🍨 Daily Scoop: Not too fast

By Hoda Mehr Wed, Jul 10, 2019

What you need to know?

The Congressional Budget Office (CBO) released a report about how increasing the federal minimum wage may cause unemployment for more than one million people in the U.S. While it is intuitive to think that increasing the wages will mean a better economic situation, the CBO’s report has other counterintuitive conclusions.

“In an average week in 2025, the $15 option would boost the wages of 17 million workers who would otherwise earn less than $15 per hour… But 1.3 million other workers would become jobless, according to CBO’s median estimate.”

What does it mean for investors?

The economy and the economic policies are not as straightforward as we would like them to be. It is usually easy for investors to just ask the government for a rate cut, or higher wages, but in reality, the economy is a lot more complicated and pulling one string on this side, will inevitably have a butterfly impact on another side. When you read the news and conclude the government should increase the minimum wages, you may also consider such potential butterfly effects.

• U.S. markets: The stock market has slightly recovered from yesterday’s all-red status. The S&P 500 and the Nasdaq finished the day slightly higher than where they started. But, the DOW continued yesterday’s price decline trend. Scroll to the Overall Market section to read more about what happened. 
• Cryptocurrency: Bitcoin price surpassed $12,000 per coin again on Tuesday, not too far from where it was on Monday. As is the case most days, the fluctuations in the cryptocurrency prices are just the result of the normal buy and sell forces in the market and are not driven by any particular news.

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The Earnings-Palooza is getting started. 

What happened on Tuesday?

Major market indices took different directions on Tuesday. The DOW closed the day lower than where it started, mostly due to a 1% decline in the Basic Materials sector. Some financial media called the volatility in the DOW in the last few hours of the trading day as concerning and scaring event. For example, if you listened to CNN Money on Tuesday, the world is most likely coming to an end.

The other two indices had better luck and got pushed into the green zone thanks to a slightly better performance by the Financial Services and the Technology sectors.

Now What?

We are entering the quarterly earnings season, also known as the Earnings-Palooza. Several banks and financial institutions are reporting their quarterly earnings this week, followed by technology companies’ earnings as we enter the next week. Expect some volailty during such busy time of the quarter. It’s a part of the market’s normal rhythm.

Oh, it’s not that bad. 

Financial Analysts from Raymond James changed their minds about Square Inc. (Ticker: SQ), and the positive news boosted the stock price more than 6%. A few months ago, most financial analysts gave Square a lousy rating as they anticipated slower than the expected growth rate. Now, Raymond James analysts are saying that the company’s problems are not as bad as they thought and investors loved the news.

As much as it is wise to listen to the expert analysis and arguments, you have to know that financial analysts’ horizon is at best 12-18 months. These professionals cannot have a longer time horizon because otherwise, most of the times, there is limited to say about the companies they cover. Individual investors can let a lot of the financial analysts’ commentaries go by without worrying about their holdings. In most cases, they will change their mind in a few months.

It’s legal now. Why are you doing it illegally? 

For the second day in a row, shares of the cannabis producer, CannTrust Holdings Inc (Ticker: CTST) is down several percentage points. The price decline comes after the government seized the company’s cannabis due to production in unlicensed rooms. The further decrease in the price on the second day came after a Danish company said it has sold some of the illegally produced cannabis to its patients. Investors are now wondering what percentage of the company’s sales is impacted and how much fine is coming down the road.

This is not the first time we have seen such rapid price decline in cannabis stocks. Those newly-formed companies lack the experience required to run their operations and keep getting off-guarded by regulatory bodies. A few months ago, other cannabis producers made several accounting mistakes and failed to recognize acquisition-related losses on their balance sheets. If you are an investor in cannabis, these are the types of unknown risks you have to deal with.

Goodbye, our beautiful Red Hat! 

So, what happened? 

If you owned shared of Red Hat Inc (Ticker: RHT), you might be feeling gloomy because the stock’s price chart flatlined Tuesday. IBM (Ticker: IBM)finalized the company’s acquisition, and Red Hat is officially an IBM company now.

With a $34 Billion price tag, investors in the stock did get a nice premium on their original investment since IBM announced the acquisition last year. But, well-managed companies such as Red Hat are better left alone to grow faster than whatever older and larger companies such as IBM can grow. Regardless, Bye-bye our dear beautiful Red Hat! You’ve been great to us.

About the Author

The authors of this Scoop are the editorial team at Stock Card, led by Hoda Mehr. Hoda Mehr is CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 40,000 stock market investors and manages Stock Card's successful flagship portfolio, Roll with Our CEO, on Stock Card Portfolio Store. Hoda is an Economist with an MBA from Concordia, John Molson School of Business. She applies behavioral economics, data journalism, and storytelling to all aspects of her work. Before starting Stock Card, Hoda worked as a strategy and insights lead at technology companies including Symantec, Aimia and Sony. Create a free account to do your stock market research easily and mistake-free: Stock Card Stock Card