Post by Admin/YBB on Feb 25, 2023 8:59:30 GMT -6
Pg 12-13.
REVIEW. Mondelez (MDLZ; fwd P/E 21) is making a bet on growing popularity of Oreo cookies.
PREVIEW. Train derailment in East Palestine, OH will lead to train safety reforms. Westinghouse Air Brake Technologies/WAB provides the old Westinghouse air brakes (using compressed air) and newer, more expensive electronically controlled pneumatic brakes (ECP). There have been attempts to require ECP brakes but those haven’t succeeded so far.
DATA THIS WEEK. Durable goods report on MONDAY; consumer confidence, home price index, ISM Chicago business barometer, wholesale inventories on TUESDAY; ISM manufacturing PMI on WEDNESDAY; ISM services PMI, Q4 productivity on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. FirstEnergy (FE; yield 3.9%; fwd P/E 15.8; electricity distribution in OH, PA, NJ; fines in 2021 related to bribery scandal; Interim CEO; Icahn’s IEP owns 3%, Blackstone/BX 5%; pg 16);
Cyclicals with pricing power (URI, DE, HON, DAL, LIN, SLB, WYNN; switch to growth when the Fed pivots; pg 20).
BEARISH.
Pg 14, ESG. The 2022 Inflation reduction Act (2022 IRA) is leading to a boom in CLEAN ENERGY. Several companies are tapping into the incentives provided under 2022 IRA. Several new battery plants have been announced. Mentioned are GLW, ENPH, FREY, NTOIY, SBGSY.
Pg 17, FUNDS. Grayscale (owned by DCG) and its Bitcoin trust GBTC and the SEC are in the Court of Appeals on March 7 on the issue of ETF conversion. Owners/holders of GBTC are counting on huge $7 billion windfall due to the closure of GBTC discount (without that much speculative windfall, nobody would bother). The SEC has only approved futures-based crypto ETFs so far (BITO, etc), but has rejected direct crypto-holding ETFs from Grayscale, Fidelity, VanEck, WisdomTree/WT, etc. The SEC says that all spot-crypto markets are unregulated and subject to manipulation. DCG is also being sued by some investors for mismanaging and misrepresenting GBTC and its high fees (most of those go to DCG). Another option for Grayscale would be partial tender offers to try to close the discount; that would also require SEC approval.
Pg 21: Brian MOYNIHAN, CEO 2010- , BoA/BAC. Strong consumer spending has pushed mild RECESSION to late-2023 or early-2024; Bank’s recession forecast has been revised several times already. INFLATION may have peaked. The FED was slow to act but may have to keep rates higher for longer. Bank is involved in ESG and energy transitions.
Pg 22: BIOSIMILAR drugs were supposed to offer price competition for original BIOLOGIC drugs. But the PBMs (pharmacy-benefit managers) aren’t embracing biosimilars. The original biologic drug manufacturer may offer larger rebates/discounts to PBMs and retail chains. The PBMs may keep insurance charges for biosimilars the same or higher based on their deals with manufacturers. Biosimilars are more difficult to develop and require extensive FDA approvals. MEDICARE drug pricing negotiations under the Inflation Reduction Act may affect this market – biologics with multiple biosimilars may be exempt from the required Medicare negotiations, and it may suddenly be in the interests of biologic drug manufactures to have viable biosimilars. ABBV-Humira’s biosimilars are used as examples; several possible future examples are also mentioned.
Pg 24: FUNDS. Several fund firms are providing shareholders more opportunities to participate in PROXY VOTING (BlackRock/BLK, Schwab/SCHW, Vanguard, etc). This may also give boost to the ESG efforts. (by MFO @lewisbraham)
Pg 25, INCOME INVESTING. Quality short-term bonds may be the best way to play no landing scenario; T-Bills are yielding 5%+ and 10-yr is nearing 4%. Bonds and bond funds have suffered – they don’t mature and have RATE and DURATION risks (VCSH, AGG, HYG). Better opportunities will be ahead for longer-duration and lower-quality bonds.
Pg 25, TECH TRADER. Are computer ALGORITHMS speech? In 2 cases before the SUPREMES on social-media and Section 230, issues were whether algorithmic-moderations for content fall under Section 230. The current case law allows human-moderations without the fear of liabilities. Supremes seem to favor Section 230 with broader interpretations and that may go in the favor of the social-media firms. Stay tuned.
