Post by Admin/YBB on Feb 4, 2023 7:26:31 GMT -6
Pg 10-11.
REVIEW. 2021 purchase of TIFFANY by Louis Vuitton/LVMUY has been working out fine; profits have doubled since. LVMUY has a good record on acquisitions (Sephora, 1997; Bulgari, 2011, etc). Chairman/CEO Bernard ARNAULT is now the richest person in the world.
PREVIEW. Silvergate/SI, a federally insured bank, got a big boost from 7.2% stake by BlackRock (and 9.32% by State Street); 75% of its stock has been sold short. (Some of those gains were later reversed on the news of DOJ investigation)
DATA THIS WEEK. Consumer credit, international trade deficit on TUESDAY; weekly initial jobless claim on THURSDAY; UM consumer sentiment, Treasury budget on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Residential REITs (Apartment REITs AVB, CPT, EQR, ESS and single-family homes REIT INVH; rising rates hurt REITs in 2022 but now is the tail end of rate hikes; relevant metrics for REITs are FFO, AFFO (not P/E); pg 12);
Beauty retailer Ulta (ULTA; fwd P/E 21; strong performance in 2022 should continue in 2023; consumable items have wide range of prices; pg 13);
Industrial gas giant Linde (LIN; fwd P/E 25; a factor in recent selloff was that it delisted from Frankfurt stock exchange; it builds facilities near customers under long-term inflation-adjusted supply contracts; new growth business is hydrogen and it produces both “blue” and “green” hydrogen; there are government subsidies and incentives for cleaner hydrogen production; pg 14).
BEARISH.
Pg 16: Auto mogul Henry FORD (when 55) bought a newspaper in 1918 (shuttered in 1927). Another auto mogul Elon MUSK (when 51) bought social-media company Twitter in 2022. Both ventures were money-losing and consumed lot of their time and energy. Fortunes of Ford/F turned for the worse from 1918-27 as competition left F in dust. What will happen to Tesla/TSLA and Twitter remains to be seen; both Tesla and Musk have taken reputational hits. Musk’s supporters want him to find a CEO for Twitter and focus his energies on Tesla and SpaceX. Dan IVES (Wedbush) says that “Elon Musk is the Henry Ford of 21st Century…”.
Pg 17: FOLLOW-UP. Take some profits in Tesla/TSLA after its breathless run in January (+41%; +70% from 1/6/23 recommendation – just 3 weeks ago).
Pg 21, FUNDS. There are many ways to play this GOLD rally: gold-bullion (GLD, IAU, GLDM, SGOL), gold-miners (majors GDX, combo majors + minors GDXJ), commodities ETF BCI (futures-based; K-1 free; 19.5% precious metals), OEFs (FKRCX, FSAGX, OPGSX, SGGDX (combo bullion + miners)), stocks (ABX, NEM, WPM) (some pay variable dividends). Gold is benefitting from weakening DOLLAR and INFLATION (global central banks are also buying gold to reduce their exposure to Western currencies). Bullion-miners mix depends on whether there is soft landing (better for miners) or recession (better for bullion). (Gold sold off later in the week, post-FOMC) (By @lewisbraham at MFO)
Pg 22, INCOME INVESTING. The BOND RALLY may run into POWELL at some point. Powell said, may be 2 more rate hikes and no cuts in 2023. The fed funds futures market complied partially – it adjusted to 2 more hikes, but projects cut(s) later in 2023. The yield-curve is quite inverted now. Money-market funds are still catching up with T-Bills (see EXTRA for how the money-market funds have reverted their ERs to previous high levels). Use a BARBELL strategy.
Pg 22, ECONOMY. Take economists’ PREDICTIONS with grains of salt. Many projections are made at the beginning of the year and most, typically optimistic, may be off the mark. Nobody predicted Covid (or Russia-Ukraine war) and that caused projections in recent years to be quite wrong. Keep this in mind for 2023.
Pg 23, TECH TRADER. Techs are soaring despite several weak earnings reports. Speculative techs have rallied more. Recent earnings reports showed that tech growth has slowed; cloud capex has stalled; consumers are spending less on techs (electronics, phones, PCs); META rallied on relatively better Q4 report, buybacks, more job cuts.
