Month: August 2023

The Week Ahead – Look Out For Light Trading and Pre-Holiday Volatility

Posted on by phoffman@channelchek.com

Heading Into the Unofficial End of Summer, Powell Gave the Market a Lot to Think About

The last “unofficial” week of summer will likely be characterized by light trading, which could amplify volatility. This week follows what is viewed by many as a more hawkish tone than expected by Fed Chair Powell on Friday. The next FOMC meeting is not until September 19–20; that is a long time to obsess over every economic number, and there are many key numbers that will be released this week. Investors will be watching the labor report, alongside the PCE price index, personal income and spending data, JOLTS job openings, ISM Manufacturing PMI, and the second estimate of Q2 GDP growth.

Monday 8/28

•              10:30 AM ET, the Dallas Fed Manufacturing Index is expected to post a 16th straight negative number, at a steep minus 21.0 in August versus minus 20.0 in July. The survey asks manufacturers whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month. Responses are aggregated into an index where positive values generally indicate growth while negative values generally indicate contraction.

Tuesday 8/29

•              10:00 AM ET, Consumer Confidence is expected to dip slightly in August, at a consensus 116.5 versus July’s 117.0. This report has exceeded not only the consensus in the last three reports but the full consensus range as well.

•              10:00 AM ET, The JOLTS report consensus for July is 9.559 million near its June’s 9.582 million level. Economist consensus have been fairy accurate for this well monitored indicator. The JOLTS report tracks monthly change in job openings and offers rates on hiring and quits.

Wednesday 8/30

•              8:30 AM ET, GDP (the second estimate of second-quarter) is expected to show no change from 2.4 percent growth in the quarter’s first estimate. Personal Consumption Expenditures (PCE), at 1.6 percent growth in the first estimate, is expected to come in at 1.7 percent in the second estimate.

•              10:00 AM ET,  Pending Home Sales are expected to fall by 0.4% after rising .3% in June. The National Association of Realtors developed the Pending Home Sales report as a leading indicator of housing activity. Specifically, it is a leading indicator of existing home sales, not new home sales. A pending sale is one in which a contract was signed, but not yet closed. It usually takes four to six weeks to close a contracted sale. Home transactions are a harbinger for economic activity.

•              10:00 AM ET,  The State Street Investor Confidence Index measures confidence by looking at actual levels of risk in investment portfolios. This is not an attitude survey. The State Street Investor Confidence Index measures confidence directly by assessing the changes in investor holdings of equities. The prior number (July) was 96.2%.

•              10:30 PM ET, EIA The Energy Information Administration (EIA) provides the Petroleum Status Report weekly with information on petroleum inventories in the US, whether produced in the US or abroad. The level of inventories helps determine prices for petroleum products.

Thursday 8/30

•              7:30 AM ET, The Challenger Job-Cut Report for August will be reported and compared to last months 23,697 job cuts.

•              8:30 AM ET, Jobless claims for the week ended 8/26 are expected to come in at 238,000. The prior week the figure was 230,000.

•              8:30 AM ET, Personal Income is expected to have risen 0.3 percent in July with Consumption Expenditures expected to increase a solid 0.6 percent. These stats will be compared with June’s 0.3 percent increase for income and 0.5 percent increase for consumption.

•              9:45 AM ET, The Chicago PMI is expected to have risen in August to 44.6 versus 42.8 in July which was the eleventh straight month of sub-50 contraction.

•              3:00 PM ET, Farm Prices for July are expected to have risen month over month by 0.4%, however year-on-year declined by 5.3%. Farm prices are a leading indicator of food price changes in the producer and consumer price indices. There is not a one-to-one correlation, but general trends move in tandem. Inflation is a general increase in the prices of goods and services.

•              4:30 PM ET, The Fed’s Balance Sheet totaled $8.139 trillion last week. Further declines in line with the Feds quantitative tightening (QT) is expected.

Friday 9/1

•              8:30 AM ET, the Employment Situation report is expected to show a moderating but still strong 170,000 increase for nonfarm payroll growth in August versus 187,000 in July which was a bit lower than expected. Average hourly earnings in August are expected to rise 0.3 percent on the month for a year-over-year rate of 4.4 percent; these would compare with 0.4 and 4.4 percent in the prior two reports. August’s unemployment rate is expected to hold unchanged at 3.5 percent.

•              10:00 AM ET, The ISM manufacturing index has been in contraction the last nine months. August’s consensus is 46.8 versus July’s 46.4.

•              10:00 AM ET, Construction Spending for July is expected to have risen 0.5% to match June’s 0.5% increase that had benefited from a second strong month for residential spending.

What Else

There is no early close scheduled for the US markets on Friday before the three day Labor Day weekend.

