A Certainly Uncertain Election
Throughout the insanity that is 2020, one thing remains certain: uncertainty. Well, uncertainty and taxes, but we’ve already been there done that.
When uncertainty reared its ugly head on Wall Street back in March, the backstoppin’ Federal Reserve stepped in.
Whether you agree with the Fed’s actions or not — and you all let us know in our inbox — ‘twas a modicum of stability during an unstable time. This ongoing support is why the market’s levee hasn’t broken under the pandemic’s weight.
When that same uncertainty swamped Main Street, the government stepped in with a rescue package of small business loans, unemployment help and direct payments to citizens.
The CARES Act provided short-term stability and certainty for many. This support is clearly not ongoing … and Washington’s lack of action is partly why Wall Street is under pressure lately.
Still, these are known quantities. Investors (should) know how to prepare for and deal with these situations, provided we have accurate economic data to work from.
Unknown quantities are what we saw emerge this past Friday. President Trump, the first lady and several other lawmakers were all diagnosed with COVID-19 last week. This unexpected uncertainty prompted a late session sell-off and turmoil in the futures markets up to this morning’s open.
Don’t worry: All is apparently better now! At least, according to the White House, and so the market rallied back today.
But 2020’s biggest uncertainty still looms large on the horizon like a market-rampaging Godzilla (but nowhere near as exciting): the November election.
Now, listen up and come in close. I have a secret that some of you will. Not. Like.
As far as Wall Street and your investment portfolio is concerned … it doesn’t matter who wins.
Will there be winning and losing sectors if Joe Biden wins? Yes.
Will there be winning and losing sectors if President Trump wins? Yes.
Will those sectors be different depending on who wins? Definitely.
However, there are always winners and losers on Wall Street. The market, as a whole, ultimately doesn’t care who’s president. (Yes, I know you care. My inbox is chock-full of “caring.”)
But Wall Street will adapt and move forward. As long as you’re prepared to adapt with it, you’ll be just fine. After all, that’s why you read Great Stuff, right?
The one thing Wall Street isn’t prepared to deal with, however, is election uncertainty. And given the way the pandemic already affects the election less than a month out, things could get messy if the race is tight.
The last thing the market wants right now is an extended version of 2000’s Bush versus Gore fiasco. But fiascos and disasters aside, no matter who you cheer, jeer, fear or steer clear of…
At least listen to someone who can make volatility lucrative if nothing else! Click here.
The Good: King Me
It’s football season again! As a Bengals fan, this has historically been both a curse and a blessing. But Joey Burrow is out there killing it, so this Cincinnati fan has hope. But I digress…
The return of the NFL hasn’t been as great for sports betting firm DraftKings Inc. (Nasdaq: DKNG). The company said this morning that “atypical hold rates from NFL wagering” negatively impact the quarter by $15 million. Low “hold rates” mean a higher number of payouts for bettors, leaving the “house” hanging.
Add to that news that DraftKings will offer 32 million more shares, and it’s easy to see why DKNG dropped more than 6% today.
Despite the troubles, DraftKings still reiterated its third-quarter revenue outlook of $131 million to $133 million. The company also said that monthly unique bettors are up 64% year over year, with total wagers up 460% and iGaming revenue up 335%.
Whether this is a sign that armchair quarterbacks moved away from Robinhood and back into sports betting remains to be seen. But this resurgence bodes well for DKNG stock going forward.
The Bad: It’s a “Value Trap!”
Normally, I don’t take investment advice from the Mon Calamari … they always go on and on about “It’s a trap!” this and “It’s a trap!” that…
But when it comes to AT&T Inc. (NYSE: T), I’m inclined to listen. KeyBanc Capital Markets Analyst Brandon Nispel (admittedly a weird name for a Mon Calamari) just downgraded T stock to underweight. Nispel cited “deterioration” in AT&T’s DirecTV business as well as falling postpaid revenue in AT&T Wireless.
What’s more, Nispel said that there were “few positive catalysts for [AT&T] outside of asset sales.” Oof.
