Post by Admin/YBB on Dec 11, 2021 8:05:05 GMT -6
Pg 39, TRADER. Investors shrugged off the super-hot INFLATION report thinking that this too shall pass. So, it was a good week for stocks with SP500 at a new high, and the Treasury market just yawned. Investors thought that POWELL was bluffing before (about inflation being transitory), and also now (that inflation is not transitory) (people have counted this as his 4th flip-flop during his reign at the Fed). David ROSENBERG noted that only 4 COMMODITIES (burlap, cattle, coffee, milk) are at highs among the 30 tracked by him; the rent-equivalents used in inflation indexes lag a lot and may not even become a major problem long-term. So, how to benefit from “high inflation now, but lower later” scenario? Buy big growth-techs (AAPL, MSFT, GOOGL, etc), not crazy-growth (PYPL, TWTR, TRIP, DOCU, ZM, CRM, etc); also buy banks, energy, etc. Tax-loss selling has hit several stocks that are down, but these may bounce in January (so-called January Effect). The complacent BOND market may just be wrong about the impact of waning QE (it will hurt when it is done).
Paperboard and other packaging producer Graphic Packaging (GPK; fwd P/E 11) is attractive as it can pass through its higher costs to customers. Paper-based packaging is also more environment-friendly.
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 May 2022 FOMC and later (The current QE-taper schedule may be accelerated to end QE in March vs June; watch the FOMC Statement, 12/15/21).
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +4.02%, SP500 +3.82%, Nasdaq Comp +3.61%, R2000 +2.43%. DJ Transports +2.74%; DJ Utilities +2.37%. (Rotating spot long Treasury -3.56%) US$ index (spot) -0.07%, oil/WTI futures +8.16%, gold futures UNCH.
YTD (index changes only), DJIA +17.53%, SP500 +25.45%, Nasdaq Comp +21.28%. (Rotating spot long Treasury TLT -5.62%)
Pg 42, EUROPE. Spanish Acerinox (ANIOY; fwd P/E 5.1) is benefiting from high demand for STAINLESS STEEL from appliance, auto and aerospace manufacturers. 2021 may be its best year ever (after bad 2020). As it supplies are under long-term contracts, the next few years should also be good. It bought VDM Metals 2 years ago; it may divest its money losing Malaysian unit.
Pg 42, EMERGING MARKETS. Athenai Institute (a student-led organization), Consumers’ Research, Calamos Investments, etc are pressing university endowments and other institutional investors to divest CHINESE companies with poor ESG records. This adds to the troubles that the US-listed Chinese companies are having with the US and Chinese authorities. But there are attractive Chinese companies in renewable energy, EVs, etc that score high for ESG.
Pg 43, OPTIONS. There are mixed signals from STOCKS (bullish) and OPTIONS (mixed from falling VIX but elevated SKEW). Traders can pair put-selling with call-buying on financials XLF on the expectations of no surprises from the FOMC beyond what has already been telegraphed widely.
(SP500 VIX 18.69, Nasdaq 100 VXN 23.95, SKEW 147.34 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg 44, COMMODITIES. Dr COPPER (+25% YTD) has been strong for 3 years but SILVER (-15% YTD) has the worst YTD loss since 2014. Copper demand is tied directly to global economic growth; deficit persists as supply is constrained due to Covid-19. Silver is both industrial and precious metal, but the latter demand is weak (jewelry, investments); it is a byproduct of the production of gold, copper, etc, so there is plenty of supply.
Pg 59, xx: A good week in EUROPE (Denmark +5.18%, Norway +1.06%; ALL reported markets up) and a good week in ASIA (China +3.34%, Malaysia +0.12%; ALL reported markets also up). MISSING CEF DATA but keeping last week info: The equity CEF index (data to Thursday) outperformed the DJIA, and its discount was -1.5%.
TREASURY* 3-mo yield 0.06%, 2-yr 0.67%, 5-yr 1.25%, 10-yr 1.48%, 30-yr 1.88%. DOLLAR fell, DXY 96.05, -0.06% (pg 65). GOLD (Handy & Harman spot, Thursday) rose to $1,780, +0.7% (pg 68); the gold-miners fell. (^XAU was at 124.05, -1.17% 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 1.24% (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 24: COVER STORY, “The King of Luxe/LVMH Has Thrived During the Pandemic. The Luxury-Goods Group’s Gains Can Continue”. MC.fr/LVMUY, yield 1%, fwd P/E 34 (2021), 30 (2022); sales 25% US, 36% Asia ex-Japan (includes 12% China), 21% Europe. With diversified global production (including in CA, TX), it didn’t have supply-chain issues except for shortages of shopping bags that came mostly from Asia. In billionaires’ race to the top, Chairman/CEO Bernard ARNAULT (72) was briefly #1, now #3; Arnault family owns 47% of LVMH shares but have 60% of voting control; BA personally visits his and rivals’ stores on Saturdays. The management bench is deep and 4 of 5 BA’s children work for the company. LVMH has 75 brands/lines/”houses” that include LV, Christian Dior, Fendi, Bulgari, Tag Heuer, Moet & Chandan, Dom Perignon, Chateau d’Yquem; there are 5,000 stores that also serve as showrooms for products ordered online. Growth by M&A continued during the pandemic with full or partial stakes in Tiffany (yep, that American icon), Jay-Z’s Champagne, Armand de Brignac, Tod’s, Phoebe Philo, Off-White (by late Virgil Abloh).
