Post by Admin/YBB on Nov 6, 2021 6:43:11 GMT -6
Pg M1, TRADER. Major indexes were at new all-time NEW HIGHS but the small-cap R2000 sprinted ahead of them all. Hold positions and enjoy performance chasing by institutions until the yearend (at least). Strangely, the market is doing a BARBELL – both the largest and smallest stocks are doing well (unusual but this does happen). Several pieces of good news launched the seasonal RALLY – the FED sticking to script (mild QE-taper but no rate hikes soon); unexpected BOE inaction; good jobs report; fading Covid-19 concerns; possible oral pills for Covid-19 (from MRK, PFE); House vote(s) on infrastructure bill(s)). (UPDATE/BREAKING: After dragging feet for months, the House passed the bipartisan infrastructure capex bill of $1.2 trillion on Friday night (it had already been passed by the Senate); the soft infrastructure bill of $1.9 trillion may be passed through reconciliation a few days later but before Thanksgiving – only the rules governing its debate could be passed on Saturday morning.)
BUBBLE or not, learn how to handle it. There have been massive moves in some very expensive stocks and ridiculous moves in some low-rated meme stocks (probably from forced buying related to SHORT-covering/liquidations). Speculation has spread from Wall Street to Main Street. The SP500 fwd P/E of 21.6 doesn’t reflect that. Bubbles can keep going for a while, but not forever – the dot. com bubble took 3 years to burst in March 2000 (and a Barron’s issue on the cash-burn rates of highflyers then with only a few weeks/months of cash remaining may have been among the triggers). Good thing is that investors may benefit from some exposure away from the epicenter of the bubble and that now means selected large-caps, small/mid-caps, EMs – in a BARBELL strategy with selected leaders and laggards. (Remember, a rising tide lifts all boats (JFK); but when the tide goes out, you find out who was swimming naked (BUFFETT) – although the Chinese, Indians and/or Greeks may have said somethings similar in the ancient times.)
American Eagle Outfitters/AEO is buying another LOGISTICS company, Quiet Logistics for the last-miles; it had previously bought AirTerra for the middle-miles. And why not? SUPPLY-CHAIN disruptions are forcing giant retailers (Amazon/AMZN, etc) to take logistics in their own hands by renting/chartering ships and planes. But a concern for AEO is that these logistics ventures may become distracting or too costly. Also benefiting are large logistics companies CHRW, XPO, etc and transportation companies UPS, FDX (it bought ShopRunner), etc.
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 September 2022 FOMC and later.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +1.42%, SP500 +2.0%, Nasdaq Comp +3.05%, R2000 +6.09% (wow1!). DJ Transports +5.89% (wow2!); DJ Utilities +0.30%. (Rotating spot small-cap R2000 +6.09%) US$ index (spot) +0.11%, oil/WTI futures -2.75%, gold futures +1.87%.
YTD (index changes only), DJIA +18.69% (36,000+ was finally done), SP500 +25.07%, Nasdaq Comp +23.92%. (Rotating spot small-cap R2000 +23.41%)
Pg M4, EUROPE. Vodaphone (VOD; fwd P/E 11.5) is attractive. Its investments in fintech in Africa (e-commerce, healthcare, insurance, money transfer M-Pesa), Internet of Things (IoT), cybersecurity will payoff; its German business is also recovering.
Pg M4, EMERGING MARKETS. With the rebranding of Facebook/FB as META, ZUCKERBERG is just catching up with Chinese meta companies (TikTok/ByteDance, Tencent/TCEHY, Alibaba/BABA, AVIT, etc). But China is now in the process of hurting itself by putting constraints on its big techs and instead favoring its large state-owned/controlled companies (the West can say thank you to China).
Pg M6, COMMODITIES. 2021 may be a losing year for GOLD-bullion (just prior was 2018); it peaked at $2,069.40 in August 2020. Negative real rates, high current inflation (transitory?) and easy monetary and fiscal policies haven’t benefitted gold yet (but those may be providing floor/support); it seems that money has flowed into CRYPTOS at the expense of gold.
