June 16
Prices keep going up.
The Mediterranean diet is good for human health. To live longer, pass on white flour and eat your beans. The more you eat, the better you feel, Toot toot.
EricTopol posted: From a first rate @NEJM review article on Diets, a quick summary on the Mediterranean diet body of evidence.
Markets and Stocks
The trend is positive. For the week, the S&P 500 rose 1.6% and Nasdaq topped that up 3%. Some traders are nervous because market leadership is narrow, essentially just the biggest technology companies. But narrow leadership does not correlate with market tops. In fact, Mike Santoli of CNBC says that worries about breadth are so pervasive that sentiment may be too negative signaling that equities are ready to pop up. I agree. And I believe short term leadership will move from big technology to industrials.
The market is experiencing a growth scare; is the economy slowing sharply? I believe that the economy will thread the needle, slower growth bringing falling inflation but no recession. Real wage growth is positive and gasoline prices are flat to down. Moreover, the wealth effect will flatter consumption.
Goldman Sachs raised its target for the S&P 500 Index for a third time.
The bank’s equity strategists led by David Kostin now see the US stock benchmark index finishing the year at 5,600, up from a 5,200 level they predicted in February. The new target implies a roughly 3% advance in the gauge from its Friday close.
Goldman’s upgraded target ties with that from UBS Group AG’s Jonathan Golub and BMO Capital Markets’ Brian Belski for the highest on Wall Street.
The upgrade in the target is “driven by milder-than-average negative earnings revisions and a higher fair value P/E multiple,” Kostin, the firm’s chief US equity strategist, wrote in a note to clients on Friday.
Kostin gamed out several other scenarios in which stocks can run even higher than his new baseline forecast. If gains broaden out and lift the S&P 500 Equal Weight Index, the main, cap-weighted benchmark could rise another 9% to 5,900 before 2024 closes out. In his most optimistic case, if mega-cap “exceptionalism” persists, the gauge could soar to 6,300 by the end of the year.
The Cleveland Fed projects that the May PCE inflation data that will be released at the end of the month should be positive for inflation and Treasuries. Headline PCE is forecast at 0.7% with core at 0.1%.
https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting
6 stocks are dominating the market but that signals nothing about future performance for the market. To me all 6 stocks look terrific.
Real wage growth is positive.
The broad market is very attractive, selling with a price earnings ratio of under 17x.
I like Corning Glass Works, GLW. My target is $50. The stock is trading at $37.
Barron’s reports: Founded in 1851, Corning makes highly engineered glass for a host of applications: Glass for TVs, PCs, and mobile phones. Glass for automotive displays and pollution control systems. Glass for vaccine vials and solar panels. And glass in the form of fiberoptic cable, which is used, among other places, in AI data centers.
Corning’s recent financial results have been ugly. Revenue has been down year over year for six straight quarters, and the June quarter will likely extend the string to seven. Declines in multiple key markets—smartphones, TVs, autos, and telecommunications—have battered the business.
But CEO Wendell Weeks thinks a turnaround is at hand, thanks to improvements in the underlying businesses along with underappreciated new opportunities. Like AI.
Weeks sees a “springboard” coming. He predicts Corning can boost annual revenue by at least $3 billion by 2026—and potentially as much as $5 billion—on top of the $13.6 billion in revenue the company reported in 2023.
The springboard framework is all about this combination of cyclical and secular growth coming together,” Weeks says. “We have this $3 billion-plus sales opportunity over the next three years in which we have high confidence. And because we already have the capacity in place to execute on that, the margins in the incremental revenue should be outstanding.” That’s an important point: Corning doesn’t need to spend a fortune here to build infrastructure.
On the cyclical side, Corning sees growth ahead in the automotive sector, for curved glass displays inside electric and autonomous vehicles, and from increased use of its gas particulate filters, widely used overseas and about to get adopted in the U.S. thanks to new Environmental Protection Agency emissions rules.
Weeks also sees a rebound coming in non-AI fiberoptic cable. That business has been down double-digits over the past year, including a 17% drop in the March quarter. But, Weeks says, it has averaged 7% growth over the long haul, and should rebound as telcos work down inventory.
