Post by Admin/YBB on Jan 8, 2022 7:31:56 GMT -6
Pg 21, TRADER. Don’t fight the FED. And the FOMC Minutes showed that it discussed shrinking of its BALANCE SHEET in addition to an early end of QE in March and several rate HIKES in 2022. Highflying tech stocks tumbled taking the Nasdaq Comp and SP500 down, while the DJIA was nearly flat. Speculative stocks had been beaten down already but were hit again. The Nasdaq Comp is down only 5.7% from its high, but 38% of Nasdaq Comp stocks are down by more than 50% from their highs. Investors were selling first, asking questions later. A poor JOBS report didn’t stop the rise in 10-yr yield to the highest level since January 2020. The CPI next week is expected at +7.1% y-o-y. Risk is being repriced, that is all.
Coca-Cola (KO; fwd P/E 24.8) is attractive as a global economic rebound play. Many restaurants that use its products have closed or have limited operations. It also eliminated several brands such as Tab, Zico, Odwalla, etc. There is a huge tax dispute of $12 billion with the IRS. But things should improve in 2022.
Biotechs had a terrible 2021 (IBB, XBI) and they continued sinking in 2022. But 2022 should be better for this beaten down sector – almost 70 biotechs have more cash than their combined market value plus debt (so, what is their EV?). Vertex/VRTX is featured; it presents at the JPM Healthcare Conference on Monday.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes. In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or later FOMC (note the format change).
1st rate hike, FOMC 3/16/22+
2nd rate hike, FOMC 6/15/22+
3rd rate hike, FOMC 9/21/22+
4th rate hike, FOMC 12/14/22+
(yep, fed fund futures are now showing 4 rate hikes in 2022)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.29%, SP500 -1.87%, Nasdaq Comp -4.53%, R2000 -2.92%. DJ Transports -1.27%; DJ Utilities -1.29%. (Rotating spot biotech XBI -8.01%) US$ index (spot) -0.24%, oil/WTI futures +4.91%, gold futures -1.67%.
52-WEEKS (index changes only), DJIA +16.51%, SP500 +22.29%, Nasdaq Comp +13.13%. (Rotating spot biotech XBI -31.11%)
Pg 24, EUROPE. The UK-based Rio Tinto (RIO; yield 10%; fwd P/E 6.7) is trying to shift from dirty iron-ore to clean-energy lithium (it recently bought Argentinean Rincon). Risk is this transformation may take time.
Pg 24, EMERGING MARKETS. CHILE’s leftist President-elect Gabriel BORIC (35) takes office on March 11. He ran on a platform of raising taxes, environmental controls on mining industry (globally #1 for copper, #2 for lithium), imposing royalties on mining revenues, and transformation to post-resources era. Some of these proposals may stall. Chile ETF ECH has rebounded from December lows but still reflects lot of bad news.
Pg 25, OPTIONS. FINANCIALS should benefit from rising rates. Consider selling puts for XLF.
(SP500 VIX 18.76, Nasdaq 100 VXN 25.65, SKEW 139.14 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg 26, COMMODITIES. Outlook for “wild” LUMBER (+32% in 2021, +83% in 2011/Q4, range $448-1,670.50 per 1,000 board ft) is bullish on constrained supply. Big lumber users are trend followers and chase prices higher. There is consolidation in the industry, and with fewer and larger players there is boom-and-bust pricing. But lumber prices should stabilize at higher levels.
Pg 47, L54: A down week in EUROPE (Belgium +1.93%, Denmark -5.99%) and a down week in ASIA (Indonesia +2.20%, Singapore -2.19%). The equity CEF index (data to Thursday) underperformed the DJIA, and its discount was -1.5%.
TREASURY* 3-mo yield 0.10%, 2-yr 0.87%, 5-yr 1.50%, 10-yr 1.76%, 30-yr 2.11%. DOLLAR was flat, DXY 95.74 (pg 49). GOLD (Handy & Harman spot, Thursday) sank to $1,793, -1.5% (pg 52); the gold-miners tanked. (^XAU was at 124.44, -6.05% 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 0.85%; 5-yr CDs 1.29% (pg L55).
*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
NOTE – Good that the MISSING data for 2 weeks has been restored.
