저자: Kevin · 외국인
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9월 고용보고서 대폭 하향 수정(-911k)에도 금리는 상승. 내일 PPI·CPI 발표 예정이며 헤드라인이 예상 상회 시 금리 반등 가능성 언급. 인플레이션 근원 재가속 우려, 연준은 점진적 인하 기조 유지 전망. 경기침체보다는 느린 연착륙/저금리 국면을 가정하고, 금리 하락 시 수혜가 기대되는 주택·풀(Pool Corp) 관련 종목을 장기 관점에서 설명. 옵션보다 현물 장기투자 선호.
다듬은 글
Well, take a look at the chart and guess where the payroll revisions came out. Obviously, the payroll revisions came out right here. 911,000 jobs and unsurprisingly risk assets trading down a bit. But surprisingly, interest rates on bonds are moving up. Now, that's what we really got to talk about because tomorrow we have some big catalysts starting with producer price index inflationary reads and then following that we'll have the CPI inflation reads.
Usually we get those in reverse order. Uh but tomorrow uh Wednesday at 5:30 in the morning we'll have our producer price index numbers. Uh and these can actually accelerate the increase of bond yields which right now are at the lowest level they've been at all year. But risk moving up even higher which will be a little bit of a short-term negative to uh some of those real estate related uh stocks could be a buying opportunity.
But take a look at this producer price index inflation month over month tomorrow is expected to be.3 and the core read is also expected to be.3 and.3 for X food energy X food energy trade. If these numbers come in, which I think they're more likely to come in at a four handle, so point4, than they are to come in at a two handle.
If they come in at that four handle, we probably are giving credence the Fed going, "Look, 25 basis points. That's it. We'll go meeting by meeting after that." It kind of puts the market into a bit of a stasis environment where the numbers aren't such that we could be so excited and rally that markets are going to the moon, but they're not so bad that, you know, we're expecting massive rapid rate cuts.
And that's basically what we got out of the QC dub numbers. As you can see here, we ended up getting just 847,000 jobs created in the 12 months ending in March. that reduces the monthly job creation rate to just 70,583. And usually you start getting recessionary concerns at under 50,000. And so I think what we have is a bond market that's reacting to numbers that are bad, but they're not recessionarily bad.
They're not bad enough to get the Fed to say, you know what, we need many multiple cuts. And unfortunately PPI in my opinion more likely to come in slightly higher than slightly low tomorrow probably just adds fuel to that fire. So it's possible that in the short term over the next few days we could end up seeing this 10-year yield just bounce up a bit.
Uh now again we're at the lowest level we've been in all year with the exception of this very brief moment right on liberation day when the 10-year dropped a smidge below 4%. But it wouldn't be surprising to see this move back up to about 415, maybe even 420 as we get that PPI CPI data. Now, best case scenario for markets tomorrow and uh Thursday when we get our CPI numbers, which are also expected to be.3, year-over-year 2.9, year-over-year core, 3.1 on CPI, year-over-year PPI, uh 3.3 tomorrow, and 3.5 on the core.
When you get these numbers tomorrow, best case scenario is that all those inflation numbers come in at expectation or slightly low. We want to see that fire cooling underneath the hood. Now, understand what I mean when I say the fire cooling underneath the hood. doesn't mean that, you know, there's no inflation from tariffs and it doesn't mean that, you know, we're at a place of, oh, uh, there's there's like this mega inflation and we're going to be in a stagflationary environment, right?
We we want to stay away from any of that. What really inflation cooling under the hood means is something like this. Think about the trend of inflation. This is COVID inflation and then you come Oh, there we go. Let's try that again. Here's COVID inflation and then you come down and then down and then you're getting the tariff inflation, right?
Oh, there we go. I guess it doesn't show until I let go, which is interesting. So, what you're kind of getting right now is uh iPad's being a little funky this morning. There we go. What you're getting right now is that you're getting that little tick up there on the end. And that's really important because it shows you that your initial trend uh of inflation is moving in the wrong direction.
