💥Investing Insights & Market Analysis [Issue #18: Week 36, September 2023]
💥Investing Insights & Market Analysis [Issue #18: Week 36, September 2023]
😲 China’s iPhone Ban, China's Economy is in Trouble, India Moves Away from Dollar, Nvidia's H100 AI Chip is in High Demand, $200 Billion in COVID-19 Relief Funds Stolen, Insider Trades and Much More!
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🎉In this week’s issue of “Investing Insights & Market Analysis”, we’ll discuss:
This Week's Financial Analysis:
1) This Week's Stock Market & Economic Insights
2) 7 Important Financial Events this Week (and what it means for you)
3) Top 3 Charts this Week (and its importance)
4) Stat of the Week (and its significance)
5) Financial Tip of the Week
This Week's Premium Research & Insights:
6) 10 Stocks to Watch (and why)
7) Notable Insider, Billionaire & Politician Trades this week
8) Options Trade of the week [Options Flow Activity]
9) Weekly Real Estate & Housing Market Insights
10) Mortgage Rate Updates & Interest Rate Predictions
11) Technical Analysis [S&P 500, Bitcoin]
12) Market Sentiment & Economic Indicators
13) Significant Economic Events This Week
14) Key Earning Announcements This Week➕Before we start, please add this newsletter to your e-mail contacts to ensure that our emails never go to your spam folder!
1) This Week’s Stock Market & Economic Insights📈
The S&P 500 is down 1.4% over the last 5 trading days, but it’s up 17% year-to-date. The recent stock market sell-off is driven by China’s iPhone ban. Chinese officials have ordered central government agencies not to use Apple iPhones or other foreign-branded devices for work. This is the latest step in an ongoing campaign by the Chinese to cut reliance on foreign technology. It's not just about phones; it's a sign of the ongoing tech rivalry between China and the U.S.
The remainder of the year is expected to see continued market volatility, as investors weigh the risks of inflation, rising interest rates, and global economic conditions.
The labor market is cooling, with declining job openings and slowing wage growth. Job openings have declined for 6 of the past 7 months and temporary hiring fell in August. With clear signs of a softening labor market and moderating wage inflation, expectations are growing that the Fed will not need to raise rates much further.
Oil prices reached a 10-month high after Saudi Arabia said it would extend its voluntary production cuts until the end of the year. The surge in oil prices can impact various sectors, including transportation, manufacturing, and consumer spending.
Despite the dollar's strength, investing in international equities remains attractive due to their significant discount compared to U.S. equities. As global economies recover, these markets may offer better returns.
2) 7 Important Financial Events that Happened this Week (and what it means for you)⚠️
At Least $200 Billion in COVID-19 Relief Funds were Stolen Through Fraud🌎
The Small Business Administration Inspector General estimates that at least $200 billion in COVID-19 relief funds were stolen through fraud in the Paycheck Protection Program (PPP) loans and unemployment insurance benefits. This includes $16.2 billion that was potentially distributed to suspicious email addresses, $267 million to federal prisoners, and more than $139 million to deceased individuals. California alone accounted for $20 billion in pandemic unemployment insurance fraud. The true extent of the fraud is still unknown, but it could be as high as $1 trillion.
Many individuals falsely claimed to own businesses or have employees to access more funds, exploiting weaknesses and loopholes in the emergency aid programs. The lack of verification and oversight made it relatively easy for criminals and individuals to manipulate these systems.
The fraud was not limited to the United States. Fraudsters from across the globe, including criminal groups in China, Nigeria, Romania, and Russia, made fraudulent claims for unemployment insurance benefits and small-business loans.
My take: The government failed enormously on this front during COVID relief, resulting in potentially up to $1 trillion in taxpayer dollars wasted on fraudsters rather than helping legitimate individuals and businesses in need. Stronger controls must be in place for any future crisis relief programs.
The scale of fraud and misappropriation in pandemic aid programs is alarming and highlights the need for comprehensive reform. Protecting taxpayer funds is essential for the well-being of the economy and the financial security of American citizens.
China's Economy is in Trouble and the Government Is Hiding It📈
The Chinese economy is in trouble, and the government is trying to hide it. The government has stopped publishing youth unemployment figures, which showed a record high of 20.5% in July. Additionally, trade data related to exports are showing discrepancies. This has led to doubts about the accuracy of China's official figures and is weakening trust in the country's economic reporting. This data obscuring suggests the government is hiding economic troubles.
