WeWork, Tesla, China: Lame Wall Street Wrong Again
How lame is Wall Street?
Well, let me give you a few examples.
First, WeWork is feeling the wrath of Wall Street. Right now, the We Company is debating with its underwriters over its initial public offering (IPO) valuation.
The funny thing is, this type of public debate reminds me of another company that struggled at the start of its IPO: Google.
Then, we have Wall Street’s favorite punching bag … Tesla.
It’s about to launch a new battery that can run its self-driving cars for 1 million miles! I believe that this innovation will be the push Tesla needs to blow market makers’ estimates out of the water.
And speaking of Wall Street being wrong, The Wall Street Journal recently published an article finally admitting that China’s economy may be weaker than it thought — something we’ve been saying since day 1 of the trade war!
Check out this week’s Market Talk below:
Video edited and produced by Amanda Klein and Warren Henderson
September 9, 2019
Amber Lancaster: Welcome to this week’s Market Talk. I’m Amber Lancaster, joined by Paul Mampilly and Hudson Cashdan. Each week we look forward to sharing our viewpoints and giving insight into what’s on our radar. Today’s outlook is for the week of September 9, 2019. I’ll being by sharing with you what I’m watching and then we’ll hear from Hudson and Paul.
Today I’ll cover three major topics. The first will be my take on recent and upcoming U.S. economic releases. Then I’ll highlight my innovation story of the week. I’ll cap things off with our Good News Roundup and the latest Disruptification Index performance numbers. Let’s begin.
First of all, last week’s non-manufacturing Institute of Supply Management print resisted any current trade war worries. Sixteen of the non-manufacturing industries reported growth in August. This is despite tariff uncertainties. Supply management professionals who responded to the ISM survey revealed that they are mostly positive about business conditions.
Therefore, the service sector continues to be well protected from trade-war qualms. As you can see in this line chart, in all, non-manufacturing solidly rebounded more than economists’ estimates, reaching 56.4 in August. This is well above the 54 expected by estimates. This print is a three-month high.
This week where economic releases are concerned, there will be five major economic releases. On Wednesday, September 11, the August PPI final demand month-over-month and wholesale inventories month-over-month will post at 8:30 a.m. and 10 a.m., respectively. On Thursday, CPI month-over-month for August will post at 8:30 a.m.
On Friday we’ll have a pair of major releases. We’ll have retail sales month-over-month for August at 8:30 a.m. and the University of Michigan preliminary print for September will post at 10 a.m.
Now for my innovation story of the week. If you live in Virginia, please listen up. Automaker Daimler just announced that it’s begun testing autonomous tractor trailer trucks on Virginia highways in partnership with Torc Robotics. Torc Robotics is a thriving self-driving vehicle startup recently acquired by Daimler in a majority stake deal.
This is to help Daimler’s autonomous truck development build out. Per VentureBeat, retro-fitted Freightliner Cascadias as seen in this photo — which I think is a gorgeous truck, by the way — will be used as autonomous 18-wheelers. These Freightliner trucks are equipped with cameras, radar, lidar sensors and Torc’s self-driving software.
Trained drivers and engineers will be onboard monitoring all the action. These trucks are, “level 4 vehicles and capable of operating with limited human oversight under select conditions as defined by the Society of Automotive Engineers.”
Daimler’s global truck and bus division leader, Martin Daum, states, “Bringing level 4 trucks to the public roads is a major step toward our goal to deliver reliable and safe trucks for the benefits of our customers, our economies and society.”
Moving on, here are our three good news headlines to carry with you this week. Good News Roundup story number one: According to HousingWire, more than 50% of homeowners with a 30-year mortgage are now paying interest that’s 0.75% higher than current rates. The largest share in six year, according the Black Knight Inc.
Those 11.7 million people are eligible for refinancing, which means they also meet broad-based underwriting criteria such as credit scores of 720 or above and enough equity to satisfy most lenders.
This is the largest number of high-quality refi candidates since Black Knight began tracking the data point in 2000. The average owner with tappable equity has $140,000 available to borrow against their homes.
Good News Roundup story number two: On the environmental front, Jaden Smith, son of actors Will and Jada Pinkett-Smith, has partnered with Drew Fitzgerald and environmental innovator in new forms of energy, food and water to create a 501(c)(3) to distribute a device to cities that cleans lead contaminated water in pipelines.
The device, called the Water Box, is a winner of the 2019 Innovation by Design awards and it was launched in Flint, Michigan earlier this year. The device has already cleaned 8,500 gallons of water, the equivalent of 68,000 plastic water bottles. A Water Box currently services about 6,000 people in the area of Flint.
Per Fast Company, Smith, Fitzgerald and partners like Apple plan to add additional Water Boxes to Flint by the end of this year and other U.S. cities starting in 2020. The initiative is separate from but ideologically related to Smith’s other venture Just Water, which he co-founded at age 12 with Fitzgerald. The company recently hit a $100 million valuation.
