November 16, 2024
What You Need to Know Today:
Congress faces another shut down deadline on September 30
Congress returned to Washington today facing a September 30 deadline to pass legislation to keep the government open after the last stop-gap funding measure expires on September 30, the end of the 20214 fiscal year. The consensus view seems to be that there’s little to worry about and that Congress will, of course, cobble together another extension so close to the Presidential election. But we are talking about Congress, remember. It’s never a good idea to completely discount an act of astounding stupidity from Capitol Hill.
Gold retreats from its record high–What to do Part 1
Gold futures for June delivery closed down 2.92% on the Comex today. The metal closed at $2343.40 an ounce. The drop came on a lessening of fears that the exchange of attacks between Israel and Iran would quickly lead to a wider Middle East war. And on growing sentiment that the Federal Reserve isn’t likely to cut interest rates soon. The drop in the gold contract for June delivery was the largest since February 3, 2023 when it fell 2.8%.
Please Watch My New YouTube Video: Quick Pick ABT
Today’s Quick Pick is Abbott Laboratories (ABT). The medical device sector is very complicated with constant changes to technology and best practice therapeutics and it can be very hard to keep track of, but two things recently caught my eye about Abbott. The company is generally very conservative and rarely raises guidance, but it did exactly that in its first quarter earnings report. It wasn’t a huge raise but the company went from projecting earnings in a range of $3.20 a share to $3.40 a share to a range with a higher floor of $3.25 to $3.40 a share. The other announcement was a big boost in sales of its diabetes continuous glucose monitoring device, Freestyle Libre. Sales grew to $1.5 billion, up 22.4% year over year. Overall, at the company medical device sales grew 14% year over year, though their Covid test sales were down 18% year over year. I think this is a medical device company that is well-positioned for an aging population. The stock pays a 2.08% dividend. Morningstar says this stock trades at fair value with the shares down about 7.8% in the last month. I think this is a good chance to buy this well-managed, conservative company.
A big test of demand for Treasuries in this week’s huge auctions
It’s been a tough month for Treasuries with yields rising on a re-thinking of when the Federal Reserve might begin to cut interest rates. The yield on the 10-year Treasury closed at 4.62% on Friday. That’s an increase in yield of 35 basis points in a month. (When yields climb, bond prices fall.) And this week the Treasury will auction a combined $183 billion of two-, five- and seven-year Treasury notes. Ans that’s ahead of the latest update on the Personal Consumption Expenditures index, the Federal Reserve’s preferred inflation measure.
Saturday Night Quarterback (on a Sunday) says, For the week ahead expect…
I’m sure you’ve noticed. The technology sector, which led the stock market rally in 2023 and in the early days of 2024, is in a slump. The Technology Select Sector SPDR ETF (XLK) tumbled 6.27% last week and is down 7.16% in the last month. For 2024 to date, as of the close on April 19, the sector is at break even with gain of 0.19%. Quite a turnabout for a sector that is still up 30% for the last 12 months. This week brings a raft of tech earnings that could turn the sector’s trend around. Or not.
Please Watch My New YouTube Video: Hot Button Moves Now Buy ASML
Today’s Hot Button Moves NOW video is Buy ASML Holding (ASML). ASML is the only global manufacturer of the most cutting-edge chip-making equipment, a technology called Extreme Ultra Violet Lithography (EUV). The equipment allows for a smaller chip, more transistors on the chip, and more power for less silicon. ASML’s earnings report on April 16 was disappointing, with fewer than expected orders, a situation that will likely continue into the next couple of quarters. This resulted in a big drop in earnings and the stock taking a big hit. But, this is the only game in town for this equipment, and anything chip that uses the new 2-nanometer, 3-nanometer, and 5-nanometer technologies will be made on ASML equipment. So orders will not stay down for long. I would use this weakness to buy ASML Holding. It’s not cheap, but it’s not likely not get much cheaper than this, and as geopolitical chip wars settle, orders for ASML will jump rebound. ASML Holding is a member of my long-term 50 Stocks Portolio.