Have you attended an in-person roadshow organized by Noble Capital Markets. Noble has been reaching out to retail and institutional investors and holding these events designed for investors to meet management teams. Investors have been able to discover more about their companies, often enough to make an informed decision. The forum has been getting rave reviews from investors and company management teams. Use this link to see if a roadshow is scheduled near you.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm

www.econoday.com

Hemisphere Energy Corporation (HMENF) – Production a bit light, but recent drilling will help

Posted on by cpereira@noblefcm.com


Friday, August 25, 2023

Michael Heim, Senior Vice President, Equity Research Analyst, Energy & Transportation, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Production was a bit light, but new wells are coming. Production was flat in the June quarter versus last year and down 9% versus the previous quarter. Results were modestly below our expectations. Management indicated that it pushed drilling (and thus well completion) into the third quarter. Hemisphere remains on track to drill ten wells this year. The company reports that production is back up over 3,000 boe/d in August and appears heading towards a good jump in production in the December quarter when wells are completed.

Lower-than-expected production had an adverse affect on bottom-line financial results. With lower-than-expected production’ revenues, operating income, adjusted fund flow, and net income were all a few C$ million lower than projected in our models. Realized prices were in line with expectations as were operating costs and netbacks. 


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*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

Should We Be Bullish on Small Caps?

Posted on by phoffman@channelchek.com

Powell’s Right About the Resilient Economy, How it May Affects Some Stocks

One can generalize and say small cap companies are more sensitive to recessions than large caps – and they would be correct. In his speech in Jackson Hole, Fed Chair Jerome Powell said, “But we are attentive to signs that the economy may not be cooling as expected. So far this year, GDP growth has come in above expectations and above its longer-run trend, and recent readings on consumer spending have been especially robust.” His words sound like a soft landing, no landing, or puts any hard landing far off into the future. Over the past few years, the performance of small-cap stocks has not held its own relative to the performance of large caps when highly weighting the stratospheric performance of mega caps. 

After the most recent year and a half of both business news and investors expressing recession concerns, the newer conversation is one of an economic soft landing. Those mentioning the inverted yield curve “proof” has been silenced as rates out on the curve have begun to move steadily higher. The conversation has now been replaced with expectations of increased economic activity. Even if expectations don’t fully come to fruition, it is expectations that move markets – just look at last year’s down stock market which was the result of investors expecting a recession was imminent. 

Will Small Caps Finally Run With the Bulls?

The S&P 600 Small Cap Index is is at the same level as December 2020
(Source: S&P Dow Jones Indices)

The S&P 600 small cap index is up by nearly a third as much as the S&P 500 this year (4.40% versus 13.98%) and trades at only 15 times earnings. BofA Securities using Russell Index numbers for its analysis of Russell 1000 large cap and Russell 200 small cap indexes, calculated that small companies are 30% cheaper than usual in comparison to big ones. Over the next decade, according to BoA Securities estimates, small caps are poised to gain an average of 11% a year versus 4% for large caps.

Source: S&P Dow Jones Indices

The S&P 600 Small Cap Index has underperformed the S&P Large Cap Index by nearly 10% over the past year. Another well-respected firm, T. Rowe Price, takes the expectations in small-caps a step further in its August insight report titled: The Outlook for U.S. Smaller Companies Looks Increasingly Compelling (Now is not the time to wait on the sidelines). The report highlights additional factors supporting the increased probabilities of small-cap performance.

T. Rowe Price discussed how smaller companies are more oriented towards U.S. economic activity. The author,  Curt Organt, the portfolio manager of the firms smaller company equity strategy, also pointes to the many bills in Congress that support capital spending projects in the U.S., explaining this will also provide a tailwind.

•             “While the U.S. equity market has become increasingly concentrated at the top end over the past decade, smaller‑company valuations are at their most compelling levels in decades.”

•             “History shows that as high concentration in the S&P 500 Index begins to unwind, a new cycle of small‑cap outperformance usually begins.”

•             “Shifting trends in the U.S. economy are particularly supportive of smaller companies, providing a potential catalyst for higher earnings growth.”

The portfolio manager discussed how, through history, investors in small-cap stocks ordinarily command higher relative valuations compared to their larger counterparts. At present, as mentioned before, small-cap stocks are currently trading at a substantial discount in relation to large-cap stocks.

Downside protection is also seen as a positive in small-caps, whether compared to its own history, or to today’s large cap valuations. The low valuations in the smaller companies do offer a degree of downside protection during market downturns.

Take Away

 At the conclusion of his Jackson Hole speech, Powell said, “As is often the case, we are navigating by the stars under cloudy skies. In such circumstances, risk-management considerations are critical.” Although he was talking about U.S. monetary policy, the words apply equally well if applied to a portfolio’s investment policy. One can never be completely sure of what is around the corner that can either accelerate returns or set the portfolio back. But, placing probabilities on your side, over time, is good practice.

