Post by Admin/YBB on Jan 2, 2021 7:45:51 GMT -6
[Italics within the brackets are my additions/elaborations]
www.barrons.com/magazine?mod=BOL_TOPNAV
Pg M1, Trader: Good finish for 2020. Only inflation so far has been in asset prices; core CPI +1.6%, core PCE +1.4% [y-o-y]. But this may change in 2021-22. Due to its new average 2% inflation policy, the Fed will tolerate inflation above 2% for a while. Money supply has grown by +25% since March. Post-pandemic surge in demand may push prices higher. The pace of inflation and related Fed action would be critical for the market. Morgan Stanley/MS has 2021 yearend estimates of 1.45% for 10-yr Treasury and 2.40% for 30-yr. Higher inflation will hurt bond-proxies such as utilities, real estate and higher P/E stocks; beneficiaries will be banks. Risk is that inflation remains below the Fed target but be prepared if it doesn’t.
2020 saw a surge in traditional IPOs, SPAC mergers, and then the SEC changed rules to allow raising funds with direct-listings. Will these alternatives threaten the traditional IPO business? In time consuming and expensive traditional IPO, the underwriter aims for an IPO price that has multiple times the interest than the shares available to ensure IPO day pop and reduce the risk for underwriters [and it doesn’t always work; the underwriter pays the company the entire amount based on the IPO price agreed and then releases those shares to the market over next few hours/days]. But do companies leave too much money on the table [some say not if only a fraction of shares outstanding is distributed via IPO]. Direct-listings [without raising new funds] have been slow to pick up, but with new changes, it may be just a matter of time for many companies to embrace direct-listings [with raising new funds].
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.
ZIRP [0-0.25% fed fund rate] through September 2021 FOMC meeting.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html ]
For the week [index changes only], DJIA +1.35%, SP500 +1.43%, Nasdaq Comp +0.65%, Russell 2000 -1.45%. DJ Transports -0.13%; DJ Utilities +2.21%. US$ index (spot) -0.32%, oil/WTI futures +0.60%, gold futures +0.70%.
52-weeks [index changes only], DJIA +6.02%, SP500 +15.29%, Nasdaq Comp +41.75%. [Rotating spot R2000 +18.48%]
Pg M4, Europe: French electrical distributer Rexel [RXL.fr/RXEEY] is attractive for post-pandemic recovery. Many manufacturers/suppliers prefer Rexel stores than online channel for their specialized products. Rexel is also boosting its online presence to supplement its store sales. It may resume dividend in 2021.
Pg M4, Emerging Markets: Chinese regulatory anger directed to Ma and his empire [BABA that includes Ant] after his open criticism of the government may also affect other large e-commerce, fintech, social-media companies. However, smaller companies in these areas may benefit.
Pg M6, Commodities: Smaller corn crop in South America [poor dry weather] and lower corn inventories are bullish for corn that has rallied [+24% in 6 months]. There is competition from soyabeans due to crop substitution/rotation. Demand from blending with gasoline and from China remain strong. ETF is CORN. Risk is that these factors and prices may change suddenly.
Pg M5, Options: Want to bet on Jack Ma vs Xi Jinping? BABA is down 34% since Ma criticized Chinese government and the latter struck back. Suggested is a risky short-strangle, i.e, pairing selling-put with selling-call [both OTM with same expirations]. The bet is that China won’t kill the goose that lays golden egg and BABA remains rangebound.
[SP500 VIX 22.75, SKEW 147.83 (high)] [Yahoo Finance data]
finance.yahoo.com/quotes/%5EVIX,%5ESKEW?.tsrc=fin-srch
Pg M22, M28: An up week in Europe [Greece +2.80%, Switzerland +2.51%, Belgium -0.75%] and a good week in Asia [China +3.92%, Thailand -2.59%]. The equity CEF index [data to Thursday] outperformed the DJIA and its discount was -7% [wide fluctuations between -4% to -16% over the last few months].
Treasury rates 3-mo yield 0.09%, 2-yr 0.13%, 5-yr 0.36%, 10-yr 0.93%, 30-yr 1.65% [Treasury data*]. Dollar fell, DXY 89.95, -0.5% [-7% for 2020; M31]. Gold [Handy & Harman spot, Thursday] was up to $1,888 +0.7% [+24% for 2020; M34]; the gold-miners rose. [^XAU was at 144.19, +0.32% 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 0.40% [most are 0.25% or below], 1-yr CDs 0.70%; 5-yr CDs 1.00% [M29].
*For local rates www.depositaccounts.com/banks/rates-map/
Bonus from Part 2 include Cover Story (now only in online designation), Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2.
Pg 14: Cover Story, “Barron’s Best Income Investments for 2021”. Only funds are mentioned below. See the source for individual securities mentioned.