Celebrity endorsements are used to focus on young and mature customers. People with extra cash/savings who stayed/worked-from-home during the pandemic didn’t neglect personal care; they spent on luxury items just to be pretty/comfortable at home, or to look good on Zoom/ZM video calls. Chinese government policies targeting its big-techs and billionaires have not yet affected the luxury goods sector there but there are some concerns; Chinese have typically accounted for 33% of global personal luxury spending (21-23% even during the pandemic) and $1,442 LV handbags sell like hotcakes.
Pg 9, UP & DOWN WALL STREET. In a week when INFLATION was at 39-year high, stocks did well and bonds did OK; the SP5, oops SP500, was at a new high with AAPL approaching $3 trillion market-cap. Why? Investors were relieved to hear that Covid-19/Omicron wasn’t so bad for the fully vaccinated and inflation may come down later as implied by low INFLATION-EXPECTATIONS (RIEDER/BlackRock thinks that may happen by 2022 yearend; DALIO/Bridgewater doesn’t think so). The FOMC move to almost double the pace of QE-taper on Wednesday is well expected, and the QE may end by March vs June. The TINA crowd was in full control of the markets. But the UM consumer confidence was near 10-yr low, meaning that there is unhappiness in the Main Street.
INFLATION (CPI +6.8%, core CPI +4.9%) was high but that was expected; headline inflation was at 39-yr high. But INFLATION-EXPECTATIONS remained subdued (+2.46% over 10 years), meaning that it will come down later, and both stocks and bonds did well. The FOMC meeting next week may double the pace QE-taper to -30 billion/month (from the current -15 billion/month). After the QE winds up in March (vs June), the RATE hikes can begin. The fund futures market still didn’t react much but projects hikes in May/June, September, December (opinions vary on 2-4 rate hikes in 2022 and more in 2023); will the Fed dot-plots catch up? The YIELD-CURVE has flattened, and it may not take much to invert it. The UNEMPLOYMENT RATE that is 4.2% now may be headed to 3% or lower in 2022; it could be that long-term Covid-19 effects are preventing recovery in the labor participation rate.
Pg 13, STREETWISE. Hedge-fund manager Ray DALIO (Bridgewater) is worried that INFLATION spiraling out of control (no, he doesn’t trust the inflation-expectations data) will cause a CIVIL WAR in the US, a MILITARY CONFLICT between the US and China, decimate TREASURIES/bond portfolios and CASH will be trash; he likes TIPS. His funds have invested heavily in China, but he recently upset the US investors and the Chinese government with his recent remarks, and he issued apologies (at least he has good company with Jamie DIMON). He says beware of the US-listed Chinese VIEs-ADRs that are under the crosshairs of both the US and China – each is attempting to outdo the other. His new book is Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail, November 2021.
(More later….)
Paperboard and other packaging producer Graphic Packaging (GPK; fwd P/E 11) is attractive as it can pass through its higher costs to customers. Paper-based packaging is also more environment-friendly.
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 May 2022 FOMC and later (The current QE-taper schedule may be accelerated to end QE in March vs June; watch the FOMC Statement, 12/15/21).
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +4.02%, SP500 +3.82%, Nasdaq Comp +3.61%, R2000 +2.43%. DJ Transports +2.74%; DJ Utilities +2.37%. (Rotating spot long Treasury -3.56%) US$ index (spot) -0.07%, oil/WTI futures +8.16%, gold futures UNCH.
YTD (index changes only), DJIA +17.53%, SP500 +25.45%, Nasdaq Comp +21.28%. (Rotating spot long Treasury TLT -5.62%)
Pg 42, EUROPE. Spanish Acerinox (ANIOY; fwd P/E 5.1) is benefiting from high demand for STAINLESS STEEL from appliance, auto and aerospace manufacturers. 2021 may be its best year ever (after bad 2020). As it supplies are under long-term contracts, the next few years should also be good. It bought VDM Metals 2 years ago; it may divest its money losing Malaysian unit.
Pg 42, EMERGING MARKETS. Athenai Institute (a student-led organization), Consumers’ Research, Calamos Investments, etc are pressing university endowments and other institutional investors to divest CHINESE companies with poor ESG records. This adds to the troubles that the US-listed Chinese companies are having with the US and Chinese authorities. But there are attractive Chinese companies in renewable energy, EVs, etc that score high for ESG.
Pg 43, OPTIONS. There are mixed signals from STOCKS (bullish) and OPTIONS (mixed from falling VIX but elevated SKEW). Traders can pair put-selling with call-buying on financials XLF on the expectations of no surprises from the FOMC beyond what has already been telegraphed widely.
