China, Jason Moser Ron Gross, United States discussed on Motley Fool Money
David Hankiss we've got some stocks on our radar but we're going to begin with the big macro the three hundred fifty billion dollars small business loan program launched on Friday although the final regulations were not released until just hours before the program began. We also got the jobs report for March. That came out Friday morning. The unemployment rate going from three and a half percent to four point. Four Percent Jason Moser. We know it's going to be a lot worse than that because in the last two weeks ten million Americans have filed for unemployment. Yeah and I think this report is it it ended. I think the survey ended the middle of Mars. So it's not really reflective of what know today but as as we say on the show. Oftentimes it's it's more about the revisions. We witness a month from now on. You know that that certainly no exception here. It's you're right. It is way worse than than perhaps what it sounds like they. We know that in when you look at some of the projections out there from some of these different firms It shows you the disparity. I mean you look at Oxford Economics. They're projecting that by may the US will have lost basically twenty eight million jobs and we'll be looking at a sixteen percent unemployment rate Which ultimately that would arrays all. The jobs gained since two thousand ten That compares to a Another point of data that we're seeing from the Saint Louis Fed where they're projecting that this could result in forty seven million jobs lost in sending the unemployment rate past thirty two percent. And then you compare that to new Goldman Sachs Projections. Which came out recently in. And they're a little bit more in line with maybe what? Oxford economics is calling for talking about unemployment hitting a fifteen percent. You know I it seems like one of the constants here is is the the hope at least that this will be a quick recovery in in. I think that's that's fair to at least hope for. I mean it really does depend on the actions that we're taking today. Are they helping stanch the spread of the virus? And furthermore I mean you can't ignore the fact there's the potential of a second wave. I mean this is not something where we just defeated and then it's over. I mean we're going to have to manage our lives with this for the foreseeable future. And so how we do that. It's GONNA play out on the economy in some capacity. It's just a matter of of how dramatic that effect. That impact is going to be yet. I have to agree with Jason. We've gotta be at ten percent plus unemployment right here perhaps as high as thirteen even fifteen percent and it is going higher gig. Workers haven't really even started applying For the most part for unemployment yet We need these. Bandaids these bridges to kick in the cell phone. The Small Business Loan Program The paycheck protection program. Which is basically forgivable loans There are bridge. And they're going to be a bridge to another stimulus program because unfortunately the two trillion that we've already got is not going to be enough and that's unbelievable say probably GonNa need another one of similar size to get us. Pass this to where the health crisis abates and people can get back to work eventually but unfortunately it's not gonna be any any time soon. This is really all about buying time. Isn't it I mean in in Rome right? I mean we've already got DC talking about yet another package. And I mean I think we all probably assume that was GONNA be the case This is this is. We're all in the same boat here right. I mean this is really about finding. It's it's it's the ultimate bridge loan in the biggest challenge in trying to buy time is right now. We just don't know how much time we ultimately need in. That certainly could change Over the course of the summer as we move into next fall and winter too. They're just so so much uncertainty either for all of the reassurance we'd gotten in the certainty that we have today that we didn't have before there's still a lot of uncertainty out there so assuming all of this plays out the way we hope it. Will that these bridge loans get the small businesses to a point of stability over the next couple of months. A ultimately Ron. This has to come down to states being able to flatten the curve for the virus. Because everything we're talking about right now is dependent on that for sure and as Dr Foul she said yesterday you know. He can't believe that as a nation where we're not shutting things down and that there's still more than a handful of states that are not complying. And we're not seeing the curve flatten as we could be if everyone was was taking this extremely seriously as some states are are. Let's get to some of the businesses out there and run. I WANNA start with oil stocks because oil stocks had a pretty good week. Exxon Mobil Chevron Royal Dutch Shell. They're all up around ten percent and this is an industry that so many people have been asking us about Ron. I'm not asking you to time the bottom on oil stocks but do you get the sense that the geopolitical risk within this industry to least been diminished. Perhaps but it's gonNA depend on the emergency meeting on Monday between OPEC in Russia. The hopes are that they're going to strike a deal on to cut production and that will shore up prices which were basically decimated over the last month or so a cuts of perhaps ten percent of global supply. I think are going to be discussed and and we'll see where the will shake out. They've got to do something though. Interestingly DEMAND FOR OIL IS WAY DOWN RIGHT. We're not driving. A lot of production is has been cut. Businesses activity has been slowing. So you've got a demand problem as well in this industry but if prices confirm up and then rise I would imagine that bodes well for these companies and these stocks now. I don't like these companies long term and as a long term investor. I wouldn't I would stay away because if I don't if I don't like industry or a business long-term then there's no point in trying to play a balance or or hit the bottom or call the bottom and as you say you won't. You won't make me do that so I won't But certainly those companies that have strong balance sheets that will benefit from rising oil. Prices will survive and probably do well others are not gonNA survive small and middle-sized guys are still going to go bankrupt Waiting Petroleum I think for bankruptcy recently as one example But the big boys like the Exxon's will probably define. Yeah it's interesting. You mentioned the price of gas and I don't know about you Jason But I've been seeing that on twitter This past week people just sort of tweeting pictures of gas stations where the price is less than two dollars a gallon and there's that for me just sort of that momentary like Oh my. Gosh. That's great but then I remind myself I'm not really driving anywhere. Yeah most people aren and I mean