Post by Admin/YBB on Jun 4, 2022 10:29:53 GMT -6
Pg 10-11. ECB monetary policy decision on THURSDAY.
REVIEW. The EU partial ban on Russian oil (that delivered by ships, but not by pipelines) may lead to higher prices for GASOLINE and diesel. The EU and UK will also ban INSURANCE on ships carrying Russian oil (and that may impact Russian oil diversions to China and India).
PREVIEW. GM EV Factory Zero (for 0 emissions, 0 accidents (?), 0 congestion) uses flexible manufacturing lines with robots to make Hummers-EV and soon Chevy Silverado-EV.
DATA THIS WEEK. Consumer credit (new record), international trade deficit on TUESDAY; wholesale inventories on WEDNESDAY; UM consumer sentiment index (near record low), CPI (near March peak), Treasury budget on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Industrial Eaton (ETN; yield 2.3%; fwd P/E 17.5; 67% of business is in fossil-fuels-to-electrification megatrend, and the rest are aerospace and auto businesses; hurt by supply-chain disruptions; has pricing power; pg 14);
Small-cap industrial distributer Wesco (WCC; fwd P/E 8; it has integrated Anixter acquisition (06/2020); launched a huge buyback program; pg 17).
BEARISH. See other stories.
Pg 12: BUSTED CONVERTIBLES are attractive. Convertibles are HYBRIDS that have features of both stocks and bonds. They are issued mostly by speculative, low-rated companies that cannot tap the regular or HY bond market (at any reasonable rates). They have low/zero rates but have CONVERSION features that may kick in if the company stocks do well (and then the debt sort of goes away) but have big risks if the company stocks don’t do well, and then they become busted-convertibles with junk-bond yields (risk is default, reward is payoff or from sudden meteoric rise in stock). The convertibles market now is dominated by TSLA convertibles (and those made fantastic money in the past). But those risks materialized in 2021-22 as the speculative/high flying stocks cooled down (BYND, MSTR, PTON, RDFN, W, etc). Unfortunately (or for good reasons), most convertible funds (PACIX, CWB, etc) stay away from busted convertibles (20% of the convertible market) but those funds have sold off too.
Pg 15: Alternatives/LONG-SHORT (L-S) funds (including market-neutral funds) are expensive and have uneven performance. Investors may consider DIY L-S funds with separate long (VOO, SPHB, VTV, QQQ, etc) and short (DWSH, GRZZX, HDGE, SPDN, PSQ, etc, or directly shorting long ETFs) funds, or using long and short stocks. (But if professionals cannot succeed, can the retail investors?)
Pg 16: An obituary for value manager and billionaire Fayez SAROFIM who passed away on 5/28/22 at age 93. He founded Fayez Sarofim & Co (1958- ; AUM 33 billion; son Christopher is in-charge now). Firm serves as manager/advisor for DGAGX, PGROX, Rice University endowment, separate accounts, etc.
Pg 23: Wedding boom of 2022 is good for DIAMONDS. But they are in short supply now as Russia is a big producer (but the impact isn’t fully felt yet due to global diamond supply-chain). Other major diamond producers are South Africa, Canada, Australia. India is a big cutter/finisher/polisher of rough diamonds (that are imported and then exported to most developed markets, so the diamond one buys in NYC or Chicago today may have originated from Russia).
Pg 24: FUNDS. Dozens of funds have repurposed themselves as ESG funds (OEFs PIODX, PSYPX, TWBIX, BRWIX, NWCIX, MGFIX, etc; ETFs TTAC, CACG, RESP, etc); total ESG funds now exceed 555. The ESG funds have had strong inflows in recent years. But 2022 has been difficult for ESG funds. Some are attributing their recent good performance to their growth and tech tilts and avoidance of energy (but that has backfired in 2022). The SEC has also become strict with ESG labelling.
