Post by Admin/YBB on Oct 23, 2021 6:43:47 GMT -6
Pg M1, TRADER. Investors have thrown caution to the wind. DJIA, SP500, DJ Transports were at/near new all-time HIGHS in October. Logical? The 10-yr touched 1.704%; 10-yr inflation expectations were +2.66%, 15-yr high; fed fund futures are projecting 1st rate hike in June 2022 (ignoring the FOMC). On the other hand, Q3 EARNINGS have been good so far and the market rewarded those companies. But the coming big TECH earnings may be poor if SNAP crash last week was an early indicator. One reason may be the change by Apple/AAPL in how it now handles targeted ads – iPhone users have to opt-in vs opt-out previously. VIX looked calm (it touched 18-month low; it was almost 29 in September) before a potential storm.
Don’t chase the bounce in Chinese stocks (MCHI +7.3% in October but -10% YTD). BABA was up +22% on the news that it will build its own chips and Jack MA was sighted in Europe. Problems include high debt (imploding Evergrande, etc), slowing economy, government crackdown on big techs, earnings expectations being too high.
News from the MILKEN Conference. Attendance was capped; KN95 masks were issued and were required; there were mask breaks in the open garden areas. Inflation was discarded as a big issue and there was lack of interest in stagflation. There were concerns about easy money and investors taking higher credit risks. Traditional 60-40 was declared dead and suggestions were for multi-asset allocations/funds (stocks, bonds, alternatives).
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% for June 2022 FOMC and later.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +1.08%, SP500 +1.64%, Nasdaq Comp +1.29%, R2000 +1.13%. DJ Transports +3.83%; DJ Utilities +2.55%. (Rotating spot China MCHI +2.91%) US$ index (spot) -0.35%, oil/WTI futures +1.80%, gold futures +1.60%.
YTD (index changes only), DJIA +16.57%, SP500 +21.00%, Nasdaq Comp +17.08%. (Rotating spot China MCHI -10.29%)
Pg M4, EUROPE. German chip maker Infineon (IFNNY; fwd P/E 25.7) is benefitting from trends of electrification, digitization and the current semi chip shortages in many industries (autos, industrial machinery, consumer electronics). Its manufacturing plant in Austin, TX was affected by bad weather and that in Malaysia by Covid-19, but the production is recovering. Almost 30% of revenues are from China.
Pg M4, EMERGING MARKETS. Use of CRYPTOS is rising in the EMs/FMs – China, Cambodia, Thailand, Indonesia, Malaysia, El Salvador, Nigeria, etc. While China has banned other cryptos, it is developing its own CBDC digital-yuan.
EXTRA. Many CYBERCRIMINALS operate from Russia (also Iran, N Korea, China) but Russia itself is not at risk and PUTIN is not helping other countries with cybercriminals. But global regulations will block ransomware payments in CRYPTOS. According to Treasury’s FinCEN, there were 635 ransomware cases in 2021/H1 that cost $590 million.
Pg M6, COMMODITIES. DRAUGHTS in many areas of the US and elsewhere are hurting production of grains, coffee, sugar, meats and livestock. Domestic and foreign demand remains high. This is causing food prices to go up although core inflation indexes exclude food (and energy and housing prices). However, many commodities have run up already, so be selective.
Pg M5, OPTIONS. Daily options volume now is 40x that in 2000. Monetary and fiscal policies remain easy. Early Q3 earnings have been good. VIX remain subdued. Stocks are near all-time high in October. To play this frothy bull market, pair call-buying with put-selling on low-cost Interactive Brokers/IBKR.
(SP500 VIX 15.43, Nasdaq 100 VXN 19.12, SKEW 139.34 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M23, M28: An up week in EUROPE (Denmark +3.23%, Spain -0.77%) and an up week in ASIA (China +2.98%, India -2.68%). The equity CEF index (data to Thursday) underperformed the DJIA and its discount was -3.5%.
