(CHINA HAS A MESSAGE FOR AUSTRALIA AND IT BEGINS WITH A PANDA)

June 17, 2024

Hello everyone,

Week ahead calendar

Monday, June 17

8:30 a.m. Empire State Index (June)

Earnings: Lennar

Tuesday, June 18

8:30 a.m. Retail Sales (May)

9:15 a.m. Capacity Utilization (May)

9:15 a.m. Manufacturing Production (May)

10 a.m. Business Inventories (April)

12:30 a.m. Australia Interest Rate Decision

Previous:  4.35%

Wednesday, June 19

Juneteenth Holiday

10 a.m. NAHB Housing Market Index (June)

2:00 a.m. UK Inflation Rate

Previous:  2.3%

Thursday, June 20

8:30 a.m. Building Permits preliminary (May)

8:30 a.m. Current Account (Q1)

8:30 a.m. Continuing Jobless Claims (06/08)

8:30 a.m. Housing Starts (May)

8:30 a.m. Initial Claims (06/15)

8:30 a.m. Philadelphia Fed Index (June)

7:00 a.m. UK Interest Rate Decision

Previous:  5.25%

Earnings:  Kroger, Darden Restaurants

Friday, June 21

9:45 a.m. PMI Composite preliminary (June)

9:45 a.m. S&P PMI Manufacturing preliminary (June)

9:45 a.m. S&P PMI Services preliminary (June)

10 a.m. Existing Home Sales (May)

10 a.m. Leading Indicators (May)

2:00 a.m. UK Retail Sales

Previous: -2.3%

Earnings: CarMax

The summer season is upon us.  Analysts are divided on how the market will behave over the next few months.  Some see a 20% to 30% correction. Others see a sideways move and then more upside.  The market taking a breath is not a bad thing.  I am not ruling out DOW 38,000 or even an extension to 37,000. 

The Reserve Bank of Australia and the Bank of England are scheduled to set their interest rates this week.  All eyes will be on the Bank of England this week to see if it follows the lead of the European Central Bank in lowering its rates.  Some analysts are predicting that the Bank of England will cut as many as three times this year.

The Diplomatic Play of the Panda Loan

China’s pandas can be seen as ambassadors with a significant role to play in global politics.

Adelaide Zoo will receive a pair of pandas soon to replace Wang Wang and Fu Ni, who have been in Australia for 15 years.  They will be returned to China.

The Chinese premier, Li Qiang is in Australia now.  It’s the first trip to Australia by a Chinese premier in seven years.   The Chinese government's loan to Australia of two new pandas conveys a message regarding Australia-China relations.

Loaning pandas is seen as promoting mutual partnerships between China and the recipient countries while withdrawing pandas, as China did with the US in 2023, was widely viewed as souring relations.

The panda loan can be interpreted as a ‘seal’ agreed to once China turns a corner with a country, be it in diplomatic, trade, or security matters.

Australia has given various marsupials, platypuses, and crocodiles to friends and allies over the last two decades, while Sri Lanka and Vietnam have gifted elephants to many countries.

Animal diplomacy dates back centuries.  During the 1950s, Chairman Mao Zedong was known to send pandas as gifts to the country’s communist allies, which included North Korea and the Soviet Union.

US First Lady, Pat Nixon, commented during a state function in China about her love for animals, and in a period when the two countries were normalizing relations, the Chinese government gifted them.

By the 1980s, panda diplomacy changed, and pandas were loaned for 10 years with the option to extend.

This shift to panda lending allowed China to keep promoting its image abroad and build “guanxi”, a Mandarin term for trust. Loaning pandas was seen as promoting mutual partnerships between China and the recipient countries.

In turn, host countries would pay an annual fee of about $1 million per bear.

Two pandas were sent to Scotland in 2011 after the two countries signed an oil deal.

The list of panda recipients includes Denmark, Germany, South Korea, Russia, and Qatar.

From left, Penny Wong, Australia’s foreign minister, South Australian Premier, Peter Malinauskas, and China’s Premier, Li Qiang pictured visiting Adelaide Zoo in Australia on Sunday, June 16, 2024.

