Wall Street is upbeat about an AI stock called Arista.
On Monday, the company earnings exceeded Wall Street expectations on both the top and bottom lines.
Earnings:$1.83/share
Revenue:$1.51
Analysts forecast:
Earnings:$1.58/share
Revenue:$1.48 billion
Arista also issued high-than-expected forward guidance, calling for fourth-quarter revenue in the range of $1.5 billion to $1.55 billion.
Arista’s focus is low-latency networks between clients and the cloud for large-scale data centres, exposing the company to growing investor interest in AI.
The stock is up 63% in 2023.
Analysts believe the company could be the top player in the Ethernet application of AI.Morgan Stanley and Wells Fargo, among others applauded the company report and highlighted the company’s potential AI catalyst for growth heading into 2024.
Morgan Stanley’s Meta Marshall believes growth will accelerate from the adoption of 800G Ethernet transceivers for data centres.Marshall upgraded Arista to overweight and gave the stock a price target of $220 which is more than 25% upside from Monday’s $175.72 close.
Market Update
U.S. 10-year Yields
We have been consolidating since reaching 5.0210% on October 23rd.But we may have another leg up before exhaustion.
It’s been an interesting month, to say the least.Political instability, conflict in the Middle East, yields on a tear, a weakening consumer against data showing a resilient economy, and the market throwing in the towel and adding to the chaos.
Most expect the Fed to hold rates steady when it announces its decision on Wednesday.But what will be more significant will be the Fed speech during the press conference.What Chair Jerome Powell says will be just as important as what he doesn’t say.
If the stance is hawkish, investor sentiment may be undermined, and this outlook could exacerbate fears of a recession when markets are already stressed.Stocks are headed for their third straight month of losses as Treasury yields rise to multiyear highs.Both the S&P 500 and the Nasdaq Composite slid into correction territory last week after the market reacted savagely to some mega cap tech reports.And the choppiness could continue until markets gain clarity.
On the other hand, the forecast is for the rate of economic growth to slow and inflation to moderate, which could mean the Fed’s commentary may be more accommodative. By the middle of 2024, it is possible that we will see the impact of higher rates rippling throughout the economy, initiating a recession & a couple of quarters of perhaps negative GDP growth.Stocks will react, as will the Fed.
The 10-year Treasury yield continues to hover around 5%.To take the pressure off equities, bond yields will need to fall.Will Powell address the growing fiscal deficit in his commentary? I’m certain his language will be thoughtful and measured.
On Friday, investors will get some insight into the labor market.It is expected to show that the U.S. economy added 175,000 jobs in October, according to consensus estimates from FactSet.It seems investors may only begin to breathe a sigh of relief from the Fed’s hawkish outlook when a real slowdown in growth happens.
Thursday will be Apple’s turn for earnings.Up around 30% this year – will the data be positive? Even if it is, how will the market react?If there is a slight miss, the market may punish it.
Uncertainty is weighing on the market.Geopolitical risks, a possible government shutdown in November among other concerns could weigh on the market until year-end.Alternatively, we know the lead up to Christmas is historically a positive time for the market, so equities could rally in time as they price in the effects of a slowing economy.
If world events are causing you a bit of angst now, and you seek to understand how to calm your mind/body, then maybe we should delve into some thoughts from Deepak Chopra. He cites inflammation as the scourge of our modern age.“Stress, inflammation, depression, anxiety, and chronic disease go together,” Chopra says.“Inflammation is the culprit in all these diseases.”
Constant stress can lead to a state of chronic inflammation, which increases the risk for mental health problems like anxiety and depression along with heart disease and Alzheimer’s, according to the Cleveland Clinic.
What’s often behind this constant state of stress?
Trauma.
Chopra explains that the rise in mental health problems and chronic stress is related to the body’s response to trauma – which can stem from generational trauma, isolation, or the constant bombardment of the news cycle & its continuous spouting of negative scripts.
Although we can’t control everything, there is a circuit breaker if we look inward. Understanding the biology of inflammation and how it can be aggravated by lifestyle habits is a good place to start, according to Chopra.
Here are his suggestions for reducing inflammation:
Plenty of Sleep.
Seven to nine hours is recommended.
Sleep reduces the risk of heart disease, stroke, and many chronic health problems.
Practice a wind-down regime – minimize screen time and keep sleep & wake time consistent.
De-stress.
Take 15–20-minute time-outs and lose yourself in an activity that brings you joy, whether that be a hobby, exercise, meditation, gardening, yoga, or spending time with your pets.
Maintain emotional connection with others.
Isolation and loneliness are harmful to our health.
Stay in contact with friends & family.
Stay connected with others through volunteering and community groups.
