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SoftBank’s Masayoshi Son may have become billions richer in one day

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The massive gains on Thursday came after SoftBank Group announced what one investor called an “enormous” stock buyback on Wednesday.

SoftBank Group said it would repurchase 112 million shares worth 600 billion yen (approx $5.46 billion) in the next 11 months, or about 10.3 percent of its total outstanding shares, excluding treasury stock. That came as the company announced a more than 50 percent surge in its net income for the first three quarters of the fiscal year.

SoftBank has been thrust into the spotlight in recent years as a result of its Vision Fund, which has shaken up the global technology landscape. The fund has invested in companies such as WeWork operator The We Company and ride-hailing giants Uber, Didi Chuxing, Grab and Ola.

According to Forbes’ real-time tracker, Son has a net worth of about $21.4 billion.

— Reuters contributed to this report.

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Investors keep buying momentum stocks, betting ‘sure thing’

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Anything perceived as scarce and getting scarcer will see its price rise and eventually become overvalued.

Today — with global economic growth patchy and monetary policy shifting fast — investors see certainty and predictability in short supply and have been bidding up assets viewed as containing these rare attributes in high concentrations.

This helps explain the persistent compression in government-bond yields, attracting and reinforced by massive flows of cash into fixed-income funds. The rush for “stability” also animates the crowding of investors into the elite class of big growth stocks believed to have the most durable profit streams. And it offers a clue as to why assets built to be boring and slow-moving have become some of the highest-momentum winning trades in the markets.

It’s now worth asking whether this tilt toward assets deemed safe or predictable has overshot the mark. Because after all, the world is always uncertain and unpredictable, even when investors are highly confident in how things will turn out (see the January 2018 market peak). A consensus that things are unusually uncertain today can just as easily be a trap as a reliable guide.

It’s become common to point to the $13 trillion or so in negative-yielding bonds in Europe and Japan as both a reflection and a cause of the craze to lock in certain returns elsewhere. Certainly this pool of securities has anchored U.S. Treasury yields below where economic conditions would seem to dictate — and has made the Federal Reserve’s short-term rate target of 2.25-2.5% appear a wild outlier.

The refusal of the 10-year yield to lift much above 2% even as bullish bond sentiment has appeared extreme for weeks is a testament to this. This isn’t truly a bond bubble, despite this term being thrown around. A bubble requires an open-ended “greed” storyline promising massive upside, which the rationale for owning bonds at today’s prices lacks.

But it’s a collective determination that inflation will stay low for years to come, central banks are trapped and growth acceleration is unlikely.

Ned Davis Research looked at prior periods when bond bullishness hit an extreme and a buying frenzy sent yields rushing to an important low. This chart hints that the recent low in the 10-year yield and reversal higher could prove consequential.

In stocks, the “certainty trade” shows up in the high demand for promises of “low-volatility” equity exposure. The most popular ETF packed with the lowest-volatility blue chips in the S&P 500 this year (SPLV) has nicely tracked the similarly popular fund containing the S&P 500 stocks exhibiting the best price momentum (MTUM).

In fact, 30% of the stocks in the SPLV are also in MTUM.

Not unrelated: the gaping premium in returns and valuation enjoyed by big growth stocks — loved for their enduring competitive advantages, high-margin businesses and lack of sensitivity to every economic blip and shudder.

The diverging paths of the Vanguard Mega-Cap Growth and Vanguard Mega-Cap Value ETFs show this pretty clearly.

It’s common to observe that secular-growth stocks do better when broad economic growth is faltering. But there is also an element of simply joining the crowd in the most popular stocks.

Quantitative strategists at Bank of America Merrill Lynch last week said, “Active investors are now ‘buying what’s working’ more aggressively than usual: our 12-month price momentum factor is almost 25% more overvalued on forward earnings than usual. … And hedge funds remain net long high momentum stocks.”

And, on the flip side, “risk or uncertainty factors are close to record historic levels of cheapness. … Companies with a high level of ‘analyst disagreement,’ measured by dispersion among EPS estimates, are trading at a notable 51% discount” to their long-term average.

This chart from J.P. Morgan offers a visual of this behavioral pattern.

Even on a sector basis, this aggressive bid for the supposed “sure thing” and shunning of cyclical and policy risk is on display.

Jared Holz, health-care-stock trading strategist at Jefferies, noted this with a tinge of exasperation late last week: “All that matters is momentum. Like everything else, investors are willing to pay up for growth at any price in the healthcare space, … Investors would rather just hang out in stocks that go up every day though on pure numbers possess less upside than stocks that are (more) out of favor. And that has been a winning strategy so as much as we would like to think that there should be a bit more reversion in the market, it is not happening.”

