Wed. Apr 8th, 2020

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Senate Knows Best?; Sucker Bets on Jumbo Jets

7 min read

The White House and the Senate agreed to a $2 trillion stimulus package, but the COVID-19 fallout is far from over.

Mo’ Money, Fewer Problems?

They did it. They finally did it.

By “they,” I mean Congress … and by “it,” I mean a stimulus package deal to combat the coronavirus.

The Senate and the White House announced late last night that they reached an agreement on a historic $2 trillion spending bill. (That’s trillion with a T.)

That’s wonderful news, Mr. Great Stuff! Now, what’s in this spending bill? Where’s my stimulus money?!

Well, reportedly, every American who makes less than $75,000 will receive a cash payment of $1,200 — $2,400 for married couples making less than $150,000 — plus $500 per child. If you make more than the specified amounts, your payout will be reduced.

And the rest?

There’s a $350 billion fund for small businesses to help with payroll and stem layoffs.

There’s $58 billion for airlines. I know from your emails that airline bailouts are very … um … “popular” with Great Stuff readers — especially since the bill won’t require airlines to pay back that money. However, the Senate says that airlines that take bailout cash will be prohibited from stock buybacks and CEO bonuses … so that’s something.

And there’s also the infamous $500 billion fund to help businesses hit by the coronavirus.

This one was a particular sticking point. In the original bill, there was no oversight on how this money was doled out. U.S. Treasury Secretary Steven Mnuchin was originally the sole proprietor of this cash fund, and companies that took money were allowed to remain anonymous for six months.

However, there will now be an oversight panel headed by independent counsel to help adjudicate (in other words, “make it rain”) that half a trillion dollars.

To paraphrase Chandler Bing from Friends: “Could we be any more stimulated?”

The Takeaway:

It’s important to remember that the Senate hasn’t actually passed this $2 trillion monstrosity yet. And, while the Senate is expected to vote to pass it today, the House is still in recess and probably won’t vote until Friday.

Until it’s actually passed, we won’t know exactly what’s in the bill. That means some of these figures and details are subject to change.

Now, I know what you’re thinking. Well … at least I hope I know what you’re thinking. It’s what I’m thinking…

Where’s the money to actually fight COVID-19?

It’s there, just in much smaller figures than the actual stimulus.

There’s reportedly $150 billion to aid states and local municipalities to fight the pandemic.

There’s also $55 billion for hospitals and the general health care system.

That seems like a relatively small portion of the $2 trillion. It has me worried that legislators were more interested in dumping cash into the economy than addressing the central issue.

And if you think I’m overreacting, just wait…

Tomorrow’s weekly jobless claims report will be an eye-opener. Next week’s report will be even worse.

Oh, geez … here he goes again. Mr. Negative Nancy…

I could be wrong — and Great Stuff readers are quick to point out when I am — but I don’t think Wall Street realizes the situation’s severity.

COVID-19 cases will soar. The number of U.S. infections will surpass Italy. It may even surpass China. (It definitely will if shelter-in-place rules are lifted too early.)

That means more jobless claims and economic woes. But for our portfolios, that means more market selling.

Sure, we have more than $2 trillion in stimulus sloshing around in the economy. But I don’t believe we’re out of the woods yet. The stark reality of COVID-19 is about to yank that nice, warm $2 trillion blanket right off of Wall Street, leaving many rushing to “buy the bottom” out in the cold.

Get ready for another dip.

I have just the solution for your COVID-19 fears. His name is Ted Bauman.

Ted knows the market will stay irrational as long as it dang well pleases … and you should prepare for any scenario. That’s why Ted’s readers in The Bauman Letter have diversification and disaster prep right at their fingertips.

If this ends up getting worse before it gets better, I want you to be ready…

Click here to get ready now!

Great Stuff Good Better Best

Good: Take These Broken Wings…

Airline stocks soared today, and the stimulus eagle hasn’t even landed yet. (I’m a little creeped out by “stimulus eagle,” but whatever…)

Airline stocks soared today, and the stimulus eagle hasn’t even landed yet. (I’m a little creeped out by “stimulus eagle,” but whatever…)

American Airlines Group Inc. (Nasdaq: AAL), Delta Air Lines Inc. (NYSE: DAL) and others went vertical to the tune of 10% or more on the bailout news. The original offer for $50 billion in loans was tempting … but the new promise of grants that airlines might not have to repay? That has everyone in the sector just giddy.

Now, you may ask yourself: “Why are airlines ‘good,’ Mr. Great Stuff?”

And you may tell yourself: “Well, it’s good because airlines are less likely to go bankrupt now.”

