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Gave: The End Of The Unipolar Era

Gave: The End Of The Unipolar Era Authored by Louis-Vincent Gave via Gavekal Research, Investors today must deal with the effects of not one, but two wars, as my Gavekal-IS colleague Didier Darcet pointed out in April (see Tick,Tock Tick,Tock). The first is the one we can see playing out each day on our television screens, with all the tanks, deaths and human suffering. The second is a financial war, with the unprecedented weaponization of the Western banking system and Western currencies aimed at bringing Russia to its financial knees (see CYA As A Guiding Principle (2022)). To the surprise of most people in the West, resistance against both of these war efforts has proved far stronger than expected. Almost 11 weeks into the war on the ground in Ukraine, Russian troops still seem to be taking heavy losses for relatively small territorial gains. And a little over six weeks after US president Joe Biden boasted that the ruble had been “reduced to rubble” by Western sanctions, the Russian currency is close to a two-year high against the US dollar and near a post-Covid high against the euro. At this point, both the euro and the yen appear to be bigger casualties of the Ukraine war than the ruble. The US boast that the ruble had been “reduced to rubble” is looking premature  In this paper, I shall review the implications of this stronger-than-expected resistance - both on the battlefield and in the financial markets - and attempt to draw some salient conclusions for investors. The evolution of warfare In October 1893, some 6,000 highly-disciplined warriors of King Lobengula’s Ndebele army launched a night-time attack on a camp occupied by 700 British South Africa Company police near the Shangani river in what is now Zimbabwe. It was a massacre. The BSAC “police” killed more than 1,500 Ndebele for the loss of just four of their own men. A week later, they did it again, killing some 3,000 Ndebele warriors for just one policeman dead. These one-sided victories were not won by courage or superior discipline, but because the British were armed with five machine guns and the Ndebele had none. As Hillaire Belloc wrote in The Modern Traveller: “Whatever happens, we have got / The Maxim gun, and they have not”. The technological superiority of the machine gun allowed Britain, and France, Germany and Belgium, to subjugate almost all of Africa, even though outnumbered by the Zulu, Dervish, Herero, Masai and even Boer forces they opposed. All were rendered helpless by the machine gun’s firepower. I revisit this ancient history to illustrate how military technology is a lynchpin of the geopolitical balance. Dominance of military technology is also a key factor underpinning the strength and resilience of a reserve currency. Today, one of the main reasons why Taiwan, South Korea, Japan, Saudi Arabia, the United Arab Emirates and others keep so much of their reserves in US dollars is that the US is widely regarded as being a generation (if not more) ahead of the competition in the design and production of smart bombs, anti-missile systems, fighter jets and naval frigates. In short, the superiority of US weaponry has been one of the principal factors underpinning the US dollar’s status as the world’s reserve currency. However, recent events raise important questions about whether the US can retain this superiority. In September 2019, drones allegedly deployed by Yemeni Houthi forces took out the Saudi Aramco oil processing facilities at Abqaiq. Between late September and early November 2020, Armenia and Azerbaijan fought a war over the Nagorno-Karabakh region. The conflict ended in near-total victory for the Azeris. This result stunned the military world. Observers had assumed that Armenia, with a bigger army, larger air force, more up-to-date anti-aircraft and anti-missile systems, and a history of Russian support, would easily triumph. But all Armenia’s expensively-acquired military “advantages” were quickly taken out in the early days of the fighting by Azerbaijan using Turkish-made drones costing no more than US$1mn each. On successive occasions between March 2021 and March 2022, Houthi drones attacked Saudi Arabian oil facilities, notably the giant terminal at Ras Tanura on the Persian Gulf. In December 2021, Turkish-made drones allowed the Ethiopian government to tip the balance in a civil war that until then had been going badly for government forces. In January 2022, Houthi drones hit oil facilities in the UAE.  Now, imagine being Saudi Arabia or the UAE. Over the years you have spent tens, if not hundreds, of billions of US dollars purchasing anti-missile and anti-aircraft systems from the US. Now, you see relatively cheap drones penetrating these defense systems like a hot knife through butter. This has to be frustrating. What is the point of spending up to US$340mn on an F-35c (and US$2mn on pilot training), or US$200mn on an anti-aircraft system, if these can be taken out by drones at a fraction of the cost? This evolution in warfare may help to explain the impressive resilience of the Ukrainian army in the face of Russia’s onslaught. When the Russian troops marched into Ukraine, consensus opinion was that the Ukrainian forces would crumble before the Russian military juggernaut. It is always hard to know what is happening on the ground amid the fog of war. But judging by the number of tanks destroyed, warships sunk and the apparent failure of the Russian air force to establish control over Ukraine’s skies, it seems the invasion of Ukraine is proving far more costly in terms of blood and treasure than Russian president Vladimir Putin had imagined. Could this be because Putin failed to factor the impact of drones into his military outlook? It may be premature to jump to that conclusion. But judging from afar, it appears inexpensive Turkish drones have helped level the battlefield in the Ukrainian-Russian David versus Goliath confrontation— the biggest and bloodiest on European soil since World War II. This helps to explain why the US military assistance package for Ukraine Biden announced this month included 700 Switchblade drones. These are surprisingly cheap—the Switchblade 300 reportedly carries a price tag as low as US$6,000—yet highly effective. In essence, they are single-use kamikaze drones. Apparently, they fly faster than the Turkish Bayraktar TB2 drones that the Ukrainians, like the Azeris before them, have used to such devastating effect. This suggests the Switchblades should be able to evade the air defenses that Russia has attempted to maintain over its troops. The US military deployed Switchblades sparingly in Afghanistan, so it is hard to know whether these will perform as billed in combat conditions. But before this shipment to Ukraine, only the UK was permitted to purchase Switchblades. This implies that the Pentagon considers the Switchblade a valuable and potent weapon. David Petraeus, the former Central Intelligence Agency director who, as a four star general, commanded the US campaigns in both Iraq and Afghanistan, singled out the weapon in a recent interview with historian Niall Ferguson: “I’ll mention one item in particular: the Switchblade drone. It’s a loitering munition that takes a one-way trip. The light version can loiter for 15 to 20 minutes. Heavy version, 30 to 40 minutes with a range of at least 40 km. The operator selects a target, it locks on and it follows. Then it strikes when the operator gives that order. This is extraordinarily effective because you can’t hear it on the ground. The first time the enemy knows it’s there is when it blows up. If we can get enough of those into Ukraine, they could be a true game-changer.” However, I digress. Returning to the discussion about why drones might matter for financial markets: 1) If ever-cheaper and more readily available drones are going to revolutionize war, much as the Maxim gun did 140 years ago, then it is questionable whether it still makes sense to invest in tanks, airplanes, anti-aircraft and anti-missile systems. If it does not, what does this mean for the value of the large, listed death-merchants? Cheap drones are bad news for the stocks of defense giants Historically, buying the merchants of death after a big rally in oil made sense, if only because so much of the world’s high-end weapon consumption occurs in the Middle East. But in the world of tomorrow, will Middle Eastern oil kingdoms still line up to buy multibillion US dollar systems from Raytheon, Boeing, Lockheed and the like, if those systems are vulnerable to attacks from relatively cheap drones? 2) Talking of Middle Eastern regimes, the deal prevailing in the Middle East for the past five decades has been that oil would be priced in US dollars, and that the oil-exporting regimes in Saudi Arabia, the UAE or Kuwait would use these US dollars to buy US-made weapons (and US treasuries). With this bargain, the US implicitly guaranteed the survival of the Gulf Arab regimes. Fast forward to 2022, and following the invasion of Ukraine, countries such as Saudi Arabia and the UAE have failed to condemn Russia. What’s more, Saudi Arabia let it be known that it might start to accept payment for its oil in renminbi. Perhaps this makes sense if Saudi Arabia feels it no longer needs US$340mn F-35s, but instead more US$1mn Turkish-made drones? 3) If, as the Azeri-Armenian and the Ukrainian-Russian wars suggest, drones have radically leveled the battlefield in war, this profound development has a multitude of implications. Does it undermine the long-held superiority of vastly expensive armament systems, tilting the balance in favor of much cheaper and much more widely-available weapons? If so, does this mean another pillar supporting the US dollar’s reserve currency status is crumbling in front of our eyes? In a world where military might is no longer the monopoly of a single superpower, or the duopoly of two, does the world become, de facto, multipolar? In such a world, would there still be a compelling reason for trade between Indonesia and Malaysia to be settled in US dollars, rather than in their own currencies? Wouldn’t trade between China and South Korea now be settled in renminbi and won? Drone tactics are a radically different form of warfare, and they are evolving fast. So, it would be premature to offer any definitive conclusions about the extent to which drones will dominate warfare in the future. However, their recent use in Ukraine (and Yemen, Azerbaijan and Ethiopia) means that investors have to be open to the idea that drones will change the battlefield of the future. Because if they are going to change the battlefield of the future, then they will also change the economic and financial realities of today. In this sense, drones might well be the modern-day equivalent of aircraft carriers. In World War II, aircraft carriers made big-gun battleships and other traditional naval warships obsolete, or at least highly vulnerable. Two early Pacific battles proved the point. The Battle of the Coral Sea in May 1942, generally considered by historians to have been a draw, was the first naval engagement ever fought in which the opposing fleets never made visual contact with each other. Carrier-based aircraft drove the action. A month later, the far more consequential Battle of Midway established the new reality beyond all doubt. The Imperial Japanese Navy was ambushed northwest of Hawaii and lost the bulk of its carrier force in a single action. It would be on the defensive for the rest of the war. With hindsight, Midway marked the start of US dominance over the world’s oceans. In short order, this translated into US dominance over global trade. But with the nature of warfare again changing, is this dominance of the oceans and of other battlefields guaranteed to last? Investors need to consider the uncomfortable possibility that it might not. The dramatic shift in the global financial landscape We are all the offspring of our own experiences. One important formative event in my own modest career was the Asian financial crisis of 1997-98. Witnessing how quickly things could unravel left a deep mark. I highlight this because I am not alone in having lived through the shock of 1997-98. Pretty much every emerging market policymaker aged 50-75 (which is most of them) went through a similar trauma. Seeing your country’s entire middle class wiped out in the space of a few weeks—which is what happened in Thailand, Indonesia, Russia, Argentina and others in the period from 1997 to 2000—is bound to leave a few scars. Among emerging market policymakers these scars took the form of a deepseated conviction of “never again” (see Our Brave New World). To ensure their countries’ middle classes were never again wiped out, they adopted a straightforward set of policy prescriptions that in the early 2000s Gavekal dubbed the The Circle Of Manipulation. It went something like this: 1) To avoid a future crisis, your central bank needs to maintain a healthy safety cushion of hard currency bonds, mostly US treasuries and bunds.   2) The more you become integrated with the global economy, the larger this cushion should be. 3) To build up this safety cushion, you need to run consistent and large current account surpluses. 4) To run consistent large current account surpluses, you need to maintain an undervalued currency. Among the results of these policy prescriptions were charts looking like this: By all previous standards, this was an odd state of affairs: an economic arrangement under which poorer countries with high savings rates and vast infrastructure investment needs ended up subsidizing consumption in rich countries with low savings rates and ever-accelerating twin deficits. To cut a long story short, for the last 25 years, we have lived in a world in which undervalued currencies in emerging markets allowed Western consumers to buy attractively priced goods and services imported from developing countries. Meanwhile, the individuals, companies and governments in the emerging markets which earned capital from these sales largely recycled their earned capital into Western assets—because Western assets were perceived to be “safe.” But this perception of safety may now be changing in front of our eyes. Consider the following changes: 1) Developed economy government bonds have proved anything but safe. As stresses of increasing severity have affected the world economy over the last 12 months, investors in local currency Indonesian and Brazilian government bonds and in gold have generated positive returns of between 3% and 4% in US dollar terms. Chinese government bonds are up by just over 1.5%. Meanwhile, Indian and South African government bonds have lost -4%. These performances contrast with US treasuries, which have lost -9%, and the train wrecks suffered by investors in eurozone bonds and Japanese government bonds, which are down anywhere between -17% and -23%. Of these, which can be considered the safest? 2) The confiscation of Russia’s reserves. I will not repeat here arguments I have made at length elsewhere (see What Freezing Russia’s Reserves Means). But in a nutshell, the decision to freeze Russia’s central bank reserves has been the most important financial development since US president Richard Nixon closed the gold window in 1971. From now on, any country that is not an outright US ally—China, Malaysia, South Africa and others—and even some historical friends—Saudi Arabia? The UAE? India?—will think twice before reflexively accumulating US treasuries from fear they may get canceled. Over the course of a weekend, with no discussion in the US Congress, and no discussion with the Federal Reserve, the US administration unilaterally turned the US treasury market on its head. From that moment on, the whole nature of a US treasury security would depend entirely on who owned it. 3) Running roughshod over property rights. It is hard to pin down what the West’s single most important comparative advantage might be. Having the world’s strongest military? Being the seat of almost all the world’s greatest universities? Issuance of the world’s reserve currencies? The list goes on. But surely somewhere near the top of the list should be the sanctity of property rights, guaranteed by rock-solid “rule of law.” The main reason Chinese tycoons for years purchased Vancouver real estate, the Emirati central bank bought US treasuries and Saudi princes parked their wealth in Zurich was the knowledge that, whatever happened, and wherever you came from, you were guaranteed property rights, and a fair trial to ascertain those rights, in any courtroom in New York, London, Zurich or Paris. Better still, since the implementation over the last 850 years in the West of habeas corpus and various bills of rights, you have been able to have confidence that you would be judged as an individual. One of the fundamental tenets of Western democracies’ legal systems is that there is no such thing as a collective crime—or collective punishment. You can only be held responsible and punished for what you have done as an individual. Unless - all of a sudden - you are a Russian oligarch. This is a dramatic development, if only because every Chinese tycoon, Saudi prince, or emerging market billionaire will now wonder whether he will be next to get canceled. If the wealth of Russian oligarchs can be confiscated so abruptly, then why not the assets of Saudi princes? Stretching this a little further, maybe it shouldn’t just be Saudi princes or Chinese billionaires who should be worried. If wealth can be seized without any trial, but simply because of guilt by association, maybe in the not-too distant future Western governments could confiscate the wealth of anyone who mined coal or pumped oil out of the ground. Don’t they have blood on their hands for causing tomorrow’s climate crisis? And while we are about it, perhaps we should also confiscate the wealth of social media barons for failing to prevent a mental health crisis among our youth? 4) Russia’s counter-attacks. Older readers may remember how in the days that preceded the Lehman bust, US Treasury secretary Hank Paulson walked around proclaiming that he had “a big bazooka,” and that if the market pushed too hard, he would fire this bazooka and blow shortsellers out of the water. Unfortunately, with Lehman it became obvious to all and sundry that Paulson’s bazooka was firing blanks. Today’s situation is similar. In the wake of the Russian invasion of Ukraine, the US decided to go for full weaponization of the US dollar, proclaiming the ruble had been turned to rubble. Last week, the ruble hit two-year highs against both the US dollar and euro. Biden’s financial bazooka seems to have been no more potent than Paulson’s. Why? Because Russia decided to fight back, requiring buyers from “unfriendly” countries to pay for their purchases of Russian commodities in rubles. And in effect, the only way unfriendly customers can acquire rubles is by offering gold to the Russian central bank (see The Clash Of Empires Intensifies). This has created a sudden and profound shift in the global trading and financial architecture. For decades, global trade was simple. If Russia produced commodities that China needed, then China first had to earn US dollars by selling goods and services to the US consumer. Only in this way could it acquire the US dollars it needed to purchase commodities from Russia. But what happens now that China or India can purchase their commodities from Russia or Iran for renminbi or Indian rupees? Obviously, their need to earn and save US dollars is no longer so acute. Conclusion Warfare is changing and the financial system has been weaponized like never before. However, the weaponization of the financial system has so far failed to deliver the intended results. At this point, investors can adopt one of two stances. The first might be described as “nothing to see here; move along.” The second is to accept that the world is changing rapidly, and that these changes will have deep and lasting impacts on financial markets. Different war, different world, different consequences For now, there are some clear takeaways. 1) The Ukraine war may be telling us that modern history’s unipolar age is now well and truly over. As big as the Russian army is, and as powerful as the US Treasury might be, the current crisis has demonstrated that neither is powerful enough to impose its will on its perceived enemies. This includes even relatively weak enemies; Ukraine’s army was hardly thought of as formidable, while Russia was supposed to be a financial pygmy. 2) This is a very important message. In an age of drones and parallel financial arrangements, there is no longer such a thing as absolute power—nor even the perception of absolute power. The pot has been called, each player has had to show his cards, and all are sitting with busted flushes! The fact that military and financial dominance may be harder to assert in the future opens the door to a much more multipolar world. 3) For 25 years, emerging market workers have subsidized consumption in developed markets, as emerging market policymakers kept their currencies undervalued and recycled their current account surpluses into “hard” currencies. If this arrangement now comes to an end, then the developed market consumer will struggle while the emerging market consumer will thrive. 4) Much consumption in emerging markets tends to occur at the “low end” of the product chain. This plays into a theme I have been harping on about for the last year: that investors should focus on companies that deliver products that consumers “need to have” rather than products that are “nice to have.” 5) Over the last two years, US treasuries and German bunds have failed in their job of providing the antifragile element in portfolios. There are few reasons to think that this failure is about to reverse any time soon. Today, investors need to look elsewhere for antifragile attributes. Precious metals, emerging market government bonds, high-yield energy assets and foodstuffs are all leading candidates. 6) High-end residential real estate in Western economies will lose the emerging market money-recycling bid and will struggle. 7) New safe destinations for emerging markets’ excess capital will emerge. Obvious candidates include Dubai, Singapore, Mauritius, and perhaps even Hong Kong (should China eventually decide to follow the rest of the world and to live with Covid). It is hard to be too bullish on these destinations. They are so small that even a marginal, influx of financial and human capital will have a disproportionate impact. The world’s unipolar era is over. Few portfolios reflect this reality - and definitely not the indexed portfolios that are today massively overweight an overvalued US and a desperately ill-omened Europe. Tyler Durden Sun, 05/22/2022 - 23:50.....»»