Special Report: 10 Contrarian Bargains to Buy Now–My third of 10 Picks is Barrick Gold
A few days ago I recommended selling positions in the SPDR Gold Shares (GLD) and in the VanEck Gold Miners ETF (GDX) on the grounds that with bon yields rising, gold wouldn’t move higher. (This was all, of course, before Hamas attacked Israel and sent markets running for safety. On Friday, October 13, Comex gold for December delivery was up 3.11%.) So what I am I doing today recommending Barrick Gold (GOLD) as the third pick in my Special Report “10 Contrarian Bargains to Buy Now”?
Live Market Report (20 minute delay)
Please Watch My New YouTube Video: Quick Pick U.S. Natural Gas Fund
Today I posted my two-hundred-and-forty-first YouTube video: Quick Pick U.S. Natural Gas Fund Want to grow your portfolio and protect it too? In the toughest investing market in 40 years? Grab my eBook, Your Best Investing Strategy for the Next 5 Years: Free download for subscribers to JubakAM.com. Just click on the image in the right margin. Today’s Quick Pick is United States Natural Gas Fund (NYSEARCA: UNG). The chart for UNG is horrendous, with a peak in August and a steady plummet after that. For 2022, the stock was up about 12%, thanks to late summer surges in price, as natural gas was bid up under the expectation that the war in Ukraine and sanctions on Russia would cause Europe to run out of natural gas. But year to date for 2023, it’s down 44%, as Europe proved better at replacing Russian gas than anyone had expected. As the end of winter approaches, European natural gas stockpiles are at about 65%–above normal for this time of year. UNG has a pattern of up years following down years–in 2020 UNG saw a 43% decline, and in 2021, a 35% increase. As the price of natural gas goes down, demand spikes as buyers look for the cheapest fuels and purchase more natural gas, which sends the pendulum swinging back upward for natural gas providers and funds that track the commodity. Between now and mid-March is a good time to get in on natural gas as we look for the upswing when China and Asia start looking at cheaper natural gas prices and Europe looks to get its stockpile back to 100%.
Adding Pioneer Natural Resources to my Dividend Portfolio on 11% annual yield
Wednesday, February 22, Pioneer Natural Resources (PXD) reported better-than-expected adjusted earnings for the fourth quarter of 2022 while revenues came up short of Wall Street estimates. Revenue was still up 18% year-over-year to $5.1 billion. Fourth quarter net income nearly doubled to $1.48 billion or $5.98 share, from $763 million, or $2.97 a share, in the fourth quarter of 2021. The company declared a quarterly total dividend of $5.58/share, made up of a $1.10 base dividend and a $4.48 variable dividend. The total annualized dividend yield is approximately 11%.Which is why I’m adding the shares to my Dividend Portfolio today.
Intel cuts dividend by 66%, stock drops just 2.26% on the day
So it wasn’t much of a surprise to most investors–although some of us were hoping that Intel (INTC) would hold its dividend steady after a big bond offering in the last few weeks. But today Intel cuts its dividend by 66% to 12.5 cents a share from a prior 36.5 cents. The stock dropped only 2.26% on that big news.
Please Watch My YouTube Video: 6% Yes, 8% No
Today I posted my two-hundred-and-fortieth YouTube video: 6% Yes, 8% No. Today’s topic is: 6% Yes, 8% No. I’ve been saying that I think 6% is the peak for interest rate increases from the Federal Reserve this cycle. Inflation is not coming down as fast as the Fed would like and it’s going to have to keep raising rates until it can bring inflation down to an acceptable level. But what’s acceptable to the Fed? According to the Taylor Rule, which looks at unemployment to calculate where interest rates should be in order to control inflation, we’re heading toward 9% interest rates. I don’t think that’s going to happen in this cycle–not because the economics are wrong, but because the politics don’t work. Mohamed El-Erian recently argued that what is really needed is 8%, but if the Fed did that, he noted, it would cause a massive recession. Instead, he thinks the Fed will declare victory when inflation reaches 3% to 4%, (and we’re 4.5% to 5.5% now, depending on what inflation measure you choose). The idea is that the Fed will settle for a higher inflation rate and blame the green energy transition, geopolitical challenges, and changes in the labor market. Look for a 6% interest rate peak as a good buy point into this market.
Financial markets aren’t happy with Fed minutes from February 1 meeting
Minutes from the Federal Reserve’s February 1 meeting show a central bank anticipating Federal Reserve further increases in interest rates in order to bring inflation down to the Fed’s 2% inflation target. “Participants observed that a restrictive policy stance would need to be maintained until the incoming data provided confidence that inflation was on a sustained downward path to 2%, which was likely to take some time,” according to the minutes of the February 1 meeting released today February 22.
