Fizz, Fizz, Oh What A Relief It Is?
So, Great Ones … how do you spell “relief?”
Bank of America apparently spells relief thusly: “S T I M U L U S.”
Today, the big American bank’s research investment committee said that the $1.9 trillion in stimulus spending won’t overheat the U.S. economy. It even included a handy-dandy chart to explain where all that money would actually go:
On one hand, I have to give Bank of America credit for getting this right — even if it spelled “relief” wrong.
Make no mistake, this is a relief package — not a stimulus package. BofA’s own calculations make that painfully clear, as did January’s consumer credit data, which unexpectedly fell. (Unexpected only to those who haven’t been there before…)
On the other hand, I’m more than a little … what’s the word? Pissed? That’s it.
I’m more than a little pissed at the whole inflation/stimulus banter going on right now. Bank of America continuing the narrative that this $1.9 trillion “stimulus” is only one part of the problem. Inflation is literally all Wall Street can talk about lately.
Why? Because in the minds of the Wall Street talking heads, Americans will rush out and spend this money on everything they wanted to buy while locked down for the past year. This buying will drive prices higher, and inflation will sink the market! Oh, noes!
For a small subset of the population receiving COVID-19 relief checks, this is true. But, by and large, this narrative gets the situation dead wrong.
Here’s why I’m not worried about inflation: More than 10 million Americans remain unemployed — roughly double pre-pandemic levels. 6.1 million Americans are working part time due to economic reasons — i.e., the pandemic.
These Americans have been unemployed or underemployed for months. They have bills piling up. They have massive credit debt. They aren’t going to rush out and buy big-screen TVs and splurge at Olive Garden for days on end.
They’ll pay bills. They’ll catch up on rent or mortgage payments, praying that the payments come soon enough to keep a roof over their heads. They’ll make sure their utility bills are caught up so that when protections are gone, they don’t go without electricity or water.
And Americans will save because we don’t know if this pandemic is truly over yet.
How do I know this? Because I’ve been there, Great Ones.
So, it’s about time I set this record straight. All the talking heads punchin’ is making me irate. Sick of my warnings fallin’ on deaf ears. Where you gonna be in the next five years?
I remember waiting on Bush “stimulus” checks after 9/11 because I was laid off and needed to pay bills and support my family. I remember food rationing. I remember a lot of things that I will not go into right now … but you get the point.
And that situation was absolutely nothing like what we’ve seen in the past year. We’re talking about “alligator in your backyard” versus “Godzilla rampaging through your city” levels of difference.
So, you’ll have to forgive me if I rant after Bank of America — which needed a massive bailout itself back in 2009 — consulted its research department and put together a nifty chart to tell me how jobless Americans will spend “stimulus” cash … or how inflation won’t be a problem.
I know it won’t be a problem. Not for a while. The Federal Reserve is right.
Any inflationary pressures rising from the COVID-19 relief package will be temporary and fleeting. This panic you’ve seen on Wall Street for the past month? An overreaction by investors who don’t understand what the situation on the ground is really like … who think the U.S. economy is much better off than it really is.
That’s why I’m not worried about inflation right now. That’s why I shared Paul ’s bullish outlook for the market on Monday. When a less-debt-ridden and more secure American workforce finally takes the stage after all this pandemic nonsense is finally gone, then we can talk about inflation.
To once again paraphrase Jim Mora: Inflation? Don’t talk about inflation. Inflation?!
And that’s all I have to say about that … because I want to hear your thoughts on the matter. Drop me a message for tomorrow’s Reader Feedback, won’t ya? GreatStuffToday@BanyanHill.com.
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Going: Oingo Boingo Mongo
From my heart and from my hand, why don’t people understand … the cloud? Seriously. It’s not weird science anymore.
Shares of MongoDB (Nasdaq: MDB) were mixed today, eventually settling lower. Investors were clearly unsure how to proceed with this cloud database company after it blew past fourth-quarter estimates and issued disappointing guidance.
The company lost $0.33 per share on revenue of $171 million, compared to expectations for a loss of $0.39 per share on $157 million in sales. First-quarter guidance, however, came in at a loss of $0.36 to $0.39 compared to the Street’s target loss of $0.27.
MongoDB is quite the growth story in the competitive cloud space. Its revenue has grown at a double-digit pace every quarter, and its clientele includes big-name tech companies such as Cisco, Verizon, SAP, Adobe, Sega and Toyota.
The problem is that MongoDB has yet to post a profitable quarter. The company likes to spend on growth, and it shows up in quarterly earnings. Prior to the arrival of the “inflation boogeyman,” investors were more than happy to bid up MDB shares. In fact, the stock more than doubled last year.
