To The Moon

Public Holidays

Hong Kong is closed on 1st Apr 2024 for Easter.

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Hong Kong is closed on 4th Apr 2024 for Qing Ming.

China is closed on 4 & 5 Apr 2024 for Qing Ming.

Qing Ming is known as Pure Brightness Festival or Tomb-sweeping Day where we visit ancestors' tombs, spring outing.

For me, Qing Ming is a chance to meet our relatives and remember those who have gone before us.

There are no public holidays this week for Singapore and the USA. In Singapore, Qing Ming is observed by the Chinese and it is not a public holiday in Singapore.

Economic Calendar (01 Apr 2024)

Notable Highlights

• China's manufacturing PMI will be released. The forecast stands at 49.9 which indicates a contraction. Is this an indication of global consumption? This would have some impact on China.

• S&P global US manufacturing PMI data will also be released together with ISM manufacturing PMI and ISM manufacturing prices. The PMI will indicate whether there is a contraction or growth in the US manufacturing sector. Manufacturing prices can give a heads-up concerning the inflation that hit the manufacturing sector. This is usually passed on to consumers.

• JOLTs job opening will reveal the number of jobs available in the market

• ADP non-farm employment changes will provide an update on non-farm-related jobs.

• S&P Global Services PMI, ISM non-manufacturing PMI and ISM non-manufacturing prices will provide insight into the demand for Services and the associated prices.

• The average hourly earnings will reveal the changes in disposable income available.

• There will also be data concerning non-farm payrolls.

• The unemployment rate will also be a data of interest for the Federal Reserve as they seek to balance inflation unemployment and a healthy economy.

• Initial jobless claims will also be a key macro data that the Federal Reserve will look into as they ponder the next interest rate decision

• 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 (01 Apr 2024)

There are a few earnings of interest starting from the 1st of April 2024. This is the start of the new earnings season for Q1/2024.

These companies include BlackBerry, Levi’s and Kura.

Let us look at Blackberry’s financial performance in recent years:

Observations of recent performances:

• Revenue fell from $6,813 million in 2014 to $656 million in 2022.  The trend of falling revenue is a concern for BlackBerry. However, we are seeing a strong gross margin.

• However, the gross profit margin has grown from -0.6% in 2014 to 63.9% in 2023.

• The operating profit for the last few years remained negative. For the year ending 2023, the operating profit is at a loss of $234 million. Operating profit needs to improve for the market to have more confidence.

• The earnings per share (EPS) was at -$1.35 for 2023.

• Total assets value fell from $13.1 billion in 2013 to $1.6 billion in 2023

• Liabilities have fallen from $3.7 billion in 2013 to $822 million in 2023.

• Retained earnings fell from $7.2 billion in 2013 to -$2 billion in 2023.

The stock price fell 30.9% from a year ago.

The latest closing price (on 28 Mar 2024) of $2.75 is lingering closer to the 52-week low and there seems to be a downward trend. Investing has a “SELL” rating for this stock.

For the coming earnings, the forecast of EPS and Revenue are -0.0386 and 150.47M respectively.

I have fond memories of BlackBerry phones. Until they break even, I do not intend to invest in the company.

Market Outlook of S&P500 - 01Apr24

Technical observations of the S&P500 1D chart:

• The MACD indicator is ranging sideways despite having completed another top crossover. We are expecting a reversal to a downtrend in the coming days.

• Chaikin Money Flow (CMF) has hit the zero line. Should the CMF line cross the zero from above, this is treated as a sell/bearish signal for some traders.

Interpretation of CMF from the CFI website:

When there is a continuous buying period (when the CMF value is sustained above zero), the trend is considered bullish and indicates that price will continue to rise with the trend. When there is continuous selling pressure (CMF value below zero), this points to a bearish trend, indicating price will continue downward.

Higher readings, either positive or negative, indicate a stronger trend. Increasing readings indicate gaining momentum.

Crosses may be bullish or bearish. Bullish crosses occur when the CMF crosses the zero line from below, and stock prices continue on an upward trend. Bearish crosses occur when the CMF crosses the zero line from above, and prices continue to fall.

• 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 have yet to converge and they are spreading outwards in a fan-like shape that implies an uptrend.

• I have replaced Stochastic with CMF to incorporate consideration of volume. Stochastic and MACD are similar with Stochastic being “more active” and more capable for “false” signals.

From investing, it recommends a “Strong Buy” for the S&P500 (based on 1D chart).

From the 29 technical indicators and moving averages, a “Strong Buy” rating was suggested. This comprised of indicators showing 19 (Buy), 1 (Neutral) and 0 (Sell).

