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The daily podcast discusses the major market activity and economic data release schedule for the day ahead, with a contrarian bent. Also includes regular podcast episodes a day (or more) early and without ads or announcements.
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Purchasing Manager Indexes
Dec 16, 202400:01:26Tap to summarizeThis is a free preview of a paid episode. To hear more, visit contrarianpod.substack.comGood morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, Dec. 16. The Bottom Line segment of today’s podcast starts at (3:43) for listeners who want to skip ahead.State of PlayBitcoin had another big rally over the weekend and is now trading at fresh record highs, again! Exciting times for Bitcoin bros. As we eye our board of indicators for signs of direction at 0630, things are pretty quiet elsewhere:* Stock index futures are unchanged with no major US index moving more than 0.2% from the break-even point;* Commodities are moving a little lower after some disappointing data out of China. WTI crude oil is down 1.7% to trade around $70/barrel. Copper is down 0.4%;* Bonds are unchanged. The 2-year yields 4.23% with the 10-year yielding 4.38%. Quick maths tells you that 15 basis points separates the 2-year from the 10-year, meaning that yield curve is moving further away from inversion;* The crypto rally appears to have entered a new phase, with Bitcoin up 2% to trade close to $105,000. It broached $106,000 earlier.Today’s Known EventsIt’s a pretty busy week centered on the Federal Reserve’s interest rate decision on Wednesday. Today is mostly quiet though.Purchasing Manager Indexes from S&P Global are the main data release of the day. This is the so-called ‘flash report’, the first one of the month that is more closely watched by investors. Economists who were surveyed expect the Services PMI to come in at 55.7, a small decline from the 56.1 recorded last month. The Manufacturing PMI is expected to come in at 49.4 versus 49.7 last month.
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Producer Prices, Opportunity in Defense Contractor Stocks?
Dec 12, 202400:13:05Tap to summarizeGood morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Thursday, Dec. 12. The Bottom Line segment of today’s podcast starts at (4:20), followed by Stocks on the Contrarian Radar©️ featuring $LMT and $GD at (6:34) for listeners who want to skip ahead.State of PlayStocks advanced yesterday led by tech after CPI matched economist estimates. As we eye our board of indicators for signs of direction at 0700, things are pretty quiet:* Stock index futures are down a bit led by tech with the Nasdaq down 0.3%. S&P 500 futures are down 0.2%;* Cryptos are advancing again. Bitcoin is up 2% to move north of $100,000 again;* Commodities aren’t doing much. WTI crude oil is unchanged at $70.50/barrel and copper is up 0.6%;* Bonds are dropping a bit. The 2-year yield is up 2 basis points to 4.18% whilst the 10-year is up 3bps to 4.30% (yields move inversely to prices).Today’s Known EventsYesterday we had consumer prices, today it’s the turn of producers. Also known as wholesale prices, this datapoint is arguably more important than the CPI under the premise that producers pass higher costs off to consumers.Anyway here are the economist estimates for today’s PPI:* Monthly headline PPI of 0.2%, the same as last month;* Annualized headline PPI of 2.6 versus 2.4% last month;* Monthly Core PPI of 0.2% (0.3% previous);* Annualized Core PPI of 3.2% (3.1%).Seeing how it’s Thursday we’ll also get initial jobless claims at 0830. The expectation here is for 221,000 new claims, effectively in line with the 224,000 recorded last week but ahead of the four-week average of 218,000.There are some earnings but those aren’t until after the close at 1600: Broadcom ($AVGO ) and Costco ($COST ) are the highlights.The Bottom LineInflation is a concern with consumer prices continuing to advance. They just didn’t advance more than economists had estimated, which was good enough for stocks to rally yesterday. What that tells us is that investors really want to take on risk and were itching for an excuse to do so.Producers prices today should be able to bring the fear of God back, but this datapoint is rarely acted on by markets. Maybe today will be different? The move upward in bond yields — indicating selling in bonds — tells us that maybe all is not as rosy as tech stocks and cryptos indicate.