Bubble, Bubble Toil and Trouble
I had a rather disturbing revelation this weekend, dear reader … one I haven’t had since the 2008 financial crisis.
On Saturday, I was minding my own business, playing video games online to wind down from the week. You know, social distancing and all that. Nothing out of the usual. Same group of guys and gals I’ve played together with since 2014. Just your typical night of shooting aliens, capturing objectives and shooting more aliens.
But this night would be different.
My gaming group started to talk about the market — a topic we’d never broached before, even remotely. This group of twenty-somethings discussed everything from Tesla to Ford, Amazon to Facebook. Who invested in what. How much they made or lost. And options, options, options!
Nearly all trade on Robinhood. Nearly all used their stimulus cash on the stock market — well, except for the money spent on video games, that is.
Now, I keep my work private when gaming online to avoid instances like these. The SEC gets a big frowny face when people like me offer individual advice off the record. Needless to say, I had to stay hush-hush during the conversation, keeping my real identity a secret like Spiderman.
It was weird, let me tell you!
As I feigned ignorance on it all, my gaming group told me that now was the time to start buying stocks. I needed to start trading options. It was all too easy, they said. “Stonks only go up, man!” they said.
I need to get on Reddit, /r/WallStreetBets or maybe MarketWatch (which wasn’t very high on their list).
I haven’t seen this level of investing fanaticism from retail investors since my in-laws asked me how to flip houses back in 2007.
Now, I’m glad my gaming group took a keen interest in their financial future. At least, that’s what I’d like to say. I’ve known this group for years. They’re in the market for the “tendies,” not future growth.
Which brings me to my point: We’re in a massive market bubble. The thing is, it truly is different this time.
The last time around, this euphoria was driven by investors keen to get in on a soaring bull market and a raging U.S. economy. This time, the soaring bull market is driven solely by the Federal Reserve’s unlimited stimulus — not a raging economy.
The situation is both a curse and a blessing.
The blessing is that the market has critical financial support from the Fed to keep it from going down too much. This unfettered support has led even your average gamer to dive headfirst into the market.
The curse is that the market should’ve already gone down to reflect the reality of the pandemic-mired U.S. economy. We all know it. We’re hitting all-time highs while earnings plummet, while millions are out of work and while a return to lockdown looms on the horizon.
I won’t tell you to pull out of the market completely right this second. I’m telling you to proceed with caution. Don’t be greedy. Take your profits when they come and cut your losses short. And keep a healthy stockpile of cash for taking advantage of critical opportunities.
Better yet, listen to Ted Bauman — the living embodiment of temperance and fair-headed research even in the most uncertain times. Ted’s readers get the best insights in risk deflection and wealth protection — a necessary part of your toolbelt going forward.
Trust me: Now’s not the time to get your research and plays on Xbox Live…
Good: Vacant Vaccine Valuation
If you’ve been jonesing to jump into a jiving COVID-19 vaccine maker, but stock prices have been too damn high … you’re in luck today, my friend!
J.P. Morgan stressed that it still believed in the bull case for Moderna, stating that it remains one of the frontrunners in the COVID-19 vaccine race. However, the firm noted that “…at these levels we are having difficulty justifying more upside given the uncertainty of the duration/characteristics of the COVID-19 pandemic.”
Valuation downgrades always strike me a bit weird. J.P. Morgan basically said: Y’all followed our advice too much, so we’re telling you to cool it.
But Moderna has an impressive vaccine in the works — one that’s blowing past all testing benchmarks. The big misnomer in this vaccine race is that there will only be one winner. Given the size and spread of the COVID-19 pandemic, there’s more than enough room for multiple vaccines.
Moderna is sure to be one of them, making today’s pullback a potential buying opportunity for those who missed the initial rally.
Better: Outing Oxford
Speaking of vaccine frontrunners, AstraZeneca Plc. (NYSE: AZN) finally released much-anticipated trial data on its COVID-19 vaccine.
The company has partnered with Oxford University in the U.K., and it currently has what many consider to be the leading vaccine candidate — ChAdOx1 nCoV-19. This is why we typically don’t let biotech researchers name things.
According to Oxford’s phase 1 trial data, AstraZeneca’s vaccine produced a strong immune response in the 1,000 trial participants. This is very good news, in case you wondered.
What’s even better, though, is that researchers believe that more than one million doses of the vaccine could be ready to go by September. That’s way ahead of the “early next year” forecasts many anticipated.
So, if you’re looking to invest in one of the supposed “winners” of the vaccine race, your bets should probably fall on AstraZeneca at this point.