One of the biggest problems facing China's economy is its massive amount of hidden debt. Local governments have accumulated this debt to fund infrastructure projects through LGFVs (Local Government Financing Vehicles), but their liabilities have ballooned. LGFVs are struggling to service these mounting debts, creating a concerning financial burden for local governments. The total value of LGFV debt is estimated to be more than $9 trillion, according to figures from Bloomberg and the International Monetary Fund. This mounting hidden debt now equals over 50% of China's GDP.
My take: The government's attempts to hide the true state of the economy are a sign of weakness. They are also a warning to investors and businesses that the country's economic growth is not sustainable. If the government does not take steps to address its debt problem, the Chinese economy could face a major crisis.
India Buys Oil in Rupees, Signaling Shift Away from Dollar 🌎
India has taken a significant step away from the US dollar by buying oil from the UAE in Rupees. India, one of the world's biggest oil importers, purchased 1 million barrels of oil from the UAE using the Indian Rupee instead of US dollars. This is the first time India has done this, and it is a sign of the growing desire of countries around the world to reduce their reliance on the dollar.
Countries like China and Russia have been seeking dollar alternatives due to US sanctions and foreign policies. Reducing dollar dependence gives them more strategic autonomy. The BRICS bloc, including India and China, recently expanded by admitting Saudi Arabia, Iran, UAE and others. Many new members also want to reduce dollar dominance in trade and diversify economic ties.
My take: This decision reflects a growing trend among major economies to reduce their dependence on the U.S. dollar in international trade. No true rival to the dollar has emerged yet, so its superiority remains for now.
Credit Card Rewards Could Be Wiped Out by New Legislation🏠
A new piece of legislation called the Credit Card Competition Act could wipe out credit card rewards programs. The bill would open up the credit card processing market to more competition, which could lead to lower swipe fees for merchants. Currently, banks collect 2-3% fees on transactions which funds rewards. This bill would open infrastructure to more processors, making rewards too costly for banks. This would also make it more difficult for banks to recoup the costs of offering rewards programs, which could lead to their elimination.
The concern is that if banks lose a substantial portion of their income from interchange fees, they may find it economically unviable to continue offering lucrative credit card rewards programs. These programs, which provide benefits like cashback, travel rewards, and more, are enjoyed by millions of consumers. Although the exact impact of the legislation is challenging to quantify, it's estimated that U.S. banks paid out $35 billion in credit card rewards in 2019.
My take: The loss of credit card rewards would hurt consumers of all income levels, but it would be felt most acutely by low- and middle-income households. These households are more likely to use credit cards for everyday purchases, and they rely on rewards to offset the cost of credit.
If you are concerned about the potential loss of credit card rewards you can contact your senator and urge them to vote against the Credit Card Competition Act.
3D-Printed Homes are The Future of Affordable Housing🏠
3D-printed homes are becoming a more viable option for affordable housing. A Japanese startup called Serendix is selling 3D-printed homes for just $37,600. The homes are 538 square feet and feature 1 bedroom, 1 bathroom, and an open living room connected to a kitchen. They take only 45 hours to print and assemble.
3D printing is a process of creating three-dimensional objects from a digital file. The process starts with a 3D printer, which uses a nozzle to deposit material layer by layer. The material can be concrete, plastic, or other materials.
The homes still require human assembly of windows, roofing, plumbing, and more after printing. But 3D printing streamlines the most costly and time-consuming aspects of building.
My take: 3D-printed homes are a promising new technology that could revolutionize the way we build homes. This technology could revolutionize home building and provide quality, affordable housing rapidly and efficiently. It eliminates many traditional construction costs.
As the technology continues to develop, the cost of 3D-printed homes is likely to come down and the quality is likely to improve. This could make 3D-printed homes a more viable option for affordable housing in the future.
Google GOOGL 0.00%↑ to Make $100 Million by Selling its Google Maps Data to the Solar Industry in its First Year🏠
Google GOOGL 0.00%↑ is planning to sell its map data to solar companies, which is projected to generate $100 million in revenue in its first year. The data includes information on the size, orientation, and shading of over 350 million buildings, which is valuable to solar companies for designing and installing solar panels.
