• We find this big rally in China stocks to a two-year high (up 14% the past month) surprising, bizarre, ironic, but also (hopefully) telling for the US markets.
  • The rally is attributed to a combination of moves by the Chinese government to limit the spread of the disease and the resulting decline in new cases outside of the epicenter Hubei, and monetary and fiscal support of the markets, consumers etc.
  • Its unclear if this big move up has become a bubble as traders globally are using the Chinese exchanges as a hedge against performance of the world's other exchanges, further driven up by the individual Chinese investors.
  • Article with good sound advise ... if you think about it, "buying the dip" really is market timing, which is generally not recommended for individual investors.
  • What becomes even more important in an extreme volatility market where no one really knows how the market is going to play out, is making sure your portfolio is properly diversified/allocated.
  • And obviously, unless you can't sleep at night because of your stock exposure (e.g. risk tolerance), panic selling has proven over time to almost always been the wrong decision.
  • Having said this the article rightfully points out, that if investors do have adequate cash balances, after a major market adjustment, it can be strategic to thoughtfully put money into high quality stocks (our comment).
  • Finally (from us), on the earnings side and this impacts views of stock valuations, there is going to clearly be on-going earnings reductions, I think we are all looking for the point when we can look across these earnings downdrafts, to seeing the decline in the virus and a path to normalized and reliable earnings growth.
  • Results of an important finding by the CDC regarding how patients contracted the coronavirus.  The CDC looked at 445 family members and others who came in close contact with first ten people who contracted the virus in the US.
  • Albeit, it's a small sample set, they found that the virus was mostly spread among family members, with less risk of spreading to other people from outside their household while they came into contact while sick.
  • This suggests that effective prevention control and prevention methods could dramatically reduce the risk of contracting the virus.
  • According to the World Health Organization, the virus is transmitted via droplets that require close, unprotected contact between people.
  • Hopefully some good news.
  • After the 10 year hit an all time low yesterday (currently at 1.135%), the article points out that rightfully investors are getting concerned with a bubble like movement (our term) into fixed income as coronovirus pushes investors into low risk investments.
  • This quote from the article shares our view: “If things go a little better -- if there is a cure in the next two, three months or if with warmer weather the virus fades -- then long-end rates will sell off,” said Alberto Gallo at Algebris Investments. “Duration is expensive to protect the portfolio.”
  • This market movement is on the back of the Fed and G7 countries that say they are ready to lower short-term rates to support the global economies. In the US, futures are pricing in that the Fed will cut rates 100 basis points this year.
  • The positive side of this situation unlike some in the past going back 30 years, is there is clearly not a liquidity problem in the markets, meaning as quickly as funds can flow into treasuries, they can flow back out into equities, etc.

Square Keeps Rolling Along

  • After selling its food delivery business and reinvesting in its core payments business, there was pressure on the company to show growth, especially given the stock's lofty valuation.
  • The company put up a strong quarter last night generating payment volume growth of 25% at higher margins, in spite of raising prices last fall.
  • The company clearly did a good job managing churn from the price increase.
  • A next leg of future growth revolves around its person-to-person money transfer service called Cash App.
  • Stock is up 4.4% today in an awful market.  Expect a slew of positive analyst reports.
  • As this seems to be coming a more material factor in the market every week Sanders wins a primary or caucus, the article points out that "Wall Street" still doesn't believe he can beat Trump and he hasn't faced a major push back in his campaign from the financial services industry, as Warren did (who was considered more electable).
  • In fact just the opposite, the more likely a Sanders nomination becomes, the more likely Trump gets re-elected, and the better for stocks.
  • As Jim Bianco said in the article, “He’s the devil we know,” says Bianco, explaining this mindset. “He’s been in there for three years, and everything’s been OK.”
  • Although, there are analysts who believe that the market is underestimating the chances of a Sanders victory in the general election.
  • And, given the accuracy of polls three years ago, frankly who knows.
 
  • The company is apparently looking at a range of options including asset sales and mergers.
  • JP Morgan analyst is chiming in that the company's only viable option is to sell to an unrelated tech company or an asset sale, noting that a deal with Erickson is "completely unlikely", and slightly more possible, a deal with Samsung, especially given that regulators want more cell phone manufactures in the West, not less.
  • A US company would be preferable, although unclear which company would be interested (he say not Apple or Cisco).
  • Cook comments are out of the Apple annual meeting today where he called the coronavirus a "challenge", this is after the company lowered revenue guidance earlier this month citing supply chain issues in China and lost retail sales in China. Although stores and factories are beginning to re-open.
  •  He also commented at the meeting that the wearables (Apple Watch, AirPods) business is going to be big, reaching $40 billion in annual sales.
  • With a hint of future products, new IPhones that are 5G capable and a virtual reality headset as early as 2021, according to Bloomberg.
  • Interesting company (FTI Consulting: FCN) highlighted by Bloomberg.  Company has been around for almost 30 years starting out in the legal area helping attorneys find expert witnesses and assisted in court room presentations.
  • Largely through acquisition, it expanded into restructuring, bankruptcy, accounting, risk advisory and public relations. Along the way the stock has tripled the past two years.
  • This is the company that traced the hack on the Amazon.com founder’s phone to a WhatsApp message allegedly sent from the account of Saudi Arabia’s crown prince, Mohammed bin Salman.
  • It seems the rapidly growing need for digital forensics, along with landing high profile clients, bodes well going forward.  Analysts concur and emphasize the need for the company to illustrate strong organic growth to justify the stock's valuation.
  • Company will report 4Q results next week with expectations of 40% growth in 2019.
  • We think this is a great idea... sort of a Marshal Plan for Central America.  We've heard others suggest the idea, but good to see it actually may happen.
  • Seems like part of the right approach to fixing the immigration issue where everyone wins.
  • Let's just hope the execution matches the idea and the aid is efficiently and effectively placed where it can have the greatest impact.