Australia hits the No.2 spot of the most unaffordable cities to live in in the world.  The cost-of-living crisis is forcing many people to leave Sydney and Melbourne for the State of Queensland.  Brisbane is cheaper, but the gap is quickly narrowing between house prices in Brisbane and Sydney and Melbourne.  Regional areas such as the Gold Coast, Sunshine Coast, Toowoomba, and Brisbane outskirts have seen strong growth.  With rate cuts not forecast in Australia until 2025, the migration north is only set to gather pace.

Portfolio Update

If you own any of these stocks exit out of them completely.  There are opportunities setting up where our funds would be better placed.

Stock Purchase Price & Date  Price Friday (06/14)

Delta Airlines (DAL) $40.54 (01/08/24) $48.72

Solaris Resources (SLSR) $3.33 (04/24/24 $3.08

Arizona Metals Corp $2.21 (04/24/24) $1.59

Global X Silver Miners $23.00 (02/15/24) $31.58

ETF (SIL)

Note:  Re: (SIL) By selling out of (SIL) I am not saying the bull market in the metals is over.  I want to take the profit and put it into another metal play that is setting up nicely.

Liberty All State

Equity Fund (USA) $6.66 (02/02/24) $6.78

Market Update

US$ - expecting the dollar to rally a little more before topping out.  Euro, Pound Sterling, Aussie and Kiwi, and Japanese Yen should weaken in the short term.  Those downside moves will provide a great opportunity to enter long positions.  Look at FXA, FXE, and FXB.

S&P 500 – market could pull back to 5,140 before the upside continues.

Gold – correction in progress – looking for support around 2250 – 2270, but correction to 2220 cannot be ruled out.

Bitcoin – correction in progress - possible targets are 60,000, 55,000, and maybe even as low as 52,000. Scale in as the crypto falls to these price zones.

Cheers,

Jacquie

(APPLE LAUNCHES ITS AI VISION)

June 12, 2024

Hello everyone,

The Worldwide Developers Conference on Monday saw Apple debut its long-awaited artificial intelligence vision.  Shares rose as much as 6.4% on Tuesday to a record high, one day after announcing the company’s AI ideas.  Apple’s plan is to integrate generative artificial intelligence into every aspect of its ecosystem with the launch of Apple Intelligence. 

The event brought positive reviews from many analysts.  The company has been thorough in addressing the privacy issue with on-device capabilities. Analysts see Apple’s emphasis on protecting users’ personal data as a “game changer” as it adds to the users’ confidence. As we all know it is not just about the experience of using AI tools that operate in the open market, but it’s also about tools that understand and protect your personal preferences and data.   Michael Ng from Goldman Sachs was “encouraged by the financial implications” of the announcements, noting that new product features should help fuel an iPhone upgrade cycle.  The updates also create an opportunity for additional AI monetization down the road.

Bernstein’s Toni Sacconaghi expects Apple’s new features to not only power a stronger device upgrade cycle but also push the company to $8 in earnings per share and potentially convince investors to pay close to the stock’s peak valuation.

However, some analysts expressed doubts about Apple’s AI prospects. Barclay’s analyst Tim Long was skeptical about the AI announcements, describing the features as more of an evolution and not very meaningful.  Furthermore, Long viewed the event as not significant from a stock standpoint.  UBS analyst, David Vogt does not see the Apple AI strategy leading to a significant iPhone upgrade and described the announcement as underwhelming.

Apple Intelligence will be free for users and will be available in beta (trial) version as part of the iOS 18, iPadOS 18 and macOS in September or October in the English language.

The latest operating system also aims to give users more control with tools to manage who can see their apps, how contacts are shared, and how their iPhone connects to accessories.

Users can now lock an app and for additional privacy can hide it too, moving it to a locked, hidden folder.  When the app is locked or hidden, content such as messages or emails within the app is hidden from search, notifications, and elsewhere across the system.

The new software will also introduce new accessibility updates including eye tracking, a built-in option for navigating iPhones with only the eyes.

Apple set to launch AI powered Safari 18

This is not a recommendation to buy Apple right now.

Recording of May 31 Monthly Zoom Meeting

https://www.madhedgefundtrader.com/jacquie-munro-meeting-replay-may-2024/

Cheers,

Jacquie

(THE AI GENIE IS OUT OF THE BOTTLE – ARE HUMAN RIGHTS AT STAKE?)

June 7, 2024

Hello everyone,

A recent report from the UN is shining a spotlight on the risks of generative AI.  The report explores 10 human rights that generative AI may adversely impact.

