Author: Dorian Holden

There’s big hope for a COVID-19 vaccine.

A report from STAT News reported that a Chicago hospital saw patients “experienced rapid recovery from fevers and respiratory symptoms” thanks to Gilead’s Remdesivir.  Should it continue to show positive results, U.S. FDA approval may not be far behind. 

“The best news is that most of our patients have already been discharged, which is great. We’ve only had two patients perish,” said Kathleen Mullane, the University of Chicago infectious disease specialist overseeing the Remdesivir studies for University of Chicago Medicine, as quoted by STAT News.

At the moment, there are no approved drugs on market for COVID-10.  However, with several ongoing trials – including the one from Gilead – we may be one step closer.

Moderna Inc. (MRNA) is Also Seeing Progress

Moderna is pushing higher after winning an $843 million U.S. award to develop a vaccine. “By investing now in our manufacturing process scale-up to enable large scale production for pandemic response, we believe that we would be able to supply millions of doses per month in 2020 and with further investments, tens of millions per month in 2021, if the vaccine candidate is successful in the clinic,” said CEO Stéphane Bancel, as quoted by Fierce Biotech.

Moderna hopes to have safety data from Phase 1 trials shortly, which could allow it to advance to the next phase in the second quarter. 

Development also requires a large effectiveness study, says CNBC, involving thousands of people.  “If all those things go well we are hoping to be able to be ready commercially to make the vaccine widely available in the U.S. in 2021, says CEO Bancel.

Other Top Companies are Racing to Help

Takeda Pharmaceuticals (TAK) is looking into “whether blood plasma from recovered Covid-19 patients, which can contain infection-fighting antibodies, can be used against the illness. Similar treatments have shown promise in treating other serious infections,” says Bloomberg.

Inovio Pharmaceuticals (INO) is experimenting with a vaccine that uses DNA to activate immune systems.  It kicked off a study in early April, with results pending.

BioNTech (BNTX) just received a $185 million upfront payment from Pfizer for a COVID-19 vaccine development collaboration, says MarketWatch.  BNTX could also receive milestone payments of up to $563 million from this, as well.

The U.S. Energy Secretary says oil may now be at a bottom.

“I think we may be at a floor. I think the intent of this conversation with OPEC and the rest of the G-20 countries is simply to do exactly that, to mitigate,” said U.S. Energy Secretary Dan Brouillette, adding that prices would be much lower if no agreement had been reached.

Unfortunately, we may not be anywhere near a bottom.

Should supply-demand fail to balance out, we could see $10 oil near-term.

For one, there’s far too much supply on the market and no demand.  In fact, oil just dropped under $20 a barrel on fear the biggest production cuts in history won’t be able to offset weak demand.  “Oil demand will this month hit its lowest levels for the year, according to the International Energy Agency, falling 29m barrels a day below last year’s average to levels not seen since 1995,” as reported by The Guardian.

In addition, the world is still flooding the world with oil with the pact yet to begin, says Bloomberg.  “State-owned oil company Saudi Aramco pledged to boost output to 12.3 million barrels a day in April as it slashed prices in a battle for market share, following the collapse of the three-year old OPEC+ pact last month.”

And, according to the U.S. Energy Information Administration, for the week ending April 10 inventory increased by 19.2 million barrels. Analysts were only expecting just over 12 million barrels, reports CNBC.  “There is no feasible agreement that could cut supply by enough to offset such near-term demand losses,” the IEA said in its monthly report. 

The U.S. Energy Secretary can tell us we’re nearing a bottom, but until excess supply is gone, and we see sizable demand for oil, we could see $10 barrel.  Even Goldman Sachs has warned the “historic, but insufficient” deal won’t be enough to help, as reported by The Guardian.

Worse, we’re running out of places to store supply.

It’s gotten so bad some tankers are storing global oil supply at sea. According to President Trump, We don’t have room to store oil anymore. We are using ships to store it.  There’s never been a glut like this. We have to get rid of this tremendous supply,” as quoted by Forbes.

