Drill baby, drill pledge sends oil prices down today
Oil slid as U..S President Donald Trump promised to boost U.S. crude production. Brent crude retreated almost 1% to near $80 a barrel.
MGM
Jobs surprise–economy delivers stronger than expected performance in December
In December U.S. economy in December added the most jobs since March and the unemployment rate unexpectedly fell. Nonfarm payrolls increased 256,000, exceeding all but one forecast in a Bloomberg survey of economists. The unemployment rate fell to 4.1%, while average hourly earnings rose 0.3% from November, a Bureau of Labor Statistics report showed Friday. For 2024 as a whole, the economy added 2.2 million jobs—-below the 3 million increase in 2023 but above the 2 million created in 2019. The data almost certainly assured that the Federal Reserve would not cut interest rates at its January 29 meeting. As of 11 a.m. New York time, the yield on the 10-year Treasury had climbed another 5 basis points to 4.74%.
China’s deflation problem got worse in December
China’s consumer price index rose 0.1% in December from a year earlier, in line with the median forecast of economists surveyed by Bloomberg. Factory deflation extended into a 27th month, though the producer price index recorded a slower drop of 2.3%, the National Bureau of Statistics said Thursday. For the full year, consumer prices only inched up 0.2% from 2023, well short of the 1.1% gain economists had predicted at the beginning of 2024.
Fed’s December minutes another nail in the coffin for early interest rate cuts
In minutes from the Federal Reserve’s December 17-18 meeting released on Wednesday, January 8, Federal Reserve officials clearly decided to move more slowly on cutting interest rates in the quarters ahead. “Participants indicated that the committee was at or near the point at which it would be appropriate to slow the pace of policy easing,” minutes from the Federal Open Market Committee showed. “Many participants suggested that a variety of factors underlined the need for a careful approach to monetary policy decisions over coming quarters.” Please note the reference to “quarters” and not “months.”
More bad news for stocks from the bond market today
The 20-year Treasury bond, a laggard on the government debt curve since its re-introduction in 2020, topped 5% Wednesday for the first time since 2023. The move looks to be fueled by concern that President-elect Donald Trump’s policies on tariffs and tax cuts will lead to wider deficits and rekindle inflation.
Stocks fall as they begin to price in no rate cut until July
The Institute for Supply Management’s index of services advanced 2 points to 54.1 last month. That show of strength in the economy–readings above 50 indicate expansion–was enough to push stocks lower as the markets began to price in a delay in the next interest rate cut from the Federal Reserve until July The measure of prices paid for materials and services rose more than 6 points to 64.4, suggesting that the drop in the inflation rate in the service sector–about 70% of the U.S. economy–might be over.
Please Watch My New YouTube video: Quick Pick Sell MGM
On Friday I posted my two-hundred-and-twentieth YouTube video: Quick Pick Sell MGM. This week’s Quick Pick is a little different. Normally my Quick Picks are long (buys) but this one is short (sell). This is a reaction to the terrible Covid outbreak in China right now. China went from a strict, 0-covid policy to hardly any policy at all. While their vaccine rate sounds good at 90%, a lot of that is Chinese-produced, non-RNA vaccines, which have proven to be fairly ineffective against the new Covid variants. As a result, viral projection models expect 1.1 to 1.3 million deaths over the next wave (or waves) of Covid in China. So how does that affect MGM International? Their resort in Macau, China, while recently receiving their gambling license renewal, will get hit hard by the largely self-directed reduction in travel. And the “official” policy, which is to encourage travel and work-as-usual, seems to be having the opposite effect by creating fear among Chinese citizens. Macao, following the lead of the new policies from the central government, has just about dropped its requirements for testing and quarantine. The new rules essentially say, “We just want you to come.” Instead, many people are locking themselves down in an effort to stay healthy as China’s covid problem runs rampant and the Chinese government refuses to share accurate data. I don’t want to watch this Covid disaster further hammer my position in the stock. I’ll be selling it at a loss in my Jubak Picks Portfolio (hey, harvest those tax losses for 2022), but I will look to get back in April or May if I start to see optimistic traders betting on an end to this wave of the Covid Pandemic in China.
How bad will China’s Covid disaster be for stocks? The likely answer is very bad–sell Volkswagen and MGM
After swiftly abandoning its 0-Covid lockdown policy–without replacing it with anything resembling a national Covid protocol–China is facing a Covid disaster that could see more than 1 million deaths from the coronavirus in 2023. That would put China’s death toll from the Pandemic on par with that of the United States, which has seen 1.1 million people die from Covid19 since the pandemic began. The magnitude of the disaster is actually understated by that comparison since China’s comparable death toll would be condensed into a much shorter period than that in the United States. We don’t know with any degree of precision what a pandemic outbreak like this would do to the economies of China and the world. But we can make some reasonable guesses.
Return of baseball and coming March Madness good news fro sports betting stocks–adding MGM Resorts International to my Volatility Portfolio
The Major League Baseball lockout is over–and the baseball season will start next month roughly on schedule. And the NCAA Basketball Tournament–March Madness–begins next week.
Both pieces of news are GOOD news for sports betting stocks.
A stock isn’t a buy just because it’s cheaper than it was–Lessons from Disney on when to buy on the dip
After a huge rally like we’re had this year, it’s easy to fall into one of the most common buy on the dip traps. Just because a stock is cheaper than it was, it’s not necessarily a bargain. There’s nothing that says a stock has to return to its previous price after a dip. And especially that it has to return to that former price on your schedule. Let me use Disney (DIS), one of the stocks I’m tracking in my Dip-O-Meter, as an example.
How much of a hedge do you need–and how much can you afford
I try to use big up and (especially) down days in the stock market to stress test my portfolio. One of the things I look to learn from a high volatility down days is how the hedges that I’ve put on to protect my portfolio work under big stress. So, for example, on a big day down day like July 16, when the Dow Jones Industrial Average fell 725 points, I looked to see if 1) the hedges I owned worked to reduce or better yet eliminate my downside losses, and 2) how much those hedges were costing me in opportunities for upside gains postponed.
Special Report: 5 Picks and 5 Hedges for a Falling Market (4 picks and 2 hedges as of June 4)
2021 will be a very different year from 2020. Or to be more exact the second half of 2021 and 2022 will be very different. We’re looking at going from a financial market where investors and traders believed the Federal Reserve was on their side with cash and more cash to push the prices of financial assets higher and then higher some more to a market where everyone is asking when will the Fed take th punch bowl away and shut down the party.Let me be clear. At this point it’s not the certainty that the Fed will reduce its $120 billion in monthly bond buying in this exact month or that, or the certainty that the Fed will start raising interest rates before the end of 2022, say, but rather the worry that those events are on the calendar, that they will change the trend in the market, and that no one can predict when the turn will materialize.FDR said “We have nothing to fear but fear itself.” To which the market right now says “Exactly.” Look at this “fear and worry calendar” that I’ve put together. And today I’ve got 3 picks and one hedge for this market
Jim’s Stock Alerts
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