Pg M5, OPTIONS. GRIDLOCK in DC is good for investors. Recent state elections (VA, etc) point to more gridlock after 2022 midterm elections. Play with options on FINANCIALS (KKR, IBKR) – pair buying-calls with selling-puts.
(SP500 VIX 16.48, Nasdaq 100 VXN 21.57, SKEW 148.83 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M23, M28: A good week in EUROPE (Italy +3.51%, Denmark +0.16%, Greece +0.12%) and an up week in ASIA (Philippines +3.46%, China -2.28%). The equity CEF index (data to Thursday) outperformed the DJIA and its discount was -3.0%.
TREASURY* 3-mo yield 0.05%, 2-yr 0.39%, 5-yr 1.04%, 10-yr 1.45%, 30-yr 1.87%. DOLLAR rose, DXY 94.22, +0.1% (M31). GOLD (Handy & Harman spot, Thursday) rose to $1,802, +2% (M34); the gold-miners rose. (^XAU was at 134.09, +3.46% 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/
NEW. US SAVINGS I-Bonds, current rate 7.12% (annualized). Rates change on May 1 & Nov 1. Limit $10K/person/yr (additional $5K possible via tax refund). Cannot cash within 12 months; 3-month interest penalty if cashed in 1-5 years. Tax may be deferred until redeemed. Better than EE Bonds now. Not tradable like TIPS. Need to open account at Treasury Direct.
www.treasurydirect.gov/tdhome.htm
(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, “Yes, Cryptos, NFTs, and Meme Stocks Are a Bubble. How to Dabble Safely”. Welcome to the wild and crazy world of WEIRD FINANCE: $3 trillion in market value for something that is post-iPhone (yes, so new); NFT auctions at $xy million; crypto-modern-art; crypto-inspired Halloween costumes this year; NFT.NYC conference, etc. Are cryptos currencies or assets or just cult? Who needs 8,800 cryptos? Many are crypto-parodies/copycats. OK, a handful may survive, but what about 8,800 minus a handful? The underlying BLOCKCHAIN technology will also find other uses. The NFTs are taking cryptos to another crazy level; the NFTs may soon be valued at $25 billion in $370-billion collectible world. Crypto-mania may now be approaching the levels of Dutch tulips or South Sea bubble, and well beyond the dot. com bubble or the Roaring 20s (none of these may be familiar to the Reddit crowd).
With cryptos, things like cash flows, profits or valuations don’t matter, and prices may be whatever their traders like/wish. Yet, a crypto collapse (mini or maxi) may not take the whole financial system down so long as the major financial players are not overly exposed (well, that is the hope). It is funny (or strange) that crypto believers think that being in 100% cryptos is being risk adverse and they “play” options and meme stocks to “add” risk. Some people with Robinhood/HOOD accounts feel good (bad) when they are up (down) the amount of their paychecks in a single day (so, who needs jobs or stocks or bonds or alts?). But keep in mind that NEWTON, the father of the force-momentum principle/law, got burned by the South Sea bubble. Rising RATES and more crypto REGULATIONS may put a stop to this out-of-control train. Those who find cryptos too speculative can dabble in crypto-exchange/dealer/custodian Coinbase/COIN, or crypto-miners MARA, RIOT, HUT. More traditionally oriented who think that stocks and bonds are too high may consider CYCLICALS (industrials, financials, consumer-discretionary, materials) that are still generationally cheap, and DIVIDEND-GROWTH stocks (DGRO). (Author is HOUGH, the regular Streetwise columnist, and his wit/humor is evident along with the serious stuff)
Pg 8, UP & DOWN WALL STREET. Good news on economy (jobs, etc) was also good news for stocks. The FED didn’t surprise by its well-telegraphed QE-taper (-$15 billion/month). The 10-yr fell to 1.45%, so, both stocks and bonds rose this week. Merck/MRK and Pfizer/PFE reported progress on oral pills for Covid-19. The BOE got cold feet and stayed put. State election results shook Democrats into doing something and they rushed to vote on infrastructure bill(s). Continued gridlock in DC will be good for investors (see UPDATE in pg M1).
