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Earlier today we wrote an extensive preview of what to expect from Nvidia’s Q3 earnings (here), but for those who missed it here is the summary: sky high expectations, which only go higher in 2025 and beyond when the full rollout of Blackwell is expected to hit the P&L, with everyone already long (Goldman desk positioning is 9 out of 10) and anything less than perfection would be punished by the market. The bull/bear case summarized by Goldman was as follows:

• Bulls playing for a ‘break-out’ trade on an expected beat/raise (with downside arguably cushioned by the upcoming Blackwell launch)
• Bears playing for a reset in the stock driven by a growing list of moving parts (Blackwell noise, scaling laws, custom ASICs/silicon, ROICs, etc) vs valuation back at ~15-mo highs.

In terms of expectations, Q3 revenue was projected to come in at $33.25BN, while the median analyst estimate for Q4 revenue is $37.1BN but buyside bogeys were $38BN+ and some were as high as $41BN. Keep in mind that that number has moved around a lot in the past few days as analysts have made last-minute tweaks to their models. While the current high sales estimate for the third quarter is $41.2 billion, some investors have have said that the whisper number may be even higher than that!

Beyond the headlines, JPM says that the key near-term bogeys are the following:

1. The margin guide (with a few saying JPM’s 73.8% buyside bar is too high),
2. The possibility of hiccups in the Blackwell ramp which – given the steep ramp – could push revenues to the April quarter;
3. Any guidance on F26 and beyond.

Other things to look out for when the company starts speaking will include how much supply it’s getting from its manufacturing partners. Like most chipmakers, Nvidia outsources production. Taiwan Semiconductor is the best in the business, and Nvidia’s pace of growth heavily depends on how well TSMC is able to provide Nvidia with the capacity it needs.

Amusingly, Nvidia shares actually closed down today, though far from session lows, ahead of the earnings report. Still, shares are up nearly 200% so far this year, and one of the best performers on the S&P 500 Index. Nvidia’s market cap north of $3.6 trillion makes it the biggest weighting in the S&P 500, meaning that any move in the stock could swing the entire market.

With that in mind, here is what NVDA reported moments ago:

• Revenue $35.08 billion, up +94% y/y, beating the median estimate of $33.25 billion (but in line with Goldman’s expectations of $35BN).
  • Data center revenue $30.8 billion vs. $14.51 billion y/y, beating estimates of $29.14 billion
  • Gaming revenue $3.3 billion, +15% y/y, beating estimates of $3.06 billion
  • Professional Visualization revenue $486 million, +17% y/y, beating estimates of $477.7 million
  • Automotive revenue $449 million, +72% y/y, beating estimates of $364.5 million
     
• Adjusted gross margin 75% vs. 75% y/y, and in line with estimates of 75%
  • Adjusted operating expenses $3.05 billion, +50% y/y, beating estimates of $2.99 billion
  • Adjusted operating income $23.28 billion vs. $11.56 billion y/y, beating estimates of $21.9 billion
     
• Adjusted EPS 81c, beating estimates 74c

The revenue trend, as expected, is impressive especially at the Data Center level where all the growth is.

Here is a full breakdown of recent results:

But while the Q3 results were stellar, the company’s guidance came in on the weak side of the buyside expectations we discussed in our premium preview.

• Revenue is expected to be $37.5 billion, plus or minus 2%: The “plus or minus 2%” means Nvidia expects 4Q revenue between $36.75 billion and $38.25 billion. The low end is ugly, and even the high end is below the median buyside bogey.

Oops: while this was above the median consensus of $37.1BN, it was far below the buyside expectations of $38.8BN; It was also well below Goldman’s Q4 revenue expectations of $39BN and close to where the bank saw the stock dropping -10%.  In fact, some estimates for Q4 revenue were as high as $41 billion!

The rest of the guidance was in line but far less important:

• Gross margins are expected to be 73.0% and 73.5%, respectively, plus or minus 50 basis points.
• Operating expenses are expected to be approximately $4.8 billion and $3.4 billion, respectively.
• Other income and expense are expected to be an income of approximately $400 million, excluding gains and losses from non-affiliated investments and publicly-held equity securities.
• Tax rates are expected to be 16.5%, plus or minus 1%, excluding any discrete items.

Nvidia has only missed analysts’ estimates on quarterly revenue once in the past five years. And it has exceeded expectations by as much as 20% in recent periods, creating a very high bar for its performance.

The muted outlook suggests that AI excitement may be getting ahead of reality according to Bloomberg. Nvidia investors had bid up the shares nearly 200% in 2024, turning it into the world’s most valuable company at $3.6 trillion in market cap. But the chipmaker has had trouble keeping up with demand for its products and struggled with production snags this year.

