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Advisors - September 6, 2019

How Ben and Michael use YCharts against Noobwhales

When it comes to finance and investing podcasts, Animal Spirits stands out as one of the most insightful and entertaining shows we listen to. 

Part of what makes the podcast so appealing is how Michael Batnick and Ben Carlson, the show’s co-hosts, poke holes in the claims of investing talking heads and Twitter trolls. Noobwhales, as Ben and Michael call them, say some pretty laughable (and usually false) things on the internet.

Using YCharts, Michael and Ben conduct market research to test Noobwhales’ claims and give their listeners an honest and unbiased perspective of the market, adding their humorous color-commentary along the way. Below we highlight 3 ways the duo conducts research and communicates their findings to their ever-growing audience.

 

1. Analyzing and comparing metrics on individual securities

In March 2019, after a Boeing 737 MAX crashed and an investigation into software used on Boeing (BA) planes was launched, Animal Spirits showed just how significant the incident was for Boeing’s stock. Michael and Ben used the “Percent Off High” feature on YCharts, shown below.

 

In January 2019 Apple Inc (AAPL) and Amazon.com (AMZN) had nearly identical market cap, yet markedly different underlying fundamentals.

Ben Carlson noted that valuing companies in today’s market is exciting but also intriguing because Apple and Amazon “have completely different fundamentals and still come out to the same ending value.” He added, “it’s kind of crazy.” Looking at the chart below, you can see what they mean.

 

2. Investigating macroeconomic trends and developments

The spread between treasury yields, especially the 10-2 spread, has long been regarded as a recession predictor. In the same vein, many say that the fixed income market is smarter than the stock market and that bond yields are a more accurate yardstick for the economy.

The Animal Spirits duo pointed out that short-term interest rates have been, and currently are, being manipulated by the Federal Reserve. They left everyone scratching their heads by saying, “can you really argue that interest rates have been manipulated, but that the bond market is really smart, too?”

In the episode  “Denominator Blindness”, Michael and Ben quoted a headline they had read: “More than 7 million Americans are seriously behind on their car payments”.

The article was clearly written to stir up concern, so Michael Batnick reminded listeners that when it comes to debt, speaking in absolute terms can be misleading. They used the chart below to show that while the number of borrowers has reached a record high, the percentage of delinquencies across student loans, auto loans, mortgages, and credit cards is actually pretty stable, or falling.

 

3. Exporting and analyzing large data sets in Excel

As the Fed strategically raises and cuts the target federal funds rate, the stock market has historically reacted to the news; however, the direction and gravity of that reaction is usually fairly hard to predict.

Using the visual below, Animal Spirits theorized that 25-basis point cuts solicit a materially different response when compared to 50-basis point cuts. Specifically, Michael and Ben proposed that 25 bip cuts are cyclical in nature, and are therefore more welcomed by the market. 50 bip cuts, on the other hand, could be interpreted like pulling a fire alarm — it’s already too late, and the Fed is doing whatever it can to prop up the market.

“Whenever we talk about IPOs, we hear about the big company that won, or the big loss,” Michael said when talking about the recent wave of high-profile companies going public.

But there’s less conversation surrounding the success of IPOs in summation. For the average investor, is an IPO a trap or an opportunity? Looking at all new listings, Animal Spirits used data to illustrate that only 38% of major IPOs over the last 10 years have outperformed the S&P 500.

The visual below highlights that for IPOs, the big winners and big losers are outliers, and most companies’ performance is just below that of the overall market.

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YCharts empowers advisors and investors in various ways such as idea generation, portfolio analytics, and prospect and client communication. When following the market and making investment decisions, you need a tool that provides access to robust and quality data and a means to analyze, understand, and communicate your findings — YCharts is that solution… just ask Ben and Michael.

Noobwhales are infiltrating Twitter at an alarming rate, do your part to protect #FinTwit from this invasive species: Start Your Free Trial of YCharts.

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