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Note from Larry to public readers: Have a great weekend Folks. It was a great week for the Community. Will do more research this weekend to see if there are upcoming opportunities.
Key Investing Resource: Strategist Larry uses Interactive Brokers as his core brokerage. Feel free to check out IB. I currently park excess cash at Interactive Brokers. Check it out. It’s a great brokerage.
In our emails, we will provide the following coverage points:
In Q2, hedge fund launches hit their highest levels in over a year with 133 debuts, marking the first time starts exceeded closures in five quarters. The surge was primarily driven by funds specializing in volatility and inflation-linked strategies, particularly those involved in fixed-income-based arbitrage. The sector witnessed a growth in assets under management, reaching nearly $3.95 trillion, up from $3.88 trillion in the preceding quarter.
Macro Chart In Focus
Analyst Team Note:
Despite the Fed's efforts to curb spending in specific sectors, American companies and consumers continue to accumulate debt.
Even as interest rates rise, major firms, including Pfizer and Meta, have increased their net debt, underscoring the persistent reliance on and accessibility of debt across various economic sectors.
While this trend reveals robust fundraising in the bond market, with a notable $124 billion raised in September, it also illustrates the broad confidence among companies, even mid-investment-grade ones, in their financial stability and future prospects. These businesses not only continue to tap into debt markets but also engage in share buybacks, signaling strong cash reserves and an optimistic economic outlook.
Various economic forecasts for 2024 show diverging sentiments: while the Federal Reserve no longer anticipates a recession, a yield curve spread analysis suggests a 61% chance of a downturn within a year, a metric historically reliable since 1959. Surveys reveal that 48% of economists and 69% of consumers anticipate a recession, while Goldman Sachs and Bank of America assess the risk at 15% and 35-40%, respectively.
Consumer spending remains robust, albeit with a shift towards economical choices, amidst high household debt levels and rising borrowing costs, while the corporate sector sees escalating defaults.
Chart That Caught Our Eye
Analyst Team Note:
In Q2 2023, the bottom 50 percent of Americans owned ~5.9%of the nation’s total assets, maintaining thet low from the previous quarter.
Historically, the wealth share for this demographic peaked in Q2 and Q3 of 1995 at 8.7%. In contrast, the top 0.1% of wealth holders in the U.S. possessed 11.4%of total assets in Q2 of 2023, an amount nearly double that owned by the poorest half of the population.
Sentiment Check
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