Post by Admin/YBB on Nov 5, 2022 5:35:41 GMT -6
Pg 27, TRADER. The FED will keep tightening until inflation, labor and/or the market break. Higher-for-longer is the new message. The fed fund rate has moved from near zero to 4% THIS year, with another 50-75 bps hike expected at the December FOMC. The actual rate effects may be higher due to the QT and tighter financial conditions. The JOBS report was strong, and the next CPI report may show persistent inflation. But POWELL said in his presser that overtightening is more desirable than under-tightening (because the Fed can deal with the consequences of overtightening). Stick with stocks with strong fundamentals and momentum (ETF MTUM).
Post-ELECTIONS, a divided CONGRESS (e.g. Republican House, Democratic Senate, with outcome unclear for days/weeks) may not be good this time. Growing political divisions may interfere with the basic functioning of the government (debt-ceiling in 2023, fiscal relief if recession strikes, etc). We have seen how political uncertainties played out in Brazil, the UK, China. At least a low testing by the US markets is possible. The fear gauge VIX is high (SP500 %daily moves +/- VIX/19) but not near crisis levels – that could change quickly.
Gym-based Planet Fitness/PLNT is benefitting from the troubles of at-home-fitness Peloton/PTON (lower revenues, losses, falling subscribers). However, PLNT also faces issues of supply-chain disruptions (lack of HVAC equipment to maintain/develop its facilities and other supply issues) and high debt.
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.
16th & 17th rate hikes, 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 -1.40%, SP500 -3.35%, Nasdaq Comp -5.65%, R2000 -2.55%. DJ Transports -0.74%; DJ Utilities -0.89%. (Rotating spot momentum MTUM -1.57%) US$ index (spot) +0.03%, oil/WTI futures +5.36%, gold futures +2.00%.
YTD (index changes only), DJIA -10.83%, SP500 -20.89%, Nasdaq Comp -33.04%. (Rotating spot momentum MTUM -19.82%)
Pg 40: NYSE cumulative (5-day) A/D line fell; ratio of winners:losers 1.0:1.1.
Pg 30, EUROPE. The UK is on to its 3rd Prime Minister this year. The tax and budget issues are settling under the new PM Rishi SUNAK. Surprisingly, the UK businesses have weathered the political storm better (publisher PSO, defense BAESY, etc).
Pg 30, EMERGING MARKETS. The BRAZILIAN economy and stocks have done well during the elections leading to a victory by Lula da Silva over the incumbent Jair Bolsonaro. But Lula’s honeymoon may be short as his fiscal and other policies become clear. Rates are very high now and may come down next year.
Pg 31, OPTIONS. NOVEMBER 29 (Tuesday) is the last day this year to DOUBLE-UP for tax-loss harvesting (TLH) this year. The doubling up can be by buying a fallen stock or cheaper options by 11/29/22 and then selling the older lot(s) by DECEMBER 30 (Friday), the last trading day of this year. AXP is used as an example. (Alternate is to immediately swap into something similar but not identical) (Tax-losses for individuals don’t expire and can be carried forward for years to offset future gains and up to $3K/yr in ordinary income)
(SP500 VIX 24.55 (high), Nasdaq 100 VXN 30.86 (high), options SKEW 111.62, bond MOVE 128.44 (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 32, COMMODITIES. There is global shortage of DIESEL (and heating oil, jet fuel, kerosene); inventories are low, critically low in the US Northeast where heating oil or diesel is also used for home heating. Diesel is the primary fuel for commercial TRANSPORTATION and AGRICULTURE. Diesel prices are at an equivalent of $150-200/bbl of crude oil; this even as actual crude oil and gasoline prices have come down. (Crude oil DISTILLATION produces a mix of gasoline, diesel and other distillates that can be adjusted only to a limited extent; in normal times, much of the US diesel is exported).
Pg 45: A down week in EUROPE (Denmark +2.39%, Netherlands -1.97%) and a good week in ASIA (China +4.20%, Malaysia -1.75%).
TREASURY* 3-mo yield 4.21%, 1-yr 4.76%, 2-yr 4.66%, 5-yr 4.33%, 10-yr 4.17%, 30-yr 4.27%. REAL yields 5-yr 1.72%, 10-yr 1.69%, 30-yr 1.77%.