Access to Google's map data can save solar companies significant time and money when scoping out locations. To illustrate, companies like Marriott can leverage this data to evaluate the solar potential of properties within their portfolios.
My take: Google's strategic move is nothing short of ingenious. Google has been collecting map data for many years, and it has built up a vast database of information on buildings, roads, and other features.
Nvidia's NVDA 0.00%↑ H100 AI Chip is in High Demand🤖
Nvidia's NVDA 0.00%↑ H100 AI chip is in high demand, with demand outpacing supply by 50%. This could last for several quarters, as tech giants compete to get their hands on the chip.
The H100 chip is the most powerful AI processing chip on the market. It is designed for use in a wide range of AI applications, including natural language processing, computer vision, and robotics. The chip's high performance and demand have made it a key component in the race to become the AI leader.
How Nvidia $NVDA makes money:
My take: The high demand for the H100 chip is a sign of the growing importance of AI. Nvidia is well-positioned to benefit from the growing demand for AI chips.
3) Top 3 Charts this Week: 📊
Consumer delinquencies surge to their highest levels in a decade, signaling economic stress
More Americans are falling behind on debt payments now than at any time in the last decade. At the same time, corporate bankruptcies have hit record highs. Many businesses took on huge debts during COVID. Now, rising interest rates and slowing growth are making those burdens unaffordable.
US home prices start to rise after months of decline
After dropping for several months straight, US home prices are rising again. The increase in home prices was driven by strong demand and limited supply.
Mortgage Payments Soar to Record High
The typical mortgage payment for a median-priced home in the US has reached a new record high of $2,649 per month. This represents a nearly 18% spike in just the last year. The increase in mortgage payments is being driven by rising home prices and interest rates.
4) Stat of the Week📊
A recent study found that nearly 50% of Americans aged 18-29 now live with their parents, record highs not seen since the Great Depression in the 1940s.
70% of America's Wealth is in the Hands of Top 10%
The richest Americans have seen their wealth grow at an astronomical rate, while the middle class and the poor have struggled to keep up. This disparity has been growing for decades, and extremely lopsided wealth distribution is not sustainable for a stable society.
Millennials make up the largest portion of the workforce, but they control just a small fraction of the nation's wealth. According to the Federal Reserve, millennials held just 4.6% of US wealth in the first half of 2020. Baby boomers, on the other hand, controlled over 53% of wealth.
This disparity is even more pronounced when you compare millennials to boomers at the same age. In 1989, when baby boomers were around the same age as millennials are today, they controlled 21% of the nation's wealth. That's almost 5X as much as what millennials own today.
5) Financial Tip of the Week🎯
The key difference between achieving financial goals or not achieving them, often comes down to having the discipline to prioritize long-term objectives over short-term wants.
Discipline gives us the power to keep our eyes on what we desire most in life – whether it’s purchasing a home, retiring comfortably, or building an investment portfolio. In personal finance, we often encounter a conflict between immediate desires (like buying the latest gadgets or dining out frequently) and long-term goals (such as homeownership, retirement, or debt reduction). Discipline helps us prioritize the latter.
The world is full of financial temptations, from impulse shopping to excessive spending on leisure. Discipline empowers us to save, invest, and make wise financial choices consistently. Discipline is instrumental in managing and eliminating debt. It encourages responsible borrowing, timely payments, and avoiding unnecessary debt traps.
Developing discipline is a gradual process. Start by setting clear financial goals and creating a budget that aligns with these objectives. Automate your savings and investments, making it easier to stay on track.
🔒Premium Research:
6) 10 Stocks to Watch (and why)📊
Thursday 9/7: Apple ($AAPL) down 3%, triggered by concerns over China expanding restrictions on iPhones. China is a massive market for Apple, and any restrictions can impact its sales significantly.
Thursday 9/7: ChargePoint Holdings ($CHPT), an electric vehicle charging infrastructure company, saw a significant drop of 11%. This came after the company missed second-quarter revenue estimates. Additionally, ChargePoint announced a 10% reduction in its global workforce.
ChargePoint must control costs and expand its charging network to support long-term growth.
