Post by Admin/YBB on Jun 11, 2022 5:51:35 GMT -6
Pg 33, TRADER. With hot INFLATION reading (CPI; the Fed watches PCE that is due June 30), forget the FED-PUT. The supply-chain issues are out of Fed control, so it would try to tame consumer DEMAND with high RATES. While this would be good for savers, it would hurt stocks, bonds, and the economy. Whether there would be soft landing (that the Fed wants) or recession (that may be necessary) is unclear. Remember – Don’t fight the Fed.
Several companies are continuing their BUYBACKS as they prefer the flexibility of buybacks over dividends. Shareholders may consider shareholder-yields (%yield + %buyback). However, some companies may be throwing good money after bad, or may need cash during a possible recession. So, look for companies that will have spare cash even after buybacks: LVS, EMR, CF, VRTX, etc. Avoid cash-hogs/burners: EFX, MLM, PWR, AKAM.
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)
10th rate hike, FOMC 11/2/22+
11th rate hike FOMC 12/14/22+ (target 2.75-3.25%)
Due to UNUSUAL changes in the fed fund futures market THIS week, the data are strange beyond the July FOMC indicating rate hikes above 50-bps and cuts – but that is unlikely.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -4.58%, SP500 -5.05%, Nasdaq Comp -5.60%, R2000 -4.40%. DJ Transports -7.45%; DJ Utilities -3.91%. (Rotating spot tech XLK -6.36%) US$ index (spot) +2.00%, oil/WTI futures +1.51%, gold futures +1.41%.
YTD (index changes only), DJIA -13.61%, SP500 -18.16%, Nasdaq Comp -27.52%. (Rotating spot tech XLK -24.60%)
Pg 45: NYSE cumulative (5-day) A/D line fell for a 3rd week.
Pg 36, EUROPE. Industrial gas giant Linde (LIN; fwd P/E 26) was formed by the merger of Linde and Praxair in 2018. Steady and growing earnings and cash flows and has pricing power. It serves various industries – chemical, electronics, manufacturing, medical, food/beverage, space. It rates highly for ESG (activity in carbon-capture; use of renewable energy). It is one of the 3 major industrial gas companies along with APD, AIQUY. Origin – German, domicile – Ireland, HQ – UK; new CEO Sanjiv LAMBA, 03/2022- (was COO; also, was Praxair CEO).
Pg 36, EMERGING MARKETS. Mexican President AMLO is limited to one 6-yr term, but his party Moreno may win again in 2024 elections. His formula of populism with some fiscal austerity has been working but he lacks parliamentary supermajority to push some of his anti-business/market ideas. Mexican blue chips are attractive. Risk is US recession.
Pg 37, OPTIONS. To bet on EVs and Tesla/TSLA, sell puts to buy TSLA on declines. (As the piece was submitted on Thursday early AM, 6/9/22, it doesn’t even mention 3 for 1 split)
(SP500 VIX 27.75 (high), Nasdaq 100 VXN 33.97 (high), options SKEW 121.64 (not high), bond MOVE 114.23 (high) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 39, COMMODITIES. That is the sound of falling LUMBER (recently $580 per 1,000/bd-ft; peak $1,711 in 05/2021) from weakening housing demand, rising mortgage rates and lumber mills running at full capacity. New home inventories are now at 9 months vs only 4.7 months a year ago. There is more downside to $300-400. May short futures or ETF WOOD.
Pg 51: An ugly week in EUROPE (Denmark -2.18%, Italy -6.60%) and a flat week in ASIA (China +4.99%, Australia -4.38%).
TREASURY* 3-mo yield 1.39%, 1-yr 2.58%, 2-yr 3.06%, 5-yr 3.25%, 10-yr 3.15%, 30-yr 3.20%. REAL yields (NEW) 5-yr 0.12%, 10-yr 0.39%, 30-yr 0.67%.
DOLLAR rose, ^DXY 104.19, +2%% (pg 58). GOLD fell to $1,830, -1.2% (Handy & Harman spot, Thursday) (pg 60); the gold-miners fell. (^XAU was at 132.92, -0.50% for the week)
Top FDIC insured savings deposit rates** (This feature seems to be discontinued)
US SAVINGS I-Bonds^, current rate 9.62% (annualized). Rates change on May 1 & Nov 1.
