Post by Admin/YBB on Oct 30, 2021 8:43:22 GMT -6
Pg 10-11. FOMC Statement and POWELL’s press conference on WEDNESDAY.
REVIEW. Audio streamer Spotify/SPOT finally made profit after years of losses. Its music operations are not very profitable, but the newer podcasts are. There is subscriber growth and more active users. It also raised subscription prices.
PREVIEW. Facebook/FB (soon to be Meta/MVRS) is planning huge capex in 2022 for AI/machine-learning and metaverse. Beneficiaries will be in networking (ANET, MSFT, CSCO, CIEN), chips (NVDA, AMD, INTC, AVGO), storage (STX, WDC).
DATA THIS WEEK. Construction spending, ISM manufacturing PMI on MONDAY; ISM services PMI, ADP national employment report, factory orders on WEDNESDAY; Q3 productivity, international trade deficit on THURSDAY; consumer credit, jobs report (+400,000 to +435,000), unemployment rate (4.7%) on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Media companies controlled by DOLAN family (MSGE (recently acquired MSG Network), MSGS, AMCX; all reopening plays; all have Dolan-discounts as some actions by Dolans are seen as investor-unfriendly; pg 14); small-cap tech Sonos (SONO; won patent lawsuit related to smart-speakers against GOOGL; beneficiary of work/stay-at-home; makes high-tech premium speakers for home, autos (Audi); negatively impacted by supply-chain disruptions; pg 19).
BEARISH. See other stories.
Pg 12: FOLLOWUP. Hertz/HTZZ recently emerged from bankruptcy. It made high-profile deals to buy 100K-150K Teslas and to rent 50K of those to UBER drivers. It will sell older cars to online used-car dealer Carvana/CVNA. VW/VWAGY also made a similar deal with car rental Europcar.
Pg 12: FOLLOWUP. Robinhood/HOOD wants to be taken seriously by regulators and investors, but its business model continues to target you-only-live-once (YOLO) novice investors and it encourages them to trade meme stocks and coins, derivatives and cryptos. Its Q3 results were poor due to loss of subscribers and low trading volume. Most of its revenues remain from payments for order flows for stocks and options (most).
Pg 13: A summary of likely tax changes includes millionaire surtax; minimum corporate tax; buyback tax; foreign profit tax; Medicare pass-through surtax; limit on business loss carryforward; higher IRS funding for compliance and enforcement; reduction of estate tax exemption to $6 million; adverse changes to wealth-transfer tools such as grantor trusts; changes to SALT deduction limits.
Pg 16: DECENTRALIZED-FINANCE (DeFi) is the Wild West of cryptos; the Squid Game token went from 12c to $6 in 3 days on an unfamiliar exchange PancakeSwap (among several decentralized exchanges, or DEXes, such as dYdX, Uniswap, SushiSwap, etc). DeFi includes activities such as crowdfunding, interest payments on crypto liquidity pools, very short-term uncollateralized crypto loans (flash-loans), crypto-swaps (peer-to-peer). In DeFi, there are no checks for money-laundering, no know-your-customer (KYC) rules, no collaterals for crypto loans, no ID checks, no investor protections (against front-running, pump-and-dump, high and undisclosed fees), and only limited transactions tracking due to encryption. If a DeFi exchange is shut down, the underlying open-source blockchain code remains and another DeFi exchange based on that may popup in the US or overseas. Major crypto exchanges like Binance provide limited access to DeFi platforms. Regulators (GENSLER at SEC, CFTC, Congress) are concerned about all this crypto-adventuring and are just watching for now (although the SEC has tried to restrict some actions by major crypto exchanges such as Coinbase). Regulators are not even clear on what should be regulated, how, and who should do it, and all this while, wild and crazy crypto-adventuring goes on.
Pg 26: Funds. Rich ROMANO of real estate SREARX has a concentrated portfolio that would benefit from the trend from offices to hybrid home-office and remote work models. He also likes warehouses, self-storage, data-centers, senior-care facilities, reopening plays (entertainment, hospitality, travel), apartments. Clearly, one has to be selective and go with the survivors.
