💥 Investing Insights & Market Analysis [Issue #25: Week 3, Jan 2024]

💥 Consumer prices rise higher than expected, SEC approves 11 Bitcoin ETFs, Citigroup cuts 10% of it's workforce, German house prices are in freefall, Stock Picks, Insider Trades, and Much More!

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👋 Good morning my friend, and welcome back to your favorite newsletter! I hope you’ve had a wonderful weekend!

Thank you for subscribing to our newsletter, dedicated to helping you become smarter with your money. We have a lot of important information to discuss, but before we get into it, one quick announcement:

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🎉This week we discuss:

🎯Financial Insights:

1) Weekly Stock Market & Economic Analysis
2) The 5 Most Important Financial Events this Week
3) The 3 Most Important Charts this Week (and why it matters)
4) Lesson of the Week (and its importance)

🎯Premium Research & Analysis:

5) Stocks picks
6) Stocks to Watch & catalysts
7) Billionaire, Politician and CEO Insider Trades
8) Trade Ideas of the Week [Options Flow Activity]

9) Real Estate & Housing Market Insights
10) Interest Rate Predictions & Mortgage Rate Update

11) Mid-Term Technical Analysis [S&P 500, Tech Stocks, Bitcoin]
12) Market Sentiment & Economic Outlook
13) Significant Economic Events This Week (and why it matters)
14) Key Earning Announcements This Week (and stocks to watch)

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1. This Week’s Stock Market & Economic Analysis:

• The 1.9% gain in the S&P 500 indicates continued optimism among investors. The outperformance of growth stocks over value stocks shows investors are betting on future earnings growth, particularly in the technology sector. This is evidenced by solid gains for Meta Platforms META 0.00%↑ and NVIDIA NVDA 0.00%↑ .

  • The outperformance of large-cap stocks over small caps likely reflects a "flight to safety" mentality among investors, who view large caps as more stable amid economic uncertainty. Investors seem to be rotating into mega-cap technology names they perceive as quality companies

• Michelle Bowman, a governor of the Federal Reserve, stated that she believes that interest rate hikes are likely over, but she is not ready to cut rates yet.

  • The outlook is clouded by conflicting economic data - a strong job market but slowing manufacturing and housing. CPI inflation reports in the coming months will likely determine if the Fed pauses or continues with smaller hikes.

• Goldman Sachs analyst Jeffrey Currie stated that he believes that the world is moving into a new super cycle, which is characterized by a long period of high commodity prices.

  • For investors, this reinforces the case for gaining exposure to commodity producers, miners, oil and gas companies, and other natural resource equities. These stocks tend to outperform during periods of rising commodity prices.

  • For personal finance, a potential super cycle means households should brace for persistently higher costs for food, fuel, and other staples.

• Earnings season kicked off with the nation’s four largest banks – JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo – reporting.

  • Fourth-quarter earnings will provide insight into the health of the U.S. consumer.

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🤔How do you feel about the markets this month?

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2. The Most Important Financial Events this Week (you need to know):

In this issue, we’re analyzing:

1) Consumer prices (CPI) rise higher than expected

2) The SEC approves 11 bitcoin ETFs

3) Citigroup is cutting 10% of it's workforce

4) Starbucks is accused of rigging payments in app for nearly $900 million gain over 5 years

5) German house prices are in freefall

1️⃣ Consumer prices (CPI) rise higher than expected

Consumer prices (CPI) rose 0.3% in December, which is higher than the expected 0.2%. Additionally, the annual rate of inflation stood at 3.4%, which is also higher than the expected 3.2%.

💡My take: A big reason prices went up is because of housing costs. Rents have been going up a lot the last couple years because the housing market has been hot. Rents and housing costs tend to go up slowly over time. So we'll probably keep seeing high inflation in housing for a while.

Even though inflation was high in December, it's much lower than it was earlier in 2022. Back then, inflation was over 9%. Now it's down to 3.4%. That's good progress but still too high for the Fed. They want inflation around 2%.

