Monday Morning Reads

Monday Morning Reads


From The Weekend:

  • Cautious view on Intelsat (I). Barron's
  • Positive view on Caterpillar (CAT). Barron's
  • Positive view on Kroger (KR). Barron's
  • Cautious view on Virgin Galactic Holdings (SPCE). Barron's
  • Boeing (BA) found debris in dozens of undelivered 737 MAX airplanes. Reuters
  • Google (GOOG) reaches antitrust settlement with state AGs over outside consultants hired. CNBC
  • Amazon (AMZN) wants internal Pentagon documents related to JEDI case. Bloomberg
  • Intuit (INTU) close to deal to purchase Credit Karma for $7 bln. WSJ
  • Boeing (BA) preparing more support for 737 Max suppliers. WSJ
  • Goldman Sachs (GS) pleads not guiltily to alleged role in 1MDB scandal in Malaysia. Bloomberg
  • Cargill to introduce plant-based burger to challenge Beyond Meat (BYND) and Impossible Foods. Reuters
  • Pepsi (PEP) aims to acquire Chinese snack brand Be & Cheery from Haoxiangni Health Food for $705 mln. Reuters
  • Former Viacom (VIAC) CFO Wade Davis near agreement to purchase Univision Communications. Bloomberg
  • Barclays (BCS) aiming to start search to replace CEO Jes Staley. FT
  • President Trump says US and India will sign $3 bln in defense deals (INP, LMT, GD, NOC, LLL, BA).



A major selloff in equities is making its way across the globe as the number of new coronavirus cases flares outside China, with the disease now spreading to at least 28 countries. Italy has canceled all public events in Venice and Milan as it confirmed 150 cases (and four deaths) of the virus over the weekend, while those diagnosed in South Korea - which raised its disease alert to the highest level - are nearing 800. A steep drop is also being seen in the U.S., with Dow futures plunging over 800 points and crude oil down 3.6% at $51.46/bbl. Gold is up 2.4% to a seven-year high of $1689/ounce and the 10-year Treasury yield is 8 bps lower to 1.38%.
Go deeper: Gold still has strong bullish potential for 2020, writes Avi Gilburt.

Latest updates

"Infections that are now emerging in people who haven't traveled to China or come into contact with confirmed cases show it's not clear how the virus is spreading," said Margaret Harris, a spokeswoman for the World Health Organization. "We're seeing some cases that don't have a clear epidemiological link." Other developments: Hong Kong's finance chief warned the virus threatened a "tsunami-like cataclysm," Austria halted train traffic with Italy, and Iran's neighbors announced travel restrictions on the Islamic Republic, which reported 43 cases of the disease.
Go deeper: 'Ironically, It Needs To Get Worse' by The Heisenberg.

China goes back to work

While a major coronavirus-driven selloff was seen across the globe overnight, stocks in China were largely unaffected by the movement, where the Shanghai Composite only closed down 0.3%. That's in part due to large regions of China relaxing curbs on transport and movement of people as President Xi told low-risk provinces to restore economic activity and output, while high-risk areas focus on controlling the epidemic. Figures released on Monday showed 24 out of China's 31 regions - including Beijing, Shanghai and populous provinces such as Henan and Anhui - reported zero cases of new infections on Feb. 23.

Economic impacts?

The coronavirus epidemic will likely cut 0.1% from global growth this year, according to the IMF, and drag down growth for China's economy to 5.6%, which is 0.4% lower from its January outlook. The U.S. is waiting for a clearer picture. "It's tough to have strong predictions on the economic issues, without being able to predict the health outcome," U.S. Treasury Secretary Steven Mnuchin told CNBC. "I think we're going to need another three or four weeks to see how the virus reacts, until we really have good statistical data."
Go deeper: 'Did The Market Just Get Infected?' by Lance Roberts.

Warren Buffett's annual letter

"If something close to current rates should prevail over the coming decades and if corporate tax rates also remain near the low level businesses now enjoy, it is almost certain that equities will over time perform far better than long-term, fixed-rate debt instruments," the Oracle wrote in his annual letter to Berkshire Hathaway (BRK.ABRK.B) shareholders. The conglomerate's Q4 operating earnings fell to $4.42B from $5.72B a year earlier as insurance underwriting took a hit, while it bought back $2.2B of its stock in the last three months of 2019, the most it has ever done in a single quarter.
Go deeper: Jeff Miller says investors (still) have much to learn from Mr. B.

More consumer finance dealmaking

Intuit (NASDAQ:INTU), the maker of TurboTax, is close to buying financial technology portal Credit Karma for about $7B in cash and stock, WSJ reports, adding that the purchase could be announced today. Credit Karma would function as a standalone business with its chief executive, Kenneth Lin, remaining in charge. Other recent transactions in the space include Morgan Stanley's (NYSE:MS) $13B deal for E*Trade (NASDAQ:ETFC) last week and Visa's (NYSE:V) $5.3B acquisition of startup Plaid announced last month.
Go deeper: Intuit Q2 2020 Earnings Preview.

Goldman pleads not guilty over 1MDB

Three units of Goldman Sachs (NYSE:GS) have pleaded not guilty to charges of misleading investors regarding $6.5B in bond sales that were raised for state fund 1Malaysia Development Berhad. Charges were filed in December 2018 against the units - based in London, Hong Kong and Singapore - for misleading investors by "making untrue statements and omitting key facts." Malaysia has said it was seeking up to $7.5B in reparations from Goldman over the 1MDB dealings, though the company has denied wrongdoing, saying it was lied to about how proceeds from the bond sales would be used.

Meatless craze

Agricultural giant Cargill, one the world's largest privately held companies, is launching plant-based hamburger patties and ground "fake meat" products in April. Competitors like Beyond Meat (NASDAQ:BYND), Impossible Foods (IMPF), Tyson Foods (NYSE:TSN) and Nestle (OTCPK:NSRGY) are watching moves into the sector. "We believe we're uniquely positioned to be very effective and efficient in the supply chain," said Elizabeth Gutschenritter, managing director of Cargill's alternative protein team.

Trade with India in focus

Bilateral trade between the U.S. and India stands at $160B as President Trump arrives in the country for a two-day visit. During a rally in Narendra Modi's home state, Trump said the two nations would shortly announce an "incredible" trade deal, but repeated the line that the prime minister was a "very tough negotiator." India wants to restore trade concessions under a tariff system called the Generalized System of Preferences, which Trump terminated in 2019 and provides additional benefits for products from least developed countries.

What else is happening...

Samsung (OTC:SSNLFconfirms coronavirus case at phone factory.

Sony (NYSE:SNE) launches its first 5G smartphone.

Climate change referenced on G20 finance communique.

Teck Resources (NYSE:TECKdrops C$20.6B oil sands Frontier project.

PepsiCo (NASDAQ:PEPbuys Chinese online snacks retailer.

MGM Resorts (NYSE:MGM) sued over guest data breach.

Boeing (NYSE:BAwidens 737 MAX debris inspections.

Today's Markets
In Asia, Japan closed. Hong Kong -1.8%. China -0.3%. India -2%.
In Europe, at midday, London -3.5%. Paris -3.8%. Frankfurt -3.7%.
Futures at 6:20, Dow -2.8%. S&P -2.7%. Nasdaq -3.2%. Crude -3.6% to $51.46. Gold +2.4% to $1688.50. Bitcoin -1.4% to $9753.
Ten-year Treasury Yield -8 bps to 1.39%

Today's Economic Calendar
8:30 Chicago Fed National Activity Index
10:30 Dallas Fed Manufacturing Survey

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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