‘Fighter jets scrutinized by traders on stock exchange’ by author via GrokStocks on the Contrarian Radar©️Defense contractors dropped yesterday and overnight led by Lockheed Martin ($LMT ) and General Dynamics ($GD ). The catalyst appears to have been a report by JPMorgan that said these companies could face Department Of Government Efficiency (DOGE) risks once Donald Trump and Elon Musk take office. There are clearly other things affecting LMT however as the stock is down some 12% over the last month:At issue may be margin pressure, with gross margins down to 12% according to the last earnings report, versus a sector median of 32%. Well okay. How about valuations? LMT trades at ~19x forward earnings, a bit below the sector median of 24x. Price-to-sales are 1.7x, which isn’t great. Price-to-cashflows are 15x, which isn’t great either. The latter two multiples are a bit worse than the sector median. GD trades at ~20x forward earnings, 1.5x sales, and 15x cashflows, so in a similar range.Add it up and these stocks are neither cheap nor expensive. If you zoom out a bit on the chart you can see that LMT has advanced by 10% this year, with GD up just 2.6%. So both trail their benchmark, the iShares Aerospace & Defense ETF ($ITA ): Still, you can’t help but be a little tempted after the pullback. Frankly it sounds like any DOGE concerns are completely unfounded. Elon & Co. may be serious about cutting government spending — or think they’re serious — but nobody is going to cut defense budgets. In fact, they aren’t even going to slow the increase of defense spending. To do so would be political suicide — and they know it. Besides, Musk’s companies are direct beneficiaries of government contracts, especially from the defense department. Musk may be crazy AF judging by some of his social media posts and other evidence, but he’s not going to bite off the hand that feeds him.Full disclosure: The Contrarian does not own LMT or GD and is not going to enter any orders to buy at this time. If it keeps dropping he will reconsider.Not investment advice!Previously In This Space…This July we examined a sell-off in fashion stocks Estée Lauder ($EL ), and Lululemon ($LULU ), deciding they were probably best avoided.…And What HappenedBoth stocks have had a rough year but late July appears to have formed a bottom for LULU, which is up some 27% since while EL has continued to take on water:The last month has been much better for both names:Who knows, maybe both have now found their bottom? Unfortunately these are both (EL especially) proxies for the Chinese consumer, which is why The Contrarian was uninterested in getting involved last time. Full disclosure: The Contrarian does have a position in EL due to poor decision-making on his part. He plans to jettison it as soon as it recovers its losses.Housekeeping* Obviously this is not investment advice (duh). Do your own research, make your own decisions.* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies). This is a public episode. If you’d like to discuss this with other subscribers or get access to bonus episodes, visit contrarianpod.substack.com/subscribe
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More Earnings
Dec 10, 202400:11:02Tap to summarizeGood morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, Dec. 10. The Bottom Line segment of today’s podcast starts at (3:52), followed by Stocks on the Contrarian Radar©️ featuring Google ($GOOG / $GOOGL ) at (5:50) for listeners who want to skip ahead.State of PlayStocks dropped a bit yesterday on news of an antitrust probe by Chinese regulators into Nvidia (NVDA ) that sounds in no way to be politically motivated. As we eye our board of indicators for signs of direction at 0645, there isn’t an awful lot to go by just yet:* Stock index futures are flat as a board with no major US index moving at all from the break-even point;* Cryptos are moving a bit lower. Bitcoin is down 1% to trade around $97,500;* Commodities are treading water. WTI crude oil is down 0.6% to trade around $68/barrel, basically where it’s been for weeks (or so it seems). Copper is down 0.5%;* Bonds are selling off a bit. The 2-year yields 4.14%, up 1 basis point, with the 10-year yield up 3 basis points to 4.23% (yields move inversely to prices).Today’s Known EventsEarnings are once again the story. The only story of the day, at least where known events are concerned.Reporting before the open at 0930 are AutoZone ($AZO ), Olli’s Bargain Outlet ($OLLI ), and Designer Brands ($DBI ). So a pretty good selection of retailers.After the close we’ll hear from GameStop ($GME ), Dave & Buster’s ($PLAY ), and Sportsman’s Warehouse ($SPWH ). The Bottom LineLooks like another dull day, then. The