Recognize moments of joy.
This can be as simple as listening to a favourite song/piece of music, listening to birdsong, observing the change of seasons through your plants/trees in your garden, or enjoying the perfume of a rose flower, or the smell of your favourite treat.
Eat an anti-inflammatory diet.
Eat plant-based, whole foods.
Chopra indicates the Mediterranean diet is ideal, as it emphasizes fruits, vegetables, olive oil, and lean meats.
There is something that nearly always gets left behind during hard times or in wartime.
Animals.
Thousands of animals have been brought back to Animal Shelters in Australia because owners can no longer afford to keep them.Most people don’t seem to think about the long-term costs of keeping an animal, and just assume it will all work out in the end. The animal seemed like a good idea during the pandemic, but now is an expense that many Australians can no longer carry.
In wartime, animals are thought of last or not at all.That’s why in war-torn areas, like Ukraine, animals have been abandoned and are now just roaming the streets or are left chained to a post.Some have terrible injuries:gunshot wounds, broken bones, and are malnourished.
One Australian vet is now making a difference to those animals’ lives.
Dr. Lachlan Campbell, a Sunshine Coast vet has flown to Ukraine on two occasions to assist the animals there.Early in October, on his second visit, he travelled to Kramatorsk – less than an hour drive from Bakhmut. Whilst there, he has treated animals and built shelters for pets displaced by the war in preparation for winter.
He teamed up with the British animal charity, Nowzad, and worked with a team of four (from dawn to dusk) to build animal shelters.He commented that the “shelters we built are enough to house 80 dogs in warmth and more comfort – and off chains – which some have been on for up to four years”.He and his team provided quality food, parasite preventatives, and toys for the animals.Dr. Campbell pointed out the building materials for the shelters were transported all the way from the UK by semi-trailer.
He reported that air raid sirens sounded as frequently as six to eight times a day.He said he also wore body armour and helmets if they were required.He had some near misses with a missile hitting within metres of the shelter Dr Campbell had been building.
During his most recent trip, Dr Campbell vaccinated, microchipped, and treated around 100 cats and dogs for diseases.
In Australia, Dr. Campbell works as a veterinarian at Vets Central on the Sunshine Coast in Queensland.
Nowzad opened its first animal clinic in Kabul, Afghanistan, in 2007, and have since opened an additional donkey/horse sanctuary in Afghanistan.
Market Update
We are in correction mode.
If we get a very good break of 4100 on the S&P, we could fall to 3800.
There is still a chance we could rally in November/December.
In other news
The Australian Prime Minister, Anthony Albanese, is in the U.S. on a State visit to the White House.Australia’s relationship with China was one of the talking points.Albanese’s State visit is intended to deepen an alliance that’s increasingly viewed as a critical counterweight to China’s influence in the Pacific.It’s the ninth and most high-profile meeting between the two leaders, which is intended to facilitate closer ties on climate change, technology, and national security.The United States also plans to provide nuclear-powered submarines to Australia in the coming years, part of a collaboration with the United Kingdom.
The Australian government is sending military aircraft and defence personnel to the Middle East to be on standby in the event the situation “gets worse”.
Australian fighter jets and defense personnel arrive in The Middle East.
(FINDING DEFENSIVE AND STABLE STOCKS AMONGST CHANGING GLOBAL FORCES)
October 25, 2023
Hello everyone,
There are many events taking place right now that will inevitably reshape the world in the near future.
Political instability, Climate change, advances in technology, government debt, and wars that may shift power dynamics amongst world powers are all playing out concurrently.
In five years, we could see a radically different world.
So, how do you cope with all these changes in relation to your stock market holdings?
You play defensive and lock in stable stocks.Let’s look at the three stocks here.
Johnson and Johnson (JNJ)
1/ It’s undervalued.13% decline this year.
2/ 3% dividend.60+ years of dividend growth.
3/ Extensive portfolio of medicines & medical devices.
4/ Analysts predict JNJ stock price could reach $168 by October 2024 & $187 in 2028.
5/ For the 21st year in a row, Fortune has named Johnson & Johnson as a Top 50 All-Star on its list of the World’s Most Admired Companies.
What could go wrong?
JNJ is facing legal action on its talc powder, opioid drugs, and surgical mesh products that could cost the company a lot of money, and impact sentiment on the company.
Earnings results:
Topped quarterly earnings and revenue estimates.
EPS: $2.66 vs $2.52 expected
Revenue: $21.35 billion vs. $21.04 billion expected.
Lifts full-year guidance as MedTech and pharmaceutical sales jump.
Johnson and Johnson stock forecast & price prediction for 2023 & 2024 & beyond.
