To The Moon

Public Holidays

China is closed on 7th Oct 2024 - last day of the Golden Week holiday.

Hong Kong is closed on 11th Oct 2024 - Chung Yeung Day.

There are no public holidays in the coming week in America and Singapore.

Economic Calendar (07Oct24)

Notable Highlights

• The most watched macro-economic data will be that involving consumer price index (CPI) the market is expecting a year-on-year CPI of 2.3%. If the actual is better than the forecast, this should be bullish for the market. 

• The month on month PPI will be released in the coming week. This data reveals the price inflation that hits the producers. After hitting the producers, this inflation of cost would likely be passed on to consumers for price inelastic product. 

• The 10-year note auction and the 30-year bond auction will review the market sentiment towards bonds and equities the more the demand for bonds and the lesser will be the money flow available for stocks, equities and other asset classes. 

• Initial jobless claims will be announced. This is one of the important data references used by the Federal Reserve as they balance inflation and employment in the economy.

• 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 (07Oct24)

Q4/2024 has started. There are some interesting earnings in the coming week namely, PEPSICO, Wells Fargo, and BlackRock.

Let’s look Pepsico.

The stock price grew 4.92% compared to a year ago. Investing dot com has a “Buy” rating from Analysts Sentiment, a price target of $182.71 that suggested an up side of 8.78%.

Observations: 

• Revenue grew from $66.6 billion in 2014 to $91.4 billion in 2023. 

• Operating profit grew from $9.5 billion in 2014 to $12.9 billion in 2023. 

• The 10-year median margin for gross profit stands at a strong 54.5%.  

• The 10-year medium margin for free cash flow stands at a strong 15.0%  

• Earnings per share grew from $4.27 in 2014 to $6.56 in 2023. 

• The price earning P/E ratio stands at 24.2. 

For the coming earnings, the forecast for EPS and Revenue are $2.20 and $23.9B respectively.

More importantly, the outlook of the company will reflect the coming consumer demand. I prefer to monitor this company for now as the cost of living challenges continue to trouble the typical household.

Market Outlook of S&P500 - 07Oct24

Observations:

• The MACD indicator has completed a top crossover. We should expect a downtrend in the coming days.

• Moving Averages (MA). Both the MA50 line and the MA200 line are on an uptrend. Both MA50 and MA200 lines are below the last candle. Thus, it could be read as bullish for both the mid and the long term.

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

• Chaikin’s Monetary flow (CMF) shows an uptrend. This implies a growing buying momentum.

• 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 dot com, they recommend a “STRONG BUY” based on 1D interval.

22 indicators point to a “BUY” rating and there are zero indicators with a “SELL” rating.

From the above, the technical indicators are pointing to more buying in the coming week.

There are more bearish candlestick patterns than bullish ones.

In my opinion, the S&P500 should start a downtrend soon. The earnings and macro news can play a part to influence the market. The outlook of the companies reporting the earnings can be more significant than the earnings themselves.

News and my thoughts from last week (07Oct24)

How long more before households are crushed under a 28% credit card interest rate? - Forbes

US national debt JUMPED $345 BILLION in 3 days and hit a WHOPPING $35.7 TRILLION, a new all-time high. Since 2020, federal debt SKYROCKETED by $12.5tn while the US GDP by $7.1tn. Debt is rising almost TWICE as fast as the economy. - X user Global Markets Investor

• Debt is one of the likely culprits to bring down the economy. Avoid leverage.

Real estate debt bubble in the US in 2007 looks almost cute in this chart. - X user Michael A. Arouet

• A staggering 75% of inbound containers return to their origin empty, illustrating the complexities of U.S. trade dynamics - QZ

• More than 20,000 shipping containers have tumbled overboard in the last 15 years. Their contents have washed onto shorelines, poisoned fisheries, animal habitats, and added to the ocean trash. Most containers sink to the sea floor. - Independent UK

• Shipping tensions continue after the Houthi drone attack on M/T Cordelia Moon - G Captain

Drewry's World Container Index decreased 5% to $3,489 per 40ft container and routes from Shanghai decreased up to 9% this week. - X user Drewry Shipping

• After Kamala announced that FEMA is providing $750 to households devastated by Hurricane Helene, people were quick to point out how that compares to aid the U.S gives other countries. So far this year, the U.S has given: - $24,400,000,000 to Ukraine - $11,300,000,000 to Israel - $1,950,000,000 to Ethiopia - $1,600,000,000 to Jordan - $1,400,000,000 to Egypt - $1,100,000,000 to Afghanistan  - $1,100,000,000 to Somalia - $1,000,000,000 to Yemen - $987,000,000 to Congo - $896,000,000 to Syria - $9,000 per illegal immigrant that has entered the U.S - X user Mario Nawfal

Port employers are preparing a sweetened offer with an almost 62% pay increase to get striking dockworkers back to work and reopen shuttered ports. The strikes have caused nationwide economic panic, could this be the end of the strike? Source: StockMKTNewz

• What would be the resulting inflation that hits the market? Who else would ask for wage adjustment? Would this lead to a series of wage surges?