It's a sign that we are seeing under the hood inflation that's rising on a consumer good pace at a tune of about 5.6% annualized. That's a lot. We're also seeing some of those uh you know core non-housing services start reacelerating which means there's potentially a spillover from goods inflation into services inflation and that's how you get broad-based inflation that's bad and unfortunately that's just what the tariffs are bringing to us at this time.
So the tariffs are bringing us uh rather than a continuation of a downtrend of inflation, the tariffs are giving us uh a a reaceleration. Now Jerome Powell and the Federal Reserve are broadly convinced that these lines uh we'll pick a different color here that these lines are going to be broadly transitory over time.
So that you know on the left over here we had co inflation and on the right we have a bump from tariffs. Both of them, I think they're arguing and from what we've seen Powell say, uh, are going to be branded as transitory in nature. And what we're finding with Powell bringing back flexible inflation targeting or FIT, which is a slight deviation from Fate, which was flexible average inflation targeting by going to FIT.
to flexible average inflation targeting. Powell's basically saying, "Hey, for this period of time right here, we just want to go and recognize that tariffs are going to be a one-time but overtime inflationary impact. If we look through that like textbooks tell us to do, then we could still reduce rates.
But the data today was not bad enough. Even though it was the worst in 26 years, negative 911 was not bad enough to actually motivate us uh to see any kind of big drop in yields, assuming that markets are going to get anything more than a 25 basis point cut. That's probably because we literally came in right at the two standard deviation level.
Two standard deviations would have been 990. We came in at 991, which that only had a 5% chance of happening statistically. We got it. It's bad, but I think markets see this as like a clearing event. It's like, all right, we were all expecting bad news. Best set up 800K, and maybe because it's a market clearing event, even though the numbers are so bad, the bond market's kind of like, all right, bro, priced in.
And that's why we're getting a little bit of a tick up here. We've seen almost no movement in the odds of a 50 basis point cut. We started the day at about an 8% chance of a 50 basis point cut. We're at about a 10% chance right now. it that's indistinguishable from zero movement. So we're really it's not bad enough data uh to motivate big cuts and we do have a risk that CPI and PPI over the next two days are going to come in hot.
Now best case scenario and that's my bias. I I lean towards getting a point4 rather than a.3. We'll be covering them live tomorrow at 5:30. ke.com. You pay once you get lifetime access. Remember, you could write it off as well. At least that's what a lot of CPAs say. Uh, and you'll get our top there's stocks that I'm buying and not selling for the next 10 years at least.
So, take a look, you know, again here at this iPad. The the key here is uh if we get a lower read, that would be clutch. So, if we end up getting a read like a 0.2 two on PPI or CPI tomorrow. That's going to be a real bullish catalyst because that's where you can actually get the stock market to go up and yields to come down.
But other than that, we seem a little stuck in place right now. The market's in this stasis of hey, yeah, we're we're waiting for data. We're, you know, bouncing on 577 on the cues. We're rejecting the 580s, the lower 580s, which are our all-time high levels, 581 and 583. Uh, and we're just kind of in a decent spot.
Like prices are relatively near all-time highs. Yields are slowly trending down. Data just isn't strong enough in any direction to say, "Oh my gosh, yeah, this is a recession," or, "Oh my gosh, this is stagflation." It's pretty benign. Now, what that means is time. And that's actually something really important to know if you're a trader or you're investing in stocks.
When everything takes longer to happen than you expect, options become really risky because options do really well when what you expect to happen happens quickly. Shares don't have that pain. And so using shares to make your investment decisions versus options in this sort of market where we're kind of like in this slog, but it's like a slow motion movement of the economy.
It's that's kind of what I feel like. It's like imagine you you've got somebody running a marathon to a recession, but they're literally moving like this. And then every time it's like, oh, his hands all the way at the top. He's getting closer. Oh, wait for the next data set next month. Oh, what's it going to be?
Like, we're moving so freaking slowly. It's It's tough to to make big bets, I feel like, in options right now. A lot easier to just go, "Hey, buy the dip on great quality companies that you can own for the very long term on um uh you know, stocks that you feel like are going to be part of the next cycle." Like I personally believe this next cycle is going to be one where either way whether we have uh really bad jobs data and we go into a recession and rates go back to zerp which is the um zero interest rate policy which will be a huge refinancing in GDP boom by the way.
