Mike's Spotlight

StockScores Spring Webinar Series

Right after the show Michael’s guest Tyler Bollhorn of Stockscores.com will be starting his very popular free spring webinar series at 10:15am pacific time with The 5 Things Every Stock Trader Must Do To Succeed.

  • Reserve your spot and register NOW

Other upcoming StockScores webinars that you might want to see include:
April 21st – How to Day Trade Profitably
April 24th – How StockScores Trader Training Can Help You Make Stock Market Profits

KEY POINTS
  • Dogecoin is a cryptocurrency based on the “Doge” meme, which rose to popularity in late 2013. It started out as a joke.
  • Now, defying all odds, dogecoin is worth $34 billion, and its price has risen by a whopping 300% in the last seven days.
  • Dogecoin’s skyrocketing price has led to worries of a potential bubble in the cryptocurrency market.

Dogecoin started out as a joke. Now it’s a top-10 digital currency worth $34 billion.

The cryptocurrency is based on the “Doge” meme, which rose to popularity in late 2013. The meme portrays a Shiba Inu dog alongside nonsensical phrases in multicolored, Comic Sans-font text.

Created in 2013 by software engineers Billy Markus and Jackson Palmer, dogecoin was intended to be used as a faster but “fun” alternative to bitcoin. It has since found a growing community online.

And now, defying all odds, dogecoin has a total market value of $34 billion, according to crypto market data site CoinGecko, adding about $19.9 billion in the last 24 hours. The digital token reached an all-time high above 28 cents Friday morning, more than doubling in price from a day ago.

 

‘I just became a Dogecoin millionaire’

 

READ MORE

 

The Problem With Rosy Economic Forecasts

“I have little doubt that with excess savings, new stimulus, huge deficit spending, more QE, a new potential infrastructure bill, a successful vaccine, and euphoria around the end of the pandemic, the U.S. economy will likely boom. This boom could easily run into 2023 because all the spending could extend well into 2023.” – Jamie Dimon, CEO JP Morgan Chase

There are many problems with this view looking forward.

To begin with, the vast majority of American’s do not have excess savings. If they did, then repeated stimulus payments wouldn’t be needed to support economic growth. The reality is “savings” get skewed by the top 20% of income earners, notably the 0.01% like Jamie Dimon.

The top 5%, of income earners skew the measure. Those in the top 20% have seen substantially larger median wage growth versus the bottom 80%. (Note: all data used below is from the Census Bureau and the IRS.)”

Since the top income earners have more than enough income to maintain their living standards, the balance falls into savings. This disparity in incomes generates the “skew” to the savings rate and obfuscates the ability to “maintain a certain standard of living.”

More Stimulus Not The Answer

Such remains problematic for many Americans and consistently forces them further into debt.

“The debt surge is partly by design. A byproduct of low borrowing costs the Federal Reserve engineered after the financial crisis to get the economy moving. It has reshaped both borrowers and lenders. Consumers increasingly need it. Companies increasingly can’t sell their goods without it. And the economy, which counts on consumer spending for more than two-thirds of GDP, would struggle without a plentiful supply of credit.” – WSJ

I often show the “gap” between the “standard of living” and real disposable incomes. In 1990, incomes alone were no longer able to meet the standard of living. Therefore, consumers turned to debt to fill the “gap.”… CLICK for the complete article

The world has clearly changed.

 

This morning: Markets are celebrating spring, rebirth and recovery. The problem is the pandemic is not over, and may continue to cast is baleful malice over markets for decades. Meanwhile… would you appoint an ESG-compliant, full-on Woke gender & diversity championing Head-hunter to find you the next killer quant-trader?

While markets are basking in the joy of a never-ending spring of new index highs, calm conditions in bonds, soaring expectations for recovery, and rising growth estimates – everyone is finance is happy, happy, happy. What can possibly go wrong? (Rhetorical question – don’t ask! I will only spoil your weekend.)

The big issue remains the Pandemic.

As Europe experiences rising infections (France surpasses 100k deaths), its increasingly becoming clear COVID is going to be a long-term fact-of-life matter rather than a short-term winnable battle. Coronavirus and Chris Whitty are going to be with us, like the flu, for decades. Pfizer and others are warning we will need further booster jabs. New vaccines, like the yearly flu shot, won’t be guaranteed to protect us.

While we all know the death rate from the virus has been low, and was loaded against the elderly and infirm, the next one might be like Spanish Flu 100-years ago hitting the young and fit. The big issue determining future reaction to successive pandemics will be hospitalisations – no Government can withstand the political damage an overwhelmed health service would create. They will therefore likely continue to err on the side of caution with loads of rhetoric about saving the NHS rather than a focus on economic resilience and jobs.

