Archive
Hot Tips
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July 30, 2020
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Historical U.S. GDP Drop of 32.9%.
The ugly numbers from April to June GDP on an annualized basis shows how deep a hole the U.S. finds itself. The first wave of the virus was one thing, but re-opening too soon has stunted the recovery. The weakness was broad-based with personal consumption, exports, inventories, investment, and spending by state and local governments down big. The administration’s strategy of the virus magically disappearing has to be one of the most questionable government responses out there. Analysts calling for a “V-shaped recovery” were dead wrong as the country still awaits an actual federal strategy to combat the virus that has killed more than 150,000 Americans.
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U.S. President Donald Trump Front-Running Election Results.
In a way to get ahead of the narrative before the election results, U.S. President Donald Trump has suggested delaying the November election where poll numbers indicate he has no chance. His reason this time is to fight against mail-in voter fraud and this was after he told Fox News reporter Chris Wallace that he most likely will not accept the results of the November election. This sets up another circus-like atmosphere as we head into the last 90 days before the election. You can’t make this stuff up.
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Unemployment Still At Painful Levels.
1.434 million Americans filed for unemployment last week, the 19th straight week that claims have been above 1 million. The depth of pain American workers are experiencing shows no sign of slowing down. No doubt that the premature reopening and subsequent reclosing of the economy have not helped the American worker. Americans also wait day to day as government haggles over another stimulus bill. It’s cringeworthy times for the average U.S. worker, to say the least.
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Resilient Huawei Soldiers On.
Chinese tech company has surged past Korea’s Samsung to claim the title as the highest-selling smartphone maker in the world on the back of higher Chinese sales. Overseas sales have stalled because of the inability to use Google’s software being a meaningful deterrent to overseas sales. Huawei sold 55.8 million devices representing a 5% drop. Analysts have questioned whether this lead is sustainable as a lack of overseas sales will eventually bite.
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German Economy Craters By 10.1%.
German exports and imports of goods and services went into free fall in the second quarter, as did household spending and investment in equipment. The EU has been devastated along with most of the world’s economy. Germany hopes its stimulus package of over $153 billion, including a temporary VAT cut to boost domestic demand will help turn around the ship. Generous unemployment benefits are keeping a cap on the unemployment rate at 6.4%. German’s superior social benefits are shining through when it counts when compared to America’s lack of safety net.
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July 29, 2020
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Kodak Pivots From Photos To Drugs.
Eastman Kodak reinvents itself from a photo company to producing ingredients in drug components. Shares spiked 200% and had to be halted because of the volatile activity. The company was able to snag a $765 million loan from the U.S. government to start producing drug ingredients under the Defense Production Act.
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Germany Hints At Vaccine Delay To Mid-2021.
The German Government has gotten in on the vaccine game awarding German biotech firms BioNtech (BNTX.O), CureVac, and IDT Biologika 750 million euros worth of grants to develop a vaccine for the German public. However, Research Minister Anja Karliczek poured cold water on the vaccine potentially being ready by the end of 2020 claiming that a “miracle” shouldn’t be expected. A meaningful vaccine a year off means living with the horrendous virus for another year increasing the chance of a third wave next summer.
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Another Disastrous Quarter From Boeing,
American airplane manufacturer Boeing announces a $2.4 billion loss last quarter with a $5 billion write-down on their cursed 737 Max program. Short-term forecasts are grim with management citing the disappearance of consumer flying demand as the reason for halting plane manufacturing. The commercial aircraft division revenue dropped by 65% with no new orders coming in. Boeing also sounded the alarm on imminent job cuts after already slashing 10% of the 160,000 earlier this year. Their plight is the sign of the times in the American economy in 2020, thanks to the coronavirus.
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12,000 U.S. Troops In Germany Slated For Removal,
U.S. President Donald Trump is following through on his strategy of removing U.S. troops from Germany because the Germans are not living up to the financial responsibility of footing their defense bill via NATO. Half of the 12,000 will be moved elsewhere in Europe to counter the perceived Russian threat. The troop removal heaps more pressure on the strained cross-Atlantic Germany relationship.
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TikTok on the Chopping Block,
U.S. Treasury Secretary Steve Mnuchin revealed that social media app TikTok is under federal government review and a recommendation will be made to U.S. President Donald Trump on it. TikTok is the most popular app for adolescents in America and is Chinese-owned. They have admitted lapses in data security routing American traffic back to servers in China. They have also censored video content unfavorable to the Chinese communist party and have been banned in India for national security reasons. There is a high chance they could become banned in the U.S. too which would be a massive loss for the Chinese tech company. However, there should be zero gripes about it since Facebook, Google, Netflix, and Amazon are currently blocked in China.
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July 28, 2020
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Fed Keeps the Pedal to the Metal.
The U.S. Central Bank has announced it will continue its generous lending program until the end of 2020. This means they will keep buying junk bonds and disburse credit to small businesses. The Fed is the ultimate x-factor in the myriad of reasons propping up the broader market. Whatever avalanche of ghastly news is pelted at the bullish narrative, Fed Governor Jerome Powell has almost always counter-acted with a show of force. Soul-searching investors ask themselves why they can’t short the market, and news like this is reason why.
