(A LOOK AT ISRAEL’S AIR DEFENSE SYSTEM & THE COUNTRY’S TIES WITH BOEING)
October 4, 2024
Hello everyone
Israel’s Iron Dome air defense system is one of several systems the country has developed to protect itself from missiles since the Gulf War in 1991.
It also uses Arrow interceptions, and a system called David’s Sling.
The short-range Iron Dome air defense system was built to intercept the kind of rockets fired by Hamas in Gaza.
It was developed by Rafael Advanced Defense Systems, an Israeli state-owned company, with US backing, and became operational in 2011.Each truck-towed unit fires radar-guided missiles to blow up short-range threats such as rockets, mortars and drones in mid-air.
A naval version of the Iron Dome to protect ships and sea-based assets was deployed in 2017. The system determines whether a rocket is on course to hit a populated area; if not, the rocket is ignored and allowed to land harmlessly.
What is David’s Sling?
David’s Sling system is designed to shot down ballistic missiles fired from 100 to 200km away.
It was developed and manufactured jointly by Rafael Advanced Defense Systems and the US company RTX, formerly known as Raytheon.
The system is also designed to intercept aircraft, drones and cruise missiles.
What is the Arrow system?
The long-range Arrow-2 and Arrow-3 interceptors, developed by Israel with an Iranian missile threat in mind, are designed to engage threats both in and outside the atmosphere.
It operates at an altitude that allows for the safe dispersal of any non-conventional warheads.
State-owned Israel Aerospace Industries is the project’s main contractor, while Boeing is involved in producing the interceptors.
Israel said it had used the system on October 31 last year to intercept a surface-to-surface missile fired from the area of the Red Seas towards its territory.
Boeing and Israel have a long history that goes back more than 75 years – to the founding of the State of Israel.Since then, Boeing has worked closely with Israeli and commercial and military customers and suppliers and has developed many lasting partnerships.
Israel has a large and modern air force and a successful commercial aviation sector.The Israeli aerospace industry in the public and private sectors provides a high level of innovation and expertise in the design and manufacture of a wide variety of defence, space and communication products.Its position as a world aerospace leader makes Israel an important market and partner to Boeing.
(MARKETS ARE SHAKEN BY AN ESCALATION IN THE MIDDLE EASTERN CONFLICT)
October 2nd, 2024
Hello everyone.
How did we get here?
Israel invaded Lebanon to disrupt Hezbollah.They took out the leader through a series of strikes.Israel is now being hit with missiles from Iran as a retaliatory strike.The question is, what is Netanyahu’s move following this strike?
Biden’s Response
Biden has been put in a very difficult position, as diplomacy efforts to secure a ceasefire between Israel and Hamas and Israel and Hezbollah appear to have failed.
The Biden administration is focused on avoiding a war with Iran.Having said that, the administration has bolstered its military presence in the region to protect Israel and deter Iran.Additional troops will be sent to the region also to support the roughly 40,000 American troops in the area.
Effect on Markets
The indexes could sell off around 5% or so over a period of two weeks and then recover that as investors pour in to buy up stocks, which would probably take us to around the end of October or at least the last week.
QI CORNER
SOMETHING TO THINK ABOUT
What your iPhone carries on it could be a biosecurity risk.
DNA analysis of microbes found on the phones of international travelers has found antibiotic-resistant bacteria and harmful pathogens are entering Australia.
Dr. Lotti Tajouri from Queensland’s Bond University said that “mobile phones act as contaminated mobile Petri dishes.
The molecular geneticist was part of a team that swabbed phones from international travelers who had flown into Sydney.
The results from about 6.8 million arrivals into Australia between January and October 2023 estimated that 749.2 million microbes may have been introduced to Australia in 2022 via mobile phones.
Tajouri points out that not only can bacteria on phones be harmful to personal health, but they can also be a risk to flora and fauna when unknowingly brought into the country by travelers.
One example is a fungus called ‘Fusarium solani’ that has been linked to the shot hole borer, a tiny beetle that has been devastating trees in Western Australia for three years.
The borers have a symbiotic relationship with the fungi and can kill a tree in two years.
Tajouri reminds us that protecting our “biodiversity and reducing the spread of superbugs is critical not only for the economy but for our national security.”
He goes on to say that there is a clear argument to be made that “international travelers’ phones should be decontaminated upon arrival to Australia, in addition to existing biosecurity measures.”
Tips to keep your phone clean
The US Centres for Disease Control and Prevention has a list of ways to improve your phone hygiene.
1/ When outside of your home, keep your phone in your pocket, purse, or car.
2/ When shopping, use a written shopping list, not a list kept on your smartphone.
3/ Use a credit card for payment, preferably a contactless one, and not the mobile pay option on your smartphone.
4/ After being in public places, only touch your phone after you have washed or sanitized your hands.
5/ Use a hands-free device when making calls so that your phone is not pressed against your face.
(CHINA INFLATES WHILE THE U.S. TROUNCES INFLATION)
September 30, 2024
Hello everyone
WEEK AHEAD CALENDAR
Monday Se,pt. 30
9:45 a.m. Chicago PMI (September)
10:30 a.m. Dallas Fed Index (September)
1:55 p.m. Federal Reserve Chair Jerome Powell speaks on the economic outlook at the National Association for Business Economics’ annul meeting in Nashville.
