Whatever it takes
In 2012, Mario Draghi promised to "do whatever it takes" and "take out a Bazooka" in order to boost the European union growth. Globally, many other central banks are cutting rates. Eventually, this will not end well, but for now, whatever marginal growth is possible globally will also be seen as helping the US short term.
Please let us not have a debate about whether this will cause malinvestments and that continually lowered interest rates will eventually slow bank lending. I am trying to call what is happening this week. Long-time readers will note that I wrote against Powell lowering interest rates the first time. My only hope is that he will pull back on this notion after lowering one more time 9 days from now. That said, the market wants to see lower rates, and Draghi lowering rates in Europe by Quantitative Easing will boost markets here.
Apple can surprise to the upside
New Apple (NASDAQ:AAPL) phone might be the best mobile camera phone on the market says Loup Ventures Gene Munster, with a 3 lens camera, new wider lens setting, and low lighting. It could boost sales until the 5G phone comes next year. Other products and services include new iPad with lower price and faster chips, 16-inch MacBook, HomePod, and AirPods. Also a focus on new services with additional announcements for Apple Arcade, Apple Card, Apple Video, and Apple TV+, maybe even new Apple Watch capabilities.
The market is not expecting it. Market participants are primed for a ho-hum product day tomorrow. If Apple surprises with a good product unveil, the chart looks very supportive for new highs. This could boost the overall market since Apple is one of the biggest companies in the world. Apple is in all the major indexes and ETFs, it is also a member of the FAANG stocks as a logical unit. I think AAPL will pull Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Alphabet (GOOGL) (NASDAQ:GOOG) up as well.
Antitrust suits for Google
That also means that I don't think the antitrust lawsuits of FB and GOOGL will amount to anything right now. The announcement might shave the price a few points for about a second, if at all. This announcement is a long time coming and the most often used rule in the stock market is "Buy on the Rumor, Sell on the News". This is already old news, and in my mind will amount to nothing. The supreme courts will likely snuff this one out if it gets too far. The most likely scenario is that Alphabet will settle, rub its neck and write a check. All the money-hungry state AGs will quickly lose their collective righteous indignation. GOOGL continues to attain new highs, same for Facebook by the way.
Speaking of Amazon...
AMZN has announced a job fair for 30,000 employees in 6 cities all around the country. None will be in Long Island City, thanks to certain politicians that made crazy demands after the deal was closed.
There are few companies anywhere on the planet that can pull in 30K workers in one shot. I think this will spark the imagination of AMZN bulls, what fantastic new businesses will AMZN disrupt now? Will, they finally announce the full-blown competitor to FedEx (NYSE:FDX) and UPS (NYSE:UPS)? Will they go after drug distribution by disintermediation, and going direct to the consumer?
Elliott Management goes activist against AT&T
This is an unalloyed benefit for shareholders of AT&T (NYSE:T). T is one of the long-term investments that I recommend. They have a great dividend that is safe, and they have an interesting media strategy that on the surface makes sense but has not been executed as well as would have hoped.
The DirecTV acquisition was a huge mistake and is hemorrhaging subscribers left and right. They probably need to slash prices or give a better offering to hold on to customers. They were also ham-handed in the way they treated production talent, which I called out as a mistake when it happened. At the same time, they are launching TimeWarner and HBO online. The strength of TimeWarner is HBO, but it is a distant third to Disney (DIS) and Netflix.
I am not sure what changes Elliot is looking for, but they will certainly shake things up and that should help T's stock price. Now T is not only a long-term investment, but it is now a speculation (medium-term trade) and even a fast money trade. Long and strong for T! If only an activist would go after 3M (MMM). I thought it would have happened by now.
SmileDirectClub (NASDAQ:SDC) is going to debut 9/12 generating $1.2 billion at an IPO price of $19-$22.
CloudFlare (NYSE:NET) is going to debut 9/13 generating $385 million at an IPO price of $10-$12.
My take: According to Wikipedia... CloudFlare, Inc. is an American web infrastructure and website security company, providing content delivery network services, DDoS mitigation, Internet security, and distributed domain name server services. CloudFlare's services sit between a website's visitor and the CloudFlare user's hosting provider, acting as a reverse proxy for websites.
CloudFlare has courted controversy by being a strong advocate for the 1st amendment and providing services for some websites with less than savory reputation. CloudFlare also provides services for other less controversial companies like Medium, Prosper, Uber, Yelp, Okcupid, Zendesk and I am sure many others. I think this could be an interesting new stock that might not get as much sponsorship initially because of the less popular customers.
The SmileDirectClub IPO is most interesting to me for what it will do to Align Technology (ALGN). SDC will put 1.2 billion of stock supply into the market for clear tooth aligners. I believe that no matter whether SDC is oversubscribed or not (it will be), I think plenty of momentum traders and algos are going to short ALGN or otherwise depress their shares. Last week I suggested put options against ALGN and it might now be too late for that.
We Company (WE) is talking about cutting their valuation even lower. They started at $47 billion, then they talked about cutting it to $25 billion, this morning they are going lower to below $20 billion. They still are planning to go on a roadshow this week in any case, but are pulling back details. I think We Company is probably not going to IPO. I would be interested if they cut the valuation to zero, but maybe not. There are so many issues with this IPO, including 3 classes of shares, and that the wife of the CEO gets to name the next CEO if the current CEO dies. Crazy stuff like that. Please stay away if this stinker does get off the ground.
PVH Corp. (PVH) CEO Manny Chirico bought more PVH stock days after the second-quarter report, paying $10 million on Sept. 3 for 133,155 shares. That is interesting...
Trim, Trim, Trim
Please remember to begin trimming your portfolio this week. Yes, the whole theme that I have been writing about for the last two weeks is that we are going to old highs and maybe even make new highs. That said, we have seen time and again that the moment the market breaks into new highs it tends to fall back and consolidate.
Trim 3% to 5% from each position every day this week. I believe that we have a new range, as I have said but bears repeating, from 2,900 to 3,000+. My cash management discipline requires setting aside funds gradually to build up a cash cache. Cash is the cheapest hedge, and if you slowly sell a bit every day, the opportunity cost will be minimized.
This is not for long-term accounts, I must repeat this apparently as well. A long-term investor is an owner, they don't buy and sell every day, they buy and HODL - NEVER sell. Invest in great names that generate plenty of cash that supports a great dividend, and if they have a nice growth profile, that is a bonus. For a trading and speculative account, we trade, that is what traders do.
This could be the week we break to new highs
Later this month and perhaps beginning of October, we could easily see another drop back to the 2,900 support level. On August 30, I projected that the S&P 500 can go to 3,038, maybe it does, maybe it doesn't, but we are going higher this week, and maybe even leading to the day before the Fed meetings the following week.
All that said, at 3,038 or somewhere around there, we are getting close to full valuation, and again we have seen volatility again and again. Don't let Lucy pull the football on Charlie Brown yet again. I don't think I can be any clearer. It is one thing to create Alpha, it is another thing to hold on to it.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.