Friday Four Play: The “You Said PP … I” Edition
Thank Buffett it’s Friday, Great Ones!
If you’re a regular stock market Joe — a “trader Friday,” if you will — I imagine your morning went something like this:
It’s a fine Friday morning! The sun is up. The dog’s walked. I’ve got my coffee.
Let’s check my portfolio and the latest stock market news. Inflation did what? *Spews coffee*
That’s right, folks. More fuel for inflation fears arrived today. According to the Labor Department, the U.S. producer price index (PPI) doubled from 0.5% in February to 1.0% in March. And if that isn’t enough to get you shakin’ in your boots, PPI surged 4.2% from March last year — the largest year-over-year gain since September 2011.
Let me just say that I told you so … twice.
On March 11, I warned that there would be “short-term freakouts on inflation, but no real long-term structural basis for concern.”
Then again, on April 2, I predicted that “we will see rapid economic growth over the summer as the ‘Great Reopening’ adds jobs and unleashes pent-up demand. This will lead to short-term inflationary pressures, as I’ve noted before.”
But maybe twice isn’t enough? So, let’s cover this ground again. Yes, PPI surged. Yes, short-term inflation is coming. Yes, it was expected. How could it not be? We just went through the worst of a pandemic that shut down global industries, idled shipping lanes and laid off millions of workers.
All of these industries are just starting to ramp up, reopen shipping and production and rehire workers. Under the best circumstances, even the most robust and well-handled economy on the planet would take time to get moving again.
Add in hiccups like the Suez Canal blockage, and you have a serious spike in demand battling a sluggish reawakening in supply.
But supply will catch up — mark my words. Consumers aren’t the only ones itching to get out there. Businesses are chomping at the bit to rake in their share of pent-up demand. Wall Street knows this.
Want proof? Just look at the Dow, S&P 500 or the Nasdaq today. If there were long-term inflationary concerns after today’s PPI data, stocks would be deep in the red across the board. As it is, stocks are only minorly inconvenienced.
So, don’t let inflation fearmongering get the better of you. We’re on the cusp of one of the biggest economic comebacks in history. And that means opportunity for Great Ones like you.
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And now for something completely different, here’s your Friday Four Play:
No. 1: Sinking Ships?
Last week, the CDC decided to delay reopening the U.S. cruise industry. This week, Florida is suing.
“We don’t believe the federal government has the right to mothball a major industry for over a year, based on very little evidence and very little data,” Florida Governor Ron DeSantis announced on Thursday.
On one hand, DeSantis has a right to be mad. Florida lost an estimated $3.2 billion in the first six months of the CDC’s no-sail order.
On the other hand, I take issue with the “very little evidence and very little data” statement. We know how COVID-19 spread. We know it has killed 560,000 Americans and more than 2.9 million people worldwide. I’d say that’s a pretty substantial amount of evidence.
Furthermore, cruise lines aren’t known for handling outbreaks very well. According to CDC data, cruise ships have averaged about 10-12 shipboard outbreaks per year for the last 10 years. And those outbreaks were for a largely preventable and easily treated — yet highly contagious — illness caused by the norovirus.
And DeSantis thinks that Royal Caribbean (NYSE: RCL) and Carnival (NYSE: CCL) can handle COVID-19? A virus that’s just as contagious, harder to detect and prepare for and is considerably deadlier?
It’s not like the CDC is being completely unreasonable. It set out guidelines for cruise lines to set sail again — albeit after getting some heat from the industry. Furthermore, Royal Caribbean appears to be stepping up to the plate and hopes to be in operation by mid-July.
All this back-and-forth debate has certainly muddied the waters for investors. However, if you’ve got a stomach for risk-taking (not norovirus) then RCL and CCL just might offer some opportunities when this mess is finally settled.
No. 2: Not So Impossible, Huh?
Are you ready for more meatless … umm … meat?
It tastes the same … if you close your eyes.
