Connect with us

Government

Weekly Market Pulse: Who’s The Boss?

I told you last week that there were strange things going on in the labor market but I had no idea how much of an understatement that really was. Much of last week’s economic focus was on the inflation report but I think the JOLTS report may turn out…

Published

on

I told you last week that there were strange things going on in the labor market but I had no idea how much of an understatement that really was. Much of last week’s economic focus was on the inflation report but I think the JOLTS report may turn out to be more significant. Inflation was indeed pretty hot year over year but that wasn’t unexpected. It wasn’t all about base effects either as our Jeff Snider pointed out. The bond market reaction to the CPI report was not as expected though and that gives us reason to believe that, for once, the Fed is going to get something right. This “inflation” is probably of the transitory variety, mostly a consequence of the supply shock nature of the last recession. There are still things to worry about on the inflation front but sustaining current inflation rates is probably going to require an assist from the dollar. Inflation is, after all, a measure of purchasing power, i.e. the value of the dollar. In the last weak dollar period from 2002 to 2008 the annual rate of inflation exceeded the Fed’s 2% target for 5 consecutive years (2003-2008). By contrast the generally strong dollar of the last decade kept CPI inflation under the Fed’s target almost the entire time. And the dollar, at least so far, is not cooperating with the big inflation narrative. The dollar is still near the bottom of its 6 year range but it refuses to fall any further.

Maybe it will eventually but in the short term the dollar looks poised to resume the gentle uptrend it started at the beginning of the year. Global yields continue to favor the dollar and investors are taking advantage which should push the dollar up and inflation down.

And so, with CPI printing at 5% year over year what did bond yields do? Fell of course. What else would you expect from this strange market? But, as I’ve pointed out before, these are small moves and the trend for rates is, for now, still up:

The 10 year Treasury yield fell 10 basis points on the week and the yield is back to where it was in early March. I think a lot of what is going on here is nothing more than a consolidation of the gains from earlier this year. I don’t think this economic cycle is even close to over but the pace of change is not what the market was looking for. The COVID recovery is going to be a bumpy one with all kinds of twists and turns no one could have predicted.

The drop in nominal yields last week was not, however, matched by TIPS yields so the result was a drop in inflation expectations. We may have already seen the high:

Which brings us to that JOLTS report from last week. Job openings is the metric that usually gets the most attention in this report and the change in April was huge, up nearly 1,000,000 jobs from March to an all time record. There are apparently plenty of jobs out there if some qualified person would just step up. And that may be part of the problem – not enough qualified applicants – but I think there is more going on here than the normal lament of a “skills mismatch”. There is also the matter of wages and there is at least anecdotal evidence that offering better pay will get you plenty of qualified applicants. There is also the small problem of very generous unemployment benefits that is keeping some portion of workers at home posting stupid tik tok videos.

But the rest of the JOLTS report offers another explanation that doesn’t involve accusing a large swath of Americans of laziness. The quits rate had a big jump too from 1.6% a year ago to 2.7% this year. Those are the numbers most of the news stories cited but that overstates the issue. People were not quitting jobs last April for pretty obvious reasons. The quits rate in February 2020 was 2.2% so the change to this year is about 22% which is still a stunning number if not quite as dramatic as the headlines. A high quits rate is seen as a sign of confidence. Workers don’t generally quit a job without having another one lined up or at least believing they can get one pretty easily.

But a lot of these people quitting their jobs do not appear to be just job hopping because the hires numbers was the outlier in this report. Hires were up but nothing like openings or quits.

So what are these quitters doing? Increasingly they are starting businesses. There has been a huge jump in business formation, a trend that started last June. There were nearly 500,000 new businesses formed in April so we know what at least some of those quitting their jobs were doing.

The Census Department also tracks what it calls high propensity business applications which are for corporate entities that indicate they are hiring employees. Those numbers have also jumped so all of these new businesses are not one man or woman shops.

A lot has changed over the last year and most of it doesn’t show up in the economic statistics yet. My wife, who knows way more about economics than most economists, says we won’t know the full COVID impact for a decade and I think she’s being conservative. A lot of people are reassessing their previous way of life, pondering their professional (and personal in many cases) relationships and how work affects their quality of life. A lot of two income couples became one income couples last year – and discovered the second income may have come at a very high cost. One of the consequences of the repeated rounds of “stimulus” payments last year was a big rise in personal savings which now appears to be fueling this new business boom. Some of this is undoubtedly just people shifting from employee to contractor, probably so they can continue working from home. But some of it is also genuine entrepreneurship, new businesses doing new things or old things in new ways. People had a lot of time to think over the last year and surely some had some great ideas that they are now taking from drawing board to action. That is not a bad thing no matter how or why it happened. Secular stagnation was about more than just a low growth rate; it was about a lack of dynamism in the economy. Maybe, in some weird unintended way, we are about to get our mojo back. If we are that is good news obviously, but with all these new businesses we’d be foolish to expect the change to be quick or smooth. Most new businesses don’t survive, much less thrive and there is a steep learning curve. Believe me, I know. Even for those who stuck with their old employers or at least their old profession, things are different now, businesses and industries changing in ways we didn’t expect. Supply chains are shifting and companies are learning how to be more adaptive, more antifragile to use Taleb’s phrase. I think that decade my wife says it will take to know the full impact of COVID is going to be very interesting.