Energy Pipelines: ETF AMLP; CEF SMM
Dividend Stocks: OEF INUTX; ETFs VYM, NOBL
Dividend Stocks-Foreign: ETFs IEFA, IEMG
Electric Utilities: ETF XLU
Real Estate: ETF VNQ
Telecom: only individual securities mentioned
Convertibles: ETF CWB
HY: ETFs HYG, ANGL
Munis: OEFs VWITX, EALTX; CEF BTT
Taxable Munis: OEF MGVAX; ETF BAB; CEFs NBB, BBN, GBAB
Preferreds: ETF PFF; CEF JPC
Treasuries: ST SHV; LT TLT, TIPS
Pg 3, Up and Down Wall Street: With economy still struggling, major indexes closed 2020 at new highs. But where is the bubble? Or are those only red flags? Look at wild and crazy SPACs/blank-check-companies [QS, etc], EVs [NIO, etc], unicorn IPOs [ABNB, DASH, etc]. Almost 500 companies [including 248 SPAC mergers] became public one way or another in 2020, the most since 1999 [with only 1 SPAC?]. Margin debt was at a record $722 billion in November [up +50% since Spring] but it was at 15-yr low as % of market-cap. SP500 now trades 16% above 200-dMA, Nasdaq 100 23% above 200-dMA, but silver peaked at 75% above in 2011, Nasdaq at 60% above in 2000, oil at 45% above in 2008. Funds owning highflyers [TSLA, SQ, ROKU, NVTA, etc] may be bubbly, e.g. ARKG is 82% above 200-dMA. SP500 fwd P/E is 22.5, Shiller P/E [CAPE] is 33.9, but rates are also low [and so explained the Fed]. It is unlikely that E will catch up soon to pre-pandemic level. There are only 5 times that SP500 has been up by double-digits for the 3rd year in a row, so a dull single-digit 2021 may be just what the doctor ordered [if unhappy, just think that it could be worse].
Don’t worry about weak dollar, now at the lowest since 2018 and near the bottom of the range since 2015. Does it sink lower or stabilize here? Weak dollar also benefits small-caps, economically sensitive cyclicals, and the rest of the world, especially the EMs.
Pg 5, Streetwise: GS projects +15% upside for SP500 in 2021. Consumer-discretionary [XLY with AMZN, HD, LOW, MCD, TSLA, etc] may do well, so may WMT, COST [in consumer-staples XLP], DIS [in communication services XLC]; note some arbitrariness in placement of stocks in S&P sector ETFs. Also look at small/mid-caps [SLY, MDY] to avoid mega-caps; there is small-cap consumer-discretionary PSCD. Semiconductors may continue to do well [SOXX, SMH, PSI].
More later….
www.barrons.com/magazine?mod=BOL_TOPNAV
Pg M1, Trader: Good finish for 2020. Only inflation so far has been in asset prices; core CPI +1.6%, core PCE +1.4% [y-o-y]. But this may change in 2021-22. Due to its new average 2% inflation policy, the Fed will tolerate inflation above 2% for a while. Money supply has grown by +25% since March. Post-pandemic surge in demand may push prices higher. The pace of inflation and related Fed action would be critical for the market. Morgan Stanley/MS has 2021 yearend estimates of 1.45% for 10-yr Treasury and 2.40% for 30-yr. Higher inflation will hurt bond-proxies such as utilities, real estate and higher P/E stocks; beneficiaries will be banks. Risk is that inflation remains below the Fed target but be prepared if it doesn’t.
2020 saw a surge in traditional IPOs, SPAC mergers, and then the SEC changed rules to allow raising funds with direct-listings. Will these alternatives threaten the traditional IPO business? In time consuming and expensive traditional IPO, the underwriter aims for an IPO price that has multiple times the interest than the shares available to ensure IPO day pop and reduce the risk for underwriters [and it doesn’t always work; the underwriter pays the company the entire amount based on the IPO price agreed and then releases those shares to the market over next few hours/days]. But do companies leave too much money on the table [some say not if only a fraction of shares outstanding is distributed via IPO]. Direct-listings [without raising new funds] have been slow to pick up, but with new changes, it may be just a matter of time for many companies to embrace direct-listings [with raising new funds].
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.
ZIRP [0-0.25% fed fund rate] through September 2021 FOMC meeting.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html ]
For the week [index changes only], DJIA +1.35%, SP500 +1.43%, Nasdaq Comp +0.65%, Russell 2000 -1.45%. DJ Transports -0.13%; DJ Utilities +2.21%. US$ index (spot) -0.32%, oil/WTI futures +0.60%, gold futures +0.70%.
52-weeks [index changes only], DJIA +6.02%, SP500 +15.29%, Nasdaq Comp +41.75%. [Rotating spot R2000 +18.48%]
Pg M4, Europe: French electrical distributer Rexel [RXL.fr/RXEEY] is attractive for post-pandemic recovery. Many manufacturers/suppliers prefer Rexel stores than online channel for their specialized products. Rexel is also boosting its online presence to supplement its store sales. It may resume dividend in 2021.
