“All over the world, money managers are waiting for the signal that the Fed is going to end tightening. I think everyone is on a hair trigger,” said oracle of Omaha, Warren Buffett.
Mad Hedge Technology Letter
September 20, 2024
Fiat Lux
Featured Trade:
(TECH STOCKS RECEIVE A GIFT)
($COMPQ), (NVDA)
No recession – highly bullish for technology stocks ($COMPQ) in the short term.
That is my hot take from Jerome Powell’s and the Fed’s surprise 50-point basis interest rate cut.
Tech stocks will overwhelmingly outperform the rest of the equity market because that is where the profits and earnings are.
I don’t see a situation for the ‘catch up’ trade, or if it does transpire, it will be very transitory in nature.
There is no other subsector that is about to overtake technology in terms of prestige or growth, and that is where I take comfort in believing that technology will harvest the lions’ share of the gains from the Central Bank’s interest rate cut.
The cut was a jumbo one, which means even better projections for tech share prices in the short run.
It is hard not to take a look-in back at the Magnificent 7 for another winter rally that should take the Nasdaq quite a bit higher from here.
That is why I executed a deep-in-the-money call spread on chip behemoth Nvidia (NVDA) this morning.
The tech-weighted Nasdaq index hit an all-time high in 2024 around July, with prices trading around 18,700 points, and we are around 5% from that high.
Any pullback in quality tech firms will be brought up, and I urge readers to enjoy the rally because of the unexpected jumbo hike, the rally is now pulled forward.
Highlighting the hawkish cut was the FOMC vote was 11-1, with Governor Michelle Bowman preferring a quarter-point move.
Powell pushed through a half-point move instead and ironically told reporters that the economy was great.
Unemployment numbers of around 4.2% were once considered full employment back in the day.
A half-point cut into a strong economy to pre-empt a recession is an interesting move.
It is clear they don’t want to get behind the curve after they badly botched inflation on the way up.
In most normal cases, tech stocks would rocket higher, and bond yields would sink, but the 10-year yield has gone the other way, signaling that this hawkish cut could ignite another bout of higher inflation at the long end of the yield curve.
The Nasdaq index gained 3%, showing that it can power through no matter what bonds are doing, and that has been the case since 2020.
The Japanese yen also shot higher from the 140 level to the 144 to the US dollar today.
A weaker trending yen is a highly bullish signal for the trajectory of U.S. tech stocks.
The committee expects the long-run neutral rate to be around 3%, a level that has drifted higher as the Fed has struggled to get inflation down to 2%.
Gross domestic product has been rising steadily, and the Atlanta Fed is tracking 3% growth in the third quarter based on continuing strength in consumer spending. Moreover, the Fed chose to cut even though most gauges indicate inflation well ahead of the central bank’s 2% target. The Fed’s preferred measure shows inflation running around 2.5%, well below its peak but still higher than policymakers would like.
The current jobless level is 4.2%, drifting higher over the past year, though still at a level that would be considered full employment.
A 50 basis point rate cut into an economy growing 3% per year will surely get GDP moving closer to 4%.
Think about it in terms of housing and all the buyers waiting on the sidelines waiting to get into the housing market.
Inflation is sure to come back again in the long term, but in the short term, this nudges 3% GDP to 4%, and that is highly bullish for tech stocks. This also should help unemployment stick close to the 4.2% in, which the Fed is worried about, which is a victory for equity markets.
The tech rally is here, and don’t miss out on it!
“It takes 20 years to build a reputation and five minutes to ruin it.” – Said American Investor Warren Buffett
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
(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
https://www.madhedgefundtrader.com/jacquie-munro-meeting-replay-august-2024/
Cheers
Jacquie
Global Market Comments
September 20, 2024
Fiat Lux
Featured Trade:
(THIS WILL BE YOUR BEST PERFORMING ASSET FOR THE NEXT 30 YEARS),
(IYR), (PHM), (LEN), (DHI), (TLT), (HYG), (MUB), (SPY)
Mad Hedge Biotech and Healthcare Letter
September 19, 2024
Fiat Lux
Featured Trade:
(THE KING’S SPEECH)
(ABT), (DXCM), (LLY), (NVO)
Warren Buffett once said, “Time is the friend of the wonderful company.” If that's true, Abbott Laboratories (ABT) must be Father Time's BFF because this centenarian healthcare heavyweight has been befriending our wallets for longer than most of us have been alive.