Earnings:Carnival
Tuesday, Oct. 1
5:00 a.m. Euro Area Inflation Rate
Previous:2.2%
Forecast: 2.0%
9:45 a.m.S&P PMI Manufacturing final (September)
10:00 a.m. ISM Manufacturing (September)
10:00 a.m. Construction Spending (August)
10:00 a.m. JOLTS Job Openings (August)
Earnings: Lamb Weston, Nike, McCormick & Co.
Wednesday Oct. 2
8:15 a.m,. ADP Employment Survey (September)
9:30 p.m. Australia Trade Balance
Precious: A$6.009B
Forecast: A$6.1B
Earnings:Conagra Brands
Thursday Oct. 3
2:30 a.m. Switzerland Inflation Rate
Previous:1.1%
Forecast: 1.1%
8:30 a.m. Initial Claims (09/28)
9:45 a.m. PMI Composite final (September)
9:45 a.m. S&P PMI Services SA final (September)
10:00 a.m. Durable Orders (August)
10:00 a.m. Factory Orders (August)
10:00 a.m. ISM Services PMI (September)
Earnings:Constellation Brands
Friday Oct. 4
8:45 a.m. Hourly Earnings preliminary (September)
8:30 a.m. Average Workweek preliminary (September)
8:30 a.m. Manufacturing Payrolls (September)
8:30 a.m. Nonfarm Payrolls (September)
8:30 a.m. Participation Rate (September)
8:30 a.m. Private Nonfarm Payrolls (September)
8:30 a.m. Unemployment Rate (September)
Welcome to October, a traditionally turbulent month in the markets.Many see the markets approaching exhaustion, and poised for a pullback of 5% to 10% before the bulls reassert themselves.(That’s a great time to scale into stocks where you want to add weight).
But maybe that is just wishful thinking on their part, so they can add to their portfolio. The market still shows a good bullish structure.Any pullback should be seen as an invitation to scale in.
The release of the US Personal Consumption Expenditures (PCE) Index for August showed annual inflation came in at 2.2%, lower than the expected 2.3% and certainly a step down from July’s 2.5%.
The US Dollar Index (DXY) retreated to 100.40 on the news release and should continue to gradually fall toward the 100 zone.
With inflation cooling, and the 50bps rate cut behind us, the chatter is now about what the Fed is going to do in November.Will it be 25 or 50 bps?
The Fed Chair Powell speech on Monday may give us an inkling what the numbers will be later in the year, so investors will be listening closely.
Policymakers and Investors are laser-focused on the health of the jobs market, so the September jobs report released this Friday will be monitored closely.Now that the Fed seems to have conquered inflation for now, it will turn its attention to the labour market.
Last Tuesday, China’s central bank unveiled a large stimulus package designed to restore confidence in the troubled housing market and to lift the country’s sluggish economy.
Among Beijing’s moves:A cut in short-term interest rates, allowing banks to hold less money in reserves, lower interest rates on existing mortgages, and a plan to inject billions of dollars of liquidity into the stock market.
China’s flailing economy has slowed construction in the country.But the stimulus announcement last Tuesday gave many stocks a lift.Caterpillar (CAT) and Freeport-McMoRan (FCX) jumped by late Tuesday trading. Luxury retailers also posted good gains.
Despite the positive immediate impact, most economists believe the stimulus package won’t be enough to lift China’s weak domestic demand.More measures will be needed to bring about significant improvement in China’s economy.
We have held Xpeng (XPEV), a Chinese EV company, in our portfolio since March this year.It has rallied well in the last couple of weeks and should continue to rally into year-end & into 2025.
MARKET UPDATE
S&P500
Uptrend still in progress. Last week the market reached its long-standing inverse Head & Shoulders upside target of 5,735.If we look at the market through an Elliott Wave lens, the S&P500 is still interpreted to be rallying within a Wave 5 move from (the August 5th low of 5,119), and actually has the potential to reach the mid 6,400’s over the next weeks/months before the market reaches total exhaustion.
Support = 5670/5640
Lower Support level = mid 5,500/5,400
GOLD
Further upside potential.Gold can rally to $3000 and beyond in the weeks/months ahead.
Support = $2,630/$2,600
Next Resistance = mid $2,700’s.
SILVER
Silver will also rally well.Keep scaling into the recommended precious metal stocks regularly (every month) and go long LEAPS on any significant pullbacks.
Zooming out to clarify the bigger picture on gold, we can see gold is headed for $10,000+ by 2030.
BITCOIN
Rally in progress.
Bitcoin completed a complex correction with its August 5th low of $49, 577.Since that time, we have seen the coin advance in its Wave 3 move.
Initial target is $68,250/$68,500 & then ~ $70,000.
I am looking for Bitcoin to soon break out of its bullish flag pattern with a strong rally to the upside.
Zooming out to look at the bigger picture, Bitcoin still has the potential to extend toward the $127,000 level over the coming months, and there are targets way beyond that in the coming years.
Short term support = ~ $64,200/$62,350
PSYCHOLOGY CORNER
CONRFLICTS CORNER
Israel has killed Hezbollah’s leader, but this may bring us one step closer to an escalation in the conflict and draw in other nations.
