Author: Camila Morocho

Markets New All-Time High

The secret of getting ahead is getting started. The secret of getting started is breaking your complex overwhelming tasks into small manageable tasks, and starting on the first one.”
                                 
– Mark Twain

 

Markets New All-Time High

Contents:

  1. Last Week’s Closing Prices
  2.  Market News
  3. Tickers to Watch
  4. Discord Recap
  5. Earnings Recap
  6. Up-Coming Earnings

 

Last Week’s Closing Prices
April 1st, 2021

Market News

  Boeing Takes Flight 

A few weeks ago, The Wall Street Journal reported that Southwest Airlines was potentially looking to ink a new deal with Airbus, ending a 50-year relationship with Boeing.

Following the grounding of a large portion of their fleet and many partner companies deciding to move away from Boeing altogether, this news was yet another huge hit to the Boeing Company this year. On Monday morning, in what was a massive turn of events, Southwest announced they had signed an impressive deal to receive a whole new fleet of 737 Max 7 airplanes. Southwest has long followed a cost leadership strategy and the fleet-wide move to the smaller 737 Max 7 models is yet another step towards increased efficiency in training, maintenance, and consistent pricing.

This is the largest purchase Boeing has received since November, when U.S. regulators lifted the 20-month flight ban imposed on Boeing aircraft in 2019. The order consisted of 349 MAX  7 firm orders and an additional 270 Max 7 options from 2021 through 2031.

On top of Southwest’s current order, United Airlines announced they would purchase 25 additional 737 MAX jets and Ryanair has agreed to buy 75 new 737 MAX jets.

Stan Deal, Boeing’s CEO who was appointed in 2019 to navigate the company’s way out of the 737 crisis, has surpassed all expectations of how quickly (or if at all) Boeing would return to the forefront of major commercial airline suppliers.

Looking ahead, we predict continued growth for Boeing. With COVID-19 vaccine administration picking up pace, commercial air travel is rapidly approaching pre-pandemic levels. We will continue to see other airlines push for new plane purchases as travel demand continues to grow – especially after many airlines had portions of their fleets grounded and un-serviced for months.

 

Convicted Criminal Swipes Over 10B from Major Bank

The r/wallstreetbets GameStop rally earlier this year showed everyone just how much the holdings of a single, well-financed fund can impact the overall market. Last week, Archegos Capital gave us yet another demonstration of the power that the high-rollers hold over all of our portfolios.
Archegos Capital, a family investment vehicle (aka – a private company that handles investment management for ultra-rich individuals & their heirs) owned and operated by Bill Hwang, single-handedly caused a market-wide liquidation event of around $33 billion.

Here’s what happened:

When a single entity (like Archegos) owns a substantial amount of stock in a single company, the SEC requires that entity to adhere to strict reporting and disclosure guidelines. To avoid these requirements, Hwang chose to buy and sell a type of derivative called Total Return Swaps (or, equity swaps).

Total Return Swaps work like this:
An investment bank agrees to buy X amount of Y stock, upon the condition that the entity will pay a fee to the bank (to cover the cost of owning the shares). The bank then owns the underlying asset and pays out the dividends and capital gains earned from owning the shares back to the entity. The fee paid to the bank is lower when the share prices are high and higher when the share price drops.
The banks that Archegos partnered with in these Total Return Swap deals included major players such as Goldman Sachs, Morgan Stanley, Credit Suisse, UBS and Nomura.

Now, because of the very low disclosure requirements for entities owning the Swaps, the investment banks that partner in these deals are unaware of the other holdings of the firm.
Hwang, through Archegos, was leveraged over $30 billion in Total Return Swap holdings of eight blue chip companies. The fund only had $10 billion under management.

So, when one of the companies in which Archegos held a huge position, ViacomCBS, rapidly began to tank last week – the partner banks began issuing  Margin Calls. And Archegos was unable to pay.
All of these major investment banks now needed to sell off other Swap positions that they held with Archegos to cover the huge losses the banks were taking on as Viacom fell and Hwang faulted on the payments.

The liquidation event resulted in over $33 billion worth of assets being sold off and an estimated $10 billion in losses for the partnered investment banks. All because one man, who plead guilty to insider trading and wire fraud charges back in 2014, chose to risk more than triple what he could lose.

Microsoft Lands Defense Contract for 20 Billion
In yet another government contract win, Microsoft has signed a $21.9B deal with the United States Department of Defense.
Microsoft has been contracted to provide more than 120,000 of their HoloLens augmented reality headsets to the training and mission preparedness units of the US Army.

