Market Morning: Xi Fears Debt, WeWork Parachutes, No CBD Coke, Hexo Collapse

Stock Market Roundup

Xi Fears Debt Overload, Hires “Experts”

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Will “financial experts” help China tackle its increasingly severe public debt problems? That’s what Chinese President Xi Jinping thinks, or at least hopes, by putting 12 former executives at state-run institutions across the country in charge of handling the problem. Most of the experts are central bankers of one sort or another, which specialize in different ways of printing money but aren’t known to be frugal. China’s debt to GDP ratio has ballooned to 50.5%, double the pre financial crisis era. Chinese government deficit spending reached records last year at 4.5% of GDP. Meanwhile, the balance sheet of China’s central bank, the People’s Bank of China, has been steady since the middle of 2018. China also has some of the highest interest rates in the developed world, with an interbank rate of about 4.5%.

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Can the Nasdaq Stay Above 9,000?

The Nasdaq Composite (NASDAQ:QQQ) has broken the 9,000 level for the first time ever, essentially going without any sort of correction for nearly a month now. Aside from Friday’s tiny move down of 0.17%, tech stocks were up for 10 straight days, the longest daily streak since July 2013. All told, tech is up 36% in 2019, unless we see some sort of major crash over the next two days. Trading volume is especially low in the inter-holiday period, suggesting that perhaps retail traders are dominating the price moves higher. Watch out for a correction as 2020 begins, just to take the edge off the bullish sentiment generated by the move above the psychological 9,000 handle.

WeWork Golden Parachutes Details in FT

WeWork’s, the world’s largest and heaviest cash-bleeding subletter, had its golden parachutes put in place when Softbank (OTCQB:SFTBY) originally took over the firm after its IPO failed to gain any traction. Included in the packages were $17 million worth of severance payments if any top executives were fired according to the Financial Times. This doesn’t include WeWork cofounder Adam Neumann who got a $1.6 billion exit package, which we now know includes revisions that could continue to earn Neumann hundreds of millions on top of that.

Volkswagen Moves to Up EV Target

Volkswagen (OTCQB:VWAGY) is making moves to increase its target for electric vehicle production by 2025. It aims to produce 1 million electric cars by 2023, two years than earlier planned. Though, people will have to buy them for Europe’s biggest carmaker to make any more. Volkswagen is increasing its spending on electric and hybrid vehicles to about $37 billion. Volkswagen. The company had a steady 2019, the stock not really moving much on net since the 2015 diesel emissions scandal. There are concerns though about the slowdown of the automotive market, especially in China, and what effects the ongoing trade war between the United States and China will have on vehicle demand.

Coca Cola Not Moving Into CBD

If you wanted CBD Coke, you’ll probably have to wait, or add your own extracts into your soft drinks manually. Coca Cola (NYSE:KO) will not be infusing any of its drinks with CBD, this announcement made to counter a viral video suggesting that a CBD drink was soon to be released in Canada. “These rumors are untrue,“ Coca-Cola said in an email to Bloomberg. “As we have stated many times, we have no plans to enter the CBD market.” The lack of enthusiasm for entering the cannabinoid market may have to do with the FDA’s unfriendly stance toward using CBD as a food additive, a practice that some FDA officials have hinted is illegal, and Coke does not want to be on the wrong side of FDA regulation.

Hexo Jumps On US Exchanges After Dilution Collapse

Hexo Corp. (NYSE:HEXO), short on cash, decided to dilute its stock float to raise some much needed funds, but its shareholders are not very happy about it. The cannabis stock collapsed 18% on Thursday, though had rebounded about 4.5% on US exchanges, with Canadian stock markets closed for Boxing Day. Hexo sold 14.9 million shares at $1.67 for the purpose of working capital and general corporate purposes including research and development. Bureaucratic red tape has severely restricted the legal cannabis market in both the United States and Canada, keeping demand in the black market. Hexo showed losses that have been similar across the entire cannabis complex. Revenue still doubled, but the company was netting less per gram than it was last quarter.

 

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