The Presidential debate and a surprise monster 50 bps cut trigger massive “risk on” move in all asset classes.
All interest rate plays deliver massive upside moves
John says we are unlikely to see a more than 5% drop in indexes for the rest of 2024.
US dollar weakness hits and could continue for years.
Technology stocks will recover after a much-needed correction.
Energy gets dumped on slowdown fears.
Buy stocks and bonds on dips – buy ALL sectors.
THE GLOBAL ECONOMY – PANIC CUT
Fed shocks market with a 50-bps rate cut.
Inflation is running slower than expected, at a 1.8% annualized rate for the last four months.
Consumer sentiment rises to the highest level in four months according to the University of Michigan.
US retail sales unexpectedly rose in August, supported by online purchases.
US Household wealth hits new all-time high, or the value of American home equity at $163.8 trillion.
Foreign Direct Investment into China collapses, down 31.5% in the first eight months of 2024.
Foreign investors pour $31 billion into Emerging Markets in August.
US Import prices are in free fall.
STOCKS – NOW LEASE ON LIFE
Market scores biggest turnaround in two years, now that the presidential debate is history, scoring an amazing 900-point intraday swing.
Solar stocks get Harris nudge.
FedEx (FDX) gets crushed 10% on disappointing earnings and guidance.
Intel (INTC) cuts Amazon deal to supply the online marketing giant with a steady supply of high-end chips.
Charles Schwab (SCHW) rallies 5% after the brokerage firm reported steady growth in new assets.
Wells Fargo (WFC) gets hit with another regulatory action for failure to control money laundering.
Palantir (PLTR), Dell (DELL) and Erie Indemnity (ERIE) to join S&P500.
Buy Apple (AAPL), (AMZN).
Snowflake (SNOW) - consider two-year LEAPS.
(FCX) buy – a recovering China play.
Also consider Cameco (CCJ), First Solar (FSLR), and NextEra Energy (NEE)
BONDS – EXHAUSTION
Another government shutdown is in the works in five days, with the house unable to pass a spending bill with only a four-seat majority.
Interest payments on national debt top $1 trillion per year.
The jump in debt service costs came as the U.S. budget deficit surged in August, edging closer to $2 trillion for the full year.
The Treasury really wants to see the Fed cut interest rates more.
The yield curve has de-inverted, meaning that short term interest rates have fallen below long-term ones.
Yield chasers post record demand for Junk Bonds.
Buy (TLT), (JNK), (NLY), (SLRN) and REITS on dips.
FOREIGN CURRENCIES – DOLLAR WEAKNESS
Dollar hits seven month low as US interest rate cuts loom.It could be a decade long move.
The Yen carry trade is back, with hedge funds piling back into positions they baled on only two weeks ago.
No more interest rate hikes by the Bank of Japan in the near future.
What this means is more leverage, risk, and volatility for global financial markets.
Falling interest rates in the US = a lower US dollar.
Buy (FXA), (FXE), (FXB), (FXC).
ENERGY & COMMODITIES – A BIG MOVE TOWARD NUCLEAR RENAISSANCE
John’s Cameco (CCJ) trade alert came through in a week, immediately tacking on 20%.
While advanced nuclear power plant design and fuels (low enriched uranium oxide with an M5TM zirconium-based cladding) have been around for years.
Microsoft (MSFT) announced the reopening of Three Mile Island, the site of the worst nuclear accident in US history in 1979.
Microsoft will purchase the carbon-free energy produced from it to power its data centres to support AI.
12 U.S. nuclear power reactors have permanently closed since 2012.Another seven U.S. reactor retirements have been announced through 2025, with total generating capacity of7,109 MW (equal to roughly 7% of U.S. nuclear capacity).
PRECIOUS METALS – NEW HIGHS
Gold hits new high, at $2,650 an ounce, as hedge funds pour in.
Seasonals for the barbarous relic are now the post positive of the year.
Look for $3,000 an ounce by next year.
Notice how (GLD) gaps higher every morning, signifying that the bulk of buying is coming from Asia.Buy (GLD) on dips.
Buy (GLD), (SLV), (AGQ) and (WPM) on dips.
REAL ESTATE – RATE SHOCK
Existing home sales drop 4.2% in August to a seasonally adjusted annualized rate of 3.86 million unit.
There were 1.35 million units for sale at the end of August.
That’s up 0.7% from July and up 22.7% year over year.
Median price of an existing home sold in August was $416,700, up 3.1% from August 2023, a new all-time high.
Real estate should pick up once lower interest rates feed through.
US Homebuilder sentiment rises, in the wake of the massive drop-in mortgage rates in recent months.
The NAHB/Wells Faro Housing Market Index of builder confidence rose to 41 this month from 39 in August.
Buy (DHI), (LEN), (PHM) and (KBH) on dips.
TRADE SHEET
Stocks – buy the next big dip.
Bonds – buy dips.
Commodities – buy dips.
Currencies – sell dollar rallies, buy currencies.
Precious Metals – buy dips.
Energy – avoid.
Volatility – sell over $30
Real Estate – buy dips.
===========================================
MY CORNER
Scale into Tesla.
Tesla will unveil its Robo taxi on October 10 at a Warner Bros. studio in Burbank, California.
The stock is likely to rally into that event.
