Rolling in the Deep
Double the circuit breakers, double the fun?
For the second time this week, trading halted on Wall Street — both in futures trading and during the regular session.
Welcome to the bear market.
Sparking the chaos this time around was President Trump’s less-than-reassuring and confusing response to the growing COVID-19 threat. The confusion started in a speech last night, when Trump announced a 30-day ban on travel from Europe.
Well, most travel. The Department of Homeland Security later clarified that the U.K. and the Irish Republic are exempt, as are U.S. citizens and permanent residents coming from Europe.
Trump also said that the ban “will not only apply to the tremendous amount of trade and cargo, but various other things.” However, he later clarified that the ban only applied to people, not goods or trade.
Confused yet? Here’s another mixed message…
A final point of contention was Trump’s claim that American health insurance companies had agreed to waive copays for coronavirus tests and treatments: “Earlier this week, I met with the leaders of health insurance industry who have agreed to waive all co-payments for coronavirus treatments, extend insurance coverage to these treatments, and to prevent surprise medical billing.”
This statement also needed some fine-tuning, which industry group America’s Health Insurance Plans was more than happy to provide: “For testing. Not for treatment,” the group said.
— Captain, Cool Hand Luke
Regular Great Stuff readers know that I’m politically agnostic on here … and for good reason. Preaching politics doesn’t make you money. It doesn’t protect your investments.
However, sometimes we need to take a closer look at what’s said in the political realm, because those actions have real-world repercussions on your portfolios … and your 401(k)s.
Today, Wall Street is saying loud and clear that it’s not happy with last night’s speech. Regardless of whether you agree with the president or not, the market still hit the down-limit circuit breakers … again.
The recent market panic even has the Oracle of Omaha befuddled. “And it may have taken me to 89 years of age to throw this one into the experience, but the markets, if you have to be open second by second, they react to news in a big time way,” Warren Buffett said in an interview on Yahoo Finance this week.
But you, dear readers … you aren’t befuddled. If you’re following along at home, you are holding bonds via the iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT), gold in the form of the SPDR Gold Trust (NYSE: GLD) and currencies in the Invesco CurrencyShares Swiss Franc Trust (NYSE: FXF).
These exchange-traded funds (ETFs) and similar investments are your critical fallout shelters from the market storm. Well … these ETFs and toilet paper, apparently. That stuff is almost as good as gold right now, and I think that says a lot about the market’s state of panic.
I’ve said it before, and I’ll keep saying it throughout this pandemic: Don’t panic.
Stay calm. Stay rational. There will be a time when this is all over. By preserving your capital, you position yourself to take full advantage of the rebound when it comes. And it will come, dear readers. It will come.
Now, perhaps moving assets to gold and buying bonds isn’t your thing. That’s OK.
There are other ways to prepare … yes indeed. Although, these murky market waters are tough to navigate on your own. Remember, the experts here at Banyan Hill have been in this kind of market environment many times before.
Just ask Ted Bauman — our resident expert on how to weather market turbulence. Instead of running for the hills, keen folks like Ted jump into the trenches, focusing on the best moves to make.
He just shared this urgent message with me from a former Washington insider.
The Good: Generally Great
Looking for an outstanding bargain for the start of the new bear market? Look no further than Dollar General Corp. (NYSE: DG).
The discount retailer checked all the right boxes with this morning’s quarterly report: better-than-expected growth in earnings, revenue and same-store sales. Dollar General also lifted guidance above Wall Street’s targets and boosted its quarterly dividend by 12.5%.
The retailer even said that it didn’t see any supply disruptions due to the coronavirus. The only thing missing from the standout report was a share buyback program.
For those of you who remember the last market mess back in 2008, you might also remember that discount retailers like Dollar General held up better than most. This should be true once again … especially since Dollar General stores are everywhere! Why go to that crowded supermarket when you can hit up your local DG to restock your stay-at-home supplies?
Now … I wonder if they have toilet paper?
The Bad: Party Over, Oops, out of Time
Life is just a party, and Party City Holdco Inc. (NYSE: PRTY) wasn’t meant to last.
If Dollar General is everything you want in a retailer right now, Party City is the exact opposite. The party supplier announced a net loss of more than half a billion dollars last quarter.
Adjusted earnings missed expectations, as did revenue, which plunged 9.2% year over year. Guidance for fiscal 2020 was also well below expectations.
