Post by Admin/YBB on Sept 4, 2021 6:30:36 GMT -6
Pg M1, TRADER. Nothing has stopped this BULL market – not the Hurricane Ida, not poor jobs report (thinking was that weak economy due to Covid-19-Delta may delay Fed actions and the jobs report may flip-flop). Just staying in the market seems the path of least resistance. Deploy restive cash into consumer-discretionary and housing stocks.
Electricity-infrastructure company Quanta Services/PWR will benefit from infrastructure stimulus and the push for renewable energy. It is acquiring Blattner, a renewable power engineering and construction firm.
Yale endowment’s low exposure to US stocks (only 2.3%) may not change under its new Director MENDELSOHN, a protégé of late SWENSEN. It has heavy exposure to alternatives (private-equity, venture-capital, etc). It has lagged SP500 over 10 years.
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 December 2022 FOMC and later.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.24%, SP500 +0.58%, Nasdaq Comp +1.55%, R2000 +0.65%. DJ Transports -1.03%; DJ Utilities +1.36%. (Rotating spot bank KBE -2.38%) US$ index (spot) -0.59%, oil/WTI futures +0.80%, gold futures +0.79%.
YTD (index changes only), DJIA +15.56%, SP500 +20.75%, Nasdaq Comp +19.21%. (Rotating spot bank KBE +23.36%)
Pg M4, EUROPE. German personal-care product company Beiersdorf/BDRFY (51.2% owned by Herz family) has a new CEO WARNERY since 05/2021 who is making several changes. Personal-care business accounts for 80% of the revenue with brands Nivea, La Prairie, Eucerin, Aquaphor, Coppertone (2019- ), etc. It also has a small industrial division Tesa (20% of revenue) that makes adhesives for industrial and consumer use. High cash position may be used for dividends and/or acquisitions. It is an attractive play for recovery.
Pg M4, EMERGING MARKETS. CHINESE REGULATORS are acting like bulls in a China shop. When they picked on old line industries (steel, mining, banking), the Western investors didn’t care, but then they went after high-profile big techs (Internet, software, e-commerce, social-media). There was a sharp selloff but now there is a rebound (KWEB +20% since August 19). Attractive are biotech, consumer-staples, green energy, etc. China has risks but avoiding China is also risky.
Pg M6, COMMODITIES. Hurricane IDA has disrupted OIL/GAS production and distribution. Things may take weeks to get normal. And the Hurricane season will end on November 30. So, GASOLINE prices now are high even as the Summer driving season is ending by the Labor Day. High gasoline prices may remain until early-October.
Pg M5, OPTIONS. Selling calls on highflying Moderna/MRNA are recommended. Be aware of its R&D day on September 9 and Q3 earnings release on October 29.
(SP500 VIX 16.41, Nasdaq 100 VXN 19.75, SKEW 162.27 (very high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M27, M32: A flat week in EUROPE (Netherlands +1.63%, Belgium -0.73%) and a great week (again) in ASIA (Japan +4.36%, Malaysia +0.25%). The equity CEF index (data to Thursday) outperformed the DJIA and its discount was -4%.
TREASURY* 3-mo yield 0.05%, 2-yr 0.21%, 5-yr 0.78%, 10-yr 1.33%, 30-yr 1.94%. DOLLAR fell, DXY 92.12, -0.7% (M35). GOLD (Handy & Harman spot, Thursday) rose to $1,824, +1.4% (M38); the gold-miners rose. (^XAU was at 136.04, +1.18% 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 1.10% (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 17: COVER STORY, “SEC’s Gary GENSLER Has a Big, New Vision for the Stock Market. There Are Too Many Inherent Conflicts of Interest”. The inner works of the US stock market are acting up and Gensler wants to fix that. PROBLEMS include HFTs; exchange rebates; payments for order flow (annually $2 billion for stocks, $4 billion for options); meme-stock phenomenon; trade gamification; dark pools (unlit/off-exchange markets); SPACs; reduced liquidity (due to constraints on banks); brokerage capital requirements imposed by clearing firms. Brokerages citing PRICE-IMPROVEMENTS for trades are just not enough. The CHANGES may not be easy as there are powerful vested interests; politicians, industry groups and consumer groups may get involved. Robinhood/HOOD has already threatened to sue the SEC if it bans payments for order flow; Virtu/VIRT has said that drastic changes are not needed. Gensler was also the CFTC Chairman from 2009-14 (this may be relevant as the CFTC now says that the SEC may be encroaching upon CFTC’s jurisdictions).
