To The Moon

Public Holidays

There will be no public holidays in Singapore, Hong Kong, The USA or China in the coming week.

Economic Calendar (09Dec24)

Notable Highlights

• The most watched macro data will be the Core CPI and CPI data. This is one of the references for inflation. This would be closely watched data as the Federal Reserve is likely to have this as part of the consideration for the coming interest rate decision in Dec 2024.

• The next important economic data will be PPI. This represents the inflation that hit producers/manufacturers - an amount that is likely to translate into inflation for the consumers when their products hit the shelves. This can be seen as a prelude to CPI (inflation). If there is an increase in PPI, the impact will also be seen in CPI.

• The 10-year Note auction will be a good marker for the bond market. If this rate falls, this can be favourable for the stock market as bonds and shares (typically) move in opposite directions.

• 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 (09Dec24)

There are a few earnings of interest namely C3.AI, Oracle, Adobe, Costco, Broadcom and GameStop.

It is interesting to know what are the financial performance of the AI companies. Let us look at C3.AI

C3 is an enterprise AI software company with a suite of solutions.

Investing dot com has recommended a “Strong Buy” rating based on technical analysis and a “Neutral” rating based on Analysts Sentiment. The price target is $25.55 which implies a downside of 36.94% based on the latest price.

Observations:

• Revenue grew from $92M (2019) to $311M (2024).

• Gross profit grew from $61M (2019) to $179M (2024).

• Earnings per Share (EPS) continued in the negative and grew with more losses from -$0.45 (2019) to -$2.34 (2024).

• Operating profit continues to be negative (in losses). It started with a loss of $36M (2019) and reached a loss of $318M (2024).

• P/E ratio remains -18.5.

• It is concerning to note a declining trend for gross margin and increasing operating losses over the years.

• The more revenue is incurred, the more operating losses C3 suffers.

For the coming earnings forecast, the EPS and revenue are -0.136 and $91.06M respectively.

Given the financials, I prefer to stay away from C3 for now.

Market Outlook of S&P500 - 09Dec24

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. However, there seems to be more selling momentum than buying. This can lead to a potential trend change.

From the 20 indicators, all are pointing to a “Strong Buy” rating for the S&P500 (for Daily interval). 21 indicators recommend a “Buy” and none recommend a “Sell”.

From the candlestick pattern, the latest seems to point to a more “bearish” outlook.

From the above, the S&P500 should continue its uptrend but we see falling momentum from this bullish run.

News and my thoughts from last week (09Dec24)

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67 $SPX companies have issued negative EPS guidance for Q4 2024, which is above the 5-year average of 56 and above the 10-year average of 62 - X user FactSet

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FOMO (Fear of missing out) can be a crippling emotion that can drive us to buying too late & selling too early. Emotional management is key to long-term success. I have exited some of my positions as weakening fundamentals or overvaluation provide opportunities to take profits & stop losses. Let us take stock of our 2024 lessons, adding refinement and better controls to our investing strategy for 2025.

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The Conference Board Leading Economic Index® (LEI) for the US declined by 0.4% in October 2024 to 99.5 (2016=100), following a 0.3% decline in September (revised up from a 0.5% decline). Over the six-month period between April and October 2024, the LEI fell by 2.2%, slightly more than its 2.0% decline over the previous six-month period (October 2023 to April 2024). - CBO

• November 2024 Logistics Manager’s Index Report® LMI® at 58.4 Growth is INCREASING AT AN INCREASING RATE for: Inventory Costs, Warehousing Capacity, Warehousing Prices, Transportation Capacity, and Transportation Utilization. Growth is INCREASING AT A DECREASING RATE for: Inventory Levels, Warehousing Utilization and Transportation Prices. - the LMI

• The dual threats of tariff hikes and port strikes continue to buttress ocean freight rates through what is historically a post-peak trough. - Freightwaves.

  How supply chain benefits from the different challenges.

