Upcoming Fed Interest Rate Cuts — How They Benefit YOU
In today’s Market Talk, Amber Lancaster, Hudson Cashdan, Ian Dyer and I discuss:
- What a projected interest rate cut means for industries and people across the board.
- How the U.S.’s longest period of economic growth in history is fueling a “secret boom,” despite what the media say.
- Ian’s new solo YouTube updates and what you can look forward to.
July 8, 2019Amber Lancaster: Welcome to this week’s Market Talk. I’m Amber Lancaster, joined by Paul Mampilly, Ian Dyer and Hudson Cashdan. Each week we look forward to sharing our viewpoints with you, our readers, and giving insight into what’s on our radar. Today’s outlook is for the week of July 8, 2019. I’ll begin by sharing with you what I’m watching and then we’ll hear from Ian, Hudson and Paul.
Today I’ll cover three major topics. The first will be my take on recent U.S. economic releases and upcoming releases. The second will be my innovation story of the week. The third will be the latest performance numbers with the Disruptification Index. Lastly, I’ll cap this week’s update on my end with the Good News Roundup.
Last week the June jobs report confirmed what we’ve been reporting here at Bold Profits for some time. The economy remains sound and it’s quite resilient despite the backdrop of ongoing trade war negotiations. It’s important to note, the Federal Reserve rate cuts are still on the table. For now, per current implied probabilities, September looks like the time where we’ll begin to see some easing.
This week we’ll learn more about what the Fed is thinking as Chairman Jerome Powell is set to testify before Congress on Wednesday and Thursday. Last week we also saw the results of the Institute of Supply Management (ISM) Manufacturing PMI numbers. The overall print came in at 51.7, just slightly above analysts’ expectations.
The most promising data results were in the non-manufacturing ISM print. Per Bloomberg data, non-manufacturing ISM remains at levels historically aligned with 2.25% to 2.5% GDP growth, which is above what the Fed is projecting for 2019 which is 2.1%.
Company earnings are ramping up again. Over the next 30 days, 649 companies will be reporting. Take a look at this table; it shows the companies reporting over the next seven days. It includes Levi-Strauss, Bed, Bath and Beyond, as well as Citi Group.
This week, you can look forward to three major economic releases. On Wednesday, wholesale inventories month-over-month final print for May will post at 10 a.m. On Thursday, month-over-month CPI for June will post at 8:30 a.m. On Friday, the final month-over-month demand for PPI will post at 8:30 a.m.
My innovation story of the week comes from The Driven. It’s an electric vehicles insider website. A big thanks to Paul for sharing this report with the team. The Driven is reporting that MIT data shows that more than a half million vehicles produced by Tesla will have the Autopilot 2, or AP2, hardware.
What’s so special about these AP2 vehicles that have been on the rise since 2016, is that they are showing 1.5 billion miles have been driven using autopilot hardware and software and 868 million miles of that are derived from AP2 data. Why is this significant?
Per The Driven, the first generation of Autopilot 1, or AP1, vehicles relied on a frontal camera, but the new vehicles rely on a suite of sensors including eight camera, radar, ultrasonic sensors for poor conditions and visibility, cameras with a long and wide length and focal point as well as side-view cameras that allows AP2 to follow the lanes on the road more precisely.
AP2 cars can take blind right turns while AP1 cars would have just left the lane altogether. The continued innovation of this autopilot feature in Tesla vehicles is just to make sure these cars are overall safer. It’s fantastic innovation that we’re seeing right now and going forward.
Our Disruptification Index continues to do very well. It outperforms all the major indices. It’s up 35% versus 23% on the Nasdaq and 15% on the Dow.
Lastly, here are our good news headlines to carry with us for the week. Good News Roundup story number one: Per Statista, the average price for battery packs for electric vehicles has been on a steady decline since 2010. The price has plummeted nearly 85%. This battery price drop will likely further increase the sales of electric cars going forward.
Good News Roundup story number two: The millionaires next door in the years to come will be millennials. Per CB Insights, by 2030 millennials are cast to hold five times as much wealth as today. Their total wealth is projected to increase from $4.5 trillion in 2018 to $20 trillion by 2030. This wealth accumulation will come from wealth transfer like inheritance from previous generations, stock market appreciation and just good old organic savings growth by feeding the piggy bank.
Good News Roundup story number three: The Wall Street Journal is reporting that the price of wireless telephone services is on a steady decline. It’s actually down 25% since 2010. They are also reporting that people are using the family cell phone plans to save on the cost of monthly wireless services. This is even for those who are not even related by blood. This is seen as a definite phenomenon around the industry.
That’s it from me. Good news all around. Ian, tell us what you’re watching for this week.
Ian Dyer: Thanks, Amber.
This week I want to talk about the stock market, which is right around all-time highs. The S&P is very close to hitting 3,000 for the first time ever. It got within five points of it last week. One of the main reasons for this is because of the interest rate environment right now that Amber touched on.
Interest rates right now are predicted to go down. If someone told you that a year ago that interest rates were going to go down in 2019, you would have thought they were crazy because three or four interest rate hikes were expected this year. Now we’re looking at interest rates most likely going down this year.
