Fake Markets, Shopify Targets and Tesla’s “Karen” Musk
Friday Four Play: The “Fake It Until You Make It” Edition
It’s been a really really messed up week. Five days of bad data, five days of going nowhere.
And the market went and cheated on me. It’s in the Fed’s back pocket and it doesn’t even matter.
(La, la, la … whatever. La, la, la … oh well.)
Are you picking up on the Hot Chelle Rae vibes I’m puttin’ down?
Analysts at Bank of America certainly are. The financial giant’s securities division issued a research note on the U.S. economy this morning, and they came to the same conclusion Great Stuff has thrown at you for months now.
That conclusion? The U.S. Federal Reserve and other central banks around the world have created “fake markets.”
According to Bank of America’s Chief Investment Strategist Michael Hartnett: “Government and corporate bond prices have been fixed by central banks … why would anyone expect stocks to price rationally?”
Let’s look at the facts: Central banks are droppin’ Benjamins around the globe, shelling out $4 trillion for asset purchases in the past two months. They’ve also spent about $2.4 billion an hour on financial assets, Bank of America states.
The net effect has forced investors to buy into the equity market, coerced banks into lending and created corporate “zombies” to issue debt. In short, the Fed and its global partners in crime have created “fake markets” to artificially bolster investment returns while the world’s economy tanks.
How does this relate to Hot Chelle Rae, you ask? (OK, you didn’t ask, but I’m telling you anyway!)
From the song Tonight Tonight: “I don’t know if I’ll make it, but watch how good I’ll fake it.
It’s all right, all right, tonight, tonight!”
Wall Street is most certainly faking it right now. And that, dear reader, is why Great Stuff remains pert’near bearish on the entire shebang. If the economy doesn’t rebound as fast as the talking heads on Wall Street expect, there’s bound to be a reckoning.
Until then, investors will “party on the rooftop top of the world.”
Wondering where to find a rooftop party in your neck of the woods? Paul Mampilly has you covered.
And now for something completely different … here’s your Friday Four Play:
No. 1: Don’t Be Greedy
As regular readers know, Shopify is a Great Stuff Pick that we recommended back in early September.
Right now, that position sits on a roughly 110% gain! Congratulations!
As I explained in the podcast, Shopify still has quite a bit of growth ahead of it.
The company enables small- and medium-sized businesses to go online during the stay-at-home pandemic. It’s paying off in spades for Shopify, especially since Amazon.com Inc. (Nasdaq: AMZN) shafted these smaller retailers to focus on essential goods.
I’m being a bit unfair. There isn’t any real blame here. It’s the right move for Amazon. But so too, is it the right move for small businesses to strike out on their own with Shopify.
However, while I think there’s plenty of upside left for SHOP shares, we recommend taking profits on our Great Stuff Picks position.
You’re up 110% on a free recommendation, after all! No reason to get greedy. And with market volatility being what it is, it’s better to take the money and run. A bird in your hand is worth two in the bush … so they say.
The bottom line here: Sell SHOP for a triple-digit win!
Finally, if you think doubling your money in nine months is a good deal … boy do I have news for you. Paul Mampilly’s readers in Rapid Profit Trader have had a winning trade every week on average during the past two years. You know you want to find out how they do it. You need to find out how they do it.
No. 2: Makin’ Nice in Cali
The row started after California issued guidance for reopening the state’s economy from the pandemic shutdown. Alameda County, however, maintained stricter stay-at-home orders that prevented Tesla from immediately reopening production at its main factory in Fremont.
In response, CEO Elon “Karen” Musk ranted and raved about tyranny and fascism, demanded to speak to California’s manager and threatened to immediately move all production to Texas or Nevada. Tesla then filed a lawsuit claiming the stay-at-home orders were unconstitutional.
The two sides have since reached an agreement on reopening the Fremont plant, likely leading Tesla to drop its lawsuit.
TSLA shares have weathered the storm better than you’d expect, rallying more than 125% off their March lows.
It’s a nice outcome for investors following one of the most ridiculous “Let me speak to your manager” moments I’ve ever seen.
No. 3: Baa Baa Black Sheep
Alibaba Group Holdings Ltd. (NYSE: BABA) is hardcore. Despite U.S.-China tensions … despite the coronavirus pandemic … despite a struggling Chinese economy, Alibaba reported blowout fourth-quarter earnings.
Now, you probably expected stronger-than-expected earnings from the online retailing giant … but these figures were even better than those expectations. (Bet you didn’t expect that!)
Alibaba’s earnings came in 51% better than the consensus estimate. Revenue jumped 22% to $16.14 billion, topping Wall Street’s target by $860 million. What’s more, cloud computing revenue alone surged 58%, also blowing past estimates.
That said, not everything lived up to expectations.
Alibaba forecast full-year revenue growth of 27.5%, slower than last year’s 35% growth rate and below Wall Street’s targets. Given that Wall Street is doped up on unlimited Fed stimulus and can’t see the writing on the economic wall, I don’t think consensus estimates really apply here.
In other words, today’s dip in BABA shares following a stellar quarterly report may be an opportunity for anyone looking to dive into an Alibaba investment. That is, if you aren’t looking for opportunities stateside.
Considering the hoopla going on in the “Chinese stocks” conversation right now … there’s no better time for Trump’s “Re-Declaration of American Independence” — his mission to bring manufacturing and growth back to American soil from overseas.
No. 4: Foot Meet Mouth
It’s a low-expectations week here at Great Stuff — well, as far as Wall Street’s analysts go. (You bet we keep our expectations pegged at Greatness all year-round!)
To start, analysts expected a 36% drop in revenue and an earnings loss of $0.17 per share — a world of a difference from year-ago profits of $1.53 per share.
So with the bar lower than a Leprechaun’s lucky coins, how low did the Locker limbo? How about a $0.67 loss per share! Same-store sales were almost cut in half, plunging 43% last quarter. Considering that Foot Locker is essentially a Nike store, selling 71% of the brand’s merchandise, this doesn’t give Nike my checkmark of confidence, either.
Keep in mind, Foot Locker’s first-quarter horrors even include two months of pre-pandemic store hours. Imagine what this quarter’s earnings will come in … even if the chain’s “phased reopening” is now underway.
Until the company’s next report, Foot Locker investors may be waiting for the other shoe to drop. FL shares were down 5% on the news today, before they, too, lost footing and slipped another 7%.
Great Stuff: Front-Row Special
Before we all sign off for the weekend — whoa-ho! Long weekend alert!
I want to give you a quick reminder of next week’s can’t-miss shindig. We talked about this on Wednesday, but in case you’re just tuning in today, listen up, this is big!
Paul Mampilly has kept busy during the quarantine. So busy, in fact, that he scheduled a special event for next Tuesday, May 26 — online, of course. At the “300 Event,” Paul wants to show you his bread-and-butter strategy.
It’s the same strategy that helps Paul “pull double and triple-digit winners from the markets year in and year out.”
You still have a few days to sign up (for free), but your invitation to the 300 Event closes on Monday!
Until next time, stay Great.
Editor, Great Stuff