Post by Admin/YBB on Jun 5, 2021 6:38:51 GMT -6
Pg M1, TRADER. An up week, But the market has done nothing since mid-April. Realized daily volatility is down but that is like calm before the storm. The market has been digesting good Q1 earnings. Things that the market just ignored: The FED announcement that it would sell its corporate bonds (only $13.8 billion, but tapering is tapering); movements in meme stocks; volatile economic data (inflation, manufacturing, jobs). Note to the market – wake me up before you go-go.
CRUDE OIL prices are at 2.5-yr high and may rise more (growing demand from reopening; disciplined OPEC; activist/environmental actions for XOM, RDS.A, CVX). Counterintuitively, activist/environmental actions at oil companies may reduce oil production in the near-term, raise oil prices and increase oil profits. Oil stocks have more upside, and one may use barbell strategy of mixing more established companies (COP, PXD, DVN, HES, SU, XOM, PDCE, MRO, BKR, SLB) with the volatile ones (OVV, CVE, OXY, FANG).
After the merger of WarnerMedia and Discovery is completed in mid-June 2022, the new company Warner Bros Discovery (Newco) will be owned 71% by T holders. But it is a PUZZLE that illiquid super-voting class B stock DISCB is trading at a huge premium to the deal value while liquid class K stock DISCK is trading at a small discount; eventually both prices should converge to the Newco deal value if the deal goes through.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes.
Probabilities of NO-CHANGE (for the current ZIRP of 0-0.25%) are tracked by the FOMC meetings as the probabilities of rate increases in the futures market have increased despite repeated Fed reassurances. Either the market or the Fed will be wrong.
06/16/21 93.0%
09/22/21 93.0%
11/03/21 93.0%
12/15/21 93.0%
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.66%, SP500 +0.61%, Nasdaq Comp +0.48%, R2000 +0.77%. DJ Transports -1.80%; DJ Utilities +0.39%. (Rotating spot XLE +6.78%) US$ index (spot) +0.11%, oil/WTI futures +4.98%, gold futures -0.67%.
YTD (index changes only), DJIA +13.56%, SP500 +12.61%, Nasdaq Comp +7.19%. (Rotating spot XLE +47.10%)
Pg M4, EUROPE. BP (yield 4.6%; fwd P/E 9; buybacks) is attractive on its planned shift from fossil fuels to low-carbon footprint and alternative energy. High CRUDE OIL prices generate profits and cash flow to fund this transition. Risks include bumpy transition from fossils to alternatives, especially if oil prices collapse; $7 billion on outstanding liabilities from 2010 Deepwater Horizon disaster.
Pg M4, EMERGING MARKETS. Chinese YUAN is rising and that is good for Chinese BONDS (10-yr at 3%; their index weights are also rising), but not for Chinese stocks (those have been hit by government crackdown on big techs). The PBOC raised bank reserve requirement to 7% but that didn’t affect yuan much. A new growth area is GROUP-PURCHASING where groups of buyers pool resources to get bigger discounts. This may hurt margins of big e-commerce stocks.
Pg M6, COMMODITIES. NATURAL-GAS prices are rising ahead of hot Summer, Atlantic hurricane season (13-20 expected) and inventory buildup for the Winter. But if natural-prices rise too much, utilities may switch to dirty COAL.
Pg M5, OPTIONS. Reopening fever hasn’t caught on with Visa/V (it is more domestic than MasterCard/MA). Suggested is a call-spread ahead of its next earnings report in late-July. Risks include new alternate ways of payment processing.
(SP500 VIX 16.42, Nasdaq 100 VXN 21.22, SKEW 147.76 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M23, M28: An up week in EUROPE (Finland +1.59%, Spain -0.73%) and an up week in ASIA (Indonesia +5.73%, HK -2.47%). The equity CEF index (data to Thursday) was in line with the DJIA and its discount was -3.75%.
TREASURY* 3-mo yield 0.02%, 2-yr 0.14%, 5-yr 0.78%, 10-yr 1.56%, 30-yr 2.24%. DOLLAR rose a bit, DXY 90.13, +0.08% (M31). GOLD (Handy & Harman spot, Thursday) fell to $1,894, -0.32% (M34); the gold-miners fell. (^XAU was at 162.06, -1.16% for the week)
*Treasury Yield-Curve www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
Top FDIC insured savings deposit rates*: Money-market accounts 0.61%; 3-mo Jumbo CD 0.35%, 1-yr CDs 0.60%; 5-yr CDs 1.00% (M29).
