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By Jeffrey Cohen 1/3/2025 - in anticipation of earnings a week from now (Jan 10, 2025 at 7am ET) Conclusion: Looking for a strong earnings release Physician and other medical services are growing 2x the US PCE rate, and Walgreens has made strategic investments into those areas that may start to show signs of paying off. They should show growth and profitability in this segment. Pharmacy sales (prescription and OTC) are growing faster than overall economy for the quarter (6.7% vs. 5.4%) and should be bullish for Walgreens. This trajectory slowed to PCE growth rates in November. Retail (front of store) will be a drag on growth. It grew more slowly than overall PCE. We are looking at the December 2024 publication of November 2024 Personal Consumption Expenditure information (also called Powell's favorite metric, and PCE). We highlight in a spreadsheet (which we download from the US Government data source), all of the rows of things that Walgreens provides. We compare that for a few periods (e.g., prior three months vs. same prior three months a year ago; prior month vs. prior month a year ago; and sometimes we go back a few years). Overall PCE (or Expenditures) are up 5.43% Year on Year for the quarter (3 months). Expenditures are up 5.45% for just November Year on Year. That sets the baseline. If pharmaceutical sales are up more than 5.44% (the average), then they are growing faster than the retail economy and the profits should be 'rolling in.' In this analysis we are ignoring the size of each category, but it does matter and things like pharmaceutical sales are more important than newspapers and we keep that in mind. 1. Pharmaceutical products (including prescription and non-prescription drugs) is up 6.7% for the quarter YoY, and 5.3% for November YoY. This will be a strong quarter for the pharmacy and OTC drug sales areas. Quarter YoY growth rates on consumable products: Food and non-alcoholic beverages purchased for off-premise consumption 3% Games 6% Film 5% Cleaning products 4% Paper products 3% Personal Care Products 4% Tobacco (4%) minus 4% Magazines 6% Photo Processing (the service) 1% Quarter YoY growth rates on Health Care Services: Physician services 9% Medical Labs 9% Other professional medical service3s 11% Implications: Walgreens should show a strong quarter, with faster than overall economic growth, in their US pharmacy department. They should also show strong growth in their Village MD and other doctor, lab services, and clinical trial services. Those areas are growing twice the US average, and should be a large tail-wind. The retail store is flat to slower growth than the overall economy. Non-alcoholic beverages and tobacco were especially weak. Given the push to highlight and grow physician and other medical services, and the economic growth moving into those areas, this is bullish for Walgreens strategy and financial results to be reported next Friday, January 10, 2025 at 7am ET. Link to Walgreens Notice here: We know there are is a huge short position against Walgreens, and the stock was the worst performer in the S&P 500 in 2024. Good luck to all.
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Good morning. Yesterday's election results are in, although still preliminary and subject to change depending on vote by mail, provisional ballots, and slow counties and states that rely on manual processes and procedures. There are always the 0% to 5% of votes that take time to tabulate...so election results are not finalized the next day. However, the news is projecting a stronger showing for Republicans in the U.S. House and Senate, and a win in the White House.  CNN.COM Online Headline November 6, 2024: 08:43 ET What are the U.S. Financial markets saying to us and where should we make changes to our portfolios? Currencies and crypto currencies are moving however not all in the same direction. Bitcoin is up to $74,000, which is stronger relative to the US Dollar. The EURO and Japanese Yen are both trading lower against the US Dollar (US Dollar is stronger). The Euro is trading at $1.071. In fact, the US Dollar is stronger against all major 'Allied Country' currencies. This is most likely a factor of US Interest Rates surging higher today. Risk is lower as priced in the market with the VIX. The risk metric went from a 21 handle to a 15 handle, and is 23% lower in early trading. This reduction in the price of risk is material and significant. (commentary: it is like the market took a deep breath and a big sigh of relief) Interest rates are higher across the board. The UST 10-year note is up 17 basis points to 4.459%. If this holds, money will flow into longer-duration bonds and any banks holding US Treasury notes or bonds will hold even greater unrealized losses on their 'low risk' investment portfolios. As is likely obvious by now, US stock markets are all trading higher. Dow is up 3%, Nasdaq 2%, S&P 500 2% and the Russell 2000 is up 4.7%. These are significant gains in the first 7 minutes of trading. Commodities are almost universally lower in price, except Orange Juice, Natural Gas and Rough Rice. Oil and gasoline are significantly lower, along with metals, grains, softw, etc. We have a hunch that the defense contractor stocks will be down today. Why? President Trump does not believe in maintaining wars 'for war's sake.' It is believed that President-Elect President Trump will move quickly and decisively to end the fighting in the world, and well before his January inauguration. (commentary: world peace is a large benefit of a Trump win.) As of now, that trade is not working. Defense Contractors are up across the board, with a few exceptions.  Key domestic manufacturers are up today. Think large product manufacturers. Residential Real Estate is not having a good morning. That sector is down (although not all companies are trading lower). The services sector is up, but the brokers, information providers, and home builders are all lower on higher interest rates. U.S. based energy producers are higher this morning. Large, diversified foreign producers are lower (think Shell, Total and BP). Gold, Silver and Platinum are all lower (the USA is safer with a Republican election victory). We notice that specific names in the consumer products and retail sector are lower. Dollar Tree (huge exposure to import tariffs) is down, but so is Coke and Pepsi, Home Depot, Procter and Gamble. Drug stocks are mostly lower, as well as hospitals. Pharmaceuticals, biotech and generally healthcare with hospitals are significantly lower. However, CVS is screaming higher. In summary, a Republican election victory has had a significant impact on financial markets. 1. Interest rates are universally and significantly higher, as is the US Dollar. 2. Stocks are up, especially in small-cap names. Not all stocks are up, there are definite winners and losers that stand out. 3. Market measures of risk are lower. Crypto is higher, VIX is lower, and precious metals are lower. 4. Commodities are lower. 5. Interest-rate sensitive sectors are lower (e.g., residential real estate) 6. Defense stocks are higher. 7. Retail is lower (especially dollar stores). 8. Pharmaceutical companies and hospital owners are significantly lower. 9. Domestic manufacturers and Domestic oil and gas exploration and production companies are higher. One caveat. We have a long position in Walgreens. Their stock is up, but not by much (around 1%) because they have retail exposure, exposure to tariffs, and exposure to longer-term interest rates via their debt and interest payments. There is something going on with pharmaceutical developers and manufacturers being lower (maybe some margin compression expected), but not sure why CVS is 11% higher (PBM and health insurer, in-store clinics, and pharmacy) and Walgreens is only 1% higher.
