Post by Admin/YBB on Jun 12, 2021 6:23:25 GMT -6
Pg M1, TRADER. A mixed week. Stock market ignored CPI of 5% that was high due to low base effects. Strangely, bond yields fell (10-yr yield below 1.5%). The FED VC CLARIDA would like to see inflation at 2%+ for at least a year before Fed tightening. Current high inflation readings are due to higher prices of some goods and services as economy reopens, and some of these may be transitory, but others not so (wages). Some also think that lower bond yields are signaling slower economic growth in H2 (some cyclicals fell sharply).
It may be time to buy momentum stocks (ETF MTUM) again. 68% of stocks in MTUM were changed in May rebalancing: Financials are now 32.5% (vs 1.6% before), techs 17.9% (vs 41.1% before). Gone are 3 of 6 FAAMNG (AAPL, MSFT, NVDA).
UPS (fwd P/E 18.5) disappointed at its investor event. Its margins fell during the pandemic, but shipping volume has been strong. New areas are emerging such as temperature-controlled shipping for the healthcare industry. It is attractive after the selloff.
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 96.0%
09/22/21 96.0%
11/03/21 96.0%
12/15/21 96.0%
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.80%, SP500 +0.41%, Nasdaq Comp +1.85%, R2000 +2.16%. DJ Transports -0.91%; DJ Utilities +1.34%. (Rotating spot healthcare XLV +2.01%) US$ index (spot) +0.41%, oil/WTI futures +1.85%, gold futures -0.66%.
YTD (index changes only), DJIA +12.65%, SP500 +13.08%, Nasdaq Comp +9.16%. (Rotating spot healthcare XLV +9.79%)
Pg M4, EUROPE. Outlook for Polish videogame publisher CD Projekt/OTGLY is poor as its buggy Cyberpunk 2077 has flopped. Short interest is rising. As the founder, CEO and insiders own 33% of stock, it would be hard to force management changes.
Pg M4, EMERGING MARKETS. MEXICAN stocks look appealing as President AMLO is losing popularity and his party lost ground in June 6 midterm elections. Covid-19 vaccination level is low at 11% but improving. Many US companies are moving production from China to Mexico.
Pg M6, COMMODITIES. Outlook for CRUDE OIL is bullish (likely 70s or 80s) but don’t expect $100 oil anytime soon. Demand is rising and may soon reach pre-pandemic levels, but supply is restrained (OPEC discipline; growing ESG trend).
Pg M5, OPTIONS. Recommended is pairing selling-put with buying-calls for DocuSign/DOCU; with hope that it becomes a meme stock.
(SP500 VIX 15.65, Nasdaq 100 VXN 19.16, SKEW 159.28 (very high) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M23, M28: An up week in EUROPE (Greece +3.01%, Switzerland +1.63%, Norway -0.63%) and a flat week in ASIA (Singapore +1.81%, HK -0.88%). The equity CEF index (data to Thursday) outperformed the DJIA and its discount was -3%.
TREASURY* 3-mo yield 0.03%, 2-yr 0.16%, 5-yr 0.76%, 10-yr 1.47%, 30-yr 2.15%. DOLLAR rose, DXY 90.51, +0.4% (M31). GOLD (Handy & Harman spot, Thursday) fell to $1,881, -0.5% (M34); the gold-miners fell. (^XAU was at 160.09, -1.22% 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, “Here Come the TEENS. They Can’t Vote, but They’re Old Enough to Buy Stocks”. There is GAMIFICATION of stock trading that has involved kids and adults. They post or look for stock tips on social-media. Some join stock or investment clubs at high school. For many teens, stock trading APPS have replaced videogames. They trade from custodial accounts (control transfers to them at 18-25) or parents’ accounts (using shared login). Fidelity has introduced “youth accounts” for kids aged 13-17 that are overseen by parents (in principle); parents sign waivers and have full liability. But Fido is late in an area where several firms are active – Robinhood, TD Ameritrade (that is now Schwab), Greenlight Financial, Stash, M1 Finance, Acorns (upcoming SPAC-acquisition by PACX), etc. There is COMMISSION-FREE and FRACTIONAL TRADING that in encouraging app-based stock trading in all kinds of stocks. Financial firms are trying to build RELATIONSHIPS early that they hope will be sticky. The notion of teaching kids early about finance and investing is also good, but not all exposure is good, and many kids are influenced by peer-pressure, social-media trends or personalities (e.g. Elon MUSK is cool). Many are mesmerized by MEME stocks and big THEMES. It may be like learning to drive in a race car and bad habits may form early too. There may also be tax (long 1099, wash-sales, etc), account (trade violations) and financial aid implications of these stock trading accounts for kids.
