(A THANKSGIVING TAKE ON THE MARKETS)

November 24, 2023

Hello everyone,

The market has just closed 100 points higher today.  Our year-end rally continues.  You may ask “What’s next after the end of the year?”  Short term, may be some volatility; long term, the market is looking good.

Retailers are hard at work endeavoring to attract customers to Thanksgiving sales.  Some people will always part with their money for what they think is a bargain.  Others are more conscious of their spending and where their money is going.  With all that being said, some items are worth a look – especially electronic items.

Bitcoin rose to a new high for the year on Friday – above $38,000.  As I have said before, if you hold it, think about taking half off the table.  It could come down to $20,000 or even lower before eventually rallying to new highs.

Don’t rule out a retest of 1900 in Gold before moving higher.  Certainly, we could well test the 1940 to 1960 area.  Within the next five years, Gold could move to around 2,800.

Be mindful that we could get another retest of the higher levels in yields.  If the yield on the 10-year Treasury note begins to move above 4.55%, that could put some pressure on the equity market.

“Edge AI” will be the trend going forward in artificial intelligence.  This theme involves running AI algorithms directly on a user’s device, be it a smartphone, laptop, or wearable, among other things.  Morgan Stanley argues that 2023 has been all about Generative AI, cloud, GPUs, and hyperscales, and they will remain core to the secular machine learning trend.  Edge AI can help save costs and reduce latency (or lag time), among many other benefits.  Everyday examples of Edge AI include facial recognition on smartphones and voice recognition in smart speakers.  Morgan Stanley points out that with the advent of Generative AI, the impetus for device upgrades to enable greater computational power natively on consumer hardware is accelerating and spanning beyond often narrowly used smart speakers.  The bank goes on to say that such AI-driven consumer use cases will become integrated into everyday devices – presenting several opportunities for investors.

The bank named four companies that are set to be key beneficiaries of this trend and likely to outperform in 2024 and 2025.

Apple – well-positioned to expand all facets of Edge AI.  The consumer trust in Apple’s data gathering and large user base gives Apple another leg up in using Edge AI applications to harness and apply new data.  Price target - $210 or a potential upside of around 10%.

Dell – best positioned to capitalize on both the cyclical rebound in hardware markets and the long-term growth of AI-related infrastructure (PCs, Servers, Storage) over the next two years.  Dell is expected to launch new AI-enabled laptops and workstations in the next 12 months.  The price target is $89 or a potential upside of nearly 21%.  (Watch for some volatility in this stock in the next few months).

MediaTek – the largest chip design house in Asia is gearing up for Edge AI. Price target is 1,000 New Taiwan dollars ($31.70) or a potential upside of 6%

STMicroelectronics – The key attribute of this stock will be its energy-efficient computing. Long-term value in its efficiency in automotive, mobile, healthcare, and industrial IoT.  Price target of 48 euros ($52) or potential upside of nearly 16%.

Enjoy your break.

Cheers,

Jacquie

(THE COUNTRY ATTRACTING TALENTED TECH WORKERS)

November 20, 2023

Hello everyone and welcome to Thanksgiving Week.

Trades

This is a reminder to please take money off the table if you have a healthy profit.

In McDonald's, you are at maximum profit in both positions. 

McDonalds (MCD)

250/260 Dec. 2023 vertical bull call spread

250/270 Dec. 2023 vertical bull call spread

Digital Ocean (DOCN)

25/27.50 January 19, 2024, vertical bull call spread

27.50/30.00 January 19, 2024, vertical bull call spread

Palo Alto Networks (PANW)

250/260 December 15, 2023, vertical bull call spread

260/270 June 21, 2024, vertical bull call spread

Market Update:

S&P 500

The U.S. stock market is rallying to new highs.  From an Elliott Wave perspective, it is charging towards its 5^th Wave, which lies at about 4,700 – 4,800.  After the market reaches Wave 5, we may be in for a healthy correction between December 2023 and April 2024.

