January 13, 2025
What You Need to Know Today:
Higher mortgage rates for longer?
Three days after the U.S. election, Redfin, the technology-driven real estate brokerage that does business in 100 markets, raised its projection for the average mortgage rate in 2025 to 6.8%. That’s roughly where the current average 30-year fixed mortgage rate stands now. Other real estate analysts, including Moody Analytics and Capital Economics, expect rates near 7% next year. This is bad news for two reasons.
The big thing to watch for in today’s Nvidia after-the-close earnings report: Blackwell delays
A report Saturday said one of Nvidia’s next generation chips will be delayed by a just-discovered design flaw. Tech news site The Information, citing a couple of industry sources, said volume shipments of the Blackwell B200 chip would be delayed some three months.
This market has an AI problem–AI companies aren’t making money
Remember the good old days–say, 2023–when all you had to do was slap AI in the name of a company and the stock would soar? I kept waiting for AI Burgers made from AI cows, or AI Shoes, which used AI machine learning algorithms to tell you what size shoe you needed. This investor embrace of all things AI led to the fear that there was an AI-stock market bubble that would send the entire stock market into a very painful bear market when it broke. The appetite for AI stocks is still huge–witness the rebound in Nvidia (NVDA) shares that added $400 billion to the stock’s market cap in a four-day recovery from the “sky-is-falling, we’re-headed-to-a-recession stock market retreat. But this stock market still has a big AI problem. We will find out how big when Nvidia reports earnings after the close tomorrow, August 28. Here’s the problem: Most AI companies aren’t making money.
Consumers more confident–but more worried about jobs
U.S. consumer confidence rose to a six-month high in August. The Conference Board’s gauge of sentiment increased to 103.3 from an upwardly revised 101.9 a month earlier, data out Tuesday showed. The median estimate in a Bloomberg survey of economists called for a reading of 100.7. But…
The argument for adding more gold even now
Gold hit a new all-time high today of $2554 an ounce on the Comex for December delivery. Gold’s 20% or so gain in 2024 to date (as of August 26) is a result of strong central-bank buying plus Asian purchases plus anticipation that the Federal Reserve was about to cut interest rates. Now that Fed chair Jerome Powell has just about promised a cut at the Fed’s September 18 meeting it looks like gold will climb further in 2024 on the fundamentals. Bullish Wall Street targets say $2700 to $3,000 by the end of 2024. That’s a decent reason to hold gold. But the very scary geopolitical landscape over the next six months makes me anxious to add more gold even at the record nominal high for the metal.
Saturday Night Quarterback says (on a Sunday), for the week ahead keep your eyes on two different events…
It wouldn’t hurt to be a crab this week so you’d be able to independently rotate your eyes to look in two different directions. With one eye this week, investors and traders will want to watch the Wednesday, August 28, earnings report from Nvidia (NVDA) to see if tech stocks can continue to regain the momentum they lost in the market tumble of early August.And with the other eye, watch for reaction to Fed chair Jerome Powell’s Friday Jackson Hole speech that promised an initial interest rate cut at the Fed’s September 18 meeting. Now market attention shifts to how many rate cuts there will be in 2024. Anything less than full 100 basis points at the September, November, and December meetings will disappoint some bond traders.
Special Report: My 10 Picks for how to invest in climate change NOW–3 first 3 picks, LAZR, PLBF and GWH
Here’s how I characterize developments in the global climate crisis in 2023: It was the year when hot air confronted cold cash. And as you might expect cold cash won.
Which gives me the framework for how to invest in the global climate crisis over the next 12 to 24 months. I’m going to use natural gas to develop my investing paradigm. And then I’m going to give you four sectors in which to concentrate your investments. And 10 specific picks for your money. I expect that I’ll be revisiting the topic of how to invest in the global climate crisis again before too long–because I think today’s paradigm will need substantial revision not all that far down the road.
