Post by Admin/YBB on Feb 11, 2023 6:01:03 GMT -6
Pg 27, TRADER. In a slow news week, investors focused on poor EARNINGS and the SP500 struggled at a key level. A consensus is developing for soft landing (vs recession). Earnings estimates continue to fall and that will make it tough for the broad market. It may be worthwhile to be defensive with consumer-staples (ETF XLP).
Strong earnings report from Pepsi/PEP leads to optimism for the upcoming earnings for Coca-Cola/KO despite two companies having different business mixes. In the recent rally, defensive consumer-staples XLP has lagged; the sector isn’t cheap.
Strong results by Starbucks/SBUX and Chipotle/CMG may point to better reports by high end restaurants (BLMN, TXRH, DRI) and retailers (SIG, MOV, TPR).
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.
2nd rate hike, FOMC 3/22/23+ 25 bps
3rd rate hike, FOMC 5/3/23+ 25 bps (rate 5.00-5.25%; likely cycle peak)
FOMC 6/14/23+ Hold
FOMC 7/26/23+ Hold
FOMC 9/20/23+ Hold
FOMC 11/1/23+ Hold
FOMC 12/13/23+ Cut
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.17%, SP500 -1.11%, Nasdaq Comp -2.41%, R2000 -3.36%. DJ Transports -3.06%; DJ Utilities -0.82%. (Rotating spot consumer-staples XLP -0.59%) US$ index (spot) +0.63%, oil/WTI futures +8.63%, gold futures UNCH.
52-WK (index changes only), DJIA -2.50%, SP500 -7.43%, Nasdaq Comp -15.03%. (Rotating spot consumer-staples XLP -3.03%) (Note shift to 52-wk until YTD becomes meaningful again in a few weeks)
Pg 40: NYSE cumulative (5-day) A/D line fell; ratio of winners:losers 1:2.
Pg 31, EUROPEAN TRADER. Spanish energy company Repsol (fwd P/E 4.7) is attractive; 30% of earnings are from refining, the rest from E&P (25% owned by the US EIG) and renewables (25% owned by French CRARY and Swiss EIP (private)). Its Argentine subsidiary YPF was nationalized in 2012 but, later, it won $5 billion in compensation. Its net-zero target is 2050.
Pg 31, EMERGING MARKETS. German BMW/BMWYY is expanding EV production in MEXICO to benefit from the US Inflation reduction Act. However, the Mexican President AMLO (with term to 12/2024) is putting obstacles through the state control of power production and distribution; the auto production is a power hog. AMLO is also trying to woo Musk’s Tesla/TSLA. The foreign minister EBRARD is smore supportive of BMW efforts and he is planning to run for presidency, so any delays may be temporary.
EXTRA. Energy and infrastructure conglomerate Adani Group’s recent troubles won’t hurt the broader INDIAN market. Adani Group owns 60% of its 7 companies that are listed only in India. The US research and shorting firm Hindenburg used its negative report to bet with non-Indian derivatives and Adani’s dollar-denominated debt; (short-sales in India are very limited and can be done only with full advance disclosures by the approved firms).
Pg 32, OPTIONS. Interactive Brokers/IBKR should benefit from the volatility of stocks and options; suggested is pairing call-buying with put-selling. The fear-gauge VIX around 20 is subdued but the volume of VIX calls is up (and lot of activity in very short-term 0DTE and 1DTE options isn’t reflected in VIX).
(SP500 VIX 20.53 (high), Nasdaq 100 VXN 27.09 (high), options SKEW 120.88, bond MOVE 109.63) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 32, COMMODITIES. Russian-Ukraine war is forcing countries to look for more energy from local/regional sources. Russian sanctions and price-caps have shifted much of RUSSIAN OIL from Europe to Asia (and some of that is going back to Europe and the US). The US oil/gas exports are also growing.
Pg 45: A down week in EUROPE (Greece +4.15%, Norway +2.34%, Sweden -4.28%) and a down week in ASIA (Japan +0.87%, China -2.61%).