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**For local rates www.depositaccounts.com/banks/rates-map/
^Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS) 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 18: COVER STORY “Gas Prices Soar to Records, but Exclusive Data Show Gas Stations Aren’t the Problem”. Consumers see high GASOLINE prices at pumps, and they can also check prices of CRUDE OIL. Who is getting most of the PROFITS, or the CRACK SPREADS? Oil E&P and majors (XOM, CVX, etc) and oil refiners (VLO, MPC, PSX, PBF, etc) are getting most of those profits, while GAS STATION owners/operators are getting squeezed. The gas station gross profits have declined to 25c/gallon only from 46c/gallon just in December. Moreover, with high gasoline prices, consumers have cut back on their purchases at gas station CONVENIENCE STORES. The government (WH, DOE, FTC, Congress) is investigating high energy profits and should consider these details in formulating related laws and any WINDFALL TAXES.
ENERGY sector turnaround/rebound (+62% YTD, +48% in 2021) has been astounding. Energy fwd P/E at 9.8 only still remain modest. Energy sector market-weight has moved from below 2% of SP500 to about 5%. While long-term moves to renewables and ESG will continue, there is a new appreciation of the realities of the global energy needs right NOW. Oil/gas CAPEX peaked in 2014 and the industry is not rushing into new capex and production this time. However, stable high oil prices and incentives (not criticisms) may change that. Attractive are oil/gas producer EOG; renewable power RUN, ENLAY (Italian); refiners PSX, VLO, PBF; conglomerates/majors SHEL; oil/gas services LBRT, SLB, HAL. (Only 6 names were in a table, but others were mentioned within the article text).
Pg 5, UP & DOWN WALL STREET. The FED projections for the economy and inflation have been too rosy. INFLATION is too high, RATES are too low. The fwd P/E (16 now, down from 21) is also too high and projections for earnings “E” have yet to come down – those point to a difficult time for STOCKS. The BOND market reacted and 2-yr T-Note yield above 3% was the highest since 11/2007. The UM consumer sentiment was at an all-time low. The Fed may have to do several 50-bps hikes (a 75-bps hike would be a surprise). Watch the FOMC Statement and POWELL’s press conference for guidance and hints. The Fed looks at PCE which lags CPI.
The FED is being forced to react to high INFLATION belatedly and that is adding to market VOLATILITY. The current high VIX, low SKEW condition is favorable to those who fear further downside (on the other hand, it may indicate limited further downside). Funds using OPTIONS to generate income and/or tame volatility include GTEYX; ETFs QYLD, RYLD; ETNs SLVO, USOI, etc.
Pg 7, STREETWISE. New drugs for OBESITY are from Novo Nordisk/NVO (Wegovy/Ozempic) and Eli Lilly/LLY (Mounjaro). These injectable drugs have dual approvals for diabetes and obesity. There are side effects and several warnings. Insurance coverage for obesity use is uncertain.
(More later….)
Accessible from Morningstar (M*), Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
Several companies are continuing their BUYBACKS as they prefer the flexibility of buybacks over dividends. Shareholders may consider shareholder-yields (%yield + %buyback). However, some companies may be throwing good money after bad, or may need cash during a possible recession. So, look for companies that will have spare cash even after buybacks: LVS, EMR, CF, VRTX, etc. Avoid cash-hogs/burners: EFX, MLM, PWR, AKAM.
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)
10th rate hike, FOMC 11/2/22+
11th rate hike FOMC 12/14/22+ (target 2.75-3.25%)
Due to UNUSUAL changes in the fed fund futures market THIS week, the data are strange beyond the July FOMC indicating rate hikes above 50-bps and cuts – but that is unlikely.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -4.58%, SP500 -5.05%, Nasdaq Comp -5.60%, R2000 -4.40%. DJ Transports -7.45%; DJ Utilities -3.91%. (Rotating spot tech XLK -6.36%) US$ index (spot) +2.00%, oil/WTI futures +1.51%, gold futures +1.41%.
YTD (index changes only), DJIA -13.61%, SP500 -18.16%, Nasdaq Comp -27.52%. (Rotating spot tech XLK -24.60%)
Pg 45: NYSE cumulative (5-day) A/D line fell for a 3rd week.
Pg 36, EUROPE. Industrial gas giant Linde (LIN; fwd P/E 26) was formed by the merger of Linde and Praxair in 2018. Steady and growing earnings and cash flows and has pricing power. It serves various industries – chemical, electronics, manufacturing, medical, food/beverage, space. It rates highly for ESG (activity in carbon-capture; use of renewable energy). It is one of the 3 major industrial gas companies along with APD, AIQUY. Origin – German, domicile – Ireland, HQ – UK; new CEO Sanjiv LAMBA, 03/2022- (was COO; also, was Praxair CEO).
Pg 36, EMERGING MARKETS. Mexican President AMLO is limited to one 6-yr term, but his party Moreno may win again in 2024 elections. His formula of populism with some fiscal austerity has been working but he lacks parliamentary supermajority to push some of his anti-business/market ideas. Mexican blue chips are attractive. Risk is US recession.
