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Saturday Night Quarterback says (on a Sunday), For the week ahead expect…
I expect another downward move for inflation when the January Consumer Price Index (CPI) is reported on Tuesday. Economists surveyed by Bloomberg expect that the core consumer price index, which excludes move volatile food and fuel prices, will show a year over year rate of increase of 3.7% in January. That would be the slowest year-over-year increase since April 2021.
Special Report: 10 Penny Stock Homeruns Pick #4 NLLSF
I’m playing catch up on this Special Report. I’ve got picks #5, #6, and #7 almost ready to post. My 10 Penny Stock Homeruns Pick #4: Nel (NLLSF).
Please Watch My New YouTube Video: Quick Pick CVS
Today’s Quick Pick is CVS Health (CVS). CVS owns a unique combination of healthcare delivery channels. Drugstores, yes–9,000 of them. But the company also owns health insurance company, Aetna, and Caremark, the largest pharmacy benefit manager. And recently it moved into the primary care marketplace through its acquisition of Oak Street. The company reported earnings on Wednesday, February 7, and the stock was up about 3.25% after that. While the earnings were good, (they beat by $0.13) the guidance is what is important here. The company projected higher costs for 2024 and cut guidance for GAAP earnings ($7.06) and adjusted earnings ($8.30). The reason the stock went up despite these cuts is that everyone was expecting DEEPER cuts to guidance. CVS has been signaling for weeks that rising costs in 2024 could be painful for the healthcare sector as a whole, and the relatively minor cuts in guidance led to a rally in the stock. Morningstar calculates a fair value for CVS Health of $103 a share. The stock closed at $76.32 on February 9. The stock also pays a 2.36% dividend. The stock is a member of my Dividend Portfolio. That position is up 31.25% since October 28, 2020.
Part 2 Worries over a top: Why this isn’t 2000–I don’t see a replay of the Dot-Com Bear Market
As I wrote a few days ago in my post “Was the Meta Platform 20% pop the market top? An important sign, yes,, but not for the reasons you think” I do think this stock market rally is putting in a top.
But I’m not worried that we’re looking at a reply of the Dot-Com crash and Bear Market that took the NASDAQ Composite down 40% in 2000 after that tech-heavy index gained more than 85% in 1999.
Why not? Let me count the ways. I get to four.
Please Watch My New YouTube Video: A Battle Between Fear and Greed (and hear me sing too)
Today’s video is A Battle Between Fear and Greed. As the S&P gets closer to 5,000, we clearly see the battle between fear and greed. With the market breaking records on the high end, there’s a fear that it’ll crash, and that it has to go down eventually. However, the greed side is a fear of missing out on this rally that started in September as well as a likely market boost from a rate cut in May. So how do you play this mix? My thought is to go with the greed side for now, but not be too greedy. Be aware that investors aren’t likely to get out of stocks in a big way until they see the projected gains from a Fed rate cut. At worst the market may move sideways until then, and some consolidation in the market leaders would be good, so I wouldn’t do much selling just yet.
Replacing South Korea with India in my Perfect 5 ETF Portfolio (and adding it to Jubak Picks Portfolio too)
I try not to argue with cash flows. Especially when I’m making asset allocation decisions. And right now global cash is heading for India. A number of reasons. Portfolio managers looking for diversification need emerging markets exposure and India looks like the best bet. Going long India is, in effect going short China since much of the new India money is essentially old China money fleeing what looks like an economy set to struggle for a while. And there is an India fundamental story based on an economy headed for 7% growth. For all these reasons I’m added the Franklin FTSE India ETF (FLIN) to both my Perfect 5 ETF Portfolio as rep
If you’re an investor looking for something to worry about in 2024, think China
The news pointing to serious trouble in China’s economy–the kind that can’t be fixed by replacing market regulators in Beijing–keeps on coming. If you’re looking for “something” that could upset the global apple cart in 2004, keep your eye on China. The country’s market is big enough to matter for just about every company doing business internationally, and China is a key market for companies ranging from Tesla and Apple to Starbucks and Yum Brands. So the news today from the National Bureau of Statistics showing another big drop in consume prices–in this case not good news on inflation but a signal of sluggish domestic demand–worries me.
