Post by Admin/YBB on Sept 24, 2022 6:50:17 GMT -6
Pg 32, TRADER. A BAD SEPTEMBER could be followed by a WORSE OCTOBER; then will come GOOD SEASONALITY from November 1 (seasonality hasn’t worked in recent years). But the bad news first. The DJIA made a new low YTD on Friday, i.e. it was below its mid-June low (also the DJ Transports). BONDS were creamed; even 1-3 yr ST Treasury SHY was down -0.6% for the week (due to the FOMC action and tough talk by POWELL). OIL wasn’t spared. Most CURRENCIES were very weak as dollar kept rising; the BOJ intervened for the first time since 1998, a futile move. Many important economic data/news will be due before the next FOMC on November 2: Personal income and consumption, jobs report, CPI, start of Q3 earnings season. The US ELECTIONS are on November 8.
MERGER ARBITRAGEURS were encouraged by a federal judge’s ruling against the DOJ related to UNH-CHNG (announced 01/2021, the DOJ filed suit 02/2022). Several M&A deals are pending: MSFT-ATVI, AVGO-VWM, JBLU-SAVE, BRK-Y, Musk-TWTR, INTC-TSEM, ICE-BKI, TD-FHN, AMZN-IRBT, AMZN-ONEM, etc. There are several M&A funds, ARBFX, MERFX, BALPX; ETF ARB.
Costco (COST; fwd P/E 34) slipped on OK earnings. Buy on weakness. Membership trends are strong, and it is holding the line on annual fees (Sam’s Club/WMT is raising them on 10/17/22 but seems to be renewing early at the current rates).
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.
13th , 14th & 15th rate hikes, FOMC 11/2/22+ (75 bps hike possible)
16th & 17th rate hike, FOMC 12/14/22+ (75 bps hike possible) (rate 4.25-4.50%)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -4.00%, SP500 -4.65%, Nasdaq Comp -5.07%, R2000 -6.60%. DJ Transports -5.43%; DJ Utilities -3.39%. (Rotating spot ST Treasury SHY -0.55%) US$ index (spot) +2.97% (HUGE move), oil/WTI futures -7.47% (big move), gold futures -1.58% (not bad but the decline has been persistent).
YTD (index changes only), DJIA -18.57%, SP500 -22.51%, Nasdaq Comp -30.53%. (Rotating spot ST Treasury SHY -5.05%)
Pg 44: NYSE cumulative (5-day) A/D line fell to 2-yr low; ratio of winners:losers 1:8. (Friday was 91% down-volume day)
NOTE. For your foreign and EM funds, keep in mind that about -3% penalty this week may be just from the strong dollar effect. There are now global concerns about dollar strength.
Pg 35, EUROPE. Scotland/UK power producer and wholesale distributor SSE (SSEZY; fwd P/E 14) is “green”/ESG as well as inflation-proof due to its focus on renewable energy (bulk from wind and hydro, rest from conventional fossil fuels). The UK has a cap on retail energy prices but wholesale prices can fluctuate widely; SSE sold its retail energy business in 2018. One worry was the windfall tax on profits, but the new PM TRUSS has ruled that out.
Pg 35, EMERGING MAARKETS. BRAZILIAN stocks are strong (after an awful 2021; seem to me in a huge trading range) ahead of its presidential elections on October 2 (Round 1) between the incumbent BOLSONARO and challenger LULA da SILVA (a former president). The economy is stronger; the central bank tightening may be behind (rates moved from 2% to 13.75% already); debt is growing and now 90% of GDP.
Pg 36, OPTIONS. Good time to hedge (with puts and put-spread-collars) is ahead of a decline, as was recommended in August. But what now? Near-options are very expensive, but far-options are reasonable. So, a new put-spread-collar is recommended. (Put-spread-collar involves selling 1 OTM call, buying 1 OTM put, selling 1 far-OTM put)
(SP500 VIX 29.92 (high), Nasdaq 100 VXN 34.88 (high), options SKEW 118.99 (not high), bond MOVE 137.28 (high) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 37, COMMODITIES. EUROPE has sufficient NATURAL GAS in storage (86% full) for Winter There has also been some demand destruction due to high prices and monetary tightening by the ECB (and other central banks globally). This has led to a selloff in natural gas despite Russian shut off of gas flows through the Nord Stream 1 pipeline. The US natural gas market has other drivers including the limitations of the LNG infrastructure for export. But high volatility will remain and this decline in prices may only be temporary. Longer-term beneficiaries will be LNG producers and exporters (LNG, TRGP, etc).
