White House And Treasury Can Solve Affordability Crisis With GSEs
Fannie Mae and Freddie Mac, two government-sponsored enterprises still under conservatorship, are making record profits and have a high net worth, leading to questions about why they have not been released from conservatorship. There is an affordable housing crisis in the United States, and it is argued that the companies have been reformed and there is a path to accessing $100 billion to solve the crisis. The Biden administration has not been responsive to restructuring initiatives or requests regarding the housing finance reform. If the administration does not take action, a Republican administration could release Fannie and Freddie, potentially undermining Biden's policy objectives. Fannie and Freddie's combined net worth is at a record high, and they have returned to profitability a decade ago. A jury recently ruled that the government acted in bad faith when it imposed the Net Worth Sweep. The companies' junior preferred shares currently trade at less than 10 cents on the dollar, indicating doubts about the Biden administration's ability to make rational decisions.
Trending Higher And Trending Lower
The recent drop in inflation is seen as positive news for the economy and markets. This may lead to the Federal Reserve stopping or even lowering interest rates sometime next year. However, concerns remain about borrowing costs and credit card debt. The average credit card balance in the U.S. reached a new record high of $1.08 trillion in the third quarter of 2023. Delinquencies are also on the rise, with a 2% increase in the share of newly delinquent credit card users. Despite these challenges, the pending lower interest rates are expected to provide significant help. In addition, there is positive news from Congress, as lawmakers passed a temporary government funding bill, lowering the risk of a shutdown. The bill is expected to be backed by the Senate and will extend funding for several departments. This development is seen as a step in the right direction and will help ease concerns about the situation and potential downgrade of American debt. With inflation and bond yields trending lower, equity prices are predicted to trend higher. Investing in securities with high dividends is suggested, as there may be a rush to purchase such investments before yields dissipate. Although global geopolitics remain a negative, there is optimism that the U.S. is slowly recovering.
Will Shrink Strike Again? Dick's And Best Buy Highlight Week 2 Of Retail Earnings
As the holiday shopping season approaches, there are mixed signals regarding card usage trends and consumer sentiment. The National Retail Federation predicts a modest rise in overall spending, but the University of Michigan's Consumer Sentiment Survey shows the weakest reading since May. The upcoming retail earnings reports, along with the October Retail Sales from the Census Bureau and the monthly CPI and PPI looks, will provide a clearer picture of the winter holiday spending period. The SPDR S&P Retail ETF has seen a decline in its share price, falling from just under $68 to a 5-handle. Some key retail earnings reports to watch out for include Walmart and Ross Stores on Thursday, as well as DICK'S Sporting Goods next week, which shocked analysts back in August with lower-than-expected earnings and weak guidance. Best Buy, heavily impacted by e-commerce, also faces a challenging holiday sales season with heavy discounting and at-risk margins. However, Goldman Sachs recently upgraded the retailer to a Buy, citing signs of stabilizing demand and better comp-store sales trends. Overall, retail executives hope that an extra week between Thanksgiving and Christmas will boost bottom lines and compensate for recent challenges in the industry.
The Underperformance Of Dividend-Only-Focused Strategies
This article discusses the role of dividends in the valuation of stocks and the total return that investors can expect. The author argues that dividends should not be viewed as an addition to a company's total return, but rather as a reduction in the capital appreciation component of the stock's value. Dividends are paid out of total return and are not additive to it. The author emphasizes the importance of focusing on total return first and suggests that investors consider stocks that generate strong free cash flow and have strong balance sheets, in addition to paying dividends. The article also encourages investors to understand the structure of the dividend payment and its impact on stock prices. While the article does not suggest avoiding dividends altogether, it suggests being cautious about focusing solely on high dividend yield stocks without considering other fundamentals.
Palo Alto Networks Q1'FY24 Review: Billings Weakness Creates Buying Opportunity
Palo Alto Networks has reported strong Q1 FY-2024 earnings, beating consensus estimates with revenues of $1.88 billion (up 20% YoY) and normalized EPS of $1.38. The company's total revenues grew 20% YoY to $1.88 billion, driven by a 53% YoY increase in Next-Gen Security ARR to $3.2 billion. Palo Alto Networks' business mix also shifted towards higher-margin, recurring software revenues, which now make up 83% of total sales. The company's management reiterated its full-year revenue guidance of $8.15-8.20 billion and raised profitability guidance. However, the stock is down nearly 6% following the earnings report's release. While billings figures were somewhat weaker than expected, with Q1 billings at $2.02 billion and FY-2024 billings at $10.7-10.8 billion, the company delivered strong growth in remaining performance obligations (RPO), which grew to $10.8 billion, up 26% YoY. Overall, the author believes that the negative reaction from the market is an overreaction and recommends buying the stock given its strong long-term risk/reward profile.