Dave Lutz Jones Trading Cam notes As we await NVDA’s earnings report keep this in mind: BoA Global Fund Manager Survey shows a possible crowded long in technology positioning, but managers can stay overweight for years.
22% Russell’s weight reports, and 45% of XOP’s – but all eyes on NVDA Wednesday.
2. A $700 Billion Insurance Product Is Powering the US Credit Market Rally-Bloomberg
Annuity sales could total about $700 billion in next two years
Funds likely to be allocated to corporate and structured debt
An insurance product that consumers use to help fund their retirements is selling at record levels, powering demand for corporate debt and commercial mortgage bonds.
Last year, sales of annuities, which allow consumers to effectively buy income for the rest of their lives, reached an all-time record high of $385 billion, according to life insurance trade group Limra. That’s up 23% from the year before. The products grew more attractive as rising interest rates translate into higher potential annual payouts from the products.
Behind the scenes, the life insurers that usually sell annuities are buying bonds to generate income for the products, and in particular, corporate debt and asset-backed securities including mortgage bonds. Their demand might decline a bit this year after bond yields have fallen, but Limra says annuity sales are still expected to remain strong by historic standards.
6. Walmart Did Make New Highs Prior to Today’s Earnings
7. Another Day…Another China Implosion Chart …Foreign Investments in China $350B to $50B
China’s direct investment liabilities in its balance of payments stood at $33 billion last year, according to data from the State Administration of Foreign Exchange released Sunday. That measure of new foreign investment into the country — which records monetary flows connected to foreign-owned entities in China — was 82% lower than the 2022 level and the lowest since 1993.
Barrons The country’s overcapacity and overproduction pose risks not just to China but also to rivals in these sectors abroad. Take solar panels. Beijing mandated that state-owned enterprises get half of their energy capacity from renewables by 2025, contributing to strong solar panel growth. But prices for solar inputs and panels have tumbled. Eurasia Group estimates that 60% to 70% of solar firms could face bankruptcy or acquisitions in the next couple of years, potentially saddling Beijing with another debt-laden sector. By Reshma Kapadia
Equities: Dividend growers have been outperforming the average stock in the S&P 500
Source: The Daily Shot
6. SMCI Hit Wall Street Record 97 RSI (overbought) Before Sell-Off Friday
SMCI AI Small Cap
7. PitchBook Analyst Note: Estimating US VC First-Time Manager Dropouts
37% of first-time VCs will not be able to raise a second fund
2021 was the heyday for new entrants in venture capital: First-time fundraising reached a peak of $14.7 billion, including to more inexperienced managers without bulletproof track records or networks. Now that LPs have retreated, those same fund managers are in trouble, according to our latest VC analyst note.
More than 247 first-time managers who closed funds between 2019 to 2021 will not be able to raise a sophomore fund, according to PitchBook estimates. Those particularly at risk of being incapable of raising a second VC fund will likely be managers of funds with less than $10 million in commitments and those in emerging US markets.
8. China Vows to Centralize Tech Development Under Communist Party
Xi’s party will take more direct role in steering development
Tech leadership is a major priority for China’s government
China’s ruling Communist Party vowed to enhance its role in steering its science and technology industries, centralizing decision-making power as the country navigates US trade curbs designed to limit its advancement.
The party will refine a mechanism whereby technological works are led by the Central Committee, according to state broadcaster CCTV citing a central government meeting led by President Xi Jinping. The news broadcast didn’t specify details of the plan, though the pronouncement marks an escalation of Beijing’s prioritization of a sector that China’s leaders consider of critical importance.
A year ago, Xi called for China to accelerate scientific research and replace foreign technologies with homegrown alternatives. His remarks were part of a broader push to stimulate both domestic efforts and international cooperation in the pursuit of technological independence from the US. Export controls from Washington have curtailed China’s access to the most advanced semiconductors, especially those made by Nvidia Corp. to accelerate artificial intelligence training.
China is now elevating the party’s role in directing its fight against the US for leadership across an array of strategic technologies, including semiconductors and AI.
Xi had earlier tapped his top deputy, former Vice Premier Liu He, to oversee development of China’s own chip technologies. Under that regime, Huawei Technologies Co.’s moonshot chipmaking effort yielded results that surprised outside observers by producing a modern smartphone chip without recourse to US tech.
BOSTON — Can we finally stop the aging process? Researchers at Brigham and Women’s Hospital (BWH) are hoping so after developing a DNA clock that may unlock the secrets of aging. These new epigenetic clocks can more accurately predict biological aging and the effectiveness of anti-aging treatments. This study introduces a machine-learning model capable of distinguishing between genetic factors that either accelerate or decelerate the aging process, a distinction not made by previous models.