In Part 1 today, I’m going to develop that paradigm. In Part 2 I’m going to tell you why I think nuclear energy, utility scale battery storage, wind and solar are the sectors that deserve your investment cash and attention (and why electric vehicles don’t make the cut now.) In Part 3, I’ll give you the ten stocks and ETFs I’d pick for these four sectors.
Live Market Report (20 minute delay)
Please Watch My New YouTube Video: Quick Pick Verizon
Today’s Quick Pick is Verizon ( VZ). Verizon’s stock is up after recently reporting earnings. Verizon reported adjusted earnings of $1.21, up only 4 cents from the expected $1.17. The modest surprise was not what boosted the stock, however. Revenue was down year over year to $32.6 billion from $33.79 billion and the earnings were lower than last year’s $1.31 during this quarter. So why was there a bump in the stock? Verizon was expected to report a loss of 9,000 subscribers as competitors, like T-Mobile, chipped away at its customer base, but the company actually gained 8,000 postpaid subscribers. The stock has a great dividend of 7.68%, but the worry was, if Verizon continued to bleed subscribers, it would no longer be able to support the dividend. With the number of subscribers going up, that dividend looks to be safe and the stock will remain in my dividend portfolio on JubakPicks and JubakAM.
Fed bumps interest rates up another 25 basis points, says future increase “depends on the data”
The Federal Reserve raised its benchmark short-term interest rate 25 basis points to 5.25% to 5.50%. The central bank said that further interest rates are likely, but that the timing of any rate increases was contingent on data showing how the economy is reacting to interest rate increases so far. Fed Chair Jerome Powell made it clear that there is more work ahead to bring in inflation down to the Fed’s target of 2%. But he also made it clear that the timing of any future moves will depend on of data over the coming weeks and months. “We think we need to stay on task,” Powell said
Please Watch My New YouTube Video: The Coming End of Business as Usual
Today’s video is The Coming End of Business as Usual. One of the most extraordinary things about the global climate catastrophe is how little effect it’s had on financial markets and their behavior and expectations. The markets still believe that The Fed and other world central banks are still in control of the global economy. Increasing that’s not so as thousands of people die from the heat, places become more and more unlivable, and entire industries face stunning systemic changes. An example of such change is the homeowners market in Louisiana, Florida and California. Louisiana, after dealing with increasingly damaging hurricanes in recent years, has had a dozen insurers go belly-up in the state. Now, about 100,000 households have been forced to move from private insurers into the insurance state fund. Just like Florida, this fiscally conservative state is moving more and more of its citizens to a state-run insurance pool. Sixteen storms and hurricanes in the past three years have resulted in $100-200 billion of property damage in Florida, causing insurance rates to go up 200% since 2019 and many insurers to cease doing business the state. Now 1.4 million people rely on Florida’s Citizens Property Plan, a state-run fund. The conservative state has to rely on–dare I say it, socialism–in order to keep its real estate market goin-it’s hard to get a mortgage to buy a house without homeowners insurance. In California, wildfires have caused homeowners insurance policies to go up 16%, with many insurers leaving the state. The state’s insurance plan called “FAIR” has seen enrollment double since 2019. These are examples of the ways in which capitalism and capital markets will change during this age of global catastrophe. I think we can expect more to come.
How close is the Gulf Stream to collapse?
Yes, we do need more data before we can put a solid date on the collapse of the Atlantic Ocean’s circulation system that includes the Gulf Stream. But the fact that we’re asking that question is really, really scary. The last time the Atlantic circulation failed was during the Younger Dryas about 12,900 to 11,700 years before the present. The change was relatively sudden, taking place over decades (study of this period has overturned the idea that all climate change is slow), and resulted in a decline of temperatures in Greenland by 7 to 18 degrees Fahrenheit and advances of glaciers and drier conditions over much of the temperate Northern Hemisphere.