TREASURY* 3-mo yield 4.79%, 1-yr 4.89%, 2-yr 4.50%, 5-yr 3.93%, 10-yr 3.74%, 30-yr 3.83%. REAL yields 5-yr 1.46%, 10-yr 1.41%, 30-yr 1.53%.
DOLLAR rose, ^DXY 103.58, +0.65% (pg 50). GOLD fell to $1,860, -0.8% (Handy & Harman spot, Thursday; pg 52); the gold-miners fell. (^XAU was at 123.44, -3.26% 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. NOTE – With half the data in, the outlook for I-Bond rate on 5/1/23 is poor and it may be 0-2% only.
*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 17: COVER STORY, “ChatGPT Sparked an AI Craze. Investors Need a Long-Term Plan”. Hard to believe that generative-text ChatGPT was launched by OpenAL only on November 30, 2022 (so, just 2+ months ago) and it has 100+ million users already. Microsoft/MSFT is a big investor in OpenAI and has integrated ChatGPT with its Bing search. Others are rushing into this area – Alphabet/GOOGL, Baidu/BIDU, Ali Baba/BABA, etc. For the first time, Google’s dominance in search (93% market share) may be challenged. Unfortunately, Google made the mistake of prematurely launching its chatbot Bard which backfired badly – it included a WRONG answer for one of its queries and that knocked off $160 billion (-12%) from its market-cap. Alphabet is also fighting an antitrust lawsuit filed by the DOJ in 2020. The new demand for AI will benefit semi chips makers AMD, IBM, NVDA, etc and software companies ADBE, BBAI, META, SOUN, etc.
Pg 19: ChatGPT isn’t that smart although it can answer many inquiries, pass several tests/exams and write passable texts. OpenAI CEO ALTMAN has called it impressive but not robust. It trains on huge databases and that is also its limitation. The databases may have inaccuracies, conflicting information or stale information. ChatGPT may also be tripped by trick questions, or deep follow up questions. It attempts to provide plausible answers but some of those may be wrong. Rival Bard from Google made a regrettable error on its debut and GOOGL stock fell sharply. There are also broader issues with databases – privacy, reliability, liability from inaccurate answers, content authors’ rights, etc.
Pg 7, UP AND DOWN WALL STREET. BIG OIL companies (US XOM, CVX; European BP, SHEL, TTE) have high profits but low valuations. Investors are skeptical that the current high oil prices will be sustainable (natural gas has already collapsed in the US to pre-war levels) and also have doubt their ENERGY TRANSITION plans. BP may be ahead of others in its dual approach for traditional energy and renewables. It bought the US Archaea Energy (biogas) and has partnered with Norwegian EQNR (offshore wind turbines). Its renowned energy outlook takes into account Russian and OPEC productions, the US shale production, and that the peak-oil-demand may have passed. In the US, it has also to recover from its image from the 2010 Deepwater Horizon accident. It owns thousands of gas stations where most of the profits are from food and other merchandise, but it can also install EV charging stations quickly. As for improving big oil valuations, at some point, they may just have to separate the traditional and renewable businesses.
The SP500 is at an important juncture. The bounce from October 2022 lows has been fast and the fwd P/E is now 18.3. The rally has been led by speculative stocks. The AAII Sentiment Survey has turned bullish after a long while. Holding some cash reserves sounds appealing.
Pg 11, STREETWISE. If your brokerage CASH doesn’t pay at least 4.5%, switch money around. At Schwab, the brokerage cash options are bad and require manual transfers to/from Schwab m-mkt fund(s). BoA/BAC downgraded Schwab/SCHW due to its policy of stiffing customers on brokerage cash. A concern was that some customers with multiple brokerage accounts may just be moving liquid money away from Schwab. On the other hand, Fidelity SPAXX and Vanguard VMFXX are available as core/settlement options for Fidelity and Vanguard customers, respectively (and better m-mkt funds are also available). If you can afford to part with the money for a few months, buy T-Bills at brokerages (commission-free at Treasury Auctions or in the secondary market). If your bank or credit union is paying low rates on checking and/or savings, move most money out electronically (ACH) to brokerage to buy m-mkt funds or T-Bills. (All good advice but may be a year late).