Pg 7, UP & DOWN WALL STREET. STRANGE BOND action recently – bond yields fell as inflation measures rose (CPI 5% due to low base effects; inflation expectations 2.35%). Stocks and bonds rose and fear gauge VIX fell to 15.65. There are huge inflows into investment-grade bonds from PENSION FUNDS; many companies are also shifting pension liabilities to INSURERS who invest heavily in bonds. The FED balance sheet expanded to $7.9 trillion and annual budget DEFICIT may again be $3+ trillion. But 10-yr Treasury yields fell below 1.5% instead of heading towards 2%. David ROSENBERG and Gary SHILLING say that declining bond yields point to economic SLOWDOWN in H2 due to rising prices and supply constraints. Auto and home sales are now showing weakness.
No action is expected at the FOMC meeting this week with the FOMC Statement and POWELL’s press conference on Wednesday. However, look for signals for future shifts to mortgage QE (now $40 billion/mo), Treasury QE (now $80 billion/mo), ZIRP (now 0-0.25%). The fed fund FUTURES market is showing them peaking at 1.6% in this cycle. The LABOR market is distorted by the extra federal unemployment BENEFITS in several states; 25 states (with 25% of unemployed workers) have ended these extra federal benefits, and they will end for the rest in September/October. Many workers have also quit or retired. So, the JOBS picture will become clear only after September/October.
EXTRA. ProPublica disclosed that billionaires (Bezos/AMZN, Musk/TSLA, etc) paid little income TAXES. This will revive the tax debates – from taxes on wealth to capital gains to estates. The IRS is investigating the leak.
Pg 11, STREETWISE. HOME-SOLAR energy is cheap and attractive. There are federal TAX CREDITS of 26% to 2022, 22% in 2023, and then those disappear. There are SUPPLY shortages (chips, steel, batteries, shipping containers, etc). But rising rates (and higher financing costs) may hurt DEMAND. Increasing use of EVs will also be favorable to home-solar (Ford/F EVs will have a cross-selling arrangement with RUN). Related stocks have run up but there has been a pullback. GREEN ENERGY related stocks include Sunrun/RUN (bought Vivint Solar in 2020), First Solar/FSLR, NextEra Energy/NEE, Albemarle/ALB, S Korean LG Chem and Samsung SDI, Tesla/TSLA (bought SolarCity in 2016).
(More later….)
It may be time to buy momentum stocks (ETF MTUM) again. 68% of stocks in MTUM were changed in May rebalancing: Financials are now 32.5% (vs 1.6% before), techs 17.9% (vs 41.1% before). Gone are 3 of 6 FAAMNG (AAPL, MSFT, NVDA).
UPS (fwd P/E 18.5) disappointed at its investor event. Its margins fell during the pandemic, but shipping volume has been strong. New areas are emerging such as temperature-controlled shipping for the healthcare industry. It is attractive after the selloff.
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 96.0%
09/22/21 96.0%
11/03/21 96.0%
12/15/21 96.0%
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.80%, SP500 +0.41%, Nasdaq Comp +1.85%, R2000 +2.16%. DJ Transports -0.91%; DJ Utilities +1.34%. (Rotating spot healthcare XLV +2.01%) US$ index (spot) +0.41%, oil/WTI futures +1.85%, gold futures -0.66%.
YTD (index changes only), DJIA +12.65%, SP500 +13.08%, Nasdaq Comp +9.16%. (Rotating spot healthcare XLV +9.79%)
Pg M4, EUROPE. Outlook for Polish videogame publisher CD Projekt/OTGLY is poor as its buggy Cyberpunk 2077 has flopped. Short interest is rising. As the founder, CEO and insiders own 33% of stock, it would be hard to force management changes.
Pg M4, EMERGING MARKETS. MEXICAN stocks look appealing as President AMLO is losing popularity and his party lost ground in June 6 midterm elections. Covid-19 vaccination level is low at 11% but improving. Many US companies are moving production from China to Mexico.
Pg M6, COMMODITIES. Outlook for CRUDE OIL is bullish (likely 70s or 80s) but don’t expect $100 oil anytime soon. Demand is rising and may soon reach pre-pandemic levels, but supply is restrained (OPEC discipline; growing ESG trend).
Pg M5, OPTIONS. Recommended is pairing selling-put with buying-calls for DocuSign/DOCU; with hope that it becomes a meme stock.
