Post by Admin/YBB on Jun 25, 2022 5:51:52 GMT -6
Pg 34, TRADER. BEAR market RALLIES (and bull market selloffs) tend to be very sharp. POWELL said this week that achieving soft landing may be “very challenging”. SENTIMENT fell further and it seems that the Fed is paying attention to that. Stocks rallied as investors thought that if Powell is worried, then his actions may not follow his tough words. BoA/BAC noted that investors have been very pessimistic, and its private clients have a record 12.6% in cash (but historical average mentioned was 12.4%, so that doesn’t seem a big deal unless there is some misquote). Many portfolios will also REBALANCE at the quarter end. Several strategists think that this bear market rally has further to go but may stall around SP500 of 4,150; techs and semis may lead. Don’t forget that this is still a bear market and NOT a new bull market.
Kellogg’s (K; yield 3.3%; fwd P/E 16.5) SPLIT into 3 companies (cereals, snacks, plant-based proteins) is both puzzling and interesting. Unlike other splits/spinoffs, these businesses are quite interrelated and there may be loss of some operating synergies. So, the sum (now) may be more valuable than the 3 new parts. But investors may like 3 purer product businesses better (or not).
Lucid’s (LCID; fwd EV/S 8.3) EVs are ultra-expensive, and its valuation is too high compared to Tesla/TSLA, the new SPAC-merger Polestar (PSNY; fwd EVS 2.9) and others in the EV industry with sales (EV/S range 2-3). Deep-pocketed Saudi PIF’s 61% ownership of LCID may have contributed to the irrationality of its valuation. But LCID may eventually crash to a valuation more in-line with its EV industry peers.
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.
7th, 8th & 9th rate hike, FOMC 7/27/22+ (75 bps hike possible)
10th & 11th rate hike, FOMC 9/21/22+ (50 bps hike possible)
12th & 13th rate hike, FOMC 11/2/22+ (50 bps hike possible)
PAUSE, FOMC 12/14/22+ (target 3.25-3.50%)
At the June FOMC, POWELL showed that he can revise his own previous guidance & market expectations if the new data requires that.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +5.39%, SP500 +6.45%, Nasdaq Comp +7.49%, R2000 +6.01%. DJ Transports +5.28%; DJ Utilities +7.42%. (Rotating spot energy XLE -2.59%) US$ index (spot) -0.53%, oil/WTI futures -1.77%, gold futures -0.50%.
YTD (index changes only), DJIA -13.31%, SP500 -17.93%, Nasdaq Comp -25.81%. (Rotating spot energy XLE +28.99%)
Pg 46: NYSE cumulative (5-day) A/D line rose after 5-week decline.
Pg 37, EUROPE. The UK money printer De La Rue (DLUEY; fwd P/E 7) has 35% global market share for PRINTING CURRENCY notes (the US Treasury prints its own dollars); it also prints passports, stamps, etc. The newest UK currency is polymer-based and feels more like plastic than paper (so, can be laundered easily (-
. Company was hurt by the pandemic as people stayed home and shopped online, thus decreasing the demand for currency notes. It is now enjoying post-pandemic rebound.
Pg 37, EMERGING MARKETS. It is unclear how far Columbia’s new leftist President PETRO can go. The market is very bearish (ETF GXG -25% in a month; peso -8%). Debt is very high. The central bank has constitutional autonomy. His party Humana is well short of majority. So, he may not be able to deliver much on his radical campaign promises. The huge market selloff may be overdone.
Pg 38, OPTIONS. Rolling covered calls is mentioned as an income enhancing strategy.
(SP500 VIX 27.23 (high), Nasdaq 100 VXN 33.77 (high), options SKEW 120.43 (not high), bond MOVE 127.00 (high) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 39, COMMODITIES. Global OIL supplies remain constrained. The OPEC is unlikely increase production (only Saudi Arabia and UAE have extra capacities) even as much of Russian oil is off the global markets (some of it is going to Europe, China, India). The US oil production is not yet at pre-pandemic levels, and the US producers are not rushing to increase production and capex. DEMAND will remain high unless there is global recession (and that fear caused a sudden brutal selloff in oil). President BIDEN will visit Saudi Arabia in July. Oil prices are expected to remain strong for 2022-23. (Crack-spreads remain high and that will benefit refiners)
Pg 51: A good week in EUROPE (Denmark +5.06%, Norway -2.55%) and a good week in ASIA (China +4.61%, S Korea -3.17%).