Pg 26: Simon POWELL, Jefferies (he is based in HK). CHINA’s population is aging and has peaked – it may be halved by 2050. Pandemic has accelerated several trends including DEMOGRAPHIC. A big factor for China was its one-child policy from 1980-2015 that has caused many distortions. Demographics will impact property, consumer and education sectors. More attractive may be healthcare, automation/robotics, new technologies (EVs, batteries, etc). Despite China REOPENING, some investors are staying away from China, but a prudent approach may be to just avoid overweight in China, but also to have exposure to the US defense sector. Chinese spy BALLOON was negative for the US-China relations. Domestic UNREST may make the government more adventurous on Taiwan. Any SANCTIONS on China would be far more damaging (than those for Russia now); it would take years to decouple from China.
Pg 54, OTHER VOICES. Martin Neil BAILY, Brookings Institution. PANDEMIC disrupted many people’s lives, jobs and retirement plans. It also revealed the shortcomings of the fragmented US retirement systems. PENSIONS are long gone from the corporate world (they are gradually disappearing from the public sector too). People now have to fend for themselves with their own INVESTMENTS and SAVINGS; 401k/403b, IRAs, Social Security (itself shaky after 2033) help some. Many are concerned about running out of money; ANNUITIES (or group annuities through employers) may be a solution, but commercial annuities have their faults (expensive; unnecessary bells and whistles); wealthy tend to hoard more in case they need long-term care (although the commercial LTCI market is fast disappearing) or expensive medical treatments. Sound policies and personal planning are needed for secure retirement. Some steps include SAVE more through 401k/403b, IRAs; INVEST wisely; DOWNSIZE home in retirement and tap home equity (but beware of reverse mortgages). (Some of these are easier said than done) Many long for old days with better retirement security, but those days aren’t coming back. Book, The Retirement Challenge: What’s Wrong With America’s System and a Sensible Way to Fix It, 01/2023.
(EXTRAS from online Friday that didn’t make the weekend paper version)
None
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
REVIEW. Mondelez (MDLZ; fwd P/E 21) is making a bet on growing popularity of Oreo cookies.
PREVIEW. Train derailment in East Palestine, OH will lead to train safety reforms. Westinghouse Air Brake Technologies/WAB provides the old Westinghouse air brakes (using compressed air) and newer, more expensive electronically controlled pneumatic brakes (ECP). There have been attempts to require ECP brakes but those haven’t succeeded so far.
DATA THIS WEEK. Durable goods report on MONDAY; consumer confidence, home price index, ISM Chicago business barometer, wholesale inventories on TUESDAY; ISM manufacturing PMI on WEDNESDAY; ISM services PMI, Q4 productivity on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. FirstEnergy (FE; yield 3.9%; fwd P/E 15.8; electricity distribution in OH, PA, NJ; fines in 2021 related to bribery scandal; Interim CEO; Icahn’s IEP owns 3%, Blackstone/BX 5%; pg 16);
Cyclicals with pricing power (URI, DE, HON, DAL, LIN, SLB, WYNN; switch to growth when the Fed pivots; pg 20).
BEARISH.
Pg 14, ESG. The 2022 Inflation reduction Act (2022 IRA) is leading to a boom in CLEAN ENERGY. Several companies are tapping into the incentives provided under 2022 IRA. Several new battery plants have been announced. Mentioned are GLW, ENPH, FREY, NTOIY, SBGSY.
Pg 17, FUNDS. Grayscale (owned by DCG) and its Bitcoin trust GBTC and the SEC are in the Court of Appeals on March 7 on the issue of ETF conversion. Owners/holders of GBTC are counting on huge $7 billion windfall due to the closure of GBTC discount (without that much speculative windfall, nobody would bother). The SEC has only approved futures-based crypto ETFs so far (BITO, etc), but has rejected direct crypto-holding ETFs from Grayscale, Fidelity, VanEck, WisdomTree/WT, etc. The SEC says that all spot-crypto markets are unregulated and subject to manipulation. DCG is also being sued by some investors for mismanaging and misrepresenting GBTC and its high fees (most of those go to DCG). Another option for Grayscale would be partial tender offers to try to close the discount; that would also require SEC approval.
