Surfing Wall Street to Retire: July 2020

Sunday, July 5, 2020

How Much Longer for the COVID Bull Market?

Currently the market is valued near previous highs without COVID? The NASDAQ maybe should be valued at more than before given many technology companies are flourishing and many because of what COVID has forced the economy to do. However, since then unemployment has RAGED, many companies are teetering (24 HR Fitness, Avis, Hertz,United, Banks, Airlines, Travel, Leasure etc.), and Trillions have gone into the market support systems from the FED and the like. How much stimulus corrects the math of exponential growth of Covid is playing out. Seems like time for the market to take a breather or corrections perhaps? What will things look like in 6 months for the market?

The Bulls: Internet Commerce, Software, Information Technology

Vaccine: Funding for vaccines is pushing many pharmaceuticals towards solving COVID

I believe a successful vaccine will be winter spring 2021.

Stimulus: Congress $3T Subsidies
CARES act additional unemployment of 600 per week runs out July 31,2020

HEROES could extend it.
PPP
EIDL
Rent and Mortgage Relief
Paid Sick Leave
Student Loan Relief until September 30, 2020
Penalty Free IRA and ROTH
Employee Retention Act
Federal Reserve Main Street Lending
Employee Retention Tax Credits
Short Time Compensation Plans
Economic Stabilization Plans
State and Local Government Aid
Hospitals and Health Assistance
Food Banks and Other Food Security- 450M

FED: Don't fight the fed because they are focused like never before to keep the economy moving.

Fed buying junk bonds and propping up all corporate debtors

Speculation: Robinhood example speculation from sports betting and from boredom betters

The Bears: Travel and Leisure, Banks, Cyclicals

Old Flu: H1N1 could be an additional problem we cant coordinate in conjunction with COVID
Reopening Bungled: Economy reopening was too fast and no amount of fiscal stimulus can fight the math of exponential growth.
Stimulus: Some stimulus is running out
Exponential COVID numbers: COVID numbers are climbing and accelerating in West and South
World wide covid numbers are accelerating
Xi vs. Trump Trade heating up
US elections heating up and there will be an exceptionally divisive for democrats and republicans
Main street restaurants, travel, hospitality, and other businesses in trouble till a vaccine arrives
Pfizer has had good trials on 24 people already
Restaurants and bars at best can make 50% of pre-Covid income
Unemployment spiking
Loan delinquencies rising and will create stress for banks and card issuers.

Home Loans
Car Loans
Student Loans

Long Term Market Equity - MacroThemes

1. How will the 46'-64' born baby boomers effect cash flows into and out of the market. Given the Dot Bomb and Housing Bubbles which help to define horrible stock market decade, more than likely there will be a movement towards perceived quality like bonds and out of riskier assets like stocks. Therefore, lower P/Es should be expected in the coming years for Stock Market investors. The Baby Boomers will be retiring at age 67 in 2013-2031. Hospital stocks and pharma stock should do well during the retirement.
2. The Information Age will become more and more pronounced by those defining what the information age is becoming. Stock exemplifying these would be IBM, MSFT, AAPL, GOOG, FB, and CRM. Salesforce.com and cloud computing seem to be where things will be headed in the next couple of years. Then likely there will be another correction in directions.
3. Emerging Markets - Additionally, all this free information available over the internet will allow emerging markets to compete without so much of an educational deficits. Look to EEM and emerging market stocks to continue to accelerate progress and prosperity. The China Age - China becomes worlds largest economy in 2032 -City Weekly January 6 2011. This theme has weakened significantly with the Chinese focus towards services and technology.
4. The Energy Age? Not defined yet, but the need will be originating from a peak in fossil fuel production coupled by increased demand originating from the largest part of the Globe. The 3rd World continues to industrialize at an accelerated pace. Small start-ups in Algae, Wind, Gas, and Fracking will be in demand as oil prices keep rising.
5. Resource Scarcity - Human activity will continue to pressure resources especially food, oil, and gold.
6. US Debtor Nation Status - Interest on the national debt should be pushing $1Trillion per year in 2020. City Weekly January 6 2011
7. Obesity kills more Americans than smoking City Weekly January 6 2011. Healthy and honest food options will become more and more in demand as the younger generations expand purchasing power.
8. Nature Deficit Disorder - Kids start getting disconnected from the natural environment at an accelerated rate. City Weekly January 6 2011
9. Emerging Markets - Rise in Food Costs driven by desire for higher protein diets. - DE, POT, ASCO re: Cramer 4-18-11
10. Emerging Markets - Power Management - Electicity will continue to follow the movement - ETN, HON, EMR
11. US - Healthy Food - Industrial Farming, Factory Farms, Hormons, Pesticides, Fertilizers, Chilpotle, Hanes Celestial Seasons, Whole Foods re: Cramer 4-18-11
12. Gold - Inflation Hedge and Especially GLD, SLV, GG, NG, BRK re: Cramer 4-18-11
13. Homeland Security - Even though defense is being cut around the world by developing nations, terrorism is a force that will stick around just like Middle East Terrorism Groups - NICE, Fortnet, American Science and Engineering re: Cramer 4-18-11 Trump should also expand insecurity through isolationism and uncertainty of campaign promises.
14. Currency Going Electronic - Consider credit card companies as a value growth proposition. DFS, MA, V, and AXP will all benefit from this trend.
15. Paperless Office - Though this was a theme in the 90s I believe the paperless office is happening now at an accelerated rate. Companies that can benefit might be ADBE which holds the keys to PDF productions. Other software and cloud plays will also benefit. There is a lack of a pure play paperless office company.

Demographic Influences of Investing

Baby Boomers Born 1946-1964 or Ages 64-46 (2010)
*Boomers might be focus on stable income investment like bonds and high yield large cap stocks.
*Catch ups will likely focus on international stocks

Baby Busters Born 1965-1977 or Ages 45-33 (2010)
*Focused even more so on 401k's and stock investment
*Not a large enough group to have great market inflow influence
*Possible Baby Boomer Inheritors

Echo Boomers Born 1978-1994 or Ages 32-16 (2010)
*AKA Millenials
*Too young to be buying homes, mostly a renter generations
*Probably more concerned with college debt and the like

Signs that a stock is a sell:

1. Accounting Irregularies are discovered - Extreme Concern.

2. The competition is starting to take market share away.

3. Caution! - when all the analysts say your stock is an "Aggressive Buy" be very careful and ready to sell.

4. PEG Ratio > 1.0

5. Short Ratio > .40 Indicator of Bearish Sentiment, but beware of a shorts squeeze.

6. P/B Price to Book = Stock Price/Total Assets-Intangible Assets and Liabilities > 1.0 = Overvalued Indicator

8. Technicals: Head and Should profile is bearish just as inverted Head and Shoulder Profile is bullish.

9. Remember Buy Low and Sell High!!!!!! You never have a profit until it is logged.

Let me know if you have others good rules to sell?

Signs That A stock May Be A BUY:

1. You believe the stock has long term earnings growth.

2. You believe the stock has a moat (Warren Buffett term). This is a form of monopoly or sustainable market control. Examples of a modern monopoly or duopoly (KO, PEP, HD, LOWS, CAT, DE, etc).

Insider Buying Tipoffs:

3.The stock is on the 52 week high list and there is significant and real insider buying.

4. The stock is heavily shorted and has significant and real insider buying.

5. The PEG Ratio is between 0-1. This is a tipoff the stock may be undervalued when considering price in relation to growth.

Let me know your favorite indicators to buy??

Sunday, July 5, 2020

How Much Longer for the COVID Bull Market?

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