Post by Admin/YBB on Mar 18, 2023 8:14:17 GMT -6
Pg 10-11. Treasury Secretary YELLEN discusses the FY 2024 budget at Senate subcommittee on WEDNESDAY and at House subcommittee on THURSDAY. FOMC Statement and POWELL’s presser on WEDNESDAY (+25 bps hike expected but look for changes in guidance). BOE monetary policy decision on THURSDAY.
REVIEW. CONSUMER-STAPLES (XLP) have been lagging but may benefit from the banking crisis.
PREVIEW. Online travel aggregator Trivago/TRVG (hotels, resorts) is benefitting from inflation and China reopening. With rising prices, consumers search more for deals. (Majority owned by Expedia/EXPE)
DATA THIS WEEK. Existing home sales on TUESDAY; new home sales on THURSDAY; durable goods orders, manufacturing PMI, services PMI on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Darden Restaurants (DRI; fwd P/E 17.8; brands Olive Garden, Capital Grille, LongHorn Steakhouse, etc, Cheddar’s, Bahama Breeze; reports 3/23/23; pg 26);
AmEx (AXP; it is premium-card company and payment processor; it will be fine in the current banking crisis; didn’t cut down operations during the pandemic and that is showing benefits now; economy is bifurcated now as it sees strength in its card business but some weaknesses elsewhere; pg 33).
BEARISH.
(Banking Crisis features continue beyond the Cover Story in Part 1. Some have become repetitive.)
Pg 14: This BANKING CRISIS will make the FED’s job even more difficult. The Fed has been moving fast with RATE hikes and QT to tame high INFLATION and may now require pause or adjustment in its pace. The economic data remain strong (labor, CPI, retail sales, etc). But the credit conditions may tighten naturally as banks become cautious. Despite banking troubles in Europe (CS, etc), the ECB went ahead with +50 bps hike. The fed fund futures are pricing +25 bps rate hike (and then pause/cuts).
Pg 15: Wealthy clients didn’t save the failed SVB (1983- ) or the troubled FRC (1985- ) BANKS. Regulators are looking into the causes of their sudden failures/troubles. Would some blame go to San Francisco Fed President Mary DALY or the Fed (POWELL)?
Pg 16: This banking CRISIS is bad, but it isn’t the GFC 2008-09. There were regulatory lapses, balance sheet holes (due to higher rates), bad business models, poor risk controls, high levels of uninsured (and unstable) deposits, weakness in the tech sector and cryptos (these banks specialized in techs and/or cryptos). The FED would now insure ALL deposits at SVB and Signature. As for the post-GFC regulations, those focused on systemically important banks (SIBs) and ended up shifting lot of risks to smaller banks (many of whom lobbied successfully for lesser regulations). During the years of ZIRP and QEs, banks used excess deposits to buy lots of Treasuries/agencies, the safest credit-wise, but those created big holes in their balance sheets when RATES rose quickly; the accumulated portfolio losses were $620 billion in December 2022 (but were hidden by the HTM accounting). The US banking may evolve into a DUAL-class system with the SIBs (with implied unlimited government protections) and smaller banks (with only regular/limited FDIC protections). However, a decline in the number of smaller banks may lead to slowdown in many local economies as these smaller banks are more tuned to the needs of the local businesses. The social-media has also accelerated the spread of news and rumors and may have fueled the bank runs. Some new REGULATIONS will be coming in the aftermath of this banking crisis.
Pg 18: The 100 MOST INFLUENTIAL WOMEN IN US FINANCE, 2023 (alphabetical listing). Barron’s online will gradually have profiles of most of these. Some names familiar to me (26/100) include:
Rupal BHANSALI/Ariel, Lael BRAINARD/NEC (formerly, Fed VC), Abby Joseph COHEN/Columbia U (formerly, GS), Lisa COOK/Fed, Mary DALY/SF Fed, Sonal DESAI/Franklin Templeton, Thasunda Brown Duckett/TIAA, Mellody HOBSON/Ariel, Amy HOOD/MSFT, Abigail JOHNSON/Fidelity, Sarah KETTERER/Causeway Capital, Lina KHAN/FTC, Sallie KRAWCHECK/Ellevest, Nancy LAZAR/Piper Sandler, Lorie LOGAN/Dallas Fed, Saira MALIK/Nuveen/TIAA, Lynn MARTIN/NYSE, Mary MEEKER/Bond Capital, Ruth PORAT/GOOGL, Claudia SAHM/Sahm Consulting, Liz Ann SONDERS/Schwab, Savita SUBRAMANIAN/BoA, Dana TELSEY/Telsey Group, Meryl WITMER/Eagle Capital, Cathie WOOD/ARK, Janet YELLEN/Treasury.
