Post by Admin/YBB on Sept 17, 2022 9:24:32 GMT -6
Pg 12-13. FOMC Statement and POWELL’s press conference on WEDNESDAY. BOJ monetary policy decision on THURSDAY.
REVIEW. Do you need 800 HP family car? Well, Ferrari (RACE; fwd P/E 33) has Purosangue SUV for you – it has 4 doors, 4 seats, 1 trunk for stuff (17 cu ft only); 800 HP V-12 will launch you and your kids 0-60 in 3 sec. Got $390K?
PREVIEW. Extrapolation is dangerous. Be careful with projections for NATURAL GAS prices in EUROPE. Keep in mind that European storage facilities are 82% full ahead of Winter and that may reach to 90% by October end. If the European consumers are serious about energy conservation, and the Winter is mild, then that amount of natural gas may be enough and prices may fall sharply rather than keep rising (as many are extrapolating). But post-Winter, when storage will fall to 22%, heavy purchases may drive prices higher again. So, the price pattern may be up (now) – down (Winter) – up (Summer) rather that high all the time. Whatever the situation, large natural gas producers will continue to do well (COP, XOM, CVX, SHEL, BP). As the US LNG exports are limited, the US natural gas prices will be governed by domestic supply and demand (generally a glut; the US prices are high but European prices are 8x-10x higher).
DATA THIS WEEK. Housing market index on MONDAY; housing starts on TUESDAY; existing home sales on WEDNESDAY; LEI on THURSDAY; manufacturing PMI, services PMI on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Newmont (NEM; yield 5.2% (basic + variable based on FCF); fwd EV/EBITDA 5.8; P/NAV 0.95; net debt/EBITDA 0.3; all-in costs $1,150/oz; earning impacted by inflation, higher labor and energy costs; strong dollar a headwind for gold; 70% assets in North America and Australia; acquired Goldcorp in 2019; only gold-miner in SP500; pg 14);
U-Haul owner Amerco (UHAL; yield 0.3%; fwd P/E 9; no buybacks; no Wall Street coverage; market based pricing (LA to Phoenix 3-day truck rental is 2.84x the reverse rental); built large self-storage business by building facilities near its rental outlets; SHOEN family owns 50%+; pg 22).
BEARISH. See other stories.
Pg 16: President BIDEN’s CRYPTO regulation proposals (via executive orders) are tough, and the crypto industry is fighting back. Attacks on cryptos are coming from the SEC, CFTC, DOL, EPA and for wasteful energy use (Ethereum just switched to proof-of-stake from wasteful proof-of-work system). Congress is also looking into regulations. Industry has been trying to push for sympathetic government regulations to legitimize cryptos for mainstream uses; it has built a powerful lobbying organization and PACs. There have been several recent blowups. Crypto valuations have collapsed. Industry is dealing with what has been called crypto winter.
Pg 20: Attractive EMs now include India, Indonesia, Brazil; MSCI EM fwd P/E 10.5. Commodity producing EMs are more attractive. Several EMs are well ahead in their inflation fights. There are headwinds of strong dollar and restrictive US Fed. Troubled EMs include China, Turkey, Columbia, S Africa. Mentioned are FEDAX, GQGPX, RNWOX, TSMGX, WBEIX and several EM stocks.
Pg 23: FUNDS. Amy ZHANG of mid-cap ALOAX/AFOZX sticks to smaller MCs and has a concentrated MC growth portfolio (she also manages SC AOFAX/AGOZX). Fund has been very volatile and has lagged recently due to tech selloff.
Pg 25: INCOME. SHORT-TERM BONDS are attractive now that 1-yr T-Bill is about 4% and 2-yr T-Note about 3.8%. The ST investment-grade CREDIT-SPREADS are 75 bps. Rates are expected to rise further (FED FUNDS may reach 4.25-4.50% by 2023/Q1) but reasonable future rate rises may be priced in by ST bonds. At these rates, the BOND MATH is working again (it seemed broken during the ZIRP). With the YIELD-CURVE inverted, the LT bonds aren’t attractive yet. Mentioned are Treasuries SHY and corporates VCSH.