Pg M4, Emerging Markets: Chinese regulatory anger directed to Ma and his empire [BABA that includes Ant] after his open criticism of the government may also affect other large e-commerce, fintech, social-media companies. However, smaller companies in these areas may benefit.
Pg M6, Commodities: Smaller corn crop in South America [poor dry weather] and lower corn inventories are bullish for corn that has rallied [+24% in 6 months]. There is competition from soyabeans due to crop substitution/rotation. Demand from blending with gasoline and from China remain strong. ETF is CORN. Risk is that these factors and prices may change suddenly.
Pg M5, Options: Want to bet on Jack Ma vs Xi Jinping? BABA is down 34% since Ma criticized Chinese government and the latter struck back. Suggested is a risky short-strangle, i.e, pairing selling-put with selling-call [both OTM with same expirations]. The bet is that China won’t kill the goose that lays golden egg and BABA remains rangebound.
[SP500 VIX 22.75, SKEW 147.83 (high)] [Yahoo Finance data]
finance.yahoo.com/quotes/%5EVIX,%5ESKEW?.tsrc=fin-srch
Pg M22, M28: An up week in Europe [Greece +2.80%, Switzerland +2.51%, Belgium -0.75%] and a good week in Asia [China +3.92%, Thailand -2.59%]. The equity CEF index [data to Thursday] outperformed the DJIA and its discount was -7% [wide fluctuations between -4% to -16% over the last few months].
Treasury rates 3-mo yield 0.09%, 2-yr 0.13%, 5-yr 0.36%, 10-yr 0.93%, 30-yr 1.65% [Treasury data*]. Dollar fell, DXY 89.95, -0.5% [-7% for 2020; M31]. Gold [Handy & Harman spot, Thursday] was up to $1,888 +0.7% [+24% for 2020; M34]; the gold-miners rose. [^XAU was at 144.19, +0.32% 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 0.40% [most are 0.25% or below], 1-yr CDs 0.70%; 5-yr CDs 1.00% [M29].
*For local rates www.depositaccounts.com/banks/rates-map/
Bonus from Part 2 include Cover Story (now only in online designation), Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2.
Pg 14: Cover Story, “Barron’s Best Income Investments for 2021”. Only funds are mentioned below. See the source for individual securities mentioned.
Energy Pipelines: ETF AMLP; CEF SMM
Dividend Stocks: OEF INUTX; ETFs VYM, NOBL
Dividend Stocks-Foreign: ETFs IEFA, IEMG
Electric Utilities: ETF XLU
Real Estate: ETF VNQ
Telecom: only individual securities mentioned
Convertibles: ETF CWB
HY: ETFs HYG, ANGL
Munis: OEFs VWITX, EALTX; CEF BTT
Taxable Munis: OEF MGVAX; ETF BAB; CEFs NBB, BBN, GBAB
Preferreds: ETF PFF; CEF JPC
Treasuries: ST SHV; LT TLT, TIPS
Pg 3, Up and Down Wall Street: With economy still struggling, major indexes closed 2020 at new highs. But where is the bubble? Or are those only red flags? Look at wild and crazy SPACs/blank-check-companies [QS, etc], EVs [NIO, etc], unicorn IPOs [ABNB, DASH, etc]. Almost 500 companies [including 248 SPAC mergers] became public one way or another in 2020, the most since 1999 [with only 1 SPAC?]. Margin debt was at a record $722 billion in November [up +50% since Spring] but it was at 15-yr low as % of market-cap. SP500 now trades 16% above 200-dMA, Nasdaq 100 23% above 200-dMA, but silver peaked at 75% above in 2011, Nasdaq at 60% above in 2000, oil at 45% above in 2008. Funds owning highflyers [TSLA, SQ, ROKU, NVTA, etc] may be bubbly, e.g. ARKG is 82% above 200-dMA. SP500 fwd P/E is 22.5, Shiller P/E [CAPE] is 33.9, but rates are also low [and so explained the Fed]. It is unlikely that E will catch up soon to pre-pandemic level. There are only 5 times that SP500 has been up by double-digits for the 3rd year in a row, so a dull single-digit 2021 may be just what the doctor ordered [if unhappy, just think that it could be worse].
Don’t worry about weak dollar, now at the lowest since 2018 and near the bottom of the range since 2015. Does it sink lower or stabilize here? Weak dollar also benefits small-caps, economically sensitive cyclicals, and the rest of the world, especially the EMs.
Pg 5, Streetwise: GS projects +15% upside for SP500 in 2021. Consumer-discretionary [XLY with AMZN, HD, LOW, MCD, TSLA, etc] may do well, so may WMT, COST [in consumer-staples XLP], DIS [in communication services XLC]; note some arbitrariness in placement of stocks in S&P sector ETFs. Also look at small/mid-caps [SLY, MDY] to avoid mega-caps; there is small-cap consumer-discretionary PSCD. Semiconductors may continue to do well [SOXX, SMH, PSI].
More later….