Category: blogSource: zerohedge21 min. ago Related News

Turkey"s Chief Statistician Quits For "Health Reasons" After Inflation Hits 70%

Turkey's Chief Statistician Quits For "Health Reasons" After Inflation Hits 70% Three months after Turkey's president Erdogan fired his statistics chief as inflation hit a mere 36%, now that inflation has almost doubled since then, the latest official in charge of compiling Turkish inflation statistics has decided to do the smart thing and step down on his own, becoming the latest prominent departure at an institution that’s facing harsh criticism over the reliability of its economic data. On Friday, the Turkish Statistical Institute said Cem Bas resigned as head of the department of price statistics for "health reasons." Furkan Metin, who previously oversaw the digital transformation and projects department at the agency known as TurkStat, has replaced Bas, who’ll remain on staff in a lower-profile role. The personnel change, first reported by Bloomberg, adds to a period of ongoing turmoil at TurkStat, whose president was replaced in January less than a year after his appointment. Turkish inflation data has been in the spotlight at a time when consumer prices are exploding at the fastest pace since the turn of the century, a key concern for President Recep Tayyip Erdogan’s government just over a year before elections. Furthermore, according to Bloomberg, concerns have swirled among researchers over what they call a divergence between the agency’s price statistics and the surge in the cost of living felt by wage earners. While TurkStat reported an annual inflation of 70% in April, ENAGroup, an independent group of scholars who’ve put together an alternative consumer price index, put the figure at as high as 157%. While both numbers are ridiculous, what is even more ridiculous is that until recently the central bank was cutting rates to avoid angering the president whose "Erdoganomics" theory of upside down economics recommends cutting rates when inflation rises, effectively setting the country on a path to suicide, something the Turkish lira has clearly grasped, as it has resumed plunging after cratering in 2021 and only a massive intervention by the central bank preventing an all-out economic collapse. The government is meanwhile seeking to pass legislation that would bar independent researchers from publishing their own data without seeking approval from TurkStat and potentially face a jail term if they violate the law. That should answer any questions whether the government or the shadow stat inflation data is the correct one. Tyler Durden Sun, 05/22/2022 - 20:55.....»»

Category: blogSource: zerohedge3 hr. 51 min. ago Related News

Futures Movers: Stock futures gain as Wall Street looks to snap 8-week losing streak

U.S. stock-index futures gained late Sunday, after Wall Street last week sank to is longest losing streak since 1932......»»

Category: topSource: marketwatch5 hr. 20 min. ago Related News

"We Have No Idea How This Will Be Used" - AI Gun Detection Gaining Popularity In US

"We Have No Idea How This Will Be Used" - AI Gun Detection Gaining Popularity In US AI Scanners may become the norm in the United States as Governments, and private companies look to beef up their surveillance options in the wake of rising gun violence. According to a report from the Washington Post, systems like Evolv Technology are becoming increasingly popular. Evolv’s machines are similar to metal detectors but instead use AI and light-emission to detect firearms concealed on a person.  Evolv claims that this system can detect weapons without the need for the traditional “airport” style system. Those looking to enter through a security checkpoint must empty their pockets and then pass through a metal detector. The system is gaining traction throughout the US. Mayor of New York City, Eric Adams, suggested using Evolv Technology’s AI weapons detection system on the NYC Subway in the weeks after the Brooklyn subway shooting that saw 23 people injured. Speaking to WaPo about the Evolv system, Jamais Cascio, founder of Open the Future, had this to say: “My concern is what happens when it moves beyond looking for weapons at a concert — when someone decides to add all kinds of inputs on the person being scanned, or if we enter a protest and a government agency can now use the system to track and log us. We know what a metal detector can and can’t tell us. We have no idea how this can be used.” The idea behind AI detecting and logging firearms is not a new one. Omnilert, another company specializing in AI threat detection, has been integrating its technologies into existing security camera systems since 2020. Tech Giants like Google and Facebook also have their versions of AI weapons detection with their Optical Character Recognition system. This system logs and indexes firearm serial numbers, making them easily accessible by google image search.  With 2020 & 2021 seeing record numbers of gun-buying and concealed carry permit applications, it seems that governments and corporate entities are seeking to beef up their surveillance and security in response. Could the upcoming verdict of the Supreme Court’s newest 2nd Amendment case affect the proliferation of AI firearms detection as well? Tyler Durden Sun, 05/22/2022 - 17:35.....»»

Category: dealsSource: nyt6 hr. 51 min. ago Related News

What"s Up With Gold?