But, if you invest in the airline sector right now, a few months down the road, you may ask yourself: “My God, what have I done?”

This bailout is good for the sector over the long term. But right now, my opinion is to let the days go by. (Let the water hold me up…) They most likely won’t go bankrupt now, but they are far from safe investments.

There will be a time to buy stocks like AAL and DAL, but now isn’t that time.

Better: Just Flu It

Nike’s third-quarter earnings topped the consensus estimate by $0.24 per share, with revenue beating expectations by $230 million.

If you’re looking for a company that isn’t rallying because of $2 trillion in stimulus today, Nike Inc. (NYSE: NKE) has you covered.

Sure, Nike could benefit from the added cash in consumers’ pockets, but earnings and projections are the real reason why NKE is up more than 10% today.

Nike’s third-quarter earnings topped the consensus estimate by $0.24 per share, with revenue beating expectations by $230 million. The coronavirus hurt profits, Nike said, but a resurgence of consumers in Asia appears very promising.

“Now all three markets are through what we’re calling recovery — that is, retail is opening back up — consumers are back on the street. And as we move into normalization, retail traffic is coming back,” CEO John Donahoe said in Nike’s conference call.

Nike reports that 80% of its stores in greater China are now reopened.

The company is sure to see some disruptions in U.S. sales as COVID-19 cases surge stateside, but Nike is looking a lot more stable now that Asian consumers are returning to stores.

Best: The Child Has Spoken

According to a Forbes report, Disney+ saw sign-ups more than triple between March 14 and March 16 compared to the week prior — making it the most popular streaming coronavirus distraction by far.

There’s been a lot of hype surrounding shelter-in-place companies like Zoom Video Communications Inc. (Nasdaq: ZM) and Slack Technologies Inc. (NYSE: WORK), but I’ve seen little hard data to back up the euphoria.

But there are some data emerging this week for Disney+ operator The Walt Disney Co. (NYSE: DIS) that you definitely need to see. According to a Forbes report, Disney+ saw sign-ups more than triple between March 14 and March 16 compared to the week prior — making it the most popular streaming coronavirus distraction by far.

Disney reported in February that it already had more than 28 million Disney+ subscribers, so we can probably expect major additions to this figure when the company releases official figures again.

Additionally, Hasbro Inc. (Nasdaq: HAS) — aka Disney’s toy division — is reporting strong demand for Baby Yoda merchandise and toys. Items like the animatronic Baby Yoda aren’t even available in stores yet, but preorders have already sold out.

Right now, many investors are shying away from DIS due to park closures and motion picture revenue concerns. However, if you already hold DIS or want a bargain in the COVID-19 sell-off, snapping up the stock for anything under $100 would be a steal.

Great Stuff Poll of the WeekIt figures: Within minutes of seeing the “DEAL REACHED” headlines, posts started to crop up across my social media feeds, all mentioning what so-and-so plans to do with their stimulus check. (Hint: It probably shouldn’t be used to further expand your toilet paper empire. Probably.)

Unless the feds are leading up to one big “check’s in the mail” punchline … hold your horses, buckaroo!

Seriously, we haven’t seen the deal’s terms … we haven’t even seen the Senate’s vote on it, for Pete’s sake. Let’s not cash our stimulus eggs before they hatch. (Do hatched stimulus eggs turn into stimulus eagles? Perish the thought…)

By now, you know my side: I still see economic storm clouds fast approaching, and Wall Street just left its umbrella at home following a $2 trillion stimulus forecast.

With that in mind — it’s time to talk market timing in today’s Poll of the Week!

They say only fools try to time the market … so let’s all be fools today! I want to hear your perspective on these unprecedented trading days. I mean, what else are we going to do? We’re all stuck inside!

Have we seen the corona-crash’s worst? Or has it only just begun? Vote below and let us know!

Great Stuff: $&*% Adds up at the Bottom

I’m investin’ … lookin’ up to see the indices. And I have swallowed the stimulus check you feed me

Whether or not the stimulus bill will scratch every economic itch that this virus is kicking up … it’s a start, at least. Frankly, I’ll take any legwork we can get before the virus ramps up stateside. (Progress from Congress? I digress…)

Regardless of what happens with the stimulus bill, I eagerly hope that it helps you. Yes, you! Dear reader, no matter the pessimism you may see in the coming weeks, just know that it’s you and the average Joe next to you who keep the U.S. economy a-turning.

I hope you’re hanging in there. Sincerely.

Until next time, good trading!

Regards,

Joseph Hargett

Editor, Great Stuff

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