To The Moon

Public Holidays

There are no public holidays in Singapore, Hong Kong, America, or Singapore in the coming week.

Economic Calendar (14Oct24)

Notable Highlights

• Core retail sales will bring insights into consumer and their consumption demand.

• Retail sales figures are expected to rise 0.3% as per forecast. This reflects the demand for retail consumption.

• Another important data that we should consider is China’s GDP which will be revealed on Friday. China remains the global factory of the world and the GDP can be also seen as global demand despite the sanctions that are in place.

• Philadelphia Fed Manufacturing Index will also reveal the status of the manufacturing sector.

• Initial jobless claims will be announced. The Federal Reserve uses this as one of the key macro data references as it balances 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 (14Oct24)

Q4/2024 has started. We have some interesting earnings namely, Citi, ASML, TSMC, Netflix and Goldman Sachs.

Let us look at Netflix.

Observations about Netflix.

• Revenue grew from $5.5 billion in 2014 to $33.7 billion in 2023.

• Gross profit grew from $1.7 billion in 2014 to $14 billion in 2023.

• The operating profit grew from $403 million in 2014 to $6.9 billion in 2023.

• Earnings per share grew from $0.62 in 2014 to $12.03 in 2023.

• The price-earnings ratio is 44.2.

• The 10-year median margin gross profit stands at 37.6%.

• The 10-year median margin for free cash flow stands at a negative 6.7%.

The stock grew 103.21% from a year ago.

Investing dot com has a “Strong Buy” rating from Technical Analysis.

For Analysts’ sentiment, there is a “Buy” rating with a target price of $712.28 (that suggests a downside of 1.45%).

For the coming earnings, the forecast of the EPS and Revenue are $5.10 and $9.77B respectively.

Netflix looks to be on track for another record earning and its outlook will be key on how the market will respond to the earnings. I am not sure if Netflix is able to double again but the growth trend looks strong. This is one stock that I am feeling mixed towards - popularity of their shows are not guaranteed.

Market Outlook of S&P500 -14Oct24

Observations:

• The MACD indicator is showing an uptrend.

• 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 more buying momentum 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.

They recommend a “STRONG BUY” based on a 1D interval from investing dot com.

21 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 seems to be 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 in influencing 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 (14Oct24)

• CHICAGO CARGO TRAIN LOOTED BY 50-150 PEOPLE IN CHAOTIC SCENE An estimated 50 to 150 people are actively looting and breaking into a cargo train on the west side of Chicago, Illinois. Police have been dispatched to the scene to address the ongoing incident, with reports indicating individuals are stealing boxes of items, possibly including TVs, from the train's containers. Witnesses describe the situation as chaotic, with looters working quickly to empty the cargo. Source:

  rawsalerts

• Kamala Harris says Iran is the United States biggest enemy, not Russia or China.

• Fitch says Hurricane Milton will push 2024 insured losses over $100 billion - Reuters

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*U.S. SEPTEMBER PPI INFLATION RISES 1.8% Y/Y; EST. 1.6%; PREV. 1.9%

• Inflation rate hit 2.4% in September, topping expectations; jobless claims highest since August 2023 What should the Fed do? - CNBC

• Wedbush’s Dan Ives just said Tesla $TSLA is the most “undervalued AI name in the market” Here’s Dan Ives talking about his bull case following Robotaxi day - CNBC

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Milton is hitting on the heels of two major market-disrupting events: the International Longshoremen’s Association (ILA) strike and Hurricane Helene. What would be the impact or complications? - Freightwaves

• Shippers are about to experience significant pain. Milton is going to create a massive surge in freight demand, coming from hurricane relief loads, followed by recovery, and then rebuilding. Retailers that preordered inventory to prepare for a strike that has been stopped are going to start their inventory liquidation processes over their holidays. That means that inventory, currently in warehouses, is going to start moving towards the distribution networks and retail locations. No retailer wants to hold on this inventory for a long time. - X user Craig Fuller

  Challenges like weather, geopolitics benefit the supply chain industry amidst the disruptions. There would be delays, cancellations and also cost inflation.

• "Jim Cramer says strong jobs report suggests no imminent recession — and that's good for stocks," per CNBC.

• It is not about America raising the debt ceiling but about the countries realizing that America has no means or intent to pay back (the treasuries).

From X user The Kobeissi Letter

The Fed's worst nightmare has begun:

1. Core CPI inflation rises to 3.3%, the first increase since March 2023

2. 258,000 people filed for unemployment this week, above expectations of 230,000 Once the September jobs report is revised sharply lower, it will reveal the Fed's nightmare situation. Rising inflation with rising unemployment.

CPI is going up against expectations. What's the next move of the Federal Reserve? Will it get worse with insurance premium surge after the hurricanes and the supply chain costs after port strike?

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Global manufacturing is contracting:

The Global Manufacturing PMI index fell to 48.8 points in September, down from 49.6 in August, marking the 3rd straight monthly contraction. 4 of the 5 index components shrunk last month including output, new orders, employment, and stocks of purchases. Furthermore, new export orders declined at the fastest rate in 11 months. This implies that global trade volumes could be decreasing now by 3-4% year-over-year. Meanwhile, manufacturers' business optimism fell to a 22-month low, suggesting a grim outlook for the next few months. Another clear sign of a slowing global economy.

