Preview of the week - Should we GRAB this time?

Public Holidays

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

Economic Calendar (11Nov24)

Notable Highlights

• Consumer Price Index (CPI) should be the most watched macro news for the coming week. CPI is typically the indicator used to capture inflation. We are expecting CPI YoY to be 2.4%. This should bring some volatility to the market as this will form of Fed’s considerations coming to the next interest rate adjustment.

• PPI shows the inflationary pressures that affects producers. If this figure goes up, there is a good chance that the producers would pass on the inflation they faced onto the consumers.

• Core Retail Sales and Retail Sales figures will be released in the coming week. This is a good indication on consumer demand.

• 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.

The macro component will play a bigger role in the market’s movement in the coming week.

Earnings Calendar (11Nov24)

r/EarningsWhisper - The Most Anticipated Earnings Releases for the Week of November 11, 2024

There are a few earnings of interest namely Sea Limited, Grab, Cisco, Disney, Alibaba and Monday.

Let us look at GRAB.

Observations:

• Revenue grew from $469M (2020) to $2,359M (2023).

• The gross profit grew from a loss of $2,165M (2019) to $860M (2023).

• Operating profit remained at a loss though the loss has improved from -$2,924M (2019) to -$387M (2023).

• The business may break even with the current trend.

Technical Analysis is recommending a “Strong Buy”.

Analysts sentiment recommends a “Strong Buy” with a price target of $4.730, implying an upside of 11.82%.

The stock price rose 29.36% from a year ago.

Recent news about GRAB (summary by ChatGPT)

Grab, the Southeast Asian superapp, has been in the spotlight recently for a series of updates and strategic moves in its operations across the region. Among the recent developments, Grab is preparing to release its Q3 2024 financial results on November 12, highlighting its ongoing performance in sectors like ride-hailing, food delivery, and financial services across eight countries. This release is highly anticipated, as it will give investors and analysts insights into how the company is faring amid competitive pressures and economic challenges across Southeast Asia​ (Source: Grab & GlobeNewswire)In terms of business expansion, Grab continues to emphasize digital financial services and environmental initiatives. Recently, it partnered with the recycling startup Klean to launch smart recycling machines that allow users to exchange plastic food packaging for GrabFood vouchers in Malaysia. This initiative aligns with Grab's triple bottom line approach, focusing on economic empowerment, social impact, and environmental sustainability​ (Source: Grab)Further, Grab Ventures, the company's startup accelerator program, showcased its latest batch of startups at the Tech in Asia Jakarta Conference. This move underlines Grab’s support for innovation within the region, as it provides new ventures with resources to scale within the superapp ecosystem.

For the coming earnings, the market forecast is -0.005 and $695.98M for the EPS and revenue respectively.

Based on the above, I prefer to monitor the business for a while more.

Market Outlook of S&P500 - 11Nov24

Observations:

• The MACD indicator is on an uptrend.

• 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.

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

The market went on a run following Trump’s victory in the Presidential election.

All 20 indicators point to a “Buy” rating (using daily intervals).

Note that there are 2 indicators showing “overbought”. Will there be a retracement in the coming days?

The most recent candlestick patterns are pointing to a downward pattern.

For the coming week, the S&P500 could retrace with the earnings providing some volatility.

News and my thoughts from last week (11Nov24)

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• Spending within our means is basic prudence. It's not just about what is accomplished but how it is managed.

• What we need is a realistic mix of news so that we can best navigate and take advantage of the different opportunities presented.

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The average American household spends $270 a week on Groceries - X user Visual Capitalist

• Supply chain has always benefited from global crisis.

• Coming to first principal, we must be ready to change on my when a different set of key information is presented. Thank you The All in Podcast and Chamath

• Container ships continue to line up outside Canada’s busiest import gateway as carriers wait for a lockout of union longshore employees to end. - FreightWaves

• The mortgage rate has risen by nearly 1% since September, even after two Federal Reserve cuts to its benchmark interest rate totalling 0.75%, including a 25 basis point cut announced Thursday. - CNBC

• The Biden administration is planning to rush the last of over $6 billion remaining in Ukraine security assistance out the door by Inauguration Day, per POLITICO

• the loudest does not always represent the majority.

• Chevron is embarking on a cost reduction initiative, targeting $2bn–3bn in structural cost savings by the end of 2026. - Yahoo Finance

From X user The Kobeissi Letter

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US personal interest payments hit $556 BILLION in September, the second-largest in history. Since 2022, Americans' interest costs have DOUBLED. Personal interest as a percentage of disposable personal income is now at 2.5%, near the highest since the 2008 Financial Crisis. This metric is also materially higher than the 2.0% seen in the 1970s when interest rates were almost twice as much as the current 4.75%-5.00% range. All while the total household debt sits at a record $17.8 TRILLION. Consumers are drowning in interest expense.

Is this sustainable? When will the floor give way?

SUMMARY OF FED DECISION (11/7/24): 1. Fed cuts interest rates by 25 bps in 2nd cut of 2024 2. Vote for 25 basis point rate cut was unanimous 3. Fed says risks to goals remain "roughly in balance" 4. Labor market conditions have "generally eased" 5. Fed removes "gaining confidence" on inflation moving to 2% 6. Fed will continue to reduce its balance sheet We expect another 25 basis point rate cut in December.

$10T worth of treasuries would need to be refinanced by 2025. Unless the government intends to inflate their way out of the debt, what options do they have despite the stubborn inflation seen in recent core PCE figure? Between the rock and a hard place?

