September 25, 2022
What You Need to Know Today:
The Federal Reserve continues to believe in Goldilocks
Yes, the Federal Reserve got a lot more pessimistic on economic growth, inflation, and interest rates in the Dot Plot projections released on Wednesday, September 21. For instance, the Fed’s median projection for real growth in the U.S. economy for 2022 dropped to 0.2% the year to year in the fourth quarter of 2022 from 1.7% in the June projections. And for 2023 the Fed’s projections dropped to an annualized rate of 1.2% in the fourth quarter from an earlier projection of 1.7%. But the Fed is still a firm believer in fairy tales. That of Goldilocks, specifically, where the economy and Fed policy turn out to be “just right.”
Saturday Night Quarterback says (on a Sunday), For the week ahead expect…
Every bond market analyst worth his or her salt is watching for signs of liquidity problems and a ramp-up in volatility in the bond market
Financial markets don’t like falling share prices, but Bear Markets are familiar territory. We’ve seen them before. We know they end. We know, battered ad tattered certainly, we’ll survive. But a liquidity crisis is something different. No one knows how big the damage might be or who will get crushed and who will skate through. And as the subprime mortgage crisis, which became the Global Financial Crisis and then the Global Economic crisis, demonstrates, those effects can be stunningly widespread.
The Federal Reserve continues to believe in Goldilocks
Yes, the Federal Reserve got a lot more pessimistic on economic growth, inflation, and interest rates in the Dot Plot projections released on Wednesday, September 21. For instance, the Fed’s median projection for real growth in the U.S. economy for 2022 dropped to 0.2% the year to year in the fourth quarter of 2022 from 1.7% in the June projections. And for 2023 the Fed’s projections dropped to an annualized rate of 1.2% in the fourth quarter from an earlier projection of 1.7%. But the Fed is still a firm believer in fairy tales. That of Goldilocks, specifically, where the economy and Fed policy turn out to be “just right.”
Posting schedule for the next few days: What’s on tap
Posting the news about the Fed and inflation–plus posting about what it all means for the market–has soaked up the bulk of my time this week. Which has left me behind the 8-ball on lots of other important stuff. But I’m going to try to catch up over the next few days with:
Please Watch My YouTube Video: Quick Pick JO
Today’s Quick Pick: JO (NYSEARCA: JO) otherwise known as Barclays iPath Bloomberg Coffee Subindex Total Return ETN Series B. As I’ve shown you in the video, I’m growing my own coffee plant to head off the coffee shortages we’re seeing now (first beans projected in 2028; enough for a cup? 2032), and will likely continue to see long-term. Brazil is the world’s largest producer of coffee but its inventory is projected to drop to about 7 million bags by March, (well below the comfort level of about 9-12 million bags.) A long-lasting drought is to blame for the shortages–and that dicey weather is likely to be with us for quite a while. Meanwhile, global coffee consumption is going up by 1.5% projected this year (2% last year). While JO is volatile since it trades on the commodity price, what interests me about it at the moment is that it’s NOT correlated to anything else like interest rates or inflation (though it definitely contributes to inflation as coffee drinkers well know.) This ETN will continue to go up, even if the market goes down. (JO is a member of my Volatility Portfolio on my subscription JubakAM.com site.)
Signs of the Next Bear Market Rally Story Yesterday–Will It Take Root?
One of the oddest things about yesterday’s reaction to news from the Federal Reserve of a 75 basis point increase in interest rates was that the market initially rallied. Yesterday, September 21, from 3801 at 10:25 a.m.New York time, the Standard & Poor’s 500 moved up to 3895 at 2:40 p.m. right after the Fed released its news. And, then, markets began a retreat with the S&P 500 closing down 1.71% on the day. It’s almost like the markets constructed one story–relatively positive–in the immediate aftermath of the news. And, then, upon further consideration, built a different much less positive story to the close of the day. Make that “exactly” instead of “almost like.”
