Post by Admin/YBB on Oct 30, 2021 7:32:22 GMT -6
Pg M1, TRADER. DO NOT SELL stocks now – ignore bad news noises (flattening yield-curve; weak tech earnings, etc). Institutions and funds would be playing CATCHUP until the yearend. Market BREADTH has improved (NYSE A/D line was at a new high). With strong technicals, any pullbacks should be shallow.
Global SUPPLY-CHAIN disruptions are affecting segments/sectors sequentially – autos (GM), industrials (GE, HON, CAT), now IT/tech (AMZN, AAPL), next may be retail (after the news comes of holiday sales and profit disappointments). But these supply problems should resolve themselves (a demand problem would be much worse).
Cinemark/CNK (reports Friday) is a better post-pandemic buy than meme crowd favorite AMC.
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 +0.40%, SP500 +1.33%, Nasdaq Comp +2.70%, R2000 +0.26%. DJ Transports +0.85%; DJ Utilities -0.60%. (Rotating spot AAPL +0.75%) US$ index (spot) +0.52%, oil/WTI futures -0.23%, gold futures -0.67%.
YTD (index changes only), DJIA +17.03%, SP500 +22.61%, Nasdaq Comp +20.25%. (Rotating spot AAPL +12.89%)
Pg M4, EUROPE. German Siemens/SIEGY is attractive at 25-35% discount from its sum-of-the-parts (SOTP) valuation. It is now a global electrical engineering giant with products related to EVs, renewable power, factory automation, electrical grids, etc. New CEO BUSCH started in February. In recent restructurings, several units were spun off with names like Siemens Xyz, and Siemens holds varying stakes in those.
Pg M4, EMERGING MARKETS. President ERDOGAN won’t be around forever (18+ years now) and Turkey is trying to do the best it can under him. Elections are June 2023, Erdogan’s popularity is low, and he has handpicked another central banker who immediately cut rates to 16% when inflation is 20% (thus creating a large negative real rate); lira sank promptly, down -33% since early-2020. Turkish stocks (TUR) are down -44% over the last 5 years with high volatility; good Turkish stocks will become even cheaper; banks are dirt cheap but strong. Oil imports are very expensive, and tourism is still depressed. Investors are hoping for a post-Erdogan era and rebound.
Pg M6, COMMODITIES. Expect to pay more for Thanksgiving feast. Restaurant menu prices are also up. Food ingredients and labor and transportation costs are up; the weather is not cooperating. Demand is strong – domestic and for exports. The situation may improve AFTER 2022.
Pg M5, OPTIONS. Most people don’t have to worry about the proposed tax on unrealized capital gains for those with $1+ billion in assets or $100+ million in income for 3 consecutive years. But once the Congress starts, would it stop there? The author then suggests that Elon MUSK use covered calls on some of his 171 million Tesla/TSLA shares to generate cash to pay such a tax (but the scale involved may affect the options market itself).
(SP500 VIX 16.25, Nasdaq 100 VXN 19.64, SKEW 148.09 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M23, M28: An up week in EUROPE (Belgium +2.14%, Norway -2.88%) and a bad week in ASIA (Taiwan +0.74%, China -3.97%). The equity CEF index (data to Thursday) underperformed the DJIA and its discount was -3.5%.
TREASURY* 3-mo yield 0.05%, 2-yr 0.48%, 5-yr 1.18%, 10-yr 1.55%, 30-yr 1.93%. DOLLAR rose, DXY 94.13, +0.5% (M31). GOLD (Handy & Harman spot, Thursday) fell to $1,769, -2.2% (M34); the gold-miners fell. (^XAU was at 129.61, -3.52% 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 20: COVER STORY, “Tesla is Winning the EV Race. Better Batteries Will Help Ford and GM Close the Gap”. BATTERIES will be key to the EV future. Ford/F has partnered with S Korean SK Innovation; GM, VW/VEAGY, Toyota/TM, Tesla/TSLA (now in the lead) are building huge battery factories. EV batteries need lithium (Albemarle/ALB), cobalt, nickel, graphite, silicon, copper, aluminum, iron, etc. EV battery CAPACITY issues are related to availability of facilities and personnel. Component production is widely distributed globally and scaling up production is an issue. CHINA accounts for 75% of global EV battery capacity now and that may decline to 40% by 2025. Development pangs include recall of Chevy Bolts (by GM with batteries from LG Chemical). The US EV battery makers include QS, SES + IVAN (SPAC merger), Solid Power + DCRC (SPAC merger). EV global market share is growing rapidly, 2.5% in 2019, 5% in 2020, 11% in 2021,….. An EV battery related ETF is LIT.