Pg 26: Jens NORDVIG, Founder and CEO of Exante Data (data analytics firm). It’s a new global macro picture – high inflation, restrictive central banks, Russia-Ukraine war, crazy energy prices in Europe, king dollar. The FED tightening isn’t fully priced in. It’s too early for fixed-income and stick with T-Bills. Negative sentiment on EUROPE is so extreme that things can only improve (hopefully) and some opportunities are developing; this is not so for CHINA (problems with Covid, debt, banks, real estate). This may be the best year ever for DOLLAR (beating 1980s and 2001). Several EMs are now attractive (Mexico, Indonesia, S Africa, Brazil) and they may handle the headwinds of strong dollar and US tightening.
Pg 28, TECH TRADER. Tech M&A sentiment is so poor that ADBE was hit hard on the news of its acquisition of unprofitable collaborative design-tool company Figma (at an absurd P/S). Similarly, in late-2021, ORCL was hit on the news of its acquisition of healthcare IT company Cerner; but ORCL is attractive at fwd P/E of 12 due to the prospects of its cloud business. Reasons for dour M&A sentiment include higher rates, lower valuations, risk aversion by investors, etc. Yet, private-equity and venture-capital have lots of idle cash.
Pg 29, ECONOMY. Forget the FED PIVOT (in 2022 or 2023), interest RATES may remain higher for longer. The CPI data have been too strong; the LABOR market has been very tight. Sharp declines in ENERGY prices are unlikely – the OPEC and the US producers are more disciplined; after October 2022, the draws from the SPR may turn into buys to restore SPR. The RR STRIKE was averted but it showed that union labor can demand and have decent wage gains. The PPI (wholesale) did moderate some. Household SAVINGS and bank DEPOSITS are declining; bank loan-to-deposit ratios are rising. A financial storm may appear at some point.
Pg 58: OTHER VOICES. Edward PRICE, Visiting Fellow at NYU Center for Global Affairs; formerly with UK Government (economics). The almighty, invincible DOLLAR could fall. Charlie MUNGER has warned that dollar could fail and crash and drop to zero. For perspective on currencies, one should look over centuries. Robert TRIFFIN suggests that one should think of 2 dollars, the domestic dollar and international/global dollar with the latter now being much larger than the former. But the US policies (economic, political) affect only the domestic dollar although the US controls the total dollars issued. This is inherently an unstable situation. What could prompt a decline in dollar? The US losing in some global WAR/conflict; FEAR causing bank runs (the current fiat dollar is only 50 years old); GUILE leading to dollar alternative(s). Trust and confidence are fickle. The US policy makers should be aware of this and work hard to extend the dollar regime as mush as possible (that won’t happen by itself).
(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. Do you need 800 HP family car? Well, Ferrari (RACE; fwd P/E 33) has Purosangue SUV for you – it has 4 doors, 4 seats, 1 trunk for stuff (17 cu ft only); 800 HP V-12 will launch you and your kids 0-60 in 3 sec. Got $390K?
PREVIEW. Extrapolation is dangerous. Be careful with projections for NATURAL GAS prices in EUROPE. Keep in mind that European storage facilities are 82% full ahead of Winter and that may reach to 90% by October end. If the European consumers are serious about energy conservation, and the Winter is mild, then that amount of natural gas may be enough and prices may fall sharply rather than keep rising (as many are extrapolating). But post-Winter, when storage will fall to 22%, heavy purchases may drive prices higher again. So, the price pattern may be up (now) – down (Winter) – up (Summer) rather that high all the time. Whatever the situation, large natural gas producers will continue to do well (COP, XOM, CVX, SHEL, BP). As the US LNG exports are limited, the US natural gas prices will be governed by domestic supply and demand (generally a glut; the US prices are high but European prices are 8x-10x higher).
DATA THIS WEEK. Housing market index on MONDAY; housing starts on TUESDAY; existing home sales on WEDNESDAY; LEI on THURSDAY; manufacturing PMI, services PMI on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Newmont (NEM; yield 5.2% (basic + variable based on FCF); fwd EV/EBITDA 5.8; P/NAV 0.95; net debt/EBITDA 0.3; all-in costs $1,150/oz; earning impacted by inflation, higher labor and energy costs; strong dollar a headwind for gold; 70% assets in North America and Australia; acquired Goldcorp in 2019; only gold-miner in SP500; pg 14);
U-Haul owner Amerco (UHAL; yield 0.3%; fwd P/E 9; no buybacks; no Wall Street coverage; market based pricing (LA to Phoenix 3-day truck rental is 2.84x the reverse rental); built large self-storage business by building facilities near its rental outlets; SHOEN family owns 50%+; pg 22).
BEARISH. See other stories.