major event weighing on markets yesterday was the anforementioned move by Chinese regulators re: Nvidia ($NVDA ). The concern here isn’t so much about Nvidia but trade wars more generally. We saw this the last time Trump was in office. Lots of tits for tats interspersed with leaks from the Trump administration that they were making progress on a trade deal. This is all forgotten because in the end it didn’t matter and stocks rallied.Could history repeat itself? Sure, and that’s why yesterday’s selloff wasn’t particularly dramatic. The issue is just the uncertainty of it all. Markets, if you’ll recall, hate uncertainty more than they hate bad news.A little bit of selling is probably warranted anyway after the run-up of the last month. The Contrarian was happy to see some of his dip buys rally yesterday: Target ($TGT ), discussed here; Newell Brands ($NWL ) and Estée Lauder ($EL ) among them.Stocks on the Contrarian Radar©️The Contrarian has started to ask if Google ($GOOG /$GOOGL ) could be a buy at these levels. The stock has trailed its benchmark, the Nasdaq 100 ($QQQ ) most of the year: Google has been under regulatory scrutiny. There has been noise about a forced breakup, with the latest being news it could be forced to sell the Chrome browser business. Despite the incoming Trump administration apparently being kind to companies like Google and their transgressions, this caused the stock to sell off. In retrospect that may have been the best buying opportunity. But it’s impossible to time these things perfectly and there are indications the company is poised for growth. A lot of growth.Self-Driving CarsThe main driver (pun intended) may just be the Waymo business, which positions Google/Alphabet as a big winner in autonomous driving. This is exciting. Driverless cars will eventually change everything. The Contrarian wants to be onboard for that transition (again, pun intended). He has been researching this technology for awhile. All signs point to this being ripe for adoption. One prominent critic of this technology has already had his come-to-Jesus moment. Some regulatory stuff needs to be cleared up but the incoming Trump administration is apparently on that already. But enough about self-driving cars. Yesterday Google made a splash with its Willow chip, apparently a ‘mind boggling’ foray into quantum computing — another major growth area. This actually caused the stock to gain ground yesterday when the rest of the Nasdaq sold off, much to the chagrin of anybody who chose yesterday to start building a position.That aside, the valuation at 23x earnings is actually below the S&P 500 average of ~27x, to say nothing of other tech stalwarts like Microsoft (36x). Apple (39x), Amazon (47x) or Nvidia (56x). Oh, and management is buying back stock.Okay so maybe Google is losing some ground on the search engine side of things. Not just to ChatGPT and the like. A point of concern is with iPhones and whether Google is still the default search mechanism on these devices. That’s certainly fair. Google’s search engine business is, well, it’s literally a verb. Or was. If that changes it stands to reason the company will lose out on revenues. No way around that.But let’s not forget that YouTube is a Google product. Is there a viable competitor to YouTube? Don’t think so. There’s also gmail and a bunch of other potential growth drivers that are under the radar. Take AlphaFold for example. This literally won Google a Nobel prize. In bio pharmacology. So yeah, growth drivers are in place. The stock is cheap compared to peers. A drop in search engine revenue is already priced in. Looks like this thing is a buy at these levels. This thesis may not materialize overnight. But chances are Google will be worth a lot more in a few years’ time. Full disclosure: The Contrarian has a limit order in to buy GOOGL, the A-shares version. He already owns a small position in his retirement account.Not investment advice!Housekeeping* Obviously this is not investment advice (duh). Do your own research, make your own decisions.* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies). This is a public episode. If you’d like to discuss this with other subscribers or get access to bonus episodes, visit contrarianpod.substack.com/subscribe
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Some Earnings