The paper says that “the most significant harms to people related to generative AI are in fact impacts on internationally agreed human rights” and lays out several examples for each of the 10 human rights it explores:  Freedom from Physical and Psychological Harm; Right to Equality Before the Law and Protection against Discrimination; Right to Privacy; Right to Own Property; Freedom of Thought, Religion, Conscience, and Opinion; Freedom of Expression and Access to Information; Right to Take Part in Public Affairs; Right to Work and to Gain a Living; Rights of the Child; and Rights to Culture, Art, and Science.

There is already talk about generative AI’s impact on creative professions.  This report discusses this issue and how it can be used to create harmful content from political disinformation to nonconsensual pornography and CSAM (child sexual abuse material).  Over 50 examples in the report illustrate the potential human rights violations, which creates an alarming picture of what’s at stake as companies rush to develop, deploy, and commercialize AI.

The report also asserts that generative AI is both altering the current scope of existing human rights risks associated with digital technologies and has unique characteristics that are giving rise to new types of human rights risks.  For instance, the use of generative AI for armed conflict and the potential for multiple generative AI models to be fused together into larger single-layer systems that could autonomously disseminate huge quantities of disinformation.

Of some concern is the idea that “other potential risks are still emerging and, in the future, may represent some of the most serious threats to human rights linked to generative AI.

One particular risk the report brings to light surrounds the Rights of the Child.  “Generative AI models may affect or limit children’s cognitive or behavioral development where there is over-reliance on these models’ outputs, for example when children use these tools as a substitute for learning in educational settings.  These use cases may also cause children to unknowingly adopt incorrect or biased understandings of historical events, societal trends, etc.”

The report also notes that children are especially susceptible to human rights harms linked to generative AI because they are less capable of discerning between synthetic content and genuine content, identifying inaccurate information, and understanding they’re interacting with a machine.

Let’s think of children and social media for a moment.  They were given daily access to social media without virtually any transparency or research into how it might impact their development or mental well-being.  It’s well known that children have been harmed by social media companies’ apparent lack of guardrails surrounding the technology.  This issue came to light earlier this year when the CEOs of Meta, Snapchat, TikTok, X, and Discord testified before Congress in a heated hearing that looked at social media’s role in child exploitation as well as its contribution to addiction, suicide, eating disorders, unrealistic beauty standards, bullying, and sexual abuse. It’s been shown that children were treated as guinea pigs on Big Tech’s social media platforms; repeating those mistakes with generative AI would be shameful.

The Right to Work and to Gain a Living was also covered in the report and showed interesting findings.  Of note was the fact that economics, labor markets, and daily work practices could be drastically altered by Generative AI.  The future may include employers using generative AI to monitor workers, and the idea that workers engaged in labor disputes with employers may be at heightened risk of being replaced with generative AI tools.

How we implement the technology will be important as well as the guardrails – or lack thereof – we put around it.  Perhaps the most significant takeaway is the understanding that Generative AI as a technology won’t commit these human rights violations independently, but rather powerful humans acting recklessly to prioritize profit and dominance will.

The May Monthly Zoom Meeting recording will be sent out next week.

QI CORNER

Cheers,

Jacquie

(ENERGY STOCKS ARE IN CONFLICT OVER GUYANA OIL ASSETS)

June3, 2024

Hello everyone,

Week Beginning June 3

The Bank of Canada and the European Central Bank are set to kick off June’s Central bank meetings on Wednesday and Thursday, respectively.  Both are anticipated to reduce their interest rates by 25 bp.  For the ECB, this adjustment would mark its first rate cut since 2016.

Investors are heading into a seasonally weak period for the markets, and while signs of inflation easing has buoyed investors, traders will still be relying on and watching macroeconomic data closely to navigate an expected choppy market.