Pg 25: INCOME INVESTING. Top global dividend payors (by absolute $amounts) include (listed here by dividend yield) VZ, XOM, CVX, JPM, PEP, JNJ, MSFT, AAPL.
Pg 26, TECH TRADER. SUPREMES sent back Texas HR 20 (banning social-media moderation) to the District Court. Section 230 has allowed social-media moderation since 1996.
Pg 27: Rich GREENFIELD, LightShed Partners (A Research Boutique for Tech, Media, Telecom – TMT). PANDEMIC has greatly affected the media business, first by shutting the outdoor activities and boosting at-home activities, and now by normalizing/reversing all that. There are many players now in STREAMING and CONTENT production (expensive). There will be industry shakeup and consolidation. Netflix/NFLX is struggling with subscribers and expensive content and is resorting to password controls and ad-supported services. Disney/DIS is in too many things and has to focus – it is still not into gaming. He muses that may be DIS should buy NFLX and gamer RBLX and sell everything else – but that is not likely. Comcast/CMCSA has been very acquisitive. Verizon/VZ and T-Mobile/TMUS are going for the 5G wireless market. Digital advertising is weakening as it always does at the first hints of economy slowing down. Facebook/FB/META had a huge success in its previous fast move to mobile but now has tough competition from TikTok, Alphabet/GOOGL, and is trying to transform again into metaverse as among the first movers. ZUCKERBERG is missing a platform, an operating system. It would be hard for Elon MUSK to wiggle out of Twitter/TWTR deal even if he feels that he may be overpaying at $54.20. His current picks include Spotify/SPOT (focused only on audio), TWTR, Live Nation Entertainment/LYV, Endeavor/EDR.
Pg 29: Dot. com survivor venture-capital (VC) firm Lux Capital (2000- ; AUM $4 billion; cofounders WOLFE and HEBERT) is now dealing again with a rapidly cooling VC market. Many startups and early-stage companies won’t survive. Job cuts of 30-50% are coming. Higher rates are drying up VC capital. But Lux avoided consumer and marketing-oriented highflyers in 2000, and again now, and invested instead in science-based emerging technologies (AI, robotics, new drugs, satellite communications, battlefield communications, military rocket launchers, scientific infrastructure and software). They look for incredible people doing incredible things for future.
Pg 58: OTHER VOICES. Michael PEREGRINE, McDermott Will & Emery (International Law Firm). Upcoming are the 20th anniversary of Sarbanes-Oxley Act, 7/30/2002 (a result of corporate and securities scandals of 2000-02) and the 50th anniversary of Watergate burglary, 6/17/1972 (that caused a historic political scandal, crisis and Presidential resignation). Criticisms of Sarbanes-Oxley aside, the scandals of early 2000s haven’t been repeated because of it. Lessons of Watergate are less clear except that it contributed to a general public mistrust of our political system and leaders and some legal changes on professional conducts. These anniversaries should be good opportunities for contemplation and introspection.
GUIDE TO WEALTH Supplement Features on ESG
Pg S3: ESG is still vaguely defined and 2022 has been a tough year for ESG funds (with their heavier emphasis on growth and techs and avoidance of energy). The ESG criteria can be applied inclusively (using ESG scores; also called relative ESG), exclusively (no oil/gas, guns, sin-stocks; also called absolute ESG) and with customized portfolios (using direct-indexing or other approaches; called custom ESG). These may have to be evaluated differently. The SEC is also reviewing uses/misuses of ESG (for naming, objectives, etc) and warns about greenwashing (i.e. ESG for PR and mostly in name only). M* data on ESG fund performance has been mixed anecdotally (although M* may have a different conclusion) and their ERs vary all over. Mentioned are inclusive ESG funds DFSIX, FITLX; HKND, ESGU, NULV; exclusive ESG funds AVEDX, GCBLX, PRBLX, PAXLX, PIODX; ESGV; custom ESG portfolios from Fidelity (FidFolios), Parametric, etc. In the former iterations of ESG, there were SRI (socially responsible investing), green investing, etc. Firms that provide ESG scores include MSCI, Sustainalytics/MORN (M*).
