ASX set to slide as tech stocks send Wall Street lower


The technology-heavy Nasdaq Composite was down 1.6 per cent after being down 3.9 per cent earlier. The Dow Jones Industrial Average, which is much less exposed to tech stocks than the two other indexes, was down 0.3 per cent.

The companies that were dragging down the overall market were the big tech names that had pushed the market significantly higher the past year: Apple, Amazon, Microsoft and Tesla. Since the pandemic began, investors consistently pushed the prices of these companies’ stocks to stratospheric heights, betting that quarantined consumers would do most of their shopping online and spend money on devices and services for entertainment.

The bet mostly paid off, as big tech companies reported big profits last year. But the pandemic may be reaching its end stages, with millions of vaccines being administered each week in the US and across the globe now. It may cause consumers to return to their pre-pandemic habits.

Apple fell 2.9 per cent, Microsoft lost 0.9 per cent, Amazon dropped 0.8 per cent and Tesla fell 4.6 per cent. Part of the decline in Tesla was caused by the falling price of Bitcoin. The electric car maker put $US1.5 billion of its cash into the digital currency earlier this year, and there’s been a sharp pullback in Bitcoin’s price in the last couple days. Investors now use at least part of Tesla’s valuation as a proxy for Bitcoin’s movement.

A bigger part of the reason for the decline has been what’s going on in the bond market, and the dynamic that happens to stock valuations when bond yields rise. The yield on the 10-year Treasury note rose to 1.36 per cent, continuing its quick climb up over the last few weeks.

When bond yields rise, stock prices tend to be negatively impacted because investors turn an increasingly larger portion of their money toward the higher, steadier stream of income that bonds provide.

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While eventually bond yields impact big dividend-paying stocks like consumer staples, utilities and real estate, it does tend to impact stocks that have big valuations like technology stocks much earlier. Tech stocks tend to have higher-than-average price-to-earnings ratios, which values a stock on how much the company earns in in profits each year versus its stock price. The S&P 500 index is currently trading at a price-to-earnings ratio of 32, historically high by any measurement, while the price-to-earnings ratio of a company like Amazon is north of 75.

More broadly, investors remain focused on the future of global economies badly hit by COVID-19 and the potential for more stimulus to fix them. The US House of Representatives is likely to vote on President Joe Biden’s proposed stimulus package by the end of the week. It would include $US1400 ($1770) cheques to most Americans, additional payments for children, and billions of dollars in aid to state and local governments as well as additional aid to businesses impacted by the pandemic.

The large amount of stimulus being pumped into the economy has given some investors pause, reviving worries about inflation that have been nearly nonexistent for more than a decade. The inflation worries have been a big driver of why bond yields have risen.

“Overall, the view is this rise in yields is just a reflection of confidence in economy and the vaccine rollout,” said Leslie Falconio, senior strategist at UBS Global Wealth Management.

“Right now, this rise in yields, given the fact that financial conditions are still loose, is not a red flag,” she said. “As long as growth supports the rise in interest rates, then that’s not a concern.”

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Interest rates are rising and tech stocks are likely to head in the other direction


We live in strange and ridiculous times. Nowhere is this more evident than on financial markets.

After blithely trading on to record highs while the seeds of a pandemic germinated in China in January and February last year, supposedly forward-looking share markets cratered when the obvious became apparent in late February and March last year.

Then, with almost as much panic as the sell-off, shares came roaring back in a speculative frenzy, leaving many markets (notably the US) hitting fresh records, even as the nations they were based in suffered their sharpest recessions since at least the Great Depression.

As is often the case, once the buying started, it seemed the less connected a stock or other asset was to an identifiable income stream the faster and higher it rose. Bitcoin anyone.

Why?

In part, it was the forward-looking nature of markets, with early bets on the vaccines, which are only now just being rolled out, ending the pandemic.

But the biggest driving force was the unprecedented flood of money and record-low interest rates from central banks that has left the world awash with ultra-cheap cash with few financially rational places left to invest it.

When the real rate of return on ‘safe’ assets, like AAA-rated government bonds, is deeply negative — you are losing money holding them — the cost of parking money in assets that offer no income but the potential for speculative gains falls and the temptation rises dramatically.

Along with growing disquiet and distrust around the central bank actions that have pushed interest rates so low, these negative rates are a major reason why professional investors have been right in there with amateurs throwing money at bitcoin and other cryptocurrencies, as well as tech companies that either make no profits or generate earnings that are a fraction of their soaring share market valuations.

For more conservative investors, the perceived safety of bricks and mortar has been the investment of choice.

Rate trigger for a ‘long overdue correction’

So, now that these benchmark bond rates have begun rising, sharply, it’s no wonder many investors are starting to sweat.

For some, the heat is getting too much and they’re fleeing the kitchen, causing sell-offs in the most vulnerable markets, such as tech stocks and cryptocurrencies.

AMP Capital’s head of investment strategy Shane Oliver says we could see further sell-downs but not, he thinks, a crash.