With all of that in mind, $10 oil is a very real possibility.

Oil is up slightly after OPEC and allies agreed to an historic production cut.

All agreed to a cut of 9.7 million barrels a day, and represents the single biggest output cut in history, and puts to bed the Russia-Saudi price war.  Initially, the group agreed to cut production by up to 10 million barrels a day. However, Mexico only agreed to cut by 100,000 barrels a day, instead of the expected 3400,000 barrels.  

Instead, the group will now cut by 9.7 million barrels beginning May 1, 2020 and will only extend until the end of June 2020.  Cuts will then taper off to 7.7 million a day from July 2020 through the end of the year. Then, it will taper off again to 5.8 million from January 2021 through April 2020.  

Unfortunately, it’s too little, too late.

“It’s simply too late to prevent a super-large inventory build of over one billion barrels between mid-March and late May and to stop spot prices from falling into single digits,” says Ed Morse, Citi’s global head of commodities, as quoted by CNBC.

“The output cut may help somewhat, but the market situation remains stacked against the producers, especially in the short-term,” added Again Capital’s John Kilduff. “Prices will likely grind lower, as the global backlog of crude oil grows. A retest of the $20.00 level is likely over the next few weeks.”

Goldman Sachs also says oil prices would continue to fall in the coming weeks, reasoning that a “historic yet insufficient” deal by major oil producers to cut output is unlikely to offset a coronavirus-led demand rout, as noted by Reuters.

Worse, we’re running out of places to store supply.

It’s so bad some tankers are storing global oil supply at sea. According to President Trump added, “We don’t have room to store oil anymore. We are using ships to store it.  There’s never been a glut like this. We have to get rid of this tremendous supply,” as quoted by Forbes.

While the cut is great news, it won’t prop up oil prices any time soon.  

We have a good deal of supply, coupled with low demand to contend with at the  moment.  

Luckin Coffee dug itself quite a hole.

And it may not find its way out.

Days ago, the stock plummeted 80% after the company suspended its COO and several employees for misconduct related to fabricating sales transactions.  It also said investors should not rely on prior financial statements and releases for the nine months ended September 30, 2019, or the two quarters starting April 1, 2019 and ending September 2019.

Luckin also said “that the internal investigation is at a preliminary stage and its estimate of the fabricated sales has not been verified by its independent auditor,” as noted by CNBC. “The company’s special committee has retained Kirkland & Ellis as its independent outside counsel and FTI Consulting as an independent forensic accounting expert.”

The company found itself in more hot water after the Chairman and CEO defaulted on a $518 million margin loan facility, says The Wall Street Journal.  And banks stand to lose as much as $100 million on it. However, a group of lenders “is putting 76.3 million of the Chinese company’s American depositary shares—representing the collateral for the loan—up for sale.”

The fraud was initially highlighted by short sellers at Muddy Waters Capital.

Now, iQIYI is on the Chop Block 

However, LK isn’t the only company Muddy Waters is alleging committed fraud.

According to Barron’s, Muddy Waters’ backed Wolfpack Research claims that iQIYI (IQ) may be guilty of wrongdoing, as well.  “Like so many other China-based companies who IPO with inflated numbers, [iQIYI] is unable to legitimately grow their business enough to true up their financial statements,” the firm wrote.

Wolfpack alleges that IQ inflated its 2019 revenue by 8 billion to 13 billion yuan ($1.14 billion to $1.85 billion) to 44%.  It’s also alleging IQ overstated user numbers by 42% as well. However, IQ notes the findings contain, ““numerous errors, unsubstantiated statements and misleading conclusions and interpretations.”

To date, IQ has pulled back on the report.  Stay tuned for more on this developing story.

Oil prices are gushing.

In fact, oil is now up to $24.05 on hopes for the Russia-Saudi price war may be nearing an end.

“With all the speculation and skepticism about the ability of OPEC+ and the U.S. to agree on production cuts ahead of this week’s OPEC and G-20 oil ministers’ meetings, there is a feeling we might see some cuts purely out of necessity as storage capacity fills up,” said Michael Hewson, chief market analyst at CMC Markets UK, as quoted by MarketWatch.

