June 13
I think Sunnova, NOVA, will double from current levels, from $6 to $12. But NOVA is high risk.
My target on GLW is $50. The stock is trading at $38.
The @TheEconomist conducted an exhaustive data investigation into claims that the NYT makes it more difficult for books by right-wing authors to appear on NYT Best Seller List regardless of sales numbers.
Its conclusion: that bias is real and clear:
https://t.co/dNoUo8PhFx https://x.com/ggreenwald/status/1800609564586320201?s=66&t=hi3LjJ8kVbN50WgSIEfnAg
The New York Times is eating itself.
Markets and Stocks
The Fed's catch-22: not wanting to cut rates without more convincing evidence their policy stance is as restrictive as they think it is versus concern it will be too late to avoid an employment downturn by the time they see the evidence.
The Fed will cut in September.
The CPI inflation report delivered a positive surprise, with headline inflation flat at 0 and core up 0.2%. Both readings were one tick better than expected.
The good inflation news is causing a strong rally in the 10 year Treasury. The yield on the 10 year has dropped from around 4.7% to 4.29% over the past week. That is a powerful move. I expect good inflation news to continue when the PPI is reported tomorrow and when the PCE is released on June 28.
Lower yields are positive for equities.
Microsoft, Apple and Nvidia have a 20% weighting in the S&P 500. Each of the big three is justifiably selling with a price earnings multiple of around 30-35x. The big 3 pull the multiple for the index to around 22x. That is not expensive. The broad market is selling around 16x.
The broad market is very attractive. I think the yield on the 10 year will fall below 4%.
I like big technology but over the next several weeks, I think we will see superior performance from banks, BAC, JPM, FITB and WAL.
I am pounding the table on CAT, DE and ETN.
Corning, GLW, will ride the AI wave, as will, DELL, HPE and MU.
I like the market right here.
The market liked Apple’s AI announcement. Positive price action in Apple is great for the market.
Apple shares popped 5% to a new record high of around $203 per share on Tuesday, a day after the company announced its long-awaited push into artificial intelligence at its annual developer conference on Monday.
At its annual software developer conference on Monday, Apple showed a host of enhancements coming this fall to iOS 18, its operating system powering iPhones. The new tools include a revamped version of its voice assistant, Siri, that is easier to talk to and an A.I. system that will generate images, create summaries of web articles and craft responses to text messages and emails.
Apple’s news followed Google’s Android announcements last month, which included an A.I. system that automatically summarizes audio transcripts, detects whether a phone conversation is likely a scam and helps students with homework.
AI is a big deal. Nvidia remains a very attractive investment.
The Cleveland Fed forecasts continued improvement in core PCE prints. For the May core PCE report the Cleveland Fed sees 0.23% inflation and for June its expectation is 0.22% for core PCE. The May report will be out right at the end of this month.
Oracle is also a great investment. Abacus Research has been doing great work on ORCL.
Oracle Corp. reported better-than-expected bookings, suggesting continued momentum for the company’s effort to compete in cloud computing against its larger tech rivals.
Separately, Oracle announced cloud partnership deals with startup OpenAI, Microsoft Corp. and Alphabet Inc.’s Google. The shares jumped about 9% in extended trading.
Total remaining performance obligations, a measure of future contracted sales, increased 44% to $98 billion in the fiscal fourth quarter, the company said Tuesday in a statement. Analysts, on average, estimated $73.9 billion. See Bloomberg.
Oracle will be a big buyer of Nvidia’s chips
There is strong pent up demand for U.S. Treasuries.
Demand in an auction of 10-year debt was strong, with the bid-to-cover ratio of 2.67 being the highest since February 2022 — the month before the start of the tightening cycle. See Bloomberg.
Demand for EVs remains lackluster. See the announcement by GM.
If the price is right, U.S. oil companies will bring oil out of the ground. According to research by the Dallas Fed, the clearing price for drilling is around $65 WTI. Currently, WTI is trading at $78.
As with everything else in the world, costs have gone up. So now, on average, firms need $64 a barrel to be profitable. That’s up a couple of dollars when this question was asked last year. And although it varies from shell play to shell play, the range is about $59 to $70 there.
The U.S. Supreme Court will not allow states to impede the development of AI.
AI is part of interstate commerce and Congress regulates interstate commerce. The Constitution does not authorize states to fill a regulatory vacuum.
For long term investors, India is a good investment.
Economics
Tyler Cowen at Marginal Revolution quotes Adam Smith.
It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens.
My words: Today, beggars depend chiefly on the government and that is a terrible thing. Dependency is morally degrading, no shit.
This passage is almost invariably cited as a statement of the potential social efficacy of self-interest. But notice the strength of its suggestion that dependence upon the benevolence of others is morally degrading and, hence, something to be avoided if possible.
Hegel insisted that supporting oneself by earning a living is one of the most important ways in which men get a sense of themselves as autonomous individuals. What Hegel called “the ethic of bourgeois society,” includes a commitment to “the activity of supporting oneself through reason and industriousness.
My words: no free riding.
Politics
The deficit raises interest rates and the cost of capital; consequently, investment is reduced. Lower investment means reduced productivity growth and a lower standard of living for everyone.
How difficult is this to understand?
Taxing corporations and increasing taxes on the most productive who have a marginal propensity to save lowers investment.
How difficult is this to understand?
Excessive regulation reduces investment.
How difficult is this to understand?