To The Moon

Public Holidays

There are no public holidays for China, Hong Kong, the USA & Singapore in the coming week.

Economic Calendar (06 Nov 2023)

Notable Highlights

• “Fed Chair Powell speaks” should be the most watched event in the coming week. This is expected to take place on 8 & 10 Nov (Asia timezone). The market would be able to understand more of their consideration and intent for the coming rate hikes. There will be a few important data points about inflation, employment and the economy that would be incorporated as part of their considerations.

• 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 (06 Nov 2023) - Buffett’s Occidental love

I am interested in a few earnings of the coming week namely, Rivian, Occidental and Disney.

Research into Occidental ($OXY)

News extract:

Buffett’s company said in a Securities and Exchange Commission filing late Wednesday that it invested more than $246 million to add to its already massive Occidental stake over the first three days of this week.Berkshire bought nearly 4 million more shares of the Houston-based oil producer to give it more than 228 million shares and control of nearly 26% of Occidental. Buffett has been consistently buying Occidental stock whenever the shares fell below $60 as he built Berkshire’s stake since early last year, but this week he was willing to pay more than $63 for some of these new shares.

Buffett has continued to increase his stake in the company. What could be the factors for his continuous buying?

Observations from 10 years:

• Revenue grew from $20.17B (2013) to $36.63B (2022), a 80% growth over 10 years.

• The 10-year median for Gross Profit is 30.4% and FCF at 12.0%.

• The 10-year CAGR performance of Revenue, FCF and EPS are 6.2%, 13.7% and 8.1% respectively.

• Operating profit grew from $7.22B (2013) to 13.66B (2022).

• The P/E stands at an attractive 8.2.

From a year ago, the stock has dropped 12.68% as the stock fluctuates within a range of 55.51 to 76.11 in the last 52 weeks.

For the coming earnings, the market is expecting 0.8694 and $7.06B for its EPS and revenue respectively. Can Occidental break upwards from its recent “sideway ranging”?

Market Outlook - 06 Nov 2023

Technical observations of the S&P500 1D chart:

• The Stochastic indicator is showing an uptrend.

• 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 the MA 200 line and thus, it could be read as bullish for the long 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). 2 of the 3 EMA lines have converged. When all 3 EMA lines converge, the reversal towards an uptrend would be confirmed. This is expected to take place in the coming days.

From the 1D technical indicators above, there are a total of 17 (Buy), 3 (Sell) and 1 (Neutral). Investing recommends the “STRONG BUY” recommendation based on the technical indicators above (1D chart for S&P500).

From the data above, we can expect the market rally to continue into the coming week.

News and my thoughts from the last week (06 Nov 2023) - layoffs,

• Reuters > Unrealized losses by Bank of America is $131B.

  "Because we're holding them to maturity, we will anticipate that we'll have zero losses over time."

• FactSet > If 2.7% is the actual growth rate for the quarter, it will mark the first quarter of YoY earnings growth reported by the index since Q3 2022. Eight of the eleven sectors are reporting YoY earnings growth.

• Tesla is a great company & could be one of the greatest in our times. We do have "key man risk" & delays in deliverables. Perhaps people are getting too binary - friend or foe.

  Elon has warned about the macro recently & we should brace ourselves.

• Reuters > WeWork had net long-term debt of $2.9 billion as of June end and more than $13 billion in long-term leases, at a time when rising borrowing costs are hurting the commercial real estate sector.

• Contraction in US manufacturing for months. Would we see the consequence soon?

• CNBC > Delta Air Lines is cutting some corporate jobs in an effort to cut costs. Delta didn’t specify how many jobs it is cutting and said they do not affect frontline workers like pilots or flight attendants.

• FreightWave > After its driest October on record, the Panama Canal will severely restrict transit capacity to conserve water. Shipping will feel the effects in the months ahead, with different vessel types facing different fallout.

• USA Today > McDonald's and Chipotle Mexican Grill executives said they will raise their menu prices next year in California to offset the minimum wage increase for fast food workers.

  This is inflationary.

• CNBC > Roughly 10% of companies in the U.S. are considered 'zombie firms' in 2021. In the first 9 months of 2023, 516 companies filed for bankruptcy. Zombie firms are unprofitable businesses that stay afloat by taking on new debt.

Los Angeles has the highest rate of retail crime. It is the fifth consecutive year the city has topped the list compiled by the National Retail Federation. In all retailers lost nearly $80 billion to shoplifters in 2022

• Yahoo Finance > Some stores may be overstating the extent and impact of theft. It’s a useful deflection, camouflaging weak demand, mismanagement and other issues denting business right now. And it forces lawmakers to respond.

My investing muse

Israel

It is about who's making the bigger mistakes and narratives driving the story. For us who are under primarily Western media, we are probably not getting the other narratives. Both sides could bring right and wrong in varying degrees.

Image

If the Russian-Ukraine conflict didn't bring down the UK, perhaps the Israeli-Gaza conflict could. It is not wrong to defend oneself. The perpetrators must be brought to justice. It should be surgical, limiting the collateral damages.

Why does the US have to fund this perpetually when they have obvious needs for their own country and citizens? Is this not a wrong priority? Due diligence is needed to avert money laundering and misappropriation.

Rebuilding U.S. Inventories: Six Critical Systems

Is the supply chain too far for the USA to be a sustainable military force in the Middle East? Can the manufacturers cope? Can the replenishment be timely? Can the USA afford the 2nd war front in Israel? Can the USA manage with a 3rd or more war fronts?

US Debt

CNBC > In a closely watched announcement, the Treasury Department said it will be looking to borrow $776 billion. The Treasury said it expects to borrow $816 billion between January and March. Any chance for the Fed to spend within its means?Business Insider > The US's $33 trillion debt pile is reflecting "unsustainable" fiscal policy, the IMF said. The government has already racked up a $1.5 trillion deficit in the first 11 months of 2023.CNBC > “We are spending like drunken sailors,” billionaire investor Stanley Druckenmiller said on federal government spending

News extract:

The US's $33 trillion debt pile is reflecting "unsustainable" fiscal policy, the IMF said.The government has already racked up a $1.5 trillion deficit in the first 11 months of 2023."Under unchanged policies, debt dynamics in the US are very unfavorable," the IMF warned.

IMF has raised their concerns about the US’s $33 trillion debt pile. To IMF, this does not seem to be sustainable. With the USA likely to incur another $1.5 trillion of debt in the next 6 months, this does not seem to be going away soon.

Conclusion

With the commitment to a second war front, the USA is likely to be spending more in the coming months. With a 4.9% GDP QoQ growth, there is some optimism about the economy avoiding a recession. Personally, the funding by debt of both private and public institutions would be detrimental due to the current interest rate. Let us look at the coming earnings to ascertain if the economy can steer away from a potential decline.

I recommend caution and let us exercise prudence.

@TigerStars

$S&P 500(.SPX)$

$Occidental(OXY)$

$Rivian Automotive, Inc.(RIVN)$