Post by Admin/YBB on Sept 3, 2022 10:42:22 GMT -6
Pg 8-9. The ECB monetary policy announcement will lift off rates above zero on THURSDAY.
REVIEW. Lucid/LCID (-60% YTD) fell more after the news of shelf registration to raise up to $8 billion in equity and debt. This is not a surprise as it has $4.3 billion cash and is burning about $3-4 billion/yr. But individuals hold 70% of the stock available and they are not comfortable with such news.
PREVIEW. Summer driving season is nearly over by the Labor Day, but Americans have been driving less due to high gasoline costs. While gasoline prices are off their peak in June, they are still high.
DATA THIS WEEK. ISM services PMI on TUESDAY; Fed beige book for 12 regional districts, mortgage applications, international trade deficit on WEDNESDAY; weekly initial jobless claims on THURSDAY; Fed financial accounts on FRIDAY.
CLOSED. The US markets for Labor Day, MONDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Target (TGT; yield 2.6%; fwd P/E 14.4; much of the bad news is in (supply-chain and inventory issues, earning miss, poor guidance); strong retailer with rising market share and sticky customers; pg 12).
BEARISH. See other stories.
Pg 10: A major switch (The MERGE) by ETHEREUM network from proof-of-WORK to proof-of STAKE will be on 9/15/22. It will eliminate wasteful mining, reduce energy use by 99%, decrease processing fees. STAKERS/validators must have minimum capital and will be assigned at random. COIN will be offering staking services for 25% cut. The Merge will impact the crypto industry and supporting players; obvious losers will be miners (HUT, HIVE, etc), specialized chip makers (NVDA, etc), rival cryptos (Bitcoin, Solana, Avalanche, Tezos, etc). Some competitors are introducing “FORK” (similar to Merge). Transitional RISKS include glitches, outages, missing tokens (to be called Beacons), loss of confidence, hacks/scams, regulatory (SEC, CFTC). Post-Merge, Ethereum prices may go up due to higher demand (institutional, retail) and limited supply. One day, this crypto DeFi may just be finance.
Pg 13: SEC top cop Gurbir GREWAL (former NJ AG) under Chairman Gary GENSLER is moving aggressively against prominent people and companies suspected of misrepresentation, fraud and wrongdoing. He is stopping the common past practice of monetary settlements without the admission of guilt that companies like to do to avoid future legal liabilities (private lawsuits, class actions, insurance costs); it started with several high-profile settlements with admissions of guilt – JPM in 12/2021, Allianz in 05/2022, Ernest & Young in 06/2022. New technologies are helping with detection of frauds (insider trading, crypto manipulations, etc).
Pg 18: Strategists have mixed views on the outlook for stocks and bonds in what has been a bad year. The following estimates for 2022 are from 8 Wall Street strategists (Chaudhuri/iShares/BLK, Desai/Franklin Templeton, Harvey/WFC, Lakos-Bujas/JPM, Persson/Nuveen/TIAA, Subramanian/BAC, Wilson/MS, Yardeni/own firm):
SP500: 3,600-4,800
Recession: None to shallow to deep
Yields: May be peaking soon. 10-yr yield range 3.00-3.26% even with fed funds in 3.50-3.75%. (Sharp yield-curve inversion implied). Fed pause is likely (so, hikes--pause--more hikes if needed).
QT: Don’t underestimate its impact.
Bonds: Most of the damage done for investment-grade, but more pain to come for HY.
Mentioned for Equity: COWZ (EV/EBITDA), HDV (dividends), IEO (energy E&P), IHF (healthcare), PBJ (food/beverage), USMV (min-volatility), XLE (energy), XLV (value); several companies are also mentioned.
Mentioned for Fixed-Income: FKIQX (really a hybrid), NFRIX (FR/BL), NPSRX (preferreds), TIBFX (core-plus)
Pg 21: John MONTGOMERY (Founder), Elena KHOZIAEVA, Michael WHIPPLE, Bridgeway Capital (a quant firm with AUM $4.5 billion); small-cap value BRSVX (AUM $504 million). JM is a follower of factors models by FAMA and FRENCH. Similar ETFs tend to be algorithmic with infrequent rebalancing. But they tinker with factor definitions, new factors and quant models; 63.5% of the fund is in micro-caps. They are also considering adding ESG screens.
Pg 23: INCOME. BONDS are attractive after a brutal global selloff. Headwinds of further rate hikes remain. But income-oriented bonds and stocks are attractive. It may be time to improve bond portfolio quality as HYs/EMs still have high risks. Mentioned are SMTHX, PUBAX, VMBS, JMBS, SEMOX, OSTVX, XLRE and several stocks.
