To The Moon

Public Holidays

America, Hong Kong, Singapore and China do not have public holidays in the coming week.

Economic Calendar (08Jul24)

Notable Highlights

• Fed Chair Powell will be testifying this week. If there are any indications about interest rate cuts, this would surely lead to some market volatility.

• The most watched news will be surrounding the CPI. Consumer Price Index (CPI) is one of the indices used to reference inflation though the Fed prefers PCE over CPI. The market is expecting a YoY CPI of 3.1%. If this is contrary to expectations, the market could become volatile. A higher CPI figure is bearish and would delay interest rate cuts. In fact, some of the Fed committee members have mentioned rate hikes if inflation worsens.

• 30 year bond auction is a good reference for the market too. When bond rates are higher, more funds would move into this asset class, meaning fewer funds for equities and other asset classes (like commodities, real estate, cryptocurrency, etc).

• PPI is one of the crucial economic data as this proceeds CPI. If the PPI shows a downtrend, there would be less inflationary pressure in the coming CPI as an inflationary impact on producers is usually passed on to 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 (01Jul24)

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

For the coming week, some of the earnings of interest would be for Citibank, Delta, Pepsico and Wells Fargo.

Let us look into Delta Airlines in detail.

From the 1 year trend, Delta’s stock price has fallen 3.88% from a year ago. Technical points to a “strong sell rating”. The stock price has been falling since its recent peak in May 2024.

Observations:

• Revenue grew from $40.3B in 2014 to $58B in 2023.

• Operating profits grew from $2.9B in 2014 to $5.2B in 2023.

• EPS has improved from $0.78 (2014) to $7.17B (2023)

• Good growth and health profits could be seen.

• A P/E of 5.9 makes the stock “attractive” but I am the 3.5% FCF is of concern (with a -5.4% 10-year CAGR)

For the coming earnings on 11 July 2024, its EPS and Revenue forecast are $2.36 and $15.47B respectively. This marks a strong improvement from the previous earnings.

Personally, I would prefer to monitor Delta more before investing in the company.

Market Outlook of S&P500 - 08Jul24

Observations:

• The MACD indicator has completed a bullish top crossover that implies a possible “bull” run.

• Chaikin Money Flow (CMF) is above the zero line in the middle which implies an uptrend. CMF seems to be moving sideways which implies buying and selling cancelling each other out. This remains in the bullish region.

• 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 18 showing a “buy” rating and none showing a “sell” rating.

However, there are 6 indicators showing “overbought” which implies a coming reversal.

In my opinion, the S&P500 should remain in a “short” uptrend. Let us monitor for now.

News and my thoughts from the last week (08Jul24)

• We need to be adults who can filter through the information, seek the truth and do our best for our families and countries.

• The role of the media is to hold those in power accountable for the powerless. - Tucker Carlson

• Greenwood said rising freight rates, shipping delays and cancellations of shipments are causing containers full of chemicals to pile up in some Asian countries and ports. China is the world’s leading exporter of chemicals, accounting for $141.3 billion (18%) of global chemical exports in 2023, according to Tendata, an international trade data consulting agency. The United States was the No. 2 global exporter of chemicals last year, accounting for $67.9 billion (8.8%) of global exports. The U.S. was the largest importer of chemicals in 2023, importing $324 billion, or 13.6%, of the total, according to TradeImeX.- FreightWaves

• A gauge of global sea transport is heading for its biggest annual jump since 2010 after attacks in the Red Sea have forced ships to travel longer distances. Shipping activity measured in ton-miles is set for the second-largest annual increase. - Economic Times

• The Wall Street Journal reports the country’s biggest retail bank JPMorgan is warning that it might begin charging customers for their accounts. That would impact some 86 million customers. - WSJ

• Container Box rates now four times higher than pre-pandemic This is driven by the supply chain disruptions in the gulf. - Splash247

• World Bank upgrades Russia to a high-income nation, estimating its gross income per capita at $14,250 annually. This comes just two years after the West imposed sanctions, Additionally, Russia now has the largest GDP in terms of purchasing power parity in Europe. - BRICS News

• In the internet age, do we still need reporters?

• President Putin says he takes Donald Trump's plan to end the war with Ukraine very seriously and Russia supports it. - BRICS News

• Nvidia CEO Jensen Huang just sold $29.7 million worth of $NVDA shares. He's now sold $184 million over the past three weeks. NVIDIA CEO keeps selling shares. - X user Jesse Cohen

• Would it be reasonable to expect both ability and accountability to be criteria for all for politicians? Performance to be tied to federal spending, with no federal deficit, the criteria for the next term. What do you vote for and how much deficit you allow would be on you?