Gold

Gold’s Daily Chart shows a developing 5-month Inverse Head & Shoulders continuation pattern.  A sustained break above $2,009 resistance will yield an Upside Target of $2,210 over the coming weeks/months.

Brent Crude Oil

There is a downside risk here.   There is a classical Head & Shoulders pattern on the Daily Chart.  The downside target could be around $70.00.

Bitcoin

The uptrend is in progress.  Resistance is found just above $43,000.  Profits should be taken between $37,000 and $40,000. 

Click here for the October 31 monthly Zoom recording.  Apologies for the delay in sending this out.

November Zoom meeting will be next week.

Canada is looking attractive for talented tech workers.

There is a shift going on now, and I’m not talking about our transition to AI.  I’m talking about the great exodus of talented and skilled people, particularly in technology jobs, who are moving out of the U.S. to Canada.

As of last month, the Canadian government says more than 6,000 U.S. H-1B visa holders have arrived in Canada so far this year.  That’s after massive layoffs left high-skilled foreign H-1B holders in limbo in the U.S.

U.S. Senator, Sheldon Whitehouse has argued that “if two million more immigrants came to the U.S. each year, we could reverse our predicted population and productivity decline.”

Canada has launched a new initiative to attract skilled workers, as well as digital nomads, and skilled American workers.

Why is the U.S. losing these workers?

How did a country with the biggest tech companies lose thousands of workers to Canada?

The bureaucratic visa process pushes workers into Canada.  It is not straightforward, and there are queues and queues.

The H1-B is a non-immigrant work visa that allows U.S. employers to hire foreign workers in specialty occupations.

They must have an area of expertise, a Bachelor of Arts, or equivalent.  Many of these visa holders work as teachers or in technology.

Since its creation in 1990 Congress has limited the number of H-1B visas each year.

The current cap is 65,000.

An additional 20,000 visas are available for graduates of an American university.

Because the visa is sponsored by an employer, employees who lose their jobs will only have 60 days to find a new job or face deportation.

In the 2024 draw, of the 258 thousand people who applied only 188 thousand were selected for the final random draw.

So, only 25% received a visa and thousands were turned away.

Once an applicant receives a visa, they face several restrictions.  They do not have the same rights as a citizen and a person with a Green Card.

The spouse of a holder of a visa cannot apply for work without applying for employment authorization.

A 9 million backlog for American visas deepens the labor crunch.

71% of people on H-1B visas are born in India.  The highly educated foreign national is at the mercy of the U.S. employer.

Big tech companies account for a lot of H-1B visa approvals.  These include Amazon, Google, Apple, and Meta.  They had 60,000 applicants in the last two years, but most of these companies laid off workers last year leaving H-1B visa holders in limbo.

On June 27, 2023, Canada stepped in.  Sean Fraser, Minister of Immigration announced a new program.  On July 16, visa applications for a pilot program became available, allowing up to 10,000 H-1B visa holders to apply for a three-year work permit in Canada.

The program reached 10,000 on the first day.

Canada is boosting its tech talent at the expense of the U.S.

Canada’s tech market has grown 15.7% since 2020.  This growth has outpaced the U.S. tech market which grew at 11.4%.

Toronto and Vancouver rank inside the 10 top tech cities in the U.S. and Canada.

Canada is also home to Shopify, and Dell, Intel, Microsoft, and Amazon all have a presence in Canada.

Unlike the H-1B visa, people do not need to have a job lined up before moving to Canada. And unlike the U.S. system, visa selection in Canada is not based on where the applicant comes from.

There is a shortage of qualified labor everywhere.  More people choose to go to Canada, Europe, and Australia rather than the U.S.

If the U.S. wants to attract and keep talented workers, it must streamline and reform the visa program.

(THE WEARABLE AI IS HERE)

November 15, 2023

Hello everyone,

The Ai Pin is here. Anyone for a wearable AI this Christmas?

