LTP Notes 009: Rising Debt Concerns, Global Growth Expectations, Recency Bias, and Others

Some investing notes that may help you gain insights or make long-term decisions.

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Content:

?? Rising Debt Concerns

↗? Global Growth Expectations

?? Nvidia's Near-Bankruptcy

?? Market Optimism

???? Pelosi's Portfolio Soars

?? Nano Caps Outperform

???? Record Inflows In EM Equities

?? Datacenters CAPEX Increase

?? Rising Debt Concerns

Debt delinquency expectations are on the rise according to data from the New York Fed. The graph illustrates the mean probability of missing minimum debt payments over the next three months, covering from September 2013 to September 2024. Key peaks are visible around March 2020, with a steady increase starting from mid-2021, reaching nearly 14% in the latest data.

This upward trend in delinquency expectations indicates potential economic challenges ahead, affecting financial stability and consumer health. It’s a crucial metric for policymakers and financial institutions to monitor closely.

?? I don’t like the situation.

↗? Global Growth Expectations

But at the same time, global growth expectations rose from -47% to -10%. The 5th largest jump since 1994, on the back of a 50bps Fed cut, +250k payroll print, and China stimulus. The monthly change in net percentage of Fund Managers Survey (FMS) expects a stronger global economy over the next 12 months.

?? Nvidia's Near-Bankruptcy

Did you know? Nvidia, the company faced near-bankruptcy three times between 1993 and 1997. Their first chip, the NV1, was a failure, but they bounced back with the RIVA 128, which was a major success.

Recency bias is real, and sometimes it takes a moment to become a success.

Recency bias is a cognitive bias that favors recent events over historic ones; a memory bias. Recency bias gives "greater importance to the most recent event", such as the final lawyer's closing argument a jury hears before being dismissed to deliberate. — Wikipedia

Stocks and ETFs to watch: NVDA.

?? Market Optimism

Risk sentiment. Most sentiment indicators point to a 'risk-on' environment. Investors are showing confidence as various financial metrics tilt towards taking more risks. Positions in US equity futures, risky bond flows, and global equity flows are all leaning towards a more optimistic outlook. Even the VIX, a key measure of market volatility, suggests that traders are less concerned about potential turbulence.

This shift indicates a belief that market conditions are favorable for growth and investment.

?? I don’t like the situation.

???? Pelosi's Portfolio Soars

Nancy Pelosi’s portfolio, boosted by stocks like NVDA, PANW, and AVGO, had hit all-time highs, with $23 million in estimated gains this year. This impressive performance highlights the potential of well-timed investments in the tech sector. Perhaps insider information? ??

You can track her trades here . By the way, did you know there’s an ETF that tracks Democrats called NANC and it outperforms the S&P 500? And KRUZ for Republicans.

Stocks and ETFs to watch: NANC, KRUZ.

?? Nano Caps Outperform

The market consensus is that smaller companies have a better chance of outperforming; it is easier for a company to go from $10 million to $100 million than from $100 billion to $1 trillion due to the law large numbers play in market share and growth.

This image perfectly illustrates this, showing that nano-cap and micro-cap companies significantly outperform larger companies. With 63% of nano caps and 24% of micro caps outperforming, it’s clear that investing in smaller companies can offer substantial growth opportunities. In contrast, only 1% of large caps and 2% of mid-caps reach the same heights.

Stocks and ETFs to watch: IWC, IJT.

???? Record Inflows In EM Equities

EM equities saw record inflows recently driven by record flows into China.

These numbers highlight a significant shift in investor sentiment, showing strong confidence in Emerging Markets, particularly in China. This massive inflow signals a potential growth opportunity in these regions, driven by favorable market conditions (China’s economic stimulus) and investor appetite.

Stocks and ETFs to watch: MCHI, KWEB, EEM, VWO.

?? Datacenters CAPEX Increase

According to Citi Research, data centres’ capital expenditures (CAPEX) are forecast to increase by 40% year over year by the big four cloud companies, which should provide upside to data center interconnect (DCI) providers.

The big four cloud providers are Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT) and Meta Platforms (META). Citi expects these four companies to increase data center spending by 40% to 50% year over year in 2025.

The primary DCI providers expected to benefit include Arista Net (ANET), Ciena (CIEN), Cisco Systems (CSCO) and Coherent (COHR).

Stocks and ETFs to watch: ANET, CIEN, CSCO, COHR.

This is not a financial or investing recommendation. It is solely for educational purposes.