Check out the charts here.You can see a very large, inverse head and shoulders pattern, which started forming in November last year.This pattern indicates that there is potential for a bullish move in the stock.
We are in the final week of September.Fall has begun, and Spring in the southern hemisphere is witnessing a plethora of blooms occupying gardens.
We will also soon be entering the festive season, where most people are looking for bargains.But, if we stay out of the proverbial well-marketed company shops, and bypass their products, and look at the stock market instead as a place to go shopping, where might we find value?
THE SALE CORNER
Real estate, communication services, and energy stocks are among the most undervalued categories.With a P/FV ratio of 0.89, energy stocks traded at an 11% discount.Communication services stocks also traded at a discount, with an average P/FV ratio of 0.85.
Look at:
(CCI) Crown Castle International (Wireless Communication Service)
(DUK) Duke Energy (Energy)
(XOM) Exxon Mobil (Energy)
(BHP) Broken Hill Proprietary Company Limited (Energy) Investment in alternative energies will drive Energy stocks higher.Also, a slowly recovering Chinese economy will be good news for (BHP) and its shareholders.
(NEE) NextEra Energy (Utilities – industry electricity)
Stock has severely underperformed in the past and is trading at a very attractive valuation.It will service the AI revolution.
(O) Realty Income (Real Estate) REITS are a play on falling interest rates and investment in data centers.
(GS) Goldman Sachs (Banking Services) Financial services sector will benefit from falling interest rates.
(JPM) JP Morgan (Banking Services)
Some of you may already have a few of these in your portfolio.
PORTFOLIO UPDATE
Xpeng (XPEV)
Date Recommended: March 15, 2024
Price: $10.05 on 03/15
Targets: (from various analysts) $11.70, $15.40, $18.00
Rising EV company in China, which is poised to deliver new models in the 4th quarter.
After the recommendation the price dropped, and the range traded for several months.Recently it has started to rally with the Chinese attempts to stimulate their economy. In addition, the CEO recently bought 2 million shares. The P7+ is expected to give stiff competition to American EV maker Tesla (TSLA) as it boasts a vision advanced driver-assistance system that is comparable to the latter’s FSD (full-serve driving) system.Analysts believe the new models being released this year could boost XPeng’s deliveries and become major sales drivers for the remainder of the year.
Daily chart (XPEV)
WEEKLY CHART (XPEV)
Core Scientific (CORZ)
Date Recommended: August 7, 2024
Price: $9.71 on 08/07
Targets (from various analysts):$13.00, $16.13, $20.00
Core Scientific is a leader in Artificial Intelligence and Blockchain technologies and provides the infrastructure that powers customers’ AI and Blockchain results.
Core Scientific, Inc. is showing rising earnings estimates.A consequent rating upgrade fundamentally means an improvement in the company’s underlying business.Investors’ appreciation of this improving business trend should push the stock higher.
DAILY CHART (CORZ)
WEEKLY CHART (CORZ)
CRYPTO CORNER
This is for those of you who don’t own Bitcoin or Ethereum, or for those who want to add weight. Your percentage weight is up to you.Anywhere from 1%-10%.
Recommendation: Scale into Bitcoin and Ethereum, and then transfer it to your decentralized wallet and just hold it there, and don’t touch it.
I am not asking you to participate in any crypto projects that promise huge rewards.Please avoid, it unless you want to lose your money.
This is a recommendation to buy the coin/s – pure and simple.You will need an account with a crypto exchange to buy the coins.
If you look at the Bitcoin chart, you will see it is coiled up in a flag pattern, which it will eventually break out of to the upside.
I have been buying small parcels of Bitcoin and Ethereum every month for several years.
My decentralized wallet is Exodus.That’s where I hold all my crypto.
You will need to hold a “seed phrase” which is basically your password to that wallet.
Please DO NOT screenshot that phrase on your iPhone or your laptop.
Get a pen and write it down in a book.In fact, write it down in two books.One should go in a safe, the other in a safe place only you and your other half know about.If you lose that seed phrase, you have basically lost your crypto.Don’t contact me as there would be nothing, I could do to help you.
DAILY BITCOIN CHART
In the Daily chart above, you can see I have drawn a blue line above the flag pattern and below it.The square box shows the low on August 5 at $49,577.
The larger square box shows a lower support zone, situated about the middle of the flagpole.If you look in the MACD section directly below this box, you will note that the MACD has dipped below the 0 line.You will also see that I have drawn a line connecting three drops under the 0 line.The next dip, after the third connected drop, is higher which represents the low in Bitcoin on August 5. This represents a divergence.
Clearly, there is a great overall divergence on the Bitcoin chart. The line connecting the MACD dips below 0 is pointing down, while the line connecting the middle of the flagpole, and the flag pattern is pointing up.
We are now patiently waiting for a break-out from the flag pattern.
WEEKLY BITCOIN CHART
On the Weekly chart above, I have once again drawn the lines above and below the flag pattern.On the underside of the flag pattern, you can see three distinct points I have connected.(The two points make a third pattern).I have circled the middle of the flag pattern to highlight a candlestick there, which is a pin bar, or a hammer.A hammer found at the bottom of a range can indicate a potential bullish move, which has been illustrated here. (If the same candlestick pattern was found at the top of a range, it would be called a “Hanging Man”.And that indicates a potentially bearish move may be about to happen).The long candlestick that made the low on August 5 can be seen as a hammer, which also indicates bullish potential ahead.