Smart governments – much to my own surprise, I put the UK on that list – will spend whatever it takes to protect and survive, investing in new vaccines, therapies, logistics, and capacity. They will learn. The crisis in the UK is now one of “everything but Covid”, unravelling the 4 million plus treatment queue of procedures put on hold by the pandemic. There are still shocks to come as it becomes clear how many early deaths were accelerated by strokes, heart attacks and cancers missed because of the virus.

I reckon the market has overbought recovery. The economic damage done by the response to Covid isn’t going to be a simple V shape. It’s going to be more nuanced reflecting societal fears and changed behaviours. That’s what critical for today’s market. Every single sector that most impacted by the crisis is now seeing the recovery effect as bonds and stock prices bounce back. It’s an overplayed theme.

Take ocean cruising – reopening as fast as possible as long as passengers can provide vaccination proofs. But, the reality could be different. While tourist destinations will be anxious to welcome the commercial boost and mini-boom a cruise ship visit creates, there will be delays and frictions as health concerns remain. Some nations will refuse visits, others will remain unvaccinated – threats of importing and exporting infections. Where will cruise ships go?

More to the point is the aging customer base; its the same generation most afeared of the virus – realistically what percentage of cruise passengers will return? If it’s only 90% – then that’s still a serious overcapacity issue for the industry.

Having sailed past the Cruise ships anchored off the English coast rusting away (apparently the key thing is to keep their plumbing operating by flushing the loos every day), they aren’t quite as sparkly as they once were. With the cruise firms now cash-strapped and their future demand unclear – who would order new boats now? If the companies aren’t ordering new ships, then what happens to the boatbuilders and their skill-sets? Without new boats the next generation aren’t going to go cruising.

You can make similar arguments about the assumptions being made about the resumption of mass air-travel. How many folk will be happy with hanging around airports waiting for test results? Maybe that staycation looks a less-hassle option. I was chatting to one of my aviation clients last week. We are seeing a number of feelers, testing the waters for new deals – but our conclusion is we face a second dip in the aviation recovery as the future of the sector becomes clearer – and not in an optimistic way.

The reality is our lives and economies are going to adapt. Distancing, virus passports, masks? Who knows… Its not a simple slam-dunk reopening. Some sectors look overbought.

Meanwhile… 

Across markets there is so much going on. Its always good to be busy; rewriting the pitch-book on one deal to reflect the investor concerns we’ve uncovered, scrabbling to close funding on another, and even finding time to go out a learn more stuff I didn’t know while talking to funds about their market expectations – which can be summed up as “nervous about when this party might end”. 

My curiosity knows no bounds.

I even found time to open a Coinbase account and bought a modest slug of Etherium and Cardano – I don’t know what they are, but on the basis no one could explain why any are better or worse than any other cryptos… why not? Since I reckon the Fed is right about the underlying value of cryptos potentially being zero, let’s just say the Blain family won’t be losing the family farm as a result of my little punt on digital currency if cryptos flatline. (Reminds me of the time years ago when I was sucked into going to the casino… At one point I was up the price of a decent new car. I had to borrow cash for a taxi home when I left. Haven’t been back.)

(Actually, to be honest – the real reason I bot into Crypto yesterday was my deeply held belief the Gods of the Markets hate me, and so the easiest way for me to prove my warnings on Crypto are right, is to buy into and lose money like everyone else. I really should set up the Blain Reverse Indicator Fund EFT… A long/short strategy mirroring my own portfolio.)

I read about Scottish Mortgage (the Baillie Gifford tech fund) which studiously ignored all my efforts to pitch them a UK satellite launch capability project based in Scotland. Instead, they have invested in a new blueprint stage US launch system utilising 3D printing to build cheap, efficient and less polluting rockets. Nice – when it works. I guess it ticked more of the tech future-stuff tick-boxes than our scheme which works today on the back of repurposing existing and proven launch technology to get satellites into Low Earth Orbit quickly and cheaply.

But, all-in-all, Thursday was quite a good day. The modern world was starting to make a little more sense. I am beginning to understanding stuff I never previously would have understood.

And then I opened a link celebrating a leading firm of global head-hunters announcing, with great pride, the release of their first ESG report.

Really?

Global head-hunters? ESG? Diversity? Inclusion? Gender politics?

The world has clearly changed.

When was I was young the role of a head-hunter was to go out and ruthlessly secure the best talents to fill the positions its clients needed filled. The best people, who could generate and develop the best deal flow were what made investment banks rich… There were no limits.

