Global Market Comments
April 11, 2024
Fiat Lux
Featured Trade:
(JOIN ME ON CUNARDS QUEEN ELIZABETH FOR MY JUNE 29 ALASKA SEMINAR AT SEA LUNCHEON)
(RIGHT SIZING YOUR TRADING)
(WMT), (MSFT), (AMZN), (NVDA), (META), (AAPL), (GOOGL), (TSLA)
Ah, the burning question on every savvy investor's mind: What's catapulting the stock market to such dizzying heights? Look no further than artificial intelligence (AI).
It's the secret sauce, the magic ingredient, the... well, you get the picture.
The current euphoria in the stock market owes a considerable debt to the AI revolution sweeping through industries far and wide.
Enter the "Magnificent Seven" – Microsoft (MSFT), Amazon (AMZN), Nvidia (NVDA), Meta Platforms (META), Apple (AAPL), Alphabet (GOOGL), and Tesla (TSLA). These stocks are leading the charge in the AI revolution.
Yet, lurking in the shadows, beyond this illustrious ensemble, is a behemoth not often sung in the AI choruses.
Valued at a staggering $496 billion, this giant is weaving AI into its fabric in ways not immediately apparent to the untrained eye.
Cue the drumroll for Walmart (WMT), the unlikely AI contender.
Now, before you cry foul, claiming Walmart is anything but an AI pioneer. The reality is far more nuanced and, dare I say, fascinating.
Long before ChatGPT became a household name, sparking an inferno of interest in large language models, Walmart was quietly laying its AI foundations. The retail titan has been leveraging AI to fine-tune its supply chain, ensuring that sales demand predictions are spot-on and its fulfillment centers are models of high-tech efficiency.
But wait, there's more. Walmart has recently embraced generative AI, adding an advanced layer to its online shopping experience.
Imagine typing, "Help me gather supplies for a new baby," and voilà, you're presented with a curated list of everything you need, courtesy of Walmart's generative AI shopping assistant.
Impressive, right?
Moreover, Walmart's customer service has been revolutionized by AI, with chatbots equipped with natural language understanding capabilities addressing millions of customer queries since 2020, significantly reducing the need for human intervention.
The retailer's "Ask Sam" voice assistant further aids employees in locating products, checking prices, and more, all with a simple voice command.
The clincher? Walmart is not just utilizing AI internally; it's commercializing its AI route optimization technology, offering other businesses a slice of its AI pie. This technology promises to streamline driving routes, ensure trailers are packed efficiently, and minimize miles traveled.
The question then begs, what do you call a company that develops and markets its own AI technology? An unequivocal AI stock, in my book.
While Walmart may not rub shoulders with the "Magnificent Seven," its splendor lies elsewhere. With a revenue haul of $648 billion last year, Walmart outpaced all members of this elite group, showcasing its sheer scale and financial muscle.
Admittedly, Walmart's profit margins don't quite match up to those of its mega-cap growth stock counterparts, but it still outperformed Tesla in terms of profits in 2023.
And how has Walmart's stock fared, you ask? With a rally of over 30% in the past year, it has left behemoths like Tesla and Apple in its wake, making a compelling case for its financial robustness.
Even when it comes to valuation, Walmart presents a more tempting proposition than most of the "Magnificent Seven," trading at 26 times forward earnings, a bargain in comparison to the lofty valuations of Amazon, Apple, Microsoft, Nvidia, and Tesla.
So, is Walmart the AI stock you should be betting on?
If you're looking for a quick trip down the stock market aisle, Walmart might not be the flashiest pick. But for marathon investors with an eye on long-term value, Walmart deserves a spot on your shopping list.
Walmart isn't just a staple in the ever-expanding grocery list of AI investments; it's a key ingredient driving the future of retail and beyond. For those looking to check out the future, Walmart offers a unique blend of innovation, stability, and long-term growth potential that's worth adding to your cart.
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
Mad Hedge Technology Letter
April 10, 2024
Fiat Lux
Featured Trade:
(PODCASTS A NEW EXPERIMENT FOR SPOTIFY)
(SPOT)
The dominant music streaming platform Spotify is trying harder these days.
When I say trying harder, I mean trying harder to become profitable because after almost a generation of when burning cash was ok, investors suddenly demand a business that doesn’t run a minus every year.
Zero rates have had an oversized effect on the balance of business in 2023 and 2024.
Failure isn’t rewarded with gaudy executive compensation and more vested shares.
Belt tightening by cutting staff and streamlining operations is the paradigm we are finding ourselves in.
Spotify was the prototypical loss maker in tech that was given a pass because it grew users fast.
Now that interest rates are high, tech companies are penalized by going to the debt markets too much and the effect is magnified if a company needs a high amount of debt.
