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How Much “V” In Another (minus) 98?

How Much “V” In Another (minus) 98?

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Technically, by showing one decimal place maybe this doesn’t exactly qualify. Then again, I was only half serious. When Mexico’s government reported earlier this week that auto production fell by almost 100% in April, I wrote it was suggestive of the great possibly lingering difficulties being forecast for the other side of this economic dislocation. Automakers, basically, aren’t buying the “V” and more than that they very likely don’t have the cash to keep producing even at minimal levels.

One key reason why is the last two years. Rather than a strong economy, in the transportation industry it has been a serious recession already because the overall situation has been globally synchronized downturn. These are the weakest players left to dangle as governments toy still with their ridiculously inaccurate models – economy and virus.

Therefore, what I wrote about what we might learn from the Mexican auto industry:

You don’t go into complete shutdown and then come out the other side like nothing happened. And then, disgustingly, to be told to depend upon “stimulus” as the crucial element clinching the argument for how everything will end up returning to normal? What normal?

I never thought I’d see a -98.8%. But there’s a better chance of seeing it again than there is for “stimulus” working big inflationary miracles.

And here we are so soon. Now, technically, we didn’t see another -98.8% – but it was -98.3%. And not for some far-flung tangential economy, nor even one of our great trading partners. Near total shutdown swept the American auto industry, too.



According to the Federal Reserve’s latest estimates, car companies of all kinds ran their domestic plants such that the number of units rolling off the assembly lines was at an annual rate of 176 thousand last month. Compared to the annual rate of 10.53 million the previous April, which was itself a very low level, that means an almost complete shutdown of the entire domestic auto industry. Minus 98 point 3.

So what, April was a full month of lockdown?

While that’s true, the BEA at the same time says somehow American auto dealers (and fleet sellers) were able to sell enough light weight vehicles that this works out to an 8.6 million annual rate during the same lockdowns. It was half the number sold during April 2019, but why the enormous disparity between production and sales? Reminiscent of early 2009, though this difference actually dwarfs then.



No other industry was forced to go right to zero like the auto sector. Manufacturing of consumer goods, for example, getting back to the Fed’s IP estimates, managed an index (output) value of 87.9 in April. It was an enormous decline, down 16% from the prior year and the lowest aggregate output since 1993. At least it wasn’t zero.

There’s more than just COVID-19 in these numbers, especially autos where especially liquidity and cash for working capital is crucial. Inventory + lack of liquidity = going out of business fire sales. Preserve cash at all costs, even if it means shutting everything down in every manufacturing location. Temporarily, of course.

The Big “D.”

We can only hope that the auto industry is itself an outlier among what hopefully will turn out to be an overall economic outlier, quickly forgotten by the intended “V” turnaround. If not, then what we see in auto manufacturing would be merely at the forefront of what could be sweeping over more of the system in the coming months.



That’s about the best interpretation we can get from April and maybe May’s economic estimates. The declines will be substantial, historic in many places, but what do they really mean beyond the government’s interference? We won’t easily interpret them unless they are -98s or the like.

It’s the same thing with US retail sales, similarly dire figures also released today by the Census Bureau. The total April 2020 headline estimate here fell by an enormous 21% year-over-year (unadjusted). Seasonally adjusted, sales were down 16% from March when sales were already lower by more than 8% from February.



And like March, the overall retail sales total was aided substantially by Americans who apparently were still splurging at the grocery store last month. At a seasonally-adjusted amount just shy of $64 billion, that was 13% more than what was spent in the same places during April 2019.

Online retailers also did well, with everyone (supposedly) shut up and unable to venture outside to the mall non-store retail sales jumped by more than 20% year-over-year – the best monthly gain since last year’s Amazon Prime holiday surge.

In other words, outside of autos and consumer goods manufacturing, shutdowns haven’t been total. Most of these declines are related to them, of course, but there’s more going on probably in relation to job insecurity with now 36 million filing for unemployment (and the government temporarily propping up this huge number through “stimulus” that’s already in a huge hole).



I keep writing that a big reason why is because the US economy, like its global counterparts, was in rough shape just prior to the pandemic. The reason I keep writing this is because it keeps showing up in the data for the months just before March and April. The whole world went into this thing already pointing downward.

The Census Bureau snuck in its annual benchmark revisions in with this month’s release (OK, they didn’t “sneak” them into the publication, this is just when they happened to be scheduled) and consumer spending as far as retail sales was a little bit less than previously thought – particularly during the final months of 2019 (and, unsurprisingly, 2018 wasn’t nearly as “robust” as once heralded).

