Preview of the market 18Nov24 - is ZIM worth a look?

Public Holidays

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

Economic Calendar (18Nov24)

Notable Highlights

• S&P Global US Manufacturing PMI. The last update came in at 48.5, indicating a contraction in the manufacturing sector.

• S&P Global Services PMI is expected to expand following a strong previous showing at 55.0.

• Philadelphia Fed Manufacturing Index is a good reflection of the manufacturing sector.

• Existing Home Sales is a good reference for real estate’s health.

• 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 (18Nov24)

There are a few interesting earnings namely Baidu, Walmart, NIO, ZIM, and Lowe’s.

Let us look at ZIM

Who is ZIM integrated Shipping Services?

ZIM Integrated Shipping Services (ZIM) is an Israeli shipping company that offers container shipping, logistics, and other services: 

• Services

  ZIM offers a variety of services, including container shipping, refrigerated cargo, dangerous and hazardous cargo, and inland transport. 

• Fleet

  ZIM is the world's 10th largest container ship operator and the leading Middle Eastern operator. As of May 2023, ZIM operated 139 container ships, with a combined capacity of nearly 600,000 TEUs. 

• Technology

  ZIM offers a real-time monitoring system called ZIMonitor, which provides customers with 24/7 alerts on route deviations, temperature and humidity deviation on their cargo. 

• History

  ZIM was founded in 1945 to transport immigrants and supplies from Europe to Israel. It was state-owned until its privatization in 2004. ZIM has traded on the New York Stock Exchange since 2021.

The above summary is provided by Google Gemini

ZIM’s recent performance

Observations:

• Revenue grew from $2.97B (2017) to $5.16B (2023)

• Operating Profit grew from $136M (2017) to a loss of $2.2B (2023)

• Earnings per Share (EPS) fell from $0.06 (2017) to -$22.42 (2023)

• The 10-year median margin for Free Cash Flow (FCF) is 20.3%

• The 10-year median margin for Gross profit is 9.4%

• The stock has risen 242.5% compared to a year ago.

According to Investing dot com’s technical analysis, the recommendation is “Strong Buy.” For Analysts' Sentiment, the recommendation is “Sell,” with a price target of $17.73 and a downside of 32.07%.

For the coming earnings, the forecast for its EPS and Revenue are $6.95 and $2.39B respectively.

For ZIM, I prefer to be monitoring for now. As a supply chain professional, the supply chain volume can be seen as a prequel to the economy.

Market Outlook of S&P500 - 18Nov24

Observations:

• The MACD indicator is about to complete a top crossover. This implies a potential downtrend coming up.

• 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 but looks to converge soon. This implies a potential change of the current trend.

• 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.

From the 18 indicators, 9 point to a “Buy” rating (using daily intervals) and 9 point to a “Sell” rating. This rendered a “Neutral” rating for the outlook of S&P500.

The last few candlesticks seem to be bullish.

From the above, the S&P500 should continue a downtrend in the coming days.

News and my thoughts from last week (18Nov24)

• If we keep views binary and polarized, society runs the risk of being split by opinions and perspectives. We need to return to days when we can live together despite our differences. Differences do not make one enemy.

• The Pentagon just failed its seventh audit in a row. The nation’s largest government agency is unable to fully account for its budget of over $824 billion. They don’t even know where billions of taxpayers’ money is going. Efficiency is coming - X user America

• What DOGE brings is transparency and accountability. The taxpayers should know how the money is spent, what it is spent on, the benefits of such spending, and who the money goes to. Every government and business needs a DOGE.

• Energy is the next area of concern for the developed and developing countries

• Military conflicts demand courage, technology, strategy, intelligence, tactical execution and leadership for victory. Is there affordable resources with a robust supply chain to match?

• (Bloomberg) - Berkshire Hathaway Inc. bought stock in Domino’s Pizza Inc. and Pool Corp. during the third quarter as Chairman Warren Buffett cut back on some long-held investments. Shares of the two new holdings jumped in late New York trading.

• "The supply chain issue is the biggest challenge the industry is facing," said Subhas Menon, the director general of AAPA. Turnaround times for engine maintenance are at record lengths, with airlines having to cut flights, move parts around and lease stop-gap engines or planes to keep operations ticking. - Reuters

• Now, many of the same people who contributed to the housing market’s inequities, from the builders to the wealthy speculators, have found themselves being forced to sell their prized homes fast. - Business Times

• GM to recall nearly 80,000 vehicles over transmission issues, NHTSA says - Reuters

• Life is about learning, unlearning and self discovery. May you find your next season by understanding who you are, what you have and what you can do.

• With the nation’s student loan debt at $1.6 trillion, borrowers in certain cities have an easier time managing their student loan payments than others. - Fox7Austin

Consumer Credit Delinquencies on the Rise Again - ACA International

• Economist David Rosenberg has said that the stock market is in a "mega-bubble." By Rosenberg's measure, the S&P 500 is at least 25% higher than where fundamentals suggest it should be. X user Unusual Whales

From X user The Kobeissi Letter

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The 30-year Treasury yield has surpassed the Fed Funds rate for the first time since Q4 2022. This comes as the 30-year Treasury yield has risen ~60 basis points over the last 2 months. At the same time, the Fed has cut rates two times, from 5.50% to 4.75%. In previous economic cycles, whenever the yield curve has turned positive a recession in the US occurred within months. However, this indicator can be proven wrong for the first time in history if a soft landing is achieved. Will history repeat itself once again?

