The consensus is that tomorrow’s CPI al-items inflation number will show show a pick-up in inflation pressures. Economists are predicting the biggest monthly jump in 14 months—-and the swap market is pricing in risk that it will come in even higher than expected.
I’m looking for another wild ride for Apple (AAPL) and consequently for the entire tech sector. Apple shares dropped another 3% on Thursday taking the two-day losses in the shares to almost $200 billion, (Yep, with a “B.” That brought Apple’s market cap to $2.9 trillion. Yep, with “T.”) A massive (Internet irony alert) rally on Friday took the shares up 0.35%. And I think that this coming week could be just as volatile.
Tomorrow September 8, I’m selling shares of U.S Oil Fund (USO) out of my Jubak Picks ad Volatility Portfolios to take profits on the 25% really in oil since June and to raise some cash in case September volatility delivers a bargain or two.
Oh, boy, something to look forward to. The Senate returned to session on September 5 and the House will follow on September 12. And a new government shutdown looms. (This is different than the threat of a default on U.S. government debt that was averted by a last-minute deal to raise the debt ceiling. This time the government and agencies such as the Federal Aviation Administration and the Department of Agriculture would simply hang closed signs on their doors until Congress appropirated money for operations.)
The timing has a good likelihod of disrupting a clear trend in the financial markets.
U.S. stocks fell today, Wednesday, on a stronger-than-expected, Purchasing Managers Index (PMI) for the service sector. The reading raised fears that the Federal Reserve, which is generally expected to keep interest rates steady at its September 20 meeting, will not move quickly to reduce rates. The odds of an interest rate INCREASE at the Fed’s November 1 meeting rose to 47.2% on the CME FedWatch Tool from 42% yesterday.
Last week I posted a video arguing that, again, U.S. stocks were the only game in town with both the Chinese and European Union economies sputtering. The market action today, September 5, showed, however, that even if the U.S. economy is leading the world with solid if not spectacular growth, U.S. stocks will still feel the pain of bad news from the world’s two other big economies. Today U.S. stock indexes fell on new data from China showing continuing weakness in that economy and indicated that a turnaround is still a way down the road.
Next week I expect the battle in the financial markets over whether or not the Federal Reserve will increase interest rates at its NOVEMBER 1 meeting to heat up.
More American consumers fell behind on their car loan and credit card payments in the last quarter than at any time in more than a decade. The problem is most acute for lower-income consumers who have exhausted the money from government stimulus checks during the Pandemic and who are seeing breaks on rent and student debt expire. Higher interest rates from the Federal Reserve aren’t helping any. The average credit card interest rate is already at a record high 20.6%, according to Bankrate.com, and could well continue climbing if the Fed tightens further in its fight against inflation. Student loan payments that were paused for more than three years are poised to resume in October. And banks and other lenders have been clamping down on credit lines for months after the spring banking turmoil. There is, of course, the question of whether the Fed is “happy” with this trend.
Today’s video is Once Again, The U.S. is The Only Market Game in Town. It’s hard to grasp the longer-term trend in any August because, frequently, there isn’t one. True again this year. The S&P is essentially where it was a year ago and it’s especially difficult right now to tell how the market should be priced as, once again, it looks like the U.S. is the only game in town. There are uncertainties about the U.S. economy, with the Fed continuing to raise rates and signs of consumers starting to waver. However, these uncertainties are not nearly as bad as a near-consumer strike in China and a slow-moving European economy. Because money is flowing into the U.S. market from those alternatives, it’s unclear how to calculate a current fair value for U.S. stocks. Stocks like Microsoft, Apple, and Nvidia are all at record highs. Should they correct from here or move higher on the relative fundamentals? The question boils down to this: Do you get in on the only game in town, even though it is very expensive, or do you wait it for a shift in market cycles? After the Fed’s September 20 meeting, where they’ll set expectations for the future, investors should have a better idea on how to answer this question.
Today’s Quick Pick is Cheniere Energy (LNG). There are a number of positive trends for Cheniere right now. The company is adding to its liquid national gas production capacity and has signed long-term contracts with Equinor, Korea Southern Power, China ENN National Gas, and BASF. This is on top of a big increase in sales and margins in its most recent report. (Year to date the stock is up about 10%.) Another factor that makes this a “buy now” stock is that Australia will likely see a liquid natural gas strike. Workers at Woodside Energy have already voted to strike if there’s no contract and Chevron workers look like they may follow suit. These strikes could happen as soon as September, so now is the time to add shares in LNG, as Australia accounts for about 10% of global LNG supply. Morningstar calculates that the shares are at a 2% premium. I think we can expect more upward bumps for LNG and as much as it pains me to accept, I think liquid natural gas will be a necessary global energy transition fuel. I own this stock in my online portfolios.
We’ve finished moving the JubakAM.com editorial offices (and residence) to Venice. The move was intended to be seamless. I hoped to keep posting on my regular schedule as a team of gondoliers rowed us across the Atlantic. But moving, as always, was more exhausting than anticipated. But it is now accomplished. Computers are unpacked. Jet lag is unlagged. And the sporadic quiet period is over. (Ready or not.) Just in time for the pre-Labor-Day jobs report spectacular due Friday, tomorrow.
Today’s video is: Stay Away From China for a While. China is looking at a long-term downward trend in the price of Chinese stocks. The iShares MSCI China ETF is down 8.1% year to date. It was down nearly 23% in 2022 and around 22% in 2021. What’s causing this? China has a long-term demographic problem. You’ll see occasional spikes in stock prices whenever the government puts money into the economy, but those spikes disappear after it becomes evident that putting more money into the system isn’t enough to fix it. In the long term, China is going through some extreme demographic changes. Last year, China’s population fell for the first time since 1961 and the United Nations predicts that China’s population will go from 1.4 billion now to 800 million by the end of this century. This is because fewer couples are deciding to have children, and the one-child policy led to a scarcity of females in the population. The younger generation is highly educated but unable to find jobs, which has led to negative sentiment on the economy and sluggish consumer spending. China’s economic policy has been based on high-tech industrialization and a dampening of consumer spending in an effort to provide the capital needed to support its industrialization. This model works for a while but inevitably hits a wall because the things you produce need somewhere to go. For a long time, China exported most of its goods, but many countries, like the United States, have pivoted to policies designed to increase domestic production. China looks to have hit the middle income economy wall, like a lot of industrializing countries before it.