Visa (V)
1/ Dominant force in digital payments. Strong financial position.Healthy balance sheet.
2/ Proactively involved with fintechs.
3/ 0.76% dividend.
4/ 61% share of the credit card market.
5/ Visa is less volatile than 75% of U.S. stocks over the last three months.
6/ EPS have increased by around 20% a year over the last 5 to 10 years.
7/ Visa works with businesses in new and evolving industries, including fintech platforms, crypto projects, and content creators. These programs may help it find traction in new areas of growth.
8/ Credit and debit card penetration in emerging markets is still low, but disposable incomes are increasing.A possible growth opportunity for Visa.
7/ Analysts predict Visa stock price could rise to $250 by the end of 2024 and $300 by the end of 2025 and be at $500 in 2030.
What could go wrong?
A severe recession resulting in lower payment volumes.
Competing technologies taking market share from Visa.
Growth opportunities missed due to regional networks/alternative payment systems.
Regulators ending the Visa/Mastercard duopoly impacting fees.
Earnings Results:
Posted better than expected fiscal Q4 earnings and revenue as payments volume, cross-border volume, and payment transactions stayed resilient.
Visa boosted its dividend by 16%.
The company announced a $25 billion stock buyback.
Net revenue for the quarter climbed to $8.61B, topping the $8.55B consensus estimate.
Alphabet (GOOGL)
1/ Google has a monopoly on Search.At 93% worldwide market share, the company is well-positioned to profit from the search industry’s expansion in the coming years.
2/ The company has huge profit margins.
3/ Digital ad sales are set to rise.(Analysts argue that the digital ad market will grow by nearly 50% to $910 billion by 2027).
4/ Google Cloud will soon become a profitable vehicle.Google Cloud is the third largest provider of cloud infrastructure services, behind only Amazon Web Services and Microsoft’s Azure.Its highly regarded data analytics capabilities will advance Google Cloud’s growth.The cloud computing market is expected to exceed $1.5 trillion by 2030, according to Grand View Research, so Google Cloud is well positioned to be Alphabet’s next major profit driver.
4/ Stock buyback initiative.
5/ Analysts predict that the stock price could rise to around $490 by 2030.
What could go wrong?
a) Google faces headline risks over anti-trust lawsuits.
b) Regulatory challenges.
c) The company loses the AI war against rival Microsoft.
d) Google’s overreliance on advertising business (may soften during a recession)
Earnings Results:
11% revenue growth in the third quarter.
Shares dropped around 7% in extended trading – the cloud business missed analysts’ expectations.Cloud revenue came in below estimates at $8.41 billion, missing the mark by more than $20 million.Once Google Cloud becomes profitable it will propel the shares much higher.
Stock price forecasts for Google in 2023, 2024 and beyond.
Earnings:Hilton Worldwide, General Dynamics, Old Dominion Freightline, T-Mobile US, Boeing, Hess, Meta Platforms, Raymond James Financial, Align Technology, Whirlpool, International Business Machines, O’Reilly Automotive.
Thursday Oct, 26
8:30 am Durable goods orders (September)
8:30 am GDP (Q3)
8:30 am Initial claims (week ended Oct. 21)
8:30 am Wholesale inventories preliminary
8:15 am ET ECB Interest Rate Decision
Previous:4.5%
Earnings:Honeywell International, Keurig Dr Pepper, Northrop Grumman, PG&E, Mastercard, Amazon, Royal Caribbean Group, Tractor Supply, United Parcel Service, Willis Towers Watson, Hasbro, Southwest Airlines, Comcast, Hershey, Intel, L3Harris Technologies, Ford Motor, Dexcom, Capital One, Chipotle Mexican Grill, Emphase Energy.
Friday, Oct, 27
8:30 am Personal consumption expenditure (September)
8:30 am Personal income (September)
8:30 am ET US Core PCE Price Index
Previous:3.9%
Earnings:Phillips 66, Chevron, AbbVie, Stanley Black & Decker, Exxon Mobile, Colgate-Palmolive, T. Rowe Price Group.
We have all seen how Bonds have been shoving stocks down the hillside.They are down but not out and could possibly rally well in the Q4. Stocks are a great hedge against inflation. Many portfolio managers and analysts are arguing that the high for the year is not in and that we could see a 4-6% gain by the end of the year.
Analysts are starting to see green shoots.Some argue that banks are bottoming just as they did in March of 2020, which ended in a year-end rally that commenced in Q4.Furthermore, they see expanding breadth for stocks.In other words, we should see more stocks rising than falling.And analysts argue that is a buy signal for the Russell 2000, retail via the SPDR S&P Retail ETF XRT and regional banks via the SPDR S&P Regional Banking KRE.Portfolio managers are also expressing interest in transports as they are deeply oversold.Included here are airlines and railroads.(That doesn’t mean you go out and buy all these stocks straight away.The bulls and bears will likely be squabbling for a while yet, so just be patient.)