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US-based firms announced 57,727 job cuts in November, the third-highest number since the 2008 FINANCIAL CRISIS. Year-to-date there have been 722,566 job cuts, the largest amount since 2009 (Financial Crisis), excluding the 2020 Crisis. - X user Global Markets Investor

• OPEC+ WILL INCREASE OIL OUTPUT UNTIL SEPTEMBER 2026 - IFX. X user Financial Juice

• If our investments are causing us sleepless nights, let us consider reducing our portfolio. To gain wealth in exchange for health is never a good deal. Money - we can always make it if we are in good health. I am not sure about vice versa. I prefer to take long-term positions so that I can go on and enjoy this “limited” life that I have. Let us find the investing strategy that works well for us. keep well and avoid leverage.

• Be thankful for the profits that we took. It is hard to buy at the bottom & sell at the peak. Profits need to be realized. The market seems overvalued and let us remember to take some profits off the table. Personally, I have exited 75% of my crypto.

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Mag 7 just reached its lowest volume in years. The last time we had similar conditions, it was very close to a significant top. - X user Guilherme Tavares

• S&P500 is a better reflection of some top MNCs. This index is not a reflection of the US economy. Unless debts can trend in a different direction, hedging should be considered. Don't leverage.

• In November, $176.5 million across nine loans were resolved with $100.0 million in losses total, carrying an average loss severity of 56.67% for the month. This was an increase in loan loss volume from October where losses totaled $47.3 million. - Trepp

• E-commerce to drive air cargo industry expansion through 2043 - Yahoo Finance

• Egyptian authorities are scrambling to salvage the VSG Glory, a cargo ship that began sinking after being stranded for 10 days at the Red Sea - Reuters. What are the financial & ecological impacts? - Reuters

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• OIL major Exxon Mobil Corp. is considering a sale of its gas stations in Singapore, which could raise about US$1 billion, according to people familiar with the matter. - Business Times

• China told the U.S. to find its own gallium, germanium, and antimony, slapping a ban on these high-tech minerals used in chips, batteries, and even military gadgets. The move? Payback for U.S. export controls on Chinese chip-making tech. The U.S. depends on China for over half its supply of these minerals, and with prices already soaring—antimony’s hit $25,000 per ton—this ban might sting. Hope those chip factories find a Plan B fast. China calls it “protecting its rights.” Critics call it “trade war 2.0.” Either way, the tech world just got a whole lot more expensive. Source: AP

• Banks that issue credit cards used by millions of consumers raised interest rates and introduced new fees over the past year in response to an impending regulation that most experts now believe will never take effect. - CNBC

• CHINA’S TRAINS SURPASS PLANES' SPEED WHILE THE US KILLS ITS POTENTIAL WITH USELESS REGULATIONS China's next-gen maglev trains, capable of reaching 1,000 km/h, aim to outpace aeroplanes using magnetic levitation in near-vacuum tubes. Powered by 5G for seamless communication, these high-speed marvels showcase China's leap in transportation technology. While Beijing pushes the limits of innovation, U.S. progress remains bogged down by regulatory overhead. Will the U.S. reform its systems to compete, or risk falling behind in the face of other countries’ relentless advancements?

• In 2024, Berkshire Hathaway, Buffett's investment behemoth, is set to rake in $776 million in Coca-Cola dividends alone.

From X user The Kobeissi Letter

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The number of hires as a % of total employment fell to 3.3% in November, the lowest level since 2020. Over the last 3 years, the hiring rate has declined by 1.3 percentage points, the biggest decline on record. In effect, the hiring rate has been below the pre-pandemic average of 3.8% for 14 straight months. This also puts the hiring rate significantly below the 2001 recession levels. Outside of the pandemic, we are now seeing the biggest drop in the hiring rate since 2008. The US labor market is freezing.

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How bad the US debt crisis has become? US net interest payments on national debt hit a $1.12 TRILLION annual rate in Q3 2024, a new record. This is TWICE the amount seen in 2021, according to the Bureau of Economic Analysis data. As a result, interest as a % of government revenue hit 18%, the highest in 30+ years. Interest expense now exceeds government spending on R&D, infrastructure, and education COMBINED. Meanwhile, the national debt reached $35.95 TRILLION this week, a new all-time high. Something must change here.