To be fair, even with the disappointing outlook, Nvidia’s growth over the past two years has been staggering, simply because not one chipmaker has been able to take its market share (Intel unprecedented collapse in recent years can be largely to blame for that). Its sales are poised to double for a second year in a row, and it now notches more money in profit than it used to generate in total revenue (thanks to that 75% profit margin).

Nvidia’s data center division alone now has more revenue than its two nearest rivals, Intel and AMD combined. Net income this year is on course to exceed revenue at Intel, a company that was the chip industry’s titan for decades.

The company’s biggest moneymaker is its accelerator chip, which helps develop AI models by bombarding them with data. Since OpenAI’s ChatGPT chatbot debuted in 2022, a frenzy of artificial intelligence services has created insatiable demand for the product.

Other recent earnings reports have given strong signals for AI. Major Nvidia customers, including Microsoft, Amazon’s AWS and Meta have reaffirmed their commitment to spend on AI infrastructure, even if few have actually done the spend, as we noted during the recent Meta earnings call.

Nvidia hopes to stay ahead of rivals by accelerating its pace of innovation. That includes a commitment to updating its lineup annually; the company is currently introducing a design called Blackwell, which is faster and has an improved ability to link up with other chips, and which is expected to hit the company’s P&L early next year, as a bevy of manufacturing challenges have slowed the Blackwell rollout. For now, Nvidia can’t fill all the orders it’s receiving, the company has said. After production improves, supplies will be plentiful, according to CEO Jensen Huang. For his sake, hopefully by then no competitors will have been able to come out with a faster, cheaper chip.

The Santa Clara, CA-based company has rapidly expanded its product lineup to include networking, software and services, as well as fully built-out computer systems. Huang is traveling the world lobbying for a broader adoption of his technology and trying to spread its use by corporations and government agencies.

Shares of Nvidia fell as much as 5% in after hours trading following the announcement, before settling about 2% lower, far below the 8.8% straddle. They previously closed at $145.89 in New York.

Authored by Kimberley Hayek via The Epoch Times,

Alameda County District Attorney Pamela Price conceded her recall election on Monday, nearly a week after Bay Area voters expressed their frustration with crime and homelessness by voting out multiple progressive leaders.

According to unofficial results as of Nov. 20, 63.1 percent of voters in the general election favored replacing Price, who had served in the position for less than two years.

Price is a former defense and civil rights attorney.

She had never prosecuted a single case when she was elected to the prestigious position. On the campaign trail, she promised criminal justice reforms and a “new era at the DA’s Office” if she was elected. She got a big financial boost from billionaire Democratic mega-donor George Soros and Laurene Powell Jobs, widow of Apple co-founder Steve Jobs, when she first ran for the job in 2018.

She lost that race but ran again in 2022 and edged out Terry Wiley, the county’s chief deputy district attorney. 

Soros, who funneled more than $5 million into his fundraising PAC, the California Justice & Public Safety, from 2018 to 2020, turned off the money tap to Price and Los Angeles County District Attorney George Gascon this election cycle.

Alongside Price, Oakland voters also ousted progressive Mayor Sheng Thao.

In San Francisco, Mayor London Breed lost her bid for reelection to a centrist opponent who vowed to crack down on crime and boost small businesses.

In a press conference that ran just under 20 minutes, Price outlined her office’s successes during a time when Gov. Gavin Newsom was forced to deploy additional law enforcement support to Oakland, which is within Alameda County’s jurisdiction.

“In November of 2022 Alameda County took a huge step forward toward a better criminal legal system,” Price said at Monday’s press conference, referring to her election win two years ago. 

“Under my leadership as district attorney, we made incredible strides toward serving the victims in this county.”

She said her office “diversified the workforce for the first time in decades,” hiring speakers of Cantonese, Mandarin, Hmong, as well as more African Americans. 

She said that a public accountability unit, created under her leadership, “exposed decades of prosecutorial misconduct, excluding Jewish, black residents and sometimes LGBTQ+ residents” from juries. She said there is evidence of an attempt to cover up the misconduct dating back nearly 20 years. 

Price also noted that her team prioritized the reduction of gun violence, the fentanyl crisis, and human trafficking.

“We prosecuted murderers and other violent persons throughout Alameda County at a higher rate than my predecessor and we processed more than 12,000 cases,” she said. 

She also said that she would leave with the largest grant portfolio in the history of the district attorney’s office, with more than $21 million in grants received since January 2023.

She credited the portfolio strength to Chief Assistant District Attorney Royl Roberts, who will lead the office as the interim district attorney until a new DA is appointed. 

Before working in the Alameda County DA office, Roberts worked as an executive from the Peralta Community College District, where, among other positions, he served as chief assistant to the chancellor and general counsel of the district. 

