ItsMoneyMark Newsletter #47

2 weeks in 2022 – have you invested as yet? Here’s your reminder!
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The U.S. Fed, Rates Hikes & Interest Rates

U.S. President Biden took office on January 20, 2021. He approaches his 1-year anniversary of his 4-year term within a week of today. The Biden team has been making its move at the Fed with the November 2021, re-nomination of Jerome Powell to a 2nd term as Fed Chair. 

In an announcement yesterday, Biden became more active with the three (3) potential openings on the Fed board, the extremely influential body, especially considering the persistent concerns of inflation in the U.S. economy with these nominations now. These are the openings on the U.S. central bank’s board of governors. Names included, Sarah Bloom Raskin, Lisa Cook & Philip Jefferson. The new potential mix bodes well for the Fed, with a law professor, who was a former Fed governor, an economist, and a former Fed economist. 

The timing is critical by Biden, as the swirling concern in the U.S. Economy, and by bankers, has been how to tame “inflation.” Over the course of the past 12 months, and a scorecard for Biden, there is no question, he & his administration have received praise for: the stock market indices performance, the stimulus packages, infrastructure projects, handling of the pandemic/ vaccines, and therefore, these Fed moves can be viewed as pro-active moves to ensure his 2nd year in office continues smoothly given the importance the criteria of the Economy & Capital Markets plays in the evaluation of a U.S. President. 

U.S. interest rate market forecasts, many analysts have projected 3 rate hikes this year, 2022, commencing in March to keep inflation intact. Goldman Sachs, leading investment bank recently announced their thoughts around rate hikes, stating that they expect 4 rate hikes. Whatever the outcome, the 10-year Treasury bond is not hoovering around 1.75%. 

All remains on course for re-nominated Fed Chair Powell, for his 2nd term as confirmation hearings have concluded and now it heads to Senate. 

Market Moves:

  • Virgin Galactic (NYSE: SPCE), the Branson tourism space venture has got hammered over the past 12 months and has had a rough week. SPCE is down approximately 70% over the past year, and down approximately 15% this week alone… Not much that Sir Branson touches goes south this much or bad, and even if it is a case in hindsight of going public with the Company too early, Branson typically turns things around. This will be a tougher play for him & his team as compared to SPCE’s competitors or companies the market will compare them too such as, SpaceX, & Blue Origin. These competitors’ shareholders have deeper pockets than Branson and their business models are seemingly more diversified than “space tourism,” especially SpaceX’s own. 

Virgin Galactic merged with a SPAC in 2019 and listed on the New York Stock Exchange (“NYSE”). In no time, the share price flew from US$ 10/ share and change level to its 52-week high of around US$ 62/ share. Flash forward to today, about 2 ¼ years later and interestingly, Virgin Galactic is below its debut price of US$ 11.75/ share. The stock currently is trading today at US$ 10.02, 14.7% off its debut price in October 2019. 

As a result, and with the current share price woos not helping SPCE, the company decided to hit the debt market. With the share price, below its debut price, and 84% below its 52-week high, it is not the right time for equity in Sir Branson’s mind. Virgin Galactic announced US$ 500 million of debt via private offering, with US$ 425 million of convertible senior notes maturing in 2027 with an option to be granted to buyers for a further US$ 75 million. 

Debt piled onto to more debt can be a vicious circle or it can lead to eventually amazing growth for an entrepreneur. Market analysts have come out blazing this past week that they feel Virgin Galactic is a “dark hole” of debt, as SPCE goes deeper into debt. Time will tell, and let us see, but Sir Branson is one of those entrepreneurs who seems to be able to get himself historically, and repeatedly out of these scenarios making money. Overall, what people or the market sees as “bad,” he is able to create value and make it “come good”, most of the time! 

