19th September
The Fed has cut rates, the economy is growing, the outlook is rosy. Fill your boots with quality. Go my son.
Markets and Stocks
The Federal Reserve cut rates by 50 basis points or 0.5%. Importantly, the Fed signaled that it will reduce rates by a further half percentage point by year end, bringing the Fed funds rate to around 4.375% by December 31.
The Fed’s statement read in part:
“The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance.”
The decision to ease came “in light of progress on inflation and the balance of risks.” The FOMC vote came by an 11-1 vote, with Governor Michelle Bowman preferring a quarter-point move.
Natural Gas is a crown jewel of the U.S. economy. Gas and nuclear energy will power the AI revolution.
The Atlanta Fed raised its Q3 GDP forecast to 3%.
https://www.atlantafed.org/cqer/research/gdpnow
@carlquintanilla JPMORGAN: “.. Today’s US retail sales report reaffirmed that the US consumer is alive and well, pointing to an above 3%ar gain in real [i.e., inflation-adjusted] consumption this quarter.”
My six month target for the S&P 500 is 6,000. Over the next six months or so the Fed will cut rates by about 1.25%. Lower rates and rising earnings are positive for equities. I don’t believe that stocks are over valued. I think the hyper scalers should sell at 30X. My top three picks among the biggest names are Nvidia, Apple and Meta but I like them all. That includes Tesla.
Naysayers on Apple are upset that AI is not embedded in the new phones. But it will be. I would rather be early than late.
The Blackwell platform launch is on schedule. My end of January target on Nvidia is $150, up 25% from current levels.
I am staying with semiconductors.
GS, BAC and JPM look good because I anticipate a strong capital markets cycle in 2025.
AXP, Visa and Mastercard all hit 52-week highs on Tuesday.
Visa is up 9% in a month.
Mastercard is up about 7% in a month.
American Express is up 5.4% in a month.
Recession risk is receding.
Mortgage applications are surging as interest rates fall. The home builders are on fire. I like Toll Brothers.
Among industrials my favorites are CAT, DE and ETN.
My target on Rolls Royce is $12, almost a double from the current price.
And I am a big believer in the uranium trade.
Economics
In 2001 Federal debt held by the public stood at $3.3 trillion, about 33% of gross domestic product.
Over the next two decades, the combination of tax cuts, spending increases, costly wars and the fiscal pressure of an aging population reversed this trend. The national debt held by the public is now above $28 trillion and is 99% of GDP.
The 2024 budget deficit alone will be nearly $2 trillion, which is 7% of GDP. The Congressional Budget Office projects that by 2035 debt held by the public will top $50 trillion and total debt will equal 122% of GDP.
Servicing the deficit costs 3% of GDP each year. About 30% of Treasuries issued to fund the deficit are held by international investors and governments.
What would happen if they said no more ? Interest rates would rocket.
Both candidates are not serious about the deficit. A crisis is coming, when is the question.
Health
Once again, coffee, tea and and caffeine consumption linked with reduced cardiometabolic diseases @EricTopol
https://t.co/RqWBdFHvf6
https://academic.oup.com/jcem/article-abstract/doi/10.1210/clinem/dgae552/7754545
Sociology
I have been home six years. Thank you to my children for standing by me and to everyone that supports me. The life of an ex-felon is not straight forward. Don’t drink and drive.