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  • 👉 The Investing Week Ahead: 10/24/22

👉 The Investing Week Ahead: 10/24/22

The most eventful week remaining in 2022..

Inflation is the gift that keeps on giving.

What’s twisted about inflationary pressure is that us normal folks cannot escape it — but government programs can simply print more money and increase their outlays.

Let’s take Social Security for example. Inflation has hovered around +8%, so let’s just go ahead and increase the Social Security payouts by +8.7% next year. No problem!

This is why inflation can be so suffocating to the currency protection of a country. When governments get too big, too much is guaranteed. When too much is guaranteed, it’s impossible to reverse the programs.

When it’s impossible to reverse programs, the ‘mandatory’ spending of a country reaches unsustainable levels — which is exactly how things are shaping up for the USA:

Alright — why should I care?

It makes no difference to us if you love or hate seeing the government getting bigger and bigger each year. All are welcome in the humble abode we call Rate of Return!

What you should care about is that the IRS just made the largest ever increase to tax-advantaged retirement plans. Here’s a WSJ article that’s a bit easier to digest.

To keep up with inflation, the employee contribution limit for 401(k) and similar workplace plans will jump +$2,000 to $22,500 for 2023. The amount taxpayers can contribute to an individual retirement account will be $6,500 for 2023, up from $6,000.

We know we’ve been plenty bearish lately with our macro insights — but we are very excited about the extra ability to invest with tax advantages! Little victories are important to celebrate, especially considering folks our age likely will never see any of their Social Security benefits.

Deadlines:

For those w/ 401(k)s through employers — you have until the end of the calendar year to make your contributions.

For those w/ Individual Retirement Accounts (IRAs) — max contributions for 2022 can be made by April 18th, 2023 (the tax filing deadline).

Key Earnings Announcements:

Amazon, Apple, Google, Microsoft, and all the other cool kids on the block. This is the biggest week of earnings for the rest of 2022.

Monday (10/24): Discover, Logitech, Philips

Tuesday (10/25): 3M, Alphabet, Chipotle, Coca-Cola, Enphase, GE, GM, Halliburton, JetBlue, Microsoft, Raytheon Technologies, Skechers, Spotify, UPS, Valero, Visa

Wednesday (10/26): Boeing, Bristol-Myers, Ford, General Dynamics, Hess, Hilton, Kraft Heinz, Meta, ServiceNow, Waste Management

Thursday (10/27): Altria, Amazon, Apple, Caterpillar, Comcast, Credit Suisse, Gilead Intel, Mastercard, McDonald’s, Merck, Pinterest, Shopify, T-Mobile, US Steel

Friday (10/28): Abbvie, Chevron, Colgate-Palmolive, ExxonMobil

What We’re Watching:

On a year-over-year basis, the S&P 500 is reporting its lowest earnings growth since Q3 2020 so far during this earnings season. If things are going to improve — it’s up to these giants below!

The chart above is outdated by a few days, but the point still remains — Google’s stock price is as disconnected as it has ever been from its free cash flow projections. While there may be some more pain ahead for Google in the coming months, we expect this to be one of the biggest ‘no-brainer’ buys looking back in a few years. The company is set to face more legal roadblocks regarding antitrust concerns in the digital ads market. Some short-term volatility could be on the table, but Google is a priority buy for us in the coming months. Oh, and Nancy Pelosi’s husband just exercised options to acquire millions of Google stock. 

It’d be great to hear some further details on the pending purchase of Activision Blizzard (ATVI). Click here to read further details about the trade — which Warren Buffett bet $1.2B on going through. 

Shortly after revealing the iPhone 14 — Apple announced major shipping delays for all models and configurations. An analyst at TF International Securities, a financial services group in the Asia-Pacific region, noted that there were “lackluster” pre-order results. Apparently they were worse than the most recent release of the iPhone SE and iPhone 13 Mini. Being one of the most reliant US companies on the Chinese supply chain — we’re curious to hear if Apple has anything to say about the CCP closing its curtains.

Amazon has been trapped in a consolidation window between $105-$140 since May 2022. The difficulty with this beautiful, yet massive, company is that uncertainties with inflation, supply chains, and currency exchange rates all impact Amazon to a greater extent than most other companies. With a profit margin that is set to remain under 1% for at least the next few years, and the expenses of AWS and Prime Video marketing — unanticipated cuts into profitability remain a risk for Amazon. 

We love the company and hope to add to our positions (hopefully) lower.

Investor Events / Global Affairs

A mysterious press conference, China’s crazy activity of late, Japan’s questionable market intervention, and the Twitter deal deadline approaches.