Pg 28: FUNDS. Another change is coming in MSCI GICS and DJ/S&P industry classifications. This proposed new change will move several companies FROM IT/tech XLK TO financials (fintechs V, MA, PYPL) and industrials XLI (ADP, FIS). Note that several old IT/tech companies are already under communications XLC (FB, GOOG/GOOGL, NFLX) and consumer-discretionary XLY (AMZN). Several funds beyond those mentioned already would be affected (VGT, FTEC, etc); funds that do not use GICS classifications would obviously not be impacted (e.g. tech IYW). Active funds would be affected indirectly as their benchmarks may change. (Some renewable energy companies will be shifted FROM utilities XLU, industrials XLI and IT/tech XLK TO energy XLE; traditional power generators, distributors, suppliers will remain in utilities XLU).
Pg 29: TECH TRADER. After warning about bad tech earnings last week, the columnist now sees opportunities. Among the FAAMG, there were 3 misses, 1 was OK (GOOGL) and 1 was good (MSFT). The misses were due to supply-chain disruptions (shortage of chips; labor and transportation issues), not from lack of demand. However, the Covid-19 related e-commerce bump is over. The hope is that these supply problems are transitory.
Pg 30: ECONOMY: If PRODUCTIVITY growth stalls, INFLATION may persist (the two are inversely correlated). It will take time for new technology to take hold and have effect on post-pandemic productivity. Strangely, productivity was high during the pandemic as businesses were forced to do more with less, but that wasn’t sustainable. Now productivity is suffering from low labor participation, labor and material shortages and higher costs (lower margins). The current trends may not be transitory and may persist.
Pg 31: INCOME from dividend funds: ETF SDY; OEF GAOAX.
Pg 32: Paul GALLANT, Cowen Washington Research Group; former FTC lawyer. The FTC is emerging as a major regulator for Big Techs; others include the DOJ, states, the US and foreign governments and courts. There is talk of ANTITRUST (related to app stores, maps, web hosting, searches), data PRIVACY, Section 230 repeal, BREAKUPS (low probability). A major antitrust issue in the US is the protection of consumers, while in Europe, it is the protection of rivals; Big Techs that operate globally are hit with both. There is no consensus in the US on data privacy issues and Europe is ahead on these. Section 230 on liability protection of online platforms needs improvements but there is lack of disagreement on what to do. The FTC is energized by BRANDEIS-movement that is embraced by the new FTC Chairwoman Lina KHAN. Don’t underestimate her FTC as the game plan is to seek Congressional actions first, but if those are too slow or fail, then to use the rule-making authority of the FTC to enact new regulations quickly (within 18 months); those may be challenged in the courts.
Pg 34: OTHER VOICES. Dona PETERSON, The Conference Board. MILLENNIALS (born 1980-95) will drive the HOUSING boom for years. Forget the old stories of millennials living in parents’ basements or renting with too many others. They now represent 22% of the US population; 36% of the workforce; 37% of homebuyers; 51% of new investors. They are paying down student-loans; the stimulus checks, and student-loan forgiveness have helped. They are starting their own families and have benefitted from low mortgage rates. Many prefer hybrid office-home model. And strong housing is good news for many businesses and the general economy.
(EXTRAS from online Friday that didn’t make the weekend paper version)
The new Metaverse ETF META (FB is #4 holding) got an inflow boost from name change by Facebook/FB to Meta/MVRS. But in a name confusion (this is getting weird), unrelated Canadian MMAT also jumped.
ECONOMY. Investors have ignored the BUDGET battle in DC so far hoping that things will work out. The soft INFRASTRUCTURE bill has been slashed to $1.75 trillion (plus $1.2 trillion infrastructure capex). But the new data show economic SLOWDOWN – Q3 GDP, consumer confidence, personal consumption, retail sales, labor participation. Risk is that smaller stimulus may not be enough for economic growth when the FED is also reducing monetary stimulus. Then, the Wall Street and investors may suddenly WAKEUP.