QI CORNER
Alternatives represent investments in real estate, hedge funds, private equity, natural resources, and infrastructure.
We’ve got a lot of data points to get through this week.
Consumer confidence in September is expected to have weakened.And that is really expected to be the overall theme in most data – weakness over strength, thereby giving validity to the Fed’s decision to go 50bps last week.
The Fed’s preferred inflation gauge, the August personal consumption expenditure price index that’s due out Friday is expected to show pricing pressures continuing to pull back from their highs.No doubt, this piece of data may well guide the Fed’s decision on the magnitude of rate cuts come November.
So, back to the rate cut theme, and we saw that the Bank of England maintained its steady course, keeping rates unchanged as August inflation figures failed to show further decline.
On Tuesday, the Reserve Bank of Australia meets.Rates are expected to remain unchanged.This comes amid a strengthening Aussie dollar, with AUD/USD closing at its highest level since January above 0.6800.
If you listen to the media, you will hear all the jibber jabber about the DOW reaching 42,000 for the first time and whether the market can continue to climb.(They are paid to talk, but you are not paid to listen! Take it all with a grain of salt). In other words, receive the information (if you watch/listen to T.V.) with some reservation as all of it may not be entirely credible.
You will also hear the many arguments explaining why the Fed went so big, and what the effects of that will be going forward, and into next year, and what the Fed will do in November and December.
Shut out all that noise.It tends to create confusion, rather than clarity.
The S&P500 is on track to reach the target I gave you many months ago – 5,745.And it will probably rally beyond that target going into year-end.
Next year may be a different story.
We may have many months of sideways movements, and quite possibly an extreme sell-off at some stage.
That sell-off, if it does take place, would create an excellent opportunity to scale into great stocks at cheap prices.
I will keep you up to date with my interpretation of the markets going forward.
But, for now, let’s stick to the present.
MARKET UPDATE
S&P500
Uptrend in progress. The September 6th low of 5403 can be interpreted as a completed corrective Wave ii of 5 and the market can now continue rallying within Wave iii of 5 toward a target of around 6,260.
Advance in progress.Bitcoin completed a complex correction on its August 5th low of $49,577.Now in its Wave 3 advanced toward a target of around $73,830.Support = $62,500/$61,330.
Next targets = $65,000, $68,650/$70,000
CONFLICTS CORNER
AUSTRALIAN CORNER
Housing affordability falls to the worst level on record.
Housing research group Prop Track’s annual Housing Affordability Index reveals the worst conditions for homebuyers on record as continued property price increases and decade-high interest rates remain stubborn.
The analysis found that a median-income household earning $112,000 annually could afford only 14% of all the homes sold last financial year, the smallest share since records began in the 1194-95 financial year.
Just three years ago, the same household could have comfortably purchased 43% of houses or units.
Property prices rose 6.6% nationally over the year to June, the equivalent of a %50,000 increase.The average first-home buyer household now must set aside a fifth of their income for 5.6 years to save a standard 20% deposit for the median home.
PropTrack economist Angus Moore comments that we are on “par with the last period of challenging affordability in 2008 and mortgage repayments today are only a little bit below what they were in the late 1980s and early ‘90s as a share of income.”
Low-income households are effectively locked out of the market, able to buy three in 100 homes.
Yellow Brick Road Home Loans executive chairman Mark Bouris says the reality is many millennials and Gen Zs will not be able to get a mortgage.
Sydney’s median home price is $1.5 million.Tasmania is now close behind.Just six years ago, Tasmania was the most affordable state.Victoria is a close third, with 12% of homes sold last year requiring 25% or less of pre-tax income to meet repayments,
South Australia experienced the most significant decline in affordability over the past year, with 16% of homes available to the state’s average earner.
Western Australia offers the best affordability, with more than a quarter of homes sold last year deemed affordable, followed by Queensland with 15% of properties.
Some relief is on the horizon.Major banks are forecasting rate cuts next year, which has the potential of returning hundreds of dollars into the pockets of mortgage holders each month and boosting new borrower’s limits.
Mr Bouris said it was unfair to lay blame for worsening affordability squarely at the feet of the RBA.He believes the federal government’s lax immigration policies, the state’s reliance on stamp duty revenues, and poor council planning all play a part in Australia’s housing crisis.
WHAT IS…?
Private equity funds are designed to generate enhanced returns by pooling investors’ capital and investing in private companies to drive business growth, streamline operations, and/or support acquisitions.
Investors provide private equity fund managers with the capital needed to invest in strategically identified companies.Unlike public equity managers, private equity managers actively seek to work with management teams to improve companies with the goal of eventually selling shares at a profit and distributing those profits to investors.In return, fund managers receive a management fee, and a share of the returns generated by the fund, further incentivizing value creation and aligning the interests of fund managers, investors, and company management teams.
4/ Winding down & final distribution – exiting remaining positions.
Sample Life Cycle of a Private Equity Fund
Benefits:
Historically, private equity generates long-term outperformance relative to the public markets.
Private equity provides access to a larger investment circle with more opportunities than the public markets.
