It’s Different This Time
It’s the mantra of the hopeful and the rally cry of bullish investors whenever the market takes a turn for the worse. As I scanned headlines in the financial media this morning, the simple truth of these words struck me.
Take this morning’s original MarketWatch headline for example: “Stocks rise for third session on easing of coronavirus lockdowns as earnings season hits stride.”
In typical MarketWatch fashion, the headline for this article shifted from “Dow rises 300 points” to “Dow rises 200 points” etcetera, ad nauseam for every 50 points the Dow jittered.
Tucked underneath that headline was one that read: “Nouriel Roubini on the coming Greater Depression of the 2020s.”
I’m picking on MarketWatch here, but this same pattern repeated itself across Bloomberg, CNBC, Yahoo Finance and every other major financial publication. It’s a pattern of acceptance, normalization and —most dangerous of all — hope.
Right now, Wall Street has hope that everything will quickly return to normal.
It has hope that the curve is flattening, even as we approach 1 million COVID-19 cases and 56,000 deaths in the U.S. It has hope that a cure and a vaccine will be found in short order. It has hope that the Federal Reserve’s great cash injection will keep the economy afloat. (Scratch that — it will keep stocks afloat.)
That hope is even prevalent among consumers. Today, the March consumer confidence index plunged to its lowest level since 2014. However, another index that gauges future expectations rose in March.
So, while nearly every economic indicator points toward a catastrophe on the scale of the Great Depression … while corporations continue to yank 2020 full-year guidance … while a vaccine and/or cure for COVID-19 is still months away … the market is on a three-day, hope-inspired winning streak.
It really is different this time.
Today’s situation brought two sayings to mind.
The first comes from my dad, who would always say: “Hope in one hand and crap in the other. See which one fills up first.”
He always had a way with words. You can see where I get my snarky attitude, honestly.
The second is a well-known market axiom: “Don’t fight the Fed.”
Given that the market continues to rally despite overwhelming economic odds, I think we have a clear winner between the two. Sorry, dad.
I still believe that a reckoning is coming for the market. But Fed-backed hope continues to push back the day of that reckoning. (Unlimited stimulus for the win!)
For example, if any company had unceremoniously yanked its full-year guidance just a year ago, its stock would’ve been red for days — weeks, even. Now? Because the Fed is on the case, there’s hope that guidance and profits will soon return … like the salmon returning to Capistrano.
In fact, I think there are now three classic blunders:
- Never get in a land war in Asia.
- Never go in against a Sicilian when death is on the line.
- Never bet against the Fed.
Keep in mind that the last one is still being tested. I’m not willing to completely capitulate yet. I’m convinced you still need more than hope and Fed cash to foment a market recovery.
But enough about the Fed … let’s talk about you!
How are you feeling? What’s bouncing around in that brilliant mind of yours? (Seriously, tell us! We want to know: GreatStuffToday@banyanhill.com.)
What do you need to thrive in this market?
Well … more than hope and clever words, that’s for certain. (Though some of that Fed cash wouldn’t hurt.)
Maybe what you need is a new approach to investing.
After all, “buy and hold” is dead. It leaves your portfolio swinging in the breeze — especially during earnings season. But what does that leave you with? Timing the market? Not in this hope-y Fed-y mess.
But Banyan Hill’s own Chad Shoop has the answer, and he’s coming in stacked … Profit Stacked, that is. Chad’s “Profit Stacking” strategy shows you how to zero in on hidden market sectors that are primed to move. In the best-case scenario, all you’d have to do is get in, grab your profits and leave.
It’s how Chad was able to show his readers a 49.33% gain in 13 days, a 94.18% gain in six days and a 53% gain in as little as two days. And that’s without day trading or using options. Once you hear Chad explain how Profit Stacking works, you may never un-stack again. (Nice stack, man!)
The Good: MMM, Good!
3M Co. (NYSE: MMM) reported stronger-than-expected first-quarter earnings. You’ll hear that “stronger-than-expected” line a lot this week. The Dow component beat the consensus earnings estimate by $0.13 per share and topped revenue expectations.
However, you’ll hear “pulls 2020 guidance” quite a bit this week. 3M isn’t the first to yank guidance, nor will it be the last. However, the company slashed its capital-spending plans and suspended its share buyback plans — all to preserve its dividend.
3M: putting investors first.