Flight from paper/fiat currency has been to CRYPTOS, not to GOLD. Gold may have a losing year in 2021 (-11.9% from August 2020 high) and GOLD-MINERS are in bear market (GDX -26.1%, GDXJ -29.7% from 2020 highs). But this may be just consolidation after 3 strong years. The entire gold-mining industry has a market-cap of $580 billion only and it won’t take much institutional money to change its course to hockey-stick takeoff. Gold-miners are more disciplined now and are in better financial shape; some pay dividends too. Junior/senior GDXJ may be a better bet than senior GDX; some smaller ones may be taken over by bigger ones.
Pg x, STREETWISE. HOUGH did the cover story this week.
(More later….)
BUBBLE or not, learn how to handle it. There have been massive moves in some very expensive stocks and ridiculous moves in some low-rated meme stocks (probably from forced buying related to SHORT-covering/liquidations). Speculation has spread from Wall Street to Main Street. The SP500 fwd P/E of 21.6 doesn’t reflect that. Bubbles can keep going for a while, but not forever – the dot. com bubble took 3 years to burst in March 2000 (and a Barron’s issue on the cash-burn rates of highflyers then with only a few weeks/months of cash remaining may have been among the triggers). Good thing is that investors may benefit from some exposure away from the epicenter of the bubble and that now means selected large-caps, small/mid-caps, EMs – in a BARBELL strategy with selected leaders and laggards. (Remember, a rising tide lifts all boats (JFK); but when the tide goes out, you find out who was swimming naked (BUFFETT) – although the Chinese, Indians and/or Greeks may have said somethings similar in the ancient times.)
American Eagle Outfitters/AEO is buying another LOGISTICS company, Quiet Logistics for the last-miles; it had previously bought AirTerra for the middle-miles. And why not? SUPPLY-CHAIN disruptions are forcing giant retailers (Amazon/AMZN, etc) to take logistics in their own hands by renting/chartering ships and planes. But a concern for AEO is that these logistics ventures may become distracting or too costly. Also benefiting are large logistics companies CHRW, XPO, etc and transportation companies UPS, FDX (it bought ShopRunner), etc.
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 September 2022 FOMC and later.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +1.42%, SP500 +2.0%, Nasdaq Comp +3.05%, R2000 +6.09% (wow1!). DJ Transports +5.89% (wow2!); DJ Utilities +0.30%. (Rotating spot small-cap R2000 +6.09%) US$ index (spot) +0.11%, oil/WTI futures -2.75%, gold futures +1.87%.
YTD (index changes only), DJIA +18.69% (36,000+ was finally done), SP500 +25.07%, Nasdaq Comp +23.92%. (Rotating spot small-cap R2000 +23.41%)
Pg M4, EUROPE. Vodaphone (VOD; fwd P/E 11.5) is attractive. Its investments in fintech in Africa (e-commerce, healthcare, insurance, money transfer M-Pesa), Internet of Things (IoT), cybersecurity will payoff; its German business is also recovering.
Pg M4, EMERGING MARKETS. With the rebranding of Facebook/FB as META, ZUCKERBERG is just catching up with Chinese meta companies (TikTok/ByteDance, Tencent/TCEHY, Alibaba/BABA, AVIT, etc). But China is now in the process of hurting itself by putting constraints on its big techs and instead favoring its large state-owned/controlled companies (the West can say thank you to China).
Pg M6, COMMODITIES. 2021 may be a losing year for GOLD-bullion (just prior was 2018); it peaked at $2,069.40 in August 2020. Negative real rates, high current inflation (transitory?) and easy monetary and fiscal policies haven’t benefitted gold yet (but those may be providing floor/support); it seems that money has flowed into CRYPTOS at the expense of gold.
Pg M5, OPTIONS. GRIDLOCK in DC is good for investors. Recent state elections (VA, etc) point to more gridlock after 2022 midterm elections. Play with options on FINANCIALS (KKR, IBKR) – pair buying-calls with selling-puts.
(SP500 VIX 16.48, Nasdaq 100 VXN 21.57, SKEW 148.83 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M23, M28: A good week in EUROPE (Italy +3.51%, Denmark +0.16%, Greece +0.12%) and an up week in ASIA (Philippines +3.46%, China -2.28%). The equity CEF index (data to Thursday) outperformed the DJIA and its discount was -3.0%.