“We must not continue to have two systems of justice that are separate and unequal in Alameda County,” Price said during her press conference. “That is the way of the past. It is up to you and me to make sure that future leaders of this office remain independent decision makers and stay the course of holding public officials accountable, and law enforcement officers accountable, for their actions.”

Price initially ran on a platform including offender rehabilitation and police accountability. 

During her tenure, Newsom deployed more law enforcement to Oakland, and recently extended the California Highway Patrol’s increased presence there.

“We will continue this important work as local leadership transitions,” the governor said in a statement.

Newsom had also sent state prosecutors and surveillance cameras to Oakland. 

Geopolitically, more missiles were reported to have been sent into Russia overnight and that dragged stocks down early… and the micro and the macro kept stocks down for most of the day. Late on, buyers appeared as FOMO spread ahead of NVDA’s earnings. That lifted The Dow into the green for the day…

On the Micro side, it was all about Target’s epic fail…

 

Then, on the Macro side, round 12ET, Fed Governor Michelle Bowman poured some hawkish water on the dovish hopes:

“We have seen considerable progress in lowering inflation since early 2023, but progress seems to have stalled in recent months,” ‘Miki’ noted.

“I would prefer to proceed cautiously in bringing the policy rate down to better assess how far we are from the end point,” because progress in reducing inflation has slowed.

That sent December rate-cut odds significantly lower (33% now)…

Source: Bloomberg

Mega-Cap tech was slammed at the open, erasing all of yesterday’s gains…before the FOMO buyers stormed in late…

Source: Bloomberg

Treasury yields ended the day higher with the short-end hit hardest (but still only 3bps)

Source: Bloomberg

Bitcoin accelerated to yet another new record high today (within a few bucks of $95,000)…

Source: Bloomberg

Gold rose for the third day in a row, back to its initial low from the election…

Source: Bloomberg

Notably gold and bitcoin rose together today amid the geopolitical chaos, but decoupled shortly after the US equity market opened…

Source: Bloomberg

The dollar rallied strongly, erasing Monday’s losses…

Source: Bloomberg

Crude prices slipped lower this afternoon to end the day unchanged with WTI hovering around $69…

Source: Bloomberg

Finally, in case you were worried, the ‘Trump Trade’ continues to work..

Source: Bloomberg

..and will continue – if history is any guide – until the inauguration.

The United States has again used its veto, blocking the fourth UN Security Council resolution on Gaza since the war began. The comprehensive resolution called for an “immediate, unconditional and permanent ceasefire.” UN News writes:

United States vetoes Security Council draft resolution that would have demanded an immediate, unconditional and permanent ceasefire in Gaza, and the release of all hostages RESULT: In Favor: 14 Against: 1 (US) Abstain: 0

The text of the draft resolution did not link or condition the call for permanent ceasefire on the release on the hostages held by Hamas. The US has identified this as the reason for the veto.

A US official ahead of the vote made clear that the US will only support a resolution explicitly calling for the release of all remaining hostages as a key part of the ceasefire.

“As we stated many times before, we just can’t support an unconditional ceasefire that does not call for the immediate release of hostages,” the official said.

The US official also alleged that Russia and China were conspiring to isolate the US, pushing the vote toward forcing Washington into being the lone veto:

Some of the council’s 10 elected members (E10) were more interested in bringing about a US veto than compromising on the resolution, the official said, accusing Russia and China of encouraging those members.

“China kept demanding ‘stronger language’ and Russia appeared to be pulling strings with various [elected] 10 members,” the official said. “This really does undercut the narrative that this was an organic reflection of the E10 and there’s some sense that some E10 members regret that those responsible for the drafting allowed the process to be manipulated for what we consider to be cynical purposes.”

The draft resolution not only demanded “an immediate, unconditional, and permanent ceasefire” but also the “immediate access [to] humanitarian assistance.” The resolution mentioned the release of all hostages and prisoners, but failed to specifically condition it as part of a ceasefire.

Israel has long stood accused of blocking the free flow of humanitarian aid into the Strip. More recently, Palestinian groups looted some 100 aid convoy trucks in the south of the Strip. 

A couple of minutes of crossing South from Gaza City today. Beyond human and material loss. What is not as easily visible is the erasure of the markers of people’s memories, of their connection to their family stories and histories, where they took their first steps, the homes… pic.twitter.com/k5YdjGnC5C

— Philippa Greer (@philippa_bear) November 19, 2024

The situation is still desperate, and most estimates say that well over 40,000 Gazans have been killed since the Oct.7 Hamas terror attacks on Israel. Israel’s military is showing sights of staying in the Strip for an indefinite period, as whole sections of central and northern Gaza are being bulldozed, and military infrastructure erected in its place.

