To The Moon

Public Holidays

There are no public holidays in this week for China, Hong Kong, Singapore and America.

Economic Calendar (03Jun24)

Notable Highlights

• S&P global US manufacturing PMI, ISM manufacturing PMI and ISM manufacturing prices will advise on the expansion or contraction of the manufacturing sector. The manufacturing price would reflect the inflationary prices that the manufacturers are taking on. The cost increase taken by the manufacturing sector will likely be passed on to the consumer leading to inflation.

• JOLT job openings will update us about the number of jobs available in the market. Nonfarm payrolls will also be released in the coming week. Should the forecast be more than 185,000, it should be bullish for the market.

• The US Unemployment rate has a forecast of 3.9%. Should this be higher, the market could end up being more bearish.

• ADP nonfarm employment change will bring an understanding of the jobs available for nonfarm-related activities. Should this exit the forecast of 175,000 jobs, this would be bullish for the market but the Federal Reserve may need to review their interest strategy.

• S&P Global Services PMI, ISM non-manufacturing PMI and ISM non-manufacturing prices will tell the impact of the contraction or expansion in the services sector. The non-manufacturing prices will review the amount of inflation taken on by the service sector.

• Average hourly earnings will be important for the Federal Reserve and the economy as this will represent the spending power of the consumers.

• Initial jobless claims will also be 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 (03Jun24)

Let us look at NIO in detail. $NIO Inc.(NIO)$

Recent performance of NIO:

• Revenue grew from $719 million in 2018 to $7.78 billion in 2023.

• The 10-year median margin of gross profit is 2.7%. This is low for a product-based company.

• The company started with an operating loss of $376 million in 2016. It ended the year 2023 with a further $3.17 billion loss.

• Earnings per share (EPS) continue to be in the negative with 2023 ending with -$1.74. The company continues to make a loss after eight years of operations despite grants from the Chinese government.

NIO’s stock price fell over 28% from a year ago and continues to make a loss since the beginning.

Investing has given this a “Strong Buy” rating.

For the coming earnings, the forecast from investing is -$2.2 and $10.43 billion for the EPS and revenue respectively.

If the business cannot break even or reduce losses over the years, I could not shortlist the company. There has been much hype about this business and the battery swap technology can be a strong competitive advantage in the future. Without breaking even soon, I would not shortlist this company for now.

Market Outlook of S&P500 - 03Jun24

Observations:

• The MACD indicator has completed a top crossover and we should expect the down trend to continue.

• Chaikin Money Flow (CMF) has crossed the zero line in the middle which implies an uptrend. There is more buying volume than selling. For the index to drop, the selling volume needs to be more than the buying volume.

• 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 the mid-term. With the current trend, the candle should cut the MA 50 line soon.

• Exponential Moving Averages (EMA). The 3 EMA lines are on an uptrend. The lines are converging and should do so in the coming days.

• 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 the technical indicators above, investing has recommended a “Strong Buy”. There are 16 indicators showing a “BUY” rating and 6 showing a “SELL” rating.

From the technical indicators above, I am expecting the downtrend to continue into the coming week. The CMF indicator needs to trend downward before we confirm a downtrend, supported with a selling momentum.

News and my thoughts from the last week (03Jun24)

• From X user Wall Street Silver: “Biden announces the U.S. will pay to rebuild schools and other infrastructure in Gaza. Somehow we end up paying to destroy everything and rebuild everything in other countries, for wars that we are not even involved in. We have $35 trillion in debt Our debt is growing $3 trillion per year Our own cities and infrastructure are falling apart Why are we rebuilding other countries but we cannot even rebuild our own?”

  The US Federal government displays no intent to rein in their debts. This is a highway to financial chaos. Without putting the citizens first, the government would lose their support and votes.

• A little more than $3 billion of the total $106 billion supplemental request bill would go toward buying more 155 mm artillery shells and building new production facilities - Foreign PolicyElon:

  “I encourage everyone in this room to have at least three children. I think we want to have a slightly increasing population and population, this applies to all countries and cultures.

  I don't think we want any country or culture to disappear. We want them to ideally flourish.

  Prosperity destroys the birthrate. When a civilization has no meaningful external threat and is prosperous, that is what causes the birthrate to plummet.

  The more prosperous a civilization and more civilization feels that it does not need to defend against external threats, the lower the birth rate.”

  Source: Milken Institute

• Are we facing a population collapse?

