DHUnplugged #710: All-In Market

DHUnplugged Podcast

Market Rotation continues – “Trump” stocks got boost after weekend (Biden stocks took a hit)

Risk On – Risk Off is the play (Fundamentals are not being considered at the moment)

KRI Indicator – Doing something not done since June 2020

Earnings growth expected to continue….

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Warm Up
- Assassination Attempts = Market Positive (for US Markets ONLY)
- ALL TIME HIGHS ACROSS THE BOARD - SMALL CAPS ON A BENDER
- Disinflation OUT - Deflation IN
- College athletes - Min Wage?

Market Update
- Market Rotation continues - "Trump" stocks got boost after weekend (Biden stocks took a hit)
- Risk On - Risk Off is the play (Fundamentals are not being considered at the moment)
- KRI Indicator - Doing something not done since June 2020
- Earnings growth expected to continue....
- Gold at ATH - Bitcoin moving - Risk on or Worries about the future?

OH MY
- Small Caps +10% MTD , 11% YTD (Tom Lee calling for 40% move over next 12 weeks...)
- Value over Growth
- Real Estate - Builders - WOW!
--- Jump from 50 to 400+ 52 Week Highs today
----- Money coming out of Big boys - rotating and it is uneven pull/push
- KRE - Regional banks up 14% this month
----- DJIA UP BIG AGAIN - Rates holding at lower end of the range

Post Assassination Attempt (Monday Markets)
- European Markets RED across the board
- Russian Market GREEN
- China RED
- Japan RED
- US Markets GREEN
- Bitcoin and Ether - GREEN

Powell on Monday
- Markets came in as Powell -ONCE AGAIN - repeated the same mantra of not done - but looking to cut before we reach 2%
-B.O.R.I.N.G.

Trump Media
- DJT Stock: Trump Media shares surged over 50% in premarket trading Monday following the attempted assassination of former President Donald Trump at a rally in Pennsylvania on Saturday.
- Was up 30% by end of day on Monday

China Economic Update
- China's National Bureau of Statistics on Monday said the country's second-quarter GDP rose by 4.7% year on year, missing expectations of a 5.1% growth, according to a Reuters poll.
- Retail sales also missed expectations, rising by 2% year-on-year in June, versus the 3.3% forecast.
- Industrial production beat expectations up by 5.3% in June from a year ago, above the forecast 5% increase.
- Urban fixed asset investment for the first six months of the year rose by 3.9%, matching expectations.
- China's GDP grew by 5.3% year on- year in the first quarter.

KRI Indicator
- Hitting +6 and that has not happened since June 2020
- First time over +5 since Dec 2023 (pulled back a few days later, then continued its upward trajectory
- Rolled over a bit a few days later then continued its upward trajectory (BULL MARKET)

Any Surprise? Retail....
- Macy's -14.2% is sharply lower after terminating M&A talks with Arkhouse Mgmt and Brigade Capital
- Burberry, a luxury brand which trades in London, also issued a profit warning and named a new CEO.
- These developments are leading to weakness in some department store names: JWN -3%, KSS -2.7%, DDS -2.3%.
- Consumer is starting to fight back?????

DEFLATION?
- CPI was NEGATIVE MoM
- PPI was hot and cold - depending on what number you looked at

Deflation

CPI Chart

Finally!
- Archegos Capital Management founder Sung Kook "Bill" Hwang was convicted of fraud and other charges by a jury in Manhattan federal court on Wednesday at a criminal trial in which prosecutors accused him of market manipulation ahead of the 2021 collapse of his $36 billion private investment firm.
- The trial centered on the implosion of Hwang's family office Archegos, which inflicted $10 billion in losses at global banks and, according to prosecutors, and caused more than $100 billion in shareholder losses at companies in its portfolio.
- Hwang secretly amassed outsized stakes in multiple companies without actually holding their stock, according to prosecutors. Hwang lied to banks about the size of the derivative positions of Archegos in order to borrow billions of dollars that he and his deputies then used to artificially inflate the underlying stocks, prosecutors said.

Mortgage Refinancing
- Activity drops again as rates remain elevated
- Estimates are that homeowners are sitting on $17 TRILLION of equity
- Problem is no where to go, higher tax base, higher financing costs.