I wonder what the role of a head-hunter is today? Is it to offer clients advice on how diversity and inclusion principals will make them more effective organisations? Will it be to ensure client boars exceed diversity pledges? Is it to deliver learning experiences to employees to empower them in their career development? I am quite on board with any company wanting to offset its carbon profile – entirely the kind of thing we should all be doing – but it really shouldn’t take umpteen pages to brag about why, and if I wanted advice on it, it wouldn’t be from a head-hunter.

I should like to deliver the message back to head-hunters in general that pale, male and stale old buffers (just like me) are people too! PMS Lives Matter! We may be old, set in our ways, but we have experience (if only we can remember where we might have left it…)

Out of time, and back to the day job! Have a great weekend.

Bill Blain

Shard Capital

 

China’s very bad bank: Inside the Huarong debt debacle

 

It’s been 11 weeks since Lai Xiaomin, the man once known as the God of Wealth, was executed on a cold Friday morning in the Chinese city of Tianjin.

But his shadow still hangs over one of the most dramatic corruption stories ever to come out of China – a tale that has now set nerves on edge around the financial world.

At its center is China Huarong Asset Management Co., the state financial company that Lai lorded over until getting ensnared in a sweeping crackdown on corruption by China’s leader, Xi Jinping.

From Hong Kong to London to New York, questions burn. Will the Chinese government stand behind US$23.2 billion that Lai borrowed on overseas markets — or will international bond investors have to swallow losses? Are key state-owned enterprises like Huarong still too big to fail, as global finance has long assumed – or will these companies be allowed to stumble, just like anyone else?

The answers will have huge implications for China and markets across Asia. Should Huarong fail to pay back its debts in full, the development would cast doubt over a core tenet of Chinese investment: the assumed government backing for important state-owned enterprises, or SOEs.

“A default at a central state-owned company like Huarong is unprecedented,” said Owen Gallimore, head of credit strategy at Australia & New Zealand Banking Group. Should one occur, he said, it would mark “a watershed moment” for Chinese and Asian credit markets.

Not since the Asian financial crisis of the late 1990s has the issue weighed so heavily. Huarong bonds — among the most widely held SOE debt worldwide — recently fell to a record low of about 52 cents on the dollar. That’s not the pennies on a dollar normally associated with deeply troubled companies elsewhere, but it’s practically unheard of for an SOE.

Fears of a near-term default eased on Thursday after the company was said to have prepared funds for full repayment of a SUS$600 million (US$450 million) offshore bond due April 27. Huarong plans to pay on the due date, according to a person familiar with the matter, who asked not to be named discussing private information.

That’s a drop in the ocean and won’t remove investor concerns. All told, Huarong owes bondholders at home and abroad the equivalent of US$42 billion. Some US$17.1 billion of that falls due by the end of 2022, according to Bloomberg-compiled data.

READ MORE

 

 

 

Big Tech’s health care battle

 

Health care is the latest Big Tech battleground.

It’s no secret that America spends on health care. In 2019, that spending reached $3.8T ($11.6k per person). By 2028, it’s projected to hit $6.2T.

To the folks in Big Tech, any number with a “T” means one thing: opportunity.

This week, Microsoft showed it’s serious about the space

The company announced the $19.7B acquisition of Nuance Communications, known for its AI transcription tools for health care professionals.

Nuance has a healthy following among…

  • Doctors: 55%+ of physicians and 75% of radiologists in the US use its products
  • Hospitals: 77% of US hospitals are Nuance customers
  • Investors: Nuance’s Health Care Cloud revenue grew 37% in 2020

Doctors can use Nuance tech — which is already integrated with Microsoft Teams — to record conversations and automatically transcribe notes.

But Microsoft isn’t alone

Cook, Pichai, and Bezos want in, too:

  • Apple is focused on selling hardware to health care providers and offering software platforms for medical record keeping
  • Google recently introduced its Google-for-medical-records platform Care Studio and bought Fitbit for $2.1B
  • Amazon is the gangster player, having recently released Prime-like online pharmacy and primary care service platforms

Bezos has also gone one step further, debuting the Amazon Halo that’s capable of calculating body fat (of which Bezos has none).

Still, challenges abound

If history is any indication, Big Tech’s success in health care is hardly a given:

  • IBM hyped Watson’s AI-cancer diagnosis capabilities but is now exploring a sale
  • Amazon’s health care venture with Berkshire Hathaway and JPMorgan Chase failed to get off the ground
  • Google faced privacy hurdles when trying to gain access to health care provider data

Regardless, the digitization of health care is a huge market, and Big Tech is gearing up for battle.