Meanwhile, Weeks expects Corning to start seeing increased fiber demand next year from the rollout of a $42.5 billion federal government program known as BEAD—Broadband Equity, Access, and Deployment—to make high-speed connectivity available in underserved areas. He also sees a boost to display glass volumes from a gradual increase in average TV screen sizes.
But the big opportunity comes from AI. As Weeks notes, fiberoptic cable is crucial to every cloud data center, linking processors to each other. That is even more important for AI, where the computing power comes from the interconnection of thousands and someday millions of graphics processing units, or GPUs, made by Nvidia and others. “I have been doing this a long time,” Weeks says. “And we have a pretty unprecedented opportunity right now.”
Weeks says systems that rely on Nvidia’s popular Hopper H100 GPUs require 10 times the fiber used in a conventional server rack.
Corning formed a dedicated team four years ago to solve the problem, Weeks notes. The company invented thinner fiber, new cabling, new connectors, and a new system to tie them together. Weeks says the new approach offers 60% higher density and 70% less labor for installation. The system starts shipping this quarter.
The math should steadily improve for Corning as systems get even denser over time. When Nvidia launches its powerful new Blackwell chips later this year, the number of GPUs per rack more than doubles, to 74 from 32. That means more connections, and more fiber. When that happens, Weeks says, Corning’s revenue per rack should double.
Corning shares have rallied 25% this year, but they still trade at a relatively modest 2.3 times expected 2024 sales, and about 20 times adjusted earnings. With growth set to explode and its AI business still emerging, the undiscovered Corning story might not stay that way for long.
I will be buying GLW on Monday, tomorrow.
Politics
Polls that show Trump trimming Biden’s lead in Virginia have served as a wake-up call for state Democrats. Republicans say that if Virginia is even remotely on the table for Trump—the state hasn’t backed a Republican for president since George W. Bush in 2004—then Biden is in serious trouble in traditional battlegrounds such as Wisconsin, Michigan and Pennsylvania. See WSJ.
The Supreme Court is expected to decide two cases that could more broadly limit the power of executive agencies and threaten regulations in areas like the environment, health care and consumer safety.
The Journal reports: The Inflation Reduction Act is the political gift that keeps on giving—especially if you’re a lobby for progressive causes. We recently told you that the Environmental Protection Agency handed IRA money to an outfit backing anti-Israel protests. Turns out EPA is also funding groups that oppose immigration enforcement.
That’s the latest discovery by West Virginia Sen. Shelley Moore Capito’s office, which is probing IRA spending. The law appropriated $3 billion for Environmental and Climate Justice block grants. EPA is supposed to select “grantmakers” and “partner” organizations to spread around the largesse.
EPA tapped Fordham University as a grantmaker to distribute $50 million, in collaboration with the New York Immigration Coalition (NYIC) and the New Jersey Alliance for Immigrant Justice (NJAIJ). What does immigration have to do with climate? Nothing, though progressives say the issues “intersect” in the oppression of minority groups.
According to the EPA, Fordham and its partners will take “an intersectional approach to place frontline communities in positions of power” to advance climate justice “in disadvantaged and hard-to-reach communities and communities disproportionately impacted by climate change, pollution, and other environmental stressors.” What does that even mean?
My words: Biden’s Administration is overtly progressive. That is a major reason why he will probably lose.
His Administration is using funds appropriated to fight climate change in order to address issues of social equity. Is that gross malfeasance?
Sociology
Prevention sometimes pays off.
In this report, the Congressional Budget Office describes its initial analysis of the potential federal budgetary effects of policies that would increase treatment of hepatitis C, a liver disease that, left untreated, can lead to serious liver problems.
CBO’s analysis focused on two sample national policies that would increase treatment rates among Medicaid enrollees and thereby affect federal spending on health care. CBO focused on the Medicaid population because people at high risk for hepatitis C (including injection drug users and people who have been involved with the criminal justice system) are likely to be Medicaid beneficiaries, either at the time of treatment or in the future.
https://www.cbo.gov/publication/60407
There is a hepatitis pandemic in Florida’s prisons. I worried about getting contaminated with the virus when I used the electric razor in the prison barbershop. I always cut myself. But all inmates are tested for HIV and hepatitis before being released. Obviously, I tested negative.
Now, more than 70 percent of Black births in D.C. are to unmarried mothers, as are about 55 percent of Hispanic births. See Colbert King Washington Post.
Those percentages do not bode well for beating poverty.