TREASURY* 3-mo yield 1.73%, 1-yr 2.83%, 2-yr 3.04%, 5-yr 3.18%, 10-yr 3.13%, 30-yr 3.26%. REAL yields 5-yr 0.36%, 10-yr 0.57%, 30-yr 0.81%.
DOLLAR fell, ^DXY 104.12, -0.5% (pg 58). GOLD fell to $1,825, -0.9% (Handy & Harman spot, Thursday) (pg 60); the gold-miners fell. (^XAU was at 119.34, -1.71% 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, “CARVANA’s Tower of Troubles”. Carvana/CVNA tried to disrupt auto-sales market but got disrupted itself. Its rapid growth to #2 auto dealer/reseller during the pandemic revealed its process and system deficiencies that included delayed titles and registrations (because it didn’t wait to get titles for the cars it bought but sold them quickly nonetheless), use of multiple out-of-state temporary license plates; undrivable-cars when even the temporary registrations couldn’t be issued; brief suspensions of operating licenses in several states. Its stock had a classic boom-and-bust cycle. Recent acquisition of Adesa US, an auto-auction company, with debt financing has added to its troubles. It is now trying to streamline operations, reduce costs and laying off employees.
Pg 9, UP & DOWN WALL STREET. With the backdrop of very negative SENTIMENT and suddenly falling OIL, Dr COPPER and other COMMODITY prices, stocks rebounded on the hopes (wishful thinking?) that POWELL-Fed may change course sooner than later. There is a big GAP between the Fed rhetoric and market expectations of Fed actions, and the FED FUNDS may peak at 3.8% by 2023 yearend. However, stocks remain in the dumps and that may lead company executives to become more frugal on capex, hiring, dividends, buybacks, M&A (sort of reverse wealth effect for companies) and thus adding to the probability of RECESSION.
After the worst H1 for BONDS, and almost doubling of some bond yields, some bonds are attractive: HY (HYG -13.3% YTD to 06/2022), FR/BL. Several companies are buying back their bonds at depressed prices.
Pg 11, STREETWISE. Kellogg/K wants to ditch its cornflakes image by SPLITTING into 3 – cereals, snacks, plant-based proteins. But it is unclear if any value will be created. The 3 businesses are operationally interrelated and will have overlapping product lines but will differ in revenue and cashflow outlooks – is that any reason to split?
INFLATION is so high that the FED has to catch up by TIGHTENING in a hurry and that may cause RECESSION and then the Fed may EASE. That somehow got the market excited, and it rallied – got that? BONDS are appealing for the first time in years. Some former GROWTH stocks are now VALUE stocks (if you doubt that, just look at post-rebalanced RUSSELL indexes).
(More later….)
Accessible from Morningstar (M*), Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
Kellogg’s (K; yield 3.3%; fwd P/E 16.5) SPLIT into 3 companies (cereals, snacks, plant-based proteins) is both puzzling and interesting. Unlike other splits/spinoffs, these businesses are quite interrelated and there may be loss of some operating synergies. So, the sum (now) may be more valuable than the 3 new parts. But investors may like 3 purer product businesses better (or not).
Lucid’s (LCID; fwd EV/S 8.3) EVs are ultra-expensive, and its valuation is too high compared to Tesla/TSLA, the new SPAC-merger Polestar (PSNY; fwd EVS 2.9) and others in the EV industry with sales (EV/S range 2-3). Deep-pocketed Saudi PIF’s 61% ownership of LCID may have contributed to the irrationality of its valuation. But LCID may eventually crash to a valuation more in-line with its EV industry peers.
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.
7th, 8th & 9th rate hike, FOMC 7/27/22+ (75 bps hike possible)
10th & 11th rate hike, FOMC 9/21/22+ (50 bps hike possible)
12th & 13th rate hike, FOMC 11/2/22+ (50 bps hike possible)
PAUSE, FOMC 12/14/22+ (target 3.25-3.50%)
At the June FOMC, POWELL showed that he can revise his own previous guidance & market expectations if the new data requires that.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +5.39%, SP500 +6.45%, Nasdaq Comp +7.49%, R2000 +6.01%. DJ Transports +5.28%; DJ Utilities +7.42%. (Rotating spot energy XLE -2.59%) US$ index (spot) -0.53%, oil/WTI futures -1.77%, gold futures -0.50%.
YTD (index changes only), DJIA -13.31%, SP500 -17.93%, Nasdaq Comp -25.81%. (Rotating spot energy XLE +28.99%)
Pg 46: NYSE cumulative (5-day) A/D line rose after 5-week decline.