We are listening to Q&A.
JPMC: Reimbursement pressure CEO Wentworth: Lessening of pressure in FY25, 80% of the discussions are completed, and 20% of the discussions are ongoing (and Walgreens is ready to take hard decisions). Constructive conversations and willingness to walk away from lines of business or sets of drugs. Discussion of value creation. JPMC: Closures CEO: 500 stores incremental in 2025 (back half) and some already occurred in 2024, helping financials. Q: FCF timing, 2025 is a re-basing year. Is it really 2025, or later? Vendor contracts renegotiations updates - suppliers progress. CEO: Timing: multi-year turn-around, and 2025 is a rebaselining year. Cencora 2029 agreement: meaningful dialog to together improve procurement through distribution and operations. No details provided. Goal is to grow cash flow and AOI in the next three years. 2025 is a better base, with fewer one-timers. FY 2026 the equity benefits from Cencora will be lapped, providing headwinds to comps. Pharmacy margins and US retail sales are the focus for growth, with scale over the next three years. Focus on cost optimization, especially store closing which should be accretive over the year. Deutsche Bank (DB): Store closures impacts, and earnings cadence in US Pharmacy Segment. Store closure benefits of $100M in AOI in 2025. Cash accretive in working capital and owned locations will exceed store closure costs. Cadence will be the same, so no difference between H1 and H2. Q: 80% PBM contract volume renegotiation: is it stable moving forward? FCF in 2025. His model is negative FCF in 2025. CEO: ongoing and dynamic process on these multi-year agreements. Ongoing dynamic to keep 'sitting down' and focusing on improving the business. PBMs operate on a calendar year basis, and the 20% of the remaining contracts need more work by both parties. Adjusted Operating Income to decline: $400M in sale leads-back and Cencora equity. Legal payments of $1.050B in 2025, and lower in 2026. Partially offset headwinds by $500M in working capital. CAPX decline by $150M in 2025. Pragmatic approach to cash management, including monetizing non-strategic assets. Q; US Healthcare: Reduction in investment in Village MD? US Retail strategy is a healthcare strategy. Specialty pharmacy is a growth area and starting point for growth. Shields continues to grow within their partnership. Improvement in Village MD (cost reduction program), and improvement from their risk-based book. Benefit of cost and clinic closures to continue, including contribution margin. Continuation of trends in 2025. UBS: Flow of consumers and overall volumes? Yes...continue to serve consumers. Dividend? Level of the dividend is on the table, and a board decision. Cash flow? Stranded costs? Yes, very committed to cost reduction. Very focused on non-store related cost reduction. This is a corporate culture of cost reduction, so they can invest in the stores. The opportunity for cost reduction is smaller, but still significant. The focus is at the corporate level. The stores are tightly staffed, and there is not a significant opportunity. The people in the stores are the areas of investment, vs. Amazon or mail order pharmacy. Q: US Healthcare side: Monetization and business improvement is complicated. Improvement to the business (margin expansion) apart from cost optimization and store closure. What about the FNG: Jason? Mary has been building a successful team here. Disciplined growth strategy focused on the short-term. They exited non-strategic programs. They are focused on adjacency assets. Reaching and serving patients. CFO Comments: There were significant non-cash charges in 2024, including in Q4/2024. This will allow for offsetting of tax liabilities. Adjusted EPS of $2.88 was down 28% GAAP net loss was $10.01, largely due to non-cash charges. Net sales were up 5% YoY and 6.5% vs. the prior year's Q4. Cost savings of $1B/year in the U.S. retail pharmacy segment helped to offset weakness in retail performance. Pharmacy Q4 adjusted gross margin was down. Consumer weakness in non-essential categories such as beauty, seasonal and general merchandise. Positive impact from health and wellness. Also, higher shrink levels impacted profitability. Cost discipline and focus on creating growth. Cash flow impacted by legal matters cost them $934M and $386M in pension plan annuity premium contributions. Their free cash flow was positive for FY 2024, ta $23M. This is effectively zero, but a big improvement over FY23. Net debt reduction of $1.9B, and lease obligations reduced by $1.2B. Strong liquidity of $3.2B in C&E, and $5.8B in revolver capacity. They should be able to weather a small storm. Guidance for EPS FY 2025: $1.40 to $1.80. They renegotiated 80% of their 2025 pharmacy volume / PBM. Consumer pressure assumed for FY2025, which requires them to cut costs further, accelerate store closure (accretive to cash flow). They will close 500 stores in FY2025, and 1,200 over the next three years. This is based on leases and owned stores, and the cash flow of individual stores. They are focused on the details of dark rent. This should fund the investments into remaining stores (to improve and modernize customer experience in the stores). There are another 800 stores where there is a focus on operational improvement and cash flow generation, not closure, but they can be targeted to close if improvements do not occur. Headwinds in 2025: Higher tax rates. Higher interest expense Good news from international profitability, led by Boots retail and Germany.  FY 2025: Working capital to generate $500M and $150M in capx reductions. Legal payments of $1.1B is a headwind. Monetization of assets will be redeployed to reducing net debt. Lease obligations will further decline through store closure. The turn-around over the next few years will help cash flow.