*For local rates www.depositaccounts.com/banks/rates-map/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 20: COVER STORY, “Viva Las Vegas: Sin City Presses Its Luck in the Post-Pandemic Era”. LV is humming again with gambling, some convention business and vacation/entertainment business. Covid-19 protocols are being followed. Many think of gambling but in 2019, 70% of LV revenues were from nongambling operations. There are labor shortages, and buffets and valet parking are still missing. Many companies still have restrictions on business travel, and international segment is very weak. There are many events booked for July 1, 2021-June 30, 2022, but some may not happen. Among the upcoming events are trade show World of Concrete, June 8-10 and in-person CES in January 2022. New Resorts World LV opens on June 24. LV-related stocks have runup, but upside still remains.
Pg 6, UP & DOWN WALL STREET. Investors were relieved that the JOBS report was robust but below expectations as that meant that the FED may remain patient for longer. But this may be only a temporary pause in rising bond YIELDS as rising prices and negative real rates are not sustainable; hourly WAGES rose at +7% annualized. Be prepared for some pain in stocks when 10-yr is at 2% in a few months.
ODDS & ENDS. MUNIS have outperformed Treasuries YTD but may be overvalued now. Recent SPINOFFS (CARR, OGN, etc) are attractive. Hertz/HTZGQ bankruptcy is very UNUSUAL – strong car-rental market and a bidding war during bankruptcy auction has meant that the creditors will be made more than whole and there will be something leftover for the shareholders with HTZGQ possibly worth $10 (it is about $6 now, so don’t tell this to the meme-traders) (typically in bankruptcy, creditors get only partial recoveries, and the shareholders are completely wiped out). ENERGY sector is in an excellent financial shape due to high oil prices and industry discipline. Oil is not going away for some decades and peak oil demand may be reached in early-2030s. Attractive are XOM (despite the activist drama for its board), COP, DVN, FANG.
Pg 9, STREETWISE. MEME traders have another go at meme stocks (AMC, BB, etc). For its part, AMC is playing too by issuing obscene amounts of stock – its outstanding shares are now 5-times that just a year ago. And Dogecoin (Dog-e-coin) has been meme-d by Australian Safe Shepherd (some websites may even block its abbreviation $***). These are fine times for terrible ideas at discounted prices. And then there are name and/or ticker confusions. Thankfully, obscure Zoom Technologies is now ZTNO (formerly, its ticker was ZOOM) to distinguish it from much more famous Zoom Video/ZM. But other confusions remain – for example, unrelated AMCX (cable networks) gains whenever AMC (movie theaters) does. And have you mastered cryptos, NFTs, SPACs? In an irony, UBS likes package delivery FedEx (FDX; fwd P/E 15), but not the package producer International Paper (IP; fwd P/E 13). May be someone will come up with hot fake/meme boxes.
(More later….)
CRUDE OIL prices are at 2.5-yr high and may rise more (growing demand from reopening; disciplined OPEC; activist/environmental actions for XOM, RDS.A, CVX). Counterintuitively, activist/environmental actions at oil companies may reduce oil production in the near-term, raise oil prices and increase oil profits. Oil stocks have more upside, and one may use barbell strategy of mixing more established companies (COP, PXD, DVN, HES, SU, XOM, PDCE, MRO, BKR, SLB) with the volatile ones (OVV, CVE, OXY, FANG).
After the merger of WarnerMedia and Discovery is completed in mid-June 2022, the new company Warner Bros Discovery (Newco) will be owned 71% by T holders. But it is a PUZZLE that illiquid super-voting class B stock DISCB is trading at a huge premium to the deal value while liquid class K stock DISCK is trading at a small discount; eventually both prices should converge to the Newco deal value if the deal goes through.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes.
Probabilities of NO-CHANGE (for the current ZIRP of 0-0.25%) are tracked by the FOMC meetings as the probabilities of rate increases in the futures market have increased despite repeated Fed reassurances. Either the market or the Fed will be wrong.
06/16/21 93.0%
09/22/21 93.0%
11/03/21 93.0%
12/15/21 93.0%
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.66%, SP500 +0.61%, Nasdaq Comp +0.48%, R2000 +0.77%. DJ Transports -1.80%; DJ Utilities +0.39%. (Rotating spot XLE +6.78%) US$ index (spot) +0.11%, oil/WTI futures +4.98%, gold futures -0.67%.
YTD (index changes only), DJIA +13.56%, SP500 +12.61%, Nasdaq Comp +7.19%. (Rotating spot XLE +47.10%)
Pg M4, EUROPE. BP (yield 4.6%; fwd P/E 9; buybacks) is attractive on its planned shift from fossil fuels to low-carbon footprint and alternative energy. High CRUDE OIL prices generate profits and cash flow to fund this transition. Risks include bumpy transition from fossils to alternatives, especially if oil prices collapse; $7 billion on outstanding liabilities from 2010 Deepwater Horizon disaster.