What does this mean for the future? The Fed will likely keep interest rates high for longer. They need to see inflation come down more before they start cutting rates.

2️⃣ The SEC approves 11 bitcoin ETFs

After years of rejections, the SEC finally gave Bitcoin ETFs the green light, paving the way for mainstream investors to gain exposure to Bitcoin in their brokerage accounts and IRAs.

However, it is important to note that the SEC's approval of these ETFs does not necessarily mean that the agency is endorsing Bitcoin or other cryptocurrencies. The SEC has made it clear that it still has concerns about the volatility and manipulability of these markets, and that it will continue to monitor developments closely.

💡My take: The SEC seems to have become more comfortable with the idea that Bitcoin is here to stay as an asset class. I see this as validation from the highest regulatory authority in the US.

In the long run, I expect these ETFs to funnel billions of dollars into Bitcoin and other cryptocurrencies over the next few years. The SEC approval intensifies the "institutional FOMO" as asset managers, hedge funds, pension funds may allocate a portion into bitcoin and crypto for diversification. This influx of institutional dollars can drive prices higher.

The launches of transparent, liquid, and regulated Bitcoin ETFs will help protect investors from potential manipulation and fraud often associated with crypto.

3️⃣ Citigroup is cutting 10% of its workforce

Citigroup C 0.00%↑ has decided to cut 10% of its workforce. This workforce reduction indicates that Citigroup is still struggling over a decade after the 2008 financial crisis.

💡My take: Citigroup's decision to cut 10% of its workforce is not surprising, given the challenges faced by the bank since the 2008 financial crisis. The company has struggled to keep up with its peers, and its stock price has suffered as a result.

By reducing its workforce, Citigroup aims to lower costs and improve efficiency, which could ultimately boost its profitability and stock price.

For investors, this large restructuring presents a potential opportunity. If Citigroup can successfully execute this transformation and become a more profitable bank, its stock valuation could expand significantly. Right now, Citi trades at one of the lowest price-to-book ratios among major banks, indicating it has upside potential if management can deliver on its strategy. Patient, long-term investors may want to take a look at adding some Citigroup stock at a discount.

4️⃣ Starbucks accused of rigging payments in-app for nearly $900 million gain over 5 years

Starbucks SBUX 0.00%↑ has been accused of exploiting its customers by forcing them into a spending cycle where they can never fully spend their prepaid balances.

Customers can only reload their accounts in $5 increments, with a $10 minimum purchase, making it difficult for them to reach a zero balance. This allegedly resulted in nearly $900 million in unspent gift card and app money over the past five years, being claimed by Starbucks as corporate revenue, which in turn boosts corporate profits.

💡My take: The required $10 minimum and $5 reloads make it tricky to hit a zero balance. This seems intentionally designed to benefit Starbucks, not the consumer. This practice of making it hard for customers to fully spend their prepaid balances appears unethical and may violate consumer protection laws if proven true. Tighter regulations on unused gift card balances may be enacted.

5️⃣ German house prices are in a freefall

The 10.2% year-over-year drop in German residential property prices in Q3 2022 signals a significant correction in the market after years of rapid price appreciation fueled by low-interest rates. This is the steepest quarterly decline since records began in 2000, confirming that Germany's decade-long property boom has decisively ended.

Home prices are likely to continue falling as high mortgage rates price out buyers. Analysts predict prices could fall 8% in 2022 and 2.8% in 2023. Further declines are expected until rates stabilize.

💡My take: Germany's property downturn has only begun. Property developers face insolvency as financing dries up. Falling demand and profits will curb new construction.

Banks face rising credit risks from property lending. Defaults may increase as developers and homeowners struggle with repayment.

Germany's construction industry will shrink, shedding more jobs. Housing investment will drag on economic growth.

