July 7, 2021 Sign Up

By Overheard on Wall Street

"When you focus all of your energy in one direction for an uncommonly long period of time, you develop talent."

Good morning! Yesterday, Amazon stock soared (+5%) after Andy Jassy officially took over as CEO of Amazon, ending a 27-year run of Jeff Bezos at the helm. Chinese stocks tanked, as we predicted yesterday, with Didi leading the way with a 20% fall, after the country’s regulators began a security review of the company. Other Chinese tech names, Kanzhun (-16%), Baidu (-5%), Tencent (-3%) and Alibaba (-3%) also fell on the news.

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1. Story of the Day: Subway Gets a Makeover

Subway is getting a makeover on July 13 after having literally the same menu since its existence. It will offer a dozen new or improved ingredients, as well ten revamped or original sandwiches, upgraded protein offerings and will bring back its rotisserie chicken. It’s also adding smashed avocado, BelGioioso’s fresh mozzarella and a parmesan vinaigrette to its ingredient lineup. 

The company has struggled for years even before founder Fred DeLuca's death in 2015. The chain boomed in the 2008 crisis with the success of its $5 footlong deal. Since then, new rivals such as Chipotle and Potbelly have cannibalized its customers. Gone are the days when Jared Fogle lost 245 pounds in one year on the "subway diet." The chain is no longer considered "healthy" and people have been crying for food innovation for years.

One menu item that is not changing is the tuna, which has recently been subject of a New York Times investigation that the "thing" subway serves isn't actually tuna. Subway is sticking by its Tuna – Trevor Haynes (Head of North America division) said: “We love our tuna. It is nothing but 100% tuna."  (Lol OK we believe you)

Short Squeez Takeaway: Subway stores have stagnated for years and really look like the saddest looking restaurants in Manhattan. It's high time the chain got a makeover. Maybe make the stores a little nicer too so people feel like going in?

Free Sandwiches: On July 13, Subway will give up to 1 million sandwiches for free from 10am to noon (local time) so make sure to mark your calendars for the big event. You're welcome.

2. Markets Rundown

• Stocks ended mostly lower to kick off a holiday-shortened week, though the Nasdaq rose slightly to its 21st record close of 2021

Movers & Shakers

• (+) Newegg Commerce ($NEGG) +42% after the company's Shuffle popular product drawing event had four models of Nvidia's hard to get GeForce RTX GPUs available.
• (+) Morrison Supermarkets ($MRWSY) +11% after a takeover battle as two new bidders entered the fray.
• (–) Didi Global ($DIDI) -20% after China shutdown downloads of the app while it conducts a cybersecurity review of the company.

3. Top Reads

4. Book of the Day: Upside: Profiting from the Profound Demographic Shifts Ahead

The next generational shift is coming and it will have profound affects across the economy.

Demographics not only define who we are and where we live but for those who can read beyond the raw numbers, they open up hidden business opportunities and investment ideas right in front of our noses.

A demographer, Kenneth Gronbach, has sorted through reams of data to show how the different generations have impacted and will continue to impact markets and economies.

Upside will help you uncover promising trends, spot the potential for profits and discover hidden business opportunities you would not have found otherwise.

5. Daily Visual: Marvel's Meteoric Rise to Become the Biggest Movie Franchise

Source: ChartrDaily

6.  Daily Acumen: Margin Trading

Trading on margin means that you’re basically borrowing money from your broker like Robinhood to buy more stock or crypto.

Say you have $1,000 but you want to buy $10,000 worth of Google stock. You can borrow the $9,000 that you don’t have from your broker at a certain interest rate (usually anywhere from 2% - 9% per year).

After buying the $10,000 worth of Google stock, the share price drops by 10%. Your $10,000 is now worth $9,000.

At this time, because you were so highly leveraged, you would receive a margin call from your broker.

A margin call is when a broker asks you to deposit more cash into your account to get to a certain maintenance margin requirement (usually 25% but differs by brokerage).

The 25% maintenance margin requirement means that if your portfolio is now worth $9,000, you need to have $2,250 in equity (money you invested yourself).

If you’re unable to add cash to your account, the broker will sell all your stock to recover the $9,000 they lent you.

In this situation, being highly leveraged, wiped out 100% of your initial $1,000 investment from a 10% drop in Google stock.

For most investors, not using leverage is the right approach. If you are going to borrow on margin, make sure to use a broker with a low interest rate and don’t borrow more than 10-20% of your portfolio.

7. Memes of the Day

via: @noneequitypartner Instagram

via: @mba_ish Instagram

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