Post by Admin/YBB on Feb 18, 2023 10:08:15 GMT -6
Pg 8-9. FOMC Minutes on WEDNESDAY.
REVIEW. After doing well in FY 2021 (07/2020-06/2021), university ENDOWMENTS did poorly in FY 2022 (07/2021-06/2022) (but now is 02/2023! It takes that much tome to collect data from 678 institutions). Average allocations of 30% alternatives (some not marked to market, a concern) and 28% US equity meant that they outperformed the SP500. Gifts/donations remained strong.
PREVIEW. With the bad Q4 EARNINGS season ending (decline of -2.2%) and no recession in sight, stocks may struggle for the rest of the year.
DATA THIS WEEK. Manufacturing PMI, services PMI, existing home sales on TUESDAY; Q4 GDP growth (2nd est) on THURSDAY; new home sales, UM sentiment, personal income and expenditures (core PCE +4.3% YoY) on FRIDAY.
CLOSED. The US markets on MONDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Waste management companies (WM, RSG, WCN; GFL, CWST; recycling is an important part of the garbage business; selloff an opportunity in critical and growing industry; services are under long-term contracts that are not affected by the economy, but their operational costs are inverse of the economy; some operate landfills and are starting to capture methane to convert to natural gas; pg 13).
BEARISH.
Pg 10: RUSSIA-UKRAINE war will be a year old on February 24. Many lives have been lost, families uprooted and Ukraine’s infrastructure has been destroyed. The GLOBAL impacts have been on energy, foods, supply-chains, deglobalization, economic growth, geopolitical (Iran, China, Japan, Taiwan, etc). 3 possible scenarios include stalemate (most likely), escalation beyond recognition, end of PUTIN’s regime. There are also SANCTIONS on Russian oil and oil-products that will be reviewed in March and may be tightened further (so far, the effect has been to just shift Russian output from Europe to Asia). Even the oil experts cannot project what may happen next and have estimates for oil in $50-150 range.
Pg 12: CRYPTOS have rallied from the lows but headwinds include federal investigations, SEC enforcement actions, unclear rules/laws, regulators’ warnings to banks on crypto assets, etc. The SEC wants only qualified custodians to hold segregated crypto assets, and most crypto firms won’t qualify. Signature Bank/SBNY has cut ties with the crypto industry; the Fed denied Custodia Bank’s application for Master Account (i.e. access to Fed’s networks) citing concerns on its digital assets; Silvergate/SI had to tap the FHLB for liquidity when it had a run (curious because this has nothing to do with housing). Banks are so concerned about crypto ties that the nonprofit Crypto Freedom Lab has difficulty opening bank account(s) – it has checks from donations, but it cannot deposit them. Stablecoins are also in the crosshairs of the Government. Even the US-based Coinbase/COIN is not immune from some of these difficulties. The Government’s idea seems to choke the crypto industry via regulations and by cutting off access to the US banking system, and some think that this is possibly in preparation for the launch of the US CBDC/digital-dollar.
Pg 18: FUNDS. Best Fund Families are ranked based on performance in 8 fund categories and are asset-weighted.
For 2022: 1-DFA, 2-Victory, 3-Neuberger Berman, 4-Capital Group/AF, 5-JPM,…, 18-Franklin Templeton,…, 21-Vanguard,…, 23-Pimco,…, 30-Fidelity, 31-Nuveen/TIAA,…, 36-Price.
For 5 Years: 1-Fidelity, 2-MFS, 3-Putnam, 4-Mainstay, 5-Amundi US, 6-Pimco,…, 10-Neuberger Berman,…, 13-Capital Group/AF,. 14-JPM,…, 17-DFA, 18-Vanguard,…, 21-Price,…, 26-Victory, 30-Nuveen/TIAA,…, 41-Franklin Templeton.