Some more important headlines this week:

• Microsoft MSFT 0.00%↑ overtakes Apple AAPL 0.00%↑ to become the World’s most valuable public company by market cap

• Google cuts hundreds of jobs across its engineering and hardware teams

• JPMorgan was fined $2.9B, Bank of America was fined $2.1B, Wells Fargo was fined $1.9B and Citigroup fined $1.7B by the FDIC

👉For daily insights, follow me on Twitter or Instagram Threads, and turn on notifications.

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3. The 3 Most Important Charts this Week (and why it matters):

1. How long $1 million in retirement savings lasts in every state:

   

   

   💡My take on this: This highlights how crucial it is to save aggressively for retirement and have realistic expectations. Start saving early and maximize contributions over time. Longer compounding growth is invaluable.

   Healthcare costs are skyrocketing, and will likely represent one of the biggest expenses in retirement. Geographic differences matter too - healthcare is generally more expensive in high-cost states.

   Lower-cost states can stretch savings further. Retirees should factor costs into location choice.

2. Microsoft overtakes Apple as the most valuable stock in the world:

   

   💡My take on this: Microsoft's market cap reached $2.89 trillion, surpassing Apple's market cap of $2.87 trillion. This shift happened because Apple's stock has struggled recently due to worries about slowing demand for iPhones. Meanwhile, Microsoft's stock has continued to climb due to optimism about its artificial intelligence capabilities.

   AI is increasingly seen as the next major technology wave. Microsoft appears well-positioned to capitalize through Azure, software, and new products. Investors are taking notice.

3. The new 11 Bitcoin ETFs and their Tickers:

   

   💡My take on this: The launch of these ETFs is also expected to lead to increased liquidity and trading volume in the cryptocurrency market. As more investors gain exposure to bitcoin through ETFs, the demand for the cryptocurrency is likely to increase, which could drive up the price.

👉For more charts like this, follow me on Instagram, Facebook or LinkedIn, and turn on notifications.

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4. Lesson of the Week (and why it’s important):

Adding your child as an authorized user on your credit card account can be an extremely beneficial strategy to help them establish credit and build an excellent credit score from a young age. This allows them to begin accruing positive payment history on their credit report, even before they turn 18, and obtain their own credit card.

Having a strong credit profile by age 18 puts your child at a significant advantage. With a strong credit score, they will qualify for the best loan terms, whether financing a car or buying their first home. Lower interest rates on loans can save thousands of dollars over time.

That said, adding your child to your account also links their credit record to yours. If you miss payments or accumulate credit card debt, it could negatively impact both of your credit scores. Before adding your child, ensure you pay balances in full and on time every month.

Moving forward, take time to educate your child on responsible credit usage. Explain the importance of staying below 30% of their credit limit. Review credit reports together to demonstrate how on-time payments and low balances strengthen scores over time. Instilling these habits from a young age will pay dividends throughout their financial life.

👉Liked this tip? To ask a question, add your thoughts, or engage in discussions, chat with me in the Reddit Community or Facebook Group.

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5. Stock Picks:

Artificial intelligence is poised to be the next major technological revolution, much like the internet boom of the 1990s. Investing in companies pioneering AI technology today could lead to significant returns in the future, as AI becomes more widespread across industries.

The rise of AI seems inevitable and its potential implications are massive. AI will transform healthcare, transportation, marketing, data analysis, and more.

To profit from the growth of AI and the broader technology sector rally, investing in tech-focused ETFs can offer exposure. Examples include the SPDR NYSE Technology ETF XNTK 0.00%↑ , Invesco S&P 500 Equal Weight Tech ETF RSPT 0.00%↑ , or Vanguard Information Technology ETF VGT 0.00%↑. These are all good options for those looking to profit from the tech sector rally in 2024.

The key is to invest now, while AI is still emerging. It feels like we're at a pivotal point, similar to the birth of the internet. AI will transform industries and daily life in the coming years. So getting in early on the companies leading the AI revolution seems like a smart play. It could lead to huge returns down the road as this technology takes off.

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6. Stocks to Watch & Catalysts:

1. Wednesday 1/10: WD-40 WDFC 0.00%↑ up 15.2% - WD-40 reported a 13% increase in revenue for the first quarter, with earnings per share and revenue guidance for the full year reaffirmed.