Pg M4, EMERGING MARKETS. Chinese YUAN is rising and that is good for Chinese BONDS (10-yr at 3%; their index weights are also rising), but not for Chinese stocks (those have been hit by government crackdown on big techs). The PBOC raised bank reserve requirement to 7% but that didn’t affect yuan much. A new growth area is GROUP-PURCHASING where groups of buyers pool resources to get bigger discounts. This may hurt margins of big e-commerce stocks.
Pg M6, COMMODITIES. NATURAL-GAS prices are rising ahead of hot Summer, Atlantic hurricane season (13-20 expected) and inventory buildup for the Winter. But if natural-prices rise too much, utilities may switch to dirty COAL.
Pg M5, OPTIONS. Reopening fever hasn’t caught on with Visa/V (it is more domestic than MasterCard/MA). Suggested is a call-spread ahead of its next earnings report in late-July. Risks include new alternate ways of payment processing.
(SP500 VIX 16.42, Nasdaq 100 VXN 21.22, SKEW 147.76 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M23, M28: An up week in EUROPE (Finland +1.59%, Spain -0.73%) and an up week in ASIA (Indonesia +5.73%, HK -2.47%). The equity CEF index (data to Thursday) was in line with the DJIA and its discount was -3.75%.
TREASURY* 3-mo yield 0.02%, 2-yr 0.14%, 5-yr 0.78%, 10-yr 1.56%, 30-yr 2.24%. DOLLAR rose a bit, DXY 90.13, +0.08% (M31). GOLD (Handy & Harman spot, Thursday) fell to $1,894, -0.32% (M34); the gold-miners fell. (^XAU was at 162.06, -1.16% for the week)
*Treasury Yield-Curve www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
Top FDIC insured savings deposit rates*: Money-market accounts 0.61%; 3-mo Jumbo CD 0.35%, 1-yr CDs 0.60%; 5-yr CDs 1.00% (M29).
*For local rates www.depositaccounts.com/banks/rates-map/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 20: COVER STORY, “Viva Las Vegas: Sin City Presses Its Luck in the Post-Pandemic Era”. LV is humming again with gambling, some convention business and vacation/entertainment business. Covid-19 protocols are being followed. Many think of gambling but in 2019, 70% of LV revenues were from nongambling operations. There are labor shortages, and buffets and valet parking are still missing. Many companies still have restrictions on business travel, and international segment is very weak. There are many events booked for July 1, 2021-June 30, 2022, but some may not happen. Among the upcoming events are trade show World of Concrete, June 8-10 and in-person CES in January 2022. New Resorts World LV opens on June 24. LV-related stocks have runup, but upside still remains.
Pg 6, UP & DOWN WALL STREET. Investors were relieved that the JOBS report was robust but below expectations as that meant that the FED may remain patient for longer. But this may be only a temporary pause in rising bond YIELDS as rising prices and negative real rates are not sustainable; hourly WAGES rose at +7% annualized. Be prepared for some pain in stocks when 10-yr is at 2% in a few months.
ODDS & ENDS. MUNIS have outperformed Treasuries YTD but may be overvalued now. Recent SPINOFFS (CARR, OGN, etc) are attractive. Hertz/HTZGQ bankruptcy is very UNUSUAL – strong car-rental market and a bidding war during bankruptcy auction has meant that the creditors will be made more than whole and there will be something leftover for the shareholders with HTZGQ possibly worth $10 (it is about $6 now, so don’t tell this to the meme-traders) (typically in bankruptcy, creditors get only partial recoveries, and the shareholders are completely wiped out). ENERGY sector is in an excellent financial shape due to high oil prices and industry discipline. Oil is not going away for some decades and peak oil demand may be reached in early-2030s. Attractive are XOM (despite the activist drama for its board), COP, DVN, FANG.
Pg 9, STREETWISE. MEME traders have another go at meme stocks (AMC, BB, etc). For its part, AMC is playing too by issuing obscene amounts of stock – its outstanding shares are now 5-times that just a year ago. And Dogecoin (Dog-e-coin) has been meme-d by Australian Safe Shepherd (some websites may even block its abbreviation $***). These are fine times for terrible ideas at discounted prices. And then there are name and/or ticker confusions. Thankfully, obscure Zoom Technologies is now ZTNO (formerly, its ticker was ZOOM) to distinguish it from much more famous Zoom Video/ZM. But other confusions remain – for example, unrelated AMCX (cable networks) gains whenever AMC (movie theaters) does. And have you mastered cryptos, NFTs, SPACs? In an irony, UBS likes package delivery FedEx (FDX; fwd P/E 15), but not the package producer International Paper (IP; fwd P/E 13). May be someone will come up with hot fake/meme boxes.
(More later….)