Uh huge for real estate stocks which I think is why Warren Buffett is investing in real estate. We just need to get Warren Buffett investing in house hack too. I don't think he knows about it otherwise he would. I I I'm sure. But uh but anyway uh or we just normalize because that hump, you know, this this hump right here, that green hump goes away and then we normalize our rates.
Like either way, I feel like the next cycle and this is what we're we're choosing, you know, stocks based on uh is in in the meet Kevin membership is this these next 10 stocks that we're buying. Well, the next six because we've already picked four of them. The next six that we're buying, they're all based on what's going to do well in our opinion, no guarantees of course, in a soft landing where rates just slowly come down and the Fed policy rates go to 2 and a half or 3%.
Or what does well in that case, but even better if rates go down to, you know, 2%, 1% or zero. So that's the next regime to look at is a lower interest rate regime either way because I don't see stagflation as an issue. Stagflation is really going to come from uh a wage price spiral which so far we're seeing no evidence that people are actually able to demand significant wage increases.
It's probable that uh artificial intelligence is limiting people's ability to uh you know get pay increases uh and and that really limits the impact of inflation or stagflation at least. But it still means we're doing this slow slog towards either a soft landing or recession. Nobody knows when we're going to have that final decision on on you know what's coming or not.
Uh but what we do recognize is jobs growth on average is low, but it's still slightly above our recessionary numbers. And that's what the QCW gave us this morning. 70,000 job creation rate over the last 12 months ending in March is still above the 50 typical threshold where you generally start getting concerned about a recession.
You know, we've got an average over the last 30 uh uh 4 months that puts us at 37,000 jobs. If we end up getting these revisions on top of those, that puts us at -39,000 jobs, then then we're basically in a recession, right? If you carry those revisions over, but we're not going to have those revisions for another 6 months.
So, we don't know. And so, as with most recessions, you don't really know until you're at like like you don't really know that you're in a recession until you're at the end of it. And that's usually when the big shock hits, which I think we are shockprone in markets. We know we're shock prone because the 102 yield curve is sitting at above 50.
Above 50 is a shockprone level, but it's chilling out a little bit. Well, down at 54 today. So, I think that's the way to look at this is you look for great quality companies that you can own over the long term that you could buy the dip on, but they should be plays that that are valuable in an environment that does well when rates come down uh and potentially when rates come down really fast.
I like I I really I have not invested in this one. I'll be transparent, but I like Warren Buffett's play on Pool that Pool is that warehouse distributor or or well they're a distributor for pool equipment, pool pumps and other ones. And I actually think it's a really interesting company. uh you know, we could take a quick peek at it, but I think it's an interesting play because really, if rates come down, homeowners who have a lot of equity in their homes, especially in markets like in California, they're probably going to get home equity lines of credit at now lower rates.
And what do people usually do when they get a home equity line of credit? They buy a boat, they pay off their credit cards, and then they go refill up those credit cards, which is good for consumer spending, or they renovate their home. Some people will buy rental property which then they go renovate the rental property, right?
When people do renovations, it's it's a contributor to GDP. Like I think when house hack I mean we're buying again, you know, we've bought like five or six homes just in the last like 14 days. When we go spend, you know, 50 grand on a renovation, that's 50 grand that was sitting in a bank account, you know, earning, you know, 5% or 4% or whatever.
Uh and it goes into the economy with a multiplier effect. you know, painters get work, flooring companies get work, Lowe's gets work, the contractor supply warehouses we use, they get work, whatever. You know, the local lumber place gets work for baseboards, whatever. Like, everybody wins when people spend money.
And so, I think that's why Warren Buffett looks at uh pool uh the in, you know, investor docs on pool over here. Sales are basically flat year-over-year, but that's flat in a high interest rate environment. Like, I'm not here to chill pool. I'm just here to say this is an example of of the the logic people are using to make investment decisions right now because they're not trying to think of what's doing well right now.
They're trying to think of what's the next cycle going to bring us. And so you've got flat revenues uh and and gross profit at pool year-over-year in a high interest rate environment. Well, what direction does this go if rates come down by a normalization and spawn more refinancing or purchasing activity or heliloc activity or rates plummet?
