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- 👉 The Investing Week Ahead: 03/27/23
👉 The Investing Week Ahead: 03/27/23
Lululemon, real estate debt, and inflation..
Episode 5 of the Rich Habits Podcast dropped this morning!
Robert and Austin discuss making your first investment in order to begin generating passive income (dividend-paying ETFs and REITS), building your real estate portfolio, and a healthy retirement savings — give it a listen!
Spring is in full swing.
But that doesn’t mean that we can leave the ugly banking problems back in the winter.
As you can see above, banks’ exposure to risk is both complicated and multi-faceted. More than anything — commercial and industrial real estate are in focus.
Small banks hold $2.3 trillion in commercial real estate debt — or roughly 80% of commercial mortgages held by banks.
Estimated unrealized losses on total bank credit was expected to have reached $1.7 trillion at the end of 2022.
With plenty of question marks still surrounding the banking system’s strength, the question is not just about the banks themselves and keeping your money safe — but also the values of underlying assets that the banks have financed:
“The combination of lower operating income generated by office properties and a higher cost of financing, if they persist, would be expected to reduce valuations for these properties over time… This is an area of ongoing supervisory attention.”
Things change quickly. In a matter of just a few weeks, Silicon Valley Bank (SVB) went from the cool start-up bank to now having its assets and loans bought by rival First Citizens Bank.
We’re not convinced that the banking issues are behind us — but we are honestly a bit more worried about the notes on China and Russia from yesterday’s Week in Review.
The U.S. Dollar is becoming less trusted internationally, America’s greatest adversaries could be trending in the opposite direction.
Our two largest concerns are 1) the integrity of the U.S. banking system and 2) the status of the USD as the global reserve currency.
Both of them have been a bit too ‘taken for granted’ until recently.
Key Earnings Announcements:
A slower earnings week allows us to give attention to Lululemon, Micron, and Walgreens.
Monday (3/27): BioNTech, Carnival Corp., PVH Corp.
Tuesday (3/28): Dave & Buster’s, Futu, Jefferies, Lululemon, McCormick, Micron, Walgreens Boots Alliance
Wednesday (3/29): Cintas, Concentrix Corp., EVO Payments, Paychex, Restoration Hardware,
Thursday (3/30): BlackBerry, Duck Creek Technologies, EVgo, Rumble
Friday (3/31): N/A
What We’re Watching:
LULU’s earnings estimates have been upwardly revised six times in the last 90 days. Analysts expect to see remarkable EPS of $4.26 (+26.4% YoY) and revenue of $2.7 billion (+26.8% YoY).
During its December report, Micron had wider-than-expected losses and revenue that was well below expectations. Analysts are expecting an adjusted loss 66 cents per share, on revenue of $3.76 billion (-51% YoY).
After a decent quarterly report to kick off the new year, investors have mixed feelings about Walgreens heading into this week.
Many analysts see results coming in lower than the expected $1.10 earnings per share on $33.4 billion in revenue. We’re most interested to see if Walgreens will decrease its cash burn, and strive to increase cash flow.
Investor Events / Global Affairs:
TikTok Drama, Eurozone Inflation, Chinese & Japanese Economic Data
TikTok Ban Update
TikTok CEO Shou Zi Chew was grilled before Congress last week as lawmakers seek to better understand the use of Americans’ data. When it comes to a TikTok ban, it’s become clear that it’s a bit more complicated than meets the eye.
The main hope of millions is that the U.S. government can effectively encourage TikTok’s parent company, ByteDance, to sell the app to a non-Chinese company.
However, if TikTok relocated its operations entirely overseas and continued to operate — there would apparently be a whole new set of legal hurdles and considerations.
In any event — please follow me on other platforms to be safe! Here’s my Instagram, Twitter, and YouTube.
WeChat as a Comparable:
“It isn’t clear how courts would rule in any such case. At least one federal judge sided with users of the Chinese app WeChat when they challenged a ban by Mr. Trump in 2020.
WeChat is widely used by Chinese Americans to communicate with family abroad. A court found that banning the app violated the First Amendment rights of users and that forcing them to use an alternative platform wasn’t an acceptable substitute. The ban was later lifted by President Biden.” — WSJ
Eurozone Inflation
New Eurozone inflation numbers will be revealed this week.
While headline inflation is expected to slow, the underlying rate of inflation (which strips out volatile elements including food and fuel prices) is expected to accelerate.
Headline inflation eased for the fourth-straight month in February (still +8.5% YoY). Core inflation rose to 5.6% (up from 5.3% the month before).
The European Central Bank raised interest rates by +50 bps earlier this month to 3%, but some policymakers are now calling for more cautious steps — especially after seeing what’s been going on in the U.S. banking system.
Chinese and Japanese Economic Data
Chinese PMI data on Friday will be closely watched as market watchers try to gauge the strength of the recovery in the world’s second largest economy in the wake of the lifting of pandemic restrictions.
In Japan, Tokyo inflation data on Friday will be in the spotlight — the report is expected to show that inflation topped the Bank of Japan’s 2% target for the tenth straight month.
“One of the major concerns raised about China’s reopening is that the surge in spending in the country would drive up inflation. The release of China’s main inflation indicators for the beginning of 2023 – the consumer price index (CPI) and producer price index (PPI) – should assuage these fears.” — China Briefing
Major Economic Events:
Consumer Confidence, Home Prices, Home Sales, Personal Spending, a Senate Banking Hearing, and more.
The S&P Case-Shiller Home Price Index is back this week, meaning we get more fun insights across 20 major urban areas in the United States.
We’re eager to see if another major metro area will be joining Seattle and San Francisco in annual housing price declines:
Monday (3/27): Speech by Fed Gov. Jefferson
Tuesday (3/28): Consumer Confidence, FHFA Home Price Index, Retail Inventories (adv.), S&P Case-Shiller Home Price Index (20 cities), U.S. Trade Balance (adv.), Wholesale Inventories (adv.)
Wednesday (3/29): Pending U.S. Home Sales
Thursday (3/30): GDP (2nd revision), Speech by Fed President Collins
Friday (3/31): Consumer Sentiment (final), Core PCE Index & PCE Index, Personal Income, Personal Spending, Speeches by Fed Gov. Cook, Fed Gov. Waller, & Fed President Williams
Senate Banking Committee Hearing:
They’ll be holding a hearing on bank failures, with the witness list including FDIC Chairman Martin Gruenberg, Federal Reserve Vice Chairman Michael Barr, and Treasury Undersecretary Nellie Liang.
Events-Driven Winners:
Which stocks moved the most last week.
Our friends at LevelFields scrub through thousands of data points each week to determine how events impact stock prices.
Accenture Cuts 19,000 Jobs
About 2.5% of Accenture’s (ACN) workforce will be removed over the next 18 months. The company said it expects to incur $1.2 billion in employee severance and other personnel costs, and it will spend another $300 million on office space consolidation.
The consulting giant saw shares surge, despite having lowered revenue forecasts.
CEO Julie Sweet said that the firm had “identified an opportunity to go after more structural costs” and directly address “compounding wage inflation.”
If you’re starting your investing journey or are interested in buying T-bills yielding 5% or more, consider visiting Public.com.
Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
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