Post by Admin/YBB on Oct 8, 2022 5:36:12 GMT -6
Pg 28, TRADER. In stock market vs the FED, the score was 0-1; hawkish Fed comments and strong jobs report were the main causes. The earlier (short covering) rebound was neutralized later in the week. It was an UP week but didn’t feel like one. Investors increased CASH holdings as there were OUTFLOWS from stock and bond funds. Q3 EARNINGS SEASON starts on Friday.
In taxable accounts, consider tax-loss harvesting (TLH). Institutional TLH is mostly in October (funds are allowed to close their books for the year on October 31 to publish yearend CG distribution estimates in November/December; retail TLH is mostly in December (some procrastinators will wait until Friday, 12/30/22, the last trading day of the year that is a normal market day). Beware of wash-sale rules (+/- 30-day window from the trade date) (For double-up strategy, the last day to double-up is Tuesday, 11/29/22; then sell the older lot on 12/30/22). Stocks with large YTD losses may remain under pressure in Q4: NFLX, META, TGT, EBAY, ALGN, ELAN, MMM, BA, NVDA, AMD, EMN, BERY, DPZ, DIS, CZR.
Selloff in BANK stocks has made several regional banks attractive. Banks are in stronger financial shape due to Fed stress-tests and should weather mild recession. Mentioned are CFG, FITB, HBAN, MTB.
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+ (50 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 +1.99%, SP500 +1.51%, Nasdaq Comp +0.73%, R2000 +2.25%. DJ Transports +3.48%; DJ Utilities -2.82%. (Rotating spot energy XLE +13.58%) US$ index (spot) +0.60%, oil/WTI futures +16.54%, gold futures +2.29%.
YTD (index changes only), DJIA -19.38%, SP500 -23.64%, Nasdaq Comp -31.91%. (Rotating spot energy XLE +47.39%)
Pg 40: NYSE cumulative (5-day) A/D line fell for the 4th week; ratio of winners:losers 3:2. (Monday barely missed being 90% UP-volume day with 89%; Tuesday was 95% UP-volume day; Friday was 90.3% DOWN-volume day; looks like VOLUME signals are fighting each other)
Pg 31, EUROPE. The UK HOMEBUILDERS have been crushed (PSMMY, BTDPY, TWODY); for their US investors, also deduct gains in dollar. But they are now attractive – high dividends, low P/Es (note profitability).
Pg 31, EMERGING MARKETS. In BRAZIL, victory by Lula De SILVA in October 30 presidential runoff elections (over incumbent Jair BOLSONARO) will benefit Amazon RAINFORESTS. Several countries and institutions have promised support for rainforests. Trade agreement with the EU (and Mercosur countries – Southern Common Market) will also help.
Pg 32, OPTIONS. Retirees following BENGEN’s 4% initial withdrawals with annual COLA are having serious trouble with 60-40 portfolios in 2022 (their worst year ever). Newer studies recommending only 1.9% initial withdrawals with COLA may be too late for them. Options are games of hitting singles and doubles, not homeruns. Recommended are writing covered calls and selling puts on blue-chips you want to own.
(SP500 VIX 31.36 (high), Nasdaq 100 VXN 36.86 (high), options SKEW 121.81, bond MOVE 148.46 (high) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 33, COMMODITIES. INDUSTRIAL commodities including IRON-ORE and STEEL have weakened as global economies slowdown (European recession; China Covid lockdowns; the US headed into recession); only natural gas has been an exception. There may be opportunities down the road.
Pg 45: An up week in EUROPE (Greece +3.63%; Norway +2.79%, Belgium -0.48%) and a good week in ASIA (Australia +4.63%, Thailand -o.79%).
TREASURY* 3-mo yield 3.45%, 1-yr 4.24%, 2-yr 4.30%, 5-yr 4.14%, 10-yr 3.89%, 30-yr 3.86%. REAL yields 5-yr 1.78%, 10-yr 1.62%, 30-yr 1.73%.
DOLLAR rose, ^DXY 112.75, +0.6% (pg 50). GOLD rose to $1,696, +1.5% (Handy & Harman spot, Thursday) (pg 52); the gold-miners rose. (^XAU was at 103.31, +2.38% 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 (EARLY estimates in the media will be available on THURSDAY NEXT WEEK).
*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 18: COVER STORY, ”The US DOLLAR is Superstrong. 8 Ways to Invest Abroad”. Dollar is near multidecade high (DXY +17% YTD; +11% only on trade-weighted basis). Foreign holdings of the US investors are hurt by dollar’s strength; in some cases, think of double DISCOUNTS from the depressed foreign markets and currencies.
Funds: VAESX; EWJ, VGK, SPEM.
