Post by Admin/YBB on Jul 3, 2021 6:02:54 GMT -6
Pg M1, TRADER. A good week with new highs for DJIA, SP500, Nasdaq Comp. Nothing can stop this BULL MARKET, not the FED, not Covid-19-DELTA, not the rising Covid-19 daily cases. Some amazing STREAK-data (momentum) for SP500: 7-day up-streak was the longest since 1997; 5-month up-streak the longest (only) since August 2020; 5-quarter up-streak the longest since 2017/Q4; 5-quarter up-streak with more than +5% per quarter the 2nd longest since 1945 (the 1st was in 1954); and the H2 gain of +14.4% was nothing to sneer at. Now, let us see which major magazine puts this bull market on its cover (hopefully, not Barron’s) and spoils the party. CONCERNS may be many too: Economic GROWTH is peaking (this is as good as it gets); the FED is starting to talk about reducing QE and rate hikes; Covid-19 hasn’t gone away (16,617 daily cases on July 1; 10-15 states have low vaccination rates by choice; DELTA may become the dominant variant in a few weeks).
5-yr INFLATION-EXPECTATIONS peaked at 2.72% in May and are now at 2.49%. The official FED line is that inflation is transitory. For those still worried about inflation or stagflation (inflation with slow growth), consider the following ideas from JPMorgan/JPM: KRO, CR, NPO, CWST, NL, EXPO, STMP, ATRI, NEOG, WRLD, NTGR, COHR.
PRIVATE JET travel has grown during the pandemic. There is shortage of private and preowned jets (those aren’t called used jets!). A beneficiary will be General Dynamics/GD (Gulfstream jets, etc). As for the commercial air travel, it is recovering slowly and is now at 75% of the level in 2019.
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.
NO-CHANGE (for the current ZIRP of 0-0.25%) through January 2022 FOMC. Beyond, the probabilities of rate rise are in double-digit %; more than 50% beyond July 2022 FOMC.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +1.02%, SP500 +1.67%, Nasdaq Comp +1.94%, R2000 -1.23%. DJ Transports +0.40%; DJ Utilities -0.37%. (Rotating spot tech XLK +3.19%) US$ index (spot) +0.44%, oil/WTI futures +1.50%, gold futures +0.34%.
YTD (index changes only), DJIA +13.66%, SP500 +15.87%, Nasdaq Comp +13.59%. (Rotating spot tech XLK +15.26%)
Pg M4, EUROPE. TRAVEL rebound in Northern Europe will benefit Scandic Hotels (Sweden) and Fraport/FPRUY (Germany; business in 31 airports around the world).
Pg M4, EMERGING MARKETS. Success of the IPO of Chinese rideshare company DIDI should benefit several upcoming EM tech IPOs: Indonesian GoTo (from the merger of Gojek and Tokopedia), Indian Paytm, S Korean super-app Kakao, etc. Note that Chinese techs also face the headwinds of regulations and tough competition.
Pg M6, COMMODITIES. Severe draught in the US farmland is bullish for Spring WHEAT. There is ETF WEAT, but it tracks the Winter wheat more. Russia (#1 exporter) and Canada (#4 exporter) also have poor wheat crops (note that the US is #3 exporter). CORN prices are also high and that creates more demand for Winter wheat for animal feed.
Pg M5, OPTIONS. To bet on the rebound of Cathie WOOD’s Ark Innovation/ARKK, pairing put-selling with call-buying is recommended. (Implicit is the assumption that growth may be back and the rotation to cyclicals may be over/stalled. Of course, recently, both growth and cyclicals have done well but that is unusual.)
(SP500 VIX 15.07, Nasdaq 100 VXN 19.28, SKEW 157.94 (high) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M25, L58: A down week in EUROPE (Denmark +2.16%, Spain -1.92%, Greece -3.09%) and a down week in ASIA (Philippines +1.05%, China -3.20%). The equity CEF index (data to Thursday) outperformed the DJIA and its discount was -4%.
TREASURY* 3-mo yield 0.05%, 2-yr 0.24%, 5-yr 0.86%, 10-yr 1.44%, 30-yr 2.05%. DOLLAR rose, DXY 92.24, +0.4% (M27). GOLD (Handy & Harman spot, Thursday) was flat at $1,786 (M30); the gold-miners were up. (^XAU was at 142.96, +0.68% 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% (L59).
*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 14: COVER STORY, “EUROPE’s Economy is Waking Up. 13 Ways to Play the Rebound”. After lagging in vaccinations, Europe is catching up fast and should have strong rebound in H2 that should continue into 2022 (the US economic activity may be peaking now, in mid-2021). European valuations (fwd P/E 16.8 vs 22.3 for US) also look attractive but some of that may be because Europe is more cyclical than the US. European fiscal stimulus NextGenerationEU Recovery Fund ($950 billion, financed with EU bonds) is just kicking in. This is an important EU-level step and there may be more EU-wide stimulative steps to follow (unlike the haphazard post-financial crisis steps). Worries for debt would be for another day. The ECB will remain easy through 2022 and may also switch to average inflation target of 2% (while the Fed may start to tighten in 2022). Cited are managers of AFJAX, CSIAX, SGENX, SGOVX.
