Post by Admin/YBB on Jun 18, 2022 12:10:23 GMT -6
Pg 12-13.
REVIEW. Many companies are planning to bring supply-chains ONSHORE (i.e. to the US). That would benefit TRUCKERS (ARCB, TFII, KNX, SNDR, WERN). RAILROADS (CSX, NSC) won’t benefit as much as they have focused more on containers used for international shipping and that volume may go down with onshoring.
PREVIEW. UK-based Quant Insight has a basket of 40 stocks (position limit 5%) that should benefit from inflation. Surprisingly, it is underweight in energy and real estate, and overweight in consumer-discretionary, industrials, healthcare, consumer-staples.
DATA THIS WEEK: Chicago Fed national activity index, existing home sales on TUESDAY; mortgage applications on WEDNESDAY; weekly initial jobless claims, manufacturing PMI, services PMI, Treasury current account on THURSDAY; new home sales on FRIDAY.
CLOSED. The US markets on MONDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Asset manager stocks (AB (65% owned by EQH), BLK, BEN, IVZ, TROW; sharp selloff; attractive yields and valuations; pg 15).
BEARISH. See other stories.
Pg 16: Options for “CASH” (with ready and short-term access) include money-market funds (finally yielding something although lagging other options), online savings accounts (ALLY, etc), T-Bills (responding fast to rate moves), ST CDs, ST bond funds (GBIL, VCSH, etc), I-Bonds (not really as they are not cashable within 12 months and there is penalty between 1-5 years; also $10K/yr/account limit at Treasury Direct).
Pg 18: CRYPTO WINTER or HELL? Recently, several crypto firms had runs, collapses, frozen redemptions. There seems a slow CONTAGION that is spreading. Cryptos were supposed to be decentralized (DeFi is a catchy term), but in reality, they turned out to be highly connected, automated (so, liquidation somewhere auto-triggers liquidations elsewhere), dominated by a few big players. As for crypto PRICES, just don’t look! Even diversified firms such as Coinbase/COIN (exchange, broker-dealer, custodian) have crashed. MONETARY tightening has hurt all speculative investments but cryptos are the most speculative. REGULATORS may be moving in to tame the Wild West of cryptos. The underlying BLOCKCHAIN technology will eventually find broad uses.
Pg 21: BIG PHARMA are changing. There is less conglomeration/diversification (GSK, PFE, BMY, LLY, JNJ, etc); big are getting bigger and more focused/specialized; many are moving to expensive, less common but more profitable disease treatments (and divesting businesses that treat common or routine diseases); trend towards health-value-pricing (i.e. get whatever prices the company can) vs cost-based-pricing and that is leading to outrageous drug prices and calls for regulations (a trend started by biotechs but now copied by others); many new drugs are so structurally or technologically complex that they cannot be copied into generics but only close biosimilars can be developed (some effective, others not); risks for investors have gone up as big drug hits and misses are more likely; loser may be our general healthcare system.
Pg 25: FUNDS. It has been a terrible year for GROWTH funds (-30% YTD to 6/13/22). But quality growth funds with lower volatility (SD), a variation of the old GARP, may be attractive: CSIEX (ESG), CIAOX, JAENX, JENSX, MIDFX, NBGNX; ETFs FLQL, PTNQ, MOAT. All have lower SDs than that for IWF/R1000-Growth. (This Relative-SD idea has broader applications) (M* recently developed a new fund classification system that primarily relies on Relative-Beta).
Pg 26: INCOME INVESTING. GM and Ford/F have tumbled but have very different dividend policies. GM hasn’t reinstated dividend and has said that it is emphasizing growth in new areas such as EVs. But F has reinstated dividend (current 3.3%) saying that it has enough resources for growth in EVs, business cycle contingencies and dividends. The Ford family has small economic ownership but 40% voting control via dual share classes, and that may have something to do with the dividend policy.
EXTRA. Both DIVIDENDS and BUYBACKS were at records in Q1, so were the SHAREHOLDER YIELDS. Big companies accounted for the bulk of buybacks. But this can change if the economy goes into recession.
Pg 27, TECH TRADER. Oracle/ORCL (fwd P/E 13, P/S 4) is attractive among the tech wreck. It is catching up in the CLOUD business. It bought electronic medical records company Cerner in December. TikTok has moved its US user traffic to Oracle Cloud – although no longer under immediate existential threat, TikTok is enhancing its US footprint with deep partnerships with ORCL (a one-time potential buyer) and others.