  • Berger Paints Jamaica Limited (JSE: BRG) gets a new CFO in the building! Berger Paints Jamaica appointed Mr. Carlinton Montgomery to the role of Chief Financial Officer, effective December 28, 2021, and additionally to the capacity of Company Secretary, January 10, 2022. It is not unusual to see a dual role at a public company like this, that is, performing, CFO/ Company Secretary, but we would say it is not typical either. The bigger takeaway here is, since ANSA McAL Group of Companies took Berger Paints Jamaica over with ANSA Coatings owning approximately 54% of the Company, the net profits just have not gotten back to where they were pre-takeover… The Jamaican shareholders who were adamant to stick it out, Sagicor pooled equity fund, Ideal Group of Companies, and other, minority shareholders, from time to time, must be re-thinking their decision. 

Sometimes, gaining an exit is better than feeling right when investing. The opportunity cost of holding Berger Paints Jamaica, given the performance of specific JSE blue chip stocks and/or U.S. stocks during the same holding period, has been brutal

  • Honey Bun 1982 Limited (JSE: HONBUN) significant trading activity in issued share capital of the Company continues into 2022. A Director sold a total of 3 million shares on January 6, 2022. You would recall, we spoke to a large trade recently before this of a comparable size as well by a director. HONBUN have advised the Stock Exchange that it was Director, Mrs. Michelle Chong with her name disclosed in the release, and then they revised this release to state only the word, Director in the trade before this one. In a recent newsletter and our weekly ItsMoneyMark Earnings Report, we spoke to a new entrant into HONBUN’s top 10 list, Cal’s Manufacturing. While we cannot confirm, but do not be surprised, if Cal’s Manufacturing continues to build a position on the top 10 list. Let us see the result when next HONBUN publishes their Quarterly results so we can see an updated top 10 list (this would be for the March 31, 2022, Quarter, given the trade occurred in January 2022). 
  • The new Jamaica Stock Exchange (JSE: JSE) website is here! It has come with more positive reviews than negative reviews to date, from looking at a snapshot of social media commentary. There were a few attempts to launch before, seemingly one primary go at it by the JSE in December 2021, that didn’t go too well, plus some maintenance days, that drew criticism from stakeholders who visit the JSE website/ newsroom multiple times throughout their day… but, in the end the JSE as it always does, got it right in January 2022, to kick off the New Year… Based on the new site, which is “overdue”, it’s a good look! 

What do we like so far? We specifically are enjoying 2 things on the re-vamped JSE site, (1) Corporate actions by Companies are posted like “tiles” so a bit easier to read and click on, (2) Our favourite part is the easier “search” part on the home page for the listings. Its quicker to get to now and identifies the exact security you want to find and then you simply click on it. One of the issues with the previous site, was that it may take you to a name that was similar or to irrelevant information and not current information. This new search that shows you the specific security has fixed that. Also, the secondary page, allows you to much easier access all the traded security information quicker and seems to have additional information.

The aesthetics and the mobile phone friendly issues still need work but the key uses of the JSE site have been improved as most stakeholders really are using it for the above 2 mentioned purposes with multi-visits daily to the site in our opinion. 

  • The Ford Motor Co (NYSE: F), rally continues with Ford’s market capitalization cruising by US$ 100 Billion for the first time ever. Do you remember when everyone wrote Ford off

Ford is not only now trading at a market value of over US$ 100 Billion, but last 12-month gains are      + 146%, currently trading at US$ 25/ share and change. What is driving all of this? Ford + turnaround plan as outlined by Ford CEO, Jim Farley clearly seems to be working… Farley took over in October 2020, and if market value reflects performance, then Farley is off to a fast start at the helm at Ford. Farley’s push to increase the electric vehicle production has been well received by stakeholders and the market, especially with an upcoming electric version of the F-150… Ford’s current best seller. 

Tesla Inc market value is US$ 1 Trillion plus; depending on your perception of Tesla Inc valuation, there is US$ 900 Billion of “gap value” between Ford & Tesla at today’s market cap values

Have an amazing 2022, stay safe and don’t forget to invest!
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