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“Something’s Awry” – Blain Warns Of “Gathering Wave” In The Real World

"Something’s Awry" – Blain Warns Of "Gathering Wave" In The Real World

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"Something's Awry" - Blain Warns Of "Gathering Wave" In The Real World Tyler Durden Wed, 08/05/2020 - 07:00

Authored by Bill Blain via MorningPorridge.com,

"The guys are busy; you're in charge. Ya know what? You're a swordboat captain! Is there anything better in the world?”

But... first...

Back in the days of ancient Rome it was not unusual for corrupt emperors to demand substantial cuts on every business transaction to fund their orgies and other transgressions. Throughout recorded history corrupt governments, bureaucrats, tax gatherers, governors and other parasites have extracted facilitation fees as their “share” for allowing commerce to proceed. But, I’ve never seen it done quite so blatantly as Donald Trump when he offered to allow the sale of Tik Tok to Microsoft on the basis: 

“a very substantial portion of that price is going to have to come into the Treasury of the United States because we’re making it possible for this deal to happen.”

Wow. That resets the rules of global business… It redefines the role of government. It solves the tax conundrum of how states are going to finance the pandemic costs. A buccaneering we will go.. Who loses? The Chinese seller or the US buyer? Or everyone?

Meanwhile…

Back in the real world I am becoming increasingly worried about the R word. Recovery. I sense the economic damage is escalating rather than easing. What do record low/negative real yields and the rise of gold tell us? Something’s awry. 

 

I’ve been relatively optimistic that recovery from the pandemic could be faster than expected – after all, it’s not like a war destroyed factories and infrastructure, shattered consumer demand, and broken supply chains are quickly fixed. Governments and central banks acted swiftly and decisively. Recent economic reports and signals of resumed activity have been increasingly positive. 

So … Why does it feel like this nascent recovery is stalling? 

Talking to clients in recent days I detect an increasing sense this is going to get worse. The obvious threat is that coronavirus policy decisions will tip us back into a meltdown.  There is a sense the recessionary forces kicked into motion by the virus are taking on their own momentum. Look at the rising number of job losses – not just in sectors being hammered by the virus like airlines, hospitality and tourism, but also what rising bank NPLs will mean for growth. 

If I can use a sailing metaphor: it feels like a gathering wave. Every negative economic pulse is each individually a small ripple on the surface of the economic ocean, but they are combining into storm waves that threaten to swamp economic activity. (If I mention anything stupid like “Perfect Storm”, please shoot me.. but you get the drift.) And, yes… I know about storms… 

The bad ones come in three parts.. 

The first issue is an increasing element of “wobble” in the background noise.  The pandemic is setting the economic agenda – and driving what feel to be increasingly reactive government responses.  We need to be ahead of this thing – not behind it!  If it looks reactive, it hammers sentiment. Confidence is what will get us out of crisis. Confidence feels in increasingly short supply. It’s not the virus that created this storm – it’s the policy decisions taken to address it that are doing the damage. Regrettable, but fact.   

Second, add the Coronavirus shocks to damaged global supply and demand chains and the friction from known geopolitical threats like China/US tension, global trade null-entrophy, Brexit, and the issues likely to be triggered by Europe’s recovery fund. Then layer on top the economic tensions multiplying in the emerging markets… Oh, and yes, the possibility of a messy US election triggering a constitutional crisis. (Long shot – but possible.)

Third is the reality of solvency – the number of SMEs being kept afloat solely through government schemes and emergency lending, plus the larger corporates that have borrowed in markets. That money that’s keeping companies open may be at ultra-cheap rates, but when it comes due and companies struggle to repay we face a wave of defaults and NPLs. The result is going to be more-for-longer government support alongside permanent lower-for-longer rates and the distortions of QE Infinity. The longer it lasts the more established permanent intervention becomes, and the more unlikely it ever ends – in effect, a whole private sector utterly dependent on state aid. 

The alternative is a tidal wave of defaults and rising unemployment. The rating agencies are seeing defaults set to rise – delayed by the pandemic but certain to lift as support polices ebb, and businesses realise it’s impossible to go on.  And governments can’t afford to write a permanent blank cheque to the economy while providing all the public good services we expect from them – defence, education, health, social care, etc. Something will break – and hoping that Modern Monetary Theory can bail us out indefinitely.. well that’s a hope – which is never a good strategy.