REVIEW. Audio streamer Spotify/SPOT finally made profit after years of losses. Its music operations are not very profitable, but the newer podcasts are. There is subscriber growth and more active users. It also raised subscription prices.
PREVIEW. Facebook/FB (soon to be Meta/MVRS) is planning huge capex in 2022 for AI/machine-learning and metaverse. Beneficiaries will be in networking (ANET, MSFT, CSCO, CIEN), chips (NVDA, AMD, INTC, AVGO), storage (STX, WDC).
DATA THIS WEEK. Construction spending, ISM manufacturing PMI on MONDAY; ISM services PMI, ADP national employment report, factory orders on WEDNESDAY; Q3 productivity, international trade deficit on THURSDAY; consumer credit, jobs report (+400,000 to +435,000), unemployment rate (4.7%) on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Media companies controlled by DOLAN family (MSGE (recently acquired MSG Network), MSGS, AMCX; all reopening plays; all have Dolan-discounts as some actions by Dolans are seen as investor-unfriendly; pg 14); small-cap tech Sonos (SONO; won patent lawsuit related to smart-speakers against GOOGL; beneficiary of work/stay-at-home; makes high-tech premium speakers for home, autos (Audi); negatively impacted by supply-chain disruptions; pg 19).
BEARISH. See other stories.
Pg 12: FOLLOWUP. Hertz/HTZZ recently emerged from bankruptcy. It made high-profile deals to buy 100K-150K Teslas and to rent 50K of those to UBER drivers. It will sell older cars to online used-car dealer Carvana/CVNA. VW/VWAGY also made a similar deal with car rental Europcar.
Pg 12: FOLLOWUP. Robinhood/HOOD wants to be taken seriously by regulators and investors, but its business model continues to target you-only-live-once (YOLO) novice investors and it encourages them to trade meme stocks and coins, derivatives and cryptos. Its Q3 results were poor due to loss of subscribers and low trading volume. Most of its revenues remain from payments for order flows for stocks and options (most).
Pg 13: A summary of likely tax changes includes millionaire surtax; minimum corporate tax; buyback tax; foreign profit tax; Medicare pass-through surtax; limit on business loss carryforward; higher IRS funding for compliance and enforcement; reduction of estate tax exemption to $6 million; adverse changes to wealth-transfer tools such as grantor trusts; changes to SALT deduction limits.
Pg 16: DECENTRALIZED-FINANCE (DeFi) is the Wild West of cryptos; the Squid Game token went from 12c to $6 in 3 days on an unfamiliar exchange PancakeSwap (among several decentralized exchanges, or DEXes, such as dYdX, Uniswap, SushiSwap, etc). DeFi includes activities such as crowdfunding, interest payments on crypto liquidity pools, very short-term uncollateralized crypto loans (flash-loans), crypto-swaps (peer-to-peer). In DeFi, there are no checks for money-laundering, no know-your-customer (KYC) rules, no collaterals for crypto loans, no ID checks, no investor protections (against front-running, pump-and-dump, high and undisclosed fees), and only limited transactions tracking due to encryption. If a DeFi exchange is shut down, the underlying open-source blockchain code remains and another DeFi exchange based on that may popup in the US or overseas. Major crypto exchanges like Binance provide limited access to DeFi platforms. Regulators (GENSLER at SEC, CFTC, Congress) are concerned about all this crypto-adventuring and are just watching for now (although the SEC has tried to restrict some actions by major crypto exchanges such as Coinbase). Regulators are not even clear on what should be regulated, how, and who should do it, and all this while, wild and crazy crypto-adventuring goes on.
Pg 26: Funds. Rich ROMANO of real estate SREARX has a concentrated portfolio that would benefit from the trend from offices to hybrid home-office and remote work models. He also likes warehouses, self-storage, data-centers, senior-care facilities, reopening plays (entertainment, hospitality, travel), apartments. Clearly, one has to be selective and go with the survivors.