Pg 7, UP & DOWN WALL STREET. Of the $6 trillion in ideas thrown at the wall, only $1.75 trillion worth of soft INFRASTRUCTURE stimulus stuck – that is lot of stuff left on the cutting room floor. But taxes will remain low for most; estate tax exemption will reduce to $6 million; stock buybacks will be taxed at 1%; lot of attractive ideas for munis won’t happen. Improving economy will shrink the budget DEFICITS. However, the passage of the reduced $1.75 trillion soft infrastructure stimulus isn’t assured. After the FOMC meeting, POWELL is expected to announce QE-taper on Wednesday. Inflation feels less transitory now.
Flattening YIELD-CURVE caused a minor worry for the market on Wednesday. The 2Y-10Y spread narrowed to 105 bps (vs 129 bps on 10/8/21). The fed fund futures market is projecting 2 25-bps HIKES by 2022 yearend (but the Fed is silent on that) beyond the well telegraphed Fed QE -taper. The FED will be catching up with other central banks (Canada, New Zealand, etc). Otherwise, the market handled the tech EARNINGS well this week (even with big misses by AMZN, AAPL, etc). The neutral fed fund rate may be 2.5% now vs 0-0.25% actual, and the infrastructure stimulus is yet to come, so the monetary accommodation remains.
Pg 9, STREETWISE. REVENGE TRAVEL? That is the name for post-pandemic pent up demand for CRUISES. Ready for $61K-$112K/person 9-mo world cruise from RCL? (Free booze and laundry included) During the pandemic, cruise lines operated with zero revenues, raised cash by tapping debt and/or equity markets and by selling off older ships. Now there are heavy operation start up costs. Cruise industry has love-hate relationship with the CDC. Cruises will require extra testing and big buffets will be gone. They do get lot of repeat business. Newer ships run cleaner on LNG or hybrid power.
(More later….)
Global SUPPLY-CHAIN disruptions are affecting segments/sectors sequentially – autos (GM), industrials (GE, HON, CAT), now IT/tech (AMZN, AAPL), next may be retail (after the news comes of holiday sales and profit disappointments). But these supply problems should resolve themselves (a demand problem would be much worse).
Cinemark/CNK (reports Friday) is a better post-pandemic buy than meme crowd favorite AMC.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes.
NO-CHANGE (for the current ZIRP of 0-0.25%) through January 2022 FOMC. Beyond, the probabilities of rate rise are in double-digit %; more than 50% for June 2022 FOMC and later.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.40%, SP500 +1.33%, Nasdaq Comp +2.70%, R2000 +0.26%. DJ Transports +0.85%; DJ Utilities -0.60%. (Rotating spot AAPL +0.75%) US$ index (spot) +0.52%, oil/WTI futures -0.23%, gold futures -0.67%.
YTD (index changes only), DJIA +17.03%, SP500 +22.61%, Nasdaq Comp +20.25%. (Rotating spot AAPL +12.89%)
Pg M4, EUROPE. German Siemens/SIEGY is attractive at 25-35% discount from its sum-of-the-parts (SOTP) valuation. It is now a global electrical engineering giant with products related to EVs, renewable power, factory automation, electrical grids, etc. New CEO BUSCH started in February. In recent restructurings, several units were spun off with names like Siemens Xyz, and Siemens holds varying stakes in those.
Pg M4, EMERGING MARKETS. President ERDOGAN won’t be around forever (18+ years now) and Turkey is trying to do the best it can under him. Elections are June 2023, Erdogan’s popularity is low, and he has handpicked another central banker who immediately cut rates to 16% when inflation is 20% (thus creating a large negative real rate); lira sank promptly, down -33% since early-2020. Turkish stocks (TUR) are down -44% over the last 5 years with high volatility; good Turkish stocks will become even cheaper; banks are dirt cheap but strong. Oil imports are very expensive, and tourism is still depressed. Investors are hoping for a post-Erdogan era and rebound.