 

The other reports released last week were generally as expected. Exports rose a bit but remain well below previous peaks. Imports were down a little in April but are well above the previous peak. Nothing surprising about either one. Wholesale inventory to sales ratios were generally unchanged at low levels. At some point I would expect to see those ratios rise some but so far businesses remain cautious. Consumer sentiment continues to rise. Expectations and current conditions both rose while inflation expectations fell.

 

We get retail sales this week along with another read on inflation, this time at the producer level. This report often gets short shrift compared to the CPI but it now be more the more important one for investors. If businesses can’t pass through higher input prices, it will come out of somewhere else – profit margins or some form of cost cutting. High stock prices and falling margins are probably not on good terms. We’ll also get housing starts and permits which have been quite volatile of late.

A turn higher for the dollar would generally be negative for commodities and the asset class is quite overbought in any case. Futures market positioning is overly bullish based on history with most of the specs long, particularly in the ag space and the softs. We have recently reduced our general commodity exposure as the market continues to adjust to a slower rate of recovery and moderating inflation expectations. The indexes are back to where they were prior to COVID and while there are some supply issues with specific commodities (lumber), I don’t think there is a lot of reason for the indexes to continue to climb at recent rates. The supply side of the economy will catch up eventually and probably sooner than commodity bulls currently believe. With no defined trend for the dollar, commodities should be considered trading assets.

There are some potentially interesting exceptions and copper may be one. Managed money accounts (hedge funds, CTAs) were quick to take profits on what were large longs in copper a few months ago. With most of the longs cleared out, a resumption of the uptrend is more likely. There are obviously some geopolitical reasons to question the reliability of copper supply too with Castillo clinging to a narrow lead over Fujimori in the Peruvian election. Castillo has threatened to nationalize the mines although he may already be moderating that position. There has been a decided political shift left in Chile too. Colombia may be next to flirt with some variant of socialism as Latin American seems to be going through one of its periodic spasms of populism. We may even get a rerun of Lula in Brazil now that his conviction has been overturned. Everything is cyclical in Latin America.

I am also watching the copper to gold ratio for a clue about future rate moves. I don’t know how much more nominal rates will fall but my guess is not a lot without some impetus. Absent a further slowdown in growth, rates should still have some upside. If the yield curve reaches the levels it did in the last three recessions, I’d expect to see rates top out a little north of 2%, maybe 2.5% at the high. Of course, the yield curve has been flattening as rates have been falling recently so it could have already peaked. If it has this may be a very short business cycle. We should be hoping the copper/gold ratio turns higher soon.

We also took some profits in our REIT allocation.  We didn’t change the allocation target as we did with commodities but sold down to the target. After a big run up the allocation had gotten too large (roughly 20% for a moderate account). We may be early on this one but we had to make an adjustment for risk purposes. The rate of ascent on many markets over the last year is not, if it needs to be said, sustainable and I think it makes sense to start anticipating a moderation. We have raised a decent amount of cash recently (about 12% for a moderate account) as momentum has reached some extremes. Selling at overbought extremes is just as hard as buying at oversold extremes but it is at those extremes that alpha is made.

There is still upside in REITs vs the S&P 500 but remember outperformance doesn’t mean positive returns. REITs could outperform by falling less in a correction.

We have been building up some cash in our portfolios recently but that has more to do with momentum than the macro-economic outlook. Stocks are expensive and we are underweight (versus our model) both large and small cap. We continue to emphasize value over growth although it is not held with a lot of conviction. We also have some international value exposure and we continue to hold a long term strategic position in Japan. We continue to like REITs and still have a full allocation after taking some profits. We are underweight general commodities but have a full allocation to gold as we await some direction from the dollar. We extended duration in our bond portfolio ever so slightly over the last few months but are still fairly short. We are positioned fairly cautiously right now but as always that is subject to change at a moment’s notice.

Small caps and REITs were the stars last week. Growth outperformed value for the week but value is still way ahead for the year. Europe continues to lead non-US markets.

The one sector that stands out right now in my opinion is healthcare which had very good week. We are long the biotech ETF in our portfolios and hold several pharma stocks in our individual stock portfolio. Biogen was a big winner for us last week but Roche Holdings also made new highs for us. Bristol Myers has had a run of good news on its pipeline recently as well. Healthcare as a whole seems very reasonably priced and it is one of the few industries that continues to invest and innovate.

