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Morning Commentary

CAN BANK INVESTORS GET SOME SUGAR?

By Charles Payne, CEO & Principal Analyst
4/12/2019 9:34 AM
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Ah sugar, ah honey honey

You are my candy girl

And you've got me wanting you

“Sugar, Sugar” -The Archies

Maybe this is what the presidential campaign slogan stood for when they suggested things were better in the past.

 I can say for sure that the music was great back then. One week, Sugar, Sugar by The Archies was number one on the charts. Two weeks later, it was I Can’t Get Next to You by the Temptations.

Those songs ruled the airwaves in October 1969, which is also the last time the weekly initial jobless claims came in under 200,000. The last time, until the most recent week, saw initial jobless claims dip to 196,000.

 

 

 

Initial Jobless Claims

 

The Message of the Market

Yesterday was the proverbial calm before the storm. Major indices were barely unchanged at the closing bell, but it’s still evident the market wants to rally higher. It’s clear as we enter earnings season, companies that ‘miss or offer’ subpar guidance will see their underlying share price crushed.

First Up: Banks

Bank profits were stagnant for a few years until the Trump Tax cut sent them soaring - along with CEO pay, much to the chagrin of several progressive politicians looking for scapegoats to be the face of the capitalism failure in making everyone rich. The alternative is everyone will be poor, but we’ll all be equal. Ironically, if any group of folks should be angry with the banks, it should be shareholders. Shareholders are down on most of the big names from the start of trading 2018 when all the mavens on Wall Street said these names were no-brainers.

All eyes have been on JPMorgan Chase (JPM), which has seen mixed reactions to mixed results going back to January of last year. The stock has missed; it was higher one week later, and it has beaten the consensus. The stock was lower one week later. The reaction is strictly a result of management’s guidance.

Release Date

Estimate

Surprise

Reaction

Jan 15, 2019

$1.98

M $0.23

+2.8%

Oct 12, 2018

$2.34

B $0.09

-0.5%

Jul 3, 2018

$2.29

B $0.07

+2.8%

Apr 13, 2018

$2.37

B $0.09

-1.5%

Jan 12, 2018

$1.07

M $0.62

+2.2%

 

Buckle up, boys and girls, because it was a lot easier for bank CEOs to answer questions from elected officials than satisfying the investors looking for greatness.

Portfolio Approach

There are no changes; however, we got aggressive on Constellation Brands (STZ) after management dumped a lot of its lagging wine business. If you have any questions, contact your account representative or email research@wstreet.com

Communication Services

1

Consumer Discretionary

4

Consumer Staples

1

Energy

1

Financials

1

Healthcare

2

Industrial

3

Materials

3

Real Estate

0

Technology

2

Utilities

0

Cash

2

 

Today’s Session

Boeing (BA) announced after the close it has flown 96 test flights with its 737 Max software fix and plan further tests.  Meanwhile, Southwest has grounded the plane until August.

Disney (DIS) streaming service pricing is substantially lower than anticipated. Perhaps even bigger news for investors is Bob Iger is staying with the firm through 2021.

Chevron is acquiring Anadarko for $33.00 billion in cash and shares.  This gives Chevron greater access to the Permian Basin and deep-water assets in the Gulf of Mexico.

JP Morgan (JPM) posted record results that beat the street and signal the company is firing on all cylinders.   Consumer lending surged profits +19% to $3.96 billion.

Wells Fargo (WFC) also beat the street

March Trade

China is also announcing it would give tax breaks for individual and institutional investors who trade Chinese Deposit Receipts

Uber IPO

This is going to be a hot deal promoted as the Amazon of mobility, but it will have risk.  Here are some outlined by management.

Company Risks

To remain competitive in certain markets, we have in the past lowered, and may continue to lower, fares or service fees, and we have in the past offered, and may continue to offer, significant Driver incentives and consumer discounts and promotions, which may adversely affect our financial performance.

We have incurred significant losses since inception, including in the United States and other major markets. We expect our operating expenses to increase significantly in the foreseeable future, and we may not achieve profitability.

Our business would be adversely affected if Drivers were classified as employees instead of independent contractors.

If platform users engage in, or are subject to, criminal, violent, inappropriate, or dangerous activity that results in major safety incidents, our ability to attract and retain Drivers, consumers, restaurants, shippers, and carriers may be harmed, which could have an adverse impact on our reputation, business, financial condition, and operating results.

Old versus New Metrics

 Uber Trends

2016

2017

2018

  Revenue

$3,845

$7,932

$11,270

  Operating

($3,023)

($4,080)

($3,033)

  MAPs

45

68

91

  Trips

1,818

3,736

5,220

  Bookings

$19,236

$34,409

$49,799


Comments
Are any illegals in the USA receiving unemployment?

Sue on 4/12/2019 10:06:55 AM
Any idea how this plays in Calif ? Given that nasty states recent ruling on 'independent contractors', this could be a problem in a Large market ???

Theodore Vieu on 4/12/2019 12:11:07 PM
Percentage Unemployment, per population, per year, shows something quite interesting:
- 0. 07 percent Unemployed in 2019 is a Whole Lot Better than O.1 percent Unemployed in 1969
{2019} 200,000(unemployed)/326,800,000(population-US, approximate) => 0.07% approximately
{1969} 200,000(unemployed)/202,700,00(population-US, approximate) => 0.1% approximately
[I used Google Search for population data and rounded numbers and guesstimated 2019 population from 2018 data.]

Robert Fay on 4/12/2019 2:09:18 PM
 

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