Pg 9, UP & DOWN WALL STREET. What stock market bubble? But it is indeed rare for stocks to rise for 7 successive months, or not even have a pullback (of at least -5%) YTD. Retail flows into stocks remain strong. Poor JOBS report indicated that the economy may be slowing down due to Covid-19-Delta; leisure and hospitality segments lagged in job creation. In bad news is good news scenario, investors thought that the FED may have to delay its taper program. Stocks may do fine but there may be an overdue CORRECTION. Barbell of growth and cyclicals may continue to work.
Investors are overlooking the impact of higher TAXES from budget reconciliation that will hurt corporate EARNINGS. The size of the currently proposed STIMULUS ($1 trillion for infrastructure capex + $3.5 trillion for fuzzy and soft stuff) may also have to be reduced. A hike in corporate tax to 25% (from the current 21%) will hurt tech and healthcare the most. The tax hits will be almost immediate while the stimulus benefits will be spread over years. The analyst ESTIMATES now don’t include the impacts of these higher taxes, but they will start coming down with a lag.
Pg 13, STREETWISE (it is back after 2 weeks). In spite of IN-CLASS learning at most schools this Fall, the HYBRID learning model will be around. Problems with in-class learning are that many students skip classes (and notes sharing is a poor substitute) and graduation rates are low. The hybrid model allows catch up for those motivated but with work and schedule issues. Beneficiaries will include CHGG (roots at Iowa State U), TWOU, LRN (used to be K12); recent IPOs DUOL, PWSC; private companies like Udemy.
(More later….)
Electricity-infrastructure company Quanta Services/PWR will benefit from infrastructure stimulus and the push for renewable energy. It is acquiring Blattner, a renewable power engineering and construction firm.
Yale endowment’s low exposure to US stocks (only 2.3%) may not change under its new Director MENDELSOHN, a protégé of late SWENSEN. It has heavy exposure to alternatives (private-equity, venture-capital, etc). It has lagged SP500 over 10 years.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes.
NO-CHANGE (for the current ZIRP of 0-0.25%) through May 2022 FOMC. Beyond, the probabilities of rate rise are in double-digit %; more than 50% for December 2022 FOMC and later.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.24%, SP500 +0.58%, Nasdaq Comp +1.55%, R2000 +0.65%. DJ Transports -1.03%; DJ Utilities +1.36%. (Rotating spot bank KBE -2.38%) US$ index (spot) -0.59%, oil/WTI futures +0.80%, gold futures +0.79%.
YTD (index changes only), DJIA +15.56%, SP500 +20.75%, Nasdaq Comp +19.21%. (Rotating spot bank KBE +23.36%)
Pg M4, EUROPE. German personal-care product company Beiersdorf/BDRFY (51.2% owned by Herz family) has a new CEO WARNERY since 05/2021 who is making several changes. Personal-care business accounts for 80% of the revenue with brands Nivea, La Prairie, Eucerin, Aquaphor, Coppertone (2019- ), etc. It also has a small industrial division Tesa (20% of revenue) that makes adhesives for industrial and consumer use. High cash position may be used for dividends and/or acquisitions. It is an attractive play for recovery.
Pg M4, EMERGING MARKETS. CHINESE REGULATORS are acting like bulls in a China shop. When they picked on old line industries (steel, mining, banking), the Western investors didn’t care, but then they went after high-profile big techs (Internet, software, e-commerce, social-media). There was a sharp selloff but now there is a rebound (KWEB +20% since August 19). Attractive are biotech, consumer-staples, green energy, etc. China has risks but avoiding China is also risky.
