- Eye-popping stimulus spending
- Zach Scheidt: Three ways to invest $1,200…
- … for safe growth potential
- *Almost* full-proof recession indicator
- Oil’s crazy sliiiide
- CalPERS CIO jukes billion-dollar question
- 420 Update: Cannabis profits step up
- Shake Shack refunds federal money
In the 13-year history of this e-letter, today is — as far as we can remember — the first time sex toys have figured into our daily mix of topics…
Aside from sex toys, the New York Post lists other unconventional items Americans are spending their federal stimulus money on, including paintball equipment, bidets and inflatable dinosaur costumes.
We’ll make a dignified exit…
Our income expert Zach Scheidt says: “The government is hoping you’ll spend it frivolously — buying things you don’t need to help boost the economy.” (See above.)
With 22 million Americans newly unemployed, however, we expect most will be using stimulus checks to keep food on the table, lights and utilities turned on and roofs over their heads.
“But what if you have the necessities covered?” Zach says. “What should you do then?
“I suggest you use your stimulus check to boost the economy another way — by maximizing your income.
“You might think I’m crazy for suggesting you invest your stimulus check in the stock market,” says Zach, “if you’ve been paying attention to what’s happening on Wall Street.”
While the market closed up Friday, we’re seeing whipsaw action among all the major indexes, leading many investors to believe we haven’t seen the bottom yet. “While that might be true for some stocks,” Zach concedes, “it’s definitely not the case for every stock.
“When investors were panicking, they sold everything without thinking,” he says. “So plenty of good stocks with stable businesses were dumped alongside risky stocks that will certainly be more challenged by this crisis.”
He says: “By now most of the panic is over. In fact, over the past week, we’ve started to see a bit more discretion in the market.
“Stocks from great businesses with reliable profits are now moving back up faster than the more speculative stocks,” Zach notes. And that’s definitely the case for companies that share their largesse with investors by paying out robust dividends (aka Zach’s favorite stocks).
Even though many of these dividend stocks are bouncing back from the flash market nose dive, “they’re still at a discount to where they were before the coronavirus bear market hit,” Zach says.
So instead of buying an inflatable dino costume (or — ahem — other unmentionables), Zach recommends using your $1,200 federal check to buy discounted, low-risk stocks that will keep paying dividends quarter after quarter. Bonus? “You’ll also see your portfolio grow as the stocks trade higher.”
To wit, Zach says: “I’ve combed through the markets to find three names you can add to your stock portfolio today. They all offer the right combination of safety, dividend payouts and growth potential that will ensure your coronavirus stimulus check works harder for you.”
Stimulus Play #1: Verizon Communications (VZ)
While the 24-hour news cycle obsessively covered the coronavirus outbreak, President Trump quietly signed the Secure 5G and Beyond Act of 2020 on March 23 that should accelerate the rollout of fifth-generation wireless connectivity.
Zach says: “5G… will dramatically transform the way we communicate and do business with each other — eventually touching every aspect of our lives. One of my favorite companies on the front lines of 5G for consumers is Verizon Communications (VZ).
“It’s one of the very few providers with a solution for setting up a 5G connection in your home,” Zach says. “And with 94.5 million consumer retail connections, Verizon has one of the world's widest customer bases.”
Zach’s also a fan of the company’s $132 billion in annual revenue and its respectable 4.3% yield. “So if you’re looking to invest your $1,200 check into one of the hottest growth areas in our economy — 5G — then VZ offers a tremendous opportunity for you to grow your income.”
Stimulus Bonus Play #2: Pfizer Inc. (PFE)
When it comes to pharmaceutical companies, blue chip Pfizer is difficult to top. “One of the most attractive things about Pfizer is its pipeline of new drugs that are being tested for approval,” Zach says. “As these drugs come online, Pfizer’s profits will naturally grow.”
But even Pfizer’s fallen victim to the irrational sell-off over the last two months. “That just means you’ll pay a bargain price to lock in its reliable dividend,” Zach says.
“Pfizer currently pays investors $1.52 per share each year,” he notes. “When you compare the dividend to the current stock price (a bit above $36), you get a yield of roughly 4.3%. That’s much better than any savings account that I know of.” Yep.