Not huge revisions by any stretch, but always in the same downward direction. And it matters for trying to understand how much the margins of weakness might have been before all the rest of this took place; how many businesses were already on the edge and then this huge shove over it.

A little bit weaker than we thought here, a bit less there, it adds up to distorting the prior picture of that starting condition.



So, yes, there wasn’t a repeated -98.8% so soon, but you might let me slide on -98.3%. What that ultimately means, and if means something meaningful since capital-intensive autos aren’t the only capital-intensive economic sector, just the most obvious right now, we’ll find out as the data becomes less historic over the months ahead. Will the declines still be deep if not April-bad as the world peeks its head out from shelter?

The problem, and where the auto data is most concerning now, is time. Not only does the “V” need to show up, it better do so quickly. Otherwise, the risks build exponentially. For both autos and manufacturers of consumer goods more broadly, there doesn’t seem to be a lot of patience. And this right from the start, in a likely nod to the existing weakness.

Since the Fed’s no help (Jay Powell thinks his magic words are all these businesses really need), perhaps GM and Ford can borrow some cash, some real cash from Kroger and WalMart. Or Amazon. There’s a better chance of that happening, and working, than there is the “announcement effect” is what will steady the global system enough to keep the damage minimal. I’d wager on finding another -98% auto number before that.

Scratch that, April Brazil autos were -99%.

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Spread & Containment

How to Use Dividends to Find the Best Tech Stock

Investors Alley
How to Use Dividends to Find the Best Tech Stock
When we talk about tech stock investing, we hear discussions of all sorts about different…

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Investors Alley
How to Use Dividends to Find the Best Tech Stock

When we talk about tech stock investing, we hear discussions of all sorts about different measures used for picking stocks.

For example, some tech investors use year-over-year revenue growth. Others subscribe to a theory that has been floating around for many years, that the secret to picking tech stocks was looking at the percentage of cash flows spent on research and development.

All too often, tech stock analysis consists of storytelling and searching for ideas that will change the world, something I’ve heard thousands of times during my career. The number of companies that actually did change the world probably totals up to a few dozen over three decades.

Some of those beat the market. Others did not.

I have found a variable that can help tech investors spot promising opportunities to identify technology companies that have higher probabilities of providing market-beating returns: dividends.

Note a stock’s dividend yield: investors who want higher dividends with an overall total return would be smart to look into high-yield tech stocks as part of their income strategy. The key to using dividends to find market-beating tech stocks is to look at the rate of their dividend growth. It doesn’t matter how high the dividend is at any given time. We want to see companies that are consistently growing their dividends.

A tech company that pays a dividend is making a statement. It tells the world: “We are generating enough cash to pay the bills, hire great people, and fund our future growth plans as well as R&D. In fact, we are generating so much cash we have some left over to pay out to our investors.”

Ideally, we want to limit our universe of companies to those who are increasing their payout by at least 20% annually. Growing a dividend at that high a rate says that things are just continuing to get better.

Once we have a universe of tech companies that are growing their payouts at high levels, we want to make sure we only own those that really do have a wonderful business that just keeps getting better. We want to use a financial checklist to make sure our companies are in excellent financial shape and have what it takes to keep growing the business.

I prefer the nine-point checklist developed by Professor Joseph Piotroski when he was at the University of Chicago – known as the “Piotroski F-Score”. This is a list of nine criteria of profitability, leverage, and efficiency. On each criterion, a firm can either get one or zero points – pass or fail.

I limit my universe of tech stocks with paid dividend growth to just two to three with the highest scores on the Piotroski checklist.

Using this simple method for picking tech stock winners has crushed the S&P 500 over the past decade and even edged at the tech-heavy NASDAQ 100.

Texas Instruments (TXN) makes the current list of technology companies with high dividend growth and outstanding fundamentals and prospects. The company makes most of its revenues from semiconductors, but it does still have some revenues from its calculators and other business machines. (I have had one of these, a Texas BAII calculator, within arm’s reach for most of my career.)

Texas Instruments had a solid second quarter and increased its guidance for the third quarter. The company has not suffered the China slowdown problems that have plagued some of their competitors so far. The brightest spot in the recent report was semiconductors being sold to the automobile industry, which were up 20%.

Although we have seen some slowdown in semiconductors due to the supply chain issues created by the pandemic, Texas Instruments has powerful tailwinds from all the developments we see in technology over the next decade.

Every one of the hottest trends in the economy—from renewable energy to artificial intelligence and everything in between—is going to increase demand for semiconductor chips. There are thousands of semiconductors in every electric vehicle, which will be another massive source of demand for the industry.