Is this a demand or supply issue for a contracting manufacturing sector?

My Investing Muse (14Oct24)

Layoffs & Closure news

• TikTok Reportedly Lays Off ‘Hundreds’ of Malaysia-Based Content Moderators Following ‘AI Hub’ Announcement - Digital Music News

• Boeing to lay off 17,000 workers, delay 777X rollout amid machinists strike - UPI

• US partners at EY have been told the firm will hold back some of their pay for 2024 after a tough financial year. - FT

• The Big Four accounting firm told employees last week that it would embark on a re-organization of areas of the business affecting about 2,700 staff and partners - FT

Layoff & closure news continued into the week.

Earnings and market overvaluation

The trailing 12-month P/E ratio for $SPX of 26.7 is above the 5-year average (23.8) and above the 10-year average (21.7). - Factset

Can innovation improve productivity and thus, bring down the cost of operations? Is the P/E remaining elevated due to profits? The increase in P/E implies that the price of stocks are growing at a faster pace than the earnings of the businesses. Is this an overvaluation?

P/E ratio for Palantir (PLTR) as of October 2024 (TTM) is 719. At the end of 2022 the company had a P/E ratio of -33.8. Is Palantir undervalued?

If we wonder what does the P/E ratio imply, Palantir’s P/E ration at 719 meant the following:

If we buy all the stocks of Palantir, it will take us 719 years to recover our investment (based on the earnings). The P/E ratio cannot be the only indicator that is used to value a business. However, this does help to put some aspects into perspective.

Private Equity - are you the next to fall over the cliff of interest rates?

Private equity market size in the U.S. forecast 2024-2027

Published by Statista Research Department, Mar 27, 2024

The private equity (PE) market size in the United States is expected to reach 460 billion U.S. dollars in 2024. By 2027, the U.S. PE market is forecast to increase to 765 billion U.S. dollars, with a compound annual growth (CAGR) of 11 percent.

The size of the global private equity market now commands a staggering $4.5 trillion assets under management (AUM) according to industry reports and data, a testament to its ever-growing appeal. - From a recent Linqto post

Private equity relies on leveraged buyout. These transactions – which account for roughly three out of every four dollars of all private equity deals: you buy a business using a ton of debt, or leverage. - The Guardian article.

Given the high interest rates, could the Private Equity market be the next to fall?

Debts

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Federal student loan debt hit $1.61 trillion in Fiscal Year 2024, near the highest on record. Since 2007, US student debt has TRIPLED, according to the National Student Loan Data System. ~10 million borrowers, accounting for over 25% of the total, were behind on their student loan payments this year. After years of interest free student loans, borrowers are struggling to pay back their debt. The student loan crisis is back.

The U.S. government deficit hit a staggering $1.9 trillion in the first 11 months of FY 2024, with a $380 billion jump in August alone, per the Treasury Department. Over the last 12 months, the deficit stands at $2.1 trillion, equal to 7.3% of GDP. Government spending reached $6.9 trillion, 24.4% of GDP, while interest expenses soared to a record $1.12 trillion—doubling in just two years.

Auto loan delinquency rates keep on rising in the US: Subprime auto loan delinquency rates just crossed above 4% for the first time on record. The 60-day delinquency rate for subprime auto loans has more than DOUBLED in just 3 years. Delinquency rates now exceed both 2008 and 2020 levels. At the same time, prime auto loan delinquencies spiked to their highest since 2011. Meanwhile, car insurance costs skyrocketed 15% in the first half of 2024 to an average of $2,329, the most on record. The car market bubble is popping.

Who will be affected by the auto loan delinquency? How can the banking and auto market recover from this?

Will debts be one of the stumbling blocks of the economy?

My final thoughts

Some of us are excited about the market, expecting S&P500 to hit new heights. Some of us are concerned that the fundamentals of the economy are showing cracks in debts, inflation and unemployment.

These can co-exist. I have learnt that market highs are and lows are typical of cycles - the weak will be removed and the market is reset, hopefully for the better. A deeper look into the economies should reveal more concerns as some companies like the Magnificent 7 are the ones moving the market.

The below segment is taken from a recent post by Visual Capitalist:

The S&P 500 Equal Weight Index is Falling Further Behind

This graphic compares the performance of the S&P 500 to the S&P 500 Equal Weight Index (EWI) over the past five years, using two representative ETFs (SPY & RSP).SPY is the largest ETF tracking the S&P 500 ($585B in AUM), while RSP is the largest ETF tracking the S&P 500 EWI ($64B in AUM). from the Visual Capitalist Post.

From the above, it seems that the market is doing much better. Was this partly due to the interest rate cut and also China’s recent stimulation in the market?

My muse involves leverage for this coming week.

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The above quotes are taken from X user BrianFeroldi.

“Having a large amount of leverage is like driving a car with a dagger on the steering wheel pointed at your heart. If you do that, you will be a better driver. There will be fewer accidents but when they happen, they will be fatal.” - Warren Buffett

I recommend for us to spend within our means, avoid leverage. Let us research before investing and if possible, let us consider some hedging. Let us take care and invest well.

@TigerStars

$.SPX(.SPX)$

$SPDR S&P 500 ETF Trust(SPY)$

$Netflix(NFLX)$