Pg S10: Federal TSP retirement plan (AUM $762 billion) may include ESG funds within its new, expensive and limited mutual fund window. The DOL has the overall responsibility for guiding workplace retirement plans. Politicians have jumped into the fray on several TSP issues (ESG, China exposure, etc).
Pg S9: The DOL 2020 guidance against ESG funds within the workplace retirement plans was reversed in 10/2021, but final DOL guidance is pending. Many plans already offer ESG funds (VFTNX, PRBLX, NBSRX, TISCX, PARMX, etc; VAs such as CREF Social Choice, etc). However, thematic or impact ESG funds are unlikely to be included. The plans have fiduciary duty to evaluate performance and risks of the funds within the plan.
Pg S7: WATER resources, infrastructure and treatment funds are gaining traction. Only 3% of earth’s water is fresh, but only 0.5% is readily available with the rest 2.5% in polar ice caps, glaciers, atmosphere. Mentioned are OEF CFWAX and ETFs PHO, FIW, CGW, PIO, EBLU, AQWA.
Pg S8: UBS is focusing on racial equality and diversity (race, gender, disabilities, minority-owned businesses, veterans, etc) at companies it invests in and for its client base. This is “S” in ESG. Diversity is a matter of degree and 25% diverse workforce is good now.
(EXTRAS from online Friday that didn’t make the weekend paper version)
FUNDS. Target-date funds (TDFs; AUM $3.27 trillion; 42% of 401k/403b) have lagged. For example, TDF 2040s have lagged both the SP500 and traditional allocation/balanced 60-40 funds. Their volatility has also been relatively high (i.e. they have relatively poor Sharpe Ratios). One reason may be their significant foreign exposure and to investment-grade bonds of longer duration. Their glide-path changes are preset and gradual and don’t respond to current market and economic environments. But as default options within 401k/403b, they seem OK. (On hindsight, this almost duplicated Streetwise)
Accessible from Morningstar (M*), Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
REVIEW. The EU partial ban on Russian oil (that delivered by ships, but not by pipelines) may lead to higher prices for GASOLINE and diesel. The EU and UK will also ban INSURANCE on ships carrying Russian oil (and that may impact Russian oil diversions to China and India).
PREVIEW. GM EV Factory Zero (for 0 emissions, 0 accidents (?), 0 congestion) uses flexible manufacturing lines with robots to make Hummers-EV and soon Chevy Silverado-EV.
DATA THIS WEEK. Consumer credit (new record), international trade deficit on TUESDAY; wholesale inventories on WEDNESDAY; UM consumer sentiment index (near record low), CPI (near March peak), Treasury budget on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Industrial Eaton (ETN; yield 2.3%; fwd P/E 17.5; 67% of business is in fossil-fuels-to-electrification megatrend, and the rest are aerospace and auto businesses; hurt by supply-chain disruptions; has pricing power; pg 14);
Small-cap industrial distributer Wesco (WCC; fwd P/E 8; it has integrated Anixter acquisition (06/2020); launched a huge buyback program; pg 17).
BEARISH. See other stories.
Pg 12: BUSTED CONVERTIBLES are attractive. Convertibles are HYBRIDS that have features of both stocks and bonds. They are issued mostly by speculative, low-rated companies that cannot tap the regular or HY bond market (at any reasonable rates). They have low/zero rates but have CONVERSION features that may kick in if the company stocks do well (and then the debt sort of goes away) but have big risks if the company stocks don’t do well, and then they become busted-convertibles with junk-bond yields (risk is default, reward is payoff or from sudden meteoric rise in stock). The convertibles market now is dominated by TSLA convertibles (and those made fantastic money in the past). But those risks materialized in 2021-22 as the speculative/high flying stocks cooled down (BYND, MSTR, PTON, RDFN, W, etc). Unfortunately (or for good reasons), most convertible funds (PACIX, CWB, etc) stay away from busted convertibles (20% of the convertible market) but those funds have sold off too.