My Investing Muse (11Nov24)

Layoffs & Closure news

• Stellantis to lay off 400 workers at Detroit parts facility - Reuters

• Boeing to repay furloughed staff, proceed with job cuts - Reuters

• THE head of HSBC Holdings’s new global wholesale banking division said the lender will seek to wrap up an ongoing restructuring “very quickly” and could announce the first round of job cuts within weeks. - Business Times

• Sharan Hegde, the influential financial content creator with over 2.7 million Instagram followers, has announced the layoff of 15 per cent of his workforce. - LiveMint

• KPMG to Lay Off 4% of U.S. Audit Workforce to Counter Fewer Voluntary Exits - WSJ

• $5B petrochemical complex ceases operation in southern Vietnam - VN Express

• SPH Media cuts 10% of tech employees in restructuring move in bid to stay sustainable This comes amid a division-wide exercise as the group adjusts the scope and size of several teams across tech - Business Times

• TGI Fridays operator files for bankruptcy amid financial woes - Reuters

The US economy shed 46,000 manufacturing jobs in October, the biggest drop since April 2020. Manufacturing jobs have declined in 4 out of the last 5 months by a total of 88,000. In effect, manufacturing payrolls reached their lowest level since July 2022 and are in a clear downtrend. This comes as total private jobs plummeted by 28,000, the most since December 2020. Interestingly, government jobs have been rising and are now up 40,000 over the same timeframe. Job market data continues to weaken. - X user The Kobeissi Letter

This should lead to more trade imbalance. Is this the bottom of will this get worse for the manufacturing sector? The secondary markets affected would involve the supply chain, energy and employment that support the ecosystem.

Layoffs Summary from ChatGPT:

In early November 2024, layoffs continued across major industries in the U.S. as companies responded to economic pressures, AI-driven automation, and sector-specific challenges.Tech, automotive, and retail were hit hardest. General Motors (GM) announced layoffs at its Fairfax Assembly plant in Kansas, cutting 1,695 jobs as it adjusts production. The retail sector also saw significant reductions, with LL Flooring filing for bankruptcy and planning to lay off around 2,000 employees due to store closures. Meanwhile, in the tech industry, Splunk, which focuses on data analytics, let go of 560 employees, restructuring amid shifts in demand.Workforce downsizing also extended to telecommunications, with companies like Verizon implementing voluntary separation programs that led to thousands of employees leaving. This trend reflects a broader movement as companies seek efficiencies through voluntary separations rather than traditional layoffs, especially where demand for certain roles has decreased due to automation​.These reductions are part of a broader pattern expected to continue into 2024, as sectors like construction, software, and finance anticipate further staff reductions. The increasing adoption of AI in workplaces also continues to influence downsizing decisions, particularly for roles that are becoming redundant due to automation​

Layoff & closure news continued into the week.

Do we have a Commercial Real Estate crisis on hand?

The delinquency rate on commercial mortgage-backed securities (CMBS) for offices spiked to 9.4% in October, the highest in 11 years. The delinquency rate of office CMBS loans has now risen by 5 TIMES over the last 2 years. Delinquencies are officially rising at a pace only seen after the 2008 Financial Crisis. This puts the office CMBS delinquency rate on track to surpass an all-time high of 10.3% seen in July 2012. Meanwhile, the overall US CMBS delinquency rate rose to 6.0%, the most since the 2020 pandemic. The commercial real estate crisis is real. X user The Kobeissi Letter

Can the wheels come off the CMBS soon? This should be owned by current administration.

Other News:

Office CMBS Delinquency Rate Spikes to 9.4%, Highest Since Worst Months after the Financial Crisis - WolfStreetThe office delinquency rate reached 9.37%, up from 8.36% in September and 5.75% a year ago. Who will take the hit? - ConnectCREBanks face growing risk as double defaults on commercial loans mount - FT

Commercial real estate maturity wall $950B in 2024, peaks in 2027 (Source: S&P Global article). More mortgages are expected to mature in the coming months and refinancing would imply costs increase at the (recently) heightened interest rates.

Fortune’s article above has reported that we are expecting $1.5 trillion of commercial real estate debt is due in 2025, with challenges expected for refinancing.

There could be spiraling effects that spread from real estate to banking, construction, materials, retail (for shops supporting the vicinity) and the local state government. Banks have varying exposure to this. Will this lead to more banking volatility? This is something that we should watch.

My final thoughts

I am relieved with the recent US election results. I am more thankful that there are no chaos and a peaceful transition looks to happen.

USA has incurred over $35.8 trillion worth of debt. Given the post COVID spending, I am not sure if America is able to repay the debt. $10 trillion worth of treasuries would require refinancing soon. Many businesses are holding out for lower interest rates. However, some could face challenging returns given the current climate. This could be one of the motivations in reducing the interest rate.

Following the election, there is much work to be done. There would be lots of activities that include mass deportation, securing of the border, cryptocurrency focus and many more developments. This should translate into various ways of creating opportunities and revenue for the market.

The market has surged to new highs. Following the euphoria, we can expect the market to “settle down” and should expect some retracement in the coming days. We need to give the new administration time to plan, implement and improve. It is unlikely that the market would have the patience to “wait” that long for structural and policy solutions to be put in place.

Price needs to be supported by value. This largely explain the market swinging from overbought to oversold. With the attention turning to earnings, this could be one of the key players bringing volatility with macro data stirring the pot of uncertainty.

Let us research before investing. With due diligence, we are able to anchor our confidence when the market moves in unexpected directions. Let us consider focusing on our circle of competence and attack with the favorable margin of safety.

@TigerStars

$Grab Holdings(GRAB)$

$Alibaba(BABA)$

$.SPX(.SPX)$