To The Moon

Public Holidays

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

The United States celebrates Labor Day on 2nd Sep 2024.

Here is wishing all Americans a well-deserving Labor Day holiday.

Economic Calendar (02Sep24)

Notable Highlights

• S&P global US manufacturing PMI will be announced alongside ISM manufacturing PMI and ISM non-manufacturing PMI in the coming week. From the forecast, the manufacturing sector seems to be contracting. The services sector is expected to continue its growth.

• ISM manufacturing prices and ISM non-manufacturing prices will be an important prequel to inflation. If the prices increase for both manufacturing and services, the cost will likely be passed on to the consumers in the coming weeks or months.

• JOLTs job openings will be updated in the coming week. This is an important reference for the Fed as they seek to balance inflation, interest rate and unemployment. Other important payroll & unemployment-related data will include the ADP Nonfarm employment change, average hourly earnings, nonfarm payrolls and the unemployment rate. These are important data for the Federal Reserve before they announce the changes in interest rates.

• 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 (02Sep24)

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

There are some earnings of interest in the coming week namely, ASANA, NIO, Broadcom and SAIC.

Let us look at NIO in detail.

As per the chart above, the stock is on a downtrend.

Based on Investing’s analysis (technical and analyst sentiments), NIO has a “BUY” rating.

The P/E ratio is -2.81 and the return on assets is -22.2%.

The company has not been profitable and the stock price has fallen over 60% from a year ago.

Observations about NIO’s recent performance:

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

• The 10-year median margin for gross profit is 2.7%. Given that it is a product-based company, the gross profit margin is worrisome.

• The company has yet to break even from 2016 to 2023. Despite the increase in revenue, they suffered an operating loss of $3.17 billion in 2023.

• Earnings per share continue to be in the negative region with 2023 hitting -$1.74

• With the 10-year median margin of free cash flow (FCF) at -13.9%, the company has yet to produce results to demand interest or shortlisting (for me).

From ChatGPT:

Over the last three years, NIO has experienced mixed financial performance. In 2021, the company saw robust revenue growth driven by strong vehicle deliveries, but profitability was hampered by high R&D expenses. In 2022, NIO continued to grow, but supply chain disruptions and rising costs affected margins. In 2023, NIO faced significant headwinds, including declining revenue in the latter half due to intensified competition and economic challenges in China. The company has been focusing on new product launches and expanding services to stabilize its financials moving forward.

For the coming earnings, the forecast of EPS and Revenue are -2.21 and $17.49B respectively.

Given the current performance, I prefer to monitor the business, instead of investing.

Market Outlook of S&P500 - 02Sep24

Observations:

• The MACD indicator shows an uptrend. There should be a top crossover soon.

• 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 above the MA 200 line. Thus, it could be read as bullish for the long & mid-term.

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

• Chaikin’s Monetary flow (CMF) shows an uptrend. This implies more buying than selling.

• 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.

Investing dot com has a “strong-buy” rating for the S&P500 based on daily intervals.

Of the 21 technical indicators, all 21 indicators are showing a “Buy” rating.

From the candlestick patterns, we have a mix of indicators though the 1W timeframe caught the “Three White Soldiers” pattern on 18 Aug 2024, which is a typically bullish indicator.

In my opinion, the S&P500 should continue its uptrend in the coming week though some earnings & macro data could add volatility in the market. The S&P500 could be losing momentum and we can look at the volume for reference.

News and my thoughts from the last week (02Sep24)

• If we cannot spend within our means, will debt and bankruptcy be our downfall?

Image

U.S. credit card debt hits all-time high of $1.14 Trillion! - X User RadarHits

• The sale of the logistics arm of Germany’s national railway Schenker has the potential to create a new supply chain powerhouse in the United States. - FreightWaves

Image

Did you know the US Government is planning on adding another $16 trillion to our national deficit through 2035?

Image

Decreasing loss & increasing revenue - these look good for Affirm but not so much for the economy. What is the default or delinquency rate?

• Allstate to increase home insurance rates for California customers by an average of 34.1%, per Bloomberg. The rate hike, which will take effect from November, will impact about 350,000 policyholders. Some customers will face premium increases of up to 650%. - X user Unusual Whale

Super Micro Computer, $SMCI, has delayed its 10K filing after Hindenburg Research said it was committing accounting fraud yesterday. The stock is now down 34% over the week.

• Kamala Harris economic adviser affirms that there is a plan to tax unrealized gains, for households worth more than $100,000,000. CNBC says: "It will not happen in my lifetime."

  I guess messing up the border is not sufficient. Now there is a migration policy that goes after the rich households. There are many places that welcome this wealth transfer. Failure to attract and keep the rich implies that one may have a policy that is counter-capitalism.

• The California State Senate has passed a bill providing undocumented immigrants up to $150,000 in state-supported home loans.

• One of San Francisco's most iconic malls has plunged ~$1 BILLION in value since 2016 The value of the Emporium Centre (formerly Westfield Centre) went from $1.22B in 2016 to $221M according to an appraisal done by KBRA The owners stopped making payments on a $558M loan tied to the property and placed into receivership per TRD In 2009, the mall was 1 of 9 finalists vying for the title of the “World’s Best Shopping Center” by ICSC. X user “Triple Net Investor”

• Russia to start using cryptocurrency for international transactions on September 1st. Russia plans on testing crypto payments as a way to break away from Western sanctions. - BRICS News

• KAMALA PLEDGES $25,000 FOR FIRST-TIME HOMEBUYERS IF ELECTED PRESIDENT “Even if aspiring homeowners save for years, it is often still not enough. My administration will provide first-time homebuyers with $25,000 to help with the down payment on a new home.” Source: X

  The taxpayers are paying for this. This would be funded by debt. Sellers would bump up their price by $25K and more. Affordability, income, and value need to be addressed. These help to propel the country forward, not free handouts.