Pg 28: Lawrence SUMMERS, Harvard. He warned early about persistent INFLATION from massive monetary and fiscal STIMULUS, and rejected the notion of transitory inflation that wasn’t. He thinks that the US is headed for RECESSION as the FED belatedly fights inflation; low unemployment rate and high inflation typically lead to recessions. Also, the Fed actions work with a LAG of 9-18 months and that makes calibrations difficult. The Fed only recently made adjustment to its +2% inflation TARGET by introducing “averaging” (2020), so it would be difficult for it to change it again just because it became more difficult to achieve that revised +2% average inflation target. He is critical of both the old and new numerical inflation targets but says that is all done, and we are now stuck with it. Things were different PRE-PANDEMIC when inflation remain subdued for years (due to secular economic stagnation), but POST-PANDEMIC situation changed dramatically with supply-chain disruptions, pent up consumer demand (and there is Russia-Ukraine war). His suggestions for the Fed: Be less transparent, discontinue forward guidance, review modeling and forecasting procedures and use adversarial scenario analyses, be willing to change views, step softly into unknown areas such as QE or QT.
This main interview was done before the FOMC meeting on June 14-15, 2022, and also includes the following new comments after the FOMC actions: 75-bps hike was an important first step, but more hikes will be needed; his recession view remains; he doesn’t think that the dot-plots were or are realistic.
Pg 30: ECONOMY. How long will the FED continue its aggressive monetary tightening? Its objectives of controlling INFLATION and moderate economic GROWTH are in conflict. The FOMC Statement and POWELL’s opening remarks at the press conference were more hawkish than his responses during the Q&A. Philly Fed manufacturing index and Atlanta Fed GDPNow are showing weakness. Rising mortgage rates will hurt housing. Consumer credit is rising, and with higher rates, consumers will be negatively affected by higher repayments. But with high PPI (wholesale) > high CPI, prices will continue to rise. So, the Fed has the mixed message of delivering pain but not to make it too painful.
Pg 58: OTHER VOICES. Charles PLOSSER (Hoover Institution, former Philly Fed President) and Mickey LEVY (Berrenberg Capital Markets). FED is late in its failed efforts to tame high INFLATION. The US RECESSION is now inevitable. Fed errors included its early call on inflation being transitory, ignoring the effects of massive monetary (its own doing) and fiscal (by Congress) stimulus, changing to average inflation target of +2% (08/2020), and now acting aggressively to catch up. The Fed must acknowledge its policy errors to avoid repeat occurrences. The Fed must raise rates to a level above inflation and tolerate/allow resulting economic consequences
(EXTRAS from online Friday that didn’t make the weekend paper version)
Andrew ADDISON (Institutional View) says that it is too early to bottom fish now. At market bottoms, stocks start to diverge, some continuing to fall, other rebounding. But that isn’t happening yet and there haven’t been notable washouts. He sees downsides for SP500 as 3,600-3,800; for Nasdaq 100, 11,000 (note 200-wMA 10,700; w = week).
Businesses have been dealing with Covid-19, supply-chain disruptions, inflation, higher rates. Now, they are facing OVER-HIRING – they hired in anticipation of recovery but that has stalled and their stocks have been hurt (AMZN, COST, CCL, ABC, SCHW, NVDA, MA, etc).
Supplement1, The Top 100 Women Financial Advisors 2022 with several features (selecting financial advisors; survey showing that more women are taking financial charge), profiles and a listing of Top 100.
Supplement2, PENTA “changemakers” issue includes features on circular fashion economy (recycling old clothes into new clothes production; from Evrnu, Carlos Campos, North Face, Lululemon, etc); African-American woman Chanterria McGILBRA’s (Prancing Ponies Foundation for women) experience of buying and owning a Ferrari; Bob & Renee PARSONS Foundation (grants for veterans oriented nonprofits); LA art scene; NFT auctions and Metaverse Fashion Week; luxury members-only private clubs; expensive watches; yachting adventures; digital art for interior design; taxes on crypto transactions; global collectibles markets, actor Colman DOMINGO’s favorites; suggested readings.
