To The Moon

Public Holidays

United States will be closed on 19 Feb 2024 (Monday) for Washington’s birthday.

No holidays for Singapore, China and Hong Kong as they return from the Chinese New Year festivities.

Economic Calendar (19 Feb 2024)

Notable Highlights

• FOMC meeting minutes. This is a closely watched announcement as the FOMC will shed more insights on the coming interest rate cuts.

• S&P Global US Manufacturing PMI. This data presents the outlook of Global US manufacturing. A figure above 50 represents expansion or growth.

• S&P Global US Manufacturing PMI. This data reviews the growth or contraction of Global services provided by US businesses.

• 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 (19 Feb 2024)

This week has several earnings of interest. Without a doubt, many eyes will be upon the earnings of Nvidia. Other earnings of interest will include that of Walmart, Home Depot, Rivian, Moderna, Block and HSBC.

Recent performance of Nvidia

Nvidia has seen a stellar surge in its value from a year ago. The 52-week range is between 204.21 to 746.11. It is one of the biggest companies in the world with a market cap of $1.794T. With a TTM PE ratio of 96.18, is this too expensive or is this reasonable?

Observations:

• There is a strong revenue growth over the last few years thanks to its products, a key hardware enabler for AI.

• Net income for TTM has reached $18.88B, compared to $4.368B from a year ago.

• Basic EPS has risen from 1.76 to 7.65

• It seems to have a commanding lead in innovation leadership.

For the coming earnings, the forecast for Nvidia’s EPS and revenue are 4.54 and 20.19B respectively. Can Nvidia lead the charge of the S&P500 to a new record high? There are quite several folks who seem to think so.

Market Outlook - 19 Feb 2024

Technical observations of the S&P500 1D chart:

• The Stochastic indicator is on an uptrend.

• The MACD indicator is showing a downtrend having completed another top crossover.

• 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 22 (Buy), 1 (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 see an uptrend in the coming days. Let us keep an eye out for various macro data, earnings and various Black Swan events.

News and my thoughts from the last week (19 Feb 2024) - Amazon, CRE & BYD

• More than 60% of Americans live paycheck to paycheck as of September 2023, according to a LendingClub report - CNBC

• Amazon founder Jeff Bezos sold around 12 million shares of the online retail and cloud services firm for roughly $2 billion - Reuters

• Shell has this week permanently closed its seven hydrogen refuelling stations for passenger cars in California, citing “supply complications and other external market factors”. - Hydrogen Insight

• For the full year, commercial real estate prices dropped 10.2%, accelerating their decline after small drops of less than one percent in 2022 and 2021. - Reuters

• Crimes can also be inflationary.

• I monitor their promise and their deliverables. I do not have any timeline or expectation. Life is easier with chances to be pleasantly surprised or less to be disappointed.

• 20% of outstanding debt on United States commercial and multifamily real estate – US$929 billion – will mature this year, requiring refinancing or property sales. Banks have US$441 billion of commercial-property debt coming due this year, the mortgage bankers group reported. About US$234 billion of maturing debt is securitised in CMBS, collateralized loan obligations & asset-backed securities, while US$168 billion in loans are coming due. - Business Times

• China's BYD Co Ltd will set up a new electric vehicle (EV) factory in Mexico, Nikkei reported on Wednesday, citing the company's Mexico head, as the EV maker aims to establish an export hub to the United States. - Reuters

• Retailers and their suppliers have been slashing their inventories. Now they’re turning to cutting back storage space. A once-booming U.S. warehousing market is coping with signs of contraction as businesses consolidate warehouses. - WSJ

• Foundry Group, an 18-year-old venture firm with nearly $3.5 billion in assets under management, has quietly decided to shut down and not raise any more funds. The firm announced a $500 million fund last year. - Techcrunch

• Warren Buffett’s Berkshire Hathaway sold 10mn Apple shares in the last three months of 2023, cutting into a position that is called one of the “four giants” that account for most of his group’s value. - FT

• For all trades, there should be a time frame and an exit strategy.

• Both profits and losses need to be cashed out and realized.

• Do you agree with the following statement:

  Crypto has no fundamentals - only demand, supply and manipulations. But, so long we make money.

• In the coming months, those with physical assets could stand to gain more. My best return thus far is still in real estate.

• JPMorgan Chase CEO Jamie Dimon said he remains cautious on the U.S. economy over the next two years because of a combination of financial and geopolitical risks. - CNBC

Image

*U.S. JANUARY CORE PPI INFLATION RISES 2.0% Y/Y; EST. 1.6%; PREV. 1.8%

• This is the prelude to CPI as producers try to pass the costs to consumers. Is inflation trending back upward?

My investing muse - layoffs, recession and AI

Layoffs continue into the last week.

Nike on Thursday said it will cut about 2% of its total workforce, or more than 1,600 jobs, as the sportswear giant looks to cut costs after flagging weaker profits this year. - CNBCIsraeli fintech company Riskified is laying off over 40 of its 750 employees, accounting for about 6% of its total workforce. - CalcalistechParamount Global announced Tuesday it is laying off about 800 employees, or roughly 3% of its workforce.Paramount Global, which owns CBS, said Monday that the network set record highs for Super Bowl viewership. - CNBCSilicon Valley tech giant Cisco is getting ready to lay off thousands of employees in its latest reorganization effort to focus on high-growth areas, Reuters reports. Cisco announced plans to cut 5% of its workforce on Wednesday, a decision that will result in the elimination of about 4,250 jobs. - CNBCRoche is cutting 345 jobs, Swiss website Muula reported, as the drugs company responds to lower profit posted for 2023 and a more cautious outlook for the year ahead. - Reuters

Layoffs can lead to a drop in disposable income. With huge job openings, it could lead to employment. However, it may not always lead to higher disposable income. Let's monitor.

Recession hits major economies

• Japan’s economy dipped into a technical recession, after unexpectedly contracting again in the October-December period. - CNBC

• UK slips into recession as reported by BBC.

• Germany has entered a technical recession.

• Eurozone narrowly escapes recession.

S&P500 and the US economy

With the S&P500 having an international business presence, this index & a few others no longer represent the country of this group of 500 international businesses. The S&P500 represents much more than the US economy.Roughly 40% of sales generated by S&P 500 companies come from outside the U.S. -Schwab

With 40% of sales generated by S&P 500 companies outside of the US, it may not be appropriate for us to refer to S&P 500 as the reference of the US market or economy.

With the S&P 500 hitting record highs, it does not imply that the US economy is doing well.

Conclusion

With some of America’s allies of Japan, the UK & Germany entering recession, the US should find them with fewer options to take over their federal debts.

It is possible that the S&P 500 hit another record following the earnings of Nvidia. CRE and regional banking are areas of concern with manufacturing continuing its slide. There was some relief with the previous PMI reporting expansion following months of contraction. The coming FOMC meeting minutes could bring some volatility to the market. With hopes of a March rate cut dwindling, a more hawkish FOMC minutes can trouble the market.

Let us continue to exercise caution. We can still see some record highs in the coming days. Some sectors are doing much better than others and thus, the average may render a "sense of security” for the overall market. Let us start to identify great companies with strong moats so that we can engage should the prices enter an attractive zone.

@TigerStars

$NVIDIA Corp(NVDA)$

$S&P 500(.SPX)$

$Cboe Volatility Index(VIX)$