Good New Roundup story number three: Tesla battery research partner has unveiled a new cell that could last one million miles in robot taxis. The new battery is tested with a new generation, single-crystal NMC cathode and a new advanced electrolyte.
Per Electrek, the team has been extensively testing these cells and they think the battery could power an electric car for one million miles. Electrek proclaims, “This is it, people. For those doubting Elon Musk when he said that Tesla would have a million-mile battery next year, it is starting to become a lot more likely now. This new battery combined with the fact that Tesla is moving to manufacture its own cells is a real game-changer.”
Turning to our Disruptification Index, it continues to outperform major indices year to date. It’s up 26% versus 22% on the Nasdaq and 14.9% on the Dow. That’s it from me. Hudson, we see you’re on location. Please let us know where you are this week.
Hudson Cashdan: Thanks Amber. I’m in place called Fire Island, which is a barrier island off of Long Island. It’s about 30 miles long and three or four footballs fields between the bay and the ocean. I’m taking a couple days here visiting some friends and working from here.
I fly out of JFK mid-week for the Total Wealth Symposium. I’ll see you there. Working from here now and it’s a nice place to work from. There’s no cars and you can only get here by ferry. Once you’re here, you can only walk or ride a bicycle. Nice and quiet and relaxing.
The best way to look at the markets is to get out of the noise and look at the big picture. That’s kind of what we do here, right? This week in the IPO world we are finally coming out of the summer doldrums. Companies are start to come back and test the IPO market.
We have 10x Genomics coming on Thursday, which I think is interesting. Smile Direct Club, as well. I think it’s interesting. It’s an orthodontic service offering. Then Cloudflare is coming on Friday. Those are the three to look out for this week. We’ll be writing something up on each of those.
Paul, what are you seeing?
Paul Mampilly: Before you go, Hudson, we have to talk about WeWork. You’ve seen all the coverage. What’s your take?
Hudson: Well, WeWork has been making the rounds with all the investment bankers and talking to the analysts and underwriters and trying to get a sense of where their clients want to buy WeWork. Obviously the investment bankers are pushing back on the valuation. They want WeWork to leave a lot more on the table for their clients.
The banking clients being the institutional investors, mutual funds, hedge funds and pension funds. My read is that the investment bankers are pushing back on the valuation trying to get it lower and they are pushing stories out into the press about that. So you’re seeing stories out there about how WeWork’s valuation is falling by $10 billion or $20 billion.
We’ll see if there’s any truth to that. We are seeing WeWork leaking stories into their friendly press outlets saying they might walk away from the IPO. I think it’s just a public negotiation similar to what’s going on with China and Trump.
Paul: Right. We’re talking about $20 billion to $47 billion, but when you think about it IPOs come and jump 50% or 70%. When people think about these numbers, remember that whenever an IPO comes they only put a tiny number of shares into the market. Some IPOs are designed to pop.
There’s a negotiation. This is all a bit of an artificial construction. People are thinking this must be horrible and the IPO market is collapsing. No. This is actually normal operation. Just remember, when you see those 70% jumps, it means the entire company is now valued 50-70% higher.
Like Hudson said, it’s a question of on that initial pop, who should get it? WeWork is saying they want to come in at $47 billion and, at which point, you might put a tiny amount in WeWork. Obviously if it came at $18 billion or $19 billion we’re going all in. I was telling Hudson it reminds me of what happened to Google.
There was a lot of this going on. A lot of public negotiation and it was initially supposed to come as high as $125 per share. Eventually it was priced at $85. They put a lot fewer shares into the market and you can see what Google has done. It’s something we’ll be tracking.
Hudson: The financial press has been universally negative on WeWork. It’s the same kind of language you see for a lot of these companies: “Look how much money they’re losing.” The fact is, WeWork is losing money because they’re investing in their business. It takes them eight or nine months to breakeven on a location.
Those first months they are losing money. If they wanted to make money they could by stopping the growth, but nobody wants them to stop growing. They are going to keep growing. I think the financial press is overly pessimistic on this one. We’ll see how it plays out. It’s in our interest for them to get the stock lower so it’s more upside for us.
Paul: That’s exactly right. We talk a lot at Bold Profits about how gloomy the financial press is. They have an agenda to make people feel bad. The problem is, it does victimize people. People end up selling their stock, never getting into stock and staying gloomy when everything we look at, whether it be the economy, jobs, unemployment, inflation —
In fact, I was having a text conversation with Ian Dyer, who does his own video updates every Friday, he was saying he has a friend who was insisting that manufacturing jobs are down. Ian does his work like we all do and he showed him the number. I asked, “What was his response?” he said, “I haven’t gotten a reply back yet.”
That is the way the financial media is. When you present actual data and information to them that contradicts them, you hear nothing. We tell you to come and watch us. We focus on the good news, of which there is plenty out there.