“Bond yields [interest rates] could still go a lot higher in the short term before they settle down again and this could cause the long overdue correction in equities,” he says.

As we’ve seen in the sell-offs so far, companies that don’t make profits and speculative assets with no income streams are the most vulnerable, but others are also at risk.

“Because these stocks rely on more earnings in the future, they are seen as ‘long duration’ stocks and so they are more vulnerable to an increase in the bond yield used to discount those earnings.

“Also at risk, but less so, are yield plays [higher dividend stocks] that benefited from the ‘search for yield’ flowing from falling interest rates and bond yields — e.g. telcos and utility stocks.

“Cyclical stocks like materials [miners/energy producers], retailers, industrials and even financials are less at risk as their earnings will rise more with economic recovery and so are more likely to see earnings upgrades.”

And this is exactly what we’ve seen on share markets over the past 24 hours, with the tech-heavy Nasdaq down but Australia’s commodity and banking dominated ASX 200 index rising solidly.

Will central banks again soothe investor nerves?

This may prove to be a short-term hiccup, with central banks once again moving in to soothe the jitters.

The Reserve Bank tried to do this on Monday after the three-year bond yield rose above its 0.1 per cent target, but the market practically laughed off its billion-dollar intervention.

Most RBA watchers expect it to follow singer Janis Joplin’s advice to “try just a little bit harder”.

“The most likely response from the RBA is a show of resolve, with significantly increased YCC [yield curve control] buying in coming days and weeks,” say CBA’s rate watchers.

The US Federal Reserve chairman, Jerome Powell, now has his turn, with the opportunity to offer soothing words talking down the risk of rising interest rates during two days of public congressional testimony.

That’s exactly what Rabobank’s head of financial markets research in the Asia-Pacific, Michael Every, expects will happen.

“Indeed, if those magicians have to face a choice between rising real rates and levitating markets, which one do you think they will make disappear? Obviously rising yields, through outright yield curve control.

“At which point, almost all price discovery will follow through the hidden trap door.”

In other words, if money is free for big investors and they think central banks will keep the party going indefinitely the sky is no limit for asset prices.

When good news again becomes bad news

The irony is that the rising bond yields are a sign that economies are recovering from COVID-19, that firms will be able to increase both sales and prices, and that profits should rise.

They should be welcome good news after the worst year for most economies since the 1930s.

But investors are simply petrified that any recovery in economic growth and profits won’t keep up with the rise of interest rates from rock bottom levels.

Remember, at current levels with US 10-year bond yields still below 1.5 per cent, a return to something even approaching a more normal rate of 3 per cent would see interest rates more than double.

That’s one of the traps of ultra-low rates — a small percentage point increase is a massive percentage rise in interest costs.

‘Bringing down the house’

But, while central banks may move to keep a lid on rising rates in the short term to buy markets a bit more time, it’s unlikely they can keep doing that indefinitely.

“It is again magical thinking to believe this trick can be pulled off without literally bringing down the house,” argues Michael Every.

Bond interest rates often jump at the beginning of an economic recovery
Bond interest rates often jump at the beginning of an economic recovery.(Supplied: AMP Capital, Bloomberg)

Shane Oliver is less dramatic in his forecast, but still sees a return to the gravity of higher interest rates as inevitable.

“There is a strong case to be made that the disinflation seen since the 1970s is coming to an end and that the long-term trend in inflation is at or close to bottoming,” he observes.

“Central banks are now throwing the kitchen sink at beating deflation and disinflation just as they threw it at high inflation in the 1980s and early 1990s.

“There is a good chance — that helped along by massive government spending, governments becoming more interventionist in economies, a reversal in globalisation and a decline in workers relative to consumers — they will win this time, ultimately resulting in a sustained rise in inflation, but that’s probably still a few years away.”

Hopefully, enough time for policymakers, investors and consumers to figure out how they are going to survive financially in a world of higher interest rates.

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Saints bolster ruck stocks after injury blow


St Kilda has signed former Adelaide ruckman Paul Hunter, bolstering the club’s ruck stocks following the foot injury to Rowan Marshall.

Hunter joins the Saints via the pre-season Supplemental Selection Period after being invited to train with the club in early February.

The 28-year-old caught the eye in St Kilda’s intra-club match on Thursday with tall trio Marshall, Paddy Ryder and Shaun McKernan all unavailable.

Hunter was preparing for a second season with SANFL club South Adelaide before the Saints came calling.

“We were really happy to be able to get Paul over to the Saints,” St Kilda’s list boss James Gallagher told the club’s website.

“We initially invited Paul to train with us, with a view to look at him in the mid-season or November draft.

“But with the injury to Rowan this week, and Paul’s strong performances in our match practice, it became very evident that he should be on our list.

“We’re conscious of the implications for South Adelaide, but it’s important we head into the season with further ruck support and we believe that Paul is the best prepared ruckman outside of the AFL.