First things first: Abbott's not just any dividend stock. It's a bona fide Dividend King, having hiked its payout for over 50 consecutive years. But let's not get too misty-eyed about history.
What's got my attention is Abbott's current form. This isn't your typical sleepy pharma stock. Abbott's been flexing its muscles across multiple segments, showing growth that could very well be a worthy competition against any Silicon Valley startup.
In the first half of this year, Abbott saw positive growth in all but one segment. The laggard? Diagnostics, which took a hit as COVID-19 testing went the way of the dodo. But hey, you can't win 'em all, right?
Now, let's talk dividends. Abbott's currently yielding a respectable 1.9%, outpacing the S&P 500's measly 1.3%. With a payout ratio of 67%, there's still room for this dividend to grow.
But where's the real excitement? Two words: diabetes care.
Abbott's continuous glucose monitoring devices are hotter than a two-dollar pistol, driving 19% organic growth in the first two quarters. With diabetes becoming a bigger epidemic than we anticipated, this could be Abbott's golden goose.
Just look at the skyrocketing stocks of diabetes-focused companies like Eli Lilly (LLY) and Novo Nordisk (NVO). Different products, same lucrative market.
Abbott's FreeStyle Libre CGM system isn't just some gadget. It’s actually a genuine life-changer that's raking in $1.6 billion in quarterly sales and growing 20% year-over-year. In a market where DexCom (DXCM) is nipping at their heels, that's no small feat.
But Abbott's not resting on its laurels. They're expanding into over-the-counter CGM systems like Lingo and Libre Rio, leveraging a decade of international experience to capture more U.S. market share. It's like they're aiming to slap a diabetes monitor on every wrist in America.
And here's the kicker: the number of people living with diabetes is projected to hit 643 million by 2030 and a whopping 783 million by 2045. If that’s not the definition of a growing market, then I don’t know what is.
But Abbott isn't a one-trick pony. While they're busy trying to corner the diabetes market, they're also cooking up a storm in other areas.
Take their cardiac care lineup, for instance. Abbott's dabbling in electrophysiology with their EnSite X EP System, equipped with something called Omnipolar Technology. Sounds like something out of a sci-fi flick, right? Well, it's making cardiac mapping more precise than a Swiss watchmaker, giving arrhythmia patients a fighting chance.
But that’s not where it ends. Abbott's TriClip system is tackling tricuspid valve repair like a pro wrestler pinning an opponent. And don't get me started on their Esprit dissolvable stent. It's like the James Bond of the vascular world - it does its job and then disappears without a trace.
So, while diabetes care might be Abbott's current chart-topper right now, they've got a whole album of potential hits in the works. From glucose monitors to heart repair, Abbott's making moves that could have investors' portfolios beating as steadily as a healthy heart.
And as for you nervous nellies out there, Abbott's beta value of 0.7 suggests it's more stable than a three-legged stool. Perfect for those of you who break out in hives at the mere mention of volatility.
Now, it hasn't all been smooth sailing. Abbott recently faced a trial over claims its preterm infant formula caused a dangerous disease. But don't start panic-selling just yet.
JPMorgan and Barclays reckon the liability is likely to be smaller than a gnat's appetite. Abbott's management is confident, too, probably because the product in question accounts for a whopping... wait for it... $9 million in revenue. That's pocket change for a company like Abbott.
Looking ahead, Abbott's firing on all cylinders. They're seeing 9.3% organic revenue growth (excluding their COVID products), and they're so confident they've raised their full-year guidance.
Meanwhile, valuation-wise, Abbott's looking pretty good. With double-digit earnings growth expected and an AA-credit rating (better than some countries I could name), this stock could easily outperform the market.
So, what's the bottom line? Abbott's got the stability of a Dividend King, the growth potential of a tech startup, and more irons in the fire than a blacksmith's shop.
It's trading at a fair price, and with its track record of innovation and dividend growth, this could be your ticket to a healthier portfolio. After all, in the race for returns, slow and steady often wins more than just participation trophies. I suggest you buy the dip.
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more