Post by Admin/YBB on Aug 20, 2022 5:28:14 GMT -6
Pg 28, TRADER. BULLS are still in control, but some CRACKS are now showing. Techs, cyclicals, small-caps, speculative and meme stocks are leading. There is complacency. SENTIMENT has improved. There is lot of money on the sidelines. The BOND market is fearless and 10-yr yield is below 3%. But for bulls, a lot of things have to go right. A problematic scenario would be high inflation, slowing economy and lower profits, rising unemployment. China has Covid lockdowns. Europe has energy crisis. The SP500 failed at 200-dMA. If BEARS takeover, remember that this is a weak seasonality period, says Ed YARDENI (own firm).
MEME stocks are back. These are distressed companies, their bonds are in the cellar, short interests are high, but their stocks are flying, disconnected from fundamentals.
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 rate hikes, FOMC 9/21/22+ (50 bps hike possible)
12th & 13th rate hikes, FOMC 11/2/22+ (50 bps hike possible)
14th, FOMC 12/14/22+ (3.50-3.75%)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.18%, SP500 -1.21%, Nasdaq Comp -2.62%, R2000 -2.94%. DJ Transports -2.48%; DJ Utilities +1.39%. (Rotating spot R2000 -2.94%) US$ index (spot) +2.34% (big move), oil/WTI futures -1.43%, gold futures -2.84%.
YTD (index changes only), DJIA -7.24%, SP500 -11.28%, Nasdaq Comp -18.79%. (Rotating spot R2000 -12.82%)
Pg 40: NYSE cumulative (5-day) A/D line fell.
Pg 31, EUROPE. COAL is hot and that is good for Swiss Glencore/GLNCY; its other businesses include mining, marketing of minerals and materials (cobalt, coper, nickel that are useful for energy transitions), recycling. Russia-Ukraine war has changed the global energy balance and this situation, while temporary, may last for a few years.
Pg 31, EMERGING MARKETS. INDIA’s Jio/Reliance Industries (part of Mukesh AMBANI’s empire) and Bharti Airtel (asset-lite model) are jumping into 5G. Jio got into Indian telecom market in 2016 with a splash and outgunned all other players with monopolistic practices. Now the Indian telecom market is a duopoly with Jio and Bharti Airtel leading and with Vodafone a distant 3rd also-ran. Prices will have to go up for 5G. PM MODI (a friend of Ambani) is pushing for digitization and has implemented direct-to-consumers government subsidies.
Pg 32, OPTIONS. Private-equity and hedge-funds won in this round of tax changes as CARRIED INTEREST loophole will continue for them. That was a great payoff for $2.3 million (only) contributed to Senator Krysten SINEMA (D-AZ). Play by pairing buying calls with selling puts for KKR.
(SP500 VIX 20.60, Nasdaq 100 VXN 26.74, options SKEW 123.68, bond MOVE 123.81 (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 33, COMMODITIES. FUEL COSTS (for diesel, natural gas) are keeping food prices high even as gasoline prices have declined. DIESEL use in ag is extensive: 75% for farm equipment, 90% for food product transportation, 20% for ag-irrigation. NATURAL GAS is also used for grain driers and fertilizer production. Globally, rising food prices are creating a crisis as the global population is increasing.
Pg 45: A down week in EUROPE (Greece +1.83%, Norway +0.53%, Belgium -2.64%) and a flat week in ASIA (Philippines +2.42%, Singapore -3.16%).
TREASURY* 3-mo yield 2.74%, 1-yr 3.26%, 2-yr 3.25%, 5-yr 3.11%, 10-yr 2.98%, 30-yr 3.22%. REAL yields 5-yr 0.39%, 10-yr 0.43%, 30-yr 0.87%.
DOLLAR rose, ^DXY 108.10, +2.30% (large move; pg 50). GOLD fell to $1,751, -2.3% (Handy & Harman spot, Thursday) (pg 52); the gold-miners tanked. (^XAU was at 104.07, -6.76% 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 19: COVER STORY, “RECESSION is Already Here for Many Small Businesses (and households)”. The FED can talk all about soft landing or avoiding recession, but the reality is different for many households and small businesses. SENTIMENT has improved but remains negative. This slowdown/recession may be longer and worse than many think, according to Nancy LAZAR (Piper Sandler). Discretionary small businesses such as oriental rugs, dog-walkers, pooper-scooper services, some unconventional home services, etc have been hit hard. The US Government releases of oil from SPR have caused the US GASOLINE prices to decline temporarily but the low SPR levels now should be of concern, according to Lyn ADEN (own firm). New TAXES will be a drag on consumer spending.