From the indicators above, the S&P500 could fall in the coming days. At the same time, the various economic data and the start of Q1/2024 earnings should bring some volatility to the market.

News and my thoughts from the last week (01 Apr 2024) - EV, debts & strikes

• BYD sees 7 millionth NEV roll off assembly line The 7 millionth vehicle is an updated Denza N7 SUV, which the premium BYD sub-brand will officially launch on April 1. - CNEVPost

• Is inflation racing recession to see who reaches the economy first? Or should the question be: who is faster - the rate cuts or the recession?

• Gen Z saw their credit card balances surge 62% between March 2022 and February 2024, according to Fortune, citing data provided by Credit Karma. - Yahoo Finance

• Druckenmiller had 21.1% of his portfolio invested in two "Magnificent Seven" stocks. Nvidia accounted for 9.1% and Microsoft accounted for 12% of his invested assets. - Yahoo Finance

• Embattled Chinese developer China Evergrande Group has filed documents to a court in the United States to withdraw its bankruptcy protection application. - YICAI Global

• Consumer lending conglomerate Curo Group Holdings Corp. and affiliates filed for bankruptcy after failing to outrun a heavy debt load. Who is the next victim of debt? Which financial institutions and banks would follow? - Bloomberg

• Debt is starting to claim victims. The US is working hard to take the lead - be it federal, corporate, or consumer debts. The country deserves better. - Reuters

From X User David Sommers - “One significant factor for debt issuance at these levels is the skyrocketing interest expense -- already at twice the annualized levels of early 2020 and possibly looking to head much higher.”

• FedEx Express has 37 deactivated cargo aircraft, 17 more than in the third quarter, because of the soft demand environment. It will retire nine ageing MD-11 aircraft, as planned, in the quarter that ends May 31. - Yahoo Finance

• Population crisis should hit us before the climate crisis. What are the plans in place?

• It is a tragedy that this (Baltimore bridge collapse) happened and lives were lost. The ship has lost power twice. The maintenance will come under scrutiny as the insurance claims pile up. Prayers and thoughts for those affected. - CNA

• Geely shows off. In a video, a test vehicle performs fully unmanned autonomous driving on snow and ice, as well as autonomous drifting, a performance that is comparable to that of a professional race car driver. - CNEVPost

• Larry Fink joins Jamie Dimon and Jerome Powell in sounding the alarm on ‘snowballing’ national debt: ‘The situation is more urgent than I can ever remember’ - Fortune

• My contemplation: What Chairman Powell says about rate cuts is political. What Chairman Powell does with interest rates is Federal. Both can coexist. Is the above possible?

• Does the military complex prefer an endless war over a successful war?

• Global air cargo volumes are up more than 10% for the first 2.5 months compared to the same period last year and the small package market is projected by some to grow about 4% per annum over the next three years. - FreightWaves

• Chinese electric vehicle maker BYD has set a 3.6- million-unit sales target for 2024, a jump of 20% from its record-breaking sales last year. - Reuters

• Members of a coalition of unions that represents more than 25,000 San Francisco city workers say a strike may be necessary to ensure city departments are properly staffed and workers are supported, with 9% unfilled positions from job listing. - Axios

• US electrical grid would fail their citizens. What are the opportunities we have?

• The Federal Reserve said on Tuesday that it officially saw a net negative income of $114.3 billion in 2023, a record loss tied to expenses related to managing the U.S. central bank's short-term interest rate target. - Reuters

• There are US$17.4 billion in office loans maturing in the next 12 months, according to the report. Moody's deemed roughly US$13 billion of the amount, or three-quarters, as very difficult to refinance. - NST

• UBS flagged on Thursday the downturn in commercial real estate markets as one of the "top and emerging risks" facing the Swiss bank, as higher borrowing costs and a post-pandemic slump in demand for office space hit the sector. - Yahoo Finance

My Investing Muse ( 01Apr24)

More Layoff news from last week:

• In October, before AT&T and Ericsson announced their deal, Nokia warned it would be cutting between 9,000 and 14,000 jobs by the end of 2026 in response to the market slowdown.- Light Reading

• Plagiarism detection firm Turnitin laid off around 15 people earlier this year as part of organisational changes, TechCrunch reported on March 7. AI would enable Turnitin to reduce its engineering headcount by 20% within 18 months.- Indian Express

• DELL Technologies reduced its workforce to cut costs including limiting external hiring & employee reorganisations. As at Feb 2, 2024, it had nearly 120,000 employees, down from about 126,000 a year earlier. - Business Times