Thursday 9/7: C3.ai ($AI), an artificial intelligence software company, experienced a substantial 12% drop due to wider-than-expected losses.
C3.ai must demonstrate meaningful progress on profitability and product development to regain investor confidence.
Wednesday 9/6: AMC Entertainment ($AMC) plummeted 37% after announcing plans to sell up to 40 million new shares to raise cash, diluting existing holders.
Wednesday 9/6: AeroVironment ($AVAV), a maker of unmanned aircraft, up 21% after reporting strong earnings and revenue that surpassed expectations.
Tuesday 9/5: Oil and Gas Companies Occidental Petroleum ($OXY), Halliburton ($HAL), and EOG Resources ($EOG) all saw gains following Saudi Arabia's decision to extend its crude oil production cut.
Tuesday 9/5: Airbnb ($ABNB) shares rose by 7% following the announcement of its inclusion in the S&P 500, starting on September 18.
Tuesday 9/5: Blackstone ($BX) up 3.6% after the news of its upcoming addition to the S&P 500.
Friday 9/1: Lululemon Athletica ($LULU) experienced a 6% increase following an earnings beat and raised guidance.
Lululemon retains upside as it expands its apparel line and grows e-commerce. Its brand loyalty and focus on community are differentiating strengths.
7) Notable Insider, Billionaire, and Politician Trades this Week💰
Not much notable buying activity in the past week, but there were two notable sells:
Nvidia (NVDA)
Nvidia CEO Jen-Hsun Huang sold over $42 million of stock across two transactions on September 1st and September 6th.
Microsoft (MSFT)
Microsoft CEO Satya Nadella sold $12.5 million of stock on September 1st.
8) Weekly Options Trades [Options Flow Activity]📈
Bullish Activity on Liberty Media Corp. (LSXMK):
Two large blocks of calls traded for the January 2024 expiration:
4,500 $25 call contracts were purchased for $1.29 per contract
9,000 $30 call contracts were sold for $0.25 per contract
The trader seems to believe that LSXMK will close above the $25.79 break-even by January 2024, with the potential to reach the max gain of $30 at expiration.
Bearish Activity on Avantor Inc. (AVTR):
Avantor Inc. ($AVTR) is showing significant put activity, indicating a bearish sentiment. A large block of 11,350 put contracts was purchased for the $17.50 strike expiring November 17th. This large new put position signals a bearish bet on Avantor.
Bearish Activity on Taiwan Semiconductor Inc. (TSM):
Taiwan Semiconductor Inc. ($TSM) is experiencing more put options being traded compared to calls, with a 3:1 ratio, driven by two big block put trades:
12,350 $70 put contracts purchased for $0.24 per contract
12,350 $65 put contracts purchased for $0.13 per contract
This signals a bearish view, with the trader betting on a drop below $70 or $65 by October expiry.
9) Real Estate & Housing Market Insights this Week🏠
Per Realtor.com:
The housing market is facing a number of challenges, including high mortgage rates hovering around 20-year highs, rising home prices, and limited inventory. The slowdown in the housing market is likely to continue in the near term. Mortgage rates are expected to remain high, and home prices are likely to continue to rise.
New listings fell 8.5% from a year ago, marking the 61st consecutive week of year-over-year declines.
Active inventory declined 5.2% from a year ago, marking the 11th consecutive week of year-over-year declines.
10) Mortgage Rate Updates & Predictions: Rates should Increase🏠
Mortgage rates should continue to increase. Rates often follow the 10-year Treasury yield, which has risen recently. Higher oil prices are reviving inflation worries, which could push rates up. The Federal Reserve will likely keep raising rates to fight inflation. That will put continued upward pressure on mortgage rates.
A 30-year mortgage is higher today than it was last week, last month, and last year:
11) Technical Analysis📈
S&P 500 (Short-term, 1-6 weeks): Positive
The S&P 500 is in a rising trend channel in the short term. This means that the market is experiencing positive development and that buy interest among investors is increasing.
Bitcoin (Short-term, 1-6 weeks): Negative
Bitcoin is in a falling trend channel in the short term, demonstrating increased downside momentum and bearish sentiment. The falling trend channel is a strong bearish signal. It shows that investors have been selling Bitcoin at lower and lower prices.