Dec 9, 202400:01:13Tap to summarizeThis is a free preview of a paid episode. To hear more, visit contrarianpod.substack.comGood morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, Dec. 9. The Bottom Line segment of today’s podcast starts at (4:00) for listeners who want to skip ahead.State of PlayAs we eye our board of indicators for signs of direction at 0650, things are pretty quiet:* Stock index futures are flat with no major US index moving more than 0.2% from the break-even point;* Commodities are seeing some signs of life however, with WTI crude oil up 1.5% to trade north of $68/barrel and copper up 1.8%. This is likely due to China pledging “more proactive” fiscal stimulus;* Cryptos are down a bit with Bitcoin down 1% to trade around $98,200;* Bonds are unchanged. The 2-year yields 4.11% with the 10-year yielding 4.17%.Today’s Known EventsIt’s a slow start to a pretty slow week, with Wednesday’s Consumer Price Index really the lone highlight. We do have some earnings to keep us interested:* Rent the Runway ($RENT ) is due to report at some point before the open at 0930;* After the close at 1600 we’ll hear from:* C3.ai ($AI )* Oracle ($ORCL )* Casey’s General Stores ($CASY ) * Toll Brothers ($TOL ) * Vail Resorts ($MTN )
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Non-Farm Payrolls
Dec 6, 202400:01:09Tap to summarizeThis is a free preview of a paid episode. To hear more, visit contrarianpod.substack.comGood morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Friday, Dec. 6. Saint Nicholas Day for those who celebrate. The Bottom Line segment of today’s podcast starts at (2:41), followed by Stocks on the Contrarian Radar©️ featuring Goodyear Tire & Rubber ($GT )at (6:13) for listeners who want to skip ahead.State of PlayStocks dropped yesterday with small caps seeing the worst of it as investors took a breath after a big rally on Wednesday. As we eye our board of indicators for signs of direction at 0540, things are quiet ahead of the crucial non-farm payrolls report:* Stock index futures are flat as a board, with no major US index moving at all from its break-even point;* Cryptos are dropping and Bitcoin has crested back below $100,000. Specifically, Bitcoin is down 4% to trade around $98,000;* Commodities are mixed. Copper is up 1% but WTI crude oil is down 0.5% to trade below $68/barrel;* Bonds are unchanged. The 2-year yields 4.18% with the 10-year yielding 4.20%. So the 2/10 yield curve is close to inverting again.Today’s Known EventsFirst Friday of the month means non-farm payrolls, out at 0830. Economists who were surveyed expect 214,000 new jobs, a significant increase from the surprisingly soft 12,000 recorded last month. This would still raise the unemployment rate a tiny bit, to 4.2% from 4.1%.At 1000 the University of Michigan releases its flash reading of the consumer sentiment report for December. There’s a number attached to this and even an economist survey for it: a reading of 73.1 is anticipated, which is a bit better than last month’s 71.8.
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PCE Deflator Returns Focus to Inflation
Nov 27, 202400:00:30Tap to summarizeThis is a free preview of a paid episode. To hear more, visit contrarianpod.substack.comGood morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Wednesday, Nov. 27. The Bottom Line segment of today’s podcast starts at (4:59) for listeners who want to skip ahead.State of PlayIt’s Thanksgiving Eve in the US, which is normally a pretty quiet trading day ahead of the market holiday. However there is a big dump of economic data on the way this morning that will keep investors interested. As we eye our board of indicators for signs of direction at 0650, it looks like risk-on is the mood:* Stock index futures are flat with the exception of small caps, which are moving higher. The Russell 2000 is pointing to a gain of 0.4% at the open;* The crypto rally appears to have resumed! Bitcoin is up 1% to move to ~$93,500. Could #Bitcoin100k be back on again?* Commodities are moving higher as well. WTI crude oil is up 0.6% to trade north of $69/barrel with copper up 1%. Gold is up 1% as well;* Bonds are seeing a few bids after yesterday’s FOMC meeting minutes indicated further interest rate cuts ahead. The 2-year yield is down 3 basis points to 4.22% with the 10-year yield down 3bps to 4.27% (yields move inversely to prices).Today’s Known EventsPersonal Consumption Expenditures at 1000 is the major economic data release of the day. The PCE Deflator, as the Fed’s preferred inflation gauge is known, is expected to increase by 0.2% month-over-month, the same as last month, which would raise the annualized number to 2.3% from 2.1%.Core PCE prices, which exclude food and energy, are expected to print at 0.3% MoM, identical to last month, which would raise the annualized core PCE to 2.8% from 2.7%.