In conclusion, I am not sure there will be any free cash flow growth over 2024 as cash will go towards paying down debt. I sure hope they can continue their dividend of $1.00 per year. We own a significant position in Walgreens Boots Alliance, Inc. to enjoy an 11% dividend yield, and a chance to earn capital gains resulting from their expected turn-around. We are on the earnings call as we write this blogpost. By Jeffrey Cohen, Principal Investment Advisor CEO Tim Wentworth, Walgreens, Strategic Comments
In the short term, Walgreens built financial momentum around cash flow. Strategic focus on retail pharmacy legacy business, and trust with consumers. Accessible and convenient, but downsized from 8,000 stores to closer to 6,000 profitable stores. They will accelerate by closing 1,200 stores over the next three years, which is a healthier store base. This should improve responsiveness in their retail business. They will re-deploy staff / employees to other stores, minimal layoffs. Walgreens to promote their own "owned" brands to promote their positioning with consumers, especially in women's health. Rightsize their focus on national brands, with greater strategic partnerships. From a financial perspective, they will monetize their non-strategic assets and use those proceeds to reduce net debt. This includes equity investments and Village MD. They also need to improve their profit margins on retail sales. That is a focus. PBMs and reimbursement approach: Fairness in reimbursement rates to maintain presence in American communities. Some PBMs are considering to adjust reimbursement to 'grow together.' Rational reimbursement to align with value provided by pharmacists. Broaden and deepen the services they perform and bill for to improve pharmacy economics. 2025 will be an important year for setting a new baseline to grow the size and value of the business. Storms affected 1,500 stores, and all but 16 are back online from the two hurricanes. CFO Comments The price of gasoline, natural gas, ethanol, and crude oil are all lower recently in a significant way. Those are down significantly...and recently fallen. Heating oil is down a bit...not significantly.
This implies either a drop in economic activity (e.g., driven by a US recession), or due to an expectation for an increase of energy production in the near future. We noticed this on Finviz dot com, and suggest you visit this page for details. We are not responsible for inaccuracies or errors/omissions on that third-party website. We like the layout and clear visualization. This is big news. Zapata AI decided to cease operations. Their stock has dropped to $0.07. It was ~$10.00 when it went IPO as a SPAC.
What I read is that they owed $2.3 million dollars that they did not have the assets to repay. They will terminate all employees, including the CFO. Today is a very green, or risk-on day in the markets. In fact, the last few weeks have seen an upward trajectory in equity prices, due to the building confidence that inflation is tame, and jobs are getting harder to come by. Housing sales and new home construction is down. Finally, the people I know around me say that business is slowing down. That is good for the US Federal Reserve Bank's dual mandate to promote stable prices (inflation coming down) and maximum employment (we are softening). It meant, well before yesterday's Fed FOMC announcement, that interest rates were coming down. So, what am I doing? I am adjusting our quantum algorithm to analyze less risky stocks using heuristics and anecdotal observations that have held true over the past few years. Instead of 3,300 stocks (common) listed on the US exchanges that traded that day...we are now looking at 1,340 stocks that are better bets for serious investors. These aren't the meme stocks, and they avoid the most risky, and anomalous stocks. These stocks are more solid, tend to pay dividends (not all, but many), and have fewer surprises. they tend to trade normally with respect to kurtosis and skewness, although the third and fourth movements don't really matter to most investors. In short, we down-select to a lower risky set of stocks, then optimize the results. We do maintain that a global set of US-listed stocks, coupled with passive ETFs, can help an investor find the diversification, and optimization of risk-reward that they cannot get by reading the paper, listening to Bloomberg (we like to), or even studying individual stocks. We find the patterns and help make a very complex optimization simple and easy to afford for investors. For those who want adventure, we identify both the best and worst stocks, so intrepid investors can invest both long and short...taking advantage of the difference in performance without bearing all the market direction risk. OK, that wasn't very silly. We like to wear, sell, and give away t-shirts that spread our message. However, our message until now is hard to understand, not interesting to 99% of the human race, and, well, boring. So, we don't sell very many t-shirts. We made a very text-heavy design today, and went to buy the shirts in volumes that match our expected demand, and the cost will be more than we could ever hope to sell them for. In fact, I wouldn't even buy the t-shirt for the price quoted. I looked at what is popular now in shirts, and people like patterns, cartoons, anime, and very short slogans like Just Fo Cat. I have not seen a popular shirt with a bibliography or explanation of terms. Never seen a good one that says 7X4Y.sfn3s is a formula used to make investment strategies. Must have missed the t-shirt pun on Fama French. I am about to change the game. Take a risk. Go crazy. We are thinking of using a photograph by an artist we like where we have permission to use it...and write a pithy one-liner. At the bottom, our website in small letters, in case people are wondering and want to learn more. Could even just do a QR code, forget the URL. So, it would look like this: pithy phrase Picture QR code. No service mark, no URL, unless I can work it into a pithy phrase...We accept the challenge. We also have the challenge of sizes. I think M/L/X/2X/3X at a minimum. How do you predict the size of those buying your T-shirt? Please let us know if you would like a T-Shirt once we design it.
Here is our tweet on the subject.