(SP500 VIX 18.69, Nasdaq 100 VXN 23.95, SKEW 147.34 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg 44, COMMODITIES. Dr COPPER (+25% YTD) has been strong for 3 years but SILVER (-15% YTD) has the worst YTD loss since 2014. Copper demand is tied directly to global economic growth; deficit persists as supply is constrained due to Covid-19. Silver is both industrial and precious metal, but the latter demand is weak (jewelry, investments); it is a byproduct of the production of gold, copper, etc, so there is plenty of supply.
Pg 59, xx: A good week in EUROPE (Denmark +5.18%, Norway +1.06%; ALL reported markets up) and a good week in ASIA (China +3.34%, Malaysia +0.12%; ALL reported markets also up). MISSING CEF DATA but keeping last week info: The equity CEF index (data to Thursday) outperformed the DJIA, and its discount was -1.5%.
TREASURY* 3-mo yield 0.06%, 2-yr 0.67%, 5-yr 1.25%, 10-yr 1.48%, 30-yr 1.88%. DOLLAR fell, DXY 96.05, -0.06% (pg 65). GOLD (Handy & Harman spot, Thursday) rose to $1,780, +0.7% (pg 68); the gold-miners fell. (^XAU was at 124.05, -1.17% 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 1.24% (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 24: COVER STORY, “The King of Luxe/LVMH Has Thrived During the Pandemic. The Luxury-Goods Group’s Gains Can Continue”. MC.fr/LVMUY, yield 1%, fwd P/E 34 (2021), 30 (2022); sales 25% US, 36% Asia ex-Japan (includes 12% China), 21% Europe. With diversified global production (including in CA, TX), it didn’t have supply-chain issues except for shortages of shopping bags that came mostly from Asia. In billionaires’ race to the top, Chairman/CEO Bernard ARNAULT (72) was briefly #1, now #3; Arnault family owns 47% of LVMH shares but have 60% of voting control; BA personally visits his and rivals’ stores on Saturdays. The management bench is deep and 4 of 5 BA’s children work for the company. LVMH has 75 brands/lines/”houses” that include LV, Christian Dior, Fendi, Bulgari, Tag Heuer, Moet & Chandan, Dom Perignon, Chateau d’Yquem; there are 5,000 stores that also serve as showrooms for products ordered online. Growth by M&A continued during the pandemic with full or partial stakes in Tiffany (yep, that American icon), Jay-Z’s Champagne, Armand de Brignac, Tod’s, Phoebe Philo, Off-White (by late Virgil Abloh).
Celebrity endorsements are used to focus on young and mature customers. People with extra cash/savings who stayed/worked-from-home during the pandemic didn’t neglect personal care; they spent on luxury items just to be pretty/comfortable at home, or to look good on Zoom/ZM video calls. Chinese government policies targeting its big-techs and billionaires have not yet affected the luxury goods sector there but there are some concerns; Chinese have typically accounted for 33% of global personal luxury spending (21-23% even during the pandemic) and $1,442 LV handbags sell like hotcakes.
Pg 9, UP & DOWN WALL STREET. In a week when INFLATION was at 39-year high, stocks did well and bonds did OK; the SP5, oops SP500, was at a new high with AAPL approaching $3 trillion market-cap. Why? Investors were relieved to hear that Covid-19/Omicron wasn’t so bad for the fully vaccinated and inflation may come down later as implied by low INFLATION-EXPECTATIONS (RIEDER/BlackRock thinks that may happen by 2022 yearend; DALIO/Bridgewater doesn’t think so). The FOMC move to almost double the pace of QE-taper on Wednesday is well expected, and the QE may end by March vs June. The TINA crowd was in full control of the markets. But the UM consumer confidence was near 10-yr low, meaning that there is unhappiness in the Main Street.
INFLATION (CPI +6.8%, core CPI +4.9%) was high but that was expected; headline inflation was at 39-yr high. But INFLATION-EXPECTATIONS remained subdued (+2.46% over 10 years), meaning that it will come down later, and both stocks and bonds did well. The FOMC meeting next week may double the pace QE-taper to -30 billion/month (from the current -15 billion/month). After the QE winds up in March (vs June), the RATE hikes can begin. The fund futures market still didn’t react much but projects hikes in May/June, September, December (opinions vary on 2-4 rate hikes in 2022 and more in 2023); will the Fed dot-plots catch up? The YIELD-CURVE has flattened, and it may not take much to invert it. The UNEMPLOYMENT RATE that is 4.2% now may be headed to 3% or lower in 2022; it could be that long-term Covid-19 effects are preventing recovery in the labor participation rate.
Pg 13, STREETWISE. Hedge-fund manager Ray DALIO (Bridgewater) is worried that INFLATION spiraling out of control (no, he doesn’t trust the inflation-expectations data) will cause a CIVIL WAR in the US, a MILITARY CONFLICT between the US and China, decimate TREASURIES/bond portfolios and CASH will be trash; he likes TIPS. His funds have invested heavily in China, but he recently upset the US investors and the Chinese government with his recent remarks, and he issued apologies (at least he has good company with Jamie DIMON). He says beware of the US-listed Chinese VIEs-ADRs that are under the crosshairs of both the US and China – each is attempting to outdo the other. His new book is Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail, November 2021.
(More later….)