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)

BlackRock, Inc. - Home

BlackRock

BlackRock an investment firm who manages an ever changing portfolio, have made their way through Covid and are operating at a significant profit. They are reporting quarterly/annual revenues and  are expected to be extremely profitable. Quarterly estimates are expected to have an EPS of $9.09 and revenue of $4.27B, while annual EPS is $32.68 and revenue is expected to be $15.98B. For an asset management firm to have such strong estimates is an extremely healthy sign.

Thursday (Before Market Open)