Economies are hard to predict because human behavior is hard to predict. And when we talk about economics that is really what we are talking about – human behavior. Who would have thought a year ago that new business applications were about to take off? I know I didn’t. But here we are with a different economy than the one we had a year ago (thank goodness) and one that is different than almost anyone expected. All the while, markets have functioned well and been more accurate about the future than any Wall St. or Federal Reserve economist. Interest rates have confounded so many recently because they couldn’t imagine that rates would fall in the midst of a big inflation scare. But bonds rallied and low and behold we get a consumer sentiment survey that says exactly what the bond market has been telling us – inflation expectations have moderated. Growth expectations have moderated some too and while the S&P did hit a nominal new high last week, other stock indexes have stalled for the last several months (NASDAQ and Russell 2000).

We seem to be at some kind of transition point right now between re-opening euphoria and the more subdued reality of a global economy still trying to recover from a pandemic. I am optimistic about the long term but I am not panglossian. The big rise in new business applications is a big positive in my opinion but it will take time to have an impact on the economy. Secular stagnation didn’t happen overnight and neither will our emergence from it. And that assumes that our policymakers don’t do something stupid to slow things down further, an always a dubious proposition. If you doubt that I give you nearly a decade of QE whose impact, when reckoned years from now, will likely be judged as negative. Now with Congress and the President only arguing about how big the spending blowout will be I fully expect the fiscal equivalent of QE. It’ll be big, splashy and ineffective at least at what it is supposed to do. But it’ll let everyone feel better, that something, anything is being done. You know, just like QE.

I don’t know what will cause markets to correct or when but I know that overbought markets don’t stay that way anymore than oversold ones. So I’m comfortable being a little more conservative right now and waiting for better opportunities. We’ve had a great run over the last year but it’s time to dial it back a little.

 

Joe Calhoun

Read More

Continue Reading

International

Net Zero, The Digital Panopticon, & The Future Of Food

Net Zero, The Digital Panopticon, & The Future Of Food

Authored by Colin Todhunter via Off-Guardian.org,

The food transition, the energy…

Published

on

Net Zero, The Digital Panopticon, & The Future Of Food

Authored by Colin Todhunter via Off-Guardian.org,

The food transition, the energy transition, net-zero ideology, programmable central bank digital currencies, the censorship of free speech and clampdowns on protest. What’s it all about? To understand these processes, we need to first locate what is essentially a social and economic reset within the context of a collapsing financial system.

Writer Ted Reece notes that the general rate of profit has trended downwards from an estimated 43% in the 1870s to 17% in the 2000s. By late 2019, many companies could not generate enough profit. Falling turnover, squeezed margins, limited cashflows and highly leveraged balance sheets were prevalent.

Professor Fabio Vighi of Cardiff University has described how closing down the global economy in early 2020 under the guise of fighting a supposedly new and novel pathogen allowed the US Federal Reserve to flood collapsing financial markets (COVID relief) with freshly printed money without causing hyperinflation. Lockdowns curtailed economic activity, thereby removing demand for the newly printed money (credit) in the physical economy and preventing ‘contagion’.

According to investigative journalist Michael Byrant, €1.5 trillion was needed to deal with the crisis in Europe alone. The financial collapse staring European central bankers in the face came to a head in 2019. The appearance of a ‘novel virus’ provided a convenient cover story.

The European Central Bank agreed to a €1.31 trillion bailout of banks followed by the EU agreeing to a €750 billion recovery fund for European states and corporations. This package of long-term, ultra-cheap credit to hundreds of banks was sold to the public as a necessary programme to cushion the impact of the pandemic on businesses and workers.

In response to a collapsing neoliberalism, we are now seeing the rollout of an authoritarian great reset — an agenda that intends to reshape the economy and change how we live.

SHIFT TO AUTHORITARIANISM

The new economy is to be dominated by a handful of tech giants, global conglomerates and e-commerce platforms, and new markets will also be created through the financialisation of nature, which is to be colonised, commodified and traded under the notion of protecting the environment.

In recent years, we have witnessed an overaccumulation of capital, and the creation of such markets will provide fresh investment opportunities (including dodgy carbon offsetting Ponzi schemes)  for the super-rich to park their wealth and prosper.

This great reset envisages a transformation of Western societies, resulting in permanent restrictions on fundamental liberties and mass surveillance. Being rolled out under the benign term of a ‘Fourth Industrial Revolution’, the World Economic Forum (WEF) says the public will eventually ‘rent’ everything they require (remember the WEF video ‘you will own nothing and be happy’?): stripping the right of ownership under the guise of a ‘green economy’ and underpinned by the rhetoric of ‘sustainable consumption’ and ‘climate emergency’.

