Valuentum Exclusive Analysis for the Discerning Investor

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Apr 12, 2020

ICYMI -- Video: The Question Is If the Economy Can Be Held Together Without Vast Equity Dilution
President of Investment Research at Valuentum and award-winning author of "Value Trap: Theory of Universal Valuation" explains how the range of probable fair value outcomes of S&P 500 companies has increased as a result of COVID-19 and possible equity dilution on the downside to long-run inflationary pressures on stocks driven by runaway Fed and Treasury stimulus on the upside.

Apr 8, 2020

US Fiscal Stimulus and Emergency Spending Update
Image Source: Pictures of Money. On Thursday, April 9, the US Senate is set to hold a vote on whether to add additional funding towards helping small- and medium-sized businesses (‘SMBs’) on top of the $350 billion allocated towards a loan/grant program that was included in the recently passed $2+ trillion Coronavirus Aid, Relief, and Economic Security Act (‘CARES Act’). Key Republican legislators and Trump administration officials including Senate Majority Leader McConnell (Kentucky), Treasury Secretary Mnuchin, and Senator Rubio (Florida) who is Chairman of the Senate Committee on Small Business and Entrepreneurship, want to add $250 billion in funding capacity to the SMBs relief program, dubbed the Paycheck Protection Program (‘PPP’). That program involves providing loans to SMBs equal to 250% of their monthly payroll, and those loans can be used to pay employees along with utilities and rent. If those funds are used to retain workers, they can become forgivable loans and effectively grants (if certain conditions are met).

Mar 30, 2020

Bullets: Recapping the Crash, Where Are We Now?
Image: The S&P 500 has only retraced a small part of its decline since the top in February 2020. We established an S&P 500 target of ~2,550 in late February and more formally established a target range of 2,350-2,750 in the March edition of the Dividend Growth Newsletter, prior to the crash. As predicted, the S&P 500 crashed to the mid-point of our S&P 500 target range of 2,350-2,750, now trading at ~2,590 at this moment. We continue to emphasize that panic selling during this crisis may continue to 2,000 on the S&P, while we emphasize that the range of fair value outcomes for equities has increased, both to the upside and to the downside. Let's recap the crash in bullet-point fashion, and explain what investors can expect next.

Mar 28, 2020

Attack COVID-19 With Forward-Looking, Expected Data
President of Investment Research at Valuentum Brian Nelson shares his financial wisdom in detailing how the world must attack COVID-19 with forward-looking expected data (not backward-looking, empirical data) as the global economy faces what could become the worst business environment since the Great Depression, irrespective of government fiscal stimulus.

Mar 26, 2020

US Congress Is Getting Ready to Pass a Massive ~$2.2 Trillion Fiscal Stimulus Bill
Image Shown: US equities have started to recover some of their lost ground as the likelihood that the US Congress will pass a massive ~$2.2 trillion fiscal stimulus and emergency spending package, dubbed the CARES Act, has increased significantly over the past week as seen through the bounce in the SPDR S&P 500 ETF Trust. President Trump has clearly indicated that he intends to sign such a bill into law as soon as possible, with the US House of Representatives expected to take up the legislation this upcoming Friday morning on March 27. On March 25, the US Senate worked late into the night to secure a bipartisan compromise on a massive ~$2.2 trillion fiscal stimulus and emergency spending bill to offset the negative impact of the ongoing novel coronavirus (‘COVID-19’) pandemic. The bill passed 96-0 after several senators forced a vote on an amendment on that bill that would have changed the nature of the “beefed up” unemployment benefits (that amendment failed 48-48, and would have needed 60 votes to pass). As of this writing, there are over 65,000 confirmed cases of COVID-19 in the US according to Johns Hopkins University, and we sincerely hope everyone, their families, and their loved ones stay safe during this pandemic. A vote in the US House of Representatives is expected this upcoming Friday morning on March 27. The House is expected to convene at 9AM EST and the goal of each party’s leadership is to secure passage of the bill via a voice vote (please note that this differs from unanimous consent, which requires every member of the House to agree to such a legislative process in order to pass a bill without having the majority of lawmakers return to Washington DC, but this is easier/faster to achieve than a recorded roll call vote that would force every member of the House to return). Assuming the House swiftly passes the bill that was approved in the Senate, President Trump has clearly communicated he would sign the bill into law right away. Please note this bill is formally known as the Coronavirus Aid, Relief, and Economic Security (‘CARES’) Act.