The surge in the U.S. debt couldn’t be coming at a worse time
The United States is on a pace to add nearly $19 trillion to its national debt over the next decade, according to a new report from the Congressional Budget Office released today, Wednesday, February 7. The budget office projected that the annual deficit will grow to $2.6 trillion in 2034 from $1.6 trillion this year, adding $18.9 trillion to the national debt during the decade. By then, the debt is projected to surpass $54 trillion.
Part 1 Worries over a top: Was the Meta Platforms 20% pop the market top? An important sign, yes,, but not for the reasons you think
I think we’re seeing stocks put in a top. Not immediate–I think we’ve got the impending Federal Reserve interest rate cuts to help stretch out this rally into a sideways move. But the signs are there. And the most important signs aren’t the “overvaluation” of the Magnificent 7 stocks or the narrow leadership in this market. (More on why this top isn’t likely to lead to a Bear Market in tomorrow’s post “Why this isn’t 1999.) Nope. To me the most important sign if the big announcement from Meta Platforms (META) of a $50 billion stock buy back and the initiation of 50 cents a share dividend, the company’s first.
Please Watch My New YouTube Video: How Long Does FOMO Drive This Market?
Today’s Trend of the Week is How Long Does FOMO Drive this Market? FOMO is “fear of missing out” and I’m using it to describe a market that is not driven by facts and fundamentals, but is largely focused on a fear of missing out on another rally, as many did in 2023. So what is the emotional trend and how long will it last? My sense is that there is one factor determining behind a lot of FOMO is expectations for a rate cut from the Fed. A potential rate cut could bring a lot more money into the market and drive prices higher– something investors don’t want to miss. In my opinion, we’ll have to wait until May or Jun for that cut to happen. So the hope of a cut will keep the market moving sideways and limit selling on high valuations. We’ll see some consolidation in the market leaders, but nothing that is likely to upend the market before these highly anticipated rate cuts.
Here we are again: 10-year Treasury yields back at 4.16%, up 14 basis points this morning
Maybe you can’t remember when the yield on the benchark 10-year Treasury fell through 4% and looked headed to 3.5%. It might be hard to remember because it was so long ago. Like two weeks. Today the yield on the 10-year Treasury completed a round trip, rising 14 basis points this morning to 4.16%.
Special Report: 10 Penny Stock Home Runs–Pick #3 GWH
Special Report: 10 Penny Stock Home Runs Pick #3 ESS Tech (GWH). The stock of this maker of iron flow, utility scale, long-draw-down batteries ticks all the boxes for my Penny Stock Home Runs.
Saturday Night Quarterback says (on a Sunday), For the week ahead expect…
I expect a relatively boring, week. With no fireworks from the Federal Reserve. Almost no economic data. No jobs surprises. And no earnings news from the Magnificent Sever stocks. Just old fashioned block and tackling to see if any other stocks can join the Momentum Parade.
Special Report: 10 Penny Stock Home Runs–Pick #2 PILBF
This one is very simple. When the price of lithium rebounds, high-quality low-cost lithium producers will see the revenue roll in. That’s why I’d got the world’s leading lithium-producer Albemarle (ALB) in my long-term 50 Stock Portfolio. But a smaller, high-quality, low-cost producer like Australia’s Pilbara Minerals will show gains even higher than Albemarle since the current price of $2.29 a share comes close to discounting the company’s survival.
New York Community won’t be the last bank to get into trouble; adding Puts on next bank crisis
Nothing like a bank surprise to get Wall Street in a lather. On Wednesday, January 31, New York Community Bancorp (NYCB) announced that it would cut its dividend and add to reserves against losses in its commercial lending portfolio. The stock fell 38% on Wednesday to hit a 23-year low on Thursday. The bad news wasn’t limited to U.S. banks either.Tokyo-based Aozora plunged more than 20% after warning of US commercial-property losses Frankfurt’s Deutsche Bank more than quadrupled its provisions against U.S real estate losses. I don’t see any reason to think that this is a one-day phenomenon. Or that the damage is just a minor problem in a few portfolios. Billionaire investor Barry Sternlicht warned this week that the office market is headed for more than $1 trillion in losses. “This is a huge issue that the market has to reckon with,” Harold Bordwin, a principal at Keen-Summit Capital Partners in New York, which specializes in renegotiating distressed properties, told Bloomberg. “Banks’ balance sheets aren’t accounting for the fact that there’s lots of real estate on there that’s not going to pay off at maturity.” On Monday then, I’m adding Put Options on the SPDR S&P Regional Banking ETF (KRE).
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