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Frequent Contributor

From Barron’s, July 6, 2020 (Part 2)

 

 

Pg 7, Up and Down Wall Street: Wall Street views Covid-19 crisis as manageable – new cases are rising but treatments are on the way. Some are looking at earnings beyond 2020 [fwd P/E 19] and 2021 [fwd P/E 17] and to 2022 [fwd P/E also 17]. Some are also preparing for Democratic sweep in 2020 elections that cannot be ruled out – that may have implications for taxes [higher] and regulations [more]. JC Penney century bonds issued in 1997 [AMZN IPO was that year] are trading at 1c; bankrupt stock JCPNQ would likely be wiped out in bankruptcy restructuring but those crazy retail app traders are keeping it around 30c. BRK-A/B is badly lagging as Warren Buffett [turns 90 in August] has lost his golden touch; David Portnoy of Barstool Sports says that WB is too old and washed up; what is he going to do with $150 billion in “cash” that he didn’t deploy in March stock and bond crashes. Convertibles did well in H1; TSLA is now the largest convertible issuer; a CEF is AVK.

 

Pg 9, Streetwise: Restaurant stocks are taking a hit again on reopening slowdown/faltering. But beneficiaries of at-home trend are doing great [WING, CMG, DPZ, PZZA, etc].

 

Pg 12-13: No important meeting noted.

Bill T Gross [not the famous WHG] of CA IdeaLab and Energy Vault has novel ideas for energy storage from alternative energy.

Tour de France will be virtual this year on Zwift for 3 weekends starting July 4. Stationary bikes will be used.

Data this week [bad reports keep coming but some may be better than expected]: ISM nonmanufacturing PMI on Monday; JOLTS report on Tuesday; consumer credit on Wednesday; weekly initial jobless claims, wholesale inventories on Thursday; PPI on Friday.

 

Bullish Recommendations: 3 ugly stocks with rebound potential [SBH, MIK, BLKB; pg 18];

utilities [XLU -11% YTD; they fell hard and had weak rebound; with some dividends in question, utilities have sold off; changes are slow in regulated business; activists like Singer/Elliott have taken positions in EVRG, CNP, SRE, FE, NRG, etc; pg 19].

 

Bearish Recommendations: See other stories.

 

Pg 11: Supreme Court ruled that Consumer Financial Protection Bureau [CFPB] was legal but the President can replace its Director for any reason [Dodd-Frank included “for-cause only” clause] like he can for most federal agencies.

 

Pg 15: Cover Story, “3 Scenarios for Playing the Covid-19 Economies in the 2nd Half”. Stock market is indicating signs of recovery before the actual economic data. 3 scenarios for 2020/H2 include 1) Bear Case with recovery faltering as Covide-19 cases keep rising on reopening and SP500 falling to 2,500, 2) Base Case that the public learns to live with Covid-19, and monetary and fiscal stimulus will support the economy; SP500 may rise to 3,300, 3) Bull Case with Covid-19 treatment(s) available and SP500 rising to 3,500.

 

Pg 17: New Covid-19 cases are rising. Several states have modified their reopening guidelines on social-distancing, masks, testing, follow up [NY, MI, OH, WA, etc]. Without effective treatment soon, the pandemic may run its course until herd immunity develops. There are hopeful signs of vaccine development from PFE, MRNA, JNJ, etc. FDA has issued guidelines for approval that suggest tracking patients for at least 6 months; that may rule out any approvals this year. Antibody drugs are being developed by LLY, REGN, VIR, etc.

 

Pg 21: Software was king in 2020/H1 with cloud-based at-home stocks doing the best: FSLY +324%, ZM +273%, DKNG +211%, LVGO +200%, ETSY +140%, SHOP +139%, BILL +137%, ZS +135%, DOCU +132%, DDOG +130%.

 

Pg 22: Dividend stock funds are facing headwinds of dividend cuts/suspensions. But active dividend-oriented funds have held up better: PRBLX, FRDPX, AMANX, WCDGX, BUFDX.