“Paul’s a dedicated guy, and he’s really excited to get another shot at the highest level, so we’re very happy to be able to provide that opportunity.”

Hunter didn’t make a senior appearance during his four years at the Crows.





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Private bank stocks outlook: Top private sector banks likely to see more selling pressure going forward


If there is any kind of incremental pressure, which the markets would probably signal, one has to watch out for these three-four names because they could probably signal another round of cool off into the Bank Nifty, says the independent market expert Kunal Bothra.

Given that we are stepping into a very volatile expiry week, is your expectation that we are likely to see more chop and churn?
I will call it one of the better months for the markets. Yes, the last couple of days were a bit more choppy, especially on Friday where the indices were a bit volatile. However, the way the markets have rallied in February starting from the Budget day itself has been spectacular. When you see a 7,000-point rally on the Bank Nifty, a 1,700 to 1,800-point jump on the Nifty in just a matter of two-three weeks, there are bound to be some bit of corrections and aberrations.

What we saw on Friday and the second half of the previous week had more or less to do with the mean reversion process, which the markets were going through. What has also happened, after previous weeks’ price correction, the Nifty and the Bank Nifty both have formed some bearish candlestick patterns. Typically, when we see those bearish patterns, it has a follow through and a spill over. In that aspect, it is possible that the action on the indices could remain a bit muted.

The 15,000 level on the index remains to be a very crucial support zone. We managed to break below that on Friday and just about have a touch and go closing towards the 15,000-mark. Next week, this level could be an important level. If we break and sustain below the 15,000 level, then a follow through downside of 500 points on the Nifty could be a high probability.

What is it that you are spotting in this entire PSU trade? Do you think it is short-lived or does it seem like there is some base building up for a bigger move?
Whether it is the PSU banking pack or specific insurance stocks like GIC Housing, etc, or the gas distribution names; if you look at it, there is a specific news flow and a certain theme which has been attached towards these stocks. We have seen that the markets were in a risk-on mode and whenever the news flow comes out to be positive for a certain set of stocks or particular sector, we have seen the stocks in the sector going to a buzzing uptrend.

Now the bigger question is, once the news flow is digested by the market and once the events are out of play, how will the stocks react because traders who trade on the momentum are the ones who specifically look out for such kind of news flow and even try to trade these kinds of plays. But once the momentum is out, whether the trading interest will be there or not is the biggest question mark that could be in line for many of these stocks.

For example, in a classic sector like the Nifty IT and pharma, many of the stocks and the news flow had just about gone a bit low and you have seen the price action for these two sectors. They went into a gradual correction, a minor downtrend or cool off. I would sense that if the PSU banking pack and the PSU pack overall goes into a similar or very slow gradual downtrend when there is devoid of news flow, then I believe you can build in a classic case that these stocks are more on the upside. But if they go through a very sharp reversal, almost a V-shaped kind of reversal on the back of no news flow, then I believe that that could probably dent the trend for many of these PSU names.

I think over the next couple of days, the outlook could be far more clearer on whether this is just a gradual correction or the stocks have run up steeply high or whether there is a sharp correction in these names.

Sectorally or stock wise, what is the lead indicator for the markets to actually see some rebound from here?
What could probably be one of the indicators which could result in the markets stabilising? I think one of them is the balancing effect, which the sectors tend to give across every time when we see a round of correction. If you look at the last three weeks or four weeks of price action, there have been three-four key sectors– IT, pharma, FMCG and auto stocks–which have gone through a corrective phase.

When you look at these stocks, many of these stocks have fallen around 10%-15% and some of the high beta pockets in the sectors have been down 20%. Now whether there is a resumption of a bounce into this space or not, that could be the first round of stability, which the index would probably get from these names. If I am not wrong, on Friday also you saw some green shoots coming across TCS, Dr Reddy and Nestle and many of these stocks were bouncing back from the intraday lows in the fag end of the session. This typically happens when you go into a risk-off mode or into a defensive mode.

Which are the sectors which could probably continue to see some selling pressure? I still believe that if there is a lot of call writing and selling of derivatives that is more riskier in the private sector banking stocks. I believe that they could be more under pressure and especially the top two-three names. When you look at the composition of the derivatives data,

, ICICI Bank and and even are three-four names where you have seen a lot of high risk call writing. I think if there is any kind of incremental pressure, which the markets would probably signal, one has to watch out for these three-four names because they could probably signal another round of cool off into the Bank Nifty, which could also have an effect on the Nifty as well.

The general insurance space had a terrific rally. , for instance, also saw a strong move. What is your view on the charts?
Excellent chart. Frankly, the moment IDFC First Bank came out of that 50 band or 50 or 47.5-48 band in December end and January start, from there on, the texture of the stock has changed completely. Remember that it has given a breakout of almost three years of downward sloping trend lines. For the last three years, from 2017 or 2018, the stock was going into that pattern of lower highs and lower lows on the monthly charts. So for a stock to break past those monthly negative patterns, it requires a lot of firepower and a lot of volume and we saw that happening for IDFC First.

