1

5 November 2024
 2

DISCLAIMER
This report by Adam Khoo, Adam Khoo Learning Technologies Group Pte Ltd and Piranha
Ltd. is in no way a solicitation or offer to sell securities or investment advisory services.
Adam Khoo, Adam Khoo Learning Technologies Group Pte Ltd and Piranha Ltd. is not
intended to be a source for professional advice. Participants should always seek the advice
of an appropriately qualified professional before making any investment decisions.

Information throughout this report and accompanying materials, whether stock quotes,
charts, articles, or any other statement or statements regarding market or other financial
information, is obtained from sources which we, and our suppliers believe reliable, but we do
not warrant or guarantee the timeliness or accuracy of this information.

Nothing in this report and accompanying course materials should be interpreted to state or
imply that past results are an indication of future performance. Neither we nor our
information providers shall be liable for any errors or inaccuracies, regardless of cause.

This report and accompanying course materials may include forward-looking statements. All
statements other than statements of historical fact are forward-looking statements (including
words such as "believe", "estimate", "anticipate", "may", "will", "should" and "expect").

Although we believe that the expectations reflected in such forward-looking statements are
reasonable, we can give no assurance that such expectations will prove to be correct.
Various factors could cause actual results or performance to differ materially from those
discussed in such forward- looking statements.

Historical performance is not indicative of future results. The investment return will fluctuate
with market conditions. Performance is not indicative of any specific investment or future
results. Views regarding the economy, securities markets or other specialized areas, like all
predictors of future events, cannot be guaranteed to be accurate and may result in economic
loss to the investor.

Investment in securities, including exchange traded funds (ETFs), and Contract for
Differences (CFDs) involves the risk of loss. There are no warranties, expressed or implied,
as to accuracy, completeness, or results obtained from any information presented in the
report and its accompanying course material.
 3

5 Nov 2024

Dear Investors and Traders,

As I am writing this newsletter, it is about 48 hours to us knowing the outcome of the US

Presidential Election. The stock market has been surprising resilient, only pulling back only
1.6% and 3% in September and October/Early November respectively.

Year to date, the S&P 500 is up +20.39%, the tech-heavy Nasdaq 100 is up +20.67%, the
Dow is up +10.82% and small call Russell 2000 ETF is up +11.28%

S&P 500 versus Dow Jones Industrials versus Nasdaq 100 versus Russell 2000 ETF

The S&P 500 (SPX) continues to be on an uptrend on all 3 times frames. The 20EMA above
40EMA (short term trend up), the 50MA above 150MA (medium term trend up) and the SPX
above the 200MA (sloping up) (long-term trend up).

Since late October, the market has been going through a small pullback (3% down), probably
over the uncertainty over the elections as well as the rise in the 10-year Treasury Bond Yield.
I don’t see the SPX retracing below 5,596 before the likely year-end rally to over 6,000.
 4

Quarter 3 Earnings Season Better than Expected

Stock prices continue to be supported by strong earnings results. Quarter 3 earnings reporting
season is wrapping up and so far, we have better than expected results from stocks like
Amazon (AMZN), Service Now (NOW) Palantir (PLTR), Alphabet (GOOGL), Microsoft
(MSFT) and Meta Platforms (META).

Overall, 70% of the companies in the S&P 500 have reported actual results for Q3 2024 to
date. Of these companies, 75% have reported actual EPS above estimates.

The blended (combines actual results for companies that have reported and estimated results
for companies that have yet to report) earnings growth rate for the third quarter is 5.1%
today, compared to an earnings growth rate of 3.6% last week and an earnings growth rate of
4.3% at the end of the third quarter (September 30). On a year-over-year basis, the index is
reporting earnings growth for the fifth-straight quarter.

Looking ahead, analysts expect (year-over-year) earnings growth rates of 12.7%, 13.0%, and
12.2% for Q4 2024, Q1 2025, and Q2 2025, respectively. For Calendar Year 2024, analysts
are expecting an earnings growth of 9.3% YoY. For Calendar year 2025, analysts are
projecting an earnings growth of 15.1% YoY.
 5

US Economy Continues to be in Goldilocks Zone (Growth with Falling Inflation)

Real GDP (advanced estimates) increased at an annual rate of 2.8% in the third quarter of
2024. Initial Jobless claims came in at 216,000 vs consensus 227,000 and prior week's
228,000. September US Personal Income rose 0.3% m/m, in line with consensus. +5.5% y/y.
US Personal Spending rose 0.5% m/m, ahead of consensus 0.2%.