Pg 24: Jurrien TRIMMER, Fidelity (global macro). Investors have become complacent and have bought into GOLDILOCKS scenario. But EARNINGS will be flat or declining and P/Es remain elevated – yes, SP500 P/E is down from about 30 to 18, but does that mark a base? BONDS (TIPS, corporates, HY) and FOREIGN stocks (with attractive valuations) may do better in 2023. The US recession call seems too obvious, but CHINA reopening (and global recovery) may lead to soft landing; however, the earnings recession is here. Investor expectations and the Fed differ on FED PIVOT (but remember, who will do the pivoting?) and higher RATES may remain for longer. Value/CYCLICALS and SMALL/MID-caps may outperform mega/large-caps. Many companies have improved their financials by swapping short-term debt into long-term debt during the ZIRP. BUYBACKS may slow in favor of dividends and capex. DEGLOBALIZATIION and RESHORING will result in higher inflation; GEOPOLITICAL tensions will also cause higher inflation from higher spending for security and defense. The US population is aging, and together with high retirements during Covid, are causing the LABOR FORCE to shrink, and WAGE pressures may remain. Inflation may come down but not to 2% average level that the Fed wants and may even reignite if the Fed pivots too soon. The 4-yr business cycles will return (forget the decade-long trends), and the markets will be more volatile.
Pg 54, OTHER VOICES. J.W. MASON, CUNY and Roosevelt Institute (a think tank in NYC). POWELL won’t be satisfied until the labor market softens and WAGE GROWTH slow. This Fed-view seems in contradiction with this supposedly pro-labor administration. Wages can rise with labor PRODUCTIVUTY but that isn’t rising as fast. Wages are also a lagging indicator. A recent FTC proposal to ban noncompete clauses may give the labor upper hand in future negotiations. Rising minimum wages are also causing wage growth in low-paying service jobs (retail, fast food, leisure/entertainment). The notion to tame inflation by weakening the labor market and economy seem strange.
(EXTRAS from online Friday that didn’t make the weekend paper version)
FUNDS. Vanguard is beginning to remove fee-waivers/ER-caps for m-mkt funds that had been in place during the ZIRP. Investors may notice the changes as most are watching rates very closely. Affected are "...Vanguard Municipal Money Market (ticker: VMSXX), Vanguard Federal Money Market Fund (VMFXX), and Vanguard Cash Reserves Federal Money Market (VMRXX)....Vanguard hasn’t announced it was reducing the fee waivers, which arguably reflect a return to a more normal state of affairs now that rates are no longer near zero....". Other m-mkt funds are expected to do the same. (Sharper ER moves are seen in Fido core/settlement SPAXX, TIAA-CREF (Retirement class) TIEXX, etc).
BULLISH. Small-caps (R2000/IWM +17% since 06/2022, 10/2022 retest of the lows, +15% in 3 months; rising rates are headwind but expectations of Fed pause soon are rising; many companies in R2000 aren’t profitable).
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
REVIEW. 2021 purchase of TIFFANY by Louis Vuitton/LVMUY has been working out fine; profits have doubled since. LVMUY has a good record on acquisitions (Sephora, 1997; Bulgari, 2011, etc). Chairman/CEO Bernard ARNAULT is now the richest person in the world.
PREVIEW. Silvergate/SI, a federally insured bank, got a big boost from 7.2% stake by BlackRock (and 9.32% by State Street); 75% of its stock has been sold short. (Some of those gains were later reversed on the news of DOJ investigation)
DATA THIS WEEK. Consumer credit, international trade deficit on TUESDAY; weekly initial jobless claim on THURSDAY; UM consumer sentiment, Treasury budget on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Residential REITs (Apartment REITs AVB, CPT, EQR, ESS and single-family homes REIT INVH; rising rates hurt REITs in 2022 but now is the tail end of rate hikes; relevant metrics for REITs are FFO, AFFO (not P/E); pg 12);
Beauty retailer Ulta (ULTA; fwd P/E 21; strong performance in 2022 should continue in 2023; consumable items have wide range of prices; pg 13);
Industrial gas giant Linde (LIN; fwd P/E 25; a factor in recent selloff was that it delisted from Frankfurt stock exchange; it builds facilities near customers under long-term inflation-adjusted supply contracts; new growth business is hydrogen and it produces both “blue” and “green” hydrogen; there are government subsidies and incentives for cleaner hydrogen production; pg 14).
BEARISH.
Pg 16: Auto mogul Henry FORD (when 55) bought a newspaper in 1918 (shuttered in 1927). Another auto mogul Elon MUSK (when 51) bought social-media company Twitter in 2022. Both ventures were money-losing and consumed lot of their time and energy. Fortunes of Ford/F turned for the worse from 1918-27 as competition left F in dust. What will happen to Tesla/TSLA and Twitter remains to be seen; both Tesla and Musk have taken reputational hits. Musk’s supporters want him to find a CEO for Twitter and focus his energies on Tesla and SpaceX. Dan IVES (Wedbush) says that “Elon Musk is the Henry Ford of 21st Century…”.
Pg 17: FOLLOW-UP. Take some profits in Tesla/TSLA after its breathless run in January (+41%; +70% from 1/6/23 recommendation – just 3 weeks ago).