Start-Up Company Name: Humane

Price:  $699 + $24 monthly data subscription to T-Mobile.  Subscription includes a cell phone number, unlimited talk, text, and data.

When available:  Orders can start from November 16.

Founders:  Imran Chaudhri and Bethany Bongiorno (former Apple designers).

Design:  Smartphone alternative, but it doesn’t have a screen.

Choice of three colors: eclipse (black), equinox (black and white), and lunar (white).

Two-piece design – main computer and a battery booster – magnetically connected and can be powered through clothing.

Features:  make calls, send texts, access information through voice controls. 

The Laser display can project information such as time and date onto the user’s palm.

Built-in speaker and camera.  Double-tap on the device to take a photo or video.  View them on Humane’s web app.

Can translate spoken English and Spanish conversations.

Collaboration:  Humane has collaborated with companies such as Microsoft.

Launch statement:  Open AI “gives the AI Pin access to some of the world’s most powerful AI models and platforms.”

ROBOTS TO THE RESCUE ON THE REEF

An Australian scientist is using the power of robots to regrow the threatened Great Barrier Reef, which is in a lot of trouble because of climate change.

50% of corals have been lost worldwide and the outlook appears grim.  70%-90% could be lost under climate change.

Dr. Taryn Foster, a marine biologist is cultivating coral from limestone, which is coral’s natural skeleton.  Fragments of coral harvested from the ocean are glued onto plugs, which are then inserted into the limestone base.  The whole skeleton is then planted in the ocean.    Foster argues that this process bypasses several years of calcification to get to adult size by providing them with a premade skeleton.

Foster’s company Coral Maker has teamed up with AI business Autodesk.  Robots will be doing the repetitive tasks.  Foster’s goal is to mass-produce millions or tens of millions of corals every year to restore threatened reefs right across the world.

More coral bleaching is predicted in Australia this coming summer.  Foster points out that more than 800,000 species are supported by coral reefs.  Letting them disappear is not an option in Foster’s mind.

If you ever visit Australia, make sure the Great Barrier Reef is on your list of sights to see.  The islands dotted off the coast of Australia in this area are truly stunning and deserve to be added to your travel schedule.  The natural beauty of the landscape, the crystal-clear warm waters, the warm sunshine, and the welcoming locals are all a treat just waiting for you to enjoy.

Great Barrier Reef suffered the worst coral die-off on record in 2016.

Snorkeling on the Great Barrier Reef

Cheers,

Jacquie

(THE OPIOID CRISIS AND ITS EFFECT ON THE ECONOMY)

November 10, 2023

Hello everyone,

While the market is dancing along nicely to year-end, I’m going to focus on an issue that can affect anyone at any time in their life.

Drugs.

Am I worried about my son, Alex, ever taking drugs?  No. He crosses the road when he sees a person walking toward him, who is smoking a cigarette because he can’t stand the smell of the smoke. 

Alex’s first semester at college has been unremarkable.  He has done the work, received good grades, and has joined the Chess Club.  He sometimes even tells me he is bored.  But I never think that is a bad thing.  After all, boredom can stimulate and inspire us to get lost in new ventures and hobbies that might otherwise have never been explored. 

I had an interesting conversation with him the other day.  His major is tech, while his roommate’s major is business.  Alex is quiet and conservative, while his roommate is a party boy and often stays out until 4 a.m.   Furthermore, sometimes, he just never comes back to the room at all over the weekend.  But that is not surprising behaviour for a young adult teenager.  What is a bit concerning is his roommate’s pill-popping, which Alex tells me has an impact on the way he behaves.   

Alex did not tell me what he was taking, only that they were illegal.

The opioid crisis is a scourge on our society.  Is life so confronting that some people have to get a buzz from a pill to make it to the end of the day?

The statistics are alarming!