ETFs: IEUR, VGK
STOCKS: BEA Systems/BAESY (UK), BNP Paribas/BNPQY (France), Booking Holdings/BKNG, Fraport/FPRUY (Germany), Groupe Bruxelles Lambert/GBLBY (Belgium), ING, Irish Continental/IRCUF (Ireland), Schneider Electric/SBGSY (France), Svenska Handelsbanken/SVNLY (Sweden), Thales/THLLY (France).
Summaries from the FUNDS QUARTERLY supplement will be in Part 3 in the MUTUAL FUNDS forum.
Pg 5, UP & DOWN WALL STREET. That was a strong JOBS report; gains were impressive in leisure and hospitality, but less so in education and public sector. Headline unemployment rate rose to 5.9% (U3) and total unemployment rate fell to 9.8% (U6). Many are also switching jobs and that is distorting the jobs data. But the jobs report wasn’t strong enough for the FED to change course on QE and rates; after all, 6.8 million are still unemployed. But some question the wisdom of mortgage QE when the housing market is hot; and continuing the monetary policy still in the emergency mode when the emergency has passed (QE alone is $120 billion/mo, or $1.44T/yr). There were new highs for 3 major indexes; the fear gauge VIX was at pre-pandemic levels; the bond spreads were tight.
EXTRA (note duplication with below). Robinhood (tentative HOOD) IPO may ring the bell for the market top. Its IPO filing indicated that its tiny options asset base contributed most of the revenues; most of the revenues were from the payments for the order flow; just over half of its accounts were funded (median value only $240, average value $5,000); 35% of the IPO issue will be for its customers. The meme stock craze is cooling off; several of these companies have issued huge amounts of new stock. Robinhood was fined recently by FINRA for lax compliance.
Pg 7, STREETWISE. ROBINHOOD has benefitted from the wave of meme stocks/options and cryptos, but that may not help its upcoming IPO. Almost 75-80% of its revenue is from payments for order flows and that is considered excessive and with conflicts of interest; more than half of its trading revenue is from options although they represent only small portion of its asset base. Almost 42% of its accounts are unfunded ($0) – as there are no account opening minimum, many seem to be using those as fancy quote service; median account value is $240, average account value is $5,000. It was fined by FINRA citing easy approvals for options and poor disclosures among the issues. Its platform has often failed on busy or critical trading days. Its temporary trading halts in several meme stocks (citing lack of capital) are being investigated by regulators (SEC, FINRA, DOJ, several states attorneys). What would its valuation be? P/S of 10? 15? 20?
(More later….)
5-yr INFLATION-EXPECTATIONS peaked at 2.72% in May and are now at 2.49%. The official FED line is that inflation is transitory. For those still worried about inflation or stagflation (inflation with slow growth), consider the following ideas from JPMorgan/JPM: KRO, CR, NPO, CWST, NL, EXPO, STMP, ATRI, NEOG, WRLD, NTGR, COHR.
PRIVATE JET travel has grown during the pandemic. There is shortage of private and preowned jets (those aren’t called used jets!). A beneficiary will be General Dynamics/GD (Gulfstream jets, etc). As for the commercial air travel, it is recovering slowly and is now at 75% of the level in 2019.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes.
NO-CHANGE (for the current ZIRP of 0-0.25%) through January 2022 FOMC. Beyond, the probabilities of rate rise are in double-digit %; more than 50% beyond July 2022 FOMC.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +1.02%, SP500 +1.67%, Nasdaq Comp +1.94%, R2000 -1.23%. DJ Transports +0.40%; DJ Utilities -0.37%. (Rotating spot tech XLK +3.19%) US$ index (spot) +0.44%, oil/WTI futures +1.50%, gold futures +0.34%.
YTD (index changes only), DJIA +13.66%, SP500 +15.87%, Nasdaq Comp +13.59%. (Rotating spot tech XLK +15.26%)
Pg M4, EUROPE. TRAVEL rebound in Northern Europe will benefit Scandic Hotels (Sweden) and Fraport/FPRUY (Germany; business in 31 airports around the world).
Pg M4, EMERGING MARKETS. Success of the IPO of Chinese rideshare company DIDI should benefit several upcoming EM tech IPOs: Indonesian GoTo (from the merger of Gojek and Tokopedia), Indian Paytm, S Korean super-app Kakao, etc. Note that Chinese techs also face the headwinds of regulations and tough competition.