This manifests in the wide canyon in returns to medical-device stocks — gauged by the IHI ETF here — and health-care providers, the IHF.

All these examples add up to a clear theme but not a clear course of action for investors. Cheap-looking, controversial and highly cyclical stocks have lagged for years and often struggle in the later phases of an economic cycle. Even when value strategies did great, such as in the early 2000s, it began in the crucible of a bear market rather than as a gentle handoff while the S&P was near a record high, as it is now.

There have been signs that the neglected parts of the market might have bottomed on a relative basis, with banks holding firm lately and transportation and auto names improving.

If indeed the Fed cuts rates next week as expected and it’s seen as a preemptive move to sustain the expansion, that could be an excuse for the areas lately seen as “too risky” to work again.

The clearest takeaway might be for investors to resist falling too hard for the promise of “certainty at any price.”

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Facebook user engagement grew through first half of 2019, tools say

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Facebook’s founder and CEO Mark Zuckerberg speaks to participants during the Viva Technologie show at Parc des Expositions Porte de Versailles on May 24, 2018 in Paris, France.

Chesnot | Getty Images

Even though Facebook often finds itself in hot water in Washington and the media, users don’t seem to care.

Despite Facebook’s numerous scandals, privacy lapses and service outages, user engagement has been on an upswing through the first half of 2019, according to the company’s own tools provided to advertisers.

The rise in engagement is good news ahead of the company’s second-quarter earnings report on Wednesday, which comes after tense congressional hearings over the Facebook’s proposal to implement a digital cryptocurrency called Libra.

Specifically, Facebook has seen an increase in the median number of comments, likes and ads clicked by users on the service from January to July, according to Audience Insights, a Facebook tool that is used by advertisers to gather data about specific demographics they can target with ads.

In the U.S., monthly median engagement levels between Jan. 3 and July 18 increased as follows:

  • Posted comments rose from 6 to 8.
  • Posts liked rose from 9 to 13.
  • Ads clicked rose from 13 to 17.

Across the globe, the monthly median increase was similar:

  • Posted comments rose from 4 to 5.
  • Likes rose from 9 to 13.
  • Ads clicked rose went from 8 to 11.

The data is based on a rolling measurement of activity over the previous 30 days.

“Facebook’s data, algorithms and use of machine learning have continued to improve,” said Daniel Newman, principal analyst at Futurum Research, which focuses on digital technology. “This means that users are seeing more and more relevant content, and this of course leads to more engagement on the platform.”

Facebook claims 2.7 billion monthly users across its suite of services, including 1.56 billion daily Facebook users, but the company has seen its user growth begin to slow or stall in key markets, including the U.S. and Europe.

A key growth area for Facebook is the company’s Stories features, which are full-screen photos and videos users can post on Facebook, Instagram, WhatsApp and Messenger. The company in April said its Stories features each have more than 500 million daily users.

“The growth of users has slowed, so keeping the customers it has engaged longer is key to being able to keep the paying customers — the advertisers — engaged, too,” said Kim Forrest, chief investment officer of investment firm Bokeh Capital.

“The company has a way of making even tough situations good when it comes to Wall Street,” Newman said. “I wouldn’t be surprised to see that trend continue.”

WATCH: Here’s how to see which apps have access to your Facebook data — and cut them off

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Release tanker and crew immediately, Britain tells Iran

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In this undated photo issued Friday July 19, 2019, by Stena Bulk, showing the British oil tanker Stena Impero at unknown location, which is believed to have been captured by Iran.

Stena Bulk | AP

Britain called on Iran on Monday to release a British-flagged tanker and its crew immediately, describing the seizure of the Stena Impero in the Strait of Hormuz as illegal.

Iranian Revolutionary Guards rappelled from helicopters and seized the Stena Impero in the Strait of Hormuz on Friday in apparent retaliation for the British capture of an Iranian tanker two weeks earlier.

“The ship was seized under false and illegal pretenses and the Iranians should release it and its crew immediately,” Prime Minister Theresa May’s spokesman told reporters.

“We do not seek confrontation with Iran but it is unacceptable and highly escalatory to seize a ship going about legitimate business through internationally recognized shipping lanes.”

May was chairing a meeting of Britain’s COBR emergency response committee and foreign minister Jeremy Hunt is expected to make a statement to parliament later on Monday to face criticism that British naval vessels should have escorted the ship.

The spokesman said emergency committee meeting was discussing ways of strengthening reassurance and monitoring for commercial shipping.

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