This is what we’re talking about when we talk about modern investing. Many people don’t know that last year 88 billion dollars was pulled out of US equity funds and ETF’s. You would think that would mean the market was down but instead the S&P 500 was actually up 31% remember that’s with 88 billion coming OUT of the stock market. Some of the bulls rationalize that by saying “well that’s bullish, imagine if money were going in how much higher we would be ”. Well you can’t prove the counter factual so that’s a silly thing to say. According to data from EPFR, a division of Informa Financial Intelligence, last year was the fifth in a row in which money came out of U.S. equity funds. There were just two years of net inflows in the last 10 years. In total, a net $444 billion was pulled out of the U.S. equity funds and ETFs over the past decade. During that period, the S&P 500 produced a cumulative total return of 257%, equivalent to 13.6% annualized. The more information you can consume, the Less you will act on bad information or no information at all.
The Fed Ain’t Dead
Fed chair Jerome Powell gave his semiannual testimony to Congress today and it wasn’t the usual craziness. The back and forth speeches by representative gave very little information to active investors as to whether they should be leaning one way or the other. This isn’t necessarily a bad thing period Powell did warn about the coronavirus, which now has a name (Covid-19). He did say central banks would stand at the ready to help the economy if it’s slowed down because of this virus. Honestly though, what can they do? If the virus were to continue to spread unchecked and quarantine zones got larger and larger and possibly even spread to other countries, what’s the point of easier monetary policy? I will say this, if they did try that tactic (Which seems like the only one they know ) it will be companies that have all this easy money available to them and since their businesses will be down, they will likely buy their own stock which probably puts a floor in any Covid-19 correction.
AI Loves Trump
A report out of the White House today confirmed the ramp up in R&D funding specifically towards artificial intelligence. There have been rumors for a while on Wall Street, but the president’s new budget proposal sent to Congress put it all down on paper. President Trump’s America first agenda includes trying to maintain its global leadership in science and technology for “generations to come”. The official budget proposal included a doubling of “R&D spending in nondefense artificial intelligence (AI) and quantum information science (QIS) by 2022,” which will result in “spending for AI R&D and interdisciplinary research institutes at the National Science Foundation to more than $830 million, which represents a more than 70 percent increase over the FY 2020 budget.” There was no specific mention of defense spending specifically in AI, but the defense budget Increased quite a bit and you have to guess a sizable portion of that will go into artificial intelligence. This is good news for the usual suspects like Amazon, Google, Microsoft, and Salesforce but you may want to throw in an Oracle and an NVIDIA into that group. Artificial intelligence will be a leading subsector for years to come.
Wireless
Let’s face it, Softbank just throws darts. Many of the darts its $100 billion fund called Vision Fund has thrown, has missed the bullseye. Missed the board, I should say. Some of them didn’t even hit the door that the dart board is hanging on. SoftBank Group Corp shares opened 12.5% higher on Wednesday morning after a federal judge approved the takeover of its U.S. wireless unit Sprint Corp, by T-Mobile US Inc. Sprint shares were up 78% and T-Mobile shares were up 12%. This is a huge relief for Softbank especially when you consider it was one of the founder’s sons who made the play to buy Sprint on Softbank’s behalf. This thing has been an anchor around that kids neck and they’re happy to get rid of it.
One more thing…
Andrew Yang dropped out of the Democratic primary period so much for having a president anywhere in the next 6 years that understands technology at all. If I can’t have one that understands technology, then at least I want one that understands low taxes so I can take my extra money and buy more technology.