Worldwide, about 296 million people (or 5.8% of the global population aged 15-64 years) used drugs at least once in 2021.   Among them, about 60 million people used opioids.  About 39.5 million people lived with drug use disorders in 2021.  Most people dependent on opioids use illicitly cultivated and manufactured heroin, but the proportion of those using prescription opioids is growing.

More than 100 people die every day from opioid overdoses.

Overall life expectancy in the U.S. has declined for three years in a row due in large part to the opioid epidemic, reversing a half-century trend.

Overdoses kill more Americans than car crashes or gun violence.

Addiction contributes to incarceration.  In 2010, 85% of the U.S. population was incarcerated for substance-related reasons, with over half of all inmates diagnosed with substance use disorder.

In economic costs

Reduced labor force participation

Decreased employment

Productively loss.

Extra health costs.

Permanent injury & chronic health conditions.

Reported opioid overdose deaths: 

2010 – 21,089

2017 – 47,600

2020 – 68, 630

2021 – 80, 411

Opioids have analgesic and sedative effects, and such medicines as morphine, codeine, and fentanyl are commonly used for the management of pain.  Opioid medicines methadone and buprenorphine are used for maintenance treatment of opioid dependence.  After intake, opioids can cause euphoria, which is one of the main reasons why they are taken for non-medical reasons.  Opioids include heroin, morphine, codeine, fentanyl, methadone, tramadol, and other similar substances.  Due to their pharmacological effects, they can cause difficulties with breathing, and opioid overdose can lead to death.

In the 1980s and 1990s, I worked in the Drug and Alcohol Unit and the Psychiatric Unit of the Toowoomba Hospital.   I was the Administration Manager for those units.  I learned a lot about the effects of drugs and alcohol on individuals, and the impact on families and the wider community.    White-collar workers,  blue-collar workers, male and female, young and old – all are at risk of being a statistic in the opioid epidemic.  Those people who took drugs for non-medical reasons were in emotional pain, except the panacea turned into an additional crisis which exacerbated the person’s despair and feelings of hopelessness.  A truly sad situation.

We can point to the pharmaceutical industry and its aggressive promotion of prescription drugs as one of the main elements contributing to the opioid epidemic in the U.S.  Advertising of drugs is at saturation point on free-to-air T.V. in the U.S.  Conversely, in Australia, promotion of drugs in television or print media is at a minimum.  There are restrictions on the direct advertising of pharmaceuticals to patients, as well as regulatory and professional actions, which have resulted in different patterns of prescribing and outcomes in Australia.

Nonetheless, opioid prescribing has increased gradually in Australia over the last three decades.  Each time a new opioid formulation becomes available, it is enthusiastically prescribed.  That brings us to look at the relationship between the drug representative and the G.P.   The payoffs for the G.P. when s/he promotes the drug are usually quite attractive.  Surely, lack of remuneration would lessen the likelihood of G.P.’s being so eager to prescribe these drugs, knowing the tendency for some patients with non-medical conditions to abuse these drugs.

Take care.

Cheers,

Jacquie

(CAN WE NOW TURN THE PAGE ON THE FED’S INTEREST-RAISING CYCLE?)

November 6, 2023

Hello everyone,

The year has dashed by. 

Only about eight weeks until Christmas. 

The question on everyone’s lips is:  Will the market rally continue into year-end?

In crystal ball gazing, it is entirely possible.  As long as we don’t keep getting battered by events out of left field.  But you know what the market is like.  It can climb a wall of worry very well as it is forward-looking.

It has been a mixed bag with earnings results.  Some good, some not so good, and didn’t the market let those companies know when they missed the mark.  An overreaction in some cases.

Earnings season is winding down.  However, there are still some important reports out this week.

Nov. 6, 2023, Monday

Australia Interest Rate Decision

Previous:  4.1%

Time: 10:30 pm ET

Nov. 7, 2023, Tuesday

8:30 a.m. D.R. Horton

Switzerland Unemployment Rate

Previous: 2%

Time: 1:45am ET

Nov. 8, 2023, Wednesday

8:00 a.m. Biogen

8:00 a.m. Warner Bros.