It remained sideways for almost a month. From December end, it was at sideways 50 plus or minus; Rs 2 or Rs 3 was the trading range for the index. So it managed to digest and absorb a lot of volatility, and tried to shake out even the weaker hands in between. But then the way in which the stock charged up, it is just an indication of how the trends could probably lie ahead for IDFC First Bank.

I believe that the stock over the next three to six months could be a candidate for Rs 75 to Rs 85 kind of a target range from the current levels. I think it is a classic candidate for a buy on dips. At Rs 60-62 levels, where the stock closed on Friday, if there is any kind of a dip towards Rs 55 levels or 5% to 10% dip on an average, that should be taken as a very good buying opportunity for the stock.



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Stocks Set for Longest Winning Streak Since 2003: Markets Wrap


Benzinga

What Keystone Pipeline Cancellation Means For Crude-by-rail

President Joe Biden’s revocation of the March 2019 permit enabling the construction of the Keystone XL pipeline will likely result in more crude-by-rail volumes, according to industry observers. But how much volumes will increase could largely depend on the price that heavy crude oil can fetch in the global market. “The cancellation of the Keystone pipeline project was inevitable once the government changed. Despite its merits or drawbacks, it is now a deflated political football,” said Barry Prentice, University of Manitoba supply chain management professor and former director of the Transport Institute there. “This means that more crude will have to move by rail. The huge investments in the oil sands will not be abandoned, and the oil has to go somewhere.” But crude-by-rail “has been problematic because with the low price for oil, and the relatively higher price for rail transport, nothing looks very appealing. The problem is not oil supply, it is the reduced demand during the pandemic. Once we come out of this period, demand will return, and $100-per-barrel oil will, too,” Prentice said. Indeed, the oil markets serve as one highly visible factor determining how much crude gets produced and shipped. For the production and transport of heavy crude oil from western Canada and the U.S. to be profitable, the pricing spread between a heavy crude product such as Western Canadian Select (WCS) and a light, sweet crude such as West Texas Intermediate (WTI) needs to be favorable. WCS crude is typically priced at a discount against WTI crude because of its lower quality and its greater distance from the U.S Gulf Coast refineries. The COVID-19 pandemic was among the factors that contributed to WTI crude oil prices’ tailspin in 2020. Why the interest in crude oil production and transport? The oil market isn’t the only factor that dictates crude oil production and its subsequent transport. Another is the vast oil reserves and the amount of investment already directed into crude oil production, as well as crude oil’s export prospects. According to the government of Alberta, the province’s oil sands represent the third-largest oil reserves in the world, following Venezuela and Saudi Arabia. Its reserves equal about 165.4 billion barrels, and capital investments to the upstream sector have equaled as much as $28.3 billion in 2016 and $26.5 billion in 2017. Furthermore, according to Natural Resources Canada, 98% of Canada’s crude oil exports in 2019 went to the U.S. Those investments and vast oil reserves have also resulted in significant investments in other areas of the energy sector, including investments in pipelines. The pipelines bring Canadian heavy crude south to U.S. refineries because American refineries were built and optimized to mostly handle heavier crude oil, according to Rob Benedict, senior director of petrochemicals, transportation and infrastructure for the American Fuel and Petrochemical Manufacturers Association. Crude oil pipelines from Canada to the U.S. have been viewed as an efficient way to transport large amounts of Canadian heavy crude oil to U.S. Gulf Coast refineries. TC Energy’s 1,210-mile Keystone XL pipeline would have had a capacity of 830,000 barrels per day with crude oil originating from Hardisty, Alberta, and heading to Steele City, Nebraska, where it would then be shipped to U.S. Gulf Coast refineries. Had construction continued, the pipeline would have entered service in 2023. But TC Energy abandoned the project after Biden revoked an existing presidential permit for the pipeline in January. “TC Energy will review the decision, assess its implications, and consider its options. However, as a result of the expected revocation of the Presidential Permit, advancement of the project will be suspended.The company will cease capitalizing costs, including interest during construction, effective January 20, 2021, being the date of the decision, and will evaluate the carrying value of its investment in the pipeline, net of project recoveries,” TC Energy said in a release last month. The Keystone XL pipeline “is an essential piece that would have allowed Canada and the U.S. to continue the very good relationship they have with transporting energy products across the border,” Benedict said. However, suspending pipeline construction doesn’t necessarily translate into a one-for-one increase in crude-by-rail volumes, according to Benedict. “The gist of the story is, it’s going to have some impact on crude-by-rail. It’s not going to shift all 830,000 barrels per day onto the rails, but any additional amount is potentially going to have some impact,” Benedict said. Several factors will influence how much crude moves by rail. In addition to the WCS/WTI price spread, the railways’ capacity to handle crude-by-rail is crucial. Not only are there speed restrictions for crude trains and possible social ramifications, there also capacity issues. The Canadian railways have reported record grain volumes over the past several months, and crude volumes must compete with grain, as well as other commodities, for the same rail track. There are also other pipelines between Canada and the U.S. that could take some of the volumes that would have been handled by the Keystone XL pipeline, Benedict said. Those include Endbridge’s (NYSE: ENB) Line 3 pipeline, which runs from Canada to Wisconsin; Endbridge’s Line 5 pipeline, which runs under the Strait of Mackinac and Lake Michigan to the Michigan Peninsula; and the Trans Mountain pipeline that’s under development in Canada. It would run from Alberta to the Canadian West Coast and then potentially south to U.S. refineries. And one other factor that could influence crude-by-rail is how much crude oil volumes go into storage, Benedict said. “It’s not just a simple question of, does one pipeline being shut down ship all to rail? It’s complex because you have to consider all the different nodes of the supply chain, including storage that would come into play,” Benedict said. The Canadian railways’ views on crude-by-rail For their part, Canadian Pacific (NYSE: CP) and CN (NYSE: CNI) have both said they expect to ship more crude volumes, but neither has indicated just how much volumes will grow. CP said during its fourth-quarter earnings call on Jan. 27 that it has been seeing increased activity as price spreads have become favorable. The railway also expects to begin moving crude volumes from a diluent recovery unit (DRU) near Hardisty, Alberta. US Development Group and Gibson Energy had agreed to construct and operate the DRU in December 2019. As part of that agreement, ConocoPhillips Canada will process the inlet bitumen blend from the DRU and ship it via CP and Kansas City Southern (NYSE: KSU) to the U.S. Gulf Coast. “These DRU volumes will provide a safer pipeline-competitive option for shippers and will help to stabilize our crude business into the future,” CP Chief Marketing Officer John Brooks said during the earnings call. CP President and CEO Keith Creel also said he sees U.S. actions on the Keystone pipeline as benefiting crude-by-rail and the DRU volumes. The actions “bode for more strength and more potential demand for crude. We think it creates more support for scaling up and expansion of the DRU. So, we’re bullish on that opportunity,” Creel said. He continued, “We still see the short-term, not long-term … pipeline capacity [eventually] catch up [but] we just think there is a longer tail on it right now. So, we think there’s going to be a space for some potential upside in both spaces.” Meanwhile, in a Jan. 27 interview with Bloomberg, CN President and CEO JJ Ruest called crude-by-rail a “question mark” in terms of what energy outlook the railway is seeing for 2021. Ruest said low oil prices, decreased travel and the Keystone pipeline cancellation are among the factors influencing CN’s energy outlook. However, crude-by-rail could be a “slight positive bump on the rail industry,” Bloomberg quoted Ruest as saying. CP and CN declined to comment further to FreightWaves about crude-by-rail, and CN directed FreightWaves to the Bloomberg article. Subscribe to FreightWaves’ e-newsletters and get the latest insights on freight right in your inbox. Click here for more FreightWaves articles by Joanna Marsh. Related articles: Social risk trumps financial risk for Canadian crude-by-rail Transport Canada issues new speed restrictions for trains hauling dangerous goods Construction of Alberta crude unit expected to start in April Commentary: Railroad tank cars take a hit See more from BenzingaClick here for options trades from BenzingaForward Air Doubles Down Amid Heightened Interest From ActivistsDrilling Deep: Reviewing Q4 Earnings; How Did Werner Do So Well?© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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Kishore Biyani: Future Group stocks hit lower circuit limits after SEBI bans Kishore Biyani from capital market


