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Lower Testing Shouldn’t Lower Quidel

When determining winners and losers in the 2020-2021 stock market, it is important not to overlook the companies that supply testing kits for COVID-19. The Quidel Corporation (QDEL) manufactures rapid healthcare diagnostic solutions,
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  When determining winners and losers in the 2020-2021 stock market, it is important not to overlook the companies that supply testing kits for COVID-19. The Quidel Corporation (QDEL) manufactures rapid healthcare diagnostic solutions and received an FDA emergency use authorization for its antigen tests in early May 2020. (See QDEL stock analysis on TipRanks) Andrew Cooper of Raymond James Financial reported on the stock, stating that although COVID-19 is waning, the company can still stand to profit and see increased investor interest. Cooper reiterated a Buy rating and assigned a price target of $160. This reflects a potential upside of 39.41% from the stock’s Friday closing price. Cooper described Quidel’s relationship with its main competitor, Abbott Laboratories (ABT), stating that Abbott had lowered its guidance due to diminishing demand for COVID-19 testing, but far more of its core business surrounds the test kit sales than that of Quidel. Additionally, he hypothesized that even before Abbott’s announcement, the information was already baked into Quidel’s share price. Due to Quidel’s lower base reach, Cooper expects to see quarter-over-quarter growth for Quidel’s Quickvue antigen test and is anticipating news on a large employer contract that could impact his model. Securing contracts for school testing could also be a boon for the company, and multi-year deals will provide consistent customers and less overall uncertainty. Cooper opined that QDEL is currently trading “below the value of the base business alone,” and that the company should be worth more. On TipRanks, Quidel is a Moderate Buy, based on 3 Buy and 1 Sell ratings. The average analyst QDEL price target is $126.67, representing a potential 12-month upside of 10.37%. Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment. The post Lower Testing Shouldn't Lower Quidel appeared first on TipRanks Financial Blog.

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Shock Waves In The Virginia Gubernatorial Election, Can Biden Help?

Shock Waves In The Virginia Gubernatorial Election, Can Biden Help?

Authored by Mike Shedlock via MishTalk.com,

With 10 days to go before Election Day, Democrat Terry McAuliffe and Republican Glenn Youngkin are locked in a close battle for..

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Shock Waves In The Virginia Gubernatorial Election, Can Biden Help?

Authored by Mike Shedlock via MishTalk.com,

With 10 days to go before Election Day, Democrat Terry McAuliffe and Republican Glenn Youngkin are locked in a close battle for governor of Virginia...

GOP Gains in Governor’s Race

Highly respected pollster Monmouth University reports GOP Gains in Governor’s Race

Democrat Terry McAuliffe and Republican Glenn Youngkin are locked in a close battle for governor of Virginia. The last Monmouth (“Mon-muth”) University Poll of the race before the election marks a gain for the GOP candidate from prior polls. Youngkin’s improved position comes from a widening partisan gap in voter engagement and a shift in voters’ issue priorities, particularly around schools and the pandemic.

Youngkin (46%) and McAuliffe (46%) hold identical levels of support among all registered voters. This marks a shift from prior Monmouth polls where the Democrat held a 5-point lead (48% to 43% in September and 47% to 42% in August). A range of probabilistic likely electorate models* shows a potential outcome – if the election was held today – of anywhere from a 3-point lead for McAuliffe (48% to 45%) to a 3-point lead for Youngkin (48% to 45%). This is the first time the Republican has held a lead in Monmouth polls this cycle. All prior models gave the Democrat a lead (ranging from 2 to 7 points).

What Happened?

At a September 28 debate, Mr. McAuliffe bluntly declared: “I don’t think parents should be telling schools what they should teach.” 

Youngkin took that pitch and ran with it. He promises more accountability, more charter schools, and an end to critical-race indoctrination.

Taken Out of Context?

What a hoot. The translation is perfect.

Translation: "I accidently said exactly what I thought, instead of the poll tested remarks."

Biden to the Rescue?

Is that supposed to help? Whom?

Obviously Biden thinks it will help McAuliffe, but color me skeptical. If an incoherent Biden gets on the stage with McAuliffe, it just might help Youngkin.

My guess Biden sticks to cameo appearances, tries to say nothing, and the pluses and minuses balance out to nothingness. 

Harris to the Rescue?

Is that supposed to help? 

I'll take a stab that this is negative for McAuliffe. Harris is not well liked and proven useless at the border.

Education Message

Changing Numbers 

Poll Dynamics 

538 Poll Synopsis 

The Trafalgar Group also has the poll as tied. But 538 corrects that to +1 for Younkin. 

Amusingly, after having repeatedly blasted Trafalgar in the 2020 presidential election, 538 now ranks Trafalgar as A-.