Authored by Jill McLaughlin via The Epoch Times (emphasis ours),

California Supreme Court ruled on Nov. 15 to toss out the state’s lawsuit against Huntington Beach’s voter ID law, but they expect the state attorney general to continue fighting it.

“Honestly, it’s a great victory for Huntington Beach, and as I’ve said, I think it’s a black eye to the state,” City Attorney Michael Gates told The Epoch Times on Nov. 18.

The state could refile the lawsuit within 20 days, but Gates confirmed on Monday that the city is “moving forward with the voter ID program.”

The state’s Supreme Court dismissed a lawsuit brought in April by Attorney General Rob Bonta and California Secretary of State Shirley Weber. The lawsuit alleged that the Huntington Beach law passed by voters in March requiring voter ID starting in 2026 violated state election law.

Bonta and Weber also said it conflicted with a state law introduced by former state Sen. Dave Min of Irvine that banned local governments from requiring voter identification in elections.

Min, who is expected to win a seat in the U.S. House to replace former Rep. Katie Porter, introduced the law in February after the state threatened legal action against the city. Gov. Gavin Newsom signed it into law Sept. 29.

Huntington Beach’s request for the court’s dismissal was granted after justices considered the case on Thursday.

“The Court finds that this matter is not ripe for adjudication, as … the City’s Charter is permissive and discretionary in character, and thus currently presents no conflict with state elections law,” the state Supreme Court justices wrote in the order.

The Orange County city, located on the coast about 40 miles south of Los Angeles, is home to about 192,000 residents.

Huntington Beach’s voter ID requirement was an amendment to the city’s charter that voters approved on March 5. The amendment defines voters as citizens of the United States, residents of Huntington Beach, and at least 18 years old.

It also states that if a conflict between the city’s charter and California’s election code arises, the city’s charter “shall prevail.”

The city’s charter serves as a city’s constitution, outlining the local government’s powers and responsibilities.

Bonta and Weber issued a joint letter to the Huntington Beach City Council in September 2023, urging it to reconsider the voter ID amendment and threatened to fight it before the measure was placed on the ballot.

“If the City moves forward and places it on the ballot, we stand ready to take appropriate action to ensure that voters’ rights are protected and state laws are enforced,” they wrote in the letter.

Although Bonta included the new state law in its arguments to the Supreme Court, the court didn’t see a conflict, according to the city attorney.

The California Constitution states charter cities have local jurisdiction over local elections, Gates said.

“We’re invoking our constitutional right.”

Huntington Beach became a charter city in 1937, according to the city. It decided to adopt a charter to ensure the state did not interfere with the city’s affairs or intrude on its oil revenue.

Bonta claimed in a statement issued Sunday about the decision that existing law prohibited cities from implementing voter ID. He claimed the court would eventually side with the state.

Bonta asserts in the state lawsuit that under existing state law and Min’s Senate Bill 1174, all local governments—including charter cities like Huntington Beach—are prohibited from implementing voter ID requirements and local laws that conflict with state laws governing a “statewide concern,” he said in the statement.

“Let me be clear: that has not changed. We disagree with the court’s decision that it is too early to bring our lawsuit and remain confident in the strength of our case.”

The decision allows the state to file an amended lawsuit within 20 days. Bonta’s office did not return a request for comment on Monday about whether he planned to refile it.

The city doesn’t plan to back down, according to a statement by Huntington Beach Mayor Gracey Van Der Mark posted on Facebook Friday.

“This is a great day for our City—we have not only successfully defended our City’s Voter ID law but also the rights of our residents from attacks by Governor Newsom and the State. We will not back down and will continue to fight for the City,” Van Der Mark stated.

Authored by Jonathan Turley,

Manhattan District Attorney Alvin Bragg pushed Tuesday to create a new constitutional creature: the layaway president.

It was once common for stores to hold expensive items that you really wanted but could not make the payment.

So they were tagged and kept on the shelf until you were ready to redeem your item.

For Bragg, that leaves Donald Trump tagged until 2029.

In a filing before Manhattan Justice Juan Merchan, Bragg suggested that the court should stay the pending criminal case and defer any sentencing “until after the end of defendant’s upcoming presidential term.”

That would allow a city prosecutor to put a leash on a sitting president for four years.

Trump would govern by the grace of this local judge and district attorney.

In the meantime, pundits and politicians could portray the president as free on a type of work release program.

The suggestion is appalling to most of the people in the country, including the majority of voters who voted for Trump.

Vice President Kamala Harris and Democrats ran on this and other cases in the election.

The result was arguably the largest jury decision in history.

That being said, I do not believe that the mere election of a president negates jury verdicts on 34 criminal counts.

But ample reasons exist to overturn those verdicts or to dismiss this case.