September 19 update Special Report “Water, Water Nowhere: 10 Water Stocks to Buy Now–first pick AWK, second pick WTRG, third pick XYL, fourth pick VEOEY (6 more to come)
I’m going to start this Special Report “Water, Water Nowhere: 10 Water Stocks to Buy Now” with a look at the problem and the context surrounding that problem. Before I get to my 10 Water Stocks picks. Don’t we know what the problem is? And isn’t how to invest in water very, very obvious?
Live Market Report (20 minute delay)
| Symbol | Name | Last Price | Jubak's Gain/Loss | Jubak's Gain/Loss % |
|---|---|---|---|---|
Saturday Night Quarterback says (on a Sunday), For the week ahead expect…
Every bond market analyst worth his or her salt is watching for signs of liquidity problems and a ramp-up in volatility in the bond market
Financial markets don’t like falling share prices, but Bear Markets are familiar territory. We’ve seen them before. We know they end. We know, battered ad tattered certainly, we’ll survive. But a liquidity crisis is something different. No one knows how big the damage might be or who will get crushed and who will skate through. And as the subprime mortgage crisis, which became the Global Financial Crisis and then the Global Economic crisis, demonstrates, those effects can be stunningly widespread.
The Federal Reserve continues to believe in Goldilocks
Yes, the Federal Reserve got a lot more pessimistic on economic growth, inflation, and interest rates in the Dot Plot projections released on Wednesday, September 21. For instance, the Fed’s median projection for real growth in the U.S. economy for 2022 dropped to 0.2% the year to year in the fourth quarter of 2022 from 1.7% in the June projections. And for 2023 the Fed’s projections dropped to an annualized rate of 1.2% in the fourth quarter from an earlier projection of 1.7%. But the Fed is still a firm believer in fairy tales. That of Goldilocks, specifically, where the economy and Fed policy turn out to be “just right.”
Posting schedule for the next few days: What’s on tap
Posting the news about the Fed and inflation–plus posting about what it all means for the market–has soaked up the bulk of my time this week. Which has left me behind the 8-ball on lots of other important stuff. But I’m going to try to catch up over the next few days with:
Please Watch My YouTube Video: Quick Pick JO
Today’s Quick Pick: JO (NYSEARCA: JO) otherwise known as Barclays iPath Bloomberg Coffee Subindex Total Return ETN Series B. As I’ve shown you in the video, I’m growing my own coffee plant to head off the coffee shortages we’re seeing now (first beans projected in 2028; enough for a cup? 2032), and will likely continue to see long-term. Brazil is the world’s largest producer of coffee but its inventory is projected to drop to about 7 million bags by March, (well below the comfort level of about 9-12 million bags.) A long-lasting drought is to blame for the shortages–and that dicey weather is likely to be with us for quite a while. Meanwhile, global coffee consumption is going up by 1.5% projected this year (2% last year). While JO is volatile since it trades on the commodity price, what interests me about it at the moment is that it’s NOT correlated to anything else like interest rates or inflation (though it definitely contributes to inflation as coffee drinkers well know.) This ETN will continue to go up, even if the market goes down. (JO is a member of my Volatility Portfolio on my subscription JubakAM.com site.)
Signs of the Next Bear Market Rally Story Yesterday–Will It Take Root?
One of the oddest things about yesterday’s reaction to news from the Federal Reserve of a 75 basis point increase in interest rates was that the market initially rallied. Yesterday, September 21, from 3801 at 10:25 a.m.New York time, the Standard & Poor’s 500 moved up to 3895 at 2:40 p.m. right after the Fed released its news. And, then, markets began a retreat with the S&P 500 closing down 1.71% on the day. It’s almost like the markets constructed one story–relatively positive–in the immediate aftermath of the news. And, then, upon further consideration, built a different much less positive story to the close of the day. Make that “exactly” instead of “almost like.”