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Home Prices Grind Higher.
Year-over-year gains of 3.1% is a slight slowdown from the prior month that saw buyers run for cover and upgrade in square footage to accommodate new home offices. The sharpest gains were found in regional markets of Phoenix, Seattle, and Tampa while Chicago, New York, and San Francisco recorded the smallest gains. The broader trend of Millennials fleeing the megacities for the smaller regional cities has legs and has been diligently chronicled by the Mad Hedge Technology Letter as tech firms become more comfortable with remote workers.
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McDonald’s Sales Tank,
an important American bellwether stock indicated the ugly plight of the U.S. consumer. Sales were down 30% year-over-year and the Cheeseburger company indicated it will close 200 stores nationwide by the end of 2020. Ironically, McDonald’s is outperforming the restaurant industry with its digital-first strategy and investments in its drive-through technology. This fast-food chain will be one of the last restaurants standing after the pandemic is over.
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Harley Davidson on a Slow Path to Nowhere,
U.S. sales of the famous motorcycle company tanked 27% and the company has announced it will cut 700 positions. The post-pandemic economy is looking increasingly like it has no room for Harley Davidson as they scratch their heads hoping to find the solution to attract a younger customer base. You can’t sell products to dead people and the company will have to go back to the drawing board before their products become obsolete.
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U.S. Dollar Nosedive Fuels Gold and Global Stocks.
The U.S. dollar is down 9% from the March lockdown and is triggering a risk-on move into gold and tech stocks. This is great for commodity prices, global sentiment, and bad for chronic exporters like South Korea and Europe. The weakness stems from investors’ pricing in even worse news from the coronavirus wreaking havoc in the U.S.
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July 27, 2020
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Moderna Pushing for a Vaccine
The healthcare company is pushing into late-stage trials funded by the U.S. government who gave the company $1 billion to pursue a vaccine. The late-stage trials will include 30,000 Americans and the stock was up 8% in the last trading session. The goal is to distribute the vaccine to Americans by the end of 2020, but that seems highly unlikely and will only happen if everything falls the right way for Moderna. Moderna hopes to distribute over 1 billion doses of vaccine per year.
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Gold Trading Close to $2,000 Per Ounce.
Spot gold hit $1,941 on its way to $2,000 as geopolitical jousting elevates the yellow metal. The tit for tat consulate closures in Chengdu, China and Houston, Texas is pressuring the U.S. – China relationship to the brink. What is the next move in the endless game of cat and mouse? Combined with interest rates at record lows, gold has more room to run.
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U.S. Supermarket Albertsons Reports 26.5% Rise in Sales.
Proof that Americans are staying home and barbecuing in the backyard is here as Albertsons has benefited from Americans doing more home cooking. People are afraid to go outside as record Covid cases are set each day. Supermarkets have pivoted to an online strategy with grocery deliveries being the most popular. Other supermarkets such as Safeway and Vons are reporting the same explosive growth as Albertsons.
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GOP Coronavirus Relief Plan is in the Works,
U.S. Treasury Secretary Steven Mnuchin and Republicans are coming close to a $1 trillion relief bills that mean more debt for future Americans. The $600 unemployment stipend ended this past weekend and Americans are waiting on a dysfunctional government to push through to an agreement. The bill is widely expected to have another round of $1,200 checks among other goodies. Americans ponder how to put food on the table as the Nasdaq markets remain at all-time highs.
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Irish Air Carrier Ryanair Slashes Outlook,
Low-cost carrier (LCC) Ryanair cut its capacity by 99% during the 3 months lockdown in Europe. Shares were down 8% as the CEO Michael O’Leary warned of a fall second wave that could stifle an airline recovery. Annual guidance of 60 million passengers is down from 150 million passengers flown in 2019. International borders are still not even close to fully functioning and airlines will suffer more pain until there is a vaccine.
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July 24, 2020
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Weekly Jobless Rise to 1.4 Million,
the first increase since March. It gives credence to my double-dip “W” scenario for the economy, with unemployment about to soar and mass evictions to explode. The airlines have already lost 400,000. Yesterday was the first time in ages the stock market noticed that prices can fall. Put on your hard hat. This down cycle could be worse than the last and the government is running out of money to plug the dyke.
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Warren Buffet Bought $800 Million Worth of Bank of America,
taking his total position up to near 10%. I am buying banks on dips too. The yield curve is about to steepen sharply, and they are massive beneficiaries of government subsidies through all the stimulus loans. Buy banks on dips.
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Intel Gets Crushed,
with the shares down 20%, as the pandemic forces product delays. Margins are down 53.3%, the worst since 2009. Another legacy tech bites the dust.
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Disney Delays Star Wars,
and Mulan is put off as well. (DIS) takes a dump. How many have died since Disneyland in Orlando reopened? This is going to be a really boring Christmas.
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Airlines are Flying Planes Empty to Keep Pilots Current,
and to keep the engines from rusting out. With flights down 78% from the peak, it is their only option. It would be cheaper to do it in a Cessna 172. Haven’t they heard of simulators?
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