Pg 16: President BIDEN’s CRYPTO regulation proposals (via executive orders) are tough, and the crypto industry is fighting back. Attacks on cryptos are coming from the SEC, CFTC, DOL, EPA and for wasteful energy use (Ethereum just switched to proof-of-stake from wasteful proof-of-work system). Congress is also looking into regulations. Industry has been trying to push for sympathetic government regulations to legitimize cryptos for mainstream uses; it has built a powerful lobbying organization and PACs. There have been several recent blowups. Crypto valuations have collapsed. Industry is dealing with what has been called crypto winter.
Pg 20: Attractive EMs now include India, Indonesia, Brazil; MSCI EM fwd P/E 10.5. Commodity producing EMs are more attractive. Several EMs are well ahead in their inflation fights. There are headwinds of strong dollar and restrictive US Fed. Troubled EMs include China, Turkey, Columbia, S Africa. Mentioned are FEDAX, GQGPX, RNWOX, TSMGX, WBEIX and several EM stocks.
Pg 23: FUNDS. Amy ZHANG of mid-cap ALOAX/AFOZX sticks to smaller MCs and has a concentrated MC growth portfolio (she also manages SC AOFAX/AGOZX). Fund has been very volatile and has lagged recently due to tech selloff.
Pg 25: INCOME. SHORT-TERM BONDS are attractive now that 1-yr T-Bill is about 4% and 2-yr T-Note about 3.8%. The ST investment-grade CREDIT-SPREADS are 75 bps. Rates are expected to rise further (FED FUNDS may reach 4.25-4.50% by 2023/Q1) but reasonable future rate rises may be priced in by ST bonds. At these rates, the BOND MATH is working again (it seemed broken during the ZIRP). With the YIELD-CURVE inverted, the LT bonds aren’t attractive yet. Mentioned are Treasuries SHY and corporates VCSH.
Pg 26: Jens NORDVIG, Founder and CEO of Exante Data (data analytics firm). It’s a new global macro picture – high inflation, restrictive central banks, Russia-Ukraine war, crazy energy prices in Europe, king dollar. The FED tightening isn’t fully priced in. It’s too early for fixed-income and stick with T-Bills. Negative sentiment on EUROPE is so extreme that things can only improve (hopefully) and some opportunities are developing; this is not so for CHINA (problems with Covid, debt, banks, real estate). This may be the best year ever for DOLLAR (beating 1980s and 2001). Several EMs are now attractive (Mexico, Indonesia, S Africa, Brazil) and they may handle the headwinds of strong dollar and US tightening.
Pg 28, TECH TRADER. Tech M&A sentiment is so poor that ADBE was hit hard on the news of its acquisition of unprofitable collaborative design-tool company Figma (at an absurd P/S). Similarly, in late-2021, ORCL was hit on the news of its acquisition of healthcare IT company Cerner; but ORCL is attractive at fwd P/E of 12 due to the prospects of its cloud business. Reasons for dour M&A sentiment include higher rates, lower valuations, risk aversion by investors, etc. Yet, private-equity and venture-capital have lots of idle cash.
Pg 29, ECONOMY. Forget the FED PIVOT (in 2022 or 2023), interest RATES may remain higher for longer. The CPI data have been too strong; the LABOR market has been very tight. Sharp declines in ENERGY prices are unlikely – the OPEC and the US producers are more disciplined; after October 2022, the draws from the SPR may turn into buys to restore SPR. The RR STRIKE was averted but it showed that union labor can demand and have decent wage gains. The PPI (wholesale) did moderate some. Household SAVINGS and bank DEPOSITS are declining; bank loan-to-deposit ratios are rising. A financial storm may appear at some point.
Pg 58: OTHER VOICES. Edward PRICE, Visiting Fellow at NYU Center for Global Affairs; formerly with UK Government (economics). The almighty, invincible DOLLAR could fall. Charlie MUNGER has warned that dollar could fail and crash and drop to zero. For perspective on currencies, one should look over centuries. Robert TRIFFIN suggests that one should think of 2 dollars, the domestic dollar and international/global dollar with the latter now being much larger than the former. But the US policies (economic, political) affect only the domestic dollar although the US controls the total dollars issued. This is inherently an unstable situation. What could prompt a decline in dollar? The US losing in some global WAR/conflict; FEAR causing bank runs (the current fiat dollar is only 50 years old); GUILE leading to dollar alternative(s). Trust and confidence are fickle. The US policy makers should be aware of this and work hard to extend the dollar regime as mush as possible (that won’t happen by itself).
(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).