Oct 3
Israel will respond forcefully against the ballistic missile attack by Iran. Israel may hit Iran’s oil export facilities. Iran exports about 2 million barrels a day but the global market is well supplied with oil, currently with up to 5 million barrels per day of spare capacity.
I would not chase the oil stocks but APA, the old Apache, looks interesting. APA is a partner in a giant oil field project located in Surinam, which importantly is adjacent to Guyana where western oil companies found a giant oil field. APA is worth a look.
Government is too big in France. Strong economic growth and large government are incompatible.
I expect the port strike to be settled within a week. Politics will force a resolution of the dispute. Follow the link to my essay for the Washington Examiner on the port strikes.
Markets and Stocks
The market should grind higher on solid economic fundamentals: rising earnings, positive economic growth, lower inflation and the Fed rate cutting cycle.
The Atlanta Fed now sees Q3 GDP growth at 2.5%.
The ADP employment report came in a little better than expected. Friday’s monthly jobs report should be okay, with a gain in jobs of 150,000.
Job openings are at a 3 month high.
Fewer people are quitting jobs, signaling uncertainty about the labor market.
Meta looks fantastic. Given its fundamentals and growth prospects, it is great value right here. Meta should report a great quarter later this month.
Apple, Alphabet and Tesla also act well. All are attractive for investment.
Nvidia is out of the limelight and that is a good thing. It should now trade on fundamentals which are excellent. My six month target is $150.
U.S. grain prices are rebounding. Deere looks great right here.
Economics
NBER working paper 33001 discusses how retail investors assess financial advice. The last sentence of the summary is especially important.
Using a randomized controlled trial we test how retail investors assess and update their priors based on different types of financial advice, which either aligns with their priors or goes against it.
We compare advice that emphasizes either the benefits of passive investment strategies (such as diversification and low fees) or active strategies (such as stock picking and market timing). We find that participants rate advice significantly higher when it aligns with their priors rather than contradicts them.
But people update their beliefs about investment strategies in the direction of the advice they receive, independent of their priors.
At the same time, there is significant heterogeneity based on the subjects’ financial literacy.
Financially more literate subjects positively update in response to seeing passive advice, but most do not update (and rate the advice negatively) when exposed to active advice.
In contrast, financially less literate subjects are strongly influenced by both types of advice.
Finally, subjects rate the advice lower if the advisor is perceived to have misaligned incentives compared to when they are more aligned.
https://www.nber.org/papers/w33001
Science
Proponents of this “obesity first” movement point to decades of research that tie obesity with more than 200 other health conditions, including heart failure, premature death and 13 types of cancer. Nearly 9 out of 10 people with Type 2 diabetes — itself a major risk factor for adverse health outcomes — have obesity or are overweight.
Dr. Wen, an emergency physician, clinical associate professor at George Washington University and author of “Lifelines: A Doctor’s Journey in the Fight for Public Health.