Texas Instruments has a yield of 2.5% right now, and has been growing that payout by 20.5% annually.

Another semiconductor company, Broadcom (AVGO) has the fastest-growing payout on our list right now. The company makes chips for smartphones, networking, broadband, and wireless connectivity. Broadcom’s recent purchase of Symantec’s Enterprise Business also puts it in the cybersecurity business.

Broadcom’s shares currently yield 2.97% and the payment has risen by an average of 49% annually for the past five years.

Most investors will never think of using dividends as part of the stock selection process. Rigorous testing shows that dividend growth is actually an important part of identifying companies with the potential to be huge winners.

My favorite way to invest in those companies isn’t to buy their stock, though. Instead, I like to use a special, little-known investment that lets me invest in these companies for up to 18% less than what others pay…

While collecting twice or more the dividend yield!

All without any more risk. I’m tracking 5 opportunities like that right now, and I lay them all out right here.

Only 3% of investors even know these funds exist

But using them, I can beat the market 2-to-1 while collecting 2-10X MORE yield from regular dividend stocks.

I learned this trick while I was rubbing elbows with some of the biggest fund managers in US history.

They too are buying these little known funds, cashing in huge discounts and collecting income while they do it.

Click here to learn the secret yourself.

 

How to Use Dividends to Find the Best Tech Stock
Tim Melvin

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Government

Where Carnival, Norwegian, Royal Caribbean Sit on Covid Vaccines

Do You still need to be vaccinated to go on a Royal Caribbean, Carnival, or Norwegian Cruise?

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Do You still need to be vaccinated to go on a Royal Caribbean, Carnival, or Norwegian Cruise?

Cruise line covid-19 vaccination and testing rules, which were imposed by the Centers for Disease Control and Prevention at the beginning of the pandemic, have been stricter than most. After the pandemic started in early 2020, the CDC signed a No Sail Order on March 14, 2020, which was finally lifted after nearly eight months on Oct. 30, 2020.

After the No Sail Order was lifted, the CDC enacted extremely restrictive rules and regulations to help keep passengers safe with the covid pandemic still raging throughout the world. The rules and regulations were set forth to begin to return cruise lines to operational status.

The cruise lines first had to be staffed accordingly and set up with the ability to test, treat and quarantine for covid medical emergencies. Testing for crew and passengers before embarkment and before dis-embarkment was required. The testing at pre-embarkment was a measure to protect those boarding, while the post-trip testing was for determining if an infection started on the cruise line itself. Being able to track the virus was very important in the prevention of spreading the virus and protecting patrons.

Image source: Shutterstock

Vaccination Still Not a Free Pass to Board

Once the vaccination was developed and approved, it became part of the CDC guidelines for cruise line adult passengers to have their vaccination before boarding. Even with a vaccination, guests still needed to test before they boarded the cruise lines. As the vaccine was approved for younger age groups, those age groups were then also required to have the vaccine to travel. Passengers were required to be fully vaccinated unless they are exempt by some status.

Before boarding, cruise line passengers who tested positive, as well as their travel companions, were not allowed to board, depending on the cruise line and how long the cruise may be. Some passengers were allowed to board and then isolate, others would have to reschedule their trip. Trip insurance is a good buy these days.

Cruise Lines Letting Loose on Vaccine Policies

Carnival Cruise Line  (CCL) - Get Carnival Corporation Report has now removed pre-cruise testing for vaccinated guests and also welcomes unvaccinated guests to travel. Fully vaccinated guests traveling less than 16 nights with the cruise line will no longer be subjected to testing, but still must provide proof of their vaccination status. Unvaccinated travelers will only need to provide a negative covid test result to board the ships. All rules and regulations are still subject to the destination country’s guidelines.

According to the Healthy Sail Center for Royal Caribbean  (RCL) - Get Royal Caribbean Group Report, the cruise line has updated its covid vaccination protocol. The cruise line will now allow passengers regardless of vaccination status to board in some ports if the travelers meet the testing requirements. Testing requirements vary by cruise departure and destination. Check the cruise lines port departure for updated information on requirements.

There is, however, a major exception, at least for now, which is obvious when you look at the specific wording shared by the cruise line:

"Starting with September 5 departures, all travelers regardless of vaccination status can cruise on the following itineraries, as long as they meet any testing requirements to board.

  • Cruises from Los Angeles, California.
  • Cruises from Galveston, Texas.
  • Cruises from New Orleans, Louisiana.
  • Cruises from a European homeport.

Notice that Florida, a major port for the cruise line, is not currently on the list.

