An Alternative To Money Market Funds
October is behind us, November has now arrived and the amazing bull market continues to set records!! As of Nov 1, both the S&P 500 and NASDAQ COMPOSITE indices reached new record highs while the Dow Jones Industrial Average closed barely 50 points below its all time high. Last Friday’s rally was fueled largely by the unexpectedly strong October Nonfarm Payroll Report.
Despite the long GM UAW labor strike, 128,000 jobs were created last month vs. a forecast of 80,000 jobs. The Labor Participation Rate set a Trump era high of 63.3% while the number of Americans employed reached an all time record of 158,510,000, according to the Labor Dept. The U-3 employment rate ticked up slightly to 3.6% from a 50 year low of 3.5% last month. The U-6 rate also ticked up a hair to 7.0% from last month’s 6.9% rate, the lowest rate since 2000. This strong jobs report likely vanquishes the fear of an imminent recession, bolstering Pres. Trump’s hopes for being reelected in 2020.
As expected, the Federal Reserve cut interest rates by another 25 basis points at its October meeting. During the press conference following the announced rate cut, Fed Chairman Jerome Powell indicated the Fed will likely be on hold for a while to assess the need for additional action.
The final Fed meeting of 2019 will take place Dec 10-11. 2020 could see additional rate cuts by the Fed since the gap in yield on the 10 Year US Treasury remains well above the negative yields offered by Germany, France, Japan and Switzerland on their 10 Year sovereign debt, and the slightly positive rate offered on 10 Year British Gilts.
The US IPO market has been rocked by the WeWork implosion, Endeavor Group’s shelving its planned IPO and the plunge in share prices for high profile deals such as LYFT, UBER, Peloton, Smile Direct Club and Slack. Beyond Meat, undoubtedly 2019’s best performing IPO based on its trading range, has seen its share price fall to barely one third of its $239.71 high. It was priced @ $25 last May!! These companies once again demonstrate the folly of investing in companies with no history of being profitable, nor hope of being profitable any time soon.
By the way, Fitbit agreed to be acquired by Google last week for $7.35/share. It went public @ $20 in 2015 and peaked @ $51.90 in August of 2015. Fitbit was trading below $3 just prior to Labor Day 2019 before reports surfaced about Google’s interest in a possible deal. If you are keeping score, Fitbit has never made a penny of profit in its history either.
My weekly radio show on WWPR 1490 AM airs at 12.30pm each Friday. The show can also be heard live on the station’s website (www.1490wwpr.com). My prior radio shows and news columns are available on my firm’s website (www.amescapmgmt.com).
If you are unhappy with the returns now offered by money market funds feel free to contact us.