Climate alarmism and the mantra of sustainability are about promoting money-making schemes. But they also serve another purpose: social control.

Neoliberalism has run its course, resulting in the impoverishment of large sections of the population. But to dampen dissent and lower expectations, the levels of personal freedom we have been used to will not be tolerated. This means that the wider population will be subjected to the discipline of an emerging surveillance state.

To push back against any dissent, ordinary people are being told that they must sacrifice personal liberty in order to protect public health, societal security (those terrible Russians, Islamic extremists or that Sunak-designated bogeyman George Galloway) or the climate. Unlike in the old normal of neoliberalism, an ideological shift is occurring whereby personal freedoms are increasingly depicted as being dangerous because they run counter to the collective good.

The real reason for this ideological shift is to ensure that the masses get used to lower living standards and accept them. Consider, for instance, the Bank of England’s chief economist Huw Pill saying that people should ‘accept’ being poorer. And then there is Rob Kapito of the world’s biggest asset management firm BlackRock, who says that a “very entitled” generation must deal with scarcity for the first time in their lives.

At the same time, to muddy the waters, the message is that lower living standards are the result of the conflict in Ukraine and supply shocks that both the war and ‘the virus’ have caused.

The net-zero carbon emissions agenda will help legitimise lower living standards (reducing your carbon footprint) while reinforcing the notion that our rights must be sacrificed for the greater good. You will own nothing, not because the rich and their neoliberal agenda made you poor but because you will be instructed to stop being irresponsible and must act to protect the planet.

NET-ZERO AGENDA

But what of this shift towards net-zero greenhouse gas emissions and the plan to slash our carbon footprints? Is it even feasible or necessary?

Gordon Hughes, a former World Bank economist and current professor of economics at the University of Edinburgh, says in a new report that current UK and European net-zero policies will likely lead to further economic ruin.

Apparently, the only viable way to raise the cash for sufficient new capital expenditure (on wind and solar infrastructure) would be a two decades-long reduction in private consumption of up to 10 per cent. Such a shock has never occurred in the last century outside war; even then, never for more than a decade.

But this agenda will also cause serious environmental degradation. So says Andrew Nikiforuk in the article The Rising Chorus of Renewable Energy Skeptics, which outlines how the green techno-dream is vastly destructive.

He lists the devastating environmental impacts of an even more mineral-intensive system based on renewables and warns:

“The whole process of replacing a declining system with a more complex mining-based enterprise is now supposed to take place with a fragile banking system, dysfunctional democracies, broken supply chains, critical mineral shortages and hostile geopolitics.”

All of this assumes that global warming is real and anthropogenic. Not everyone agrees. In the article Global warming and the confrontation between the West and the rest of the world, journalist Thierry Meyssan argues that net zero is based on political ideology rather than science. But to state such things has become heresy in the Western countries and shouted down with accusations of ‘climate science denial’.

Regardless of such concerns, the march towards net zero continues, and key to this is the United Nations Agenda 2030 for Sustainable Development Goals.

Today, almost every business or corporate report, website or brochure includes a multitude of references to ‘carbon footprints’, ‘sustainability’, ‘net zero’ or ‘climate neutrality’ and how a company or organisation intends to achieve its sustainability targets. Green profiling, green bonds and green investments go hand in hand with displaying ‘green’ credentials and ambitions wherever and whenever possible.

It seems anyone and everyone in business is planting their corporate flag on the summit of sustainability. Take Sainsbury’s, for instance. It is one of the ‘big six’ food retail supermarkets in the UK and has a vision for the future of food that it published in 2019.

Here’s a quote from it:

“Personalised Optimisation is a trend that could see people chipped and connected like never before. A significant step on from wearable tech used today, the advent of personal microchips and neural laces has the potential to see all of our genetic, health and situational data recorded, stored and analysed by algorithms which could work out exactly what we need to support us at a particular time in our life. Retailers, such as Sainsbury’s could play a critical role to support this, arranging delivery of the needed food within thirty minutes — perhaps by drone.”

Tracked, traced and chipped — for your own benefit. Corporations accessing all of our personal data, right down to our DNA. The report is littered with references to sustainability and the climate or environment, and it is difficult not to get the impression that it is written so as to leave the reader awestruck by the technological possibilities.

However, the promotion of a brave new world of technological innovation that has nothing to say about power — who determines policies that have led to massive inequalities, poverty, malnutrition, food insecurity and hunger and who is responsible for the degradation of the environment in the first place — is nothing new.

The essence of power is conveniently glossed over, not least because those behind the prevailing food regime are also shaping the techno-utopian fairytale where everyone lives happily ever after eating bugs and synthetic food while living in a digital panopticon.

FAKE GREEN

The type of ‘green’ agenda being pushed is a multi-trillion market opportunity for lining the pockets of rich investors and subsidy-sucking green infrastructure firms and also part of a strategy required to secure compliance required for the ‘new normal’.

