Public Holidays
There are no public holidays for China, Hong Kong & the USA in the coming week.
Singapore is closed on 13 Nov 2023 as we celebrate Diwali.
Economic Calendar (13 Nov 2023)
Notable Highlights
CPI data will be shared this coming week. This will be the most crucial news this week for the market. A sticky inflation may lead the Federal Reserve to revisit the possibility of another rate hike. Thus, the market may be volatile in lieu of this news.
PPI. This is the Producer Price Index (PPI) that reflects inflation “received” by producers and manufacturers. This is the leading indicator before the CPI and can be used to predict the trend of inflation in the country.
Philadelphia Fed Manufacturing Index (Nov) reveals the manufacturing activities. A decline of 11.0% is expected.
Initial Jobless Claims will be released in the coming week. This is another important data point for the Fed’s coming interest rate decision as they seek to balance inflation and unemployment. Together with the Unemployment rate, this will be part of the Fed’s consideration for the coming interest rate. decision.
Crude Oil Inventories can be seen as forward indicators of market demand and consumption. If the trend of excess inventories continues, this implies demand erosion that can lead to reduced production & weakening consumer spending.
Earnings Calendar (13 Nov 2023) -
These are the earnings for the coming week starting 13 Nov 2023.
Some of the earnings of interests are Tyson, Sea, Monday, CISCO and Alibaba.
Let us look into Sea Limited.
From the 9 years earnings data above, we have the following observations:
Revenue has grown from $161M (2014) to 12,450M (2022). This is an exponential growth.
In terms of operating profit, the company has been making a loss for 9 years though there has been a reduction of losses in recent years. Hopefully, it can become profitable soon.
Gross profit stands at an average of 30.8% from 10-year median margin.
There is concern that Debt/Equity stands at 0.5.
the price has dropped almost 8% from a year ago.
For the coming earnings, the EPS and revenue forecast are 0.1179 and 3.17B respectively. Will Sea Limited be able to continue its current climb from its low?
Market Outlook - 13 Nov 2023
Technical observations of the S&P500 1D chart:
The Stochastic indicator has completed a top crossover and should be starting a downtrend soon.
The MACD indicator is on an uptrend.
Moving Averages (MA). The MA50 line has started a downward trend and the MA200 line is on an uptrend. The last candle is above both the MA 50 line and the MA 200 line. Thus, it could be read as bullish for the long-term and mid-term. As the 2 lines move closer, there is a chance of forming a death cross - typically, a bearish indicator. This could take weeks before this death cross is formed and changes are possible.
Exponential Moving Averages (EMA). All 3 EMA lines are moving upwards and thus, implying an uptrend.
From the 1D technical indicators above, there are a total of 20 (Buy), 0 (Sell) and 0 (Neutral). Investing recommends the “STRONG BUY” recommendation based on the technical indicators above (1D chart for S&P500).
From the data above, the market should continue to rally into the coming week.
News and my thoughts from the last week (13 Nov 2023) - bear rally, layoffs,
This is just a bear market rally warns Morgan Stanley CIO Mike Wilson
“Members should prepare for the possibility of a coastwide strike in October 2024,” the International Longshoremen’s Association (ILA) — the union representing 45,000 East and Gulf Coast dockworkers — warned in a press release on Saturday.
Berkshire has incurred a loss. Personally, $BRK is a better investment than $SPY. What does this imply about the economy? Is this due to the overweight of Apple in the portfolio or a reflection of a wider market performance?
'Scale Economies Shared' SES, coined by Nomad Partners, is a strategy where a company that benefits from 'economies of scale' shares those benefits with its customers, typically by offering lower prices, to gain long-term market share.
FreightWave > Transportation service providers continue to struggle in what has been an extremely competitive environment since Q2 of 2022. Spot rates plummeted in the spring last year from all-time highs, but contract rates fell much more gradually.
BRICS is looking to end dependency on the U.S. dollar by promoting their local currencies for cross-border transactions.
Bloomberg > While the US banking sector is stable, growing vulnerabilities leave at least some institutions under a near-term threat of funding pressure and capital shortfalls, according to Federal Reserve Bank of New York staff.
Business Insider > The EIA report from last month pointed out that the US still imports more oil than it exports. Even though US crude oil production is booming, many US refineries are built to work with "heavy, sour" crude oil.