Pg M6, COMMODITIES. Severe draught in the US farmland is bullish for Spring WHEAT. There is ETF WEAT, but it tracks the Winter wheat more. Russia (#1 exporter) and Canada (#4 exporter) also have poor wheat crops (note that the US is #3 exporter). CORN prices are also high and that creates more demand for Winter wheat for animal feed.
Pg M5, OPTIONS. To bet on the rebound of Cathie WOOD’s Ark Innovation/ARKK, pairing put-selling with call-buying is recommended. (Implicit is the assumption that growth may be back and the rotation to cyclicals may be over/stalled. Of course, recently, both growth and cyclicals have done well but that is unusual.)
(SP500 VIX 15.07, Nasdaq 100 VXN 19.28, SKEW 157.94 (high) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M25, L58: A down week in EUROPE (Denmark +2.16%, Spain -1.92%, Greece -3.09%) and a down week in ASIA (Philippines +1.05%, China -3.20%). The equity CEF index (data to Thursday) outperformed the DJIA and its discount was -4%.
TREASURY* 3-mo yield 0.05%, 2-yr 0.24%, 5-yr 0.86%, 10-yr 1.44%, 30-yr 2.05%. DOLLAR rose, DXY 92.24, +0.4% (M27). GOLD (Handy & Harman spot, Thursday) was flat at $1,786 (M30); the gold-miners were up. (^XAU was at 142.96, +0.68% 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% (L59).
*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 14: COVER STORY, “EUROPE’s Economy is Waking Up. 13 Ways to Play the Rebound”. After lagging in vaccinations, Europe is catching up fast and should have strong rebound in H2 that should continue into 2022 (the US economic activity may be peaking now, in mid-2021). European valuations (fwd P/E 16.8 vs 22.3 for US) also look attractive but some of that may be because Europe is more cyclical than the US. European fiscal stimulus NextGenerationEU Recovery Fund ($950 billion, financed with EU bonds) is just kicking in. This is an important EU-level step and there may be more EU-wide stimulative steps to follow (unlike the haphazard post-financial crisis steps). Worries for debt would be for another day. The ECB will remain easy through 2022 and may also switch to average inflation target of 2% (while the Fed may start to tighten in 2022). Cited are managers of AFJAX, CSIAX, SGENX, SGOVX.
ETFs: IEUR, VGK
STOCKS: BEA Systems/BAESY (UK), BNP Paribas/BNPQY (France), Booking Holdings/BKNG, Fraport/FPRUY (Germany), Groupe Bruxelles Lambert/GBLBY (Belgium), ING, Irish Continental/IRCUF (Ireland), Schneider Electric/SBGSY (France), Svenska Handelsbanken/SVNLY (Sweden), Thales/THLLY (France).
Summaries from the FUNDS QUARTERLY supplement will be in Part 3 in the MUTUAL FUNDS forum.
Pg 5, UP & DOWN WALL STREET. That was a strong JOBS report; gains were impressive in leisure and hospitality, but less so in education and public sector. Headline unemployment rate rose to 5.9% (U3) and total unemployment rate fell to 9.8% (U6). Many are also switching jobs and that is distorting the jobs data. But the jobs report wasn’t strong enough for the FED to change course on QE and rates; after all, 6.8 million are still unemployed. But some question the wisdom of mortgage QE when the housing market is hot; and continuing the monetary policy still in the emergency mode when the emergency has passed (QE alone is $120 billion/mo, or $1.44T/yr). There were new highs for 3 major indexes; the fear gauge VIX was at pre-pandemic levels; the bond spreads were tight.
EXTRA (note duplication with below). Robinhood (tentative HOOD) IPO may ring the bell for the market top. Its IPO filing indicated that its tiny options asset base contributed most of the revenues; most of the revenues were from the payments for the order flow; just over half of its accounts were funded (median value only $240, average value $5,000); 35% of the IPO issue will be for its customers. The meme stock craze is cooling off; several of these companies have issued huge amounts of new stock. Robinhood was fined recently by FINRA for lax compliance.
Pg 7, STREETWISE. ROBINHOOD has benefitted from the wave of meme stocks/options and cryptos, but that may not help its upcoming IPO. Almost 75-80% of its revenue is from payments for order flows and that is considered excessive and with conflicts of interest; more than half of its trading revenue is from options although they represent only small portion of its asset base. Almost 42% of its accounts are unfunded ($0) – as there are no account opening minimum, many seem to be using those as fancy quote service; median account value is $240, average account value is $5,000. It was fined by FINRA citing easy approvals for options and poor disclosures among the issues. Its platform has often failed on busy or critical trading days. Its temporary trading halts in several meme stocks (citing lack of capital) are being investigated by regulators (SEC, FINRA, DOJ, several states attorneys). What would its valuation be? P/S of 10? 15? 20?
(More later….)