Post by Admin/YBB on May 7, 2022 8:01:53 GMT -6
Pg 8-9.
REVIEW. From 1965-2021, BRK-A under Warren BUFFETT has generated +20.1% annual return vs +10.5% for SP500. Some compounding math gymnastics are presented – If BRK were to fall by 99% tomorrow, it would still beat the SP500.
PREVIEW. MERGER ARBITRAGE is becoming more risky and wide deal discounts show that (ATVI, TWTR, TEN, NLSN).
DATA THIS WEEK. Wholesale inventories on MONDAY; small business optimism index on TUESDAY; CPI, Treasury budget on WEDNESDAY; PPI, weekly initial jobless claims on THURSDAY; UM consumer sentiment index on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Fortune Brands Home & Security (FBHS; fwd EV/EBITDA 10; planning to spinoff cyclical cabinetry business (tied to housing cycle) in 2023 that accounts for 40% of revenues; remaining plumbing/water-innovations and home-security businesses are less cyclical; pg 11);
GM (Fwd P/E 5.7; it should e-celerate its EV push; there has been lot of talk but little results to show yet; market is not assigning much value to its traditional ICE business; pg 21).
BEARISH. Travel stocks (travel is recovering but travel stocks remain in funk; may be the investors are not trusting analysts’ enthusiasm or are tired of on-again-off-again travel rebound(s); online booking BKNG may be the only bright spot; pg 10);
Toyota (TM; fwd P/E 9.7, high among traditional automakers and potentially rising due to falling earnings ahead; me-too late in EVs; its Kaizen (“continuous process”) for ICE business is a dead end; it is betting big on hybrids, a very complicated product that makes sense only while battery capacities are limited; hybrids have the worst of both worlds (ICE, EV); pg 22).
Pg 25, FUNDS. Higher rates are headwinds for GOLD but there are strong INFLOWS into gold funds as real rates remain negative. While investment demand is up, that from jewelry is down; supply is also increasing. Inflation-adjusted peak for gold would be $3,200 ($875 in 01/1980). Mentioned are gold-bullion ETFs GLD, IAU, SGOL, GLDM, IAUM, BAR. (Central banks may also diversify away from dollar by adding to their gold reserves) (gold may respond one day to Barron’s bullish pieces on it)
Pg 26: ECONOMY. Fed Chair POWELL wants a SOFT LANDING but that may be unlikely, according to Solomon TADESSE, Societe Generale. He also thinks that the Fed is about done raising rates – one more 50-bps hike and done, but Powell will keep the suspense going by saying what he can or may do. Tadesse bases his projections on his quant-model that accounts for QE/QT – each $100 billion in QT will be equivalent to +12 bps rise/effect in rates. So, a few months of QT and one more 50-bps is all Powell can do for soft landing. What if Tadesse is wrong? Then HARD LANDING and a recession. Powell cannot have it both ways.
Pg 26: INCOME INVESTING. BONDS look attractive – corporates, munis. Beware of chasing high yields. You may want to wait until the 10-yr yield rises to 3.25% and that may be in a week or a year. (BAD. This piece was submitted on Wednesday morning, pre-FOMC Statement, and was NOT updated. By Friday, the 10-yr yield was already 3.123%)
Pg 27, TECH TRADER. TECH stocks are getting crushed and several HEDGE-funds along with them (some down 40% or more YTD). Complacency after a long bull market may have been a reason. Pandemic and post-pandemic fundamentals changed quickly, and hedge funds were slow to react. It isn’t the past or current EARNINGS that matter (for techs at least), but the future earnings and growth expectations. Stock multiples (especially P/S) can go up fast, but also come down fast (ZM, etc). Then there are earnings surprises and forward guidance (both poor from AMZN, NFLX, etc). Attractive may be SONY and EA due to multiyear videogame product cycle.
Pg 54: OTHER VOICES. Marc CHANDLER, Bannockburn Global Forex (First Financial Bancorp/FFBC) and Omkar GODBOL, Independent Author. Lately, Japanese YEN hasn’t been a safe haven. This is because the BOJ continues aggressive monetary easing while the US FED and many other global central bankers are tightening. Yen has weakened to historic levels and there may be interventions in the currency markets (but those won’t work by themselves, and large dollar sales won’t be appreciated by the US or the Fed). Apparently, the belief is that this will benefit Japanese exporters (a traditional idea), but that may be misguided as Japan has growing trade deficits. What is happening is that Japanese businesses are offshoring more in order to protect from falling yen. Higher import prices (energy, food, commodities) will contribute to higher inflation (Japanese CPI below 2% now). Russia-Ukraine war is causing more supply-chain disruptions and higher commodity prices. China’s Covid-19 strategy of more lockdowns is also causing further supply-chain disruptions. As it looks now, yen will continue to weaken.