TREASURY* 3-mo yield 0.06%, 2-yr 0.48%, 5-yr 1.22%, 10-yr 1.66%, 30-yr 2.08%. DOLLAR fell, DXY 93.61, -0.3% (M31) (what’s with the collapsing Japanese yen?). GOLD (Handy & Harman spot, Thursday) rose to $1,808, +2.5% (M34); the gold-miners rose. (^XAU was at 134.34, +1.73% 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 1.25% (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 18: COVER STORY, “BITCOIN ETFs Are Changing the Game for Cryptos. But Investors should be Wary”. Along with the new futures-based Bitcoin-ETF BITO (AUM already $1.1 billion in 2 days) on Tuesday, Bitcoin rallied to $67,000, +50% since September 30, and then pulled back; Coinbase/COIN rose +32%. Another futures-based Bitcoin-ETF BTF launched on Friday. Cryptos are now $2 trillion market. But these futures based crypto-ETFs come with COMPLEXITIES of contango/backwardation, futures position limits, taxes, etc. A physical-based crypto-ETF is not likely in the US soon although they exist elsewhere (Canada). The US investors have access to restricted crypto funds such as Grayscale GBTC, Bitwise BITW; Grayscale has filed to convert GBTC to a spot-Bitcoin-ETF, and Bitwise has filed for a new physical-based Bitcoin ETF. (Beware that Digital Currency Group (DCG) owns both Grayscale and the news arm Coindesk whose coverage often pushes physical-based ETFs over futures-based ETFs) One problem with physical-based crypto-ETFs is that cryptos trade on various US and foreign exchanges, some even unregistered. In the US, it is also unclear which agency should regulate cryptos, the SEC (well, GENSLER is obviously for that) or CFTC or another? Futures-based ETFs come under the ICA 1940 while physical-based ETFs under the older SA 1933. There will now be COMPETITION in trading cryptos at brokerages (Coinbase, Interactive Brokers, Robinhood, Webull, etc) vs commission-free crypto-ETF trading at most brokerages.
Pg 5, UP & DOWN WALL STREET. CHEAP MONEY is lifting all boats. Enjoy while it lasts. Stocks rose as bond yields rose and POWELL confirmed (again) that QE-taper is coming soon (read that again). The fed fund futures market is projecting 2 rate hikes by the end of 2022, disbelieving the FOMC. The 10-yr TIPS yield is -0.95% (negative) and 10-yr inflation-expectation is +2.62%. Almost $1+ billion of the easy money flowed into the new futures-based ETF BITO. Supposedly dead/dormant SPACs perked up this week – WeWork/WE finally became public via SPAC merger with BOWX, and another, DWAC jumped +800% after announcing merger with Trump Media & Technology Group. Are you worried about weakness in the BOND market? But investor couldn’t have enough bonds and billions were raised by AER, CCL, etc. The new INFRASTRUCTURE bill was slashed to $2 trillion (from $3.5 trillion) by dropping several elements, and its TAX hike part may also be in trouble. More people are beginning to say that INFLATION may be transitory but may linger for longer. And this is when the core inflation doesn’t include food, energy, home prices; some estimate that all-in inflation may now be +10%.
Martin BARNES is retiring from Canadian BCA Research and returning to Scotland. He thinks that STAGFLATION will be here soon – a combination of slow growth and inflation. Real rates are negative. The FED thinks that inflation is transitory. Asset BUBBLES may be forming in housing and stocks as too much dumb money is chasing too few good opportunities. WAGES are rising and putting pressure on company margins. Stocks should still do better than bonds but keep expectations lower. The short-term stock TREND is bullish with major averages above moving averages, but keep in mind +10% upside and -20% downside. Newbies may regret their fully invested behavior, the only one they may have known. Remember the saying for flying, there are bold pilots, and old pilots, but not many old, bold pilots.
Pg 9, STREETWISE. Do you have exposure to METAVERSE? ZUCKERBERG of Facebook/FB is so gung-ho about this advanced form of virtual reality (VR) that he may change Facebook’s name to something weird. Players in this area include FB, RBLX, MSFT, GOOGL, ATVI, EA, TTWO, SONY, HPQ, HTC/Taiwan (note strong connection to videogames). Other indirect beneficiaries include NVDA, QCOM, U, IMMR. There is a metaverse ETF META.
