(New York)

Goldman Sachs is going on the record warning of “extreme” optimism in markets after stocks’ torrid start to the year. The bank says its cross-asset measure of risk appetite is the highest it has been since 1991 (!). The bank says the risk of losses is higher now, but that in their experience, signals from the macro economy tend to trump signals from risk appetite. Therefore, given that the world’s economy is moving nicely, the market may have more room to run. That said, Goldman is nervous about markets, saying “Risk appetite is now at its highest level on record, which leads to the question of what future returns can be”.

FINSUM: We think this grey-haired bull market still has some juice in it, but our big fear is how hard a recession might hit the markets (given high valuations), not just the economy.

(New York)

While everyone expects that we will have a recession at some point, and likely a significant correction, one of the big questions regards the depth. The Wall Street Journal has something to say about this issue, as the paper is arguing that the next recession is going to be brutal. The reason why is that the government won’t have as much firepower to stimulate the economy in coming years. That is because the newest tax package will send the deficit surging, and there will not be further room to cut once the recession takes hold, eliminating one of the government’s main weapons in combating recessions.

FINSUM: This makes sense to us. Several weeks back we ran an article where an analyst said he loved the tax cuts, but wished they could have been saved for the next recession. We couldn’t agree more.

(New York)

Some analysts are growing increasingly wary of the real estate market as valuations continue to rise higher. Now, more fringe signs that the market might be getting toppy. A new practice is being favored by Wall Street that looks like a sign of froth—so-called “drive-by” valuations. The practice involves local real estate agents driving by properties to do valuations at glance. Much cheaper than traditional appraisals, they were outlawed for use in regular mortgages after the crisis. However, at the institutional buying level, they are still allowed and thriving. The Wall Street Journal sums up the scale and shoddiness of the practice best, saying “Now these perfunctory valuations abound, underpinning tens of billions of dollars of home deals. Sometimes the process is outsourced to India, where companies charge real-estate agents a few dollars to come up with U.S. home values by consulting Google Earth and real-estate websites”.

FINSUM: This is an absolutely terrible idea, and is exactly the kind of pooling practice that leads to dangerous buildups. Foreign companies doing US home valuations with Google Earth? Sounds like a recipe for disaster.

(New York)

While value investing is one of the most famous forms of the discipline, it has been outshined over the last several years by growth and momentum strategies. Subsequently, there has been much less coverage of it. Well, Barron’s has just put out a piece picking what it says are five good value stocks that look inexpensive in this very rich market. The names discussed in the piece include Magellan Midstream Partners, SunTrust Banks, Kansas City Southern, Thor Industries, and Owens Corning.

FINSUM: This piece offers quite a mix of sectors and companies. Definitely some names to check out here.

(San Francisco)

While the press around it has not been nearly as hyped as the iPhone, Apple has finally released its new HomePod. The company’s version of the very popular smart speaker could end up being a major profit source for Apple, if not for the device itself, then because it could facilitate a significant source of service based revenue within Apple’s ecosystem. The device will offer similar functionality to other smart speakers, but apparently will have immensely better sound quality, and will, unsurprisingly, be priced significantly higher than competition, at $349, or more than triple the price of the newest Amazon Echo.

FINSUM: We think this is a very smart area for Apple to get involved in, and frankly, they should have done it sooner. However, being first is often less important than executing perfectly, so if this device is really great, then it won’t matter that it came out late.