Walmart breaks through the Halloween wall. Brace yourselves. Christmas is coming!

Friday Four Play: The “It’s Way Too Quiet” Edition

If you’ve been following the Great Stuff Trade War Cycle chart, you know that we’ve been stuck at “No progress is made” for about two weeks.

There have been no major headlines. No tweets from President Trump. Nothing.

It’s been unusually quiet … almost too quiet.

This silence has been golden for Wall Street. The S&P 500 Index is up almost 1% on the week and headed toward its third consecutive weekly gain, bolstered by better-than-expected corporate earnings.

And yet, here I am writing Great Stuff feeling like Charlie Brown.

I just can’t seem to get fully into the bullish earnings season festivities. It’s that silence that’s eating at me. (Parents, you’ll understand. It’s that feeling you get when your kids are in the other room, and they’ve been quiet for way too long.)

Yesterday, however, we saw some stirring in U.S.-China relations. The silence is about to be broken.

News hit that China is going to ask the U.S. to remove tariffs in exchange for big purchases of agricultural products.

Now, correct me if I’m wrong, but didn’t China already agree to buy billions in U.S. agricultural products?

Yes, I’m sure of it. Trump even tweeted about it. As part of the supposed new trade deal, China would buy $40 billion to $50 billion in U.S. agricultural products.

So, what’s this new talk of removing tariffs for buying soybeans and such? Do we already have a trade deal or not?

What’s more, the rumblings about being tough on China are starting to rise again. At a CNN conference yesterday, Trump trade adviser Peter Navarro had this to say about China: “We are dealing with a strategic rival — and they are trying to buckle our knees.”

Navarro continued: “As the president has said many times, we’ll either get a great deal or we won’t. We’ll see what happens.”

Truer words have never been spoken.

For reference, here’s where the Trade War Cycle chart stands right now:

With the late uptick this week in news about U.S.-China trade relations, I have a suspicion we might hear something on this front soon — possibly after the close of trading today.

We’ll see.

And now for something completely different, here’s your Friday Four Play:

No. 1: Hey, Big Spender!

The minute Inc. (Nasdaq: AMZN) walked in the joint, I could see it was a company of distinction. A real big spender.

It’s been a blissful two years of solid growth for Amazon investors. But that peace was shattered this morning.

Amazon posted its first year-over-year drop in profit since June 2017. Earnings fell 35% to $4.23 per share from $5.75 per share last year. Wall Street was anticipating a profit of $4.60 per share.

The reason for the decline? Heavy spending on shipping. Shipping costs surged 46% in the third quarter as Amazon rolled out one-day shipping to Prime subscribers. The company says it will continue to push one-day shipping going forward as online competition heats up.

But wait … there’s more.

Amazon also said that Amazon Web Services (AWS) revenue growth slipped, up only 35% in the quarter compared to 37% growth in the prior quarter and 46% last year.

And — yes, there’s still more — Amazon projected holiday sales in the fourth quarter to come in below Wall Street’s expectations.

To recap, Amazon’s earnings growth declined, AWS revenue growth slowed and holiday sales are coming in lower than expected.

We’ve seen this act before from Amazon. Longtime AMZN bulls remember when the company was spending so much on growth that profits were slim or nonexistent. It’s nothing to get rattled about yet, but it’s worth keeping a close eye on.

No. 2: Our Chief Weapon Is Pricing…

Pricing and convenience … convenience and pricing! Our two weapons are pricing and convenience … and ruthless efficiency!

Well, maybe not that last one. (I’ll bet you didn’t expect a Spanish Inquisition reference today!)

Regardless, Guggenheim brought out the comfy chair for Uber Technologies Inc. (NYSE: UBER) today. Guggenheim analyst Jake Fuller initiated coverage on UBER with a buy rating and a $40 price target — that’s 20% above the stock’s trading range today.

Why the upgrade? Because Uber has “unappreciated pricing leverage” in the ride-hailing market. Fuller says that the “growth-at-all-cost” pricing war between Uber and Lyft Inc. (Nasdaq: LYFT) is abating, which could lead to muted competition and higher revenue for Uber.

What’s more, Fuller believes that the WeWork dumpster fire lessens the chance that private investors will dump more money into potential competitors.

This is mostly true. But what Fuller is forgetting is that Lyft and Uber already have established competition: the taxi service market they originally disrupted. Remember that Uber and Lyft’s chief weapons are low prices and convenience.

Once they start raising prices, they lose that competitive advantage over taxi services. That leaves them with convenience … and even that advantage is starting to erode with the rise in popularity of taxi apps such as Gett.

So, Uber has pricing power, but maybe not as much as Guggenheim thinks.

No. 3: Forgot About Intel

Nowadays, every semiconductor company’s got something to sell, but investors act like they forgot about Intel Inc. (Nasdaq: INTC).

There’s been so much talk about Advanced Micro Devices Inc. (Nasdaq: AMD) taking market share from Intel — yes, Great Stuff is guilty as charged — that we seem to forget how much of the market Intel actually controls.

We were reminded this morning when Intel reported Street-beating quarterly results. Revenue rose to $19.2 billion, topping expectations for $18 billion. Earnings blew past estimates by $0.18 per share.

What’s more, the hotly contested data-center market remained a big revenue generator for Intel, rising 4% to $6.38 billion despite AMD’s encroachment.

The kicker for INTC investors was the company’s announcement of a $20 billion stock buyback plan.

While I would rather see Intel use that cash to address competition with AMD — and production delays with its 7-nanometer chip production — investors will be more than happy with the bump.

No. 4: The Nightmare Before Christmas

The Halloween wall has fallen! The elves are riding for King’s Landing and the red-suited one (who shall not be named here before Thanksgiving) is waxing his sleigh.

Brace yourselves: Christmas is coming!

Walmart Inc. (NYSE: WMT) has fired the first volley in the holiday war, bypassing Thanksgiving altogether and gunning straight for Christmas. The world’s largest retailer announced that it will begin unveiling online holiday sales at midnight tonight.

Even Walmart’s Chief Merchandising Officer, Steve Bratspies — wait, brat spies? Really? I’m sorry, dude — said it was the earliest start to the holiday season ever.

“Saving our customers time is also paramount at this time of year, especially with fewer days to get ready for big family meals, parties and gift giving,” said Bratspies.

I’m sure Walmart is worried about your limited party time. Brian Cornell, CEO of Target Inc. (NYSE: TGT) was at least a little more honest: “If you’re in retail, every day counts.”

Cornell said that Target wouldn’t be far behind Walmart, but that it would wait until after Halloween. “The trees are on their way to stores,” he noted.

Great Stuff: Help Your Friends Make Billions!

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Are you hoarding all this Great Stuff for yourself?

I don’t blame you. If I had a financial e-zine with a trading chart that could help me make billions, I’d keep it quiet too.

But no … no! Shame on you for not sharing!

Where’s your holiday spirit? (If you can’t find yours, you can buy some tonight at midnight at Walmart.)

Sharing is caring, and Great Stuff cares.

So, if you have a friend who still gets their daily financial news in that dry, Waspy old format from the major financial publications, forward them today’s copy of Great Stuff.

Liven up their day. Help them make billions too!

They’ll thank you for it.

Maybe they’ll even buy you some (really) early Christmas presents with their winnings.

Until next time, good trading!


Joseph Hargett

Great Stuff Managing Editor, Banyan Hill Publishing