Pg 24: Mary ERDOES, JPM. RISK management in banking is essential. 3 recent bank failures (Silvergate, SVB, Signature) were partly from weaknesses in risk controls. The banking system as a whole is in much better shape now than during the GFC 2008-09 – the loan/deposit ratios are low; the capital ratios are high. There is much higher regulatory scrutiny for the systemically important banks (SIBs) than for smaller banks and may be new regulations can address that. Chances for US RECESSION are high (65%) and JPM is prepared; some sectors of the economy such as housing may be in recession already. FED’s path to +2% average inflation won’t be easy or smooth. After the disaster last year, the 60-40 portfolios look attractive for these volatile markets. ALTERNATIVE investments are fine for those who can take higher risks, but don’t overdo those as some university endowments have done. DIVERSIFICATION is useful but keep in mind that diversified mixes evolve; problems arise when investors get stuck on some fixed diversification mixes. HOME-COUNTRY biases are strong in the US but are everywhere. The ESG is in flux, and it is important to provide the asset managers the leeway on ESG. JPM is using AI for security and fraud prevention.
CHINA is challenging but important; even if you are not in China, it will affect your investments. After 100+ years in China, and lots of efforts there, JPM can now own 100% of its joint-ventures and it has big expansion plans targeted for the Chinese population. But JPM stays away from the politics of the US-China relations. JPM sent a delegation to UKRAINE in February because JPM is #1 debt issuer for Ukraine; it gave Ukraine 2-yr payment deferrals after the war started; it will also be involved heavily in post-war reconstruction and redevelopment (and some thought that JPM was pulling a stunt with its Ukraine trip).
Pg 27, FOLLOW UP. GOLD is shining again, and NEM (fwd P/E 6.7) is attractive.
Pg 28, FUNDS. There are lots of crosscurrents in the fund flows. Money is moving into money-market funds, ultra-short-term bond funds (this category now is different from the pre-GFC category), short-term bond funds, bank money-market accounts (FDIC insured), online savings accounts (FDIC insured), T-Bills (at brokerages or Treasury Direct).
Pg 30, INCOME INVESTING. Despite the headlines of a regional banking CRISIS (crashing KBE, KRE; failures of Silvergate Bank, SVB Bank, Signature Bank), regionals bank dividends appear sustainable (FITB, KEY, MTB, PNC, TFC, USB) – IF there is no recession.
Pg 31, TECH TRADER. Lot of CASH held by companies ($3.6 trillion) is in uninsured BANK deposits; sometimes, the terms of bank lending/financing require the money to be held at the lending bank(s). Larger companies have hundreds, even thousands, of bank accounts all over the world and their corporate treasurers or CFOs manage that liquidity. But smaller companies may be better off holding unrestricted cash in the money-market funds, the ICD Portal for auto-distribution to multiple money-market funds, T-Bills, etc.
Pg 32, ECONOMY. Days of the FED remitting billions to Treasury are over. Its income stream is just a trickle. Its operating losses have mounted. Due to the QT, the Fed isn’t adding any newer, higher-rate securities to its portfolio. As a consequence, the US budget DEFICIT will go up.
Pg 62, OTHER VOICES. Viral ACHARYA, NYU and former Deputy Governor of RBI (India) and Raghuram RAJAN, U Chicago, former Governor of RBI (India) and former Chief Economist of the IMF. How has the world changed just days after POWELL’s House and Senate testimonies? 3 US banks failed – Silvergate, SVB (#2 biggest failure), Signature (#3 biggest failure). They had large uninsured deposits, and when those fled, they had to sell underwater securities in bulk, and the related losses wiped out their equity. The FED took over SVB and Signature and guaranteed ALL deposits (in a hearing, YELLEN said that in future the uninsured deposit from the SIBs may also be guaranteed upon Presidential determination of systemic risk, but not so for community banks). However, the problem that these failed banks faced isn’t that unusual in the banking system today after several years of ZIRP and QEs. There were also failures in banks’ monitoring of risks as well as in the bank supervision. It isn’t as easy for banks to reverse the effects of QEs just because the Fed is doing the QT quickly.; there were difficulties also seen in 2017, 2019, and now. May be the Fed should slowdown on its rate hikes and QT, and tame INFLATION more gradually over a longer timeframe.
