Great Stuff 7-30-2019

Look Kids, Big Ben … Parliament!

Summer vacation is in full swing on Wall Street.

Just be sure to check your wallet, especially if it’s a Capital One Financial Corp. (NYSE: COF) wallet.

Unfortunately, it’s a Griswold family vacation … and investors are stuck on a roundabout.

Both the Dow and the S&P 500 have gone nowhere since the middle of July.

This holdup is largely a product of stalled U.S. trade talks with China, which President Trump tweet-stormed about this morning:

China is doing very badly, worst year in 27 — was supposed to start buying our agricultural product now — no signs that they are doing so. That is the problem with China, they just don’t come through…

Stalled trade talks are seen as a major driver for tomorrow’s expected interest rate cut from the Federal Reserve. Trump’s tirade on trusting the Chinese, however, could have come at a better time.

Currently, a delegation led by Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer are in China to meet with officials and discuss a deal. Expectations are low that any resolution will be struck this week.

The Takeaway:

Honestly, I’ll be happy when the phrase “the president tweet-stormed” goes away. While it gives me fodder for Great Stuff, I want off this roundabout.

The fact is, China just might be stalling until after the 2020 elections. Whether or not another negotiator in the White House is good for the U.S. and investors … well … I’ll let you decide.

If the Fed cuts rates tomorrow, it should help make up for the strain that trade relations are having on the U.S. As long as President Trump doesn’t travel to Walley World China and punch a moose in the face, we’ll be fine.

But does it mean another trip around the circle: “Look kids, Big Ben … Parliament…”

Great Stuff The Good The Bad and The Ugly

The Good: We’re Good, Right?

Great Stuff 7-30-2019

Are you looking for big gains this earnings season? If so, you might want to avoid Apple Inc. (Nasdaq: AAPL) and Advanced Micro Devices Inc. (Nasdaq: AMD).

These tech-sector heavy hitters report earnings today — probably by the time you’re reading this. (Why did you wait so long?) And big moves are not in the forecast. The options market is pricing in only a 4.2% move for AAPL shares and a 9.5% move for AMD.

Both stocks are expected to move far less than they have following previous earnings reports. For instance, AAPL has historically moved 5% after earnings, while AMD has moved as much as 13%.

For those options lovers out there, this means it’s cheaper to “go long” (or bet bullishly) on both AMD and AAPL. But remember, these expected moves can go in either direction.

Furthermore, lower expected moves mean lower expected returns … i.e., those big gains you’re looking for might be more elusive for both AMD and AAPL.

The Bad: Meat Your Maker

Great Stuff 7-30-2019

Beyond Meat Inc. (Nasdaq: BYND) investors were all, “Yes! Yes! Yes! Noooo!” this morning.

After the close last night, the maker of meatless balls (it tastes the same … if you close your eyes) reported that sales nearly quadrupled from last year, rising to $67.3 million. The company also boosted its full-year expectations and issued a positive outlook for the second and third quarters.

Beyond Meat did say that it lost $0.14 per share, wider than the expected loss of $0.09 per share. But the meat-free hype train wasn’t to be derailed.

And then Beyond Meat took things a bit too far for even the most bullish investor. It announced plans to sell 3.25 million more shares in a secondary offering.

Meatless meat … that’s one thing. Diluting share prices? That’s a sell-off.

It looks like the venture capitalists behind Beyond Meat are looking to cash in on BYND’s insane rally before the stock comes back to earth.

As you can see, it’s probably too late to cash in on Beyond Meat, but there are other initial public offerings just ripe for the picking. And Banyan Hill expert Paul can hook you up.

Click here now to find out more.

The Ugly: Hackers in the Clouds

Great Stuff 7-30-2019

Do you have a Capital One account? Might want to check your wallet.

Capital One announced this morning that a hacker compromised Social Security numbers, bank account numbers, names, addresses, phone numbers and other data for thousands of credit card customers.

Overall, some 100 million individuals are affected, the company said.

“This headline is not a good one for Capital One,” said RBC Capital Markets. Even Samuel L. Jackson is speechless at this obvious assessment. Say “not a good one” again!

The hack was possible due to a “configuration vulnerability” in Capital One’s Amazon Web Services (AWS) server. However, Capital One said that Amazon was not to blame.

Still, Paige A. Thompson, the woman arrested for the hack, was a prior employee at AWS. This throws some serious shade on Amazon, which has yet to comment on the hack.

Capital One stock isn’t taking the news well, down about 6% today. But that’s little consolation to the millions affected by the company’s lax security.

Great Stuff Quote of the Week

According to a report on CNBC, U.S. companies are going to break the record for share repurchases in a year in 2019. So far, nearly $1 trillion in company cash has been spent buying back shares. It’s gotten so bad that the money spent on buybacks has exceeded free cash flow for the first time since the 2008 financial crisis.

Resident Banyan Hill “don’t waste your money” expert Ted Bauman was particularly incensed at the news, providing this quote of the week:

People who like share buybacks argue that corporate executives are obliged to do whatever is best for their shareholders. We’ve now reached the point where that means borrowing money.

If you think capitalism is simply the pursuit of individual profit at all costs without regard to the consequences, then this is what you do.

But it’s hard to square that selfish, short-term behavior with the notion that we are in the strongest economy that the U.S. has ever experienced. If we were, that money would be going to investments.

This just proves that the logic of capitalism has been turned on its head: Companies now make money to acquire things, rather than making things to acquire money.

Ouch. That hurts … not as much as jumping on a bicycle without a seat, but it hurts.

And Ted knows a thing or two about how this could all fall out wrong.

As the editor of The Bauman Letter (Ted Bauman, The Bauman Letter … who saw that coming?), he’s spent his entire life helping people grow and secure their wealth so that they can live the lives they’ve always dreamed of.

In these uncertain times, securing your wealth has never been more important. Rumblings of a market collapse are starting to surface again.

You can’t afford to wait any longer.

Click here now to find out how you can prepare for the worst.

Great Stuff: Where’s the Beef?

It’s stock pick day, and … well, the Great Stuff stock filter has a migraine.

Earnings season is one thing, but the Fed meeting on interest rate cuts is quite another. Once again, we’re faced with uncertainty and unreasonable volatility on a Tuesday.

To save you from your own migraine, I’m holding off until after Federal Reserve Chairman Jerome Powell has his say. So, if you’re looking for this week’s Great Stuff pick of the week, check back on Thursday. I’ll have something great for you then.

Until then, here are some ways to pass the time:

Until next time, good trading!


Joseph Hargett

Great Stuff Managing Editor, Banyan Hill Publishing