Does the market get what they want? Market peak and bottom are part of market cycle. Let's research before investing, spend within our means and do not leverage.

28% of credit card users in the US are still paying off LAST YEAR'S holiday shopping. Average credit card balances are now 6.9% higher than last year and more than 20% higher than 2 years ago. 83% of Americans are expected to purchase gifts during the holiday season this year, spending $925 on average. That’s more than 217 million Americans spending over $201 billion, compared to $184 billion in 2023. Also, 49% of Americans plan to spend money on flights and hotels for the holiday season, spending $2,330 on average. That’s more than 128 million Americans spending nearly $300 billion on these travel costs. Credit card debt is set to skyrocket again.

My Investing Muse (18Nov24)

Layoffs & Closure news

• Marriott starts to Lay Off Corporate Employees which may result in hundreds of employees exiting. The cuts are worldwide and affect “above-property” positions, which refer to people at the corporate level rather than those working in hotels. - Skift

• FuelCell Energy to lay off 13% of workforce to reduce operating costs - Reuters

• US supermajor to lay off nearly 400 workers following $64 billion merger - Upstream online

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What is going on in San Francisco? Layoff news seems relentless. Some of the layoffs are international. Can any advise on new job openings in SF or California? - SF Gate

• Advance Auto Parts, a major supplier of aftermarket replacement parts and accessories, announced plans to close 700 stores by mid-2025, closing 523 corporate-owned stores, 4 distribution centers, and leaving 204 locations. - SF Gate

• San Francisco tech company Forward, once worth $1B, abruptly shuts down. Nearly 200 workers are set to lose their jobs. A 2021 funding round featured several blue-chip Silicon Valley investors and valued Forward at over $1 billion. - SF Gate

• Chegg announced the new layoff round, which will hit 21% of its workforce. Chegg lost more than $212 million from July through September, blaming Google and AI. The power of disruption? - SF Gate

• AMD to lay off 4% of workforce, or about 1,000 employees to gain a stronger foothold in the growing artificial intelligence chip space dominated by Nvidia. How does one gain AI chip space by layoffs?

• In Woodbridge, Virginia, LongHorn Steakhouse takes over an old TGI Fridays. In Watertown, New York, a former Red Lobster is being converted to a Northern Credit Union bank. Chick-fil-A is taking over a shuttered Red Lobster in Naples, Florida. - CNN

• Reuters - 2023 was a brutal year for the journalism industry, with at least 8,000 job cuts in the UK, US and Canada. The tide continued in 2024, with around 1,000 people affected by closures and rounds of redundancies in January alone. - Press Gazette UK

• Meta, IBM, Google, and Microsoft; finance leaders like Goldman Sachs, Citi, and BlackRock; accounting firms like PwC; entertainment behemoths like Pixar and Paramount; and corporate giants like Tesla, Dow, and Nike have all announced layoffs. - Business Insider

• Nissan shares slump after it announces 9,000 job cuts and a plan to slash production - CNN

• CNN staffers 'deeply frustrated' as looming budget cuts, layoffs set to impact struggling network - Fox News

Is Mainstream Media the next facing disruption?

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Lots of articles on how MSNBC's audience has completely collapsed -- disappeared -- once Kamala lost and the got disillusioned, but the full extent is shocking. Their prime-time shows can't even get 75k people watching in the key demo (18-54). Weekend shows don't even get 30k! - X user Glenn Greenwald

Who do they turn to after exiting the legacy media? Is X the next destination? What other options do we have?

The stubborn inflation

CPI rising but “as expected”. Total +2.6% (up from 2.4% last month). Core +3.3%. Shelter coming in HOT at +4.9%, transports still STICKY at +8.2%, but moderating. Services are the stickiest inflation. Salaries & rents always want to “catch up” to goods. Thus hot & sticky! X user - Wasteland Capital

Latest CPI - inflation remains stubborn. Will the Fed continue to pivot?

The market is predicting more interest rate cuts in the coming months. Will the Fed be guided by data? Is the $35.8 trillion debt burdening the economy? Are the $10 trillion treasuries (requiring refinancing in 2025) on the Fed’s mind?

Inflation is stubborn. It will be tough to make the next call as the Fed balances the data from Inflation (PCE), unemployment and GDP.

My final thoughts

With the USA election out of the way, it will be back to business as usual. The current administration remains in control for the next few weeks. President elect Trump is putting together his (somewhat controversial) team. We can expect some challenges and disruptions.

The recent political high will be met with the reality of life and the challenges faced by global economy. China does not represent the global economy but they remain one of the biggest manufacturers of the world.

According to China’s National Bureau of Statistics post, China’s manufacturing has seen a decline since May 2024. Oil can be seen as a forward indicator of market demand.

Some have predicted tough days ahead. I am keeping my eyes on the banking sector, commercial real estate and the situation with debt. It is possible for a market to surge against a backdrop of weakening fundamentals. Let us research before investing.

@TigerStars

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