MUMBAI: Shares of most Future Group companies hit their 5 per cent lower circuit limits today after the Securities and Exchange Board of India (SEBI) banned the group’s chief executive officer, Kishore Biyani, from accessing the capital market for one year.

In an order on Wednesday, SEBI said that its investigation found that Future Retail’s promoters including Biyani had traded the in the scrip while possessing undisclosed price sensitive information.

Shares of Future Enterprises, Future Retail, Future Consumer, Future Supply, Future Lifestyle Fashion and Future Market Network fell 3-5 per cent.

SEBI has also banned Biyani from trading in the Future Retail stock.

The development comes at a time when the Group is facing difficulty in getting its deal to sell its retail and wholesale assets to Reliance Industries’ arm, Reliance Retail Venture, completed amid a dispute with Amazon.com Inc.



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Retail investors warned on overhyped Reddit stocks


“We all have a pretty good sense of where this ends up.”

Pengana international equities deputy portfolio manager Steven Glass said retail investors must keep in mind that stocks like GameStop are currently being driven higher by “pure speculation”.

“There’s a lot of bravado, about ‘we want to destroy institutional investors’. That’s not a reason for buying things,” he said.

Posters on Wallstreetbets are largely from the US and many have access to the trading platform Robinhood. However, Australian startups that give access to US share trading for local investors say they’ve also seen a small but growing cohort of traders take a sudden interest in stocks like GameStop.=

Co-founder of Stake, Matt Leibowitz, said “there’s a niche core following these trends” and believed it was unsurprising some traders on the youth-focused platform would be interested.

