To The Moon

Public Holidays (China, Hong Kong, Singapore & the US)

China's golden week - 3rd to 7th Oct 2022

Hong Kong National Day - 4th Oct 2022

Earnings Calendar

Earnings for week starting 03 Oct 2022 by Earnings Whispers

Earnings will start this week. The company ofpersonalinterest for me is Levi's.

Levi's

LEVI stock has fallen 42.12% from a year ago and currently, is hugging the 52-week low of 14.44. From the peak of 28.62 in Dec 2022, the stock has been on a decline.

From the forecast, Investing has a forecast of 0.3719 and 1.6B for their EPS and revenue respectively. Despite meeting/beating the forecast for the last few quarters, the stock has been falling from the height in late Dec 2021.  While P/E ratio of 11.87 looks to be affordable, is it a good time to enter for this company? Will the stock be able to beat the current downtrend? Let us monitor accordingly.

News and my muse

Market turns to goods when in-person service is not available during Covid19. Now, people turn to experience, reducing the demands for goods as travel opens up. Where is the spending heading right now?

In mid-2022, adjustable-rate mortgages made up nearly 10% of all new home loan applications, according to the Mortgage Bankers Association (MBA).

Bloomberg reports that the global container shipping industry is cutting back on capacity by reducing the number of sailings. American & European consumers seem to spend less than before because of inflation & post-COVID-19 preference for services. “Consumer spending patterns have both softened and shifted away from goods-heavy pandemic-era patterns and more towards the services and experiences unavailable during the Covid outbreaks,” Maersk, the world’s No. 2 container carrier, told Bloomberg.

With Winter Coming, Europe Is Walking Off a Cliff Europeans won’t escape their energy crisis as long as ideology trumps basic math. Renewable is not sufficient and we should revisit nuclear if we can manage the risks involved.

The supply chain is one of the functions that we need to manage, a vital part of the service experience. What you spend on a broken supply chain could bleed away your profits & resources. If you need some advice, do reach out. Drop me a message.

WSJ - Nike said inventories rose 44% to $9.7 billion in the latest quarter, & higher discounts & freight costs squeezed profit margins. Executives said they would mark down more goods, heading into the holidays.

WSJ - David Malpass said the challenges for the developing world are shaped by higher food, fertilizer and energy prices caused by the war in Ukraine, as well as rising interest rates, currency depreciation and capital outflows.

CNBC - The Unite union currently striking at the Port of Liverpool has announced a second strike 11-17 Oct. The US represents 30% of Port of Liverpool volume (about $1 billion in weekly trade).

Reuters - Nord stream pipelines are damaged. In June, EU has turned to Egypt and Israel for energy alternatives. Hope that the situation can be solved soon.

Menker cited five major factors occurring simultaneously that are “each individually extraordinary.” They are a Lack of fertilizer, climate disruptions, Record-low inventories in cooking oils, Record-low inventories of grains & Logistical bottlenecks.

CNBC - "Merry go round' passing debt from one to another. In the end, the government will need to finance this from somewhere else, putting the burden back on the 158 million taxpayers. Does this solve the root cause?

one man's debt is another man's assets. debt cancellation could be inflationary in consequence.

Let us treat news, economic data & earnings as data. We should not get emotional with data. Let us look beyond delivery, into their content & intent. The key is to get a realistic view so that we can navigate accordingly.

NYPost - Goldman Sachs begins layoffs.

Alphabet (GOOGL), the parent company of Google, wants to avoid unpleasant surprises. The firm is convinced that a sharp slowdown in growth will have an impact on advertising revenues, its main source of income.

US 2021 infrastructure report ... https://infrastructurereportcard.org. Overall: C- Over a ten-year period, the total investment gap is nearly $2.59 trillion.

Economic Calendar

With China closed for their Golden week (for the entire week of 3rd to 7th October), let us continue to pay attention to their Caixin Manufacturing PMI and Manufacturing PMI on Friday. These will paint a "forecast" for coming productions. If the figure is lesser than expected, we can expect future market/economy to be "weakening".

