02Apr10:57 amEST

Better to Be Luckin Than Good

The implosion of shares in the Beijing, China-based Luckin Coffee this morning, down 70-80% as I write this, after the COO apparently fabricated jaw-dropping sales regarding the firm's growth is a good reminder that buying and holding China firms carries additional risk.

While it is certainly true that we have seen corporate scandals here in America over the years, with Enron coming to mind, it is also true that our corporate governance thresholds are generally much higher than what we are seeing in China. 

LK's magnificent momentum run in 2019 seemingly compelled many to declare it a "can't-miss" name to buy and hold. However, the fallout from that misguided view today serves as a reminder to tighten back up the process when the tide goes out.

In other words, names like LK can thrive when the party is alive and well during the bull run. But once the tide turns you can literally have rather abrupt blow-ups and you had better think with a defensive bias first and foremost. 

As for the market right here, some Trump tweets about coordinating less oil supply with Russia and the Saudis, plus a Fed head interview on CNBC seem to be lifting stocks after a mixed open. That said, despite pops in oil and stocks like OXY, I remain skeptical of rallies for now a far as growth stocks are concerned.  Case in point: SHOP and ZM are actually being sold off here, and the problem spots for the market like cruise lines like CCL remain heavy. 

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