The authorities need to be both effective and efficient. Let us consider sustainability as part of the equation. The future generation would be forced to carry the weight of debt. This is fiscal mismanagement.

My Investing Muse (09Dec24)

Layoffs & Closure news

• Intel's biggest revenue decline in five quarters to hit amid broad layoffs and missed AI boom - Calcalitech.com

• UK-based wealth manager St James’s Place is planning to cut about 500 jobs in an attempt to reduce costs under chief executive Mark FitzPatrick. - FT

• Cargill plans to cut around 5% of global employees, internal memo says - Yahoo Finance

Layoffs could be companies trimming their fats or their efforts to stay afloat. This may not always be bad news.

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US restaurant bankruptcies are accelerating: There have now been 14 bankruptcies in restaurant chains with $20+ million in revenue this year, the highest number since 2020. This is up 133% compared to 2022 when 6 large chains with at least $20 million in annual revenue went bankrupt. This comes as restaurants have been materially hit by elevated interest rates, rising labor costs, and declining sales. Revenues are declining as US consumers are eating out less often due to inflation. Restaurant prices have increased by ~44% over the last decade, according to Black Box Intelligence. Eating out in the US is a luxury. - X user the Kobeissi Letter

The cutting of luxuries hints at the purchasing prowess of the consumers. Fine dining and entertainment are amongst the first to go during the affordability crisis. Let's monitor.

This next section is taken from Grok 2+ FLux (beta).

Last week saw several notable layoffs across various sectors in the United States:

• Vox Media: The company announced layoffs and reorganization of its lifestyle properties, including Eater, PS (formerly PopSugar), and Thrillist, right before the holiday season. This move has drawn significant criticism for its timing and execution.

• Tech and Manufacturing: Layoffs were reported in the tech sector with companies like Microchip Technology and in manufacturing with companies like Ford and Bosch. The exact numbers of these layoffs weren't specified in the sources provided, but the trend indicates significant job reductions.

• Other Sectors:

  Fiserv, Inc. announced over 1,500 staff cuts across the U.S.

• Toro Corp. in Minnesota cut more than 300 office staff positions.

• NovaBus increased its staff reduction, though specific numbers weren't detailed.

• Wells Fargo, FedEx, ITC Federal, Dwarf House Group, LLC, Russ David Wholesale, Inc, Brown Brothers Resources Holdings, and Kashaco, Inc. also announced layoffs, with numbers ranging from 721 at Wells Fargo to smaller figures at the others.

• General Layoff Trends: There's a continued increase in layoffs with November seeing 57,727 job cuts announced, marking a 27% year-over-year rise. The automotive sector led with 11,506 layoffs, indicating a high level of job cuts in this industry.

This reflects a broader trend of companies adjusting to economic conditions by reducing the workforce or restructuring operations. However, these numbers might not capture the full scope of layoffs across all sectors or companies, as some layoff announcements could be smaller or not publicized in the same manner.

Is America having an affordability crisis?

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74% of US residents earning less than $50,000 annually are struggling to afford their mortgage or rent payments. To cover monthly housing costs, 43% of these people had to eat out at restaurants less often, according to a Redfin survey. 36% took no or fewer vacations while 25% borrowed money from family or friends. Even worse, 24% admitted that they skipped meals to afford housing payments. Meanwhile, the share of apartments renting for under $1,000/month fell to 32%, the lowest on record. Housing affordability has never been worse.

Is there light at the end of the tunnel? There should be a quality of life baseline that provides dignity and respect for all.

My final thoughts

This will be another interesting week with the CPI & PPI data. I am unsure if this has any significance over the coming interest rate decision. We can expect some market volatility as the market inches towards new heights.

As we enter the last weeks of Q4/2024, we should receive some businesses’ 2025 outlook. At the same time, it can be timely for us to review our portfolios to cut losses and take some profits off the table.

I like my portfolio to do well in good and not-so-good times. With the current debt situation, I have been hedging. Let us research before investing, spend within our means and avoid leverage.

@TigerStars

$C3.ai, Inc.(AI)$

$.SPX(.SPX)$