• Inflation is a function of federal spending We’d all do well to remember the wisdom of Milton Friedman, who taught that the cost of the federal government is measured not by the tax rate, but the rate of federal spending Congress spends too much That’s what’s driving up prices - X user Mike Lee

• Port strike ends as workers agree to tentative deal on wages and contract extension - CNBC

• Should the strike last 4 weeks, causing almost 7 % of the Global Fleet to be tied up along the US East Coast, the overall impact on the supply and demand equation will be very significant,” commented Sea-Intelligence CEO Alan Murphy. - Sea Trade Maritime

The gap between contract and spot truckload rates just hit a 3-year low of $.43, with contract rates at $2.15/mi and spot rates at $1.72/mi. A $0.30 gap could signal the end of the market cycle. Watch rejection rates closely for the first signs of a shift! Data Source: SONAR_FW

Federal Reserve posted its biggest loss in history of $114 billion last year.

In Q3, the company spent $4.1B buying 414mm shares/52mm ADRs. Reduced shares outstanding by 2.1%. Bravo bravo!!!!

• Warren Buffett and Berkshire Hathaway $BRK.B ended Q2 with 276,900,000,000.00 in cash and cash equivalents How much cash do you think Buffett ended Q3 with?

• U.S. ports from Maine to Texas shut down Tuesday. A lengthy shutdown could raise prices on goods around the country and potentially cause shortages & price increases at big and small retailers alike as the holiday shopping season. - AP News

• Danish shipping giant Maersk has warned that just a one-week shutdown could take four to six weeks to recover from, "with significant backlogs and delays compounding with each passing day." - CNBC

• He was concerned about the “layered leverage” that private equity firms were using to return cash to investors and urged regulators to insist on more transparency about complex forms of debt. From FT.

Delinquency rates of office mortgages backing commercial mortgage-backed securities (CMBS) spiked to 8.4% in September - Wolf Street

• Supply chain is the blood of the economy. They have grounds for their pay hike. To push back automation & innovation will set USA back. There is a place where we can co-exist.

Some highlights from X user The Kobeissi Letter

US homebuyer demand declined by 7% year-over-year in September, building on a similar sized drop in August 2024. Since the 2022 peak, homebuyer demand is now down by a whopping 35%. Meanwhile, Google searches for “home for sale” fell 16% year-over-year and 8% month-over-month. Currently, mortgage demand sits near its lowest levels since 1995. With high interest rates and even higher prices, the housing market is frozen.

Total money supply in the US, the Euro Area, Japan, and China has reached a new record of a MASSIVE $89.7 trillion. Global money supply has skyrocketed by $7.3 trillion over the last year. This marks the largest increase in 3 years and a similar jump to the initial pandemic response seen in the first half of 2020. In the US alone, the amount of money in circulation has surged $410 billion year-over-year, to $21.2 trillion. To put this into perspective, at the beginning of 2020 the US money supply was 27% below current levels. Global money printing is back.

The mortgage demand index reached 142 this month, recording the worst September since 1994. Since 2020, mortgage applications declined 55% and sit 44% below pre-pandemic levels. This is despite mortgage rates falling by 1.1 percentage points since May, to 6.1%, the lowest level since September 2022. Meanwhile, pending home sales have declined for a third consecutive year and hit another record low in August. Lower rates are not helping in housing.