It is inevitable that the style of war fighting is changing to leverage new (and old) technologies.
Israel targets pagers used exclusively by Hizballah or Hezbollah, the radical Islamic terrorist organization. Pagers, as in prostitutes and drug dealers in the 1980s, along with pay phones. Pagers, as in 'I don't have the money to buy a flip phone, so I carry a pager,' or pager, as in a worker on the level 3 support desk of an enterprise IT department that needs to be reached 24 x 7 when a problem happens. Now, in the modern day, those pagers could activate a network, that we know includes the Iranian Ambassador to Lebanon, to act and react immediately, and in a coordinated and synchronous manner. What happened? A Tom Clancy, super secret spy action by some country (might not be Israel), caused all Hizballah operatives and supporters that are senior or important (e.g., operatives, logistics, coordination, communications, transport) enough to get a pager now bear a mark of shame. They will forever be known as Hizballah. Israel is not allowed to massively attack Lebanon because of civilian impacts to infrastructure, and quality of life (as seen in Gaza protests and Kamala Harris's recent statements), but they can isolate and target a distributed terrorist organization via obsolete technology.
The second event in the last 24 hours is Ukraine blowing up a massive weapons depot using drones. These drones are suspected to have jet engines (so they are a little more expensive), but they still could be the quad-copter types carrying a bomb.
This is a massive military victory for Ukraine. Drone warfare can reach hundreds of miles into an enemy territory and destroy strategic targets. I used to be able to buy a drone at Five Below, for $5.00, and learn how to fly a helicopter. Of course, these cost more than five dollars, but in the grand scheme of things, Ukraine can afford to launch a thousand of them in a night, on an attack deep into Russia, and not think twice about it. Probably the biggest issue is how to reduce, reuse or recycle the cardboard boxes they came in. You know...to fight global warming.
I hope you enjoyed this post. We are thinking about Russia's term, Hybrid War, and think that as the world pushes conflicts to last for years (think WW2 only lasted six years, but Ukraine has been fighting, actively for three years), innovations occur.
Those innovations will be harmful for NATO defenses, in our opinion, and require a rethink of military strategy and defensive posture in the twenty-first century. We found an anomaly in $AMED Amedisys Inc.Something is going on with $AMED Amedisys Inc. It does not have a normal stock price distribution with respect to the third movement of stock prices, the kurtosis. Some people have 'junk in the trunk' and this stock has fat tails, both up and down.
This is a NASDAQ listed stock that trades between $90 and $99. It typically trades 400k shares per day. It has a small beta of 0.10785 against the S&P 500, down from a 5-year BETA of 0.78 (according to Yahoo Finance). It has a market capitalization of $3.2B, a PE ratio of 35, EPS of $2.81 (thank you Yahoo Finance). This stock has a very low variance of 0.0000074 or 7.4 x 10-6, or about 20% of the variance of the S&P 500 Equity Index ETF. This stock is very leptokurtic. It's standardized kurtosis measure is 36.451. It is highly leptokurtic (normal distribution for kurtosis is a 3.0, and the next highest kurtosis stock has a score of 6.83. This stock is the 184th stock in our long Chicago Quantum Net Score CQNS market analysis, out of 1,338 stocks and ETFs. It scores well because the variance is lower than would be predicted by the BETA score, and that is better than 85% of all stocks analyzed on September 16, 2024. It has a relatively good match of low BETA and even lower variance. No dividend paid in the past year. Leptokurtic means there have been surprises, or high-standard deviation moves in the stock. In late October of 2023, we saw a "V" shaped move, up and down, that eventually led to a rally up. Rally is a funny term, as it was up maybe 4%, but for this stock that is a very large move. In middle to late April, 2024, the stock fell sharply for a few days, then recovered (again, another 3% move in total up and down), then crashed 4% at the end of May, then soared higher by 5% at the end of June. There were analyst ratings events close to a few of the events, and earnings for one. I wonder if these short, explosive moves are related to options? If so, why end of month moves? So, this is a leptokurtic stock. It typically moves gradually with very small moves and a very small BETA and stock price variance. However, we see , we see a few dramatic moves. There is a pending acquisition of Amedisys by United Healthcare Group (UHG) Optum unit for $101 / share, but like all mergers these deals are not 'sure things' and this one is undergoing anti-competition review by at least the Department of Justice, Oregon regulators (OHA). Source Our next step is to see how we can profit from this anomaly. Maybe you can too. Thank you for reading our BLOG. Think about buying a stock market analysis off our website to gain dozens of insights and stock anomalies each day. For more formal clients, we can set up an invoice and payment by check, typically monthly or quarterly. Thank you, Chicago Quantum US Advanced Computing Infrastructure, Inc. Jeffrey Cohen, President and Investment Advisor Principal  This blogpost will analyze Former President Donald Trump's debate transcript from the ABC News debate on September 10, 2024 with Vice President Kamala Harris. This blogpost focuses on the words he used in the debate, used without editing or 'cleaning up duplicates', based on the ABC News (partial) transcript released on September 11, 2024 here. In 90 minutes he spoke exactly 1,033 words, about 8% fewer than VP Harris.. Twenty most frequently used words:
These are conversational words, easily spoken words, fairly balanced between positive and negative. His topics were generally active, about the world, people, and convey a sense of urgency. It was very conversational, fully of storytelling. He did say Biden 13 times. He said Great 11 times. There are different styles present (going - rebel, know - opinions, look - sensing, like - feeling). The top three words cover the gist of it: People, Country, Going. If I gave you a sentence to finish that said American People and our Country are going __________, I think you could fill in those blanks.However, with the exception of Never (27 times), he was pretty positive or at least neutral, with a focus on time. Maybe we are running out of time. There was a large discussion of foreign policy and national security that was covered in another blog-post, so we will leave it there.