That’s quite a feat for an upstart cloud-services company. But Wall Street is very growth shy at the moment. And all it took was a slight miss on earnings guidance to send investors into profit-taking mode.
Going: Mmm Mmm Mmmediocre
Campbell Soup (NYSE: CPB) poured out a tepid helping of earnings today that disappointed the Street … and anyone hoping for some enthralling earnings reports today.
Campbell, parent of Cape Cod, Pepperidge Farm, Prego and Snyder’s of Hanover, brought in $0.84 per share on $2.28 billion in revenue. Analysts expected earnings of $0.83 per share on revenue of $2.3 billion.
But that’s so close to a double beat! Why’s CPB down today?
Well, it wasn’t that earnings were merely a quarter of what they were a year ago. And it wasn’t that revenue only eked up 5.4% during a period where packaged food was the most readily available attempt at sustenance.
It was guidance and a pessimistic outlook that sank the soup slinger today.
See, Campbell reigned over the eat-at-home environment. Everyone got lost in the sauce cooking at home during the pandemic (some more than others, don’t @ me). The glut of easy-to-whip-up packaged food was nigh.
And as such, Campbell now predicts a sea of change in consumers’ food interests as the country reopens. You don’t say! Many people are just seeing the sun and breathing fresh air for the first time in months, and Campbell predicts more of us might start … you know, eating anywhere but at home for a while?
Warnings of the pandemic pantry-stocking slowing down is more than expected by this point. Although, one bright spot in the report was that 75% of its brands “grew or held share” during the quarter. So, at least Campbell is holding its own against the stiff packaged food competition … which is a nice consolation prize.
Gone: Apple Gets Sauced
It looks like Apple (Nasdaq: AAPL) was schooled in the smartphone market once again … and it’s a little embarrassing.
According to a report from Nikkei, Apple slashed orders for the iPhone 12 mini. They just aren’t selling as well as the company hoped. Honestly, it’s something Apple could’ve figured out if it just read the smartphone room … so to speak.
Smartphones and mobile devices are getting bigger. Bigger screens. Bigger processing power. Just bigger all around. Small is out right now. Now, it remains to be seen whether that’s due to less travel during the pandemic (making larger devices more palatable) or a general shift in size preference overall. But if Apple just looked around at its competitors, it might get a hint.
The Nikkei report also noted that Apple still plans to produce 230 million iPhones in 2021. It’s just shifting that production to the bigger iPhone 12 and iPhone 12 Pro models — both of which are, obviously, much larger than the mini. It is a mini, after all.
There likely won’t be a lot of real-world investor impact for Apple’s blunder. I mean, it’s Apple. It could make iPaperclips with Bluetooth at a premium price, and people would buy them.
The disconcerting thing is that continued market miscalculations like the iPhone 12 mini will eventually catch up to the company … if Apple doesn’t get its head on straight and start innovating again.
What, you thought you could just scroll on by without saying “howdy?”
Oh, nay nay. It’s poll day here at Great Stuff, and it’s about time we cut our yapping and hear from you all out there.
In last week’s poll, we got straight to the meat of the market matter and asked you: What primary drivers make you buy a stock?
First off, I’m thankful that 47.5% of you stick with an editor here at Banyan Hill — and that absolutely none of you got sucked in by the mainstream Cramers or Reddit meme stocks, for that matter.
Of course … I have to play favorites to the 23% of you who count on Great Stuff Picks for your … well, picks.
The rest of you are split between two camps: 21.3% still fight the good fight to keep fundamentals alive, while 8.2% are technical traders through and through. (By the way … haaaave you met Mike Carr?)
This week, we’re paging those fundamental folks out there and channeling our inner Ted Baumans in the shift to value.
Yes, amid yesterday’s back-patting on predictions proved right … we mentioned the sector-by-sector rotation of past weeks, ditching growth and those now-yapping dogs of the Dow. In other words, value’s back on the menu — are you eatin’?
Most of your fellow Great Ones also expected a value comeback in 2021 when we last asked you on January 6. But how many of y’all put your stock-slinging money where your polls are? (Hang on, let me rephrase that … nope, nothing’s comin’.)
In other words: Have you joined the value tide, or are you still riding the growth wave?
Click below and let me know!
By the way, if you have more thoughts stewing about valuation, inflation and the stimulus conversation … lemme hear it all!
GreatStuffToday@BanyanHill.com is the spot for any trading thoughts you have — rants and tirades included. Send some greatness our way, and you may just find your email featured in tomorrow’s edition of Reader Feedback!
Until then, you can always check out Great Stuff on the web (click here) or follow us on social media: Facebook, Instagram and Twitter.
Until next time, stay Great!
Joseph Hargett
Editor, Great Stuff