In the U.S. aside from Florida, any guest with a valid negative covid test within the last three days will be able to board. These guests will also not be required to take a second test at the boarding terminal. Fully vaccinated guests do not need to provide proof of a negative covid test for shorter cruises. See the cruise line website for all updated information as it is subject to change.

Beginning Sept. 3, Norwegian Cruise Line  (NCLH) - Get Norwegian Cruise Line Holdings Ltd. Report is dropping its covid vaccine requirements for all its cruises. The cruise line stated that it is continuing to follow requirements for all destination countries, so guests traveling will want to check on destination vaccine and testing requirements. All guests 12 and older regardless of vaccination need to show proof of a negative test within 72 hours. Check NCL online for further instructions prior to travel.

The CDC has taken the stance that travelers are now well informed enough to make their own decisions when it comes to traveling on cruise lines. The travelers are taking their own assumed risk for their health and well-being. Cruise lines are now welcoming this new freedom for their passengers. 

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Government

Here’s Where Carnival, Norwegian, Royal Caribbean Stand on Covid Vax Rules

The three major cruise line have all made big changes to their vaccine policies and some passengers may be very happy (while some won’t.)

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The three major cruise line have all made big changes to their vaccine policies and some passengers may be very happy (while some won't.)

Cruise line covid-19 vaccination and testing rules, which were imposed by the Centers for Disease Control and Prevention at the beginning of the pandemic, have been stricter than most. After the pandemic started in early 2020, the CDC signed a No Sail Order on March 14, 2020, which was finally lifted after nearly eight months on Oct. 30, 2020.

After the No Sail Order was lifted, the CDC enacted extremely restrictive rules and regulations to help keep passengers safe with the covid pandemic still raging throughout the world. The rules and regulations were set forth to begin to return cruise lines to operational status.

The cruise lines first had to be staffed accordingly and set up with the ability to test, treat and quarantine for covid medical emergencies. Testing for crew and passengers before embarkment and before dis-embarkment was required. The testing at pre-embarkment was a measure to protect those boarding, while the post-trip testing was for determining if an infection started on the cruise line itself. Being able to track the virus was very important in the prevention of spreading the virus and protecting patrons.

Image source: Shutterstock

Vaccination Still Not a Free Pass to Board

Once the vaccination was developed and approved, it became part of the CDC guidelines for cruise line adult passengers to have their vaccination before boarding. Even with a vaccination, guests still needed to test before they boarded the cruise lines. As the vaccine was approved for younger age groups, those age groups were then also required to have the vaccine to travel. Passengers were required to be fully vaccinated unless they are exempt by some status.

Before boarding, cruise line passengers who tested positive, as well as their travel companions, were not allowed to board, depending on the cruise line and how long the cruise may be. Some passengers were allowed to board and then isolate, others would have to reschedule their trip. Trip insurance is a good buy these days.

Brittany Murray/MediaNews Group/Long Beach Press-Telegram via Getty Images

Cruise Lines Letting Loose on Vaccine Policies

Carnival Cruise Line  (CCL) - Get Carnival Corporation Report has now removed pre-cruise testing for vaccinated guests and also welcomes unvaccinated guests to travel. Fully vaccinated guests traveling less than 16 nights with the cruise line will no longer be subjected to testing, but still must provide proof of their vaccination status. Unvaccinated travelers will only need to provide a negative covid test result to board the ships. All rules and regulations are still subject to the destination country’s guidelines.

According to the Healthy Sail Center for Royal Caribbean  (RCL) - Get Royal Caribbean Group Report, the cruise line has updated its covid vaccination protocol. The cruise line will now allow passengers regardless of vaccination status to board if the travelers meet the testing requirements. Testing requirements vary by cruise departure and destination. Check the cruise lines port departure for updated information on requirements.

In the U.S., any guest with a valid negative covid test within the last three days will be able to board. These guests will also not be required to take a second test at the boarding terminal. Fully vaccinated guests do not need to provide proof of a negative covid tests for shorter cruises. See the cruise line website for all updated information as it is subject to change.

Beginning Sept. 3, Norwegian Cruise Line  (NCLH) - Get Norwegian Cruise Line Holdings Ltd. Report is dropping its covid vaccine requirements for all its cruises. The cruise line stated that it is continuing to follow requirements for all destination countries, so guests travelling will want to check on destination vaccine and testing requirements. All guests 12 and older regardless of vaccination need to show proof of a negative test within 72 hours. Check NCL online for further instructions prior to travel.

The CDC has taken the stance that travelers are now well informed enough to make their own decisions when it comes to travelling on cruise lines. The travelers are taking their own assumed risk for their health and well-being. Cruise lines are now welcoming this new freedom for their passengers. 

Read More

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