Microsoft beats Wall Street expectations but disappoints me
This isn’t the quarter I expect from a stock trading at a record, all-time high. Today, after the close, Microsoft (MSFT) reported fiscal fourth-quarter adjusted earnings of $2.69 a share. That exceeded Wall Street estimates of $2.55 a share.Revenue rose on 8% to $56.2 billion Wall Street analysts had expected $55.5 billion. For the fiscal 2023 year revenue grew by just 7%. That was the lowest annual growth since 2017.
Danaher continues its post-Covid reset–now is the time to buy future growth
The comparisons with 2022 continue to hurt shares of Danaher (DHR). For the second quarter, reported yesterday, the company saw revenue down 8% and adjusted earnings per share off 26% year over year. The culprit is easy to see. But I continue to hold Danaher in my Jubak Picks Portfolio where the position, initiated on June 20, 2017, was up 198.3% as of the close on July 25. Tomorrow July 26, I’ll be adding these shares to my long-term 50 Stocks portfolio. Danaher is one way to play the growth of the drug sector and the need of these companies for pure water.
Please Watch My New YouTube Video: Trend of the Week This is What Deflation Looks Like
Today’s Trend of the Week is This is What Deflation Looks Like. Last week, Ford announced it’s cutting the price of the Ford F-150 electric truck, the F-150 Lightning, by nearly $10,000. The prices had gone up when supplies were low, but now, Ford says that they’ve cut production costs, so they’re able to cut prices. Maybe. That’s one explanation anyway. But, the news came as Tesla’s long-awaited truck appears to be finally hitting the market (sometime this year.) There is an over-supply of electric vehicles in general as more and more car makers have pivoted to the EV, and the sector hasn’t grown as fast as the production. In order to keep market share in a young-fast growing industry, companies, like Ford, will cut prices. This is as an early sign of a potential deflationary period. The timing of a transition from an inflationary environment to a deflationary environment will depend largely on global climate change. A lot of money will have to be spent on building, or rebuilding infrastructure, which could stress supply, putting the brakes on deflation. Keep an eye out for my special report called, Investing in Global Climate Catastrophe for more on inflation, deflation and interest rates. For now, the Ford announcement gives us the first hint of deflation in a critical sector of the global economy.
Saturday Night Quarterback (on a Monday) says, For the week ahead expect…
Ho, hum, it’s a quiet week with nothing much going on. Oh, except for the meeting the Federal Reserve’s interest-rate setting Open Market Committee on Wednesday, July 26. Oh, and earnings from Microsoft (MSFT) and Alphabet (GOOG) on July 25, and Meta Platform (META aka Facebook) on July 26. Apple (AAPL) and Amazon (AMZN report on August 3.
Please Watch My New YouTube Video: Quick Pick Iron Mountain
Today’s Quick Pick is Iron Mountain (IRM). Iron Mountain has been around since the 1950s. It started off as a corporate document storage repository and has gradually moved into shredding, security and digitalization (they digitize and store important documents) and a full cloud storage and management offering. The company has 93 million square feet of storage around the world in 56 countries. It acquired about 29 companies in the last three years as the company looks to consolidate a still rather fragmented industry. It has had an average 5.6% revenue growth over the last three years. Morningstar calculates the shares trade at a 3% discount, with a PE of 31, and they pay a 4.2% dividend. I think Iron Mountain is riding a number of o-gern The long-term trends that include corporate and cyber security, as well as the need for document backup in a age of climate change. I’ll be adding this to my JubakPicks and Dividend portfolios on Monday, July 24..
Tesla drops today on earnings–it’s all about falling margins
Tesla (TSLA) delivered a big beat over Wall Street estimates when the company reported second quarter earnings after the close yesterday. The company reported earnings of 91 cents a share, well above the Wall Street projection of 80 cents a share. But in after hours trading, the stock still fell by 4.20%. Today, July 20, the shares are down 7.17% as of 10:45 a.m. New York time. And this comes despite another record quarter of unit sales. The problem?