Please Watch My New YouTube Video: Ford Drops a Bombshell on the Market
My one-hundred-and-seventy-eighth YouTube video: “Ford Drops a Bombshell on the Market” went up today. Ford (NYSE: F) came out on Monday with a pre-announcement on third-quarter earnings that was pretty grim – not just for them, but for the market and global economy as a whole. Instead of Ford’s expected $3 billion in operating profits for the third quarter, the pre-announcement stated it will actually be closer to $1.4 -1.7 billion. This of course caused the stock to plunge by 9.18% by 11 am the following day. The reason the earnings were so disappointing is a continuing supply chain problem that has left them with 40,000-50,000 “uncompleted cars” awaiting computer chips. This is why I think it represents a larger problem within the global economy: supply chain issues and inflationary costs cutting into profit margins.
Fed raises interest rates by another 75 basis points as expected; Dot Plot signals rate increases for well into 2023
At today’s meeting of the Federal Open Market Committee, the U.S. central bank raised interest rates by 75 basis points for a third straight meeting. That took the Fed’s short-term benchmark rate to a range of 3% to 3.25%. This move was widely expected with the CME FedWatch Tool giving odds of 84% yesterday on a 75 basis point increase. What the market hadn’t expected was how negative the Fed’s projections in its Dot Plot would be. To sum up: Higher interest rates (with more rate increases) for longer. And very low economic growth but no recession.
No surprise–Putin raises his bet in Ukraine
Faced with the alternative of admitting that recent Ukrainian counter-attacks have sent Russia’s military reeling, Russian President Vladimir Putin has decided to up his game in Ukraine. So far, today, the markets remain focused on the meeting of the Federal Reserve and the U.S. central bank’s decision on interest rates. But I’d try to spare a few brain cells for the likely effects on commodities such as wheat and natural gas from these signs of escalation. Europea natural gas inventories are now at 86% full, just above the 5-year average. That suggests that gas prices will move higher but that this winter won’t see widespread shortages and prices. I think it’s likely to be another story for prices in 2023 when European countries need to scramble to refill these reserves. I own U.S.Natural Gas Fund ETF (UNG) and the Teucrium Corn Fund ETF (CORN) and Teucrium Wheat Fund ETF (WEAT) in my online portfolios. I own all three in my personal portfolios.
Update for September 20 With One New Pick: Glitches and opportunities abound in the green initiatives of the Inflation Reduction Act–here’s how to profit from them ( 3 battery minerals picks)
It’s time to move on from relief/enthusiasm/grudging acceptance of the $369 billion in the Inflation Reduction Act for programs designed to speed up the transition to clean energy and to de-carbonize the economy. The surprise–and in many quarters–appreciation that the United States is doing anything–and it’s a big anything–about climate change has led to big rallies in the stocks of electric vehicle charging companies and hydrogen-economy pioneers. For example, EVgo (EVGO), obviously, I think< an electric vehicle charging stock is up 48.14% in the last month as of the close on August 17. Plug Power (PLUG), one of those hydrogen economy pioneers, is up 84,15% in the last month as of the August 17 close.But I think it's time to go from the general amazement stage to an examination of what companies--and stocks--are actually going to be winners because of the Inflation Reduction Act. (And I say that not only because some of these early winners have started to show some weakness--profit taking perhaps. But also I would pay attention to these near-term trends. EVgo, for example, fell to $10.74 a share on August 17 from $12.02 on August 16. That's a 10.6% tumble.) The bill as finally passed is a masterpiece of compromises and add-ons that mean that many of the top line dollars won't wind up where recent headlines have suggested. My take?
Waiting for Jerome
You’d think that if everyone (maybe even Samuel Beckett) is expecting the Fed to raise interest rates 75 basis points at tomorrow’s meeting of the Open Market Committee, financial markets would have been able to move on today to other “issues.” (Like Ford’s huge negative earnings pre-announcement or the global supply crunch for coffee. The CME FedWatch Tool today puts the odds of a 75 basis point increase at 84%. The other 16% goes to a 100 basis point increase. Nobody is expecting just 50 tomorrow. But no. Stocks and bonds are lower but it feels like markets are just marking time.
Just made Veolia my fourth Special Report water pick
I just added Veolia to my Special Report Water, Water Nowhere: 10 Water Picks for Our Drying World.
