Friday Four Play: The “What Do You Mean, No Rate Cut?” Edition
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I had hoped to open today’s issue with a refreshing round of “It’s a beautiful day in the neighborhood” … because who doesn’t like Mr. Rogers? The market was supposed to log its fifth consecutive win and hit fresh all-time highs.
That’s how things were supposed to go. And it looked like we were headed that way … initially.
The Labor Department reported that the U.S. economy added an impressive (most impressive) 225,000 jobs in January. The figure easily topped economist estimates for 165,000 new jobs.
Despite this strong economic data, the market sold off.
So, if the numbers were so great, why’s the market down, Mr. Great Stuff? Is it because it didn’t get its picture on bubble gum cards?
I hadn’t thought of that angle, but I doubt Lucy van Pelt’s reasoning applies here.
No, the reason, dear reader, is that Wall Street actually hoped for weaker jobs numbers … so that it could get another interest rate cut from the Federal Reserve.
So, you’re saying that Wall Street hoped for a weaker economy … so that it could get more easy money? It’s kinda like a crack addict at this point, isn’t it?
True, but there’s some credence to its argument, as I’ve noted here before. Expectations for a rate cut from the Fed rose steadily alongside the spread of the Wuhan coronavirus.
Today, Wall Street sees the writing on the wall.
It knows that this outbreak will affect more than just Chinese economic growth. Today’s stronger-than-expected January jobs data just dashed Wall Street’s hopes for quicker action on that front.
And now for something completely different … here’s your Friday Four Play:
No. 1: Red Eyes Can’t Lie
Canadian weed producer Aurora Cannabis Inc. (NYSE: ACB) is stoned, and now everyone knows it.
The former high flyer in the cannabis market announced several major changes last night, including: CEO Terry Booth stepping down. Hundreds of layoffs. Write-downs of unusual size (they do exist!) on overvalued properties. Months of disciplined spending.
Aurora chairman Michael Singer is taking over as interim CEO. The company plans to lay off about 10% of its workforce in a bid to cut costs, and it announced certain charges it plans to write down in its coming fiscal second-quarter earnings report. Those charges include C$190 million to C$225 million — that’s in “maple syrup” dollars, for us investors south of the border — for “certain intangible and property, plant and equipment” and between C$740 million to C$775 million in goodwill.
That looks bad … like, “getting pulled over with weed in your car” bad (well, in Kentucky, at least).
I don’t think I have to say this, but keep avoiding Aurora Cannabis for now. There are better opportunities in the cannabis market.
No. 2: ViacomCBS Caches In
Another big player is about to enter the streaming market. Yes, another one.
Newly merged ViacomCBS Inc. (Nasdaq: VIAC) is working on what could become a major contender in the streaming wars. According to “people familiar with the matter” — I just love these people, whomever they are — the company plans to combine CBS All Access with a whole host of Viacom properties.
And, oh, what a list of properties it is. Feast your eyes on this list: “Pluto TV, Nickelodeon, BET, MTV, Comedy Central and Paramount Pictures.” That’s a veritable who’s who of millennial streaming goodness right there. Reportedly, the service will offer all of this up free (with ads, of course).
But wait … there’s more. For less than $10 per month (again, according to those familiar people), there will be an ad-free version that could include Showtime (for an additional nominal fee).
Clearly, ViacomCBS is late to the game with this new offering. It isn’t even in the official prelaunch phase yet. However, the company has oodles of content that it doesn’t have to pay for. It already has the technology to set up a streaming site (both from CBS All Access and Pluto TV). And it’s nowhere near as cash-strapped as some other parties in the streaming wars. I’m looking at you, AT&T Inc. (NYSE: T).
So, while most of you probably suffer from “new streaming service” fatigue, ViacomCBS has the potential to be a real contender … when the service finally arrives, that is.
No. 3: FANGU… FUANG … FANUG?
Is Uber Technologies Inc. (NYSE: UBER) really ready to join the ranks of the big FANG stocks?
Mark Mahaney, analyst at RBC Capital Markets, thinks so. In a bullish note following Uber’s fourth-quarter earnings release, Mahaney wrote: “Uber is the global ridesharing leader and is becoming the global food delivery leader,” and that FANGU was a better acronym for the leading internet companies.
Nah, fam. There’s one massive difference, and it was apparent in Uber’s fourth-quarter report. The company lost $1.1 billion. None of the current FANG members are posting losses, let alone in the billions.
Could Uber eventually get there? Maybe — once it settles all its legal issues with employees and foreign and local governments. But including Uber now when neither Microsoft Corp. (Nasdaq: MSFT) nor Amazon.com Inc. (Nasdaq: AMZN) is a member of the FANG acronym is just crazy talk.
No. 4: A Live, Captive Audience
Need a bit of dark humor in your day? I’ve got you covered.
You might’ve noticed that Chinese social media/video streaming company Bilibili Inc. (Nasdaq: BILI) has been on fire recently. There have been no major releases from the company. No breakthroughs. No deals signed. So, what gives?
It turns out that China’s response to the Wuhan coronavirus has inadvertently given Bilibili a captive audience. From quarantines and travel bans to forced corporate shutdowns, Chinese citizens are largely trapped in their homes. That means more viewership for Bilibili.
What’s more, Bilibili is one of the few Chinese companies that makes it easier to get news about the coronavirus outside of China’s locked doors.
Seriously, that’s what BILI investors are banking on right now. A live, captive audience for streaming viewers. I didn’t think it was possible, but here we are.
Now, Wall Street doesn’t expect those increased ad-revenue numbers to show up in Bilibili’s next quarterly report. But it’s looking for higher guidance from the company for the current quarter due to those trapped viewers.
This will certainly be an interesting report to watch for Bilibili.
Great Stuff: Just a Little Patience
Oof, that was a lot of red today … especially after yesterday’s “Ooh-rah!” as the major indexes reached new all-time highs.
But as we head into the weekend, keep your chin up, dear reader! Investing has a natural ebb and flow … the market giveth but also taketh away.
As always, find your happy place. Your Zen center, if you will. Don’t panic. Be patient. (Just a little patience, yeah yeah…)
But you don’t need to be walking Wall Street at night, just trying to get it right. I know it’s hard to see with so much red around, and you really don’t like being stuck in the ground.
Just remember, the stocks don’t change … maybe the names.
Listen, I know you ain’t got time for the game … that’s why you need Banyan Hill expert Charles Mizrahi. When it comes to spotting sustainable business growth, Charles has the edge with his Alpha-3 Approach.
It’s the same secret that helped his Wall Street firm see its assets soar ninefold during the ’90s. Market giants from Goldman Sachs to Credit Suisse have sought Charles’ advice.
Today, you have the chance to see just how powerful this approach is … and why other Great Stuff readers are latching on to his research.
Now let’s get this weekend started!
Until next time, good trading!
Great Stuff Managing Editor, Banyan Hill Publishing