McAuliffe’s Gift to the GOP

The Wall Street Journal discusses McAuliffe’s Gift to the GOP.

Mr. McAuliffe this week released an ad that radiates panic. The screen pans over pictures of Mr. McAuliffe’s children, as the Democrat complains his Republican opponent took his words about education “out of context.” 

Candidates stuck explaining what they really meant (two weeks from an election) are candidates in trouble. And every sign is that Mr. McAuliffe’s campaign has been on a perilous slide since that fateful comment.

The moment illustrates again the power of education as a wedge issue. It crosses socio-economic lines, giving Republicans the opportunity to peel back crucial suburban voters who helped Joe Biden to the White House. And it crosses racial lines, providing the party a chance to build on gains among blacks, Hispanics and Asian voters.

The issue resonates as strongly with Mr. Youngkin’s base, which is energized by a candidate willing to confront entrenched school boards and teachers unions. Monmouth finds GOP voter enthusiasm is booming, with 79% of Republicans saying they are very motivated to vote (7 points higher than Democrats) and 49% saying they are enthusiastic about the election (23 points higher). Education transcends the divide between working-class and college-educated voters.

Virginia isn’t an outlier; it’s a road map. While the Beltway press corps has obsessed over protests in the Virginia suburbs, the same fury is ripping across districts in every state—including those crucial to Democrats’ congressional majorities. In New Hampshire ( Sen. Maggie Hassan ), parents line up to rail at school boards. In Colorado (where Sen. Michael Bennet used to be Denver’s superintendent of schools), board members are quitting, getting recalled or being challenged by entire slates of reformist parents. In Arizona ( Sen. Mark Kelly ), the state GOP has taken to running to “school board boot camps” to handle the unprecedented flood of newly engaged citizens.

The McAuliffe experience shows how tricky the issue can be for Democrats. Teachers unions (core Democratic donors) demand fealty. Activists demand backing for transgender policies and critical-race curriculums. Yet it turns out this standard progressive line is offensive to millions of reengaged parents. Mr. McAuliffe’s first instinct was to bow to and back the educational establishment—which didn’t go well. He’s since tried to turn the tables and duck questions by incorrectly claiming CRT isn’t taught in Virginia schools and is a fiction—a “racist” “dog whistle.” That’s not fooling a single Virginia parent.

Mish Call 

Tossup. I don't know. Perhaps a slight edge to Youngkin, simply based on momentum.

But there is a second issue that no one above addressed and it can easily be the deciding factor.  

Right To Choose

Youngkin is pro-life in a deeply blue state. Women are over half the voters. This is just not a good issue for Republicans. In fact, it's a terrible issue for them. 

Once again, the base is going nowhere. Independents and moderates will decide the election. 

Can Youngkin win enough independents and swing voters on education to counter a major flaw on abortion? 

The Real Lesson  

The real takeaway that the WSJ missed is the GOP needs to bend towards the middle. 

The middle wants an end to critical-race indoctrination. But the middle includes other wedge issues like abortion. 

The middle does not want the radical Left policies of the Progressives who have hijacked Biden's agenda. 

Instead, we have extreme politics on both sides where independents have to chose one wedge issue over another.

*  *  *

Like these reports? If so, please Subscribe to MishTalk Email Alerts.

Tyler Durden Sun, 10/24/2021 - 17:30

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Economics

This Shows Why The Yuan Is Defying Economic Slowdown

This Shows Why The Yuan Is Defying Economic Slowdown

By Ye Xie, Bloomberg markets live commentator and analyst

Three things we learned last week:

1. The yuan keeps rising even as the economy slows. China’s growth slipped below 5% in the…

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This Shows Why The Yuan Is Defying Economic Slowdown

By Ye Xie, Bloomberg markets live commentator and analyst

Three things we learned last week:

1. The yuan keeps rising even as the economy slows. China’s growth slipped below 5% in the third quarter. Excluding pandemic-hit 2020, that would be the slowest in more than three decades. Yet the yuan is surprisingly strong with the trade-weighted index hovering near the highest in almost six years. Friday’s FX settlement data show why the yuan is so resilient.

A proxy for foreign-currency inflows, the net yuan purchases by banks’ clients amounted to 174 billion yuan ($27 billion) in September. The 12-month average rose to a record 159 billion yuan, thanks to strong exports and inflows to China’s stock and bond markets. The portfolio inflow will likely keep coming. The widely-followed FTSE WGBI index will include Chinese bonds by the end of this month, a move that Citigroup estimated will bring in about $3 billion a month. Against this background, any expectation for large yuan deprecation is likely to be misplaced.

