Post by Admin/YBB on Nov 20, 2021 7:42:22 GMT -6
Pg 35, TRADER. A mixed week but the Nasdaq Comp made a new high. Q3 earnings have been good despite supply-chain concerns. SP500 has been creeping up but it has been within +/- 1% for 25 trading days, the longest such stretch in 2 years. CRUDE OIL fell on extra supplies and Covid-19 concerns in Europe. (Basically, growth outperformed cyclicals this week)
GM and Ford/F may benefit from the EV frenzy now by issuing TRACKING STOCKS for their EV operations (borrowing from John MALONE’s playbook). That would be simpler than spinoffs of their EV operations that some are suggesting. GM and F have real EV operations now while crazy highflyers Rivian/RIVN and Lucid/LCID have just EV concepts.
New NATURAL GAS producer Coterra (CTRA; variable yield 6% now; EV/EBITDA 3.5), the largest gas producer in the US, was formed from the merger of Cabot Oil & Gas and Cimarex; it doesn’t hedge much of its production. It promises to be shareholder friendly. Natural gas would be the TRANSITIONAL FUEL as the world moves from coal/oil/gas to renewable energy. But gas prices are high now due to high demand and supply constraints (the US oil and gas producers are not rushing to increase production but are focusing on profits and cash flows).
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 (the current QE-taper schedule will end the QE in June).
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -1.38%, SP500 +0.32%, Nasdaq Comp +1.24%, R2000 -2.85%. DJ Transports -1.45%; DJ Utilities -1.13%. (Rotating spot retail XRT -1.38%) US$ index (spot) +0.98%, oil/WTI futures -5.81%, gold futures -0.89%.
YTD (index changes only), DJIA +16.32%, SP500 +25.08%, Nasdaq Comp +24.59%. (Rotating spot retail XRT +57.11%)
Pg 38, EUROPE. Adidas’/ADDDF production in Vietnam has suffered due to Covid-19, and its sales in China have declined, also due to Covid-19. Moreover, there are boycotts of Adidas products in China as it refuses to buy cotton from Xinjiang province (with Uighur Muslims issue). But other apparel and footwear makers (Nike/NKE, Puma/PUMSY) are not similarly affected because the supply-chain disruptions and other issues are company specific.
Pg 38, EMERGING MARKETS. Due to troubles in the CHINESE PROPERTY sector, Asia Pacific HY KHYB has crashed by -13%. But it seems that Chinese authorities will not let the property sector collapse and there may be some bargains among depressed Chinese BONDS.
Pg 39, OPTIONS. Implied volatility of crazy EV highflyer Rivian/RIVN is 130% (vs only 17% for SP500). Its November 10 IPO price was $78, and its post-IPO range is $95.20-179.40. Its revenues? $0, of course. Its market-cap is much bigger than GM or Ford/F (with decent real EV operations). But adventurous investors (with deep pockets) may pair call-buying with put-selling for RIVN.
Pg 13: OPTIONS are a new toy for day-traders. Like lottery tickets, they don’t cost much, have high payoffs (when you are right), and with most options, you cannot lose more than the amount invested (unlike futures where you can lose even more than the money invested; so, futures traders think that options are “conservative”). Options do affect trading in the UNDERLYING stocks as dealers have to hedge. Options VOLUME is near record high now; the call volume well exceeds the put volume and that makes historical PUT-CALL RATIO data less useful (related is SKEW that is high when puts are relatively more expensive than calls). Much of the kick in options comes near the open as overnight news accumulates. Top 5 calls are TSLA, AAPL, F, AMD, NVDA (that is a changing mix). Options are no longer being used to hedge portfolio risks, but to ADD portfolio risks.
(SP500 VIX 17.91, Nasdaq 100 VXN 21.75, SKEW 148.44 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg 40, COMMODITIES. CLEAN ENERGY and EVs are boosting demand for Dr Copper and other GREEN metals (lithium, cobalt, nickel, rare earths, etc). The new infrastructure-capex stimulus has $7.5 billion for EV charging station network. Prices have risen sharply as supply cannot keep up with demand. There is a brand-new green metal ETF GMET.