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Trump Tariffs, Fed Meeting Minutes, Earnings
Nov 26, 202400:01:51Tap to summarizeThis is a free preview of a paid episode. To hear more, visit contrarianpod.substack.comGood morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, Nov. 26. The Bottom Line segment of today’s podcast starts at (5:44) for listeners who want to skip ahead.State of PlayStocks advanced yesterday, led by small caps again. Then came news of President-elect Trump’s ‘Day One’ tariffs on Mexico, Canada, and China, that appear to have upended the good cheer a bit. As we eye our board of indicators for signs of direction at 0640, things are quiet for the most part:* Stock index futures are mostly unchanged. Only the Russell 2000, which tracks small small caps, is moving at all from the break-even point and that is lower by 0.5%;* Cryptos are dropping pretty precipitously. Bitcoin is down almost 7% overnight to drop below $92,000. Maybe Bitcoin100k isn’t going to happen after all? (One can hope);* Commodities are moving a bit higher with WTI crude oil up 1% to trade around $69.50/barrel. Copper is unchanged;* Bonds are unchanged. The 2-year yields 4.26% whilst the 10-year yields 4.29%.(‘Trump Tariffs’ by author via Grok AI)
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The 3-Headed Monster Vexing Markets
Nov 21, 202400:02:13Tap to summarizeThis is a free preview of a paid episode. To hear more, visit contrarianpod.substack.comGood morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Thursday, Nov. 21. The Bottom Line segment of today’s podcast starts at (4:27) for listeners who want to skip ahead.State of PlayNvidia ($NVDA ) earnings after yesterday’s close were kind of blah, beating expectations but not by the margin that Wall Street has come to expect. The stock dropped a bit overnight. (“Blah NVDA earnings” cartoon by author via Grok AI)As we eye our board of indicators for signs of direction at 0645, things are relatively quiet other than in crypto land:* Cryptos continue their advance into record territory. Bitcoin is up another 5% to trade close to $98,000;* Stock index futures are flat as a board with no major US index moving at all from the break-even point;* Commodities are rallying, for the most part. WTI crude oil is up 2% to trade north of $70/barrel. Gold and silver are up. Copper isn’t going along however, down 0.5%;* Bonds are unchanged. The 2-year yields 4.30% with the 10-year yield 4.40%.Today’s Known EventsEarnings are in focus, again:* BJ’s Wholesale Club ($BJ ) reports were mixed but the company appears to have raised guidance and the stock is rallying in the pre-market, up 6%;* Deere & Co. (DE ) beat top- and bottom-line estimates but the stock isn’t moving;* Baidu (BIDU ) earlier reported mixed results and is down 2.5% at the time of this writing;* Pinduoduo (PDD ) missed on top- and bottom-line estimates and is getting beat up a bit, down 9%;* Warner Music Group ($WMG ) is also due before the open;* After the close at 1600 we’ll hear from The Gap ($GAP ) and Ross Stores ($ROST ). Initial jobless claims are out at 0830. Economists who were surveyed expect 220,000 new claims, effectively in line with the 217,000 recorded last week and in line with the four-week average of 221,000.Existing home sales at 1000. The expectation here is for 3.94 million sales, an increase over the 3.84 million recorded last week.One Fed speaker: Chicago Fed President Austin Goolsbee speaks at some event in Indiana at 1225. Goolsbee is just an alternate voting member this year.The Bottom LineInvestors hate uncertainty more than they hate bad news. Right now there are three elements of uncertainty vexing the narrative, all tied to the incoming US president:(“3-headed Trump monster” by author via Grok AI)
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Nvidia Earnings, Target’s Big Miss
Nov 20, 202400:11:31Tap to summarizeGood morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Wednesday, Nov. 20. The Bottom Line segment of today’s podcast starts at (4:38), followed by Stocks on the Contrarian Radar©️ featuring $TGT and $BORR at (6:22) for listeners who want to skip ahead.State of PlayStocks advanced yesterday with tech the leader. As we eye our board of indicators for signs of direction at 0700, things are pretty quiet:* Stock index futures are flat with no major US index moving more than 0.2% from the break-even point;* Cryptos continue their ascent. Bitcoin is up another 2% to move north of $93,000 again;* Not much going on in commodities land. WTI crude oil is up 0.5% to trade around $69.50. Copper is up 0.3%. Silver is down 1%. Gold unchanged;* Bonds are selling off a tiny bit. The 2-year yield is up 3 basis points to 4.30% whilst the 10-year is up 5bps to 4.42% (yields move inversely to prices.Today’s Known EventsMore earnings!* Target ($TGT ) just posted a major miss on analyst estimates and cut full-year guidance. The stock is down 16% (!) in the pre-market to drop to its lowest level of the year.* Nio ($NIO ), the Chinese EV manufacturer earlier beat on top- and bottom-line estimates but investors still didn’t like what they see as the stock is dropping in the pre-market;* Two other retailers TJX Companies ($TJX ) and Williams-Sonoma ($WSM ) are also due to report before the open at 0930.After the close comes the main event with Nvidia ($NVDA ).Snowflake ($SNOW ), Palo Alto Networks ($PANW ), and Jack in the Box ($JACK ) also report after the close.