Sept 28
Only 8% of workers are employed in manufacturing.
The majority of voters don’t like welfare for illegals. The majority don’t care about unintended consequences. Correct policy is to fix the border and to open wider the legal immigration door for the best and brightest. A new research paper asks whether providing large welfare payments to illegal immigrants is good policy because transfer payments give the children of illegals a step up in life. See also Marginal Revolution.
This paper studies the effects of a large welfare benefit reduction on the children in the affected families. The welfare cut targeted adult refugees who received residency in Denmark, and it reduced their disposable income by 30 percent on average over the first five years. We show that children exposed to the welfare cut during preschool and school-age obtained lower GPAs, experienced reduced well-being and overall education levels, and suffered lower employment and earnings as adults. Children in their teens at exposure faced large increases in conviction probabilities for violent and property crimes.
https://www.aeaweb.org/articles?id=10.1257/app.20230519
Markets and Stocks
I like the market. The August PCE inflation data was very slightly better than expected. The Fed will continue to cut rates going forward. Lower rates support equity valuations. The economy is growing. The Atlanta Fed sees Q3 GDP growth at 2.9%.
https://www.atlantafed.org/cqer/research/gdpnow
Very importantly, for future household spending, the personal savings rate was revised up by a significant amount. See below for a chart.
Rising earnings and falling interest rates are strong indicators of higher equity prices.
But the market is not cheap and 5-10% corrections are inevitable. Buy good stocks and invest, don’t trade.
The labor market is resilient.
Productivity growth is improving in the United States.
The personal savings rate was revised up. This is very good news.
American Express is up 77% over the past 12 months. It is up 10% since I started to write about it. AXP is a terrific long term investment.
Nvidia, Broadcom, ARM and TSMC all have great fundamentals and look good technically. See Investors Business Daily. I like the AI trade and I like the semiconductor industry, generally.
Dell HPE and MU all should do great
CAT is up 17% this quarter. I still like the stock. I also like DE and ETN.
China remains uninvestable. China will remain uninvestable until Xi Jinping creates a modest social security system for his people and until Xi stops favoring the public sector over the private sector.
For the long term I like the equity markets in India. But invest prudently, as Indian markets are white hot. I would invest through ETFs.
The iShares MSCI India ETF (INDA) hit a record Thursday, as did the First Trust India Nifty 50 Equal Weight ETF (NFTY). Both are up almost 4% in the last month.
Costco is a great investment. COST just reported a solid quarter.
Revenue of $79.7 billion was a hair shy of consensus calls for $79.9 billion. Same-store sales, a metric measuring sales growth at stores open more than a year, increased 5.4% from a year ago, falling short of estimates calling for a 5.7% increase.
Nvidia
Something to ponder:
Susquehanna Financial analyst Christopher Rolland holds a positive rating on Nvidia shares with a $160 price target — higher than the average from analysts polled by FactSet, which implies more than 29% potential upside for the chip darling. He remains bullish on Nvidia’s competitive advantages in semiconductor design, holistic AI systems and its CUDA software toolkit, which he said gives the company a 15-year lead in AI enablement tools, libraries, and operating software.
Gold and Silver are overbought but both are worth a wager on a pullback. I have changed my thinking on both because of the out of control deficit.
A Bank of America note on Wednesday said that gold could rise to $3,000 per ounce in the next 12 to 18 months. However, Bank of America ETF strategist Jared Woodard warned in the same note that gold might be “tactically overbought.”
“Despite the positive long-term outlook, we highlight some risks today. Prices are 15% above the 200-day moving average ... Historically, returns are flat 1-6 months after trading at such extremes,” Woodard said
Silver just hit its highest price in more than a decade, and growing demand and falling interest rates mean it could have more room to run.
On Thursday, silver hit $32.43 an ounce, its highest price since 2012. The metal is up 35% so far this year. That beats a 30% rally for gold, which has been trading at all time highs
https://www.barrons.com/articles/silver-gold-prices-interest-rates-china-4b24141
Coeur, CDE, is a very high risk play on gold and silver.
Coeur Mining: The company recently announced an operational update at the expanded Rochester silver-gold mine in Nevada. At Rochester, the new three-stage crushing circuit continues to provide significantly increased flexibility to serve the full range of mined ore. The three-stage crusher is now fully ramped up. With this milestone, the focus has shifted to particle sizing optimization in the second half of the year. These efforts are already exceeding expectations. sRochester is on track to achieve its full-year production targets of 4.8-6.6 million ounces of silver and 37,000-50,000 ounces of gold. It has the potential to be one of the world’s largest open-pit heap leach operations. Exploration success continues at Silvertip and Kensington, which bodes well for the company’s long-term growth. The highlights from surface and underground expansion drilling completed last year continue to support Silvertip’s status as one of the world’s highest-grade, undeveloped carbonate replacement deposits.
https://finance.yahoo.com/news/5-non-ferrous-metal-mining-130000688.html
https://stocks.apple.com/AlZonAJdrS02Kflh7GE2R8A
Economics
AI is being deployed across the economy.
Alexander Bick from the Federal Reserve Bank of St. Louis, David J. Deming from Harvard, and Adam Blandin from Vanderbilt use data from the Real-Time Population Survey to estimate the speed and intensity of the adoption of generative artificial intelligence (AI).
They find that 39% of the U.S. population aged 18-64 used generative AI in August 2024. More than 24% of workers used it at least once in the week prior to being surveyed, and nearly 1 in 9 used it every workday.
This widespread use is evident across different sectors: nearly half the workers in computational and management occupations used generative AI, and nearly 1 in 4 blue-collar workers did as well.
Generative AI has been adopted faster than computers and the internet, a trend attributed to its low cost and widespread availability. Because of its diversity of use across various fields and applications, the authors conclude that generative AI appears to be a general-purpose technology.
Sociology
Caveat Emptor
Those using marijuana for recreational purposes should remember that it has an enormous array of serious potential side effects. That includes psychosis, suicidality, and increased risk of heart attack, stroke and head and neck cancers.
https://www.washingtonpost.com/opinions/2024/09/26/medical-cannabis-recreational-marijuana-harms/