For example, after the verdict, the Supreme Court rendered its immunity decision barring the use of certain evidence against a president.

Some of the evidence used in the Manhattan case likely fell within one of the protected categories.

The prosecutors not only elicited testimony from Trump aides in the White House but then doubled down on the significance of that evidence in their closing arguments.

Merchan could declare that the court cannot rule out the impact of such testimony on the final verdict.

Even if Merchan, as expected, does not dismiss the case on the basis for the immunity decision, the trial was rife with reversible error.

This was a raw exercise of lawfare and Merchan did little to ensure fairness toward the defendant.

Yet none of those errors can be likely addressed until Merchan reaches final decisions on the motion to dismiss as well as the sentencing question.

While that will mean that Trump could, upon possible sentencing, formally become a convicted felon, the matter can then be finally pried out of the hands of Merchan and taken to higher courts for review.

The worst possible option is the one suggested by Bragg, who would adopt the popular persona of Trump’s turnkey.

The President would be seen by many as governing on a type of conditional status from one of the most politically compromised prosecutors in the country.

For Bragg and other Trump opponents, that may be far more satisfying than a sentencing now given the unlikelihood of any jail component.

After the years and millions spent on the case, it would be the ultimate buzz kill to have Trump sentenced to some fine or other non-carceral penalty.

Many Democrats want to have Trump govern with an asterisk of a “President pending sentencing.”

Instead, Trump would govern with the clock ticking toward a sentencing date.

It is a dangerous precedent. Such pending sentences can have a coercive impact on a president in dealing with given officials, including a state governor who might be willing to pardon a president.

Consider the effort of the governor of New York in restoring the lucrative state and local tax, or SALT, deductions.

There is no reason to believe that Trump would succumb to such leverage (and he has already indicated that he would consider the change).

However, any decision on policies like SALT would be the subject of speculation of whether a reduction in taxation was made in the hope of a reduction in incarceration.

Critics would suggest that New York is yanking on the leash to achieve policy advantages.

This is the same judge and prosecutor who gagged the leading candidate for the presidency in discussing aspects of the case in the months leading up to the election.

Now, they would allow him to govern pending their own suspended decisions on his future.

The Trump case was always a thrill kill for Bragg.

Under Bragg’s proposal, his supporters would prolong that thrill for four more years.

The cost, however, would be devastating for the country.

This country needs a president, not a president on layaway from the Manhattan District Attorney.

*  *  *

Jonathan Turley is the Shapiro professor of public interest law at George Washington University and the author of “The Indispensable Right: Free Speech in an Age of Rage.”

Authored by Emel Akan via The Epoch Times (emphasis ours),

WASHINGTON—The Biden administration is urging Congress to allocate $100 billion in disaster relief to assist communities across the Southeast affected by the recent hurricanes Helene and Milton.

“With the Congress now back in session, I write to request urgently needed emergency funding to provide for an expeditious and meaningful Federal response to Hurricanes Helene and Milton and other natural disasters,” President Joe Biden said in a letter to Congress addressed to House Speaker Mike Johnson (R-La.) on Nov. 18.

The administration on Nov. 18 submitted a funding request that included $40 billion for the Federal Emergency Management Agency (FEMA), $24 billion for the Department of Agriculture, and $12 billion for the Department of Housing and Urban Development.

“The last time Congress passed a comprehensive disaster package was in December of 2022 as part of the Consolidated Appropriations Act of 2023,” Shalanda Young, director of the Office of Management and Budget, told reporters during a call.

“Since then, numerous deadly storms and disasters have struck communities across the country. Those, of course, include hurricanes Milton and Helene.”

Biden is seeking funding for a total of 16 agencies, with additional allocations such as $8 billion for the Department of Transportation, $4 billion for the Environmental Protection Agency, $3 billion for the Department of Health and Human Services, and $2 billion for the Small Business Administration (SBA).

The request came after Johnson signaled that the House might delay appropriations bills until early 2025, when Republicans are set to control both Congress and the White House.

“We’re running out of clock; December 20 is the deadline,” Johnson told Shannon Bream on “Fox News Sunday” on Nov. 17. “We’re still hopeful we might be able to get that done, but if not, we will have a temporary measure. I think it would go into the first part of next year and allow us the necessary time to get this done.”

Young said the administration has already allocated funds for a range of other disasters, including the fires in Maui, tornadoes across the Midwest, the collapse of the Francis Scott Key Bridge in Baltimore, and severe storms in Alaska, Connecticut, Louisiana, New Mexico, Virginia, Pennsylvania, Illinois, and other states.

“That is why we need comprehensive disaster relief in order to ensure that our communities can fully recover and rebuild,” she said.

