Tax Cuts for Viruses
I have a TLDR (too long, didn’t read) for you today: Stocks are up today … because stocks were down yesterday.
It’s a bit tongue-in-cheek, but if the shoe fits … I think we can all agree that the market’s volatility has just been ridiculous lately.
The financial media tell you that Wall Street is rallying because the White House is finally pulling together a plan to combat the coronavirus. That plan, which may or may not be ready, involves a hefty amount of economic stimulus.
The White House is banking on a payroll tax cut, a potential stimulus for the travel industry and other economic relief.
“We are to be meeting with House Republicans, Mitch McConnell, and discussing a possible payroll tax cut or relief, substantial relief, very substantial relief,” President Trump said at a press briefing last night.
The move arrives on the heels of an $8.3 billion spending package passed on Friday, which was designed to support state virus responses and boost vaccine research spending.
Any such deal will have to move through both the Senate and the House. But reportedly, President Trump will hold a briefing today to outline details of the economic package. Reports also indicate that the package could include “a short-term expansion of paid sick leave,” according to the infamous “people familiar with the matter.”
The $8.3 billion already thrown at state preparedness and vaccine research was clearly a non-starter for Wall Street.
But payroll tax cuts? That’s got everyone in a bullish tizzy.
It’s time for a reality check.
Tell me: How will millions of Americans actually get that money when they’re too sick to go to work?
Even better, how will they spend that extra money if they’re sick and/or quarantined?
(Seriously, tell me! Email us at GreatStuffToday@banyanhill.com and let us know your thoughts.)
I would argue that if the American economy is as strong as this administration claims, people already have money. Could they use some more? Certainly. We can always use more money.
But viruses don’t care about money. They care about prevention, containment and trust in your government to handle the situation. As I’m sure most Great Stuff readers would agree, we’re sorely lacking on all three fronts right now.
So, while Wall Street likes the idea of a payroll tax cut on the surface, clearer heads will eventually prevail and see this for what it is: a smokescreen to curry public favor.
President Trump has been very good for the stock market. But when it comes to the coronavirus outbreak … the emperor has no clothes.
Now, viruses may not care about tax cuts … but if President Trump offers one, who are we to look a gift horse in the mouth?
Good: Parts Production Parade
Increased production? In my coronavirus outbreak? It’s more likely than you think.
Today, Tesla Inc. (Nasdaq: TSLA) announced that it’s ramping up production capacity for car parts in China. As part of its goal to locally source all parts for Chinese-made vehicles, Tesla will add production lines to its Shanghai factory.
Those parts will eventually include battery pack components, electric motors and motor controllers. Right now, however, Tesla has only confirmed additional production lines for cooling pipes for Tesla heat-management systems.
Localization of Tesla parts in China is a major hurdle for production costs in the country. Currently, Tesla imports about 70% of the parts for Chinese-made vehicles.
Wall Street appears to be happy with the news, as TSLA shares outpaced the broader market’s gains today.
Better: No Hunting
Everyone said it couldn’t be done. Everyone said you couldn’t take hunting supplies out of Dick’s Sporting Goods Inc. (NYSE: DKS). “The company would go under!” they claimed. Boycotts were organized. Rabble-rousers roused rabble, and so on.
But Dick’s hasn’t merely carried on — it’s beating expectations. This morning, the company announced that it earned $1.32 per share in the fourth quarter, topping the consensus by $0.10 per share. Revenue topped Wall Street’s view by $120 million, and same-store sales growth soared to 5.3%, blasting past estimates for 3% growth.
And if that wasn’t enough, Dick’s also announced that it’ll remove the hunting category from another 440 stores this year and boost its quarterly dividend by 13.6%.
The company did give a nod to the coronavirus, issuing conservative guidance for fiscal 2020. However, that guidance was still well within Wall Street’s expectations.
It seems that Dick’s can still fire from the hip — even without gun sales.
Best: Fire, Ready, AIM
If you need more proof that there are serious pockets of opportunity out there in this volatile market, look no further than Aim ImmunoTech Inc. (NYSE: AIM). This biotech focuses on cancer, immunodeficiency and antiviral therapeutics.
With that lead-in, you probably already see where this is going.
Yesterday, Japan’s National Institute of Infectious Diseases (NIID) announced that it’ll begin testing Aim’s Ampligen drug as a treatment for COVID-19. Ampligen was developed to treat the 2002 SARS outbreak. Researchers believe that the similarities between SARS and COVID will make Ampligen a viable treatment for the current outbreak.