Shares of Palo Alto Networks pop on earnings
After the market close on February 21, cyber security company Palo Alto Networks (PANW) reported fiscal second-quarter 2023 year-over-year revenue growth of 26% to $1.7 billion. Billings in the quarter also rose by 26% to $2.0 billion. The rock-solid consistency of revenue and billings growth in this quarter and as projected for the rest of the year got a cheer from the market. In after-hours trading shares gained 8.56%.
Treasury yields continue to creep higher
Today, February 21, the yield on the 10-year Treasury rose 14 basis points to 3.95%. Other Treasuries dropped in price and showed higher yields as well.
Please Watch My New YouTube Video: Quick Pick Cameco
Today I posted my two-hundred-and-thirty-ninth YouTube video: Quick Pick Cameco Today’s Quick Pick: Cameco (NYSE: CCJ). I’m not a fan of nuclear power. Relying on an energy source that produces waste that will remain radioactive for thousands of years when we have no real solution for long-term disposal, is, to me, not the best idea. However, we’ve waited so long to deal with climate change and we still haven’t upgraded the grid so that wind and solar can replace current baseload power sources, so nuclear power will remain in the mix longer than expected. And might even see an increase in its share of the electricity market. Cameco is one of the largest producers of uranium in the world. The company has a lot of capacity that it can bring back into production since it shut down a number of mines when demand for uranium was down. The stock is up about 35% in the last year, 30% year to date, and 16% in the last month. For the trailing 12 months, the company was actually profitable ($116 million), following a loss in 2021 and 2020. You may want to wait for another dip in the general stock market for this one, or dollar cost average into it, but for global warming solutions, this is a good play since we’ve dragged our feet until we’re in an emergency that will require non-optimum, shall we say, solutions. I’ll be adding the stock to my Jubak Picks Portfolio tomorrow, February 22.
Walmart’s caution a red flag on consumer spending: stocks fall today
Today, February 21, Walmart (WMT) reported s 76% year-over-year jump in earnings to $1.71 a share. Wall Street analysts had forecast earnings of $1.52 a share for the fourth quarter. Revenue rose 7.3% to $164 billion. Comparable store sales gained 8.3%. All that pushed the company’s shares higher today with the stock up 0.59% at the close. But Walmart’s cautious guidance for the rest of 2023 helped send the general market lower.
Special Report: 7 AI Stocks to Own Now–with a couple of speculative picks to come on Thursday
You can understand the gold rush: One AI stock is up 105% (and 78% in the last month) in 2023 as of the February 17 close.
But are shares of that company, the software artificial company C3A (AI), the stock you want to own, or is this stock simply a beneficiary of hot money jumping on anything that sounds like artificial intelligence? As one market observer put it on Seeking Alpha recently, “The ticker is more valuable than the company.” This doesn’t mean that the current revolution in artificial intelligence isn’t real. And here I give you my 7 picks for investing in the latest AI revolution
Saturday Night Quarterback (on a Monday) says, For the week ahead, expect…
The big event of the week will be Friday’s report on the Personal Consumption Expenditures (PCE) inflation index. This, rather than the CPI, is the inflation measure that the Federal Reserve watches.
Please Watch My New YouTube Video: You Can Get 5% in a CD
This week’s Trend of the Week is: You Can Get 5% in a CD. Thank you, Jerome Powell and the Federal Reserve. Recently we’ve seen a huge rally in short-term yields. Right now, you can get a 5% CD from Capital One with a $0 minimum. As far as money market accounts go, you can get one from CFG Community Bank at 4.45% with a $1,000 minimum. For a fund, PIMCO Enhanced Short Maturity Active Exchange (NYSEARCA: MINT) is an actively managed fund that shifts among Treasury and corporate bonds and some other income assets, and currently, you could get more than 4.5%. One thing to think about in this environment is whether or not you want to hold a fund or buy bonds from TreasuryDirect, knowing that the debt ceiling crisis could cause Treasury prices to go down. If the Treasury prices do go down, bond funds will get hurt. You’ll be better off holding a Treasury bond to maturity. My suggestion is to buy the Treasury, if it rallies, you can sell, otherwise, keep it and get a guaranteed yield. For more on this, go to JubakPicks.com or JubakAM.com to find a complete, in-depth look at all these options.
