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Week Ahead – Central banks face inflation dilemma

A challenging period for the markets Nerves are starting to creep into the markets which will make the final months of the year very interesting. The list of downside risks for the economy and markets is growing all the time, something investors have…

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A challenging period for the markets

Nerves are starting to creep into the markets which will make the final months of the year very interesting. The list of downside risks for the economy and markets is growing all the time, something investors have been relatively comfortable with but it seems something is pushing them too far.

Over the years, many have questioned whether central banks have been a backstop for the markets, ensuring that investors continue to buy dips and sell-offs don’t turn into anything more serious during troubling times. Which makes their current situation all the more challenging.

For more than a decade, central banks haven’t been able to generate enough inflation to hit their targets, often not even close, which has allowed them to be patient as their economies get back to full strength. With inflation in many countries now running above target and policymakers seemingly less confident in how temporary it is, the theory may be put to the test as the stimulus is withdrawn and rates start rising.

Jobs report eyed as Fed prepares to taper

Sterling struggles as markets price in multiple rate hikes

Evergrande risks remain after missed coupon payments


Country

US

Risks to US economic recovery are growing as inflation pressures intensify, an energy crisis abroad might push oil prices to levels that threaten growth, and the battle in Washington DC over the debt will likely go down to the wire when the last cent is almost exhausted around October 18th. 

Congress was able to pass a stopgap bill that avoided a government shutdown, at least till early December.  It is clear that getting anything done amongst Democrats, both conservative and progressive will be difficult going forward. 

Investors will remain on central bank watch as pricing pressures don’t seem like they will be easing anytime soon.  If some of the dovish Fed members turn hawkish, that could allow the bond market selloff to continue. 

On Monday, Fed’s Bullard speaks at the World Strategic Forum. Thursday will have an appearance by Fed’s Williams at the Business Cycle Dynamics in Open Economies conference.  

Friday’s nonfarm payroll report is expected to be strong, with 500,000 Americans finding employment.  September included the expiration of pandemic unemployment benefits, but the delta variant impact to the short-term outlook made some employers refrain from hiring.  A November Fed taper announcement is widely expected, with robust employment reports likely accelerating the pace of tapering.

EU 

The German election was won narrowly by the SPD, as expected, but coalition talks will take some time. The most likely result is the traffic light coalition with the Greens and Free Democrats but a grand coalition can’t be ruled out.

PMIs and retail sales early next week are the standout data points but ultimately, focus will be on the central bank ahead of the meeting in a few weeks. Others are looking to remove stimulus, even raise rates, and we are seeing some inflation in the region. The fate or the PEPP program in March and what, if anything, will replace it is what traders want to know.

UK

A little light on the data side next week, with the PMIs on Tuesday and Wednesday the only releases, of note.

Key for the UK at the moment is interest rate expectations with the market’s pricing in three by the end of next year despite the country facing an energy crisis this winter, fuel crisis currently, Brexit-related challenges, the end of the furlough and universal credit top-up schemes and a national insurance hike in March. 

Not the ideal environment to be tightening unless, of course, policymakers aren’t being entirely honest in their assessment of the stickiness of inflation. The pound has been under pressure even as hike expectations rise, not what you would expect in that scenario and a worrying signal.

Emerging Markets

Russia

The economic calendar is a little thin next week, with inflation data on Wednesday the standout, as well as the services PMI on Tuesday.

South Africa

Next week is looking very quiet, with PMI data on Tuesday the only notable release.

Turkey

The lira came under more pressure this week after the decision by the CBRT last week to cut interest rates despite the recent rise in inflation destroyed the new Governors credibility. With that in mind, the inflation data on Monday could be big, with the CPI seen rising again to 19.7%. The central bank may now prefer to focus on core inflation but the headline number is impossible to ignore, especially when the central bank is seemingly yielding to political pressure. The currency could come under further pressure.

Asia Pacific

China

China is on holiday all week until Friday and thus there are no significant data releases this week.

Although the Evergrande story has ebbed from headlines, it has not gone away despite some recent asset sale announcements and partial payments to retail investors, Evergrande has missed two foreign currency coupon payments. Any deterioration or signs of a government bailout will be reflected through their HK listed equities and will drive directional volatility on the HKEX with the Mainland closed.

