Post by Admin/YBB on Mar 26, 2022 6:22:03 GMT -6
Pg 38, TRADER. Another UP WEEK. Stocks ignored war, inflation and the Fed, but for how long? There was no good news to drive the market up in these 2 weeks. Some investors may have shifted from poorly performing bonds to stocks (TINA at work). Investor SENTIMENT has improved from very negative levels. But there may be better opportunities in Q2 with stocks in a trading range.
Reasons for recent Tesla/TSLA rally (+32% in 8 up days) are unclear; it is +3% over 3 months. It seems that earlier rate worries have been replaced by growth expectations. A new German manufacturing facility opened a few days ago. Q1 deliveries report (310,000-320,000) is due April 2.
M&T Bank/MTB is benefitting from rising rate-expectations. Risks include yield-curve inversion; tangible book value (tBV) hit from falling bond prices. Recently acquired People’s United Financial/PBCT.
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 (+/- 0.25%). 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 a later FOMC.
2nd & 3rd rate hike, FOMC 5/4/22+ (50 bps hike possible)
4th & 5th rate hikes, FOMC 6/15/22+ (50 bps hike possible)
6th rate hike, FOMC 7/27/22+
7th rate hike, FOMC 9/21/22+
8th rate hike, FOMC 11/2/22+
9th & 10th rate hike, FOMC 12/14/22+ (50 bps hike possible) (target 2.50-2.75%)
POWELL’s/FED’s new strategy may be to aggressively talk up the fed fund rates but may not follow through with all that the futures market are projecting. Nice attempt to catchup by the FOMC, also known popularly as the Federal Open Mouth Committee.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.31%, SP500 +1.79%, Nasdaq Comp +1.98%, R2000 -0.39%. DJ Transports -0.68%; DJ Utilities +3.42%. (Rotating spot AAPL +6.55%) US$ index (spot) +0.58%, oil/WTI futures +8.79%, gold futures +1.31%
YTD (index changes only), DJIA -4.06%, SP500 -4.68%, Nasdaq Comp -9.43%. (Rotating spot AAPL -1.61%)
Pg 41, EUROPE. UK MINING giant Anglo American (NGLOY; fwd P/E 8.3) is benefitting from rally in COMMODITIES. It mines platinum group of metals (PGMs), iron ore, Dr Copper, diamonds (owns 85% of private De Beers), nickel, etc. It has no exposure to Russia and Ukraine. New CEO will start in April.
Pg 41, EMERGING MARKETS. Post-pandemic opportunities in Southeast Asia include Indonesia (EIDO), Malaysia, Philippines, Singapore, Thailand, Vietnam. They have learned to live with Covid-19.
Pg 42, OPTIONS. Pandemic followed by war, inflation and an aggressive Fed, how bad can it be? Forget the Fed put. Michael SCHWARTZ (Oppenheimer) suggests waiting for higher VIX (35+) to buy high-quality stocks and/or sell puts.
(SP500 VIX 20.81, Nasdaq 100 VXN 27.34, SKEW 140.26 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg 43, COMMODITIES. The OPEC/OPEC+ and the US frackers are not rushing to increase CRUDE OIL production. Within the OPEC, only Saudi Arabia and UAE have spare production capacity. Russia with 7.8 million barrels/day leads OPEC+. The US has banned Russian oil imports but the EU and UK will only reduce that over time. The US-EU partnership on LNG will take years to have meaningful impact. Iran and Venezuela may also pick up some slack. But be ready for higher oil prices for longer.
Pg ***, 63: A great rebound week in EUROPE*** (Netherlands +9.37%, Norway +3.06%) and a great rebound week in ASIA*** (Japan +6.09%, Philippines -1.39%). The equity CEF index (data to Thursday) outperformed the DJIA, and its premium was +0.5%. ***MISSING data. Shown are data from last week.
TREASURY* 3-mo yield 0.55%, 1-yr 1.67%, 2-yr 2.30%, 5-yr 2.55%, 10-yr 2.48%, 30-yr 2.60% (a hump from 3-7 yrs). DOLLAR rose, ^DXY 98.81, +0.6% (pg 65). GOLD rose to $1,954, +0.9% (Handy & Harman spot, Thursday) (pg 68); the gold-miners rose. (^XAU was at 160.79, +3.20% for the week)
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
Top FDIC insured savings deposit rates**: Money-market accounts 0.65%; 3-mo Jumbo CD 0.35%, 1-yr CDs 1.00%; 5-yr CDs 1.79% (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.
