In his podcast addressing the markets today, Louis Navellier offered the following commentary.
A Lagging Indicator
Rents and shelter costs are emerging as a stubborn inflation problem since shelter costs have been rising steadily and rose 0.7% in August after rising 0.5% in July.
Although there is no doubt that the Fed is striving to prick real estate bubbles around the country, rents and shelter costs are a lagging inflation indicator, which is why the Fed must raise key interest rates and then keep interest rates high for an extended period to make sure shelter costs begin to cool off.
Q2 2022 hedge fund letters, conferences and more
As a result, the soonest we can hope that the Fed will reverse its high-interest rate policy will likely be late 2023 at the earliest, provided that shelter costs moderate and Treasury yields ease a bit.
Inflation Threat in Spring
The other major inflation threat will appear in the spring when worldwide demand for crude oil rises due to seasonal pressure. The EU is desperately striving to lock up energy supplies for 2023 as it brakes away from Russian energy.
Furthermore, since the Biden Administration has depleted the Strategic Petroleum Reserve (SPR) by releasing 1 million barrels per day for several months, the SPR is now at its lowest level since 1984 and has to start being refilled.
Hopefully, the Biden Administration will begin refilling the SPR during the winter months when demand is light.
Tesla-Like Valuations for Porsche
The excitement about Porsche’s IPO in late September is helping to lift the overall stock market. The demand for the initial $9.4 billion stock being sold in the IPO is now grossly oversubscribed, so the stock is now expected to surge, post IPO.
Since I recommend VW Group (OTCMKTS:VWAGY) and hold the stock in many managed accounts, shares of Porsche will be tentatively distributed on September 29th. The exact details of VW Group’s Porsche share spinoff will be released shortly.
I should add since Porsche has high operating margins, massive brand loyalty, plus has been assisting VW Group’s EV transformation, it will undoubtedly be compared to Tesla Inc (NASDAQ:TSLA) on a market valuation basis.
Currently, Tesla is trading at 53 times estimated 2023 earnings, but Tesla still gets lots of EV tax credits, plus has not yet had to pay U.S. taxes yet. Porsche will have a Macan EV in 2023 to accompany its hot-selling Taycan EV sedan.
I should add that Porsche will initially electrify its iconic 911 via a hybrid model that will compete with its Porsche Turbo S model, so that its fastest performing sports cars will be utilizing electrification in the upcoming years.
Frankly, I think Porsche is a great company, making great high-quality vehicles, which I why I own so many of them and have more Porsches on order. Do not be surprised if Porsche soon trades at Tesla-like valuations, since Porsche’s electrification plan for its hot-selling Macan EV is expected to be an instant success.
Supply Bottleneck
Speaking of EVs, the transition to electric vehicles (EVs) has created long waiting lists that are frustrating buyers, since prices are being increased substantially while they wait. In other words, many buyers are now wondering if they can really afford an EV. Currently, the WSJ reported that EVs now account for 6% of all new vehicle sales.
Although Ford Motor Company (NYSE:F), General Motors Company (NYSE:GM) and VW Group now all expect that they can pass Tesla in EV sales, they are hampered by insufficient supplies of critical parts, especially lithium-ion batteries.
As an example, Ford wants to double the production of its F-150 Lightning but has a worldwide task force scouring for batteries. Even though Ford signed a supply deal with CATL, it will take several years for CATL to build the U.S. battery plants.
Ford warned on Tuesday that its supplier costs will be $1 billion higher than expected and that 40,000 to 45,000 “largely high margin trucks & SUVs” will be stored at the end of the quarter, waiting for key parts. Clearly, supply chain woes continue to impede the automotive industry.
I should add that LG Energy Solutions recently completed a new battery plant in Ohio, but this plant is only supplying GM, which is way behind in throttling up its EV production, despite 90,000 orders for its new Hummer EV.
I am in Alabama this week and Mercedes opened a new battery plant next to its manufacturing plant, but initially, this new plant was assembling lithium-ion battery pack modules that will eventually be outsourced to Envision AESC by the end of the decade. An acute shortage of lithium, nickel and cobalt is unquestionably hindering EV production.
Coffee Beans
Suicide is one of the leading causes of death in jails in the United States, with a rate more than three times higher to that of the general public.
Jails are considered to have worse conditions than state prisons since they are more likely to receive first-time offenders who might experience a traumatic “shock of confinement”, as they are suddenly cut off from social support. Source: Statista. See the full story here.