We’ll know more about potential cuts by Thursday, when major oil producers hold a virtual meeting.   Reports are already surfacing that Russia and the Saudis are nearing a deal to cut production by up to 10 million barrels, and put an end to a damaging price war.  

“Look for at least 10 million and a commitment from non-OPEC of 3 million more,” Phil Flynn, senior market analyst at the Price Futures Group, told Fox Business. “If prices get worse, it could cause long-term harm to the global economy.”

If no deal is reached, oil could easily fall back under $20 a barrel.

All thanks to an increase in supply, and falling global demand.  Weekly inventory data from the American Petroleum Institute showed crude stockpiles were up by 11.94 million barrels for the week ended April 3, 2020.  That was more than the expected 9.3 million barrels. A week earlier, inventories were up by 10.49 million barrels.

At the same time, the Energy Information Administration (EIA) said global demand could fall by 5.2 million barrels a day, as inventories increase by 3.9 million barrels.  

If we see a resolution by tomorrow, some of the top oil names to watch include:

·      Exxon Mobil (XOM)

·      Chevron (CVX)

·      BP PLC (BP)

·      Baker Hughes (BKR)

·      National Oilwell Varco (NOV)

Stay tuned for further updates on this developing story.

Over the last few weeks, the Dow Jones plummeted 10,000 points.

Fear rampaged through the markets.  Investors sold just about everything in panic.  Great stocks plummeted to unsustainable lows. All thanks to coronavirus fear.  

However, it looks as if the fear may be subsiding – at least temporarily.  

All thanks to news of a falling death rate in Europe.  

Italy for example reported 525 cases in a single day – its lowest daily toll in two weeks, says The Guardian. It’s also a possible indication things may be slowly improving in the region.  France also reported its lower daily toll in a week, as Spain said fatality numbers fell for the third straight day.

There’s also hope for improvement in the U.S.  In fact, President Trump just said, “We are starting to see a light at the end of the tunnel,” even though he also noted, “In the days ahead America will endure the peak of this terrible pandemic.”  

That was also followed with U.S. Surgeon General Jerome Adam’s warning that this was going to “the hardest and the saddest week of most Americans’ lives.”

“This is going to be our Pearl Harbor moment, our 9/11 moment, only it’s not going to be localized; it’s going to be happening all over the country,” Adams added.  

Economist El-Erian is Also Encouraged

After weeks of telling investors not to buy the dip, economist Mohamed EL-Erian says, “I’m feeling better.  We’re having a bounce on medical issues, not on policy issues, not on technical issues,” as quoted by CNBC. “it’s about people,  fewer people dying, fewer people getting infected. I’ve also said it’s a medical solution that forms a bottom for this market.” 

However, we’re not out of the woods just yet. 

We need to see sustainably low numbers around the world before we can begin to get excited about any improvements.  We need more than just a few days of better reports. Until then, it’s best to prepare for the potential for further volatility.

To you and yours, stay safe out there.

Crude is showing signs of life.

All after President Trump said he expects for the Saudi Arabia and Russia feud to end soon.  “Worldwide, the oil industry has been ravaged,” Trump said, as quoted by CNBC. “It’s very bad for Russia, it’s very bad for Saudi Arabia. I mean, it’s very bad for both. I think they’re going to make a deal.”

However, a good deal of damage has been done.

And until we hear from the Saudis or Russia, the feud will persist.  Worse, the world is running out of places to store oil, which could lead to negative prices unless the news turns positive.

According to Forbes, “Analysts at Rystad Energy, the oil consultancy based in Oslo, Norway, estimate that the world is likely to run out of storage at current production rates by April, estimating earlier this week at 76% of the world’s storage is already full. In some regions, like Western Canada, storage could be full by the end of this month.”

Major damage is being done to U.S. shale, too.

A Chapter 11 bankruptcy filing from Whiting Petroleum (the first domino to fall) yesterday is only a bad omen of what’s to come, says CNBC.  

