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Friday File: Revenge on Private Equity?

Buying into a private equity firm that's "stealing" our assets, plus another "royalty" buy and updates on Perimeter, Illumina, PAR, Unity Software, Avalara and more...

By Travis Johnson, Stock Gumshoe, August 12, 2022


I can’t seem to help myself, the big-picture musing comes upon me each Friday, even though it’s not likely to do any of us any good. Hopefully it will provide some context, but if you can’t tolerate all the blather, just scroll down to the ***** and I’ll talk about companies again.

Wednesday was a tough day for anyone trying to predict the madness of crowds, or pinpoint the inflection points which drive changes in investor sentiment. The most popular inflation measure, the CPI, came in a whisker lower than most people had predicted, representing the first time in a while that prices hadn’t gone up over the prior month (mostly because energy prices came down quite rapidly after their spike, it’s pretty common for energy to be the X-factor that bumps CPI up or down in one month), and the market seemed instantly to adopt the opinion that inflation was over, and the Fed would ease off on interest rate hikes in future meetings. Everything’s fine, nothing to worry about, time to bet on the future again and buy tech stocks.

Will that hold? I have no idea. It doesn’t seem logical — inflation is still a large problem, year-over-year prices were still up by 8.5%, which is huge if slightly lower than the 8.7% that the average soothsayer predicted — but in any given week or month, markets aren’t driven by cold logic about the past, they’re driven by changing sentiment about the future. In the long term, it will be the performance of companies that matter, how much profit they earn and whether they can navigate these strange financial times and keep their footing… but in the short term, it’s all about interest rates and the impact they have both on professional investors, because they are a key input into their valuation models, and on traders and retail investors, because they drive changes in how we feel about the market.

Inflation is obviously still critical, and the housing and rental markets will probably take the place of food or energy as a key pain point now… which is probably bad for the big headline CPI numbers, because housing costs make up about a third of the “basket” that is used to calculate changes in consumer prices, and rents and home prices are generally lagging and slow-moving indicators compared to other highly-inflated areas like ...

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