The research revolves around the concept of DNA methylation, a biological process that modifies the DNA structure and affects how genes function. This process is closely linked to aging, with certain DNA regions, known as CpG sites, being particularly influential. The novel epigenetic clocks, named CausAge, DamAge, and AdaptAge, are designed to parse out which methylation changes are merely associated with aging from those that directly cause it.
“Previous clocks considered the relationship between methylation patterns and features we know are correlated with aging, but they don’t tell us which factors cause one’s body to age faster or slower. We have created the first clock to distinguish between cause and effect,” says study corresponding author Dr. Vadim Gladyshev, a principal investigator in the Division of Genetics at BWH, in a media release. “Our clocks distinguish between changes that accelerate and counteract aging to predict biological age and assess the efficacy of aging interventions.”
To develop these clocks, researchers employed an epigenome-wide Mendelian Randomization (EWMR) on over 20,000 CpG sites across the genome, correlating them with eight aging-related traits, including lifespan, health span, and frailty index. This technique allowed them to establish causation rather than a mere correlation between DNA structure and observable aging traits.
Zach Goldberg Jefferies Will rational optimism turns into irrational exuberance? Applying the peak of the TMT bubble maths to the Nasdaq-100, the S&P 500 would have to reach 6250 to price-in the same level of irrational exuberance, according to the excellent cross-asset team at Soc Gen.
At the peak of the TMT bubble, the Tech sector traded at 2x its profit share in the S&P 500. Today it is at 1.25x of profits.
SPX was at a 25x fwd P/E; today we are 20xfwd P/E.
Applying the peak of the TMT bubble maths to the Nasdaq-100, the S&P 500 would have to reach 6250 to price-in the same level of irrational exuberance.
2. Lower AI Mentions on Earnings Calls
Torsten Slok, Ph.D.Chief Economist, Partner
3. Zuck vs. AAPL ….Apple Lags Again vs. QQQ Yesterday
Morningbrew Letter
The billionaire grand dork of the metaverse, Mark Zuckerberg, took a digital dump on Apple’s new wearable technology yesterday in a three-minute Instagram reel about Meta’s Quest 3 headset that may as well have been captioned “she is very gorgeous to me!”
“I don’t just think that Quest is the better value, I think Quest is the better product, period,” the Meta CEO said in the video, which was recorded on a Quest 3 by a guy sitting across from him. Zuck telling the internet he believes Quest 3 out-headsets Vision Pro is about as much of a shocker as Zuck having a home bunker for gaming.
What’s more surprising is…that he shouted it from the rooftops on his personal Instagram account. Zuck’s decision to plop down on a couch and Apple Hands™ his way through a Quest 3 demo likely reflects Meta and Apple’s heated race to create the one true mixed-reality headset.
Looking to build on Meta’s head start in the VR/AR space, here’s what Zuck emphasized in his get-ready-with-me video review of Quest 3 vs. Vision Pro:
Quest can also do the mixed-reality-floating-screens thing that Apple calls “spatial computing,” except Meta’s goggles start at $500, compared to $3,500 for Vision Pro.
Quest doesn’t have a wired battery pack and is still about a bar of soap lighter than the Vision Pro, which some have criticized for causing headaches and neck pain.
Zuck gave a shout-out to the Apple “fanboys” who “get upset whenever anyone dares to question if Apple’s going to be the leader in a new category,” but he admitted that the Vision Pro’s screen resolution is superior and that the eye-tracking function is “really nice.”
It’s still anybody’s game. Meta started selling AR/VR headsets after it acquired Oculus in 2014. While its work has been overshadowed by the hype surrounding the Vision Pro lately, reviews of the new Apple product do not indicate an iPhone moment yet, and people have even started returning the headsets.—ML
1. S&P 500 Trading at Largest Valuation vs. S&P Equal Weight in 10 Years
Jack Ablin Cresset The S&P 500 is trading at a sizable valuation premium to the average S&P stock: it’s currently situated at more than four multiple turns above that of the equal-weighted market. That’s the largest valuation premium in more than 10 years thanks to the dominance of the largest names.
Dave Lutz at Jones Trading No Shorts out there in Treasuries, as it is a way crowded long in anticipation of Fed Easing – The “Pain Trade” was a rip higher in yields.
3. Look for U.S. Dollar Break-Out
Negative for international stocks if dollar breaks-out
4. South Korea Nowhere for 5 Years
Barrons Korea’s Kospi Composite Index, the country’s main benchmark, has dropped an annualized 4.5%, including reinvested dividends, over the past three years, lagging not only the S&P 500’s 10% return but the MSCI World Index’s 7.6%. That’s reflected in the Kospi index’s price/book ratio of just 0.2 times, which means the companies are worth less than their total net assets. The MSCI World index trades at just over three times book.