Pg M6, COMMODITIES. Hurricane IDA has disrupted OIL/GAS production and distribution. Things may take weeks to get normal. And the Hurricane season will end on November 30. So, GASOLINE prices now are high even as the Summer driving season is ending by the Labor Day. High gasoline prices may remain until early-October.
Pg M5, OPTIONS. Selling calls on highflying Moderna/MRNA are recommended. Be aware of its R&D day on September 9 and Q3 earnings release on October 29.
(SP500 VIX 16.41, Nasdaq 100 VXN 19.75, SKEW 162.27 (very high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M27, M32: A flat week in EUROPE (Netherlands +1.63%, Belgium -0.73%) and a great week (again) in ASIA (Japan +4.36%, Malaysia +0.25%). The equity CEF index (data to Thursday) outperformed the DJIA and its discount was -4%.
TREASURY* 3-mo yield 0.05%, 2-yr 0.21%, 5-yr 0.78%, 10-yr 1.33%, 30-yr 1.94%. DOLLAR fell, DXY 92.12, -0.7% (M35). GOLD (Handy & Harman spot, Thursday) rose to $1,824, +1.4% (M38); the gold-miners rose. (^XAU was at 136.04, +1.18% 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 1.10% (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 17: COVER STORY, “SEC’s Gary GENSLER Has a Big, New Vision for the Stock Market. There Are Too Many Inherent Conflicts of Interest”. The inner works of the US stock market are acting up and Gensler wants to fix that. PROBLEMS include HFTs; exchange rebates; payments for order flow (annually $2 billion for stocks, $4 billion for options); meme-stock phenomenon; trade gamification; dark pools (unlit/off-exchange markets); SPACs; reduced liquidity (due to constraints on banks); brokerage capital requirements imposed by clearing firms. Brokerages citing PRICE-IMPROVEMENTS for trades are just not enough. The CHANGES may not be easy as there are powerful vested interests; politicians, industry groups and consumer groups may get involved. Robinhood/HOOD has already threatened to sue the SEC if it bans payments for order flow; Virtu/VIRT has said that drastic changes are not needed. Gensler was also the CFTC Chairman from 2009-14 (this may be relevant as the CFTC now says that the SEC may be encroaching upon CFTC’s jurisdictions).
Pg 9, UP & DOWN WALL STREET. What stock market bubble? But it is indeed rare for stocks to rise for 7 successive months, or not even have a pullback (of at least -5%) YTD. Retail flows into stocks remain strong. Poor JOBS report indicated that the economy may be slowing down due to Covid-19-Delta; leisure and hospitality segments lagged in job creation. In bad news is good news scenario, investors thought that the FED may have to delay its taper program. Stocks may do fine but there may be an overdue CORRECTION. Barbell of growth and cyclicals may continue to work.
Investors are overlooking the impact of higher TAXES from budget reconciliation that will hurt corporate EARNINGS. The size of the currently proposed STIMULUS ($1 trillion for infrastructure capex + $3.5 trillion for fuzzy and soft stuff) may also have to be reduced. A hike in corporate tax to 25% (from the current 21%) will hurt tech and healthcare the most. The tax hits will be almost immediate while the stimulus benefits will be spread over years. The analyst ESTIMATES now don’t include the impacts of these higher taxes, but they will start coming down with a lag.
Pg 13, STREETWISE (it is back after 2 weeks). In spite of IN-CLASS learning at most schools this Fall, the HYBRID learning model will be around. Problems with in-class learning are that many students skip classes (and notes sharing is a poor substitute) and graduation rates are low. The hybrid model allows catch up for those motivated but with work and schedule issues. Beneficiaries will include CHGG (roots at Iowa State U), TWOU, LRN (used to be K12); recent IPOs DUOL, PWSC; private companies like Udemy.
(More later….)