Post by Admin/YBB on Sept 25, 2021 6:20:38 GMT -6
Pg M1, TRADER. VOLATILITY last week was a preview of more mayhem to come. Early concerns about the Chinese property company Evergrande faded and the focus shifted on the FOMC (QE taper soon, rate liftoff later) and the unfolding DC drama (possible government shutdown over budget and debt-ceiling combo; infrastructure bills). Now there have been 224 days without 5% or more decline, the 7th longest such streak. But the ride from here on will be bumpy. Fully invested bears at fwd P/E 21 are nervously watching the exists and are inclined to sell first, ask questions later.
Pay attention to how companies talk about EARNINGS for 2021/Q3 earning season that starts on October 13. Analysts have started to cut ESTIMATES due to supply-chain disruptions, higher labor and materials costs, and strong demand (but missed sales due to lack of products). Joseph MEZRICH (Nomura) looks at Gunning Fog Index that quantifies complexity of LANGUAGE used in company 10-Qs/10-Ks and earnings calls. Companies tend to use simple language for good news and complex language for bad news. Remember, KISS is better.
Joby Aviation/JOBY, a SPAC merger in August, plans to make “flying cars”, really an electric vertical takeoff and landing (eVTOL) aircraft/helicopter. It may get the FAA approval in 2022 and may launch commercial air-rides later at about $50 per ride for rides up to 24 miles. Other players include BLDE, ACHR, LILM. All 4 have combined market valuation of $15 billion but $0 sales and it is unlikely that all 4 would be around for long.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes.
NO-CHANGE (for the current ZIRP of 0-0.25%) through May 2022 FOMC. Beyond, the probabilities of rate rise are in double-digit %; more than 50% for November 2022 FOMC and later (finally a change after many weeks).
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.62%, SP500 +0.51%, Nasdaq Comp +0.02%, R2000 +0.50%. DJ Transports +0.53%; DJ Utilities -1.22%. (Rotating spot small-cap R2000 +0.50%) US$ index (spot) +0.10%, oil/WTI futures +2.77%, gold futures +0.02%.
YTD (index changes only), DJIA +13.69%, SP500 +18.62%, Nasdaq Comp +16.75%. (Rotating spot small-cap R2000 +13.83%)
Pg M4, EUROPE. Volkswagen/VWAGY (fwd P/E 6.2) has been down due to concerns about semi-chips shortages and supply-chain disruptions. But it has good future prospects as it jumps into the EVs that may be 20% of sales by 2025, 50% by 2030.
Pg M4, EMERGING MARKETS. Investors are concerned by CHINA’s crackdown on its big techs, ecommerce, online education, some industrials. However, there are investment opportunities in areas promoted by China such as green energy, EVs, semis, AI, automation, healthcare, consumers, fintech. So, invest “with China”.
Pg M6, COMMODITIES. After a huge selloff/crash from May 2021 peak, LUMBER is getting ready for rebound (+25% in just a month). Lumber demand will rise from home construction, packaging, and industrial and consumer uses.
Pg M5, OPTIONS. Chinese Evergrande’s debt troubles spilled into the US banking sector although direct exposures may be small. On the other hand, FED’s reduction in stimulus would benefit banks. Selling puts on financial XLF is recommended.
(SP500 VIX 17.75, Nasdaq 100 VXN 20.93, SKEW 145.67) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M22, M28: An up week in EUROPE (Norway +1.13%, Sweden -1.76%, Greece -4.30%) and a down week in ASIA (India +1.04%, HK -3.27%). The equity CEF index (data to Thursday) underperformed the DJIA and its discount was -3.5%.
TREASURY* 3-mo yield 0.03%, 2-yr 0.29%, 5-yr 0.97%, 10-yr 1.47%, 30-yr 1.99%. DOLLAR rose, DXY 93.28, +0.1% (M31). GOLD (Handy & Harman spot, Thursday) fell to $1,747, -0.5% (M34); the gold-miners tanked. (^XAU was at 119.78, -3.17% 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% (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, “2021 2nd Annual Healthcare Roundtable (Virtual)”. Panelists were Ziad BAKRI (PRHSX), Lilsa BAYKO (Evercore ISI), Stephen BERENSON (Flagship Pioneering), Chris SCHOTT (J.P. Morgan). Each panelist also gave company recommendations. A brief summary of their discussions follows.
Covid-19 has accelerated technologies and practices that should translate into the treatment of other diseases. Covid-19 will go from pandemic to endemic and people will learn to adopt. It was amazing that 2 leading Covid-19 vaccine companies (BioNTech/BNTX, Moderna/MRNA) had no prior products. Giant Pfizer/PFE provided resources for trials, approvals, distribution, marketing to small BNTX (US NIH provided valuable assistance to MRNA). Vaccine development used to take 15 or so years but all that was done in a year for Covid-19 vaccines. Government also played a critical role by guaranteeing advanced purchases from multiple companies. Important developments are now taking place for Alzheimer’s; gene editing/Crispr technology; precision oncology; NASH (nonalcoholic fatty liver disease); AI/computing in drug R&D; drug platforms (mRNA, etc), etc.