2. Wednesday 1/10: GoodRx GDRX 0.00%↑ up 13.3% - GoodRx issued fourth-quarter revenue guidance that beat prior guidance and analyst estimates, indicating strong demand for its healthcare services.

3. Wednesday 1/10: PriceSmart PSMT 0.00%↑ up 4.9% - PriceSmart reported first-quarter results with earnings per share of $1.24, a 10% increase from the year-ago period, and revenue of $1.17 billion, an 11% increase.

4. Wednesday 1/10: Intuitive Surgical ISRG 0.00%↑ up 10.3% - Intuitive Surgical reported preliminary fourth-quarter revenue that beat expectations, with the company expecting revenue of $1.93 billion for the quarter.

5. Tuesday 1/9: CrowdStrike CRWD 0.00%↑ up 4.8% - Morgan Stanley upgraded CrowdStrike to overweight from equal weight, citing promising product cycles, including its newly launched artificial intelligence platform.

6. Tuesday 1/9: Illumina ILMN 0.00%↑ up 4.6% - Illumina guided for fourth-quarter revenue that exceeded analyst expectations, with the company expecting revenue of around $1.1 billion.

7. Monday 1/8: Equifax EFX 0.00%↑ up 3.94% - Bank of America double upgraded Equifax to a buy rating from underperform, citing a bullish mortgage outlook on the back of expected rate cuts.

8. Monday 1/8: Nvidia NVDA 0.00%↑ up 6.43% - Nvidia announced three new graphics chips that can power PCs or laptops and can power AI at home, leading to a new all-time high for the stock.

9. Monday 1/8: Twilio TWLO 0.00%↑ up 6.68% - Twilio's stock jumped after Jeff Lawson announced that he would step down as CEO, following pressure from two activist investors pushing for changes at the company.

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7. Billionaire, Politician and CEO Insider Trades:

1. Chevron CVX 0.00%↑ :

   1. Tommy Tuberville, a Republican Senator from Alabama, reported purchasing between $100,000 and $250,000 worth of Chevron stock on January 12, 2024.

      1. Chevron is an energy company that engages in the exploration, production, and refining of oil and natural gas, and is one of the largest energy companies in the world.

2. Opko Health OPK 0.00%↑:

   1. On January 8, 2024, the CEO and Chairman of Opko Health, Phillip Frost, reported purchasing shares valued at $1.34 million.

      1. OPK is a diversified healthcare company focusing on pharmaceuticals, diagnostics, and medical devices. Recent news includes positive development updates for their kidney disease drug and a collaboration agreement for a clinical trial in Alzheimer's disease.

3. Liberty Media FWONK 0.00%↑

   1. Warren Buffett's Berkshire Hathaway made multiple sizeable purchases of Liberty Media shares between January 2nd and 4th, 2024, investing over $76 million.

      1. FWON owns stakes in various businesses, including satellite TV provider Sirius XM, online entertainment platform Live Nation, and media conglomerate Liberty Global. Recent news includes strong subscriber growth for Sirius XM and a potential spin-off of Live Nation's ticketing business.

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8. Trade Ideas of the Week [Options Flow Activity]:

1. Bullish Activity on META META 0.00%↑

   1. The call option volume for META is significantly higher than the put option volume, with a put/call ratio of 0.575. This means for every put option traded, there were over 1.7 calls traded. The largest single block execution occurred on the Feb. 16, 2024 335.00 Calls.

   2. This activity shows traders are betting on further upside in the near-term and indicates a bullish sentiment towards the stock.

2. Bearish Activity on Alaska Air ALK 0.00%↑

   1. A large block of 7,500 Feb 16, 2024, $30 puts at $0.25 was traded, signifying bearish sentiment.

   2. The investigation into Boeing Co.'s 737 Max 9 aircraft has caused a slide in Alaska Air’s stock price. The investigation news has likely increased bearish sentiment, as seen in the elevated put activity, signaling potential challenges for Alaska Air Group.