• Pending Home Sales -7.7, Exp. -1.0%, Below lowest estimate - X user Zero Hedge

From X user Adam Khoo - The higher a stock's price goes, the more expensive it gets. Right? Well, not always. A year ago, when NVDA was selling at $277, its earnings per share was $0.82 and its P/E ratio was 147x Today, NVDA's share price is up +284% to $1,064.... BUT... Its earnings per share is up +629% to $5.98. Its P/E has fallen to 62x... forward P/E is now at 30x So, NVDA is CHEAPER today than it was a year ago. Investors who say that NVDA is a bubble have no idea what they are talking about.

• Can the productivity from AI and innovations bring deflationary results for the economy? How can we balance the value gain and jobs creation from AI with the cost incurred and job losses caused by AI? Is education & learning the key to sustainability?

• Reasons aside, is war the way to siphon money from the public into corporations and individuals? Follow the money.

• Is population collapse an eventual end of developed countries’ prosperity?

From X user Guilheme Tavares - Bear market? Not yet! Remain bullish until the "blood indicator" starts to bleed. It involves the 3-month US Yield / High Yield Spread ratio surpassing 0.5% and subsequently crossing its 100-week moving average (WMA), which could serve as an early warning sign for an impending recession.

China EV insurance registrations for the week ending May 26: Nio 5,400, Tesla 13,100, BYD 55,000, Xiaomi 2,700 - CnEVPost

• China has dumped a substantial amount of U.S. treasuries and agency bonds worth a staggering $74 billion in seven months. - WatcherGuru

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An AAA-rated portion of Blackstone's $308 million loan suffered losses. Bondholders of the CMBS loan for 1740 Broadway faced steep losses for the first time in 18 years. - CRE Daily

• Singapore's April’s headline inflation was 2.7 per cent, the same rate as in March and in line with the median forecast by private-sector economists polled by Bloomberg. - BusinessTimes

• SINGAPORE’S factory output fell 1.6% year on year in April, slowing from the previous month’s contraction. This was worse than the forecast given by economists, who predicted a median contraction of 0.5 per cent in a Bloomberg poll. - BusinessTimes

My Investing Muse (03Jun24)

Layoffs & Closure news

• Synapse’s problems have hurt and taken down a whole bunch of other startups and affected consumers all over the country. 100 fintechs could be in trouble, with funding prospects weakened for many more. - Techcrunch

Is America’s GDP funded by debt?

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From X user EJ Antoni - This morning's revised data show the gov't is basically "buying" GDP w/ debt, but getting only 50 cents on the dollar - worst deal ever.

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From X user The Kobeissi Letter:

NET interest expense on US Federal debt reached a MASSIVE $514 billion in the first 7 months of Fiscal Year 2024. This is higher than spending on National Defense ($498 billion), Medicare ($465 billion), and Medicaid ($355 billion). Interest has also surpassed money spent on veterans, transportation, and education COMBINED. To put this in perspective, in the first 7 months of Fiscal Year 2020 net interest expense was 33% lower, at $345 billion. Meanwhile, total government spending has reached $3.9 trillion so far this fiscal year. This is unsustainable.

The Committee for a Responsible Federal Budget (CRFB) reports that net spending on interest reached $514 billion in the first seven months of fiscal 2024 – more than what was spent on both national defence and Medicare.

My final thoughts

Not all base their outlook on statistics but on their living condition. If their purchasing power is in decline, their view of the economy would be likewise. Yet, such sentiments should not be discounted just because of strong GDP data.

A recent nonprobability survey conducted by LendingTree found that 78% of consumers now consider fast food to be a "luxury" purchase due to how expensive the meals have become. - Fox Business article

Debt is a constant component in all economies, at all times. Should there be an alarm raised at all? With USD being the global reserve currency, there will always be a demand for USD. To fund the deficits seen above in the federal government, the USA has to issue treasury assets with the current interest rate. With the current trajectory, there is limited confidence that America can pay off its debts.

Money printing will be the only option left for America at that juncture. America can continue to borrow money so long as people are willing to buy these assets. When money printing is activated, the impact is inflationary. The government needs to rein in their spending.

With $8.9 trillion worth of Treasury bills to be refinanced by the end of 2024 at the current interest rates, it does add to the challenge. (Source is from Apollo Academy article).

There is still time to take evasive action. This is why I have been hedging consistently over the last few months.

Let us research before investing, avoid leverage and invest with what we can afford (to lose). Invest safe.

@TigerStars

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