College Athletes
- They opened Pandora's Box .....
- A U.S. appeals court on Thursday created a test for courts to determine when college athletes are the employees of their schools and the governing body for American intercollegiate sports, making them eligible for the minimum wage.
- In the first ruling of its kind, a panel of the Philadelphia-based 3rd U.S. Circuit Court of Appeals said athletes may be regarded as employees under federal wage laws if they primarily perform services for their schools' benefit "in return for express or implied compensation or in-kind benefits."
- The ruling allows a group of former college athletes to pursue a proposed class action against the National Collegiate Athletic Association and their former schools.

Musk - Legal issues
- Every week another legal issue
- The European Commission on Friday accused Elon Musk's X of deceiving users and infringing digital content rules, putting the social media giant at risk of a hefty fine.
- The commission, which is the European Union's executive arm, started an investigation last year to assess whether X is in breach of the Digital Services Act (DSA) — a piece of landscape legislation requiring Big Tech firms to better police the content on their platforms.
- The body's preliminary view, published Friday, is that X has broken rules regarding dark patterns, advertising transparency and data access for researchers. So-called dark patterns are deceptive tactics designed to push people toward certain products and services.
- X's use of the blue checkmark for verified accounts does not correspond to industry practices, the commission said, as anyone can subscribe and obtain a verified status. It added that there was evidence of "motivated malicious actors" abusing the verified status to deceive users.

Earnings
- For the S&P 500, the actual earnings growth rate has exceeded the estimated earnings growth rate at the end of the quarter in 37 of the past 40 quarters for the S&P 500. The only exceptions were Q1 2020, Q3 2022, and Q4 2022.
- Based on the average improvement in the earnings growth rate during the earnings season, the index will likely report year-over-year growth in earnings at or above 12% for the second quarter.
- Over the past four quarters (Q2 2023 through Q1 2024), actual earnings reported by S&P 500 companies have exceeded estimated earnings by 6.5% on average. During these four quarters, 78% of companies in the S&P 500 reported actual EPS above the mean EPS estimate on average.
- There is a good amount of positive vibes about the coming earnings over the next few weeks.

Bank Earnings
- High expectations coming into this earnings season
- Stocks were WAY up ahead of reports
- Generally good quarters with a few outlier - just expectations are out of control
- A few made it through in pretty good shape - GS and JPM at ATH

Bank of America
- Earnings: 83 cents a share vs. 80 cents a share LSEG estimate
- Revenue: $25.54 billion vs. $25.22 billion estimate
- The bank said profit slipped 6.9% from the year earlier period to $6.9 billion, or 83 cents a share, as the company’s net interest income declined amid higher interest rates. Revenue climbed less than 1% to $25.54 billion.
- The firm was helped by a 29% increase in investment banking fees to $1.56 billion, edging out the $1.51 billion StreetAccount estimate.
- Asset management fees rose 14% to $3.37 billion, buoyed by higher stock market values, helping the firm’s wealth management division post a 6.3% increase in revenue to $5.57 billion, essentially matching the estimate.
- Stock up 5%

New Deal for Renters?
- President Biden will unveil a new proposal in Nevada on Tuesday to cap rental costs nationwide
- The plan — which would need to be approved by Congress — calls for stripping a tax benefit from landlords who increase their tenants’ rent more than 5 percent per year
- The measure would only apply to landlords who own more than 50 units, which represents roughly half of all rental properties
- HAHAHA (MORONIC): It wouldn’t cover units that have not yet been built, in an attempt to ensure that the policy does not discourage construction of new rental housing.

Really?
- A new discovery has proved the existence of the Loch Ness Monster "plausible," according to scientists. The recent revelation, made in the Sahara Desert, makes old Nessie, the mythical Scottish creature, entirely "plausible".
- Researchers from University of Bath and University of Portsmouth in the UK and Université Hassan II in Morocco made a shock discovery of fossils of a plesiosaur in the Sahara Dessert, according to newsweek.com.

Retail Sales
- Big jump in retail sales this month
- So much for consumers backing off
- Several "luxury retailers" sending in signals that they are hurting - Hugo Boss and other European retailers hit by slowdown in China sales
- - Shoppers are likely to spend roughly $14 billion during Amazon's Prime Day two-day shopping event this week, according to projections from Adobe Analytics, a firm that studies e-commerce transaction data.

And this...
- Deutsche Bank criticized by German regulator for financial reporting error
- Deutsche Bank incorrectly disclosed deferred tax assets in its 2019 financial statement which did not meet international accounting standards, the German regulator BaFin said on Tuesday.

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