“I don’t want to be a doomsayer, but I think Whiting is just simply the first domino that’s going to fall,” John Driscoll, chief strategist at JTD Energy Services, told CNBC.  “It’s a fairly substantial company, but the smaller producers, if they don’t have the hedging in place, it’s going to be a tough route — Chapter 11 might be the only way to go.” 

All as U.S. shale becomes economically unviable.

Until the oil price feud between Russia and the Saudis end, and until we see demand pickup, and supply drain, oil prices will remain under pressure.  There’s hope the U.S. shale boom could eventually recover at some point, too. Unfortunately, that’ll take quite some time.

While it’s best to avoid oil stocks at this time, keep an eye on the majors like Exxon Mobil, Chevron, and BP as potential long-term “blood in the street” opportunities.

Luckin Coffee (LK) may soon be a top “blood in the street” opportunities.

Weeks ago, short sellers Muddy Waters alleged the company fabricated its financial and operating numbers beginning in the third quarter of 2019.  Luckin then called the report “flawed” and that “evidence is unsubstantiated.

But as it turns out the short seller was right to call out an issue with this stock.

Shares of LK just plummeted nearly 80%, or $20.58 at the open after the company suspended its COO and several employees for misconduct related to fabricating sales transactions that could have totaled $300 million.  It also said investors should not rely on prior financial statements and releases for the nine months ended September 30, 2019, or the two quarters starting April 1, 2019 and ending September 2019.

Look out below, near-term.  

Luckin also said “that the internal investigation is at a preliminary stage and its estimate of the fabricated sales has not been verified by its independent auditor,” as noted by CNBC. “The company’s special committee has retained Kirkland & Ellis as its independent outside counsel and FTI Consulting as an independent forensic accounting expert.”

There is Still Opportunity in LK

Once the storm clouds clear, there may still be plenty of opportunity for the stock.

We have to remember the annual growth rate of coffee consumption in China alone is nearly 20%, which is more than 2% above the global growth rate, as noted by Coffee Business Intelligence.  As that number increases, the value of China’s coffee market could reach billions of yuan over the next decade.

Short-term, the stock has a real mess on its hands thanks to a ridiculous COO.

Long-term, once the storm clouds clear, LK may be a solid blood in the street opportunity.  Stay tuned for more on this developing story.

The coronavirus has been devastating.

Markets have crumbled.  Businesses have closed. Schools are ending early.  Hospitals are packed with patients. It’s gotten so bad 30 state governors have now issued a “stay at home” order.  Those states have more than 225 million people, says CNN.

For investors, it’s been difficult to find opportunity.  However, there are bright spots.

Not only have social distancing stocks like Zoom Video (ZM) exploded higher, but so have gaming-related stocks, like Activision Blizzard (ATVI) and Take-Two Interactive (TTWO).  Even gaming ETFs, like the Global X Video Games & eSports ETF (HERO) and the Roundhill BITKRAFT eSports and Digital Entertainment ETF (NERD) are rallying well off recent lows.

“You’re now seeing [the market] differentiate between sectors and areas that can actually perform here [given the current environment, and] the data points are bearing it out,” says Roundhill Investments CEO Will Hershey, as quoted by CNBC. “Steam is hitting a new record concurrent player base every weekend, Twitch [is on track to break a new record] for viewership, and that’s going to be reflected in companies’ earnings.”

Verizon just reported a 75% week over week jump in gaming usage, as well.  Video games like Call of Duty Warzone grew to 30 million players in just over a week.  Even in China, there’s a gaming surge for companies like Tencent.

WHO Is Encouraging Folks to Play Video GamesEven the World Health Organization (WHO) is encouraging video games during the pandemic.  “We’re at a crucial moment in defining outcomes of this pandemic. Games industry companies have a global audience – we encourage all to #PlayApartTogether. More physical distancing + other measures will help to flatten the curve + save lives,” tweeted Ray Chambers, U.S. ambassador to WHO.