(EXTRAS from online Friday that didn’t make the weekend paper version)
FUNDS. Despite recent strength in CRYPTO currencies, investors are fleeing crypto funds.
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
REVIEW. CONSUMER-STAPLES (XLP) have been lagging but may benefit from the banking crisis.
PREVIEW. Online travel aggregator Trivago/TRVG (hotels, resorts) is benefitting from inflation and China reopening. With rising prices, consumers search more for deals. (Majority owned by Expedia/EXPE)
DATA THIS WEEK. Existing home sales on TUESDAY; new home sales on THURSDAY; durable goods orders, manufacturing PMI, services PMI on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Darden Restaurants (DRI; fwd P/E 17.8; brands Olive Garden, Capital Grille, LongHorn Steakhouse, etc, Cheddar’s, Bahama Breeze; reports 3/23/23; pg 26);
AmEx (AXP; it is premium-card company and payment processor; it will be fine in the current banking crisis; didn’t cut down operations during the pandemic and that is showing benefits now; economy is bifurcated now as it sees strength in its card business but some weaknesses elsewhere; pg 33).
BEARISH.
(Banking Crisis features continue beyond the Cover Story in Part 1. Some have become repetitive.)
Pg 14: This BANKING CRISIS will make the FED’s job even more difficult. The Fed has been moving fast with RATE hikes and QT to tame high INFLATION and may now require pause or adjustment in its pace. The economic data remain strong (labor, CPI, retail sales, etc). But the credit conditions may tighten naturally as banks become cautious. Despite banking troubles in Europe (CS, etc), the ECB went ahead with +50 bps hike. The fed fund futures are pricing +25 bps rate hike (and then pause/cuts).
Pg 15: Wealthy clients didn’t save the failed SVB (1983- ) or the troubled FRC (1985- ) BANKS. Regulators are looking into the causes of their sudden failures/troubles. Would some blame go to San Francisco Fed President Mary DALY or the Fed (POWELL)?
Pg 16: This banking CRISIS is bad, but it isn’t the GFC 2008-09. There were regulatory lapses, balance sheet holes (due to higher rates), bad business models, poor risk controls, high levels of uninsured (and unstable) deposits, weakness in the tech sector and cryptos (these banks specialized in techs and/or cryptos). The FED would now insure ALL deposits at SVB and Signature. As for the post-GFC regulations, those focused on systemically important banks (SIBs) and ended up shifting lot of risks to smaller banks (many of whom lobbied successfully for lesser regulations). During the years of ZIRP and QEs, banks used excess deposits to buy lots of Treasuries/agencies, the safest credit-wise, but those created big holes in their balance sheets when RATES rose quickly; the accumulated portfolio losses were $620 billion in December 2022 (but were hidden by the HTM accounting). The US banking may evolve into a DUAL-class system with the SIBs (with implied unlimited government protections) and smaller banks (with only regular/limited FDIC protections). However, a decline in the number of smaller banks may lead to slowdown in many local economies as these smaller banks are more tuned to the needs of the local businesses. The social-media has also accelerated the spread of news and rumors and may have fueled the bank runs. Some new REGULATIONS will be coming in the aftermath of this banking crisis.
Pg 18: The 100 MOST INFLUENTIAL WOMEN IN US FINANCE, 2023 (alphabetical listing). Barron’s online will gradually have profiles of most of these. Some names familiar to me (26/100) include:
Rupal BHANSALI/Ariel, Lael BRAINARD/NEC (formerly, Fed VC), Abby Joseph COHEN/Columbia U (formerly, GS), Lisa COOK/Fed, Mary DALY/SF Fed, Sonal DESAI/Franklin Templeton, Thasunda Brown Duckett/TIAA, Mellody HOBSON/Ariel, Amy HOOD/MSFT, Abigail JOHNSON/Fidelity, Sarah KETTERER/Causeway Capital, Lina KHAN/FTC, Sallie KRAWCHECK/Ellevest, Nancy LAZAR/Piper Sandler, Lorie LOGAN/Dallas Fed, Saira MALIK/Nuveen/TIAA, Lynn MARTIN/NYSE, Mary MEEKER/Bond Capital, Ruth PORAT/GOOGL, Claudia SAHM/Sahm Consulting, Liz Ann SONDERS/Schwab, Savita SUBRAMANIAN/BoA, Dana TELSEY/Telsey Group, Meryl WITMER/Eagle Capital, Cathie WOOD/ARK, Janet YELLEN/Treasury.