On the other side of the coin are those that see the stock market moving lower.Several analysts see investor emotions taking over when they see the stock market falling and then realize something is very wrong. As this realisation becomes apparent a washout becomes inevitable as many investors decide to get out, either because they can’t take it anymore or because they expect a terrible event is close at hand – a climatic stock market drop and/or an economic depression.Cash is the best protection here. Cash reserves soften the performance drawdown, and you are well-positioned when the selling gets heated.
The high in Bond Yields is expected to peak around 5.25%.And we may not even get to that number.
The Middle Eastern conflict has created another layer of uncertainty over the market.The threat of the war escalating and drawing in allies and other neutral countries should be recognized and taken seriously. All countries need to work together to de-escalate the Middle Eastern conflict.
S&P 500
From a technical standpoint the S&P has broken weekly trendline support, so we could see more downside to around the mid 4,100’s.If you look at the S&P through an Elliott Wave lens, particularly over the last couple of years, since peaking at 4,819 in January 2022, you could interpret that it is undergoing a very complex correction structure, which is still developing and risks testing the 3,800 level over coming weeks/months.
Earnings and economic data will certainly have a strong influence over the markets this week.
Gold
The uptrend in Gold should continue and extend onto the next key chart resistance at $2,072. The next key target after that is $2,244. Support should hold around mid $1,900, but a push lower to $1900/$1880 cannot be ruled out.
Brent Crude Oil
Brent Crude displays a developing 14-month Inverse Head and Shoulders reversal formation with a potential upside target of around $126.50.A sustained break above neckline resistance at $97.85 will confirm this reversal target.
In other news:
Aid trucks have entered Gaza from Egypt, but the real challenge will be in distributing this aid where it is needed.
Israeli attacks on Gaza have increased.
The U.S. has pledged to provide Israel and Ukraine with billions of dollars in aid.
Still no Speaker in the House.
David Attenborough, 97, is back at work.
He will present the third series of the BBC’s award-winning natural history programme, Planet Earth.It will air later this year on BBC One.
My son, Alex, grew up watching Attenborough’s natural history documentaries.When Alex was aged three I started buying him Attenborough documentary DVDs and books.These included Our Planet, The Blue Planet, Life, The Life of Birds, The Life of Mammals, Life in the Undergrowth, Tiny Creatures, Life in the Freezer, Plants behaving Badly, The Private Life of Plants, and Planet Earth.It gave him a wonderful appreciation of the wonders of nature – something that he still holds today.Thomas the Tank Engine and Bob the Builder were quickly cast aside when David Attenborough became an alternative.
Global warming and the Aedes Aegypti mosquito
Around half the world’s population could be at risk from dengue due to global warming.
Where once this disease was confined to the small pockets of Asia, researchers now confirm that dengue can be found across several continents.In fact, the incidence of dengue has increased by at least 30-fold over the past 50 years.
Half a million cases were reported to the WHO in 2000, rising to 5.2 million in 2019, with the true number of annual infections now estimated to be up to 96 million.
The disease is now considered endemic in more than 100 countries globally.Global warming is driving increasingly hotter and wetter climates in which mosquitos, the main transmitter of dengue, can survive, breed, and further spread.
Dengue is already on the rise in Europe. Its spread has increased across France over the past 12 years; it was identified in more than 70 regions in 2022, compared to just six in 2010.
Analysis from Airfinity, a science data analyst company, showed that locally acquired infections in France could reach 3,000 annually by 2030.Cases of the virus have also been reported in Spain and Italy in recent years, and British experts believe it’s only a matter of time before it takes off in the UK.
It seems that the mosquito that carries dengue, the Aedes albopictus, is often transported into Europe via shipping containers or people’s cars.
In response, funding is being invested into mosquito trapping and monitoring systems at UK ports that aim to detect the insects.
Many dengue infections are asymptomatic, but the virus can occasionally cause fever, body aches, and a rash.Although most cases recover in one to two weeks, some can require hospital care and result in death.In total, 36,000 people die from the infection every year.
The mosquito that transports the dengue virus can be found in Central and Far North Queensland, so if you are ever thinking of travelling to that area of Australia taking precautions is crucial.Wear long sleeves and use insect repellent regularly.There is currently no vaccine to prevent dengue fever in Australia. (There are four different variations of the virus that cause dengue fever, which essentially means that dengue fever behaves like four different viruses, and is why scientists and researchers have struggled to make progress on dengue prevention and treatment methods.)
