It has been, to put it mildly, a full two weeks with lots to watch. Jamie Dimon and President-elect Donald Trump’s “one-step forward, two steps back” dance over the role of Treasury Secretary, earnings reports, Samsung upping the ante in the loyalty/rewards arena, and, well, blink too many times and one runs the distinct risk of missing something important.
So what to keep your peepers trained on this week before the Thanksgiving Day parade starts?
Well…
Analysts: Tech Stocks Aren’t Slumping, They’re Just On Sale
Despite concerns that the stock market was about to go into a “Brexit” like free fall – the surprise election of Donald Trump actually seems to have injected some adrenaline into the stock market for the last week or so. What is being called the “Trump Bull Run” has sent the blue-chip heavy Dow on a climbing spree — and the action has been particularly potent for the bank stocks. Reassured by an administration that seems less bent on heavy regulatory action, investor enthusiasm has seen big run up over the last week and half.
But the news has not been all excitement, as all of that investor love for banks seems to have come at the expense of tech stocks — which have fallen sharply since the election. The FANG block (Facebook, Amazon, Netflix and Google) took the biggest early hits. By Tuesday, Amazon had lost over $35 billion in value and Netflix — the hardest hit of the block — has seen its share price drop a whopping 7.6 percent.
Time to worry? Not so much, according to the analysts, who think that most of what is driving the slump is psychology as opposed to actual market fundamentals.
“I find Netflix extremely interesting going into ’17 for a variety of reasons. So it’s our top pick,” RBC’s Mark Mahaney said on “Squawk Box,” noting that his prediction for Netflix next year is a 30 percent increase from its closing price Thursday of of $115 per share.
He was not alone in his enthusiasm — highly respected Piper Jaffray tech analyst Gene Munster noted that any tech stock is a good buy at present, since fears about net neutrality and severe immigration requirements for highly skilled jobs seem totally overblown.
“We would be buying the [Trump election] fear priced into internet mega-caps,” he wrote.
It is also worth noting that after the big plunge, Amazon’s market cap spent much of the week recouping and has made up more than half the ground it’s lost since November 8th.
Meaning the experts might have it — this year’s best Black Friday sale might be tech stocks.
Buffett Gives Wells Fargo The Big Thumbs Up
As many, many people commented last week — one sure sign that Donald Trump’s election has spurred great confidence in banks could be found in the fact that even Wells Fargo’s stock was soaring, having bounced ~15 percent since November 8.
And while Wells was doubtless buoyed greatly by the rising tide in finance, it certainly got a great big assist with Warren Buffett’s big vote of confidence last week.
The sage finally broke his silence last week — making his first public pronouncements since news of the Wells Fargo fake account scandal broke.
Buffett told CNN that Wells Fargo made a “terrible mistake” by maintaining its sales goals. He further noted that they were almost designed to corrupt people.
“It was a dumb incentive system,” Buffett said, noting that Wells Fargo created a culture that “produced bad behavior.”
Nevertheless, Buffett didn’t unload any shares of Wells Fargo in the wake of the scandal and said he still has faith in the company, calling it an “incredible institution.” Buffett owns 2 million shares of Wells Fargo, the report noted.
He is the largest shareholder in the embattled bank through Berkshire Hathaway. Buffett said he wouldn’t be surprised if Wells Fargo isn’t the only company he has a holding in that has problems. “It’s not my job to run those companies,” he said.
Speaking of whose job it is to run a company…
Prosper Marketplace Picks A New CEO
When the going gets tough — the tough hire a new CEO. And the goings have been pretty tough at Prosper Marketplace since the beginning of 2016. Over the first half of 2016, Prosper recorded a net loss of $53.1 million, or nearly four times the $13.5 million loss it recorded in the first half of 2015. That much red ink has taken its toll, and to go along with being less prosperous, Prosper is also a smaller firm than it was, having laid off 28 percent of its workforce this year.
And, as of last week, it has lost another employee — its CEO. Aaron Vermut has announced that as of the end of the month he will be leaving the firm, to be replaced by Chief Financial Officer David Kimball. Vermut had already this year agreed to forgo his salary.
Prosper’s recent troubles come in tandem with many of its peers in marketplace lending, as investors have seemingly fallen out of love with loans provided online as quickly as they fell in love with them.
Prosper — like many with a similar marketplace model — does not function as a lender so much as a conduit for borrower debt to be purchased by money managers and other investors. Its revenue is derived from the fees it charges to use its platform — meaning revenue began to significantly suffer as fewer investors were drawn to the site to purchase debt. The firm has been actively seeking investor commitment to a sizable loan-buying agreement — but no final agreement has been made.
Vermut will remain a director of the company. His father, Stephan Vermut, will step down as executive chairman of Prosper. Reports indicate he has been looking to make an exit since early this year — to spend more time with his family.
Aaron Vermut joined Prosper as President in April 2013 and became Chief Executive in March 2014. Kimball will begin manning the helm as of December. He has been at Prosper for six months; he previously had worked for nine years at financial services provider USAA.
So what did we learn this week?
It’s a great time to be a bank, and still a good time to be a tech firm as recent market reports would indicate. How good a time is it to be a marketplace lender? We suspect 2017 will have an awful lot of new information to add to that answer.
And it’s always a good time to give thanks for all of the many blessings we can all count and to spend time with family and friends while doing it.
Happy Thanksgiving!
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