Post by Admin/YBB on Jan 28, 2023 9:57:36 GMT -6
Pg 10-11. FOMC Statement and POWELL’s presser on WEDNESDAY.
REVIEW. Inflation has cooled. Growth in money supply M2 has turned negative, the first time since 1959; yet the M2 level now is 37% above that pre-pandemic. The Fed QT has reduced liquidity; yet the Fed balance sheet is high. The Fed has to be careful not to hurt the economy or cause financial instability.
Rolling 12-mo changes in M2 from FRED (data 1981- ), fred.stlouisfed.org/graph/?g=Zkny
PREVIEW. REFINERS are benefitting from high gasoline (and diesel) prices. CRACK-SPREADS have risen to $40/barrel. Demand is up (domestic, exports) but refineries are operating at 85% capacity due to maintenance. Diesel is more expensive than gasoline and its price may rise more as the European ban on Russian oil products start on February 5. Futures markets show prices stabilizing, possibly due to slowdown/recession and more refining capacity coming on line.
DATA THIS WEEK. Consumer confidence on MONDAY; ISM Chicago business barometer, home price index on TUESDAY; ADP national employment report, JOLTS report, construction spending on WEDNESDAY; productivity, factory orders on THUSDAY; jobs report (+185,000 to +190,000), unemployment rate (3.6%) on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Lowe’s (LOW; yield 2.0%; fwd P/E 14.8; buybacks; growing contractor supply business (25% of revenues) reduces dependence on the housing sector; home-improvement competitor is HD, and LOW is similar but undervalued; pg 31).
BEARISH.
Pg 12: Roman ABRAMOVICH was a supporter of PUTIN and tried to distance himself after Russian invasion of Ukraine. But he has been sanctioned by the EU, UK, Switzerland, Canada (but not by the US so far due to his involvement in Russia-Ukraine negotiations; however, some of his assets have been seized by the US). His US investments are in blue-chips, media, oil/gas, art, venture-capital and CANNABIS (CURLF, SBIG, TLLTF; venture fund Measure 8, private-equity Tuatara Capital, etc). His involvement in the cannabis industry is well-hidden behind trusts or proxies (Cetus, Meliastove, etc in British Virgin Islands, etc), and his name doesn’t appear in any regulatory filings; regulators are now taking another look (MA, etc). He has transferred lots of his assets to family members (his family office is Millhouse) or made them beneficiaries of existing trusts.
Pg 14: ROUNDTABLE 2023 Part 3 has recommendations from Ahlsten, Desai, Giroux, Witmer. All have some value orientation.
Tod AHLSTEN/Parnassus, PRBLX: AMAT, BALL, CRM, DE, SHW, SYY (Part 3); all post-pandemic plays; some have ESG aspects.
Rupal BHANSALI/Ariel: AMIGY, GSK, TIMB, VIV (Part 1)
Scott BLACK/Delphi: CB, COKE, JBL, STRL (Part 2); builds his own models and estimates.
Abby COHEN/Columbia U: Daikin (Japan), DELKY, Signify (Netherlands), TM, TRO (Part 2); selected depressed techs and cyclicals are attractive; market-cap indexing and alternatives will disappoint.
Sonal DESAI/Franklin Templeton: 5-yr TIPS; FRIAX (hybrid); CPREX (private real estate); EADOX, FHYVX, IGSB, SIDCX (Part 3); gradually increasing duration.
Henry ELLENBOGEN/Durable Capital: ABCM, DUOL, FSV, RBC, YOU (Part 1)
Mario GABELLI/Gamco: BATRA, CR, CZR, DRQ, HAL, MSGS, PARA, TV, TXT, WBD, WYNN (Part 2); lots of action in sports franchises and gaming; defense is booming globally; as usual, likes media; likes oil stocks if oil stays in $70-80 range.
David GIROUX/T Rowe Price, PRWCX: AVTR, FTV, GEHC, NXPI; a HY bond (Part 3).
William PRIEST/Epoch Inv Partners: ASML, CCEP, CNC, EADSY, RHHBY, RTX (Part 2); negative on Europe but several of his picks are in Europe (so, good stocks can be found anywhere).
