3 charts for you today:
Every week it feels like we get a new headline about financial markets doing something unusual. Just this week we've had:
All of which begs the question: are we in a bubble?
Irrational exuberance
Answering that question is a bit like answering how long is a piece of string. Just limiting the question to US stock markets helps to narrow the focus, as does getting some help from Nobel laureate Robert Shiller.
Shiller is the creator of the Cyclically-Adjusted Price-to-Earnings Ratio (CAPE).
A simple price-to-earnings ratio compares how much one share costs with how much it earns. A share that costs $100, and earns $5 a year, has a P/E of 20x. It's a rough but simple way to compare valuations between different companies, or history.
Shiller took that simple metric and... made it more complicated (but also probably better). Instead of just looking at one year of earnings, Shiller compares the price with the average from the last 10 years (adjusted for inflation). Doing that helps to smooth things out, as any company can have one good or bad year.
Lucky for us, Shiller has been calculating this CAPE ratio for the US stock market as a whole, for decades and decades.
So where are we now?
The latest CAPE ratio for the S&P 500 Index is 38x. That's pretty close to the all-time record, which was 44x back in 2000. For those with a short memory, that was just before the dotcom bubble burst and markets (particularly tech) crashed hard.
It's the big one this week.
World leaders have gathered in Glasgow for COP26, the two-week long United Nations conference on climate change, and they didn't waste any time announcing some big goals.
Most notable of those is a promise to end deforestation by 2030, which has been signed by more than 100 world leaders, including - crucially - Brazil, which is home to the Amazon rainforest, one of the largest carbon sinks on the planet. Getting Brazil on board, even at this early stage, is vital as deforestation has picked up again in the Amazon in the last few years, hitting a 12-year high last year.
A little less conversation, a little more action
All told the countries that have signed account for roughly 85% of the world's forests, suggesting good global support, although cynics will point to the last agreement from 2014, that failed to do much of anything. Hopefully this time there is more action.
For more great data on climate change and what is at stake at COP26, we recommend checking out the 11 charts from DW and the very cool "draw your own chart" from the FT, which tests how well you know some of the data behind climate change.
Ferrari is back in pole position.
This week the Maranello-based company announced that they had shipped 2,750 lucky people a Ferrari in their most recent quarter, up 19% on shipments from this time last year.
Stop start
For now it's business as usual for Ferrari, but that might not always be the case. Like all carmakers, they need to carefully navigate their way towards electric vehicles. Not many people buy a Ferrari without some intention to rev the traditional combustion engine to its ear-shattering potential. That is presumably not as compelling when the electric motor is almost silent.
Being one of the most iconic luxury car brands in the world does afford Ferrari some extra time on the transition to electric. Its financials also don't look like many other carmakers. Ford for example, usually makes somewhere around a 5% operating profit margin (in a solid year). Ferrari's was 26% last quarter.
That gives Ferrari a lot more time (and money) to make the transition to electric, and the Italian company is taking every spare minute. Earlier this year the company announced that its first all-electric car will be unveiled... in 2025. That's a few years away, but the pressure will be on to deliver something high-quality.
1) What's in a name? For a small startup called Meta PC, it could be a fortune. After Facebook's Meta rebrand, a small Arizona-based computer retailer with a pending trademark application for all things "Meta" might be in for a windfall.
2) Zillow is officially pulling the plug on its iBuying business, just a few days after announcing it had thousands of homes left to sell on its books — sending the company's share price down 20%. Zillow will also shed a quarter of its workforce.
3) Great dataviz from The Economist, calculating the true global death toll of the pandemic — which they estimate is closer to 17 million globally — way ahead of the ~5 million official count.
4) Over 2,000 businesses around the world rely on Sisense for game-changing business insights. Find out why they trust Sisense to go beyond business intelligence to infuse analytics everywhere.**
5) Netflix is rolling out its first set of games on the Netflix app, as it goes after the ~$100bn global mobile games market.
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