The week ahead calendar

Monday, June 3

9:45 a.m. Markit PMI Manufacturing final (May)

10 a.m. Construction Spending (April)

10 a.m. ISM Manufacturing (May)

Tuesday, June 4

10 a.m. Durable Orders final (April)

10 a.m. Factory Orders (April)

10 a.m. JOLTS Job Openings (April)

Australia's GDP Growth Rate

Previous: 0.2%

Time: 9:30pm ET

Earnings: Hewlett Packard Enterprise, Bath & Body Works

Wednesday, June 5

9:45 a.m. PMI Composite final (May)

9:45 a.m. Markit PMI Services final (May)

10 a.m. ISM Services PMI (May)

Canada Interest Rate Decision

Previous: 5.0%

Time: 9:45 am ET

Earnings:  Campbell Soup, Dollar Tree

Thursday, June 6

8:30 a.m. Continuing Jobless Claims (05/25)

8:30 a.m. Initial Claims (06/01)

8:30 a.m. Unit Labor Costs final (Q1)

8:30 a.m. Productivity final (Q1)

8:30 a.m. Trade Balance (April)

Euro Area Interest Rate Decision

Previous: 4.5%

Time: 8:15 am ET

Earnings: J.M. Smucker Co.

Friday, June 7

8:30 a.m. May Jobs report

Previous: 175k

10 a.m. Wholesale Inventories final (April)

12 p.m. Fed Governor Lisa Cook gives commencement address at Girls Global Academy, University of the District of Columbia, Washington, D.C.

3 p.m. Consumer Credit (April)

Exxon Mobil and Chevron are in a battle over lucrative offshore oil assets in Guyana.

Exxon has outpaced Chevron this year with the oil majors gaining roughly 15% and 6%, respectively.

But the environment for Chevron may look brighter in the second half of the year if it can exercise a favourable outcome from its feud with Exxon over an offshore oil development in Guyana called the Stabroek Block.

Exxon leads that development with a 45% stake, but Chevron is seeking to get in on the action through its pending acquisition of Hess Corp, which has a 30% holding in Stabroek.

Hess shareholders approved the Chevron merger last Tuesday, but it’s still unclear when the deal will close.

Exxon has dragged Chevron and Hess before an arbitration court to defend its claims to a right of first refusal over Hess’ Guyana assets under a joint operation agreement.

Chevron came into the year facing production issues in the Permian Basin and cost overruns at its Tengiz project in Kazakhstan that frustrated investors.  Chevron has been bouncing around in a price range between $40 and $65 for most of this year.

Exxon, on the other hand, hasn’t really faced any execution issues this year.  In fact, Exxon’s performance is a reversal from the decade leading up to the Covid-19 pandemic, when the company underperformed Chevron due to its capital expenditures during a period when oil prices were low.

Since 2020, Exxon has outperformed Chevron as the company has implemented capital discipline. Additionally, investors have noted Exxon’s lead position in the lucrative offshore oil development in Guyana.

Kevin Holt, senior portfolio manager of the Invesco Energy Fund (FSTEX) believes that the Guyana development is probably the best project the oil sector has seen in 25 years with very productive wells at a relatively low cost.  Holt goes on to say that Chevron would look very attractive if the Hess deal closes due to the latter’s large stake in Guyana.  However, if Exxon prevails in the arbitration case, the merger will terminate and Hess would remain a stand-alone company, raising questions about Chevron’s next move.

It is unclear how long the arbitration will take.  There is a possibility it may drag into 2025.

Holt sees the odds in Chevron’s favour regarding the arbitration, and points to other issues at Tengiz and in the Permian as short-term bumps in the road that will be resolved.  The resolution of all the latter will see Chevron in a very good position.

The fund manager argues that both companies are inexpensive

QI CORNER

I found this post interesting form Jason Sen.   I have underlined the parts of the post that I have recommended to other traders and investors:

Scaling into a trade or an investment – not committing all your capital at once.

Place your stop loss when you enter the trade – takes the emotion out as you now have a defined risk, and you are sticking to a plan.

Scaling out of positions – allows you to take some profits but still let part of the position run to capture further potential profits.  In other words, you can have two take profit positions set.

I refer to the scaling in and out strategy as pyramiding in and out of a position.

Monthly May Zoom Meeting

Thank you to all those who attended the May monthly meeting on Friday afternoon/evening.

We had a great turn out – subscribers from United Kingdom, Australia and the U.S. tuned in.

A recording will be sent out shortly after the presentation has been edited.

Cheers,

Jacquie

(BUCKLE UP WHEN FLYING - CLIMATE CHANGE MAY BE INCREASING CLEAR-AIR TURBULENCE)

May 29, 2024

Hello everyone,

Scientists at Reading University in the UK have studied clear-air turbulence. 

Their research shows that severe turbulence has increased by 55% between 1979 and 2020 on a typically busy North Atlantic route.

