To The Moon

Public Holidays

Singapore and China do not have public holidays in the coming week.

Hong Kong is closed on 01 July 2024 for Hong Kong - Hong Kong Special Administrative Region Establishment Day.

America will close early on 3rd July 2024 as they celebrate 4th July 2024 Independence Day.

Here is wishing all my American friends a blessed Independence Day

Economic Calendar (01Jul24)

Notable Highlights

• China will reveal the manufacturing PMI for June on Sunday. The forecast is 49.5 which represents a contraction of the manufacturing sector.

• S&P global US manufacturing PMI will be released and an increase is expected with the forecast of 51.7. S&P Global Services PMI will also be announced in the coming week with an expected growth of 55.1.

• ISM manufacturing PMI and ISM manufacturing prices will be released in the coming week. The PMI has a forecast of 49.0 which indicates contraction.

• Fed Chair Powell will be speaking this week and this would affect the market’s expectation concerning the coming interest rate cuts.

• JOLTs job openings will also be revealed, representing the job openings in the market.

• ADP non-farm employment change will also be updated with a forecast of 170,000 jobs.

• ISM non-manufacturing PMI and ISM non-manufacturing prices will also be released in the coming week. These will speak of the production expected for services and their relative prices.

• Non-farm payroll and unemployment rate wouls also be announced in the coming week.

• 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 (01Jul24)

Q3/2024 starts and a few earnings are coming in the coming week.

Let us look at MSC.

MSC runs an entertainment resort and casino in Macau.

The stock price has fallen over 16% from a year ago. The technical analysis recommends a “Strong Sell”.

Observations:

• Revenue grew from $69 million in 2015 to $446 million in 2023.

• The gross profit grew from $41 million in 2015 to $273 million in 2023.

• The operating loss continued over the last nine years though there were four years of profits.

The forecast of the EPS and revenue are -$0.08 and $150.16 million. I would need a few profitable quarters before I would consider a business. I prefer to observe for now.

Market Outlook of S&P500 - 01Jul24

S&P500 1 year chart as of 29Jun24

Observations:

• The MACD indicator has completed a top crossover and we should expect a downtrend.

• Chaikin Money Flow (CMF) is above the zero line in the middle which implies an uptrend. Yet, there is a stronger selling momentum than a buying one.

• 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.

• Exponential Moving Averages (EMA). The 3 EMA lines are on 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.

S&P500 continues a strong uptrend coming into this week. Technically, it looks to be a “strong buy”.

Using 21 technical indicators, they largely point to a “Strong Buy” with 17 showing a “buy” rating and "4 showing a “sell” rating.

In my opinion, the S&P500 should hit a downtrend soon though it is possible to range sideways for a while. Q2 earnings season will start and it should be interesting for the market.

News and my thoughts from the last week (01Jul24)

• from X user Triple Net Investor: Commercial real estate values in Washington DC has plunged at an absolutely shocking pace... An affiliate of Society for Science just acquired 1776 Massachusetts Ave NW at auction w/ a bid of $10M This is a huge discount to the assessed value of $29M, and ~80% less than what it last traded for, $45M, back in 2012

• What would you invert to avoid the stupidity that we do? Sometimes, it is easier to identify what not to do than to identify what to do. It is like solving the problem backwards which can be easier than solving the problems forward. Thanks

  William Green & Mr Charlie Munger.

• Some of us focus on being smarter. Charlie Munger has advised us to reduce standard stupidity.

• Can CRE be one of the legs that gives way to a greater financial crisis in America?

• Average vacancy rates at logistics properties in east and north China are approaching 20 per cent, the highest in years, according to real estate consultancies. - Business Times

• SOME Wall Street banks, worried that landlords of vacant and struggling office buildings won’t be able to pay off their mortgages, have begun offloading their portfolios of commercial real estate loans hoping to cut their losses. - Business Times

• Cost of borrowing is not included in the inflation rate but it should be. When Americans have to pay more for their mortgage, it diminishes their buying power by even more than an increase in the price of gas or groceries. - David Sacks

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*U.S. MAY NEW HOME SALES PLUNGE -11.3% M/M TO 619,000; EST. 636,000; PREV. 698,000 *LOWEST SINCE NOVEMBER 2023 - investing

• EXXON: STRIKES PREVENTS DELIVERY OF MATERIAL NEEDED BY REFINERY. WE MAY HAVE TO HALT GRAVENCHON REFINERY IF STRIKE CONTINUES.

• Container transit times for routes from China to Europe, Southeast Asia to Europe, and Southeast Asia to the US East Coast have been extended by a median of 10-14 days. G Captain

• Consultants seeking to escape the industry downturn are encountering strong competition for “transformation” and “strategy” roles at sought-after companies. - AFR

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The U.S. grid is not ready for all of this new demand, the report warns, and a slowdown in transmission investment could lead to overspending on generation.

• Russia has blamed the United States for a “barbaric” attack in Crimea that relied on US-provided missiles and killed at least four, including children, and wounded 151 others. What escalations would follow? - Al Jazeera

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86% of Americans are worried about inflation, and many of them still define inflation as being a rise in prices, rather than just high prices. But they tend to look at that rise over four years, not one. X user Unusual Whales

• Based on averages, it is possible for Fed’s Day to say that there is no evidence that stagflation or recession is in the future. If we zoom into the different demographics and socio-economic brackets, would this tell a different story?

