09 Sep 9th September 2024
Weekly Index Movement
| S&P500 | -4.2% |
| Nasdaq | -5.9% |
| Aussie All Ords | -1.8% |
Maybe I should be careful for what I wish for.
Last week I wrote that I was hoping for a down week so I could buy more QQQ. Well, I certainly got it in one of the most bearish weeks of the year.
US stocks sold every day last week culminating in a big 1.7% fall on Friday after the employment numbers were released. They came in at +142,000 jobs added.
But June was revised lower from 176k to 118k and July was also revised down from 114k to 89k.
This becomes significant because the US Labor force has grown by an average of 1.0 percent annually over the last 5 years so we need about 132k new jobs every month just to keep employment levels constant.
The last 3 months has been below this level and so should mean an increasing unemployment rate.
Continued solid economic expansion is supposed to come with greater job growth.
You can see where this thinking leads. That’s right, we are back to talking recession again.
Here we go again. Time to roll out some fact about something that we have never heard of that predicts a recession. This time it is the inverted yield curve has now reverted and that means a recession is coming.
Two years ago the yield curve inverted and we were all told – that means a recession is about to happen.
It didn’t. Now we have, the curve has gone back to normal so that means a recession is about to happen.
Just because the yield curve does something does not mean a recession will occur. The yield curve has predicted 9 of the last 6 recessions.
Recessions are always caused by a catalyst. A reason. For example, the banks tightened credit to such high levels lending stopped. That was what caused the recession in 2008. Not because the yield curve inverted. It 2001 it was the bursting of the Dot Com Bubble that was the catalyst for the recession and the large unemployment it caused.
Before a recession happens, we need a catalyst and I can’t see one yet. One might appear in future. But right now we don’t have one. That means there will be no recession.
If we have no recession, then this selling is only temporary and is a buying opportunity. I did take a nibble last week at QQQ because I am not 100% sure it will fall more. But I tend to think it will this week. If it does I will buy more.
If I was a gambling man, I’d bet the low occurs just before Powell speaks about the economy and lowers interest rates on September 18th.
But as investors we should consider both sides. If there is a recession coming, what should be do? About all you can do is sell everything now before it hits. So if you think we will have a recession, act now. Not after a recession is confirmed.
If you want to hold on, then the safest place is large-cap Tech. Much the same as all year.
Move along. Nothing to see here.
Past Septembers
The last 4 Septembers have all been down months with the SPY losing 5%, 5%, 9% and 5%. It is already down almost 5% this year so is on track to complete another down September.
Looking at those last 4 down Septembers, if we consider what happened in the October to December period for each one we get +10%, +9%, +4% and +11%.
In each of the last Septembers it would have felt like the selling was going to continue. At the time. But look what happened after September
I suspect this year will be very similar.
AI Uses
It might be because I am planning a trip to Brazil in December, but I keep receiving adverts for AI language teaching apps.
This week I saw a story on ABC about NSWEduChat, an AI tool developed by NSW Education to help students learn. Students are claiming this tool has helped increase their grades significantly.
All of which made me think about what jobs might be lost to AI. Who would have thought teaching could be one of the first?
My daughter already does online school. How long will it take to replace human teachers with AI teachers that can work 24 hours a day, take no breaks, are never sick and make no complaints to HR.
New Stock Idea
Last week I spoke about NVidia and how I wouldn’t buy it now because I don’t see much of a chance it goes up 10X from here
But I found one this week that could go 10X. Maybe.
Grab Holdings (GRAB) – $3.29
Grab is Southeast Asia’s leading super app, integrating ride-hailing, food delivery, and financial services, essential for 40+ million users.
Grab was Uber’s main rival in the region in 2018 and Uber realised they could not compete with Grab and so exited the region in exchange for a stake in Grab.
But Grab is more than just a ride-hailing service. The “super app” label refers to its wide range of services, including food delivery, digital payments, and financial services, all accessible from a single platform. This approach makes Grab a crucial part of daily life for millions across Southeast Asia.
It was formed in 2012 but two Harvard Business School graduates who were inspired to create Grab after witnessing the inefficiencies and safety concerns of traditional taxi services in Malaysia. They envisioned a platform leveraging technology to provide safe, reliable, and affordable transportation options.
Grab’s core strength lies in its super-app model, which offers a wide range of services within a single platform. This ecosystem approach enhances customer convenience and fosters strong user engagement and loyalty.
In the latest statements, Revenue grew 17% (made up of 11% growth in deliveries, 17% growth in mobility and 54% growth in financial services)
Gross margin was 48%, but as is the case with all growing tech businesses, the company made an over all loss of $54million
Which is insignificant when compared to $4.1Billion it has in cash and short-term investments in the bank.
Whilst accounting can deceive us, cash flow is easier to read. The company generated a positive operating cash flow of $272M in the latest quarter.
Grab is basically an Asian version of Uber with financial services added on that is just turning the corner to profitability.
If you missed out on buying an early stage Uber, here is your second chance, except this one comes with a broader range of future revenue streams.
Warning
Stock values can go down as well as up. It is possible to lose 100% of your investment in a stock. Any advice given by Capital 19 is general advice only and does not take your personal circumstances into account and might not be suitable for you.