The announcement resulted in Microsoft’s share price increasing by 1.7% by the end of the trading day this past Wednesday.

This deal comes less than two years after a $10.5B contract between Microsoft and the Pentagon for a new cloud computing software.

What this means for the future of $MSFT…
While tech sector stocks tend to pull back in times of economic downturn, defense companies are usually considered safe long-term investments, even in times of economic uncertainty. So should a market correction or revenue decline occur that would negatively impact Microsoft’s share price, this recent induction into the ranks of defense contractor may act as a solid mitigator of any substantial loss of value.

Discord Recap 
A short week last week with Market’s being closed Friday due to celebrate Easter on Good Friday.

Overall, we did incur some losses but also some wins. 

The S&P500 hit a new all-time high of $4,020.63, indicators are pointing at more upside to come.

Earnings Recap 
Micron Earnings Show a Sector with Tons of Demand
Micron had Q2 revenues of $6.2B, and a net income of $1.1B. The semiconductor industry is booming, demand is climbing, and prices are surging. Data centers, computers, graphics, mobile systems, and the automotive industry are all relying heavily on semiconductors. The current growth of supply for Micron technology is expected to be well below industry demand in 2022. Micron’s Dynamic random access memory (DRAM) semiconductor drives over 70% of their revenue and this industry is growing faster than Micron can keep up. This is a positive sign as demand will remain until one company or the entire industry can increase capacity at a faster rate.  Micron currently allocates its capital in four ways: Share repurchases, Capital Expenditures, Restricted Cash, and liquid cash. We want to see Micron increase its capital expenditure spending to increase its capacity for buyers.
Up-Coming Earnings
April 5th, 2021 – April 9th, 2021
Events & Talks

The Week of The Fed

“I don’t stop when I’m tired, I stop when I’m done. ” -David Goggins

THE WEEK OF THE FED

Friday, March (3/19) Closing Price

TABLE OF CONTENTS
  1. Review of Past Week: News and events 3/15 -3/19
  2. Review of Past Week: Earnings 3/15 – 3/19
  3. Upcoming Week: Talks and events 
  4. Upcoming Week: Earnings from 3/22 – 3/26 
  5. Educational Learning Segment

Discord Logo And the History of the Business | LogoMyWay
DISCORD
www.tigerwolfcapital.com/discord

Jerome Powell Speaks and the Market goes Parabolic

Markets reacted exceptionally well to Jerome Powell’s press release on Wednesday afternoon, with the S&P500 climbing nearly .64%. Some of the highlights from his recap of the FOMC (Federal Open Market Committee).

  • Projecting GDP Growth of 6.4%
  • Unemployment down to 4.5% by the end of the year
  • Inflation is currently below 2% projections
  • Federal Funds Rate to remain at 0 – .25% in the near future
  • Continue purchasing Treasury Securities and Mortgage-Backed Securities
  • Household Spending on goods is strong
  • Household Spending on services is weak

Let’s Break This Down

First and foremost, a GDP projection of 6.4% is an extremely healthy sign of a roaring back economy in 2021. In the last 50 years, the United States has reached a GDP growth rate of over 6% three times. This growth rate would mark an extraordinary bounce-back of the economy within the next 6-10 months. This is primarily due to vaccinations and herd immunity. Additionally, Powell highlighted a lower unemployment rate heading into 2022 as another indicator of a stronger economy. He did highlight that this figure may be slightly lower due to some individuals not participating in the labor market. He made sure to reiterate the position that inflation is well below their 2% projections for this year, and moving forward, we can begin to see it rise due to March and April data from 2020 leaving the picture.

When those two months are out of the data, we will see a “transitory” spike in inflation to around 2.4%. These remarks sent the 10-Year Treasury Yield on Thursday to a new 52-Week high of 1.75%, which subsequently took away all of the market gains from the day before. Most notably, in his speech, Powell remained steadfast on Interest Rates remaining at near 0%. He wants to wait “for actual data and not forecasts” to indicate that Inflation is above their 2% target for an extended period before raising rates. Lastly, Powell noted that supply might be bottlenecked for the next year with production not keeping up with such increased demand.


The Fed Declined to Extend Bank Lower Capital Requirements

One Friday, banks, including Chase, Citi Bank, Wells Fargo, and Goldman Sachs all took a dip after the Fed declined to extend a pandemic-era exemption that allowed them lowered capital requirements.

The brieftly stated that they will allow the exempation to expire on March 31st that has been in place since April of last year.

The decision to relax the capital requirements has been widely viewed as key to calming what had been tumultuous Treasury markets in the early days of the Covid-19 pandemic. A need for cash had caused a massive sell-off in the bond market that the Fed helped to cover through its liquidity programs.