Meryl WITMER/Eagle Capital: BXSL (BDC), EEFT, DFIN, DLTR, Hoicim/HCMLY, SLVM (Part 3).
Pg 26, ESG FUNDS. 2022 was a tough year for ESG funds. The top ESG funds had relative ESG and/or VALUE orientation (DAABX, BOSOX, TADFX, BTSMX, WSEFX). Many ESG funds had GROWTH orientation (that was hurt by Fed rate hikes) and avoided ENERGY (but it received unexpected boost from Russia-Ukraine war). The ESG also came under attack from politicians and some segments of the public. There was little agreement on the definition of ESG although the SEC tightened rules to eliminate “greenwashing” (exaggeration of ESG claims by funds). Barron’s also changed its ESG fund evaluation criteria to include only those funds that had explicit ESG mandates and considered AUMs above $250 million in all market-cap categories. As a result, the total list was small, 33 funds only. Gone were the so-called accidental ESG funds that had high Sustainalytics/Morningstar ESG scores (those also came under attack) but didn’t have any ESG mandates. (See more under EXTRAS).
Pg 33, TECH TRADER. Investors looked beyond MSFT’s poor earnings. For most companies, earnings will decline in 2013; several big techs will be reporting next week (AAPL, AMZN, GOOGL, META). Watch for themes of digital transformation, cloud-computing, enterprise software. Also mentioned are AMZN, MDB, NET, SNOW, CFLT, ORCL.
Pg 33, INCOME INVESTING. Stick with investment-grade CORPORATES as HY defaults are rising (est 3.0-3.5% for 2023, most will be in retail, telecom, media). Risk is ratings downgrade and then the BBB-rated corporates (60% of investment-grade universe) become fallen-angles. Mentioned are IGIB, LQD, SPIB, USIG, VCIT.
Pg 34, ECONOMY. Fed fund futures market projects terminal rate as 5.00-5.25% but watch the FOMC Statement and POWELL’s presser for clues. The 2-yr was at 4.215%, 6-mo at 4.823%. Mortgage rates fell. The PCE index was +5%. Volatility has declined in most markets. But POWELL may point to sticky inflation in SERVICES and a tight LABOR market to continue monetary tightening by the FED. The HY spreads are tight. These conflicting signals may become clear only with more future data.
Pg 62, OTHER VOICES. Mark PENN, Stagwell (marketing services). BIG TECHS face new REGULATIONS related to privacy, censorship, cybersecurity. Increased use of AI and industry-government collaborations have heightened consumer concerns about these matters. There are added anxieties about Chinese government access to TikTok that has made only half-hearted efforts to move away from Chinese influence (it was moving fast when it faced existential threats a few years ago, but then, it has been foot-dragging). The FTC will be more aggressive while the Congress takes time to develop formal legislation. Companies also face cross-border regulations on privacy (EU General Data Protection, 2018, etc). Many companies have now adjusted to restrictive privacy policies by Apple/AAPL and Google/Alphabet/GOOGL.
(EXTRAS from online Friday that didn’t make the weekend paper version)
It looked like an ESG series/supplement on Friday, but it wasn’t.
ESG FUNDS. The US ESG funds had their worst quarterly outflows in 5 years (-2.2% of AUM) due to bad markets and growing ESG criticism; however, there were small inflows for the whole 2022. The ESG fund inflows peaked in 2021. The ESG fund performance also lagged due to their emphasis on growth stocks and lack of energy exposure.
The US Treasury SOCIAL-LENDING program CDFI Fund postponed the changes it was due to announce on April 1, 2023. There were backlash from the industry, DC (including Senators Crapo-R and Warner-D), NCUA, etc on the proposals as well as procedures for public participation and comments that were followed over the last 6 years (!). The changes are needed as there were significant abuses and misuses of the CDFI certifications. There are 1,400+ CDFI certifications now and new certifications were put on hold pending new rules that are now delayed.
FUNDS. Vanguard has added an active fund bundle to its VG Digital Advisor (robo-advisor; ER 0.20% + 0.05%); such active fund bundles have been available for VG PAS for a while. It has also added some tax-loss harvesting (TLH) features. (Vanguard also announced that its multisector bond fund VMSIX/VMSAX will become available more generally; competitors are FADMX, PONAX/PIMIX, etc).