Pg 24, TECH TRADER. Tech PROFITS are under pressure and lower lows are ahead for tech stocks. POWELL has warned of pain as the FED continues with rate hikes and QT. RECESSION will not be kind to techs. Several tech executives have said that that they already feel the recession as tech orders and capex are down in anticipation of tough times ahead. Only cloud-computing may remain strong but there are worrisome signs there too. Tech valuations resets (in P/Es) that started in 11/2021 will continue, and now the earnings (Es) will crumble. Watch out.
Pg 25, ECONOMY. FED’s inflation fighting efforts (rate hikes, QT) will lead to JOB LOSSES. Phillip’s Curve is back (the inverse relation between unemployment and wage growth); BRUSUELAS (RSM) supplemented it with supply-chain and other data to estimate job losses. At PCE of +2%, -5.3 million jobs lost; at CPI +2%, -6.0 million; at PCE +3%, -1.7 million; at CPI +3%, -3.5 million. There is also a mismatch between job capabilities needed and available.
Pg 26: Dan NILES, Satori Fund (tech-oriented hedge-fund). He remains bearish as he thinks that the FED will continue to tighten and that the US is headed into a RECESSION. He sees a downside of 30-50% from the peak, with trough in 2023. Corporate EARNINGS will decline, and the trailing P/Es are just too high for the current inflation. Also remember that after a stock is down by 90%, the downside is still 100%, not just 10%. He likes WMT, AMZN as they tend to gain market share in recessions; also gambling sector (PENN, DKNG) and INTC (for its potential). On the other hand, the ad revenues will decline and that would hurt META, SNAP, NFLX, even AAPL (he is long now but may flip to short after September 7 product launches). He is concerned about Russia-Ukraine war and China-Taiwan tensions (a risk for TSM but that may benefit INTC).
Pg 54: OTHER VOICES. Paul LEDER, Miller & Chevalier (a law firm); Milken Institute (Fellow); formerly at the SEC. CHINA blinked on audits by the PCAOB and SEC to avoid delisting of Chinese ADRs, but this may only be a one-tine concession that may not be repeated. The deal followed after the Congress passed the HFCA 2020 mandating PCAOB audits for the US listings and the Chinese saw that there was no other way. Some Chinese companies have voluntarily delisted to avoid future PCAOB audits. Now we have to see how well the Chinese cooperate with the PCAOB and SEC.
(EXTRAS from online Friday that didn’t make the weekend paper version)
None
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
REVIEW. Lucid/LCID (-60% YTD) fell more after the news of shelf registration to raise up to $8 billion in equity and debt. This is not a surprise as it has $4.3 billion cash and is burning about $3-4 billion/yr. But individuals hold 70% of the stock available and they are not comfortable with such news.
PREVIEW. Summer driving season is nearly over by the Labor Day, but Americans have been driving less due to high gasoline costs. While gasoline prices are off their peak in June, they are still high.
DATA THIS WEEK. ISM services PMI on TUESDAY; Fed beige book for 12 regional districts, mortgage applications, international trade deficit on WEDNESDAY; weekly initial jobless claims on THURSDAY; Fed financial accounts on FRIDAY.
CLOSED. The US markets for Labor Day, MONDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Target (TGT; yield 2.6%; fwd P/E 14.4; much of the bad news is in (supply-chain and inventory issues, earning miss, poor guidance); strong retailer with rising market share and sticky customers; pg 12).
BEARISH. See other stories.
Pg 10: A major switch (The MERGE) by ETHEREUM network from proof-of-WORK to proof-of STAKE will be on 9/15/22. It will eliminate wasteful mining, reduce energy use by 99%, decrease processing fees. STAKERS/validators must have minimum capital and will be assigned at random. COIN will be offering staking services for 25% cut. The Merge will impact the crypto industry and supporting players; obvious losers will be miners (HUT, HIVE, etc), specialized chip makers (NVDA, etc), rival cryptos (Bitcoin, Solana, Avalanche, Tezos, etc). Some competitors are introducing “FORK” (similar to Merge). Transitional RISKS include glitches, outages, missing tokens (to be called Beacons), loss of confidence, hacks/scams, regulatory (SEC, CFTC). Post-Merge, Ethereum prices may go up due to higher demand (institutional, retail) and limited supply. One day, this crypto DeFi may just be finance.
Pg 13: SEC top cop Gurbir GREWAL (former NJ AG) under Chairman Gary GENSLER is moving aggressively against prominent people and companies suspected of misrepresentation, fraud and wrongdoing. He is stopping the common past practice of monetary settlements without the admission of guilt that companies like to do to avoid future legal liabilities (private lawsuits, class actions, insurance costs); it started with several high-profile settlements with admissions of guilt – JPM in 12/2021, Allianz in 05/2022, Ernest & Young in 06/2022. New technologies are helping with detection of frauds (insider trading, crypto manipulations, etc).