2. Beijing is making moves to calm the property market. A slew of senior officials, including Vice Premier Liu He, came out to try to shore up the struggling real-estate sector and reassure everyone that risks from Evergrande are contained. Evergrande’s surprising payment of interest rates last week helped it avoid an imminent default, triggering the biggest weekly rally in Chinese junk bonds since 2012. The crisis is by no means ending. But China’s fine-tuning of housing policy, including encouraging banks to increase mortgages, should bring some relief for property developers.

It’s part of broad efforts by policy makers to keep the economy from faltering further. On Friday, a Ministry of Finance official said Beijing has urged local governments to speed up bond issuance to fund infrastructure projects.

3. Inflation is bringing forward central bank rate expectations across the world. The global bond selloff continued last week as inflation expectations rose. The U.S. five-year breakeven rate reached the highest in more than a decade. In Russia, the central bank stunned investors with a bigger-than-expected rate increase Friday, and warned that more tightening may come to curb inflation. In China, while consumer prices are held back by lower pork prices, bond yields have also increased in recent weeks as expectations of reserve ratio cuts waned.

Tyler Durden Sun, 10/24/2021 - 18:30

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Spread & Containment

Shadow Inflation: Shipping Costs Are Up Way More Than You Think

Shadow Inflation: Shipping Costs Are Up Way More Than You Think

By Greg Miller of FreightWaves,

Name something that costs far more than it did before the pandemic that simultaneously gives you far less value for your money than it used to.

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Shadow Inflation: Shipping Costs Are Up Way More Than You Think

By Greg Miller of FreightWaves,

Name something that costs far more than it did before the pandemic that simultaneously gives you far less value for your money than it used to.

Of all the goods and services in the world, it’s hard to find a better pick than ocean container shipping. As rates have skyrocketed, delivery reliability has collapsed amid historic port congestion. Ocean cargo shippers are paying more than they ever have before for the worst service they’ve ever experienced.

The true COVID-era inflation rate for ocean shipping, when adjusted upward to account for lower quality, is much higher than the rise in freight rates.

Rates spike, quality plummets

For businesses that rely on imports and exports, ocean shipping is a necessity, not a luxury, so pricing rises if demand exceeds supply regardless of how bad the service is. U.K.-based consultancy Drewry recently upped its forecast and now predicts that global container rates will increase by an average 126% this year versus 2020, including both spot and contract rates across all trade lanes.

Norway-based data provider Xeneta sees most long-term contract rates in the Asia-West Coast route averaging $4,000-$5,000 per forty-foot equivalent unit, double rates of $2,000-$2,500 per FEU at this time last year. Spot rates have risen much more than that, both in dollar and percentage terms. The Freightos Baltic Daily Index currently assesses the Asia-West Coast spot rate (including premium charges) at $17,377 per FEU, 4.5 times the spot rate a year ago.

Daily assessment in $ per FEU. Data: Freightos Baltic Daily Index. Chart: FreightWaves SONAR (To learn more about FreightWaves SONAR, click here.)

Service metrics have sunk as rates have risen. Denmark-based consultancy Sea-Intelligence reported that global carrier schedule reliability fell to 33.6% in August, an all-time low. In August 2019, pre-COVID, reliability was more than double that. Sea-Intelligence calculated that the global delays for late vessels was 7.57 days, almost double the number of days late in August 2019.

Charts: Sea-Intelligence. Data sources: Sea-Intelligence, GLP report issue 121

U.S.-based supply chain visibility platform Project44 highlighted the diverging paths of pricing and quality by contrasting its data on average days delayed with Xeneta’s short-term rate data. Between August 2020 and this August, project44 found that the monthly median of days delayed on voyages from Yantian, China, to Los Angeles increased 425%, from 2.46 days to 12.93. Over the same period, average short-term rates jumped 102%.

Chart: p44. Data sources: p44 and Xeneta

Shadow inflation

Neil Irwin of The New York Times recently wrote about “shadow inflation”when you pay the same as before for something that’s not as good as it used to be, so you’re effectively paying more. A pre-COVID example of shadow inflation: the infamous Lay’s potato chip incident of 2014. Lay’s intentionally included about five chips less per bag, lowering content from 10 ounces to 9.5, yet still charged $4.29 per bag, meaning customers were paying (and Frito-Lay was making) 5.3% more per ounce of chips.

The opposite — and until COVID, far more common — scenario is when product quality rises faster than pricing, decreasing effective inflation, as in the case of computers and other tech products. This downward effect on inflation is incorporated into the Consumer Price Index (CPI) via so-called hedonic adjustments.

As recounted by Irwin and Full Stack Economics author Alan Cole, COVID flipped hedonic adjustments in the other direction, toward lower quality per dollar paid, the equivalent of inflation. Pointing to restaurants and hotels, Irwin wrote, “Many types of businesses facing supply disruptions and labor shortages have dealt with those problems not by raising prices (or not only by raising prices), but by taking steps that could give their customers a lesser experience.”