• It is possible for the stock to go either way but Tesla is one of the best companies out there. period. The macro conditions are worrisome.

• The disconnect with reality will demand a price. Since so many democrats have stood up on the ability of Biden, they should stick to their claims. It is just the figurehead, no loss of control. But what happens to the Senate and lower house would be more concerning.

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To fight a war dependent on external resources is dangerous. If you need equipment and supplies from thousands of miles away, your supply chain is at risk. It is not about what Trump says. What is left of a country known for its corruption?

My Investing Muse (08Jul24)

Layoffs & Closure news

• The death of the DVD has likely played a big role in the demise of Redbox parent Chicken Soup for the Soul, which just filed for Chapter 11 bankruptcy filing. - The Street

• Vanuatu, a South Pacific nation of 326,000 people, was left without an airline after its flagship carrier, Air Vanuatu, declared bankruptcy. - Yahoo Finance

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Here are some headlines of layoff news.

Layoff & closure news continued into the week.

USA Unemployment and Jobs updates

The unemployment rate has ticked up to 4.1%, going over 4% for the first time since November 2021. - 74% of jobs added last month came from government and healthcare education. - May jobs were revised down from 272K to 218K. - April jobs were revised down from 165K to 108K. - Black and Asian unemployment rates increased. - Full-time employment in June actually decreased by 28,000 workers. - Part-time employment went up by 50,000 workers. - In just over a year, the unemployment rate has increased from 3.4% to 4.1%. - From X user CollinRugg:

Sahm Rule defines recession if the 3-month average of the national unemployment rate has risen 0.5% or more from the previous 12-month low. The latest unemployment rate has risen 0.36% from its 12-month low over the last 3 months. - Yahoo Finance

From the updates above, the uptick in the unemployment rate would pose some concerns. Based on Sahm Rule, there would be an unemployment rate surge is another technical way to define inflation.

With more job data downward revision, the job market looks less robust as compared to initial. The loss of full-time jobs is not offset by the increase in part-time employment. This does not paint a strong outlook for the job market. Is this possible with a raging stock market? Absolutely.

Storms and Supply Chain

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Hurricanes cause major disruptions to supply chains and tend to be enormous stimuli for freight demand, but the path of Berryl could have the opposite effect. The reason - the primary driver of hurricane freight is FEMA. The path of this storm is right into the heart of Mexican production and distribution (Nuevo Laredo, after passing over the Yucatán), which is a huge driver of US freight volume. If this area of Mexico gets obliterated or flooded out, the Mexicans will react, but with a far muted level of response compared to the Americans. It could cause a sharp slowdown in cross-border freight, at least for a few months. - Craig Fuller

Supply Chain has always benefitted from the development of both man-made crisis and natural disasters. Despite the challenges and disruptions, the result is typically inflationary, adding to the costs and complexity of the supply chain. We have seen shipping extension of delays of 10 days and more as vessels avoid the Red Sea by going round the continent of Africa. This is inflationary and should take a while to dissolve.

I doubt that President Biden’s administration is able to address this. If they could, this should have been addressed. Hopefully, former President Trump can bring closure on this matter should he win the November Election.

My final thoughts

Here are some of my thoughts after revisiting William Green’s video, paying tribute to the late Charlie Munger:

Is our integrity based on convenience or conviction? Integrity does not change its standards. It is for us to meet them.

Being ethical is a competitive advantage.

We do better in life because we are ethical. - Charlie Munger

I have penned down my thoughts in this article about the world of honour - the wisdom of Mr Charlie Munger. Honour and integrity are gaining premium as the world falls into much disarray. The extreme weather is going to cause much disruptions which translate into increased costs. With the ongoing supply chain complexities, inflation is creeping slowly back into the market with container rates hitting pre-Covid high.

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The above is taken of a recent FactSet post about market outlook.

The S&P500 is expected to report Y/Y earnings growth of 8.8% for Q2 2024, which is slightly below the estimate of 9.1% earnings growth on March 31.

Let us consider hedging. It is possible for some of the market to be thriving while some segments struggle to cope. Looking at averages without understanding the impact to different demographics can skew our views easily. Let us research before investing.

@TigerStars

$Delta Air Lines(DAL)$

$Citigroup(C)$

$S&P 500(.SPX)$