Post by Admin/YBB on Dec 25, 2021 6:14:45 GMT -6
Pg 33, TRADER. Omicron who? The SP500 was at a new all-time high. While Covid-19-Omicron has become the dominant variant, and there are pauses in some activities (NHL, NBA, NFL, Broadway, conferences/shows/events), investors focused on economic RECOVERY. New Covid-19 antiviral PILLS (from PFE, MRK) will soon be available. Big techs continue to lead. The old FAAMNG are now GAMMA. Some alternative energy, environmental and cyclical stocks were hit by potential delay or failure of soft-infrastructure stimulus (BBB) due to opposition from WV D-Senator MANCHIN.
Rising rates should be good for BANKS that are already in sound financial shape. Banks have passed Fed’s stress tests and also the real tests from pandemic. But easy money has been made (KBE +111% vs SP500 +103% since 3/23/20) and one should look for banks that will benefit significantly from rising RATES and LOAN growth. Mentioned are JPM, SIVB, PNFB, BANF, SFBS, WAL. These banks are not cheap on P/B but have high compound annual growth rates (CAGRs).
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. In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or later FOMC (note the format change).
1st rate hike, FOMC 3/16/22+
2nd rate hike, FOMC 6/15/22+
3rd rate hike, FOMC 12/14/22+
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +1.65%, SP500 +2.28%, Nasdaq Comp +3.19%, R2000 +3.11%. DJ Transports +2.26%; DJ Utilities +0.60%. (Rotating spot bank KBE +2.19%) US$ index (spot) -0.54%, oil/WTI futures +4.14%, gold futures +0.41%.
YTD (index changes only), DJIA +17.46%, SP500 +25.82%, Nasdaq Comp +21.45%. (Rotating spot bank KBE +32.27%)
Pg 36, EUROPE. REOPENING theme worked for consumer-discretionary (+31.4%) and luxury goods (+42) sectors. But food/drinks/tobacco and specialty online retailers weren’t hot as people started to go out. Auto prices rose but the auto industry couldn’t benefit as there were production reductions due to shortages of semi chips and other parts from supply-chain disruptions.
Pg 36, EMERGING MARKETS. POLITICAL factors hurt EMs like China. Bright spots were India, S Korea, Taiwan. Commodity-producing EMs (Brazil, Russia) were volatile.
Pg 37, OPTIONS. Stock market has become a gambling CASINO where some things that trade have no relation to valuations. Short-term calls ahead of upcoming events are like LOTTERY tickets. Frenzied options action can drive stocks as it has for MEME stocks and the phenomenon is spreading to general stocks. On an active day, options volume can be 50 million contracts (with each contract representing 100 shares) when 1 million contracts were big deal at the dot. com peak in 2000. High options VOLATILITY makes selling them attractive for patient and informed investors. The MONETARY conditions are changing and this options mania may crash and burn.
(SP500 VIX 17.96, Nasdaq 100 VXN 21.32, SKEW 150.26 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg 38, COMMODITIES. Many commodities shot up (wheat, coffee, sugar, lumber, lithium, energy) due to various factors (weather, drought, geopolitical, regulation, supply-chain disruptions). Surge in natural gas in Europe is for the history books. Precious metals slumped even as inflation surged but the real rates remain negative.
Pg 66**, 70**: A flat week in EUROPE** (Switzerland +1.15%, Netherlands -1.17%, Greece -1.40%) and a down week in ASIA** (Thailand +1.90%, China -2.95%). The equity CEF index** (data to Thursday) outperformed the DJIA, and its discount was -2%.
TREASURY* 3-mo yield 0.07%, 2-yr 0.71%, 5-yr 1.25%, 10-yr 1.50%, 30-yr 1.91%. DOLLAR** rose, DXY 96.67, +0.6% (pg 73). GOLD** (Handy & Harman spot, Thursday) rose to $1,808, +1.6% (pg 76**); the gold-miners rose. (^XAU was at 130.61, +3.18% 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 0.85%; 5-yr CDs 1.29% (pg 71**).
*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.
www.treasurydirect.gov/tdhome.htm
**MISSING data. Info carried over from the LAST week.
(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, “OMICRON is Wreaking Havoc in the World. INVESTORS are the only ones Not Worried”. It seems that everybody except investors is worried about Covid-19-Omicron, the dominant strain now. Omicron has caused mild illnesses in fully vaccinated and governments and businesses have so far been cautious in restricting activities. But stronger steps may be needed if hospitals reach capacity. The FDA has cleared oral antiviral PILLS from PFE and MRK. The SP500 was at a new high. The market experience so far has been strong rebounds following any pandemic related selloffs. Pay attention to Q4 EARNINGS to be released after mid-January. The FED actions will also have impact – the QE may wind up by March followed by several rate hikes in 2022-23. Watch SCHOOL closures and LABOR markets. Labor participation remains low, but unemployment rate is also low and there are millions more job openings than unemployed, and wages are rising. SUPPLY-CHAIN disruptions will continue, and INFLATION may peak in 2022/Q1. Overall, it seems that people and business are learning to cope with Covid-19 variants.