Making matters worse, the company closed 35 stores last year and has already closed another 20 in 2020.
I mean, if you’re having an “end of the world” party, I guess Party City could be your mascot.
With most big gatherings and large events discouraged for the foreseeable future, I cannot see Party City rebounding in any meaningful way right now. That’s some harsh news for a stock that plunged 88% last year alone … and was nearly cut in half during today’s bloodbath.
The Ugly: Boeing’s Lost That Loving Feeling
“Come on, man. I hate it when she does that…” — Goose, Top Gun
Travel warnings couldn’t have come at a worse time for The Boeing Co. (NYSE: BA). The company was already struggling with orders and suspended operations due to the 737 Max debacle, but now it has something entirely different to worry about.
According to reports, the company froze hiring, suspended nonessential travel and placed limits on overtime. Boeing will also draw down (or completely withdraw) the rest of a $13.8 billion loan that it secured last month, according to “a person familiar with its plans.”
If you’re wondering what all this is about, it means that Boeing is in cash-preservation mode. With the coronavirus limiting global air travel, many airlines are pausing orders or outright canceling them. In short, Boeing is taking steps now to prepare for any such breakdown in orders — and potential troubles in the lending market, it seems.
In the long run, Boeing’s proactive moves are a good thing for the company. However, BA stock will be punished over the short term. This means that, eventually, BA shares will be a bargain-shopper’s dream. When that “eventually” will arrive, however, remains to be seen.
It’s time for Reader Feedback … and boy, did I strike a few nerves this week.
On Tuesday, I asked for your feedback on President Trump’s proposal to cut payroll taxes to zero. I wondered how people would take advantage of that tax cut if they were too sick to work, and how people would spend the money if they were quarantined or too sick to leave home.
And feedback I got…
Let Them Order Online!
Wake up! Did you ever hear of Amazon delivery to your door? Wow. If people have money and needs or wants, they will spend it. Enough said?
— Joe E.
People will spend money online.
— Sunny L.
What is wrong with you? That question/statement is so stupid it defies reason. We live in the world of Amazon.
— Elain M.
Has Great Stuff really forgotten that Jeff Bezos is our coronavirus savior? Nah, fam.
I know that you can order online. I took that into account when asking these questions. But I got this response so many times from so many of you that I thought I should at least give you some airtime.
You’re all correct. Amazon and online ordering do exist. But online sales only make up a fraction of the overall U.S. retail market — projections peg 2020 e-commerce sales at only 12.4% — mostly because not everyone has access to online ordering at home. Just throwing that out there for you to chew on.
Also, there’s nothing wrong with me. My mother had me tested.
The Coronavirus Is a Gas, Gas, Gas!
Most people who catch coronavirus have a mildly upset digestive system for the first two weeks and fart wherever they go, spreading more viruses. Then, the third week, it moves into the respiratory tract like a Type A flu bug, and people lose their voices and cough a lot.
It’s that first two weeks of farting around that makes the virus so contagious. Most people just blame something they ate. They don’t know they are contagious.
— Robert S.
I … I am … well. Ahem … you readers never cease to amaze me.
To reassure many of you out there, the Centers for Disease Control and Prevention says that farts “do not constitute another transmission route of COVID-19, unless someone takes a good and rather close sniff of gas from a pantless patient.”
And that’s all I’m going to say about that.
Going, Going … Gone?
As a 50-year-old American who has worked my entire life and played by the rules, I want to know if my Social Security will be there in 15 years if we aren’t fully funding the program due to this “payroll” tax cut!
— T. Flores
T. is asking the real question here. This was my first reaction to the payroll tax cut news as well.
Now, Great Stuff doesn’t have a concrete answer for you on this one. So, I’m pitching this one over to Banyan Hill expert Ted Bauman:
I think the fair answer would be that it’s anyone’s guess!
We would need a change in Washington that takes the needs of citizens for a decent social safety net seriously. That’s the reality of the situation. If we continue to have the fantasyland crowd in charge, then it’s a given that Americans will be left to fend for themselves eventually.
Have you written in yet? What’s stopping you? Drop me a line at GreatStuffToday@banyanhill.com and let me know how you’re doing out there in this crazy market.
Until next time, good trading!
Editor, Great Stuff