Pg 24: Mary ERDOES, JPM. RISK management in banking is essential. 3 recent bank failures (Silvergate, SVB, Signature) were partly from weaknesses in risk controls. The banking system as a whole is in much better shape now than during the GFC 2008-09 – the loan/deposit ratios are low; the capital ratios are high. There is much higher regulatory scrutiny for the systemically important banks (SIBs) than for smaller banks and may be new regulations can address that. Chances for US RECESSION are high (65%) and JPM is prepared; some sectors of the economy such as housing may be in recession already. FED’s path to +2% average inflation won’t be easy or smooth. After the disaster last year, the 60-40 portfolios look attractive for these volatile markets. ALTERNATIVE investments are fine for those who can take higher risks, but don’t overdo those as some university endowments have done. DIVERSIFICATION is useful but keep in mind that diversified mixes evolve; problems arise when investors get stuck on some fixed diversification mixes. HOME-COUNTRY biases are strong in the US but are everywhere. The ESG is in flux, and it is important to provide the asset managers the leeway on ESG. JPM is using AI for security and fraud prevention.
CHINA is challenging but important; even if you are not in China, it will affect your investments. After 100+ years in China, and lots of efforts there, JPM can now own 100% of its joint-ventures and it has big expansion plans targeted for the Chinese population. But JPM stays away from the politics of the US-China relations. JPM sent a delegation to UKRAINE in February because JPM is #1 debt issuer for Ukraine; it gave Ukraine 2-yr payment deferrals after the war started; it will also be involved heavily in post-war reconstruction and redevelopment (and some thought that JPM was pulling a stunt with its Ukraine trip).
Pg 27, FOLLOW UP. GOLD is shining again, and NEM (fwd P/E 6.7) is attractive.
Pg 28, FUNDS. There are lots of crosscurrents in the fund flows. Money is moving into money-market funds, ultra-short-term bond funds (this category now is different from the pre-GFC category), short-term bond funds, bank money-market accounts (FDIC insured), online savings accounts (FDIC insured), T-Bills (at brokerages or Treasury Direct).
Pg 30, INCOME INVESTING. Despite the headlines of a regional banking CRISIS (crashing KBE, KRE; failures of Silvergate Bank, SVB Bank, Signature Bank), regionals bank dividends appear sustainable (FITB, KEY, MTB, PNC, TFC, USB) – IF there is no recession.
Pg 31, TECH TRADER. Lot of CASH held by companies ($3.6 trillion) is in uninsured BANK deposits; sometimes, the terms of bank lending/financing require the money to be held at the lending bank(s). Larger companies have hundreds, even thousands, of bank accounts all over the world and their corporate treasurers or CFOs manage that liquidity. But smaller companies may be better off holding unrestricted cash in the money-market funds, the ICD Portal for auto-distribution to multiple money-market funds, T-Bills, etc.
Pg 32, ECONOMY. Days of the FED remitting billions to Treasury are over. Its income stream is just a trickle. Its operating losses have mounted. Due to the QT, the Fed isn’t adding any newer, higher-rate securities to its portfolio. As a consequence, the US budget DEFICIT will go up.
Pg 62, OTHER VOICES. Viral ACHARYA, NYU and former Deputy Governor of RBI (India) and Raghuram RAJAN, U Chicago, former Governor of RBI (India) and former Chief Economist of the IMF. How has the world changed just days after POWELL’s House and Senate testimonies? 3 US banks failed – Silvergate, SVB (#2 biggest failure), Signature (#3 biggest failure). They had large uninsured deposits, and when those fled, they had to sell underwater securities in bulk, and the related losses wiped out their equity. The FED took over SVB and Signature and guaranteed ALL deposits (in a hearing, YELLEN said that in future the uninsured deposit from the SIBs may also be guaranteed upon Presidential determination of systemic risk, but not so for community banks). However, the problem that these failed banks faced isn’t that unusual in the banking system today after several years of ZIRP and QEs. There were also failures in banks’ monitoring of risks as well as in the bank supervision. It isn’t as easy for banks to reverse the effects of QEs just because the Fed is doing the QT quickly.; there were difficulties also seen in 2017, 2019, and now. May be the Fed should slowdown on its rate hikes and QT, and tame INFLATION more gradually over a longer timeframe.
(EXTRAS from online Friday that didn’t make the weekend paper version)
FUNDS. Despite recent strength in CRYPTO currencies, investors are fleeing crypto funds.
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).