What's Up With Gold? Authored by MN Gordon via EconomicPrism.com, Amidst a backdrop of raging consumer price inflation something strange and unexpected is going on.  The U.S. dollar has become more valuable.  Not against goods and services.  But against foreign currencies. For example, the U.S. dollar index, which is a measure of the value of the dollar relative to a basket of foreign currencies, recently crossed the 105 level.  This marks its highest level since December 2002.  Not since tech stocks were in full meltdown in 2002 has the dollar been so strong. Without questions, the dollar’s had quite a run.  The dollar index increased over 6 percent in 2021.  So far in 2022, it has already gained over 7 percent.  And, for the time being, and despite shortsighted dollar weaponization policies, the dollar is preserving its reserve currency status. This week, the dollar index did retreat slightly…at market close Thursday (May 19) it stood at 102.91.  Maybe the dollar has peaked.  Or maybe this is just a period of consolidation before its springs upward. From a historical perspective the dollar could go much, much higher.  In the mid-1980s, for instance, the dollar index hit 164.  Of course, the world was much different back then.  The euro didn’t even exist. From our perspective, it seems unlikely the dollar index could hit its old high from nearly 40 years ago.  But it does seem likely the dollar could hit parity with the euro for the first time in 20 years. Slow growth and high inflation in Europe could continue to be a drag on the euro.  In addition, the Russia-Ukraine war, and the resulting supply chain disruptions to natural gas imports in Europe, points to a weaker euro ahead. So what are we left with? Somehow, with all its faults and foibles, the dollar is perceived to be an interim safe haven asset.  Somehow, with its 75 basis points in rate hikes this year, the Federal Reserve is perceived as being hawkish on inflation.  Somehow the dollar, and dollar based investments, have become attractive to foreign investors. What’s going on… Insufficient Explanation You’ve likely heard the well-worn metaphors.  The dollar’s the cleanest shirt in the dirty laundry basket of fiat money.  The dollar’s the best house in a bad neighborhood. Does this really explain what’s going on? Maybe.  At least for now, it offers a partial and insufficient explanation. As noted above, the euro is haggard.  But it’s not just the euro… In Japan, the situation is quite different.  Inflation is just 1.2 percent – compared to 8.3 percent in the U.S.  Following the simultaneous meltdown of the Japanese NIKKEI and the Japanese real estate market in 1989 the Bank of Japan (BOJ) has tried just about everything to compel inflation higher. The BOJ has tried policies of unlimited bond buying.  It has also pumped massive amounts of printing press money into Japanese stocks via exchange traded funds.  It has splattered the countryside with concrete under the guise of public works spending. For its efforts, the central bank has driven Japan’s debt to GDP ratio to over 250 percent.  Still, inflation has remained elusive.  Thus since the BOJ wants higher inflation, and is unlikely to hike interest rates like its cohorts at the Fed, the Japanese yen is staying comparatively weak against the dollar. That’s the popular story, at least.  The rationale, no doubt, is rather suspect. At the same time, Beijing’s control freak zero-COVID policies have transformed the Chinese yuan into panda turds.  For these reasons, and many more, the U.S. dollar is in high demand. The whole thing seems rather farcical.  On a relative basis the dollar may be strong.  But it’s still doomed…just like all fiat currencies. So, what’s up with gold? What’s Up With Gold? U.S. based gold investors may be frustrated by the dollar’s strength.  With consumer price inflation raging at a 40 year high, shouldn’t the price of gold be shooting to the moon? Simple logic says yes.  Gold is a venerable hedge against inflation.  Consumer price inflation is raging out of control.  Therefore, gold, as priced in dollars, should be adjusting upward. But that’s not what’s happening.  At least not yet. After hitting $2,039 per ounce in early March, the price of gold, in dollar terms, is down 9.7 percent.  If you’re sitting on a pile of cash, now’s certainly a good time to trade some of it in for gold bullion coins – and silver too. Remember, gold is for long term wealth preservation and not for short term speculation.  Owning gold sets you free from the destructive money debasement policies of central bankers and centrally planned governments.  And owning gold will be especially important when the dollar turns later this year – if it didn’t already turn this week. You see, the U.S. economy is entering a recession.  In fact, it may already be in one.  U.S. GDP shrank by 1.4 percent during the first-quarter of 2022.  The stock market, sensing the weakness, is in full meltdown. With this backdrop, Fed Chair Jay Powell is staring down a difficult choice.  Continue to hike interest rates in the face of a recession?  Or reverse course, support financial markets, and let inflation run? What will he do?  We anticipate he’ll do both… The Fed will likely hike rates another 50 basis points following the June FOMC meeting.  It needs to put on a show of strength to restore any semblance of credibility after boofing it so hard with its “inflation is transitory” shtick. By mid-summer, however, it will be clear the U.S. economy is in a recession.  The Fed will then pause its rate hikes, and then start cutting rates. Under this scenario, the dollar will turn from sirloin to bottom round.  This is when gold will really shine. If you recall, the last time the dollar was this strong – back in 2002 – an ounce of gold cost about $320.  Over the next nine years, an ounce of gold, priced in dollars, increased by 490 percent to about $1,900. Given the monetary shenanigans and outright policies of extreme dollar destruction that have occurred over the last 14 years, the relative increase in gold’s price in dollar terms should dwarf the move that occurred during the first decade of the 21st century. Tyler Durden Sun, 05/22/2022 - 13:00.....»»

Category: dealsSource: nyt11 hr. 51 min. ago Related News

Freedom And Sound Money: Two Sides Of A Coin

Freedom And Sound Money: Two Sides Of A Coin Authored by Thorsten Polleit via The Mises Institute, It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of right. So wrote Ludwig von Mises in The Theory of Money and Credit in 1912. And further: The sound-money principle has two aspects. It is affirmative in approving the market's choice of a commonly used medium of exchange. It is negative in obstructing the government's propensity to meddle with the currency system. Against this backdrop, modern day monetary systems appear to have been drifting farther and farther away from the sound money principle in the last decades. In all countries of the so-called free world, money represents nowadays a government controlled irredeemable paper, or "fiat," money standard. The widely held view is that this money system would be compatible with the ideal of a free society and conducive to sustainable output and employment growth. To be sure, there are voices calling for caution. Taking a historical viewpoint, Milton Friedman stated: The world is now engaged in a great experiment to see whether it can fashion a different anchor, one that depends on government restraint rather than on the costs of acquiring a physical commodity. Irving Fisher, evaluating past experience, wrote: "Irredeemable paper money has almost invariably proved a curse to the country employing it." The primary cause for concern rests on a key characteristic of government controlled paper money: the system's unrestrained ability to expand money and credit supply. In contrast, under the (freely chosen) gold standard, money (e.g., gold) supply was expected to increase as well over time, but only in proportion to how the economy expanded—i.e., an increase in money demand, brought about by an increase in economic activity, would bring additional gold supply to the market (by, for instance, increased mining which would become increasingly profitable). As such, the gold standard puts an "automatic break" on money expansion—the latter would be, at least in theory, related to the economy's growth trend. The government controlled fiat money system has no inherent limit to money and credit expansion. In fact, quite the opposite holds true: Central banks, the monopolistic suppliers of governments' money, have actually been deliberately designed to be able to change money and credit supply by actually any amount at any time. To prevent abuse of their unlimited power over the quantity of money supply, most central banks have been granted political independence over the past decades. This has been done in order to keep politicians who, in order to get reelected, from trading off the benefits of a monetary policy induced stimulus to the economy against future costs in the form of inflation. In addition, many central banks have been mandated to seek low and stable inflation—measured by consumer price indices—as their primary objective. These two institutional factors—political independency and the mandate to preserve the purchasing power of money—are now widely seen as proper guarantees for preserving sound money. Be that as it may, Mises's concerns appear as relevant as ever: The dissociation of the currencies from a definitive and unchangeable gold parity has made the value of money a plaything of politics…. We are not very far now from a state of affairs in which "economic policy" is primarily understood to mean the question of influencing the purchasing power of money. Whereas the objective to preserve the value of government controlled paper money appears to be a laudable one, the truth is that it is (virtually) impossible to deliver on such a promise. In fact, there are often overwhelming political-economic incentives for a society to increase its money and credit supply, if possible, in order to influence societal developments according to ideological preset designs rather than relying on free market principles. This very tendency is particularly evidenced by the fact that central banks are regularly called upon to take into account output growth and the economy's job situation when setting interest rates. And these considerations are what seem to cause severe problems in a paper money system if and when there is no clear-cut limit to money and credit expansion. To bring home this point, it is instructive to take a brief look at the relationship between credit and nominal output and "wealth" growth (which is defined here, for simplicity, as gross domestic product plus stock market capitalization). The figure below shows the annual changes of US nominal gross domestic product (GDP) and bank credit in percent from 1974 to the beginning of 2022. As can be seen, both series are positively correlated in the period under review: On average, rising output had been accompanied by rising bank credit and vice versa. It is actually an instructive illustration of the Austrian business cycle theory (ABCT), which holds that the expansion of bank credit is not only closely associated with a boom-and-bust cycle, affecting both real magnitudes and goods prices, but its driving force. Also from 1974 to the beginning of 2022, the following figure shows the US money stock in billions of US dollars and the S&P 500 stock market index. The rising money stock is basically the re of result of the expansion of bank credit—through which new money is created. As can be seen, the development of the money stock trends on the same wavelength as the stock market. Why? On the one hand, the increase in nominal GDP over time is reflected in rising values of corporate valuations. On the other hand, the rising money stock pushes goods prices up, including stock prices. In other words: The stock market performance is—sometimes more so, sometimes less so—attributable to the fiat-money-caused goods price inflation. From the end of 2019 to the first quarter 2022 the US central bank increased the money stock M2 by 43 percent, while the stock market gained 63 percent in the same period. As the increase in the money stock helped inflating nominal GDP, it also translated into (substantially) higher stock prices. In other words: The monetary expansion caused "asset price inflation." Looking at these charts, the message seems to be: The chronic increase in credit and money supply has, on average, been "quite positive" for output and wealth. However, this would be a rather shortsighted interpretation. For a fiat money system, the expansion of credit and money makes a few benefit at the expense of many others. What is more, its "invisible effect" is that it prevents all the economic success and the resulting distributive income and wealth effects that had occurred had there not been an issuance of additional credit and fiat money. As even classical economic theorists warn, a money- and credit-induced stimulus to the economy is (as the ABCT shows) short-lived and will eventually lead to inflation, as outlined by David Hume in 1742: Augmentation (in the quantity of money) has no other effect than to heighten the price of labour and commodities…. in the progress towards these changes, the augmentation may have some influence, by exciting industry, but after the prices are settled … it has no manner of influence. However, the today's intellectual conviction of the economic mainstream, which is dominated by Keynesian economics, is that by lowering interest rates the central bank can stimulate growth and employment. So it does not take wonder that, especially so in periods in which inflation is seen to be "under control," central banks are pressured into an "expansionary" monetary policy to fight recession. In fact, it is widely considered "appropriate" if monetary policy keeps borrowing costs at the lowest level possible. In the work of Mises one finds a well-founded criticism of this broadly held conviction. He writes: Public opinion is prone to see in interest nothing but a merely institutional obstacle to the expansion of production. It does not realize that the discount of future goods as against present goods is a necessary and eternal category of human action and cannot be abolished by bank manipulation. In the eyes of cranks and demagogues, interest is a product of the sinister machinations of rugged exploiters. The age-old disapprobation of interest has been fully revived by modern interventionism. It clings to the dogma that it is one of the foremost duties of good government to lower the rate of interest as far as possible or to abolish it altogether. All present-day governments are fanatically committed to an easy money policy. Mises also outlines what the propensity to lower interest rates and increasing money and credit supply does to the economy. The Austrian school's monetary theory of the trade cycle maintains that it is monetary expansion which is at the heart of the economies' boom and bust cycles. Overly generous supply of money and credit induces what is usually called an "economic upswing." In it's wake, economic growth increases and employment rises. With the liquidity flush, however, come misalignments, a distortion of relative prices, so the theoretical reasoning is. Sooner or later, the artificial money and credit-fueled expansion is unsustainable and turns into a recession. In ignorance and/or in failing to identify the very forces responsible for the economic malaise, namely excessive money and credit creation in the past, falling output and rising unemployment provoke public calls for an even easier monetary policy. Central banks are not in a position to withstand such demands if they do not have any "anchoring"—that is a (fixed) rule which restrains the increase in money and credit supply in day-to-day operations. In the absence of such a limit, central banks, confronted with a severe economic crisis, are most likely to be forced to trade off the growth and employment objective against the preserving the value of money—thereby compromising a crucial pillar of the free society. Seen against this backdrop, today's monetary policy actually resembles a lawless undertaking. The zeitgeist holds that "inflation targeting" (IT)—the so-called state-of-the-art concept, from the point of view of most central banks—will do the trick to prevent monetary policy from causing unintended trouble. In practice, however, IT does not have any external anchor. Under IT, it is the central bank itself that calculates inflation forecasts which, in turn, determine how the bank set interest rates; setting a quantitative limit to money and credit expansion is usually not seen as a policy objective. IT can thus hardly inspire confidence that it will mitigate the threat to the value of paper money stemming from governments (in the form of fraud/misuse) and/or politically independent monetary policy makers (in the form of policy mistakes). The return to "monetary policy without rule" began in the early 1990s, when various central banks abandoned monetary aggregates as a major guide post for setting interest rates. It was argued that "demand for money" had become an unstable indicator in the "short term" and that, as such, money could no longer be used as a yardstick in setting monetary policy, particularly so as policy makers were making interest rate decisions every few weeks. However, that guide post has not been replaced with anything since then. In view of the return of discretion in monetary policy, it might be insightful to quote Hayek's concern; namely, that inflation "is the inevitable result of a policy which regards all the other decisions as data to which the supply of money must be adapted so that the damage done by other measures will be as little noticed as possible." In the long run, such a policy would cause central banks to become "the captives of their own decisions, when others force them to adopt measures that they know to be harmful." Echoing the warning that Ludwig von Mises gave back in The Theory of Money and Credit, Hayek concluded: The inflationary bias of our day is largely the result of the prevalence of the short-term view, which in turns stems from the great difficulty of recognising the more remote consequences of current measures, and from the inevitable preoccupation of practical men, and particularly politicians, with the immediate problems and the achievements of near goals. What can we learn from all this? The inherent risks of today's paper money standard—the very ability of expanding the stock of money and credit at will by actually any amount at any time—are no longer paid proper attention: Putting a limit on the expansion of money and credit does not rank among the essential ingredients for "modern" monetary policy making. The discretionary handling of paper money thus increases the potential for a costly failure substantially. A first step for moving back towards the sound money principle—which is doing justice to the ideal of a free society—would be to make monetary policy limiting—e.g., stopping altogether—money supply growth. Tyler Durden Sun, 05/22/2022 - 09:20.....»»