DOLLAR was flat (but very volatile during the week, 110.72-113.10), ^DXY 110.79 (pg 50). GOLD rose to $1,674, +1.6% (record buying by central banks) (Handy & Harman spot, Thursday; pg 52); the gold-miners were up. (^XAU was at 106.30, +1.35% for the week)
Top FDIC insured savings deposit rates** (This feature has been discontinued)
US SAVINGS I-Bonds^, current rate 6.89% (annualized); fixed/base rate +0.40%. 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/marketable-securities/
(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, ”Twitter is Elon MUSK’s Biggest Test – and Tesla’s Biggest Challenge. How They’ll Make it Work”. Musk owns Twitter for $44 billion (but it may be valued at $17.6 billion only; Musk’s stake $10 billion) that includes lot of debt. Now he is furiously cutting costs via mass layoffs (50-90% globally) and trying to raise revenues by selling Twitter authentications at $8/mo. Musk is not a delegator, but he does have competent people in place at his other companies, Tesla/TSLA ($780/160 billion; the 1st figure is company valuation, the 2nd figure is Musk’s stake), SpaceX ($125/47 billion), The Boring Co ($6/4.8 billion), Nuralink ($1/0.67 billion). These may run without much attention from Musk who is suddenly very busy with Twitter. His personality is unpredictable and there is a touch of mystery, but that may be changing as he engages with anybody and everybody in the social-media (of course, via Twitter). This may also have negative impact on Tesla (that doesn’t spend much on advertising) although so far, the chaos is limited to companies who have suspended advertising on Twitter.
Pg 19: Another feature is by HOUGH (the columnist for Streetwise, but this piece isn’t labeled as such) that asks whether MUSK is a pioneer or poseur? Genius or jackass? Savior or threat? His Twitter/social-media personality is still emerging surprising many among his 114+ million followers. He paid $44 billion for Twitter that may be valued less than half as much (he tried to get out of the deal but couldn’t), has annual revenues of only $5 billion and losses (est $4 million/day); there is little growth. Several companies have suspended ads on Twitter as they evaluate the new Twitter. Musk’s ambition is to turn Twitter into a super-app one day.
Pg 7, UP & DOWN WALL STREET. Only a RECESSION or high UNEMPLOYMENT RATE may change the tightening course of the FED. POWELL’s comments at his presser were harsher than the FOMC Statement. The fed fund futures market projects a cycle PEAK of 5.00-5.25% in 2023. If inflation persists despite rising rate, but unemployment rate rises uncomfortably, the Fed may change its +2% average target to +3% (or +4%) temporarily and declare a pause.
High MORTGAGE rates of 7%+ are hurting homebuyers as housing AFFORDABILITY has been negatively impacted. RE-FIs and prepayments are down. Bond market volatility (^MOVE) is high. The yield-curve is partially INVERTED. The QT of -$95 billion/mo includes -$35 billion/mo in MBS that may require the FED to sell off some if its MBS holdings. Selloff in the bond market and rate sensitive securities has made MBS (agency, nonagency), mREITs (AGNC, NLY; preferreds NLY-I, AGNCO) and REITs attractive. (Beware of chasing high yields)
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
Post-ELECTIONS, a divided CONGRESS (e.g. Republican House, Democratic Senate, with outcome unclear for days/weeks) may not be good this time. Growing political divisions may interfere with the basic functioning of the government (debt-ceiling in 2023, fiscal relief if recession strikes, etc). We have seen how political uncertainties played out in Brazil, the UK, China. At least a low testing by the US markets is possible. The fear gauge VIX is high (SP500 %daily moves +/- VIX/19) but not near crisis levels – that could change quickly.
Gym-based Planet Fitness/PLNT is benefitting from the troubles of at-home-fitness Peloton/PTON (lower revenues, losses, falling subscribers). However, PLNT also faces issues of supply-chain disruptions (lack of HVAC equipment to maintain/develop its facilities and other supply issues) and high debt.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
16th & 17th rate hikes, FOMC 12/14/22+ (50 bps hike possible) (rate 4.25-4.50%)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -1.40%, SP500 -3.35%, Nasdaq Comp -5.65%, R2000 -2.55%. DJ Transports -0.74%; DJ Utilities -0.89%. (Rotating spot momentum MTUM -1.57%) US$ index (spot) +0.03%, oil/WTI futures +5.36%, gold futures +2.00%.
YTD (index changes only), DJIA -10.83%, SP500 -20.89%, Nasdaq Comp -33.04%. (Rotating spot momentum MTUM -19.82%)
Pg 40: NYSE cumulative (5-day) A/D line fell; ratio of winners:losers 1.0:1.1.
Pg 30, EUROPE. The UK is on to its 3rd Prime Minister this year. The tax and budget issues are settling under the new PM Rishi SUNAK. Surprisingly, the UK businesses have weathered the political storm better (publisher PSO, defense BAESY, etc).
Pg 30, EMERGING MARKETS. The BRAZILIAN economy and stocks have done well during the elections leading to a victory by Lula da Silva over the incumbent Jair Bolsonaro. But Lula’s honeymoon may be short as his fiscal and other policies become clear. Rates are very high now and may come down next year.