Pg 18: Strategists have mixed views on the outlook for stocks and bonds in what has been a bad year. The following estimates for 2022 are from 8 Wall Street strategists (Chaudhuri/iShares/BLK, Desai/Franklin Templeton, Harvey/WFC, Lakos-Bujas/JPM, Persson/Nuveen/TIAA, Subramanian/BAC, Wilson/MS, Yardeni/own firm):
SP500: 3,600-4,800
Recession: None to shallow to deep
Yields: May be peaking soon. 10-yr yield range 3.00-3.26% even with fed funds in 3.50-3.75%. (Sharp yield-curve inversion implied). Fed pause is likely (so, hikes--pause--more hikes if needed).
QT: Don’t underestimate its impact.
Bonds: Most of the damage done for investment-grade, but more pain to come for HY.
Mentioned for Equity: COWZ (EV/EBITDA), HDV (dividends), IEO (energy E&P), IHF (healthcare), PBJ (food/beverage), USMV (min-volatility), XLE (energy), XLV (value); several companies are also mentioned.
Mentioned for Fixed-Income: FKIQX (really a hybrid), NFRIX (FR/BL), NPSRX (preferreds), TIBFX (core-plus)
Pg 21: John MONTGOMERY (Founder), Elena KHOZIAEVA, Michael WHIPPLE, Bridgeway Capital (a quant firm with AUM $4.5 billion); small-cap value BRSVX (AUM $504 million). JM is a follower of factors models by FAMA and FRENCH. Similar ETFs tend to be algorithmic with infrequent rebalancing. But they tinker with factor definitions, new factors and quant models; 63.5% of the fund is in micro-caps. They are also considering adding ESG screens.
Pg 23: INCOME. BONDS are attractive after a brutal global selloff. Headwinds of further rate hikes remain. But income-oriented bonds and stocks are attractive. It may be time to improve bond portfolio quality as HYs/EMs still have high risks. Mentioned are SMTHX, PUBAX, VMBS, JMBS, SEMOX, OSTVX, XLRE and several stocks.
Pg 24, TECH TRADER. Tech PROFITS are under pressure and lower lows are ahead for tech stocks. POWELL has warned of pain as the FED continues with rate hikes and QT. RECESSION will not be kind to techs. Several tech executives have said that that they already feel the recession as tech orders and capex are down in anticipation of tough times ahead. Only cloud-computing may remain strong but there are worrisome signs there too. Tech valuations resets (in P/Es) that started in 11/2021 will continue, and now the earnings (Es) will crumble. Watch out.
Pg 25, ECONOMY. FED’s inflation fighting efforts (rate hikes, QT) will lead to JOB LOSSES. Phillip’s Curve is back (the inverse relation between unemployment and wage growth); BRUSUELAS (RSM) supplemented it with supply-chain and other data to estimate job losses. At PCE of +2%, -5.3 million jobs lost; at CPI +2%, -6.0 million; at PCE +3%, -1.7 million; at CPI +3%, -3.5 million. There is also a mismatch between job capabilities needed and available.
Pg 26: Dan NILES, Satori Fund (tech-oriented hedge-fund). He remains bearish as he thinks that the FED will continue to tighten and that the US is headed into a RECESSION. He sees a downside of 30-50% from the peak, with trough in 2023. Corporate EARNINGS will decline, and the trailing P/Es are just too high for the current inflation. Also remember that after a stock is down by 90%, the downside is still 100%, not just 10%. He likes WMT, AMZN as they tend to gain market share in recessions; also gambling sector (PENN, DKNG) and INTC (for its potential). On the other hand, the ad revenues will decline and that would hurt META, SNAP, NFLX, even AAPL (he is long now but may flip to short after September 7 product launches). He is concerned about Russia-Ukraine war and China-Taiwan tensions (a risk for TSM but that may benefit INTC).
Pg 54: OTHER VOICES. Paul LEDER, Miller & Chevalier (a law firm); Milken Institute (Fellow); formerly at the SEC. CHINA blinked on audits by the PCAOB and SEC to avoid delisting of Chinese ADRs, but this may only be a one-tine concession that may not be repeated. The deal followed after the Congress passed the HFCA 2020 mandating PCAOB audits for the US listings and the Chinese saw that there was no other way. Some Chinese companies have voluntarily delisted to avoid future PCAOB audits. Now we have to see how well the Chinese cooperate with the PCAOB and SEC.
(EXTRAS from online Friday that didn’t make the weekend paper version)
None
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).