Well, that’s not completely fair. The company is churning out N95 masks as fast as it can. It’s a balancing act, really, and one that’s playing well with 3M investors. MMM shot up roughly 4% on the open, before settling on a gain of about 2% for the day.
The Bad: Pfoor Pfizer
So, we saw that investors will overlook quite a bit right now: pulling forecasts, missing earnings expectations … even lowered earnings expectations and price crashes in the product (I’m looking at you, oil companies).
But Dow pharmaceutical giant Pfizer Inc. (NYSE: PFE) stumbled upon one thing that investors won’t overlook: generic competition.
Pfizer reported stronger-than-expected first-quarter earnings and revenue (even though both figures fell year over year) and reiterated its full-year 2020 financial guidance. That last fact alone should’ve guaranteed a rally for PFE stock. Pfizer is in rarified air there.
However, the company said that it faced “two expected headwinds this quarter — generic competition for Lyrica in the U.S. and the nationwide expansion of the VBP program in China.”
Lyrica is a multibillion-dollar drug for Pfizer, so that one stings quite a bit. The Volume-Based Procurement (VBP) Program is China’s answer to high drug costs in the country. That one, too, could be painful for Pfizer’s overseas sales.
So, despite an otherwise stellar quarterly report, PFE shares fell roughly 1.5% today. If you own Pfizer, you probably shouldn’t be bothered too much for now, but keep an eye on the Lyrica and China situations going forward.
(Looking for a better way to break into biotech investing? You won’t want to miss what Jeff Yastine found… Click here ASAP.)
The Ugly: One Ugly Butterfly
When is a bellwether not a bellwether?
Seriously, I’d like to know.
U.S. economic bellwether Caterpillar Inc. (NYSE: CAT) just released one of the worst quarterly financial reports of the season.
Earnings plunged 46% to miss Wall Street’s targets. Revenue fell 21% to a three-year low, also missing consensus estimates. The company even pulled its 2020 guidance, though we’ve known that since March 26.
It could’ve been worse, I guess. The company did reaffirm its quarterly dividend, which it has paid every quarter since 1933. So, Caterpillar has that going for it, which is nice.
The thing about Caterpillar’s results that stands out the most is that, in practically every other earnings season, the financial media boasts the company’s results as a crucial indicator for the U.S. economy’s direction — and thereby the market’s direction as a whole.
The financial media’s silence on Caterpillar’s “economic bellwether” status today is deafening. Make of that what you will.
— Bill Bostock for Business Insider
No, this isn’t from Karl Pilkington’s “Monkey News” … just your routine biotech race update.
Today’s Quote of the Week comes from the front line of the COVID-19 fight. Well, one of the many front lines, so to speak. Great Stuff has reported on the great biotech bonanza for a few weeks now … with everyone and their mother coming up with a vaccine, test or treatment.
As it stands, the most promising signs of vaccine progress comes from none other than the University of Oxford, which predates the Aztec empire, by the way … just a bit of Tuesday trivia for you.
With a testable vaccine at the ready — I, for one, am glad that someone sprang into action and prepared our brave primate testing crew. (The monkeys was doing a crazy dance … they put buggies in my underpants!)
Thinking back to my dad’s quote, the Montana monkey trials (as I plan on calling them) gives us some hope to start filling one hand … the monkeys could probably help you with the other.
Meanwhile, while researchers review rhesus results, what if I told you that you might already have the next COVID-19 treatment in your medicine cabinet? That’s right … some New York hospitals are reaching for the Pepcid … but it’s not Hot Pocket heartburn they’re testing it for.
You may still have the virus, but my oh my would you be gasless and acid reflux free. At least it’s better than pouring back a jug of disinfectant…
Great Stuff: Unleash the Beast
Now, you know what time it is…
It’s time to feed the beast!
Our mailbag has been light recently … well, light in a virtual sense. It’s Week Whatever of quarantine … I wouldn’t blame you if you’ve sworn off online communication completely and ran to the woods to rejoin nature.
So, how are you holding up these days, dear reader?
Send us a quick message at GreatStuffToday@BanyanHill.com and share what thoughts you’ve been chewing on or rants you’re stewing on.
In the meantime, don’t forget to check out Great Stuff on social media. If you can’t get enough meme-y market goodness, follow Great Stuff on Facebook and Twitter.
Until next time, be Great!
Editor, Great Stuff