One can never have too much information when selecting companies to invest in. Small company information is particularly challenging for investors to find. Creating a login to Channelchek allows access to data on 6,000 small and microcap companies; this may be the key to further placing investment probabilities on your side. And, if you’d like to take your exploration for the ideal smaller companies to invest in to a higher level, join Noble Capital Markets and Channelchek at its annual investment conference, NobleCon19, this fall.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_080423.pdf

https://www.spglobal.com/spdji/en/indices/equity/sp-600/?utm_source=pdf_commentary#overview

https://www.spglobal.com/spdji/en/indices/equity/sp-600/#overview

https://www.spglobal.com/spdji/en/indices/equity/sp-500/#overview

https://www.troweprice.com/content/dam/gdx/pdfs/2023-q3/the-outlook-for-us-smaller-companies-looks-increasingly-compelling.pdf

Insider Trading − The Legal Kind − Is a Lot More Profitable If You Work for a Multinational Company

Posted on by phoffman@channelchek.com

Here’s How Big the Multinational Insider Advantage Is

Corporate insiders who trade stocks based on the information they gain on the job earn a lot more if they work at multinational corporations than their peers at U.S. companies with no sales abroad. That’s the main finding of our new peer-reviewed research. We wanted to know if multinational insiders stand to make more money because of the complexity of the information they could possess relative to outsiders.

Insider trading happens when a director or employee trades their company’s public stock or other security based on important or “material” information about that business. Insider trading isn’t illegal as long as the person reports the trade to the Securities and Exchange Commission and the information is already in the public domain.

This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of, D. Brian Blank, Assistant Professor of Finance, Mississippi State University, and Dallin Alldredge, Assistant Professor of Finance, Florida International University.

We wanted to know if multinational insiders stand to make more money because of the complexity of the information they could possess relative to outsiders.

So we examined returns from over 2.5 million trades reported to the SEC from 1987 to 2019 by insiders at over 10,000 companies. This is only a subset of all insider trades reported during the period because we focused on only those transactions most likely to be informed by the employee’s insight. We then compared monthly returns for insiders at multinational and domestic companies with those for a typical investor.

We found that all insiders beat the market, but those at multinationals did better – especially if they were on the highest rungs of the corporate ladder. While insiders at domestic companies typically obtained a return of 2.4% in the month following a stock purchase, those at multinational corporations reaped 2.8%. That may not sound like a lot, but, assuming consistent returns, it could amount to earning $170,000 more if an insider traded $1 million over several months. And it’s triple the typical stock market monthly gain of 0.9%

The most in-the-know insiders – executives and others with the most intimate knowledge of the company and its operations – at multinationals got an even bigger advantage, earning 3.6% per month vs. 2.7% at domestic companies.

Why it Matters

Insider trading is familiar to most people from movies that portray it in criminal terms, such as Gordon Gekko of “Wall Street.” In the film, he makes millions off others’ inside information.

But even when it is legal, insider trading is very profitable. That’s because insiders trading on public information are more knowledgeable about their industry and process information more effectively than outside investors.

With global companies, the advantage of being an insider increases. Since multinational companies generate earnings in foreign countries, with different currencies, cultures, economies and operating environments, it can be hard for an outsider or analyst to accurately value the company and its stock price. This is especially true when the company does business in regions that are culturally and linguistically distinct from the U.S. This helps insiders trade more efficiently, by buying underpriced stocks at a bargain and selling them later for a windfall.

Companies often motivate their employees to work harder by offering them a stake in their success, but if insiders seem to be getting an unfair advantage over ordinary investors, it may undermine trust in financial markets. The size and profitability of such trades – particularly in light of our data – mean regulators and policymakers may want to consider whether new restrictions on insider trading are needed, such as placing additional limits on the timing or frequency of trades.

What Other Research is Being Done?

Scholars, including us, are pursuing many avenues of research on insider trading, such as how insider trading restrictions are determined and how insider trades inform markets when news is limited. We’ve recently conducted research on how insider trades by colleagues at the same company tend to cluster together, and we are currently looking at how innovation affects insider trading.

Another recently published project relates to how information is incorporated into stock market prices and how investors underreact to news that may affect insiders’ ability to trade profitably. Similarly, ongoing research uses a GPT language model to assess the complexity of business regulatory filings and financial statements by analyzing technical jargon that can confuse investors, which could also affect how outside investors understand stock prices compared with insiders.

Great Lakes Dredge & Dock (GLDD) – Another LNG Award

Posted on by cpereira@noblefcm.com


Thursday, August 24, 2023

Great Lakes Dredge & Dock Corporation is the largest provider of dredging services in the United States. In addition, Great Lakes is fully engaged in expanding its core business into the rapidly developing offshore wind energy industry. The Company has a long history of performing significant international projects. The Company employs experienced civil, ocean and mechanical engineering staff in its estimating, production and project management functions. In its over 131-year history, the Company has never failed to complete a marine project. Great Lakes owns and operates the largest and most diverse fleet in the U.S. dredging industry, comprised of approximately 200 specialized vessels. Great Lakes has a disciplined training program for engineers that ensures experienced-based performance as they advance through Company operations. The Company’s Incident-and Injury-Free® (IIF®) safety management program is integrated into all aspects of the Company’s culture. The Company’s commitment to the IIF® culture promotes a work environment where employee safety is paramount.