Category: dealsSource: nyt12 hr. 20 min. ago Related News

Companies are bemoaning the strongest dollar in 20 years. Here"s what experts say to expect for the greenback in the next few months.

"Other central banks are not nearly as hawkish as the Federal Reserve," one currency expert said about what's driving dollar strength. Dollar bills on display at a money exchange office in Istanbul, Turkey.YASIN AKGUL/AFP via Getty Images The US dollar has been sharply advancing this year, with the widely watched US Dollar Index hitting a 20-year high.  Multinational companies including Apple and Pfizer have noted dollar strength could dent financial results.  The DXY has jumped 10% during 2022 and it's likely to stick around high levels in the coming months, experts say.  What's shaping up as a banner year for US dollar strength is being flagged as a pain point by multinational companies   – and it may take months before a sustainable pullback in the greenback takes hold, analysts say. Apple, Pfizer, and other large corporations have told investors their financial results may be dented by foreign exchange fluctuations which this year features the dollar shooting up to a two-decade high against a widely watched basket of currencies. Scorching inflation and the Federal Reserve's response are at the center of the dollar's ascent in relative value. The US Dollar Index recently marked a 10% increase for 2022 when it reached above 104. The index was at 103 on Friday - but it may not travel significantly lower over the next few months. "In the next three to six months, I would say 100 to 105 is probably where the dollar [index] might be trading around," Fawad Razaqzada, market analyst at Forex.com, told Insider. "I don't think the dollar is going to slump really sharply simply because other central banks are not nearly as hawkish as the Federal Reserve," he said in an interview from London. The US Dollar Index gauges the greenback's performance against the euro, the Japanese yen, the British pound, the Canadian dollar, the Swedish krona, and the Swiss franc.  The greenback this year was up 11% against the yen. The DXY is "overbought" and is showing the start of a correction, Bank of America said in a Friday note. "However across time frames we see a bullish breakout, uptrend conditions and no top pattern which means we should buy the dip. With no visible DXY top, it's possible the DXY trends to 110 this summer," wrote BofA technical strategist Paul Ciana. Dollar demand  For US companies conducting business overseas, dollar strength can make their products more expensive for holders of other currencies to purchase. Also, the value of their international sales is lowered when converted back to dollars. S&P 500 companies generate 41% of revenues outside the US, according to FactSet. Foreign exchange "is an issue with the dollar being strong at this point," Apple said about factors that could lead to lower sales growth in its current fiscal third quarter compared with the second quarter. "With respect to foreign exchange, we expect it to be a nearly 300 basis points headwind," or to hurt revenue by about 3%, Apple's CFO Luca Maestri said in an earnings call in April. Meta Platforms, formerly Facebook, foresees a nearly 3% dent from foreign currency on second-quarter revenue growth. Pfizer said its anticipated negative impact from exchange rate changes had increased to $2 billion from $1.1 billion guided in February but the COVID vaccine maker held its 2022 revenue projection at $98 billion to $102 billion. "We've seen another step in cost pressures, and foreign exchange rates have moved further against us," Andre Schulten, chief financial officer at Procter & Gamble, said in its third-quarter earnings call. "We now expect FX to be a $300 million after-tax headwind to earnings for the fiscal year," he said.The Fed last year signaled it would undertake an aggressive cycle of interest-rate hikes to cool inflation. Headline US consumer price inflation was 8.3% in April. Rate-hike expectations have pushed US Treasury bond yields in 2022 to multi-year highs, making them attractive to foreign investors comparing debt from other countries, such as Japan, that offer relatively lower return rates. Investors will sell foreign currencies and buy dollars to purchase higher-yielding US bonds, driving up demand for the greenback and its value. The 10-year Treasury note yield has risen above 3% and was at 2.8% on Friday. Japan's 10-year yield was 0.24% on Friday.The Fed has raised interest rates by 75 basis points since March and a hefty hike of 50 basis points is expected at the June 14-15 meeting. Rate hikes are aimed at lowering inflation by slowing the pace of economic activity. Growth wobbles A significant shift to fears about a US recession from inflation concerns could pose somewhat of a challenge to the dollar's run-up, Huw Roberts, director of analytics at Quant Insight, told Insider. One flick at that idea came when the 10-year yield fell from 3% after the April inflation report showed prices eased from March's 41-year high of 8.5%. "[If] bond yields keep coming lower and copper keeps coming in lower, then that's telling you the markets are worried about growth," said Roberts. "Is that necessarily dollar bearish? Well, it certainly takes the wind out of the dollar upside but it won't necessarily be an outright dollar-bear call because if the US economy is struggling, the rest of the world is going to be struggling," he said."I would frame it as it might mean an end to the one-way traffic that is dollar upside. Does it necessarily open up dollar downside? That's much more debatable," Roberts said.Read the original article on Business Insider.....»»

Category: topSource: businessinsider16 hr. 20 min. ago Related News

Bank of America says it sees a 1-in-3 chance of a US recession some time next year, but it will be mild by historical standards

The bank says a "bumpy landing" is more likely from the Fed's interest rate increases, though it expects bigger hikes than what's priced into the market. The cost of living has surgedskynesher/Getty Images Bank of America sees a 1-in-3 chance of a US recession next year, but sees a 'bumpy landing' as more likely. If the US does plunge into recession, it will be mild by historical standards, the bank's economists said. They expect the Federal Reserve to hike interest rates by 30 basis points more than the market is pricing in. Bank of America has warned the US faces a one-in-three chance of tumbling into a recession next year, but said it would likely be mild by historical standards.The bank's economists said that risks of a recession are low for this year, and they foresee a "bumpy landing" rather than an outright recession as the Federal Reserve tightens financial conditions.But they're becoming more worried about prospects for the US economy in 2023, given inflation shows signs of persisting and the labor market looks to be seriously overheating.The US has inflation running at 40-year highs, and the Federal Reserve plans a series of interest rate increases to combat it. But there is concern the central bank could tip the economy into a recession by hiking rates too aggressively."Risks are low this year, as the economy has plenty of momentum and it will take time for Fed hikes to impact growth," BofA economists said in a note Friday. "However, next year the Fed will be facing some tough choices. We see a roughly one-in-three chance that a recession starts sometime next year."In May, the central bank raised interest rates by 50 basis points, the biggest increase at one meeting in 22 years, and signaled that similar hikes would follow. As the Fed lifts interest rates to 3.4% by May next year, there will be an ongoing slowdown in the economy, according to BofA. They see growth falling to 0.4% by the last quarter of 2023."We expect the Fed to hike by about 30 bps more than what is priced into the market, adding a bit further pressure on financial markets," the bank said. "The lag from financial tightening to weaker growth is likely to be a bit longer than normal, causing gradual downward pressure on growth," they added.The US stock market has logged a string of weekly losses as investors fret about the risk of stagflation and recession. Sentiment has dropped to "extreme fear" levels, according to CNN's Fear and Greed index, as business leaders from Tesla CEO Elon Musk to Goldman Sachs CEO David Solomon sound the alarm on growth.Market historian Jeremy Grantham has predicted stocks could fall as much as 80% from their peaks in a coming recession, though JPMorgan's quant guru Marko Kolanovic believes the market is pricing in too much risk."If the economy does tumble into a recession, it will likely be mild by historic standards," BofA said. "The economy has relatively few imbalances, and hence the risk of ugly feedback loops kicking in is lower than normal."It laid out three reasons why the US could avoid an outright recession. The first is that the economy has only one big imbalance — an overheating labor market.In April, the US unemployment rate was 3.6%, and businesses struggled to hire staff, with the number of Americans actively looking for jobs stuck below pre-pandemic levels. BofA expects the rate to fall to 3.2% next year.That labor shortage means employers must pay higher wages to recruit staff — which feeds into inflation.Given that, the Fed will have to push the unemployment rate back up in 2023 and 2024, according to BofA. Their baseline case calls for a 1% rise to do the trick, or 2% in a recession."Second, we don't think the Fed has to do all the work in raising the unemployment rate: workers returning to the job market will help," they said.The third reason is they see the Fed as relatively dovish, and believe it will stop hiking rates once the unemployment rate starts rising and underlying inflation falls to to 3%, rather than to its 2% target.Read more: Goldman Sachs lays out the case for investing more of your money in real assets — and reveals which ones it's most bullish on as the stock market crashesRead the original article on Business Insider.....»»