Pg 37, EUROPE. The UK money printer De La Rue (DLUEY; fwd P/E 7) has 35% global market share for PRINTING CURRENCY notes (the US Treasury prints its own dollars); it also prints passports, stamps, etc. The newest UK currency is polymer-based and feels more like plastic than paper (so, can be laundered easily (-
. Company was hurt by the pandemic as people stayed home and shopped online, thus decreasing the demand for currency notes. It is now enjoying post-pandemic rebound.Pg 37, EMERGING MARKETS. It is unclear how far Columbia’s new leftist President PETRO can go. The market is very bearish (ETF GXG -25% in a month; peso -8%). Debt is very high. The central bank has constitutional autonomy. His party Humana is well short of majority. So, he may not be able to deliver much on his radical campaign promises. The huge market selloff may be overdone.
Pg 38, OPTIONS. Rolling covered calls is mentioned as an income enhancing strategy.
(SP500 VIX 27.23 (high), Nasdaq 100 VXN 33.77 (high), options SKEW 120.43 (not high), bond MOVE 127.00 (high) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 39, COMMODITIES. Global OIL supplies remain constrained. The OPEC is unlikely increase production (only Saudi Arabia and UAE have extra capacities) even as much of Russian oil is off the global markets (some of it is going to Europe, China, India). The US oil production is not yet at pre-pandemic levels, and the US producers are not rushing to increase production and capex. DEMAND will remain high unless there is global recession (and that fear caused a sudden brutal selloff in oil). President BIDEN will visit Saudi Arabia in July. Oil prices are expected to remain strong for 2022-23. (Crack-spreads remain high and that will benefit refiners)
Pg 51: A good week in EUROPE (Denmark +5.06%, Norway -2.55%) and a good week in ASIA (China +4.61%, S Korea -3.17%).
TREASURY* 3-mo yield 1.73%, 1-yr 2.83%, 2-yr 3.04%, 5-yr 3.18%, 10-yr 3.13%, 30-yr 3.26%. REAL yields 5-yr 0.36%, 10-yr 0.57%, 30-yr 0.81%.
DOLLAR fell, ^DXY 104.12, -0.5% (pg 58). GOLD fell to $1,825, -0.9% (Handy & Harman spot, Thursday) (pg 60); the gold-miners fell. (^XAU was at 119.34, -1.71% 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, “CARVANA’s Tower of Troubles”. Carvana/CVNA tried to disrupt auto-sales market but got disrupted itself. Its rapid growth to #2 auto dealer/reseller during the pandemic revealed its process and system deficiencies that included delayed titles and registrations (because it didn’t wait to get titles for the cars it bought but sold them quickly nonetheless), use of multiple out-of-state temporary license plates; undrivable-cars when even the temporary registrations couldn’t be issued; brief suspensions of operating licenses in several states. Its stock had a classic boom-and-bust cycle. Recent acquisition of Adesa US, an auto-auction company, with debt financing has added to its troubles. It is now trying to streamline operations, reduce costs and laying off employees.
Pg 9, UP & DOWN WALL STREET. With the backdrop of very negative SENTIMENT and suddenly falling OIL, Dr COPPER and other COMMODITY prices, stocks rebounded on the hopes (wishful thinking?) that POWELL-Fed may change course sooner than later. There is a big GAP between the Fed rhetoric and market expectations of Fed actions, and the FED FUNDS may peak at 3.8% by 2023 yearend. However, stocks remain in the dumps and that may lead company executives to become more frugal on capex, hiring, dividends, buybacks, M&A (sort of reverse wealth effect for companies) and thus adding to the probability of RECESSION.
After the worst H1 for BONDS, and almost doubling of some bond yields, some bonds are attractive: HY (HYG -13.3% YTD to 06/2022), FR/BL. Several companies are buying back their bonds at depressed prices.
Pg 11, STREETWISE. Kellogg/K wants to ditch its cornflakes image by SPLITTING into 3 – cereals, snacks, plant-based proteins. But it is unclear if any value will be created. The 3 businesses are operationally interrelated and will have overlapping product lines but will differ in revenue and cashflow outlooks – is that any reason to split?
INFLATION is so high that the FED has to catch up by TIGHTENING in a hurry and that may cause RECESSION and then the Fed may EASE. That somehow got the market excited, and it rallied – got that? BONDS are appealing for the first time in years. Some former GROWTH stocks are now VALUE stocks (if you doubt that, just look at post-rebalanced RUSSELL indexes).
(More later….)
Accessible from Morningstar (M*), Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).