February 27, 2024

What You Need to Know Today:

Economy looks good, economists say, but real estate credit market is scary bad

Economy looks good, economists say, but real estate credit market is scary bad

This probably isn’t a part of the credit market you watch–even if you watch the credit market. But 8.6% of commercial real estate loans bundled into collateralized loan obligations (CLOs) were classed as distressed in January, according to a report by analytics firm CRED iQ, Bloomberg reported Friday. That’s a 480% increase in distressed loans in CLOs since February 2023. The culprit, again, is real estate loans that have gone bad.

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Nvidia lifts most but not all tech boats

Nvidia lifts most but not all tech boats

Yesterday, Thursday, February 22, Nvidia (NVDA) gained 16.40% at the close after beating Wall Street expectations on earnings and revenue after the market close on Wednesday. And then raising guidance for the rest of 2024. But what most interested me on Thursday were what tech stocks Nvidia carried higher with it–and which stocks it didn’t.

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Live Market Report (20 minute delay)

Economy looks good, economists say, but real estate credit market is scary bad

Economy looks good, economists say, but real estate credit market is scary bad

This probably isn’t a part of the credit market you watch–even if you watch the credit market. But 8.6% of commercial real estate loans bundled into collateralized loan obligations (CLOs) were classed as distressed in January, according to a report by analytics firm CRED iQ, Bloomberg reported Friday. That’s a 480% increase in distressed loans in CLOs since February 2023. The culprit, again, is real estate loans that have gone bad.

Nvidia lifts most but not all tech boats

Nvidia lifts most but not all tech boats

Yesterday, Thursday, February 22, Nvidia (NVDA) gained 16.40% at the close after beating Wall Street expectations on earnings and revenue after the market close on Wednesday. And then raising guidance for the rest of 2024. But what most interested me on Thursday were what tech stocks Nvidia carried higher with it–and which stocks it didn’t.

Please Watch My New YouTube Video: Doldrums from now through April

Today’s video is Doldrums from now through April.. Doldrums are, “a state or period of inactivity, stagnation, or depression” or, in nautical terms, the places where tradewinds converged and ships were left stagnant on the ocean until a storm or the wind picked up to get the vessel back in motion. The recent stock plunge of 26% from Palo Alto Networks (PANW) certainly doesn’t feel like a market that is stagnant or waiting for a change in the winds, but I think that’s what we’ll see going forward. After Nvidia’s report, there aren’t any big earnings reports expected until April and we’ll likely be moving sideways until the Fed sets the market sailing with a rate cut. The odds of the Fed not doing anything at the March meeting according to the CME Fedwatch are up to 90%. That rate cut expectation has now moved solidly to June or July with the CME Fedwatch polling at 75% for June and 90% for June or July. Until those rate cuts happen, and with little to no market-moving earnings reports expected in the months between, the stock market will be drifting in the doldrums while we wait for the wind to pick up.

Yes, I’d buy Palo Alto Networks today–with these caveats

Yes, I’d buy Palo Alto Networks today–with these caveats

After yesterday’s earnings report–the company beat Wall Street estimates for the quarter–and radically lower guidance for next quarter and the rest of 2024–total billings for next quarter will grow by just 2% to 4% and revenue for all of 2024 will grow by just 15% to 16% from 2023–shares of Palo Alto Networks (PANW) took a big hit right between the eyes. The stock fell 28.44% at the close and lost $104.12 a share to $261.97. What do I recommend? I’d say “buy” with a couple of caveats. Why buy?

Palo Alto takes a beating after it lowers guidance; preview of Nvidia tomorrow?

Palo Alto takes a beating after it lowers guidance; preview of Nvidia tomorrow?

t should be a familiar story in this priced-to-perfection market: Company beats big in current quarter but lowers guidance and stock takes a dive. Latest victim? Palo Alto Networks (PANW). The stock is down 14.09% at 4:30 New York time today. And with Nvidia scheduled to report tomorrow after the close, you can bet the market will be on edge tomorrow.

Don’t stand in front of the Nvidia train right now–shorts lose $3 billion and counting

Get ready for the Nvidia circus

Can you hear the barkers yelling to the crowd? It’s Wall Street analysts rushing to raise their target prices for Nvidia (NVDA) ahead of next week’s quarterly earnings report. On February 21, after the close, Nvidia is expected to report earnings of $4.18 share, up from $0.65 a share in the quarter a year ago, on revenue of $20.5 billion. And even though the stock is up 47% for 2024 as of the February 15 close and up 219% for the last year, Wall Street analysts are rushing to increase their target price on the shares.