Pg 50: An ugly week in EUROPE (UK -3.23%, Norway -5.56%) and a bad week in ASIA (Indonesia +0.38%, China -4.83%).
TREASURY* 3-mo yield 3.24%, 1-yr 4.15%, 2-yr 4.20%, 5-yr 3.96%, 10-yr 3.69%, 30-yr 3.61%. REAL yields 5-yr 1.58%, 10-yr 1.32%, 30-yr 1.38%.
DOLLAR rose sharply to 20-yr high, ^DXY 113.02, +3% (HUGE move; pg 58). GOLD fell to $1,644, -1.3% (Handy & Harman spot, Thursday) (pg 60); the gold-miners fell sharply. (^XAU was at 93.81, -5.96% 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 & November 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, ”What’s Next for Healthcare”. Roundtable panel included Jorge CONDE (Andreessen Horowitz), Ann GALLO (Wellington Management), Neal KAUFMAN (Baron Capital BHCFX), Chris SCHOTT (JPM).
Big issues/trends include innovation (AI/machine-learning/cloud-computing, biotech, pharma, medical technology, platform-based drug technologies, Covid revealed new possibilities and cracks); costs of healthcare (R&D, delivery, inflation and pricing power); digitalization (R&D, medical records); healthcare delivery and utilization (capacity constraints, entry of “outsiders” such as AMZN, AAPL, etc); patent cycles; organic growth vs M&A vs partnerships; startups/early-stage companies (private and public capital, venture-capital, sovereign-wealth funds); impacts of the Inflation Reduction Act 2022 (Medicare Part D reforms, price-increase-caps, selective drug price negotiations – for new drugs and big drugs); limited impact of interest rate hikes (mostly on general valuations).
Mentioned are biotechs (HZNP, ABBV, RPRX, VERV, NTLA, ICLR), genetics (Ultima Genomics, Dyno Therapeutics), big pharma (LLY, ABBV, TECH, TMO), healthcare providers (UNH, HUM, Bayesian Health, EQRX, Komodo Health, Devoted Health), medical devices (BSX, MDT, BDX, EW, ABMD, PODD, INSP, TNDM), ILMN (multicancer blood screening, Grail acquisition, regulatory issues).
Pg 6, UP & DOWN WALL STREET. Unusually, both STOCKS and BONDS have sold off; this BOND CRASH may be similar only to those in 1931 and 1949. Real rates (TIPS yields) are positive and rising. Yearend fed fund rate may be 4.25-4.50%. Techs and private equity are in slump. DOLLAR is very strong (20-yr high) and is causing global stress. Chances of some credit event or crash are rising. Earnings estimates are being cut; some say that there would soon be earnings recession due to PPI > CPI. The yearend SP500 targets are being slashed – GS is at 3,600 from previous 4,300; some bears’ target of 3,000 is not out of the question.
FED’s rapid rate hikes from ZIRP to 3.00-3.25% now (on the way to 4.25-4.50% by the yearend) are bad for everybody. This after Fed’s pretense of transitory INFLATION far too long last year. POWELL also would like to see REAL RATES positive across the maturity spectrum (there was some vagueness on which real rates? TIPS yields or nominal vs core PCE projections); financial conditions will tighten; economic GROWTH below trend would be tolerated, and so will some rise in the UNEMPLOYMENT RATE; he didn’t like to forecast RECESSION but its probabilities over soft landing have gone up. The Fed was behind the curve last year but has not only caught up now but may be ahead of the curve. The SP500 barely held above its mid-June low (but DJIA and DJ Transports were below).