• Creativity using AI can produce products of a certain quality. Creativity using AI that is a script of algorithm would be limited by the same algorithm. Creativity in itself is without limits.

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67 $SPX companies have issued negative EPS guidance for Q2 2024, which is above the 5-year average of 58 and above the 10-year average of 62 - FactSet

• Bond giant PIMCO sees another wave of bank failures coming as commercial mortgage trouble mounts - Business Insider

• More than a third of Americans earning at least $250,000 annually say they are living paycheck to paycheck, per Bloomberg.

• The company is never in control of the stock price but its efforts to grow and create value. The price and expectations are on the investors. If the fundamentals are good, holding is not a bad idea.

• The weapons are as good as the supply chain support and the manufacturing capacity. Given the military manufacturing capacity, supply chain complexity and span of land & ocean between the US and their proxy wars, it is hard to manage such war fronts.

• An agreement was signed on June 6 between China, Kyrgyzstan and Uzbekistan to build a new rail line that will connect all three countries. - Express UK

• The worst-performing junk bonds are concentrated in the media, telecom and cable industries, with debt from AMC Theaters and Paramount among this week's biggest laggards. - WSJ

• The end of ultra-easy money will likely be the death of many “zombie” firms - businesses whose annual earnings are lower than their interest bill. Japan had 251,000 of them at the end of November, accounting for roughly one in six companies - Reuters

My Investing Muse (01Jul24)

Layoffs & Closure news

• KPMG to cut further 200 UK jobs amid market slowdown - FT

• 60% of U.S business is likely to have layoffs in the second half of 2024, according to a new ResumeTemplates survey of 934 business leaders. And of this number, nearly half anticipate reducing 30% or more of their total headcount. - Forbes

• "The world and the industry are rapidly changing around us. After careful consideration, Melt Bar and Grilled has decided to file Chapter 11 bankruptcy. This gives us the best opportunity to reorganize and rebuild the company." - The Street

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Layoff & closure news continued into the week.

US household stock allocation

This is taken from X user The Kobeissi Letter’s recent post:

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US households' stock allocation as a percentage of financial assets hit a new record of 41.6% in Q1 2024. This is up from 30.5% in 2020 and even higher than in the 2000 Dot-Com bubble peak of 38.4%. Since the 2008 Financial Crisis, household participation in stocks has more than DOUBLED. Since then, the Nasdaq has rallied 1,738% and the S&P 500 is up 702%. Since October 2023 alone, the Nasdaq and S&P 500 have seen40% and 32% gains, respectively. Households are benefiting from the historic run in stocks.

As society improves with education, there are more citizens who take up passive income like investments. This is possible thanks to education and the advancements in various investing and trading platforms.

Instead of putting excess income into traditional assets like savings in the bank, more are willing to put these into various investing instruments that include bonds and equities. Indirectly, the families will also gain more risk exposure from market volatility. The impact of the market rises and falls would be more widespread and strongly felt due to the bigger pool of retail investors. I recommend due diligence and education so that we understand the risk profile and avoid overleveraging.

US Banks stress test

Article is taken from a recent CNBC news article

31 major banks stress test 2024. Higher hypothetical losses stem from “Substantial increases” in credit card balances & higher delinquency rates; riskier corporate credit portfolios; and a combination of higher expenses & lower income from fees. - Business Times

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Total unrealized losses of $516.5 billion were $38.9 billion higher than the previous quarter. Higher unrealized losses on residential mortgage-backed securities drove the increase, as mortgage rates increased in the first quarter according to a recent FDIC update.

With the annual Federal Reserve stress test for 31 major banks claiming success, there remains concern for the banks that are not part of the 31. The exposures to home and personal loans weigh heavily on the regional banks. The stress test needs to be conducted across the board so that the country is aware of the current status of the banking sector. It is likened to asking the rich families in the neighbourhood whether they felt the impact of inflation. The result of such a survey would be very different if it were done mainly with the lower income bracket families. There remain concerns for the banking sector especially with the news of debts and major losses from various commercial real estate sales.

My final thoughts

This is one of my recent contemplations.

During a recession, wealth is not lost, just re-distributed.

We have read reports of how the richer demographics have gained much more wealth compared to that which is lost by the lower income bracket after the COVID-19 pandemic. What can the common folks do to protect or grow the wealth that they have accumulated? With more of us entering the stock market, it is important to be trained and to do the necessary due diligence.

With every investment there would be risk, it is important for us to understand the market so that we are able to best take advantage of the different positions and opportunities available.

There is troubling debt amassing in America. Consumers, corporations and the Federal government have their share of debt. While debts have always been around, the growth of these debts is concerning. The interest paid to service the federal deficit has exceeded the budget that we have allocated for National Defense.

For the First Time, the U.S. is Spending More on Debt Interest than Defense

The above is taken from a recent 23 May 2024 article by Council on Foreign Relations.

Market tops and corrections are part of the economic and market cycle. Let us consider some hedging given the recent developments.

@TigerStars

$Studio City International Holdings Ltd(MSC)$

$S&P 500(.SPX)$