We were talking about the threats y’day and one of my colleagues used the analogy that we’re in the Phoney War phase of the Covid pandemic and its economic/social consequences. His fear is the real war will begins when Govts recognise that they can’t keep impoverishing future generations by maintaining subsidies and grants in perpetuity. 

Its a war we won’t be winning if the whole economy remains dependent on state support, and we still suffer massive and rising long-term structural unemployment and crashing disposable incomes. The danger is null-entrophy economies may work in consensus economies like Japan – but won’t work in the socially volatile occidental economies where strife and unrest is much more likely. Tensions will be massively inflated by rising inequality and the perception of bailed out markets benefiting only the elites. 

There is, of course, a more optimistic perspective – that the pandemic will act a catalyst from the old, tired, debt dependent pre-covid economy to something new and much more exciting. I’ve mentioned a couple of times my expectations we’ll see Covid spur new efforts on the environment – bringing forward new clean energy and related technologies that will be transformative and wealth creating. 

We are also on the cusp of a healthcare paradigm shift as new ways to monitor our health will decisively shift the medical profession towards early interventions – much more prevention over treatment. And in industry the possibilities of 3D Printing, Automation, Robotics and AI could transform the growth outlook. Another of my colleagues sees the global economy at the start of a new “semi-conductor” supercycle where trends like smartinfrastructure, digitisation and automation will be driven by a tidal wave of consumer demand – forcing China and the US to work together to meet it. 

That is an attractive vision for future growth. I think it happens – but not before the current storm passes through..  

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Economics

Braxia and KetaMD, CEOs McIntyre and Gumpel Speak on Acquisition

Last week, the Canadian company Braxia Scientific acquired 100% of the issued and outstanding stock of KetaMD, Inc. This is an exciting acquisition, and…

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Last week, the Canadian company Braxia Scientific acquired 100% of the issued and outstanding stock of KetaMD, Inc. This is an exciting acquisition, and in today’s interview, The Dales Report’s Nicole Hodges talks with CEOs Dr. Roger McIntyre and Warren Gumpel of Braxia Scientific and KetaMD respectively.

For some background information, KetaMD is a U.S. based, privately-held, innovative telemedicine company, with a mission to address mental health challenges via access to technology-facilitated ketamine-based treatments. Braxia Scientific is Canada’s first clinic specializing in ketamine treatments for mood disorders. They recorded revenue of $1.49m for 2022 fiscal year, ended March 31. On a year-over-year basis, revenue increased 47.5%.

Here’s some highlights from the interview.

KetaMD gives Braxia a presence in the US

Dr. McIntyre says that KetaMD gives Braxia what they’ve had as their vision from the beginning: a US presence. KetaMD is a living program. It’s already running, has infrastructure, and patients. McIntyre believes that a program like KetaMD is something Braxia’s needed to scale and obtain commercial success.

With telemedicine, Braxia has a potential to serve a gap in access. The zeitgeist of “patient going to medicine” has flipped, McIntyre says. “Now it’s medicine goes to the patient, and that is long overdue.”

COVID speeding a trend that was already happening

In 2020, 80% of physicians indicated they had virtual visits. That’s a number up from 22% the year before. But this is something that many doctors, McIntyre included, believe always should have happened. The pandemic only was the catalyst for innovation and making the option viable.

While some treatments will always need a clinic or a hospital, McIntyre believes some treatments can be done safely at home. And they are, for many chronic diseases. He feels implementing ketamine and psychedelics would be among these treatments where service could be expanded into the home. It would require careful SOPs in place, best practices, and surveillance. But he believes Braxia Scientific could deliver this with KetaMD.

Gumpel to stay as CEO of KetaMD

Gumpel says that KetaMD benefits in this acquisition from being part of the world’s most prominent researchers in depression, psychedelics, and ketamine. In the acquisition, he’ll stay on as CEO. He admits that Dr. McIntyre has been a huge part of collecting the data on the safety of ketamine treatment, and has a strong motivation to “see this thing through until most of society can access that – or at least the people that need it and want it.”

Gumpel admits he has a personal connection to ketamine treatment. As a person who has experienced bouts of depression for years, it saved his life, he says. He is grateful he was living within walking distance of ketamine treatment in Manhattan. It made him extremely aware of the accessibility gap, which in part inspired KetaMD.

Be sure to tune in for the full interview regarding Braxia and KetaMD, right here on The Dales Report!

The post Braxia and KetaMD, CEOs McIntyre and Gumpel Speak on Acquisition appeared first on The Dales Report.

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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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