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
Strong earnings report from Pepsi/PEP leads to optimism for the upcoming earnings for Coca-Cola/KO despite two companies having different business mixes. In the recent rally, defensive consumer-staples XLP has lagged; the sector isn’t cheap.
Strong results by Starbucks/SBUX and Chipotle/CMG may point to better reports by high end restaurants (BLMN, TXRH, DRI) and retailers (SIG, MOV, TPR).
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.
2nd rate hike, FOMC 3/22/23+ 25 bps
3rd rate hike, FOMC 5/3/23+ 25 bps (rate 5.00-5.25%; likely cycle peak)
FOMC 6/14/23+ Hold
FOMC 7/26/23+ Hold
FOMC 9/20/23+ Hold
FOMC 11/1/23+ Hold
FOMC 12/13/23+ Cut
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.17%, SP500 -1.11%, Nasdaq Comp -2.41%, R2000 -3.36%. DJ Transports -3.06%; DJ Utilities -0.82%. (Rotating spot consumer-staples XLP -0.59%) US$ index (spot) +0.63%, oil/WTI futures +8.63%, gold futures UNCH.
52-WK (index changes only), DJIA -2.50%, SP500 -7.43%, Nasdaq Comp -15.03%. (Rotating spot consumer-staples XLP -3.03%) (Note shift to 52-wk until YTD becomes meaningful again in a few weeks)
Pg 40: NYSE cumulative (5-day) A/D line fell; ratio of winners:losers 1:2.
Pg 31, EUROPEAN TRADER. Spanish energy company Repsol (fwd P/E 4.7) is attractive; 30% of earnings are from refining, the rest from E&P (25% owned by the US EIG) and renewables (25% owned by French CRARY and Swiss EIP (private)). Its Argentine subsidiary YPF was nationalized in 2012 but, later, it won $5 billion in compensation. Its net-zero target is 2050.
Pg 31, EMERGING MARKETS. German BMW/BMWYY is expanding EV production in MEXICO to benefit from the US Inflation reduction Act. However, the Mexican President AMLO (with term to 12/2024) is putting obstacles through the state control of power production and distribution; the auto production is a power hog. AMLO is also trying to woo Musk’s Tesla/TSLA. The foreign minister EBRARD is smore supportive of BMW efforts and he is planning to run for presidency, so any delays may be temporary.
EXTRA. Energy and infrastructure conglomerate Adani Group’s recent troubles won’t hurt the broader INDIAN market. Adani Group owns 60% of its 7 companies that are listed only in India. The US research and shorting firm Hindenburg used its negative report to bet with non-Indian derivatives and Adani’s dollar-denominated debt; (short-sales in India are very limited and can be done only with full advance disclosures by the approved firms).
Pg 32, OPTIONS. Interactive Brokers/IBKR should benefit from the volatility of stocks and options; suggested is pairing call-buying with put-selling. The fear-gauge VIX around 20 is subdued but the volume of VIX calls is up (and lot of activity in very short-term 0DTE and 1DTE options isn’t reflected in VIX).
(SP500 VIX 20.53 (high), Nasdaq 100 VXN 27.09 (high), options SKEW 120.88, bond MOVE 109.63) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 32, COMMODITIES. Russian-Ukraine war is forcing countries to look for more energy from local/regional sources. Russian sanctions and price-caps have shifted much of RUSSIAN OIL from Europe to Asia (and some of that is going back to Europe and the US). The US oil/gas exports are also growing.
Pg 45: A down week in EUROPE (Greece +4.15%, Norway +2.34%, Sweden -4.28%) and a down week in ASIA (Japan +0.87%, China -2.61%).
TREASURY* 3-mo yield 4.79%, 1-yr 4.89%, 2-yr 4.50%, 5-yr 3.93%, 10-yr 3.74%, 30-yr 3.83%. REAL yields 5-yr 1.46%, 10-yr 1.41%, 30-yr 1.53%.
