To The Moon

Public Holidays

Nil for Singapore, China & the USA

26 May 2023 (Fri) - Hong Kong celebrates Buddha’s birthday

Economic Calendar (22 May 2023)

Economic Calendar for the week starting 22 May 2023

Notable Highlights

• Inflation > PCE - This would be the most watched update for the week. Known as the most watched and preferred inflation indicator for the Fed, this will be one of the key references for the Fed to decide on their next interest rate adjustment. If inflation proves to be sticky, the Fed can maintain its hawkish stand.

• Home sales & Building - Building permits and pending existing home sales (Apr) will be announced. These will give us an update on the development of the real estate market.

• PMI - This reflects the manufacturing outlook and can be a good reference for the market outlook.

• Employment-related> initial jobless claims will reveal the extent of the jobless/unemployment situation, a data point for consideration leading to the final interest rate decision. These will be important data points for the Fed coming to how they should apply interest rates to address inflation with an eye on employment.

• Crude Oil Inventories can be seen as forward indicators of market demand and consumption. If the trend of excess inventories continues, this implies demand erosion that can lead to reduced production & weakening consumer spending. The last crude oil saw a bigger drawdown than expected.

Earnings Calendar (22 May 20230) -

earnings for the week starting 22 May 2023

For this coming week, we have a few earnings of interest namely, ZIM, Zoom, Nvidia and Costco.

Let us look at ZIM in detail.

ZIM shipping line

ZIM's earnings have grown significantly over the past 5 years. This is due to a number of factors, including:

• The strong global economy, which has led to increased demand for shipping services.

• The high freight rates, which have benefited ZIM's bottom line.

• The company's focus on efficiency, which has helped it to reduce costs.

Recent earnings of ZIM (2018 ~ 2022)

ZIM is well-positioned for continued earnings growth in the years to come. The company has a strong balance sheet, a large fleet of ships, and an experienced management team. ZIM is also benefiting from the strong global economy and the high freight rates.

However, there are some risks that could impact ZIM's earnings in the future. These risks include:

• A slowdown in the global economy, which could lead to decreased demand for shipping services.

• A decline in freight rates, which would hurt ZIM's bottom line.

• Increased competition from other shipping companies.

Overall, ZIM is a well-run company with a strong track record of earnings growth. The company is well-positioned for continued earnings growth in the years to come, but there are some risks that could impact its earnings.

The stock has fallen 72.54% from a 1 year ago and it currently ranges along the recent bottom. Its 52-week low is 16.19 and its 52-week high was 71.40.

For the coming earnings, the forecast for the EPS & Revenue is 0.2638 and $1.59B respectively. Will ZIM be able to break upwards from its recent low?

News and my muse - US Debt, banking, supply chain & BRICS

• <Watcher Guru> 30 Countries Now Ready To Accept BRICS Currency

Dubai/UAE and Singapore are preferred migration destinations of the rich.

• BAC sits on $113B of gross unrealized losses in 2022. When a system collapses, it affects all businesses - small and big banks alike.

• <WSJ> PacWest Bancorp fell 23% Thursday, dragging down other midsize banks.

  The bank said in a securities filing that it lost 9.5% of its total deposits last week. PacWest stock was halted several times because of volatile trading.

• United States NY empire state manufacturing index fell 31.80 compared to forecast of 3.70 decline.

  Much worse than expected.

• <FreightWaves> The Port of Long Beach said that April imports fell 22% from the year before. Taiwanese ocean carriers Evergreen & Yang Ming reported that Q1 profits plunged 95% & 94% year-on-year (y/y), respectively. South Korean carrier HMM's Q1 net income sank 91% y/y. The prior week, Maersk reported a 66% y/y fall in Q1 net income on a 37% decline in freight rates. Hapag-Lloyd reported a 57% y/y drop in net income as its rates fell 28%.

• <CNBC> The total for borrowing across all categories hit $17.05 trillion, an increase of nearly $150 billion, or 0.9% during the January-to-March period. That took total indebtedness up about $2.9 trillion from the pre-Covid period ended in 2019.

We have varying degrees of investor bias, customer bias, cultural bias, brand loyalty & more. It is important for us to be objective coming to our investing decision-making.

• The supply chain can be a good forward indicator for economic activities.

• <CNEVPost> On May 15, a plot of land of more than 520,000 square meters in Shenzhen's Shenzhen-Shanwei Special Cooperation Zone was acquired by BYD for RMB 376 million ($5.4 million), according to an announcement by the local government.

• <Bloomberg> China's April eco data is not pretty. Estimates missed across the board - and 2022's comps were low due to the lockdown in Shanghai.

