Top Market News for 10/11/20

This post is just a quick summary of the events going on in the world that might be affecting your portfolio. If anything in particular interests you, please let me know, and I will make sure I research it! Also, feel free to drop a comment below to ask any questions you might have.

Trump Executive Orders:

Trump took the approach if you can’t convince them to do something, do it yourself, and piss them off to motivate them to do something. That was the goal of President Trump over the weekend when he signed four executive orders over the weekend:

  • Enhanced Unemployment benefits – The Fed would pay $300 + $100(from states) to provide $400 of bonus payments till the end of the year. Trump is using the Disaster Relief Fund to pay for it with up to $44 billion.
    • The pros of this are unemployed get a small bump again to their payments.
    • The negatives if a 2020 disaster like a hurricane hits funds will already be depleted. Another issue is State governments are low on funds or in the red already so that an extra $100 from the states is unlikely.
    • Legal challenge? Technically, the constitution gives Congress control over federal spending, so Trump does not have the authority to do what he did. Still, he is playing a political gamble to force action.
  • Eviction Order – The CARES Act banned late fees and evictions until 7/25/2020 from properties back by federal mortgages or from those who receive funds from HUD. Trump’s order does not stop that but instead directs departments of the federal government to try and find solutions to prevent evictions and homeless families.
  • Student Loan Payment Deferral – Trump pushed the waiving of student loan interest held by the Department of Education from 9/30/2020 to 12/31/2020.
  • Payroll Tax – Trump did not suspend payroll tax but instead deferred it until 12/31/20. This is a risky gamble as Trump is promising if reelected to get rid of the payroll tax, but if not, all taxes will be due at the end of the year as they were deferred not canceled.
    • Payroll tax supports Social Security and Medicare (6.2% for Social Security; 1.45% for Medicare), which will have a significant impact on those funds. The Treasury Secretary said they would be paid by a general fund, but it sounds like robbing Peter to pay Paul. This would need some more thought before eliminating as many people rely on these funds in retirement.

Republicans and Democrats continue to battle it out over what should be included and how much should it cost for the second stimulus bill.

Uncertain Weather Conditions for Launch

Rocket Companies, which is the parent company of Rocket Mortgage and Quicken Loans, to name a few, had one of the biggest IPOs of the year. It raised $1.8 billion, which was less than hoped as it priced shares at $18 while it was hoping for $22. The company has grown by almost 80% since 2014, and the company argues it is more a tech company than financial, but only time will tell if this stock will fly like the company’s name or not.

I plan on doing a full post on Rocket Companies, as I think it is a fascinating speculative stock.

Big Oil on Fire

ExxonMobil is one of the largest oil companies in the world, and if you have not paid much attention, COVID-19 has all bug killed the entire oil market. Exxon is a Dividend Aristocrat meaning it has increased its dividend for 25+ years; it has raised its dividend 37 years in a row. That fact has not gone unnoticed since 2,553 funds and 353,000 investors own the stock.

What is concerning? It came out in the news that Exxon had to cancel its 401k matching for its 75,000 employees as it is trying to take drastic measures to prevent having to cut the dividend. This should raise some red flags for investors as the company is under extreme financial strain.

Repurpose the Mall?

Amazon appears to be in talks with Simon Property Group, which is the largest mall owner in the US, to convert unused retail space into Amazon warehouses to process and ship orders. Amazon is interested in this deal as it could provide better logistics by having hubs closer to consumers to reduce the most expensive part of shipping, which is the last mile.

Previous anchor department store locations that used to be occupied by Sears and JCPenny seems to have the most promise for converting into a warehouse. If you have a vacant one by you, maybe Amazon will be moving in! This makes sense from a business perspective for Amazon but thoughts on having trucks, delivery vehicles, and worker traffic at a mall near you?

Picture some Insider Trading with Kodak

Last week Kodak, the camera, and filmmaker skyrocketed 190% on the news that it was working with the Trump administration on developing generic drug ingredients. That all appears to be on hold as the SEC is investigating for insider trading as well as the government deal is on hold as other investigations are underway as to why the company value skyrocketed so fast. Shares have tumbled over 40% since the inquiry and hold on the deal have been announced.  

Buffet Big Purchase

Few names in the investing world come up as often as Warren Buffet, and many have been surprised that he has not made any significant moves and bought anything. The biggest trades had been selling the airlines and taking substantial losses. Well, over the weekend, it was noted that Berkshire bought $5.1 billion of its stock over the past two months. That is large compared to the $1.6 billion in the first quarter.

Fun fact, Berkshire owns tons of companies and stocks but which has performed the best during the past few months. Was it Apple? How about Amazon? Nope! Restoration Hardware, a high-end furniture retailer, was the best performer, and coming in second is StoneCo a Brazilian digital payment company, similar to Paypal.

Wireless Battles

5G is the new battleground, but the players are all the same. T-Mobile merged with Sprint, which combined the third and fourth largest carriers in February to compete with AT&T & Verizon. The big news is that the latest numbers are showing that T-Mobile has gained market share to overtake AT&T.

This is a fierce and competitive space!

Comments or Requests?

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This post is my opinion, which is strictly for information & educational purposes only. The post is not intended to provide any investment advice. Please seek your own duly licensed professional for investment advice as they will be able to consider your situation. Please read my Terms & Conditions Page for a full disclaimer.

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