So far, the damage of the Middle Eastern crisis on Wall Street has been limited. It is anybody’s guess whether this escalates.
The markets are trapped in a narrow range, as the market seems to be dealt a savage hit almost every week. This keeps it swinging back and forth in a narrow range.
From a technical standpoint, a year-end rally is possible, but the market will have to sidestep multiple crisis situations to accomplish this. We all know that the market can climb a wall of worry.
Bonds are getting trashed.
Oil prices and precious metals have risen sharply because of the Middle Eastern war.
John argues that the tech sell-off will be brief, as too many people are trying to get into accelerating long term earnings driven by AI.
Let the market come to you.Be patient.
THE GLOBAL ECONOMY – JITTERS
September nonfarm payroll report rises to 336,000. Still a very resilient economy.
CPI explodes to 3.7%.
The Producer Price Index jumps 0.5%
The International Monetary Fund has raised its U.S. growth projection for this year by 0.3% points compared with its July update, to 2.1%.
Retail sales rise 0.7% in September – greater than expectations. Price increases are not stopping the consumer spending.
Car Strike expands – United Auto Workers closed Ford’s biggest plant.
China Trade drags as both imports and exports decline.
STOCKS – UNCERTAINTY
Earnings come in better than expected in big tech and financials.
JP Morgan sets new record.Buy on any dip.
Threat of a government shutdown on November 17 will continue to cap prices and risk taking.
Middle Eastern war is adding to uncertainty.
Keep positions small until some of the uncertainty is dealt with.
BONDS – CRISIS
Big swings in the U.S. Treasury prices highlight the uncertainty in this market.
10-year Treasury yields hit new 16-year highs at 4.80%. Now heading toward 5.00%
Fear of excessive borrowing is given as the reason, but real borrowing is actually declining.
The real reason according to John is that too many institutions are loading the boat with bonds at the 0.32% yield lows.
The whole falling interest rate, rising bond price trade has been delayed for six months due to hotter-than-expected economic growth at 2.40% for Q2 and the prospect of more Fed rate rises.
Keep buying 90-day T-bills, now pushing a 5.50% risk-free yield.
Junk bond ETFs (JNK) and (HYG) are holding up extremely well with a 8.74% yield.
Stand aside from (TLT) until we find the new floor.
FOREIGN CURRENCIES
USD$ soars on Middle Eastern crisis – flight to safety bid. Top approaching soon.
At new 2023 highs with the Fed’s catchcry “higher for longer” powering the greenback.
Also fuelling the U.S.$ is the approaching government shutdown.
Collapse of $ is a 2024 story.
Aussie $ collapse prompted by slowing Chinese economy not buying their energy or commodities.
Buy (FXE), (FXB), (FXA), (FXY).
ENERGY AND COMMODITIES
Oil surges because of the Middle Eastern crisis.
Saudi Arabia continues Oil supply squeeze into Q4.Price manipulation is moving prices up.
$100 a barrel is possible and higher if we get a cold winter.
The big theme of the century will be electrification. Multiple projects are already underway.
PRECIOUS METALS – FLIGHT TO SAFETY
Precious metals rocket on the back of the Middle Eastern crisis.
Gold has risen 45% over five years.
Gold is headed for $3000 by 2025.
Silver is the better play with a higher beta.
Russia and China are also stockpiling gold to sidestep international sanctions.
REAL ESTATE
New US home mortgage rates hit 17 year- high and have virtually ground to a halt.
Sales volume down to 2008 lows.
S&P Case Shiller rises to new all-time high, for sixth consecutive month as inventory shortages drive up competition.
The median home price for existing homes rose to 1.9% to $406,700 according to the National Association of Realtors (NAR)
The robust housing market suggests that while some buyers have pulled back due to high borrowing costs, demand continues to outweigh supply.
By the end of the decade, Australia could be a cashless society.In other words, instead of walking around with notes and change in our wallets, we will walk around with just our phones.
The transition to digital transactions is happening much quicker than experts first imagined as cash becomes a less popular form of payment.
Credit/debit cards and digital wallets such as Apple Pay and Google Pay are now the preferred method of payment by most customers.
It is a convenient way to transact in our day-to-day lives.
One of Australia’s major banks, the Commonwealth Bank, is predicting that the use of cash will be a thing of the past by 2026.
In 2007, 70% of consumer payments were cash and they were still 61% in 2010.
By 2022, cash payments were just 13%.
The Covid-19 pandemic popularised the use of mobile wallets when businesses avoided contact with customers by implementing strict no-cash policies.Today, around 40% of Australians are comfortable leaving home without their actual wallets or cards, using only their phone to pay.