Please Watch My New YouTube Video: Earnings It’s All About Surprise
Today’s video is Earnings: It’s All About Surprise. Good news is good, but it doesn’t necessarily move markets. On Friday, July 14, JPMorgan Chase came out with a stellar earnings report–but other stocks in the sector moved down on a belief that these banks wouldn’t match JPMorgans good news. However, SURPRISE! On July 18, Bank of America came out with a very good earnings report, and the stock popped by 4.2%. Bank of America surprised the market with a big bump from its Wall Street trading operations. On the surprise, Bank of America actually moved the entire banking index up 2.29%. On the negative side, regional bank PNC Bank surprised negatively with a cut to its full year guidance from 6-8% to 5-6%, and the stock, of course, fell. (Early in the day although it recovered by the close.) Keep all this in mind as we head into earnings season for technology companies, where expectations are often very high. Apple is one of the first to report and will set the tone for the second quarter which is typically a weaker quarter in the technology sector.T
Please Watch My New YouTube Video: Trend of the Week Consumers are Skipping Essentials
Today’s Trend of the Week is Consumers are Skipping Essentials. The impact of high inflation has consumers moving down the price point ladder, and we’re now seeing people skip purchases for essentials. Unit purchases for essentials like toothpaste, laundry detergent and toilet paper are falling. It’s only inflation that keeps retail sales in dollars from dipping. From an investing perspective, this means there isn’t anywhere to hide. Target, which is a relatively inexpensive retailer, is reporting negative growth. Walmart and Costco are still positive, but that could change if this trend continues. In May, inflation adjusted household spending stalled and was essentially flat. Unit sales are down 3% to 4% in the 52 weeks through June 24. This is a sure sign that consumers are cutting back on spending. This all before consumer incomes take a hit with the resumption of college loan payments in October. My advice: be careful out there.
Please Watch My New YouTube Video: Quick Pick Nvidia Hold Through Earnings on August 23
Today’s Quick Pick is Nvidia (NVDA)–Hold Through Earnings on August 23. Nvidia reports late in this quarter’s earnings season, and this report is expected to be very good. Wall Street’s expectations range from a low of 75 cents a share to a high of $1.75 but the consensus is $1.66 a share, up from 32 cents last year. Nvidia has been reporting 30% positive surprises in recent quarters, so there’s a good chance the results may be even better than expected. My suggestion is to hold the stock through this report in August, and then think about selling. I know, I know. Sell Nvidia!? That’s crazy! Here’s the thing. At some point, Nvidia’s growth rate is going to start to slow. When it does, people will look at the stock and decide the slower growth rate may not
Please Watch My New YouTube Video: Remember the Quiet Period
Today’s video is Remember the Quiet Period. Don’t panic. There have been a lot of announcements coming from the Fed recently but it’s not because there’s a new crisis or a huge event brewing. It’s simply that the window of time when the Fed can speak is about to close. The Fed has to go quiet twelve days before the July meeting, so right now, they’re trying to make it very clear to the market that a 25 basis point raise is likely in July. On Monday, three Fed officials, Michael Barr, Mary Daly and Loretta Mester discussed the need for another rate hike–possibly two. We’ll be entering the Fed’s quiet period on Saturday, July 15. Looking at the CME FedWatch, on July 11, the market believed there was a 92.4% chance we’ll get a rate hike on July 26. On the same date, the market thought the odds were only at 22.2% for a 25 basis point increase at the meeting on September 20. It sounds like the Fed has made their intentions clear for the July 26 meeting, and the market won’t be shocked by a rate hike on that date. September 20? Hmmm.
