Hello~great to see you again after the long weekend! Remember to say something nice to everyone you meet on this Say Something Nice Day. You can also leave a nice note or do something nice for a friend, family member, or co-worker. 🥰
Morning Wrap your long holiday:
- Biden unveiled a budget to increase federal spending to levels not seen since World War II.
- The meme stock frenzy is back: another stock gained 1000%+.
- A travel boom during the holiday.
Wall Street reopens after the long weekend. S&P 500 and Nasdaq 100 closed with small losses. US manufacturing data overnight topped estimates but inflation concerns continued.
European stocks were lifted to a new peak as big commodities rallied on higher oil prices, and data showed euro zone manufacturing activity expanded at a record pace in May.
Asia: Shares in toy makers, diaper producers and infant food companies soared for the second day on Tuesday, boosted by China’s new three-child policy. Hong Kong ended higher as tech heavyweights bounced back.
The Most Important Policy Document
Source: Morning Wrap
Right before the start of your holiday, will you be too excited to focus on other things? White House chose the release time “smartly” based on this:
Before a three-day weekend, it released what is arguably the most important policy document of the year for US at the start of a congressional recess, when it is likely to receive little attention. In this doc, Biden unveiled a budget that would increase federal spending to USD 6 tln in the coming fiscal year - levels not seen since World War II.
Seems to be very big...what’s in that budget plan?
- 🚧 American Jobs Plan = USD 2.3 tln. It includes the investment for ① the nation's crumbling infrastructure, and ② the spending on "care" infrastructure such as long-term care for the elderly and disabled. ③ It will be funded by a tax hike, mainly for wealthy Americans.
- 👪 American Families Plan = USD 1.8 tln. It includes ① 1 tln in spending on families and education + ② 800 bln in tax cuts to promote economic prosperity and security.
- Other investments in areas such as: health research focusing on diseases like cancer, control of gun violence, climate crisis, helping homelessness, curbing the opioid epidemic etc.
Note: 1 & 2 were previously laid out by Biden, and are now under negotiation with lawmakers.
What does this budget imply? Is it a final decision?
No..it’s an opening bid under negotiations with Congress and could change before being signed into law. Overall, this budget proposal serves more as a marker of the government's priorities than a blueprint destined to be signed into law.
- 🙅♀️ Republicans don’t like these big spending plans, as usual - concerned about inflation and the decrease in corporate competitiveness.
- 😟 Even some moderate Democrats are worried about risks of inflation and deficit.
What do investors think?
The proposal was in fact leaked on Thursday, and the market reaction was muted. Because many of the details aren’t new - they have already been pitched by Biden for several months.
Stocks held the ground on Thursday and ended the week higher helped by a mammoth Biden budget plan and positive economic data.
Another Stock Gained 1,000%+
Source: Hey Poor Player, Morning Wrap
The meme stock frenzy is back! It’s AMC’s turn now - it gained 35% last Friday, 190% last month, and more than 1,300% year to date… also heading to the moon?
Hold on 😶 who is AMC?
The full name is AMC Entertainment: it is one of the largest cinema chains both in America and globally. It’s also a meme stock - whose price is fueled by social media but not its financial performance.
As we can imagine, AMC just had a bad year due to lockdowns and social distancing requirements around the world... and it has been a perfect target for short-sellers (those who bet on shrinking share price through a sell-now-buy-later strategy).
- AMC’s short interest is approaching 20% - implying that 20% of its shares are in short positions… that’s extremely high vs. a normal of 5%.
Then… why did it go up like crazy?
That’s similar to Gamestop (GME) in Jan. - mainly driven by enthusiastic retail investors on Reddit and Twitter, following r/wallstreetbets and #AMCSTRONG.
- Squeeze those short-sellers out! The so-called “short squeeze” is back again. No reason, just want to squeeze them out after seeing the high-flying short interest.
- Shift back from Crypto to meme? The crypto frenzy in Apr. has finished, and maybe it’s time for many of them to “reallocate” their assets… or simply shift back to meme stocks.
- Maybe AMC’s business is picking up? 🤔 In early May, AMC held a conference call following their quarterly numbers, with an optimistic outlook as the American vaccination accelerates. Time to go to the cinema?
How did the short squeeze work? So far, so good. ✌️ Short sellers have been slapped with a USD 2 bln+ loss on AMC, and some of them have already closed their position.
Source: Los Angeles Times, Morning Wrap
While we are away during the Memorial Day weekend, US just had a travel boom during this holiday. Here are some quick + interesting numbers that we shouldn’t miss.
- Highest number of air travelers since pandemic ✈️- more than 5x than 2020’s Memorial Day, though still 20% lower than 2019.
- Drivers on the road: it is estimated that 37 mln people would travel 80 km or more...60% higher than 2020.
+ How’s the Covid situation now? Yesterday, US reported the lowest Covid cases since the outbreak. Vaccination wise, 60% of the US population have received at least one dose, while 40% have been fully vaccinated.
What To Watch This Week
Earnings: Zoom (just now); Lululemon (Thu)
A PMI week: UK composite and services PMI (Thursday); US non-manufacturing PMI (Thu)
Central banks watch: BoE Gov Bailey speaks (Wed); Fed Chair Powell speaks, ECB President Lagarde Speaks (Fri)
Is the US job market doing well? US initial jobless claim (Thu); US nonfarm payrolls, unemployment rate (Fri)
What’s Moving in the Business World?
🛢️ Oil hit the highest since 2018 as the OPEC+ forecasted a tightening global market, and international efforts to revive a nuclear deal with Iran haven’t reach a breakthrough. (more)
✈️ The first step of quarantine-free travel: Hong Kong allows vaccinated senior executives of 500 large companies to travel outside the city freely without quarantine. (more)
🍟 Nestle is not that healthy. The world’s largest food producer Nestle admitted that 63% of its food and beverage products are unhealthy. (more)
🚗 Boom Korea! S.Korea’s May exports expanded the fastest in 32 years driven by surging chip and car shipment. (more)
✅ Sinovac got the green light. WHO approved the emergency use of a second Chinese Covid vaccine Sinovac. (more)
📉 Save the birth rate. China made a major policy shift by allowing married couples to have up to three children after seeing the decades-low population growth rate. (more)