Best: The Down Boys
I was thrilled when Nikola Corp. (Nasdaq: NKLA) shares surged the day after Great Stuff Picks recommended buying the electric vehicle (EV) maker. I didn’t plan on that kind of enthusiasm, but it was welcome for a bit.
The stock has since come back to earth, with Wall Street panicking over stock warrants. These NKLA stock warrants were issued as part of its going-public process. They were always there, waiting in the background.
Last week, these warrants were eligible to be exercised.
In short, the NKLA warrants allow a holder to buy one share of Nikola for $11.50. The warrants themselves trade freely, and they last traded near $24.62 on Friday. This means that someone buying and exercising a warrant would pay about $36.12 for NKLA stock. There are about 24 million NKLA warrants outstanding.
Because of this, Wall Street is seeing red and panicking over the potential that millions of new NKLA shares will flood the market. I say “Wall Street,” but what I really mean is retail investors. The big names on Wall Street already knew this would happen. The warrants were already priced into NKLA shares.
What this means is that if you missed out on Great Stuff’s original recommendation to buy NKLA, you now have another opportunity to get in.
Nothing has changed in our outlook for Nikola or the company’s unique hydrogen fuel cells. There are great things on the horizon for this company. Look at these warrants as your cherry pie, so to speak. The panic-induced sell-off is your second chance at a missed opportunity.
Editor’s Note: If chasing EV makers isn’t your bag … check this out. One company is set to tear through the electric market in the most lucrative story of 2020. Click here for the details! (And we’re not talking about Tesla here, either…)
Ah, earnings season.
The roar of the analyst crowd, the rush of seeing “great beat!” or “bad miss!” blaze across every financial media outlet, prophesizing future earnings…
Past earnings seasons were comfortable and familiar, like our favorite pair of jeans — at least if the latest reports, data and projections fresh out of the confessional box are your thing. Maybe that’s just us.
Right now, we’re headed into the thick of a busy earnings week — and company reports will now include a full pandemic quarter. So, you know we had to hit up our friends on the earnings front lines today: Earnings Whispers on Twitter.
In today’s Chart of the Week, here’s what reports we’re watching:
- We start off airborne (or grounded) with the jet-setting usual suspects: United Airlines Holdings Inc. (Nasdaq: UAL) on Tuesday, Southwest Airlines Co. (NYSE: LUV) and American Airlines Group Inc. (Nasdaq: AAL) on Thursday.
- It’s a bird! It’s a stealth chopper! It’s a look at some good ol’ Uncle Sam spending with Lockheed Martin Corp. (NYSE: LMT) for good measure.
- Let’s check out the retail side with TD Ameritrade Holdings Corp. (Nasdaq: AMTD) and Interactive Brokers Group Inc. (Nasdaq: IBKR) on Tuesday, then E-Trade Financial Corp. (Nasdaq: ETFC) on Thursday.
- It’s a Robinhood top-held-stocks special on Wednesday when both Tesla Inc. (Nasdaq: TSLA) and Microsoft Corp. (Nasdaq: MSFT) report, with some Chipotle Mexican Grill (NYSE: CMG) on the side (yes, guac costs extra).
- We have a tech-thirsty Thursday that features current Great Stuff Pick Citrix Systems Inc. (Nasdaq: CTXS), joined by chipmaker Intel Corp. (Nasdaq: INTC) and the likely ad-revenue-anemic Twitter Inc. (NYSE: TWTR).
- We’re watching for quick glances at the state of consumer credit throughout the week, with American Express Co. (NYSE: AXP), Discover Financial Services (NYSE: DFS) and Capital One Financial Corp. (NYSE: COF).
We’ll keep you up to speed on the fast-and-loose action this week. It’s like the Lollapalooza of earnings highlights with all the big-name greatness. (Man, I miss going to concerts right now…)
What earnings reports are you looking forward to? Are there any holdings that you’re itching to take some profits or cut your losses on?
We’d love to hear from you! Whatever your take on the market, the economy and this whole crazy pandemic thing, write to us at GreatStuffToday@BanyanHill.com.
Great Stuff: And We’re Off!
By the time you read this, the first horses of the looming earnings Armageddon may already be out of the gate, to mix metaphors.
Remember, while I can’t give you individual investing advice … you and I both know that the profit-taking this season will be frantic, chaotic, hectic — frenetic, even! We gotta read the room, here, and grab those open and lofty gains if the grabbing’s good.
However, today’s issue of Great Stuff does not end here. You can always check out Ted Bauman’s insights for all things wealth protection and risk deflection. Or, follow us on the social media front: Facebook, Instagram and Twitter.
Until next time, stay Great!
Editor, Great Stuff