Pg 6, UP & DOWN WALL STREET. Nothing seems to stop this BULL market, not insurrection, infections nor inflation. Most investors would have done fine by turning off their PCs, phones and TVs, and going on vacation. YTD to Wednesday: SP500 SPY +25.52%, R2000 IWM +12.34%, foreign VEU +6.32%, but EM EEM -4.87%, China MCHI -22.02%. In fixed-income, investment-grade total bond AGG -1.63%, HY HYG +3.35%, FR/BL CEF JRO +23.34%. INFLATION started gradually and then came on suddenly (to paraphrase HEMINGWAY) due to supply-chain disruptions (semi chips, commodities, goods). Monetary and fiscal STIMULUSES kept coming and the money supply grew at 4x the rate of growth of the Fed balance sheet. Inflation indexes are at historic high rates, but they don’t yet capture rising HOUSING prices because of the odd owners’ equivalent rent used in indexes. STOCKS had wild speculations in meme stocks and other highflyers (some without profits or even revenues). Negative REAL rates have fueled speculation everywhere (except in precious metals). But the process REVERSES in 2022 and there will be turbulence in stocks, commodities, goods, and services. The ride down may be less pleasant than the ride up.
Are you dreaming of a Santa Claus rally (Dec 27 – Jan 4) when Covid-19-Omicron is surging, and inflation is rising? Some blamed Monday’s selloff on overreaction to Omicron and possible delay or scuttling of soft-infrastructure stimulus (BBB) by “President Manchin” (of the coal country). But things turned around later in the short week and SP500 was at a new high. New oral pills for Covid-19 are also coming from PFE and MRK.
Pg 8, STREETWISE. While hard-seltzer fizzled out (White Claw/Mark Anthony, Truly/SAM, etc), canned ready-to-drink (RTD) cocktails are booming (Cutwater Spirits/BUD, several RTDs from Pernod/PRNDY, etc). Some of these distillers’ stocks are trading like software stocks (PRNDY, DEO, BF-A/B, etc). Family-owned US Sazerac may be bought by French PRNDY or REMYY.
Now from booze to banks that will profit from widening rate-spreads as rates rise. Banks may use new deposits to grow their loan books. Attractive are regional banks – KEY, CFG, some mentioned by Trader (Part 1), and some that will benefit from service tie-ins with the app-based neobanks serving niche communities.
(More later….)
Rising rates should be good for BANKS that are already in sound financial shape. Banks have passed Fed’s stress tests and also the real tests from pandemic. But easy money has been made (KBE +111% vs SP500 +103% since 3/23/20) and one should look for banks that will benefit significantly from rising RATES and LOAN growth. Mentioned are JPM, SIVB, PNFB, BANF, SFBS, WAL. These banks are not cheap on P/B but have high compound annual growth rates (CAGRs).
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. In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or later FOMC (note the format change).
1st rate hike, FOMC 3/16/22+
2nd rate hike, FOMC 6/15/22+
3rd rate hike, FOMC 12/14/22+
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +1.65%, SP500 +2.28%, Nasdaq Comp +3.19%, R2000 +3.11%. DJ Transports +2.26%; DJ Utilities +0.60%. (Rotating spot bank KBE +2.19%) US$ index (spot) -0.54%, oil/WTI futures +4.14%, gold futures +0.41%.
YTD (index changes only), DJIA +17.46%, SP500 +25.82%, Nasdaq Comp +21.45%. (Rotating spot bank KBE +32.27%)
Pg 36, EUROPE. REOPENING theme worked for consumer-discretionary (+31.4%) and luxury goods (+42) sectors. But food/drinks/tobacco and specialty online retailers weren’t hot as people started to go out. Auto prices rose but the auto industry couldn’t benefit as there were production reductions due to shortages of semi chips and other parts from supply-chain disruptions.
Pg 36, EMERGING MARKETS. POLITICAL factors hurt EMs like China. Bright spots were India, S Korea, Taiwan. Commodity-producing EMs (Brazil, Russia) were volatile.
Pg 37, OPTIONS. Stock market has become a gambling CASINO where some things that trade have no relation to valuations. Short-term calls ahead of upcoming events are like LOTTERY tickets. Frenzied options action can drive stocks as it has for MEME stocks and the phenomenon is spreading to general stocks. On an active day, options volume can be 50 million contracts (with each contract representing 100 shares) when 1 million contracts were big deal at the dot. com peak in 2000. High options VOLATILITY makes selling them attractive for patient and informed investors. The MONETARY conditions are changing and this options mania may crash and burn.