Pg 9, STREETWISE. We are approaching just the NORMAL: Higher rates, lower stocks. How long now that you haven’t heard of cryptos, NFTs, etc? Investors are looking again at old stuff like Treasuries, bonds, dividend-stocks, old economy cyclicals, hybrid funds. Fed funds are headed to 4.25-4.50% THIS year and 4.50-4.75% NEXT year; their long-term average is 4.6%. High 30-yr mortgage rates of around 6.5% now are just approaching their long-term average of 7.8%. Rates can overshoot too. (The message is that the recent years were abnormal, and weren’t the new normal, and now we are going back to the true normal, or reality).
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
MERGER ARBITRAGEURS were encouraged by a federal judge’s ruling against the DOJ related to UNH-CHNG (announced 01/2021, the DOJ filed suit 02/2022). Several M&A deals are pending: MSFT-ATVI, AVGO-VWM, JBLU-SAVE, BRK-Y, Musk-TWTR, INTC-TSEM, ICE-BKI, TD-FHN, AMZN-IRBT, AMZN-ONEM, etc. There are several M&A funds, ARBFX, MERFX, BALPX; ETF ARB.
Costco (COST; fwd P/E 34) slipped on OK earnings. Buy on weakness. Membership trends are strong, and it is holding the line on annual fees (Sam’s Club/WMT is raising them on 10/17/22 but seems to be renewing early at the current rates).
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.
13th , 14th & 15th rate hikes, FOMC 11/2/22+ (75 bps hike possible)
16th & 17th rate hike, FOMC 12/14/22+ (75 bps hike possible) (rate 4.25-4.50%)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -4.00%, SP500 -4.65%, Nasdaq Comp -5.07%, R2000 -6.60%. DJ Transports -5.43%; DJ Utilities -3.39%. (Rotating spot ST Treasury SHY -0.55%) US$ index (spot) +2.97% (HUGE move), oil/WTI futures -7.47% (big move), gold futures -1.58% (not bad but the decline has been persistent).
YTD (index changes only), DJIA -18.57%, SP500 -22.51%, Nasdaq Comp -30.53%. (Rotating spot ST Treasury SHY -5.05%)
Pg 44: NYSE cumulative (5-day) A/D line fell to 2-yr low; ratio of winners:losers 1:8. (Friday was 91% down-volume day)
NOTE. For your foreign and EM funds, keep in mind that about -3% penalty this week may be just from the strong dollar effect. There are now global concerns about dollar strength.
Pg 35, EUROPE. Scotland/UK power producer and wholesale distributor SSE (SSEZY; fwd P/E 14) is “green”/ESG as well as inflation-proof due to its focus on renewable energy (bulk from wind and hydro, rest from conventional fossil fuels). The UK has a cap on retail energy prices but wholesale prices can fluctuate widely; SSE sold its retail energy business in 2018. One worry was the windfall tax on profits, but the new PM TRUSS has ruled that out.
Pg 35, EMERGING MAARKETS. BRAZILIAN stocks are strong (after an awful 2021; seem to me in a huge trading range) ahead of its presidential elections on October 2 (Round 1) between the incumbent BOLSONARO and challenger LULA da SILVA (a former president). The economy is stronger; the central bank tightening may be behind (rates moved from 2% to 13.75% already); debt is growing and now 90% of GDP.
Pg 36, OPTIONS. Good time to hedge (with puts and put-spread-collars) is ahead of a decline, as was recommended in August. But what now? Near-options are very expensive, but far-options are reasonable. So, a new put-spread-collar is recommended. (Put-spread-collar involves selling 1 OTM call, buying 1 OTM put, selling 1 far-OTM put)
(SP500 VIX 29.92 (high), Nasdaq 100 VXN 34.88 (high), options SKEW 118.99 (not high), bond MOVE 137.28 (high) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 37, COMMODITIES. EUROPE has sufficient NATURAL GAS in storage (86% full) for Winter There has also been some demand destruction due to high prices and monetary tightening by the ECB (and other central banks globally). This has led to a selloff in natural gas despite Russian shut off of gas flows through the Nord Stream 1 pipeline. The US natural gas market has other drivers including the limitations of the LNG infrastructure for export. But high volatility will remain and this decline in prices may only be temporary. Longer-term beneficiaries will be LNG producers and exporters (LNG, TRGP, etc).