It is, furthermore, a type of green that plans to cover much of the countryside with wind farms and solar panels with most farmers no longer farming. A recipe for food insecurity.

Those investing in the ‘green’ agenda care first and foremost about profit. The supremely influential BlackRock invests in the current food system that is responsible for polluted waterways, degraded soils, the displacement of smallholder farmers, a spiralling public health crisis, malnutrition and much more.

It also invests in healthcare — an industry that thrives on the illnesses and conditions created by eating the substandard food that the current system produces. Did Larry Fink, the top man at BlackRock, suddenly develop a conscience and become an environmentalist who cares about the planet and ordinary people? Of course not.

Any serious deliberations on the future of food would surely consider issues like food sovereignty, the role of agroecology and the strengthening of family farms — the backbone of current global food production.

The aforementioned article by Andrew Nikiforuk concludes that, if we are really serious about our impacts on the environment, we must scale back our needs and simplify society.

In terms of food, the solution rests on a low-input approach that strengthens rural communities and local markets and prioritises smallholder farms and small independent enterprises and retailers, localised democratic food systems and a concept of food sovereignty based on self-sufficiency, agroecological principles and regenerative agriculture.

It would involve facilitating the right to culturally appropriate food that is nutritionally dense due to diverse cropping patterns and free from toxic chemicals while ensuring local ownership and stewardship of common resources like land, water, soil and seeds.

That’s where genuine environmentalism and the future of food begins.

Tyler Durden Thu, 03/14/2024 - 02:00

Read More

Continue Reading

Government

Five Aerospace Investments to Buy as Wars Worsen Copy

Five aerospace investments to buy as wars worsen give investors a chance to acquire shares of companies focused on fortifying national defense. The five…

Published

on

Five aerospace investments to buy as wars worsen give investors a chance to acquire shares of companies focused on fortifying national defense.

The five aerospace investments to buy provide military products to help protect freedom amid Russia’s ongoing onslaught against Ukraine that began in February 2022, as well as supply arms in the Middle East used after Hamas militants attacked and murdered civilians in Israel on Oct. 7. Even though the S&P 500 recently reached all-time highs, these five aerospace investments have remained reasonably priced and rated as recommendations by seasoned analysts and a pension fund chairman.

State television broadcasts in Russia show the country’s soldiers advancing further into Ukrainian territory, but protests have occurred involving family members of those serving in perilous conditions in the invasion of their neighboring nation to be brought home. Even though hundreds of thousands of Russians also have fled to other countries to avoid compulsory military service, the aggressor’s President Vladimir Putin has vowed to continue to send additional soldiers into the fierce fighting.

While Russia’s land-grab of Crimea and other parts of Ukraine show no end in sight, Israel’s war with Hamas likely will last for at least additional months, according to the latest reports. United Nations’ leaders expressed alarm on Dec. 26 about intensifying Israeli attacks that killed more than 100 Palestinians over two days in part of the Gaza Strip, when 15 members of the Israel Defense Force (IDF) also lost their lives.

Five Aerospace Investments to Buy as Wars Worsen: General Dynamics

One of the five aerospace investments to buy as wars worsen is General Dynamics (NYSE: GD), a Reston, Virginia-based aerospace company with more than 100,000 employees in 70-plus countries. A key business unit of General Dynamics is Gulfstream Aerospace Corporation, a manufacturer of business aircraft. Other segments of General Dynamics focus on making military products such as Abrams tanks, Stryker fighting vehicles, ASCOD fighting vehicles like the Spanish PIZARRO and British AJAX, LAV-25 Light Armored Vehicles and Flyer-60 lightweight tactical vehicles.

For the U.S. Navy and other allied armed forces, General Dynamics builds Virginia-class attack submarines, Columbia-class ballistic missile submarines, Arleigh Burke-class guided missile destroyers, Expeditionary Sea Base ships, fleet logistics ships, commercial cargo ships, aircraft and naval gun systems, Hydra-70 rockets, military radios and command and control systems. In addition, the company provides radio and optical telescopes, secure mobile phones, PIRANHA and PANDUR wheeled armored vehicles and mobile bridge systems.

Chicago-based investment firm William Blair & Co. is among those recommending General Dynamics. The Chicago firm gave an “outperform” rating to General Dynamics in a Dec. 21 research note.

Gulfstream is seeking G700 FAA certification by the end of 2023, suggesting potentially positive news in the next 10 days, William Blair wrote in its recent research note. The investment firm projected that General Dynamics would trade upward upward upon the G700’s certification.

“General Dynamics’ 2023 aircraft delivery guidance of approximately 134 planes assumes that 19 G700s are delivered in the fourth quarter,” wrote William Blair’s aerospace and defense analyst Louie DiPalma. “Even if deliveries fall short of this target, we believe investors will take a glass-half-full approach upon receipt of the certification.”