Private equity managers aim to create value by taking a long-term view, which can help reduce risk, particularly in uncertain markets.
A private equity allocation can provide enhanced return potential and diversification benefits (i.e. uncorrelated investment exposure in a portfolio).
Risk Considerations:
Private equity funds are considered long-term investments, typically with terms of seven to ten years.
Fees:equity fund managers usually charge an annual management fee of 1-2% of assets under management.They also collect performance fees, which can range from 10-20% of any value appreciation generated by the fund.
Private equity funds may use some form of leverage, which offers the potential for higher returns, cut also increases the downside risk.
Private equity funds may not be as transparent as traditional investments, which are required to provide frequent and full disclosures.
QI CORNER
We are witnessing a cultural shift in the average age of marriage and overall marriage rates, couples with the challenges of high entry-level home prices and mortgage interest rates.As a result, many young individuals are opting to rent for more extended periods of their lives.This trend may signal the beginning of a new era where North Americans embrace lifelong renting, akin to many European countries.
The evolving dynamics in marriage and housing choices are likely to have intriguing implications for different real estate asset classes investment returns over the next decade.
(Ross W. McBride, Experienced Real Estate Investment Professional)
(NEW AUSSIE TECHNOLOGY WILL BE USED DURING DISASTERS)
September 20, 2024
Hello everyone
Well, the rate cut show is over.
The number was 0.5 basis points.
Some will think the Fed was late in its policy reaction.
The true ramifications of such a move probably won’t be seen until next year.
Then, a whole new pattern of events may show up.
But let’s concentrate on the near term first.
The market woke up Thursday morning with a spring in its step and decided the 0.5% number was a good policy move.Nearly every sector was on fire.
Surely smoother, more gradual rate cuts – starting earlier - would have been a better policy move than an initial big move with the probability of more to come this year.But what do I know.I’m not an economist.
Still, analysts are divided over the medium- and long-term view of where markets are going.
Some see storm clouds developing on the horizon, while others see clear air ahead with occasional turbulence.
We have more labour reports ahead and the U.S. election, which could well create some chop in the markets.
AUSTRALIAN CORNER
Technology to the rescue during a disaster
New technology to help keep Aussies safe and connected during emergency situations will be rolled out in disaster-ravaged towns from this summer.
The NSW government will have giant orange portable cell towers, called Cells on Wheels (COWs), ready to deploy to bushfire and flood-affected areas, which will allow residents and emergency service workers to stay in touch.
They will provide telecommunications backup when existing infrastructure is damaged or destroyed in natural disasters.
Communities will be able to connect to the COWs via Wi-Fi, enabling them to make data calls or to connect to the internet.
Additionally, the COWs are able to connect to each other to expand coverage.
As part of a $2 million contract. Communications company Pivotel is due to deliver four COWs, which will be available to be sent across the state in a matter of hours.
QI CORNER
SOMETHING TO THINK ABOUT
RECORDING OF JACQUIE’S POST AUGUST ZOOM MONTHLY MEETING
(THE SCIENCE OF AGEING BACKWARDS MAY BE IN OUR POCKETS WITHIN THE NEXT TEN YEARS)
September 18, 2024
Hello everyone.
Today will be a refreshing change of pace and content, as I think we all have endured a lot of noise about this week’s events.
So, let’s jump right in.
Ageing.Or should I say the study and research into ageing backwards is gaining steam?It’s no longer the stuff of science fiction.Affordable treatments that could slow, stop or even reverse your ageing are, thanks to new breakthroughs, less than a decade away.Without even realizing it, you may even be taking some of these pills already.
The biology of ageing essentially causes diseases like cancer, cardiovascular disease, and dementia.For example, while having high blood pressure roughly doubles your chance of a heart attack, being aged 80 rather than 40 multiplies that risk by 10.That means understanding the biology behind these enormous risk increases could lead to the greatest revolution in medicine since the discovery of antibiotics.It could transform not just the treatment but the prevention of disease in the first place.
The pay-off, if we can identify and treat these underlying causes of ageing, is enormous.If we could make people in middle age a bit biologically younger with drugs that address the ageing process, we could improve everything from heart health to wrinkles and delay the onset of cancer, dementia, and frailty, all at the same time.
Andrew Steele, in his text, Ageless: The New Science of Getting Older Without Getting Old, reveals how scientists have identified several so-called ‘hallmarks’ of the ageing process – underlying biological and biochemical processes…
So, what are these biological hallmarks, and what might treatments to slow or stop their currently relentless march look like?
According to Steele, the most promising treatments are:
1/ A Miracle Drug from Easter Island
Easter Island, known for its giant stone heads, is also the origin of one of our most promising drugs to improve longevity: rapamycin.
Discovered in a soil sample returned by a Canadian expedition in the 1960s, it was named after the Polynesian name for Easter Island, Rap Nui.The molecule, produced by a species of bacterium, is a pharmaceutical Swiss army knife with applications ranging from treating cancer to suppressing transplant patients’ immune systems to help prevent organ rejection.And we could soon add ‘slowing down the ageing process’ to that list.
It all comes down to the hallmarks of ageing: the accumulation of dysfunctional proteins as we get older.
‘Autophagy’ – which literally means ‘self-eating’ – allows our cells to recycle malformed molecules and turn them into fresh, functional proteins.Rapamycin can increase our cells’ ability to engage in this anti-ageing spring-cleaning.
