HI Market View Commentary 08-14-2023
OK Let’s talk about a couple of things in regard to making your decision.
The decision-making process for investing changes …… minute by minute
SO…… what I say Monday night after the market closes my change Tuesday morning.
We actively trade because it is our belief you can’t beat the market being in the market = SPX
We believe that we need to protect stocks when they are 83% most likely to lose 15%+ of their value=Earnings
We also protect on technical crossovers, we dollar cost average without asking you to put more money in
We like the Warren Buffet stock analysis of undervalued positions.
Sometimes stocks lose 70% or more of their value
Right we have BA, BIDU, DIS, F, UAA, MU, SQ, GOOGL, BAC, JPM, LMT,
Biggest mistake people have when investing, trading, or putting any money into the market=Market timing
They think they have some edge to give them an advantage in the stock market which is ego, garbage or crap
Hurley Investments is playing the odds,
Most importantly we left Schwab who didn’t give us the opportunity to protect like we want to always.
We don’t always have to be right when we added protection to positions.
Yes, we know the market is expensive here
Yes, we know this is a seasonally slow time in the market
Every day Keve and I go over positions after the first hour and before the las hour. During the day we are consuming information
Everyday mistakes: Just because it did it before doesn’t mean it will do it again, I have a hot stock tip,
Michael Berry place long puts on the market to the tune of 1.6 billion dollars
BIDU – 8/28 est
MU – 9/27
The Big Picture
Last Updated: 11-Aug-23 07:01 ET | Archive
Your typical consolidation period
The stock market has gone up in a nearly straight line since the end of March. It has hit some bumps in early August, though, primarily because it has gone up in a nearly straight line, inviting calls that it is overbought on a short-term basis and overvalued relative to its long-term average.
Said another way, it is thought that the stock market is due for a pullback or, in more technical terms, a consolidation period.
The latter appears to be unfolding here in early August. The major indices have all pulled back some; most S&P 500 sectors have pulled back some; and the Russell 3000 Value Index and the Russell 3000 Growth Index have pulled back some.
The retreat has been orderly and broad based, which is what one typically sees in a consolidation phase. Something else one typically sees at the end of a consolidation phase — and even within one — is a willingness to buy on the weakness.
That willingness should be apparent again during this consolidation period since there hasn’t been anything in the fundamental news flow to derail the basis for why the stock market rose in a nearly straight line since the end of March.
Put a Ring on It
To begin, the mini banking crisis in early March got ringfenced with a joint declaration from the Department of the Treasury, the Federal Reserve, and the FDIC that was designed to strengthen public confidence in the banking system. That was done in part with an implicit guarantee of bank deposits and additional funding for banks to make sure they could meet the needs of all their depositors.
Some took these actions to mean that the so-called Fed put had been restored. No matter the spin on those actions, there is no denying that the stock market liked what it heard then, and in subsequent weeks, which effectively showed the fallout from the banking crisis wasn’t as bad as feared.
Beyond that, a string of economic data made it clear that the economy was not doing as badly as feared on account of the rate hikes that preceded the banking crisis.
What’s more is that there have been three more rate hikes by the Fed since the March banking crisis and the economic data, as a whole, have continued to surprise in a positive way.
Note: a number above zero implies economic data have generally beaten consensus estimates
The employment data and the inflation data have been the most encouraging for the stock market. That’s because the employment data continues to reveal a tight labor market, evidenced by an unemployment rate of 3.5% that is hovering near a 50-year low, while the inflation data has been revealing a trend of disinflation.
Core inflation is still well above the Fed’s target, but incoming inflation data showing disinflation have bolstered the market’s thinking that the Fed is done, or close to being done, raising rates.
Earnings Estimates Are Rising
The second quarter reporting period is nearly complete. It was better than expected (per usual), but it still did not compute to any earnings growth overall. According to FactSet, the blended second quarter earnings growth estimate is -5.0% versus -7.4% in early July.
What happened with earnings in the second quarter, though, isn’t as important for investor sentiment as what is expected to happen with earnings in coming quarters — and that’s where the good news lays.
During the second quarter earnings reporting period, consensus earnings estimates for the forward 12-months, calendar 2023, and calendar 2024 have all risen, lending some confidence to the notion that earnings have troughed. That thinking will remain a point of debate in the coming months, but for now, it can be said that earnings estimates are rising.
On June 30, the forward 12-month estimate stood at $231.52, the calendar 2023 estimate stood at $218.63, and the calendar 2024 estimate stood at $244.63. Today they stand at $234.87, $219.39, and $244.96, respectively.
The upward revision to consensus earnings estimates may not seem like much, but when a market is anxious to identify an earnings trough, every little bit helps. That is especially true for a market that was trading at a premium to its 10-year historical average going into the reporting season.
On June 30, the forward 12-month P/E for the market-cap weighted S&P 500 was 19.3x. The 10-yr average is 17.3x, according to FactSet, so the S&P 500 was trading at a nearly 12% premium to the long-term average. It sits at 19.1x today with stock prices sputtering in early August and earnings estimates rising.
