To The Moon

Public Holidays

There are no public holidays in the USA for the coming week.

Hong Kong will be closed for the Chinese Lunar New Year (CNY) from 10 to 13 Feb 2024.

China will be closed for the Chinese Lunar New Year (CNY) from 9 to 15 Feb 2024.

Singapore will be closed for the Chinese Lunar New Year (CNY) from 10 to 12 Feb 2024.

Here is wishing all a blessed Chinese New Year.

Economic Calendar (12 Feb 2024)

Notable Highlights

• The Chinese-speaking world should be closed as they celebrate the Chinese Lunar New Year. Celebrations start on 09 Feb 2024 for Chinese-speaking nations like China, Hong Kong & Singapore.

• CPI. This should be the most watched macro data for the coming week. This is likely to move the market though the Core CPI is likely to be the same as the previous month. Though this is not the main reference for the Fed, this will remain a key reference for inflation and how the market anticipates the coming Fed pivot.

• PPI. This shows the inflation that hits producers. The forecast is 0.1% and implies that inflation could be persistent. This is the prelude to CPI that reaches the consumers. Thus, if PPI ticks higher as per forecast, this could translate to more inflationary pressures in the coming weeks.

• Philadelphia Fed Manufacturing Index will shed light on the manufacturing performance.

• Retail Sales and Core Retail Sales data will be released. This reveals the sentiment of consumers and spending in the market.

• Initial Jobless Claims - This reflects the impact of unemployment, a data point for the Fed’s interest rate decision. The unemployment rate will also reveal the job and jobless situation in the USA.

• 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 (12 Feb 2024)

There are a few earnings of interest for the coming week starting 12 Feb 2024 including Monday, Shopify, Occidental, Coinbase and Cisco.

Let us look at Coinbase.

Observations:

• Since 2019, there has been an increase in revenue. However, there is a steep drop in revenue for 2022.

• 2022 ended in an operating loss of $2.67B.

Observations for TTM:

• TTM revenue has reached $2.78B

• TTM total expenses have fallen from $5.86B to $4.12B.

• There is an improvement in EPS from -11.81 to -3.20.

• However, the business continues to experience net loss.

The stock has risen 138% from a year ago. Investing has recommended the stock as a “Strong Buy”. There is a strong crypto ETF interest in the market.

From the article above, there are concerns about the impact of ETFs on Coinbase.

For the coming earnings, investing has a forecast of 0.0443 and 826.69M for its EPS and revenue respectively. Can Coinbase surge from the recent crypto ETF?

Market Outlook - 12 Feb 2024

Technical observations of the S&P500 1D chart:

• The Stochastic indicator is on an uptrend.

• The MACD indicator is showing an uptrend.

• Moving Averages (MA). Both the MA50 line and the MA200 line are 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.

• Exponential Moving Averages (EMA). The 3 EMA lines are moving in a fanned-out pattern, 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 have an uptrend in the coming days. Let us keep an eye out for various macro data like CPI and various Black Swan events.

News and my thoughts from the last week (12 Feb 2024)

• Stock price movements after earnings depend on performance, expectations, and outlook.

• "I can be wrong" is a good paradigm. Same for investing, Same for life.

• The US has a shortfall in refinery capacity 18.1M bpd and consumes about 20.07M bpd as of EIA 2022. Supply shortage is possible.

• Oil market will face supply shortage by end of 2025, Occidental CEO says - CNBC

• Over 430,000 customers were without power across the state, according to a USA TODAY power outage tracker. - USA Today

• Businesses first go to China for their factory and they stay on for their customers.

• WSJ: Why the FAA Still Can’t Fix Boeing? FAA does not need to fix Boeing. Boeing needs to demonstrate due diligence and compliance for FAA's review.

• To afford the median-priced home of $433,100, Americans need an annual income of roughly $166,600. However, the median household earns just $74,580, per FORTUNE.

• Powell has foretold that smaller regional banks should suffer and that federal spending is not sustainable.

• It could be a K market with stocks surging up and plunging down. Let's monitor.

• In 2023, 463 ETFs saw fee hikes as 87 ETF providers increased management fees, other expenses, or acquired fund fees. Only 64 ETF providers cut fees in 2023. - Factset

• Journalism and MSM. We do not need to agree but let us consider the opinions from all sides. This is the beauty of free speech.

Analysts lowered EPS estimates for $SPX companies for Q1 in 8 of 11 sectors during the month of January, led by the Energy sector. - Factset

AAA estimates the annual cost of owning a new car in 2023 has reached $12,182, up 14% from last year. - Visual Capitalist

• Credit card debt delinquency rates surged more than 50% in 2023 to their highest level since 2008, according to the NY Fed. Last quarter alone, total credit card debt in the US jumped $50 billion to a record $1.13 trillion. Auto loan delinquency rates also surged toward 8% for the first time since the Great Recession. All while interest rates on credit card debt hit a record 25% and new card loan rates hit a record 9%. How long can consumers hold on here? - The Kobeissi Letter

• TREASURY Secretary Janet Yellen said that while losses in commercial real estate are a worry, US regulators are working to ensure that loan-loss reserves and liquidity levels in the financial system are adequate to cope. - Business Times

• Protests have erupted in several countries, exposing anger about low prices for produce, rising costs, cheap imports and constraints imposed by the EU's drive to fight climate change. - Reuters

• THE troubles in the US commercial property market, which have already hit banks in New York and Japan, moved to Europe this week, elevating fears about broader contagion. - Business Times

• Dry season in Panama is in full swing, and the impacts to trade through the Panama Canal will remain challenged in the months to come. - Freight Waves

• Hertz said last month it would take a $245 million charge from the sale of those cars due to high depreciation costs, in addition to higher costs for repairs for EVs, which dragged on the bottom line. - Yahoo Finance

• Sometimes we assume because of arrogance, a pure heart but not because of a great mind.