According to Aim: “In those studies of SARS-infected mice, Ampligen stands out as the only drug tested that conferred a significant survival effect: 100% of the Ampligen-treated mice survived, while none of the untreated mice survived.”
The NIID hopes that Aim’s drug will have the same success rate with COVID-19.
The bonus for Aim is that Ampligen is already an established antiviral treatment on the market — i.e., it’s already passed human safety trials. All that’s left to do is prove that it’s effective against the coronavirus, and Bob’s your uncle.
Wall Street realized this yesterday and sent Aim shares soaring more than 100%. The stock fell sharply on profit-taking today, but ambitious investors looking for an opportunity might consider taking a risk and jumping on board.
If it makes you uncomfortable when things go down, don’t look.
— Chris Remedios, a certified financial planner with Remedios Financial Planning
Well done Slytherin, well done … however, what if you trade on Robinhood and literally can’t look at your positions?
Checkmate, other brokers. Nothing’s down if you can’t look at your account. (It’s one of Robinhood’s hidden perks.)
Great Stuff Rants: Inovio Pharmaceuticals
I am mad today, dear readers. I’m mad because you got hornswoggled. Ya been had. Ya been hoodwinked. Bamboozled. Led astray. Run amok.
Yesterday, Great Stuff recommended closing out your position on Inovio Pharmaceuticals Inc. (Nasdaq: INO). Early Monday morning, the stock had rallied to a fresh all-time high on hopes that the company’s COVID-19 vaccine would be ready much earlier than anyone had hoped.
I recommended taking profits ahead of the company’s quarterly earnings report and ongoing market volatility. I still like Inovio and its revolutionary system for designing DNA-based treatments and vaccines. This company is truly on the cutting edge of modern medicine.
You should’ve realized a 200%-plus gain on INO if you got in when Great Stuff recommended the stock. However, notorious short seller Citron Research had other plans.
Citron said in a tweet that “[the] SEC should immediately HALT this stock and investigate the ludicrous and dangerous claim that they designed a vaccine in 3 hours. This has been a serial stock promotion for years. This will trade back to $2. Investors have been warned.”
Inovio responded with the following statement: “A third-party report today demonstrated a lack of understanding of the science behind DNA medicines.”
A lack of tech understanding? You don’t say…
This is the short seller’s MO. Citron makes outlandish claims on red-hot tech companies because it knows most investors don’t understand the underlying tech. Then, Citron attempts to profit from the panic.
Here are some examples from the past couple of years:
- June 9, 2017: Citron called Nvidia Corp. (Nasdaq: NVDA) a “casino stock” and said its rally had gone too far. NVDA went on to rally 63% in the next year.
- October 6, 2017: Citron said that Shopify Inc. (NYSE: SHOP) would get “caught red handed by the FTC” as a “promoter of the hottest new ‘get rich quick’ scheme on the internet.” SHOP has since more than quadrupled in value.
- November 28, 2017: Citron called Roku Inc. (Nasdaq: ROKU) a “total joke.” Roku has more than doubled since this tweet … guess who’s laughing now?
- October 23, 2018: After remaining a bear since 2016, Citron finally relented on Tesla Inc. (Nasdaq: TSLA). It took Citron two years, but at least it finally got this one right.
- June 11, 2019: Citron made a rare bullish call on Revolve Group Inc. (NYSE: RVLV). “Revolve has done what I call ‘fashtech’: the merging of fashion and technology,” the company said. Fashtech never really took off. RVLV is off about 68% since.
- December 12, 2019: Citron set a $5 price target for Peloton Interactive Inc. (Nasdaq: PTON). OK, I agreed with this one — not the $5 price target, which will likely never materialize — but I’m throwing this one in to show that it’s not all bad.
The list goes on, including bearish positions on Tesla and Netflix Inc. (Nasdaq: NFLX). You get the picture.
The point is, dear readers, yesterday you got Citron-ed on Inovio. I’m almost tempted to get back into the stock, given the short seller’s track record. Almost … the market’s too volatile right now to go chasing waterfalls.
Most of you should’ve realized at least a 100% gain on INO — not the 200% gain I touted before the Citron rout. Given the S&P 500 Index’s 14.8% route through yesterday’s close, I’d say that’s not too shabby.
Meanwhile, Inovio will come back, and Great Stuff will be ready to pounce when it does.
If you’re looking for truth in tech investing, Ian King’s research is perfect for you. Not only can Ian find the right tipping-point trends to outlive viral markets, he also pinpoints each trend’s standout leader.
Until next time, good trading!
Editor, Great Stuff