it is just a just a fascinating time. I mean we've normally look at those types of conditions man that is just so wonderful for the consumer and yet here we are. We know that there's pretty much nothing right now. That is just wonderful to consumer as Israel just in a state of of Trying to figure out how to move forward. Well you know maybe one silver lining there is just the the distribution companies across America The trucking companies that are trying to move goods from point eight point be particularly as there appears to be a national shortage on toilet paper. Still not straight. I fully get that and I got the email from Amazon the other day that are subscription for toilet. Paper is slated to to to arrive here next week. I'm really curious as to whether I'm actually GonNa get it or not. Because apparently the grocery store shelves or not fully restocked with toilet paper yet coming up to beverage companies making headlines for two very different reasons. Stay right here. You're listening to Motley Fool Money Modern Woman Priscilla Human Studio with Jason Moser Ron Gross joining from his home. We've talked on this show before about luck and Coffee Chinese Startup Company that IPO last year. Trying to go head to head with starbucks in China shares of luck and fell eighty percent this week after an internal investigation found the chief operating officer fabricated sales last year. And Ron. There's more information to come. This is an ongoing investigation. But this is every investor's nightmare right that the company that you own shares of someone was high up in the food chain was lying about the sales and it just craters. It's a disaster. As an investor is a foolish investor. Who Really thinks that management teams are such an important part of the investment decision making process and the running of a business? And then you have those folks who you've trusted lied to you. It literally is a betrayal and ended. It hurts you in the wallet As well as well as your ego I would imagine because you trusted these folks in this particular case fraud can happen in any company in any in the country. It's more likely I think we're finding in China. Because of the oversight problems we have there were. Us regulators are prevented from inspecting the audit work of auditors over in China. And that's a real problem If we clean up oversight and it's been hard to specifically with China because they're not cooperating. We could maybe get some of this to go away. You'll never get it one hundred percent probably people do lie unfortunately and it's hard to catch them in every circumstance but this is just as astor. The company hasn't been public at long last night when public. At seventeen dollars a share They did a secondary offering January at forty two dollars a shared a now. Where are we five or six dollars? it's been a pure disaster And it's it's a risk of when you invest in Chinese companies Jason. We've talked a lot. About what the future will look like. In terms of regulations across any number of Industries as regulations get relaxed to help small businesses. Stay IN BUSINESS. And this is one of those incidents that makes me wonder if we're going to see a regulatory change or a policy change because there have been US senators who have pushed for this type of thing. If we'RE NOT GONNA see if not greater oversight over China maybe quicker punishment. You know the the idea that Something like this would lead to a Chinese company being delisted by the Nasdaq the NYSE. Yeah and I mean there are certainly that potential right. I mean there's Ron was talking about. I mean it's lack of cooperation on the part of China. We have this thing called the Public County of the Public Company. Accounting Oversight Board Which which ultimately is geared towards helping Create transparency with with you know all companies that are that are going to be publicly traded but but when you have essentially country they'd say now we're just GonNa Kinda go our own way with it then. You have to start taking a little bit more drastic action. There has to be consequences for behavior and in this case. I mean there's clearly gonNA be investigation. I think there are going to be. All sorts considerations is to is to potential actions. I'm not saying it should be a blanket action Certainly luck in should should suffer some consequences here. If this proves to be as as true as it sounds you know it goes back to the questions we get all the time about investing in China. How do you feel about doing it in for me? It's always been a very difficult leap to make because of things like this. We have track records of companies. Doing this over the last decade particularly you know ten years ago a little bit more than that one these Chinese small-cap started coming onto the scene Sometimes you know that saying if it looks too good to be true than it usually is. I think this is another example. Constellation brands has a portfolio of beer wine and spirits. Fourth quarter profit and revenue came in higher than expected for constellation Shares down on Friday despite this report chase and we've seen speaking of regulations. We've seen governors across America Designate liquor stores as being essential. This seems like an environment where constellation brands would do. Well Yeah Yeah I think so. I mean this is sort of a good news bad news. Good news situation so follow me here. Good News as you mentioned. It was a good quarter. The beer business in particular was was pretty impressive. Growth in the beer business was eleven point. Four percent now the modell. Oh family the modell brand family was responsible for a lot of that depletion. Zehr more than eighteen percent The Corona brand family grew to nearly five percent that's encouraging and does sound like the Corona Hard Seltzer launch has been successful in Howard. Celta really does seem to be taking off and I'm glad to see that the constellations of playing a part in that role Bad News Right no guidance. I mean we really don't have an idea of what the rest of the year is going to look like in and you couple that with what has been an ongoing drag in the canopy investment and canopy is just not working out. I I. I don't know what the future holds there. Clearly that's that's a greater market Type of situation But they're still potential there And then the good news ultimately again as you mentioned. This is an environment where constellations should do. Okay given that beer liquor wine and spirits. Industry has been deemed more or less essential. And I think a lot of us are very appreciative of that fact and in given constellations broad portfolio of offerings from beer wine and spirits. I mean I think that plays out pretty well for them. The essential part is interesting because just about an hour ago. I saw come across the tape. That Coronas GonNa Stop Brewing Beer because Mexico deemed non-essential. So that it's really interesting. I think where you're domiciled..