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg L4: COVER STORY from FundQ, “The Commodities Boom/Why It’s Time to Invest in COMMODITIES, and How to Do It”. Factors driving commodities include inflation, China and energy transitions. Bloomberg commodity index rose +27% in 2021 and more gains are ahead, especially for oil and ag-commodities. INFLATION is driven by pent-up demand and constrained supplies due to supply-chain disruptions. Greenflation is also contributing as the ESG movement has costs. CHINA is a huge consumer of commodities, and it is slowing. Its property sector is in trouble. Yet, commodities need China. ENERGY TRANSITIONS and ESG are driving the demand for several commodities. Rising energy and other prices feed into higher AG-COMMODITY prices. Plant substitutes for meats are boosting demand for several ag-commodities. WEATHER has been difficult in many areas. Most commodities are in BACKWARDATION (i.e., the prices of near-futures are higher than those for far-futures); futures-based commodity funds benefit from backwardation during their periodic future rolls. It is hard to find active commodity funds but an article in FundQ mentions 3.
Excerpts from Fund Quarterly (FundQ) supplement will be presented in Part 3 in the Mutual Fund forum.
Pg 5, UP & DOWN WALL STREET. It has been a NEW BAD YEAR so far for both stocks and bonds. Some Treasury YIELDS were at their pre-pandemic levels and there may be 3-4 rate HIKES in 2022. And don’t forget about an early end of QE and internal FOMC discussions about reducing the Fed balance sheet. Highflying growth stocks sank (Nasdaq-100/QQQ was down -4.5%) while cyclicals (especially financials) did OK. INFLATION is well above Fed’s +2% target (CPI is expected at +7.1% y-o-y next week, although the Fed uses PCE). JOBS number was a huge miss, but the unemployment rate fell to 3.9% (vs 3.5% in pre-pandemic February 2020). Average hourly WAGES rose +4.7% y-o-y. Inflation may remain high due to wage gains, rising rents (owners’ rent-equivalent is used in inflation indexes), rising prices, greenflation (ESG doesn’t come cheap), and monetary stimulus (M2 grew +41% over 2 years). The Fed’s announced responses seem mild as the REAL RATES will remain negative for quite a while.
Dan FUSS (88; formerly managed LSBRX) likes BB-rated bonds and high-dividend stocks over investment-grade bonds. Reinvestments don’t offer much for bonds at these low rates of today.
Pg 7, STREETWISE. AUTO stocks have run up and been very volatile on prospects of EVs – TSLA (2 analysts are cited for possible price range $67-1,400), GM (fwd P/E 9), F (fwd P/E 12), RIVN (forget about P/E or P/S). Who would have thought that CES 2022 would move auto stocks? Many are working on pickups and SUVs. But EVs will not be profitable initially and traditional automakers will have to deploy cash flows from ICE-cars that may eventually be sold as collectors’ items.
(More later….)
Coca-Cola (KO; fwd P/E 24.8) is attractive as a global economic rebound play. Many restaurants that use its products have closed or have limited operations. It also eliminated several brands such as Tab, Zico, Odwalla, etc. There is a huge tax dispute of $12 billion with the IRS. But things should improve in 2022.
Biotechs had a terrible 2021 (IBB, XBI) and they continued sinking in 2022. But 2022 should be better for this beaten down sector – almost 70 biotechs have more cash than their combined market value plus debt (so, what is their EV?). Vertex/VRTX is featured; it presents at the JPM Healthcare Conference on Monday.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes. In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or later FOMC (note the format change).
1st rate hike, FOMC 3/16/22+
2nd rate hike, FOMC 6/15/22+
3rd rate hike, FOMC 9/21/22+
4th rate hike, FOMC 12/14/22+
(yep, fed fund futures are now showing 4 rate hikes in 2022)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.29%, SP500 -1.87%, Nasdaq Comp -4.53%, R2000 -2.92%. DJ Transports -1.27%; DJ Utilities -1.29%. (Rotating spot biotech XBI -8.01%) US$ index (spot) -0.24%, oil/WTI futures +4.91%, gold futures -1.67%.
52-WEEKS (index changes only), DJIA +16.51%, SP500 +22.29%, Nasdaq Comp +13.13%. (Rotating spot biotech XBI -31.11%)
Pg 24, EUROPE. The UK-based Rio Tinto (RIO; yield 10%; fwd P/E 6.7) is trying to shift from dirty iron-ore to clean-energy lithium (it recently bought Argentinean Rincon). Risk is this transformation may take time.