“Best of all,” Zach says, “the company has a nine-year track record of growing its dividend… meaning you will get paid more over time.”
Stimulus Bonus Play #3: Procter & Gamble (PG)
We’ll spare you the TP jokes… but one day when the coronavirus crisis is behind us consumers will remember denuded store shelves (heh). “Of course, that also means the companies that produce [TP] and other consumer staples have seen a big spike in business,” Zach says.
One of Zach’s favorites is Procter & Gamble (PG). And why not? “It has hundreds of well-known brands including Charmin, Bounty, Tide, Gillette, Pampers and many more.” (Pampers and other baby essentials might benefit from the baby boom expected in nine months or so… just sayin’.)
“PG also has a very wide consumer base, with products sold in more than 180 countries,” says Zach. “Best of all, the company has a 63-year history of growing its dividend payouts… and that’s not going to change anytime soon.”
Zach’s takeaway: “I love the idea of using some of your stimulus checks to lock in a growing income stream.” And there you have “three great opportunities to put the money the government sends you to work.”
So “instead of frivolously spending the cash, you can use it to add income and wealth to your retirement for years to come!”
[Ed. note: We already mentioned one way to play the imminent 5G tech revolution… And Zach and his team have landed on another paydirt opportunity that has savvy investors already generating income from 5G — before it blankets America.
And the Trump administration is making 5G infrastructure a top priority, paving the way for 5G’s implementation. Because of which, certain 5G companies will have the opportunity to dip into a pool worth billions of dollars.
To find out how you can be one of them too, learn more right here.]
We start our market notes today with a major economic number: The Chicago Fed's National Activity Index (CFNAI) is a monthly indicator that gauges overall economic activity and associated inflationary pressure.
While the number crunches 85 economic indicators into one composite number, the number to watch isn’t the month-to-month, but the three-month moving average. If it’s below minus 0.7, that signals the onset of a recession.
The only time it’s been off the mark was when it was late to the party with the 1973 oil shock. Perhaps this is the second time. In any event, hard to deny it’s a recession with the number at minus 1.47
Sooo about oil… Crazy, right? We’ve watched the price of oil slide as economies across the globe have been brought to their knees by the COVID-19 pandemic. But this is out of control…
At the time of writing, a barrel of WTI is going for less than $11 — that’s the cheapest since 1998, with the sharpest one-day contraction since 1983.
“Oil prices [are] under pressure as the measures to curb the spread of the virus saw fuel demand evaporate,” Al-Jazeera reports, “leaving so much extra supply that countries were finding it hard to find space to store it.”
And while the price of Brent crude is holding up better than the West Texas variety, unemployment contagion is spreading to the U.S. oil industry; in the last four weeks, the number of active oil rigs has dropped by more than 35%
Taking a look today at the other commodity we track — safe haven gold — it’s rallied $12.90 to $1,711.70 per ounce.
Pivoting to the stock market, the Dow’s pared losses to 200 points to 24,040; the S&P 500 is also in the red, down 13 points to 2,860. In the green, however, the Nasdaq is up 21 points to 8,670.
“The California Public Employees’ Retirement System was well prepared to cash in on a stock market sell-off,” The Wall Street Journal reports. “Until a few months ago.”
For years now, The 5’s followed the ups and downs of CalPERS — that provides current retirement benefits for about 700,000 Californians.
Today we learn CalPERS exited three hedge funds last year, hedge funds specifically “designed to produce big payoffs when markets fall steeply.” A decision that’s cost the pension fund $1 billion.
The kicker is CalPERS CIO Ben Meng was less than forthright about the boneheaded move… During a March 18 teleconference, board member Margaret Brown asked Mr. Meng how the three hedge funds were performing.
“They should perform well in this kind of a down market, as they were exactly designed to do,” Mr. Meng answered. “And from what we know…most of these strategies are performing as anticipated.”
Performing incredibly well, in fact; one of the funds had a 3,612% return in March. The funds just aren’t performing incredibly well for CalPERS — something Meng didn’t specifically mention when he expertly juked Ms. Brown’s question.