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 22: COVER STORY, “STREAMING Goes Hollywood”. For the Oscar night on Sunday, there are 27 nominations from Netflix, 6 from Apple TV+, 4 from Amazon Studios; there are also several nominations for dual/simultaneous releases for theaters and streaming from Disney, Warner Bros, etc. This at a time when Wall Street has turned sour on streaming stocks (NFLX, DIS, AMC, CNK, etc). Streaming is not profitable (except for NFLX). Heavy investments are required for content, marketing and subscribers. There is high subscriber churn; there are streaming price-wars. But NFLX and DIS (investor day, March 28) should be long-term winners. AMZN and APPL are also into the streaming game. There may be more industry consolidations and partnerships.
Pg 7, UP & DOWN WALL STREET. BONDS have been hurt by rising yields from FED jawboning (but only 1 actual 25-bps hike so far). The fed fund futures market is projecting 2.25%-2.50% by the yearend (that means 9-10 25-bps hikes for 2022, so several 50-bps hikes with only 6 FOMC meetings remaining). The 10-yr yield broke above its downtrend line; the 2Y-10Y spread is narrow at 20 bps. Several strategists are recommending short-term HY, FR/BL (a subclass of ST-HY; ETF BKLN, etc), short-term munis. With both stocks and bonds negative YTD, allocation/balanced funds haven’t offered any protection.
Will the FED be able to pull SOFT LANDING by talking tough and acting some? The fed fund futures market is now showing target rate of 2.50-2.75% by 2022 yearend (that is 10 25-bps hikes in 6 FOMC meetings, so several would have to be 50-bps hikes). Treasury yields jumped; 2Y-10Y spread was only 18 bps. But the stock market charged ahead for another week – that is unusual considering all the negatives out there (war, high oil prices, sharply rising rate-expectations, etc). May be the dance will continue until the music stops.
Pg 11, STREETWISE. This may be a Golden Age for the US REFINERS. Profit boom from high oil and natural gas prices (multiple times more expensive in Europe and Asia) may last through the decade. Natural gas has many uses, and the US companies and refiners will have huge global advantage due to relatively lower cost (although they may seem high to us) of natural gas. But unlike oil, natural gas is very difficult to transport and handle and related facilities take years to develop. There is still significant leakage of natural gas at oil wells but the old practice of flaring has almost disappeared. Beneficiaries will be refiners VLO, MPC, PSX, DINO and industrial gas suppliers LIN, APD.
(More later….)
Reasons for recent Tesla/TSLA rally (+32% in 8 up days) are unclear; it is +3% over 3 months. It seems that earlier rate worries have been replaced by growth expectations. A new German manufacturing facility opened a few days ago. Q1 deliveries report (310,000-320,000) is due April 2.
M&T Bank/MTB is benefitting from rising rate-expectations. Risks include yield-curve inversion; tangible book value (tBV) hit from falling bond prices. Recently acquired People’s United Financial/PBCT.
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 (+/- 0.25%). 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 a later FOMC.
2nd & 3rd rate hike, FOMC 5/4/22+ (50 bps hike possible)
4th & 5th rate hikes, FOMC 6/15/22+ (50 bps hike possible)
6th rate hike, FOMC 7/27/22+
7th rate hike, FOMC 9/21/22+
8th rate hike, FOMC 11/2/22+
9th & 10th rate hike, FOMC 12/14/22+ (50 bps hike possible) (target 2.50-2.75%)
POWELL’s/FED’s new strategy may be to aggressively talk up the fed fund rates but may not follow through with all that the futures market are projecting. Nice attempt to catchup by the FOMC, also known popularly as the Federal Open Mouth Committee.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.31%, SP500 +1.79%, Nasdaq Comp +1.98%, R2000 -0.39%. DJ Transports -0.68%; DJ Utilities +3.42%. (Rotating spot AAPL +6.55%) US$ index (spot) +0.58%, oil/WTI futures +8.79%, gold futures +1.31%
YTD (index changes only), DJIA -4.06%, SP500 -4.68%, Nasdaq Comp -9.43%. (Rotating spot AAPL -1.61%)
Pg 41, EUROPE. UK MINING giant Anglo American (NGLOY; fwd P/E 8.3) is benefitting from rally in COMMODITIES. It mines platinum group of metals (PGMs), iron ore, Dr Copper, diamonds (owns 85% of private De Beers), nickel, etc. It has no exposure to Russia and Ukraine. New CEO will start in April.