Barrons By Randall W. ForsythIndeed, the expansion of legal gambling has been a boon to stock market investors, notably those who have ridden shares of DraftKings. The Almost Daily Grant’s note this past week, from the invaluable advisory headed by Barron’s alum Jim Grant, pointed out that DraftKings’ shares were up some 283% from late 2022. That raised the company’s valuation to near $20 billion despite it having posted negative adjusted Ebitda (earnings before interest, taxes, depreciation, and amortization, a measure of cash flow) in each quarter going back to the start of 2019. DraftKings management sold $145.2 million of stock in the past three months, more than all but five of the 152 U.S.-listed consumer cyclical firms tracked by Bloomberg—proving again that the winners in gambling aren’t the punters but the bookies.
From Dave Lutz at Jones Trading According to the survey, tech allocation is at its highest since August 2020 and fund managers believe that “long Magnificent 7” – a notional basket of the seven biggest U.S. companies by market value that includes AAPL and MSFT – is the most crowded trade right now.
Business Insider Phil RosenNo bottom in sight-As things stand, China’s housing downturn that began in mid-2021 still has no end in sight, according to Goldman Sachs.
Housing starts and new home sales in the country have dropped 64% and 52%, respectively, since peaking at the end of 2020, and analysts expect the country’s inventory glut to keep both variables depressed for several years.
For context, US real house prices peaked in early 2006 and bottomed in 2012. Then, US homeowner vacancy rates peaked in 2008 and did not fall back to their long-term average until a decade later.
Beijing did take action on high home prices in 2016 by tightening mortgage requirements and imposing other restrictions, which were effective in the short term. The pandemic, however, reversed those efforts. Price growth accelerated, and trouble emerged for key developers like Country Garden and Evergrande.
Goldman’s derived measure of China’s real house prices has only dropped by half as much as the US saw during its six-year collapse, as the chart shows below.
Goldman’s gauge for China home prices has declined half as much as the US saw in 2006-2012. Goldman Sachs
“[O]verly loose mortgage lending standards and too much mortgage debt, which were at the center of the US subprime crisis, do not apply in China,” Goldman analysts said. “Instead, overly high house prices, which are rooted in the unique land supply mechanism, are the reason behind many economic distortions. Put differently, while the property problem in the US turned into a financial problem, the property problem in China is fundamentally a fiscal problem that needs to be addressed.”
Jeff Bezos has sold roughly $2 billion worth of Amazon stock in recent days, according to financial filings.
The sales come a few days after he disclosed a separate sale of Amazon stock worth more than $2 billion.
The Amazon founder and executive chairman has accelerated his share sales since he left Seattle to move to Miami.
Amazon founder and executive chairman Jeff Bezos sold roughly $2.08 billion of shares in the company over the past few days, according to a financial filing.
The sales began Friday, the filing shows, and continued Monday. In total, Bezos sold 11,997,698 shares in the company for about $2.08 billion, according to the filing.
The sales were executed under a prearranged trading plan that Bezos adopted in November, which was revealed earlier this month in Amazon’s 2023 annual filing. As part of the plan, Bezos plans to sell 50 million Amazon shares before Jan. 31, 2025.
Bezos, who stepped down as Amazon’s CEO in 2021, unloaded another round of Amazon shares last week, when he sold almost 12 million shares worth more than $2 billion, according to a securities filing. It marked the first time Bezos sold Amazon’s stock since May 2021. He gifted about $240 million worth of Amazon shares last November.
Bezos’ stock sales have accelerated since he announced last November he would leave Seattle and move to Miami, allowing him to be closer to fiancée Lauren Sanchez and his parents, as well as Blue Origin’s operations.
10. It Doesn’t Matter What You Do, the Criticism is Always Going to Be There
The Daily Stoic Nobody wants to be criticized. It doesn’t feel good when people judge what you’ve done. We want the right people to like us, we want all people to like us. We want to be accepted, appreciated, celebrated. So we try to be like other people, like the people that everyone likes.
But in the end, does this effort pay off? No, it doesn’t. You work hard to preempt criticism, to appeal to the trends, to make people like you and then what happens? They still criticize you. Somebody finds something to find fault with you about. Think of how Marcus Aurelius was savaged by critics in his own time, just as he is today by many academic and philosophers, written off by many historians.
Imagine if he had tried instead to conform to their expectations, to fit more clearly in the box they wanted him to be. Imagine if he’d tried to win the mob’s favor or the respect of future generations by conquest or dazzling deed. Imagine if he had written Meditations for an audience instead of from a far more personal and vulnerable place.
It doesn’t matter what you do, the criticism is always going to be there. So you might as well do what you think ought to be done. You might as well do what seems meaningful and important and fulfilling and right to you. People are going to say what they’re going to say, haters will find a way to hate. In the meantime, just be true to yourself, be true to the mission you have, fight for the respect (and praise) of yourself, not the mob, not the future. That’s hard enough to win anyway.