• Global investors expect falling prices in China to push down inflation rates worldwide this year, as excess capacity in its slowing economy prompts Chinese exporters to cut prices on goods they sell abroad - FT

• The rise of office-to-apartment conversions has grown over 350% in just three years, according to data from RentCafe, largely due to lifestyle changes made during the pandemic. - Yahoo Finance

Is there more duress from the Commercial Real Estate (CRE)?

My investing muse

Updates about layoffs news in the past week:

• McKinsey & Co. has warned about 3,000 of the firm’s consultants that their performance was unsatisfactory and will need to improve. - Fortune

• FRENCH digital payments company Worldline said on Wednesday (Feb 7) it would cut its global workforce by around 8 per cent as part of a cost reduction plan initially announced in October. - Business Times

• 40% of 2000 Singaporeans (polled) felt they were likely to lose their jobs in the next three months, compared to 25% in the same period last year. - NTUC. Aren't things looking good?

• Orsted, the world’s largest offshore wind developer planned to become a leaner and more efficient organization: a reduction of 800 jobs worldwide, a pause for dividends and a retreat from markets in Norway, Spain and Portugal. - CNBC

• Amazon Health Services is cutting “a few hundred” employees from its One Medical chain and Amazon Pharmacy - Forbes

• JPL said it would lay off about 530 employees, as well as 40 contractors, after exhausting other efforts to reduce costs given potential spending reductions for NASA - Space News

• Snap said it will lay off 10% of its workforce worldwide, around 500 employees, to “promote in-person collaboration.” - CNBC

• MAC lipstick maker Estee Lauder slashed its annual profit forecast on Monday (Feb 5) and announced a restructuring programme aimed at cutting about 3 to 5 per cent of its workforce to rein in costs. - Business Times

• Société Générale plans to cut about 900 jobs at its Paris headquarters through voluntary departures - Business Times

The news of layoffs continues to hit the market as more was reported during the last week.

Deglobalisation

De-globalisation is inflationary. De-dollarisation is one of the developments. USD would remain the main global currency. For near-shoring, friend-shoring, & reshoring to work, there are aspects of supply chain, raw material, resource, infrastructure, policy, & competency needed.

A recession is a time of wealth redistribution

Wealth is not lost but redistributed to favour the rich likely. During a recession, wealth is not lost but merely re-distributed. Some will gain and some will lose. There will be a good portion going to the rich. How will the luxury market be affected? If so, luxury items should be “rather” recession-proof.

Market Abnormality - The A-D Line alert

There were twice as many losers as winners in the market Friday. That last happened the day after Black Monday, and it's "not ideal," David Rosenberg said. - Yahoo Finance article on 6th Feb 2024.

This is from investing that explains the A/D line.

If the majority of the S&P500 is not doing well and yet the index continues to surge due to weightage, the average does not paint a full picture. A rising index can hide struggling sectors. Vice versa, a falling index can hide recovery. Without details, we could be left with the impression that the market is doing well. This is not an indicator that guarantees a crash but twice the number of falling stocks is an issue.

US Federal Debt

When we borrow from future generations, we will burden our kids and grandkids with debts that we incur now. $10T worth of treasury should expire by 2024 and be extended at current rates.

Biden Treasury Secretary Janet Yellen says the U.S. will "borrow $760 billion in the first quarter". This sets the US on a trajectory towards $3 trillion in annual federal debt.

This implies that the US may need to borrow the entire nominal GDP of the 7th biggest country in the world (2023) - ie France due to its deficit.

This sets me thinking who else is willing and able to help?

This sets me pondering if this is sustainable.

This implies that the US needs to borrow the entire annual GDP of France to finance its current lifestyle and expenditure in one year. With $10T worth of treasury expiring in 2024, these are likely to be refinanced at the current (high) interest rates. With a Federal deficit of $34T, the US economy has yet to suffer any consequences. This can be sustained so long as countries are willing to take on the debts through the issue of treasury assets. Failing which, they can always turn to their money printing machine.

Conclusion

With the S&P500 hitting the historical 5000 mark, this affirms the positivity of the market and the outlook for most investors. Yet, we cannot ignore the weaknesses that are in the economy. From layoffs, inflationary impact of de-globalisation, and market concerns like for the banking sector, it is wise to thread with caution.

Can China help with its deflation? Is Europe in survival mode?

Let us spend within our means, invest with what we afford to lose and avoid leverage. It is important to update our watchlist regularly so that we can buy great companies at good discounts when prices fall.

@TigerStars

$S&P 500(.SPX)$

$Coinbase Global, Inc.(COIN)$

$Cboe Volatility Index(VIX)$