Pg 24, EMERGING MARKETS. CHILE’s leftist President-elect Gabriel BORIC (35) takes office on March 11. He ran on a platform of raising taxes, environmental controls on mining industry (globally #1 for copper, #2 for lithium), imposing royalties on mining revenues, and transformation to post-resources era. Some of these proposals may stall. Chile ETF ECH has rebounded from December lows but still reflects lot of bad news.
Pg 25, OPTIONS. FINANCIALS should benefit from rising rates. Consider selling puts for XLF.
(SP500 VIX 18.76, Nasdaq 100 VXN 25.65, SKEW 139.14 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg 26, COMMODITIES. Outlook for “wild” LUMBER (+32% in 2021, +83% in 2011/Q4, range $448-1,670.50 per 1,000 board ft) is bullish on constrained supply. Big lumber users are trend followers and chase prices higher. There is consolidation in the industry, and with fewer and larger players there is boom-and-bust pricing. But lumber prices should stabilize at higher levels.
Pg 47, L54: A down week in EUROPE (Belgium +1.93%, Denmark -5.99%) and a down week in ASIA (Indonesia +2.20%, Singapore -2.19%). The equity CEF index (data to Thursday) underperformed the DJIA, and its discount was -1.5%.
TREASURY* 3-mo yield 0.10%, 2-yr 0.87%, 5-yr 1.50%, 10-yr 1.76%, 30-yr 2.11%. DOLLAR was flat, DXY 95.74 (pg 49). GOLD (Handy & Harman spot, Thursday) sank to $1,793, -1.5% (pg 52); the gold-miners tanked. (^XAU was at 124.44, -6.05% 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 0.85%; 5-yr CDs 1.29% (pg L55).
*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
NOTE – Good that the MISSING data for 2 weeks has been restored.
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg L4: COVER STORY from FundQ, “The Commodities Boom/Why It’s Time to Invest in COMMODITIES, and How to Do It”. Factors driving commodities include inflation, China and energy transitions. Bloomberg commodity index rose +27% in 2021 and more gains are ahead, especially for oil and ag-commodities. INFLATION is driven by pent-up demand and constrained supplies due to supply-chain disruptions. Greenflation is also contributing as the ESG movement has costs. CHINA is a huge consumer of commodities, and it is slowing. Its property sector is in trouble. Yet, commodities need China. ENERGY TRANSITIONS and ESG are driving the demand for several commodities. Rising energy and other prices feed into higher AG-COMMODITY prices. Plant substitutes for meats are boosting demand for several ag-commodities. WEATHER has been difficult in many areas. Most commodities are in BACKWARDATION (i.e., the prices of near-futures are higher than those for far-futures); futures-based commodity funds benefit from backwardation during their periodic future rolls. It is hard to find active commodity funds but an article in FundQ mentions 3.
Excerpts from Fund Quarterly (FundQ) supplement will be presented in Part 3 in the Mutual Fund forum.
Pg 5, UP & DOWN WALL STREET. It has been a NEW BAD YEAR so far for both stocks and bonds. Some Treasury YIELDS were at their pre-pandemic levels and there may be 3-4 rate HIKES in 2022. And don’t forget about an early end of QE and internal FOMC discussions about reducing the Fed balance sheet. Highflying growth stocks sank (Nasdaq-100/QQQ was down -4.5%) while cyclicals (especially financials) did OK. INFLATION is well above Fed’s +2% target (CPI is expected at +7.1% y-o-y next week, although the Fed uses PCE). JOBS number was a huge miss, but the unemployment rate fell to 3.9% (vs 3.5% in pre-pandemic February 2020). Average hourly WAGES rose +4.7% y-o-y. Inflation may remain high due to wage gains, rising rents (owners’ rent-equivalent is used in inflation indexes), rising prices, greenflation (ESG doesn’t come cheap), and monetary stimulus (M2 grew +41% over 2 years). The Fed’s announced responses seem mild as the REAL RATES will remain negative for quite a while.
Dan FUSS (88; formerly managed LSBRX) likes BB-rated bonds and high-dividend stocks over investment-grade bonds. Reinvestments don’t offer much for bonds at these low rates of today.
Pg 7, STREETWISE. AUTO stocks have run up and been very volatile on prospects of EVs – TSLA (2 analysts are cited for possible price range $67-1,400), GM (fwd P/E 9), F (fwd P/E 12), RIVN (forget about P/E or P/S). Who would have thought that CES 2022 would move auto stocks? Many are working on pickups and SUVs. But EVs will not be profitable initially and traditional automakers will have to deploy cash flows from ICE-cars that may eventually be sold as collectors’ items.
(More later….)