China’s energy shortages are grabbing the headlines with the government instructing state energy companies to secure supplies at any cost. That will keep energy prices supported, but any signs that the situation is worsening will again lead to selling on the HKEX.

India

All attention will be focused on the RBI rate decision on Friday where the central bank may be running out of wriggle room to keep rates lower than inflation. They are likely to hold rates this week, however.

Pressure has resumed on the Indian Rupee which has been boosted in recent times by international flows into India’s hot IPO market, money shifting from China equities and lower than usual selling from oil importers, Those flows appear to be ebbing and the aggressive rally in oil prices could see further selling of INR. 

Australia & New Zealand

The Australian and New Zealand Dollars continue to bounce around on daily shifts in international risk sentiment, rather than domestic developments. Both the RBA and RBNZ have policy decisions this week. Of the two, the RBNZ is more significant as the RBNZ may well raise rates this month, having postponed a rate hike because of Covid-19 previously. 

The NZD/USD remains acutely vulnerable to the delta-variant jumping the fence around Auckland and into the wider community. Both currencies are a proxy for US Fed tapering nerves and China concerns, and thus, look quite vulnerable to more downside.

Japan

The selection of a new Prime Minister by the LDP has passed without incident. The new Prime Minister has promised to open the fiscal taps as predicted but otherwise, there are no big-bang policy decisions to move local markets.

Japan equities are being buffeted by a fall in US equities and will maintain a high correlation to Wall Street this week. Having been boosted previously by fiscal stimulus hopes, Japan equities are among the more vulnerable in Asia to a material pullback if speculative confidence wanes,


Key Economic Events

Saturday, Oct. 2

Russia Foreign Minister Sergei Lavrov speaks at a conference.

Sunday, Oct. 3

The 77th IATA Annual General Meeting and World Air Transport Summit begins

UK Conservative Party conference begins

Monday, Oct. 4

Golden Week Holiday: Mainland Chinese markets closed till Thursday

OPEC+ meets to discuss November output

UK’s Chancellor of the Exchequer Sunak speaks at the Tory Party Conference.

Fed’s Bullard speaks at the World Strategic Forum – International Economic Forum of the Americas.

BOE’s Ramsden chairs a session at the Money Macro & Finance Society Policy Conference.

European Parliament plenary starts in Strasbourg, France

Eurogroup finance ministers meet in Luxembourg.

Economic Data/Events:

US factory orders, durable goods

Spain unemployment

Turkey CPI, PPI

Switzerland CPI, retail sales

Tuesday, Oct. 5

BOJ’s Governor Kuroda speaks at the TCFD Summit 2021.

OECD 2021 Ministerial Council Meeting starts

EU Economic and Financial Affairs Council meets in Luxembourg.

G-20 trade ministers meeting in Sorrento, Italy.

Norges Bank’s Olsen delivers a speech at the central bank’s regional network.

Economic Data/Events:

US Trade and ISM Services data

Australia Rate decision: RBA to keep cash rate target at 0.10%

Japan CPI

Thailand CPI

Australia Trade

Eurozone PPI

France Industrial production

Mexico international reserves

Singapore retail sales

Eurozone Services PMI

UK Services PMI

South Africa PMI

South Africa monetary policy review

Turkey effective exchange rate

Wednesday, Oct. 6

EU summit in Slovenia to discuss future membership of six Balkan States.

Fed’s George speaks at Kansas City Fed’s annual Banking and the Economy: A Forum for Women in Banking.

UK Prime Minister Johnson speaks at the Tory party conference.

Economic Data/Events:

US ADP employment change

New Zealand Rate Decision: Expected to increase Official cash rate 25 basis points to 0.50%

Poland Rate Decision: To keep base rate at 0.10%

Russia CPI

Eurozone retail sales

Germany factory orders

Spain industrial production

Sweden monthly GDP indicator

EIA Crude Oil Inventory Report

Thursday, Oct. 7

BOJ’s Governor Kuroda speaks at the branch managers meeting.

PBOC’s Governor Yi Gang speaks at the BIS virtual conference on big tech regulation.

Federal Reserve Bank of Cleveland and ECB joint annual conference ‘Inflation: Drivers and Dynamics’

New York Fed President Williams speaks at Business Cycle Dynamics in Open Economies conference.