Pg M6, COMMODITIES. Expect to pay more for Thanksgiving feast. Restaurant menu prices are also up. Food ingredients and labor and transportation costs are up; the weather is not cooperating. Demand is strong – domestic and for exports. The situation may improve AFTER 2022.
Pg M5, OPTIONS. Most people don’t have to worry about the proposed tax on unrealized capital gains for those with $1+ billion in assets or $100+ million in income for 3 consecutive years. But once the Congress starts, would it stop there? The author then suggests that Elon MUSK use covered calls on some of his 171 million Tesla/TSLA shares to generate cash to pay such a tax (but the scale involved may affect the options market itself).
(SP500 VIX 16.25, Nasdaq 100 VXN 19.64, SKEW 148.09 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M23, M28: An up week in EUROPE (Belgium +2.14%, Norway -2.88%) and a bad week in ASIA (Taiwan +0.74%, China -3.97%). The equity CEF index (data to Thursday) underperformed the DJIA and its discount was -3.5%.
TREASURY* 3-mo yield 0.05%, 2-yr 0.48%, 5-yr 1.18%, 10-yr 1.55%, 30-yr 1.93%. DOLLAR rose, DXY 94.13, +0.5% (M31). GOLD (Handy & Harman spot, Thursday) fell to $1,769, -2.2% (M34); the gold-miners fell. (^XAU was at 129.61, -3.52% 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 20: COVER STORY, “Tesla is Winning the EV Race. Better Batteries Will Help Ford and GM Close the Gap”. BATTERIES will be key to the EV future. Ford/F has partnered with S Korean SK Innovation; GM, VW/VEAGY, Toyota/TM, Tesla/TSLA (now in the lead) are building huge battery factories. EV batteries need lithium (Albemarle/ALB), cobalt, nickel, graphite, silicon, copper, aluminum, iron, etc. EV battery CAPACITY issues are related to availability of facilities and personnel. Component production is widely distributed globally and scaling up production is an issue. CHINA accounts for 75% of global EV battery capacity now and that may decline to 40% by 2025. Development pangs include recall of Chevy Bolts (by GM with batteries from LG Chemical). The US EV battery makers include QS, SES + IVAN (SPAC merger), Solid Power + DCRC (SPAC merger). EV global market share is growing rapidly, 2.5% in 2019, 5% in 2020, 11% in 2021,….. An EV battery related ETF is LIT.
Pg 7, UP & DOWN WALL STREET. Of the $6 trillion in ideas thrown at the wall, only $1.75 trillion worth of soft INFRASTRUCTURE stimulus stuck – that is lot of stuff left on the cutting room floor. But taxes will remain low for most; estate tax exemption will reduce to $6 million; stock buybacks will be taxed at 1%; lot of attractive ideas for munis won’t happen. Improving economy will shrink the budget DEFICITS. However, the passage of the reduced $1.75 trillion soft infrastructure stimulus isn’t assured. After the FOMC meeting, POWELL is expected to announce QE-taper on Wednesday. Inflation feels less transitory now.
Flattening YIELD-CURVE caused a minor worry for the market on Wednesday. The 2Y-10Y spread narrowed to 105 bps (vs 129 bps on 10/8/21). The fed fund futures market is projecting 2 25-bps HIKES by 2022 yearend (but the Fed is silent on that) beyond the well telegraphed Fed QE -taper. The FED will be catching up with other central banks (Canada, New Zealand, etc). Otherwise, the market handled the tech EARNINGS well this week (even with big misses by AMZN, AAPL, etc). The neutral fed fund rate may be 2.5% now vs 0-0.25% actual, and the infrastructure stimulus is yet to come, so the monetary accommodation remains.
Pg 9, STREETWISE. REVENGE TRAVEL? That is the name for post-pandemic pent up demand for CRUISES. Ready for $61K-$112K/person 9-mo world cruise from RCL? (Free booze and laundry included) During the pandemic, cruise lines operated with zero revenues, raised cash by tapping debt and/or equity markets and by selling off older ships. Now there are heavy operation start up costs. Cruise industry has love-hate relationship with the CDC. Cruises will require extra testing and big buffets will be gone. They do get lot of repeat business. Newer ships run cleaner on LNG or hybrid power.
(More later….)