Preview of the week starting 28Oct24 - have you consider SiriusXM?

Public Holidays

There are no public holidays in Singapore, Hong Kong, America, or Singapore in the coming week.

Economic Calendar (28Oct24)

Notable Highlights

• The most important macro data of the coming week would be the core PCE price index. This is the preferred indicator used by the Federal Reserve coming to inflation. If the figure remains heightened, may be required to review their coming interest rate decisions.

• There are a few important job-related data that will be released, starting with JOLTS job openings which reported 8.04 million jobs in the previous report. The other important job-related data will include the ADP non-farm employment change, average hour earnings, nonfarm payrolls for October, and unemployment rates. These figures would be part of the consideration by the Federal Reserve coming to the next interest rate decision.

• Manufacturing PMI for China should demand some of our attention. If the index falls under 50, this implies a contraction in manufacturing. While this has a direct implication for China, this would also imply the strength of global demand.

• Chicago PMI, ISM manufacturing PMI, ISM manufacturing prices and S&P Global US manufacturing PMI would provide good insights into the manufacturing sector and the inflation they face in the prices.

• CB consumer confidence will be released. A number under 100 implies a less than positive sentiment towards the economy. Sentiment can drive the market more than data.

• Initial jobless claims will be announced. The Federal Reserve uses this as one of the key macro data references as it balances inflation and employment in the economy.

• Crude Oil Inventories can be seen as forward indicators of market demand and consumption. If the trend of excess inventories continues, demand erosion can lead to reduced production & weakening consumer spending.

Earnings Calendar (28Oct24)

r/EarningsWhisper - The Most Anticipated Earnings Releases for the Week of October 28, 2024

There are a few earnings of interest in the coming week namely, Alphabet, Microsoft, Meta, Apple, Amazon, ExxonMobil, AMD, Intel and SiriusXM.

This is one stock that intrigues me after Buffett’s Berkshire kept adding ownership. Let us look at Sirius XM Holdings for this week.

Article dated 23 Oct 2024

Who is Sirius? The below is taken from QuickFS:

Let us look at Sirius’ recent performances

Observations:

• Revenue grew from $4.1 billion in 2014 to $8.9 billion in 2023.

• The operating profit grew from $1.1 billion in 2014 to $2 billion in 2023.

• The earnings per share (EPS) grew from $0.08 in 2014 to $0.32 in 2023.

• Revenue grew 217% whereas EPS grew about 400%. Thus, there is improving profitability and good cost management.

• The 10-year median margins for gross profit and free cash flow (FCF) stands at 50.4% and 22.7%.

• The P/E ratio of the company is 7.0 – making this an attractive valuation.

Both Technical Analysis and Analysts Sentiment ratings are “Neutral”. The price target of Analysts is $29.93 and the upside is about 13.38%.

The stock price fell 37.59% over the last 1 year.

For the coming earnings, the forecast for EPS and revenue are 0.0776 and $2.19B respectively.

This is a stock to watch and deserves some deep-diving.

Market Outlook of S&P500 -28Oct24

Observations:

• The MACD indicator has started a downtrend following a top crossover.

• Moving Averages (MA). Both the MA50 line and the MA200 line are on an uptrend. Both MA50 and MA200 lines are below the last candle. Thus, it could be read as bullish for both the mid and the long term.

• The 3 Exponential Moving Averages (EMA) lines are on an uptrend and are starting to show signs of converging. This demonstrates a potential change in trend.

• Chaikin’s Monetary flow (CMF) shows an uptrend. This implies more buying momentum than selling. The CMF seems to be moving sideways - applying similar momentum by both buyers and sellers.

From investing dot com, the daily technical indicators are showing a “STRONG BUY” rating.

Investing dot com has a “STRONG BUY” rating with 15 indicators with a “BUY” rating and 4 with a “SELL” rating.

There are a mix of bullish and bearish candlesticks with more recent candlesticks being bearish.

From the above, there is a chance that the market can be going on a downtrend in the coming days.

News and my thoughts from last week (28Oct24)

• Should we treat this as a concern for Bank of America and the bigger banking sector after Berkshire dumps $10 Billion worth of shares? - DaiyHODL

• Credit ratings agency Moody's revised France's outlook to "negative" from "stable" on Friday, over mounting uncertainty that the country will be able to curb widening budget deficits, but maintained its rating on French debt at Aa2. - Reuters

• In the first nine months of this year, 60 non-standard products tied to LGFVs have defaulted or warned of repayment risks, up 20% from the same period last year, according to data compiled by Financial China Information & Technology. - Business Times

• AWS CEO on AI & Energy: "If you think about these generative AI models... estimates suggest that in two to three models' time, an individual model may require somewhere between one to 5GW of power, which is equivalent to powering a small to medium, or even a large city" - X user The Transcript

  Will energy beat the bottleneck in the future? Will they take from the poor?

• Cargo-ship owner to pay US $102 million over Baltimore bridge collapse, DOJ says - Reuters

  Do we have any estimates for business interruption insurance claims related to this accident?

• Chairman and CEO of Marathon Asset Management said a ‘no recession’ scenario unlocks new opportunities, including CRE and asset-based financing, for private credit. - WSJ

  Isn't this good news?