Pg 15: Alternatives/LONG-SHORT (L-S) funds (including market-neutral funds) are expensive and have uneven performance. Investors may consider DIY L-S funds with separate long (VOO, SPHB, VTV, QQQ, etc) and short (DWSH, GRZZX, HDGE, SPDN, PSQ, etc, or directly shorting long ETFs) funds, or using long and short stocks. (But if professionals cannot succeed, can the retail investors?)
Pg 16: An obituary for value manager and billionaire Fayez SAROFIM who passed away on 5/28/22 at age 93. He founded Fayez Sarofim & Co (1958- ; AUM 33 billion; son Christopher is in-charge now). Firm serves as manager/advisor for DGAGX, PGROX, Rice University endowment, separate accounts, etc.
Pg 23: Wedding boom of 2022 is good for DIAMONDS. But they are in short supply now as Russia is a big producer (but the impact isn’t fully felt yet due to global diamond supply-chain). Other major diamond producers are South Africa, Canada, Australia. India is a big cutter/finisher/polisher of rough diamonds (that are imported and then exported to most developed markets, so the diamond one buys in NYC or Chicago today may have originated from Russia).
Pg 24: FUNDS. Dozens of funds have repurposed themselves as ESG funds (OEFs PIODX, PSYPX, TWBIX, BRWIX, NWCIX, MGFIX, etc; ETFs TTAC, CACG, RESP, etc); total ESG funds now exceed 555. The ESG funds have had strong inflows in recent years. But 2022 has been difficult for ESG funds. Some are attributing their recent good performance to their growth and tech tilts and avoidance of energy (but that has backfired in 2022). The SEC has also become strict with ESG labelling.
Pg 25: INCOME INVESTING. Top global dividend payors (by absolute $amounts) include (listed here by dividend yield) VZ, XOM, CVX, JPM, PEP, JNJ, MSFT, AAPL.
Pg 26, TECH TRADER. SUPREMES sent back Texas HR 20 (banning social-media moderation) to the District Court. Section 230 has allowed social-media moderation since 1996.
Pg 27: Rich GREENFIELD, LightShed Partners (A Research Boutique for Tech, Media, Telecom – TMT). PANDEMIC has greatly affected the media business, first by shutting the outdoor activities and boosting at-home activities, and now by normalizing/reversing all that. There are many players now in STREAMING and CONTENT production (expensive). There will be industry shakeup and consolidation. Netflix/NFLX is struggling with subscribers and expensive content and is resorting to password controls and ad-supported services. Disney/DIS is in too many things and has to focus – it is still not into gaming. He muses that may be DIS should buy NFLX and gamer RBLX and sell everything else – but that is not likely. Comcast/CMCSA has been very acquisitive. Verizon/VZ and T-Mobile/TMUS are going for the 5G wireless market. Digital advertising is weakening as it always does at the first hints of economy slowing down. Facebook/FB/META had a huge success in its previous fast move to mobile but now has tough competition from TikTok, Alphabet/GOOGL, and is trying to transform again into metaverse as among the first movers. ZUCKERBERG is missing a platform, an operating system. It would be hard for Elon MUSK to wiggle out of Twitter/TWTR deal even if he feels that he may be overpaying at $54.20. His current picks include Spotify/SPOT (focused only on audio), TWTR, Live Nation Entertainment/LYV, Endeavor/EDR.
Pg 29: Dot. com survivor venture-capital (VC) firm Lux Capital (2000- ; AUM $4 billion; cofounders WOLFE and HEBERT) is now dealing again with a rapidly cooling VC market. Many startups and early-stage companies won’t survive. Job cuts of 30-50% are coming. Higher rates are drying up VC capital. But Lux avoided consumer and marketing-oriented highflyers in 2000, and again now, and invested instead in science-based emerging technologies (AI, robotics, new drugs, satellite communications, battlefield communications, military rocket launchers, scientific infrastructure and software). They look for incredible people doing incredible things for future.