Pg 57, 62: A down week in EUROPE (Germany +0.66%, Spain -3.44%) and a down week in ASIA (Taiwan +2.09%, Singapore -2.85%). The equity CEF index (data to Thursday) underperformed the DJIA, and its discount was -3%.
TREASURY* 3-mo yield 0.05%, 2-yr 0.52%, 5-yr 1.22%, 10-yr 1.54%, 30-yr 1.91%. DOLLAR rose, DXY 96.01, +1% (highest since mid-2020; pg 65). GOLD (Handy & Harman spot, Thursday) was flat at $1,861 (pg 68); the gold-miners tanked. (^XAU was at 137.78, -4.05% 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% (pg 63).
*For local rates www.depositaccounts.com/banks/rates-map/
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 18: COVER STORY, International Roundtable on CHINA. Panelists were Winnie CHWANG/MCHFX, MCSMX; Rajiv JAIN/GQG Partners (GSIMX, GQGPX); Sara MORENO/PDEAX; Rory GREEN/TS Lombard. China is in FLUX due to new regulations (now promoting social issues over growth); energy transition; supply-chain disruptions; US-China tensions, China-Taiwan tensions (a waiting game for China), China-xxx tensions; high debt; property sector troubles (but in control); upcoming 20th Party Congress, Winter Olympics. There may be a SECULAR top but CYCLICAL bottom (i.e., near-term rebound potential but long-term economic slowdown). Banks are in decent shape. Any Chinese contagion may spread to EMs selectively. One approach is to invest in areas promoted by Chinese government – alternative energy, EVs, semis, medical devices, 5G (the first technology where China may be ahead of the US). There is wide variance in performance among the Chinese ADRs listed in the US, the H-shares (HK), the A-shares (Mainland). Several stocks are mentioned but most may not be familiar or available to the US investors.
Pg 6, UP & DOWN WALL STREET. When will President BIDEN decide on Fed Chair (POWELL or BRAINARD or…)? Some Fed officials (Clarida, Walker, Bullard) are calling for faster QE-tapering (than the modest -$15 billion/mo to June 2022) regardless of the Fed Chair decision (thinking is that sooner the QE ends, sooner the rate hikes may begin). The fed fund FUTURES markets are predicting rate hike by mid-2022. Covid-19 is spreading in EUROPE with Austria in lockdown, Germany in partial lockdown; cases are also rising in parts of the US and the US may lag Europe by a few weeks. These concerns caused oil to drop sharply and bond yields to also fall (it seems that these Covid-19 concerns may require more gradual actions by the FED, not faster actions that many are calling for now).
OUT are bonds, IN are FR/BL and cash. PAULSEN (Leuthold) looked at stock-bond relationship since 1976 and found that bonds worked well when 10-yr Treasuries were above 3%, but not so well when 10-yr yield was below 3% (same applies for allocation/balanced 60-40 portfolios). TIPS are not a solution as real rates will also rise. So, consider FR/BL, option -writing, cash.
EXTRA. POWELL or BRAINARD? Decision may be imminent for February 2022 effective date. May be the wait has been for the $1.75 trillion soft-infrastructure bill to pass (done by the House, pending for the Senate). It seems to be for Powell’s to lose. Predictit has Powell at 66%, Brainard 37%, Bostic 2%, Ferguson 1%.
Pg 9, STREETWISE. Stop it! Forget about INFLATION proofing portfolio. So, what if the American Farm Bureau said that Thanksgiving Dinner will cost +14% more? But did you read its footnote/fine print (or did the media even mention this?) that between its survey date and publication date, turkey prices were slashed almost in half? Trust the good old USDA that said that Thanksgiving Dinner ingredients will cost (only) +5% more. And that headline CPI +6.2%? Much of it is not sticky (new/used cars etc won’t remain expensive after the supply-chain issues clear out). Instead, check median CPI +3.1% (only), trimmed-mean CPI +4.1%. If you own STOCKS, you are covered/inflation-protected. Just buy the SP500 index, or if you want to look fancy, buy some consumer-staples (NKE, KO, etc), foreign stocks (Japan and Europe are more cyclical and also cheaper), ST-HY, etc. Forget TIPS with negative yields – those may bite you. Control spending that you can – less on booze, women, clothes. (HOUGH, a man, is being a serious humorist here)
(More later….)
