Post by Admin/YBB on May 7, 2022 5:42:00 GMT -6
Pg 28, TRADER. Rising RATES are causing stock declines and that may continue for a while. There are lingering pandemic issues, high inflation, Russia-Ukraine war, supply-chain disruptions. Investors are no longer paying for growth at all costs but are looking for profits and cash flows (or definite paths to those). Stocks rallied sharply after POWELL ruled out 75-bps hikes at his post-FOMC press conference. The 10-yr yield was above 3% for the first time since 2018 – that is now competition for bond-proxies such as utilities, REITs. Higher yields have also hit highflying stock P/E or P/S. Treasury-short TBF is up +27.7% YTD. The JOB market is too tight and that will cause wage inflation. Rising rates will benefit banks/financials (C, CFG, SYF, USB, etc). High oil/gas prices are benefiting oil/gas producers (APA, MRO, OXY).
After a worst selloff in decades, PREFERREDS are attractive. Some preferreds have dropped by 30% and yields have moved up from 4% to 6% (JPM-M, WFC-Z, T-C, VNO-O). ETF PFF is down 15% YTD; CEFs include FFC, JPC. Most preferred have perpetual maturities and are very rate sensitive (a point not fully appreciated by retail preferred buyers); many can be redeemed in 5 years. Banks issue most preferreds and they are in good financial shape.
EXTRA. Liberty Formula One (FWONA; fwd P/E 17.2; a tracking stock) is attractive.
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.
4th & 5th rate hikes, FOMC 6/15/22+ (50 bps hike possible)
6th & 7th rate hike, FOMC 7/27/22+ (50 bps hike possible)
8th rate hike, FOMC 9/21/22+
9th & 10th rate hike, FOMC 11/2/22+ (50 bps hike possible)
11th rate hike FOMC 12/14/22+ (target 3.00-3.25%)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.24%, SP500 -0.21%, Nasdaq Comp -1.54%, R2000 -1.32%. DJ Transports +0.24%; DJ Utilities +0.73%. (Rotating spot Treasury-short TBF +4.66%) US$ index (spot) +0.71%, oil/WTI futures +4.85%, gold futures -1.47%.
YTD (index changes only), DJIA -9.46%, SP500 -13.49%, Nasdaq Comp -22.37%. (Rotating spot Treasury-short TBF +27.7%)
Pg 39: NYSE cumulative (5-day) A/D line fell for a 5th week.
Pg 31, EUROPE. UK biotech company Oxford Nanopore Technologies (ONTTF; 09/2021 IPO; 2,000+ patents) will benefit from growing DNA testing for Covid-19, infectious diseases, cancer, rare diseases, genetics, microbiology. These tests will have applications beyond healthcare in agriculture, epidemiology, industry, education. Stock has just sold off along with other biotechs.
Pg 31, EMERGING MARKETS. Selloff in EM bonds (EMB -15% vs AGG -10% YTD) has made them attractive; dollar-denominated EM bonds are better than local-currency EM bonds. Russia-Ukraine war, related EM index changes, high food and fuel prices have hurt the EMs. The EM central bank policies vary widely but some are even ahead on their inflation fight (Brazil. Mexico); but several are distressed (Sri Lanka, Tunisia). Be selective and use active EM funds. Commodity-related EMs (both exporters, importers) will have high volatility.
Pg 32, OPTIONS. Many investors are experiencing horripilation. But when stocks have scared you, that is the time start to buy them. Look at 91-year-old Warren BUFFETT, he is finally buying (he doesn’t want to miss out like in 2020). VIX above 30 is rare (only 4% of the time over 5 years) (for daily volatility, divide VIX by 19, so more than +/- 1.6% now is typical). Sell puts on stocks you would like to buy at lower prices.
(SP500 VIX 30.19 (high), Nasdaq 100 VXN 37.40 (high), SKEW 126.21 (not high) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg 33, COMMODITIES. Bold EU move to transition away from Russian oil/gas into alternate/renewable energy will benefit BP and Shell/SHEL as they have diversified into wind, solar, biomass energy. Energy prices in the EU will remain elevated as it looks for additional supplies in the global markets. The US producers will also ramp up oil/gas production once they see higher stable prices. Risks include global recession and windfall taxes on energy companies (being discussed in UK, etc).
