Don’t Wreck It, Ralph
I’m no Ralph Kramden, but even I can see that the market is ready for launch.
Like I said in yesterday’s Great Stuff, anything but complete inaction by the U.S. Federal Reserve was likely to spark a rally — and save Fed Chair Jerome Powell’s job.
All Powell had to do was drop the word “patient” from the Fed’s approach to raising interest rates. That was it. The omission of one single word.
Like a pack of dogs with fresh meat, Wall Street is running with it.
The S&P 500 opened at a record high this morning. The Dow isn’t far behind.
Fed watchers and the infamous Fed funds futures are now pricing in a 100% chance of an interest rate cut in July.
But this is just the beginning of easy money for the world markets. European Central Bank president Mario Draghi has already indicated that he is ready to cut rates. Late Thursday, both the Bank of Japan and the Bank of England signaled they were prepared to follow suit.
This truly is becoming a race to the bottom for interest rates … and a race to the moon for stocks.
We all love easy money, yes?
But let’s not forget what the Federal Reserve and the rest of the world are throwing cash at: a slowdown in economic demand and warning signs of a potential recession.
Contrary to popular belief, the Fed doesn’t just go around making it rain hundred-dollar bills. It’s cutting interest rates because it’s worried. The New York Fed’s manufacturing index plunged into negative territory in June. The Philadelphia Fed’s manufacturing index fell to a flat reading for the month. And May’s payrolls data was well below expectations.
The bottom line is that you absolutely should ride this market rally for all it’s worth. But, remember to prepare just in case it all goes pear-shaped.
The Good: Oracle May Be the One
I’m not telling you that you can dodge bullets or losing trades. I’m telling you that, when you’re ready, you won’t have to.
But first, you have to visit Oracle Corp. (NYSE: ORCL). Today, the company proved why it’s one of the most consistantly performing tech stocks of the past decade.
Fourth-quarter earnings beat expectations, and Oracle put first-quarter guidance above Wall Street’s expectations.
Not only that, but co-chief executive Safra Catz said that 2020 revenue would grow “faster” than in previous years and that Oracle anticipated “double-digit” earnings growth for the year.
This is the kind of company you want in your long-term holdings. The kind of cloud-technology company that could make Keanu Reeves say: “Woah!”
The Bad: The Battle for Breadsticks
I honestly don’t know how this is possible.
Olive Garden owner Darden Restaurants Inc. (NYSE: DRI) missed same-store sales projections. I can’t even get into my local Olive Garden without at least a one-hour wait!
I know, it has to be LongHorn Steakhouse, Cheddar’s or that sneaky Eddie V’s chain: “Yo, Eddie V. You got my money?”
But happen it did. Darden beat expectations with a 24% jump in earnings and a 5% rise in revenue. However, same-store sales came in shy of expectations.
The thing is, margins also rose more than expected and 2020 projections are pretty much in line with Wall Street’s targets. Maybe today’s drop in DRI shares is a gift to savvy investors?
Or maybe I just want more breadsticks.
The Ugly: Elon Musk Built My Hot Rod
Well … he’s trying to, at least. I don’t own a Tesla, or even shares in Tesla Inc. (Nasdaq: TSLA) — I’m technically not allowed to (thanks, Securities and Exchange Commission).
But that’s beside the point. It’s almost never pretty when Tesla hits the financial news headlines lately.
This time, Tesla is having a bit of a demand problem — at least according to Wall Street analysts.
Musk has adamantly denied such a problem exists, but that won’t stop analysts. Speculators gotta speculate.
Today’s bit of news comes courtesy of Goldman Sachs and RBC Capital Markets. Both believe that demand is falling for Tesla cars and that there’s little that the company can do about it. RBC specifically thinks that the company is “sacrificing profitability to focus on unit growth.”
The result? Goldman cut its price target on TSLA to $158 from $200, and RBC reiterated its $190 target and its sell rating.
Tesla is still expected to see record deliveries and sales this quarter, so you might want to take Goldman and RBC’s advice with a grain of salt.
We’re doubling up on the Great Stuff Quote of the Week today, because this one is just too good to pass up. (Click here to check out Tuesday’s Quote of the Week … honestly, I can’t believe you missed it!)
Machine learning and artificial intelligence (AI) in medicine isn’t intended to be used to diagnose patients. It’s a reference for doctors.
If you’re asking me whether I trust a new doctor who is grossly overworked, an older doctor with a lifetime of biases or a machine with near-perfect accuracy — I’m going to pick the machine.
This article conflates failures in AI used on huge datasets with identifying tumors in MRIs.
— Anthony Planas, Internal Analyst for Front Line Profits and Real Wealth Strategist
Anthony’s mini-rant was inspired by a rather sensationally titled article on AI in health care: What if AI in health care is the next asbestos? The article basically calls out AI as not being ready for prime time where heath care is concerned, and contained this little gem:
As an example, he showed an image of a cat that a Google algorithm had correctly categorized as a tabby cat. On the next slide was a nearly identical picture of the cat, with only a few pixels changed, and Google was 100% positive that the image on the screen was guacamole.
Regardless of your feelings on cats or guacamole, I think Anthony hits the nail on the head. Besides, anyone who’s used Google knows that it’s much better at finding cats and guacamole than tumors — it’s not a tumor!
Crazy for IPOs!
Right now, you might be thinking that you’re crazy, crazy for feeling so excited.
No, Patsy Cline, you’re not crazy. This IPO season has had a plethora of big winners and truckloads of long-term potential.
You’re probably just feeling overwhelmed right now … and that’s normal. There have been nearly 60 IPOs so far this year. That’s enough to make any investor feel a bit crazy.
The problem is: Where do you start?
Well, luckily for you, Banyan Hill expert Paul Mampilly can help you feel a little more whelmed. In his latest video, Paul gives you two simple ways to profit from the veritable flood of IPOs rushing the market this year. Click here for Paul’s latest commentary, or go straight to the video below:
Until next time, good trading!