“The Board will take appropriate actions to assure that any changes to the SLR do not erode the overall strength of bank capital requirements,” the Fed said in a statement.

Bank stocks were sharply lower following the announcement, pulling down the broader market, but government bond yields were mixed.


Earnings Recap 3/15 – 2/19

Retail Therapy is Still As Active As Ever

On Friday, Fedex’s trading price increased over 6% after having better than expected earnings. On top of additional spending by consumers, FedEx is one of the leading logistics companies in the effort to deliver Covid-19 Vaccines across the globe. Operating Income increased primarily due to the increase of domestic spending by consumers. With household spending on goods remaining strong in the near future, FedEx will continue to have excellent earnings. FedEx is continually partnering with online retailers to be their logistics provider, and this will continue to increase revenue.

Some takeaways, while FedEx may have astronomical numbers, they are inflated due to Covid-19. Individuals, businesses, and families are all remaining home and using online shopping as a convenient way to get things. We can see FedEx’s earnings slowly normalize in the next few quarters  due to more in-person shopping and normalcy.

UPCOMING WEEK 3/22 – 3/26

EVENTS & TALKS
UPCOMING WEEK’S EARNINGS 3/22 – 3/26
EDUCATIONAL LEARNING SEGMENT
Is Buying the Dip Dead?

Newsletter 11 : Who Gives a Fuck? Stock Market All Time High

“Whether you think you can or think you can’t, you’re right”.–Henry Ford
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Thursday, January 8th Closing Price


TABLE OF CONTENTS

  1. WHERE IS JACK MA?
  2. GA SENATE ELECTION
  3. CAPITOL VIOLENCE
  4. BOEING
  5. BITCOIN
  6. BOEING FATAL CRASH
  7. LAST WEEK’S EARNINGS
  8. UPCOMING EARNINGS
  9. MERCHANDISE
  10. DISCORD RECAP
  11. STOCKS ON OUR RADAR
  12. EDUCATIONAL LEARNING SEGMENT
  13. VIDEO OF THE WEEK
MARKET LAST WEEK (1/4 – 1/8)
MARKET

MONDAY (1/4)

WHERE IS JACK MA?

Jack Ma, the co-founder of Alibaba and China’s third richest individual, has been absent from the public eye for the past couple months. This has started to gain some scrutiny and bring rise to concerns for many. Jack Ma’s failure to make an appearance at a game show for entrepreneurs in November also added cause for speculation. This led to an Alibaba spokeswoman issuing a statement today stating the absence was due to a scheduling conflict. Ma has been in seclusion ever since giving a speech where he publicly criticized and denounced chinese regulators claiming that they have thrown a wet blanket on innovation in the financial sector. It is unclear whether this speculation will lead to any significant impact on the stock value but Alibaba’s Hong-Kong listed shares fell 2.15% by close.

NYSE to continue listing three Chinese telecom giants

Late Monday night, the New York Stock Exchange issued a statement announcing that they no longer plan to delist China Telecom, China Mobile, and China Unicom.They NYSE originally planned to delist these companies to comply with an executive order signed by President Trump due to his concerns that companies and individuals may by investing in firms that aid the Chinese military. After further communication with authorities in the office of Foreign Assets Control to ensure compliance they have changed stance from their New Year’s Eve announcement. This is the first in a number of developments from this news as other major indices ranging from S&P Dow Jones indices to just the trading platform robinhood have taken steps to comply with President Trump’s executive order. Whether the President will take further steps for his executive order to become enforceable has yet to be determined.

TUESDAY (1/5)

GA SENATE ELECTION

GA Senate election opened in what will be a critical election for the next 2 years of policy making. Ossoff and Warnock show a lead in this important election. Having a democratic senate, house of representatives, and President of the United States will allow for massive policy shifts, and agenda’s actually being able to be completed. Joe Biden’s agenda will practically be reversing the last 4 years of the previous administration’s work and a senate majority will make the transition much smoother. A major fiscal change from the pending runoff election will be the possibility of enacting a new tax policy, climate change act, and even another Covid Relief bill.

WEDNESDAY (1/6)

CAPITOL VIOLENCE

In a stunning day for the U.S. several rioters supporting our current sitting President Donald Trump stormed the United States Capitol. This violent upheavel forced congress to pause deliberations they were having on the certification of results from the presidential election. The reaction to this nationwide has been swift and deliberate with several politicians calling for President Trump’s removal through impeachment or invoking the 25th amendment. While some rioters stated they hoped to inspire Republican lawmakers to support the President as the true winner of the election, it appears that the riot has had the opposite effect. A large number of Trump administration officials and staunch advocates of the President have switched stance with some resigning from his administration, chief among them being Secretary of Education Betsy Devos.