Category: topSource: businessinsider20 hr. 4 min. ago Related News

Sustainable Investing: Elon Musk called ESG a scam — did the Tesla chief do investors a favor?

A major move to cut Tesla from a closely followed environmental, social and governance (ESG) index brought anger and relief in nearly equal measure......»»

Category: topSource: marketwatchMay 21st, 2022Related News

Breaking Down the Earnings Outlook After Retailers Disappoint

The stock market has been merciless in response to disappointing Q1 results, with Walmart (WMT) and Target (TGT) the most recent victims. Here's how the earnings outlook is shaping up near the end of the Q1 earnings season... The stock market has been merciless in response to disappointing Q1 results, with Walmart (WMT) and Target TGT the most recent victims. Walmart and Target are hardly alone in this respect as a number of other prominent operators also got roughed up at the hands of the market after failing to meet Wall Street expectations.Staying within the broader retail space, it is instructive to recall that the market’s reaction to Q1 results from Amazon AMZN, Ebay EBAY and Expedia EXPE was similar to the recent beating Target and Walmart took.Multiple factors are at play here, ranging from merchandising missteps and failure to accurately read evolving consumer behavior, to coming up short in responding to an admittedly tough operating environment characterized by rising costs. The consumer is still very healthy, supported by low debt loads, adequate savings and rising wages as a result of a tight labor market.That said, it makes intuitive sense to envision that lower-income consumers will start to feel the squeeze, with rampant inflation eating into, if not altogether offsetting, wage gains. It would make sense for such a consumer to spend less on discretionary items and more on everyday necessities.There was some of that at play in the Walmart and Target results. But the biggest driver of their disappointing results was weak execution that resulted in compressed margins that forced analysts to lower their outlook for the current and coming quarters.You can see this in consensus estimates for Walmart and Target, with Walmart’s July quarter EPS estimate down -4.2% in the last few days, while Target slipped -9.1%. As bad as these negative revisions to Walmart and Target estimates are, please keep in mind that the Q2 EPS estimates for Amazon have come down -62.8% in the past month.Stepping back from these major retail operators and looking at the sector’s earnings expectations as a whole, we see that expectations have notably been adjusted lower.The Zacks Retail sector, which includes Walmart, Target, Amazon and all the other digital and brick-and-mortar operators, including restaurants, was expected to -0.7% decline in 2022 Q2 earnings at the start of the year. This expected earnings growth rate for the June quarter declined to -1.1% on March 30th. The 2022 Q2 earnings growth rate has dropped to -14.2% at present.However, if we look at the revisions trend in the aggregate, at the S&P 500 level, we don’t see a lot of movement, as you can see in the chart below that plots the evolution of aggregate Q2 earnings growth estimates for the index since the start of 2022.Image Source: Zacks Investment ResearchIn other words, estimates in the aggregate are essentially unchanged since the beginning of April and are actually up since the start of the year.But as we saw earlier with the revisions trend for the Zacks Retail sector, there are plenty of cross currents at the sector level, with positive revisions to the Energy sector offsetting declines in most other sectors.The Q2 earnings estimates for the Zacks Energy sector have increased +78.5% since the start of January and +41.7% since the beginning of April.Energy is not the only sector that has enjoyed positive Q2 estimate revisions; there are 5 other sectors whose estimates have gone up by varying magnitudes. Since the start of Q2 on April 1st, earnings estimates have gone up for the Transportation, Basic Materials, Autos, Construction, and Consumer Staples sectors. Of these 5 sectors, the upgrade to the Q2 earnings outlook is particularly significant for the Transportation and Basic Materials sectors.If we look at the aggregate Q2 revisions, after excluding the Energy sector from the mix, then the picture changes, as you can see below.Image Source: Zacks Investment ResearchPretty much the same trend is at play with the revisions on an annual basis, with aggregate estimates stable or even modestly up since the start of the year, but starting to come down on an ex-Energy basis.I will not share those charts here to keep the length of this piece manageable, but I think it will be useful for you to see what has happened to full-year 2022 earnings estimates for the Energy sector since the start of the year.Image Source: Zacks Investment ResearchBefore I started analyzing the aggregate earnings picture some 12 or so years ago, I used to cover the Energy sector for a living. I have never seen this magnitude of estimate revisions for the Energy sector at any other time, or for any other sector for that matter.Putting It All Together The Fed’s monetary policy tightening is expected to slow down the economy. At the expense of over-simplifying a complex development, this is how the Fed confronts inflation in the economy. Expectations of U.S. GDP growth have come down as result. You can see this in consensus GDP growth estimates since the start of year, with the Zacks Economic team currently projecting 2022 GDP growth at +2.3%, down from +3.5% back in January. Estimates for next year have also come down, but not to the same extent.  Since the Fed still has some ways to go in its inflation-fighting quest, is reasonable to expect these GDP growth estimates to come down further.As you would expect, earnings are a function of the broader economy, though the economy in the earnings discussion is the global economy and not just the domestic one. This is the reason why there is not a perfect correlation between nominal global GDP growth and revenue growth for the S&P 500 index.Without getting into the debate whether the Fed tightening will push the U.S. economy into a recession or the central bank will be able to engineer the so-called ‘softish’ landing, it is a given that U.S. economic growth is on track to slow down in the coming quarters.And so should expectations for S&P 500 companies. We have seen some of that already, but it’s reasonable to expect more of that as we move into the second half of the year.The Current Earnings BackdropThe chart below shows current expectations (and actuals) on a quarterly basis.Image Source: Zacks Investment ResearchThe chart below shows the comparable picture on an annual basis.Image Source: Zacks Investment ResearchFor a detailed look at the overall earnings picture, including expectations for the coming periods, please check out our weekly Earnings Trends report >>>>Making Sense of Walmart, Target and Disappointing Retail Earnings  Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Target Corporation (TGT): Free Stock Analysis Report eBay Inc. (EBAY): Free Stock Analysis Report Expedia Group, Inc. (EXPE): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksMay 21st, 2022Related News

3 Low P/E Stocks Displaying Attractive Earnings Growth

All three companies sport the highly coveted Zacks Rank #1 (Strong Buy), have solid dividend yields, low forward earnings multiples, and strong projected earnings growth. The market continues to punish investors in the seemingly “no-fun allowed” environment that we have found ourselves in. Many of us already can’t wait to put this year behind us, and it’ll undoubtedly be talked about for years to come.Coming out of a once-in-a-lifetime pandemic, we have found ourselves in a unique economic situation. The Fed has become much more hawkish, raising interest rates to curb inflation that had gotten out of control.  Low borrowing costs during the initial phases of the pandemic helped provide liquidity, a major driving force behind many of the runs we witnessed stocks go on. Now that the cheap borrowing days are over, stocks and indexes have extensively pulled back.   Nonetheless, investors have been rolling with the punches. The high-growth names have been hit the hardest throughout 2022, making many investors pivot to value stocks. Value stocks are typically much less volatile.Three companies that are strong value plays include TotalEnergies SE TTE, Pangea Logistics Solutions PANL, and Danaos Corporation DAC.All three companies sport the highly coveted Zacks Rank #1 (Strong Buy), have solid dividend yields, low forward earnings multiples, strong projected earnings growth, and have a Style Score of A for Value.For investors looking to add value plays to their portfolios, let’s take an enhanced look at all three companies to see why they are solid bets.TotalEnergies SETotalEnergies SE TTE is an extensive energy company that produces and markets energies on a global scale. Energy operations of the company span across oil, biofuels, natural gas, green gases, renewables, and electricity.Year-to-date, shares have shown a valuable blend of defense and appreciation, up around 10%. The return is more than enough to handily outperform the S&P 500’s decline of 18%. In the sea of red that has been 2022, the strong share performance bodes well.Image Source: Zacks Investment ResearchThe company also sports a beautifully low forward earnings multiple of 4.8X, which is well below the Zacks Oil and Gas – Refining and Marketing Industry’s average of 6.5X. Additionally, the value is an absolute fraction of 2020 highs of 49.1X and is well below the median of 11.4X over the last five years.Image Source: Zacks Investment ResearchIn addition to attractive valuation levels, the company also rewards its shareholders extensively. The company has a 3.91% annual dividend yield with a sustainable payout ratio sitting at 24% of earnings. Furthermore, the company has increased its dividend by nine times just over the last five years.Analysts have been upping their earnings outlook across the board over the last 60 days. For the upcoming quarter, the Consensus Estimate Trend has increased by a mighty 60% up to $2.99 per share, displaying a sizable 135% growth in earnings from the year-ago quarter. Additionally, current fiscal year earnings are expected to expand by 75% year-over-year.Image Source: Zacks Investment ResearchPangea Logistics Solutions Pangea Logistics Solutions PANL is a global provider of comprehensive maritime logistics and transportation solutions. The company not only owns a large fleet of bulk carriers, but also designs, produces, and operates port and inland projects.Year-to-date, shares have been on an absolute tear. Up nearly 60% so far, the performance doesn’t even come close to the general market’s decline. Once again, the strength within the shares bodes well – investors have defended this stock, buying at every stop along the way.Image Source: Zacks Investment ResearchThe company’s forward earnings multiple is sitting nicely at 3.5X, well below the median of 5.4X over the last five years and nowhere near 2020 highs of 61.3X. Additionally, the value displays a sizable 80% discount relative to the S&P 500’s forward earnings multiple of 17.4X.Image Source: Zacks Investment ResearchPANL has shown a commitment to its shareholders within its 3.43% dividend yield, with a very sustainable payout ratio sitting at 12% of earnings. Furthermore, the company has increased its dividend three times over the last five years.Like TTE, the company has witnessed positive estimate revisions across the board over the last 60 days. The Consensus Estimate Trend for the upcoming quarter has increased by nearly 48% up to $0.37 per share, reflecting a considerable 28% expansion in the bottom line from the year-ago quarter. Looking forward, the $1.67 per share estimate for the current fiscal year displays a 19% growth in earnings.Image Source: Zacks Investment ResearchDanaos CorporationDanaos Corporation DAC is one of the largest independent owners of modern, large-size containerships. The company charters its containerships on long-term contracts at fixed rates.Year-to-date, DAC shares have been substantial, providing investors with a 7% return and easily outpacing the S&P 500. DAC shares have shown a valuable blend of defense relative to most other stocks in a time of overall weakness.Image Source: Zacks Investment ResearchDAC’s forward earnings multiple is sitting nicely at 2.6X, well below 2021 highs of 6.7X, and just slightly above its median of 1.8X over the last five years. Additionally, the value represents a very steep 85% discount relative to the S&P 500’s forward P/E ratio. Image Source: Zacks Investment ResearchLike PANL and TTE, the company likes to reward its investors handsomely. DAC has an annual dividend yield of 3.81% and has a very sustainable payout ratio of 12% of earnings. Furthermore, the company has increased its dividend twice over the last five years.Positive estimate revisions have hit across the board over the last 60 days. For the upcoming quarter, the $6.89 per share estimate reflects a sizable triple-digit earnings growth of 107% from the year-ago quarter. Earnings are expected to surge 85% year-over-year for the current fiscal year.Image Source: Zacks Investment ResearchBottom LineWhile the general market has suffered throughout 2022, these stocks have done quite the opposite, providing investors with positive returns. Additionally, growth rates are robust, shares are at attractive valuation levels, and most importantly, they all carry a Zacks Rank #1 (Strong Buy).All three companies are tremendous value bets, further displayed by their Style Score of A for Value. Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Danaos Corporation (DAC): Free Stock Analysis Report Pangaea Logistics Solutions Ltd. (PANL): Free Stock Analysis Report TotalEnergies SE Sponsored ADR (TTE): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksMay 21st, 2022Related News

Will ETFs Gain From Improving US Industrial Output in April?