The funding request also includes critical support for the SBA’s disaster loan program for small businesses, which has completely exhausted its funding, according to Young.

“Homeowners also use this funding as a critical source of rebuilding,” she said.

During the call, FEMA Administrator Deanne Criswell also emphasized the importance of the urgent funding, noting that “2024 has been a year of records.”

“For example, in 2023, we had 114 disaster declarations, and as of today, in 2024, we’ve had 172,” she said.

During a visit to Western North Carolina last month, Johnson pledged that Congress would take bipartisan action to support recovery efforts once cost assessments are completed.

When asked about a lawsuit against FEMA in Florida brought because emergency workers allegedly skipped houses with Trump signs in front, a senior administration official stated during a call on Nov. 18: “We’re not able at this time to comment on an open and active investigation. I can tell you that FEMA’s mission is to help people before, during, and after disasters.

“And our core values are fairness, respect, integrity, and compassion. And that is the ethos of the organization.”

House Speaker Mike Johnson (R-LA) is banning transgender individuals from bathrooms on the House side of the Capitol Complex regardless of their gender identity.

The move comes after the election of Rep-elect Sarah McBride (D-DE), who will become the first transgender member of Congress.

“All single-sex facilities in the Capitol and House Office Buildings (like restrooms, changing rooms, and locker rooms) are reserved only for individuals of that biological sex,” Johnson said of women with johnsons, adding “Like all policies, it’s enforceable. We have single-sex facilities for a reason. Women deserve women’s only spaces.”

“We’re not anti-anyone. We’re pro-woman. I think it’s an important policy for us to continue. It’s always been, I guess, an unwritten policy, but now it’s in writing,” Johnson continued.

The move comes after Rep. Nancy Mace (R-SC) introduced a resolution to ban transgender women from women’s bathrooms in the House.

As Axios notes, Mace pushed Johnson to include her measure, which charges the House sergeant-at-arms with enforcing the ban.

Biological men do not belong in private women’s spaces. Period. Full stop. End of story. pic.twitter.com/IhR7kExkBU

— Rep. Nancy Mace (@RepNancyMace) November 18, 2024

Meanwhile, Rep. Marjorie Taylor Greene (R-GA) told colleagues at a Tuesday closed-door GOP conference meeting that she might get into a “physical altercation” if she’s forced to share the bathroom with a trans woman.

In a Monday statement, McBride, a woman with a penis, said “This is a blatant attempt from far right-wing extremists to distract from the fact that they have no real solutions to what Americans are facing.”

lol what?

Authored by Lance Roberts via RealInvestmentAdvice.com,

Following President Trump’s re-election, the S&P 500 has seen an impressive surge, climbing past 6,000 and sparking significant optimism in the financial markets. Unsurprisingly, the rush by perma-bulls to make long-term predictions is remarkable. For example, Economist Ed Yardeni believes this upward momentum will continue and has revised his long-term forecast, projecting that the S&P 500 will reach 10,000 by 2029. 

His forecast reflects a mix of factors that he believes are reigniting investor confidence, including tax cuts, deregulation, and advancements in technology that could drive productivity growth.

The chart shows the current bull market from the 2009 lows to the present, with a 12-month moving average and a trend channel extension into 2030. While Yardeni’s forecast seems astonishing, it represents a bit more than a 7% annualized rate of return through the end of the decade.

Specifically, Yardeni highlights the potential for substantial corporate tax cuts. He suggests that Trump could reduce the corporate tax rate from 21% to as low as 15%, which would significantly boost corporate profitability. Tax cuts and deregulation would help companies expand their margins and grow earnings. As a result, Yardeni predicts a continuation of record-high profit margins for S&P 500 companies, further supporting his bullish outlook on the stock market.

Yardeni’s analysis is equally striking, even in the shorter term. He anticipates the S&P 500 will reach 6,100 by the end of 2024, with additional gains to 7,000 by 2025 and 8,000 by 2026. He believes these targets are achievable in the current environment, bolstered by solid performances from tech giants and the reinvigoration of investor “animal spirits.”

As investors, is such optimism warranted? Are there essential risks to consider with his forecast? That answer would be “yes,” as Yardeni has previously made bullish forecasts that failed to mature. In the late 1990s, he predicted that the S&P 500 could reach 5,000 by 2000, reflecting his optimism during the dot-com boom. However, the market downturn in 2000 prevented the achievement of that target. Then, during the market run-up into 2008, he maintained his bullish outlook, forecasting significant gains derailed by the “Financial Crisis.” As discussed in this past weekend’s Bull Bear Report:

Concerning long-term market outlooks, it is helpful to remember that Wall Street analysts predicted the same in 1999 and 2007. At the time, valuations were elevated, but analysts and economists believed that economic growth would remain strong and support earnings growth well into the future. Unfortunately, despite the rather rosy outlook, economic realities overtook the exuberance, leading to significant market declines. The same assumptions existed in 1972 about the “Nifty Fifty,” Also, let’s not forget 1929 when Irving Fisher proclaimed the market had achieved a “permanently high plateau.”