Multinationals: PM, QCOM, BKNG, CAT, XOM, ABT, META, NFLX, GOOGL, C; some stocks on foreign exchanges are also mentioned.
Pg 7, UP & DOWN WALL STREET. The JOBS report was strong, OIL prices rose (OPEC production cuts; energy XLE +13.6%), DOLLAR remained strong, chances of some FINANCIAL ACCIDENT in the US or elsewhere are rising. But the FED remains hawkish. The dead-cat bounce early in the week turned into a rout and major indexes closed near their lows for 2022. The CME FedWatch is projecting 75 and 50 bps hikes at November and December FOMC meetings, respectively. The next CPI may be +8.1%, core +6.5%. Q3 EARNINGS SEASON starts on Friday.
MORTGAGE market, not the FED, will lead INFLATION down. The 30-yr mortgage rates are near 7%; the mortgage SPREADS over 10-yr Treasuries have widened to 2008 and 2020 levels. Home buyers and re-fi-ers are facing 80% higher payments vs a year ago. Housing prices have cooled. Homebuilders have been hit (ITB, XHB). Bond volatility MOVE is high (the originator Harley BASSMAN is quoted). Although housing is 42% of CPI, it affects the CPI only indirectly via OERs (owners’ equivalent rents) and those are rising with some lag. Before the Fed flips, the CPI needs to be 4.xx% and the PCE 2.xx%. The Fed will also have some flexibility in that the QT of -$95 billion/mo (-$60 billion/mo Treasuries, -$35 billion/mo MBS) are max/caps, not targets/averages, and the Fed may go slow on the MBS part of QT and avoid selling MBS.
Pg 11, STREETWISE. The NEW CAR payments are up +8% vs last year due to higher car prices and interest rates; some car payments now look and feel more like apartment rents. Car INVENTORIES have risen to 33 days (vs 20 days a year ago). But don’t expect deals and incentives; only the premiums over the MSRP for most brands have disappeared. DEMAND is high and SUPPLY is just catching up. Auto makers and dealers have gotten used to higher profits with higher prices and lower volumes. Seasonally adjusted annual rate (SAAR) is now 12.0-13.5 million (vs 17 million pre-pandemic). With future transitions expected from ICEs to EVs, the LEASE payments are up due to lower assumed residual values; leases are now only 17% of sales (vs 30% pre-pandemic). The best strategy to buy a new car is to just wait (if you can). The auto-part/system stocks (LEA, APTV, MG) may be better than the auto manufacturer stocks (GM, F).
Supplement FUNDS QUARTERLY will be posted separately.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
In taxable accounts, consider tax-loss harvesting (TLH). Institutional TLH is mostly in October (funds are allowed to close their books for the year on October 31 to publish yearend CG distribution estimates in November/December; retail TLH is mostly in December (some procrastinators will wait until Friday, 12/30/22, the last trading day of the year that is a normal market day). Beware of wash-sale rules (+/- 30-day window from the trade date) (For double-up strategy, the last day to double-up is Tuesday, 11/29/22; then sell the older lot on 12/30/22). Stocks with large YTD losses may remain under pressure in Q4: NFLX, META, TGT, EBAY, ALGN, ELAN, MMM, BA, NVDA, AMD, EMN, BERY, DPZ, DIS, CZR.
Selloff in BANK stocks has made several regional banks attractive. Banks are in stronger financial shape due to Fed stress-tests and should weather mild recession. Mentioned are CFG, FITB, HBAN, MTB.
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+ (50 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 +1.99%, SP500 +1.51%, Nasdaq Comp +0.73%, R2000 +2.25%. DJ Transports +3.48%; DJ Utilities -2.82%. (Rotating spot energy XLE +13.58%) US$ index (spot) +0.60%, oil/WTI futures +16.54%, gold futures +2.29%.
YTD (index changes only), DJIA -19.38%, SP500 -23.64%, Nasdaq Comp -31.91%. (Rotating spot energy XLE +47.39%)
Pg 40: NYSE cumulative (5-day) A/D line fell for the 4th week; ratio of winners:losers 3:2. (Monday barely missed being 90% UP-volume day with 89%; Tuesday was 95% UP-volume day; Friday was 90.3% DOWN-volume day; looks like VOLUME signals are fighting each other)
Pg 31, EUROPE. The UK HOMEBUILDERS have been crushed (PSMMY, BTDPY, TWODY); for their US investors, also deduct gains in dollar. But they are now attractive – high dividends, low P/Es (note profitability).
Pg 31, EMERGING MARKETS. In BRAZIL, victory by Lula De SILVA in October 30 presidential runoff elections (over incumbent Jair BOLSONARO) will benefit Amazon RAINFORESTS. Several countries and institutions have promised support for rainforests. Trade agreement with the EU (and Mercosur countries – Southern Common Market) will also help.