Chart courtesy of www.stockcharts.com.

Five Aerospace Investments to Buy as Wars Worsen: GD Outlook

The G700 is a major focus area for investors because it is Gulfstream’s most significant aircraft introduction since the iconic G650 in 2012, DiPalma wrote. Gulfstream has the highest market share in the long-range jet segment of the private aircraft market, the highest profit margin of aircraft peers and the most premium business aviation brand, he added.

“The aircraft remains immensely popular today with corporations and high-net-worth individuals,” Di Palma wrote. “Elon Musk has reportedly placed an order for a G700 to go along with his existing G650. Qatar Airways announced at the Paris Air Show that 10 G700 aircraft will become part of its fleet.”

G700 deliveries and subsequent G800 deliveries are expected to be the cornerstone of Gulfstream’s growth and margin expansion for the next decade, DiPalma wrote. This should lead to a rebound in the stock price as the margins for the G700 and G800 are very attractive, he added.

Management’s guidance is for the aerospace operating margin to increase from about 13.2% in 2022 to roughly 14.0% in 2023 and 15.8% in 2024. Longer term, a high-teens profit margin appears within reach, DiPalma projected.

In other General Dynamics business segments, William Blair expects several yet-unannounced large contract awards for General Dynamics IT, to go along with C$1.7 billion, or US$1.29 billion, in General Dynamics Mission Systems contracts announced on Dec. 20 for the Canadian Army. General Dynamics shares are poised to have a strong 2024, William Blair wrote.

Five Aerospace Investments to Buy as Wars Worsen: VSE Corporation

Alexandria, Virginia-based VSE Corporation’s (NASDAQ: VSEC) price-to-earnings (P/E) valuation multiple of 22 received support when AAR Corp. (NYSE: AIR), a Wood Dale, Illinois, provider of aviation services, announced on Dec. 21 that it would acquire the product support business of Triumph Group (NYSE: TGI), a Berwyn, Pennsylvania, supplier of aerospace services, structures and systems. AAR’s purchase price of $725 million reflects confidence in a continued post-pandemic aerospace rebound.

VSE, a provider of aftermarket distribution and repair services for land, sea and air transportation assets used by government and commercial markets, is rated “outperform” by William Blair. The company’s core services include maintenance, repair and operations (MRO), parts distribution, supply chain management and logistics, engineering support, as well as consulting and training for global commercial, federal, military and defense customers.

“Robust consumer travel demand and aging aircraft fleets have driven elevated maintenance visits,” William Blair’s DiPalma wrote in a Dec. 21 research note. “The AAR–Triumph deal is valued at a premium 13-times 2024 EBITDA multiple, which was in line with the valuation multiple that Heico (NYSE: HEI) paid for Wencor over the summer.”

VSE currently trades at a discounted 9.5 times consensus 2024 earnings before interest, taxes, depreciation and amortization (EBITDA) estimates, as well as 11.6 times consensus 2023 EBITDA.

Five Aerospace Investments to Buy as Wars Worsen: VSE Undervalued?

“We expect that VSE shares will trend higher as investors process this deal,” DiPalma wrote. “VSE shares trade at 9.5 times consensus 2024 adjusted EBITDA, compared with peers and M&A comps in the 10-to-14-times range. We think that VSE’s multiple will expand as it closes the divestiture of its federal and defense business and makes strategic acquisitions. We see consistent 15% annual upside for shares as VSE continues to take share in the $110 billion aviation aftermarket industry.”

William Blair reaffirmed its “outperform” rating for VSE on Dec. 21. The main risk to VSE shares is lumpiness associated with its aviation services margins, Di Palma wrote. However, he raised 2024 estimates to further reflect commentary from VSE’s analysts’ day in November.

Chart courtesy of www.stockcharts.com.

Five Aerospace Investments to Buy as Wars Worsen: HEICO Corporation

HEICO Corporation (NYSEL: HEI), is a Hollywood, Florida-based technology-driven aerospace, industrial, defense and electronics company that also is ranked as an “outperform” investment by William Blair’s DiPalma. The aerospace aftermarket parts provider recently reported fourth-quarter financials above consensus analysts’ estimates, driven by 20% organic growth in HEICO’s flight support group.

HEICO’s management indicated that the performance of recently acquired Wencor is exceeding expectations. However, HEICO leaders offered color on 2024 organic growth and margin expectations that forecast reduced gains. Even though consensus estimates already assumed slowing growth, it is still not a positive for HEICO, DiPalma wrote.

William Blair forecasts 15% annual upside to HEICO’s shares, based on EBITDA growth. HEICO’s management cited a host of reasons for its quarterly outperformance, highlighted by the continued commercial air travel recovery. The company also referenced new product introductions and efficiency initiatives.

