September 15
Markets and Stocks
Why did the market perform so well last week? For now, the market is betting on a soft landing. Both the Atlanta Fed and Dallas Fed are projecting GDP growth around 2.5%. Keep your eyes on the weekly jobless claims report. That is the best real time indicator of GDP growth. As long as claims stay near current levels of 230,000, a recession is unlikely. If claims jump toward 300,000, the economy is in trouble. This week on Tuesday we will get August retail sales data.
On Wednesday the Fed will cut. It is a 50/50 toss up between 0.25 and 0.50%. Last week a few former Fed governors talked about a 50 bps cut. I shrug my shoulders. The Fed will cut. The key questions are about a soft landing or recession in 2025 and how many rate cuts over the next 6 months.
@NickTimiraos The amount of cuts over the next few months “is going to be a lot more important than whether the first move is 25 or 50, which I think is a close call,” said Jon Faust, who served until earlier this year as a senior adviser to Powell.
“I don’t think we’re in a spot that really…
Core inflation is falling.
@NickTimiraos Economists who map the CPI and PPI into the PCE think core inflation using the Fed's preferred gauge will be around 0.13% to 0.17% in August, extending a streak of mild, target-consistent monthly readings. This is notably cooler than the August core CPI
The PCE price data will be available on September 27.
My bet is on a 2% growth economy and 100 bps of cuts by the end of January. I like the market. My five month target is 6,000.
I like the AI trade.
I like semiconductors. The chips performed well last week. I love MU at 9x.
I like the hyper scalers, Nvidia and Tesla. Autonomous driving is here. And robots are next.
I like AXP, Visa and Mastercard.
I think LLY is a fantastic investment.
I recommend a small position in a biotech ETF. With the implementation of AI, drugs to beat cancers and Alzheimer’s are coming. Emerging biotechnology is an exciting opportunity. But finding the handful of big winners is extraordinarily difficult.
Last week both the S&P 500 and also the Nasdaq Composite registered their highest returns for the current year. The S&P gained 4% and Nasdaq posted a 5% increase. Both indexes moved above their 50 day moving averages. The S&P 500 is within 0.5% of its all time high.
Investors Business Daily says: “CEO Jensen Huang said demand for the company's AI chips is "incredible" and said production of its next-generation Blackwell chips is in full swing. Nvidia stock surged, lifting other AI plays and the broader market.
IBD says Arista Networks, Broadcom, Meta, TSMC and Microsoft all look attractive. I AGREE
Interestingly, from the standpoint of the state of the economy, both Royal Caribbean and Booking Holdings look attractive. I am agnostic about both stocks.
Something to think about in the context of economic growth:
@conorsen My highest-conviction economic thought over the next 5-10 years is that the home equity is going to be tapped.
China’s steel production is at a 7 year low.
Economics
The gig economy is good for America.
A city’s unemployment rate falls once the ridesharing app Uber begins operating.
This is likely driven by workers driving for Uber while frictionally unemployed.
Uber may also allow unemployed workers to commute to new job opportunities.
25th percentile Wages also increase following Uber’s arrival to a city.
The “gig economy” is complementary to more traditional employment.
https://www.sciencedirect.com/science/article/abs/pii/S0927537124000551
See also Marginal Revolution.
Libertarian, Michael Strong writes,
What if, instead of distorted academic reputation systems such as peer review and institutional prestige, we required reputational bets or formal forecasts of future events in order to regard an academic as a credible source of information?
…We can’t afford another century in which our leading academic institutions elevate intellectuals who support beliefs that led to more than a hundred millions of unnecessary murders along with billions in unnecessary poverty and misery. (We need to hold Joe Stiglitz responsible for Venezuela now).
https://studentsforliberty.org/blog/staff/michael-strong/
See also “In My Tribe.”
Politics
Pennsylvania is the pivotal state in the battle for the White House.
@NateSilver538 LOL, Silver Bulletin model had been randomly bullish on D chances in Alaska even before this poll. Just 3 electoral votes so unlikely to matter, but 8th-highest state in our Voter Power Index (impact per marginal vote).
My question why does it take so long to count ballots in Philadelphia?
My opinion: if it takes longer than 3 days to count ballots I am suspicious of the integrity of the process. A caveat: that assumes no recount.
Science
What is the economic value of a human life in the United States?
@EricTopol There's never been a successful Rx mutation-directed pill approved for brain cancer (gliomas and astrocytomas, grade 2) that extends progression-free survival, until the one directed vs IDH mutations came along. Unfortunately, its price is $480K/year
A question: does a wealthy country with very high drug prices produce more or less life saving drugs?