(SP500 VIX 17.96, Nasdaq 100 VXN 21.32, SKEW 150.26 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg 38, COMMODITIES. Many commodities shot up (wheat, coffee, sugar, lumber, lithium, energy) due to various factors (weather, drought, geopolitical, regulation, supply-chain disruptions). Surge in natural gas in Europe is for the history books. Precious metals slumped even as inflation surged but the real rates remain negative.
Pg 66**, 70**: A flat week in EUROPE** (Switzerland +1.15%, Netherlands -1.17%, Greece -1.40%) and a down week in ASIA** (Thailand +1.90%, China -2.95%). The equity CEF index** (data to Thursday) outperformed the DJIA, and its discount was -2%.
TREASURY* 3-mo yield 0.07%, 2-yr 0.71%, 5-yr 1.25%, 10-yr 1.50%, 30-yr 1.91%. DOLLAR** rose, DXY 96.67, +0.6% (pg 73). GOLD** (Handy & Harman spot, Thursday) rose to $1,808, +1.6% (pg 76**); the gold-miners rose. (^XAU was at 130.61, +3.18% 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 0.85%; 5-yr CDs 1.29% (pg 71**).
*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.
www.treasurydirect.gov/tdhome.htm
**MISSING data. Info carried over from the LAST week.
(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, “OMICRON is Wreaking Havoc in the World. INVESTORS are the only ones Not Worried”. It seems that everybody except investors is worried about Covid-19-Omicron, the dominant strain now. Omicron has caused mild illnesses in fully vaccinated and governments and businesses have so far been cautious in restricting activities. But stronger steps may be needed if hospitals reach capacity. The FDA has cleared oral antiviral PILLS from PFE and MRK. The SP500 was at a new high. The market experience so far has been strong rebounds following any pandemic related selloffs. Pay attention to Q4 EARNINGS to be released after mid-January. The FED actions will also have impact – the QE may wind up by March followed by several rate hikes in 2022-23. Watch SCHOOL closures and LABOR markets. Labor participation remains low, but unemployment rate is also low and there are millions more job openings than unemployed, and wages are rising. SUPPLY-CHAIN disruptions will continue, and INFLATION may peak in 2022/Q1. Overall, it seems that people and business are learning to cope with Covid-19 variants.
Pg 6, UP & DOWN WALL STREET. Nothing seems to stop this BULL market, not insurrection, infections nor inflation. Most investors would have done fine by turning off their PCs, phones and TVs, and going on vacation. YTD to Wednesday: SP500 SPY +25.52%, R2000 IWM +12.34%, foreign VEU +6.32%, but EM EEM -4.87%, China MCHI -22.02%. In fixed-income, investment-grade total bond AGG -1.63%, HY HYG +3.35%, FR/BL CEF JRO +23.34%. INFLATION started gradually and then came on suddenly (to paraphrase HEMINGWAY) due to supply-chain disruptions (semi chips, commodities, goods). Monetary and fiscal STIMULUSES kept coming and the money supply grew at 4x the rate of growth of the Fed balance sheet. Inflation indexes are at historic high rates, but they don’t yet capture rising HOUSING prices because of the odd owners’ equivalent rent used in indexes. STOCKS had wild speculations in meme stocks and other highflyers (some without profits or even revenues). Negative REAL rates have fueled speculation everywhere (except in precious metals). But the process REVERSES in 2022 and there will be turbulence in stocks, commodities, goods, and services. The ride down may be less pleasant than the ride up.
Are you dreaming of a Santa Claus rally (Dec 27 – Jan 4) when Covid-19-Omicron is surging, and inflation is rising? Some blamed Monday’s selloff on overreaction to Omicron and possible delay or scuttling of soft-infrastructure stimulus (BBB) by “President Manchin” (of the coal country). But things turned around later in the short week and SP500 was at a new high. New oral pills for Covid-19 are also coming from PFE and MRK.
Pg 8, STREETWISE. While hard-seltzer fizzled out (White Claw/Mark Anthony, Truly/SAM, etc), canned ready-to-drink (RTD) cocktails are booming (Cutwater Spirits/BUD, several RTDs from Pernod/PRNDY, etc). Some of these distillers’ stocks are trading like software stocks (PRNDY, DEO, BF-A/B, etc). Family-owned US Sazerac may be bought by French PRNDY or REMYY.
Now from booze to banks that will profit from widening rate-spreads as rates rise. Banks may use new deposits to grow their loan books. Attractive are regional banks – KEY, CFG, some mentioned by Trader (Part 1), and some that will benefit from service tie-ins with the app-based neobanks serving niche communities.
(More later….)