Post by Admin/YBB on May 14, 2022 5:31:41 GMT -6
Pg 35, TRADER. A BAD week despite Friday’s bounce. Thursday looked quite bleak – highflyers, Nasdaq Comp, R2000, etc were already in BEAR market, and the SP500 just kissed the edge of the bear territory. There have been 15 such times for SP500 since 1957 and only 5 were bottoms due to some critical event that prompted a turnaround. This time no such trigger is in sight and markets may resume their decline. But how much worse it can be? Also, the daily volatility (or VIX) has to calm down for the bottoming process to begin.
Market technician Andrew ADDISON (Institutional View) sees little more DOWNSIDE with major indexes already down by 12-25%. Many stocks continue to break down. He sees the following SUPPORT levels (not far from here): DJIA 29,000-30,000; SP500 3,800; Nasdaq-100 11,000 (200-dMA is 10,700). If these support levels don’t hold, lookout below!
Add OVERHIRING to the long list of issues – Covid-19, supply-chain disruptions, high inflation, rising rates. In preparation for economic RECOVERY, many companies have hired more than what is need for the current demand/sales (demand may be there but often the products are not). Some companies have even reported declining sales. This has led to declines in PRODUCTIVITY and profit MARGINS and many stocks have been hit (AMZN, NVDA, COST, MS, MA, etc).
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 & 9th rate hike, FOMC 9/21/22+ (50 bps hike possible)
9th rate hike, FOMC 11/2/22+
10th rate hike FOMC 12/14/22+ (target 2.75-3.00%)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -2.14%, SP500 -2.41%, Nasdaq Comp -2.80%, R2000 -2.55%. DJ Transports -2.98%; DJ Utilities -1.43%. (Rotating spot speculative ARKK -4.45%) US$ index (spot) +0.78%, oil/WTI futures +0.71%, gold futures -3.92%.
YTD (index changes only), DJIA -11.40%, SP500 -15.57%, Nasdaq Comp -24.54%. (Rotating spot speculative ARKK -53.91%)
Pg 47: NYSE cumulative (5-day) A/D line fell for a 6th week.
Pg 38, EUROPE. Russia-Ukraine war was a huge shock to European STEEL sector (MT, fwd P/E 2.9; TKAMY, fwd P/E 4.7; SZGPF, fwd P/E 3.4). While commodity and production COSTS went up, the steel PRICES went up much higher generating juicy profit MARGINS for these companies. But this may not be sustainable.
Pg 38, EMERGING MARKETS. DeFI and CRYPTOS haven’t allowed RUSSIANS to evade sanctions. 1st, the crypto universe is too small (about $1.5 trillion) to handle the scale of transactions Russians need ($785 billion in trade flows); 2nd, the secrecy goes away the moment one exchanges cryptos for real/fiat money – think of crypto highways and real/fiat money offramps; crypto exchanges are doing more self-monitoring fearing harsher future regulations; some crypto exchanges concentrating in Russian transactions have been shut down (in Germany, etc); once the law enforcement gets information about illicit activities, it is actually easier to trace those in blockchain ledgers (recent ransomware busts; some ransoms were even returned). On the other hand, cryptos came in handy for UKRAINIANS in their current crisis.
Pg 39, OPTIONS. Fed Chair POWELL has turned from friend to foe for the markets. And did he really mean to rule out 75-bps hike(s)? Is there still a Fed-put? These big questions were lead-in to a repeat recommendation for writing/selling calls on stocks one owns. (This piece was turned in on Thursday morning as a safe piece for these volatile days)
(SP500 VIX 28.87 (high), Nasdaq 100 VXN 37.61 (high), SKEW 122.09 (not high) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg 40, COMMODITIES. Good news for tofu lovers – SOYBEANS are in surplus for the 4th year (higher crop yields again) and constrained demand due to smaller hog population; avian flu among birds and chickens; uncertain exports to China. Lower soybean prices may help with food inflation. Recommended are short positions via futures or futures-based ETF SOYB. Beware of high volatility driven by weather, geopolitical events, crop harvest.
Pg 52: An up week in EUROPE (Italy +2.44%, Denmark -4.36%) and a bad week in ASIA (China +0.25%, Indonesia -8.62%).
TREASURY* 3-mo yield 1.03%, 1-yr 2.04%, 2-yr 2.61%, 5-yr 2.89%, 10-yr 2.93%, 30-yr 3.10%. DOLLAR rose, ^DXY 104.47, +0.9% (amazing! pg 57). GOLD fell to $1,812, -3.7% (Handy & Harman spot, Thursday) (pg 59); the gold-miners tanked again. (^XAU was at 124.87, -9.85% 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**, STALE DATA: Money-market accounts 0.70%; 3-mo Jumbo CD 0.38%, 1-yr CDs 1.23%; 5-yr CDs 2.47% (pg xx).