Yesterday’s CPI inflation report created a huge dilemma for the Federal Reserve (and your portfolio)–here’s what to watch
Yesterday, the Bureau of Labor Statistics reported that all-items inflation rose at just a 3% annual rate in June. That was a huge drop from the 4% annual rate reported in May. The inflation numbers immediately prompted Wall Street to, again, declare that the Federal Reserve’s cycle of interest rate increases would end “soon.” “Soon” is now defined as after the Fed’s July 26 meeting. Fed officials have been so adamant in recent days about the need for more interest rate increases that the odds of 25 basis point increase at the July 26 meeting barely budged after the June CPI report. Today the CME FedWatch Took, which calculates the odds of a Fed move by looking at prices in the Fed Funds Futures market (and is, thus, a measure of investor sentiment rather than speculation on Fed thinking) puts the odds of a July 26 25 basis point increase at 92.4%. That’s down only slightly from the 94.2% odds before the CPI inflation report. The big move has been in the odds for a second 25 basis point increase at the Fed’s September 20 meeting. Today, the odds are just 11.1%. That’s down from 13.2% odds of a 25 basis point move in September on July 12. And down big from 27.5% odds of another interest rate increase in September on July 6. And there’s the Fed’s problem.
Special Report: Finding the Next Nvidia: My 10 Picks–Pick #2 ESS Technology
Two keys to finding a stock capable of racking up Noida-like gains over the long term: Finding a cheap entry point. And finding a stock from a company with a fast-growing (over the long term) addressable market. (Just as a refresher Nvidia (NVDA) shares are up an average of 61% a year over the last 10 years.) My second pick to meet this challenge: ESS Technology (GWH)
Consumers finally start to buckle; time to sell Procter & Gamble
U.S. consumers are reducing spending on staples such as toothpaste, laundry detergent, and toilet paper. The bad news for investors is that consumer staples stocks, seen as a safe haven as the economy slows and inflation continues above 3%, aren’t a safe as assumed in so many portfolios.
Please Watch My New YouTube Video: Trend of the Week India is the Next China
Today’s Trend of the Week is India is the New China–in investing terms. Companies are looking to India for better prices and as a means of side-stepping the China and U.S. technology trade wars. For example, Apple is openly looking for suppliers in India, or asking suppliers to move from China to India, and other companies are following the path as well. Moody’s forecasts India’s GDP growth at 6% to 6.3% this year. I have two suggestions to get in on this trend. The first is the iShares MSCI India ETF, (INDA), which is up 5% year to date, but up 10-11% in the last three months. The other option is HDFC Bank, (HDB), much more volatile that the ETF, but also up 5% year to date and up 8% in the last three months. HDFC Bank is the biggest credit card issuer in India, with 28-29% market share. As wealth in India grows, more and more consumers are getting credit cards for the first time. HDFC also offers alternative platforms and payment technology that will also let the bank ride the technology wave in India’s financial sector. I don’t feel overly enthusiastic about investing in India as a whole. The country has an incredible, increasing reliance on coal, and the economy is riddled with special deals that favor family-run conglomerates with ties to the government. Buying the whole Megillah makes me a little leery, but I like INDA and HDB to get in on sentiment that sees India as the new China for investments.
China nears deflation–and it doesn’t look like the standard policies will work
China’s consumer inflation rate was flat in June with the consumer price index unchanged year over year, according to data release by the National Bureau of Statistics today. That was the lower inflation rate since February 2021 when slumping pork prices dragged the index into deflationary territory. Aside from that brief period of deflation, China hasn’t experienced prolonged consumer price deflation since 2009 during the global financial crisis. The fall in what are called factory-gate prices, the equivalent of producer prices in the United States, says there aren’t inflationary pressures ready to ride to the rescue. Producer prices fell 5.4% from a year earlier, the deepest pace since December 2015. Core inflation, which excludes volatile food and energy costs, slowed to a year-over-yrar rate of 0.4% from 0.6%. The problem is falling consumer demand
Saturday Night Quarterback (on a Sunday) says, For the week ahead expect…
Look for big news on inflation and earnings this week. But I think the news is baked into stock prices so I don’t expect much of a move on the news.
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