January 12, 2025
What You Need to Know Today:
Biden proposes/Trump disposes: Will GLP-1 diabetes/obesity drugs become free under Medicare and Medicaid?
The Biden administration has proposed making GLP-1 weight loss drugs free for low-income people and retirees who qualify as obese. Expensive drugs such as Ozempic, Wegovy and Zepbound, which cost $1,000 a month, would be covered for the 40% of the U.S. population who qualify as obese. Currently, the federal plans only cover the drugs when patients have other conditions caused by obesity, such as diabetes, heart disease. The leading drugs are made by Eli Lilly (LLY) and Novo Nordisk (NVO). Shares of Eli Lilly were up 4.55% today while Novo Nordisk rose 1.50%. The incoming Trump Administration will have to decide whether to move ahead with the plan. You can either think of this as a smart piece of health care policy or an effort to jam up an incoming administration that already faces challenges in devising coherent policy on healthcare. I go with the “jam ‘em up” theory myself.
So what happened to the big market crash?
I think of Nvidia (NVDA) as this market’s warning indicator; it’s the canary in a coal mine; the bird that will die first if dangerous gases start to build up. So, yes, it’s important that Nvidia shares plunged from $134.91 on July 10 to $98.91 on August 7. And again from $128.83 on August 28 to $102.83 on September 6. But the shares are up again–15.83% last week–to $116.78 This canary seems to be sending a rather more complicated message than “Look I’m dead! See my feet in the air?” What’s the message, though?
Apple’s Meh! iPhone 16 update begins to bite pre-orders and stock
Apple shares were down 2.78% today, Monday September 16, as pre-order sales to the iPhone 16 showed lower than expected demand for the new phones after a lackluster update that included fewer AI features than competitive smartphones.
Saturday Night Quarterback says, For the week ahead expect…
The Federal Reserve will cut its benchmark interest rate at the Wednesday, September 8, meting off its Open Market Committee. It will be the first in a series of cuts that is likely to include 3 cuts in 2024 (at the September, November and December Fed meetings. The odds of a rate cut are a solid 100%. But there is high drama about the size of the initial cut to the Fed’s benchmark interest rate, now at a target range of 5.25% to 5.50%.
Consumer sentiment points to healthy spending; lower inflation fears
U.S. consumer sentiment rose to a four-month high in early September. The sentiment index from the University of Michigan increased to 69 from August’s 67.9, preliminary figures showed Friday. The median estimate in Bloomberg’s survey of economists called for a reading of 68.5. The biggest contributors to the improved sentiment reading were the tamest short-term inflation expectations since the end of 2020 and anticipation of a drop in borrowing costs as the Federal Reserve begins to cut interest rates.
Weak Chinese economy takes toll on copper demand, prices–wait to buy SCCO
China’s copper imports in August dropped by 12.3% from the previous year, preliminary official Chinese customs data showed on Tuesday, September 10. It’s yet another sign that the slowdown in Chinese economy is rippling out into the global economy.
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).
Live Market Report (20 minute delay)
Just enough in today’s CPI inflation report to keep one more rate increase for 2023 on the table
Today’s Consumer Price Index report on inflation had just enough bad news on inflation to keep one more interest rate increases from the Federal Reserve on the table for 2023. The all items CPI inflation rate rose 0.4% in September from August. That was slightly above the 0.3% monthly rate that economists had expected. The core rate, which excludes more volatile food and fuel prices, rose by 0.3% in the month, as expected by economists. The bad news in the core number is that the month to month rate of increase at 0.3% recently isn’t low enough to bring inflation down to the Fed’s 2% target.
