I will begin this newsletter with a pat on the back. During the month of August, the market,(Dow30), rose by 2.16% or increased from 25,415 on 7/31/18 to 25,964 on 8/31/18. On theother hand, our portfolio had a monthly gain of 6.63% and this is because I asked all of youto buy more of Apple when all analysts were negative on Apple and Carl Icahn sold of his Apple holdings.
“Sure, the robots might take over some day, but for now businesses are stuck with humans,and they are finally being forced to pay more to employ them. “Wages grew at a 2.9% annualrate in August, the government said on Friday (9/7). That is the best since 2009. Wage growthspooks investors, as it cuts in to company profits and could push inflation higher, thusconvincing the Federal Reserve to raise interest rates more quickly. But for workers, the anemicwage gains of the past9 years might be finally over. More small businesses are looking to hirethan in the last 30 years. (Barron;s Market Week, 9/7/18)Developing countries are facing a perfect storm, according to Larry Brainard, TS Lombard’sChief emerging market economist. In the research firm’s September message to clients, hewarned, would be bargained hunters that emerging markets have not neared a bottom.While problems in Turkey and Argentina have not been “systematic”, Brainard wrote that acombination with several other crises now brewing could lead to a broader problem. Among possible events Brainard sees: Further escalation of the US/China trade spat Likelihood of a market friendly candidate emerging as a winner in Brazil’s elections Real risk of a financial crisis in Turket when Europeans cut of financing as bad debt rise. Due to trade war fears, most stock markets of emerging markets like Brazil and China arehaving severe corrections; some are down as much as 35% within the past few months. Someanalysts are fearful that that is an indicator or what will happen to our market in the near future.Historically, September has been the worst month for the stock market and October is the monthwhen we had all our market crashes.
They say talk is cheap, but tariff talk has been expensive for oil and stock investors. The latest round of retaliatory tariffs took a bite out of crude prices as China slapped a 25% charge on $16 Billion worth of goods, including petroleum products. US crude was carved out of the list; it might have been spared for now, only to be used later if the trade war escalates. He adds that crude also could have been given a temporary pass to allow previously purchased barrels to land without additional cost to Chinese refiners. This also buys refiners time to find alternative sources. The news is neither light nor sweet (Michael Tran, RBC Capital Markets,8/10/18)
Looking at our historical record is a good way of learning lessons for the future. About 20 years ago I worked for a boss who used to be a financial analyst at Intel during its hayday. He told me that I should invest in AMD which was Intel’s #1 competitor. A few years ago, there was not a single person on Wall Street who could say a bad thing about Intel and who could do the opposite of AMD. In 2015, I purchased some AMD for about $2.50. A few months later the stock price went down to $1.80.Till January 2016, the price fluctuated around $2. I gave up and sold my holdings. Now everyone hates Intel and everyone loves AMD, a couple of days ago, it had an intra day high around $30.. Just imagine buying at $2 and selling at $30! This happens to most professionals.
GM- Autonomous and electric cars—the Auto 2.0 movement—are gaining momentum, and today's players will likely see increased competition, says Morgan Stanley. The best bet for General Motors (ticker: GM)? Breaking out its Cruise division. Where we were: Technology gives companies like GM and Tesla an advantage in the Auto 2.0 movement, for now. While Tesla's technology often steals the headlines, it's hardly the only company working on electric and autonomous cars. For example, General Motors' Cruise division is a bright spot for the company: The company is targeting a 2019 launch for Cruise's robo-taxi service and if it gets the technology right, the unit could bring in $17 billion in earnings before interest, taxes, depreciation, and amortization by 2030. That's a big if, however. As Morgan Stanley's Adam Jonas warns, if Cruise "doesn’t achieve independence soon....the market might have reason to forget about it." He reiterated an Overweight rating and $46 price target on GM on Thursday, but writes that "each month brings more evidence of an auto cycle past its peak and a growing backlog of competition focused on Auto 2.0." (Teresa Rivas, Sector Focus,9/6/18)
Apple- As Apple (AAPL) preps for its biggest day of the year next week, at least one Wall Street firm has raised its price target on the company's stock in anticipation of the launch of three new iPhones. Canaccord Genuity set its price target at $250, up from $220, saying it expects the launch will "drive a continued strong upgrade cycle," encouraging people to buy higher-margin, more expensive iPhones. "Given the strong consumer satisfaction with iPhones, we anticipate Apple will continue to grow its global share of the premium smartphone market," analyst T. Michael Walkley wrote in a note Monday. Apple's share of the worldwide smartphone market, including both premium and less costly phones, slipped to 11.9% from 12.1% in the second quarter of the calendar year, according to the market researcher Gartner. This left it at No. 3 in the world, after Samsung Electronics (South Korea: 005930) and Huawei Technologies, both of which posted year-over-year gains. Walkley expects Apple to offer two new OLED-screen iPhones and a more affordable LCD iPhone on Sept. 12. If the devices' launch leads to gains in market share, as he expects, that could lead to more gains for the stock, the analyst says. Apple shares are up 35% this year, through Tuesday's close.(Jon Swartz, Tech Trader Daily,9/4/18)
Have a nice month!