(NVDA earnings on Watch’ by author via Grok AI)The Bottom LineRetailers are suddenly in the spotlight after that Target miss. What’s weird is at their last earnings report management raised profit guidance. That was now slashed and same-store sales are expected to be flat this quarter. Apparently the port strike affected things. So this very much appears to be a company-specific issue, especially after Walmart ($WMT ) blew away earnings yesterday.But yeah TJX and Williams-Sonoma will now be closely scrutinized, even though neither is really a fair comparison to TGT.We’ll see if this translates into any lingering skittishness for investors. Judging by cryptos, the answer would appear to be ‘no’ so far… Stocks on the Contrarian Radar©️This morning’s sell-off in Target ($TGT ) makes The Contrarian wonder if this is a buying opportunity. The drop was brutal and is not captured in the following chart that only goes through yesterday’s close:The ‘Pre’ sign isn’t accurate either as TGT finds itself trading around $125/share at the time of this writing!You have to go back to the middle of last year to see it that low. That was when the company was reeling from the trans-swimsuit issue. As you can see it eventually rebounded but never recaptured its lofty post-pandemic heights.The valuation looks pretty promising: TGT was trading at 16x forward earnings coming into today, 0.7x sales, and 10x cash flows, all well below the sector median. Today’s numbers will make the stock look even cheaper. Unfortunately the company does rely on discretionary spending to drive a lot of its sales. That’s one advantage Walmart has here.So from a cyclical perspective this is maybe not the right time to be getting long TGT. But if the economic expansion can continue for another year or two, then it certainly makes a lot more sense. Surely Trump tariffs will hurt margins some, but if Americans keep spending money you figure the valuation will adjust…Full disclosure: The Contrarian is long TGT and is looking to add more at these levels. Indeed he just bought in at $126/share.Borr Drilling ($BORR ) comes to us via reader/listener request. The closest ETF appears to be the iShares U.S. Oil & Gas Exploration & Production ETF ($IEO ) but that isn’t a perfectly fair comparison as it mostly contains large caps. So let’s add in the Invesco S&P SmallCap Energy ETF ($PSCE ). As you can see, BORR has trailed the two benchmarks this year:Indeed BORR has diverged pretty widely from IEO and PSCE. This warrants a closer look at valuation.BORR trades at:* 13x forward earnings (in line with the sector median);* 1x forward sales versus 1.5x for the sector at large.That doesn’t really tell us much. When it comes to oil drillers, there are other things that determine the stock’s performance anyway. One of these is the number, age, and status of its oil rigs. BORR will have 24 rigs in operation next year with no plans for expansion, according to its latest earnings. That latter point is important as it will cut down on next year’s capex (capital expenditures). Importantly, its fleet is the youngest in the industry at an average age of seven years, according to a company presentation from September.So much for its equipment. What about demand? BORR was hurt by Saudi Aramco’s decision in January to halt production increases. It has since booked other contracts and apparently has 73% of its 2025 capacity contracted at a competitive rate, according to its Q2 earnings.That’s nice, but what’s to keep clients from canceling projects like Aramco did? Presumably that work was technically ‘paused’ but it still hit BORR’s bottom line. The fact is that this company is likely very dependent on oil demand. If there is demand for oil, then companies will have incentive to drill for it, largely because nation-owned oil companies will make decisions to accelerate these efforts. For now, BORR can certainly be an attractive hold due to its 9% dividend yield. That would appear to be safe as the balance sheet is in good shape with $200 million in cash and little short-term debt.Still, there is a lot about this business that The Contrarian does not understand and therefore he will be sitting this one out.Housekeeping* Obviously this is not investment advice (duh). Do your own research, make your own decisions.* Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.* If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.* Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies). This is a public episode. If you’d like to discuss this with other subscribers or get access to bonus episodes, visit contrarianpod.substack.com/subscribe
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Earnings Should Drive this Week's Narrative
Nov 18, 202400:01:11Tap to summarizeThis is a free preview of a paid episode. To hear more, visit contrarianpod.substack.comGood morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Monday, Nov. 18. The Bottom Line segment of today’s podcast starts at (4:06) for listeners who want to skip ahead.State of PlayStocks dropped on Friday to conclude a losing week. As we eye our board of indicators for signs of direction at 0640, things are pretty quiet:* Stock index futures are pointing to small gains for tech. The Nasdaq is up 0.3%. Other US indexes are unchanged;* Commodities are moving higher, led by precious metals. Gold and silver are up 1% each. WTI crude oil is up 0.6% to trade north of $67/barrel. Copper is up 0.2%;* Cryptos are unchanged after a volatile weekend. Bitcoin trades around $91,000;* Bonds aren’t doing anything. The 2-year yields 4.31% whilst the 10-year yields 4.47%.
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