Scientists believe that we could improve everything from heart health to wrinkles and delay the onset of cancer, dementia, and frailty.
2/ Drugs in your Medicine Cabinet
Diabetes drugs known as SGLT -2 inhibitors – canagliflozin, dapagliflozin, or empagliflozin – might be giving you health and lifespan benefits beyond helping with your blood sugar. These drugs have been shown to improve wider health in patients that take them, and canagliflozin extended lifespan by 14% in male mice.
Other drugs include Metformin and Acarbose – diabetes drugs, and bisphosphonate drugs- usually used to reduce bone loss, weight-loss treatments like semaglutide, commonly known under brand names like Wegovy or Ozempic.
3/ Bottling Up a Baby’s Biology
An immortal jellyfish (Turritopsis dohrnii) can, in times of stress, simply revert their biology to the junior ‘polyp’ stage and then grow up all over again, seemingly as many times as they like.In other words, ageing backward isn’t against the laws of biology.But is it possible in humans?
Steele argues that ageing biology, as a field, needs more funding to begin human trials for the promising interventions.If it gets it, Steele says there’s no reason why some of these real anti-ageing medicines couldn’t be approved within a decade, allowing us all to stay healthy for longer.
AUSTRALIAN CORNER
That’s Wednesday evening, September 18 (Australian time) Hope you enjoyed it.
QI CORNER
Shaded areas indicate cuts not followed by recessions.
(THE FED RATE CUT SHOW IS HERE – BUT WHAT’S THE NUMBER?)
September 16, 2024
Hello everyone.
Welcome to the biggest show in town this week.It has been hugely hyped, so expectations are high for a spellbinding event that will keep us hanging on every utterance the Fed delivers. Body language interpreters will be busy scribbling notes about Powell’s poker face and hand and arm movements, while other analysts will be dissecting his speech and looking for what was not said, which can also speak volumes.
And the rate cut will be…?
It’s uncertain, but what you can probably bank on is that there will be several cuts within the next year.
If the Fed cuts by 50 bps, markets may interpret that the Fed was behind the curve and made a mistake by not cutting in July and is acting pre-emptively against recession risks – which would be a shift from their typical stance of data dependency.Such a move could see a sell-off in equity markets take place.In other words, a big cut may indicate that the Fed has data that is worse than what we are seeing.
The uncertainty appears to be setting stocks up for an initial sell-off regardless of what the Fed does. We all know that markets hate uncertainty.
The dollar is likely to strengthen on a smaller cut and weaken on a larger one.
Two other major central banks also meet this week.The Bank of England is expected to hold rates at 5%, diverging from the ECB’s recent cut.The Bank of Japan is also likely to hold rates, but the meeting is still worth monitoring given their past surprise moves.
So, sit back and grab a front-row seat.Just make sure you scoop up opportunities’ volatility reveals.
WEEK AHEAD CALENDAR
Monday, Sept. 16
8:30 a.m. Empire State Index (September)
5: 00 a.m. Euro Area Wage Growth
Previous: 5.3%
Forecast: 3.2%
Tuesday, Sept 17
8:30 a.m. US Retail Sales (August)
Previous: 1.0%
Forecast: 0.2%
9:15 a.m. Capacity Utilization (August)
9:15 a.m. Industrial Production (August)
9:15 a.m. Manufacturing Production (August)
10 a.m. Business Inventories (July)
10:00 a.m. NAHB Housing Market Index (September)
Wednesday, Sept 18
8:30 a.m. Building Permits preliminary (August)
2:00 p.m. US Rate Decision
Previous: 5.5%
Forecast: 5.25%
2:00 p.m. Fed Funds Target Upper Bound
Earnings:General Mills
Thursday, Sept 19
8:30 a.m. Current Account (Q2)
8:30 a.m. Continuing Jobless Claims (09/07)
8:30 a.m. Initial Claims (09/14)
8:30 a.m. Philadelphia Fed Index (September)
10:00 a.m. Existing Home Sales (August)
10:00 a.m. Leading Indicators (August)
7:00 a.m. UK Rate Decision
Previous: 5.0%
Forecast: 5.0%
Earnings:Lennar, FedEx, Darden Restaurants.
Friday, Sept. 20
12:00 a.m. Japan Rate Decision
Previous: 0.25%
Forecast: 0.25%
MARKET UPDATE
S&P500
Looking at the market through an Elliott Wave lens, we can interpret that the market has recently completed a corrective Wave ii of 5/ on its September 6 low of 5,403 to enable the resumption of Uptrend onto new highs for the year, with potential for advance toward 6220/6256 over coming weeks.A strong break above 5,652/5,670 will confirm this interpretation.
GOLD
Uptrend in progress.Support = $2,570/$2,530.Next upside target is around $2,640.
BITCOIN
Upside potential.Bitcoin has been undergoing a complex correction since reaching $73,794 in mid-March. The low reached on August 5th at $49,577 may have completed this correction.Through an Elliott Wave lens, it is possible to understand that Bitcoin may now have commenced a Wave 3/ advance toward a target of around $73,826.
Initial target is around $65,000 while holding support at around the mid$58s.
September is living up to its reputation with whiplash type movements, and a double top on the charts.