Pg 50: An ugly week in EUROPE (UK -3.23%, Norway -5.56%) and a bad week in ASIA (Indonesia +0.38%, China -4.83%).
TREASURY* 3-mo yield 3.24%, 1-yr 4.15%, 2-yr 4.20%, 5-yr 3.96%, 10-yr 3.69%, 30-yr 3.61%. REAL yields 5-yr 1.58%, 10-yr 1.32%, 30-yr 1.38%.
DOLLAR rose sharply to 20-yr high, ^DXY 113.02, +3% (HUGE move; pg 58). GOLD fell to $1,644, -1.3% (Handy & Harman spot, Thursday) (pg 60); the gold-miners fell sharply. (^XAU was at 93.81, -5.96% 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 & November 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, ”What’s Next for Healthcare”. Roundtable panel included Jorge CONDE (Andreessen Horowitz), Ann GALLO (Wellington Management), Neal KAUFMAN (Baron Capital BHCFX), Chris SCHOTT (JPM).
Big issues/trends include innovation (AI/machine-learning/cloud-computing, biotech, pharma, medical technology, platform-based drug technologies, Covid revealed new possibilities and cracks); costs of healthcare (R&D, delivery, inflation and pricing power); digitalization (R&D, medical records); healthcare delivery and utilization (capacity constraints, entry of “outsiders” such as AMZN, AAPL, etc); patent cycles; organic growth vs M&A vs partnerships; startups/early-stage companies (private and public capital, venture-capital, sovereign-wealth funds); impacts of the Inflation Reduction Act 2022 (Medicare Part D reforms, price-increase-caps, selective drug price negotiations – for new drugs and big drugs); limited impact of interest rate hikes (mostly on general valuations).
Mentioned are biotechs (HZNP, ABBV, RPRX, VERV, NTLA, ICLR), genetics (Ultima Genomics, Dyno Therapeutics), big pharma (LLY, ABBV, TECH, TMO), healthcare providers (UNH, HUM, Bayesian Health, EQRX, Komodo Health, Devoted Health), medical devices (BSX, MDT, BDX, EW, ABMD, PODD, INSP, TNDM), ILMN (multicancer blood screening, Grail acquisition, regulatory issues).
Pg 6, UP & DOWN WALL STREET. Unusually, both STOCKS and BONDS have sold off; this BOND CRASH may be similar only to those in 1931 and 1949. Real rates (TIPS yields) are positive and rising. Yearend fed fund rate may be 4.25-4.50%. Techs and private equity are in slump. DOLLAR is very strong (20-yr high) and is causing global stress. Chances of some credit event or crash are rising. Earnings estimates are being cut; some say that there would soon be earnings recession due to PPI > CPI. The yearend SP500 targets are being slashed – GS is at 3,600 from previous 4,300; some bears’ target of 3,000 is not out of the question.
FED’s rapid rate hikes from ZIRP to 3.00-3.25% now (on the way to 4.25-4.50% by the yearend) are bad for everybody. This after Fed’s pretense of transitory INFLATION far too long last year. POWELL also would like to see REAL RATES positive across the maturity spectrum (there was some vagueness on which real rates? TIPS yields or nominal vs core PCE projections); financial conditions will tighten; economic GROWTH below trend would be tolerated, and so will some rise in the UNEMPLOYMENT RATE; he didn’t like to forecast RECESSION but its probabilities over soft landing have gone up. The Fed was behind the curve last year but has not only caught up now but may be ahead of the curve. The SP500 barely held above its mid-June low (but DJIA and DJ Transports were below).
Pg 9, STREETWISE. We are approaching just the NORMAL: Higher rates, lower stocks. How long now that you haven’t heard of cryptos, NFTs, etc? Investors are looking again at old stuff like Treasuries, bonds, dividend-stocks, old economy cyclicals, hybrid funds. Fed funds are headed to 4.25-4.50% THIS year and 4.50-4.75% NEXT year; their long-term average is 4.6%. High 30-yr mortgage rates of around 6.5% now are just approaching their long-term average of 7.8%. Rates can overshoot too. (The message is that the recent years were abnormal, and weren’t the new normal, and now we are going back to the true normal, or reality).
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).