Please Watch My New YouTube Video: Quick Pick Cheniere Energy

Please Watch My New YouTube Video: Quick Pick Cheniere Energy

Today’s Quick Pick is Cheniere Energy (LNG). Cheniere is a liquified gas supplier  and the stock was down about 7.5-8% this year. Much of that drop was a reaction to the Biden administration’s decision to delay permits for new LNG export facilities in order to put pressure on the industry to decrease their methane emissions. However, this is essentially a non-issue for Cheniere since the company’s most recent expansion had already been permitted. The company is on track to go from a capital-intensive/debt heavy stage to putting billions into new sites and export facilities to a generator of free cash flow from those completed facilities.  The current dividend is only 1.05% but the total yield, (dividends plus stock buybacks) is about 6.05%. Management has said they believe there will be enough free cash flow to raise the dividend rate by 10% a year from now until the mid to late 20s. In my opinion, demand for LNG is shifting as markets like Japan and China are transitioning to nuclear or solar and wind, but there is still growing demand from places like India, which is looking to transition away from coal. Cheniere is predicting 3% annual revenue growth and I think that’s reasonable and enough to keep the cash flow and dividends moving. I will be Cheniere to my Dividend Portfolio on those future yield prospects.

Another day, another hotter than hoped inflation number

Another day, another hotter than hoped inflation number

The Labor Department reported Friday that its producer price index—which tracks inflation before it reaches consumers—rose 0.3% from December to January. The index had dropped -0.1% in December. Measured year over year, producer prices rose by 0.9% in January. But the month to month increase in producer prices and at a higher month to month rate is the latest sign that getting inflation the “last mile” down to the Federal Reserve’s 2% target rate is going to be harder and take longer than expected.

Please Watch My New YouTube Video: Inflation Stickier for Longer

Please Watch My New YouTube Video: Inflation Stickier for Longer

Today’s video is Inflation: Stickier for Longer. The market is now beginning to suspect that the Fed has a last mile problem. The CPI numbers from Tuesday weren’t terrible, but they weren’t as low as the market hoped. Headline inflation was at 3.1% annual rate and core inflation was 3.9%–markedly better than the past high of 9%, but not quite hitting the 2.9% for headline inflation that economists were looking for. The miss has finished a flip in sentiment about a March rate cut. The CME FedWatch poll in January had March rate cut odds at 90% likely, now, just a month later, the odds of no action are up to nearly 90%. Only about a third of investors believe there will be a rate cut in May with odds of no action up to 61%. The calendar is being pushed out to June or July for cuts from the Fed. This has resulted in bond yields going back up, around 4.3% on the ten year Treasury, and stocks going down a bit. There is a hope out there that the CPI numbers were a January blip, but if you look at the breakdown of the inflation numbers, it seems clear that inflation is just plain sticky. The Atlanta Federal Reserve Bank index that looks at the sectors that tend to be sticky and how much they’re influencing the overall inflation rate shows that prices in those sticky inflation categories have stopped and that they are a major factor keeping inflation higher than hoped. . Additionally, while there’s been a big drop in goods prices, the price of services has not gone down nearly as much. The super core inflicts number, which looks a prices in the services sector after taking out the cost of shelter has stalled. All this to say, we’ve got good evidence that this last mile from 3% to 2% on inflation could take a while.

Special Report: 10 Penny Stock Homeruns #6 LYSDY

Special Report: 10 Penny Stock Home Runs Pick #5 VWDRY

My 10 Penny Stock Homeruns Pick #5: Vestas Wind Systems (VWDRY).

Technically, the Vestas Wind Systems ADR (VWDRY) isn’t a penny stock. By the strict definition, a penny stock sells for $5 or less and the Vestas ADR closed on $9.06 today, February 14. But I included Vestas in my previous penny stock list back on July 11, 2022, even though the stock closed at $7.80 that day. With the company reporting a return to profitability for 2023 in its fourth quarter earnings report released today, I think Vestas has (finally) turned the corner. And, frankly, I just don’t want drop it from this list just as things get good again for the company and its investors. (Vestas is a member of my Jubak’s Picks Portfolio. The position is up 65.6% since initiation on March 4, 2019.) Tomorrow, February 15, I’ll also add Vestas to my long-term 50 Stocks Portfolio.

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