Some economic data look positive only because of INFLATION that makes $amounts high even when the units of production and sales have declined. Google MOBILITY data point to reduced travel for shopping, entertainment, restaurants. The household SAVINGS accumulated during the pandemic, and from generous stimulus checks, are nearly gone, according to Ed YARDENI (own firm). Consumer CREDIT and related debt servicing are rising, and so are debt delinquencies. Banks are reducing CREDIT LINES for people and small businesses. Strong JOBS reports look good on the surface, but the numbers of part-time and multiple job holders have gone up; weekly jobless claims are rising; there are more incidences of layoffs and job offers withdrawn. Jobs data also don’t reflect early retirements and job shifts to gig economy. Unemployment rate may have to rise to tame inflation. Cleveland Fed’s sticky/trimmed inflation is rising (not falling like CPI, PCE, PPI). The Fed/FOMC is misreading the economy that is softer than they think/admit.; it may overtighten when it should err on the side of inflation.
Pg 7, UP & DOWN WALL STREET. The stock market better learn to deal with UNCERTAINTY. Investors were getting complacent after a strong rally from mid-June lows, but a negative week is raising doubts. There are uncertainties of inflation, Fed policy, Fed put, economy (slowdown/recession), jobs. One could read whatever one wanted in the FOMC Minutes. Lot of things that worked in the past have stopped working. Contradictions abound.
It has been a boom-and-bust year for OIL STOCKS, but they are ready to run up (XLE yield 3% fwd P/E 8.5 only; also, IYE). Recently, energy stocks are up even with oil and gasoline prices down because of their huge profits and cash flows. The OPEC will be restrained in raising production; Chinese demand is rising. Competing coal and natural gas prices are high. RISK is an oil collapse but that is unlikely.
MEME stock cheerleader Ryan COHEN dumped all of his BBBY stock and options. Is GME next? Meme stock buyers are upset as they tend to hold until the shorts are squeezed.
Pg 11, STREETWISE. This is now a TRADE-DOWN economy as consumers face high inflation and rein in their spending. Retailers (WMT, BJ, TJX, DG, DLTR, etc) are noticing this change in behavior even among the well-to-do consumers with good incomes. There are concerns about RECESSION and bad times ahead. According to BoA/BAC, the RULE of 20 (trailing P/E + CPI < 20) for a new bull market hasn’t kicked in and 70% of its other indicators aren’t confirming a bull market, so this is only a BEAR-RALLY.
Randal KONIK (Jeffries) likes subscriptions-based business models, e.g. PLNT (fitness), EWCZ (waxing), MCW (carwash), etc. Once one signs up for subscriptions, one is hooked, and it is hard to go back.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
MEME stocks are back. These are distressed companies, their bonds are in the cellar, short interests are high, but their stocks are flying, disconnected from fundamentals.
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 rate hikes, FOMC 9/21/22+ (50 bps hike possible)
12th & 13th rate hikes, FOMC 11/2/22+ (50 bps hike possible)
14th, FOMC 12/14/22+ (3.50-3.75%)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.18%, SP500 -1.21%, Nasdaq Comp -2.62%, R2000 -2.94%. DJ Transports -2.48%; DJ Utilities +1.39%. (Rotating spot R2000 -2.94%) US$ index (spot) +2.34% (big move), oil/WTI futures -1.43%, gold futures -2.84%.
YTD (index changes only), DJIA -7.24%, SP500 -11.28%, Nasdaq Comp -18.79%. (Rotating spot R2000 -12.82%)
Pg 40: NYSE cumulative (5-day) A/D line fell.
Pg 31, EUROPE. COAL is hot and that is good for Swiss Glencore/GLNCY; its other businesses include mining, marketing of minerals and materials (cobalt, coper, nickel that are useful for energy transitions), recycling. Russia-Ukraine war has changed the global energy balance and this situation, while temporary, may last for a few years.
Pg 31, EMERGING MARKETS. INDIA’s Jio/Reliance Industries (part of Mukesh AMBANI’s empire) and Bharti Airtel (asset-lite model) are jumping into 5G. Jio got into Indian telecom market in 2016 with a splash and outgunned all other players with monopolistic practices. Now the Indian telecom market is a duopoly with Jio and Bharti Airtel leading and with Vodafone a distant 3rd also-ran. Prices will have to go up for 5G. PM MODI (a friend of Ambani) is pushing for digitization and has implemented direct-to-consumers government subsidies.
Pg 32, OPTIONS. Private-equity and hedge-funds won in this round of tax changes as CARRIED INTEREST loophole will continue for them. That was a great payoff for $2.3 million (only) contributed to Senator Krysten SINEMA (D-AZ). Play by pairing buying calls with selling puts for KKR.