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The sectors of Utilities, Energy, and IT are expecting better EPS estimates for Q4/2023. How can this be from the recent 4.9% QoQ GDP growth?
Some will fall gradually and some will collapse suddenly.
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CHINA OCTOBER EXPORTS TUMBLE -6.4% Y/Y; EST. -3.3%
CHINA OCTOBER IMPORTS RISE +3.0% Y/Y; EST. -4.8%
CHINA OCTOBER TRADE SURPLUS IS $56.5B; EST. $82.0B
Rivian $RIVN has just released its earnings for the third quarter. Here's the breakdown: Rivian reported third-quarter revenues of $1.34 billion, surpassing the estimates which were set at $1.31 billion. The company's adjusted loss per share stood at $1.19, which is better than the anticipated $1.32 per share. With total vehicle deliveries reaching 15,564, Rivian exceeded the expected number of 14,973 deliveries.
Forbes estimated 191 million credit card users in the USA.
This implies that the card user has added about $251 of debt on average last quarter. With high-interest rates, a cost of living crisis unfolds before our eyes.
Fun is an important part of integrating and humanizing technology.
It will get interesting during field deployment where energy supply chain and sources will be an important factor. Cyber security is the first line of defence. Wars are won in the supply chain and cyberspace.
Debt is a factor in the current climate. The more debts one has, the more risk they have. Debt = Risks
BAYER, the German maker of medicines, seeds and crop chemicals also unveiled plans to remove several layers of management to accelerate decision-making, resulting in a "significant reduction" in the workforce.
Tesla can be deemed expensive according to some metrics. Is Tesla another car company? Tesla to me is an innovation and technology company driving the world towards sustainability with solutions in mobility, energy, AI, robotics and more.
Industrial & Commercial Bank of China Ltd. is suspected of being hacked by the same group that has — just in the past year — also hit Boeing Co., ION Trading UK and the UK’s Royal Mail.
Are our systems secured?
Finance expert points to cautionary signals for US freight demand. Data is used to provide insights. Data can also be used to manipulate narratives. Let us do our due diligence.
My investing muse - real estate & crashing up
Real Estate is an area of concern, namely Commercial Real Estate (CRE).
The commercial real estate CRE remains an area of concern. The value of office properties may continue this downtrend with default hurting various stakeholders. Once the banks are affected, the subsequent waves could hit rapidly.
The high mortgage rate can affect employment when people are forced to stay in their current geography. People are limited in their ability to relocate by the high mortgage offering and the low mortgage they are servicing.
With the housing situation, it can be difficult for people to relocate to take up new jobs - unless the mortgage can be adequately covered. The states can only look internally for manpower to take up the job openings.
Graph from Financial Times
With the interest rate, the work-from-home hybrid is causing a drop in office vacancy. This will also affect neighbouring businesses and the various public services like public transport. With a drop in the demand for public services, the local government can “incur losses” and may re-deploy these “excess” resources. On top of these, the crime rates are a concern for business and tourism.
Crash up
When the interest rate starts to drop, asset inflation is likely to follow, causing a “crash up”. With a lowered interest rate, property can get “more affordable”. Thus, it is possible that the price of assets like property increase from the current due to a surge in demand. This is known as “crash up”. When the price of assets like real estate increases, this should render houses more unaffordable despite the drop in interest rate - causing the market to crash upwards, making assets surge in value and thus enlarging the income gap between asset and non-asset owners.
Conclusion
We are seeing more debt being taken on by households, some businesses and the federal government. The government has a deficit of $1.6 trillion - financed by issuing treasury assets. This does not seem to be sustainable with another $1.5 trillion deficit expected in the coming 6 months. The Federal government will need to “liquidate” a company with a scale of Alphabet (market cap of about $1.67 trillion) in 6 months, a company that took about 19 years to build. What the US government needs to borrow in 6 months is similar to the 13th biggest economy in the World - South Korea with a (2022) GDP of $1.665 trillion.
CNBC news article dated 10 Nov 2023
When the biggest superpower needs to borrow money every few months to fund its deficit, it is a major red flag for me. Moody’s cut the US outlook to a negative last Friday. We can expect this to spill over into the market.
Let us exercise caution.
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