Digital wallet payments rocketed from $746 million in 2018 to more than $ 93 billion four years later.
There are concerns over consumer privacy when using digital payments as everything we spend our money on can be seen.Using cash, on the other hand, prevents our bank or government from knowing where our money goes. Furthermore, fraud and identity theft are also an increasing threat due to our reliance on our cards/digital transactions.
Interest rates and geopolitics are prompting us to buy more Gold.
The commodity will act as a hedge against looming geopolitical risks and an expected fall in bond yields.As I write this gold now sits around $1922. Buy in small parcels.(I have been urging everyone to purchase gold in small parcels for many weeks now, particularly when gold was falling towards $1800.)(WPM), (SIL), SLV), (GOLD), (GLD).
An option trade to consider (MCD)
Mcdonald's has shed some 17% of its market value over the past three months as it declined from nearly $300 to its current level of around $250. To any trader looking at the McDonald's chart, we could say the trends are bearish with negative momentum.But a contrarian view could see it as an opportunity to be a buyer of this blue chip at a cheap valuation and play for a bounce.
MCD is showing signs of exhaustion (the RSI is oversold) and now trades at just above 20 times forward earnings, which is about a 15% discount to its historical average relative. Furthermore, its push into digital penetration with mobile ordering and delivery is expected to deliver growth of nearly 10% this year after a flat 2022.
You could look at a vertical call spread in MCD with expiration and strikes at
Dec 2023 $250/$270 or even Dec 2023 $250/$260
MCD is a suggestion for a trade idea.By the time you receive this Post, the stock may have moved, and prices changed.Check your risk/reward before entering any trade.
We have a lot to learn about longevity from The Naked Mole Rat.
Compared to other rodents, naked mole rats have unprecedented longevity; their average lifespan lies somewhere between 10 to 30 years. By comparison, similarly sized rodents are lucky if they make it to four.Not only are naked mole rats long-lived, but they are also comparatively healthier than other rodents.
We need to look at the cellular level to explain the naked mole rat’s extraordinary longevity.
Structures called telomeres, found at the ends of chromosomes, protect our DNA from damage. They normally shortage with age, but in the naked mole rate their telomeres elongate slightly as they age.They also don’t face any issues with proteasome function, which is like the cellular garbage disposal system that gets rid of old and damaged proteins that are clogging up the space.
What’s behind their mysterious long-lived lives?
Hyaluronic Acid.
It’s the kind of glue that provides mechanical support to cells and is involved in a host of important cellular functions, including cell migration and proliferation. Hyaluronic acid comes in different masses, which define its function. The low mass version of the molecule (LMM-HA) is related to inflammation and cancer metastasis. The high mass version (HMM-HA), on the other hand, has anti-inflammatory properties and helps keep the body’s tissues in order. Scientists have discovered that naked mole rats have up to ten times more high-molecular-mass hyaluronic acid in their bodies than do their close relatives, mice, or even humans.Furthermore, the hyaluronic acid produced by the naked mole rats also seems to be very good at protecting cells against harmful agents.To discover whether other rodents could benefit from the effects of the mole rat’s hyaluronan, researchers genetically modified mice so that they carried the naked mole rate version of the gene that produces the acid, hyaluronan synthase 2 gene. After studying these mice for the duration of their lifespan and paying special attention to cancer incidence, the researchers found that the genetically modified mice were far less likely to develop cancer, and experienced fewer health issues generally.
Can we replicate this in humans in the future?
Honouring the Fallen
Many Australian citizens have dropped their lives in their home country to go and fight with Ukrainians in Ukraine.Many have made the ultimate sacrifice including those pictured below.We give thanks to those men and to all those people who have fought to support the Ukrainians.I have a Ukrainian friend in London, and she tells me that her cousins – some as young as 12 have gone to the front to fight.Incredible courage!
(THERE ARE MANY NARRATIVES ABOUT THE MARKET AND THE ECONOMY)
October 16, 2023
Hello everyone,
What’s on the Economic Calendar this week:
Monday
Australia RBA meeting minutes
Previous: N/A
Time:8:30pm ET
Tuesday
Canada Inflation Rate
Previous:4%
Time: 8:30am ET
Wednesday
UK Inflation Rate
Previous: 6.7%
Time: 2:00am ET
Thursday
Japan Inflation Rate
Previous: 3.2%
Time:7:30pm ET
Friday
UK Retail Sales MoM
Previous:0.4%
Time: 2:00am ET
Earnings reports continue this week.