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
REVIEW. Inflation has cooled. Growth in money supply M2 has turned negative, the first time since 1959; yet the M2 level now is 37% above that pre-pandemic. The Fed QT has reduced liquidity; yet the Fed balance sheet is high. The Fed has to be careful not to hurt the economy or cause financial instability.
Rolling 12-mo changes in M2 from FRED (data 1981- ), fred.stlouisfed.org/graph/?g=Zkny
PREVIEW. REFINERS are benefitting from high gasoline (and diesel) prices. CRACK-SPREADS have risen to $40/barrel. Demand is up (domestic, exports) but refineries are operating at 85% capacity due to maintenance. Diesel is more expensive than gasoline and its price may rise more as the European ban on Russian oil products start on February 5. Futures markets show prices stabilizing, possibly due to slowdown/recession and more refining capacity coming on line.
DATA THIS WEEK. Consumer confidence on MONDAY; ISM Chicago business barometer, home price index on TUESDAY; ADP national employment report, JOLTS report, construction spending on WEDNESDAY; productivity, factory orders on THUSDAY; jobs report (+185,000 to +190,000), unemployment rate (3.6%) on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Lowe’s (LOW; yield 2.0%; fwd P/E 14.8; buybacks; growing contractor supply business (25% of revenues) reduces dependence on the housing sector; home-improvement competitor is HD, and LOW is similar but undervalued; pg 31).
BEARISH.
Pg 12: Roman ABRAMOVICH was a supporter of PUTIN and tried to distance himself after Russian invasion of Ukraine. But he has been sanctioned by the EU, UK, Switzerland, Canada (but not by the US so far due to his involvement in Russia-Ukraine negotiations; however, some of his assets have been seized by the US). His US investments are in blue-chips, media, oil/gas, art, venture-capital and CANNABIS (CURLF, SBIG, TLLTF; venture fund Measure 8, private-equity Tuatara Capital, etc). His involvement in the cannabis industry is well-hidden behind trusts or proxies (Cetus, Meliastove, etc in British Virgin Islands, etc), and his name doesn’t appear in any regulatory filings; regulators are now taking another look (MA, etc). He has transferred lots of his assets to family members (his family office is Millhouse) or made them beneficiaries of existing trusts.
Pg 14: ROUNDTABLE 2023 Part 3 has recommendations from Ahlsten, Desai, Giroux, Witmer. All have some value orientation.
Tod AHLSTEN/Parnassus, PRBLX: AMAT, BALL, CRM, DE, SHW, SYY (Part 3); all post-pandemic plays; some have ESG aspects.
Rupal BHANSALI/Ariel: AMIGY, GSK, TIMB, VIV (Part 1)
Scott BLACK/Delphi: CB, COKE, JBL, STRL (Part 2); builds his own models and estimates.
Abby COHEN/Columbia U: Daikin (Japan), DELKY, Signify (Netherlands), TM, TRO (Part 2); selected depressed techs and cyclicals are attractive; market-cap indexing and alternatives will disappoint.
Sonal DESAI/Franklin Templeton: 5-yr TIPS; FRIAX (hybrid); CPREX (private real estate); EADOX, FHYVX, IGSB, SIDCX (Part 3); gradually increasing duration.
Henry ELLENBOGEN/Durable Capital: ABCM, DUOL, FSV, RBC, YOU (Part 1)
Mario GABELLI/Gamco: BATRA, CR, CZR, DRQ, HAL, MSGS, PARA, TV, TXT, WBD, WYNN (Part 2); lots of action in sports franchises and gaming; defense is booming globally; as usual, likes media; likes oil stocks if oil stays in $70-80 range.
David GIROUX/T Rowe Price, PRWCX: AVTR, FTV, GEHC, NXPI; a HY bond (Part 3).
William PRIEST/Epoch Inv Partners: ASML, CCEP, CNC, EADSY, RHHBY, RTX (Part 2); negative on Europe but several of his picks are in Europe (so, good stocks can be found anywhere).
Meryl WITMER/Eagle Capital: BXSL (BDC), EEFT, DFIN, DLTR, Hoicim/HCMLY, SLVM (Part 3).
