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Wednesday, December 30, 2020

$2000 Delayed, Covid-19 Mutation, Trading Intel - RealMoney - RealMoney

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He said... actually, he... being President Trump said nothing, at least not on the record. He did tweet though. "Unless Republicans have a death wish, and it is also the right thing to do, they must approve the $2,000 payments ASAP, $600 IS NOT ENOUGH!" If you immediately thought of the late Charles Bronson, you are not alone my friend.

Readers who've been with me for any length of time know well that at my core I can be something of a fiscal and monetary hawk, but that I do swing the bat from both sides of those plates when necessary once all is considered. In other words, I have policy goals or preferences, but I am no ideologue. I consider the current situation to be a crisis of titanic proportions. The hospitality/recreation/ travel industries are obviously going to be much smaller than they had been pre-pandemic. Small businesses, historically in aggregate our nation's largest source of employment are disappearing despite government's best efforts made toward life support.

As seemingly slow (actually lightning quick) progress is made toward reaching an end to this pandemic through scientific achievement, the nation remains in terms of deficit spending, in a World War II moment. Senator Bernie Sanders has mentioned "a level of economic desperation we have not seen in this country since the Great Depression." Some might say Sanders exaggerates for political purposes, and that might be true in a broad sense, but it is always easier to see a broader picture from the comfort of my office. For I am able to work from home, and (knock wood)... so far so good.

Drive down your town's Main Street. If your town is like mine, around one third of those store fronts are empty. It would have been nice to have gone into this crisis in better shape fiscally or, on the monetary side, with higher interest rates and a smaller Fed balance sheet, but that is not reality. Nor does it change the fact that policy makers need to understand that the nation should be acting as if on a war footing. Yes, there was (2014 through 2019) a time to get more conservative with federal spending, and there will be again (perhaps not quite voluntary), but that day is not today.

Where I Am Going With This

By now, every last one of us knows that President Trump and nearly every Democrat in both the House and the Senate agree on expanding the $600 individual payment in helicopter money to $2,000. The president had preferred to draw these increased funds from elsewhere in the budget rather than increase the spending bill now law altogether, but has seemed content with how the House (with some bi-partisan support) passed the increased payment as an add-on instead.

This additional distribution has now hit a wall in the Senate, though a handful of higher profile Republican senators are indeed on board. (The bill needs 60 votes to pass.) Senate majority leader Mitch McConnell appears to have put these increased payments in jeopardy through an attempt to link them to issues that will not find nearly as much (if any) bi-partisan backing. Is it a bluff? I only ask because equity index futures are trading higher overnight (Tuesday into Wednesday), and I would have thought otherwise.

For those still celebrating the holidays this week, McConnell is trying to hook the extra $1,400 up with addressing both section 230 concerns in regards to social media, and purported election fraud in regards to November's outcome. As far as these two issues are concerned, perhaps they both do need to be addressed, but not as part of this bill. Nor, as far as section 230 is concerned, as part of the NDAA. McConnell will move to override the president's veto of the defense bill probably today.

The thing is this. The people, or at least some people, need help. Graduate this $1,400 payment if you must, a pyramid model is fine.... but get the extra dough where it will do the most good. As for social media and election fraud (being neither Republican nor Democrat), I can throw stones in both directions. In 2016, Democrats saw social media and election fraud as a problem. In 2020, the shoe is on the other foot. My opinion? Social media should be held to the same standards as all media, and all media needs to be seriously held to a much, much higher standard. Enough with agenda driven presentation already. Nobody trusts the mainstream media for good reason. Period.

In order to address issues around fraud, which clearly does happen in some states, voting and counting methods need to be standardized across all jurisdictions, while also monitored much more closely and fairly moving forward. Remove doubt from the outcome. Why is this so hard? That said, these are and should be separate fights. Borrow another $400 billion to $500 billion and make this happen.

Meanwhile, Back At The Ranch...

According to Treasury Secretary Steven Mnuchin, the $600 support distribution payments started going out on Tuesday night, and could take a couple of weeks for the last one of you to see that money.

Here We Go

It had first been discovered in the UK. We knew it had spread to France, the Netherlands, Japan, and Canada. We knew that something similar had spread to South Africa. Add the USA to this growing list. A man in his 20's in Elbert County, Colorado who has no history of recent travel has been confirmed as the first positive case of the newer mutated version of Covid-19.

While scientists have for the most part come to the conclusion that this variant probably does not cause more severe illness than the original and virtually all of the vaccine manufacturers believe there will be no impact on the efficacy of their products, there does appear to be consensus that this variant is considerably more contagious than what we have been dealing with. While following the science has been impossible throughout this pandemic as the science has changed so often, just take as few chances as possible, folks. We are likely to experience a surge on top of this surge as we get past the holidays. The spread will accelerate.

