Post by Admin/YBB on Aug 6, 2022 5:11:28 GMT -6
Pg 33, TRADER. The JOBS report was very strong, but the STOCK market did OK (cyclicals and small/mid-caps did better). The BOND market was another matter as RATE hike expectations went up to 75-50-0 bps hikes to 3.50-3.75% at the December FOMC meeting. DOLLAR surged. Q2 earnings and revenues (with 432 of SP500 companies reporting) have been better than expected but future GUIDANCE has been poor. In fact, with Q2 revenues strong, inflation helped profits and margins held up. However, fwd P/Es were lower due to higher rates (recent low was 16, now 17.7). This is better than the feared falling Es and falling P/Es. However, overtightening by the FED may change this scenario.
Dollar-stores (DG, DLTR) are doing better than big-box stores (WMT, TGT) although the entire retail sector sold off. Dollar-stores offer essentials at low-prices and are found nearby.
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.
10th, 11th &12th rate hikes, FOMC 9/21/22+ (75 bps hike possible)
13th & 14th rate hikes, FOMC 11/2/22+ (50 bps hike possible)
Rest, FOMC 12/14/22+ (3.50-3.75% peak remains)
No change in 2023/H1, or cuts.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.13%, SP500 +0.36%, Nasdaq Comp +2.15%, R2000 +1.94%. DJ Transports -0.05%; DJ Utilities -1.00%. (Rotating spot semi-ETF SOXX +2.95%) US$ index (spot) +0.63%, oil/WTI futures -7.88%, gold futures -0.56%.
YTD (index changes only), DJIA -9.73%, SP500 -13.03%, Nasdaq Comp -19.10%. (Rotating spot semi-ETF SOXX -22.70%)
Pg 45: NYSE cumulative (5-day) A/D line rose for 3rd week.
Pg 37, EUROPE. Airbus (EADSY; fwd P/E 21) has good growth potential regardless of recession. It is addressing higher costs of labor, materials and supplies and production, and it can pass on some costs through price increases. (It may also be benefitting from the troubles of Boeing/BA)
Pg 37, EMERGING MARKETS. Chinese REAL ESTATE is overvalued. What other EM property markets are overvalued on price and affordability? S Korea, Hungary, Czech Republic, Poland, Romania, Chile, India, Singapore. But don’t overlook the real estate bubble in the developed markets and any triggers may start there. (Part 2 has a negative feature on US private real estate BX-BREIT)
Pg 38, OPTIONS. Is this a BEAR-trap or a new BULL/up-move? Cautious investors may use put-spread-collar. SPY/SP500 is used as example to show how to buy an OTM put, sell another lower OTM put and sell an OTM call.
(SP500 VIX 21.15 (high), Nasdaq 100 VXN 27.13 (high), options SKEW 125.97, bond MOVE 122.58 (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg xx, COMMODITIES. Strange to skip.
Pg 50: A down week in EUROPE (Germany +1.06%, Denmark -4.88%) and an up week in ASIA (Singapore +3.28%, HK -0.27%).
TREASURY* 3-mo yield 2.58%, 1-yr 3.29%, 2-yr 3.24%, 5-yr 2.97%, 10-yr 2.83%, 30-yr 3.06%. REAL yields 5-yr 0.33% (positive again), 10-yr 0.37%, 30-yr 0.81%.
DOLLAR rose, ^DXY 106.58, +0.6% (pg 58). GOLD rose to $1,773, +1.3% (Handy & Harman spot, Thursday) (pg 60); the gold-miners fell. (^XAU was at 108.00, -0.67% for the week)
Top FDIC insured savings deposit rates** (This feature has been 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 16: COVER STORY, “GE Stock Is a Buy as Breakup Looms”. GE is attractive ahead of its breakup into 3 parts – AVIATION (likely to be led by CULP), HEALTHCARE and ENERGY. Post-breakup, these parts may do M&A of their own. Pensions are 88% funded now (GAAP). It has set aside $14.5 billion to cover liabilities from discontinued legacy LTCI business (there was industrywide underpricing). Debt is $32 billion but it has $20 billion in cash and stakes in other companies, so net debt is manageable $12 billion. The sum-of-parts valuation is about the double that now. Larry CULP has been restructuring GE since 2018. He has sold biopharma and most of GE Capital. Covid-19 delayed the other restructuring, but he is now moving ahead. Headwinds include the FED monetary tightening and possible economic slowdown/recession.