The best way to get a 5% yield–my choices and their pluses and minuses
Remember the good ol’ days when Treasuries paid 0% or so and you had to give a bank your toaster to open an account, paying 0.01%? Right now you can find a CD paying 5%–and it doesn’t require locking up your money until the sun goes super-nova either.
Today, the 12-month Treasury closed with a yield of 4.99%. And the 6-month bill paid an even higher 5.02? You can find a bond ETF with an SEC yield of 4.63%. And even a money market fund paying 4.45%. What’s the case for stashing some of your cash in something “safe” as the stock market looks like it’s about to go into one of its periods of volatility? And what’s the best choice when you’ve suddenly got so many vehicles offering to pay you 5% or so? In today’s post, I’ll sketch out the pluses and minuses of these alternatives.
Just as Wall Street starts to get comfortable with more 25 basis-point interest rate increases, some on the Fed start talking about a return to 50
The comments come from two of the Federal Reserve’s most hawkish members on the need for higher interest rates to combat inflation, so the remarks aren’t exactly a surprise. Nonetheless, the language does push the envelope on thinking about where the Fed’s interest rate peak for this cycle of interest rate increases might be.
More on Wall Street see a Federal Reserve interest rate increase in June
Economists at Bank of America and Goldman Sachs now see the Federal Reserve extending its interest-rate increases through the June Fed meeting.
Is soaring credit card debt and rising defaults a threat to the consumer economy?
In the fourth quarter of 2022 credit card balances rose to a record high of $986 billion. The $61 billion increase from the third quarter was the biggest in data going back to 1999. The increase pushed Americans’ total credit card debt past the previous high of $927 billion, which was set in the fourth quarter of 2019, according to the New York Fed’s Household Debt and Credit Report. And it’s not just rising balances. Borrowers are missing payments too and delinquency rates have passed pre-pandemic norms.
Special Report: 7 AI Stocks to Own Now will go up on Monday
Sorry for the delay on my Special Report: “7 AI stocks to Own Now.” The Special Report will be posted Monday
Please Watch My New YouTube Video: Sell! Time to Take Some Rally Profits
Today’s topic is: Sell! Time to Take Some Rally Profits. Wednesday’s rally had all the earmarks of a blow-out-the-top rally. Though it wasn’t a huge jump, the markets went up on a goldilocks reaction to stronger-than-expected retail sales for January. The S&P was up 0.28% and the NASDAQ Composite was up 0.92%. The interesting part of this jump is the stocks that saw the big action – not Microsoft, Amazon, or some of the big stocks, but some more speculative things. One of them was Quantumscape Corporation (NYSE: QS), a tech company that is in the process of creating a solid-state lithium battery- though it’s not expected until 2025. They reported losing less money than they expected, and their stock shot up 32% in one day. Wayfair (NYSE: W) is up in the last month by about 58% and was up 10.4% yesterday. These are both examples of a big jump in 2023 and an even bigger jump on a blow-out day. These kinds of numbers are not sustainable, especially with more interest rate hikes from the Fed on the way and an impending debt ceiling crisis. This really is not likely to last too long. If you want to learn more about what I’m selling now, you can go to my latest post on JubakPicks.com and JubakAM.com for a detailed breakdown of what I’m selling and why.
Wednesday’s rally in the market’s most speculative stocks is the last straw for me: I said I’d be a seller into any post-Fed rally–but what specifically would I be selling? Here are the 12 stocks I’d sell now
The rally on February 15 sure looked like a speculative blowout of the kind that often signals a market top. For me, it was the last straw and I’m selling into the rally. This post tells you what I’m selling and how I arrived at these decisions. But first, a few words on Wednesday’s move.
CBO says federal government could default as early as July
The nonpartisan Congressional Budget Office warned, today, that the federal government would be at risk of a default as soon as July if lawmakers fail to raise the debt limit. The Treasury Department is currently using accounting gimmicks to keep paying federal obligations, after hitting the statutory debt ceiling last month. Treasury Secretary Janet Yellen signaled last month that those measures would enable Treasury to keep paying the government’s bills at least until early June. Today’s CBO estimate is, thus, an updated timeline.
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