Hedgie Reports: February 24th, 2025

The Big Picture

Welcome to the beautiful mess we call the financial markets, where optimism and dread are like dance partners at a prom gone awry. On one hand, we have the dazzling lights of tech and innovation, with companies like Apple throwing around $500 billion like confetti at a wedding. On the other hand, geopolitical tensions are ramping up like a bad sitcom plot, with Asian stocks sliding faster than a toddler on a slick slide after too much ice cream. Apparently, the market is still trying to figure out whether to embrace AI like a long-lost relative or push it away like an awkward first date.

In this week’s episode of "As the Market Turns," we witnessed a delightful juxtaposition of headlines. There’s the Singaporean bank cutting jobs in favor of AI (because who needs humans when you have algorithms?) juxtaposed with Domino’s managing to spin a less-than-stellar earnings report into a victory lap. It’s a world where companies are either embracing the future or clinging to the past, all while we sit back and munch our popcorn, occasionally checking our portfolios.

This Week's Market Movers

• Singapore’s AI Job Cuts: The Future is Now

  • Singapore's biggest bank has decided to trim its workforce as it embraces AI. This is a classic case of “out with the old, in with the new,” but instead of a shiny new car, they’ve opted for a robotic overlord. Why hire a human when an algorithm can do the same job—without coffee breaks or awkward small talk? This move underscores the relentless march of technology, leaving workers wondering if they should invest in a new skill set or just start binge-watching sci-fi.

• Domino’s Earnings Miss: A Slice of Humble Pie

  • Domino’s earnings report missed on all fronts, yet they still managed to declare the quarter a win. This is like getting a C- on your report card but convincing your parents that you’re actually just a “C+ student.” The company attributed its success to a strong delivery network and new menu items, proving once again that when life gives you lemons, you can always make a pizza.

• Asian Stocks Slide: Geopolitical Gloom

  • Asian stocks took a nosedive after the U.S. decided to flex its muscles and pressure China. It’s like watching a game of chicken where both sides are driving vintage cars towards each other. Investors are understandably wary, and the market is reacting like a skittish cat in a room full of rocking chairs.

• China Tech Slump: The Bargain Basement Sale

  • Chinese tech stocks are in a slump, but some traders are calling it a “buying opportunity.” It’s like finding a vintage jacket at a thrift store—sure, it’s a little dusty, but it has potential! Amidst the chaos, smart investors are rummaging through the wreckage, looking for diamonds in the rough.

• Nvidia Needs a Jolt: The AI Whisperer

  • Nvidia’s stock has been stagnant for months, leading analysts to ponder what could give it a boost. It’s like waiting for a long-overdue sequel to your favorite movie—will it be a blockbuster, or will it flop like a bad rom-com? With AI still at the forefront, Nvidia needs to pull a rabbit out of its silicon hat.

•  Walmart’s Identity Crisis: Something for Everyone

  • In a divided America, Walmart wants to be everything to everyone, like a Swiss Army knife but with more aisles and less sharpness. The retail giant is attempting to navigate this tricky landscape by diversifying its offerings, but will it be able to satisfy all the palates, or will it end up as the jack of all trades and master of none?

• Gold’s Shiny Glimmer: A Safe Haven?

  • Gold is holding near record highs, buoyed by hopes of rate cuts and the ongoing quest for safe havens. It’s like that reliable friend who always brings a blanket to the picnic—everyone appreciates it when the weather turns chilly. Investors are flocking to gold, looking for some warmth in these tumultuous times.

Stocks in the Spotlight

• Apple: The $500 Billion Bet

  • Apple is not just playing the long game; it’s betting the farm with a $500 billion investment in the U.S. It’s like the tech giant decided to throw a lavish party and invited everyone to bring their best ideas. Market sentiment? Bullish, but with a side of caution.

• Starbucks: The Coffee Conundrum

  • Starbucks is laying off 1,100 corporate workers, a move that has baristas everywhere raising their mugs in solidarity. While the company hopes to turn things around, the market seems skeptical, akin to a half-empty cup of cold brew—still good, but not quite what you ordered.

• Nvidia: The AI Whisperer

  • Nvidia, once the darling of the tech world, is now seeking a miracle to revive its stock. Analysts are less optimistic than a cat in a room full of rocking chairs, wondering if the company can find its spark.

• Joann: Crafting a Downfall

  • Joann is closing down all its U.S. stores shortly after filing for Chapter 11. This is like a DIY project gone horribly wrong—too many materials, not enough vision. The company’s fate is a lesson in the importance of keeping your supplies organized and your business model sustainable.

Trends You Can't Ignore

AI Anxiety

As companies embrace AI, the nervous energy in the market feels akin to the first day of school—the excitement is palpable, but who knows what the future holds?

Geopolitical Tug-of-War

The ongoing tensions between the U.S. and China are like a high-stakes game of Jenga, with every move threatening to topple the entire structure.

The Shift to Safe Havens

Investors are turning to gold and other safe-haven assets faster than a kid running to their parents after a nightmare. When the going gets tough, the tough start hoarding precious metals.

The Risk Radar

• Geopolitical Tensions: Level 9/10 – The U.S.-China rivalry is simmering and could boil over at any moment, impacting global markets.

• Tech Sector Volatility: Level 7/10 – With giants like Nvidia struggling, the tech sector is feeling the heat.