• Ericsson would lay off about 1,200 employees in Sweden as part of cost-cutting measures announced earlier this year as customers reduce their spending on 5G gear. - Reuters

• During the remote meeting on Friday, 400 Stellantis employees were informed that they were being laid off. - Yahoo Finance

• Citigroup opens new tab is in the last phase of a sweeping overhaul to simplify its structure and improve performance, the bank said, after shrinking its workforce by 5,000 employees since September. - Reuters

• Deloitte will trim its main business units to four from five in a bid to cut costs ahead of an expected slowdown, the Financial Times (FT) reported about the accounting giant that employs more than 455,000 people worldwide. - Business Standard

• A recent report from the Ministry of Manpower (MOM) says that the number of layoffs more than doubled in 2023 and are now similar to pre-pandemic levels. - The Independent SG

• ByteDance slashes 1,000 jobs from workplace collaboration unit Feishu. TikTok parent firm might lay off up to 20% of Feishu’s employees in total, or over 5,000 people, mostly in mainland China. - TechAsia

• Canada Goose revealed that about 17% of its corporate workers would lose their jobs in the cuts. It amounts to approximately 915 jobs. - Fox Business

• Amazon is extending its year-long campaign to reduce costs, with recent layoffs impacting its advertising division, resulting in the elimination of 160 positions. - People Matters

There is more news of layoffs in the past week. Layoffs lead to a loss in household income. Hopefully, they can find work that pays a similar or better package.

Purchasing Power of USD

From the chart above, we witness a constant falling purchasing power of USD with the last at $0.04 in 2024. Will this become worse as we have lost 94% of the purchasing power?

Baltimore Bridge Accident

This tragedy has rocked the nation. This bridge is iconic and the impact is significant.

Taken from USA Today news:

The economic impact of the collapse of the Francis Scott Key Bridge in Baltimore – which left six dead and one seriously injured – will be hefty.

The immediate price tag: $2 million dollars in wages a day and 8,000 jobs, according to Transportation Secretary Pete Buttigieg.

"Rebuilding will not be quick or easy or cheap,” Buttigieg told reporters at the White House on Wednesday.

The area is a critical one for America's economy. Ranked the United States' largest vehicle handling port, the Port of Baltimore offers the deepest harbor in Maryland's Chesapeake Bay. Closer to the Midwest than any other East Coast port, the Port of Baltimore also is within an overnight drive of one-third of the nation's population.

Between $100 million and $200 million of cargo passes through the port every day. With that coming to standstill, many longshore workers could be unemployed, Buttigieg warned this week.

With 8,000 jobs affected and a daily wage cost of USD$2 million, dragging this out will affect the city and its people. With a daily average of $100 to $200 million worth of cargo (and trade) passing through, the subsequent economic impact would be significant. This will add to the complications of the supply chain. An increased supply chain cost is on the cards. There will also be delays in the delivery and collection of products as people turn to other ports and transport modes for workarounds.

This happened at a time when the global supply chain was facing challenges in the Red Sea. Unfortunately, such a crisis can lead to supply chain challenges. This can also give a lifeline to supply chain. This can be inflationary in nature.

Conclusion

Layoffs will lead to a loss of disposable income. They can find similar or better pay. Yet, this could not be applied to everyone who lost their jobs. Inflation over the years has led to a loss in purchasing power. With things getting more expensive, it will be difficult to maintain their lifestyle unless it is met by a corresponding increase in income. The challenge could be seen in people required to take on additional jobs, and people delaying or coming out of retirement. Does this always lead to a better quality of life? There is a disconnect between the people and the leaders. This has led to strikes even from city workers in places like San Francisco. If change does not come from the top, it will start from the ground.

The crazy weather in the US has brought complications. The latest Baltimore bridge collapse tragedy will impact society and economics. The latest PCE data has suggested an improving inflation. The market is concerned with how this will guide interest rate decisions for the Fed in the coming months.

“I could be wrong” is a good philosophy to live with. Same for investing, same for life - Benson Kong

Coming to investing, I have been contemplating the philosophy of “I could be wrong”. In the absence of full knowledge, adequate consideration and knowing the intent of other players, it is not possible to be right on several factors. We are at the mercy of the actions and words of others, with limited or no control over all external factors. With this realization, it is wise to leave room for mistakes. It is not a lack of confidence but a realization of human limits and the more important need for understanding.

For now, I recommend prudence and caution. Let us spend within our means, avoid leverage and invest with what we can afford to lose.

@TigerStars

$S&P 500(.SPX)$

$BlackBerry(BB)$