Scientists have found that changes in wind speed at high altitudes due to warmer air from carbon emissions have played a role.

Prof. Paul Williams, an atmospheric scientist at the University of Reading has co-authored a decade-long study in this area.  He argues that the focus should be on investing in improved turbulence forecasting and detection systems to prevent the rougher air from translating into bumpier flights in the coming decades.

Flight routes in the USA and North Atlantic have seen the largest increases in turbulence.  Europe, the Middle East, and the South Atlantic also have seen significant increases in turbulence.

Prof Williams explained that increased turbulence was due to greater wind shear – or differences in wind speed – in the jet stream, a strong wind system blowing from west to east, about five to seven miles above the Earth’s surface.  Williams further shows that it exists largely due to the difference in temperature between the world’s equator and poles.

While satellites can’t see the turbulence, they can see the structure and the shape of the jet stream, allowing it to be analysed.

Radar can pick up turbulence from storms, but clear-air turbulence is almost invisible and hard to detect.

We all know that turbulent flights are uncomfortable, but they can also cause injuries for those on the flight.  Severe turbulence is very rare, but clear-air turbulence can come out of the blue when passengers are not belted in.

It is sensible to keep your seat belt fastened all the time, unless you are moving around.

The financial costs for airlines can be huge.  The aviation industry loses between $150 and $500 million in the US alone annually because of turbulence, including wear and tear on aircraft.  There is also an environmental cost, as pilots burn up fuel avoiding the turbulence when they can.

A case in point is the Singapore Airlines flight (SQ321) from London to Singapore on May 21.  About 10 hours into the flight when the staff were serving breakfast, the airline hit severe clear air turbulence passing over the Irrawaddy Basin (Myanmar).  The crew requested an emergency landing at Bangkok airport as one of the passengers had died.  At least 50 people were injured including two crew members and a toddler.  All were admitted to a hospital in Bangkok; some had serious injuries.  More than 20 were admitted to ICU with spinal injuries.  (Many people were obviously not wearing their seatbelts).

On Sunday, May 26 a Qatar Airways flight from Doha to Dublin experienced clear air turbulence but managed to land safely in Ireland.  12 people were injured and eight were taken to hospital.

In August 2023 a Delta flight hit severe turbulence about 40 miles outside of Atlanta catapulting passengers out of their seats.  Another incident involving an Allegiant Air flight last July that was flying from North Carolina to Florida.  One passenger described the experience like being in “The Matrix.”

NASA is working on a way to detect clear-air turbulence.

The technology, under development at NASA’s Langley Research Centre and involving government, university and private sector experts, anticipates using ground-mounted infrasonic microphones that can pick up ultralow frequencies produced by turbulence -possibly as far as 300 miles away.

Such microphones could provide an early warning for what’s known as “clear-air turbulence,” the top cause of inflight injuries and fatalities, according to researchers at the University of Reading.

Clear air turbulence differs from other forms of turbulence in several ways, and it can occur without warning at altitudes of 20,000 to 40,000 feet.  The unstable air masses can be as much as 100 miles wide and 300 miles long, and they often are found just above the jet stream core, researchers say.

Turbulence is expected to get worse as the world warms.

Prof. Williams and his team at the University of Reading project that the frequency of clear-air turbulence events will double by 2050 and that the intensity of such events will increase by as much as 40%.

The NASA research effort could make flight crews, passengers, and aircraft more resilient to that future.

Market Update

The summer season is almost upon us.  A retracement is imminent in the DOW and S&P500 in line with retracements in the metals sector and Bitcoin & crypto in general as well.

S&P500 – expecting a pullback to 5221 or as far as 5140.

DOW – looking for trendline support around 37810 price point.  A lower price point would be 37000.

US tech 100 – looking for consolidation now towards the 18450-price level.  18085 possible support level before a further rally in the tech sector.

GOLD- looking for a correction back towards the 2275 price range and potentially as low as 2220.  Subsequent profit targets for further highs sit at 2482 and 2689. 

SILVER – expecting retracement towards 3050.  Following correction, the metal will rally toward the longer-term target of 3470.

US dollar –expecting a short-term rise in the USD basket towards 10800 before a decline to the 10,000-price zone.  So, you should be looking to short the US dollar in 4-6 weeks and buy the EURO, POUND Sterling, and Australian dollar.

Cheers,

Jacquie