My Investing Muse (07Oct24)

Layoffs & Closure news

• The Ministry of Manpower (MOM) has met with consumer electronics giant Dyson to work on an ‘amicable solution’, after the company gave a labour union just one-day’s notice of its retrenchment exercise. - Straits Times

• Dyson conducted a round of layoffs in Singapore on Tuesday (Oct 1) in a “surprise” move. This comes about three months after a global restructuring that involved about 1,000 job cuts in Britain. - ChannelnewsAsia

• Samsung axes thousands of jobs in global layoff round, including Singaporean ones. - Vulcan Post

• Amazon may eliminate approximately 14,000 manager positions by early 2025, potentially saving up to $3 billion per year, according to a recent Morgan Stanley analysis - Times of India

• Flexport cut about 2% of its U.S. staff this week as the freight forwarder looks to reduce costs and turn around a money-losing business targeting e-commerce. - WSJ

• 73% OF AMAZON EMPLOYEES CONSIDER QUITTING OVER RETURN-TO-OFFICE MANDATE A recent survey reveals that 73% of Amazon employees are considering leaving due to CEO Andy Jassy's decision to enforce a full-time return-to-office policy by 2025. The move has particularly affected morale, especially among working parents. Employees are pushing back, hoping for reconsideration, as inconsistencies across Amazon subsidiaries add to the discontent. Source: CEO World

• GM to begin laying off about 1,700 workers at Kansas plant, WARN notice shows - CNN.

• Not all layoffs are translated into unemployment.

• US job cut announcements are rising: US employers announced 72,821 job cuts in September posting a 53% year-over-year increase, according to Challenger, Gray and Christmas data. The number of layoffs last month marked the third-largest September since the 2008 Financial Crisis. In Q3 2024 alone, companies announced 174,597 job cuts, 19% higher than 146,305 seen in Q3 2023. Year-to-date announced layoffs are now at a massive 609,242, nearly TRIPLE the 2022 number. Cost-cutting has been the major reason for corporate layoffs. Is the labor market really that strong? - X user The Kobeissi Letter

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The number of new hires as a % of total employment dropped to 3.3% in August, the lowest since 2013 excluding the 2020 pandemic. Since November 2021, the hiring rate has fallen by 1.3 percentage points, a comparable decline to the one seen in the 2008 Financial Crisis. The hiring rate has been now below the 2015-2019 average of 3.8% for 14 consecutive months. At the same time, the share of workers voluntarily quitting their jobs is down to 1.9%, the lowest since 2020. In other words, the Americans' confidence that they can find a new position has dropped to recessionary levels. The labor market is weakening.

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Is unemployment set to spike further? Last week, the Fed began another rate cut cycle with a 50-basis points reduction, similar to 2001 and 2007. During those two previous cycles, the unemployment rate jumped by 1.5 and 1.4 percentage points within a year from the first cut. At the same time, job openings dropped by ~29% and ~31%, or 1.5 million and 1.4 million. Falling rates initially did not work to prop up the economy as it takes 6 to 24 months for the effects to be felt. Is the Fed behind the curve again?

Layoff & closure news continued into the week.

Global Manufacturing

GLOBAL MANUFACTURING IS IN A RECESSION - Global manufacturing PMI has contracted for the 3rd straight month in September. New export orders dropped globally at fastest rate in 11 months. Data points to global trade volumes falling 3-4% year-over-year, the most since COVID.

Is this the result of a weakening demand or supply?

My final thoughts

Timing Market and Economic Cycle Phases ...

In a typical market cycle, market peaks and troughs are typical. The market will remove weakness in the market.

A fertility rate below 1.6 means 50% less new people after three generations, say 100 years. Below 1.2 means an 80% drop. The U.S. is at 1.64. China, Japan, Poland, Spain all below 1.2. South Korea is at 0.7—96% drop. Mass extinction numbers. - X user Marko Jukic

For years, most of us are drawn to the crisis of “climate change”. With the recent fertility news, a “population crisis” is creeping up on several of the developed economies. Countries like Japan and China are expecting a significant drop in their population based on current fertility data. Is this one of the “curses” that plagued developed countries where kids are seen as “falling” priority?

The Middle East tension together with that in Russia and Ukraine is bringing much tension to the world market. With the recent conflicts involving Israel and the nearby countries, the market is fearing that this will spill over leading to a bigger war. Some have called this the beginning of a third World War.

I hope that the countries can exercise restraint and seek resolution away from bullets and bombs. With the US presidential election happening in less than one month, we can expect the market to experience volatility.

Warren Buffett and Berkshire Hathaway just cant stop selling Bank of America $BAC shares recently.

Berkshire is sitting on cash pile of over $200 billion. From the above Yahoo Finance news article, Elon Musk has suggested a market correction.

The market has hit recent highs and the S&P500 is inching closer to the 6,000 market. The market looks rosy. Let us consider the risk of debt.

I recommend for us to consider some hedging in lieu of the recent developments.

@TigerStars

$S&P 500(.SPX)$

$Pepsi(PEP)$

$Wells Fargo(WFC)$