Pg 44, xx: An ugly week in EUROPE (Norway -4.53%, Sweden -5.81%) and a bad week in ASIA (Japan +0.86%, China -5.01%). STALE DATA – The equity CEF index (data to Thursday) underperformed the DJIA, and its discount was -2.2% (feature missing in yet another Barron’s FORMAT revision).
TREASURY* 3-mo yield 0.85%, 1-yr 2.08%, 2-yr 2.72%, 5-yr 3.06%, 10-yr 3.12%, 30-yr 3.23% (3s appearing). DOLLAR rose, ^DXY 103.66, +0.7% (amazing! pg 49). GOLD fell to $1,882, -1.5% (Handy & Harman spot, Thursday) (pg 51); the gold-miners tanked again. (^XAU was at 138.51, -2.88% 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 0.70%; 3-mo Jumbo CD 0.38%, 1-yr CDs 1.23%; 5-yr CDs 2.47% (pg 55).
**For local rates www.depositaccounts.com/banks/rates-map/
US SAVINGS I-Bonds, current rate 9.62% (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 12: COVER STORY, “Barron’s 1st TRANSPORTATION Roundtable – The Future of Transportation Is a Lot More Than Tesla. How to Invest”. Panelists included Gary BLACK, Future Fund (sponsor of ETF FFND); Pierre FERRAGU, New Street Research; Abhijit GANGULY, Goodyear Ventures (part of GT); A Carolina JOLLY, Gamco/GBL. Elon MUSK, Tesla/TSLA and EVs have caught the transportation world by storm. Add autonomous-driving, ride-sharing, robotics, mobility technology to this transportation REVOLUTION. EV adoption growth is exploding. EVs are popular for autonomous-driving, robo-taxis, new delivery services. Tesla’s direct-to-consumers auto sales model is unique and broke some industry and regulatory barriers. EV charging infrastructure will need huge investments. Fossil fuels to EVs will be a huge industry-wide TRANSFORMATION; EVs are ESG-friendly. Future ride-sharing will have an enormous impact on how we buy, keep and use cars. There are also workforce training issues (in manufacturing, servicing). Future cars will have lot more digital electronics and network connectivity. The current market share of EVs is low but growing rapidly: US 5% only, Europe 10%, China 15%; that may reach 35% in the US by 2030.
TSLA has 20% market share in the EVs and it may keep it at that level as the EV market expands. TSLA will have first-mover advantage and it is also innovating fast. Elon Musk is a multitasker with Tesla, SpaceX, Boring, and now Twitter. DEMAND for Teslas is very high and there are long wait times. The auto AFTERMARKET will suffer initially as there will be less maintenance and parts required for EVs. Some seemingly common parts such as tires are quite different for EVs. Traditional auto manufacturers will struggle with EVs as that business will conflict with their legacy auto business; they will always be reactive (with a little too late). Evolution of EV industry will have some parallels with that of smartphones – see how Apple/AAPL, a newcomer then, left behind most of the established players before it. There are many EV-related STARTUPS now to sort through. (see the paper/online issue for panelists’ stock recommendations).
Pg 5, UP & DOWN WALL STREET. Nasdaq Comp (and small-cap R2000) is in a BEAR market; the DJIA and SP500 are in CORRECTION; more than 50% of SP500 stocks are down by more than 20%. The FOMC action was well-expected but market fireworks started as soon as POWELL ruled out 75-bps hikes in his press conference on Wednesday; but all and more was taken back on Thursday. It may be difficult to tame INFLATION without a recession. Economic data were mixed. The 10-yr yield rose above 3%. Now the good news is bad news, and bad news is, of course, bad news. Selling has to exhaust before the bottom is in (around SP500 3,850?). The AAII Sentiment Survey (tracked here^) has been very bearish but other signs of capitulation are lacking.
