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Listen to these Wall Street heavyweights (May 14, 2020)

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Bloomberg: Wall Street Heavyweights Are Sounding Alarm About Stock Prices

  • Stan Druckenmiller and David Tepper are saying the risk-reward of holding stocks is the worst they’ve seen in years, since 1999!
  • Druckenmiller said his analysis showed liquidity that drove markets higher will soon shrink as Treasury borrowing crowds out the private economy and even overwhelms Fed purchases He said he’s never seen a time when the risk of owning stocks so outweighed the potential gain
  • Carl Icahn said in late April that he wasn’t buying stocks, he was hoarding cash and shorting commercial real estate

Nearly 3 Million Sought Jobless Benefits Last Week But Stocks Finish Higher (S&P @ ~$2,850)

  • ~36.5 million Americans have filed for unemployment benefits in the past 8 weeks
  • New claims in Georgia and Florida (which lifted restrictions) increased last week but fell by a lot in Oklahoma and Texas
  • 22.8 million Americans received unemployment payments in the week ended May 2
  • Many are still waiting for their unemployment benefits as states process the claims

WSJ: Cracks Are Emerging Again in the Stock Market

  • S&P 500’s financial, utilities and real-estate sectors are down more than 10% from recent highs
  • S&P Small Cap 600 is down 12% and the Russell 2000 is down 9.1% from recent highs and flirting with correction territory

WSJ: Coronavirus Finishes the Retail Reckoning That Amazon Started

  • ~100,000 stores expected to close over the next 5 years—more than 3x shut during previous recession
  • E-commerce jumps to 25% of U.S. retail sales from 15% last year

Economic Shock of Virus Hit Lower-Income Households Harder, Fed Finds

  • 40% of households earning <$40,000/yr had at least 1 job loss in March, vs 19% earning between $40,000 and $100,000 and 13% of those earning >$100,000
  • Rapidly widening gap between those households that experienced the early economic effects of the pandemic and those that were spared
  • JO: … watch out for wealth gap widening after all this

Be careful when betting on Vaccine companies

  • Some are even placing bearish bets on pharma companies… “most of the stock prices don’t bear semblance to reality
  • You have to believe a treatment works and that sales last long enough
  • Gilead promised to donate 1.5 million doses of Covid-19 treatments to hospitals for free, and we don’t know the price it would charge thereafter

Fannie Mae, Freddie Mac: Borrowers in forbearance can defer all missed payments until the end of their loan

  • Borrowers who took forbearance because COVID don’t have to repay missed payments they sell their house, refinance, or the mortgage matures
  • The deferral option is available to borrowers in forbearance who regain the ability to pay their mortgage on time
  • JO: What if they don’t regain the ability?

HHS Vaccine Expert Details Complaint in House Testimony

  • Rick Bright, government vaccine specialist, says a lack of preparation by the Trump administration is causing the U.S. to face ‘unprecedented illness and fatalities’ and a resurgence of coronavirus as early as this fall
  • Bright was removed in April from heading the HHS Biomedical Advanced Research and Development Authority

WSJ: Richard Branson’s Virgin Atlantic in Talks to Raise More Than $900 Million

  • Airline is talking to Deutsche Bank and private-equity firms for cash to weather the coronavirus pandemic
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Responses

  1. Hey Justin!

    Based on all the data showing the market being too expensive right now, to me it’s looking like we could see another downtrend turn at some point in time this year? If that were to happen or once the market looks approachable to buy again, do you have a go-to pick of any ETFs/Stocks/Index Funds you’d purchase right away?

        1. If you’re going to place small concentrated bets on the overall stock market, SPY’s a good liquid one to get options on. You want a liquid highly traded ETF

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