President Trump discussed the economy quite a bit.
He spoke about Crime (10 times), and discussed Abortion (8), Criminals (8), and Destroying (8), Destroyed (5) America. He discussed Killed (8) and Afraid (7). I remember his discussion of firing government employees that do a poor job Fired (5), and Fire (4). He did lightly support the Police, with four mentions. Finally, the key topics of the day in politics were mostly all covered a few times in Trump's debate answers. He covered a very broad range of topics. Here are some general observations after watching the debate live two days ago. 1. President Trump was passionate, or at least had a high emotional content, by the end of the debate. I think he cares deeply about what he was saying, and what he is seeing and doing. I detected a little fear of World War 3, of America losing her way, and her power, through the introduction of 21 million illegal immigrants from 168 countries and through a world without a SuperPower, or Super Hero? 2. President Trump reminds me of when I sit with certain older men, like I used to with my father before he passed away, and hear them tell stories of their past. Bruce Springsteen's song "Glory Days" always comes to mind (and is worth a listen if you don't know it). President Trump tells stories. He is a "Rebel" in the nomenclature of Dr. Taibi Kahler (Mastery of Management) who wants you to react to, and learn from, his stories. However, this debate told the same stories he has told on the campaign trail. I had a sense of hearing the same things, just in a different format. President of Hungary says he is a good guy, the Taliban leader stops sniping US soldiers, how the wars would never have started, and how we will close them out quickly through diplomacy (he never suggests killing, only talking). 3. President Trump did not answer any question directly. This did not sit well with me. 4. There were two significant new points from President Trump, and that was National Security. I recall the early comment about World War 3 and how we are heading straight towards it with the Biden/Harris administration. He mentioned negotiations from a position of strength preventing war, and how things said early in the Administration, the lack of negotiations by the current administration contributed to war breaking out, along with the visible sign of 'weakness' or 'negligence' in the withdrawal from Afghanistan. I still remember people falling off US military aircraft as they clung to tails or landing gear for dear life to exit the country. I think on those we left behind, and the weapons, and military bases, and materials, and friends / collaborators who were left to face the new Afghan government. This is a place where I agree with President Trump and I fear for my children. The second point was the Affordable Care Act or Obamacare. He suggested we keep it, improve it, and only replace it if we have something better and cheaper for American insureds. We agree, our health care costs have skyrocketed higher (private insurance) since Obamacare. We are not sure why that is...but somehow the higher costs of guaranteed coverage, kids eat free until 26 years old, new healthcare providers (e.g., CVS and Walgreens and Immediate Care), and other added benefits are spread to us too. Our 'best' healthcare option has a $13,000 maximum out of pocket, per year, and this year we paid thousands in costs before the deductible kicked in. That is on top of already higher premiums (maybe $2,000+ per month for a small family). 5. The immigration point was lost on most listeners, but I think I understand what he is saying (my second largest driver is Rebel, so I have a good ear for it). In a nation of strong norms and cultures (we have many cultures, but there are shared values and ideas), the influx of a large number of immigrants can change America, especially in pockets. He never explicitly said "Little Italy" in New York City or "Little Havana" in Tampa, Florida, or the fact that there are more Poles in Chicago than Warsaw (at least there were when I last looked). However, his anecdote that Haitians eat outdoor dogs and cats (lots of cultures eat small animals), was not about those poor cats stuffed in a bag, but about a challenge to our norms and values when 20,000 immigrants from a strong, foreign culture migrate into a town like Springfield, Ohio (58,000 people in 2022). If we can control our border, and our immigration, then we can ensure that the country can handle the influx, distribute it, and ensure we have social services, schools, police presence, jobs, and protect the current groups in the same socio-economic class (remember Black Jobs.) However, this point gets lost in polite company, when the focus is on political correctness, and the message is list. President Trump is an old man who grew up in a different era, and tells it straight. When 20,000 immigrants enter a small city, they want to work, and will take any job, for any legal pay, that will have them. They may not have language skills, or transferrable educational credentials, but they will work hard. Those jobs likely were held by someone, who now has to find a new job (hopefully a better one), but could end up unemployed and forced out of their neighborhood as it changes to the influx culture. President Trump made his argument in his closing remarks. 1. Why hasn't VP Harris done the things she speaks about? Because these are fringe ideas that America does not believe in, like giving up fossil fuels. 2. America is weaker now, being laughed at. America is no longer a leader (SuperPower), and are not central to events. We are heading into WW3. "We're going to end up in a third World War. And it will be a war like no other because of nuclear weapons, the power of weaponry. " 3. Illegal immigration is destroying our country. Here is the Word Cloud (thank you to wordclouds.com). https://imgdlvr.com/pic/wordclouds.com/20240912-8614/public If you would like to collaborate on activities like this, or receive a deeper briefing, please contact us here.