(SP500 VIX 15.65, Nasdaq 100 VXN 19.16, SKEW 159.28 (very high) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M23, M28: An up week in EUROPE (Greece +3.01%, Switzerland +1.63%, Norway -0.63%) and a flat week in ASIA (Singapore +1.81%, HK -0.88%). The equity CEF index (data to Thursday) outperformed the DJIA and its discount was -3%.
TREASURY* 3-mo yield 0.03%, 2-yr 0.16%, 5-yr 0.76%, 10-yr 1.47%, 30-yr 2.15%. DOLLAR rose, DXY 90.51, +0.4% (M31). GOLD (Handy & Harman spot, Thursday) fell to $1,881, -0.5% (M34); the gold-miners fell. (^XAU was at 160.09, -1.22% 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, “Here Come the TEENS. They Can’t Vote, but They’re Old Enough to Buy Stocks”. There is GAMIFICATION of stock trading that has involved kids and adults. They post or look for stock tips on social-media. Some join stock or investment clubs at high school. For many teens, stock trading APPS have replaced videogames. They trade from custodial accounts (control transfers to them at 18-25) or parents’ accounts (using shared login). Fidelity has introduced “youth accounts” for kids aged 13-17 that are overseen by parents (in principle); parents sign waivers and have full liability. But Fido is late in an area where several firms are active – Robinhood, TD Ameritrade (that is now Schwab), Greenlight Financial, Stash, M1 Finance, Acorns (upcoming SPAC-acquisition by PACX), etc. There is COMMISSION-FREE and FRACTIONAL TRADING that in encouraging app-based stock trading in all kinds of stocks. Financial firms are trying to build RELATIONSHIPS early that they hope will be sticky. The notion of teaching kids early about finance and investing is also good, but not all exposure is good, and many kids are influenced by peer-pressure, social-media trends or personalities (e.g. Elon MUSK is cool). Many are mesmerized by MEME stocks and big THEMES. It may be like learning to drive in a race car and bad habits may form early too. There may also be tax (long 1099, wash-sales, etc), account (trade violations) and financial aid implications of these stock trading accounts for kids.
Pg 7, UP & DOWN WALL STREET. STRANGE BOND action recently – bond yields fell as inflation measures rose (CPI 5% due to low base effects; inflation expectations 2.35%). Stocks and bonds rose and fear gauge VIX fell to 15.65. There are huge inflows into investment-grade bonds from PENSION FUNDS; many companies are also shifting pension liabilities to INSURERS who invest heavily in bonds. The FED balance sheet expanded to $7.9 trillion and annual budget DEFICIT may again be $3+ trillion. But 10-yr Treasury yields fell below 1.5% instead of heading towards 2%. David ROSENBERG and Gary SHILLING say that declining bond yields point to economic SLOWDOWN in H2 due to rising prices and supply constraints. Auto and home sales are now showing weakness.
No action is expected at the FOMC meeting this week with the FOMC Statement and POWELL’s press conference on Wednesday. However, look for signals for future shifts to mortgage QE (now $40 billion/mo), Treasury QE (now $80 billion/mo), ZIRP (now 0-0.25%). The fed fund FUTURES market is showing them peaking at 1.6% in this cycle. The LABOR market is distorted by the extra federal unemployment BENEFITS in several states; 25 states (with 25% of unemployed workers) have ended these extra federal benefits, and they will end for the rest in September/October. Many workers have also quit or retired. So, the JOBS picture will become clear only after September/October.
EXTRA. ProPublica disclosed that billionaires (Bezos/AMZN, Musk/TSLA, etc) paid little income TAXES. This will revive the tax debates – from taxes on wealth to capital gains to estates. The IRS is investigating the leak.
Pg 11, STREETWISE. HOME-SOLAR energy is cheap and attractive. There are federal TAX CREDITS of 26% to 2022, 22% in 2023, and then those disappear. There are SUPPLY shortages (chips, steel, batteries, shipping containers, etc). But rising rates (and higher financing costs) may hurt DEMAND. Increasing use of EVs will also be favorable to home-solar (Ford/F EVs will have a cross-selling arrangement with RUN). Related stocks have run up but there has been a pullback. GREEN ENERGY related stocks include Sunrun/RUN (bought Vivint Solar in 2020), First Solar/FSLR, NextEra Energy/NEE, Albemarle/ALB, S Korean LG Chem and Samsung SDI, Tesla/TSLA (bought SolarCity in 2016).
(More later….)