(SP500 VIX 20.60, Nasdaq 100 VXN 26.74, options SKEW 123.68, bond MOVE 123.81 (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 33, COMMODITIES. FUEL COSTS (for diesel, natural gas) are keeping food prices high even as gasoline prices have declined. DIESEL use in ag is extensive: 75% for farm equipment, 90% for food product transportation, 20% for ag-irrigation. NATURAL GAS is also used for grain driers and fertilizer production. Globally, rising food prices are creating a crisis as the global population is increasing.
Pg 45: A down week in EUROPE (Greece +1.83%, Norway +0.53%, Belgium -2.64%) and a flat week in ASIA (Philippines +2.42%, Singapore -3.16%).
TREASURY* 3-mo yield 2.74%, 1-yr 3.26%, 2-yr 3.25%, 5-yr 3.11%, 10-yr 2.98%, 30-yr 3.22%. REAL yields 5-yr 0.39%, 10-yr 0.43%, 30-yr 0.87%.
DOLLAR rose, ^DXY 108.10, +2.30% (large move; pg 50). GOLD fell to $1,751, -2.3% (Handy & Harman spot, Thursday) (pg 52); the gold-miners tanked. (^XAU was at 104.07, -6.76% 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 19: COVER STORY, “RECESSION is Already Here for Many Small Businesses (and households)”. The FED can talk all about soft landing or avoiding recession, but the reality is different for many households and small businesses. SENTIMENT has improved but remains negative. This slowdown/recession may be longer and worse than many think, according to Nancy LAZAR (Piper Sandler). Discretionary small businesses such as oriental rugs, dog-walkers, pooper-scooper services, some unconventional home services, etc have been hit hard. The US Government releases of oil from SPR have caused the US GASOLINE prices to decline temporarily but the low SPR levels now should be of concern, according to Lyn ADEN (own firm). New TAXES will be a drag on consumer spending.
Some economic data look positive only because of INFLATION that makes $amounts high even when the units of production and sales have declined. Google MOBILITY data point to reduced travel for shopping, entertainment, restaurants. The household SAVINGS accumulated during the pandemic, and from generous stimulus checks, are nearly gone, according to Ed YARDENI (own firm). Consumer CREDIT and related debt servicing are rising, and so are debt delinquencies. Banks are reducing CREDIT LINES for people and small businesses. Strong JOBS reports look good on the surface, but the numbers of part-time and multiple job holders have gone up; weekly jobless claims are rising; there are more incidences of layoffs and job offers withdrawn. Jobs data also don’t reflect early retirements and job shifts to gig economy. Unemployment rate may have to rise to tame inflation. Cleveland Fed’s sticky/trimmed inflation is rising (not falling like CPI, PCE, PPI). The Fed/FOMC is misreading the economy that is softer than they think/admit.; it may overtighten when it should err on the side of inflation.
Pg 7, UP & DOWN WALL STREET. The stock market better learn to deal with UNCERTAINTY. Investors were getting complacent after a strong rally from mid-June lows, but a negative week is raising doubts. There are uncertainties of inflation, Fed policy, Fed put, economy (slowdown/recession), jobs. One could read whatever one wanted in the FOMC Minutes. Lot of things that worked in the past have stopped working. Contradictions abound.
It has been a boom-and-bust year for OIL STOCKS, but they are ready to run up (XLE yield 3% fwd P/E 8.5 only; also, IYE). Recently, energy stocks are up even with oil and gasoline prices down because of their huge profits and cash flows. The OPEC will be restrained in raising production; Chinese demand is rising. Competing coal and natural gas prices are high. RISK is an oil collapse but that is unlikely.
MEME stock cheerleader Ryan COHEN dumped all of his BBBY stock and options. Is GME next? Meme stock buyers are upset as they tend to hold until the shorts are squeezed.
Pg 11, STREETWISE. This is now a TRADE-DOWN economy as consumers face high inflation and rein in their spending. Retailers (WMT, BJ, TJX, DG, DLTR, etc) are noticing this change in behavior even among the well-to-do consumers with good incomes. There are concerns about RECESSION and bad times ahead. According to BoA/BAC, the RULE of 20 (trailing P/E + CPI < 20) for a new bull market hasn’t kicked in and 70% of its other indicators aren’t confirming a bull market, so this is only a BEAR-RALLY.
Randal KONIK (Jeffries) likes subscriptions-based business models, e.g. PLNT (fitness), EWCZ (waxing), MCW (carwash), etc. Once one signs up for subscriptions, one is hooked, and it is hard to go back.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).