So, why have biotech ETFs IBB (market-cap weighted) and XBI (equal weighted) have lagged the SP500? Reason may be that many new companies became public and diluted some great prior successes; 54% of IPOs in 2020 and 44% of IPOs YTD have been in healthcare. There is a lot of M&A activity. Many Big Pharma are using M&A to buildup their drug pipelines. On the government side, not much has happened lately – Medicare Part D (prescriptions) was in 2003; ACA/Obamacare was in 2010. But there are lots of noises about drug pricing; drug access; generics; drug approvals, etc.
Pg 7, UP & DOWN WALL STREET. Stock market shrugged off Chinese Evergrande and the DC drama, but liked POWELL’s easy money (QE taper soon, but rate liftoff later). Monday was good for buy-the-dip (BTD) crowd in a week that didn’t do much overall. Back above the 50-dMA were SP500, Nasdaq Comp, R2000 (below were DJIA, DJ Transports, DJ Utilities). 10-yr Treasury yield moved to 1.47% (while 10-yr TIPS yield was -0.87%). The FED balance sheet is now $8.4 trillion (more than doubled from February 2020) but the Fed also holds $1.4 trillion in reverse REPOs.
Common stocks are considered as long-term INFLATION hedges, but not when companies cannot pass on cost increases. The consumer CPI now is lagging the producer PPI. FedEx/FDX tanked after its earnings miss. Watch 2021/Q3 reports for growing talk of MARGIN PRESSURES, or the signs that profits have peaked. The FED review of trading of financial assets by the Fed officials is ongoing.
Pg 11, STREETWISE. March IPO Vizio/VZIO is interesting for SMART TVs that are overshadowing dumb TVs with dongles (Amazon Fire Stick, Google Chromecast, etc). Smart TVs connect over wi-fi and Vizio offers WatchFree+ streaming bundle. Included are free ad-supported TV services (FAST; examples Pluto TV, Tubi, Xumo, Crackle) and ad-supported video on demand (AVOD; example Peacock). There is a sophisticated ad-software based on automatic content recognition (ACR) that samples what you are watching and delivers targeted ads and controls their frequencies across various streaming channels. Vizio bought an ACR company in 2015. Now, Amazon is also getting into this game. Smart TV players are Samsung Electronics (33% market share) and next a 3-way tie (with combined 33% market share) among Vizio, LG Electronics (S Korea), TCL Technology Group (China), and then SONY (Japan). (Who would have thought a few years ago that Vizio would be ahead of Sony?)
(More later….)
Pay attention to how companies talk about EARNINGS for 2021/Q3 earning season that starts on October 13. Analysts have started to cut ESTIMATES due to supply-chain disruptions, higher labor and materials costs, and strong demand (but missed sales due to lack of products). Joseph MEZRICH (Nomura) looks at Gunning Fog Index that quantifies complexity of LANGUAGE used in company 10-Qs/10-Ks and earnings calls. Companies tend to use simple language for good news and complex language for bad news. Remember, KISS is better.
Joby Aviation/JOBY, a SPAC merger in August, plans to make “flying cars”, really an electric vertical takeoff and landing (eVTOL) aircraft/helicopter. It may get the FAA approval in 2022 and may launch commercial air-rides later at about $50 per ride for rides up to 24 miles. Other players include BLDE, ACHR, LILM. All 4 have combined market valuation of $15 billion but $0 sales and it is unlikely that all 4 would be around for long.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes.
NO-CHANGE (for the current ZIRP of 0-0.25%) through May 2022 FOMC. Beyond, the probabilities of rate rise are in double-digit %; more than 50% for November 2022 FOMC and later (finally a change after many weeks).
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.62%, SP500 +0.51%, Nasdaq Comp +0.02%, R2000 +0.50%. DJ Transports +0.53%; DJ Utilities -1.22%. (Rotating spot small-cap R2000 +0.50%) US$ index (spot) +0.10%, oil/WTI futures +2.77%, gold futures +0.02%.
YTD (index changes only), DJIA +13.69%, SP500 +18.62%, Nasdaq Comp +16.75%. (Rotating spot small-cap R2000 +13.83%)
Pg M4, EUROPE. Volkswagen/VWAGY (fwd P/E 6.2) has been down due to concerns about semi-chips shortages and supply-chain disruptions. But it has good future prospects as it jumps into the EVs that may be 20% of sales by 2025, 50% by 2030.
Pg M4, EMERGING MARKETS. Investors are concerned by CHINA’s crackdown on its big techs, ecommerce, online education, some industrials. However, there are investment opportunities in areas promoted by China such as green energy, EVs, semis, AI, automation, healthcare, consumers, fintech. So, invest “with China”.