^ ybbpersonalfinance.proboards.com/post/615/thread
New-age disrupter Carvana/CVNA is being disrupted by the old-line AutoNation/AN. That is similar story elsewhere too (HOOD, TDOC, PTON, ZOOM, DOCU, etc) as the pandemic related online retail boom has faded. Some of these highflyers are still not bargains despite their huge declines. So, look for growth companies with decent prospects for earnings and cashflows (PANW, ZS, FTNT, CYBR, etc)
(More later….)
Accessible from Morningstar (M*), Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
After a worst selloff in decades, PREFERREDS are attractive. Some preferreds have dropped by 30% and yields have moved up from 4% to 6% (JPM-M, WFC-Z, T-C, VNO-O). ETF PFF is down 15% YTD; CEFs include FFC, JPC. Most preferred have perpetual maturities and are very rate sensitive (a point not fully appreciated by retail preferred buyers); many can be redeemed in 5 years. Banks issue most preferreds and they are in good financial shape.
EXTRA. Liberty Formula One (FWONA; fwd P/E 17.2; a tracking stock) is attractive.
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.
4th & 5th rate hikes, FOMC 6/15/22+ (50 bps hike possible)
6th & 7th rate hike, FOMC 7/27/22+ (50 bps hike possible)
8th rate hike, FOMC 9/21/22+
9th & 10th rate hike, FOMC 11/2/22+ (50 bps hike possible)
11th rate hike FOMC 12/14/22+ (target 3.00-3.25%)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.24%, SP500 -0.21%, Nasdaq Comp -1.54%, R2000 -1.32%. DJ Transports +0.24%; DJ Utilities +0.73%. (Rotating spot Treasury-short TBF +4.66%) US$ index (spot) +0.71%, oil/WTI futures +4.85%, gold futures -1.47%.
YTD (index changes only), DJIA -9.46%, SP500 -13.49%, Nasdaq Comp -22.37%. (Rotating spot Treasury-short TBF +27.7%)
Pg 39: NYSE cumulative (5-day) A/D line fell for a 5th week.
Pg 31, EUROPE. UK biotech company Oxford Nanopore Technologies (ONTTF; 09/2021 IPO; 2,000+ patents) will benefit from growing DNA testing for Covid-19, infectious diseases, cancer, rare diseases, genetics, microbiology. These tests will have applications beyond healthcare in agriculture, epidemiology, industry, education. Stock has just sold off along with other biotechs.
Pg 31, EMERGING MARKETS. Selloff in EM bonds (EMB -15% vs AGG -10% YTD) has made them attractive; dollar-denominated EM bonds are better than local-currency EM bonds. Russia-Ukraine war, related EM index changes, high food and fuel prices have hurt the EMs. The EM central bank policies vary widely but some are even ahead on their inflation fight (Brazil. Mexico); but several are distressed (Sri Lanka, Tunisia). Be selective and use active EM funds. Commodity-related EMs (both exporters, importers) will have high volatility.
Pg 32, OPTIONS. Many investors are experiencing horripilation. But when stocks have scared you, that is the time start to buy them. Look at 91-year-old Warren BUFFETT, he is finally buying (he doesn’t want to miss out like in 2020). VIX above 30 is rare (only 4% of the time over 5 years) (for daily volatility, divide VIX by 19, so more than +/- 1.6% now is typical). Sell puts on stocks you would like to buy at lower prices.
(SP500 VIX 30.19 (high), Nasdaq 100 VXN 37.40 (high), SKEW 126.21 (not high) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg 33, COMMODITIES. Bold EU move to transition away from Russian oil/gas into alternate/renewable energy will benefit BP and Shell/SHEL as they have diversified into wind, solar, biomass energy. Energy prices in the EU will remain elevated as it looks for additional supplies in the global markets. The US producers will also ramp up oil/gas production once they see higher stable prices. Risks include global recession and windfall taxes on energy companies (being discussed in UK, etc).
Pg 44, xx: An ugly week in EUROPE (Norway -4.53%, Sweden -5.81%) and a bad week in ASIA (Japan +0.86%, China -5.01%). STALE DATA – The equity CEF index (data to Thursday) underperformed the DJIA, and its discount was -2.2% (feature missing in yet another Barron’s FORMAT revision).