We are 14 days away from the Biden presidency. The Georgia runoff results at the moment seem to indicate a democratic win. If this holds this would mean the democrats would control both houses of congress and the executive branch. A high concern many had after Biden won the presidency was a divided congress may fork any of Biden’s efforts they may have not been in favor of. A common example of this is in the amount of stimulus spending Republicans in congress have tended to not be in favor of issuing large amounts of stimulus citing concerns of the nations overall debt. Yet, members of the FED and democrats cite the need for heavy spending now so we can return to economic levels pre-covid. Too little spending in the short-run may keep the national debt down but will likely result in slower growth which would likely mean a longer turnaround time until the nation can fully recover. Control of both houses will enable the Biden presidency to issue as much stimulus as they feel is needed. Biden a few hours ago indicated that a win in the senate would allow him to issue $2,000 stimulus checks the very week he takes off. Inexpensive loans to America’s largest companies may help with payroll but may not be the best way to put more money in the economy and keep the dollar circulating as best as possible. Putting money into the hands of the American people will directly help them in the continuation of the purchasing goods and services. This many economists argue is the best way to accelerate growth and keep the economy alive until we extinguish the pandemic.

In addition, control of both houses of congress should easily acerate a democratic attempt to make cannabis legal nationwide. It is important to note when the Obama-admin had control of both houses they did not put forth an effort for legalization nationwide. So there is no guarantee that this specific issue will be the first on Biden’s to-do list.  But given Biden’s given history of pushing the crime bill, a part of history that is very frowned upon today it is likely he will attempt to rectify this by pushing legalization and decriminalization of cannabis. The crime of possession alone in many states have led to the imprisonment and initialization of many non-violent offenders.

THURSDAY (1/7)
BOEING

Boeing charged with 737 Max Fraud conspiracy and agrees to pay over $2.5 Billion to resolve a criminal charge related to a conspiracy to defraud the Federal Aviation Administration’s Aircraft Evaluation Group in connection with Boeing’s 737 MAX airplane. They were charged with conspiracy to defraud the United States and under the defense protection act, Boeing will pay a total amount above $2.5 Billion. This payment consists of $1.77 Billion to the 737 Max Airline customers, Boeing established a $500 million dollar beneficiaries fund to help compensate all relatives from the 346passengers who passed in the two Boeing crashes. The remaining monetary punishment was derived from a criminal monetary penalty of $243.6 Million. “The misleading statements, half-truths,  and omissions communicated by Boeing employees to the FAA impeded the government’s ability to ensure the safety of the flying public” – U.S. Attorney Erin Nealy Cox. Boeing admitted in court documents that they deceived the FAA AEG about an important part called the Maneuvering Characteristics Augmentation System (MCAS) that impacts the flight control system.

In other news, Europe’s Covid-19 vaccination program is taking a lot longer than citizens expected as tens of thousands are testing positive everyday. The United Kingdom and Germany are leading the pack in terms of vaccinations and even then they are not vaccinating at a fast enough pace. Citizens are demanding that the process begin to speed up and have more portions of the population to become vaccinated. The United Kingdom was prepared for Oxford University’s vaccine to become the leading vaccine and was put in a bad position when Pfizer had received approval. Overall many European countries are facing several logistic, and administrative issues with the implementation of the Covid-19 vaccine. European citizens have some of the highest levels of vaccine skepticism and this has caused some of the miscues across Western Europe.

FRIDAY (1/8)

BITCOIN- WHAT’S TO COME?

Cryptocurrencies have been experiencing significant increase in value as retail and institutional demand has increased steadily. At the forefront of this has been Bitcoin, which hit another all time high at 10 a.m. of $41,970 per coin. Bitcoin is up over 400% YTD against the dollar and this unprecedented runup has led to a surge in interest from previously skeptical investors. Whether or not this growth is sustainable has yet to be seen, although the industry’s biggest players have issued their own respective valuations. Bitcoin’s market cap is now in the range of $778 billion and some analysts have predicted astronomically high bitcoin prices. Hedge fund Morgan Creek Co-Founder Anthony Pompliano has projected for bitcoin to eventually hit $1 million in value. Despite widespread concerns that bitcoin is experiencing a bubble and has no long-term value, analyst Willy Woo has shared his opinion that 30% is the maximum projected pull back for bitcoin. Regardless of where we head next, the world is certainly eagerly awaiting.