Pg M6, COMMODITIES. After a huge selloff/crash from May 2021 peak, LUMBER is getting ready for rebound (+25% in just a month). Lumber demand will rise from home construction, packaging, and industrial and consumer uses.
Pg M5, OPTIONS. Chinese Evergrande’s debt troubles spilled into the US banking sector although direct exposures may be small. On the other hand, FED’s reduction in stimulus would benefit banks. Selling puts on financial XLF is recommended.
(SP500 VIX 17.75, Nasdaq 100 VXN 20.93, SKEW 145.67) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M22, M28: An up week in EUROPE (Norway +1.13%, Sweden -1.76%, Greece -4.30%) and a down week in ASIA (India +1.04%, HK -3.27%). The equity CEF index (data to Thursday) underperformed the DJIA and its discount was -3.5%.
TREASURY* 3-mo yield 0.03%, 2-yr 0.29%, 5-yr 0.97%, 10-yr 1.47%, 30-yr 1.99%. DOLLAR rose, DXY 93.28, +0.1% (M31). GOLD (Handy & Harman spot, Thursday) fell to $1,747, -0.5% (M34); the gold-miners tanked. (^XAU was at 119.78, -3.17% 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% (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, “2021 2nd Annual Healthcare Roundtable (Virtual)”. Panelists were Ziad BAKRI (PRHSX), Lilsa BAYKO (Evercore ISI), Stephen BERENSON (Flagship Pioneering), Chris SCHOTT (J.P. Morgan). Each panelist also gave company recommendations. A brief summary of their discussions follows.
Covid-19 has accelerated technologies and practices that should translate into the treatment of other diseases. Covid-19 will go from pandemic to endemic and people will learn to adopt. It was amazing that 2 leading Covid-19 vaccine companies (BioNTech/BNTX, Moderna/MRNA) had no prior products. Giant Pfizer/PFE provided resources for trials, approvals, distribution, marketing to small BNTX (US NIH provided valuable assistance to MRNA). Vaccine development used to take 15 or so years but all that was done in a year for Covid-19 vaccines. Government also played a critical role by guaranteeing advanced purchases from multiple companies. Important developments are now taking place for Alzheimer’s; gene editing/Crispr technology; precision oncology; NASH (nonalcoholic fatty liver disease); AI/computing in drug R&D; drug platforms (mRNA, etc), etc.
So, why have biotech ETFs IBB (market-cap weighted) and XBI (equal weighted) have lagged the SP500? Reason may be that many new companies became public and diluted some great prior successes; 54% of IPOs in 2020 and 44% of IPOs YTD have been in healthcare. There is a lot of M&A activity. Many Big Pharma are using M&A to buildup their drug pipelines. On the government side, not much has happened lately – Medicare Part D (prescriptions) was in 2003; ACA/Obamacare was in 2010. But there are lots of noises about drug pricing; drug access; generics; drug approvals, etc.
Pg 7, UP & DOWN WALL STREET. Stock market shrugged off Chinese Evergrande and the DC drama, but liked POWELL’s easy money (QE taper soon, but rate liftoff later). Monday was good for buy-the-dip (BTD) crowd in a week that didn’t do much overall. Back above the 50-dMA were SP500, Nasdaq Comp, R2000 (below were DJIA, DJ Transports, DJ Utilities). 10-yr Treasury yield moved to 1.47% (while 10-yr TIPS yield was -0.87%). The FED balance sheet is now $8.4 trillion (more than doubled from February 2020) but the Fed also holds $1.4 trillion in reverse REPOs.
Common stocks are considered as long-term INFLATION hedges, but not when companies cannot pass on cost increases. The consumer CPI now is lagging the producer PPI. FedEx/FDX tanked after its earnings miss. Watch 2021/Q3 reports for growing talk of MARGIN PRESSURES, or the signs that profits have peaked. The FED review of trading of financial assets by the Fed officials is ongoing.
Pg 11, STREETWISE. March IPO Vizio/VZIO is interesting for SMART TVs that are overshadowing dumb TVs with dongles (Amazon Fire Stick, Google Chromecast, etc). Smart TVs connect over wi-fi and Vizio offers WatchFree+ streaming bundle. Included are free ad-supported TV services (FAST; examples Pluto TV, Tubi, Xumo, Crackle) and ad-supported video on demand (AVOD; example Peacock). There is a sophisticated ad-software based on automatic content recognition (ACR) that samples what you are watching and delivers targeted ads and controls their frequencies across various streaming channels. Vizio bought an ACR company in 2015. Now, Amazon is also getting into this game. Smart TV players are Samsung Electronics (33% market share) and next a 3-way tie (with combined 33% market share) among Vizio, LG Electronics (S Korea), TCL Technology Group (China), and then SONY (Japan). (Who would have thought a few years ago that Vizio would be ahead of Sony?)
(More later….)