Logically, SPOT has made diversifying revenue a top bullet point in their strategic future and that is exactly what they are doing.
SPOT has also discovered it can generate additional money from the most diehard music fans. Currently, all listeners pay the same rate for access to a musician’s catalog. But there are fans willing to pay far more to support an artist they love, as evidenced by the rising price of concert tickets, merchandise, and even vinyl for Korean artists.
SPOT plans to raise the price of its popular audio service in several key markets for the second time in a year, a crucial step toward reaching long-term profitability.
The streaming giant will increase prices by about $1 to $2 a month in five markets by the end of April, including the UK, Australia, and Pakistan, according to people familiar with the matter.
It will raise prices in the US, its largest territory, later this year, said the people, who asked not to be identified discussing confidential plans.
The higher prices will help cover the cost of audiobooks, a popular service introduced late last year.
Spotify offers customers up to 15 hours of audiobook listening a month as part of their paid plan. While the company pays publishers for books, it has so far only collected additional revenue from listeners who exceed the limit.
Spotify paid record labels, artists, and others more than $9 billion last year – from $13.2 billion in revenue.
Last year, SPOT posted its best year of user growth ever, with 113 million new sign-ups to its free and paid services.
Spotify had 602 million users at the end of 2023, including 236 million paying customers.
The success of the price increase has given management confidence to seek even more. Under the new pricing, individual plans will go up by about $1 a month, while family plans and so-called duo plans for couples will rise by $2.
In the last 365 days, the stock has catapulted from $134 to over $300 per share.
The stock is absolutely resonating with investors and moves by management have been aggressive to branch out from the music royalty business.
Buy SPOT on the dip.
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
(INVESTORS ARE SPINNING ON EMPTY AS THEY COME TO GRIPS WITH ECONOMIC DATA)
April 10, 2024
Hello everyone,
Have you invested in Gold Bars? Look who is selling them.
But I’m sure your portfolio already has quality gold and silver stocks. Right?
Let’s pause for a moment and consider where we are.
I’m not speaking philosophically.
I’m talking about where we are in the economic cycle, by using an analogy of washing machine cycles.
Let me briefly explain.
For the last few years, we have been in the wash cycle, and that cycle was definitely not the one we use for Delicates or Woollens.
We have been washed up, rinsed, tossed around, and radically tested.
There was great cost and disruption associated with this cycle, so the world saw a flush of funds and then an acceleration of costs – inflation.
We are moving into the spin cycle now, where everything seems chaotic, and you can’t seem to get your bearings or make sense of the world. Disconcerting, to say the least.
How long will the spin cycle last? – not sure yet.
Markets have rebalanced. While the tech sector is resting, energy, commodities, and the metals have taken centre stage and have risen steadily.
Jamie Dimon, CEO of J.P. Morgan commented recently on the economic outlook and emphasised the need for investors to stay overweight on commodities with a focus on energy to hedge against inflation as he believes interest rate cuts may arrive much later than originally forecast.
According to Marko Kolanovic, J.P. Morgan’s chief market strategist “we are not out of the woods yet on inflation, and the current backdrop of above-trend growth raises the risk that inflation will re-emerge as a problem for both central banks and markets.”
In recent months, inflation has risen in both the U.S. and Western Europe, most particularly in the services sector. Due to stronger economic growth, JPMorgan has revised its global growth upward by 0.5% in the first half of this year.
The investment bank now expects the Fed to start cutting interest rates in July – and right now it still sees 75 basis points of cuts through year-end.
However, this forecast is tied to data related to growth and inflation and so the Fed could easily pull back from pulling the trigger on the expected number of rate cuts. And it is a possibility we may not get any at all.
The crude rally is impacting the global economy at the same time as the conflict in the Red Sea disrupts shipping and demand puts upward pressure on prices.
JPMorgan expects Brent prices could rise to $100 a barrel by September.
Why?
Russia is slashing production and Ukraine is escalating drone attacks against Russia’s energy infrastructure.
Ukraine has hit 18 Russian oil refineries so far with a total annual capacity of 3.9 million barrels per day. An estimated 670,000 barrels per day of Russian refining capacity is currently shuttered, according to JPMorgan. What this means is that Ukraine’s attacks could force Russia to cut production further and ban gasoline exports.
The U.S. could act here and become a fall-back measure by tapping the strategic petroleum reserve as a countermeasure if the situation escalates and deteriorates further.
Interesting times, to say the least.
Cheers,
Jacquie
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
Global Market Comments
April 10, 2024
Fiat Lux
Featured Trade:
(MAY 8 GALAPAGOS ISLANDS STRATEGY LUNCHEON)
(WHY THE UNDERGROUND ECONOMY IS GROWING SO FAST)
“2024 will be the fourth year of living dangerously,” said Ed Yardeni of Yardeni Research.
