Tech titans, plus demand for gold, Justin Bieber, and great businesses
The Sandbox Daily (1.25.2023)
Welcome, Sandbox friends.
Today’s Daily discusses the giant tech companies sitting atop the market, unwavering demand for gold, Justin Bieber cashes out (what do you mean?), and investing in great businesses.
Let’s dig in.
Markets in review
EQUITIES: Russell 2000 +0.25% | Dow +0.03% | S&P 500 -0.02% | Nasdaq 100 -0.27%
FIXED INCOME: Barclays Agg Bond +0.12% | High Yield -0.01% | 2yr UST 4.133% | 10yr UST 3.451%
COMMODITIES: Brent Crude +0.09% to $86.21/barrel. Gold +0.62% to $1,964.3/oz.
BITCOIN: +3.03% to $23,166
US DOLLAR INDEX: -0.27% to 101.642
CBOE EQUITY PUT/CALL RATIO: 0.68
VIX: -0.62% to 19.08
Large and in charge?
Despite the major tech heavyweights getting de-FAANG’d in 2022 (or FANMAG’d if you prefer to include Microsoft), these massive enterprises remain, well… massive. The top 5 (and top 10) constituents in the S&P 500 still remain close to the highest percentage weighting of the overall index market cap in 50 years.
Not much of a reset, despite trillions of market cap being wiped out from Apple, Microsoft, Google, Amazon, and Tesla.
But when looking through the history books, the “recent” large percentage holdings sitting atop the stock market share is nothing new. AT&T was one of the highest weightings for nearly 60 years, which dominated the rankings alongside the likes of household names General Motors, General Electric, Exxon, DuPont De Nemours, and IBM.
Enjoy this trip down memory lane…
If some of the tech titans are to join the aforementioned names above, then perhaps they’re just getting started.
Source: FS Insight, Dimensional
Unwavering demand for gold
Buyers are absorbing overhead supply in gold futures. For the past two weeks, precious metals bulls have chipped away at a multi-year resistance level, coinciding with the 2011 peak at approximately $1,924.
This is a critical level for gold as it marks the peak of the last commodity supercycle. The relentless bid at this key resistance level is impressive, especially considering the waning risk appetite across the space.
Here is an overlay chart of gold futures graphed alongside the silver/gold ratio:
The silver/gold ratio depicts risk appetite for precious metals, as silver represents the higher-beta play and the riskier investment. When the line is rising, investors are reaching for risk, and vice versa.
Seeing gold continue to digest supply while the silver/gold ratio turns lower speaks to meaningful demand for the shiny yellow rock.
If gold refuses to roll over while investors reduce risk, imagine what it could do when risk-on sentiment returns to the market.
Source: All Star Charts
Justin Bieber cashes out
Justin Bieber sold his publishing catalog of songs and artist royalties to Hipgnosis Songs Capital, a fund that’s been on a buying spree of musical property.
The deal, which covered 290 songs released prior to 2022, was for slightly more than $200 million (!!), the largest rights sale of anyone from Bieber’s era of artists. Lots of old-timers have been cashing out on their song rights – Bob Dylan, Bruce Springsteen, Kenny Chesney, Justin Timberlake, to name a few – which tend to be proven quantities in terms of long-term staying power, while buyers have been a bit skittish to buy music from younger musicians because there’s a little more uncertainty regarding how long their music will be in demand.
Bieber, though, has produced on a level that seemed to put investor’s minds at ease, with 26 songs that hit the top 10 of the Billboard Hot 100 as well as eight No. 1 hits.
“The impact of Justin Bieber on global culture over the last 14 years has truly been remarkable,” stated Hipgnosis CEO Merck Mercuriadis.
One simple graphic
Focus on a landing a great business in your analysis. Stock performance will follow – maybe not over the next week or month or even quarterly earnings cycle, but value will be accretive to shareholders over longer time frames.
Source: Brian Feroldi
That’s all for today.
Welcome to The Sandbox Daily, a daily curation of relevant research at the intersection of markets, economics, and lifestyle. We are committed to delivering high-quality and timely content to help investors make sense of capital markets.
Blake Millard is the Director of Investments at Sandbox Financial Partners, a Registered Investment Advisor. All opinions expressed here are solely his opinion and do not express or reflect the opinion of Sandbox Financial Partners. This Substack channel is for informational purposes only and should not be construed as investment advice. Clients of Sandbox Financial Partners may maintain positions in the markets, indexes, corporations, and/or securities discussed within The Sandbox Daily.