Joe Gomes, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.

Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Port Arthur Award. Yesterday, Great Lakes Dredge & Dock announced the award for the Port Arthur LNG Phase 1 project Marine Dredging and Disposal contract. This is the second LNG related award received by the Company this summer, following on the heels of the Next Decade contract. The Port Arthur LNG project is a natural gas liquefaction and export terminal in Southeast Texas with direct access to the Gulf of Mexico.

Work Details. The scope of work on this project is to dredge the Port Arthur LNG Berthing Pocket on the Port Arthur Ship Canal. The berthing pocket and turning basin will connect to the Port Arthur Ship Canal and allow LNG vessels to berth, load and depart safely. A significant portion of the dredged materials will be placed by Great Lakes within designated Beneficial Use of Dredged Material (BUDM) areas to restore and enhance marshlands within a local wildlife refuge. Great Lakes is expected to start this project later this year and finish within two years.


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Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

Lifeway Foods (LWAY) – Raising Price Target to $12.00

Posted on by cpereira@noblefcm.com


Thursday, August 24, 2023

Joe Gomes, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.

Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Raising Price Target. With the shares exceeding our $10 price target, we are raising our target to $12. Our new target is 1.1x our 2023 revenue estimate, up from a prior 1.0x, and still well below the specialty foods peer group average of 2.3x. While we were impressed with the second quarter results, rising milk prices and the potential of consumers trading down in a recessionary environment continue to make us take a more conservative approach to valuation.

Shares Up Solidly YTD. On the heels of record quarterly results, LWAY shares appreciated over 60% since August 11th and are now up 77.8% YTD, compared to a 6.2% YTD rise in the Russell 2000. The last time LWAY shares breached the $10 level was back in 2017.


Get the Full Report

Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

Do Regional Federal Reserve Branches Put Banks in Their Region at Risk?

Posted on by phoffman@channelchek.com

The Fed Is Losing Tens of Billions: How Are Individual Federal Reserve Banks Doing?

The Federal Reserve System as of the end of July 2023 has accumulated operating losses of $83 billion and, with proper, generally accepted accounting principles applied, its consolidated retained earnings are negative $76 billion, and its total capital negative $40 billion. But the System is made up of 12 individual Federal Reserve Banks (FRBs). Each is a separate corporation with its own shareholders, board of directors, management and financial statements. The commercial banks that are the shareholders of the Fed actually own shares in the particular FRB of which they are a member, and receive dividends from that FRB. As the System in total puts up shockingly bad numbers, the financial situations of the individual FRBs are seldom, if ever, mentioned. In this article we explore how the individual FRBs are doing.

All 12 FRBs have net accumulated operating losses, but the individual FRB losses range from huge in New York and really big in Richmond and Chicago to almost breakeven in Atlanta. Seven FRBs have accumulated losses of more than $1 billion. The accumulated losses of each FRB as of July 26, 2023 are shown in Table 1.

Table 1: Accumulated Operating Losses of Individual Federal Reserve Banks

New York ($55.5 billion)

Richmond ($11.2 billion )

Chicago ( $6.6 billion )

San Francisco ( $2.6 billion )

Cleveland ( $2.5 billion )

Boston ( $1.6 billion )

Dallas ( $1.4 billion )

Philadelphia ($688 million)

Kansas City ($295 million )

Minneapolis ($151 million )

St. Louis ($109 million )

Atlanta ($ 13 million )

The FRBs are of very different sizes. The FRB of New York, for example, has total assets of about half of the entire Federal Reserve System. In other words, it is as big as the other 11 FRBs put together, by far first among equals. The smallest FRB, Minneapolis, has assets of less than 2% of New York. To adjust for the differences in size, Table 2 shows the accumulated losses as a percent of the total capital of each FRB, answering the question, “What percent of its capital has each FRB lost through July 2023?” There is wide variation among the FRBs. It can be seen that New York is also first, the booby prize, in this measure, while Chicago is a notable second, both having already lost more than three times their capital. Two additional FRBs have lost more than 100% of their capital, four others more than half their capital so far, and two nearly half. Two remain relatively untouched.

Table 2: Accumulated Losses as a Percent of Total Capital of Individual FRBs

New York 373%

Chicago 327%

Dallas 159%

Richmond 133%

Boston 87%

Kansas City 64%

Cleveland 56%

Minneapolis 56%

San Francisco 48%

Philadelphia 46%

St. Louis 11%

Atlanta 1%

Thanks to statutory formulas written by a Congress unable to imagine that the Federal Reserve could ever lose money, let alone lose massive amounts of money, the FRBs maintained only small amounts of retained earnings, only about 16% of their total capital. From the percentages in Table 2 compared to 16%, it may be readily observed that the losses have consumed far more than the retained earnings in all but two FRBs. The GAAP accounting principle to be applied is that operating losses are a subtraction from retained earnings. Unbelievably, the Federal Reserve claims that its losses are instead an intangible asset. But keeping books of the Federal Reserve properly, 10 of the FRBs now have negative retained earnings, so nothing left to pay out in dividends.

