- GRIT
- Posts
- 👉 The Investing Week Ahead: 7/31/23
👉 The Investing Week Ahead: 7/31/23
The multi-trillion dollar 'steroid injector' of the global economy...
Happy Monday.
With July coming to a close — here’s your friendly reminder to cut those subscriptions that you don’t use or care much about.
Alternatively — see what subscriptions you could be getting for cheaper or even for free.
If you already pay for Amazon Prime and Spotify for example — there can be interconnected discounts for platforms like Discovery+ and Hulu.
Let’s dive into the Investing Week Ahead!
Key Earnings Announcements:
Phones, packages, and rides home.
Monday (7/31): Arista, Avis Budget Group, Diamondback Energy, ImmunoGen, ON Semiconductor, SoFi, Symbiotic, Transocean, ZoomInfo
Tuesday (8/1): Altria, AMD, Caterpillar, Devon Energy, JetBlue, Norwegian Cruise Line, Merck, MicroStrategy, Pfizer, Pinterest, Starbucks, Uber
Wednesday (8/2): APA Corp., Builders FirstSource, Cameco, CVS Health, Etsy, Generac, Humana, Kraft Heinz, MercadoLibre, Occidental Petroleum, PayPal, Qualcomm, Robinhood, Shopify, Teva, The Carlyle Group, Unity
Thursday (8/3): ABInBev, Airbnb, Amazon, Apple, Block, BR Petrobras, Cigna, Cloudflare, Coinbase, ConocoPhillips, DraftKings, Expedia, Fortinet, Hasbro, Moderna, Regeneron, Warner Bros Discovery, Wayfair
Friday (8/4): Dominion Energy, Enbridge, Fisker, FuboTV, Magna, Nikola
What We’re Watching:
Recently surpassing a $3 trillion market cap — Apple stock has soared nearly +50% this year. Michael Ng of Goldman Sachs expects outperformance, noting that “growing iPhone installed base serves as the foundation for growing monetization per user driven by ASP (average selling price) increase.”
Investors are eager to hear about the health of Amazon Web Services (AWS), as well as a probable FTC antitrust lawsuit that will attempt to breakup the company.
Back in May, I let subscribers know that Uber was one of my favorite stocks. Since that post — the stock is up +26%.
We’re excited to see Q2 updates, particularly in Gross Bookings and the company’s quest for profitability. A small beat here could get investors very excited.
Investor Events / Global Affairs:
You should care about the Japanese Central Bank, it’s also the cheapest time ever to buy a put option, relatively speaking.
Pay Attention to Japan
“The Bank of Japan stepped into the bond market, sending a message that it isn't done with monetary easing, despite its decision Friday to let government-bond yields rise.
The yield on 10-year Japanese government bonds stabilized at 0.6% after the central bank announced special bond purchases early Monday to stop sharp yield rises. The BOJ's move was seen as a hint that Friday's policy change wouldn't foretell a quick rise in interest rates, meaning the rate gap between Japan and the U.S. would remain wide for some time.
The result was a return to the basic trend of the past year: a weaker yen, since low interest rates make yen-based investments less attractive, and stronger stock prices, since Japanese exporters benefit from a weaker currency.”
Explanation, please? The Bank of Japan is keeping the Yen artificially cheap to borrow. This helps with keeping exports high, managing inflation in the short-term, and limits the pain of the gross amount of debt that Japan technically owes themselves.
For many years — institutions have been partaking in the Yen Carry Trade. This means that you borrow Yen and sell US bonds or buy US equities. They are borrowing a cheap currency (Japanese Yen), and swapping it to buy something with a better yield in another country (USA). If you want to totally nerd out — here’s a helpful link from the end of the Great Financial Crisis.
OK, who cares? Well — those that do the carry trading sure do.
The BOJ recently tried to issue bonds and nobody wanted to buy them. As a result, they bought more of their own debt once again. The BOJ sells USD to buy Japanese bonds, causing the Yen to rise against the dollar (below). The carry trade becomes more expensive when this happens.
“Japan’s interest rates have stayed low while central banks elsewhere are raising rates to regain inflation control. As a result, its currency is falling like a stone. Indeed, the Japanese yen has lost more than 20% of its value against the dollar since the beginning of 2021. Meanwhile, to keep long-term interest rates at close to zero at a time of rising world interest rates, the BOJ has had to intervene heavily in the Japanese government bond market. That in turn has seen the BOJ’s balance sheet swell to approximately 130% of Japan’s GDP.”
For the first time in eight years — Japan’s headline inflation surpassed that of the United States in June. Japan has been willing to devalue its own currency for quite some time because 1) they didn’t have much of an inflation problem and 2) it allows them to keep their global position of financial power.
Now — they have an inflation problem. Japan has been a consistent liquidity ‘steroid injection’ for the global economy, but what happens if / when that has to change? Keep in mind, Japan is the largest foreign holder of US Treasuries.
"All these markets are linked together in terms of global liquidity flows. People borrow in yen to buy dollars, dollars sit around looking for something to do, people say we might buy Treasuries or Apple.”
— Simon Edelsten, Global Equities Fund Manager at Artemis
"They're essentially digging themselves a deeper hole in terms of making it very, very difficult for the market to take away simple things. They're trying to control too many variables.”
Cheapest Ever Cost of Buying a Put
The volume of call options has outpaced put options by more than 8 million contracts on a 10-day moving basis. For every $100 in notional — the value an options contract covers — investors now pay only $3.50 for an S&P 500 put option expiring a year from now with a strike price 5% below current levels, data compiled by Bank of America show. That’s the least in the bank’s data going back to 2008.
“Bullish sentiment and weak seasonality has made our contrarian antennas tingle a little bit… All the bears that came off the sideline are chasing this momentum and the ‘FOMO’ players are all in now, so that means it’s time to see this rally pause.”
— Jeffrey Hirsch, Editor of the Stock Trader’s Almanac (who correctly predicted the a decade-long “super boom” after the Great Financial Crisis)
“There is a ‘CPI-mission accomplished’ state of mind among many investors at this point, and it’s not the case… There is this risk that the Fed will keep interest rates higher for longer, and it will cause something to ultimately break.”
— Nitin Saksena, Head of US Equity Derivatives Research at Bank of America
Major Economic Events:
The Jobs Report and Unemployment Rate are in focus, but we’ll also be watching the Fed Senior Loan Survey + PMI Readings.
Monday (7/31): Chicago Business Barometer, Fed Senior Loan Survey
Tuesday (8/1): Construction Spending, ISM Manufacturing, Job Openings, S&P US Manufacturing PMI (Final)
Wednesday (8/2): ADP Employment Report
Thursday (8/3): Factory Orders, ISM Services, S&P US Services PMI (Final), US Productivity
Friday (8/4): Jobs Report & Unemployment Rate
Jobs Report & Unemployment Rate:
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.
Madison Square Garden Sports (MSGS) flew last week after being added to the S&P SmallCap 600. Congrats to those that received the notice from LevelFields.
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.
Reply