Bank of Canada’s Governor Macklem speaks on global financial architecture.

ECB Chief Economist Lane speaks at a Central Bank of Ireland webinar.

B20 final summit begins in Rome.  

Economic Data/Events:

US initial jobless claims, consumer credit

Mexico CPI:

Russia CPI:

Chile copper exports, trade

China Forex Reserves

Switzerland Forex reserves

France Trade Data:

Germany industrial production

Turkey cash budget balance

South Africa gross and net reserves, electricity production and consumption

Russia gold and forex reserves

Friday, Oct. 8

Economic Data/Events:

US Sept Change in Nonfarm Payrolls: 500Ke v 235K prior, unemployment rate, wholesale inventories

India Rate decision: Expected to keep Reverse Repo Rate at 4.00%

Czech Republic General Election

BOE Quarterly Bulletin

Hungary CPI

Trade: Germany, Taiwan

Norway GDP

Argentina industrial production

Canada unemployment

China Caixin services PMI

Japan household spending

Sovereign Rating Updates:

– Ukraine (Moody’s)

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Economics

Braxia and KetaMD, CEOs McIntyre and Gumpel Speak on Acquisition

Last week, the Canadian company Braxia Scientific acquired 100% of the issued and outstanding stock of KetaMD, Inc. This is an exciting acquisition, and…

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Last week, the Canadian company Braxia Scientific acquired 100% of the issued and outstanding stock of KetaMD, Inc. This is an exciting acquisition, and in today’s interview, The Dales Report’s Nicole Hodges talks with CEOs Dr. Roger McIntyre and Warren Gumpel of Braxia Scientific and KetaMD respectively.

For some background information, KetaMD is a U.S. based, privately-held, innovative telemedicine company, with a mission to address mental health challenges via access to technology-facilitated ketamine-based treatments. Braxia Scientific is Canada’s first clinic specializing in ketamine treatments for mood disorders. They recorded revenue of $1.49m for 2022 fiscal year, ended March 31. On a year-over-year basis, revenue increased 47.5%.

Here’s some highlights from the interview.

KetaMD gives Braxia a presence in the US

Dr. McIntyre says that KetaMD gives Braxia what they’ve had as their vision from the beginning: a US presence. KetaMD is a living program. It’s already running, has infrastructure, and patients. McIntyre believes that a program like KetaMD is something Braxia’s needed to scale and obtain commercial success.

With telemedicine, Braxia has a potential to serve a gap in access. The zeitgeist of “patient going to medicine” has flipped, McIntyre says. “Now it’s medicine goes to the patient, and that is long overdue.”

COVID speeding a trend that was already happening

In 2020, 80% of physicians indicated they had virtual visits. That’s a number up from 22% the year before. But this is something that many doctors, McIntyre included, believe always should have happened. The pandemic only was the catalyst for innovation and making the option viable.

While some treatments will always need a clinic or a hospital, McIntyre believes some treatments can be done safely at home. And they are, for many chronic diseases. He feels implementing ketamine and psychedelics would be among these treatments where service could be expanded into the home. It would require careful SOPs in place, best practices, and surveillance. But he believes Braxia Scientific could deliver this with KetaMD.

Gumpel to stay as CEO of KetaMD

Gumpel says that KetaMD benefits in this acquisition from being part of the world’s most prominent researchers in depression, psychedelics, and ketamine. In the acquisition, he’ll stay on as CEO. He admits that Dr. McIntyre has been a huge part of collecting the data on the safety of ketamine treatment, and has a strong motivation to “see this thing through until most of society can access that – or at least the people that need it and want it.”

Gumpel admits he has a personal connection to ketamine treatment. As a person who has experienced bouts of depression for years, it saved his life, he says. He is grateful he was living within walking distance of ketamine treatment in Manhattan. It made him extremely aware of the accessibility gap, which in part inspired KetaMD.

Be sure to tune in for the full interview regarding Braxia and KetaMD, right here on The Dales Report!

The post Braxia and KetaMD, CEOs McIntyre and Gumpel Speak on Acquisition appeared first on The Dales Report.

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Spread & Containment

How to Use Dividends to Find the Best Tech Stock

Investors Alley
How to Use Dividends to Find the Best Tech Stock
When we talk about tech stock investing, we hear discussions of all sorts about different…

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Investors Alley
How to Use Dividends to Find the Best Tech Stock

When we talk about tech stock investing, we hear discussions of all sorts about different measures used for picking stocks.

