Post by Admin/YBB on Jul 10, 2021 6:57:28 GMT -6
Pg M1, TRADER. A repeat – new HIGHS again for major indexes, DJIA, SP500, Nasdaq Comp. Covid-19 fears (with no spectators to be allowed at Summer Olympics in Japan) and low bond YIELDS (with 10-yr touching 1.2455%) cannot keep this bull market down. However, concerns are emerging for PEAK GROWTH now and slowdown later (the ISM services index disappointed). But note that there have been 7 economic expansions since 1970, and on average, they lasted 37 quarters (9+ years!) beyond the peak quarters; the shortest duration was only 4 quarters beyond the peak quarter (1980-81). And stocks rose during these expansions albeit with volatility.
Although BANKS were hurt by the recent decline in bond yields, their Q2 EARNINGS should be solid – economy is improving, there is more trading and M&A activity, and some loan-loss reserves may be reversed and flowed through earnings. All big banks passed the STRESS-TESTS last month and can increase dividends and buybacks. Bank valuations are still attractive with ETF KBE fwd P/E of 11.1 (vs 21.5 for SP500); Citigroup/C has P/B of 0.9 only and yields 3%.
Alphabet nonvoting class C GOOG is trading at 3% premium to the voting class A GOOGL; the buybacks apply only to GOOG; cofounders BRIN and PAGE own nontraded super-voting class B stock. It is the best FAAMG stock YTD. Its growth is strong, cash position is high, but it may not buy anything big in the current regulatory environment.
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 May 2022 FOMC. Beyond, the probabilities of rate rise are in double-digit %; more than 50% for Dec 2022 FOMC and later.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.24%, SP500 +0.40%, Nasdaq Comp +0.43%, R2000 -1.12%. DJ Transports -1.29%; DJ Utilities +0.95%. (Rotating spot bank KBE -1.19%) US$ index (spot) -0.14%, oil/WTI futures -0.80%, gold futures +1.54%.
YTD (index changes only), DJIA +13.93%, SP500 +16.33%, Nasdaq Comp +14.07%. (Rotating spot bank KBE +21.23%)
Pg M4, EUROPE. Besides Covid-19 vaccine (500 million doses provided globally so far at-cost, i.e., no profits), AstraZeneca (AZN; fwd P/E 19) has a strong drug pipeline (oncology, cardiovascular, metabolic, respiratory, immunologic, etc). It has had adverse publicity related to Covid-19 vaccine side effects and has been caught in the political fights between the UK and EU. It recently acquired rare-disease specialist Alexion/ALXN.
Pg M4, EMERGING MARKETS. CHINESE HY bonds are attractive after the selloff. Many are hard-currency bonds issued by highly leveraged property companies. China won’t let its real estate market collapse and has cut the required bank reserve ratios. China Evergrande (#2 builder in China) is in trouble but may be too big to fail.
Pg M6, COMMODITIES. SUGAR has rallied (+20% in Q2) due to poor weather (dry, cool) in Brazil and possibly in Asia (Thailand, India). Demand for sugarcane for ETHANOL also has risen with CRUDE OIL prices. Recent deadlock at OPEC/OPEC+ is bullish for oil and sugar (who would have thought that the OPEC had anything to do with sugar?). Sugar futures are thinly traded, and the ETF is CANE.
Pg M5, OPTIONS. Risks of government intervention are rising in CHINA and the regulators there are no longer content with slaps on the wrists (as in the past). Consider buying puts on Chinese stocks and ETFs (FXI, KWEB); also sell/write calls on current holdings.
(SP500 VIX 16.18, Nasdaq 100 VXN 21.23, SKEW 155.70 (high) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M27, M32: An up week in EUROPE (Sweden +1.68%, Spain -1.80%) and a bad week in ASIA (Singapore +0.16%, China -3.80%). The equity CEF index (data to Thursday) underperformed the DJIA and its discount was -4%.
TREASURY* 3-mo yield 0.06%, 2-yr 0.23%, 5-yr 0.79%, 10-yr 1.37%, 30-yr 1.99%. DOLLAR fell, DXY 92.10, -0.1% (M35). GOLD (Handy & Harman spot, Thursday) rose to $1,806 (M38); the gold-miners were down. (^XAU was at 141.37, -1.11% 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% (M33).
*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 18: COVER STORY, “The MEME Stock Trade is Far from Over. What Investors Need to Know”. Several meme stocks (AMC, GME, BB, etc) perked up again in January and have continued strong; there are even some new names (CLOV, NEGG) as some old names have fades (BBBY). Many of these companies are burning cash with no signs of turning around and have high SHORT interests (although many short-sellers are staying away). After quintupling its outstanding shares, AMC cancelled yet another stock issue because it was unpopular in the chatrooms – welcome to corporate governance by chatroom polls. It is astounding that June average daily trading $-volume in AMC was higher than that for much bigger and widely held AMZN, AAPL, etc. Many buy these meme stocks and/or their OPTIONS, and buy-the-dip is alive and well for this crowd at WSB/Reddit, Superstonk/Reddit, etc. These new traders don’t follow any traditional rules of investing, shun mutual funds and ETFs, and dive fearlessly into stocks or options of companies with weak fundamentals but lots of trading action and significant short interests. Any many of these new traders will hang around even after offices open and kids return to schools. Many institutions are also trying to piggyback on to the retail crowd. ONLINE brokers added record 10 million new accounts in 2020 and that is already exceed by mid-2021. 15% of Schwab customers trading now started just after 2020. Fidelity is luring kids as young as 13 to stock trading (it has a Reddit page as do most other brokers). Robinhood IPO is coming soon, and it has promised a huge allocation to its customers. There seems an inverse correlation between meme stocks and CRYPTOS. REGULATORS are looking at this trading phenomenon.