September’s PCE inflation rate dropped to 2.1% (in line), the lowest since early 2021 and
right near the Fed's 2% target.
“Core PCE” (which excludes food and energy) remains at +2.7% for the past year (below
+2.6% estimate)

A negative piece of news was that

Nonfarm payrolls came in at only
+12,000 (versus 105,000 expected).

However, the market shook it off as

this was likely a short-term distortion
caused by the Boeing strike and severe
Hurricanes affecting the labour market.
The unemployment rate stayed
unchanged at 4.1%
 6

Long-Term Interest Rates Rising Again

On the 18th of September, the Federal Reserve cut the Fed Funds Rate (Short-term Rate) by
0.5% from ‘5.25%- 5.5%’ to ‘4.75%-5%’. On 7 November, there is a 98% probability (based
on the CEM Fed watch Tool), that they would cut the short-rates by another 0.25% to the
‘4.5%-4.75%’ range.

Many investors (stupidly, myself included) expected that the long-term interest rates
(measured by the 10-year Treasury Bond Yield (10Y Yield)) would fall as well. The opposite
has happened. Since the Fed cut the short-rates, the long-rate (10Y Yield) has jumped up
from 3.6% to 4.29%.

10-Year Treasury Bond Yield (i.e. Long-Term Interest Rates)

Remember that Bond yields move opposite of Bond prices. The 10Y Yield spiked up because
10Y/20Y Treasury Bond prices have been crashing back down (i.e. the IEF ETF, TLT ETF
declining).

There are a few reasons why this has happened.

1) Stronger than expected economic data has prompted investors to sell long-term bonds,
hence driving up their yields
2) An anticipation over a resurgence of inflation may also have contributed to the dumping
of long-term bonds and a spike in yields. Market anticipation of a Trump win and
increased Tariffs may be a factor. This may hence reverse if Trump loses (which I am
personally predicting)
3) Concerns over increasing US National Debt may have lowered demand for long-term
Government bonds.
4) Normalization of the Yield Curve. Since the long-term Fed Funds rate (short-term rate) is
targeted to drop to 3.3%, it is only natural for the 10Y yield to trade at least 1% above it
(i.e. 4.3%) in a normal sloping yield curve.
 7

The Current Yield Curve is still Inverted. Long-Term 10-Year Yield 4.295% still below
the 1-month yield of 4.65% and below the Fed Funds Rate of ‘4.75%-5%’.

Is a rising 10Y yield good news or bad news for investors? In the short run, leveraged
businesses (i.e. cyclical stocks, small caps) and REITs have retraced down because of the
concern over higher borrowing costs.

I personally have been taking advantage of the retracement of high-quality Singapore listed
REITs in the last week to add to my position in S-REITs like Capitaland Ascendas Trust
(A17U) and Parkway Life REIT (C2PU) and looking to also add to Frasers Centrepoint trust
(J69U) as recent price retracements have brought their dividend yields back up to high 5%+.

Over the long run, I think a 10Y yield of 4.3% to 5% is perfectly normal in a robust US
economy. Remember that the Fed Funds Rate is expected to move to 3.3% in the long run
(based on the FED’s dot plot projection).

So, this means that the 10Y Yield has to be 100 to 150 basis points above 3.3% in a normal
sloping yield curve. This would put the 10Y yield at between 4.3% to 5%. I have illustrated
this in the chart below.

If you look way back in history, you can see that the 10Y yield was way above 5% in the
1990s. During that decade, the S&P 500 rose +312%. So, if the 10Y yield stays at where it is
today or even rises to 5%, the stock market can still do very well.
 8

S&P 500 Components’ Valuation

In last month’s newsletter, I mentioned that US stocks looked expensive based on the S&P
500 index P/E and forward P/E ratio versus its historical average. However, if we take a look
at the 500 component stocks that make up the index, you can see some high quality names
that are still fairly valued or undervalued.