Accessible from Morningstar (M*), Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
REVIEW. Many companies are planning to bring supply-chains ONSHORE (i.e. to the US). That would benefit TRUCKERS (ARCB, TFII, KNX, SNDR, WERN). RAILROADS (CSX, NSC) won’t benefit as much as they have focused more on containers used for international shipping and that volume may go down with onshoring.
PREVIEW. UK-based Quant Insight has a basket of 40 stocks (position limit 5%) that should benefit from inflation. Surprisingly, it is underweight in energy and real estate, and overweight in consumer-discretionary, industrials, healthcare, consumer-staples.
DATA THIS WEEK: Chicago Fed national activity index, existing home sales on TUESDAY; mortgage applications on WEDNESDAY; weekly initial jobless claims, manufacturing PMI, services PMI, Treasury current account on THURSDAY; new home sales on FRIDAY.
CLOSED. The US markets on MONDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Asset manager stocks (AB (65% owned by EQH), BLK, BEN, IVZ, TROW; sharp selloff; attractive yields and valuations; pg 15).
BEARISH. See other stories.
Pg 16: Options for “CASH” (with ready and short-term access) include money-market funds (finally yielding something although lagging other options), online savings accounts (ALLY, etc), T-Bills (responding fast to rate moves), ST CDs, ST bond funds (GBIL, VCSH, etc), I-Bonds (not really as they are not cashable within 12 months and there is penalty between 1-5 years; also $10K/yr/account limit at Treasury Direct).
Pg 18: CRYPTO WINTER or HELL? Recently, several crypto firms had runs, collapses, frozen redemptions. There seems a slow CONTAGION that is spreading. Cryptos were supposed to be decentralized (DeFi is a catchy term), but in reality, they turned out to be highly connected, automated (so, liquidation somewhere auto-triggers liquidations elsewhere), dominated by a few big players. As for crypto PRICES, just don’t look! Even diversified firms such as Coinbase/COIN (exchange, broker-dealer, custodian) have crashed. MONETARY tightening has hurt all speculative investments but cryptos are the most speculative. REGULATORS may be moving in to tame the Wild West of cryptos. The underlying BLOCKCHAIN technology will eventually find broad uses.
Pg 21: BIG PHARMA are changing. There is less conglomeration/diversification (GSK, PFE, BMY, LLY, JNJ, etc); big are getting bigger and more focused/specialized; many are moving to expensive, less common but more profitable disease treatments (and divesting businesses that treat common or routine diseases); trend towards health-value-pricing (i.e. get whatever prices the company can) vs cost-based-pricing and that is leading to outrageous drug prices and calls for regulations (a trend started by biotechs but now copied by others); many new drugs are so structurally or technologically complex that they cannot be copied into generics but only close biosimilars can be developed (some effective, others not); risks for investors have gone up as big drug hits and misses are more likely; loser may be our general healthcare system.
Pg 25: FUNDS. It has been a terrible year for GROWTH funds (-30% YTD to 6/13/22). But quality growth funds with lower volatility (SD), a variation of the old GARP, may be attractive: CSIEX (ESG), CIAOX, JAENX, JENSX, MIDFX, NBGNX; ETFs FLQL, PTNQ, MOAT. All have lower SDs than that for IWF/R1000-Growth. (This Relative-SD idea has broader applications) (M* recently developed a new fund classification system that primarily relies on Relative-Beta).
Pg 26: INCOME INVESTING. GM and Ford/F have tumbled but have very different dividend policies. GM hasn’t reinstated dividend and has said that it is emphasizing growth in new areas such as EVs. But F has reinstated dividend (current 3.3%) saying that it has enough resources for growth in EVs, business cycle contingencies and dividends. The Ford family has small economic ownership but 40% voting control via dual share classes, and that may have something to do with the dividend policy.
EXTRA. Both DIVIDENDS and BUYBACKS were at records in Q1, so were the SHAREHOLDER YIELDS. Big companies accounted for the bulk of buybacks. But this can change if the economy goes into recession.
Pg 27, TECH TRADER. Oracle/ORCL (fwd P/E 13, P/S 4) is attractive among the tech wreck. It is catching up in the CLOUD business. It bought electronic medical records company Cerner in December. TikTok has moved its US user traffic to Oracle Cloud – although no longer under immediate existential threat, TikTok is enhancing its US footprint with deep partnerships with ORCL (a one-time potential buyer) and others.