Pg 31, OPTIONS. NOVEMBER 29 (Tuesday) is the last day this year to DOUBLE-UP for tax-loss harvesting (TLH) this year. The doubling up can be by buying a fallen stock or cheaper options by 11/29/22 and then selling the older lot(s) by DECEMBER 30 (Friday), the last trading day of this year. AXP is used as an example. (Alternate is to immediately swap into something similar but not identical) (Tax-losses for individuals don’t expire and can be carried forward for years to offset future gains and up to $3K/yr in ordinary income)
(SP500 VIX 24.55 (high), Nasdaq 100 VXN 30.86 (high), options SKEW 111.62, bond MOVE 128.44 (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 32, COMMODITIES. There is global shortage of DIESEL (and heating oil, jet fuel, kerosene); inventories are low, critically low in the US Northeast where heating oil or diesel is also used for home heating. Diesel is the primary fuel for commercial TRANSPORTATION and AGRICULTURE. Diesel prices are at an equivalent of $150-200/bbl of crude oil; this even as actual crude oil and gasoline prices have come down. (Crude oil DISTILLATION produces a mix of gasoline, diesel and other distillates that can be adjusted only to a limited extent; in normal times, much of the US diesel is exported).
Pg 45: A down week in EUROPE (Denmark +2.39%, Netherlands -1.97%) and a good week in ASIA (China +4.20%, Malaysia -1.75%).
TREASURY* 3-mo yield 4.21%, 1-yr 4.76%, 2-yr 4.66%, 5-yr 4.33%, 10-yr 4.17%, 30-yr 4.27%. REAL yields 5-yr 1.72%, 10-yr 1.69%, 30-yr 1.77%.
DOLLAR was flat (but very volatile during the week, 110.72-113.10), ^DXY 110.79 (pg 50). GOLD rose to $1,674, +1.6% (record buying by central banks) (Handy & Harman spot, Thursday; pg 52); the gold-miners were up. (^XAU was at 106.30, +1.35% for the week)
Top FDIC insured savings deposit rates** (This feature has been discontinued)
US SAVINGS I-Bonds^, current rate 6.89% (annualized); fixed/base rate +0.40%. 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/marketable-securities/
(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, ”Twitter is Elon MUSK’s Biggest Test – and Tesla’s Biggest Challenge. How They’ll Make it Work”. Musk owns Twitter for $44 billion (but it may be valued at $17.6 billion only; Musk’s stake $10 billion) that includes lot of debt. Now he is furiously cutting costs via mass layoffs (50-90% globally) and trying to raise revenues by selling Twitter authentications at $8/mo. Musk is not a delegator, but he does have competent people in place at his other companies, Tesla/TSLA ($780/160 billion; the 1st figure is company valuation, the 2nd figure is Musk’s stake), SpaceX ($125/47 billion), The Boring Co ($6/4.8 billion), Nuralink ($1/0.67 billion). These may run without much attention from Musk who is suddenly very busy with Twitter. His personality is unpredictable and there is a touch of mystery, but that may be changing as he engages with anybody and everybody in the social-media (of course, via Twitter). This may also have negative impact on Tesla (that doesn’t spend much on advertising) although so far, the chaos is limited to companies who have suspended advertising on Twitter.
Pg 19: Another feature is by HOUGH (the columnist for Streetwise, but this piece isn’t labeled as such) that asks whether MUSK is a pioneer or poseur? Genius or jackass? Savior or threat? His Twitter/social-media personality is still emerging surprising many among his 114+ million followers. He paid $44 billion for Twitter that may be valued less than half as much (he tried to get out of the deal but couldn’t), has annual revenues of only $5 billion and losses (est $4 million/day); there is little growth. Several companies have suspended ads on Twitter as they evaluate the new Twitter. Musk’s ambition is to turn Twitter into a super-app one day.
Pg 7, UP & DOWN WALL STREET. Only a RECESSION or high UNEMPLOYMENT RATE may change the tightening course of the FED. POWELL’s comments at his presser were harsher than the FOMC Statement. The fed fund futures market projects a cycle PEAK of 5.00-5.25% in 2023. If inflation persists despite rising rate, but unemployment rate rises uncomfortably, the Fed may change its +2% average target to +3% (or +4%) temporarily and declare a pause.
High MORTGAGE rates of 7%+ are hurting homebuyers as housing AFFORDABILITY has been negatively impacted. RE-FIs and prepayments are down. Bond market volatility (^MOVE) is high. The yield-curve is partially INVERTED. The QT of -$95 billion/mo includes -$35 billion/mo in MBS that may require the FED to sell off some if its MBS holdings. Selloff in the bond market and rate sensitive securities has made MBS (agency, nonagency), mREITs (AGNC, NLY; preferreds NLY-I, AGNCO) and REITs attractive. (Beware of chasing high yields)
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).