Pg 32, OPTIONS. Retirees following BENGEN’s 4% initial withdrawals with annual COLA are having serious trouble with 60-40 portfolios in 2022 (their worst year ever). Newer studies recommending only 1.9% initial withdrawals with COLA may be too late for them. Options are games of hitting singles and doubles, not homeruns. Recommended are writing covered calls and selling puts on blue-chips you want to own.
(SP500 VIX 31.36 (high), Nasdaq 100 VXN 36.86 (high), options SKEW 121.81, bond MOVE 148.46 (high) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 33, COMMODITIES. INDUSTRIAL commodities including IRON-ORE and STEEL have weakened as global economies slowdown (European recession; China Covid lockdowns; the US headed into recession); only natural gas has been an exception. There may be opportunities down the road.
Pg 45: An up week in EUROPE (Greece +3.63%; Norway +2.79%, Belgium -0.48%) and a good week in ASIA (Australia +4.63%, Thailand -o.79%).
TREASURY* 3-mo yield 3.45%, 1-yr 4.24%, 2-yr 4.30%, 5-yr 4.14%, 10-yr 3.89%, 30-yr 3.86%. REAL yields 5-yr 1.78%, 10-yr 1.62%, 30-yr 1.73%.
DOLLAR rose, ^DXY 112.75, +0.6% (pg 50). GOLD rose to $1,696, +1.5% (Handy & Harman spot, Thursday) (pg 52); the gold-miners rose. (^XAU was at 103.31, +2.38% 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 (EARLY estimates in the media will be available on THURSDAY NEXT WEEK).
*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 18: COVER STORY, ”The US DOLLAR is Superstrong. 8 Ways to Invest Abroad”. Dollar is near multidecade high (DXY +17% YTD; +11% only on trade-weighted basis). Foreign holdings of the US investors are hurt by dollar’s strength; in some cases, think of double DISCOUNTS from the depressed foreign markets and currencies.
Funds: VAESX; EWJ, VGK, SPEM.
Multinationals: PM, QCOM, BKNG, CAT, XOM, ABT, META, NFLX, GOOGL, C; some stocks on foreign exchanges are also mentioned.
Pg 7, UP & DOWN WALL STREET. The JOBS report was strong, OIL prices rose (OPEC production cuts; energy XLE +13.6%), DOLLAR remained strong, chances of some FINANCIAL ACCIDENT in the US or elsewhere are rising. But the FED remains hawkish. The dead-cat bounce early in the week turned into a rout and major indexes closed near their lows for 2022. The CME FedWatch is projecting 75 and 50 bps hikes at November and December FOMC meetings, respectively. The next CPI may be +8.1%, core +6.5%. Q3 EARNINGS SEASON starts on Friday.
MORTGAGE market, not the FED, will lead INFLATION down. The 30-yr mortgage rates are near 7%; the mortgage SPREADS over 10-yr Treasuries have widened to 2008 and 2020 levels. Home buyers and re-fi-ers are facing 80% higher payments vs a year ago. Housing prices have cooled. Homebuilders have been hit (ITB, XHB). Bond volatility MOVE is high (the originator Harley BASSMAN is quoted). Although housing is 42% of CPI, it affects the CPI only indirectly via OERs (owners’ equivalent rents) and those are rising with some lag. Before the Fed flips, the CPI needs to be 4.xx% and the PCE 2.xx%. The Fed will also have some flexibility in that the QT of -$95 billion/mo (-$60 billion/mo Treasuries, -$35 billion/mo MBS) are max/caps, not targets/averages, and the Fed may go slow on the MBS part of QT and avoid selling MBS.
Pg 11, STREETWISE. The NEW CAR payments are up +8% vs last year due to higher car prices and interest rates; some car payments now look and feel more like apartment rents. Car INVENTORIES have risen to 33 days (vs 20 days a year ago). But don’t expect deals and incentives; only the premiums over the MSRP for most brands have disappeared. DEMAND is high and SUPPLY is just catching up. Auto makers and dealers have gotten used to higher profits with higher prices and lower volumes. Seasonally adjusted annual rate (SAAR) is now 12.0-13.5 million (vs 17 million pre-pandemic). With future transitions expected from ICEs to EVs, the LEASE payments are up due to lower assumed residual values; leases are now only 17% of sales (vs 30% pre-pandemic). The best strategy to buy a new car is to just wait (if you can). The auto-part/system stocks (LEA, APTV, MG) may be better than the auto manufacturer stocks (GM, F).
Supplement FUNDS QUARTERLY will be posted separately.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).