Pg 23: Meme stock ANALYSTS have thrown in the towel. Meme stocks are just too crazy and volatile now as retail WSB/Reddit crowd tangos with the short-sellers. Many analysts thought that this silliness would be over by now, but the rollercoaster goes on. The prices have disconnected with fundamentals or economic realities. Several analysts have dropped coverage and have resorted to just watching the social-media chatter. Thin options markets and short-squeezes are also playing roles in this sheer momentum strategy, and some institutional and hedge-fund investors have joined the retail crowd to play/manipulate. Companies related to meme stocks are also raising huge amounts by issuing new stock but don’t have sound plans for future.
Pg 5, UP & DOWN WALL STREET. Behavior of the BOND market is projecting economic slowdown in H2. The 10-yr went from 1.75% in March to 1.25% on Thursday (near 200-dMA). What’s wrong with this picture? This when many were expecting 10-yr to be headed soon to 2% or more. Bond market is reacting to PEAK GROWTH now and the FED becoming less accommodating in 2022-23. Next come lots of economic data, Q2 earnings (showing stagflation?) and the Fed Chair POWELL’s testimony (House committee on Wednesday, Senate committee on Thursday; the text was released on Friday). The PBOC (China) took easing steps on Friday by reducing required bank reserves; Chinese HY bond market is under stress, and its tech and property stocks have sold off for various reasons.
PUBLIC PENSION funds have benefitted from this bull market. The top 3rd (by size) is now 93% funded, middle 3rd 74% funded but the bottom 3rd only 54% funded. Their median interest RATE assumptions of 7% remains high (typically, the assumed rate does TRIPLE-duty as accumulation crediting rate, annuitizing interest rate for payouts and discount rate for calculating present-value of pension liabilities; these then benefit, respectively, the current employees, retirees and the plan/state).
Pg 7, STREETWISE. 4-5 US companies now have $1 TRILLION market-cap (FB is slipping in/out). The next in line are quite far off: TSLA, BRK-A/B, BABA, TSM, V, NVDA, JPM, JNJ. Who among them will sprint next to the $1 trillion club? Author EULE is betting on V.
(More later….)
Although BANKS were hurt by the recent decline in bond yields, their Q2 EARNINGS should be solid – economy is improving, there is more trading and M&A activity, and some loan-loss reserves may be reversed and flowed through earnings. All big banks passed the STRESS-TESTS last month and can increase dividends and buybacks. Bank valuations are still attractive with ETF KBE fwd P/E of 11.1 (vs 21.5 for SP500); Citigroup/C has P/B of 0.9 only and yields 3%.
Alphabet nonvoting class C GOOG is trading at 3% premium to the voting class A GOOGL; the buybacks apply only to GOOG; cofounders BRIN and PAGE own nontraded super-voting class B stock. It is the best FAAMG stock YTD. Its growth is strong, cash position is high, but it may not buy anything big in the current regulatory environment.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes.
NO-CHANGE (for the current ZIRP of 0-0.25%) through May 2022 FOMC. Beyond, the probabilities of rate rise are in double-digit %; more than 50% for Dec 2022 FOMC and later.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.24%, SP500 +0.40%, Nasdaq Comp +0.43%, R2000 -1.12%. DJ Transports -1.29%; DJ Utilities +0.95%. (Rotating spot bank KBE -1.19%) US$ index (spot) -0.14%, oil/WTI futures -0.80%, gold futures +1.54%.
YTD (index changes only), DJIA +13.93%, SP500 +16.33%, Nasdaq Comp +14.07%. (Rotating spot bank KBE +21.23%)
Pg M4, EUROPE. Besides Covid-19 vaccine (500 million doses provided globally so far at-cost, i.e., no profits), AstraZeneca (AZN; fwd P/E 19) has a strong drug pipeline (oncology, cardiovascular, metabolic, respiratory, immunologic, etc). It has had adverse publicity related to Covid-19 vaccine side effects and has been caught in the political fights between the UK and EU. It recently acquired rare-disease specialist Alexion/ALXN.
Pg M4, EMERGING MARKETS. CHINESE HY bonds are attractive after the selloff. Many are hard-currency bonds issued by highly leveraged property companies. China won’t let its real estate market collapse and has cut the required bank reserve ratios. China Evergrande (#2 builder in China) is in trouble but may be too big to fail.