Pg 26, ESG FUNDS. 2022 was a tough year for ESG funds. The top ESG funds had relative ESG and/or VALUE orientation (DAABX, BOSOX, TADFX, BTSMX, WSEFX). Many ESG funds had GROWTH orientation (that was hurt by Fed rate hikes) and avoided ENERGY (but it received unexpected boost from Russia-Ukraine war). The ESG also came under attack from politicians and some segments of the public. There was little agreement on the definition of ESG although the SEC tightened rules to eliminate “greenwashing” (exaggeration of ESG claims by funds). Barron’s also changed its ESG fund evaluation criteria to include only those funds that had explicit ESG mandates and considered AUMs above $250 million in all market-cap categories. As a result, the total list was small, 33 funds only. Gone were the so-called accidental ESG funds that had high Sustainalytics/Morningstar ESG scores (those also came under attack) but didn’t have any ESG mandates. (See more under EXTRAS).
Pg 33, TECH TRADER. Investors looked beyond MSFT’s poor earnings. For most companies, earnings will decline in 2013; several big techs will be reporting next week (AAPL, AMZN, GOOGL, META). Watch for themes of digital transformation, cloud-computing, enterprise software. Also mentioned are AMZN, MDB, NET, SNOW, CFLT, ORCL.
Pg 33, INCOME INVESTING. Stick with investment-grade CORPORATES as HY defaults are rising (est 3.0-3.5% for 2023, most will be in retail, telecom, media). Risk is ratings downgrade and then the BBB-rated corporates (60% of investment-grade universe) become fallen-angles. Mentioned are IGIB, LQD, SPIB, USIG, VCIT.
Pg 34, ECONOMY. Fed fund futures market projects terminal rate as 5.00-5.25% but watch the FOMC Statement and POWELL’s presser for clues. The 2-yr was at 4.215%, 6-mo at 4.823%. Mortgage rates fell. The PCE index was +5%. Volatility has declined in most markets. But POWELL may point to sticky inflation in SERVICES and a tight LABOR market to continue monetary tightening by the FED. The HY spreads are tight. These conflicting signals may become clear only with more future data.
Pg 62, OTHER VOICES. Mark PENN, Stagwell (marketing services). BIG TECHS face new REGULATIONS related to privacy, censorship, cybersecurity. Increased use of AI and industry-government collaborations have heightened consumer concerns about these matters. There are added anxieties about Chinese government access to TikTok that has made only half-hearted efforts to move away from Chinese influence (it was moving fast when it faced existential threats a few years ago, but then, it has been foot-dragging). The FTC will be more aggressive while the Congress takes time to develop formal legislation. Companies also face cross-border regulations on privacy (EU General Data Protection, 2018, etc). Many companies have now adjusted to restrictive privacy policies by Apple/AAPL and Google/Alphabet/GOOGL.
(EXTRAS from online Friday that didn’t make the weekend paper version)
It looked like an ESG series/supplement on Friday, but it wasn’t.
ESG FUNDS. The US ESG funds had their worst quarterly outflows in 5 years (-2.2% of AUM) due to bad markets and growing ESG criticism; however, there were small inflows for the whole 2022. The ESG fund inflows peaked in 2021. The ESG fund performance also lagged due to their emphasis on growth stocks and lack of energy exposure.
The US Treasury SOCIAL-LENDING program CDFI Fund postponed the changes it was due to announce on April 1, 2023. There were backlash from the industry, DC (including Senators Crapo-R and Warner-D), NCUA, etc on the proposals as well as procedures for public participation and comments that were followed over the last 6 years (!). The changes are needed as there were significant abuses and misuses of the CDFI certifications. There are 1,400+ CDFI certifications now and new certifications were put on hold pending new rules that are now delayed.
FUNDS. Vanguard has added an active fund bundle to its VG Digital Advisor (robo-advisor; ER 0.20% + 0.05%); such active fund bundles have been available for VG PAS for a while. It has also added some tax-loss harvesting (TLH) features. (Vanguard also announced that its multisector bond fund VMSIX/VMSAX will become available more generally; competitors are FADMX, PONAX/PIMIX, etc).
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).