Mar 23, 2020

US Fiscal Stimulus Update
Image Source: frankieleon. The US Congress is debating and working on a massive multi-trillion dollar fiscal stimulus package to mitigate the negative impact the ongoing novel coronavirus (‘COVID-19’) pandemic is having on the domestic economy and to provide for additional healthcare funds to cash-strapped entities to combat the virus.

Mar 20, 2020

Op-Ed: Bail Out Boeing, No Other Publicly Traded Companies
Image: Boeing B-17E Fortress 41-2599 "Tugboat Annie"; took part in the Battle of Midway in Jun '42; later ditched at sea on 16 Jan 43. Source.Dear Uncle Sam: Please stop bailing out the competition of small business. We need a changing of the guard. Let capitalism work.

Mar 19, 2020

Extreme Volatility and Crisis Economics
Image: The Dow Jones has now registered 8 consecutive trading days with a 4% move in either direction, from March 9 through March 18. This is the most volatile time in history, a streak that is longer than the 5 consecutive days registered in November 1929 (Great Depression), 4 consecutive days in 1987 (Crash of 1987), and 4 consecutive days in 2008 (Great Financial Crisis). The worst of the declines may still be ahead of us. The S&P 500 still is trading within our fair value estimate range of 2,350-2,750, and we wouldn’t be surprised to see panic/forced selling all the way down to 2,000 on the S&P. Expect more volatility, and please stay safe out there as the world declares all out war on COVID-19. Our best ideas remain in the Best Ideas Newsletter portfolio, Dividend Growth Newsletter portfolio, High Yield Dividend Newsletter portfolio, and Exclusive publication.

Mar 18, 2020

Banking Entities: The Technicals Tell the Story
Image: The Financial Select Sector SPDR ETF has experienced a tremendous amount of pain in recent weeks.  What is clear is that temporarily shutting down large parts of U.S. economy is absolutely unprecedented, and there will be substantial knock-on effects and difficulties in getting things restarted. This is most especially true if the coronavirus re-emerges following the periods of social distancing around the world, or when the weather turns colder again in the fall, and humanity could be facing a different strand of the coronavirus. Don’t forget that all bank institutions use a lot of financial leverage by their very nature, and the Fed and Treasury can never truly stop a run-on-the-bank dynamic (i.e. that which happened to WaMu in 2008). We think BOK Financial is in particular trouble given its energy loan exposure. Others to avoid include Cullen/Frost Bankers, Cadence Bancorp, and CIT Group. The credit card entities, Capital One and Synchrony Financial may be worth avoiding. We’d stay far away from the regional banks given their exposure to small business pain amid COVID-19. We don’t think the fiscal stimulus on the table does much to help small businesses. Deutsche Bank may be the first of the big European banks to topple, and this weakness could eventually spread to the U.S. banks given counterparty risk. Most foreign banks, including Santander, Credit Suisse, UBS, ING, and BBVA remain exposed to crisis scenarios. We’re also witnessing some very troubling developments with banking preferred shares, with the bank-preferred-heavy ETF, Global X SuperIncome Preferred ETF dropping ~15% during the trading session March 18. The preferreds of HSBC and Ally Financial are top weightings in that ETF. Banking technicals are raising some major red flags across the board, and given actions by the Fed and Treasury, this crisis has all the makings of being worse than the Great Financial Crisis. In any financial crisis perhaps excepting a depression, there can come a time to invest new money in bank stocks. Though it seems likely we have not yet reached the bottom in the markets yet, the highest-ground bank franchises in the US are JPMorgan and Bank of America, in our view. While sharp declines in their equity values may be expected (no one truly knows how deep the coming flood will be), they’re likely to make it to the other side with most of their equity capital firmly intact. With all that said, however, one doesn’t have to hold banking equities. It may be time to phone Mr. Buffett before things really start to unfold.

Jan 23, 2020

Resetting Your Mental Model
Image Source: affen ajlfe. Having the right mental model and using the right information can be the reason why you win or lose in investing.