HEICO’s defense product sales increased by 26% sequentially, marking the third consecutive sequential increase in defense product revenue. The company’s leaders conveyed that defense in general is moving in the right direction to enhance financial performance.

Chart courtesy of www.stockcharts.com.

Five Dividend-paying Defense and Aerospace Investments to Purchase: XAR

A fourth way to obtain exposure to defense and aerospace investments is through SPDR S&P Aerospace and Defense ETF (XAR). That exchange-traded fund  tracks the S&P Aerospace & Defense Select Industry Index. The fund is overweight in industrials and underweight in technology and consumer cyclicals, said Bob Carlson, a pension fund chairman who heads the Retirement Watch investment newsletter.

Bob Carlson, who heads Retirement Watch, answers questions from Paul Dykewicz.

XAR has 34 securities, and 44.2% of the fund is in the 10 largest positions. The fund is up 25.82% in the last 12 months, 22.03% in the past three months and 7.92% for the last month. Its dividend yield recently measured 0.38%.

The largest positions in the fund recently were Axon Enterprise (NASDAQ: AXON), Boeing (NYSE: BA), L3Harris Technologies (NYSE: LHX), Spirit Aerosystems (NYSE: SPR) and Virgin Galactic (NYSE: SPCE).

Chart courtesy of www.stockcharts.com

Five Dividend-paying Defense and Aerospace Investments to Purchase: PPA

The second fund recommended by Carlson is Invesco Aerospace & Defense ETF (PPA), which tracks the SPADE Defense Index. It has the same underweighting and overweighting as XAR, he said.

PPA recently held 52 securities and 53.2% of the fund was in its 10 largest positions. With so many holdings, the fund offers much reduced risk compared to buying individual stocks. The largest positions in the fund recently were Boeing (NYSE: BA), RTX Corp. (NYSE: RTX), Lockheed Martin (NYSE: LMT), Northrop Grumman (NYSE: NOC) and General Electric (NYSE:GE).

The fund is up 19.07% for the past year, 50.34% in the last three months and 5.30% during the past month. The dividend yield recently touched 0.69%.

Chart courtesy of www.stockcharts.com

Other Fans of Aerospace

Two fans of aerospace stocks are Mark Skousen, PhD, and seasoned stock picker Jim Woods. The pair team up to head the Fast Money Alert advisory service They already are profitable in their recent recommendation of Lockheed Martin (NYSE: LMT) in Fast Money Alert.

Mark Skousen, a scion of Ben Franklin, meets with Paul Dykewicz.


Jim Woods, a former U.S. Army paratrooper, co-heads Fast Money Alert.

Bryan Perry, who heads the Cash Machine investment newsletter and the Micro-Cap Stock Trader advisory service, recommends satellite services provider Globalstar (NYSE American: GSAT), of Covington, Louisiana, that has jumped 50.00% since he advised buying it two months ago. Perry is averaging a dividend yield of 11.14% in his Cash Machine newsletter but is breaking out with the red-hot recommendation of Globalstar in his Micro-Cap Stock Trader advisory service.


Bryan Perry heads Cash Machine, averaging an 11.14% dividend yield.

Military Equipment Demand Soars amid Multiple Wars

The U.S. military faces an acute need to adopt innovation, to expedite implementation of technological gains, to tap into the talents of people in various industries and to step-up collaboration with private industry and international partners to enhance effectiveness, U.S. Joint Chiefs of Staff Gen. Charles Q. Brown Jr. told attendees on Nov 16 at a national security conference. Prime examples of the need are showed by multiple raging wars, including the Middle East and Ukraine. A cold war involves China and its increasingly strained relationships with Taiwan and other Asian nations.

The shocking Oct. 7 attack by Hamas on Israel touched off an ongoing war in the Middle East, coupled with Russia’s February 2022 invasion and continuing assault of neighboring Ukraine. Those brutal military conflicts show the fragility of peace when determined aggressors are willing to use any means necessary to achieve their goals. To fend off such attacks, rapid and effective response is required.

“The Department of Defense is doing more than ever before to deter, defend, and, if necessary, defeat aggression,” Gen. Brown said at the National Security Innovation Forum at the Johns Hopkins University Bloomberg Center in Washington, D.C.

One of Russia’s war ships, the 360-foot-long Novocherkassk, was damaged on Dec. 26 by a Ukrainian attack on the Black Sea port of Feodosia in Crimea. This video of an explosion at the port that reportedly shows a section of the ship hit by aircraft-guided missiles.


Chairman Joint Chiefs of Staff Gen. Charles Q. Brown, Jr.
Photo By: Benjamin Applebaum

National security threats can compel immediate action, Gen. Brown said he quickly learned since taking his post on Oct. 1.

 

“We may not have much warning when the next fight begins,” Gen. Brown said. “We need to be ready.”