**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 20: COVER STORY, “How Workers Gained an Edge – and Why They Won’t Lose It Soon”. Tight post-pandemic JOB market (1.84 job openings per unemployed) is allowing people to SWITCH jobs often with signing bonuses; higher pay and benefits; more flexible and better schedules. This has given workers new powers. But can it last? The advantages gained may be temporary and may reverse in a RECESSION. There are several long-term changes – boomers retiring; reduced immigration; rising popularity of unions; higher public support for essential frontline workers; extra retention efforts by employers; rise in self-employment. Profit MARGINS will be under pressure from rising labor costs and businesses may have to cut costs elsewhere.
Pg 8, UP & DOWN WALL STREET. Ironic that only 3 months after huge media hype for CRYPTOS, including ads in Super Bowl, there is a spectacular CRYPTO CRASH. Replay of the old dot. com movie? Investors may think that they are far-far away from cryptos, but there is a positive CORRELATION between cryptos and speculative stocks, especially the Nasdaq stocks. The BEAR market that started in speculative stocks (ETF ARKK, etc) early LAST year, has now spread to FAANG, tech-heavy Nasdaq, small-cap R2000, but the SP500 was barely spared this week (DJIA remains in correction territory). Was Friday the start of a new rebound/rally or just a bear market rally? We are in poor SEASONALITY period from May 1 – October 31. The FED will continue to tighten until inflation moderates. The Fed-PUT may kick in much later, or not at all. Crypto crash has sucked serious LIQUIDITY from the financial markets (and that money is residing happily in money heaven). HK was forced to defend its dollar peg.
Dan FUSS, 88 (Loomis Sayles/Natixis), says that falling BOND prices have a silver lining – yields go up, and so do the REINVESTMENT returns. Buying short/intermediate-term bonds below par that will mature at par may be attractive (but that is reflected in YTMs and 30-day SEC yields). 2-yr T-NOTE is around 2.5% and may yield 2.75-3.00% by the yearend. 30-day SEC yields of short/intermediate-term bond funds are rising (SHY, ISTB, AGG). MUNI bond rout is comparable to those in 1994, 2008, 2020 and muni yields are also attractive (SHM, MUB).
Pg 11, STREETWISE. Is DATING app company Bumble (BMBL; 2021 IPO; down -71%) stock a bear market catch? Its earnings reports have been good. A smaller Russian operation was shutdown. It may be a problem for those who follow Peter LYNCH’s buy-what-you-know motto but are out of dating game or pool. After a profile match on Bumble, women have to reach out first and then men can react, but this unique aspect may change soon. Competition is from Tinder, Match (both run by MTCH), Hinge, etc. Other fallen IPOs? Alt-meat BYND, crypto exchange-broker/dealer-custody COIN.
(More later….)
Accessible from Morningstar (M*), Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
Market technician Andrew ADDISON (Institutional View) sees little more DOWNSIDE with major indexes already down by 12-25%. Many stocks continue to break down. He sees the following SUPPORT levels (not far from here): DJIA 29,000-30,000; SP500 3,800; Nasdaq-100 11,000 (200-dMA is 10,700). If these support levels don’t hold, lookout below!
Add OVERHIRING to the long list of issues – Covid-19, supply-chain disruptions, high inflation, rising rates. In preparation for economic RECOVERY, many companies have hired more than what is need for the current demand/sales (demand may be there but often the products are not). Some companies have even reported declining sales. This has led to declines in PRODUCTIVITY and profit MARGINS and many stocks have been hit (AMZN, NVDA, COST, MS, MA, etc).
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 & 9th rate hike, FOMC 9/21/22+ (50 bps hike possible)
9th rate hike, FOMC 11/2/22+
10th rate hike FOMC 12/14/22+ (target 2.75-3.00%)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -2.14%, SP500 -2.41%, Nasdaq Comp -2.80%, R2000 -2.55%. DJ Transports -2.98%; DJ Utilities -1.43%. (Rotating spot speculative ARKK -4.45%) US$ index (spot) +0.78%, oil/WTI futures +0.71%, gold futures -3.92%.
YTD (index changes only), DJIA -11.40%, SP500 -15.57%, Nasdaq Comp -24.54%. (Rotating spot speculative ARKK -53.91%)
Pg 47: NYSE cumulative (5-day) A/D line fell for a 6th week.
Pg 38, EUROPE. Russia-Ukraine war was a huge shock to European STEEL sector (MT, fwd P/E 2.9; TKAMY, fwd P/E 4.7; SZGPF, fwd P/E 3.4). While commodity and production COSTS went up, the steel PRICES went up much higher generating juicy profit MARGINS for these companies. But this may not be sustainable.
