Post by Admin/YBB on Dec 10, 2022 6:28:15 GMT -6
Pg 35, TRADER. A BAD week. The PPI (wholesale inflation) was hotter than expected. The coming week will be busy with the CPI report (Tuesday) and the FOMC meeting (Tuesday-Wednesday; +50 bps hike; new economic projections). The nervous markets may be volatile.
In 2023, we will still have rate hikes, inflation and a possible recession. These stocks with low net debt/EBITDA (list is in descending order), good operating profits and steady growth may do fine: MCO, PM, ZTS, MA, BLK, LRCX, V, TXN, ODFL, PAYX, MSFT, MKTX, CPRT, MPWR, ANET, SCHW.
Carvana/CVNA sank on bankruptcy rumors that were denied/refuted by the company. Other auto dealers were also hit but look attractive now: KMX (used cars), AN, SAH, LAD, GPI, PAG.
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%) (CPI report on 12/13/22 while the FOMC meets)
Good riddance, 2022
1st & 2nd rate hikes of 2023, FOMC 2/1/23+ 50 bps hike possible
Rest, FOMC 3/22/23+
3rd rate hike, FOMC 5/3/22+ 25 bps (rate 5.00-5.25%; likely cycle peak)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -2.77%, SP500 -3.37%, Nasdaq Comp -3.99%, R2000 -5.08%. DJ Transports -5.22%; DJ Utilities -0.15%. (Rotating spot LT Treasury TLT -0.71%) US$ index (spot) +0.38%, oil/WTI futures -11.20% (it was supposed to go UP!), gold futures +0.12%.
YTD (index changes only), DJIA -7.88%, SP500 -17.45%, Nasdaq Comp -29.66%. (Rotating spot LT Treasury TLT -28.25%)
Pg 48: NYSE cumulative (5-day) A/D line fell; ratio of winners:losers 1:4. (Monday was 93% downside-volume day)
Pg 38, EUROPE. French fashion goods company Hermes International (HESAY; fwd P/E 44.6!) has pricing power over its dedicated fans. China sales are growing.
Pg 38, EMERGING MARKETS. INDONESIA, the largest Muslim country by population (#2 Pakistan, #3 India), has passed strict criminal laws on adultery, insults to state institutions (up to 3 years jail!), etc. President Joko-Wi resisted these a few years ago but now he let them go through with the next elections coming up in 14 months. What about the “pleasure” stuff that goes in its tourist hotspots of Bali (location of 2022 G-20) and elsewhere? Well, adultery can only be reported by spouse, parents or children (so, if no report, no action). E-commerce and fintech companies are scrambling to serve 50% unbanked population; some names, GoTo Gojek Tokopedia, SE, GRAB, Lazada/BABA. Indonesia is a big exporter of nickel and several commodities (palm oil, coal, iron-ore, rubber, etc).
Pg 39, OPTIONS. Strangely, both the hedge-funds (fast-money) and mutual funds (slow-money) have accumulated Wells Fargo/WFC ahead of its earnings on January 13 expecting a turnaround. Recommended is pairing OTM put-selling with OTM call-buying.
(SP500 VIX 22.83 (high), Nasdaq 100 VXN 27.94 (high), options SKEW 119.24, bond MOVE 132.79 (high)) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 40, COMMODITIES. The COAL rally may burn out soon. This dirtiest source of energy (globally 36.5% in 2021; US 21.9%) has benefitted (+100% YTD; thermal coal +241%) from unexpected events in 2022, but the world is slowly and surely moving away from coal and towards the NET-ZERO goals by 2030-70 (varies by countries; also in the news was Vanguard quitting the NZAM/GFANZ). The ETF COMB peaked in June.
Pg 53: A bad week in EUROPE (Greece +0.62%, Denmark -0.95%, Germany -2.31%) and a down week in ASIA (HK +4.55%, Indonesia -4.48%).
TREASURY* 3-mo yield 4.31%, 1-yr 4.72%, 2-yr 4.33%, 5-yr 3.75%, 10-yr 3.57%, 30-yr 3.56%. REAL yields 5-yr 1.45%, 10-yr 1.31%, 30-yr 1.28%.
DOLLAR rose, ^DXY 104.93, +0.4% (pg 58). GOLD rose to $1,796, +0.6% (Handy & Harman spot, Thursday; pg 60); the gold-miners fell. (^XAU was at 119.90, -3.62% 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 18: COVER STORY, ”CVS Wants to be America’s Healthcare Provider. All it Needs Now are Doctors”. CVS (fwd P/E 11.4; buybacks) is pushing well beyond toilet papers, snacks, cold meds, prescriptions. Many CVS stores have older MinuteClinics or newer HealthHUBs. It recently acquired Signify Health/SGFY home healthcare. Medicare recently cut the rating of CVS-owned/run Aetna Medicare Advantage (MA) plans (so, it won’t get performance bonuses from Medicare; Aetna has #4 market share for MAs). Its PBM Caremark lost a big customer Centene/CNC. CVS stores now are in 3 categories: Traditional retail pharmacies, those also providing minor healthcare via MinuteClinics or HealthHUBs, and those providing primary care. It is that last part that CVS is having difficulty with in its ambitions for becoming a vertically integrated healthcare service – it is hampered by the lack of master plan for primary care (Store-based model? Buying medical group practices? Buying hospitals? Other?) and shortage of doctors. CVS was outbid by Amazon/AMZN for 1Life Healthcare/ONEM, and it ended up buying SGFY later. Regulators (DOJ, etc) are also looking into CVS’ expansion into healthcare. Despite execution risks, the stock has potential for patient investors.
