In his Daily Market Notes report to investors, while commenting on Evergrande Property Services Group Ltd (HKG:6666), Louis Navellier wrote:
Q2 2021 hedge fund letters, conferences and more
Evergrande - An Isolated Event
After all the damage suffered last Monday about China's defaulting property developer Evergrande, by Friday, the name wasn't even in the news. We went from wondering if we were looking at another "Lehman moment" possibly triggering another global financial crisis to nothing more than an isolated event that is only an internal Chinese issue.
China did manage to make the news on Friday nevertheless by declaring that all crypto-related transactions are illegal and bringing quick damage to that sector.
More interesting is that stocks continue to hold their ground in the face of US Treasury rates continuing to rise today to levels not seen since early July with the 10 years now at 1.46%. That said, the NASDAQ Index, considered most vulnerable to rising rates of the major equity Indexes, has now logged minor losses for three weeks in a row.
There appears to be very little concern regarding the US Debt Limit, nor a lot of discussion regarding Covid besides vaccines for kids and booster shots.
There's more concern about all the container ships waiting for their turn to be unloaded in the west coast ports and how that may feed further increases in inflation. The market appears to be patiently waiting for September to pass and is looking hopefully at the historically strong months of October and November. With expectations that before year-end the new spending bill will get passed and Covid numbers will finally start falling in earnest, the 4th quarter is setting up to achieve new highs to end the year.
Durable Goods Orders Rise
The Commerce Department announced that durable goods orders rose 1.8% in August, which was substantially better than economists’ consensus expectation of a 0.6% rise. Also notable was that July’s durable goods orders were revised up to a 0.5% increase, up substantially from a 0.1% decline that was previously reported. There is no doubt that the shipping crisis and bottlenecks at the ports are contributing to this massive order backlog, which is great news for GDP growth.
Interestingly, the Atlanta Fed lowered its third-quarter GDP estimate to an annual pace of 3.2%, down from its previous estimate of 3.7%. Weaker than expected home sales seem to be the primary culprit behind the Atlanta Fed’s downward GDP revision. Overall. The U.S. seems constrained by ongoing port bottlenecks, which are getting worse as retailers strive to stock up on merchandise for the holidays.
EU Gas Shortage
Interestingly, no matter how bad the supply shortages seem to be, they are much more acute in Europe. A big high-pressure system (and beautiful weather) neutered much of the wind turbines that Europe relies on for electricity, so natural gas prices have skyrocketed to fuel natural gas peaker power plants. Normally, countries in Europe are stocking up on natural gas reserves as the winter months approach, but high spot prices for natural gas have caused much of their natural gas reserves to be largely depleted. Russia is poised to profit from this crisis since they supply most of Europe with natural gas.
Complicating matters further, in Britain, there are now lines at petroleum stations as many gasoline grades have been depleted, due to a shortage of truck drivers. Prime Minister Boris Johnson is expected to use the British military to deliver fuel as long as the truck driver shortage persists. Due to a six-fold increase in natural gas prices in Britain, plus the fuel shortages for vehicles, I do not recommend that Prime Minister Boris Johnson declare an election since British citizens are pissed and have suffered enough after Covid-19 created the worst recession in 311 years.
Speaking of elections, the left of center Social Democrats in Germany last Sunday defeated Chancellor Angela Merkel’s Christian Democratic party with 25.7% of the vote, while Merkel’s party received only 24.1%. This was a big surprise and President Joe Biden said “I’ll be darned,” so the U.S. relationship with Germany may become increasingly complicated as Germany shifts further to the left, which may undermine NATO and defense alliances due to severe criticism from Social Democrats. Since a ruling coalition has to be formed, led by the Social Democrats Olaf Scholz, it is expected to take months to form this coalition, since Germany is politically very fragmented and has a significant Green party that it must appease with more government investment into clean energy.
Heard & Notable
Six out of the 10 most frequently mentioned brands on Instagram in 2020 were fashion retail brands, including Zara, Shein, and Fashion Nova. Otherwise unknown LIKEtoKNOW was at the top spot on Instagram. Source: ecommerceDB