Please Watch My New YouTube Video: Trend of the Week Seasonal Patterns–Looking past the worst months for stocks to better months to end the year
My one-hundred-and-seventy-seventh YouTube video: “Trend of the Week Seasonal Patterns” went up today. For today’s Trend of the Week, we’re looking at the calendar and yearly stock patterns. September is notoriously the worst-performing month of the year for the S&P since the 1950s. October is a scary month because of s history of crashes and one-day plunges during the month. That history does leave investors spooked. But! Starting around November, we get the January effect, where small-cap stocks tend to go up, and tech stocks get a lift from sales during the third and fourth quarters. You can also look for positive earnings news at about this time of year. around this time–though this year’s retail outlook is not great. Overall, things may start getting better as the seasons start to change.
Saturday Night Quarterback (on a Saturday) says, For the week ahead expect…
Investors are expecting a 75 basis point increase in interest rates from the Federal Reserve at Wednesday’s meeting of its Open Market Committee. That would take the Fed’s target interest rate to a range of 3.00% to 3.25% from the current 2.25% to 2.50%. At least that’s what the market heavily expected as of Friday. The odds of a 75 basis point increase, according to the CME FedWatch Tool, which calculates the odds of a Fed move on interest rates by tracking prices in the Fed Funds Futures market, rose to 82% on Friday, September 16 from 74.0%on September 15.
Trick or trend: People’s Bank faces “no-win” choice between defending the yuan and stimulating the economy
This past week the People’s Bank of China looks like it decided to defend the yuan instead of stimulating the economy.
Analysts cutting earnings forecasts for third quarter that ends on September 30 (and what 3 sectors they do like)
Earnings forecasts are falling as we get close to the end of the quarter on September 30 and the start of earnings season in early October. Aggregate earnings per share estimate for companies in the Standard & Poor’s have dropped 5.5% in the past two months, according to Credit Suisse.
FedEx sets off market retreat with very negative guidance
Yesterday, September 15 FedEx (FDX) preannounced a huge miss for the upcoming quarter (due to be reported on September 22) and withdrew its guidance for the full year. Researchers at Deutsche Bank said that it’s the worst report they’ve seen in two decades. “FedEx preannounced last night the weakest set of results we’ve seen relative to expectations in our ~20 years of analyzing companies,” the company’s analysts wrote in a note to clients.
What stocks will go up the most in the next Bear Market rally? Not the “best” but the most shorted
If we do get the Bear Market rally that I expect after the Fed raises interest rates (by 75 basis points in my opinion) next Wednesday, September 21, what stocks will go up the most and fastest? Don’t look to the “best” stocks. Or to great stocks that have been crushed in the selling in 2022 To see what stocks have the biggest supply of true, short-term, rocket fuel, look to the list of most heavily shorted shares.
Please Watch My New YouTube Video: Quick Pick Kroger
My one-hundred-and-seventy-sixth YouTube video: “Quick Pick Kroger” went up today. Grocery stocks aren’t very volatile. Normally. So when shares of Kroger, the nation’s free-standing largest grocery chain, went up almost 7.5% on Friday, September 9, it got my attention. A huge increase in sales of store-brand goods, cheaper for the consumer but more profitable for Kroger led to a very strong second quarter. And the sentiment among investors that this was a good stock to own during inflationary times. I’ll be adding it to my Jubak Picks Portfolio tomorrow, September 16.
Biden announces release of $900 million in funding for electric vehicle charging build out
Wednesday, September 14, President Joe Biden used a visit to the Detroit Auto Show to announce the release of the first $900 million in funding for the buildout of a national network of charging stations for electric vehicles. The funding, part of $7.5 billion in the Infrastructure bill to build out a network of 500,000 charging stations, would go to 35 stations to build charging networks along 53,000 miles of highways. Today, the sector is moving up rapidly with ChargePoint up 8.60% and EVgo up 12.16% as of 2:30 p.m. New York time.
Xylem is my #3 pick in my 10 water stocks Special Report
You can find the gradually larger water Special Report in the Special Reports section of the site. Xylem is the most recent addition to the list of 10.