10-year rankings and rankings within the fund categories are also provided. (Too much detail to be included here, so access Barron’s online, at newsstand, or at local library)
Pg 22: Early TAX moves for 2023: Pay attention to inflation adjustments in various tax brackets; tax-loss harvesting (TLH; why wait until October or December?); take RMDs from stocks/funds that are up; Roth Conversions (from eventually taxable T-IRA to tax-free R-IRA); start and/or contribute to 529s (Secure 2.0 will allow limited conversions of excess funds to R-IRAs, plus other recent improvements – grandparents’ 529 made more attractive; state incentives for 529s for newborns).
Pg 24, INCOME INVESTING. Be wary of higher-yielding EM debt, whether dollar-denominated (EMB) or in local currencies (EBND, LEMB). Many EM countries are at different stages of the rate cycle, and dollar can also have a significant impact.
Pg 24, ECONOMY. NO LANDING (neither soft nor hard) is still plausible. The economy may just slow as the FED keeps RATES high with high INFLATION. This market rebound from October lows has been a bet on no/soft landing. With Fed funds peaking at 5.50%, the money-market funds and T-Bills will be catching up to 5.xx%. However, no landing may just defer the settling of soft vs hard landing issue (it’s like a plane that skips landing but then after making a few loops, has to land somehow, soft or hard).
Pg 25, TECH TRADER. MSFT Bing Chat (“Sydney”) is an improvement overOpenAI ChatGPT. However, Bing Chat may provide some wrong answers, constrained by its databases, and may become unpredictable, even irritable/hostile, with long line follow up questions (MSFT says that it was intended for short Q&As but is working on fixes for this “entertainment aspect” by possibly refreshing/restarting after few Q&As). Content authors and publishers are complaining about free, unauthorized and extensive uses of their materials within the databases. MSFT hopes to gain market share in search where GOOGL has a near monopoly (and its chatbot candidate Bard had a disastrous debut recently).
Pg 26, FUNDS. Gibson Smith, Smith Capital (core-plus SMTRX, etc); formerly, Janus Hendersen FI-CIO (JABAX, etc). After a disastrous 2022, BONDS in 2023 are the most attractive in a decade and may remain so for 12-24 months. Money is flowing into bond funds. The FED is near the tail end of its monetary tightening (rate hikes, QT). Remember that slowing economy or recessions are good for the bond market (true for investment-grade bonds, but not for spread products, HY, EMs, etc). He doesn’t like short-term bonds – yes, yields are attractive, but for how long? He likes IT/LT bonds and a BARBELL approach. Bond volatility will remain (Treasury MOVE 110.11). For corporates, he looks at company fundamentals first, and then invest in its bonds, investment-grade or HY. He also likes MBS and CMOs.
Pg 54, OTHER VOICES. Arvind KRISHNAMURTHY and Hanno LUSTIG, Stanford U. The CBO projects that by 2052, the annual US budget deficit will rise to 7.9% of GDP (from 3.5%) and the total US federal debt to 195% of GDP (from about 100%). The CBO assumes extrapolation of the current situation without any future changes (but major changes will be made). The US is benefitting from the global reserve status of the DOLLAR that makes persistent US deficits and debt more palatable globally (otherwise, the supply of dollars will dwindle). But games with the US DEBT-CEILING may end all that with a huge global crisis. The last such debacle in 2011 caused only minor hiccups, but this time may be different. (Time for fiscal control and discipline is when appropriations are made, not when the bills come due after the spending)
(EXTRAS from online Friday that didn’t make the weekend paper version)
FUNDS. ETFs that are benefiting from higher rates include DIVO, DGRW, GCOW, LVHI, ROUS, TBF (short Treasuries).
ESG. As part of its energy transition, Ford/F has eliminated thousands of old ICE-related jobs in the US, Europe, Asia, and is creating thousands of EV-related jobs in the US to benefit from the 2022 Inflation Reduction Act (IRA) that also promoted onshoring. The EU is coming up with incentive programs similar to the US 2022 IRA. However, industry-wide, thousands of jobs net would be lost by the ICE to EV transition.