Pg 21: Brian MOYNIHAN, CEO 2010- , BoA/BAC. Strong consumer spending has pushed mild RECESSION to late-2023 or early-2024; Bank’s recession forecast has been revised several times already. INFLATION may have peaked. The FED was slow to act but may have to keep rates higher for longer. Bank is involved in ESG and energy transitions.
Pg 22: BIOSIMILAR drugs were supposed to offer price competition for original BIOLOGIC drugs. But the PBMs (pharmacy-benefit managers) aren’t embracing biosimilars. The original biologic drug manufacturer may offer larger rebates/discounts to PBMs and retail chains. The PBMs may keep insurance charges for biosimilars the same or higher based on their deals with manufacturers. Biosimilars are more difficult to develop and require extensive FDA approvals. MEDICARE drug pricing negotiations under the Inflation Reduction Act may affect this market – biologics with multiple biosimilars may be exempt from the required Medicare negotiations, and it may suddenly be in the interests of biologic drug manufactures to have viable biosimilars. ABBV-Humira’s biosimilars are used as examples; several possible future examples are also mentioned.
Pg 24: FUNDS. Several fund firms are providing shareholders more opportunities to participate in PROXY VOTING (BlackRock/BLK, Schwab/SCHW, Vanguard, etc). This may also give boost to the ESG efforts. (by MFO @lewisbraham)
Pg 25, INCOME INVESTING. Quality short-term bonds may be the best way to play no landing scenario; T-Bills are yielding 5%+ and 10-yr is nearing 4%. Bonds and bond funds have suffered – they don’t mature and have RATE and DURATION risks (VCSH, AGG, HYG). Better opportunities will be ahead for longer-duration and lower-quality bonds.
Pg 25, TECH TRADER. Are computer ALGORITHMS speech? In 2 cases before the SUPREMES on social-media and Section 230, issues were whether algorithmic-moderations for content fall under Section 230. The current case law allows human-moderations without the fear of liabilities. Supremes seem to favor Section 230 with broader interpretations and that may go in the favor of the social-media firms. Stay tuned.
Pg 26: Simon POWELL, Jefferies (he is based in HK). CHINA’s population is aging and has peaked – it may be halved by 2050. Pandemic has accelerated several trends including DEMOGRAPHIC. A big factor for China was its one-child policy from 1980-2015 that has caused many distortions. Demographics will impact property, consumer and education sectors. More attractive may be healthcare, automation/robotics, new technologies (EVs, batteries, etc). Despite China REOPENING, some investors are staying away from China, but a prudent approach may be to just avoid overweight in China, but also to have exposure to the US defense sector. Chinese spy BALLOON was negative for the US-China relations. Domestic UNREST may make the government more adventurous on Taiwan. Any SANCTIONS on China would be far more damaging (than those for Russia now); it would take years to decouple from China.
Pg 54, OTHER VOICES. Martin Neil BAILY, Brookings Institution. PANDEMIC disrupted many people’s lives, jobs and retirement plans. It also revealed the shortcomings of the fragmented US retirement systems. PENSIONS are long gone from the corporate world (they are gradually disappearing from the public sector too). People now have to fend for themselves with their own INVESTMENTS and SAVINGS; 401k/403b, IRAs, Social Security (itself shaky after 2033) help some. Many are concerned about running out of money; ANNUITIES (or group annuities through employers) may be a solution, but commercial annuities have their faults (expensive; unnecessary bells and whistles); wealthy tend to hoard more in case they need long-term care (although the commercial LTCI market is fast disappearing) or expensive medical treatments. Sound policies and personal planning are needed for secure retirement. Some steps include SAVE more through 401k/403b, IRAs; INVEST wisely; DOWNSIZE home in retirement and tap home equity (but beware of reverse mortgages). (Some of these are easier said than done) Many long for old days with better retirement security, but those days aren’t coming back. Book, The Retirement Challenge: What’s Wrong With America’s System and a Sensible Way to Fix It, 01/2023.
(EXTRAS from online Friday that didn’t make the weekend paper version)
None
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).