Pg 6, UP AND DOWN WALL STREET. The next big thing in AI is being fast, smart and creative. 2 developments from nonprofit OpenAI: Generative AI ChatGPT can generate art, text, poem, music; Dall-E 2 can produce images from word descriptions. SoftBank’s/SFTBY (it has huge problems this year) Vision Fund has made investments in AI.
Remember UNICORNS? Now they are becoming an endangered species. Unicorns are pre-IPO companies with private-market values of $1+ billion. Their number grew globally like wildfire and peaked in 2021, then came the tech implosion and crypto Winter. Private-market values are not marked-to-market regularly and the only gauge for their valuation is the most recent round of financing. Some estimates are that the number of unicorns may have shrunk by 25-75%; some have already passed away and several are unicorn-zombies now. Venture-capitalists (VCs) are talking about profitability or path to profitability, and not cash burns.
Internet infrastructure service provider Rackspace/RXT was hit with RANSOMWARE attack. The situation remains unresolved even after a week and there is no estimate for resolution. Its clients had to quickly switch to alternate platforms. Even though the affected business is a small part of RXT’s total business, the reputational hit caused its stock to sink. Lesson is also not to rely on a single cloud vendor for mission critical services.
Pg 9, STREETWISE. Competition is growing for TikTok-like short-videos from Reels/Instagram/META, YouTube/GOOGL, SNAP, etc. TikTok is owned by Chinese ByteDance but it has promised to keep its US operations distinct using Oracle/ORCL servers/cloud. There are still calls for the US restrictions or ban on TikTok (it is banned in several countries). Several states have banned TikTok from government devices (MD, ND, NE, SC, TX).
Why call an earnings conference call if for 9 minutes without Q&A? Meme stock company GameStop/GME did just that. It had a long journey from videodiscs to online games to NFTs and crypto wallets; it was unlucky in having a “hot” deal with FTX just in September (note that FTX collapse and SBF are in the news). With no new plans, and the current cash burn, money may run out in 2025.
Cathy JONES (Schwab) recommends bonds and 60-40 portfolios now.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
In 2023, we will still have rate hikes, inflation and a possible recession. These stocks with low net debt/EBITDA (list is in descending order), good operating profits and steady growth may do fine: MCO, PM, ZTS, MA, BLK, LRCX, V, TXN, ODFL, PAYX, MSFT, MKTX, CPRT, MPWR, ANET, SCHW.
Carvana/CVNA sank on bankruptcy rumors that were denied/refuted by the company. Other auto dealers were also hit but look attractive now: KMX (used cars), AN, SAH, LAD, GPI, PAG.
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%) (CPI report on 12/13/22 while the FOMC meets)
Good riddance, 2022
1st & 2nd rate hikes of 2023, FOMC 2/1/23+ 50 bps hike possible
Rest, FOMC 3/22/23+
3rd rate hike, FOMC 5/3/22+ 25 bps (rate 5.00-5.25%; likely cycle peak)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -2.77%, SP500 -3.37%, Nasdaq Comp -3.99%, R2000 -5.08%. DJ Transports -5.22%; DJ Utilities -0.15%. (Rotating spot LT Treasury TLT -0.71%) US$ index (spot) +0.38%, oil/WTI futures -11.20% (it was supposed to go UP!), gold futures +0.12%.
YTD (index changes only), DJIA -7.88%, SP500 -17.45%, Nasdaq Comp -29.66%. (Rotating spot LT Treasury TLT -28.25%)
Pg 48: NYSE cumulative (5-day) A/D line fell; ratio of winners:losers 1:4. (Monday was 93% downside-volume day)
Pg 38, EUROPE. French fashion goods company Hermes International (HESAY; fwd P/E 44.6!) has pricing power over its dedicated fans. China sales are growing.
Pg 38, EMERGING MARKETS. INDONESIA, the largest Muslim country by population (#2 Pakistan, #3 India), has passed strict criminal laws on adultery, insults to state institutions (up to 3 years jail!), etc. President Joko-Wi resisted these a few years ago but now he let them go through with the next elections coming up in 14 months. What about the “pleasure” stuff that goes in its tourist hotspots of Bali (location of 2022 G-20) and elsewhere? Well, adultery can only be reported by spouse, parents or children (so, if no report, no action). E-commerce and fintech companies are scrambling to serve 50% unbanked population; some names, GoTo Gojek Tokopedia, SE, GRAB, Lazada/BABA. Indonesia is a big exporter of nickel and several commodities (palm oil, coal, iron-ore, rubber, etc).