On orthodox principles, then, 10 of the 12 FRBs would not be paying dividends to their shareholders. But they continue to do so. Should they?

Much more striking than negative retained earnings is negative total capital. As stated above, properly accounted for, the Federal Reserve in the aggregate has negative capital of $40 billion as of July 2023. This capital deficit is growing at the rate of about $ 2 billion a week, or over $100 billion a year. The Fed urgently wants you to believe that its negative capital does not matter. Whether it does or what negative capital means to the credibility of a central bank can be debated, but the big negative number is there. It is unevenly divided among the individual FRBs, however.

With proper accounting, as is also apparent from Table 2, four of the FRBs already have negative total capital. Their negative capital in dollars shown in Table 3.

Table 3: Federal Reserve Banks with Negative Capital as of July 2023

New York ($40.7 billion)

Chicago ($ 4.6 billion )

Richmond ($ 2.8 billion )

Dallas ($514 million )

In these cases, we may even more pointedly ask: With negative capital, why are these banks paying dividends?

In six other FRBs, their already shrunken capital keeps on being depleted by continuing losses. At the current rate, they will have negative capital within a year, and in 2024 will face the same fundamental question.

What explains the notable differences among the various FRBs in the extent of their losses and the damage to their capital? The answer is the large difference in the advantage the various FRBs enjoy by issuing paper currency or dollar bills, formally called “Federal Reserve Notes.” Every dollar bill is issued by and is a liability of a particular FRB, and the FRBs differ widely in the proportion of their balance sheets funded by paper currency.

The zero-interest cost funding provided by Federal Reserve Notes reduces the need for interest-bearing funding. All FRBs are invested in billions of long-term fixed-rate bonds and mortgage securities yielding approximately 2%, while they all pay over 5% for their deposits and borrowed funds—a surefire formula for losing money. But they pay 5% on smaller amounts if they have more zero-cost paper money funding their bank. In general, more paper currency financing reduces an FRB’s operating loss, and a smaller proportion of Federal Reserve Notes in its balance sheet increases its loss. The wide range of Federal Reserve Notes as a percent of various FRBs’ total liabilities, a key factor in Atlanta’s small accumulated losses and New York’s huge ones, is shown in Table 4.

Table 4: Federal Reserve Notes Outstanding as a Percent of Total Liabilities

Atlanta 64%

St. Louis 60%

Minneapolis 58%

Dallas 51%

Kansas City 50%

Boston 45%

Philadelphia 44%

San Francisco 39%

Cleveland 38%

Chicago 26%

Richmond 23%

New York 17%

The Federal Reserve System was originally conceived not as a unitary central bank, but as 12 regional reserve banks. It has evolved a long way toward being a unitary organization since then, but there are still 12 different banks, with different balance sheets, different shareholders, different losses, and different depletion or exhaustion of their capital. Should it make a difference to a member bank shareholder which particular FRB it owns stock in? The authors of the Federal Reserve Act thought so.

About the Author

Alex J. Pollock is a Senior Fellow at the Mises Institute, and is the co-author of Surprised Again! — The Covid Crisis and the New Market Bubble (2022). Previously he served as the Principal Deputy Director of the Office of Financial Research in the U.S. Treasury Department (2019-2021), Distinguished Senior Fellow at the R Street Institute (2015-2019 and 2021), Resident Fellow at the American Enterprise Institute (2004-2015), and President and CEO, Federal Home Loan Bank of Chicago (1991-2004). He is the author of Finance and Philosophy—Why We’re Always Surprised (2018).

Will the New Buzzword Being Bandied About Regarding Inflation Be “r-star”?

Posted on by phoffman@channelchek.com

Federal Reserve Chairman’s Speech at Jackson Hole Symposium Sparks Speculation on Subject and Market Impact

There’s an economic concept that is expected to be included in Fed Chair Powell’s next speech that may soon become the new buzzword. It may be worth a minute now to be sure there is a thorough understanding. Especially if his address at the Jackson Hole Symposium begins to drive markets one way or the other. Other news outlets say Powell’s address may be a pivotal moment that could potentially reshape the stock market landscape. Last year they said the same thing, but instead his address was a yawner, ultra-safe, with no new information for the markets to use.

Scheduled for 10:05 ET Friday morning, Powell’s address, it is said, may center around the concept of the neutral rate of interest, a theoretical but influential notion that holds the potential to send ripples through financial markets.

The neutral rate of interest, also referred to as r* or r-star, represents the level of real short-term interest rates anticipated to prevail when the U.S. economy is at its peak strength and inflation remains stable. Analysts estimate this real neutral rate to be around 0.5%, calculated by deducting the Federal Reserve’s 2% inflation target from policymakers’ latest predictions for the long-term trajectory of the fed funds rate. Speculation suggests that the neutral rate might be on the rise, given the current economic performance.