However, the rise in “animal spirits” continues to support more bullish outlooks. But what exactly does that mean?

The Problem With Animal Spirits

The term Animal Spirits” comes from the Latin term “spiritus animals,” meaning “the breath that awakens the human mind.” 

The term can be traced back to 300 BC in human anatomy and physiology. It refers to the fluid, or spirit, responsible for sensory activities and nerves in the brain. Besides the technical meaning in medicine, animal spirits were also used in literary culture. In that form, they referred to states of physical courage, delight, and exuberance.

Its modern usage came about in John Maynard Keynes’ 1936 publication, “The General Theory of Employment, Interest, and Money.” He used the term to describe the human emotions driving consumer confidence. Ultimately, the financial markets adopted the “animal spirits” to describe the psychological factors that drive investors to take action. This is why human psychology is essential in understanding the close linkage to short-term valuation measures.

The 2008 financial crisis revived interest in the role that “animal spirits” could play in the economy and financial markets. The Federal Reserve, under the direction of Ben Bernanke, believed it necessary to inject liquidity into the financial system to lift asset prices to “support” consumer confidence. The result would be a self-sustaining environment of economic growth. In 2010, Bernanke made his famous statement as the economy was on the brink of slipping back into a recession. The Fed’s goal was simple: ignite investors “animal spirits.”

“This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending.” – Ben Bernanke

“Bernanke & Co.” successfully fostered a massive lift in equity prices, boosting consumers’ confidence. (The chart below shows the composite index of the University of Michigan and Conference Board surveys. Shaded areas are when the index is above 100)

Unfortunately, since 2009, despite the massive expansion of the Fed’s balance sheet and the surge in asset prices, there has been relatively little translation into wages, full-time employment, or corporate profits after tax, which ultimately triggered very little economic growth.

The problem with reviving the “animal spirits” is the monetary policy “transmission system” collapsed following the financial crisis.

The Instability Of Borrowing From The Future

Instead of flowing through the system, liquidity remained bottled up within institutions and the ultra-wealthy, who had “investible wealth.” However, the bottom 90% of Americans continued to live paycheck-to-paycheck. The chart below shows the failure of the flush of liquidity to translate into economic growth. While the stock market returned over 300% since the 2007 peak, that increase in asset prices was more than 7x the growth in real GDP and roughly 3x the growth in corporate revenue. (I have used SALES growth, which is not subject to accounting manipulation.) 

Asset prices should reflect economic and revenue growth. Therefore, the deviation is evidence of a more systemic problem. The market has acted as a “wealth transfer” system from the middle class to the rich. Such has not gone unnoticed by the masses as the complaint that “capitalism is broken” continues to rise. However, while capitalism is not broken, there has been a clear shift in the underlying economic dynamics. One of the critical issues is corporate profitability, which we addressed last week:

“Companies have been able to push through profit‑margin‑expanding price increases under the cover of two key events, namely 1) supply constraints in the aftermath of the Covid pandemic and 2) commodity cost-push pressures after Russia’s invasion of Ukraine. But we still emphasise that one of the main sources of the recent surge in profit margins is massive fiscal expansion. In short, the government has been spending more to the benefit of corporates.” – Albert Edwards, Societe Generale

As he notes, U.S. corporate profits are incredibly elevated as a percentage of GDP, well outside historical norms.

However, that surge in profitability has come at the expense of the employee. We discussed this point in “Does Technology Make Things Better?”

“Monopolistic behavior stifles competition, reduces innovation, and limits consumer choice. Furthermore, corporate profitability soared by reducing labor, which is the most costly expense for any business.”

While the rise in “animal spirits” may foster an appearance of economic growth, especially when combined with monetary and fiscal policy support, the sustainability of that growth is questionable. Pulling forward growth does work in the short term; however, the void it leaves in future consumption continues to grow. As such, without continued, outsized fiscal deficit increases, the reversion risk to corporate profitability seems quite significant.

Which brings us to the risks in Yardeni’s bullish long-term forecast.

Risks To Forecasts

In conclusion, while Yardeni’s optimistic forecast is enticing, several risks could derail this bullish outlook. First, historical precedents remind us that unforeseen economic downturns can reverse market momentum even during seemingly unstoppable growth. As noted, Yardeni made bullish forecasts previously, only for economic realities to undermine those projections. The risk of repeating history remains, especially if overconfidence blinds investors to underlying vulnerabilities.