The latest update on the U.S. industrial output is encouraging amid the current market turbulence. April’s encouraging U.S. industrial output data has brought some hope despite the current turbulent market conditions. Per the Fed’s recently-released data, total industrial production rose 1.1% in the month. It stood out as the fourth straight month of gains of 0.8% or higher. Moreover, a 0.8% increase in the manufacturing output also looks positive. There was a 2.4% rise in utility production. Moreover, mining production witnessed a 1.6% uptick, mainly due to strength in the oil and gas sector.Considering the latest data release, investors can track ETFs like The Industrial Select Sector SPDR Fund (XLI), Vanguard Industrials ETF (VIS), Fidelity MSCI Industrials Index ETF (FIDU) and iShares U.S. Industrials ETF (IYJ), which might gain from an improving industrial output.Total industrial production increased 6.4% from the year-ago figure in April. According to the Fed’s report, the durable and the nondurable manufacturing indexes inched up 1.1% and 0.3%, respectively, in April. The other manufacturing (publishing and logging) index was also up 0.9% in the month.Capacity utilization for the industrial sector expanded to 79% in April. The manufacturing capacity utilization for the industry, the measure for studying how efficiently firms are utilizing their resources, increased 0.6% in April to 79.2%, up 1.1 percentage points from its long-run average, per the Fed’s report (the highest level since April 2007).Present U.S. Economic ScenarioThe world’s largest economy continues to struggle with the persistently high-inflation levels. Per the latest Labor Department report, the Consumer Price Index (CPI) jumped 8.3% year over year in April, surpassing the already high Dow Jones estimate of an 8.1% rise. The metric, however, compared favorably with the 8.5% rise (the maximum since December 1981) in March.The core inflation index, which excludes volatile components, such as food and energy prices, rose 6.2% year over year, beating the expectations of a 6% rise. The rising inflation levels dashed the hopes of inflation peaking in March.The continued steep inflation levels are also weighing on consumer confidence in the United States. The growing supply-chain disturbances, emanating from the ongoing Russia-Ukraine war crisis and the resurging COVID-19 cases in China, might trigger concerns over a further rising inflation level.The Conference Board's measure of consumer confidence index stands at 107.3 in April 2022 compared with 107.6 in March. Moreover, April’s reading missed the consensus estimate of 108, per a Reuters survey of economists. Also, the metric continues to be below the pre-pandemic level of 132.6 achieved in February 2020.However, certain U.S. economic data releases have been encouraging so far. The Department of Commerce reported that retail sales in April were up 0.9% month over month, marginally below the consensus estimate of 1%. Year over year, retail sales grew 8.2% in April.Industrial ETFs in FocusIn the current scenario, we believe, it is prudent to discuss ETFs with relatively high exposure to the industrial companies:The Industrial Select Sector SPDR Fund XLI           The Industrial Select Sector SPDR Fund seeks to provide investment results that before expenses, match the performance of the Industrial Select Sector Index. The Industrial Select Sector SPDR Fund has an AUM of $13.67 billion and an expense ratio of 0.10% (read: Can Industrial ETFs Gain on Mixed Q1 Earnings?).Vanguard Industrials ETF VIS                   Vanguard Industrials ETF offers exposure to the industrial sector and follows the MSCI US Investable Market Industrials 25/50 Index. Vanguard Industrials ETF manages an AUM of $3.44 billion and an expense ratio of 0.10%.Fidelity MSCI Industrials Index ETF FIDUThe Fidelity MSCI Industrials Index ETF seeks to provide investment returns that match, before fees and expenses, the performance of the MSCI USA IMI Industrials Index. Fidelity MSCI Industrials Index ETF has an AUM of $708.5 million and an expense ratio of 0.08%.iShares U.S. Industrials ETF IYJThe iShares U.S. Industrials ETF seeks to track the investment results of the Russell 1000 Industrials 40 Act 15/22.5 Daily Capped Index. iShares U.S. Industrials ETF has an AUM of $1.29 billion and an expense ratio of 0.41%, as stated in the prospectus. Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Vanguard Industrials ETF (VIS): ETF Research Reports Industrial Select Sector SPDR ETF (XLI): ETF Research Reports iShares U.S. Industrials ETF (IYJ): ETF Research Reports Fidelity MSCI Industrials Index ETF (FIDU): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksMay 21st, 2022Related News

Whether We"re At The Bottom Or Not, Read This Before Your Next Trade

This pullback has been extremely difficult, but stock valuations are now at their lowest level in over two years. Kevin Matras will help you prepare for the inevitable rebound by putting the probability of success in your favor. Stocks got off to a rough start this year. And they are still struggling.40-year high inflation, rising interest rates, the war on Ukraine, which sent already high energy prices even higher, has taken its toll on the market.Pullbacks and corrections are common. In fact, stocks usually pull back about -5% roughly 3-4 times per year, while the market typically corrects -10% on average of once a year.A pullback is defined as a decline between -5% and -9.99%, while corrections are defined as declines between -10% and -19.99%.All of the major indexes have fallen into correction territory. Actually, the S&P briefly slipped into bear market territory (which is defined as a decline of -20% or more), on Friday, intraday, before escaping by the close. But the Nasdaq breached bear market territory back in March and is still in it.What’s roiling the market right now is the fear of a recession. Some think we may already be in one.While bear markets typically precede recessions, they don’t always do.True, GDP was down -1.4% in Q1, so we’re technically halfway there. But the Federal Reserve Bank of Atlanta’s GDP Now forecast has Q2 GDP coming in at 2.4%.And for the record, last quarter’s Q1 contraction actually showed lots of positives in the economy with consumer spending up 2.7% q/q, which was a faster growth rate than the previous quarter’s 2.5%; business investment was up 9.2%; residential investment was up 2.1%; and final sales to private domestic purchasers were up 3.7% vs. last quarter’s 2.6%. (What tanked Q1 GDP numbers was lower government spending, lower exports, and lower inventories, as businesses built up supplies very slowly, in spite of surging demand.)So, the prospect of 2 quarters in a row of negative GPD does not look like it’s in the cards for now.Moreover, for comparison purposes, the S&P was down by nearly -20% at its worst so far. But during the flash crash of 2020, at the beginning of the pandemic when everybody thought the world was coming to an end, the S&P plunged -33.9%. And due to the economic lockdown, we actually saw a real recession of 2 quarters in a row of negative GDP with Q1 down by -5.1% and Q2 down by -31.2%.That was real economic carnage. And that’s why stocks tanked.We aren’t anywhere near anything like that.Plus, it should be noted that over the last 50 years, there’s never been a recession (aside from 2020’s pandemic-induced plunge), when the Fed Funds rate was under 4%.And with the Fed pegging rates at 1.9% by the end of this year, and 2.8% next year, with no further rate hikes in 2024, we’ll still be a long way from 4%.And that’s why talk of a recession looks to be premature. And why the current sell-off looks to be overdone.Now, as the John Maynard Keynes saying goes, the “markets can remain irrational longer than you can remain solvent.”So, one can’t dismiss the possibility of going down even further.But the current sell-off has pushed valuations down to the lowest level in more than 2 years (since April 2020 during the pandemic).And whether the lows are already in, or whether they’ve yet to be seen, stocks are trading at a bargain. And given their growth prospects, if they end up going even lower, the bargains look to only get better.So, now is the time to start planning for the next leg up. And picking up stocks at prices you only wished you could have gotten into before.But before you make your next trade, please read this first to learn how to put the probabilities of success in your favor.Knowledge Is Power We’ve all heard the old adage, ‘knowledge is power.’It’s a great saying because it’s true.And that saying couldn’t be truer than when it comes to investing.Take a look at your last big loser for example. After analyzing what went wrong, you soon discover some piece of information that ‘had you known beforehand, you never would have gotten into it in the first place.’I’m not talking about things that are unknowable, like inside information or surprise announcements that can catch even the most professional of professionals off guard.I’m talking about things that you could have known about or SHOULD have known about before you got in.Did You Know?...• Did you know that roughly half of a stock's price movement can be attributed to the group that it’s in?• Did you also know that oftentimes a mediocre stock in a top performing group will outperform a ‘great’ stock in a poor performing group?• And did you know that the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1?• And did you also know that the top 10% of industries outperform the most?More . . .------------------------------------------------------------------------------------------------------Saturday Deadline: Claim your Free Copy of Finding #1 StocksOne single idea changed Kevin Matras' life as an investor, enabling him to tap into the greatest force driving stock prices. In Finding #1 Stocks, Kevin reveals his top stock-picking secrets and strategies based on this powerful idea. Now you can claim a free copy of the 300-page hardcover book.In 2021 - while the market climbed +28.8% - these strategies actually produced gains up to +48.2%, +67.6%, and even +95.3%.¹You can take full advantage of them without attending a single class or seminar, in a lot less time than you think. Opportunity ends Saturday, May 21.Get your free book now >>------------------------------------------------------------------------------------------------------Was your last loser in one of the top industries or in one of the bottom industries?If it was in one of the bottom industries, you should have known to not take a chance on something with a reduced probability of success.That’s what is meant by ‘knowledge is power.’ Knowable things that you need to know.That’s not to say that stocks in crummy industries won’t go up -- they do. And that’s not to say that stocks in good industries won’t go down -- because they do too.But more stocks go up in the top industries, and more stocks go down in the bottom industries.And since there are over 10,000 stocks out there to pick and choose from, why settle for one with a reduced chance of making any money?Did You Know?...• Did you know that stocks with ‘just’ double-digit growth rates typically outperform stocks with triple-digit growth rates?• Did you also know that stocks with crazy high growth rates test nearly as poorly as those with the lowest growth rates?Did your last loser have a spectacular growth rate?If so, and it got crushed, would you have picked it if you knew that stocks with the highest growth rates have spotty track records?It seems logical to think that the companies with the highest growth rates would do the best. But that doesn’t always turn out to be the case.One explanation for this is that sky high growth rates are unsustainable. And the moment a more normal (albeit still good) growth rate emerges, the stock gets a dose of reality as well.For example, a company earning 1 cent a share that is now expected to earn 6 cents, has a 500% growth rate. But, if it receives a downward estimate revision to 5 cents, that’s a significant drop. Even though it still has a 400% growth rate, the estimates were just reduced by -16.7% and the price is likely to follow.If you’ve ever wondered how a stock with a triple-digit growth rate could possibly go down -- that’s how.Instead, I have found that comparing a stock to the median growth rate for its industry is the best way to find solid outperformers with a lesser chance to disappoint. And focusing on companies with growth rates above the median, but less than 50%, has produced some of the best results.Did You Know?...• Did you know that stocks receiving broker rating upgrades have historically outperformed those with no rating change by more than 1.5 times? And did you know they outperformed stocks receiving downgrades by more than 10 x as much? The next time one of your stocks is upgraded or downgraded, be sure to remember these statistics so you know how the odds stack up and whether they’re for you or against you.• Did you know that stocks with a Price to Sales ratio of less than 1 have produced significantly superior results over companies with a Price to Sales ratio greater than 1? And did you know that those with a Price to Sales ratio of greater than 4 have typically been shown to lose money? That doesn’t mean that all stocks with a P/S ratio of less than one will go up, and those over four will go down, but you can greatly increase your odds of success by following these valuations.• Did you know that the Zacks Rank is one of the best rating systems out there? And did you know that stocks with a Zacks Rank #1 Strong Buy have beaten the market in 28 of the last 34 years, with an average annual return of 25% per year? That’s more than 2 x the returns of the S&P with an 82% annual win ratio. And when doing this year after year, that can add up to a lot more than just two times the returns.• Did you know that two simple filters added to the Zacks Rank #1 stocks significantly increases its returns? What if you did? We have a screen that utilizes these two additional items to narrow that list down to 5 high probability stocks per week. Over the last 22 years (2000 thru 2021), using a 1-week rebalance, it’s produced an average annual return of 51.2%, which is 6.8 x the market. That screen is aptly called the Filtered Zacks Rank 5 screen.Do you know how well your stock picking strategies have performed?Whether good or bad -- do you know why?Do you know if your favorite item to pick stocks with is helping you or hurting you?If not, you should.Beat The Market On Your Next Trade  With stocks poised for another historic move, there's a simple way to add a big performance advantage for stock picking success. It's called the Zacks Method for Trading: Home Study Course.With this fun, interactive online program, you can master the Zacks Rank in your own home and at your own pace. You don’t have to attend a single class or seminar.Zacks Method for Trading covers the investment ideas I just shared and guides you to better trading step by step, plus so much more.You'll quickly see how to get the most out of the proven system that has more than doubled the market for over three decades. Discover what kind of trader you are, how to find stocks with the highest probability of success, and how to trade them so you can consistently beat the market no matter where stock prices are headed.You’ll get the formulas behind our top-performing strategies suited for a variety of different trading styles.The best of these strategies actually produced gains up to +48.2%, +67.6%, and even +95.3% in 2021.¹The course will also help you create and test your own stock-picking strategies.Today is the perfect time to get in. I'm giving participants free hardbound copies of my book, Finding #1 Stocks, a $49.95 value. Its 300 pages unfold virtually every trading secret I’ve learned over the last 25 years to beat the market.Please note: Copies of the book are limited and your opportunity to get one free ends midnight Saturday, May 21, unless we run out of books first. If you're interested, I encourage you to check this out now.Find out more about Zacks Home Study Course >>Thanks and good trading,KevinZacks Executive VP Kevin Matras is responsible for all our trading and investing services. He developed many of our most powerful market-beating strategies and directs the Zacks Method for Trading: Home Study Course. ¹ The results listed above are not (or may not be) representative of the performance of all strategies developed by Zacks Investment Research. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksMay 21st, 2022Related News

