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Archive for the ‘FANG’ Category

Structured Notes Linked to FANG and Technology Are in Deep Trouble

Main street investors who have purchased FANG or other technology related structured notes face a stark reality check.

With banks selling $2 billion of structured products linked to one or more of the now-struggling FANG members this year alone, investors are getting schooled on the risks lurking in complex debt securities — even those laden with protective buffers.

They’ve already missed out on coupon payments and unless this month’s $2 trillion U.S. equity rout reverses course, investors face haircuts and more lost income.

The hardest hit are structured securities tied to Nvidia Corp., with $221 million linked to the chipmaker sold globally this year alone. The timing couldn’t be worse: the stock is worth about half as much as it was at the start of last month after disappointing forecasts.  Nvidia’s trading below the threshold required to receive the touted 11 percent return per year.

Citigroup sold $7.34 million of structured notes tied to Netflix in June when the shares were rocketing toward an all-time high. The six-month securities pay an annualized coupon of 13.75 percent as long as the streaming service remains above $308.32.

With the stock trading below the $308.32 price investors would have received no coupon this month and risk losing at least a quarter of their principal when the notes mature on Dec. 28 — unless Netflix stages a rally to the tune of 20 percent.

Holders of notes issued by Goldman Sachs Group Inc. that are linked to Facebook Inc., Amazon.com Inc. and Netflix also stand to forgo coupons unless there’s a robust equity rebound by January.

All the same, the missed payments highlight how the tech blow-out is reverberating beyond the equity market, with a rising count of potential victims.

Investors Selling FANG Stocks As Technology Losses Grow

On November 20, 2018, an article in the New York Times (“The Tech Stock Fall Lost These 5 Companies $800 Billion in Market Value”) noted that “Wall Street’s turn against big tech is adding up” and that “as investors have dumped shares of Facebook, Amazon, Apple, Netflix, and Google-parent Alphabet, $822 billion in value has been wiped off their combined market value since the end of August.”

This article further noted that “based on the losses from each company’s high point in recent months, more than $1 trillion in value has been erased. Facebook, Apple and Amazon have endured the greatest declines, all down $250 billion or more from their respective peaks.”

In fact, “by the end of August, the market value of Apple and Amazon had each surpassed $1 trillion, and Alphabet was flirting with $900 billion. The combined market value of the five had reached $3.6 trillion.”

Clearly, “worries about global economic growth as well as lackluster earnings and outlooks the past two quarters have shaken investors’ confidence” in these stocks and “has investors questioning whether the values of these big tech companies have become too lofty.”

“Of course, Facebook, Amazon, Apple, Netflix, and Alphabet have faced steep sell-offs before, only to bounce back quickly. Just this year, the combined market value of those five companies has tumbled 7 percent or more during three separate periods. In each instance, the stocks resumed their march to fresh highs within weeks.”

Whether this time will be different – especially for those investors who have purchased these stocks on margin or have purchased other securities that are tied to the performance of these technology shares – is clearly the question of the day.

If you are an individual or institutional investor who has any concerns about your technology investments or margin account with any brokerage firm, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing an individual securities arbitration claim with the Financial Industry Regulatory Authority (FINRA).

FANG leads the markets lower, nearly $1 Trillion in FANG market cap lost

Stocks veered into deep early losses Tuesday, as leading tech stocks plummeted and the Dow Jones industrial average cut deep below the 25,000 mark.

The Dow Jones industrial average undercut its 50-day line of support on Monday, ending the session flush at the 25,000 mark. A slip below that mark would leave the index ready for another, lower test, at the level of its Oct. 29 low. The Nasdaq ended the session 1.5% above its Oct. 29 low. The S&P 500 was in somewhat stronger position, holding 1.8% off its October low. The S&P 500 is 4% below its 50-day moving average. The Nasdaq was 8% below that line of support, and 13.5% off its August peak.

Apple stock opened down 3.5%. As of Tuesday, Apple constituted a bit more than 5% of the weight of the Dow Jones industrial average, placing it at sixth on the list. It ranks first among weightings on the Nasdaq 100 list, at slightly more than 11% of the index. Apple shares are now nearing a free-fall, working on their eighth straight down week, well below their 40-week moving average and down more than 20% from a Oct. 3 high. The last time Apple shares fell more than 20% was in April-May of 2016.

Among so-called FANG stocks, Netflix and Amazon.com led the retreat, down 3.4% and 2.7%, respectively.

FANG Leads the Markets Lower, $2 Trillion Lost by Stock Markets In October

October ended as one of the worst months since the 2008 financial crisis.  The S&P 500 lost $1.91 trillion in October. Losses were spread widely across industry sectors. October was the worst month for the S&P 500 since September 2011.

Federal Reserve Chairman Jerome Powell said the central bank is “a long way” from neutral interest rates. Powell said the Fed does not need the policies put in place that pulled the economy out of the last financial crisis. He declared that “we don’t need” the “really extremely accommodative low interest rates” the central bank put in place a decade ago. The Fed is likely to raise the federal funds rate to 3.4 percent before pausing, according to the most recent projections.

Big technology stocks — most well-known as FANG —FacebookAmazonNetflix and Google parent Alphabet — were among the hardest hit. Amazon ended the month down 20.2 percent, and Netflix ended down 19.3 percent. Investors fled both after earnings reports. Facebook and Alphabet finished October down 7.7 percent and 9.7 percent, respectively.

FANG has lost $300 billion in market value since mid-September this year.  The Dow Jones Industrial Average closed down 13 days in October.

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