• Tuesday got off to a tragic start at Atlanta’s international airport after a tyre unexpectedly exploded on a Delta Air Lines jet and killed two workers instantly. What a loss. Prayers for the family. - The Daily Beast

• For regular usage, homeowners will have fewer needs to visit the petrol kiosks when they can charge their vehicles at home. This is a convenience that can lead to some lifestyle changes.

• Mark Zuckerberg, in a bombshell letter to House Judiciary Chairman Jim Jordan, expresses deep regret over Meta's compliance with Biden Administration pressure to censor COVID-19 content in 2021. The tech mogul admits they should have been more outspoken against government-led censorship attempts. Zuckerberg reveals the White House repeatedly urged Meta to remove COVID-related content, including humor and satire, causing internal frustration. He now believes this government pressure was "wrong" and vows to push back against similar future attempts. In a stunning political shift, Zuckerberg also announced he will not contribute money to Democratic candidates this election cycle. Source: BRICSinfo

• "Charlie Munger gave me a great quotation on this subject, from Demosthenes: “Nothing is easier than self-deceit. For what each man wishes, that he also believes to be true." - Howard Marks, The Most Important Thing: Uncommon Sense for the Thoughtful Investor

Some highlights from X user The Kobeissi Letter

US government spending is estimated to hit $6.8 trillion in Fiscal Year 2024, the most since 2021. Medicare, Medicare, and Social Security expenditures are projected to reach a MASSIVE $3.1 trillion, or 46% of the budget. Defense and non-defense discretionary spending will likely exceed $1.8 trillion, accounting for 27% of all expenditures. Net interest and other spending are set to hit $892 billion and $908 billion, respectively, or 13% a share each. All while the government projects $4.7 trillion in revenue. This leaves a whopping $1.9 trillion budget gap which has to be borrowed, the highest in 3 years. The US government has a spending problem.

US net interest payments on national debt hit $861 BILLION over the last 12 months, according to the latest US Treasury report. Interest costs have nearly DOUBLED in just 2 years. This does not include $100 billion of Federal Reserve payments handed to banks as interest payments. Including those payments, effective interest costs over the last year hit a RECORD $962 billion. The US government needs lower interest rates more than anyone.

What could be the outlook of a lifestyle or economy funded by debt? Eventually, there may be no more creditors when they realize that there is no intent or means to repay. The printer would be turned on, and inflation would rise again. We need fiscal responsibility.

My Investing Muse (02Sep24)

Layoffs & Closure news

• Goldman Sachs is planning to cut a few hundred jobs as part of an annual review process - Yahoo Finance

• Shell is planning to cut a fifth of its workforce in two oil and gas exploration divisions, as a cost-cutting drive by chief executive Wael Sawan reaches its core upstream business. - FT

• Big Lots is reportedly considering filing for Chapter 11 bankruptcy. Stock is down 27% in the pre-market. X user Triple Net Investor

• Shake Shack to shut 6 California locations, including 5 in LA, after state’s $20 minimum wage hike, per NYP.

• Layoffs at Cisco securities - Times of India

• Chinese employees at US computing giant IBM have expressed dismay over a terse conference call with the company’s American executives on Monday, as the firm cuts hundreds of jobs at two local research labs - SCMP

Layoff & closure news continued into the week.

US inflation (CPI Calculator)

Image

Inflation in America has risen 21.93% since Jan 2020. Have we seen this in our income? How do we feel compared to this data? Is the inflation much lower or higher? Source: BLS

Top 10 stocks in S&P500

Image

US stock market concentration is getting worse: The top 10 stocks now reflect ~38% of the S&P 500 market cap, near the all-time high of 39% seen in June. Over the last decade, this share has more than DOUBLED. To put this into perspective, in 2020, the top 10 companies accounted for just ~25% of the S&P 500. Now, this percentage even exceeds the 2000 Dot-Com bubble levels by ~12 percentage points. A few key stocks *are* the stock market. - X user The Kobeissi Letter

This is why the indices are “skewed”. This may also hide the strengths and weaknesses that we do not see from the other companies in the indices and market.

My final thoughts

The market looks forward to a coming Fed pivot - where the Federal Reserve drops the interest rates after accounting for inflation and unemployment data.

There seem to be some inflationary pressures coming from insurance, housing and other sectors. One of the key events would be the coming presidential candidates’ debate. Let there be more debate on policies instead of personal attacks. This would help many who are still undecided.

The extreme weather in the USA, Japan and other parts of the world would add to the cost of living.

One area of concern is Artificial Intelligence (AI). The elevated interest rates are putting pressure on “results” following AI investments. There would be expectations for more returns - more revenue, productivity and profits. One of the leading lights in AI, OpenAI may lose $5B in 2024. There were also concerns about cash flow running out by the end of the year.

AI will be part of the future but not every AI company can reap its benefits. More companies should fall away compared to those who are successful. The Fed pivot may ease some of the tensions but will this be too little, too late?

Let us do our due diligence to identify great companies. When the time comes, let us invest boldly.

@TigerStars

$NIO Inc.(NIO)$

$S&P 500(.SPX)$