Investors trading in GameStop via Stake’s platform increased five-fold this month, with 2 per cent of the company’s 230,000 trading in or out of the stock. The buy to sell ratio on the platform is 1.19, suggesting some users are selling into the rise rather than wildly speculating, Mr Leibowitz said.

Investors on Wallstreetbets were encouraging each other to buy in further on Wednesday after attracting global attention for their trades, including from Tesla founder Elon Musk, who tweeted ‘GameStonk’ with a link to the subreddit.

Co-founder of millennial-focused Australian investing podcast and community Equity Mates, Alec Renehan, said the mood inside Wallstreetbets has been “euphoric” and the stock moves have shown the power of retail investors leveraging online forums.

“Retail investors have found a space where they can congregate from any area in the world,” he said.

While some Equity Mates listeners are involved in the push into GameStop, for many Australian investors there is little appetite for this kind of trading, Renehan said.

“We always talk about the merits of longer term investing.”

For investors in GameStop, the idea of making gains because the concerted effort of retail investors is exciting, however.

Equity Mates community member Coleen, who started investing last March and bought GameStop shares where they were $4.00 each, said it had been interesting to experience a “short squeeze” for the first time through the actions of Reddit traders.

Stake founders Matt Leibowitz, right, Dan Silver and John Abitz. Credit:Edwina Pickles

“The thing I love about this particular squeeze is that it’s the retail investors who are joining together through online forums and swaying the movement of the stock simply by holding tight and being patient. I have to say, I kind of love the idea of millennials making thousands of dollars, knowing that that money came directly from a fund managers’ pocket.”

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budget: Budget sops that can send realty, aviation, tourism stocks soaring


NEW DELHI: Finance Minister Nirmala Sitharaman has over the past couple of months announced a slew of measures to revive demand for the Covid-hit sectors. While the focus of the forthcoming Budget is seen shifting from ‘growth’ to ‘repair’ and from ‘survival’ to ‘revival’, a host of Covid-hit sectors such as travel & tourism and real estate, among others, are eyeing budgetary sops.

For the hotel sector, the biggest wish has been to get an infrastructure status, as loans available to the asset-heavy sector attract as high as 15-20 per cent interest rate. The industry has sought that capital expenditure above Rs 25 crore be granted infrastructure status. At present, the status is granted only to hotels incurring capex of Rs 200 crore and above.



“If the hotel industry is granted infrastructure status, it can avail loans at lower interest rates for greenfield projects and will help them get water and electricity at industrial rates. It would be positive for Indian Hotels Company, Chalet Hotels, Lemon Tree Hotels, Jubilant FoodWorks and Speciality Restaurants,” Sharekhan said.

YES Securities said there are expectations that the government may allow business losses to be carried forward for up to 12 years, instead of eight years now, and there could be easing of tax for hotels from 34.94 per cent at present, to help increase cash flows. Hopes are also high of credit-guaranteed loans to the sector.

The tourism industry, as a whole, is asking for deferral of all statutory dues at the state government level such as excise fees, levies, taxes, power and water charges, and also deferral of renewal periods for all permits, licences, bank guarantees and security deposits across the tourism, travel, hospitality and aviation industry by 12 months.

Such a step would be positive for aviation companies SpiceJet and InterGlobe Aviation as well as hotels.

The tourism industry is also seeking to be brought under the ‘concurrent list’ by amending Schedule VII of the Constitution. “It would be ideal for each state to remove certain regulatory and licensing requirements that are currently in place to ease costs and the process of doing business,” said Sharekhan. “Thus, a more defined approach will be adhered to for the tourism sector, which would be driven by the unique needs of each state,” it said.

In the case of real estate, a Rs 2 lakh rebate is available on housing loan interest rates under Section 24 of the IT Act. There are expectations that this could be increased to at least Rs 5 lakh. If that happens, real estate stocks such as DLF, Godrej Properties, Prestige Estates, Brigade Enterprise, Ashiana Housing would be in focus.

It would also be positive for building material players such as Kajaria Ceramics, Century Plyboards, Astral Poly Technik and Supreme Industries, brokerages said.

The real estate sector is also seeking a GST waiver for a limited period. So far, the rate on under-construction properties is 5 per cent (minus the input tax credit benefit) for premium homes worth over Rs 45 lakh. The rate is 1 per cent for affordable homes (less than Rs 45 lakh).

The sector is also seeking a higher deduction under Section 80C up to Rs 1.5 lakh against principal repayment of housing loan, which is currently clubbed with other tax savings

“When it comes to investment in REITs, which have become a favoured route to raise funds for developers with renting-bearing commercial properties, an investment of up to Rs 50,000 should be allowed as a deduction under Section 80C. Also the holding period for REITs to qualify for long-term capital gain should be reduced from 36 months to 12 months, a step which will spur retail investment in value-creating instruments like REITs,” said Krish Raveshia, CEO at Azlo Realty.