4:30 p.m. Disney

5:00 p.m. MGM Resorts

China Inflation Rate

Previous: 0%

Time: 8:30 pm ET

Nov. 9, 2023, Thursday

US Initial Jobless Claims

Previous:  210K

Time: 8:30am ET

Nov. 10, 2023, Friday

US Consumer Sentiment

Previous: 63.8

Time: 10:00am ET

The market is working against a backdrop of conflict in different parts of the world. It seems the world is never entirely free of conflict at any one time.  Religion, race, and land are at the basis of many wars/conflicts, but these explanations simplify complex underlying issues, and we mostly have to delve into history to highlight important points to gain a thorough understanding of where we are today.   Though I do not have the luxury of time or space here to give a history lesson, I will draw your attention to two giants of Wall Street, who believe the world is at its “most precarious since 1938.”  Jamie Dimon (JPMorgan) and Larry Fink (BlackRock) are both expressing concern about the nature of the world we live in.  “Scary and unpredictable” – this is the language these giants of Wall Street are using to describe our times.  At stake is the future of our world as we know it: freedom, democracy, food, energy, and immigration.

The Middle East accounts for 48% of global energy reserves and produced 33% of the world’s oil last year. 

Geopolitical risk is arguably shaping all our lives.  Rising fear impacts consumers.  It can create a withdrawal from consumption, or it can sometimes see consumers spend more.  In the long term, fear is a drag on the consumer and can ultimately lead to recessions.

Last week the Fed left rates on hold for the second time in a row after 11 hikes since March last year.   Powell was unsure whether the Fed had done enough to bring inflation down to its 2% target but highlighted that it would proceed carefully.  The knock-on effect of the Fed’s language was enough to bring the yield down on the 10-year U.S. Treasury bills down to less than 4.7%.

Both Dimon and Fink believe there may be long-term forces that are still inflationary at play and are conscious of the fact that rates could possibly go up from these levels.   Dimon points out that there is interest rate exposure in a lot of things.  And these current rates are stressing certain assets, which the market, up until now, has mostly taken in its stride.  But if rates go up another 100 basis points, it will stress a wider variety of things including real estate and even some banks.  Both Fink and Dimon aren’t ruling out 6% or 7% rates. 

The U.S. government’s ability to finance itself in the medium term is also causing concern.  After the financial crisis in 2008, the market for government debt was underpinned by huge waves of quantitative easing (QE) as the Federal Reserve bought assets including Treasuries to boost the economy.  The programme was revisited during Covid but came to an end in March 2022.  The withdrawal of QE together with a flat appetite for Treasuries among US banks and international investors such as China, could force the government to pay higher prices at a time of near-record borrowing.   The US has issued $1.8 trillion of debt this year, the second-highest amount ever other than in the early stages of Covid. Stanley Druckenmiller and Ray Dalio have also sounded the alarm recently over the deficit. Going forward, there may be considerable headwinds the US government may have to face.

The US economy has been showing strong growth, but recent data – jobs report & manufacturing data - may now suggest that the economy is finally slowing.  The Biden administration has been pumping stimulus into the system via big pieces of legislation – Inflation Reduction Act, the Chips Act, and the Infrastructure Act – which are about $970 billion of stimulus.  These are designed to accelerate America’s adoption of renewables, rebuild its semiconductor industry, and increase its spending on roads, bridges, and broadband.  Fink and Dimon argue that this stimulus coupled with unions negotiating 25% labour increases are inflationary.  High growth, government stimulus and two wars, which are threatening to become a broader crisis – all are inflationary.  So, Fink and Dimon caution us not to turn the page on the rate-rising cycle just yet – it may prove premature.

Inflation, interest rates, and the economy

Cheers,

Jacquie