I mean, obviously, if you go into a recession, you know, 10% more of our workforce is going to be unemployed. Our unemployment rate will go from 4% to 14%. And so, you'll have more unemployment. But the people who are employed, some of them are gonna be like, "Damn, rates are so cheap, honey. Let's go buy a pool.
let's go build a pool or whatever. Uh, and I think that's what Warren Buffett is seeing here by wanting to invest in home builders and the pool corporation. Flat in the worst interest rate time uh implies good uh in in a lower interest rate time. And I don't know, maybe that's too too overly simplified, but I look at this company, they they don't exactly have like the best balance sheet.
So, I'm also somewhat surprised because I know Warren Buffett generally starts his analysis by looking at the balance sheet. You know, I've got $1.2 billion of long-term debt. I've got bills to pay uh outside of I don't even have deferreds over here. I've got bills to pay of $800 million in the next 12 months.
Uh I have like no cash. I've got $83 million in cash, but I've got $1.3 billion in inventory. So, I have to sell inventory to pay my bills, which is fine. It's a distributor, so of course they're going to do that. But it's not a surprise that they are borrowing. So I don't love the balance sheet. That's I think that's what's been keeping me away from wanting to buy it.
But I look at this. They're borrowing on their credit line. You know, net borrowing right here is about what? $150 million borrowed right here. And then maybe another 150 million borrowed right here. So I've got about net borrowing of about $300 million. They gave about 250 of that away in dividends and stock.
That's what Buffett likes as well. They're rebying the stock. They're issuing dividends. Uh but they're literally borrowing to do that. Meanwhile, they're just chilling out lax and lax and all cool and all waiting for interest rates to come down and their earnings are flat in the high interest rate environment.
So, it makes sense. Now, in terms of an actual valuation for the company, uh distributor, it's pretty labor intensive. I probably would only give this like a 1.67 peg price to earnings growth ratio. Uh so, let's see what they're trading for now. Uh let's see. Pool pool investor relations. This is the kind of analysis we like doing in our course member live streams as well, by the way.
Uh almost a daily basis. uh we're doing I mean we are doing analysis on a daily basis but very frequently we'll also do fundamental analysis we did this morning uh we did NBIS remember you you're in the course member membership you get lifetime access to all that analysis and you could always re a lot of people go back and play it back on 2x since we have the recorded archive of it all but um pool right now is trading uh let's see here we've got a earnings of about 11 bucks for the year ending December number and pool stock right now is trading for about 321 divided by 11.
That puts me at about a 29 times and then I've got growth. These are current Wall Street growth numbers which could be low. I've got growth over the next four years of 11.5%. Which implies a PEG ratio of 2.5. So it's definitely on the expensive side. Like for me, I'd rather I personally think they'll probably grow more than this, but if they grow at 11% on earnings and they've got EPS of about 11 uh and I give them a 1.67 peg, this should be like a $200 stock.
You know, it's trading for 320 right now. So, like it's too expensive for my buy level. But, uh if I increase the growth rate because I think we're going to go into a refinance boom and I give them maybe a 20%. Okay. Okay. Well, if I give them a 20 uh at 1.67, they should be about a $367 stock. So, it's all going to come down to that earnings growth.
And I wouldn't be surprised if the reason why Buffett went for this is because he thinks that either he doesn't trust the Wall Street estimates or he thinks that the company's going to grow more so than uh you know, than than people expect, which is possible. and again reiterates that that focus on um expecting some kind of like refinance boom or or whatever.
Uh that's that's my take on on that. But I mean that's that's broadly what we pay attention to uh when we're looking at analysis. But broadly market is moving in a relatively benign manner today. Uh you know you've got some pain in even pool down 3% in some of the real estate plays. uh partly because of this bond yield moving up rather than down like what we've been seeing.
So very interesting, but uh it is what it is. So we'll see. Probably getting ready for CPI PPI tomorrow, the next day. I'll be live on those at 5:30 in the morning. So look forward to seeing you there. And then remember to use coupon code bullish gadget uh to get that meet Kevin membership and lifetime access to .
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