Expectations are so negative on China that a 56% drop in gross gaming revenue in Macau counts as a positive surprise. Analysts had expected year over year gross gaming revenue to drop by 57% year over year in the month. And the December total was actually up 16% from the gross gaming revenue in November, according to the Gaming Inspection and Coordination Bureau.
On Friday I posted my two-hundred-and-twentieth YouTube video: Quick Pick Sell MGM. This week’s Quick Pick is a little different. Normally my Quick Picks are long (buys) but this one is short (sell). This is a reaction to the terrible Covid outbreak in China right now. China went from a strict, 0-covid policy to hardly any policy at all. While their vaccine rate sounds good at 90%, a lot of that is Chinese-produced, non-RNA vaccines, which have proven to be fairly ineffective against the new Covid variants. As a result, viral projection models expect 1.1 to 1.3 million deaths over the next wave (or waves) of Covid in China. So how does that affect MGM International? Their resort in Macau, China, while recently receiving their gambling license renewal, will get hit hard by the largely self-directed reduction in travel. And the “official” policy, which is to encourage travel and work-as-usual, seems to be having the opposite effect by creating fear among Chinese citizens. Macao, following the lead of the new policies from the central government, has just about dropped its requirements for testing and quarantine. The new rules essentially say, “We just want you to come.” Instead, many people are locking themselves down in an effort to stay healthy as China’s covid problem runs rampant and the Chinese government refuses to share accurate data. I don’t want to watch this Covid disaster further hammer my position in the stock. I’ll be selling it at a loss in my Jubak Picks Portfolio (hey, harvest those tax losses for 2022), but I will look to get back in April or May if I start to see optimistic traders betting on an end to this wave of the Covid Pandemic in China.
After swiftly abandoning its 0-Covid lockdown policy–without replacing it with anything resembling a national Covid protocol–China is facing a Covid disaster that could see more than 1 million deaths from the coronavirus in 2023. That would put China’s death toll from the Pandemic on par with that of the United States, which has seen 1.1 million people die from Covid19 since the pandemic began. The magnitude of the disaster is actually understated by that comparison since China’s comparable death toll would be condensed into a much shorter period than that in the United States. We don’t know with any degree of precision what a pandemic outbreak like this would do to the economies of China and the world. But we can make some reasonable guesses.
I ended my recent post “This looks like the Bear Market rally I’ve been waiting for” on my subscription JubakAM.com site by saying “Enjoy the ride but look to sell shares of companies that look most exposed to the return of recession/high interest rates/inflation worries. That post had been up for all of 18 minutes before I got the perfectly reasonable question “Like what?” And I promised an answer so here are my preliminary thoughts on what I’d look to sell in a Bear Market rally
I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. My one-hundredth-and fourteenth YouTube video “Three great summer trades get tricky” went up today. Special extra video this week! Ahead of tomorrow’s Quick Pick (no, I won’t tell you what it is yet), I’m revisiting a story from early December about three stocks I had identified as huge growth areas with the summer and the return to business, travel, and leisure. I think that simple narrative has become slightly tricky with the development of the war in Ukraine as well as rising or unstable oil prices and the possibility of a recession later in 2022 or in 2023, but I think the overall message remains. I look at three stocks I liked in December and see how they’re doing now.
The Major League Baseball lockout is over–and the baseball season will start next month roughly on schedule. And the NCAA Basketball Tournament–March Madness–begins next week.
Both pieces of news are GOOD news for sports betting stocks.
ESPN has reported today, March 10, that Major League Baseball owners and the MLB Players Association have reached a tentative agreement on a new labor deal. The agreement still needs to be ratified by both parties, but players could report to spring training camps as early as Friday. Opening Day could be set for April 7.
After a huge rally like we’re had this year, it’s easy to fall into one of the most common buy on the dip traps. Just because a stock is cheaper than it was, it’s not necessarily a bargain. There’s nothing that says a stock has to return to its previous price after a dip. And especially that it has to return to that former price on your schedule. Let me use Disney (DIS), one of the stocks I’m tracking in my Dip-O-Meter, as an example.
Federal Reserve Chair Jerome Powell retired the word “transitory” to describe stubbornly high inflation in testimony today in front of the Senate Banking Committee. And, Powell continued, the Fed might accelerate the pace at which it is winding down its purchase of Treasuries and mortgage-backed assets. “It is appropriate, I think, for us to discuss at our next meeting, which is in a couple of weeks, whether it will be appropriate to wrap up our purchases a few months earlier.” The Fed is currently scheduled to complete its asset-purchase program in mid-2022
Today, Monday November 29, it’s a tale of two bounces from Friday’s big sell off. Technology stocks and especially big technology stocks are up big. At the close in New York Applied Materials was up 5.53%. Adobe (ADBE) was ahead 3.83%. Nvidia (NVDA) was higher by 5.95%. Amazon (AMZN) had gained 1.63%. Apple (AAPL) and Meta Platforms (AKA FB) were 2.19% and 1.47%, respectively. Qualcomm (QCOM) had gained 4.55%. Alphabet (GOOG) was higher by 2.32%. Microsoft (MSFT) had picked up 2.11%. NXP Semiconductors (NXPI) had climbed 5.41%. In most of these stocks today’s gains made up for Friday’s losses–or more. For example, on Friday Applied Materials had dropped 3.84% and NXP Semiconductors was down 3.88%. On the other hand, the “re-opening stocks” that got crushed Friday on fears that the Omicron Covid-19 variant would throw sand in the gears of the global economy showed only minor gains.
Oddly, the big sell off on Friday hasn’t created as many buys among the 25 stocks in the Dip-O-Meter as you might expect. Part of the reason is that the run up in stock prices in 2021 has been so fast that many stocks are still way above the 2021 lows. It’s hard to call Nvidia (NVDA), for example, a buy on the dip opportunity when the stock even Friday’s 3.58% drop to $315.03, is still way above the 200-day moving average at $190.81. Part of the reason is that, in my opinion, we’re looking at some negative trends in the economy, from the resurgence in Covid infections, and from inflation/interest rates/the Federal Reserve in the first half of 2022. Do you really feel in a rush to buy Disney at $148.11 after Friday’s 2.13% drop to $148.11 when it looks like park attendance is going to get slammed again by the Pandemic? Or MGM Resorts International (MGM)? Part of the reason is that existing negative trends haven’t bottomed out. Volkswagen (VWAPY) doesn’t look like a bargain at $18.50 after Friday’s selling because China’s auto market remains in turmoil, for example. Same with Freeport McMoRan Copper & Gold (FCX) on slumping global copper demand. Which doesn’t mean I’ve got nothing to recommend for buying after Friday.
Analysts watching game revenue in Macao’s casinos are seeing just a bit of improvement after operators were walloped by Pandemic shutdowns, border closings with Hong Kong, and government restrictions aimed at high-rollers. JPMorgan has forecast that 2022 gross gaming revenue in Macao will rise to just above 50% of the pre-pandemic level seen in 2019 as a result of 70% recovery in mass market gaming and travel and a 24% recovery in VIP revenue. That’s a very slight improvement from JPMorgan’s previous outlook. Investment house Jefferies has also become incrementally more positive on the Macao outlook. Analyst David Katz says the Macao market could be close to bottoming with current local Covid-19 infections in China falling to single-digits and a partial China-Hong Kong border opening possible before year-end. My preferred stock to play Macao is MGM Resorts International