A significant threat lies in the sustainability of the so-called “animal spirits,” the psychological factors that drive market exuberance. While heightened investor confidence can fuel short-term market gains, it often relies on continuous support from monetary and fiscal policies. The long-term effectiveness of those policies is debatable. If economic growth fails to match rising market valuations, the illusion of stability could shatter, leading to sharp corrections.

Yardeni’s bullish case also hinges on expectations of substantial tax cuts and deregulation. However, such fiscal policies have trade-offs, including potential federal debt and deficit increases. Over time, these imbalances could strain economic growth. Such is especially the case if rising deficits erode economic growth or investor confidence in the government’s fiscal health.

Lastly, corporate profitability also poses a challenge. The elevated profit margins, primarily boosted by fiscal spending and price increases, may be unsustainable. As supply chain constraints ease and cost pressures subside, companies could struggle to maintain margins, particularly if labor costs rise or consumer spending weakens. While the outlook remains positive, investors should remain vigilant. Acknowledging that optimism can quickly give way to economic headwinds and market instability is crucial.

Here are five steps investors can take to position portfolios for potential market gains if Ed Yardeni’s bullish forecast is correct. However, these steps can also hedge against unexpected economic downturns or market volatility:

1. Diversify Across Asset Classes

• Strategy: Spread investments across various asset classes, including equities, bonds, real estate, and alternative assets. Diversification reduces the risk of being overly exposed to a single market downturn.
• Implementation: Consider maintaining a core allocation to broad-market index funds or ETFs that can capture market upside while diversifying into sectors like fixed income and real assets, which tend to perform well in risk-off environments.

2. Maintain a Balanced Equity Portfolio

• Strategy: Balance growth-oriented stocks, which could benefit from continued market gains, with defensive and dividend-paying stocks that provide stability.
• Implementation: Allocate a portion of your portfolio to high-quality, large-cap tech and growth stocks to capture Yardeni’s expected upside. Simultaneously, invest in defensive sectors like utilities, healthcare, and consumer staples to cushion against market corrections.

3. Use Bond Investments as a Hedge

• Strategy: Invest in a mix of short- and long-term bonds to benefit from potential interest rate cuts while providing stability if equities falter.
• Implementation: With the expectation of falling inflation and interest rates, long-term Treasuries could increase in value, serving as a hedge. Short-term bonds and cash equivalents provide liquidity and reduce volatility.

4. Add Exposure to Alternative Investments

• Strategy: Incorporate alternatives such as gold, commodities, or real estate investment trusts (REITs) to diversify risk and hedge against inflation or market disruptions.
• Implementation: Gold and commodities can act as a hedge if inflation unexpectedly rises, while REITs may offer income and stability, benefiting from lower interest rates.

5. Keep Cash Reserves and Stay Flexible

• Strategy: Hold a portion of your portfolio in cash or cash equivalents to capitalize on future market opportunities and mitigate downside risk.
• Implementation: Cash reserves allow you to quickly take advantage of market dips or reallocate to higher-yielding investments if conditions change. Staying flexible ensures you can adapt to evolving economic landscapes without being forced into reactive decisions.

We, nor anyone else, know what the market will do in 5 months, much less 5 years from now. History clearly shows that the most optimistic forecasts are often disappointed by economic realities; however, by taking some action within portfolios, investors can remain well-positioned to benefit from potential market gains while being prepared for unforeseen economic shocks.

Authored by Mike Shedlock via MishTalk.com,

CA-45 will come down to the wire, perhaps decided by 10 votes or less…

California House District 45 Image courtesy of the Washington Post, annotations and insets by Mish.

If these percentages hold, and anything remotely close to what’s happening in Pennsylvania happens in California, guess what.

Admittedly, the setups are different so that comparison is gone. But there are other issues such as illegal immigrants voting.

I doubt illegal immigrant voting widespread.

But it doesn’t have to be to steal the election.

If the winning margin is 6 or even 600, this question is going to come up.

Election Fraud by Democrats Must Stop

In Pennsylvania, there is admitted election fraud underway.

The state supreme court had to step in, and did with feeble actions.

In Bucks County one of those counting votes openly stated “I think we all know that precedent by a court doesn’t matter anymore in this country and people violate laws anytime they want. So for me, if I violate this law, it’s because I want the court to pay attention to it.”

For discussion, please see Pennsylvania Supreme Court Rules Election Fraud by Democrats Must Stop

Time to Prosecute

Regardless of how one feels about the 2020 election (and this one), the one and only way to stop this kind of purposeful fraud is to prosecute these cases to the fullest extent of the law.

The governor is missing in action.

And where the heck is the outrage from Democrats?

“No one is above the law”. Yes, hypocrites, tell me about it.