In layman’s terms, AT&T’s business is so bad, the only reason to buy the stock is the potential return on selling off company assets … such as DirecTV. If only the company’s online offerings weren’t such a mess — or available on Roku.
But what about AT&T’s staggering 7% dividend yield? Nispel says that’s a “value trap.”
Think about it this way: Nearly every other wireless or online content provider has seen considerable gains during the pandemic. And yet, AT&T struggles on all fronts. If that doesn’t scream “leadership failure,” I don’t know what does.
The Ugly: The Show Won’t Go On
The days of “let’s all go to the movies” were already coming to an end. But for Cineworld Group PLC (LSE: CINE), the second-largest movie chain in the world, that time may be closer than you thought.
CEO Mooky Greidinger (I really hope that’s a nickname), announced this morning that Cineworld would draw the curtain on 663 screens in the U.S. and the U.K. indefinitely. Mooky noted that the decision was not made lightly and that the company “did everything in our power to support safe and sustainable reopenings in all of our markets.”
But the problem might not have been safety concerns as much as the delayed release of AAA titles.
Cineworld’s announcement comes on the heels of MGM’s decision to yet again delay the latest James Bond film No Time to Die until April 2021.
And Bond isn’t alone. The next Fast & Furious installment was delayed until May 2021, as well as other potential blockbusters, including Top Gun: Maverick and Disney’s Mulan live-action, which went straight to Disney+.
If we’re being honest here, the pandemic sped up a trend that was already in the making. The rise of streaming services and massive, high-definition home theaters slowly ate away at the moviegoing experience for years.
Why spend all that money on tickets, popcorn, snacks and drinks when you can just stay at home and not have people constantly talking in the movie theater?
The question now is, which movie chain will go under first?
Now, the other other uncertainty that plagues our pandemic days is the good news, bad news cycle with relentless torrents of trepidation … and the dullest of glacial-paced doldrums. When it rains, it pours, and when it pangs, it roars.
Mr. Great Stuff, you’re just making up metaphors today.
That’s my secret, reader: I always have been. But what I can’t make up is that there is, in fact, a touch of investable brightness behind every cloudy headline. Our Chart of the Week paints a similar picture. We could focus on the labor market’s devastation and depravity all day long, but masochism for its own sake is boring, so…
Bloomberg released a nice-and-tidy graphic with 10 snapshots at individual job markets, from education to the recording industry. Each line below shows the past year of job growth or decline, with last month highlighted in either green or red, depending on how it fared in September.
Take a look:
Anything stand out to you? Investment ops here won’t be as obvious from the get-go, but take the motion picture business for instance, with jobs up almost 10% on the month.
See, California has gradually eased filming restrictions, and the summertime production sadness might ease up soon, albeit with the same pandemic safety hurdles most other industries also face.
But but, cinemas are closing! How can motion picture jobs be up? And what @%&#*% stock do I buy?!
Did … did you skip past what we said about Cineworld? The curtain call has long rang out for cinemas, but not the film industry — it’s just delayed. The point of picking through the pandemic rubble with investor’s eyes is that the whole COVID-19 kerfuffle confirms a dying industry from a thriving one.
Forget those cinemas — Great Stuff Picks has been banking on Roku Inc. (Nasdaq: ROKU) long before this pandemic began. Look for Walt Disney Co. (NYSE: DIS) too on this one. Digital entertainment has only strengthened, molded by the stay-at-home market’s pressure like a portfolio diamond.
Amusement, gambling and recreation? Same thing, even if we’re kind of splitting industry hairs. Job growth here is a boon to companies like DraftKings that found ways to keep cranking cash in the impersonal all-digital market.
On the other hand, sorry if you were banking on the great coal resurgence…
So goes the ebb and flow of opportunity — sometimes it’s clear to tell a dying industry and trend from a future-building one, sometimes it’s not.
Just ask Mr. America 2.0 himself: Paul .
Great Stuff: Good Times, Bad Times
You know we’ve had our share. We’ve also had our fair share of your emails in our inbox this weekend — thank you!
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Until next time, stay Great!
Editor, Great Stuff