"Don't Panic": Bank of America's 20 Must-Know Stats For Investors

Discussion in 'The World has gone to Hell' started by Tyler Durden, Jun 14, 2018.

  1. Tyler Durden

    Tyler Durden Guest

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    Taking whimsical stream-of-consciousness financial commentary to levels even Aleksandar Kocic would blush, overnight BofA CIO Michael Hartnett has released a report titled "The Hitchhiker’s Guide to the Investment Universe"...

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    ... which, to the delight of Douglas Adams fans everywhere, covers "Wall St Life, the Universe and Everything."

    Hartnett's report is a primer for retail & institutional investors on the size, composition, performance, risks, fund flows, yields, and valuations of the bond & equity universe.

    Of course, there are exactly “42” charts & tables in the report, which illustrate Wall Street’s huge bull run, the “great corporate rotation”, credit’s inflection point, the multi-year decoupling of US assets, tech’s leadership & vulnerability, and the shift to late-cycle returns in 2018.

    For the sake of brevity, we will focus only on the 20 "don't panic" must-know stats for investors highlighted by Bank of America:

    1. Global financial assets = $180tn or 226% of global GDP, an all-time high. Global financial assets totaled $23tn in
    1990, $64tn in 2000, $139tn in 2010.

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    2. By the end of 2017 the universe of global equities totaled $81tn. And in Jan’18 global equity market cap reached a high of $90tn, a massive jump from $30tn in Mar’09

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    3. The “great corporate rotation": Since the GFC, US companies have issued $14tn of debt, bought $5tn of stocks. Corporations in the US have become more important relative to institutional investors in driving equity prices up & down

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    4. Number of listed equities on NYSE was 3572 in 2000, fell to 3062 in Q1’18. The diminishing number of public companies this century has coincided with much higher valuation

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    5. The US Treasury market is the largest debt market in the world with $17.6tn of debt securities. US = 37% of global government bond market. The US, no surprise, is the largest equity market, accounting for $24.9tn or 53% of the MSCI index, close to its all-time high53% of global stock market.

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    6. Tech sector market cap: US $6.6tn, China $0.7tn, Europe $0.5tn, Japan $0.5tn

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    7. Five largest global stocks 2018: Apple, Amazon, Google, Microsoft, Facebook

    8. Five largest global stocks in 2009: ExxonMobil, GE, China Mobile, Microsoft, Gazprom

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    9. YTD returns: commodities best since 2002, REIT returns worst since 2011, US IG bonds worst since 1974

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    10. Peak-to-trough yield from GFC: global HY 23.1% to 5.0%; now 5.9%

    11. Peak-to-trough yield from GFC: EM debt 10.8% to 3.6%; now 5.0%

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    12. Govt bond yields >7%: Turkey, Brazil, South Africa, India, Mexico, Indonesia

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    13. Dividend yields >5%: banks in Aust, Brazil, France, Italy; US telcos; UK energy

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    14. From all-time equity index high: US 3%, Japan 19%, Eurozone 27%, China 31%

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    15. Most creditworthy = German bunds (CDS 11bp), least creditworthy = Venezuelan debt (11507bp)

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    16. Evolution of “tail risks” since 2011: Eurozone debt crisis…US “fiscal cliff”…China “hard landing” & geopolitics…populism…quantitative tightening…trade war

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    17. Evolution of “crowded trades” since 2013: short Yen, long high “yield”, long US$, long high Quality, long Nasdaq, long Bitcoin, short vol, long FAANG+BAT

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    18. Price to book ratios >3x: US, India, tech, health care, staples, discretionary

    19. Price to book ratios strong>

    20. Price to book ratio of China tech stocks = 8x, China financials = 1x

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