Some projected that lockups at home during pandemic would lead to another baby boom. But people were so busy with the digital stuff (including stocks/options trading) that BIRTH RATE actually FELL 4% during the pandemic. And if this VR stuff keeps up, there may be only VR-BABIES in future.
(More later….)
Don’t chase the bounce in Chinese stocks (MCHI +7.3% in October but -10% YTD). BABA was up +22% on the news that it will build its own chips and Jack MA was sighted in Europe. Problems include high debt (imploding Evergrande, etc), slowing economy, government crackdown on big techs, earnings expectations being too high.
News from the MILKEN Conference. Attendance was capped; KN95 masks were issued and were required; there were mask breaks in the open garden areas. Inflation was discarded as a big issue and there was lack of interest in stagflation. There were concerns about easy money and investors taking higher credit risks. Traditional 60-40 was declared dead and suggestions were for multi-asset allocations/funds (stocks, bonds, alternatives).
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% for June 2022 FOMC and later.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +1.08%, SP500 +1.64%, Nasdaq Comp +1.29%, R2000 +1.13%. DJ Transports +3.83%; DJ Utilities +2.55%. (Rotating spot China MCHI +2.91%) US$ index (spot) -0.35%, oil/WTI futures +1.80%, gold futures +1.60%.
YTD (index changes only), DJIA +16.57%, SP500 +21.00%, Nasdaq Comp +17.08%. (Rotating spot China MCHI -10.29%)
Pg M4, EUROPE. German chip maker Infineon (IFNNY; fwd P/E 25.7) is benefitting from trends of electrification, digitization and the current semi chip shortages in many industries (autos, industrial machinery, consumer electronics). Its manufacturing plant in Austin, TX was affected by bad weather and that in Malaysia by Covid-19, but the production is recovering. Almost 30% of revenues are from China.
Pg M4, EMERGING MARKETS. Use of CRYPTOS is rising in the EMs/FMs – China, Cambodia, Thailand, Indonesia, Malaysia, El Salvador, Nigeria, etc. While China has banned other cryptos, it is developing its own CBDC digital-yuan.
EXTRA. Many CYBERCRIMINALS operate from Russia (also Iran, N Korea, China) but Russia itself is not at risk and PUTIN is not helping other countries with cybercriminals. But global regulations will block ransomware payments in CRYPTOS. According to Treasury’s FinCEN, there were 635 ransomware cases in 2021/H1 that cost $590 million.
Pg M6, COMMODITIES. DRAUGHTS in many areas of the US and elsewhere are hurting production of grains, coffee, sugar, meats and livestock. Domestic and foreign demand remains high. This is causing food prices to go up although core inflation indexes exclude food (and energy and housing prices). However, many commodities have run up already, so be selective.
Pg M5, OPTIONS. Daily options volume now is 40x that in 2000. Monetary and fiscal policies remain easy. Early Q3 earnings have been good. VIX remain subdued. Stocks are near all-time high in October. To play this frothy bull market, pair call-buying with put-selling on low-cost Interactive Brokers/IBKR.
(SP500 VIX 15.43, Nasdaq 100 VXN 19.12, SKEW 139.34 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M23, M28: An up week in EUROPE (Denmark +3.23%, Spain -0.77%) and an up week in ASIA (China +2.98%, India -2.68%). The equity CEF index (data to Thursday) underperformed the DJIA and its discount was -3.5%.