 

Pg 23: +8 million jobs have been added since April bottom. But that jump is from temporary fiscal boost that is already fading. There are new Covid-19 cases on reopening and that is affecting some reopening schedules and may affect consumer behavior. Weekly new Covid-19 cases are now above the April peak and up-sloping. Many temporarily unemployed may become permanently unemployed. The next stimulus is stuck in DC.

 

Pg 24: There are several tax traps related to Social Security and Medicare. Higher income may be from Social Security, pension, RMDs [there is relief in 2020], investment income and CGs. When income thresholds are crossed, extra taxes and Medicare premium kick in, sometimes in quantum jumps. Long-term planning is necessary several years ahead of retirement. If there are life changing events that affect income significantly, one can file appeal to Social Security to lower Medicare premium.

Waiver of RMD in 2020 makes $x in Roth Conversion and $x in charitable contribution [to offset tax] attractive; must itemize. [This is possible in other years also but $x must be beyond RMD]

 

Pg 26: Paul Fehlner, reVision Therapeutics; Axcella Health; formerly, Novartis/NVS. Focus on healthcare outcomes, and profits will follow. Eyebrows are being raised on $3,120 per Covid-19 treatment with GILD-remdesivir. High drug costs include their expensive R&D. Eventually, volume purchases, competition, licensing, generics [after patents expire], and repurposing existing drugs may reduce costs.

 

Extras from Friday – I try to guess on Friday which features will make it in the weekend edition but the following guesses didn’t make it. Almost 75-80% of the weekend edition is now available by 9:00 PM Central on Friday. Barron’s revised website has “Interests” tabs similar to columns topics and that makes it easier to find potential items for the weekend edition. This is also the reason for earlier postings on Saturday – I do wait for my paper delivery [typically between 5:00-6:30 AM Central] to fill in some data.

None

YBB
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Explorer ○○○

Re: From Barron’s, July 6, 2020 (Part 2)

Thanks Yogi ...

Berkshire already owns Dairy Queen.  Let's see if they do not make a move after the markets crash in the first Qtr of 2021 when the Death bed ridden Biden and his socialist VP "masked" player to be named later  go to work on anyone with more than $200K in net worth. Why would they not then make a move on MCD?  Would that be the end of MCN dividend re-investment plans?

I added 70 shares of EVRG on Friday. Sold 35 sh of the nuke waste dump plagued EXC to partially finance the deal. The list just keeps growing as to WashingtonGL,  VECTREN, Valener, and AGAAF getting taken private by TRiSummit have all gone away at strong premiums.  AQN with it's US All American sounding,  Liberty Utilities subsidiary may be a very likely EVRG suitor. 

The CFPB will rise again after the Nov elections.  Thank you LIZ, your work there has proven there is a little bit of Good in even the worst of us. 

I also added to PFE AND! JNJ in the June11th and 25/26 bottoms.  Always happy to see Barrons endorse my own picks, or were they theirs from previous old issues?   Barrons and most others seem not to remember the 4th quarter of 2018 when interest rates rose.  Even I have the S&P upside "POTENTIAL" near 3385 against a national resolution in the C-19 plague.  But then there is the market reaction SHOCK of the Republicans not just losing the White House but also the US Senate.   The Boomers should look through their nostalgia collections for some old "WIN" buttons. WE will have to wait another 5 to 7 years for a next one term President after Trump and Biden, to appoint the next Paul VOLKER. 

Ditto DOCU another of the usual suspects for a giant buyout offer. Berkshire?  

So far the TBTF and most of the larger more stable Regional bank preferred shares have been holding up on their dividend distributions.  A few weeks ago Barrons Recommended MRK-L which now seems safer vs it being an ETD actual type of bond debt that is likely safer than Traditional preferreds .  AS much as COF common  has the gravity of Jupiter it's preferreds actually look pretty good.   As per Baron's recent Rec I started 20 shares of the COF- J with a $21 handle. I  missed the Ex of a few weeks ago .  THE TBTF and others would have to suspend their common dividend altogether to cancel mostly Non-Cumulative tax advantaged dividends on their preferreds.   PACW now paying out 5% vs just slashing their dividend by near 60%.  There are now many previously well heeled S/Cap banks like PACW who may now be takeover candidates.  I added to RF last week.  SNV and FFWM among some of the other likely suspects.  I am sticking with DGRO, DVY, and NOBL for the long term.   Good grief we now have zero comm trading so that we can NOW cost effectively nibble at these on retrenchments with 1 to 3 share orders.  On 6/8 DGRO peaked with a $40.80 handle and then was making $36 handles on June 18th and 26. 