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9. Real Estate & Housing Market Insights:

1. Price reductions are down. The percentage of homes with price reductions decreased from 14.1% in December of last year to 12.7% this year. This suggests that buyers are willing to pay premium prices for properties.

2. Inventory levels are still low. While inventory has improved slightly compared to last year, it remains well below pre-pandemic levels. This indicates that supply is still tight, keeping upward pressure on home prices.

   1. Low inventory forces buyers to compete for homes at list price or higher, reducing the need for sellers to lower asks.

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10. Interest Rate Update & Predictions: Rates will Stay the Same

1. Interest rates are expected to remain flat in the coming weeks. Higher-than-expected job numbers have tempered expectations for a rate cut in March. The market awaits more evidence of a slowing economy to support further declines in mortgage rates.

2. The 30-year mortgage is now 6.69%, which is -0.06 lower today than it was a week ago, and -0.40 lower today than it was a month ago:

   

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11. Mid-Term Technical Analysis [S&P 500, Tech Stocks, Bitcoin]:

1. S&P 500 SPY 0.00%↑ (Mid-term, 1-3 months): Positive

   1. The S&P 500 index is in a rising trend overall, indicating positive market sentiment and increased buying interest from investors. No major resistance levels are currently blocking further gains.

      1. Recent news that could impact the S&P 500 includes strong corporate earnings reports boosting investor optimism.

   

2. Tech Stocks QQQ 0.00%↑ (Mid-term, 1-3 months): Positive

   1. The Nasdaq 100 index shows a strong rising trend, signaling positive sentiment and increasing buyer demand. With no overhead resistance, the index could continue climbing higher.

   

3. Bitcoin $BTC (Mid-term, 1-3 months): Positive

   1. Bitcoin broke below its rising trend channel, signaling a potential slowdown in its uptrend.

   

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12. Market Sentiment & Economic Outlook:

1. Fear & Greed Index = Greed

   1. Currently at 71, the Index shows high greed, indicating potentially overbought conditions and euphoric investor sentiment. This suggests the market may be primed for a pullback or correction after an extended rally. However, stocks can continue climbing even with greed levels over 70, if positive fundamentals like strong earnings growth remain intact.

   

2. AAII Sentiment Survey — 6-Month Outlook = Optimistic

   1. For the 10th week in a row, optimism about stocks over the next 6 months held steady at a high of 48.6%. That's well above the historical average of 37.5%, showing investors are feeling upbeat.

   2. Bearish sentiment, which means the expectation that stock prices will fall over the next six months, increased by 0.7 percentage points to 24.2%. This is still below its historical average of 31.0% for the 10th consecutive week.

   

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13. Significant Economic Events this Week (and their importance):

1. Wednesday - Retail Sales data

   1. Retail Sales data is a crucial indicator of consumer spending, which accounts for a significant portion of the US economy's overall growth. Disappointing retail sales numbers can raise concerns about economic growth and lead to a market downturn.

2. Thursday - Philly Fed Manufacturing Index

   1. A positive index indicates a thriving manufacturing sector, potentially leading to job creation and economic expansion.

3. Friday - Existing Home Sales data

   1. Existing home sales reflect the real estate market's health, impacting construction and mortgage lending.

4. Friday - MI Consumer Sentiment data

   1. The MI Consumer Sentiment data provides insights into consumer confidence, which is a crucial indicator of consumer spending.

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14. Key Earnings Announcements this Week (and stocks to watch):

The most important earnings releases this week are Goldman Sachs GS 0.00%↑, TSMC TSM 0.00%↑, Morgan Stanley MS 0.00%↑, Alcoa AA 0.00%↑, Interactive Brokers IBKR 0.00%↑, Charles Schwab SCHW 0.00%↑, Applied Digital APLD 0.00%↑, LB SLB 0.00%↑ , Discover Financial Services DFS 0.00%↑, and Fifth Third Bancorp FITB 0.00%↑.

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