Amidst an environment where the U.S. economy appears to be gathering momentum, even following a series of interest rate hikes that brought rates to a 22-year high of 5.25%-5.5%, the stakes are high for determining the correct theoretical level for the neutral rate. The economy achieved a robust growth rate of 2% in the first quarter, followed by 2.4% in the second quarter. The Atlanta Fed’s GDPNow model projects an astonishing 5.8% growth rate for real gross domestic product in the third quarter, a figure met with skepticism but indicative of the economy’s notable resilience.

Investors will be hanging on the Fed chair’s every utterance, clarity from Powell’s address to better comprehend the Fed’s perspective on this crucial neutral rate. What a higher neutral rate could mean is policymakers could find themselves compelled to implement additional hikes to fed-funds. This scenario would result in longer periods of higher borrowing costs and a delay in the timing of the first rate reduction.

Traders and investors have already adjusted their expectations to anticipate the Federal Reserve maintaining elevated interest rates for a longer period.

This year has seen significant gains in the stock market, with the Dow Jones Industrial Average (DJIA) rising by 4%, the S&P 500 (SPX) surging by 15.5%, and the Nasdaq Composite (COMP) leading the pack with a remarkable 31.1% increase. Investors and traders are cautiously optimistic about a scenario where the U.S. economy navigates a soft landing, with inflation trending downward.

In the days leading up to Powell’s speech at the Kansas City Fed’s Jackson Hole symposium, the Treasury market has already incorporated expectations of stronger-than-anticipated U.S. economic growth. Yields for 10-year and 30-year Treasury bonds reached multiyear highs, though they retraced slightly in the days following. However, market participants anticipate potential fluctuations in response to Powell’s remarks, which could trigger further yield adjustments.

The recent upswing in yields, leading to the highest closing levels since 2007 and 2011 for the 10-year and 30-year rates, respectively, has been given as the reason for the decline in U.S. stock values during August. The S&P 500 experienced a decline of over 3% during the month.

Take Away

Understanding r* or r-star in advance may prevent some scurrying at 10:10 AM ET tomorrow. While Market participants eagerly await Powell’s speech, hoping for insights that will shed light on the Federal Reserve’s outlook regarding the neutral rate and its potential impact on monetary policy and the stock market, last year his words were short, and seemed to be designed to convey nothing new.

Paul Hoffman

Managing Editor, Channelchek

Release – Salem Media Group Announces Plan to Sell Its Greenville Radio Stations

Posted on by aweinsoff@channelchek.com

Research News and Market Data on SALM

August 23, 2023 3:32pm EDT

IRVING, Texas–(BUSINESS WIRE)– Salem Media Group, Inc. (NASDAQ: SALM) announced today that it entered into an agreement to transfer the ownership of its Greenville-Spartanburg stations, WGTK-FM, WRTH-FM, and WLTE-FM to Educational Media Foundation (EMF). Salem Media CEO David Santrella stated, “We have enjoyed our years in the Greenville-Spartanburg market but have made the strategic decision to divest our interests there. As we do, we are grateful to be able to place these signals in the hands of Educational Media Foundation (EMF) who share a like-minded mission with Salem through their music programming. We are also thankful to our Greenville-Spartanburg staff for their many years of service.”

ABOUT SALEM MEDIA GROUP:

Salem Media Group is America’s leading multimedia company specializing in Christian and conservative content, with media properties comprising radio, digital media and book and newsletter publishing. Each day Salem serves a loyal and dedicated audience of listeners and readers numbering in the millions nationally. With its unique programming focus, Salem provides compelling content, fresh commentary and relevant information from some of the most respected figures across the Christian and conservative media landscape. Learn more about Salem Media Group, Inc. at www.salemmedia.com, Facebook and Twitter.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230821844514/en/

Company Contact:
Evan D. Masyr
Executive Vice President and Chief Financial Officer
(805) 384-4512
evan@salemmedia.com

Source: Salem Media Group, Inc.

Released August 23, 2023

Release – Baudax Bio Announces Distribution of Series C Preferred Stock to Holders of its Common Stock

Posted on by aweinsoff@channelchek.com

Research News and Market Data on BXRX

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August 23, 2023 8:00am EDT

MALVERN, Pa., Aug. 23, 2023 (GLOBE NEWSWIRE) — Baudax Bio, Inc. (the “Company” or “Baudax Bio”) (NASDAQ: BXRX), a biotechnology company focused on developing T cell receptor (“TCR”) therapies utilizing human regulatory T cells (“Tregs”), as well as a portfolio of clinical stage Neuromuscular Blocking Agents (“NMBs”) and an associated reversal agent, today announced that its Board of Directors declared a dividend of one one-thousandth of a share of newly designated Series C Preferred Stock, par value $0.01 per share, for each outstanding share of the Company’s common stock held of record as of 5:00 p.m. Eastern Time on September 5, 2023. The shares of Series C Preferred Stock will be distributed to such recipients at 5:00 p.m. Eastern Time on September 7, 2023. The outstanding shares of Series C Preferred Stock will vote together with the outstanding shares of the Company’s common stock, as a single class, exclusively with respect to a proposal to approve a reverse stock split, as well as any proposal to adjourn any meeting of shareholders called for the purpose of voting on the reverse stock split, and will not be entitled to vote on any other matter, except to the extent required under the Pennsylvania Business Corporation Law. Subject to certain limitations, each outstanding share of Series C Preferred Stock will have 1,000,000 votes per share (or 1,000 votes per one one-thousandth of a share of Series C Preferred Stock).