We’re looking at a global debt bomb
“Nobody expects the Spanish Inquisition!” Monty Python observed back in 1970 before attempting to torture a coal-miner’s wife with a dish rack. There’s an important investing version of this core truth: The financial market usually worries about the wrong problem. So that when the “Spanish Inquisition” (in financial terms) finally arrives, everybody is surprised. Well, we investors and traders have done it to ourselves again. We’ve spent much of 2022 and a good part of 2023 worrying about whether Federal Reserve interest rate increases would send the economy into a recession. There are still a few recession die hards worrying about that possibility, but by and large the worry has shifted to whether or not the Fed will delay its rate cuts in 2024–and thus delay the arrival of the “rate-cut-bounce.” While MANY–but certainly not all–investors, traders, and market analysts have been looking OVER THERE, however, the credit markets have built up a huge debt overhead and the global debt bomb looks ever closer to exploding. A crisis with the dire effects of the Global Financial Crisis of mid-2007 to 2009 is a possibility. I’d “guess” that most portfolios aren’t ready. The time to get ready is now. This increasingly looks like a debt market crisis of the type known as a Minsky Moment. To get ready first understand the source of the problem. I’m putting together a new Special Report for next week on what to do to get ready. Today’s post is a kind of set up, a get ready for the post on getting ready, if you will.
PepsiCo beats on earnings, raises guidance
Clearly, inflation isn’t bad for everyone. Not if you have pricing power, anyway. Today, PepsiCo (PEP) reported earnings and sales that a beat Wall Street estimates, and raised its guidance for the next quarter.
Special Report: 10 Contrarian Bargains to Buy Now–My first 3 picks are Luminar, Nidec, and Barrick
a lot of individual stocks are cheap right now, I’d argue. 180 of the 500 stocks in the S&P 500 trade now at the same or lower price that they commanded a year ago. And for many individual stocks the performance is even worse. For example, Luminar Technologies (LAZR), a maker of LIDAR safety and navigation equipment for cars, is down 40% in the last three months. Albemarle, the world’s leading supplier of lithium, is off 27% in the last three months. Nidec (NJDCY), a Japanese maker of small electric motors and electric vehicle drive trains, is down 13% in the last three months. I’d argue that these and the rest of the 10 Contrarian bargain stocks that I’m going to recommend in this Special Report share a number of characteristics that have led to their losses over the last few months or longer.
Selling 2 gold positions out of my portfolios tomorrow
Gold was up 1.9% in trading on COMEX today to $1876 an ounce on war in Israel and Gaza and fears that it would become a wider conflict in the region. I’ve been looking for an exit from two of my gold positions for a while now. And tomorrow is a good exit point, I think.
OPEC doesn’t see a reduction in global oil demand by 2045
Oil consumption will climb 16% to reach 116 million barrels a day in 2045, about 6 million a day more than previously predicted, the Organization of Petroleum Exporting Countries said today in its World Oil Outlook. India represents the biggest expansion in projected consumption, more than doubling its consumption to almost 12 million barrels a day, followed by China, with a gain of 4 million a day, or 26%.
News with the potential to move the markets this week: CPI inflation, Fed minutes, bank earnings
In my last post I wrote that the trend for the market is very uncertain at the moment and very dependent on news. This week will bring some of the news that will determine the market trend. Here’s a list in order of my sense of importance to the markets.
Saturday Night Quarterback (on a Sunday) says, For the week ahead expect…
I’m hoping for some clarity this week on the market trend after Friday’s wild day. Friday’s intraday moves summed up the uncertainty about the direction of this market.
Exxon Mobil in talks to acquire Pioneer Natural Resources for $60 billion–I’m selling my position on Monday
The Wall Street Journal has reported that Exxon Mobil (XOM) is in advanced talks to buy Pioneer Natural Resources (PXD) in a deal valued at $60 billion. Pioneer currently has a market cap of $55 billion. Through in th debt that Exxon would be buying and there’s not a lot of extra upside here, in my opinion. Today’s 10.45% jump in pioneer shares to care of a lot of any potential deal premium. (I’m assuming that the report is accurate. Today’s news story follows on earlier speculation that the two companies were talking.) Unless you think another bidder will emerge–difficult but not impossible at this deal size, I’d sell my shares here. I like Pioneer as an independent big dividend paye
Ya can wrap fish in that ADP report showing a slowing jobs market
The U.S. economy added 336,000 jobs in September, the Bureau of Labor Statistics reported today, October 6. The unemployment rate held 3.8%. Economists surveyed Bloomberg had expected to see continued slowing growth in the labor market—-with forecasts of 170,000 jobs created, down from 187,000 in August. On Wednesday the ADP Research Institute reported that private payrolls rose by just 89,000 jobs in September. That was the fewest jobs added in a month since the start of 2021 and added to expectations of a weak report this morning.