Pg 39, OPTIONS. Strangely, both the hedge-funds (fast-money) and mutual funds (slow-money) have accumulated Wells Fargo/WFC ahead of its earnings on January 13 expecting a turnaround. Recommended is pairing OTM put-selling with OTM call-buying.
(SP500 VIX 22.83 (high), Nasdaq 100 VXN 27.94 (high), options SKEW 119.24, bond MOVE 132.79 (high)) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 40, COMMODITIES. The COAL rally may burn out soon. This dirtiest source of energy (globally 36.5% in 2021; US 21.9%) has benefitted (+100% YTD; thermal coal +241%) from unexpected events in 2022, but the world is slowly and surely moving away from coal and towards the NET-ZERO goals by 2030-70 (varies by countries; also in the news was Vanguard quitting the NZAM/GFANZ). The ETF COMB peaked in June.
Pg 53: A bad week in EUROPE (Greece +0.62%, Denmark -0.95%, Germany -2.31%) and a down week in ASIA (HK +4.55%, Indonesia -4.48%).
TREASURY* 3-mo yield 4.31%, 1-yr 4.72%, 2-yr 4.33%, 5-yr 3.75%, 10-yr 3.57%, 30-yr 3.56%. REAL yields 5-yr 1.45%, 10-yr 1.31%, 30-yr 1.28%.
DOLLAR rose, ^DXY 104.93, +0.4% (pg 58). GOLD rose to $1,796, +0.6% (Handy & Harman spot, Thursday; pg 60); the gold-miners fell. (^XAU was at 119.90, -3.62% 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 18: COVER STORY, ”CVS Wants to be America’s Healthcare Provider. All it Needs Now are Doctors”. CVS (fwd P/E 11.4; buybacks) is pushing well beyond toilet papers, snacks, cold meds, prescriptions. Many CVS stores have older MinuteClinics or newer HealthHUBs. It recently acquired Signify Health/SGFY home healthcare. Medicare recently cut the rating of CVS-owned/run Aetna Medicare Advantage (MA) plans (so, it won’t get performance bonuses from Medicare; Aetna has #4 market share for MAs). Its PBM Caremark lost a big customer Centene/CNC. CVS stores now are in 3 categories: Traditional retail pharmacies, those also providing minor healthcare via MinuteClinics or HealthHUBs, and those providing primary care. It is that last part that CVS is having difficulty with in its ambitions for becoming a vertically integrated healthcare service – it is hampered by the lack of master plan for primary care (Store-based model? Buying medical group practices? Buying hospitals? Other?) and shortage of doctors. CVS was outbid by Amazon/AMZN for 1Life Healthcare/ONEM, and it ended up buying SGFY later. Regulators (DOJ, etc) are also looking into CVS’ expansion into healthcare. Despite execution risks, the stock has potential for patient investors.
Pg 6, UP AND DOWN WALL STREET. The next big thing in AI is being fast, smart and creative. 2 developments from nonprofit OpenAI: Generative AI ChatGPT can generate art, text, poem, music; Dall-E 2 can produce images from word descriptions. SoftBank’s/SFTBY (it has huge problems this year) Vision Fund has made investments in AI.
Remember UNICORNS? Now they are becoming an endangered species. Unicorns are pre-IPO companies with private-market values of $1+ billion. Their number grew globally like wildfire and peaked in 2021, then came the tech implosion and crypto Winter. Private-market values are not marked-to-market regularly and the only gauge for their valuation is the most recent round of financing. Some estimates are that the number of unicorns may have shrunk by 25-75%; some have already passed away and several are unicorn-zombies now. Venture-capitalists (VCs) are talking about profitability or path to profitability, and not cash burns.
Internet infrastructure service provider Rackspace/RXT was hit with RANSOMWARE attack. The situation remains unresolved even after a week and there is no estimate for resolution. Its clients had to quickly switch to alternate platforms. Even though the affected business is a small part of RXT’s total business, the reputational hit caused its stock to sink. Lesson is also not to rely on a single cloud vendor for mission critical services.
Pg 9, STREETWISE. Competition is growing for TikTok-like short-videos from Reels/Instagram/META, YouTube/GOOGL, SNAP, etc. TikTok is owned by Chinese ByteDance but it has promised to keep its US operations distinct using Oracle/ORCL servers/cloud. There are still calls for the US restrictions or ban on TikTok (it is banned in several countries). Several states have banned TikTok from government devices (MD, ND, NE, SC, TX).
Why call an earnings conference call if for 9 minutes without Q&A? Meme stock company GameStop/GME did just that. It had a long journey from videodiscs to online games to NFTs and crypto wallets; it was unlucky in having a “hot” deal with FTX just in September (note that FTX collapse and SBF are in the news). With no new plans, and the current cash burn, money may run out in 2025.
Cathy JONES (Schwab) recommends bonds and 60-40 portfolios now.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).