According to Cole, “Over the last 18 months … goods and services are getting worse faster than the official statistics acknowledge,” implying that “our inflation problem has actually been bigger than the official statistics suggest.”

Shadow inflation and container shipping

Ocean container shipping is an extreme example of the “services are getting worse” trend, despite enormous freight-rate inflation.

Measuring quality adjustments to inflation is inherently difficult, which is why very few CPI categories have hedonic adjustments. One way to do a back-of-the-envelope estimate of ocean shipping shadow inflation is to focus on time: the longer the delays, the less quality, the higher the cost fallout, the higher the effective inflation above and beyond the rise in freight rates.

Jason Miller, associate professor of supply chain management at Michigan State University’s Eli Broad College of Business, suggested using accounting of inventory carrying costs to measure the time effect.

“If I already own a product and I took possession of it overseas at the port of departure, and it’s on my balance sheet and it’s just sitting on the water, then in inventory management, there is a charge incurred every day it’s not sold,” he explained.

Miller explained, “There is the cost of capital. Every $100 in inventory is $100 that can’t be allocated elsewhere for a more value-producing purpose. There is also the cost due to obsolescence. It’s essentially opportunity costs. The longer the delay, the more additional costs from stockouts [as shelves empty] or the need to buy more safety stock.”

Rate rises affect different shippers differently

Whether it’s price inflation from rate hikes or indirect shadow inflation from slow service, different shippers are affected very differently.

On the rate side of the equation, Xeneta data shows a massive $20,000-per-FEU spread between the lowest price paid by large contract shippers in the trans-Pacific trade and highest price paid by small spot shippers.

Erik Devetak, chief data officer of Xeneta, told American Shipper, “We see the very bottom of the bottom of the long-term market at approximately $3,300 per FEU, although there are very few contracts at this price. On the other hand, we see the short-term market high up to $23,000 per FEU, again, in rare situations.”

In the latest edition of its Sunday Spotlight report, Sea-Intelligence analyzed how rate hikes affect different shippers and found a huge competitive advantage for larger shippers given this gaping freight spread.

Sea-Intelligence, using Xeneta data, estimated that a large importer on contract (in this case, in the Asia-Europe trade) shipping a 40-foot box with $250,000 of high-value cargo would see freight costs rise from 0.5% of the cargo value a year ago to 1.8% currently — an easily digestible increase. A small shipper in the spot market moving the same load would see freight costs jump from 0.7% of cargo value to 6.2%.

Sea-Intelligence then ran the same exercise with a low-value cargo worth $25,000. It said that in this case, the large contract shipper’s freight-to-cargo-value ratio rose from 5% last year to 18% currently, while the small spot shipper’s freight-to-cargo-value “exploded” from 7% to 62%.

Service delays affect different shippers differently

Rising rates affect high-value cargo the least because the freight rise equates to a small proportion of the cargo value. But with shadow inflation from voyage delays, it’s the opposite, according to Miller. Shipments of high-value goods get hit much harder than low-value goods.

Accounting carrying costs are derived from cargo value. The higher the cargo value, the higher the carrying costs. “Where these delays especially matter is for high-value imports,” said Miller. “It’s ironic. The importers that are least affected by high spot prices are the ones who are getting really hurt most by the delays.”

One example: A large importer pays $4,000 in freight under a contract to ship a high-value cargo of $250,000 worth of electronics in a 40-foot box. There is a 30% annual carrying cost, in part due to high obsolescence risk, thus a carrying cost of $205 per day, so a 10-day delay would equate to an accounting cost of $2,050, adding 51% on top of the freight cost.

A contrasting example: A small importer pays $15,000 in the spot market to ship a low-value cargo of $25,000 worth of retail products in a 40-footer, with a 20% annual carrying cost. A 10-day delay would equate to an accounting carrying cost of $137, just 1% more on top of the freight rate.

It’s not just high-value cargoes that suffer from delays, Miller continued. Obsolescence risk is key. On the high end of the value spectrum, that relates to goods like electronics; on the low end, to things like holiday items and seasonal fashion.

Another major factor: whether the delayed import item is a component in a manufacturing process. In that case, the cost of ocean shipping delays can be enormous, dwarfing the increase in freight rates.

American Shipper was recently contacted by a manufacturer that has a vital component of its production process trapped in containers aboard a Chinese container ship that has been at anchor waiting for a berth in Los Angeles/Long Beach since Sept. 13.

“When imports are actually inputs into a production process, and if a stockout is going to shut down a plant, you are now facing a huge opportunity cost,” warned Miller.

Tyler Durden Sun, 10/24/2021 - 15:30

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