Impossible Foods is looking to hit the public markets and change all that — if you believe the alleged people familiar with the matter.
IPO or SPAC, Impossible doesn’t care how it goes public, and there’s no exact timeline given to the deal.
Overall, details are sparse on the meatless wonder’s public foray, but the infamous unnamed sources speculate the company could be valued upwards of $10 billion.
To me, Impossible’s foods still taste better than Beyond’s … like, a lot better. But that’s just my personal opinion, and you shouldn’t use some random internet dude’s taste in non-meat meat to buy IPOs so…
What I will say is that Impossible’s next cash infusion should give it the funds it needs to make its products more widely available — and potentially with more big-name alliances like Disney and Burger King. If Impossible could pull off an IPO, I think it’d have a killer foothold to take on Beyond in the meatless market aisles.
Editor’s Note: It’s Not Impossible … It’s Imperium!
A technology called “Imperium” is about to spark the biggest investment mega trend in history … with one small Silicon Valley company at the center of it all.
It’s something that only science geeks know about right now. Yet, according to experts, Imperium is set to go from 1 million users to 2 billion in the next four years, launching a stock market “gravy train” that almost nobody sees coming.
No. 3: Fractional Fudging
We all know that Robinhood offers fractional shares … right?
You know, fractional trading?
That thing where you can own like one one-thousandth of a share of Berkshire Hathaway for a few bucks instead of dropping $400k for a single share?
Well, funny thing about those fractional shares … they need to be reported to the SEC just like every other stock trade.
Typically, those reports go through wholesale brokers — i.e., bigger brokerage firms that handle such transactions. Now, these wholesale brokers handled most of Robinhood’s fractional trades … but most isn’t good enough for financial reporting.
In fact, most can get you in a lot of trouble with “Prince John,” as Robinhood is about to find out.
How many trades Robinhood left unreported remains unclear. Upon policing itself, Robinhood believes it was only a “very small percentage of its fractional orders from its own inventory.” So, it’s just a little treason, is it?
I can’t imagine this going over very well at all for Robinhood, not to mention the potential impact on the company’s IPO. And therein lay the real questions here. Does Robinhood get fined into oblivion? A slap on the wrist? And just how many trades did these buggers not report? Curious minds want to know.
I, too, want to know what you think about Robinhood getting caught in the revolving door of publicity missteps. Drop me a line at GreatStuffToday@BanyanHill.com.
No. 4: Levi To Beaver
First-quarter earnings season starts next week! Aren’t you excited?
How about a little taste before the main course? Levi Strauss (NYSE: LEVI) entered the earnings confessional today … and it was either really late to the previous earnings party, or really early to next week’s bonanza.
Now, I know that most of us barely left our PJs and sweatpants during the pandemic. However, it turns out that even a pandemic can’t kill denim. You’ve heard of no life ‘til leather? How about no dreams without denim?
Even with pandemic store closures, supply chain stiffness, and, let’s face it, all of us lounging around in our skivvies … Levi’s revenue only dropped 13% on the quarter.
On paper, the pants producer packed a powerful punch: Revenue still reached $1.31 billion and beat predictions for $1.25 billion.
Earnings likewise creamed analysts’ estimates: $0.34 per share vs. expectations for $0.24 per share.
But, like Billy Mays would have you believe — there’s more! Levi also raised its dividend and guidance for future earnings. Why, we have here the rare double beat and double raise! The sheer optimism is overflowing!
Levi expects revenue to grow 24% to 25% in the first half of this year, and that rosiness seems to be the only part of Levi’s report that the Street picked up on.
Analysts went gaga about an apparent comeback for jeans once more places reopen — as if millions of cozy, comfortable remote workers would suddenly lay down their yoga pants and gym shorts to don the denim hides and return to public civilization.
But really though — a comeback? Jeans? Where’d they go? Levi’s told me that quality never goes out of style…
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Editor, Great Stuff