Tuesday October 17
Goldman Sachs (GS)
Bank of America (BAC)
Johnson & Johnson (JNJ)
United Airlines (UAL)
Wednesday October 18
Morgan Stanley (MS)
Citizens Financial Group (CFG)
Western Alliance Bancorp (WAL)
Lam Research (LRCX)
Netflix (NFLX)
Thursday October 19
American Airlines (AAL) October 19
If we are in for a prolonged period of higher interest rates, we can also foresee:
Higher oil prices
Higher government deficits
Higher defense spending and
More political division
What will keep rates high?
A strong economy
Higher fiscal deficits
More Treasury issuance to cover budget deficits.
Investment implications:
A contrarian bias toward longer-duration debt and
Investment grade tax-free municipal bonds.
OIL
The Hamas attacks on Israel plus tighter supplies, declining inventories and limited spare capacity are lining up to keep energy costs high.
Investment implications:
Stay overweight energy as strong cash flow and earnings drive benefits to the sector.
BUDGET DEFICITS
The U.S. government has racked up a budget deficit of more than $1.5 trillion.
It becomes a spiral – the market stresses out over America’s finances -> greater potential for higher interest rates, deferred social spending, credit downgrade, a weaker U.S.$ and fiscal consolidation.
DEFENCE SPENDING
Geopolitical tensions should lead to an increase in defense spending around the world. The war in Ukraine and now the war in the Middle East have heightened the need for investment in this sector.
Investment implications:
Given the geopolitical situation, you can expect an emphasis on ‘hard power.’ In other words, we could see coercive diplomacy, economic sanctions, military action, or the formation of military alliances to act as deterrence.
U.S. firms are global leaders in defense and cyber activities.
POLITICS
There is political uncertainty everywhere:
A presidential election next year
Another potential government shutdown in November
The election of the Speaker of the House
Markets hate uncertainty.
Investment implications:
A rising dollar could mean trouble for stocks (but a downward move could be close).
Another credit downgrade could rattle markets.
Another viewpoint:
We can also argue that rising yields may have done the job for the Fed, and we may not get another interest rate rise this year.The implication here is that bond market movements are working to tighten financial conditions by raising the cost of credit for companies and individuals.
The 10-year Treasury yield has reached a medium-term high and could drop by roughly 80 basis points by the end of the year, according to some analysts.
Why might this happen?
Growth could start to falter in the U.S. with the economy possibly falling into a mild recession.And this will help push inflation down more quickly than most anticipate. These movements may give the Fed enough reasons to cut rates sooner and by more than what is currently discounted in the markets.
In other news:
Australians voted NO in the Referendum held on Saturday, October 14 that would have given Indigenous Australians a voice in Parliament in the form of an advisory body.
Thoughts on the S&P 500
From an Elliott Wave perspective, we can still interpret the market to be in the early stages of a rally headed toward an Elliott Wave 5 target around the mid-4,500s in the weeks ahead.
Next resistance is at 4340/4386.
Gold
Gold has the potential to trend higher after its big jump last week. (There was a flight to safe-haven assets because of the Israeli/Hamas war.)Resistance is now at $1,960/$2,000. If Gold can clear the $2,000 level, then this precious metal can retest Chart resistance at $2,072.
(A WARMING CLIMATE IS BAD NEWS FOR THE CACAO TREE)
October 13, 2023
Hello everyone,
Does your morning routine involve a cup of coffee?
Well, be prepared. The warming climate will impact the price of those coffee beans you purchase. And ponder this - a dwindling production of chocolate may well be part of your future.
El Nino and climate change are bad news for coffee crops, which are highly sensitive to weather changes. Hotter temperatures and shifts in rainfall patterns can also damage cocoa pod development and promote the spread of pests and diseases.
The latest El Nino Southern Oscillation outlook does not look good.El Nino is expected to last from January to March 2024, with a 71% chance that it will intensify from November to January.
The knock-on effect of this is that greatly intensified and frequent El Nino could well reduce the amount of arable land for cocoa cultivation. The climate factor not only poses a threat to food security but also endangers the livelihoods of farmers.West African countries are particularly at risk from extreme weather changes.
Jonathan Haines, who is the research director at Gro Intelligence, points out that El Nino conditions “are often historically associated with drier conditions in West Africa where three-quarters of the world’s cocoa is produced.”
Africa accounts for 75% of global cocoa production, while the Americas, which includes Brazil and Ecuador, account for only 20%.Asia-Pacific produces the remaining 5% with Indonesia and Papua New Guinea being the largest producers in the region.
Cocoa comes from the seed of the cacao tree and is an essential ingredient for chocolates. But cocoa butter, which is a by-product of cocoa processing, is also widely used in the pharmaceutical industry for skincare products and cosmetics.