Pg M6, COMMODITIES. SUGAR has rallied (+20% in Q2) due to poor weather (dry, cool) in Brazil and possibly in Asia (Thailand, India). Demand for sugarcane for ETHANOL also has risen with CRUDE OIL prices. Recent deadlock at OPEC/OPEC+ is bullish for oil and sugar (who would have thought that the OPEC had anything to do with sugar?). Sugar futures are thinly traded, and the ETF is CANE.
Pg M5, OPTIONS. Risks of government intervention are rising in CHINA and the regulators there are no longer content with slaps on the wrists (as in the past). Consider buying puts on Chinese stocks and ETFs (FXI, KWEB); also sell/write calls on current holdings.
(SP500 VIX 16.18, Nasdaq 100 VXN 21.23, SKEW 155.70 (high) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M27, M32: An up week in EUROPE (Sweden +1.68%, Spain -1.80%) and a bad week in ASIA (Singapore +0.16%, China -3.80%). The equity CEF index (data to Thursday) underperformed the DJIA and its discount was -4%.
TREASURY* 3-mo yield 0.06%, 2-yr 0.23%, 5-yr 0.79%, 10-yr 1.37%, 30-yr 1.99%. DOLLAR fell, DXY 92.10, -0.1% (M35). GOLD (Handy & Harman spot, Thursday) rose to $1,806 (M38); the gold-miners were down. (^XAU was at 141.37, -1.11% 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% (M33).
*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 18: COVER STORY, “The MEME Stock Trade is Far from Over. What Investors Need to Know”. Several meme stocks (AMC, GME, BB, etc) perked up again in January and have continued strong; there are even some new names (CLOV, NEGG) as some old names have fades (BBBY). Many of these companies are burning cash with no signs of turning around and have high SHORT interests (although many short-sellers are staying away). After quintupling its outstanding shares, AMC cancelled yet another stock issue because it was unpopular in the chatrooms – welcome to corporate governance by chatroom polls. It is astounding that June average daily trading $-volume in AMC was higher than that for much bigger and widely held AMZN, AAPL, etc. Many buy these meme stocks and/or their OPTIONS, and buy-the-dip is alive and well for this crowd at WSB/Reddit, Superstonk/Reddit, etc. These new traders don’t follow any traditional rules of investing, shun mutual funds and ETFs, and dive fearlessly into stocks or options of companies with weak fundamentals but lots of trading action and significant short interests. Any many of these new traders will hang around even after offices open and kids return to schools. Many institutions are also trying to piggyback on to the retail crowd. ONLINE brokers added record 10 million new accounts in 2020 and that is already exceed by mid-2021. 15% of Schwab customers trading now started just after 2020. Fidelity is luring kids as young as 13 to stock trading (it has a Reddit page as do most other brokers). Robinhood IPO is coming soon, and it has promised a huge allocation to its customers. There seems an inverse correlation between meme stocks and CRYPTOS. REGULATORS are looking at this trading phenomenon.
Pg 23: Meme stock ANALYSTS have thrown in the towel. Meme stocks are just too crazy and volatile now as retail WSB/Reddit crowd tangos with the short-sellers. Many analysts thought that this silliness would be over by now, but the rollercoaster goes on. The prices have disconnected with fundamentals or economic realities. Several analysts have dropped coverage and have resorted to just watching the social-media chatter. Thin options markets and short-squeezes are also playing roles in this sheer momentum strategy, and some institutional and hedge-fund investors have joined the retail crowd to play/manipulate. Companies related to meme stocks are also raising huge amounts by issuing new stock but don’t have sound plans for future.
Pg 5, UP & DOWN WALL STREET. Behavior of the BOND market is projecting economic slowdown in H2. The 10-yr went from 1.75% in March to 1.25% on Thursday (near 200-dMA). What’s wrong with this picture? This when many were expecting 10-yr to be headed soon to 2% or more. Bond market is reacting to PEAK GROWTH now and the FED becoming less accommodating in 2022-23. Next come lots of economic data, Q2 earnings (showing stagflation?) and the Fed Chair POWELL’s testimony (House committee on Wednesday, Senate committee on Thursday; the text was released on Friday). The PBOC (China) took easing steps on Friday by reducing required bank reserves; Chinese HY bond market is under stress, and its tech and property stocks have sold off for various reasons.
PUBLIC PENSION funds have benefitted from this bull market. The top 3rd (by size) is now 93% funded, middle 3rd 74% funded but the bottom 3rd only 54% funded. Their median interest RATE assumptions of 7% remains high (typically, the assumed rate does TRIPLE-duty as accumulation crediting rate, annuitizing interest rate for payouts and discount rate for calculating present-value of pension liabilities; these then benefit, respectively, the current employees, retirees and the plan/state).
Pg 7, STREETWISE. 4-5 US companies now have $1 TRILLION market-cap (FB is slipping in/out). The next in line are quite far off: TSLA, BRK-A/B, BABA, TSM, V, NVDA, JPM, JNJ. Who among them will sprint next to the $1 trillion club? Author EULE is betting on V.
(More later….)