DOLLAR rose, ^DXY 103.58, +0.65% (pg 50). GOLD fell to $1,860, -0.8% (Handy & Harman spot, Thursday; pg 52); the gold-miners fell. (^XAU was at 123.44, -3.26% 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. NOTE – With half the data in, the outlook for I-Bond rate on 5/1/23 is poor and it may be 0-2% only.
*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 17: COVER STORY, “ChatGPT Sparked an AI Craze. Investors Need a Long-Term Plan”. Hard to believe that generative-text ChatGPT was launched by OpenAL only on November 30, 2022 (so, just 2+ months ago) and it has 100+ million users already. Microsoft/MSFT is a big investor in OpenAI and has integrated ChatGPT with its Bing search. Others are rushing into this area – Alphabet/GOOGL, Baidu/BIDU, Ali Baba/BABA, etc. For the first time, Google’s dominance in search (93% market share) may be challenged. Unfortunately, Google made the mistake of prematurely launching its chatbot Bard which backfired badly – it included a WRONG answer for one of its queries and that knocked off $160 billion (-12%) from its market-cap. Alphabet is also fighting an antitrust lawsuit filed by the DOJ in 2020. The new demand for AI will benefit semi chips makers AMD, IBM, NVDA, etc and software companies ADBE, BBAI, META, SOUN, etc.
Pg 19: ChatGPT isn’t that smart although it can answer many inquiries, pass several tests/exams and write passable texts. OpenAI CEO ALTMAN has called it impressive but not robust. It trains on huge databases and that is also its limitation. The databases may have inaccuracies, conflicting information or stale information. ChatGPT may also be tripped by trick questions, or deep follow up questions. It attempts to provide plausible answers but some of those may be wrong. Rival Bard from Google made a regrettable error on its debut and GOOGL stock fell sharply. There are also broader issues with databases – privacy, reliability, liability from inaccurate answers, content authors’ rights, etc.
Pg 7, UP AND DOWN WALL STREET. BIG OIL companies (US XOM, CVX; European BP, SHEL, TTE) have high profits but low valuations. Investors are skeptical that the current high oil prices will be sustainable (natural gas has already collapsed in the US to pre-war levels) and also have doubt their ENERGY TRANSITION plans. BP may be ahead of others in its dual approach for traditional energy and renewables. It bought the US Archaea Energy (biogas) and has partnered with Norwegian EQNR (offshore wind turbines). Its renowned energy outlook takes into account Russian and OPEC productions, the US shale production, and that the peak-oil-demand may have passed. In the US, it has also to recover from its image from the 2010 Deepwater Horizon accident. It owns thousands of gas stations where most of the profits are from food and other merchandise, but it can also install EV charging stations quickly. As for improving big oil valuations, at some point, they may just have to separate the traditional and renewable businesses.
The SP500 is at an important juncture. The bounce from October 2022 lows has been fast and the fwd P/E is now 18.3. The rally has been led by speculative stocks. The AAII Sentiment Survey has turned bullish after a long while. Holding some cash reserves sounds appealing.
Pg 11, STREETWISE. If your brokerage CASH doesn’t pay at least 4.5%, switch money around. At Schwab, the brokerage cash options are bad and require manual transfers to/from Schwab m-mkt fund(s). BoA/BAC downgraded Schwab/SCHW due to its policy of stiffing customers on brokerage cash. A concern was that some customers with multiple brokerage accounts may just be moving liquid money away from Schwab. On the other hand, Fidelity SPAXX and Vanguard VMFXX are available as core/settlement options for Fidelity and Vanguard customers, respectively (and better m-mkt funds are also available). If you can afford to part with the money for a few months, buy T-Bills at brokerages (commission-free at Treasury Auctions or in the secondary market). If your bank or credit union is paying low rates on checking and/or savings, move most money out electronically (ACH) to brokerage to buy m-mkt funds or T-Bills. (All good advice but may be a year late).
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).