GM and Ford/F may benefit from the EV frenzy now by issuing TRACKING STOCKS for their EV operations (borrowing from John MALONE’s playbook). That would be simpler than spinoffs of their EV operations that some are suggesting. GM and F have real EV operations now while crazy highflyers Rivian/RIVN and Lucid/LCID have just EV concepts.
New NATURAL GAS producer Coterra (CTRA; variable yield 6% now; EV/EBITDA 3.5), the largest gas producer in the US, was formed from the merger of Cabot Oil & Gas and Cimarex; it doesn’t hedge much of its production. It promises to be shareholder friendly. Natural gas would be the TRANSITIONAL FUEL as the world moves from coal/oil/gas to renewable energy. But gas prices are high now due to high demand and supply constraints (the US oil and gas producers are not rushing to increase production but are focusing on profits and cash flows).
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 (the current QE-taper schedule will end the QE in June).
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -1.38%, SP500 +0.32%, Nasdaq Comp +1.24%, R2000 -2.85%. DJ Transports -1.45%; DJ Utilities -1.13%. (Rotating spot retail XRT -1.38%) US$ index (spot) +0.98%, oil/WTI futures -5.81%, gold futures -0.89%.
YTD (index changes only), DJIA +16.32%, SP500 +25.08%, Nasdaq Comp +24.59%. (Rotating spot retail XRT +57.11%)
Pg 38, EUROPE. Adidas’/ADDDF production in Vietnam has suffered due to Covid-19, and its sales in China have declined, also due to Covid-19. Moreover, there are boycotts of Adidas products in China as it refuses to buy cotton from Xinjiang province (with Uighur Muslims issue). But other apparel and footwear makers (Nike/NKE, Puma/PUMSY) are not similarly affected because the supply-chain disruptions and other issues are company specific.
Pg 38, EMERGING MARKETS. Due to troubles in the CHINESE PROPERTY sector, Asia Pacific HY KHYB has crashed by -13%. But it seems that Chinese authorities will not let the property sector collapse and there may be some bargains among depressed Chinese BONDS.
Pg 39, OPTIONS. Implied volatility of crazy EV highflyer Rivian/RIVN is 130% (vs only 17% for SP500). Its November 10 IPO price was $78, and its post-IPO range is $95.20-179.40. Its revenues? $0, of course. Its market-cap is much bigger than GM or Ford/F (with decent real EV operations). But adventurous investors (with deep pockets) may pair call-buying with put-selling for RIVN.
Pg 13: OPTIONS are a new toy for day-traders. Like lottery tickets, they don’t cost much, have high payoffs (when you are right), and with most options, you cannot lose more than the amount invested (unlike futures where you can lose even more than the money invested; so, futures traders think that options are “conservative”). Options do affect trading in the UNDERLYING stocks as dealers have to hedge. Options VOLUME is near record high now; the call volume well exceeds the put volume and that makes historical PUT-CALL RATIO data less useful (related is SKEW that is high when puts are relatively more expensive than calls). Much of the kick in options comes near the open as overnight news accumulates. Top 5 calls are TSLA, AAPL, F, AMD, NVDA (that is a changing mix). Options are no longer being used to hedge portfolio risks, but to ADD portfolio risks.
(SP500 VIX 17.91, Nasdaq 100 VXN 21.75, SKEW 148.44 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg 40, COMMODITIES. CLEAN ENERGY and EVs are boosting demand for Dr Copper and other GREEN metals (lithium, cobalt, nickel, rare earths, etc). The new infrastructure-capex stimulus has $7.5 billion for EV charging station network. Prices have risen sharply as supply cannot keep up with demand. There is a brand-new green metal ETF GMET.
Pg 57, 62: A down week in EUROPE (Germany +0.66%, Spain -3.44%) and a down week in ASIA (Taiwan +2.09%, Singapore -2.85%). The equity CEF index (data to Thursday) underperformed the DJIA, and its discount was -3%.