Thank you for reading. If you like the blogpost (and appreciate the effort), please drop a comment below and share the blogpost with your friends and social media circles.  Good morning. Kamala Harris debated Donald Trump on ABC News on September 10, 2024. She communicated ideas about ways to stimulate demand and give tax credits to people to pay for two important life events, buying a first home and having a child. She spoke about putting abortion back into Federal Government jurisdiction (which just means a different set of legislators make those decisions), and she defined our enemies clearly as Russia, Iran, North Korea and less clearly China, saying she does not speak with, nor curry favor with dictators. This blogpost focuses on the words she used in the debate, used without editing or 'cleaning up duplicates', based on the ABC News (partial) transcript released on September 11, 2024 here. In 90 minutes she spoke exactly 1,103 words. Twenty most frequently used words:
Now, let's highlight a few things. The Former, President of the United States, Donald Trump, was in her words 31 or 32 times in 90 minutes. When we watched the debate live, my wife walked away saying "stop doing that" because instead of speaking about her own candidacy, she quickly started talking about her opponent. If we add the word "Trump's", it takes this count up by 7 to 38 or 39 times. She also speaks about people, or 'the People.' This makes sense because when she was in law enforcement, she represented "the People" as in "the People vs. John Doe." The other thing we see is that she is is opinions-based, very direct and believe-driven. Those words are:
Dr. Taibi Kahler does a good job explaining this, and you can also see this 'type' in other personality profile tests. She also used words that were technical or proper:
We are struck by how frequently these words were used. She believes in taxes and in our opinion, a military-driven security posture and war. She also highlighted abortion. She also mentioned Ukraine and Israel relatively frequently when compared to America (10 vs. 50). We added up all the derivatives of America she used. She also mentioned Ukrainian President Zelenskyy four times. You can see the topics that she was asked to debate on, including energy, the economy, the military, foreign policy, and taxes in the words she spoke. Our summary of Harris's debate performance is that she spoke very, very often about Former President Donald Trump and his policies, his actions and his beliefs and character. She has a military-focus in foreign policy and national security. Also, there were many filler words used: including, actually, want, well, and important. Here is the Word Cloud (thank you to wordclouds.com). https://imgdlvr.com/pic/wordclouds.com/20240912-8075/public If you would like to collaborate on activities like this, or receive a deeper briefing, please contact us here.
Thank you for reading. If you like the blogpost (and appreciate the effort), please drop a comment below and share the blogpost with your friends and social media circles. National Security Topics An analysis of the national security and foreign policy topic identifies an area of significant white space between the candidates. I will summarize a few points and include verbatim transcript below. I found the World War 3 comment stated by President Trump. It was very early in the debate: "And what, what's going on here, you're going to end up in World War 3, just to go into another subject." President Trump believes President Biden has set the USA onto a path to World War 3. He predicts dire consequences of a VP Harris victory:
Approaches Trump President Trump's plan is to act decisively to secure peace through direct diplomacy, backed by the US military. Other countries find common ground with him, whether receiving money, prisoner release, trade, or other quiet benefits in return for what the USA requires. Harris Kamala Harris prefers peace without direct negotiations through strong, multi-country alliances and indirect warfare (give material to those fighting, but keep our soldiers off the battlefield). Kamala said in the debate that President Trump will negotiate a bad deal, in bad faith, with poor skill, and knowingly negotiate against the interests of the United States. He would put America's interests first and this would hurt America's interests. She would keep Ukraine fighting with US weapons and money, indefinitely, and work to being safety and security to both a new nation of Palestine and the State of Israel. Different Plans Israel Trump had an approach to protect Israel through economic sanctions on Iran, and suggested it was working and the war would not have happened. Iran was broke. Harris will pursue a two-state solution with equal protections for Palestine and Israel. It starts with a cease fire deal and a release of hostages by Hamas. China Trump wants fair trade and an even playing field, with China held to the same rules he will hold the EU and other nations to. He wants a return of tariffs to support domestic manufacturing. Harris suggests a trade "policy about China should be in making sure the United States of America wins the competition for the 21st century." This is done by alliance building, supporting America's workforce (which we agree with), and "investing in American based technology so that we win the race on A.I. and quantum computing." She suggests we shouldn't allow China to buy American semiconductors, or chips, stating: "he ended up selling American chips to China to help them improve and modernize their military." I am pretty sure President Trump wasn't running a value added reseller business, so she means that American vendors were legally allowed to sell US licensed technology (e.g., NVIDIA chips) to China. She would not allow that. Diplomacy vs. Proxy Wars (a new Cold Wavs. Direct War Declaration The text is a little hazy here on Harris's position, but we will try to fill in the blanks. President Trump If President Trump is elected, he will cause both wars to end before inauguration day, via diplomacy. President Trump relies on diplomacy first, whether with the Taliban in Afghanistan, Iran (they had tough sanctions), China (tariffs and removal from joint military engagement), Europe and NATO (pay your fair share, engage in your own defense), kept a cold war in Ukraine and Russia, and there was actual peace and economic integration between Israel and the Palestinians, even jobs in Israel with daily crossings. Vice President Harris If Vice President Harris is elected, Israel: 100% diplomacy. Her administration will work 'around the clock' to negotiate a cease-fire deal and cause Hamas to free the hostages (in case it hasn't happened by January, 2025). She would 'chart a course' for a two-state solution. She would provide Israel defensive weaponry, calling out Iran first, and its proxies (e.g., Hezbollah and Hamas). She recognizes Iran as the primary enemy of Israel. Ukraine: War directly or through European allies This progresses towards a moral imperative to defend Ukraine. Harris would not give up Ukraine in its 'righteous defense.' Her role in the defense of Ukraine was "I shared with him American intelligence about how he could defend himself." Not sure if this is an admission of an act of war, or just poor OpSec. This is after "Russia invaded, tried through force to change territorial boundaries to defy one of the most important international rules and norms, which is the