 

In a pre-recorded speech at the national security conference, Michael R. Bloomberg, founder of Bloomberg LP, told the John Hopkins national security conference attendees about the critical need for collaboration between government and industry.

 

“Building enduring technological advances for the U.S. military will help our service members and allies defend freedom across the globe,” Bloomberg said.

 

The “horrific terrorist attacks” against Israel and civilians living there on Oct. 7 underscore the importance of that mission, Bloomberg added.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street JournalInvestor’s Business DailyUSA Today, the Journal of Commerce, Seeking Alpha, Guru Focus and other publications and websites. Attention Holiday Gift Buyers! Consider purchasing Paul’s inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is great gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many othersCall 202-677-4457 for special pricing on multiple-book purchases or autographed copies! Follow Paul on Twitter @PaulDykewicz. He is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper, after writing for the Baltimore Business Journal and Crain Communications.

The post Five Aerospace Investments to Buy as Wars Worsen Copy appeared first on Stock Investor.

Read More

Continue Reading

Government

Health Officials: Man Dies From Bubonic Plague In New Mexico

Health Officials: Man Dies From Bubonic Plague In New Mexico

Authored by Jack Phillips via The Epoch Times (emphasis ours),

Officials in…

Published

on

Health Officials: Man Dies From Bubonic Plague In New Mexico

Authored by Jack Phillips via The Epoch Times (emphasis ours),

Officials in New Mexico confirmed that a resident died from the plague in the United States’ first fatal case in several years.

A bubonic plague smear, prepared from a lymph removed from an adenopathic lymph node, or bubo, of a plague patient, demonstrates the presence of the Yersinia pestis bacteria that causes the plague in this undated photo. (Centers for Disease Control and Prevention/Getty Images)

The New Mexico Department of Health, in a statement, said that a man in Lincoln County “succumbed to the plague.” The man, who was not identified, was hospitalized before his death, officials said.

They further noted that it is the first human case of plague in New Mexico since 2021 and also the first death since 2020, according to the statement. No other details were provided, including how the disease spread to the man.

The agency is now doing outreach in Lincoln County, while “an environmental assessment will also be conducted in the community to look for ongoing risk,” the statement continued.

This tragic incident serves as a clear reminder of the threat posed by this ancient disease and emphasizes the need for heightened community awareness and proactive measures to prevent its spread,” the agency said.

A bacterial disease that spreads via rodents, it is generally spread to people through the bites of infected fleas. The plague, known as the black death or the bubonic plague, can spread by contact with infected animals such as rodents, pets, or wildlife.

The New Mexico Health Department statement said that pets such as dogs and cats that roam and hunt can bring infected fleas back into homes and put residents at risk.

Officials warned people in the area to “avoid sick or dead rodents and rabbits, and their nests and burrows” and to “prevent pets from roaming and hunting.”

“Talk to your veterinarian about using an appropriate flea control product on your pets as not all products are safe for cats, dogs or your children” and “have sick pets examined promptly by a veterinarian,” it added.

“See your doctor about any unexplained illness involving a sudden and severe fever, the statement continued, adding that locals should clean areas around their home that could house rodents like wood piles, junk piles, old vehicles, and brush piles.

The plague, which is spread by the bacteria Yersinia pestis, famously caused the deaths of an estimated hundreds of millions of Europeans in the 14th and 15th centuries following the Mongol invasions. In that pandemic, the bacteria spread via fleas on black rats, which historians say was not known by the people at the time.

Other outbreaks of the plague, such as the Plague of Justinian in the 6th century, are also believed to have killed about one-fifth of the population of the Byzantine Empire, according to historical records and accounts. In 2013, researchers said the Justinian plague was also caused by the Yersinia pestis bacteria.

But in the United States, it is considered a rare disease and usually occurs only in several countries worldwide. Generally, according to the Mayo Clinic, the bacteria affects only a few people in U.S. rural areas in Western states.

Recent cases have occurred mainly in Africa, Asia, and Latin America. Countries with frequent plague cases include Madagascar, the Democratic Republic of Congo, and Peru, the clinic says. There were multiple cases of plague reported in Inner Mongolia, China, in recent years, too.

Symptoms

Symptoms of a bubonic plague infection include headache, chills, fever, and weakness. Health officials say it can usually cause a painful swelling of lymph nodes in the groin, armpit, or neck areas. The swelling usually occurs within about two to eight days.

The disease can generally be treated with antibiotics, but it is usually deadly when not treated, the Mayo Clinic website says.

“Plague is considered a potential bioweapon. The U.S. government has plans and treatments in place if the disease is used as a weapon,” the website also says.

According to data from the U.S. Centers for Disease Control and Prevention, the last time that plague deaths were reported in the United States was in 2020 when two people died.

Tyler Durden Wed, 03/13/2024 - 21:40

Read More

Continue Reading

Trending