ChargePoint Holdings, Inc. (CHPT) Outpaces Stock Market Gains: What You Should Know

In the latest trading session, ChargePoint Holdings, Inc. (CHPT) closed at $11.02, marking a +0.27% move from the previous day. ChargePoint Holdings, Inc. (CHPT) closed at $11.02 in the latest trading session, marking a +0.27% move from the prior day. This move outpaced the S&P 500's daily gain of 0.02%. Meanwhile, the Dow gained 0.03%, and the Nasdaq, a tech-heavy index, lost 0.16%.Coming into today, shares of the company had lost 24.83% in the past month. In that same time, the Auto-Tires-Trucks sector lost 21.32%, while the S&P 500 lost 12.5%.Investors will be hoping for strength from ChargePoint Holdings, Inc. as it approaches its next earnings release, which is expected to be May 31, 2022. On that day, ChargePoint Holdings, Inc. is projected to report earnings of -$0.17 per share, which would represent year-over-year growth of 5.56%. Our most recent consensus estimate is calling for quarterly revenue of $75.1 million, up 85.38% from the year-ago period.CHPT's full-year Zacks Consensus Estimates are calling for earnings of -$0.70 per share and revenue of $474.84 million. These results would represent year-over-year changes of +57.58% and +95.94%, respectively.It is also important to note the recent changes to analyst estimates for ChargePoint Holdings, Inc.These revisions help to show the ever-changing nature of near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.Our research shows that these estimate changes are directly correlated with near-term stock prices. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. Over the past month, the Zacks Consensus EPS estimate remained stagnant. ChargePoint Holdings, Inc. is currently sporting a Zacks Rank of #4 (Sell).The Automotive - Original Equipment industry is part of the Auto-Tires-Trucks sector. This group has a Zacks Industry Rank of 209, putting it in the bottom 18% of all 250+ industries.The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com. Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report ChargePoint Holdings, Inc. (CHPT): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksMay 21st, 2022Related News

We Have Official Entered Bear Market Territory...What Now?

The US stock market has been an unstoppable falling knife since the moment 2022 began, how much longer can it last? The US stock market has been an unstoppable falling knife since the moment 2022 began as an endless torrent of inflationary headlines drive interest rate expectations to the moon.The S&P 500 SPY broke below its -20% bear market threshold on the 3rd attempt over twice that many sessions, making a fresh 52-week low. However, the lack of panic-selling from retail investors allowed the S&P 500 to bounce cleanly off a critical 2-year fib-extension level (@ 3810) back to even once oversold RSI conditions were met in the afternoonAll the major indices touched fresh 52-week lows on Friday (5/20), but this garden variety sell-off isn’t laced with the same fear-fueled capitulation that we saw in March 2020.The S&P 500’s 3.5% intraday range on relatively low volumes is the type of indecision that you typically see near the trough of a correction. The decisive midday springboard off this 38.2% Fibonacci extension support drawn from the S&P 500’s March 2020 low to its recent highs at the beginning of 2022, has me cautiously optimistic.The US equity market has already essentially priced in a recession, as the market leading index's growth adjusted forward P/E multiple (PEG) trades down to an 8-year low, so what happens if we don’t’ get one?I see US equity risk being to the upside after this overcooked correction but remember that the market can remain irrational longer than you can remain solvent.The trend is your friend (until it’s not), so don’t fight the market by trying to call a conclusive bottom, rather scale into your favorite equities on breakdowns like we saw today. Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report SPDR S&P 500 ETF (SPY): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksMay 21st, 2022Related News

Warren Buffett, Michael Burry, and other elite investors just revealed major changes to their stock portfolios. Here are 5 key trades they made.

Buffett's Berkshire Hathaway more than quadrupled its stake in Chevron, while Burry's Scion Asset Management placed a bet against Apple stock. Warren Buffett.Reuters Warren Buffett, Michael Burry of "The Big Short," and others shared portfolio updates this week. Ray Dalio, Jim Simons, and Stanley Druckenmiller also disclosed their stock holdings as of March 31. Key trades included a big bet on Chevron, a wager against Apple, and several meme-stock purchases. Warren Buffett, Michael Burry of "The Big Short" fame, and other top-flight investors made significant changes to their stock portfolios in the first quarter of this year, ranging from a huge wager on Chevron to a bet against Apple.Ray Dalio, Jim Simons, and Stanley Druckenmiller's funds all made notable tweaks to their holdings. The first two bought or sold two of the best-known meme stocks, GameStop and AMC, while the third bet big on energy stocks and made a surprising wager against the S&P 500.Read more: Goldman Sachs lays out the case for investing more of your money in real assets — and reveals which ones it’s most bullish on as the stock market crashesHere are 5 of the most striking trades in the first quarter:Warren Buffett piled into ChevronWarren Buffett.REUTERS/Marc CardwellWarren Buffett's Berkshire Hathaway more than quadrupled its Chevron stake last quarter. The energy company's stock price also rose 39% last quarter, helping to boost the value of Berkshire's position from $4.5 billion to almost $26 billion.The famed investor's conglomerate also disclosed new positions in Citigroup and Paramount Global, worth $2.9 billion and $2.6 billion respectively as of March 31.On the other hand, Berkshire virtually eliminated its Verizon stake, which was valued at north of $8 billion three months earlier. Michael Burry bet against AppleMichael Burry.Jim Spellman/Getty ImagesBurry's Scion Asset Management, which sold most of its US stocks last year, piled back into the market in the first quarter.The hedge fund added the likes of Alphabet, Meta Platforms, and Discovery to its holdings, helping to boost its US stock portfolio's value (excluding options) by 122% to $165 million.Burry and his team also disclosed bearish put options against 206,000 Apple shares. The iPhone maker's stock has tumbled 23% this year as investors — facing the prospect of higher interest rate, stubborn inflation, and a possible recession — have dumped technology stocks.Ray Dalio's Bridgewater fund got out of Tesla and invested in AMCRay Dalio.Hollis JohnsonRay Dalio's Bridgewater Associates disposed of its Tesla stock, and built new stakes  in GameStop and AMC Entertainment, in the first quarter of this year.Bridgewater exited Elon Musk's electric-vehicle company after holding about $27 million of its stock at the end of December. In contrast, it bought GameStop shares worth $689,000 as of March 31; it last reported owning the meme stock at the end of 2018.Moreover, Dalio's fund disclosed AMC as a holding for the first time. It owned $667,000 of the cinema-chain's stock at the end of March.Jim Simons' RenTech fund boosted its Tesla and GameStop betsJim Simons.AP Images / Jason DecrowRenaissance Technologies doubled down on Tesla, ramped up its GameStop wager, and slashed its AMC Entertainment stake in the first quarter.RenTech, founded by a Cold War codebreaker and former MIT math professor named Jim Simons, boosted its Tesla stake by 109% to 1.6 million shares — worth $1.7 billion at the end of March.Simons' quantitative hedge fund also grew its GameStop position 118-fold to 307,000 shares, valued at $51 million as of March 31.Moreover, RenTech cut its AMC holdings by 61%, and the cinema-chain's stock price slid 9% in the period. As a result, the position's value tumbled by almost two-thirds to $45 million.Stanley Druckenmiller made a wager against the S&P 500Stanley Druckenmiller.Reuters / Brendan McDermidStanley Druckenmiller placed a bet against the S&P 500 index, and snapped up a bunch of energy and mining stocks, in the first quarter.Druckenmiller's Duquesne Family Office held puts against 239,600 shares of the SPDR S&P 500 ETF, which tracks the benchmark index, as of March 31.The billionaire investor and his team also boosted their Chevron stake, and added Teck Resources, Coterra Energy, and several other commodity stocks to their portfolio.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 21st, 2022Related News