12) Market Sentiment & Economic Indicators📈
Fear & Greed Index = Neutral
The Fear & Greed Index is currently at 53, in the "Neutral" zone. This suggests that investors are neither too fearful nor too greedy, which could be a sign of stability in the US market.
AAII Sentiment Survey = Bullish
The latest AAII Sentiment Survey shows bullish sentiment is above average for the first time in four weeks, and bearish sentiment is at a four-week low. The percentage of bullish investors rose 9.1% to 42.2%, this is the first time in a month bullishness is above its historical average. Bearish sentiment fell 4.9% to 29.6%, dipping below average again.
The increase in bullish sentiment is likely due to easing concerns about inflation. The survey found that 48% of AAII members believe that inflation is slowing, but not by enough.
Recession Risk Key Indicators = Recession Ahead
Several key indicators are signaling that the US is at an increased risk of entering a recession, with the following indicators worsening:
Worsening job sentiment indicators suggest employees are growing more pessimistic about the economy, labor market and their ability to find a job.
If job sentiment is weakening, it implies consumers will pull back on discretionary purchases. This can negatively impact GDP growth as spending slows. It also signals potential issues brewing in the job market that could lead to higher unemployment. Overall, deteriorating job sentiment is a troubling sign for the health of the economy.
A rise in initial jobless claims points to increasing layoffs and unemployment. More workers filing for unemployment benefits means companies are cutting jobs as business conditions worsen. The risk is rising unemployment will weigh on consumer confidence and spending.
Declining truck cargo volumes indicate lower demand for transported retail goods and manufacturing materials. This implies slowing economic activity and consumer spending.
Businesses may be producing and shipping less, while consumers are reducing purchases. Overall, falling trucking activity is a worrying sign of slowing economic growth.
Detailed Economic Indicators and Market Conditions: Neutral
A yield spread of -1.47 is far below its typical average. This is a worrying sign, and it suggests that investors are expecting a recession.
A low consumer sentiment reading can be a sign that consumers are less likely to spend money, which can hurt economic growth. The current consumer sentiment reading is 71.20, which is below its typical average. This is also a worrying sign, and it suggests that consumers are becoming more pessimistic about the economy.
With high inflation into incomes and the Fed raising rates, it's understandable consumers feel unsettled.
13) Significant Economic Events next Week💰
Wednesday- Consumer Price Index and Core CPI
The CPI reports on inflation by measuring changes in the prices paid by consumers for goods and services.
Thursday- Initial jobless claims
This measures the number of people filing for unemployment benefits each week. It provides insight into layoffs, the health of the job market, and employment trends. A rise in claims could signal upcoming weakness in the jobs market that could foreshadow an economic slowdown.
Thursday- Core PPI
The Producer Price Index (PPI) measures inflation pressures on the production side. Rising PPI can indicate potential future increases in consumer prices if producers pass on higher costs.
Thursday- U.S. retail sales
Retail sales are a measure of the total amount of money spent by consumers on goods and services. They are a good indicator of consumer spending, which is a major driver of economic growth.
14) Key Earnings Announcements this Week💰
September 11th:
Oracle (ORCL)
Oracle has been making strategic acquisitions in cloud computing and AI to compete with industry leaders like AWS and Microsoft Azure.
Pay attention to Oracle's cloud revenue growth and how it's faring against competitors.
Oracle's ability to capitalize on the cloud services market will be crucial for its long-term growth prospects.
September 12th:
Nike (NKE)
Pay attention to any announcements regarding supply chain improvements and their impact on future earnings.
Nike's ability to overcome supply chain disruptions will be vital for its performance.
September 13th:
Logitech (LOGI)
Logitech has benefited from the surge in remote work and the demand for computer peripherals.
Pay attention to updates on trends in remote work and Logitech's product innovation.
September 14th:
Adobe (ADBE)
Adobe continues to benefit from the increasing demand for digital marketing and creative software.
Look out for Adobe's subscription growth and any guidance on the digital marketing landscape.
Adobe's dominance in digital software positions it well for continued growth.
Lennar (LEN)
Pay attention to housing market trends and Lennar's order backlog.
Lennar's earnings may reflect the broader housing market's strength.
Ryanair (RYAAY)
ConAgra Foods (CAG)
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What a great newsletter! very useful and informative. Thank you!