This is not Apple, Tesla or even Nvidia. This are interest payments on the US national debt of $36 trillion. We now pay nearly $1.2 trillion per year in interest on the debt, and about 23% of all taxes, tariffs and fees collected by the US govt goes to paying interest on the debt. -X user Wall Street Silver

• An outer dome was installed in a small modular Chinese nuclear reactor. The Changjiang ACP100 reactor - will be capable of producing 1 billion kilowatt-hours of electricity annually, enough to meet the needs of 526,000 households. - World Nuclear News

• The market swings from oversold to overbought. Once fear enters the market, the panic and volatility are not incremental. Sustained fear is crippling. The impact would be mental.

• Weaker-than-expected oil consumption in China and rising electric vehicle sales will continue to weigh on the world’s oil demand growth going forward. - Oil Price

• Spanish energy giant Repsol has decided to pause green hydrogen development projects in its home country - Oil Price

The trailing 12-month P/E ratio for $SPX of 27.4 is above the 5-year average (23.9) and above the 10-year average (21.8). - FactSet

Is the market overvalued?

From X user The Kobeissi Letter

For the first time since August 8th, the average interest rate on a 30-year mortgage is back above 7%. Since the Fed cut rates, mortgage rates have risen over 50 BASIS POINTS. Such extreme moves have rarely ever occurred during interest rate-cutting cycles.

The Fed has cut rates by 50 basis points and now the advantage interest rate for a 30-year mortgage is higher, above 7%. What is the market telling us? A surge in demand for homes?

You can't make this up: Total US debt has jumped by $473 BILLION over the last 3 weeks alone, to a record $35.8 trillion. This means the US has taken on $1,450 of debt for EVERY American over the last 3 weeks alone. It also means that the US now holds a record $103,700 of debt for every American. In 2024, the US paid a total of $1.16 trillion of interest on this debt in its first year above the $1 trillion mark. In interest alone, the US paid $3,360 for every American during fiscal year 2024. What is the long-term plan here?

Is there the will and intent to repay? Money printing is a way but could not be the only way. Fiscal responsibility is needed especially when USD is the global reserve currency.

All the young citizens need to band together to contain this. Spending money from the future and leaving a burden of debt is fiscal mismanagement. This is not a party issue. This is an American issue. There is still time to address this.

US net interest costs as a share of GDP are set to reach 6.3% by 2054, the highest on record. This will be more than DOUBLE the 3.1% projected for the Fiscal Year 2024. To put this into perspective, interest costs will nearly triple the government's average historical spending on R&D, infrastructure, and education COMBINED. Interest payments have reached $1.1 trillion over the last 12 months, exceeding defence spending for the first time. At the current pace, interest will soon be the largest expense in the Federal budget, surpassing Social Security. We are on an unsustainable fiscal path.

It is not far away but it can be worse too. According to Milton Friedman, it is the government that drives the inflation.

My Investing Muse (28Oct24)

Layoffs & Closure news

• Southern Glazer's Wine & Spirits, the largest wine distributor in the US, has reportedly laid off hundreds of employees across the country. These reports are unconfirmed. - Wine Searcher

• Intel has submitted in an official document that it plans to reduce staff, laying off 1,300 people spread across four offices in the U.S. state of Oregon. - The Hindu

• Multiple teams at Meta were hit by layoffs on Wednesday, the company confirmed in a statement to TechCrunch, noting these changes were made to reallocate resources within the company. - TechCrunch

• LSEG considers cutting 200 jobs globally, Bloomberg News reports

• Broad Institute of MIT and Harvard Lays Off 87 Workers in Restructuring Effort - The Crimson

• Deloitte has cut about 250 employees in the UK who were deemed to be underperforming, marking at least the third time in the past 13 months that the Big Four accounting and consulting firm has axed staff. - FT

Layoff & closure news continued into the week.

Market Abnormality

This post by X user Global Market Investor got me thinking. What used to move in contrary has been moving otherwise. What could be happening here?

The market can be bullish and show bearish signs. What if all the signs are correct and it is just a matter of timeframe? What if the fundamentals are weakening against the background of a record market? Is this about bulls having a headstart and the bears catching up?

Market peaks and contractions are just part of the cycle. Every dog, bull and bear will have its day.

Druckenmiller is shorting U.S. Treasuries with a record setting 20% of his portfolio. He knows what's about to happen. Interest rates could double from here. - X user Financelot

Druckenmiller is taking the other side of this bet, that he is shorting U.S. Treasury bonds. Bets against U.S. government bonds now account for 15% to 20% of Druckenmiller's portfolio.

Should we consider some hedging?

My final thoughts

The US election is going to bring some volatility to the market. The outlook of the earnings season could be more vital than the actual earnings performance.

Excluding the "Magnificent 7" companies, the other 493 $SPX companies are reporting earnings growth of 0.1% for Q3 - X user FactSet

Some of the top US companies - the S&P493 report earnings growth of 0.1% for Q3/2024 - exclude the Magnificent 7. What does this say about both the American and the global economy?

S&P 500 represents some of the top American companies in the world. Most of them are global companies, generating revenue globally. With the overweight of the magnificent 7, this can skew the performance of the index. S&P 500 represents more than the American economy.

While foreign revenues made up just 28% of the S&P 500’s revenues in 2023, some sectors are more exposed to foreign sales than others. Source is from Visual Capitalist post in 2023.

The macro data like PCE is likely to rattle the market and the Fed’s next interest rate decision. More volatility is expected together with the war in Middle East, Ukraine and other Black Swan events. I recommend caution and consider some hedging for the coming days.

@TigerStars

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