TREASURY* 3-mo yield 0.05%, 2-yr 0.52%, 5-yr 1.22%, 10-yr 1.54%, 30-yr 1.91%. DOLLAR rose, DXY 96.01, +1% (highest since mid-2020; pg 65). GOLD (Handy & Harman spot, Thursday) was flat at $1,861 (pg 68); the gold-miners tanked. (^XAU was at 137.78, -4.05% 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% (pg 63).
*For local rates www.depositaccounts.com/banks/rates-map/
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 18: COVER STORY, International Roundtable on CHINA. Panelists were Winnie CHWANG/MCHFX, MCSMX; Rajiv JAIN/GQG Partners (GSIMX, GQGPX); Sara MORENO/PDEAX; Rory GREEN/TS Lombard. China is in FLUX due to new regulations (now promoting social issues over growth); energy transition; supply-chain disruptions; US-China tensions, China-Taiwan tensions (a waiting game for China), China-xxx tensions; high debt; property sector troubles (but in control); upcoming 20th Party Congress, Winter Olympics. There may be a SECULAR top but CYCLICAL bottom (i.e., near-term rebound potential but long-term economic slowdown). Banks are in decent shape. Any Chinese contagion may spread to EMs selectively. One approach is to invest in areas promoted by Chinese government – alternative energy, EVs, semis, medical devices, 5G (the first technology where China may be ahead of the US). There is wide variance in performance among the Chinese ADRs listed in the US, the H-shares (HK), the A-shares (Mainland). Several stocks are mentioned but most may not be familiar or available to the US investors.
Pg 6, UP & DOWN WALL STREET. When will President BIDEN decide on Fed Chair (POWELL or BRAINARD or…)? Some Fed officials (Clarida, Walker, Bullard) are calling for faster QE-tapering (than the modest -$15 billion/mo to June 2022) regardless of the Fed Chair decision (thinking is that sooner the QE ends, sooner the rate hikes may begin). The fed fund FUTURES markets are predicting rate hike by mid-2022. Covid-19 is spreading in EUROPE with Austria in lockdown, Germany in partial lockdown; cases are also rising in parts of the US and the US may lag Europe by a few weeks. These concerns caused oil to drop sharply and bond yields to also fall (it seems that these Covid-19 concerns may require more gradual actions by the FED, not faster actions that many are calling for now).
OUT are bonds, IN are FR/BL and cash. PAULSEN (Leuthold) looked at stock-bond relationship since 1976 and found that bonds worked well when 10-yr Treasuries were above 3%, but not so well when 10-yr yield was below 3% (same applies for allocation/balanced 60-40 portfolios). TIPS are not a solution as real rates will also rise. So, consider FR/BL, option -writing, cash.
EXTRA. POWELL or BRAINARD? Decision may be imminent for February 2022 effective date. May be the wait has been for the $1.75 trillion soft-infrastructure bill to pass (done by the House, pending for the Senate). It seems to be for Powell’s to lose. Predictit has Powell at 66%, Brainard 37%, Bostic 2%, Ferguson 1%.
Pg 9, STREETWISE. Stop it! Forget about INFLATION proofing portfolio. So, what if the American Farm Bureau said that Thanksgiving Dinner will cost +14% more? But did you read its footnote/fine print (or did the media even mention this?) that between its survey date and publication date, turkey prices were slashed almost in half? Trust the good old USDA that said that Thanksgiving Dinner ingredients will cost (only) +5% more. And that headline CPI +6.2%? Much of it is not sticky (new/used cars etc won’t remain expensive after the supply-chain issues clear out). Instead, check median CPI +3.1% (only), trimmed-mean CPI +4.1%. If you own STOCKS, you are covered/inflation-protected. Just buy the SP500 index, or if you want to look fancy, buy some consumer-staples (NKE, KO, etc), foreign stocks (Japan and Europe are more cyclical and also cheaper), ST-HY, etc. Forget TIPS with negative yields – those may bite you. Control spending that you can – less on booze, women, clothes. (HOUGH, a man, is being a serious humorist here)
(More later….)