(EXTRAS from online Friday that didn’t make the weekend paper version)
None
Accessible from Morningstar (M*), Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
REVIEW. From 1965-2021, BRK-A under Warren BUFFETT has generated +20.1% annual return vs +10.5% for SP500. Some compounding math gymnastics are presented – If BRK were to fall by 99% tomorrow, it would still beat the SP500.
PREVIEW. MERGER ARBITRAGE is becoming more risky and wide deal discounts show that (ATVI, TWTR, TEN, NLSN).
DATA THIS WEEK. Wholesale inventories on MONDAY; small business optimism index on TUESDAY; CPI, Treasury budget on WEDNESDAY; PPI, weekly initial jobless claims on THURSDAY; UM consumer sentiment index on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Fortune Brands Home & Security (FBHS; fwd EV/EBITDA 10; planning to spinoff cyclical cabinetry business (tied to housing cycle) in 2023 that accounts for 40% of revenues; remaining plumbing/water-innovations and home-security businesses are less cyclical; pg 11);
GM (Fwd P/E 5.7; it should e-celerate its EV push; there has been lot of talk but little results to show yet; market is not assigning much value to its traditional ICE business; pg 21).
BEARISH. Travel stocks (travel is recovering but travel stocks remain in funk; may be the investors are not trusting analysts’ enthusiasm or are tired of on-again-off-again travel rebound(s); online booking BKNG may be the only bright spot; pg 10);
Toyota (TM; fwd P/E 9.7, high among traditional automakers and potentially rising due to falling earnings ahead; me-too late in EVs; its Kaizen (“continuous process”) for ICE business is a dead end; it is betting big on hybrids, a very complicated product that makes sense only while battery capacities are limited; hybrids have the worst of both worlds (ICE, EV); pg 22).
Pg 25, FUNDS. Higher rates are headwinds for GOLD but there are strong INFLOWS into gold funds as real rates remain negative. While investment demand is up, that from jewelry is down; supply is also increasing. Inflation-adjusted peak for gold would be $3,200 ($875 in 01/1980). Mentioned are gold-bullion ETFs GLD, IAU, SGOL, GLDM, IAUM, BAR. (Central banks may also diversify away from dollar by adding to their gold reserves) (gold may respond one day to Barron’s bullish pieces on it)
Pg 26: ECONOMY. Fed Chair POWELL wants a SOFT LANDING but that may be unlikely, according to Solomon TADESSE, Societe Generale. He also thinks that the Fed is about done raising rates – one more 50-bps hike and done, but Powell will keep the suspense going by saying what he can or may do. Tadesse bases his projections on his quant-model that accounts for QE/QT – each $100 billion in QT will be equivalent to +12 bps rise/effect in rates. So, a few months of QT and one more 50-bps is all Powell can do for soft landing. What if Tadesse is wrong? Then HARD LANDING and a recession. Powell cannot have it both ways.
Pg 26: INCOME INVESTING. BONDS look attractive – corporates, munis. Beware of chasing high yields. You may want to wait until the 10-yr yield rises to 3.25% and that may be in a week or a year. (BAD. This piece was submitted on Wednesday morning, pre-FOMC Statement, and was NOT updated. By Friday, the 10-yr yield was already 3.123%)
Pg 27, TECH TRADER. TECH stocks are getting crushed and several HEDGE-funds along with them (some down 40% or more YTD). Complacency after a long bull market may have been a reason. Pandemic and post-pandemic fundamentals changed quickly, and hedge funds were slow to react. It isn’t the past or current EARNINGS that matter (for techs at least), but the future earnings and growth expectations. Stock multiples (especially P/S) can go up fast, but also come down fast (ZM, etc). Then there are earnings surprises and forward guidance (both poor from AMZN, NFLX, etc). Attractive may be SONY and EA due to multiyear videogame product cycle.
Pg 54: OTHER VOICES. Marc CHANDLER, Bannockburn Global Forex (First Financial Bancorp/FFBC) and Omkar GODBOL, Independent Author. Lately, Japanese YEN hasn’t been a safe haven. This is because the BOJ continues aggressive monetary easing while the US FED and many other global central bankers are tightening. Yen has weakened to historic levels and there may be interventions in the currency markets (but those won’t work by themselves, and large dollar sales won’t be appreciated by the US or the Fed). Apparently, the belief is that this will benefit Japanese exporters (a traditional idea), but that may be misguided as Japan has growing trade deficits. What is happening is that Japanese businesses are offshoring more in order to protect from falling yen. Higher import prices (energy, food, commodities) will contribute to higher inflation (Japanese CPI below 2% now). Russia-Ukraine war is causing more supply-chain disruptions and higher commodity prices. China’s Covid-19 strategy of more lockdowns is also causing further supply-chain disruptions. As it looks now, yen will continue to weaken.
(EXTRAS from online Friday that didn’t make the weekend paper version)
None
Accessible from Morningstar (M*), Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