For example, some tech investors use year-over-year revenue growth. Others subscribe to a theory that has been floating around for many years, that the secret to picking tech stocks was looking at the percentage of cash flows spent on research and development.

All too often, tech stock analysis consists of storytelling and searching for ideas that will change the world, something I’ve heard thousands of times during my career. The number of companies that actually did change the world probably totals up to a few dozen over three decades.

Some of those beat the market. Others did not.

I have found a variable that can help tech investors spot promising opportunities to identify technology companies that have higher probabilities of providing market-beating returns: dividends.

Note a stock’s dividend yield: investors who want higher dividends with an overall total return would be smart to look into high-yield tech stocks as part of their income strategy. The key to using dividends to find market-beating tech stocks is to look at the rate of their dividend growth. It doesn’t matter how high the dividend is at any given time. We want to see companies that are consistently growing their dividends.

A tech company that pays a dividend is making a statement. It tells the world: “We are generating enough cash to pay the bills, hire great people, and fund our future growth plans as well as R&D. In fact, we are generating so much cash we have some left over to pay out to our investors.”

Ideally, we want to limit our universe of companies to those who are increasing their payout by at least 20% annually. Growing a dividend at that high a rate says that things are just continuing to get better.

Once we have a universe of tech companies that are growing their payouts at high levels, we want to make sure we only own those that really do have a wonderful business that just keeps getting better. We want to use a financial checklist to make sure our companies are in excellent financial shape and have what it takes to keep growing the business.

I prefer the nine-point checklist developed by Professor Joseph Piotroski when he was at the University of Chicago – known as the “Piotroski F-Score”. This is a list of nine criteria of profitability, leverage, and efficiency. On each criterion, a firm can either get one or zero points – pass or fail.

I limit my universe of tech stocks with paid dividend growth to just two to three with the highest scores on the Piotroski checklist.

Using this simple method for picking tech stock winners has crushed the S&P 500 over the past decade and even edged at the tech-heavy NASDAQ 100.

Texas Instruments (TXN) makes the current list of technology companies with high dividend growth and outstanding fundamentals and prospects. The company makes most of its revenues from semiconductors, but it does still have some revenues from its calculators and other business machines. (I have had one of these, a Texas BAII calculator, within arm’s reach for most of my career.)

Texas Instruments had a solid second quarter and increased its guidance for the third quarter. The company has not suffered the China slowdown problems that have plagued some of their competitors so far. The brightest spot in the recent report was semiconductors being sold to the automobile industry, which were up 20%.

Although we have seen some slowdown in semiconductors due to the supply chain issues created by the pandemic, Texas Instruments has powerful tailwinds from all the developments we see in technology over the next decade.

Every one of the hottest trends in the economy—from renewable energy to artificial intelligence and everything in between—is going to increase demand for semiconductor chips. There are thousands of semiconductors in every electric vehicle, which will be another massive source of demand for the industry.

Texas Instruments has a yield of 2.5% right now, and has been growing that payout by 20.5% annually.

Another semiconductor company, Broadcom (AVGO) has the fastest-growing payout on our list right now. The company makes chips for smartphones, networking, broadband, and wireless connectivity. Broadcom’s recent purchase of Symantec’s Enterprise Business also puts it in the cybersecurity business.

Broadcom’s shares currently yield 2.97% and the payment has risen by an average of 49% annually for the past five years.

Most investors will never think of using dividends as part of the stock selection process. Rigorous testing shows that dividend growth is actually an important part of identifying companies with the potential to be huge winners.

My favorite way to invest in those companies isn’t to buy their stock, though. Instead, I like to use a special, little-known investment that lets me invest in these companies for up to 18% less than what others pay…

While collecting twice or more the dividend yield!

All without any more risk. I’m tracking 5 opportunities like that right now, and I lay them all out right here.

Only 3% of investors even know these funds exist

But using them, I can beat the market 2-to-1 while collecting 2-10X MORE yield from regular dividend stocks.

I learned this trick while I was rubbing elbows with some of the biggest fund managers in US history.

They too are buying these little known funds, cashing in huge discounts and collecting income while they do it.

