What to know today

  • Testify, Jerome Powell…
  • Bitcoin hits some turbulence.
  • Some REITs represent good value.

How To Promote Maximum Employment and Stable Prices

That’s the Federal Reserve’s dual mandate.

If all goes according to trend, the Consumer Price Index for June will show the rate of inflation continues to ease.

The Bureau of Labor Statistics will release that data at 8:30 a.m. ET on Thursday.

On Tuesday and Wednesday, Federal Reserve Chair Jerome Powell will testify to the US Senate and the House of Representatives on economic conditions and interest rates.

Members of Congress will try to bring the heat. But Powell will likely stick to variations of his new theme, that we’ve made progress on inflation and that the labor market is cooling.

That seems fairly obvious based on an accumulation of incoming data.

There is no question the unemployment rate is rising and payroll growth is slowing.

And the Fed’s preferred measure of inflation – the core reading on the Personal Consumption Expenditures Price Index – is trending in the right direction as well.

Recent incoming data show the unemployment rate is rising and nonfarm payrolls growth is slowing.

The question is when the Fed’s policy priority shifts from “price stability” to “maximum employment.”

Powell will deliver prepared remarks around the Fed’s Semiannual Monetary Policy Report on both days of legally required Congressional testimony.

Senators and Representatives on both sides of the political aisle will attempt to corner the Fed Chair into their policy preferences with their questions.

That should make for good sport. And Powell may even offer a little bit of light on the rate-cut timeline.

But inflation politics is not likely to be particularly edifying for investors, traders, and speculators.

Happily, second quarter earnings reporting season starts this week too.

Delta Air Lines $DAL and PepsiCo $PEP will report on Thursday, and Bank of New York Mellon $BNY, Citigroup $C, JPMorgan Chase & Co. $JPM, and Wells Fargo $WFC will report on Friday.

But the big number of the week is still CPI.

The consensus expects to see a 0.1 percent month-over-month increase at the headline level in June following a flat reading in May.

The year-over-year print is expected to be 3.1 percent, down from 3.3 percent in May.

The consensus forecast is for a 0.2 percent increase at the core level. Year-over-year core CPI is expected to come in at 3.5 percent.

The Fed’s target inflation rate is 2 percent.

deep dive

Bitcoin Flirts With a Key Price Level

Crypto is still an extremely volatile market.

As my friend J.C. Parets pointed out last week, Bitcoin $BTC celebrated the anniversary of American independence by falling more than $3,000 in overnight trading.

That extended BTC’s correction to more than 20 percent in less than a month.

“That 60,000 level for Bitcoin is a big one,” J.C. notes. “Below that and things get hairy.”

Bitcoin bulls want to see some strength and a quick recovery above $60,000. “If that doesn’t happen quick, look out!”

BTC traded as low as $53,717 on July 5 but recovered to $$58,367 over the weekend.

Bitcoin $BTC traded as low as $53,737 on July 5 but recovered to $58,367 on July 7.

Cryptocurrency investors, traders, and speculators appear to be concerned about the broader impact of a bankruptcy-related sale of approximately $9 billion of digital coins by Japanese exchange Mt. Gox.

Mt. Gox at one time handled an estimated 80 percent of global Bitcoin trading volume. It first filed for bankruptcy protection back in February 2014 after a series of heists of up to 950,000 BTC. That’s approximately $58 billion at today’s prices.

Forensic accountants have recovered approximately 140,000 BTC that will be returned to former Mt. Gox account holders.

Fears of dilution and other destabilizing effects hit Coinbase $COIN, Riot Platforms $RIOT, and Marathon Digital Holdings $MARA hard right at the open on Friday, but all three stocks recovered most of their substantial early losses.

Let’s keep our eyes on that $60,000 level.

deep dive |
July 8, 2024

Bitcoin Flirts With a Key Price Level


There’s Value in These REITs

They’ve got the cash flow to cover their dividends.

The mess that is the US property market is reflected in price action for real estate investment trusts.

The Wilshire US Real Estate Investment Trust Price Index is down nearly 5 percent in 2024, while the S&P 500 is up nearly 17 percent year to date.

According to UBS analyst Jonathan Woloshin, recent underperformance for a beleaguered sector represents opportunity for investors focused on the long term.

Interest rate uncertainty and concerns about consumer debt levels have weighed on REITs, but a turnaround is coming, Woloshin writes.

The key is to focus on high-quality vehicles run by solid management teams, strong balance sheets, and healthy free cash flows.

“Investors need to remember that no one rings a bell at the bottom,” Woloshin observes.

Prologis $PLD is down 14.13 percent so far in 2024 compared to a gain of 16.72 percent for the S&P 500.

Prologis REIT buys and manages logistics facilities. It’s the world’s largest owner of industrial properties, including warehouses.

PLD enjoyed a nice 1 percent-plus bounce on Friday but is down about 15 percent year to date, closing at $114.46.

Woloshin sees it trading at $144 12 months from now, which represents 26 percent upside from here.

The analyst rates PLD a “buy” because of its own-operate business model, its development pipeline, and its profit potential.

It doesn’t hurt that the REIT pays a 3.4 percent yield right now. 

Wall Street likes PLD, too, with 18 analysts rating it a “buy.” Five analysts rate it a “hold.” Average upside from here over the next 12 months is 16 percent.

Alexandria Real Estate Equities $ARE is down 7.86 percent so far in 2024 compared to a gain of 16.72 percent for the S&P 500.

Alexandria Real Estate Equities $ARE invests in and leases office buildings and laboratories. ARE is down about 9 percent in 2024.

UBS says its 4.4 percent yield is ample compensation while management works on a recovery. And the REIT’s solid balance sheet provides ample support for those efforts.

According to Woloshin, ARE “has a demonstrated history of developing assets that are strongly pre-leased and has a well-diversified, strong credit tenant base.”

Wall Street is generally bullish on the REIT, with 13 analysts rating it a “buy” and one rating it a “hold.” The average 12-month target price implies 23 percent upside from here.

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