SATURDAY (1/9)
BOEING EXPERIENCES ANOTHER FATAL CRASH

On Saturday, an Air Boeing 737 passenger airplane carrying 62 people crashed leaving Jakarta, on it’s way to Borneo. Indonesian authorities have located both black boxes and announced there is little to no hope of finding survivors in this tragic crash. Authorities have stated that there are no clues as to what cause the crash and the similarities it bears to the last fatal crashes. They key differences in this instance are that this aircraft is not a 737 max, the Boeing model that has been since 2019 until this past december for the two fatal crashes they experienced as well. The 737 from Saturday’s crash was also 26 years old and in good condition according to a Sriwijaya Air chief executive. The timing of this couldn’t be worse as just last week Boeing agreed to pay more than $2.5 Billion in criminal fines with the U.S. Department of Justice related to conspiracy to defraud the Federal Aviation Aviation in regards to the two fatal crashes of their 737 max. The implications of this latest news on Boeing’s share price is just the beginning. If it becomes clear that this crash is related to problems with the 737 max we can expect some seriously adverse consequences possibly culminating in Boeing being ordered to ground more planes or more cancelled contracts for the 737 max at a time when Boeing had just began what looked like a successful recovery from their recent woes.

REVIEW OF LAST WEEK’S EARNINGS
1/04 – 01/08

Color-Bed-Bath-and-Beyond-Logo - Optoro

Bed Bath & Beyond (Thursday Pre-Market)

Bed Bath & Beyond, a company that has been forced to reposition itself due to Covid-19. Much like a lot of other retailers they have had to shut down many of their storefronts and lateral their business to online sales.

Comparable sales increased for the second consecutive quarter, led by 5% growth in the core Bed Bath & Beyond banner. Comparable sales benefited from a significantly strong growth in digital channels, including 94% growth in the Bed Bath & Beyond online store and total enterprise growth of 77%. Net sales were $2.6 Billion, a decrease of 5% YoY, due to the significant portfolio transformation and store closing activity. In store sales reported a decline of 17% and an increase of digital sales by 75%. They have decreased SG&A expenses by $41 Million YoY driven primarily by lower payroll, advertising expenses, and related expenses. Net loss per diluted share of $(0.61) includes approximately $86 million from unfavorable impacts including net loss on the sale of businesses.

We will have to continue to monitor quarterly/annual reports moving forward to assess the success of Bed Bath & Beyond’s online business, reduction of debt by lowering lease liabilities, and portfolio optimization.

Walgreens Logos | Walgreens

Walgreens (Thursday Pre-Market)

Walgreens reported earnings pre-market this past Thursday that were better than analysts projection due to them improving operational performance across a number of fronts. While COVID-19 has presented a number of challenges in the retail space Walgreens has maintained their guidance for growth this year for adjusted earnings per share.

Walgreens reported the following:

  • Adjusted EPS was $1.22, a 11.6% lower than prior year on a constant currency basis.

  • COVID-19 AOI impact of approximately $290 million to $325 million (Lower than Q3 and Q4 from before)

  • Free cash flow of $763 million (Up 13% YoY)

  • Sales up 5.7% from Q1

  • Pharmacy sales up 3.9%

Takeaways:

Walgreens is committed to improving efficiency and minimizing risk to operations throughout this pandemic. Their confidence in this is reflected in the guidance they issued for this year, although they have warned that this was made with confidence in the effectiveness of the vaccine. A second round of lockdowns would prove extremely detrimental to their recent efforts and success despite the pandemic.

Thursday

File:Micron Technology logo.svg - Wikimedia Commons

Micron Technology (After Market Close)

Micron Technology, a world leader in memory and storage solutions, reported earnings last Thursday after-market close.  Micron is leading the industry in technological innovation and capability currently and their numbers, despite complications from pandemic, show that.

Micron reported the following:

  • FQ1 revenue was approximately $5.8 billion (representing 12% growth YoY)

  • FQ1 DRAM revenue was $4.1 billion (A 17% increase YoY)

  • FQ1 NAND revenue was approximately $1.6 billion (representing 27% of total revenue)

  • Revenue for networking business unit was approximately $2.5 Billion (A 29% increase YoY)

Takeaways:

Over the last four years, Micron has delivered average gross margins of 40%, EBITDA margins of 50% and return on invested capital of 20%. They just reported a record auto revenue quarter, as well NAND bit demand growth is projected to grow approximately 30%. Their promising outlook on 2021 appears

UPCOMING WEEK 1/11 – 01/15
EARNINGS
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Thursday (Before Market Open)