importance of sovereignty and territorial integrity. " Harris also ties in US alliances with the defense of Ukraine, which is a foreign policy expansion, stating: "understanding that the alliances we have around the world are dependent on our ability to look out for our friends and not favor our enemies." She arranged a 50-nation alliance to help support Ukraine. This is her red line, drawn very clearly, calling out a bifurcation of countries into friends and enemies. She characterizes Russia as an expansionist enemy with eyes on the European Union, stating: "Otherwise, Putin would be sitting in Kyiv with his eyes on the rest of Europe. Starting with Poland. " In conclusion President Trump President Trump would favor pragmatic diplomacy and sanctions, with tough talk, to keep the peace. He protects Israel by throttling the wealth of Iran. He protects Europe by having them defend themselves better, and by respecting Russia and China. Regarding China, Trump ended joint military exercises and meetings, but his main focus was on fair trade (which was likely better for the relationship). Regardless of who sits in the White House, President Trump sees us heading into World War 3. "We're going to end up in a third World War. And it will be a war like no other because of nuclear weapons, the power of weaponry. Vice President Harris VP Harris has a strong, values-based belief system when it comes to foreign policy. VP Harris stated she is not open to negotiating with undemocratic leaders. She draws a distinction by labeling countries as friends or enemies. She thinks of Hamas as a terrorist organization, but charts a course for a two-state solution. She suggests a righteous defense of Ukraine is important not just for Ukraine, but to support our global alliances and stop an expansionist Russia. Harris, in our opinion, is a cold war warrior. For the original transcript, visit ABC News here. Good morning, we watched the debate last night on ABC. We discussed it this morning, but everyone was in a rush so not much was said. Here is an analysis of the debate. We will start with the official ABC transcript (which is stated to be partial) and go from there. Abortion
I just found an interesting exchange on abortion. I will post the text (verbatim), and add some commentary at the end. Trump calls out Harris in a lie. FORMER PRESIDENT DONALD TRUMP: Excuse me, I have to respond. Another lie. It's another lie. I have been a leader on IVF which is fertilization. The IVF -- I have been a leader. In fact, when they got a very negative decision on IVF from the Alabama courts, I saw the people of Alabama and the legislature two days later voted it in. I've been a leader on it. They know that and everybody else knows it. I have been a leader on fertilization, IVF. And the other thing, they -- you should ask, will she allow abortion in the eighth month, ninth month, seventh month? FORMER PRESIDENT DONALD TRUMP: Would you do that? Why don't you ask her that question -- FORMER PRESIDENT DONALD TRUMP: That's the problem. Because under Roe v. Wade. FORMER PRESIDENT DONALD TRUMP: You could do abortions in the seventh month, the eighth month, the ninth month - VICE PRESIDENT KAMALA HARRIS: That's not true. What I notice is that in Colorado, there is one of three functioning abortion clinics in the United States that does abortions at and after the 28th week (the 7th month) of a pregnancy. They have been doing this since the 1970s (Roe v. Wade timing). I read about it in Reuters yesterday, because they sometimes get a protester, and they have bullet proof glass. They will perform abortions in the 7th or 8th month of pregnancy. It isn't like they enjoy it (from the article), but they do it. One example was that the mother had an illness that she just learned about. In conclusion, it is true. Under Roe v. Wade, you can (and do) perform abortions in the seventh and eighth month, and in Colorado (and two other undisclosed locations), they still do. Good morning. I have been watching a lackluster stock market today, and bitcoin, and oil, and interest rates, and to keep busy I have been reading and analyzing the CNN interview. I have the full transcript put out by CNN, which is available here. Governor Walz Words:We will start with Walz, the candidate for Vice President. Below is his Word Cloud (www.wordclouds.com, thank you) of his answers according to the CNN Transcript, with no edits.  Walz is incredibly simple spoken. Simple, value-laden words:
Here is the word cloud: https://imgdlvr.com/pic/wordclouds.com/20240830-0637/public From the speech, I noticed content:
Vice President's Words:Note: We included all of her answers verbatim, with no editing, from the CNN transcript. She is definitely running for President of the American people. Her top three words were People, American and President, with America close behind. She spoke about herself a great deal, with top words being:
Her filler words were in full force: Clear, Important, Including, One, and Actually. She did speak of Joe Biden. There wasn't much discussion of policies in the speech. I see a few words, like investing and invest, and tax, inflation, and credit. However, the speech largely avoided the economy and economic policy. There are few words on foreign policy. Fracking was there, but in response to a question. There was no discussion of America's energy or industrial policy. I see "Bacon" which could upset leaders in muslim countries (she said she cooks bacon and feeds it to her family). It stood out for me in the transcript.  In terms of her positions, policies and important matters of state:
With regards to the New Cold War, she has a few well hidden ideas that came out being couched as things Joe Biden did that she was proud of: - The way to handle Israel and the Palestinians is a Two-State Solution, and a 'deal' is urgent. She said it at least four times in quick succession. Diplomacy & deals. - She is for expanding our NATO, SEATO and new AUKUS+India+Japan+Indonesia alliances. She will protect sovereignty and territorial integrity. This is directly targeted at Russia and China, whether she realizes this or not. She will continue our New Cold War. A few things that were absent that I expected to see: - more active, policy statements (things to do, and how, when and why) - proud to be an American, free, strong and independent (her mom and dad were immigrants) - speaking like a president in a polished and formal way, serious - The government's debt and deficits, interest rates, currencies, trade flows and the markets. - The private sector and how to promote jobs, income, opportunity and wealth. - America as a promise, a place to come to, and a treasure to protect (patriotism) - Big picture strategy and strategic thinking. - A grand challenge for America. Is there a race to 2050 we need to win? A goal to unify us? The Kamala Harris Word Cloud can be found here:
https://imgdlvr.com/pic/wordclouds.com/20240830-2937/public I hope you enjoyed the post and analysis. We are available for consultation on multiple matters, whether the stock market, the South China Sea, Enterprise IT Infrastructure, Global Outsourcing, and even Iranian energy. We manage money with the custodial agent support of Charles Schwab. Let us know...we are here to serve. 10-year UST note futures trading at 3.792% this morning. The 13-week UST bill at 5.03%. The 2-year UST note is trading at 3.943%. The spread between the 2&10 years notes is -0.151%, which shows a pretty flat yield curve.
