[Market Madness] Edition 0098
Midweek Hurdles
Choppy week
Well folks, it is shaping out to be a choppy week in the markets. There is a lot weighing on the shoulders of investors today, particularly the Fed meeting results, rising COVID 19 cases, and the upcoming stimulus bill.
Speaking of stimulus, here is the latest summed up in one headline:
Not included in the headline, but is in other headlines is Donnie’s desire for the new FBI building to be included in the stimulus bill. As we talked yesterday, there are mounting hopes and entrenched politicians who are unwilling to move the dial to get the bill passed quickly. Treasury Secretary Mnuchin is smart to negotiate for just the unemployment extension, as that is probably the most timely element of the bill.
Elsewhere, overseas indices closed mixed with the world still wondering what’s gone wrong with the U.S. and the virus. On the day, crude oil is up, volatility is down, and gold is up as well. Other big things to watch today are the Big Tech testimony, the Fed’s meeting follow-up, and developments on the upcoming stimulus package.
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Fundamentals
Wednesday’s Close:
Dow Jones: +0.62%
S&P 500: +1.25%
NASDAQ: +1.35%
US 10 YR: 0.567%
Crude OIL: $41.25
Market Madness Portfolio: +1.06%
COVID 19 Global Cases: 16,824,259
Indices Overseas:
FTSE 100: +0.12%
Nikkei 225: -1.15%
Hang Seng: +0.45%
TEDRATE: 0.13
LIBOR (3 month): 0.26825%
A new Kodak moment: a picture worth a thousand prescriptions
Picture this, because I still can’t: Kodak moving into production of pharmaceutical medicines and ingredients. Who’s behind this? You guessed it — Donnie. Kodak “has won a $765 million government loan under the Defense Production Act, the first of its kind. The purpose: to help expedite domestic production of drugs that can treat a variety of medical conditions and loosen the U.S. reliance on foreign sources.” (excerpted from WSJ article)
The market value of the company actually tripled during normal trading on Tuesday and the stock was up about 60% in after-market activity and now up over 500% early in the day with several trading halts due to volatility. The SEC better look around for inside dealings on this one, that’s for sure.
And, naturally, they will be increasing production of Donnie’s new favorite dietary supplement, Hydroxychloroquine (that still has no FDA support in treating COVID 19)
“The onetime leader in photography sales is gearing up to produce ingredients for a number of generic drugs, including the antimalarial drug hydroxychloroquine that President Trump has touted in the treatment of coronavirus. Meanwhile, the U.S. is aiming to shift from relying on countries such as China and India, Kodak Chief Executive Jim Continenza and U.S. officials said.” (excerpted from WSJ article)
Leadership on the inside suggest that their history in chemicals based on the film and photography production will allow them a more or less ‘seamless’ transition into the production of pharma-related products. I’m no expert by any means, but it doesn’t seem all too likely that the overlap is so large that they will have a ‘seamless’ transition from one industry to another that have miniscule overlapping qualities. It could be very likely that they are able to adjust production systems and create a U.S.-based production system for intermediate drug components, but I don’t know that it’s going to be the flash in the pan that investors are making it out to be.
Kodak as a company is not without its own challenges and flaws. In 2012, the company files for bankruptcy protection as the rise in digital cameras destroyed their original business. Funny enough, they were the company that invented the digital camera in 1975, but they themselves did not capitalize on what became a future booming trend. More on the fundamentals can be found here, some analyst reports here and a snapshot of their credit report here:
(latest is June 16, 2020 — labeled “Local Currency LT”):
Another major piece to the puzzle is the continued assault on China and corporate supply chains that flow through China.
“China is recognized as the world’s biggest supplier of the raw materials—known as active pharmaceutical ingredients—that form the basis of medicines. That dependence on China makes shortages more likely should Chinese manufacturing be shaken, according to a 2019 U.S. government report. China’s dominance is growing: The U.S. imported $3.9 billion worth of pharmaceutical raw material from China in 2017, an increase of nearly one-quarter from the prior year, according to IHS Markit.” (excerpted from WSJ article)
It really should not come as a surprise that this move has major U.S.-China tension undertones, as that has been a headline focus for the last several weeks. This discretion with China has turned into an all-out brawl from many angles and will likely only continue to lead to heightened tensions between the two nations, particularly with the rhetoric that has been continuously issued by Donnie and Pompeo.
Quick Takes
Big tech braces up before congress. (via WSJ)
More on the $600 unemployment assistance. (via WSJ)
New COVID 19 hot spots to rise in the U.S. (via CNBC)
Santander posts massive writedowns. (via FT)
Rallies and protests break out in Russia against Putin’s reign. (via FT)
Yes, we’re all still fighting over TikTok. (via CNBC)
Despite the FDA’s disapproval, Donnie still thinks hydroxychloroquine is still an effective COVID 19 treatment. (via CNBC) (Same article: Donnie shares a fake COVID 19 treatment video that goes viral. Media sites pull the plug on the post and video.)
Blame the Robinhooders for the Kodak boom. (via CNBC)
Barclays lifts loan loss reserves. (via FT)
Private debt defaults on the rise. (via WSJ)
Businesses are running low on change. (via CNBC)
Reader’s Corner
The reader might want to look into the upcoming sales tax holiday and see if they’re state offers any breaks. Read more here.
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