And she was suitably pissed: “He took away a risk strategy that the board had approved without telling the board,” she said.
The WSJ concludes: “The CalPERS board will convene again next week and discuss, among other things, how much authority it delegates to investment staff.”
In light of 420 day, our pot stock authority Ray Blanco says: “More states are reporting spikes in cannabis sales [since] the onset of the pandemic.
“Across many parts of North America,” he says, “we’ve seen cannabis sales rocket higher as folks stocked up on cannabinoid medicines, experimented with cannabis to try to relieve stress and looked to recreational pot as a way to pass the time while stuck at home.
“In Illinois,” for example, “recreational marijuana sales continued to be red-hot in March. On one occasion, a line of about 100 cars built up outside the drive-thru window for Rise Dispensary in Mundelein, a village of about 31,000 residents outside of Chicago.
“Meanwhile,” says Ray, “some pot companies are doing something that’s even more shocking to businesses in other industries right now: posting profits.” He cites Canadian company Valens GroWorks Corp. that reported profits of C$2.5 million for Q1 of 2020 — the company’s third-straight profitable quarter.
“That’s an astonishing result in one of the toughest business environments in history,” Ray says.
And that’s something CNBC picked up on today….
“As the global coronavirus pandemic brought most U.S. businesses to a near halt in March, cannabis dispensaries were designated as essential in eight of the 11 states where adult-use is legal.
“Sales have also surged,” CNBC reports. “Weekly sales in March topped $134 million in California, Washington, Nevada and Colorado, a 17% increase from the weekly average in 2019.” And consumers are stocking up on cannabis the same way they’re stocking up on toilet paper — average purchases have increased almost 50%.
CNBC concludes: “Cannabis investor Matt Hawkins says the data makes the best case for legalization. ‘You can just point to the fact that we have been deemed essential, why are we not legal?’”
Just a matter of time now…
“Burger giant Shake Shack plans to return $10 million it received from a government loan program meant to protect small businesses during the coronavirus crisis,” the New York Post reports.
As long as the federal government was giving away money, publicly traded Shake Shack — with more than 189 restaurants across the U.S. and about 8,000 employees — got in line for the Paycheck Protection Program that’s supposedly aimed at helping businesses with fewer than 500 workers.
But what a mensch: Shake Shack’s CEO Randy Garutti “decided to return its loan because it found a way to raise money through a public stock transaction instead.”
So why did Shake Shack take the government’s money in the first place? Garutti says: “The ‘PPP’ came with no user manual and it was extremely confusing.” (Something about apologizing later… but still asking permission?)
That being said — since it is 420 day — would you like fries with that?
The 5 Min. Forecast
P.S. The biggest crisis to hit America in recent times has pushed 5G front and center…
And remote work has only underscored the need for more robust 5G infrastructure in the U.S.
Now the federal government is trying to accelerate 5G’s deployment… the benefits of which will transfer directly to the people who earn what we’re calling “5G Cash.”
Whatever price everyday folks are paying for gold, it has only the most tenuous connection to the “gold price” reported in the financial media. Read More
If mainstream financial media are to be believed, all of Wall Street’s operating assumptions since the Panic of 2008 have been flipped on their head. Read More
Nomi Prins on the “reopening” economy: “The old model will be supplanted by different businesses.” Read More
“[AI] has slowly become ingrained into our everyday routine,” tech maven Ray Blanco observes, “and has become more powerful every year.” Read More
It’s the fastest that any technology has reached critical mass — and our resident futurist Robert Williams says it’s not too late to get in. Read More
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“Millennials are just aging to their PEAK buying years,” says Zach Scheidt. This industrywide shift — and others — makes homebuying a trend to watch… Read More
“This trend isn’t going anywhere,” says our tech maven Ray Blanco. “So how can you invest in SPACs for profit?” Read More
Our biggest beef with GDP is that it’s a nigh-meaningless statistical abstraction. Now for a new spin on one of our long-standing complaints… Read More
The global power elite are set to declare a crisis of confidence in the U.S. dollar… Not that they’ll put it in those terms… Read More