• Consumer Sentiment: Level 6/10 – Layoffs at major companies could dampen consumer spending, leading to a vicious cycle of economic slowdown.

Where Smart Money is Looking

💰️ Hedgie’s Economy Quick Serve 💰️ 

The Dallas Fed Manufacturing Index is the headline-grabber this week, showing a significant downturn from +14.1 to -8.3. Imagine a kite soaring high on a windy day, only to get caught in a sudden downdraft—manufacturing is experiencing its own turbulence. A negative reading indicates contraction, and this steep drop of 22.4 points is akin to a rollercoaster hurtling downward, leaving businesses bracing for a bumpy ride ahead. In contrast, the S&P Global Manufacturing PMI edged up slightly to 51.6, hinting that while some manufacturers are feeling the heat, others are still managing to stay afloat. This index is often viewed as the heartbeat of the manufacturing sector, and a reading above 50 suggests expansion. But with the services sector faltering (PMI at 49.7), the overall picture is one of uncertainty.

Inflation & Fed Watch

Inflation expectations have taken a notable jump, with the Michigan Inflation Expectations rising to 4.3% from 3.3%—like a balloon inflating just a bit too much at a party. This uptick suggests consumers are increasingly worried about rising prices, which could lead to a self-fulfilling prophecy if businesses start raising prices in anticipation. As for the Federal Reserve, it’s a bit like watching a magician who’s lost his flair. The Fed has been trying to communicate its intentions clearly, yet the mixed signals—like a magician pulling rabbits out of hats—leave many scratching their heads. The Fed's balance sheet has shrunk slightly, but with inflation on the rise, it seems like they’re gearing up for another round of interest rate discussions.

Jobs & Wages

In the realm of employment, the job market remains robust, but the specter of inflation looms large. As wages rise, they often drag prices along with them, leading to a classic tug-of-war between inflation and purchasing power. If consumers feel squeezed, they may cut back on spending, which could stifle growth—a classic economic paradox.

Housing & Construction

The housing market is feeling the chill, with existing home sales dropping by 4.9% month-over-month. Imagine trying to sell ice cream in winter; it’s tough out there. The 30-year mortgage rate is hovering at 6.85%, making homeownership feel like an uphill battle for many first-time buyers. With affordability issues becoming the norm, it’s no surprise that sales are cooling off.

Energy & Commodities

In the energy sector, the Baker Hughes Oil Rig Count has risen slightly, indicating a slight uptick in oil production. However, crude oil speculative net positions have dropped, suggesting that traders might be getting jittery about future prices. Meanwhile, copper’s speculative net positions are on the rise, like a miner hitting a rich vein. This could indicate optimism in construction and manufacturing, as copper is often viewed as a bellwether for economic activity.

What's Coming Around the Corner

• Manufacturing Recovery: With the Dallas Fed index in free fall, we may see a slight recovery as businesses adjust to the new economic realities. Confidence Meter: 60%

• Interest Rates Stability: The Fed may hold rates steady in response to rising inflation expectations, but further hikes could be on the table if inflation continues to climb. Confidence Meter: 70%

• Housing Market Adjustment: As mortgage rates stabilize, we may see a gradual increase in housing activity, but affordability will remain a key issue. Confidence Meter: 65%

The Worry List

• Manufacturing Contraction: The sharp drop in the manufacturing index raises concerns about broader economic stability. Threat Level: Orange (Caution)

• Inflation Resurgence: Rising inflation expectations could lead to decreased consumer spending, impacting economic growth. Threat Level: Red (Urgent Attention)

• Housing Market Stagnation: Continued high mortgage rates could trap potential buyers and stall the housing market further. Threat Level: Yellow (Monitor Closely)

Hedgie’s Weekly Stock Picks 🧑‍🚀 

This Week's Top Pick: HP (Helmerich & Payne)

HP is our highest conviction play this week. This oil & gas drilling company offers an exceptional risk/reward profile in the current market environment.

• Current Price: $27.64

• Entry/Stop/Targets: $27.64 / $24.88 / $33.17-$41.46

• Risk/Reward: 3.5x

• Thesis: Classic value opportunity with strong fundamentals and significant upside potential as energy demand remains resilient.

Other High-Conviction Opportunities

LOOP (Loop Industries) - Specialty Chemicals

• Price: $1.47 | Entry/Stop/Targets: $1.47 / $1.32 / $1.76-$2.21

• Thesis: Explosive potential in sustainable plastic solutions

NNNN (Nano Dimension) - Medical Instruments

• Price: $0.54 | Entry/Stop/Targets: $0.54 / $0.49 / $0.65-$0.81

• Thesis: Innovative technology with breakout potential

GGB (Gerdau S.A.) - Steel

• Price: $2.82 | Entry/Stop/Targets: $2.82 / $2.54 / $3.38-$4.23

• Thesis: Value play benefiting from infrastructure spending

VIVO (Meridian Bioscience) - Medical Equipment

• Price: $41.95 | Entry/Stop/Targets: $41.95 / $37.76 / $50.34-$62.93

• Thesis: Healthcare value play with growth in diagnostics

"The stock market is a device for transferring money from the impatient to the patient." - Warren Buffett

What are you buying this week? Let us know in the comments!

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Disclaimer: This newsletter is for informational purposes only and does not constitute investment advice. Always do your own research and consult with a financial advisor before making investment decisions.