This is good news for stocks, as lower interest rates lessen the 'pull' of risk free income away from equities. There is an issue. This may not be sustainable. What would happen if the economy weakens AND the US Federal Government has to borrow more to finance deficit spending. Typically, the government pays down its debt during positive economic growth (like the last few years) and has 'dry powder' for when things turn lower. The bad case for us is that politicians feel the need to grow spending (as opposed to shrinking it) and cannot raise enough tax revenue to pay for that, plus the increase in interest expense (which is something like an extra trillion dollars per year as the debt rolls over). This re-creates the inflation boogey-man, which requires higher policy interest rates, which creates a debt crisis. That being said, it is unlikely that our technocratic leadership at the US Federal Reserve will let that happen, and everything should be fine. We are not pouring our clients, nor our own assets, into long-term debt at sub-4% rates until US Fiscal Policy is resolved and starts taking action to resolve our unstable spending and borrowing situation. Here is the funny part. I am not sure that this is about elections...it is about a collective, bipartisan focus on our economic health and prioritizing our spending. By Jeffrey Cohen
Short note. We continue to be surprised by the strength of real estate stocks, but then we see that interest rates continue to fall.
What we don't really understand is why the 10-year note is trading so much higher (rates lower). This is the market talking, and not a simple measure of arbitrage. It implies a much more inverted yield curve, which is typically an advance warning signal for recession. This is weakening the U.S. Dollar, which is now trading at $1.110 This has been below $1.10 since late December 2023. This means it costs more Dollars to buy a Euro, and the Euro is considered 'stronger' or a better place to park assets. It also could mean that financial assets are flowing back to Europe from the USA. The U.S. equities markets have been on a steady and steep upward climb since August 7, 2024. The rally has lasted for eight straight days, and today it looks like we could see a ninth day of increases. There seems to be a rotation, but we cannot pinpoint it. Gold is higher, as well as residential mortgage-backed securities. This is because interest rates are lower, sure, but what about credit quality? At the end of the day, what is an investor to do? Give us a call and let's discuss it. Good morning to our faithful followers, and sometimes visitors. We have been learning a great deal about the U.S. residential real estate business due to a position we took.
However, last night we checked out Google Earth in the South China Sea, and see some islands have new satellite coverage. Newer 2024 images that we can use on our website, and in our analysis. We will be updating our South China Sea research today, and into early next week. We have also been putting aside articles to process on the region. It appears that China and the Philippines have had discussions and may have made a deal. Not sure. We will go through our backlog, and look around for open source intelligence on the area. We offer consulting (for an hourly or daily fee) and project work on the South China Sea. Please reach out if you are interested in a free consultation or quotation. Jeffrey Cohen President, US Advanced Computing Infrastructure, Inc. Good morning.
CPI all items is down to 2.9% for the year, with all items less food and energy up 3.2%. Key highlights: Services cost more led by transportation and shelter. Automobiles costs less, especially used. Electricity is more expensive, and gasoline is down a bit. Services is slower to correct, as those economic cycles may take years to play out. They use capital goods and/or are real-estate based. Labor is a part of the story. Automobiles becoming less valuable...never really understood this cycle. Electric vehicles, computing, and normal economic growth, along with the closing of coal-fired electricity plants creates larger growth in demand for electricity (dE/dT) than the growth rate of the production of electricity. The U.S. Federal Government should support new construction of renewable energy systems like nuclear, wind, hydroelectric and solar, along with heat-capture systems. More energy means more heat. Chicago Quantum proposes to design a system that captures the heat of electricity production and usage and release it in Chicago during the winter months, creating a literal oasis of beautiful weather all year round. We propose using quantum mechanics to do this efficiently and effectively. Original post by the Bureau of Labor Statistics: https://www.bls.gov/news.release/pdf/cpi.pdf By Jeffrey Cohen, President, US Advanced Computing Infrastructure, Inc. Illinois Registered Investment Advisor, and friend to all in the markets Story is a work in process. This has been an unusually bad week for high beta stocks that have low volatility (relative to their high beta). As the market has corrected, so too have these stocks. A few examples: TNA - The 3x small cap ETF, Direxion Daily Small Cap Bull 3X Shares, is down 25%, and looks very much like a hill, up fast and down fast. OPEN - Open Door Technologies down about a third this week on a lower earnings forecast for Q3 BETR - Better Homes and Financing down sharply today on news of a 50:1 reverse split SMCI - Super Micro Computer, Inc. is down 25% this week, along with Intel $INTC, potentially on earnings. QBTS - D-Wave Systems down 25% on quantum computing concerns RGTI - Rigetti Computing also down 25% on quantum computing concerns  This is all happening at the same time that the S&P 500 ETF is down around 5%, but mostly in a downward direction. Today the market is higher, taking back about a third of the loss, but the damage to high BETA stocks is already done.  In conclusion, the benefit of holding high beta and low volatility stocks is that they do very well when the market is rising steadily. They move higher, often in lock-step with the overall market, and rarely have negative surprises. However, when the markets correct, these stocks also move quickly downward. The news driving the declines seems independent (reverse split, earnings surprise, etc.) but the declines happen. If you invest in high beta stocks, hedge against the downside risk.
The other thing about these stocks is that the market has a short memory, and it is likely that if they can find their footing and rise again on good market news, they can keep their position and market focus, and rise again. |
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