Pg 28: Lawrence SUMMERS, Harvard. He warned early about persistent INFLATION from massive monetary and fiscal STIMULUS, and rejected the notion of transitory inflation that wasn’t. He thinks that the US is headed for RECESSION as the FED belatedly fights inflation; low unemployment rate and high inflation typically lead to recessions. Also, the Fed actions work with a LAG of 9-18 months and that makes calibrations difficult. The Fed only recently made adjustment to its +2% inflation TARGET by introducing “averaging” (2020), so it would be difficult for it to change it again just because it became more difficult to achieve that revised +2% average inflation target. He is critical of both the old and new numerical inflation targets but says that is all done, and we are now stuck with it. Things were different PRE-PANDEMIC when inflation remain subdued for years (due to secular economic stagnation), but POST-PANDEMIC situation changed dramatically with supply-chain disruptions, pent up consumer demand (and there is Russia-Ukraine war). His suggestions for the Fed: Be less transparent, discontinue forward guidance, review modeling and forecasting procedures and use adversarial scenario analyses, be willing to change views, step softly into unknown areas such as QE or QT.
This main interview was done before the FOMC meeting on June 14-15, 2022, and also includes the following new comments after the FOMC actions: 75-bps hike was an important first step, but more hikes will be needed; his recession view remains; he doesn’t think that the dot-plots were or are realistic.
Pg 30: ECONOMY. How long will the FED continue its aggressive monetary tightening? Its objectives of controlling INFLATION and moderate economic GROWTH are in conflict. The FOMC Statement and POWELL’s opening remarks at the press conference were more hawkish than his responses during the Q&A. Philly Fed manufacturing index and Atlanta Fed GDPNow are showing weakness. Rising mortgage rates will hurt housing. Consumer credit is rising, and with higher rates, consumers will be negatively affected by higher repayments. But with high PPI (wholesale) > high CPI, prices will continue to rise. So, the Fed has the mixed message of delivering pain but not to make it too painful.
Pg 58: OTHER VOICES. Charles PLOSSER (Hoover Institution, former Philly Fed President) and Mickey LEVY (Berrenberg Capital Markets). FED is late in its failed efforts to tame high INFLATION. The US RECESSION is now inevitable. Fed errors included its early call on inflation being transitory, ignoring the effects of massive monetary (its own doing) and fiscal (by Congress) stimulus, changing to average inflation target of +2% (08/2020), and now acting aggressively to catch up. The Fed must acknowledge its policy errors to avoid repeat occurrences. The Fed must raise rates to a level above inflation and tolerate/allow resulting economic consequences
(EXTRAS from online Friday that didn’t make the weekend paper version)
Andrew ADDISON (Institutional View) says that it is too early to bottom fish now. At market bottoms, stocks start to diverge, some continuing to fall, other rebounding. But that isn’t happening yet and there haven’t been notable washouts. He sees downsides for SP500 as 3,600-3,800; for Nasdaq 100, 11,000 (note 200-wMA 10,700; w = week).
Businesses have been dealing with Covid-19, supply-chain disruptions, inflation, higher rates. Now, they are facing OVER-HIRING – they hired in anticipation of recovery but that has stalled and their stocks have been hurt (AMZN, COST, CCL, ABC, SCHW, NVDA, MA, etc).
Supplement1, The Top 100 Women Financial Advisors 2022 with several features (selecting financial advisors; survey showing that more women are taking financial charge), profiles and a listing of Top 100.
Supplement2, PENTA “changemakers” issue includes features on circular fashion economy (recycling old clothes into new clothes production; from Evrnu, Carlos Campos, North Face, Lululemon, etc); African-American woman Chanterria McGILBRA’s (Prancing Ponies Foundation for women) experience of buying and owning a Ferrari; Bob & Renee PARSONS Foundation (grants for veterans oriented nonprofits); LA art scene; NFT auctions and Metaverse Fashion Week; luxury members-only private clubs; expensive watches; yachting adventures; digital art for interior design; taxes on crypto transactions; global collectibles markets, actor Colman DOMINGO’s favorites; suggested readings.
Accessible from Morningstar (M*), Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).