TREASURY* 3-mo yield 0.05%, 2-yr 0.39%, 5-yr 1.04%, 10-yr 1.45%, 30-yr 1.87%. DOLLAR rose, DXY 94.22, +0.1% (M31). GOLD (Handy & Harman spot, Thursday) rose to $1,802, +2% (M34); the gold-miners rose. (^XAU was at 134.09, +3.46% 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/
NEW. US SAVINGS I-Bonds, current rate 7.12% (annualized). Rates change on May 1 & Nov 1. Limit $10K/person/yr (additional $5K possible via tax refund). Cannot cash within 12 months; 3-month interest penalty if cashed in 1-5 years. Tax may be deferred until redeemed. Better than EE Bonds now. Not tradable like TIPS. Need to open account at Treasury Direct.
www.treasurydirect.gov/tdhome.htm
(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, “Yes, Cryptos, NFTs, and Meme Stocks Are a Bubble. How to Dabble Safely”. Welcome to the wild and crazy world of WEIRD FINANCE: $3 trillion in market value for something that is post-iPhone (yes, so new); NFT auctions at $xy million; crypto-modern-art; crypto-inspired Halloween costumes this year; NFT.NYC conference, etc. Are cryptos currencies or assets or just cult? Who needs 8,800 cryptos? Many are crypto-parodies/copycats. OK, a handful may survive, but what about 8,800 minus a handful? The underlying BLOCKCHAIN technology will also find other uses. The NFTs are taking cryptos to another crazy level; the NFTs may soon be valued at $25 billion in $370-billion collectible world. Crypto-mania may now be approaching the levels of Dutch tulips or South Sea bubble, and well beyond the dot. com bubble or the Roaring 20s (none of these may be familiar to the Reddit crowd).
With cryptos, things like cash flows, profits or valuations don’t matter, and prices may be whatever their traders like/wish. Yet, a crypto collapse (mini or maxi) may not take the whole financial system down so long as the major financial players are not overly exposed (well, that is the hope). It is funny (or strange) that crypto believers think that being in 100% cryptos is being risk adverse and they “play” options and meme stocks to “add” risk. Some people with Robinhood/HOOD accounts feel good (bad) when they are up (down) the amount of their paychecks in a single day (so, who needs jobs or stocks or bonds or alts?). But keep in mind that NEWTON, the father of the force-momentum principle/law, got burned by the South Sea bubble. Rising RATES and more crypto REGULATIONS may put a stop to this out-of-control train. Those who find cryptos too speculative can dabble in crypto-exchange/dealer/custodian Coinbase/COIN, or crypto-miners MARA, RIOT, HUT. More traditionally oriented who think that stocks and bonds are too high may consider CYCLICALS (industrials, financials, consumer-discretionary, materials) that are still generationally cheap, and DIVIDEND-GROWTH stocks (DGRO). (Author is HOUGH, the regular Streetwise columnist, and his wit/humor is evident along with the serious stuff)
Pg 8, UP & DOWN WALL STREET. Good news on economy (jobs, etc) was also good news for stocks. The FED didn’t surprise by its well-telegraphed QE-taper (-$15 billion/month). The 10-yr fell to 1.45%, so, both stocks and bonds rose this week. Merck/MRK and Pfizer/PFE reported progress on oral pills for Covid-19. The BOE got cold feet and stayed put. State election results shook Democrats into doing something and they rushed to vote on infrastructure bill(s). Continued gridlock in DC will be good for investors (see UPDATE in pg M1).
Flight from paper/fiat currency has been to CRYPTOS, not to GOLD. Gold may have a losing year in 2021 (-11.9% from August 2020 high) and GOLD-MINERS are in bear market (GDX -26.1%, GDXJ -29.7% from 2020 highs). But this may be just consolidation after 3 strong years. The entire gold-mining industry has a market-cap of $580 billion only and it won’t take much institutional money to change its course to hockey-stick takeoff. Gold-miners are more disciplined now and are in better financial shape; some pay dividends too. Junior/senior GDXJ may be a better bet than senior GDX; some smaller ones may be taken over by bigger ones.
Pg x, STREETWISE. HOUGH did the cover story this week.
(More later….)