The Wall Street Journal had a big article saying it turns out the Chinese economy might be weaker than reported. We have been telling you this for months. They depend on us, it was never that hard to figure out. We’re their biggest market. If we stop buying, their economy is going to go into a decline.
We’ve told you that sooner rather than later a deal is coming. They need a deal more than we do. Our economy is still growing. The jobs number came out on Friday and it was completely fine. It didn’t hit the top end of certain estimates, but nonetheless unemployment is at a very low level and our economy is growing.
Other things that were in the news last week was that Porsche is releasing its competitor to Tesla. Many people are hyping this as if this is a Tesla killer. Some great work has been done by ARK Invest — we recommend their ETFs in our e-letter.
Again, if you’re not already, sign up because Amber, Hudson, Ian and other folks on our team write some incredible stuff. They give away valuable information and ETF stock picks that you can invest in. Remember, this is free.
Anyway, ARK Invest put out an article where they compare the Porsche to the Tesla and the Porsche is going to go for $165,000, will have a smaller range and will be slower, which Amber hates.
Paul: On top of that, they said you could buy a Model S and a Model 3 for what it would cost to buy one Porsche. It’s very unlikely this is going to be any kind of a Tesla killer.
The other thing I saw that was interesting in terms of stocks that are in the news is Facebook is going into the dating business. I’ve been reading up on their dating operation. It looks pretty good. I sent around something to the team that said something like 40% of folks meet their partners through online dating today.
The numbers for all the other ways to meet are in deep decline. This is an interesting use of Facebook’s data and information to connect people. It’s kinda like what used to happen where you used your connections and family to put together a network of people you might meet. It’s an interesting business for them to be in.
We think it might reinvigorate the Facebook platform, which has been dying. That’s a good moment for us to mention that all of us have Twitter accounts where we put things out on a regular basis. We update you on things like WeWork and other things in the market.
Also, this is the perfect moment for my shameless plug of the week. This week we are promoting Rapid Profit Trader. It has an unbelievable track record. We have a hit rate that I have never seen anything like it. We generate a lot of option trades based on our current services.
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You’ll see a shopping cart on your screen. If you want more details about getting into the service, just click on it.
Last thing I want to mention is that Amber does her Good News Roundup and I want to come up with my own moniker about lame Wall Street. Lame Wall Street. Does that work?
Amber: We’ll finesse it.
Hudson: Wacky Wall Street?
Paul: Wacky Wall Street, lame Wall Street. Come on! Did you guys see this? A brokerage firm is now upgrading Chipotle. We put Chipotle into the Profits Unlimited portfolio nearly 100% cheaper. Wall Street is out for themselves. You know this from 2008, you know this from everything you see.
You couldn’t tell me to buy when it was $400? Now it’s at $800 and you’re telling me to buy? Hmmm. You’ve got to wonder.
Hudson: We used to call this the brokerage upgrade chase. The broker upgrade chase is when they don’t want to be too far away from the pack, they want to stay in the same area. But once one broker starts to upgrade, they start to move up.
They won’t move up all the way, they’ll just start gradually moving up consistently because they don’t want to move too far from their initial estimates. You want to be in stocks when that happens because there will be a period of time where every couple weeks there’s an upgrade.
Paul: This is why we tell you to forget Wall Street. Come to us. We look out for you, we’re on watch for you, we’re on your side. You get the real deal right here. Alright Amber, back to you.
Amber: Thank you, Paul. Thank you, Hudson. Great insights as always. Yes, you have tuned in to the real deal, which is the Paul Mampilly YouTube channel. Thank you so much for watching. We appreciate our viewers so much. If you like this channel, please subscribe, comment and share with your friends and family.
Until next time, have a great week and take care.
Wall Street is out for themselves. You know this. Today, I also talk about another of its lame moves: It decided to upgrade Chipotle’s status on the market.
Now it wants to tell you to buy? When it’s doubled?
This is why you should stick with us.
We’re on your side. And you’ll get the real deal with us. The good news is that now that Wall Street is catching up to us, this move means our Profits Unlimited subscribers are sitting on 100% growth.
Bottom line: We at Bold Profits always have your best investing interests in mind when we make recommendations and bring you the facts. Be sure to check in with us every day so you can get the best info on the markets!
In today’s video, we also discuss:
- Why a Virginia truck company is about to take the self-driving world by storm with its 18-wheelers.
- How Facebook’s entry into the online dating world will capitalize on a growing market.
- Jaden Smith, son of actor Will Smith, is taking a stand for cleaner water with his new company. Smith’s company has already cleaned 8,500 gallons of lead-contaminated water thanks to a new device called Water Box. And with another coming to Flint, Michigan, this month, Smith’s company is on track to bring clean water to communities around the country.
- The Tesla Killer? Porsche is releasing its answer to Tesla’s self-driving cars. At its initial price of $165,000, you could buy a Tesla Model S and Model T. But when you compare the features of Porsche’s car to Tesla’s, will Elon Musk still come out on top? Click here to find out what we think.
Editor, Profits Unlimited