Pg 21, FUNDS. There are many ways to play this GOLD rally: gold-bullion (GLD, IAU, GLDM, SGOL), gold-miners (majors GDX, combo majors + minors GDXJ), commodities ETF BCI (futures-based; K-1 free; 19.5% precious metals), OEFs (FKRCX, FSAGX, OPGSX, SGGDX (combo bullion + miners)), stocks (ABX, NEM, WPM) (some pay variable dividends). Gold is benefitting from weakening DOLLAR and INFLATION (global central banks are also buying gold to reduce their exposure to Western currencies). Bullion-miners mix depends on whether there is soft landing (better for miners) or recession (better for bullion). (Gold sold off later in the week, post-FOMC) (By @lewisbraham at MFO)
Pg 22, INCOME INVESTING. The BOND RALLY may run into POWELL at some point. Powell said, may be 2 more rate hikes and no cuts in 2023. The fed funds futures market complied partially – it adjusted to 2 more hikes, but projects cut(s) later in 2023. The yield-curve is quite inverted now. Money-market funds are still catching up with T-Bills (see EXTRA for how the money-market funds have reverted their ERs to previous high levels). Use a BARBELL strategy.
Pg 22, ECONOMY. Take economists’ PREDICTIONS with grains of salt. Many projections are made at the beginning of the year and most, typically optimistic, may be off the mark. Nobody predicted Covid (or Russia-Ukraine war) and that caused projections in recent years to be quite wrong. Keep this in mind for 2023.
Pg 23, TECH TRADER. Techs are soaring despite several weak earnings reports. Speculative techs have rallied more. Recent earnings reports showed that tech growth has slowed; cloud capex has stalled; consumers are spending less on techs (electronics, phones, PCs); META rallied on relatively better Q4 report, buybacks, more job cuts.
Pg 24: Jurrien TRIMMER, Fidelity (global macro). Investors have become complacent and have bought into GOLDILOCKS scenario. But EARNINGS will be flat or declining and P/Es remain elevated – yes, SP500 P/E is down from about 30 to 18, but does that mark a base? BONDS (TIPS, corporates, HY) and FOREIGN stocks (with attractive valuations) may do better in 2023. The US recession call seems too obvious, but CHINA reopening (and global recovery) may lead to soft landing; however, the earnings recession is here. Investor expectations and the Fed differ on FED PIVOT (but remember, who will do the pivoting?) and higher RATES may remain for longer. Value/CYCLICALS and SMALL/MID-caps may outperform mega/large-caps. Many companies have improved their financials by swapping short-term debt into long-term debt during the ZIRP. BUYBACKS may slow in favor of dividends and capex. DEGLOBALIZATIION and RESHORING will result in higher inflation; GEOPOLITICAL tensions will also cause higher inflation from higher spending for security and defense. The US population is aging, and together with high retirements during Covid, are causing the LABOR FORCE to shrink, and WAGE pressures may remain. Inflation may come down but not to 2% average level that the Fed wants and may even reignite if the Fed pivots too soon. The 4-yr business cycles will return (forget the decade-long trends), and the markets will be more volatile.
Pg 54, OTHER VOICES. J.W. MASON, CUNY and Roosevelt Institute (a think tank in NYC). POWELL won’t be satisfied until the labor market softens and WAGE GROWTH slow. This Fed-view seems in contradiction with this supposedly pro-labor administration. Wages can rise with labor PRODUCTIVUTY but that isn’t rising as fast. Wages are also a lagging indicator. A recent FTC proposal to ban noncompete clauses may give the labor upper hand in future negotiations. Rising minimum wages are also causing wage growth in low-paying service jobs (retail, fast food, leisure/entertainment). The notion to tame inflation by weakening the labor market and economy seem strange.
(EXTRAS from online Friday that didn’t make the weekend paper version)
FUNDS. Vanguard is beginning to remove fee-waivers/ER-caps for m-mkt funds that had been in place during the ZIRP. Investors may notice the changes as most are watching rates very closely. Affected are "...Vanguard Municipal Money Market (ticker: VMSXX), Vanguard Federal Money Market Fund (VMFXX), and Vanguard Cash Reserves Federal Money Market (VMRXX)....Vanguard hasn’t announced it was reducing the fee waivers, which arguably reflect a return to a more normal state of affairs now that rates are no longer near zero....". Other m-mkt funds are expected to do the same. (Sharper ER moves are seen in Fido core/settlement SPAXX, TIAA-CREF (Retirement class) TIEXX, etc).
BULLISH. Small-caps (R2000/IWM +17% since 06/2022, 10/2022 retest of the lows, +15% in 3 months; rising rates are headwind but expectations of Fed pause soon are rising; many companies in R2000 aren’t profitable).
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).