Argentina"s Inflation Problem

Argentina's Inflation Problem Authored by Jack Raines via Young Money, This article is based on a combination of my own experiences in Argentina and my subsequent research after I came back to the US. I know some of my readers are from Argentina, and others are probably much more knowledgeable than me on this topic. If I'm dead wrong about something, or if you have a good personal anecdote, let me know. I would love to learn more about my favorite South American nation. What Inflation? In March 2022, the US CPI reading showed an 8.5% year-over-year inflation print, the highest since 1981. Pretty rough, right? Well in March 2022, Argentina recorded a 6.7% month-over-month inflation print. The country's year-over-year print was 55.1%. Argentine bank accounts pay 45% interest on deposits, which sounds great if the value of your currency isn't getting cut in half every year. Used cars, a depreciating asset in most of the world, are investments that retain value better than the national currency in Argentina. Trust in the government is minimal at best, and the ultra-wealthy store their capital in international bank accounts.  What does everyone else do? Hoard dollars. When you are dealing with 50% inflation every year, 8% inflation is a dream come true. Those that have enough money to save extra cash exchange their pesos for dollars as quickly as possible, as the dollar is the best inflation hedge they have. These dollars aren't stored in bank accounts. They're kept in safes, under mattresses, and anywhere else that the government can't touch them. The constant exchanging of pesos for dollars has created a vicious cycle: an already weak currency continues to lose value as consumers dump it as quickly as possible. Two years ago, the Argentine government sought to stop this flight to dollars by instituting a $200 peso-dollar monthly exchange limit, but this rule simply expanded the black market for dollars. Argentina now has two currency exchange rates: The quoted rate The informal rate The quoted rate, which sits around 100 pesos per dollar right now, is what any bank will pay you for your dollars. However, demand for dollars is so high that the unofficial exchange rate trades at a 100% premium: 200 pesos per dollar. Because inflation is so rampant, the local population will pay double the market price to get their hands on dollars. If you are an American tourist, it's a great deal. Bring a few thousand bucks and you can live like a king. If you are a local Argentine, this exchange is born out of desperation. Without access to dollars, your purchasing power will quickly diminish. So how did we get here? What Went Wrong Argentina is a unique case study in economic development, because as recently as 80 years ago it was poised to rival the US in global influence. During the first three decades of the 20th century, the South American nation outgrew both Canada and Australia in population, total income, and per capita income. In fact, in 1913 Argentina was the 10th wealthiest country per capita. (For perspective, Argentina was 89th in 2020, and the United States was 10th). Yet the rest of the world has largely flourished since the end of World War II, while Argentina has floundered. What went wrong? In the 1940s, it seemed like the South American nation would be a superpower for the rest of the 20th century. Argentina was one of the world's leading agriculture exporters, the country was industrializing quickly, and unlike war-torn Europe, it had remained relatively stable since gaining its independence. Italians, Spaniards, and other Europeans immigrated to Argentina by the millions, seeking opportunity in a new land. Buenos Aires was becoming the New York of the southern hemisphere. However, in 1946 Juan Perón came to power, setting in motion 75 years of decline and stagnation. On a global scale, the first four decades of the 20th century were filled with war and economic depression. As a result, Perón implemented a series of import substitution policies, such as high tariffs, to make the country less dependent on international markets. However, the timing couldn't have been worse, as the post-WW2 era brought us an explosion of international trade. Consumers around the world benefited from cheap imports, while businesses had access to exponentially larger customer bases. Argentina missed the bus.  While the goal was to make Argentina an independent nation, the reality was a blossoming world power exited international markets before the biggest expansion of global trade in history. The consequences of protectionism cannot be overstated. Argentina was previously an agriculture superpower, but protectionist policies forced the country to divert resources away from its strongest sector to increase industrial production. Domestic production couldn't compete with the lower prices of international goods, and consumers suffered. Peronist economic policy didn't stop here. Rent and price controls were pervasive, with the government going as far as setting menu price limits for restaurants. Government spending exploded as companies across a variety of sectors were nationalized, and Perón distorted property rights and the freedom to contract. Heavy government spending, widespread nationalization, and minimal international trade were a recipe for disaster. Peronist policies stifled economic growth, locked Argentina out of international markets, sowed seeds of distrust, destroyed their currency, and created a 70+ year cycle of hyperinflation and economic stagnation. Perón was overthrown after a decade in power, but Argentina's fate had been sealed.  Over the next 50 years, governing power shifted hands several times through coups and "elections," the nation repeatedly defaulted on its debts and changed currencies, and inflation wreaked havoc on the purchasing power of local consumers. Perspective 8% inflation sucks. Inept government policies suck. But our problems in the US are minute compared to elsewhere in the world. The reality is that we live in a country with a stable currency, a stable government, and unlimited opportunities.  In the US, we are worried about whether the market is going to maintain its 9% annual returns. In Argentina, they worry about whether or not their currency will exist tomorrow. Americans invest in stocks, bonds, index funds, and real estate. Argentines hoard dollars under their mattresses and buy used vehicles as investments to fight hyperinflation. The craziest part about this whole thing? There is an alternative timeline where Argentina rivals the US in global influence in 2022. Just a few generations ago, Argentina was poised to be the world power of the southern hemisphere. The peso was as stable as the US dollar and British pound, Buenos Aires was one of the world's premier cities, and immigrants moved to the nation by the millions in search of opportunity. However, a single decade of government incompetence led to generations of decline. Despite the issues that we do have in the US, we won the lottery of opportunity by being born here. We don't have to worry about our dollars being worthless or our government being overthrown by a coup. Had a few events in history been different, we could be looking at a different reality right now. Life in the US isn't perfect, but it's important to have a little perspective about this stuff. If our biggest problem is 8% inflation, are our problems really all that big? - Jack If you liked this piece, make sure to subscribe! Tyler Durden Fri, 05/20/2022 - 19:40.....»»

Category: dealsSource: nytMay 20th, 2022Related News

"Who Cares If Miami Is Underwater In 100 Years" - HSBC Global AM Head Slams "Nut Job" Climate-Alarmists

"Who Cares If Miami Is Underwater In 100 Years" - HSBC Global AM Head Slams "Nut Job" Climate-Alarmists What do the world's richest person [Elon Musk] and a top HSBC Asset Management global head have in common? Well, they both called out the absurdity behind ESG investing.  On Tuesday, Tesla was removed from the ESG version of the S&P 500 Index. Musk went on a tweet rant on Wednesday, calling out ESG investing as a "scam," noting "phony social justice warriors have weaponized it."  He said, "S&P Global Ratings has lost their integrity," considering companies like Exxon Mobil (fossil fuels), Apple (China slave labor), and Amazon (which is working against unions) remain in the index.  Exxon is rated top ten best in world for environment, social & governance (ESG) by S&P 500, while Tesla didn’t make the list! ESG is a scam. It has been weaponized by phony social justice warriors. — Elon Musk (@elonmusk) May 18, 2022 On Thursday, in London, at a Financial Times Moral Money conference, Stuart Kirk, global head of responsible investing at HSBC Asset Management, questioned the risk climate change plays on financial markets, arguing investors shouldn't worry about it.  Kirk said the drumming up of climate change problems is similar to Y2K, explaining that "some nutjob" has always told him the "end of the world" is nearing.  Titled "Why investors need not worry about climate risk," he asked: "Who cares if Miami is six meters underwater in 100 years?" Kirk noted: "Amsterdam has been six meters underwater for ages and that is a really nice place. We will cope with it." He doesn't disagree with climate science but said "there will be fires" and humans are good at adapting and navigating challenging times.  Kirk said HSBC spends too much time on ESG:  "One of the tragedies of this whole debate, which we obsess about at HSBC, is that we spend way too much on mitigation and financing and not enough on adaption financing."  He then points out some climate alarmists traveling around the world, promoting apocalyptic warnings, such as those from ex-BoE head Mark Carney.  "I completely get that at the end of your central bank career there are still many, many years to fill in. You have to say something, you have to fly around the world to conferences, you have to out-hyperbole the next guy, but I feel like it is getting a little bit out of hand."  Here are some of the nut jobs he lists off, spouting impending climate doom.  He noted that ex-central bank climate alarmists had skewed their climate-related financial models with interest rate shocks to get an apocalyptic scenario they were looking for: A way to manipulate statistics to get a scary outcome: Fear sells.  "What they have done is [factor] a gigantic interest rate shock on all the Bank of England and central bank scenarios to get a nasty number."  He said with a big bank like HSBC -- the average loan length is around six. So at year seven, "what happens to the planet in year seven is actually irrelevant to our loan book."  Watch Kirk's full interview here.  Musk is not a lone wolf decrying the ESG nonsense in financial markets as the top HSBC investment head makes a valid point why investors need not worry about climate risk.  Tyler Durden Fri, 05/20/2022 - 18:40.....»»

Category: personnelSource: nytMay 20th, 2022Related News

Stock Market Headed Between Scylla And Charybdis

For weekend reading, the staff from Navellier & Associate offers the following commentary: Scylla — A female sea monster who devoured sailors when they tried to navigate the narrow channel between her cave and the whirlpool Charybdis. In later legend, Scylla was a dangerous rock, located on the Italian side of the Strait of Messina. Charybdis […] For weekend reading, the staff from Navellier & Associate offers the following commentary: Scylla — A female sea monster who devoured sailors when they tried to navigate the narrow channel between her cave and the whirlpool Charybdis. In later legend, Scylla was a dangerous rock, located on the Italian side of the Strait of Messina. Charybdis —  A sea monster in Greek mythology. She, with the sea monster Scylla, appears as a challenge to epic characters such as Odysseus, Jason, and Aeneas. Scholarship locates her in the Strait of Messina. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q1 2022 hedge fund letters, conferences and more There was a strong rebound last Friday, but it wasn’t strong enough to prevent a down week for most indexes. I think we are due for a big rebound after being down six weeks in a row, as there is clarity on the interest rate front, with the Fed committed to 50 basis-point hikes – and we are basically oversold. A 10+ percent rally in the S&P 500 or Nasdaq 100 takes us to around 4,300 on the S&P or 13,500 on the Nasdaq 100, which basically are the post-FOMC highs on those indexes. We can always overshoot, but a good target is the downtrend that lies between the 50-day (10-week) and the 200-day (40-week) moving averages. I know it feels like we have traveled a lot, but getting there – in late May or early June – seems like the more reasonable course of action, given the increased amount of clarity introduced by the Fed. To use some Greek mythology, for the sake of the argument, the shorter-term moving average can be named Scylla, while the harder-to-get-to longer-term moving average we can name Charybdis. The downtrend line is the midpoint between the two. I would say that the higher moving average is the best-case target for a rebound, while the lower moving average is the lower target. In the short term, this is the best we can hope for in the next 4-6 weeks, which would be a welcome change from the past six weeks. One situation that can spoil this setup is Ukraine, if the conflict were to spiral out of control. Right now, the Russians seem hell bent on carving out a part of the South – at least that is what they want everybody to think – but we can never be sure if those plans won’t change. The war turned out to be one heck of an economic event, and one of my bigger concerns is a huge spike in the price of oil to the $150s or higher. The Russian Ruble is on a Moonshot The Russian ruble has appreciated dramatically from its post invasion low in the 130s (to the dollar) to close Friday at 64 per dollar on the USDRUB cross rate. That’s basically doubling in value in short order. (Fewer rubles per dollar means a stronger ruble on an inverted scale). The setting of gold’s price at 5,000 rubles per gram of gold, as well as a policy interest rate of 14% (after spiking to 20%) helped the ruble, and so did the clever mechanism of paying indirectly for Russian natural gas in rubles. Foreign buyers of Russian natural gas pay their contract rates in euros at Gazprombank, which then buys rubles and sends the rubles to Gazprom as the final payment. This is a mechanism to prop up the ruble, and it is working remarkably well, combined with the domestic convertibility into gold bullion that is the only limited “gold standard” in the world at the moment. I do not know of one person that saw this monstrous rally in the ruble ahead of time. Updated on May 20, 2022, 5:13 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkMay 20th, 2022Related News

Market Snapshot: U.S. stocks end mixed, but book weekly losses as Dow suffers longest losing streak since 1932

U.S. stocks end mixed Friday, with the S&P 500 index eking out a gain after trading in bear-market territory earlier in the session......»»

Category: topSource: marketwatchMay 20th, 2022Related News