Still, that’s not a bad tradeoff to see some consolidation in stock prices as consensus earnings estimates get revised higher. Of course, the “premium multiple” has a lot to do with the premium returns logged by the “Magnificent Seven” mega-cap stocks.
Things look more enticing from a valuation standpoint for the equal-weighted S&P 500, which trades at 15.7x forward 12-month earnings versus a 10-year historical average of 17.6x. In brief, there is more value in the stock market than meets the eye when looking at the market-cap weighted S&P 500.
What It All Means
The pullback seen so far in August should not be surprising. If anything, it is a welcome development for a bull market that was getting long on complacency, long on a select few stocks, and long in the tooth with a rally effort that ran mostly unabated since late March.
It did so because the narrative switch was flipped from hard landing to soft landing, from multiple rate hikes to potentially no more rate hikes, and from downward earnings revisions to upward earnings revisions.
It was a fundamental change that triggered a repositioning of portfolios that had been constructed for a more challenging period. Additionally, it drove performance chasing by underperforming money managers, short covering by short sellers, and the deployment of cash back into equities.
So, what comes next? Presumably, there will be continued selling interest since this pullback is just getting started. In the absence of a fundamental news driver that shakes the foundation of this year’s rebound effort, though, there will be a willingness to buy on weakness.
That doesn’t mean it will be a rebound to new highs for the stock market, which will still be contending with valuation angst and the specter of the lag effect from the Fed’s rate hikes kicking in, but it should mean this pullback will look like a typical consolidation period so long as the fundamental switch isn’t turned off.
Where will our markets end this week?
DJIA – Bullish
COMP – Bullish
Where Will the SPX end August 2023?
Tues: CAH, HD, TME
Wed: TJX, CSCO, TGT
Thur: WMT, ROST
Fri: BKE, DE, EL, PNW
Tue Empire Manufacturing, Import, Expert, Retail Sales, Retail ex-auto, Business Inventories
Wed: MBA, Housing Starts, Building Permits, Capacity Utilization, Industrial Production
Thur: Initial Claims, Continuing Claims, Phil Fed, Leading Indicators,
Fri: Monthly Options Expiration
How am I looking to trade?
Adding protection based on technical analysis on indexes and earnings seasons starts soon
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F get put to people at $15 booking us a nice profit
This From Barron’s on line. This time possibly good news?
Congratulations if you’re the winner of the Mega Millions jackpot, that’s a nice chunk of change.
The bad news is that $1.6 billion doesn’t go as far as it used to. Time to think about how to invest your windfall.
If you still see gambling as a winner, consider buying shares of Disney. Its ESPN unit just agreed to a $2 billion deal with Penn Entertainment to get it into sports betting. Penn’s shares surged overnight after a 30% drop over the past year.
Disney stock has also been beaten down, having declined more than 20% from 12 months ago. The entertainment giant reports earnings after the bell on Wednesday, giving investors a sense of how CEO Bob Iger is coping with a raft of problems at the company he returned to.
The ESPN Bet move could be a sign that the company is making plans to sell ESPN. It’s hard to imagine a place for gambling in Disney’s wholesome Magic Kingdom in the longer term. Beyond that, watch out for progress on the Disney+ streaming service, and whether parks business is perking up this year.
Investing is certainly a good option for those with billions–or less–in the bank. The stock market’s strong performance has led some of the most outspoken bears to change their tune recently.
Of course, a bullish consensus itself could be a contrary indicator. As any investor knows, it’s not enough to be right about a company to make money in the market–you have to be right and bet against the herd. When everyone expects values to rise, that may well be a sign they won’t.
For you, Mega Millions winner, playing the stock market may feel harder than playing the lottery. But at least your odds are better than the 1 in 302,575,350 that got you this far.
Buffett disciple Guy Spier names the only chip stock he owns — and explains why he avoids Nvidia
PUBLISHED SUN, AUG 13 20237:30 PM EDT
Renowned value investor Guy Spier doesn’t own Nvidia — and he isn’t planning to.
“Price matters, and it’s not always the horse that is the fastest that is best for the person to bet on,” he told CNBC Pro Talks last week.
Spier says Nvidia is too expensive right now, and he would avoid it.
“In investing, we don’t want to be in the very, very best because there’s no room for growth in a certain way all the low-hanging fruit has been picked. In the case of Nvidia, we have a nosebleed valuation. And for me that says stay far away,” he said.
Spier, who calls himself an “ardent disciple” of legendary investor Warren Buffett, manages the $350 million Aquamarine Fund. Spier closely follows Buffett’s investing principles, and the Aquamarine Fund is inspired by the original 1950s Buffett Partnership era.
Shares of Nvidia have skyrocketed 190% this year on the optimism surrounding artificial intelligence.
“Nvidia might be excellent, but at this price, I don’t think it’s excellent. And buyer beware,” Spier added.
The only chip stock Spier owns
Spier has only one chip stock in his portfolio: Micron, one of the world’s largest producers of memory chips.
He says it’s a consolidating industry with “really just four competitors.”
