At What Point Does Malfeasance Become Fraud?’: NYU Biz-School Professor Scott Galloway on WeWork

The inability of WeWork to bring its IPO to market believe it or not is a positive. The IPO would have sold shares to retail investors at a huge valuation only to let them bear the brunt of the loss.

“But there is a silver lining. The marketplace stepped in. The mandatory disclosure that the SEC requires in the form of S-1. The autopsy here will reflect death by S-1. Then, media and academics read the S-1 and started applying this incredibly prescient competence called math.” - Scott Galloway

Properly valuing a company before it comes to market validates the process and removes the froth before it can move downstream and inflict its harm on retail investors and the market in general.

To read the full interview click on the link below:

‘At What Point Does Malfeasance Become Fraud?’: NYU Biz-School Professor Scott Galloway on WeWork

The Decline of American Investment??

Many politicians and economists talk about the decline of corporate investment spending into long term capital projects. This article from Verdad Capital describes why this story may be more complicated than it appears.

Excerpt from the article below:

1. “First, as our economy has grown more prosperous and efficient, the cost of capital goods has declined. Economists estimate that the cost of machinery and equipment has fallen about 40% in developing economies, led by a 90% drop in the cost of computing equipment.”

2. “Second, the decline in fixed investment reflects a shift in the economy from manufacturing to technology and pharmaceuticals. Since 1980, healthcare and technology have gone from 18% of US equity market cap to 34% while energy, materials, and industrials have fallen from 50% to 19%. Healthcare and tech firms spent a combined 60% of all R&D expenditure in 2018, while industrials, auto, chemicals, and energy added up to 31%. And while fixed asset investment has declined, R&D expenditures have sharply increased. The share of revenues corporate America invests in R&D has increased significantly from 1.3% of sales in 1980 to 2.7% of sales in 2015.”

“So most of the decline in investment isn’t a story of rapacious capitalists destroying our economy, but rather a more productive and technologically sophisticated business world that doesn’t require as much spending on machinery and equipment.”

To read the entire Article click the link below:

The Decline of American Investment

What are Money Flows saying about the Equity Market

There is a saying from Sir John Templeton that "Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria."

I think you can use Fund flows as a guide to that sentiment. The chart below shows how much money has gone into bond funds versus equity funds since 1984. What's striking is how much more has gone towards bond funds since 2009.

Looking at this it's hard to believe we are close to euphoria. We may have pullbacks and corrections but if sentiment is a guide this market has room to run.