All shares of Series C Preferred Stock that are not present in person or by proxy at the meeting of shareholders held to vote on the reverse stock split as of immediately prior to the opening of the polls at such meeting will automatically be redeemed by the Company and shall have no voting power. Any outstanding shares of Series C Preferred Stock that have not been so redeemed will be redeemed if such redemption is ordered by the Company’s Board of Directors or automatically upon the approval by the Company’s shareholders of an amendment to the Company’s articles of incorporation effecting the reverse stock split at such meeting.

The Series C Preferred Stock will be uncertificated, and no shares of Series C Preferred Stock will be transferable by any holder thereof except in connection with a transfer by such holder of any shares of the Company’s common stock held by such holder. In that case, a number of one one-thousandths of a share of Series C Preferred Stock equal to the number of shares of the Company’s common stock to be transferred by such holder would be transferred to the transferee of such shares of common stock.

Further details regarding the Series C Preferred Stock will be contained in a report on Form 8-K to be filed by the Company with the Securities and Exchange Commission.

About Baudax Bio

Baudax Bio/TeraImmune is a biotech company focused on innovative products for certain auto-immune conditions, of which many but not all, are orphan drug conditions as well as acute care and related settings. The combined company will further the development of Treg therapy specific to HA (pipeline candidate TI-168). TI-168 is a next-generation, FVIII specific Treg therapy designed to reliably and effectively address Hemophilia A patients with FVIII inhibitor. By combining the patented Treg culture method and TeraImmune designed FVIII-specific TCR, the Company has successfully demonstrated the therapeutic concept of FVIII TCR-Treg therapy in controlling of FVIII ADA in a hemophilic animal model. The lead program TI-168 has shown encouraging pre-clinical data and the FDA has cleared an IND to commence a Phase 1/2a clinical trial for the treatment of Hemophilia A with inhibition.

In addition, over time, the combined company will advance the development of TeraImmune’s innovative immune-cell therapies, leveraging a dual Treg manufacturing platform consisting of both natural regulatory Tregs isolated from patients and induced Tregs converted from a patient’s T-effector (“Teff”) cells. This Treg platform technology is designed for conditions that suppress unwanted immune reactions and includes the allogenic, or off-the-shelf, Tregs obtained from Umbilical Cord Blood for the treatment of skin diseases such as Atopic Dermatitis. For more information, please visit www.baudaxbio.com.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect Baudax Bio’s expectations about its future performance and opportunities that involve substantial risks and uncertainties. When used herein, the words “anticipate,” “believe,” “estimate,” “may,” “upcoming,” “plan,” “target,” “goal,” “intend,” and “expect,” and similar expressions, as they relate to Baudax Bio or its management, and TeraImmune or its management, are intended to identify such forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on Baudax Bio’s current beliefs, expectations and assumptions regarding the future of its business, future plans and strategies, clinical results and other future conditions. There are a number of important factors that could cause Baudax Bio’s actual results to differ materially from those indicated or implied by such forward-looking statements including, without limitation: whether Baudax Bio will be able to successfully integrate the TeraImmune operations and realize the anticipated benefits of the acquisition of TeraImmune; whether Baudax Bio’s shareholders approve the conversion of the Series X Preferred Stock and the required cash payment of the then-current fair value of the Series X Preferred Stock if such approval is not provided; whether Baudax Bio’s cash resources will be sufficient to fund Baudax Bio’s continuing operations and the newly acquired TeraImmune operations, including the liabilities of TeraImmune incurred in connection with the completion of the Merger; whether Baudax Bio’s collaborations will be successful; whether Baudax Bio will be able to advance its current product candidate pipeline through preclinical studies and clinical trials, that interim results may not be indicative of final results in clinical trials, that earlier-stage trials may not be indicative of later-stage trials, the approvability of product candidates; whether Baudax Bio will be able to comply with the financial and other covenants under its credit facility; and whether Baudax Bio will be able to maintain its listing on the Nasdaq Capital Market. New risks and uncertainties may emerge from time to time, and it is not possible to predict all risks and uncertainties. No representations or warranties (expressed or implied) are made about the accuracy of any such forward-looking statements. Baudax Bio may not actually achieve the forecasts disclosed in such forward-looking statements, and you should not place undue reliance on such forward-looking statements. Such forward-looking statements are subject to a number of material risks and uncertainties including but not limited to those set forth under the caption “Risk Factors” in Baudax Bio’s most recent Annual Report on Form 10-K filed with the SEC, as well as discussions of potential risks, uncertainties, and other important factors in its subsequent filings with the SEC. Any forward looking statement speaks only as of the date on which it was made. Neither Baudax Bio, nor any of its affiliates, advisors or representatives, undertake any obligation to publicly update or revise any forward-looking statement, whether as result of new information, future events or otherwise, except as required by law. These forward-looking statements should not be relied upon as representing Baudax Bio’s views as of any date subsequent to the date hereof.