I had to pick up a prescription on Tuesday. Had to go indoors, as the drive-thru has long been converted into a Covid-testing site, and that line is never, ever short. Inside, it's a maze of trying to get to the pharmacy, up the candy aisle, down the make-up aisle, across the school supplies section, as everyone who just needs to pick up their meds is now in the building, and half of them appear to "be done" with social distancing. Oh, and get this. My wife and I received an invitation to a New Year's Eve party from one of our neighbors. Crazy? Literally half of the houses on my block are currently down right now with the active virus. Could folks be any more out of touch? We as a people, can only be as smart as the least smart among us. Somebody will be foolish enough to go to that party, even with half of their neighbors currently ill. How can individuals be this ignorant this deep into this crisis, living in an area that for the second time in nine months has become a "hot zone"? Incredible.

In case you have not noticed, "Operation Warp Speed" has gotten the American people to an advanced place in getting past this pandemic relative to where we would have been otherwise. That said. "Operation Warp Speed" is behind schedule. We may get to whatever will become "normal" later this year. Hopefully... but this winter is still going to stink. Badly.

Markets

Minor selloff on Tuesday. Very minor. I think one can take the action at least across the large cap space with a grain of salt. There was a reversal off of the highs, but interest was lackluster. There was however some serious profit taking across small to mid-cap stocks. Losers beat winners by 2 to 1, or 5 to 2, depending on the exchange. Declining volume bested advancing volume at both locales. The fact is that aggregate trading volume decreased for NYSE listed stocks on Tuesday from Monday, and decreased quite significantly for Nasdaq-listed names.

Aggregate trading volume for constituent members of the S&P 500 have not landed at or above the 50 day trading volume SMA for that index since December 21st. On Tuesday, such volume fell 27% short of that level. There was some strength on Tuesday in the pharmaceuticals/biotechs space led by Moderna (MRNA) , a name that rebounded roughly 2.7% after peaking three weeks ago, and then going into something close to free-fall.

On that note, the viral vector based vaccine developed by AstraZeneca (AZN) and the University of Oxford has been authorized for emergency use in the UK. UK Health Secretary Matt Hancock has indicated that between what that nation has on order from AstraZeneca and Pfizer (PFE)  , that the UK is now prepared to "vaccinate the whole population." See, there is good news.

Trading

Readers know that I am a long-time fan of both Advanced Micro Devices (AMD) CEO Lisa Su, and Nvidia (NVDA) CEO Jensen Huang. I have become a long-term investor in AMD, and have been long NVDA for even longer. I did something on Tuesday that I never thought that I would do again. I bought some Intel (INTC) . Some will recall a time when I was a big fan of this name, and when INTC had been one of my largest longs. That was before I really caught onto just what a leader Lisa Su is.

Am I confident in Bob Swan's leadership? Not particularly. He offers no reason for such confidence. I do know however that more times than not, when activist investors make waves at struggling corporations, trades (not investments) are born for me and my kind. Enter Dan Loeb's Third Point LLC, and their $1 billion stake held in Intel. They offer a number of potential changes, including the outsourcing of a significant portion of the manufacturing of the firm's own chips. AMD, NVDA, and Qualcomm (QCOM) all outsource much of their business to Taiwan Semiconductor (TSM) .

I think the one quote from Third Point's letter that really had me rolling was this one: "We cannot fathom how the boards who presided over Intel's decline could have permitted management to fritter away the company's leading market position while simultaneously rewarding them handsomely with extravagant compensation packages." Ouch.

Economics (All Times Eastern)

08:30 - Goods Trade Balance (Nov-adv): Expecting $-82.2B, Last $-80.42B.

08:30 - Wholesale Inventories (Nov-adv): Expecting 0.6% m/m, Last 1.1% m/m.

09:45 - Chicago PMI (Dec): Expecting 56.8, Last 58.2.

10:00 - Pending Home Sales (Nov): Expecting 0.0% m/m, Last 1.1% m/m.

10:30 - Oil Inventories (Weekly): Last -562K.

10:30 - Gasoline Stocks (Weekly): Last -1.125M.

The Fed (All Times Eastern)

No public appearances scheduled.

Today's Earnings Highlights (Consensus EPS Expectations)

No significant quarterly earnings scheduled for release.

(AMD and NVDA are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)

The Link Lonk


December 30, 2020 at 07:41PM
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$2000 Delayed, Covid-19 Mutation, Trading Intel - RealMoney - RealMoney

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