September 18 interest rate cut is an almost certainty, but how much of it is already priced into the market?
The next sell-off is the one you buy into for a post-election rally.
US dollar begins to weaken and could do so for years.
Tech stocks will rally again after a much-needed correction.
Energy is in the doldrums because of recession fears.
Buy stocks & bonds on dips in ALL sectors.
THE GLOBAL ECONOMY – WEAKENING
The Fed waited too long to cut interest rates as the economy is now undeniably weakening.
Nonfarm payroll report fades at 142,000
Headlines Unemployment rate stays at 4.2%
Previous two months saw substantial downward revisions.
ADP Employment Change Report hits 31/2 year low, up only 99,000 in August.
Personal Consumption Expenditures price index rises a modest 0.2% in July.
UD GDP Reaccelerates to 3.0% growth in Q2, up from the previous estimate of 2.8%
STOCKS – NOSEDIVE
John says if the Fed doesn’t cut by 0.50% in September the stock market will crash
Look for two bottoms on September 18 and October 20.
NVDA dives on fabulous earnings, one of the greatest “Buy the rumour, sell the news” moves of all time.
Broadcom beats and Stock tanks, driven by strong sales of its AI products and VMware software.
Biden blocks Nippon Steel takeover of US Steel, no doubt to save the jobs these deals usually destroy.
Volatility Index soars 50% in a Day, from $14 to $22.
ISM Manufacturing PMI comes in weak, with just 47.2% of purchasing managers reporting expansion in August.
Eli Lily is now a trillion-dollar stock, the first biotech to do so.
Suggestions -
Look to buy JPMorgan as it gets closer to the 200MA.Netflix (NFLX) buy.
UPS- buy/ good LEAPS trade, UNP – China recovery play. Caterpillar (CAT) falling interest rate play – long term hold.
(ROM) Technology ETF – watch for good entry.
BONDS – NEW HIGHS
The Yield curve has de-inverted, meaning that short term interest rates have fallen below long-term ones.
Two-year interest rates at 3.72% are now 0.03% lower than ten-year ones at 3.75%.
It’s a clear signal to the Fed that rates must be cut soon.
Yield Chasers Post Record Demand for Junk Bonds.
That’s helped make 2024 the busiest year for issuance of new corporate high-yield bonds, with $357 billion sold so far.
Market prices in 50-point basis cut for September, holding on to massive rally.
A cut of only 25 basis points on September 18 could give us a $5 selloff.
The September 6 Nonfarm Payroll Report and Unemployment rate will be crucial.
Buy (TLT), (JNK), (NLY), (SLRN) and REITS on dips.
Also 90-day T-bills at 4.97%
FOREIGN CURRENCIES – DOLLAR IS TRASH
Dollar hits seven Month Low, as US interest rates loom.John says it could be a decade long move.
The Yen Carry Trade is Back, with hedge funds piling back into positions they jumped from only two weeks ago.
It’s a matter of math, John says, now that the Bank of Japan has given up on raising interest rates anytime soon.
What this means is more leverage, risk and volatility for global financial markets.John loves the volatility.
The prospect of falling interest rates means that the greenback is out of favour.
Buy (FXA), (FXE), (FXB), (FXC)
ENERGY & COMMODITIES – CRUDE AWAKENING $60 in play
Crude Oil now down on the Year, after a sharp weekend sell-off.
Blame can be spread amongst a weak China, lost OPEC discipline, and over production.
The bearish Goldman Sachs commodities report was also a factor.
US Oil Production hits all-time high.In August 2024, U.S. oil production hit a record 13.4 million barrels per day according to the U.S. Energy Information Administration.
Big Oil has become more productive as horizontal drilling and hydraulic fracturing, which is also known as fracking, have seen technological breakthroughs.
The fossil fuel industry benefits from tax incentives, such as the intangible drilling costs tax credit, that are built into the tax code.The intangible drilling costs tax break is expected to benefit oil and gas companies by $1.7 billion in 2025 and $9.7 billion through 2034.
PRECIOUS METALS – NEW HIGHS
Goldman goes Big on Gold
Central banks in emerging market countries are continuing to buy gold – with purchases tripling since the middle of 2022 amid fears of U.S. financial sanctions and a mountain of sovereign debt.
Goldman is taking a more selective approach to commodity investing, pushing gold but avoiding crude oil and copper prices as China continues to drag.
Silver dives on economic slowdown, enters a sideways range.
A global monetary easing is at hand.
Buy precious metals on the dips because rates are now falling decisively.
Buy (GLD), (SLV), (AGQ), and (WPM) on dips.
REAL ESTATE – READY FOR TAKEOFF
Pending Home Sales drop 5% and 8.5% YOY, on a signed contract basis.
Many buyers are waiting until after the presidential election to make a move
Pending home sales fell in all four regions last month.
The positive impact of job growth and higher inventory could not overcome affordability challenges and some degree of wait-and-see related to the upcoming U.S. presidential election.
Manhattan Commercial Real Estate has bottomed, and bottom fishers are swooping in.Can San Francisco be far behind?
Mortgage Rates Hit New 2024 Low.The average for a 30-year foxed loan was 6.23%, down from 7.5% high.
Sales of new U.S. single-family homes rocket by 10.6%.
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