TREASURY* 3-mo yield 0.06%, 2-yr 0.48%, 5-yr 1.22%, 10-yr 1.66%, 30-yr 2.08%. DOLLAR fell, DXY 93.61, -0.3% (M31) (what’s with the collapsing Japanese yen?). GOLD (Handy & Harman spot, Thursday) rose to $1,808, +2.5% (M34); the gold-miners rose. (^XAU was at 134.34, +1.73% 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 1.25% (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 18: COVER STORY, “BITCOIN ETFs Are Changing the Game for Cryptos. But Investors should be Wary”. Along with the new futures-based Bitcoin-ETF BITO (AUM already $1.1 billion in 2 days) on Tuesday, Bitcoin rallied to $67,000, +50% since September 30, and then pulled back; Coinbase/COIN rose +32%. Another futures-based Bitcoin-ETF BTF launched on Friday. Cryptos are now $2 trillion market. But these futures based crypto-ETFs come with COMPLEXITIES of contango/backwardation, futures position limits, taxes, etc. A physical-based crypto-ETF is not likely in the US soon although they exist elsewhere (Canada). The US investors have access to restricted crypto funds such as Grayscale GBTC, Bitwise BITW; Grayscale has filed to convert GBTC to a spot-Bitcoin-ETF, and Bitwise has filed for a new physical-based Bitcoin ETF. (Beware that Digital Currency Group (DCG) owns both Grayscale and the news arm Coindesk whose coverage often pushes physical-based ETFs over futures-based ETFs) One problem with physical-based crypto-ETFs is that cryptos trade on various US and foreign exchanges, some even unregistered. In the US, it is also unclear which agency should regulate cryptos, the SEC (well, GENSLER is obviously for that) or CFTC or another? Futures-based ETFs come under the ICA 1940 while physical-based ETFs under the older SA 1933. There will now be COMPETITION in trading cryptos at brokerages (Coinbase, Interactive Brokers, Robinhood, Webull, etc) vs commission-free crypto-ETF trading at most brokerages.
Pg 5, UP & DOWN WALL STREET. CHEAP MONEY is lifting all boats. Enjoy while it lasts. Stocks rose as bond yields rose and POWELL confirmed (again) that QE-taper is coming soon (read that again). The fed fund futures market is projecting 2 rate hikes by the end of 2022, disbelieving the FOMC. The 10-yr TIPS yield is -0.95% (negative) and 10-yr inflation-expectation is +2.62%. Almost $1+ billion of the easy money flowed into the new futures-based ETF BITO. Supposedly dead/dormant SPACs perked up this week – WeWork/WE finally became public via SPAC merger with BOWX, and another, DWAC jumped +800% after announcing merger with Trump Media & Technology Group. Are you worried about weakness in the BOND market? But investor couldn’t have enough bonds and billions were raised by AER, CCL, etc. The new INFRASTRUCTURE bill was slashed to $2 trillion (from $3.5 trillion) by dropping several elements, and its TAX hike part may also be in trouble. More people are beginning to say that INFLATION may be transitory but may linger for longer. And this is when the core inflation doesn’t include food, energy, home prices; some estimate that all-in inflation may now be +10%.
Martin BARNES is retiring from Canadian BCA Research and returning to Scotland. He thinks that STAGFLATION will be here soon – a combination of slow growth and inflation. Real rates are negative. The FED thinks that inflation is transitory. Asset BUBBLES may be forming in housing and stocks as too much dumb money is chasing too few good opportunities. WAGES are rising and putting pressure on company margins. Stocks should still do better than bonds but keep expectations lower. The short-term stock TREND is bullish with major averages above moving averages, but keep in mind +10% upside and -20% downside. Newbies may regret their fully invested behavior, the only one they may have known. Remember the saying for flying, there are bold pilots, and old pilots, but not many old, bold pilots.
Pg 9, STREETWISE. Do you have exposure to METAVERSE? ZUCKERBERG of Facebook/FB is so gung-ho about this advanced form of virtual reality (VR) that he may change Facebook’s name to something weird. Players in this area include FB, RBLX, MSFT, GOOGL, ATVI, EA, TTWO, SONY, HPQ, HTC/Taiwan (note strong connection to videogames). Other indirect beneficiaries include NVDA, QCOM, U, IMMR. There is a metaverse ETF META.
Some projected that lockups at home during pandemic would lead to another baby boom. But people were so busy with the digital stuff (including stocks/options trading) that BIRTH RATE actually FELL 4% during the pandemic. And if this VR stuff keeps up, there may be only VR-BABIES in future.
(More later….)