Overall, based on a bottom-up valuation approach of individual stocks, 32.6% are

overvalued, 41.6% are fairly valued and 25.7% are undervalued.

Table 1
 9

If you look at Table 1, you can see the specific stocks that fall into the 5 valuation categories.
Remember that we should only invest in high quality stocks that are fairly valued or
undervalued. Amazon (AMZN), Lululemon (LULU), Ulta Beauty (ULTA), Thermofisher
(TMO) and Alphabet (GOOGL) are some of the stocks that I would personally add to.

I would personally avoid low quality stocks that are undervalued (e.g. Intel (INTC), Boeing
(BA)). As I always say, cheap crap is still crap. Many investors are often tempted to buy a
stock just because it looks cheap or because it has fallen a lot. However, if the underlying
business is not a high quality one, there is a high chance that the price could keep falling and
never recover (cheap becomes cheaper).

In the Whale investor course and Wealth Academy Investor Master Class, I have made clear
that investors should never buy (and should always sell) a stock that has been accused of
financial fraud. When accusations started to emerge that Super Micro Computer (SMCI) had
engaged in fraudulent accounting, I sent a clear message that it was too risky to buy/hold it.

Sadly, there are a lot of stubborn people around who won’t listen. Now, they are looking at
large losses and not much chance of a recovery.
 10

Nvidia (NVDA) Replaces Intel (INTC) in the Dow Jones Industrials Average Index

It was just announced that after 25 years of being in the Dow Jones index, Intel (INTC) will
be removed and replaced by Nvidia (NVDA) on 8 November One of the reasons why the US
stock market always goes up in the long run is because unprofitable/less relevant companies
are eventually removed from the index and replaced with more profitable companies.

Investors who have no clue how to pick stocks should just buy the Stock market Index (Dow
Jones, S&P 500, Nasdaq 100) ETF and let their portfolio grow brain free! Over the last 123
years, despite a multitude of crisis (pandemics, wars, recessions, bear markets, flash crashes,
financial crisis), the stock market keeps moving higher, delivering an annual compounded
growth of over 10% p.a.

Of course, those of you who have learnt how to pick the fundamentally strongest undervalued
stocks using the Value Momentum Investing (VMI) 7-Step formula, would have been beating
these index returns with 20%~30% annualised returns or even more. Here are some of the
many sharings.
11
 12

US Election Outcome and the Stock Market

Understandably, many are nervous about the outcome of the US elections. Democrats believe
that the world will end if Trump wins and conversely, Republicans believe that the economy
and stock market will suffer if Harris wins.

In reality, the stock market will continue to do well regardless of which party wins the White
house/congress. In the table below, you can see the average 3-month S&P 500 return under
the different political scenarios. The best short-term stock market returns have come from a
scenario when Democrats win the Presidency (White House) and when Republicans control
congress (+3.85%) or if congress is divided (+3.93%).

Over the long run, the S&P 500 has historically delivered double digit returns regardless of
which party holds the Presidency. The best annualized returns have come from a Democratic
President and a divided congress as well (+15.75% p.a) and the second-best returns have
come from a Republican President and a divided congress (+12.2%). So let us sit back and
enjoy the show!
 13

China Stocks. Bull Market Still Intact?

Finally, a quick word on China stocks. In September, China stocks rallied strongly (+37%)
after forceful monetary stimulus actions by the PBOC. Over the last week, prices have
retraced down to the Fibonacci 50% retracement level and consolidated. The bull market is
intact and the Hang Seng index is still up +25.95% Year-to-date, outperforming the S&P 500.

From what I see from the current price action, I think the China stocks are setting up for a
continuation of the Bull Market as Beijing continues to unleash its fiscal and monetary
stimulus.

Hang Seng Index (Daily Candles)

I look forward to seeing all of you at the upcoming Black Market Live Online Event
happening from the 23rd of November. We will be sharing with all of you lots of great
content and ideas. You will also have a chance to grab Piranhaprofits courses and playbooks
at the biggest discounts!

Happy Investing and May the Markets Be with You!

14