Pg 38, EMERGING MARKETS. DeFI and CRYPTOS haven’t allowed RUSSIANS to evade sanctions. 1st, the crypto universe is too small (about $1.5 trillion) to handle the scale of transactions Russians need ($785 billion in trade flows); 2nd, the secrecy goes away the moment one exchanges cryptos for real/fiat money – think of crypto highways and real/fiat money offramps; crypto exchanges are doing more self-monitoring fearing harsher future regulations; some crypto exchanges concentrating in Russian transactions have been shut down (in Germany, etc); once the law enforcement gets information about illicit activities, it is actually easier to trace those in blockchain ledgers (recent ransomware busts; some ransoms were even returned). On the other hand, cryptos came in handy for UKRAINIANS in their current crisis.
Pg 39, OPTIONS. Fed Chair POWELL has turned from friend to foe for the markets. And did he really mean to rule out 75-bps hike(s)? Is there still a Fed-put? These big questions were lead-in to a repeat recommendation for writing/selling calls on stocks one owns. (This piece was turned in on Thursday morning as a safe piece for these volatile days)
(SP500 VIX 28.87 (high), Nasdaq 100 VXN 37.61 (high), SKEW 122.09 (not high) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg 40, COMMODITIES. Good news for tofu lovers – SOYBEANS are in surplus for the 4th year (higher crop yields again) and constrained demand due to smaller hog population; avian flu among birds and chickens; uncertain exports to China. Lower soybean prices may help with food inflation. Recommended are short positions via futures or futures-based ETF SOYB. Beware of high volatility driven by weather, geopolitical events, crop harvest.
Pg 52: An up week in EUROPE (Italy +2.44%, Denmark -4.36%) and a bad week in ASIA (China +0.25%, Indonesia -8.62%).
TREASURY* 3-mo yield 1.03%, 1-yr 2.04%, 2-yr 2.61%, 5-yr 2.89%, 10-yr 2.93%, 30-yr 3.10%. DOLLAR rose, ^DXY 104.47, +0.9% (amazing! pg 57). GOLD fell to $1,812, -3.7% (Handy & Harman spot, Thursday) (pg 59); the gold-miners tanked again. (^XAU was at 124.87, -9.85% 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**, STALE DATA: Money-market accounts 0.70%; 3-mo Jumbo CD 0.38%, 1-yr CDs 1.23%; 5-yr CDs 2.47% (pg xx).
**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 20: COVER STORY, “How Workers Gained an Edge – and Why They Won’t Lose It Soon”. Tight post-pandemic JOB market (1.84 job openings per unemployed) is allowing people to SWITCH jobs often with signing bonuses; higher pay and benefits; more flexible and better schedules. This has given workers new powers. But can it last? The advantages gained may be temporary and may reverse in a RECESSION. There are several long-term changes – boomers retiring; reduced immigration; rising popularity of unions; higher public support for essential frontline workers; extra retention efforts by employers; rise in self-employment. Profit MARGINS will be under pressure from rising labor costs and businesses may have to cut costs elsewhere.
Pg 8, UP & DOWN WALL STREET. Ironic that only 3 months after huge media hype for CRYPTOS, including ads in Super Bowl, there is a spectacular CRYPTO CRASH. Replay of the old dot. com movie? Investors may think that they are far-far away from cryptos, but there is a positive CORRELATION between cryptos and speculative stocks, especially the Nasdaq stocks. The BEAR market that started in speculative stocks (ETF ARKK, etc) early LAST year, has now spread to FAANG, tech-heavy Nasdaq, small-cap R2000, but the SP500 was barely spared this week (DJIA remains in correction territory). Was Friday the start of a new rebound/rally or just a bear market rally? We are in poor SEASONALITY period from May 1 – October 31. The FED will continue to tighten until inflation moderates. The Fed-PUT may kick in much later, or not at all. Crypto crash has sucked serious LIQUIDITY from the financial markets (and that money is residing happily in money heaven). HK was forced to defend its dollar peg.
Dan FUSS, 88 (Loomis Sayles/Natixis), says that falling BOND prices have a silver lining – yields go up, and so do the REINVESTMENT returns. Buying short/intermediate-term bonds below par that will mature at par may be attractive (but that is reflected in YTMs and 30-day SEC yields). 2-yr T-NOTE is around 2.5% and may yield 2.75-3.00% by the yearend. 30-day SEC yields of short/intermediate-term bond funds are rising (SHY, ISTB, AGG). MUNI bond rout is comparable to those in 1994, 2008, 2020 and muni yields are also attractive (SHM, MUB).
Pg 11, STREETWISE. Is DATING app company Bumble (BMBL; 2021 IPO; down -71%) stock a bear market catch? Its earnings reports have been good. A smaller Russian operation was shutdown. It may be a problem for those who follow Peter LYNCH’s buy-what-you-know motto but are out of dating game or pool. After a profile match on Bumble, women have to reach out first and then men can react, but this unique aspect may change soon. Competition is from Tinder, Match (both run by MTCH), Hinge, etc. Other fallen IPOs? Alt-meat BYND, crypto exchange-broker/dealer-custody COIN.
(More later….)
Accessible from Morningstar (M*), Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).