  • Trump Indictment Coming?

At 1:30pm ET this afternoon — Attorney General Garland, FBI Director Wray, and NatSec AAG Olsen will be hosting a press conference about “alleged activity by a nation-state actor in the US.”

We’re curious to see if this is about Trump, especially ahead of midterm elections.

We’ll be interested to see if Trump will be indicted for January 6th developments or anything found in the Mar-a-Lago raids. If that’s the case — let’s see if my video turns out to be relevant! I made the case that the stock market may not have priced in the Republican frontrunner being unable to run for election.

  • China Favors the State Over the Private Sector

As you can see above, the Hang Seng Index has sank to a 13-year low — matching up quite nicely with the financial crisis of 2008-2009. This response comes after President Xi Jinping strengthened his grip on power with key loyalists and signaled “no let-up in the security of private businesses.”

It seems that President Xi is ready for war at any moment and does not care about the well-being of Chinese based companies. Just check the NASDAQ Golden Dragon China Index — which is a basket of 65 Chinese Stocks:

The More You Know:

We’ve been saying for months now that you should never trust economic data that comes out of China. Interesting to see this tidbit below, and we’ll be remain on-our-toes regarding Chinese developments. More details can be found in the most recent Week in Review.

  • Japan FX Intervention

“Japan’s FX intervention = quantitative tightening. $50bn of dollar liquidity sucked out of the system as they sell their US treasuries to fund it. BOJ’s actions could arguably strengthen the dollar, exacerbate yield differentials, and add stress to USD funding, shown above” — Valeria Tytel, Bloomberg

Long story short — the Bank of Japan seems to be intervening with its currency by dumping USD and buying back more Japanese Yen (JPY). Japan’s Ministry of Finance has declined to comment on the speculation of intervention. US Treasury Secretary Yellen recently noted that she’s “unaware of Japan FOREX intervention” and that “Tokyo hasn’t informed me.”

As you can see below, the JPY has been in a free fall against the USD over the last couple of years. Instead of raising rates, Japan has attempted to prop up its own currency. It doesn’t seem to be working. Things could get ugly in Tokyo.

Not Believing in Coincidences:

This morning, Japan’s Economy Minister randomly stepped down from his position. While this could just be interesting timing, it seems pretty unlikely that the resignation isn’t related to the economic mess that Japan currently faces.

  • Twitter Deadline Approaching

Elon Musk has until Friday evening to close his $44 billion acquisition of Twitter or face an uphill legal battle beginning next month.Holders of Tesla (TSLA) and Twitter (TWTR) should be closely watching the developments of the deal’s final closing.

The deal will close on Friday…If it doesn’t, we will be in trial a week or so later and – unless Musk has a very real and new excuse – the chancellor [McCormick] will not be happy to see them. If this goes to trial, absent the federal government big-footing the process through an ill-conceived CFIUS order, Musk will be ordered to do this deal.” — Brian Quinn, Boston College Law Professor

Major Economic Events

Manufacturing & Services reports from Monday morning, and a fresh GDP print is on the menu.

Both the US Manufacturing & Services PMI results were disappointing this morning… the labor market could be showing some cracks sooner rather than later:

Monday (Reported This Morning): S&P 500 US Manufacturing PMI (Expected: 51, Result: 49.9), S&P 500 US Services PMI (Expected: 49.2, Result: 46.6)

Tuesday (10/25): Consumer Confidence Index, S&P US Home Price Index

Wednesday (10/26): New Home Sales

Thursday (10/27): Durable Goods Orders, Q3 GDP (First Estimate)

Friday (10/28): Consumer Spending, Disposable Income, Employment Cost Index, PCE Price Index, Pending Home Sales, UMich Consumer Sentiment Index

GDP Expectations Are…High:

After two consecutive quarters of negative GDP growth, economists are predicting a GDP growth of +2.3% annualized for Q3. According to Yahoo Finance, the rebound is expected to be attributed to a rebound in net exports and technical factors lifting inventory numbers.

“But the outlook for the first half of next year has materially darkened, and the chance of a brief recession has increased, thanks to the substantial and broad tightening of financial conditions.” — Ian Shepherdson, Chief Economist @ Pantheon Economics

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.

Rather quietly, Lockheed Martin (LMT) has had a rock-solid year. The ongoing war has certainly been the catalyst, and just this morning the company secured some $15 million in additional weapons contracts (Link 1, Link 2).

It seems like defense stock-holders expect war to carry on and major contracts to continue to be signed.

If you’re starting your investing journey or want to change to a cleaner, social-focused investing platform, 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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