Big Banks Bound; Nike Left Barfoot; Mobile Suit Ekso
Friday Four Play: The “Follow the Bouncing Banks” Edition
What in the wild, wild world of banks is a goin’ on here?
Yesterday, the Federal Deposited Insurance Commission (FDIC) rolled back Volcker Rule restrictions on big banks. Put simply, the loosened rules allow banking giants to more easily channel money into risky investments, such as credit default swaps. We all remember how wonderful that went the first time around.
But today, the Federal Reserve essentially tightened restrictions on the banking sector.
In a 4-to-1 vote, the Fed suspended stock buybacks and tied bank dividend payouts to a formula based on their income. If you like math — and who doesn’t? — MarketWatch reports that “the formula sets third-quarter dividends at a level equal to average net income over the past four quarters.”
Have fun with that.
But why is the Fed doing all of this?
Because, after this week’s stress tests on major U.S. banks, the Fed is concerned that it could be in trouble as the pandemic rages on.
To sum things up, the FDIC and the Fed said that banks need to be free to speculate on risky investments to boost the economy. But they also said that banks can’t pay higher dividends or buy back shares because they might get in trouble.
How’s that for mixed signals?
As you might’ve guessed, Wall Street didn’t like this uncertainty one bit. Uncertainty is, after all, Wall Street’s kryptonite.
After yesterday’s Volker V-bound, stocks didn’t take today’s new banking restrictions well at all. The Dow fell more than 2%, and the market was awash in red.
This green-to-red flip-flopping in stocks has to be driving you bonkers right now. But this volatility is exactly why Mike Carr developed his “One Trade” strategy.
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And now for something completely different … it’s time for your Friday Four Play:
No. 1: Bye-Bye Brick and Mortar
Microsoft Corp. (Nasdaq: MSFT) will finally get rid of its physical store locations. Let’s be honest, Microsoft stores weren’t the best idea to begin with. The company doesn’t have the cult following or the plethora of devices of rival Apple Inc. (Nasdaq: AAPL). It just wasn’t going to happen.
Microsoft already closed its Microsoft Store locations back in March due to the pandemic. During the closures, the company learned that it could sell products online just as well as in store. I mean, nobody is lining up to get that fresh copy of Microsoft Windows on disk anymore.
“Our sales have grown online as our product portfolio has evolved to largely digital offerings, and our talented team has proven success serving customers beyond any physical location,” said Corporate Vice President David Porter.
Microsoft will take a $450 million charge in the fourth quarter due to the store closures.
I have just one thing to say when it comes to today’s MSFT news: good.
Microsoft didn’t need stores. It’s not Apple. This news is a good thing for the company and for MSFT investors.
No. 2: Imma Let You Finish
Yeezy, Yeezy what’s good? It’s your boy, GAP, what’s going on? Just checking in on you, appreciate the love and support. The wave is here…
Gap Inc. (NYSE: GPS) says it gave us the best years of its life. Judging from it’s recent earnings report, I guess Gap is right. After the retailer reported an impressively horrid 43% drop in first-quarter sales this month, I too thought the Gap was apt for a dirt nap.
Today, though, the company that might as well stand for “generic and pricey” got a transfusion of new blood via Mr. Kanye West — Yeezy, for those not in the know.
An all-new Yeezy Gap line is set to launch sometime next year that builds “on the aesthetic and success of his Yeezy brand … together defining a next-level retail partnership.”
It’s a Hail Mary from the Gap, but I respect the effort. Right now, Gap hasn’t shared any of the fun financials, though it states that “Yeezy would earn royalties and potential equity related to sales results through this partnership.”
Potential equity? In GAP sales? What better time! Overall, the deal sounds like a million-dollar renovation to an unhappy home. I mean, I hope that a new Yeezy line breathes some fresh life into Gap’s stilted stores, but at the same time … what else does Gap have to lose?
News of the deal sent GAP up over 30%.
No. 3: Walk All Over You
Nike Inc.’s (NYSE: NKE) shoes were made for walkin’ … and running and exercising … you get the idea. But that’s not what they do right now. You know, cause of the pandemic and all.
The company reported fiscal fourth-quarter earnings this morning. Instead of running, NKE backpedaled. Nike reported a loss of $0.51 per share on a 38% plunge in revenue. Analysts expected a profit of $0.02 per share and a 29% drop in revenue.
Nike also said that full-year revenue would be flat compared with 2020, and that the first quarter would be down.
But it wasn’t all flat feet and tripping over COVID-19 cracks. Online sales surged 75% during the quarter, making up 30% of revenue. So, Nike has that going for it, which is nice.
Still, when you think of online retail juggernauts, Nike certainly doesn’t leap to mind.
NKE stock fell more than 5% on the news. We’re calling this one a “hold” for now.
No. 4: Mobile Suit Ekso
Anyone else watch Mobile Suit Gundam growing up? Probably not. It was an imported 1980s Japanese cartoon about people riding around in robots fighting bad guys.
Well, if Ekso Bionics Holdings Inc. (Nasdaq: EKSO) has its way, we’re one step closer to fulfilling my childhood dreams.
The company just received FDA clearance to market its EksoNR robotic exoskeleton … for medical purposes. While my bad-guy-fighting dreams will clearly have to wait, this is excellent news for millions of people with acquired brain injuries. (Some of you would probably argue that this applies to me as well. Shame on you.)
Acquired brain injuries include things such as a stroke, severe head trauma, infections and surgical injuries. Ekso’s “robot suit” is specifically designed to improve quality of life and mobility for these patients. There are an estimated 3.7 million patients in the U.S., and some 84 million globally, according to Ekso.
Now, before you rush out and jump on the Ekso exoskeleton bandwagon … the company has yet to turn a profit, but losses are narrowing fast. As this technology advances, Ekso stands to make big strides for both patients and investors.
Naturally, we don’t recommend buying amid this week’s near-200% rally. If you’re interested in picking up EKSO shares, wait for the hype to die down and the shares to consolidate.
Great Stuff: Half Meme, Half Machine
Thanks for tuning in to another week of Great Stuff!
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Until next time, stay Great!
Editor, Great Stuff