Debt: It’s What’s for Breakfast; Pot Market Swan Dives
A Stimulating Chinese New Year
I’ll gladly pay you Tuesday for some economic stimulus today!
Debt is back on the menu, dear readers — did it ever really leave? — especially in China.
The People’s Bank of China hopes to shake loose about $115 billion in the Chinese economy by easing up on its reserve requirement. This essentially works the same way in China as it does stateside.
The Chinese central bank requires banks to hold a certain amount of cash. This “stimulus” lessens that requirement and frees up cash for lending.
So far, Wall Street is loving it. Both the Dow Jones Industrial Average and the S&P 500 Index have hit fresh all-time highs. What’s more, Chinese stocks such as Alibaba Group Holding Ltd. (NYSE: BABA), Bilibili Inc. (Nasdaq: BILI) and JD.com Inc. (Nasdaq: JD) are off to the races today.
I know what you’re thinking. Debt is bad, and more debt is worse.
And we’re not talking about government debt here. We’re talking about rising corporate debt. Furthermore, this is the second time China’s central bank has eased reserve requirements in the past five months. It did something similar back in September.
But, what’s a central bank to do? China faces its worst economic slowdown in 30 years. Furthermore, more than 30 central banks across the globe cut interest rates last year, including the U.S. China has to keep up with the Joneses, right?
There’s also the fact that China is heading into the Lunar New Year holiday period, which begins on January 25. Cash demand reportedly spikes during this time of year, and China has made such financial maneuvers in the past to make sure there isn’t a crunch during the holiday.
Are we explaining away the risks of rising corporate debt? Sure.
However, the hope is that, with enough stimulus, this concern will correct itself. And remember, it’s not just China here — this is global.
For now, Wall Street appears satisfied. There’s enough growth to justify feeding the corporate debt monster for a while longer. And that means the bull rally extends into 2020 with a bang.
But, I can see that some of you aren’t entirely convinced. That’s good. Doubt is healthy, and it keeps you on your toes. (Just because I’m paranoid doesn’t mean they aren’t out to get me, right?)
What you can do … what you should do … is find a source of information that helps you make money regardless of the market’s direction. You know, just in case.
As it happens, I know a guy.
Banyan Hill expert Chad Shoop is the editor of an amazing research service called Pure Income — and that name is no joke. Using his 1-Minute Windfalls method, Chad has seen amazing results even when the market face-plants.
In fact, this 1-Minute Windfalls strategy has paid out $2,500, $3,600 and even $9,000 in just 60 seconds. (That’s one minute, for those keeping track at home.)
Now, these payouts depend on how much you’re able to invest and not representative of every trade … but there’s no denying the potential.
If I’ve piqued your interest, you can learn more about Chad’s Pure Income today by clicking here.
The Good: Follow the Leader
Some days, I feel like a visionary … an oracle, if you will.
In Tuesday’s decade-ending blockbuster, Great Stuff listed Applied Materials Inc. (Nasdaq: AMAT) as one of our top four picks for 2020 and beyond. And, in the first trading day of 2020, analysts are following my lead.
Nomura Instinet analyst David Wong lifted his price target on Applied Materials today to $75 from $68 and reiterated his buy rating on the company. According to Wong, AMAT is set to benefit from a rebound in global wafer-processing equipment sales. In other words, a resurging semiconductor market will drive demand for Applied.
Wong also lifted little-known chipmaker Advanced Micro Devices Inc. (Nasdaq: AMD) — have you heard of this company yet? The Nomura analyst boosted his target on AMD to $58 from $40 with a buy rating.
AMD, says Wong, will release a steady stream of new products in 2020 with 7-nanometer (nm) and 7nm-plus technologies. (Those are high-performance, but low-power-consumption chips that are perfect for today’s mobile marketplace.)
This year is truly shaping up to be a big year for semiconductors. I’d watch Applied Materials very closely if I were you. There’s quite a bit less hype surrounding it than AMD right now.
The Bad: Gone to Pot
Dude … like, did any of you see that end-of-year rally in pot stocks this week? It was righteous. Those stocks were so high.
It’s a shame they all had to come crashing down today. That cannabis hangover … am I right?
It might’ve been that Illinois was on the verge of legalizing recreational cannabis with the new year. But that’s been a known quantity for some time. More than likely, we saw investors repositioning for what’s expected to be a bigger year for cannabis stocks.
Many of these big names were at or just above 52-week lows. You’ll notice that stocks like ACB, which surged more than 12% on Tuesday, only gave back a fraction of those gains today.
But I’m not ready to call a bottom just yet. Legal weed in Chicago is huge, but we need a bigger spark than Illinois … preferably something at the federal level. Until then, Great Stuff only recommends the cannabis sector as a very speculative option for investment — i.e., if you have some cash to burn, why not? (Especially if it’s not legal where you are just yet.)
The Ugly: ¯\_(ツ)_/¯
Just when I thought AT&T Inc. (NYSE: T) was on the straight and narrow toward fully realizing its streaming potential … it goes and does something like this.
If you got a new Roku Inc. (Nasdaq: ROKU) for Christmas, and you subscribe to AT&T TV Now … I’m sorry, but you’re SOL. (Sorely out of luck. What’d you think I meant? Dirty minds, all of you!)
AT&T has pulled its AT&T TV Now channel from the Roku store. If you already have it, bully for you. You can keep it. But new subscribers will have to look elsewhere. Here’s the official statement from AT&T’s support page:
I don’t know what there is to resolve. According to Roku’s developer distribution agreement, it doesn’t charge to put a channel on its store. The only costs, as far as we’ve been able to discern, are ad revenue sharing and whether you use Roku’s payment processing service — which you don’t have to.
I sincerely hope AT&T isn’t trying to charge Roku for listing AT&T TV Now on the channel store. That’s some old-school cable-TV licensing BS right there. It’s part of the reason why millions cut the cord to begin with. We’re already struggling with hundreds of new streaming services … we don’t need hundreds of streaming devices to go along with them.
But I’m just speculating here. Let’s see how AT&T plays this for now.
In the meantime … what a horrible time of year to make this decision.
Yes, I know it’s Thursday, and that’s supposed to be Reader Feedback day. But it was a holiday week, and we both needed the break. Also, the last thing either of us needs is for you to send in drunken emails after partying all night on New Year’s Eve.
Instead, I have a wonderful Quote of the Week for you today. It comes from Paul Condra, a lead emerging tech analyst at PitchBook:
This could well be a quote of the year right here. It’s a theme that Great Stuff will surely pick up on throughout 2020, especially with companies such as Airbnb (a hotel disrupter), Casper (it makes beds and pillows) and Didi Chuxing (the Chinese Uber) all planning on going public this year.
All I have to say is, if you’re going public in 2020, you’d better leave the losses in 2019. Wall Street ain’t got time for that kind of hype after last year’s failures.
Until next time, good trading!
Great Stuff Managing Editor, Banyan Hill Publishing