Click here to learn the secret yourself.

 

How to Use Dividends to Find the Best Tech Stock
Tim Melvin

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Government

Where Carnival, Norwegian, Royal Caribbean Sit on Covid Vaccines

Do You still need to be vaccinated to go on a Royal Caribbean, Carnival, or Norwegian Cruise?

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Do You still need to be vaccinated to go on a Royal Caribbean, Carnival, or Norwegian Cruise?

Cruise line covid-19 vaccination and testing rules, which were imposed by the Centers for Disease Control and Prevention at the beginning of the pandemic, have been stricter than most. After the pandemic started in early 2020, the CDC signed a No Sail Order on March 14, 2020, which was finally lifted after nearly eight months on Oct. 30, 2020.

After the No Sail Order was lifted, the CDC enacted extremely restrictive rules and regulations to help keep passengers safe with the covid pandemic still raging throughout the world. The rules and regulations were set forth to begin to return cruise lines to operational status.

The cruise lines first had to be staffed accordingly and set up with the ability to test, treat and quarantine for covid medical emergencies. Testing for crew and passengers before embarkment and before dis-embarkment was required. The testing at pre-embarkment was a measure to protect those boarding, while the post-trip testing was for determining if an infection started on the cruise line itself. Being able to track the virus was very important in the prevention of spreading the virus and protecting patrons.

Image source: Shutterstock

Vaccination Still Not a Free Pass to Board

Once the vaccination was developed and approved, it became part of the CDC guidelines for cruise line adult passengers to have their vaccination before boarding. Even with a vaccination, guests still needed to test before they boarded the cruise lines. As the vaccine was approved for younger age groups, those age groups were then also required to have the vaccine to travel. Passengers were required to be fully vaccinated unless they are exempt by some status.

Before boarding, cruise line passengers who tested positive, as well as their travel companions, were not allowed to board, depending on the cruise line and how long the cruise may be. Some passengers were allowed to board and then isolate, others would have to reschedule their trip. Trip insurance is a good buy these days.

Cruise Lines Letting Loose on Vaccine Policies

Carnival Cruise Line  (CCL) - Get Carnival Corporation Report has now removed pre-cruise testing for vaccinated guests and also welcomes unvaccinated guests to travel. Fully vaccinated guests traveling less than 16 nights with the cruise line will no longer be subjected to testing, but still must provide proof of their vaccination status. Unvaccinated travelers will only need to provide a negative covid test result to board the ships. All rules and regulations are still subject to the destination country’s guidelines.

According to the Healthy Sail Center for Royal Caribbean  (RCL) - Get Royal Caribbean Group Report, the cruise line has updated its covid vaccination protocol. The cruise line will now allow passengers regardless of vaccination status to board in some ports if the travelers meet the testing requirements. Testing requirements vary by cruise departure and destination. Check the cruise lines port departure for updated information on requirements.

There is, however, a major exception, at least for now, which is obvious when you look at the specific wording shared by the cruise line:

"Starting with September 5 departures, all travelers regardless of vaccination status can cruise on the following itineraries, as long as they meet any testing requirements to board.

  • Cruises from Los Angeles, California.
  • Cruises from Galveston, Texas.
  • Cruises from New Orleans, Louisiana.
  • Cruises from a European homeport.

Notice that Florida, a major port for the cruise line, is not currently on the list.

In the U.S. aside from Florida, any guest with a valid negative covid test within the last three days will be able to board. These guests will also not be required to take a second test at the boarding terminal. Fully vaccinated guests do not need to provide proof of a negative covid test for shorter cruises. See the cruise line website for all updated information as it is subject to change.

Beginning Sept. 3, Norwegian Cruise Line  (NCLH) - Get Norwegian Cruise Line Holdings Ltd. Report is dropping its covid vaccine requirements for all its cruises. The cruise line stated that it is continuing to follow requirements for all destination countries, so guests traveling will want to check on destination vaccine and testing requirements. All guests 12 and older regardless of vaccination need to show proof of a negative test within 72 hours. Check NCL online for further instructions prior to travel.

The CDC has taken the stance that travelers are now well informed enough to make their own decisions when it comes to traveling on cruise lines. The travelers are taking their own assumed risk for their health and well-being. Cruise lines are now welcoming this new freedom for their passengers. 

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