Pg 28: FUNDS. Another change is coming in MSCI GICS and DJ/S&P industry classifications. This proposed new change will move several companies FROM IT/tech XLK TO financials (fintechs V, MA, PYPL) and industrials XLI (ADP, FIS). Note that several old IT/tech companies are already under communications XLC (FB, GOOG/GOOGL, NFLX) and consumer-discretionary XLY (AMZN). Several funds beyond those mentioned already would be affected (VGT, FTEC, etc); funds that do not use GICS classifications would obviously not be impacted (e.g. tech IYW). Active funds would be affected indirectly as their benchmarks may change. (Some renewable energy companies will be shifted FROM utilities XLU, industrials XLI and IT/tech XLK TO energy XLE; traditional power generators, distributors, suppliers will remain in utilities XLU).
Pg 29: TECH TRADER. After warning about bad tech earnings last week, the columnist now sees opportunities. Among the FAAMG, there were 3 misses, 1 was OK (GOOGL) and 1 was good (MSFT). The misses were due to supply-chain disruptions (shortage of chips; labor and transportation issues), not from lack of demand. However, the Covid-19 related e-commerce bump is over. The hope is that these supply problems are transitory.
Pg 30: ECONOMY: If PRODUCTIVITY growth stalls, INFLATION may persist (the two are inversely correlated). It will take time for new technology to take hold and have effect on post-pandemic productivity. Strangely, productivity was high during the pandemic as businesses were forced to do more with less, but that wasn’t sustainable. Now productivity is suffering from low labor participation, labor and material shortages and higher costs (lower margins). The current trends may not be transitory and may persist.
Pg 31: INCOME from dividend funds: ETF SDY; OEF GAOAX.
Pg 32: Paul GALLANT, Cowen Washington Research Group; former FTC lawyer. The FTC is emerging as a major regulator for Big Techs; others include the DOJ, states, the US and foreign governments and courts. There is talk of ANTITRUST (related to app stores, maps, web hosting, searches), data PRIVACY, Section 230 repeal, BREAKUPS (low probability). A major antitrust issue in the US is the protection of consumers, while in Europe, it is the protection of rivals; Big Techs that operate globally are hit with both. There is no consensus in the US on data privacy issues and Europe is ahead on these. Section 230 on liability protection of online platforms needs improvements but there is lack of disagreement on what to do. The FTC is energized by BRANDEIS-movement that is embraced by the new FTC Chairwoman Lina KHAN. Don’t underestimate her FTC as the game plan is to seek Congressional actions first, but if those are too slow or fail, then to use the rule-making authority of the FTC to enact new regulations quickly (within 18 months); those may be challenged in the courts.
Pg 34: OTHER VOICES. Dona PETERSON, The Conference Board. MILLENNIALS (born 1980-95) will drive the HOUSING boom for years. Forget the old stories of millennials living in parents’ basements or renting with too many others. They now represent 22% of the US population; 36% of the workforce; 37% of homebuyers; 51% of new investors. They are paying down student-loans; the stimulus checks, and student-loan forgiveness have helped. They are starting their own families and have benefitted from low mortgage rates. Many prefer hybrid office-home model. And strong housing is good news for many businesses and the general economy.
(EXTRAS from online Friday that didn’t make the weekend paper version)
The new Metaverse ETF META (FB is #4 holding) got an inflow boost from name change by Facebook/FB to Meta/MVRS. But in a name confusion (this is getting weird), unrelated Canadian MMAT also jumped.
ECONOMY. Investors have ignored the BUDGET battle in DC so far hoping that things will work out. The soft INFRASTRUCTURE bill has been slashed to $1.75 trillion (plus $1.2 trillion infrastructure capex). But the new data show economic SLOWDOWN – Q3 GDP, consumer confidence, personal consumption, retail sales, labor participation. Risk is that smaller stimulus may not be enough for economic growth when the FED is also reducing monetary stimulus. Then, the Wall Street and investors may suddenly WAKEUP.