For the US, let us monitor these few economic indicators:

• JOLTs job openings is expecting 10.65M job openings in the coming forecast. A higher number is usually bullish for the market. Let us not forget that it is not just about having a job, but a job that is adequate to pay the bills on hand. Thus, if a senior banker is looking for a work with a similar pay package, the availability of F&B work is unlikely to be of interest for him/her.
• The initial jobless claims and unemployment rate (September) will be important data points for the Fed as they seek to manage both inflation and unemployment. This will be taken into consideration for the next rate hike as this will be seen as an indicator for the next rate announcement.
• For the U.S. ISM Manufacturing Purchasing Managers Index (PMI), investing dot com explains the breakdown of this:

The PMI is a composite index based on the seasonally adjusted diffusion indices for five of the indicators with varying weights: New Orders --30% Production --25% Employment --20% Supplier Deliveries --15% and Inventories -- 10%.

A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD.

• Crude oil inventory is an important indication of future demand. Thus, if there is higher inventory than the forecast, it is usually a bearish indicator about the coming demands.

Market Outlook

S&P500 1D chart as of 01 Oct 2022

Observations from the charts above:

[MA - moving average; EMA - exponential moving average]

• the stochastic indicator looks to be trending down though it is approaching a potential bottom. Let us not forget stochastic can be ranging sideways (along the bottom) with prices continuing to drop.
• the MACD indicator, the drop should continue as we await the bottom cross-over. In the near future, we can expect a downtrend.
• Both MA 50 & MA 200 are pointing to a downward trend (for both short/mid and long term). The last few 1D candles are below both MA50 & MA200, an implication of a downtrend.
• EMA lines are still pointing downwards and the lines look to be spreading (in a fanning-out pattern) - implying strength in the current "downtrend".
• The average trading volume was 3.76B. For the last week, the downtrend has garnered a trading volume of 4.89B, 4.58B, 4.68B, 4.68B & 5.65B from Monday to Friday. This implies that the current "down" trend continues to carry momentum into the current week.

from the technicals, it does point to a downtrend though we can also expect potential bottoming up.

My investing muse ... ...

With the damages to Nord stream pipeline, Europe looks to be heading quickly into a recession. Regardless of the culprit, the energy crisis will have short term impact with the gas supplies affected. While there are speculations of the potential perpetuators, it is best for the "official" report to be issued.

With this, Europe's dreaded winter and energy crisis may have started. With the news of high inflation reported by various countries, the strain on the people will worsen. The energy costs inflation will be passed on eventually to the consumers and thus, the energy situation should be inflationary in consequence.

With Russian annexation of the 4 regions in Ukraine, Russia has drawn the lines to allow the "conflict" to be official with Ukraine. For Ukraine, it is not just these 4 regions but some have speculated that even Crimea region is one of the targets.

For most of us, we would be reading the narratives from western news agencies. Thus, we need to understand that the news may have some "bias". It does not excuse any countries for the wrongs but it does encourage a certain narratives. President Putin may not be one who "bluffs" and thus, we need to measure his words with objectivity. Having NATO at the doorstep of Russia is what he does not want. If this happens with Finland, Ukraine and other countries adjacent to Russia, we cannot assume that he would be "merely" words. We do not know how desperate is he. At desperate times, Presiden Putin could turn to (desperate) measures not limited to chemical weapons or nukes. We should not assume that he would not use nukes having quoted USA setting the precedence. Rather, we should assume that he would and prepare accordingly.

In this case, China may be key to reduce the tensions or moderate the negotiations.

Article from World Bank

With more countries (developing ones especially) facing challenges in food, fuel (energy) and finances, it is even more needful for the countries to work together rather than against one another. With weather extremities, supplies and supply chain challenges, we can expect the situation to worsen for many countries. It is a time to work together.

While we hope for common sense to prevail but it is necessary for us to be prepared for the worst. The best time to invest is when the market is most fearful. Thus I am looking forward to pounce on great bargains. It is time to shortlist great companies. Let us spend within our means, invest with what we can afford to lose and save "cash for crash". When the chance comes, let us "hit hard", buy great companies at good discounts and then, we hold and allow time to do her compounding magic.

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