TREASURY* 3-mo yield 0.85%, 1-yr 2.08%, 2-yr 2.72%, 5-yr 3.06%, 10-yr 3.12%, 30-yr 3.23% (3s appearing). DOLLAR rose, ^DXY 103.66, +0.7% (amazing! pg 49). GOLD fell to $1,882, -1.5% (Handy & Harman spot, Thursday) (pg 51); the gold-miners tanked again. (^XAU was at 138.51, -2.88% 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 0.70%; 3-mo Jumbo CD 0.38%, 1-yr CDs 1.23%; 5-yr CDs 2.47% (pg 55).
**For local rates www.depositaccounts.com/banks/rates-map/
US SAVINGS I-Bonds, current rate 9.62% (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 12: COVER STORY, “Barron’s 1st TRANSPORTATION Roundtable – The Future of Transportation Is a Lot More Than Tesla. How to Invest”. Panelists included Gary BLACK, Future Fund (sponsor of ETF FFND); Pierre FERRAGU, New Street Research; Abhijit GANGULY, Goodyear Ventures (part of GT); A Carolina JOLLY, Gamco/GBL. Elon MUSK, Tesla/TSLA and EVs have caught the transportation world by storm. Add autonomous-driving, ride-sharing, robotics, mobility technology to this transportation REVOLUTION. EV adoption growth is exploding. EVs are popular for autonomous-driving, robo-taxis, new delivery services. Tesla’s direct-to-consumers auto sales model is unique and broke some industry and regulatory barriers. EV charging infrastructure will need huge investments. Fossil fuels to EVs will be a huge industry-wide TRANSFORMATION; EVs are ESG-friendly. Future ride-sharing will have an enormous impact on how we buy, keep and use cars. There are also workforce training issues (in manufacturing, servicing). Future cars will have lot more digital electronics and network connectivity. The current market share of EVs is low but growing rapidly: US 5% only, Europe 10%, China 15%; that may reach 35% in the US by 2030.
TSLA has 20% market share in the EVs and it may keep it at that level as the EV market expands. TSLA will have first-mover advantage and it is also innovating fast. Elon Musk is a multitasker with Tesla, SpaceX, Boring, and now Twitter. DEMAND for Teslas is very high and there are long wait times. The auto AFTERMARKET will suffer initially as there will be less maintenance and parts required for EVs. Some seemingly common parts such as tires are quite different for EVs. Traditional auto manufacturers will struggle with EVs as that business will conflict with their legacy auto business; they will always be reactive (with a little too late). Evolution of EV industry will have some parallels with that of smartphones – see how Apple/AAPL, a newcomer then, left behind most of the established players before it. There are many EV-related STARTUPS now to sort through. (see the paper/online issue for panelists’ stock recommendations).
Pg 5, UP & DOWN WALL STREET. Nasdaq Comp (and small-cap R2000) is in a BEAR market; the DJIA and SP500 are in CORRECTION; more than 50% of SP500 stocks are down by more than 20%. The FOMC action was well-expected but market fireworks started as soon as POWELL ruled out 75-bps hikes in his press conference on Wednesday; but all and more was taken back on Thursday. It may be difficult to tame INFLATION without a recession. Economic data were mixed. The 10-yr yield rose above 3%. Now the good news is bad news, and bad news is, of course, bad news. Selling has to exhaust before the bottom is in (around SP500 3,850?). The AAII Sentiment Survey (tracked here^) has been very bearish but other signs of capitulation are lacking.
^ ybbpersonalfinance.proboards.com/post/615/thread
New-age disrupter Carvana/CVNA is being disrupted by the old-line AutoNation/AN. That is similar story elsewhere too (HOOD, TDOC, PTON, ZOOM, DOCU, etc) as the pandemic related online retail boom has faded. Some of these highflyers are still not bargains despite their huge declines. So, look for growth companies with decent prospects for earnings and cashflows (PANW, ZS, FTNT, CYBR, etc)
(More later….)
Accessible from Morningstar (M*), Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).