Investor Relations Contact:

Mike Moyer
LifeSci Advisors
mmoyer@lifesciadvisors.com

Baudax Bio (BXRX) – A New Phase Begins For Baudax Bio With Reported 2Q 2023

Posted on by cpereira@noblefcm.com


Wednesday, August 23, 2023

Baudax Bio is a pharmaceutical company focused on innovative products for acute care settings. ANJESO is the first and only 24-hour, intravenous (IV) COX-2 preferential non-steroidal anti-inflammatory (NSAID) for the management of moderate to severe pain. In addition to ANJESO, Baudax Bio has a pipeline of other innovative pharmaceutical assets including two novel neuromuscular blocking agents (NMBs) and a proprietary chemical reversal agent specific to these NMBs. For more information, please visit www.baudaxbio.com.

Gregory Aurand, Senior Vice President, Equity Research Analyst, Healthcare Services & Medical Devices, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Dramatic changes. The Company has undergone a transformation since the end of 2022, first with the discontinuation of ANJESO, and the subsequent June 30, 2023 announced acquisition of privately-held TeraImmune. With the acquisition, the Company expanded its pipeline with a new IND-cleared therapeutic (TI-168) and could have another IND filed asset by yearend with the anticipated filing of its neuromuscular blocking reversal agent (BX3000).

2Q 2023 Results. ANJESO related activities have been reclassified as a discontinued operation. As a continuing operation, the Company in 2Q 2023 reported overall lower R&D and SG&A expenses of $4 million, compared to our $4.8 million outlook. However, this was more than offset by a change in warrant valuation of $2.87 million. Total loss from continuing operations was $7.3 million compared with our expectations for a $5.3 million loss.  


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Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

The ODP Corporation (ODP) – Initiation: Not Your Father’s Office Depot

Posted on by cpereira@noblefcm.com


Wednesday, August 23, 2023

Office Depot, Inc., together with its subsidiaries, supplies a range of office products and services. It offers merchandise, such as general office supplies, computer supplies, business machines and related supplies, and office furniture through its chain of office supply stores under the Office Depot, Foray, Ativa, Break Escapes, Worklife, and Christopher Lowell brand names. The company also provides graphic design, printing, reproduction, mailing, shipping, and other services through design, print, and ship centers. It has operations throughout North America, Europe, Asia, and Central America. The company also sells its products and services through direct mail catalogs, contract sales force, Internet sites, and retail stores, through a mix of company-owned operations, joint ventures, licensing and franchise agreements, alliances, and other arrangements. As of December 31, 2008, Office Depot operated 1,267 North American retail division office supply stores and 162 international division retail stores, as well as participated under licensing and merchandise arrangements in 98 stores. The company was founded in 1986 and is based in Boca Raton, Florida.

Joe Gomes, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.

Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Initiation. We are initiating research coverage of The ODP Corporation with an Outperform rating and a $65 price target. Not your father’s Office Depot, ODP’s four business unit, low cost operating model will highlight each unit’s strength and value, in our view, while an aggressive share repurchase program returns excess capital to shareholders.

Two Established Cash Flowing Businesses. ODP Business Solutions, a leader in the B2B distribution business, and Office Depot, a leading omnichannel retailer of office supplies, form the foundation, with both businesses generating strong cash flows, with Business Solutions set up for long-term growth.


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Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

Permex Petroleum (OILCF) – June-Quarter Results Reflect Production Delays

Posted on by cpereira@noblefcm.com


Wednesday, August 23, 2023

Michael Heim, Senior Vice President, Equity Research Analyst, Energy & Transportation, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Permex reported a loss of $0.74 per share as drilling delays put the company behind our original production schedule. Permex reported $157,019 in revenues for the fiscal third quarter ended June 30, 2023, a 43% decline from third quarter revenues last year. Permex receives sales from ownership interest in 78 wells in the Permian Basin as well as royalty interests in 73 wells. It completed its first well in the Breedlove Field (a transformative acquisition) in January and is working to turn the well into a horizontal well. We had hoped the well would be producing and Permex would have started on a second well by now.

The extension and repricing of a warrant program and subsequent exercises resulted in 273,410 addition shares and generated $688,092 in net proceeds. The number of fully diluted shares including warrants is now more than 3 million versus basic shares of less than 2 million. The proceeds, along with a $847,000 positive change in working capital, helped offset a $865,000 net loss in operating cash. Permex’s cash position at the end of the quarter was $764,386, not enough to drill a well. The balance sheet remains debt free. Management shelved plans for an equity offering and uplisting. Liquidity remains an issue.


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Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.