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
REVIEW. After doing well in FY 2021 (07/2020-06/2021), university ENDOWMENTS did poorly in FY 2022 (07/2021-06/2022) (but now is 02/2023! It takes that much tome to collect data from 678 institutions). Average allocations of 30% alternatives (some not marked to market, a concern) and 28% US equity meant that they outperformed the SP500. Gifts/donations remained strong.
PREVIEW. With the bad Q4 EARNINGS season ending (decline of -2.2%) and no recession in sight, stocks may struggle for the rest of the year.
DATA THIS WEEK. Manufacturing PMI, services PMI, existing home sales on TUESDAY; Q4 GDP growth (2nd est) on THURSDAY; new home sales, UM sentiment, personal income and expenditures (core PCE +4.3% YoY) on FRIDAY.
CLOSED. The US markets on MONDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Waste management companies (WM, RSG, WCN; GFL, CWST; recycling is an important part of the garbage business; selloff an opportunity in critical and growing industry; services are under long-term contracts that are not affected by the economy, but their operational costs are inverse of the economy; some operate landfills and are starting to capture methane to convert to natural gas; pg 13).
BEARISH.
Pg 10: RUSSIA-UKRAINE war will be a year old on February 24. Many lives have been lost, families uprooted and Ukraine’s infrastructure has been destroyed. The GLOBAL impacts have been on energy, foods, supply-chains, deglobalization, economic growth, geopolitical (Iran, China, Japan, Taiwan, etc). 3 possible scenarios include stalemate (most likely), escalation beyond recognition, end of PUTIN’s regime. There are also SANCTIONS on Russian oil and oil-products that will be reviewed in March and may be tightened further (so far, the effect has been to just shift Russian output from Europe to Asia). Even the oil experts cannot project what may happen next and have estimates for oil in $50-150 range.
Pg 12: CRYPTOS have rallied from the lows but headwinds include federal investigations, SEC enforcement actions, unclear rules/laws, regulators’ warnings to banks on crypto assets, etc. The SEC wants only qualified custodians to hold segregated crypto assets, and most crypto firms won’t qualify. Signature Bank/SBNY has cut ties with the crypto industry; the Fed denied Custodia Bank’s application for Master Account (i.e. access to Fed’s networks) citing concerns on its digital assets; Silvergate/SI had to tap the FHLB for liquidity when it had a run (curious because this has nothing to do with housing). Banks are so concerned about crypto ties that the nonprofit Crypto Freedom Lab has difficulty opening bank account(s) – it has checks from donations, but it cannot deposit them. Stablecoins are also in the crosshairs of the Government. Even the US-based Coinbase/COIN is not immune from some of these difficulties. The Government’s idea seems to choke the crypto industry via regulations and by cutting off access to the US banking system, and some think that this is possibly in preparation for the launch of the US CBDC/digital-dollar.
Pg 18: FUNDS. Best Fund Families are ranked based on performance in 8 fund categories and are asset-weighted.
For 2022: 1-DFA, 2-Victory, 3-Neuberger Berman, 4-Capital Group/AF, 5-JPM,…, 18-Franklin Templeton,…, 21-Vanguard,…, 23-Pimco,…, 30-Fidelity, 31-Nuveen/TIAA,…, 36-Price.
For 5 Years: 1-Fidelity, 2-MFS, 3-Putnam, 4-Mainstay, 5-Amundi US, 6-Pimco,…, 10-Neuberger Berman,…, 13-Capital Group/AF,. 14-JPM,…, 17-DFA, 18-Vanguard,…, 21-Price,…, 26-Victory, 30-Nuveen/TIAA,…, 41-Franklin Templeton.