This will definitely benefit all players involved. With the stock market you get money coming in from the bond market because the main reason people buy bonds is for income. But if rates are lower, they get less income from bonds so they put their money in stocks which have a higher potential return.
You also have money coming in that’s sitting on the sidelines due to fear of recession because if rates are falling, recession is way less likely. That money wants to get in on the upcoming rally for when rates do go down.
It’s also good for companies because when they take out debt, they get lower rates. They can save money and have more cash for growing their own business and also investing in other businesses or returning it to shareholders through dividends. Of course, dividends are like a replacement for bond interest.
If you are buying bonds and you are getting 2% and there’s a stock out there where you can get 3-3.5%, you’re going to take it out of the bond and put it into the stock market. Lastly, it’s good for individuals because you can do things like refinance a mortgage or a car loan. That gives you more cash, savings and disposable income to put back in the economy, which grows.
That’s even more of a catalyst for a growing stock market. So that’s what I’m watching this week, a market right around all-time highs. We could see all-time highs this week. That’s what I’m looking at. Over to you, Hudson.
Hudson Cashdan: Thanks, Ian.
What I’m looking at right now is that last week there was news that Broadcom is bidding for Symantec, which is a network security company. They’ve been struggling a little bit. Broadcom recently bought Computer Associates, which was a similarly struggling computer network company.
If you remember, Broadcom tried to buy Qualcomm about a year ago. It was blocked by the U.S. government because Qualcomm is strategic and Broadcom is based in Singapore. I think there’s suspicion a lot of the management is close to the People’s Republic of China and they were trying to get ahold of the IP of Qualcomm which is the major chip manufacturer here in the U.S.
It will be interesting to see how the government reacts to this bid for Symantec, a network security company, which is also arguably critical to our infrastructure and security. Since the failed acquisition of Qualcomm, Broadcom has re-domiciled in the U.S. That allows it to avoid oversight by the CFIUS, which is an oversight board, because they are domiciled in the U.S. now.
I don’t think that’s going to exempt them from oversight. It will be interesting to see how that shakes out. In the meantime, the network security space is an interesting thing to watch. I’m keeping a close eye on that this week. It’s kind of a slow week in IPOs after the Fourth of July holiday. The week after will pick up quite a bit.
That’s what I have. Over you to you, Paul.
Paul Mampilly: Thanks, Hudson. I just got an email while you were talking and I see that the Renaissance IPO Index is now up 38.7% so far this year. There’s another number in here that surprised me more. Despite all those mega IPOs, the total amount raise is actually down 22% from last year.
In other words, there’s a lot more capacity, I believe, for more IPOs to come. I don’t know if you saw the Wall Street Journal had something about WeWork, which is a company we’ve discussed a great deal. To me, it’s like the next McDonald’s. It’s a real estate play. People see it as a play on the gig economy and it is, but it’s also a real estate play.
They raised something like $3 billion, which I think is a good sign. It takes pressure away from needing to raise money from the stock market. They could control the supply as needed and that would make it a hot IPO.
Hudson: WeWork has become synonymous with the gig economy. When someone says they need a temporary office space as an independent consultant or they have a startup with five people and need an office, people say to get a WeWork. It’s just assumed that every major city or secondary cities there’s going to be a WeWork there.
When you travel to different cities, there will be a WeWork wherever you go. Even though there are other mom and pops or small upstarts that are doing WeWork-like services, WeWork is the name, just as Uber is the name. When you want to get from A to B, “Take an Uber.” Even if there’s also Lyft or some of the others.
Paul: In terms of work it would be like graduating from working from your house if you have a small business perhaps to working at a coffee shop to then working at a WeWork.
Hudson: Right. WeWork also has a program where they have designated certain floors for large spaces. They are designating certain floors in their facilities to companies that are growing out of the five or 10 person office and need a 25-50 person space of their own. They are thinking to the next level as well.
They want to be from founding to not quite public, but maybe series B or C workspace.
Paul: For those of you who have forgotten, Hudson runs an incredible service called IPO Speculator. We have begun this service because we believe there is a wave of companies that are going to come IPO in 2019 and beyond. They will slowly and surely replace many of the companies of the old.
If you haven’t checked into Hudson’s service, I believe it’s going to be an unbelievable service. We’ve got a number of incredible companies in there, so check into it.
Going off of some of what Amber said, if I was to put a headline on this update it would be “Secret Boom Continues.” You would never know it. I read an enormous amount. You can go to the websites — New York Times, Wall Street Journal, Washington Post, whatever — you would never know that we are in the longest economic period of growth in our country’s history.
We have never seen a period like this and you would just never know it. We have the perfect conditions. We have job growth, we have just the right amount of GDP growth — somewhere between 2-3% which varies a little. There’s virtually no inflation. You have moderate wage growth. There’s low interest rates.
It’s really the perfect environment and yet we have incredible pessimism wherever you look. We have companies like the ones Hudson is covering in IPO Speculator. There are incredible, new companies that are building entire new businesses. We have technologies like what Amber talked about: Autopilot 2.