″[Capital expenditure] and technological development have slowed sufficiently that I think that the companies will find a way to have a stable if not growing profit pool from the increasing demand from chips,” Spier said.
He added that it’s very likely that competition in memory chips will be reduced.
“In memory chips, it’s going to be a stable profit pool, providing something very important for all computing, which is memory. And that profit pool will be shared by the existing players, which may still consolidate even farther,” Spier said.
Spier’s fund, which was started in 1997, has logged an annualized return of 9% since then, according to Aquamarine. That’s higher than the S&P 500′s 8.2%, the MSCI World’s 6.9%, and the FTSE 100′s 3.6%.
Bill Ackman’s Pershing Square adds to Google-parent Alphabet stake, slashes Lowe’s bet
PUBLISHED MON, AUG 14 20236:54 PM EDTUPDATED 44 MIN AGO
Bill Ackman, Pershing Square
Richard Brian | Reuters
Bill Ackman’s Pershing Square Capital stepped up a bet in Google-parent company Alphabet while lowering a large stake in Lowe’s during the second quarter, according to a regulatory filing.
Ackman’s firm purchased roughly 1.3 million shares of Alphabet’s class C stock, bringing that position to $1.1 billion, according to the hedge fund’s latest 13F filing with the Securities and Exchange Commission. Pershing Square’s stake in the Google parent’s A shares was unchanged in the second quarter and stood at $261 million.
Meanwhile, the firm parted with more than 25% of its position in home improvement and supplies company Lowe’s, bringing Pershing’s total position to $1.6 billion in the second quarter, down from about $2 billion.
The firm’s position in Canadian Pacific Railway dissolved in the second quarter, the filing showed, which is the result of its merger with Kansas City Southern. Pershing Square now has a stake in the new company, known as Canadian Pacific Kansas City, worth $1.2 billion.
Ackman’s fund managed roughly $10.8 billion 13F securities at the end of the second quarter, according to WhaleWisdom.com.
Once you hit this credit score, ‘there’s no benefit to scoring higher,’ says expert: ‘It’s just bragging rights’
“Typically, once you hit the mid-700s, you’re considered to have excellent credit and there’s no practical benefit to scoring any higher,” says Ted Rossman, Bankrate’s senior industry analyst. “It’s just bragging rights above that threshold.”
The exact number within that mid-700 range varies by lender, but usually a credit score between 740 and 750 will qualify you for the best terms with credit cards and auto loans, Rossman tells CNBC Make It. A 760 will typically get you the best rates on mortgages.
Your FICO score, which most potential lenders use to assess your ability to manage credit, can range from 300 to 850. Here are the ranges that generally qualify as poor, fair, good, very good and exceptional, according to Experian.
- Poor: 300 — 579
- Fair: 580 — 669
- Good: 670 — 739
- Very good: 740 — 799
- Exceptional: 800 — 850
If your credit score is between 740 and 760, you’re probably already getting the most favorable terms when it comes to opening a new credit card or getting a mortgage, Rossman says. But if it’s below that threshold, every point counts.
“Every 20 points or so can make a big difference in the battleground between fair, good and excellent credit,” he says.
Say you have a 675 credit score and qualify for a $300,000 mortgage with an interest rate of 7.5%. Over 30 years, you’ll pay around $36,000 more in total interest expenses than if you’d had a 700 credit score and received a 7% interest rate, Rossman says.
“This is a great illustration of why your credit score really matters,” he says. “A half a point doesn’t sound like a whole lot, but it certainly can be.”
How to improve your credit score
Some people may think carrying a balance from month to month on your credit card can help raise your credit score, but that’s simply not true. In fact, it will only cost you more money in interest charges, says Rossman.
Instead, try lowering your credit utilization rate, which represents how much of your available credit you’re using at a given time. You can calculate it by dividing your credit card balances by your total credit limit.
Say you have two credit cards that each have $6,000 limits; your total available credit would be $12,000. If you’re carrying a balance of $3,600 between the two cards, your credit utilization rate is 30%.
Financial experts typically recommend aiming to keep your credit utilization below 30% because it shows lenders that you’re generally good at managing debt.
If your utilization rate is above 30%, one way to try and lower it is by paying down your outstanding debt. Using the example above, if you brought your credit card balance down to $3,000, your credit utilization rate would fall to 25%.
Another method to try is asking your lender to increase your line of credit, Rossman says. Typically, you can do this within your banking app or by calling your issuer.
Say your credit card balance is still $3,600, but you’re able to increase your available credit from $12,000 to $18,000. By doing that, your credit utilization ratio would drop to 20%, despite having the same balance.
But if you’re going this route, be careful. Asking for a credit limit increase may cause your lender to request a hard inquiry of your credit reports, which can cause your credit score to decrease temporarily, according to Equifax. (For more, check out this list of six easy tips to help raise your credit score from CNBC Select.)
Ultimately, remember that raising your credit score is more of a marathon than a sprint, says Rossman. You may not see immediate improvements, but sticking to a consistent strategy, paying your bills on time and keeping your debts low can help you eventually reach your goal credit score, he says.
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