Edelweiss said the government may look to support the bounce in the real estate sector by providing an extension to the PMAY-CLSS scheme, which is expiring at end of March 2021, which would also be in line with the government’s vision to provide Housing for All by 2022.

Meanwhile, public health has become very critical of late and further investments in public health infrastructure would be keenly awaited.

The vaccination rollout will be a very large project involving significant government expenditure. The outlay for this mega project and possible funding structure could become critical aspects of the budget, analysts said.



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Jim Cramer: Here Are the Biden Stocks


A new broom sweeps clean. Yep, a new president is upon us, and we need to be sure we have the right themes to ally ourselves with Joseph Biden.

Let’s get this straight: This administration is the most opposite a previous one since Abe Lincoln took over from James Buchanan. That means we have to turn the page on so much of what former President Donald Trump believed in, whether it be anti-immigration, pro-fossil fuels or vocally anti-China. That’s over.

We also have to believe that we are about to have some improvement in getting vaccines into peoples’s arms. I say that because I do not know how much worse we can do this. Putting the states in charge of the vaccine at the same time as putting the military in charge, putting McKesson Corp. (MCK)  and putting CVS (CVS) and Walgreens (WBA) in charge, goes far to explaining the insanity of the current “process,” although that word hints that there may be some organization to what’s going on. In many states, it has all come down to the county public health official doling the vaccine out and they don’t have the faintest idea how to do it.

I sincerely don’t think it can be worse. So score one for Biden, before he even starts, if he simply finds where the vials are hidden or lost given the tens of millions that have been made and not used.

Oh, and we will have the maker of a brand new kind of vaccine that might obliterate these new strains.

With that hopeful note, let’s get right to the “Investable Themes for 2021” that I touched on last year with two new ones in keeping with what the president has outlined in the intervening weeks, particularly with the anointing of his cabinet.

First, e-commerce. I feel more strongly than ever that this theme is still in its infancy, as every retailer and restaurant chain has to adopt e-commerce. Winners: Target (TGT) , with Shipt, the same-day service and Chipotle (CMG) , with its ability to deliver products through many e-commerce windows, still makes sense, even up here. So does Shopify (SHOP) , or Etsy (ETSY) or Paypal (PYPL) or Square (SQ) . Oh, and, of course, FAANG. Facebook’s (FB) the best way to advertise, Amazon (AMZN) the No. 1 e-commerce play in the world, Apple (AAPL) , the essential e-commerce device, Netflix (NFLX) , the e-commerce entertainment king and Alphabet (GOOGL) , increasingly the rival of Amazon when it comes to buying, chiefly services.

Next, we are going to re-open, because we are going to have a national vaccine policy and it is going to change the nation’s fortunes. You want to participate, you want Marriott (MAR) , you want Airbnb (ABNB) , Southwest Air (LUV) and Boeing (BA) — more on the latter later.

Third, we are so early in the digitization of this country and the world that it is painful. Who wins in digitization: The two rivals Salesforce.com (CRM) and Microsoft (MSFT) . Of course Adobe (ADBE) . Service Now (NOW) . Workday (WDAY) . All the cloud-based companies.

Next up is cybersecurity. When you listen to these bank conference calls, you are struck by how much money they have to spend on cybersecurity. We have cloud native companies like Crowdstrike (CRWD) , or Z-scaler (ZS) and Okta (OKTA) , or we have companies that can do both, chiefly Palo Alto (PANW) . Frankly, I don’t care which you buy.

There’s a theme that’s been so overwhelming that it can’t be stopped. We ed that it can’t be stopped. We did a 5G basket the other day, T-Mobile (TMUS) , Crown Castle (CCI) , Marvell (MRVL) , Inseego (INSG) , Skyworks Solutions (SWKS) , Qualcomm (QCOM) and Taiwan Semiconductor (TSM) are the best ways to invest in it. What you must know, right here, right now, is that there is a tremendous shortage in chips right now. It is vital you own one.

Covid-19 stimulus is tougher. We just don’t have enough industrials to matter for infrastructure to be a play. I think that Martin Marietta Materials (MLM) can work or Vulcan Materials (VMC) . The individual stores that benefit? Walmart (WMT) , Amazon (again) Target (again) Costco (COST) , Home Depot (HD) , Lowe’s (LOW) , Dollar General (DG) , Dollar Tree (DLTR) , Whirlpool (WHR) , Stanley Black & Decker (SWK) are all in play.

We have heard endlessly that the Biden administration is going to continue the hardline President Trump had against China. I think that’s poppycock. The Democrats have lost their claim on helping the working person who has lost her job from the Chinese. I think that Biden goes back to the same old, same old: You buy our goods, we look the other way, except for Taiwan, which we know the PRC wants to take over. Who wins? Apple’s worries about China sales? I think they’re over. Nike (NKE) and Starbucks (SBUX) are in there, but good. Finally, Boeing. The Chinese need planes. Boeing, which directly and indirectly employs two million people, should be the biggest beneficiary of the Biden regime — if Biden doesn’t tweet and starts to negotiate.