Pg 58: OTHER VOICES. Michael PEREGRINE, McDermott Will & Emery (International Law Firm). Upcoming are the 20th anniversary of Sarbanes-Oxley Act, 7/30/2002 (a result of corporate and securities scandals of 2000-02) and the 50th anniversary of Watergate burglary, 6/17/1972 (that caused a historic political scandal, crisis and Presidential resignation). Criticisms of Sarbanes-Oxley aside, the scandals of early 2000s haven’t been repeated because of it. Lessons of Watergate are less clear except that it contributed to a general public mistrust of our political system and leaders and some legal changes on professional conducts. These anniversaries should be good opportunities for contemplation and introspection.
GUIDE TO WEALTH Supplement Features on ESG
Pg S3: ESG is still vaguely defined and 2022 has been a tough year for ESG funds (with their heavier emphasis on growth and techs and avoidance of energy). The ESG criteria can be applied inclusively (using ESG scores; also called relative ESG), exclusively (no oil/gas, guns, sin-stocks; also called absolute ESG) and with customized portfolios (using direct-indexing or other approaches; called custom ESG). These may have to be evaluated differently. The SEC is also reviewing uses/misuses of ESG (for naming, objectives, etc) and warns about greenwashing (i.e. ESG for PR and mostly in name only). M* data on ESG fund performance has been mixed anecdotally (although M* may have a different conclusion) and their ERs vary all over. Mentioned are inclusive ESG funds DFSIX, FITLX; HKND, ESGU, NULV; exclusive ESG funds AVEDX, GCBLX, PRBLX, PAXLX, PIODX; ESGV; custom ESG portfolios from Fidelity (FidFolios), Parametric, etc. In the former iterations of ESG, there were SRI (socially responsible investing), green investing, etc. Firms that provide ESG scores include MSCI, Sustainalytics/MORN (M*).
Pg S10: Federal TSP retirement plan (AUM $762 billion) may include ESG funds within its new, expensive and limited mutual fund window. The DOL has the overall responsibility for guiding workplace retirement plans. Politicians have jumped into the fray on several TSP issues (ESG, China exposure, etc).
Pg S9: The DOL 2020 guidance against ESG funds within the workplace retirement plans was reversed in 10/2021, but final DOL guidance is pending. Many plans already offer ESG funds (VFTNX, PRBLX, NBSRX, TISCX, PARMX, etc; VAs such as CREF Social Choice, etc). However, thematic or impact ESG funds are unlikely to be included. The plans have fiduciary duty to evaluate performance and risks of the funds within the plan.
Pg S7: WATER resources, infrastructure and treatment funds are gaining traction. Only 3% of earth’s water is fresh, but only 0.5% is readily available with the rest 2.5% in polar ice caps, glaciers, atmosphere. Mentioned are OEF CFWAX and ETFs PHO, FIW, CGW, PIO, EBLU, AQWA.
Pg S8: UBS is focusing on racial equality and diversity (race, gender, disabilities, minority-owned businesses, veterans, etc) at companies it invests in and for its client base. This is “S” in ESG. Diversity is a matter of degree and 25% diverse workforce is good now.
(EXTRAS from online Friday that didn’t make the weekend paper version)
FUNDS. Target-date funds (TDFs; AUM $3.27 trillion; 42% of 401k/403b) have lagged. For example, TDF 2040s have lagged both the SP500 and traditional allocation/balanced 60-40 funds. Their volatility has also been relatively high (i.e. they have relatively poor Sharpe Ratios). One reason may be their significant foreign exposure and to investment-grade bonds of longer duration. Their glide-path changes are preset and gradual and don’t respond to current market and economic environments. But as default options within 401k/403b, they seem OK. (On hindsight, this almost duplicated Streetwise)
Accessible from Morningstar (M*), Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
