Dimon: A “huge mistake” to think the economy will keep booming

[CLICK HERE JOIN OUR LIVE TRADING & TRAINING SESSIONS]( Hello investor, Dimon: A “huge mistake” to think the economy will keep booming The Wall Street Journal reported on Sunday that there was a consensus among Federal Reserve officials not to hike rates at next week’s meeting. What’s more, the article said more officials see less urgency to hike later this year. But it all depends on the incoming inflation data. We will receive fresh readings for the CPI this Wednesday (and the PPI this Thursday), and the thinking could change if it becomes hotter than expected. However, a pause looks very likely for September. - “It certainly helps that the market’s thinking that the Fed is probably done and maybe transitioning into a new strategy,” said U.S. Bank’s Rob Haworth. - “And that’s giving them some hope that we’re kind of past the toughest spots for corporate earnings.” U.S. Bank’s Rob Haworth (Photo: CNBC) Oracle fell by as much as 5% in extended trading: Last night, the database software maker reported lower revenue than expected with a 9% year-over-year growth. Larry Ellison, Oracle’s chairman and technology chief, wanted investors to focus on its growing cloud business. Revenue from cloud infrastructure increased 66% to $1.5 billion for the quarter. It was a slight deacceleration from 76% in the prior quarter. - “As of today, AI development companies have signed contracts to purchase more than $4 billion of capacity in Oracle’s Gen2 Cloud. That’s twice as much as we had booked at the end of Q4,” said Larry Ellison, Oracle’s chairman and technology chief. Dimon: It’s a “huge mistake” to think the economy will boom: JPMorgan Chase CEO Jamie Dimon said the economy remains strong, but it would be a “huge mistake” for investors to think it will last for years. There are plenty of risks ahead, he said. He pointed to central banks shrinking their liquidity programs, the Ukraine war, and global governments “spending like drunken sailors.” “To say the consumer is strong today, so we are going to have a booming environment for years is a huge mistake,” Dimon said. JPMorgan Chase CEO Jamie Dimon (Photo: REUTERS/Benoit Tessier)  A Top “Low-Risk” Stock To Own Right Now Today’s Stock Pick: James River Group Holdings, Ltd ([JRVR]() The stock of James River Group is insanely undervalued. Let tell you why -- the EPS is projected to post $2.1 per share in 2023. The stock is currently trading at around $14 per share, so it’d be about 6.6 P/E for an excellent company. A little bit about James River Group: It is an insurance company that underwrites the Excess & Surplus (“E&S”) market. What is the E&S market? It insures things that standard carriers won’t cover – due to difficulty or high-risk exposures. Some examples are mobile homes, daycare centers, and oil companies. Here’s the critical trait to succeed in the E&S market – a carrier must have an inside-out knowledge of each segment. This means hiring specialists per segment, so they know true exposures to any loss. Naturally, major carriers choose not to do business in this market because of its requirement to specialize and too “niche” for them. James River Group’s HQ in Bermuda Lower risk appetite for major carriers: The pandemic made major carriers risk-averse, exiting many coverages thus bringing opportunities for James River Group to cover these gaps in insurance. In the graph below, you will see how quickly the E&S market grew from 2017 to 2022. The growth accelerated for four straight years before “cooling down” to a solid 20% growth in 2022: (Source: James River Group) As a result, James River’s Gross Written Premiums exploded by 22% CAGR since 2013: (Source: James River Group) Rate increases: James River has a clear pricing power to cushion any long-term inflation effect. Because of the specialized nature of its business (which major carriers are unwilling to enter and compete on prices), James River was able to increase rates on renewal books by a compound rate of 72% in the last 26 quarters. (Source: James River Group) Conservative investments: Insurance carriers make money by taking premiums and investing them to generate income on the “float.” Some insurance carriers, such as Berkshire Hathaway, are more aggressive with their investments. Not James River. It takes more specialized knowledge to monitor its risks, so James River chooses to make extremely conservative investments. In other words, it doesn’t want to spend any time worrying about its investment portfolio. It averages about a 3% yield on its investments: (Source: James River Group) Its conservative philosophy spills over to its underwriting discipline. It has easily the lowest catastrophe losses as a percentage of loss ratio among its peers. (Source: James River Group) The combined ratio is excellent, as well. As a reminder, it measures how much a company pays out versus the premiums it collects. If it is above 100%, that’s bad. Generally, an insurance company earns enough from investment income that it can afford to lose a little bit on premiums. But still, top insurance companies have lower than 100% which means it earns profits from underwriting premiums alone. James River never had more than a 100% combined ratio since 2017: (Source: James River Group) Bottom line: James River Group is trading at an attractive valuation of about 6.6 P/E if we consider its forecasted EPS for 2023. It reduced the dividend payout due to tough years during the pandemic. But we have no doubt that it’ll be back on track and you could eventually be yielding as much as 4-5% at the current price. Now is the perfect time to buy this low-risk stock while it is still cheap.   [CLICK HERE JOIN OUR LIVE TRADING & TRAINING SESSIONS](     © All Rights Reserved, Trade Alliance If you no longer want to receive these messages, you may [click here]( to unsubscribe.