I have a Tesla. I actually use Autopilot 2. When I drive long distance, once I get on the highway I just put it on Autopilot. The car will change lanes by itself, knows where the highway exits are and from the on ramp to the off ramp it can drive itself, especially on well-established roads. This is what we were reading about as science fiction, not 50 years ago, but 10 or 15 years ago.
It’s accelerating even further because now we have the megatrends. What is Tesla Autopilot? It’s Internet of Things, it’s connected to the internet, it has to have that mapping software. It’s artificial intelligence. It’s big data and robotics. It’s all those things we tell you to invest in.
What I see likely to happen in 2019 and beyond is the stock market will continue to make new highs.
Disruptification will accelerate. Our stocks will rise. I know you’ll say, “Hey Paul, come on.” But that’s essentially what has unfolded for our stocks. I expect that to continue.
I will say this, this is a time of unbelievable opportunity if you are in the right stocks. If you are in the wrong stocks, it is a time of incredible peril. You will lose, first slowly, then quicker. Then many of your investments will go to zero.
If you are invested in the old, we were talking about it as a team, incredibly enough it’s the Warren Buffett portfolio. It’s Coca Cola and Wells Fargo. It’s insurance companies, which first are going to be disrupted and then wiped out by disruptification. That’s the portfolio of the old.
Our portfolio is the portfolio of the new. It’s today controversial to say this, but I believe in time it’s something that we are going to say we should have seen coming. Just like we can look back at Amazon today and say we should have seen that coming. You can look at Netflix and Google and say you should have seen that coming.
I believe that you are going to see this a few years from now.
Hudson: I was looking over the weekend at charts and some news and Deutsche Bank is in serious trouble. All the old world European banks, which are the oldest of the old, are either at 52-week lows or are making 52-week lows. They look like they are about to break support.
They are looking very sick because they are going into negative rates in Europe because the economy is weak there. We have a lot of growth names here that are going to do much better.
Paul: When’s the last big IPO you heard of from any other country than the United States? It’s few and far between. We have a very dynamic country and we create incredible companies like the ones we’ve mentioned.
I wanted to mention that Ian is going to branch off on his own. It’s an incredibly exciting development. He’s going to have his own updates. We’re going to come up with a super cool name for Ian’s updates because I know they are going to be great. We’re going to come up with a day and he’s going to do his own updates and cover a lot of cool stuff.
Ian, do you want to give folks a peek into what you’re going to be talking about this week?
Ian: Going back to interest rates, there’s a weird behavior in the market in times like this. It doesn’t happen very often and it can catch people off guard. It can make the market act weird and if you don’t know it’s coming, you can be caught off guard. I’m going to tell everyone about that so you don’t panic sell or buy into a fake rally.
It’s pretty important information and I’m going to go into more detail in my first video.
Paul: Sounds really intriguing. I’m definitely going to check in. Everyone come back to this channel. Subscribe to it, that way you don’t miss out. I also want to mention since many of you are Profits Unlimited readers, this week my publisher is promoting a service that Ian and I work on called the $10 Million Portfolio. It is filled with small opportunities that you would only get a shot at if you were a client of Goldman Sachs or Morgan Stanley.
These are unbelievable opportunities. Check out emails from my publisher asking you to watch the promotional video we made for the service. As a way of showing you the kinds of things in there, Ian and I collaborated and found an incredible stock in pot technology. It went up a crazy amount over two days.
Ian: We sold that for a 330% gain in two days.
Paul: Wow. So if you want opportunities like that, keep an eye on your emails for information about that. That’s my update. Back to you, Amber.
Amber: Thank you guys. Great talk and great information. Thank you to our viewers for tuning in this week. We wish you a productive, healthy and safe week. We look forward to seeing you again next week. Until then, subscribe to this channel, comment on this channel and share this channel. Take care, everyone. Bye bye.
The Federal Reserve’s potential interest rate cuts have many investors on the edge of their seats, anticipating the huge benefits these cuts will have on the U.S. economy.
And with Fed Chairman Jerome Powell likely to reveal more details about when and how the Fed plans to make these cuts, I wanted to take a few moments to describe the impact that lower rates will have on you.
For one thing, the stock market is currently at an all-time high. This means many stocks have higher potential returns. Plus, we can all breathe a sigh of relief, knowing that a recession isn’t likely lurking around the corner.
Lower interest rates will also be great for companies. It gives them more money to pay off debt, build up their cash reserves and pay back shareholders.
Cuts like this also help out individual investors by offering an easier way to refinance loans and accumulate more disposable income.
Overall, the Fed cutting interest rates is great news for smart investors like you, so keep an eye out for more info on how you can ride the success of a major interest rate drop.
We also discuss:
- The Renaissance IPO ETF (NYSE: IPO) is already up 37% this year thanks to all of the amazing initial public offerings (IPOs) that have gone public so far in 2019. From Beyond Meat to Uber, there are so many great new companies to invest in.
- There’s a lot of good news that you never see in mass media headlines, and that’s where Amber comes in! Check out this week’s Market Talk and learn about the best news on electric vehicle batteries, cell phone evolution and the growth of millennial wealth.
Editor, Profits Unlimited