature

Posted by Brent Luce on May 13, 2016 2:43:52 PM

Perceived Risk and Human Nature

The greatest opportunities in the market, on both sides, occur when there is a large gap between the actual risks to the market and the perception of those risks by market participants.  For example, in 2007, as the sub-prime lending crisis grew, very few people saw those risks and the market dramatically underestimated those risks.  This dichotomy allowed for the greatest shorting opportunity in generations.  As always, the perception of risk moves like a pendulum, so as the actual risks came to fruition and were addressed, the fears and perception of risk moved to an extremely negative stance, thereby creating a great buying opportunity only a year later. 

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Topics: Oil Prices, Retailers, Risk

The Great Rate Debate

Posted by Brent Luce on Apr 21, 2016 3:14:25 PM

The Great Debate

There has been much debate on whether rates are going to rise or stay at historical lows and every time the Federal Reserve does something (or nothing), many of those paying attention seem to disagree.  MORE:  Yellen will regret slow pace of rate hikes.  Below is chart of 10-year Treasury rates over the past year. For the most part, rates have been downward trending, culminating (so far) in the synchronized bottom on February 11.  

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Topics: Oil Prices, Inflation, Jobless Claims, Interest Rates

Restaurants are the New Retail

Posted by Brent Luce on Jan 28, 2016 3:42:42 PM

Restaurants are the New Retail

I can’t speak for other cities, but in Cleveland there has been an  influx of new and great   It occurs to me that restaurants are becoming the new retail.  In the past, people would go shopping at the mall and much of the fun was about the experience of going to the mall, not necessarily about buying things.  Now, people are making more purchases online and malls seem to be dying.  Instead of going to the mall, however, people are spending their free time on culinary experiences.  People are thinking of going out to eat as more of a social experience than just a way to fill their stomachs. As you can see below, restaurant sales now exceed grocery store sales for the  first time ever.  The bottom chart shows that over the past year, restaurant stocks have significantly outperformed the market, while department stores have significantly underperformed.  Is this a short-term coincidence or a reflection of a long-term trend shifting from traditional retail and toward culinary experiences?  Related:  Celebrity Chefs Feed Cleveland Real Estate

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Topics: Restaurants, Cleveland, Oil Prices

Oil, Texas Tea and Black Gold

Posted by Brent Luce on Jan 21, 2016 4:08:20 PM

Oil Prices

Everyone and their mother (and grandmothers) is talking about oil prices.  It has become THE central topic related to the financial markets.   Two years ago, Wall Street gurus were calling for $120 oil, seeing almost nothing that could hurt oil prices.  Today, these same people are calling for oil to drop to $20 (I have seen as low as $10), with no end in sight and no prospects for higher prices.  This behavior is very typical of market and human behavior.  Anyhow, there are a couple of topics below related to oil, so I thought I would start with a long-term chart of oil prices, including the inflation adjusted price, which is not shown in most charts.  As you can see, real oil prices are as low as they have been in at least 32 years. 

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Topics: Market, Oil Prices

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