Category: INO.com Contributors

What's The Right 'Neutral' Interest Rate?

Posted on by George Yacik

Will last Friday’s August jobs report showing that wages rose nearly 3% compared to a year ago finally convince the Federal Reserve that inflation really is starting to pick up steam? If not, what exactly will it take?

That report was certainly good news for workers, who have waited a long time – since 2009, apparently – to see their wages rise by so much. But it also provides convincing evidence that 2% inflation – which the Fed has been trying to stoke for the past 10 years – has finally arrived. But will the Fed actually believe it and do something before it “overheats,” to use its word?

A hike in the federal funds rate to 2.25% at the Fed’s September 25-26 monetary policy seems like it’s already baked in the cake. But it’s still not a given that another one will happen at the December meeting. According to CME’s Market Watch tool, the odds of a rate hike at the yearend confab are only 72%, compared to more than 98% for this month’s meeting. (While the Fed does meet in early November – just a day after the “most important election in our nation’s history,” if you believe some of the political pundits – a rate change then is very unlikely. The Fed has indicated that it will only adjust rates at a meeting that ends with a press conference by the Fed chair. That pretty much disqualifies November).

After the jobs report was released, the yield on the two-year Treasury note hit 2.70%, its highest level in more than 10 years. The benchmark 10-year note closed last week at 2.94%, its highest point in over a month. That those rates didn’t go even higher seems to indicate that the market isn’t yet sold on two more rate increases this year.

At least one member of the Fed is. Continue reading "What's The Right 'Neutral' Interest Rate?" →

U.S. Crude Production Growth Rebounds In June

Posted on by Robert Boslego

The Energy Information Administration reported that June crude oil production averaged 10.674 million barrels per day (mmbd), up 231,000 b/d from May. The surge was partly on the back of a rebound of 154,000 b/d in the Gulf of Mexico (GOM) which had fallen due to unplanned maintenance. In addition, there was a surge of 165,000 b/d in Texas and a loss of 45,000 b/d in Alaska due to normal summer maintenance.

U.S. Crude Production Growth Rebounds

The EIA-914 Petroleum Supply Monthly (PSM) figure was 223,000 b/d lower than the weekly data reported by EIA in the Weekly Petroleum Supply Report (WPSR), averaged over the month, of 10.897 mmbd.

U.S. Crude Production Growth Rebounds

EIA has since kept weekly production estimates essentially flat, as it apparently waits for the monthly survey numbers to catch-up. Continue reading "U.S. Crude Production Growth Rebounds In June" →

Marijuana ETFs Aren't Too 'High' Just Yet

Posted on by Matt Thalman

With Canada set to legalize the recreational use of marijuana on October 17th, marijuana-related stocks and thus marijuana ETFs built around these equities have been on the rise. Many investors believe the marijuana industry will the next big growth industry since the drug has never been legal, but known to be rather popular with those looking to relax. Not only have individual investors been looking to the industry as a way to grow their wealth, but the alcohol industry has recently shown serious interest in the industry.

In August we saw Constellation Brands (STZ) increase its stake in Canopy Growth (CGC), we saw Molson Coors (TAP) partner up with Hydropothecary Corp. (HEXO) and there were reports that Tilray (TLRY) was in talks with Diageo (DEO). The rumors that Diageo and recently IPO’d Tilray where in talks has helped TLRY jump more than 100% since going public in mid-July of this year. While the moves from TLRY, HEXO, and CGC have all been astonishing in the past few months, the fact remains that the industry as a whole can still go higher in the future.

When marijuana became legal in Colorado and then California, the industry experienced a significant increase in demand literally overnight. That demand is once again going to jump on October 17th when Canada becomes legal. Furthermore, with the trend appearing to be taking hold not only around the country but the world, it's not hard to see how within maybe the next five to ten years from now, some of the marijuana stocks will be as big as the top alcohol companies.

But, that is where the problem rests. Trying to determine today, which companies are going to dominate the marijuana market in the coming years is not only a daunting task but perhaps more like gambling than investing.

Luckily though, we have a few ETFs that you can pick from today. Continue reading "Marijuana ETFs Aren't Too 'High' Just Yet" →

AMC Appreciates 30% - Further Upside?

Posted on by Noah Kiedrowski

I recently profiled AMC Entertainment Holdings Inc. (AMC) as a compelling buy in the backdrop of a record-setting year at the box office, a robust slate of movies for 2018 and 2019, a strong consumer, dividend yield of over 4% and accelerating revenue and EPS growth. AMC was trading near $14.50 or nearly 30% below its 52-week high in July. AMC is reengaging the consumer via digital, mobile and loyalty program options, reformatting theaters to enhance the user experience and international expansion augmented by a healthy share buyback program. After coming off record first quarter numbers in June across all categories, the stock looked very attractive considering its depressed valuation, industry strength forecasted through the remainder of 2018 and through 2019 coupled with a slew of company initiatives to drive the consumer experience. Sure enough, AMC has been on the rise and reported its Q2 earnings in August. AMC posted robust growth with record admission and food and beverage revenue increasing ~18% and 19%, respectively while overall revenue increased 20% year-over-year. Since July, AMC has broken out from ~$14.50 to ~$19.50 for a ~30% appreciation in stock value. AMC remains compelling despite this recent appreciation on any significant pullback since the long-term growth narrative remains intact while revenue continues to grow at a double-digit clip.

AMC’s Accelerating Revenue and EPS – Q2 Earnings

AMC has a mix of improving fundamentals across the entire enterprise which were highlighted during its latest earnings announcement for Q2 2018. AMC set second quarter records for all revenue categories: admissions, food and beverage and other. Total revenues increased 20% to $1,442.5 million compared to total revenues of $1,202.3 million during the same period last year. Admissions revenues increased 17.7% while food and beverage revenues increased 19.2%. Net earnings increased $198.7 million to net earnings of $22.2 million compared to net loss of $176.5 million for the three months ended June 30, 2017. Continue reading "AMC Appreciates 30% - Further Upside?" →