Individual stock selection and wealth management are the denizens of Morgan Stanley (MS) and Goldman Sachs (GS) . Unbelievable quarters, capitalizing on the new era of people who know that stock picking is a treasure denied by people who come on air and hector and embarrass you.

Remote work is so here to stay that those who think that we are going back to the central office missed the last year when the productivity soared among the employed, because they stayed at home. Winners: Williams-Sonoma (WSM) , Wayfair (W) , Logitech (LOGI) , and Zoom (ZM) . Oh, and, of course, Amazon. We’re not done with this theme.

Health care will be huge, because I think this administration will embrace the process of more democratic, not nationalized, but democratic health care. That means good news for Centene (CNC) , for Aetna now CVS and Humana (HUM) . I like breakthrough drug makers such as Eli Lilly And Co. (LLY) for Alzheimer’s and Regeneron (REGN) for therapeutics. This president will embrace and encourage science, which was openly ridiculed by the previous administration, something that millions of people now believe.

And now I have two new themes that you have to be impaired by gin or perhaps vodka to be missing: First is environmental regulations that are going to drive electronic vehicles. We are seeing it all over the place, with a leader of Tesla (TSLA) . But so many companies fit it, like Plug Power (PLUG) for green hydrogen, or Northern Genesis (NGA) , soon to be Lion Electric, or any of the Lordstowns (RIDE) or CIIG (CIIC) , which will be merging with U.K.-based Arrival. Increasingly, though, I am being drawn to Ford (F) , because of its Rivian investment and the coming electrification of the F-150 and GM (GM) for all things EV. They are the cheapest ones. They have the momentum.

Finally, one more theme: housing. I had been reluctant to recommend Toll (TOL) , KB Home (KBH) , Pulte Group (PHM) , D. R. Horton (DHI) and Lennar (LEN) , because I feared higher rates. But the Fed chief and the new Treasury Secretary, Janet Yellen, took those off the table. I worried about tightness, but we have little more than two months, arguably the lowest ever. Finally, the coup de grace, Biden is openly pro-immigration. There are a minimum of 10 million people who can stop hiding and being worried about getting deported and can soon ask for credit to buy a home. It will be an amazing time to be a homebuilder.

Now, the administration does have the ability to shift things. You get infrastructure you go CAT (CAT) . You get push into solar, you still go Tesla (TSLA) but you can augment it with SunPower (SPWR) . But unlike these other themes, the jury’s out on those.

Now, remember what you do with themes. You fall back on them. You don’t chase these stocks. You have to bet on multiple setbacks, because the idea we are somehow now united after this inauguration is just a fairy tale and we know after the events of the last few weeks in the Capitol they don’t come true.

No matter, these don’t need a new president, an old president, or any president. They need capital and this stock market will give them all they want in abundance.

(F, SBUX, NKE, GS, MSFT, CRM, BA, GOOGL, FB, AMZN, AAPL, CVS, CCI, MRVL, WMT, and COST are holdings in Jim Cramer’s Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)

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Carrefour shares slump as Couche-Tard’s short pursuit ends while European stocks and U.S. futures drift


Shares of Carrefour slumped 7% on Monday, after Canada’s Alimentation Couche-Tard ended its short-lived takeover bid to buy the French supermarket giant.

Carrefour’s
CA,
-5.81%
shares were trading at the same level as before Couche-Tard announced its interest. Couche-Tard
ATD.B,
+4.66%
ended its pursuit after France’s finance minister, Bruno Le Maire, stated his objections on “food sovereignty” grounds.

The two companies did say they will look to share best practices on fuel, pool purchasing volumes, and partner on private labels.

Suez’s
SEV,
+2.98%
shares rose 3% to €17.41, after the waste and water management company recommending an €18 per share, or €11.3 billion, bid from private-equity investors Ardian and Global Infrastructure Partners. Rival Veolia Environnement
VIE,
-3.11%
has nearly a third of Suez, which it is trying to buy, and said it won’t sell its Suez stake.

Broader markets traded in a narrow band with the U.S. shut in observance of Martin Luther King Jr. Day. Attention was building to the incoming Biden administration.

Treasury secretary nominee Janet Yellen will say the U.S. doesn’t back a weaker dollar, according to The Wall Street Journal, and one of President-elect Joe Biden’s first executive actions will be to end the Keystone XL oil pipeline, according to Canadian broadcaster CBC.

Down 0.8% last week, the Stoxx Europe 600
SXXP,
-0.05%
slipped 0.1%.

U.S. stock futures
ES00,
-0.15%,
which are continuing to trade electronically, slipped 0.2%.

The euro
EURUSD,
-0.16%
weakened by 0.1% to $1.2070.

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