Pg 5, UP & DOWN WALL STREET. The JOBS boom (and upward revisions to prior jobs reports) means no recession in the near future but that makes higher RATES more likely. Open-Mouths at the FOMC also said not to expect the Fed to flip early. The CME FedWatch now shows peak 3.50-3.75% fed fund rate at December FOMC. The CPI next week will show if inflation is moderating. Several tech companies (AAPL, FB) rushed to issue bonds to fund buybacks and other corporate stuff (for which they already have tons of cash on hand). Ironically, the new mini-stimulus bill in Congress will tax buybacks (but will leave the carried-interest loophole alone).
Dr Doom (Henry KAUFMAN, 95) made the historic call on rate reversal in 1982 (his book, The Day the Markets Roared, April 2021). The FED in those days believed in surprises, secrecy, and opaqueness. The Fed now is completely different – gradualist, transparent (and may be, talks too much). He thinks that POWELL-Fed will continue on the monetary TIGHTENING path despite the BOND market thinking otherwise (as indicated by 10-yr yield). Eventually, the current high INFLATION will subside, and the US will lead Europe and Asia in post-pandemic RECOVERY. He avoided talking about equities but likes MUNIS.
Pg 9, STREETWISE. WIRELESS stocks are attractive, TMUS, VZ, T (in that order). Strangely, wireless accounts are growing faster than population. HOUGH asks cynically if pets are opening cell phone accounts? Seriously, some growth is from the shift from PRE-PAID to POST-PAID plans due to carriers offering attractive packages and free/discounted phones, and from KIDS 8-12 (parents want to remain in touch). A reason for differential growth among the companies is from how much coverage is from MIDBAND that offers the best compromise between speed and distance (vs low- and high- bands); VZ and T are catching up fast with spectrum purchases and plan discounts, but their profitability may suffer. T has been going through restructuring – it just got rid of its media business. All are expanding broadband in competition with CABLE.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
Dollar-stores (DG, DLTR) are doing better than big-box stores (WMT, TGT) although the entire retail sector sold off. Dollar-stores offer essentials at low-prices and are found nearby.
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.
10th, 11th &12th rate hikes, FOMC 9/21/22+ (75 bps hike possible)
13th & 14th rate hikes, FOMC 11/2/22+ (50 bps hike possible)
Rest, FOMC 12/14/22+ (3.50-3.75% peak remains)
No change in 2023/H1, or cuts.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.13%, SP500 +0.36%, Nasdaq Comp +2.15%, R2000 +1.94%. DJ Transports -0.05%; DJ Utilities -1.00%. (Rotating spot semi-ETF SOXX +2.95%) US$ index (spot) +0.63%, oil/WTI futures -7.88%, gold futures -0.56%.
YTD (index changes only), DJIA -9.73%, SP500 -13.03%, Nasdaq Comp -19.10%. (Rotating spot semi-ETF SOXX -22.70%)
Pg 45: NYSE cumulative (5-day) A/D line rose for 3rd week.
Pg 37, EUROPE. Airbus (EADSY; fwd P/E 21) has good growth potential regardless of recession. It is addressing higher costs of labor, materials and supplies and production, and it can pass on some costs through price increases. (It may also be benefitting from the troubles of Boeing/BA)
Pg 37, EMERGING MARKETS. Chinese REAL ESTATE is overvalued. What other EM property markets are overvalued on price and affordability? S Korea, Hungary, Czech Republic, Poland, Romania, Chile, India, Singapore. But don’t overlook the real estate bubble in the developed markets and any triggers may start there. (Part 2 has a negative feature on US private real estate BX-BREIT)
Pg 38, OPTIONS. Is this a BEAR-trap or a new BULL/up-move? Cautious investors may use put-spread-collar. SPY/SP500 is used as example to show how to buy an OTM put, sell another lower OTM put and sell an OTM call.