Pg 41, EMERGING MARKETS. Post-pandemic opportunities in Southeast Asia include Indonesia (EIDO), Malaysia, Philippines, Singapore, Thailand, Vietnam. They have learned to live with Covid-19.
Pg 42, OPTIONS. Pandemic followed by war, inflation and an aggressive Fed, how bad can it be? Forget the Fed put. Michael SCHWARTZ (Oppenheimer) suggests waiting for higher VIX (35+) to buy high-quality stocks and/or sell puts.
(SP500 VIX 20.81, Nasdaq 100 VXN 27.34, SKEW 140.26 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg 43, COMMODITIES. The OPEC/OPEC+ and the US frackers are not rushing to increase CRUDE OIL production. Within the OPEC, only Saudi Arabia and UAE have spare production capacity. Russia with 7.8 million barrels/day leads OPEC+. The US has banned Russian oil imports but the EU and UK will only reduce that over time. The US-EU partnership on LNG will take years to have meaningful impact. Iran and Venezuela may also pick up some slack. But be ready for higher oil prices for longer.
Pg ***, 63: A great rebound week in EUROPE*** (Netherlands +9.37%, Norway +3.06%) and a great rebound week in ASIA*** (Japan +6.09%, Philippines -1.39%). The equity CEF index (data to Thursday) outperformed the DJIA, and its premium was +0.5%. ***MISSING data. Shown are data from last week.
TREASURY* 3-mo yield 0.55%, 1-yr 1.67%, 2-yr 2.30%, 5-yr 2.55%, 10-yr 2.48%, 30-yr 2.60% (a hump from 3-7 yrs). DOLLAR rose, ^DXY 98.81, +0.6% (pg 65). GOLD rose to $1,954, +0.9% (Handy & Harman spot, Thursday) (pg 68); the gold-miners rose. (^XAU was at 160.79, +3.20% for the week)
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
Top FDIC insured savings deposit rates**: Money-market accounts 0.65%; 3-mo Jumbo CD 0.35%, 1-yr CDs 1.00%; 5-yr CDs 1.79% (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.
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 22: COVER STORY, “STREAMING Goes Hollywood”. For the Oscar night on Sunday, there are 27 nominations from Netflix, 6 from Apple TV+, 4 from Amazon Studios; there are also several nominations for dual/simultaneous releases for theaters and streaming from Disney, Warner Bros, etc. This at a time when Wall Street has turned sour on streaming stocks (NFLX, DIS, AMC, CNK, etc). Streaming is not profitable (except for NFLX). Heavy investments are required for content, marketing and subscribers. There is high subscriber churn; there are streaming price-wars. But NFLX and DIS (investor day, March 28) should be long-term winners. AMZN and APPL are also into the streaming game. There may be more industry consolidations and partnerships.
Pg 7, UP & DOWN WALL STREET. BONDS have been hurt by rising yields from FED jawboning (but only 1 actual 25-bps hike so far). The fed fund futures market is projecting 2.25%-2.50% by the yearend (that means 9-10 25-bps hikes for 2022, so several 50-bps hikes with only 6 FOMC meetings remaining). The 10-yr yield broke above its downtrend line; the 2Y-10Y spread is narrow at 20 bps. Several strategists are recommending short-term HY, FR/BL (a subclass of ST-HY; ETF BKLN, etc), short-term munis. With both stocks and bonds negative YTD, allocation/balanced funds haven’t offered any protection.
Will the FED be able to pull SOFT LANDING by talking tough and acting some? The fed fund futures market is now showing target rate of 2.50-2.75% by 2022 yearend (that is 10 25-bps hikes in 6 FOMC meetings, so several would have to be 50-bps hikes). Treasury yields jumped; 2Y-10Y spread was only 18 bps. But the stock market charged ahead for another week – that is unusual considering all the negatives out there (war, high oil prices, sharply rising rate-expectations, etc). May be the dance will continue until the music stops.
Pg 11, STREETWISE. This may be a Golden Age for the US REFINERS. Profit boom from high oil and natural gas prices (multiple times more expensive in Europe and Asia) may last through the decade. Natural gas has many uses, and the US companies and refiners will have huge global advantage due to relatively lower cost (although they may seem high to us) of natural gas. But unlike oil, natural gas is very difficult to transport and handle and related facilities take years to develop. There is still significant leakage of natural gas at oil wells but the old practice of flaring has almost disappeared. Beneficiaries will be refiners VLO, MPC, PSX, DINO and industrial gas suppliers LIN, APD.
(More later….)