Pensioners who are beneficiaries of the ever shrinking defined benefit pension plans in the PRIVATE sector do not have to worry about COLAs increasing their pension incomes as those pension trusts still solvent have operated for decades on actuarially sustainable models.  Newer pensioners get their high ten and the high three is for the private sector, a time that is forever gone with the wind. Credits for foreign taxes,  favorable tax treatments of "qualified" dividends, and LT  Capital gains are going to be steadily eroded.  There will be an increasingly viable black market in the trading of Gold coins as the already onerous taxes on wealth preservation in "collectibles" get even more pernicious as the US gov't strikes out at those who would consider gold a currency. The Hero's Act now will also provide for mechanisms to pay back all or portions of  2019 MRDs as well.  There is some mechanism in the bill where 60 day limits on re-funding to rollovers and pay backs are waived and most or all of the MRDs you would pay back can be converted to Roth at no additional tax liability.  In that case you would not have to file an amended return for 2019?   Excluding the working poor and the struggling to remain in the middle class from the TRUMP tax cuts by not including a FICA payroll tax cut in the Trump Tax cuts, now comes home to roost.  If you ain't gotten no tax cut you got no decrease taxes to payid last year, this year, or next year anyway.  Now it is too late to get any political traction from there not being a FICA/ payroll tax cut which then just exacerbated the ever growing wealth gaps.  Americans who worked, sacrificed, and saved for retirement over the 30 to 40 years they had in the workplace will now have to find / design ways to defer as much taxable income as possible over the next 4-5 years until Biden and his henchwoman finish the term with the country in same condition the DUMYA left us in.  The lies about only coming for the +$400K a year salaried wealthy will give way to gouging the retired whose net worth can not sustain even half the pension annuity amount a pensioner from the public sector making $100K is awarded.  But they have that "BIG" money in the era of ZIRP everlasting and   are therefore supposed to be fabulously wealthy and fair game.  Was it ZIRP everlasting that quelled the voice of the AARP? 

Many investors hoped to ride GILD to $100, but the stock has been a huge disappointment.  Don't expect to get an even break on a Butterball Turkey this Thanksgiving. 

 

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Frequent Contributor

Re: From Barron’s, July 6, 2020 (Part 2)

 

Nomas...you wrote:

The Hero's Act now will also provide for mechanisms to pay back all or portions of  2019 MRDs as well.  There is some mechanism in the bill where 60 day limits on re-funding to rollovers and pay backs are waived and most or all of the MRDs you would pay back can be converted to Roth at no additional tax liability.  In that case you would not have to file an amended return for 2019?   

-------------------------------------

Do you have a reference or two for these 2019 MRD paybacks?

TIA

R48

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Re: From Barron’s, July 6, 2020 (Part 2)

The Tour de France on stationary bikes? The horror, the sacrilege. No bloody peloton pileups. Sacré bleu!

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Explorer ○○○

Re: From Barron’s, July 6, 2020 (Part 2)

I found fairly decent explanantion of the IRA changes for 2020 AND 2019 with a couple shots on google "Hero's Act IRA MRDs".

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Re: From Barron’s, July 6, 2020 (Part 2)

HEROES Act is just a House proposal now but it does for 2019 RMDs what CARES Act [+IRS modifications] did for 2020 RMDs - basically waive RMDs for 2019 along with waivers of 60-day rollover and 1/yr rollover rules; deadline mentioned in the proposal is 11/30/20.

https://www.forbes.com/sites/jamiehopkins/2020/05/20/4-ways-the-heroes-act-could-impact-retirement-p...

https://401kspecialistmag.com/dem-proposed-heroes-act-includes-further-rmd-pension-relief/

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