Pg 37, OPTIONS. To bet on EVs and Tesla/TSLA, sell puts to buy TSLA on declines. (As the piece was submitted on Thursday early AM, 6/9/22, it doesn’t even mention 3 for 1 split)
(SP500 VIX 27.75 (high), Nasdaq 100 VXN 33.97 (high), options SKEW 121.64 (not high), bond MOVE 114.23 (high) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 39, COMMODITIES. That is the sound of falling LUMBER (recently $580 per 1,000/bd-ft; peak $1,711 in 05/2021) from weakening housing demand, rising mortgage rates and lumber mills running at full capacity. New home inventories are now at 9 months vs only 4.7 months a year ago. There is more downside to $300-400. May short futures or ETF WOOD.
Pg 51: An ugly week in EUROPE (Denmark -2.18%, Italy -6.60%) and a flat week in ASIA (China +4.99%, Australia -4.38%).
TREASURY* 3-mo yield 1.39%, 1-yr 2.58%, 2-yr 3.06%, 5-yr 3.25%, 10-yr 3.15%, 30-yr 3.20%. REAL yields (NEW) 5-yr 0.12%, 10-yr 0.39%, 30-yr 0.67%.
DOLLAR rose, ^DXY 104.19, +2%% (pg 58). GOLD fell to $1,830, -1.2% (Handy & Harman spot, Thursday) (pg 60); the gold-miners fell. (^XAU was at 132.92, -0.50% for the week)
Top FDIC insured savings deposit rates** (This feature seems to be discontinued)
US SAVINGS I-Bonds^, current rate 9.62% (annualized). Rates change on May 1 & Nov 1.
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**For local rates www.depositaccounts.com/banks/rates-map/
^Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS) 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 18: COVER STORY “Gas Prices Soar to Records, but Exclusive Data Show Gas Stations Aren’t the Problem”. Consumers see high GASOLINE prices at pumps, and they can also check prices of CRUDE OIL. Who is getting most of the PROFITS, or the CRACK SPREADS? Oil E&P and majors (XOM, CVX, etc) and oil refiners (VLO, MPC, PSX, PBF, etc) are getting most of those profits, while GAS STATION owners/operators are getting squeezed. The gas station gross profits have declined to 25c/gallon only from 46c/gallon just in December. Moreover, with high gasoline prices, consumers have cut back on their purchases at gas station CONVENIENCE STORES. The government (WH, DOE, FTC, Congress) is investigating high energy profits and should consider these details in formulating related laws and any WINDFALL TAXES.
ENERGY sector turnaround/rebound (+62% YTD, +48% in 2021) has been astounding. Energy fwd P/E at 9.8 only still remain modest. Energy sector market-weight has moved from below 2% of SP500 to about 5%. While long-term moves to renewables and ESG will continue, there is a new appreciation of the realities of the global energy needs right NOW. Oil/gas CAPEX peaked in 2014 and the industry is not rushing into new capex and production this time. However, stable high oil prices and incentives (not criticisms) may change that. Attractive are oil/gas producer EOG; renewable power RUN, ENLAY (Italian); refiners PSX, VLO, PBF; conglomerates/majors SHEL; oil/gas services LBRT, SLB, HAL. (Only 6 names were in a table, but others were mentioned within the article text).
Pg 5, UP & DOWN WALL STREET. The FED projections for the economy and inflation have been too rosy. INFLATION is too high, RATES are too low. The fwd P/E (16 now, down from 21) is also too high and projections for earnings “E” have yet to come down – those point to a difficult time for STOCKS. The BOND market reacted and 2-yr T-Note yield above 3% was the highest since 11/2007. The UM consumer sentiment was at an all-time low. The Fed may have to do several 50-bps hikes (a 75-bps hike would be a surprise). Watch the FOMC Statement and POWELL’s press conference for guidance and hints. The Fed looks at PCE which lags CPI.
The FED is being forced to react to high INFLATION belatedly and that is adding to market VOLATILITY. The current high VIX, low SKEW condition is favorable to those who fear further downside (on the other hand, it may indicate limited further downside). Funds using OPTIONS to generate income and/or tame volatility include GTEYX; ETFs QYLD, RYLD; ETNs SLVO, USOI, etc.
Pg 7, STREETWISE. New drugs for OBESITY are from Novo Nordisk/NVO (Wegovy/Ozempic) and Eli Lilly/LLY (Mounjaro). These injectable drugs have dual approvals for diabetes and obesity. There are side effects and several warnings. Insurance coverage for obesity use is uncertain.
(More later….)
Accessible from Morningstar (M*), Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).