(SP500 VIX 21.15 (high), Nasdaq 100 VXN 27.13 (high), options SKEW 125.97, bond MOVE 122.58 (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg xx, COMMODITIES. Strange to skip.
Pg 50: A down week in EUROPE (Germany +1.06%, Denmark -4.88%) and an up week in ASIA (Singapore +3.28%, HK -0.27%).
TREASURY* 3-mo yield 2.58%, 1-yr 3.29%, 2-yr 3.24%, 5-yr 2.97%, 10-yr 2.83%, 30-yr 3.06%. REAL yields 5-yr 0.33% (positive again), 10-yr 0.37%, 30-yr 0.81%.
DOLLAR rose, ^DXY 106.58, +0.6% (pg 58). GOLD rose to $1,773, +1.3% (Handy & Harman spot, Thursday) (pg 60); the gold-miners fell. (^XAU was at 108.00, -0.67% for the week)
Top FDIC insured savings deposit rates** (This feature has been 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 16: COVER STORY, “GE Stock Is a Buy as Breakup Looms”. GE is attractive ahead of its breakup into 3 parts – AVIATION (likely to be led by CULP), HEALTHCARE and ENERGY. Post-breakup, these parts may do M&A of their own. Pensions are 88% funded now (GAAP). It has set aside $14.5 billion to cover liabilities from discontinued legacy LTCI business (there was industrywide underpricing). Debt is $32 billion but it has $20 billion in cash and stakes in other companies, so net debt is manageable $12 billion. The sum-of-parts valuation is about the double that now. Larry CULP has been restructuring GE since 2018. He has sold biopharma and most of GE Capital. Covid-19 delayed the other restructuring, but he is now moving ahead. Headwinds include the FED monetary tightening and possible economic slowdown/recession.
Pg 5, UP & DOWN WALL STREET. The JOBS boom (and upward revisions to prior jobs reports) means no recession in the near future but that makes higher RATES more likely. Open-Mouths at the FOMC also said not to expect the Fed to flip early. The CME FedWatch now shows peak 3.50-3.75% fed fund rate at December FOMC. The CPI next week will show if inflation is moderating. Several tech companies (AAPL, FB) rushed to issue bonds to fund buybacks and other corporate stuff (for which they already have tons of cash on hand). Ironically, the new mini-stimulus bill in Congress will tax buybacks (but will leave the carried-interest loophole alone).
Dr Doom (Henry KAUFMAN, 95) made the historic call on rate reversal in 1982 (his book, The Day the Markets Roared, April 2021). The FED in those days believed in surprises, secrecy, and opaqueness. The Fed now is completely different – gradualist, transparent (and may be, talks too much). He thinks that POWELL-Fed will continue on the monetary TIGHTENING path despite the BOND market thinking otherwise (as indicated by 10-yr yield). Eventually, the current high INFLATION will subside, and the US will lead Europe and Asia in post-pandemic RECOVERY. He avoided talking about equities but likes MUNIS.
Pg 9, STREETWISE. WIRELESS stocks are attractive, TMUS, VZ, T (in that order). Strangely, wireless accounts are growing faster than population. HOUGH asks cynically if pets are opening cell phone accounts? Seriously, some growth is from the shift from PRE-PAID to POST-PAID plans due to carriers offering attractive packages and free/discounted phones, and from KIDS 8-12 (parents want to remain in touch). A reason for differential growth among the companies is from how much coverage is from MIDBAND that offers the best compromise between speed and distance (vs low- and high- bands); VZ and T are catching up fast with spectrum purchases and plan discounts, but their profitability may suffer. T has been going through restructuring – it just got rid of its media business. All are expanding broadband in competition with CABLE.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).