10-year rankings and rankings within the fund categories are also provided. (Too much detail to be included here, so access Barron’s online, at newsstand, or at local library)
Pg 22: Early TAX moves for 2023: Pay attention to inflation adjustments in various tax brackets; tax-loss harvesting (TLH; why wait until October or December?); take RMDs from stocks/funds that are up; Roth Conversions (from eventually taxable T-IRA to tax-free R-IRA); start and/or contribute to 529s (Secure 2.0 will allow limited conversions of excess funds to R-IRAs, plus other recent improvements – grandparents’ 529 made more attractive; state incentives for 529s for newborns).
Pg 24, INCOME INVESTING. Be wary of higher-yielding EM debt, whether dollar-denominated (EMB) or in local currencies (EBND, LEMB). Many EM countries are at different stages of the rate cycle, and dollar can also have a significant impact.
Pg 24, ECONOMY. NO LANDING (neither soft nor hard) is still plausible. The economy may just slow as the FED keeps RATES high with high INFLATION. This market rebound from October lows has been a bet on no/soft landing. With Fed funds peaking at 5.50%, the money-market funds and T-Bills will be catching up to 5.xx%. However, no landing may just defer the settling of soft vs hard landing issue (it’s like a plane that skips landing but then after making a few loops, has to land somehow, soft or hard).
Pg 25, TECH TRADER. MSFT Bing Chat (“Sydney”) is an improvement overOpenAI ChatGPT. However, Bing Chat may provide some wrong answers, constrained by its databases, and may become unpredictable, even irritable/hostile, with long line follow up questions (MSFT says that it was intended for short Q&As but is working on fixes for this “entertainment aspect” by possibly refreshing/restarting after few Q&As). Content authors and publishers are complaining about free, unauthorized and extensive uses of their materials within the databases. MSFT hopes to gain market share in search where GOOGL has a near monopoly (and its chatbot candidate Bard had a disastrous debut recently).
Pg 26, FUNDS. Gibson Smith, Smith Capital (core-plus SMTRX, etc); formerly, Janus Hendersen FI-CIO (JABAX, etc). After a disastrous 2022, BONDS in 2023 are the most attractive in a decade and may remain so for 12-24 months. Money is flowing into bond funds. The FED is near the tail end of its monetary tightening (rate hikes, QT). Remember that slowing economy or recessions are good for the bond market (true for investment-grade bonds, but not for spread products, HY, EMs, etc). He doesn’t like short-term bonds – yes, yields are attractive, but for how long? He likes IT/LT bonds and a BARBELL approach. Bond volatility will remain (Treasury MOVE 110.11). For corporates, he looks at company fundamentals first, and then invest in its bonds, investment-grade or HY. He also likes MBS and CMOs.
Pg 54, OTHER VOICES. Arvind KRISHNAMURTHY and Hanno LUSTIG, Stanford U. The CBO projects that by 2052, the annual US budget deficit will rise to 7.9% of GDP (from 3.5%) and the total US federal debt to 195% of GDP (from about 100%). The CBO assumes extrapolation of the current situation without any future changes (but major changes will be made). The US is benefitting from the global reserve status of the DOLLAR that makes persistent US deficits and debt more palatable globally (otherwise, the supply of dollars will dwindle). But games with the US DEBT-CEILING may end all that with a huge global crisis. The last such debacle in 2011 caused only minor hiccups, but this time may be different. (Time for fiscal control and discipline is when appropriations are made, not when the bills come due after the spending)
(EXTRAS from online Friday that didn’t make the weekend paper version)
FUNDS. ETFs that are benefiting from higher rates include DIVO, DGRW, GCOW, LVHI, ROUS, TBF (short Treasuries).
ESG. As part of its energy transition, Ford/F has eliminated thousands of old ICE-related jobs in the US, Europe, Asia, and is creating thousands of EV-related jobs in the US to benefit from the 2022 Inflation Reduction Act (IRA) that also promoted onshoring. The EU is coming up with incentive programs similar to the US 2022 IRA. However, industry-wide, thousands of jobs net would be lost by the ICE to EV transition.
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).