So how high will yields go? I’m hearing 6% or even 7%
Today the yield on the 10-year Treasury closed at 4.71%. That was down 2 basis points on the day but in the year the yield is up 96y basis points. Almost a full percentage point. How high can yields go? Bond traders and investors want to know. Investors in other financial assets, stocks, for instance want to know. The Federal Reserve, which is supposed to set interest rates but is increasingly a sideline spectator on rates, wants to know.
The oil slump continues with WTI crude dropping below its 50-day moving average
So suddenly oil traders are worried about slowing global growth? Remember that just last week, these same folks bid oil up to near $100 a barrel after Saudi Arabia and Russia announced that they would extend curbs on production. My take on all this: Nobody knows and the traders driving these moves don’t have much conviction in their buys or sells. Which means that any move in either direction is likely to be followed by a strong move in the opposite direction.
Count on another shutdown “emergency” and another temporary spending “fix”
Here’s the math that leads me to believe we’re headed to a new show down crisis when the temporary fix that keeps the government open until November 17 runs out.
The bond plunge (and soaring yields) isn’t limited to the United States
Yesterday, October 3, the yield on the 30-year U.S. Treasury hit 5% for the first time since 2007. The yield on the German 10-year bond hit 3% for the first time since 2011. In one financial market after another higher U.S. yields are driving global bond prices lower and bond yields higher.
Good news for inflation, interest rates, the Fed in today’s ADP jobs number if we can believe it
Private payrolls rose by just 89,000 jobs in September, according to figures published today by the ADP Research Institute. That’s the fewest jobs added in a month since the start of 2021. Private payrolls climbed 180,000 in August. The results trailed all estimates in a Bloomberg survey of economists. The report is more evidence of a further slowing in the labor market. “We are seeing a steepening decline in jobs this month,” Nela Richardson, ADP’s chief economist, said in a statement. “Additionally, we are seeing a steady decline in wages in the past 12 months.” Both trends would be good news for the Federal Reserve in its fight to lower inflation. And would be positives for a financial market which has seen bond yields rise and stock prices stagnate recently in fears that inflation might be staging a come back. Good news–if, that is, the ADP numbers can be believed.
My VIX Call Options are up 38% since September 25–hold ’em
The VIX, the CBOE S&P 500 Volatility Index, climbed another 12.32% today, October 2, to 19.78. The Call Options–with a strike at 17 and an expiration on December 20–I bought on the VIX on September 25 are up 38% as of the close on October 2. (I hold them in my Volatility Portfolio.) I’m inclined to hold them a bit longer because:
The yield on the 10-year Treasury jumped another 13 basis points today, October 3
Where did the slow-moving, deep and placid Treasury market go? The yield on the 10-year benchmark Treasury–you know the one used to set the interest rate on things like mortgages–moved up another 13 basis points today, October 3, to 4.80%. That’s a jump to 24 basis points in just two days. The Treasury market just doesn’t move like this. The yield on the 10-year Treasury is now up 63 basis points in the last month.
The yields keep rising
Despite the Wall Street consensus that there won’t be an interest rate increase at the Federal Reserve’s November 1 meeting, Treasury yields keep climbing. The yield on the 10-year Treasury closed at 4.68% today, October 2.
I’ll be selling Nvidia out of my Volatility Portfolio tomorrow
I’m going to take advantage of today’s pop in Nvidia (NVDA) to sell the shares out of my very short-term Volatility Portfolio tomorrow, Tuesday, October 2. The shares closed up at the close today at $447.82, a gain of 2.95% on the day. I initiated the position in the Volatily Portfolio on Mach 25, 2023. It was up 66% as of the close today So why sell Nvidia here?
And don’t forget Friday’s jobs report for September
The September jobs report is expected to show that the U.S. economy added 168,000 nonfarm payroll jobs in September with the unemployment rate dropping to 3.7%.
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