The financial damage of climate change will be costly for this soft commodity, since top cocoa producers like Ivory Coast, Ghana, and Indonesia, are vulnerable to extreme weather conditions.As profits from cocoa make up 70% to 100% of Ghanaian cocoa producers’ income, any decline in yields will have a substantial impact on their livelihoods.Climate change is also wreaking havoc in Indonesia where it is reducing productivity by 50%, leading to an estimated loss of $666 per hectare, affecting up to one million hectares.
Cocoa prices have already jumped significantly to “high premiums” according to the International Cocoa Organisation.
At the end of August, ICCO’s latest data showed that cocoa futures settled at $3,730 per tonne in London, and $3,633 per tonne in New York.That amounts to a 78% rise from $2,095 per tonne in London a year ago and a nearly 50% year-on-year rise from $2,427 per tonne in New York.
Prices of cocoa are at their highest in 50 years, according to a Reuters report.
Agricultural adaptation and mitigation efforts are some ways that farmers can tackle specific climate threats, but they are costly.
Private sector capital and non-profit initiatives can help alleviate the financial burden on cocoa farmers learning to adapt to climate change.The Rainforest Alliance, a non-governmental organisation, started the Restore project in Cote d’Ivoire and Ghana.The project has set aside $7 million to help 15,000 farmers manage 50,000 hectares of farmland and aims to expand tree cover in cocoa production landscapes across the two countries.
This year rain has helped ease the impact of drought to some extent in West African countries.The cacao tree thrives in humid rainforest-like conditions, relying on heavy rainfall close to the equator. But the threat of rising temperatures over the next three decades means a loss of moisture in the ground which scientists tell us will not be made up by rain. A temperature rise of just 2.1C over the next 30 years caused by global warming could spell an end for the chocolate industry worldwide, according to the US National Oceanic and Atmospheric Administration.In the face of climate change and changing weather patterns, ongoing adaptation efforts will be needed in agricultural land management if we are to maintain consistent production of soft commodities.
(PLANT EXTINCTIONS COULD THREATEN THE CREATION OF MEDICINES)
October 11, 2023
Hello everyone,
Welcome to a future world with far less plant variety.
Dr Brown is one of the researchers who works at the Royal Botanic Gardens, Kew, who, along with others,has recently published a new report called State of the World’s Plants and Fungi.
The report has warned that we could potentially lose up to half of future medicines because of plant extinctions.
Nearly half of all plants that flower are at risk, amounting to more than 100,000 while it is believed around 77% of all those as yet undescribed by science are at risk.
Some are going extinct between the time of their discovery and when they are catalogued – which takes around 16 years on average.
The main cause of the extinctions is habitat loss, such as deforestation or the construction of dams which flood areas upstream.
We must remember that nine out of ten of our medicines come from plants, so we are potentially losing up to half of our future medicines.
Professor Alexandre Antonelli, director of science at Kew, said: “We know more about the surface of Mars than we know about fungi on this planet.”
Scientists state that at the current rate of scientific description it would take 750-1000 years to catalogue all fungal species.
Scientists have described 10,200 new fungal species and more than 8,600 species of plants since the pandemic in 2020, as lockdowns gave them more time to work through the backlog of found but unclassified samples.
Plants and fungi provide the cornerstone of all ecosystems of human life, supporting our livelihoods and providing us with food, medicine, clothing, and raw materials. So, protection of areas with important plant diversity should be of utmost significance.
With only around 10% of the world’s fungal biodiversity so far described, we could be missing out on species with game changing functions – like ones with enzymes that can break down plastic or cure diseases.
Scientists hope the research will encourage policy makers to take plants and fungi into account when choosing areas to protect as part of an international goal to protect 30% of the planet by 2030 and not just focus on animals.
From destruction of habitat to futuristic transport creation.
Imagine this – a 1,200-mile underwater train line in the deep blue sea, with a view of marine life as you travel at high speeds to your destination.
This is exactly what the UAE (United Arab Emirates) have planned. It was first discussed in 2018 as a hypothetical idea, but now it’s quickly becoming a reality, and it will cost a lot of cash.
The UAE is widely known for their technology, construction, and infrastructure in the Middle East.
With this futuristic mode of transport, exchange of goods and oil exports are feasible as well as movement of people.By joining the Indian city of Mumbai with Fujairah through ultra-speed floating trains, the projects aim to boost bilateral trade. There will be export of oil to India from Fujairah port and import of excess water from Narmada River, north of Mumbai.
The total length of the rail network will be less than 2,000km but the underwater part of the construction could pose unique challenges.Feasibility studies are still being done.
Happy mid-week.
Cheers
Jacquie
Prayers for all those affected by conflict in The Middle East and Ukraine.
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