  *Industrial production +5.6% y/y (+10.9% est)

  *Retail sales +18.4% y/y (+21.9% est)

  *Youth unemployment at a record 20.4%

Institutional investors have been dumping stocks for the last 12 months.

• US Delinquency Rates by Category:

  1. Credit Cards: 4.6%

  2. Auto Loans: 2.4%

  3. Student Loans: 0.9%

  4. Mortgage Debt: 0.6%

  5. Home Equity: 0.5%

  6. Other: 4.4%

  Currently, 2.6% of outstanding debt is in some stage of delinquency.

  All of these categories are up sharply over the last year except student loan debt.

  However, this summer payments on student loans will resume for the first time since the pandemic.

  Student loan debt will further the debt crisis.

• <WSJ> Schwab Taps Credit Markets to Raise $2.5 Billion in Debt

  Will there be takers?

• <Oilprice> According to Baker Hughes data, U.S. oil and natural gas rig count has declined 6% in the year-to-date to 731 last week. Especially the dropoff in natural gas drilling has surprised analysts. The International Energy Agency forecast that global oil demand would hit 102 million barrels daily, driven by China, whose oil demand reached 16 million bpd 2 months ago. Oil demand should grow by 2.2 million bpd this year.

• «Business Insider> More layoffs could be on their way at big tech firms as bosses prepare to tighten on the "laptop generation," according to Gene Munster.

• <CGTN> Smartphones with Qualcomm chips were found to send private user information, including IP address, unique ID, mobile country code, "without user consent, unencrypted, and even when using a Google-free Android distribution," said the report.

• <CTVNews> Canada has the highest debt in the G7, with household debt representing 187% of net disposable income in 2022, according to figures released by the Organization for Economic Cooperation and Development.

• <CBS News> Americans are carrying a record $986 billion in credit card debt, up 17% from last year. Inflation is causing many people to lean on credit cards to cover monthly expenses and most people are paying heavy interest on that debt.

• <FreightWaves> Inventory destocking has gone on longer than expected. Pressures on consumer demand are building. Trans-Pacific shipping capacity is not down as much as predicted. Spot rates bumped up in mid-April but have eased since & remain weak.

Market Outlook - 22 May 2023

S&P500 1D chart as of 20 May 2023

Technical observations of the S&P500 1D chart:

• The stochastic indicator is on an uptrend.

• The MACD indicator is on an uptrend.

• Moving Averages (MA). The MA50 line implies an uptrend in the mid-term. The MA200 line is turning upwards and implies an uptrend in the long term. With the last candle being above both the MA50 line and MA200 lines, this can be interpreted as an uptrend in the mid-term and the long term.

• Exponential Moving Averages (EMA). The lines are on an uptrend and have started a fanning-out pattern. This implies an uptrend and should be on an uptrend in the short term.

From the list of technical indicators (1D interval), they are pointing to a “Strong Buy” ie an uptrend. Out of the 23 technical indicators and moving averages, we have the following:

• 0 neutral

• 20 Buy

• 0 sell

From the technical indicators, the market should be on an uptrend in the coming week.

My investing muse - Debt ceiling & Economic data

From the Economic data above, most of the data look less favourable except for initial jobless claims that came at a lesser 242K than the forecast of 254K.

Philadelphia Fed Manufacturing Index came in lesser at -10.4 than -19.8. There are also lesser existing home sales and building permits compared to the forecast. Crude oil consumption came in much lesser than expected and this reflects how the producer foresee the coming consumption.

Yet the technical indicators point to a coming uptrend in the coming days.

Debt Ceiling

The debt ceiling issue was the result of the US government spending more than its collection. In any household & business, we have learnt to spend within our means as parents and business leaders. It is not unreasonable for us to expect our governments to spend within our means too. As the global reserve currency, the US’s ”printing of money” could lead more countries to go the de-dollarization route.

Eventually, the debt ceiling would be raised and some drama would be expected as the politicians pull their weight to conclude this unnecessary chapter.

Without sounding unreasonable towards the unexpected Covid pandemic, the US could not keep kicking the can down the road. The interest paid for the debts has exceeded the defence spending.

Spending on interest will exceed spending on a number of categories over the next decade

This is a red flag for financial misappropriation. I am not a US citizen but the US is not trending in the right direction. With increasing domestic issues like debt, racism and violence, the US needs to sort out their internal issues and prioritize their citizens above external issues. What happens to the US can and will have an impact on the global economy.

Conclusion

The market is expected to climb based on technicals with AI being the rage. With the recent earnings season coming to an end, it did come across better than initially expected.

I recommend caution as we move into a volatile week, largely influenced by PCE and the debt ceiling drama.

@TigerStars

$ZIM Integrated Shipping Services Ltd.(ZIM)$

$S&P 500(.SPX)$