Post by Admin/YBB on Mar 25, 2023 7:34:58 GMT -6
Pg 10-11. Fed VC of Supervision BARR and FDIC Chair GRUENBERG appear before the House Financial Services committee on WEDNESDAY.
REVIEW. SoftBank/SFTBY has again rescued the office-space-rental company WeWork (2021 SPAC merger) through another restructuring that will massively dilute the shareholders of this depressed stock. But bankruptcy will be avoided.
PREVIEW. UBS is now huge (#2 globally; #1-MS) and that may be its risk. There is a merger integration risk with the acquired/rescued Credit Suisse that will consume lot of time, energy and resources. Some good UBS advisors and wealthy clients may go elsewhere.
DATA THIS WEEK. Dallas Fed Texas manufacturing outlook on MONDAY; home price index, consumer confidence on TUESDAY; pending home sales on WEDNESDAY; final Q4 GDP on THURSDAY; UM sentiment, personal income and consumption (core PCE +4.7% yoy) on FRIDAY.
MONEY-MARKET FUND assets rose to $5 trillion. Weekly inflows have been strongest since 04/2020.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Bank preferreds (good yields; favorable tax treatment; bank preferreds are ahead of common stocks but count for bank capital if noncumulative (preferreds dividends must be paid before any common dividends); new BTFP and Discount Window support should benefit bank preferreds; risk – those from failed banks may be worthless, newly issues preferreds cannot be redeemed at face value for 5 years; from big banks/SIBs BAC-Q, JPM-M, MS-P, WFC-Z; from big regional banks FITB-A, RF-E; from speculative regionals NYCB-A, FRC-N; ETFs PFF, PREF; CEF JPS; pg 13);
Health insurer Humana (HUM; fwd P/E 17.8; growth from Medicare Advantage (but exiting employer MA plans) and senior-wellness (home care, pharmacy services, primary care) businesses; pg 15).
BEARISH. Schwab (SCHW; cash-sorting – lot of cash is leaving Schwab because its brokerage accounts don’t offer money-market funds as core/settlement account and Schwab Bank rates are paltry; 50% of 2022 revenues were from net interest revenues; the HTM portfolio is carried at par, but if marked-to-market, losses would well exceed the capital base; Schwab points out that the AFS portfolio (already market-to-market) will provide ample liquidity; insiders bought stock to boost confidence; stock may remain weak; a full-page ad on its government SNVXX and retail-prime SWVXX money-market funds is on pg 21; pg 14).
Pg 12: TIKTOK has troubles in the US again. CEO CHEW at congressional hearings didn’t help; his deference to China on several hot button issues backfired. A few years ago, it almost sold the US operations (ORCL and MSFT were possible buyers), but when pressures declined, not much happened. While its US network has mostly moved to Oracle/ORCL servers (Project Texas), some ties and back-office work remain with the Chinese parent ByteDance and that is raising privacy and security concerns again. China also said that it would oppose an outright sale and it has new laws on national intelligence (especially, Articles 7 and 10 require cooperation with Chinese authorities). The US beneficiaries of ban or sale may be META, YouTube/GOOGL, SNAP. More comprehensive reforms for the US social-media may also follow (privacy, content rights, Section 230, etc).
Pg 20: RETIREMENT PLANNING steps 10-Yrs ahead. Market risks (also called the SOR risks) are the highest during this period. Important are asset allocation (60-40 may be a good compromise), savings rate (also look at 50+ catchups), debt/liability management, contingency planning, income streams (decumulation; need total picture with Social Security, pensions, annuities, portfolio withdrawals), healthcare (including insurance).
Pg 23, ECONOMY. Should the FED choose between solving the BANKING crisis or taming the INFLATION? The fed fund futures market is betting on the former, but POWELL’s words pointed to the latter. There were also mixed messages about the FDIC coverage by Powell and YELLEN. Banks facing reduced asset valuations (direct for AFS portfolio, indirect/implied for HTM portfolio) may turn cautious on lending and this effect may be equivalent to +50 bps rate hike. The Fed has provided $354 billion in short-term collateralized loans on easy terms to banks within days through the new BTFP facility and the existing Discount Window, but that loan growth is now slowing. The US banking problems spread to Switzerland (UBS and government rescue of Credit Suisse) and may spread to Germany (troubled DB).
Pg 24, FUNDS. How much money is invested by fund MANAGERS in the funds they manage may be important. The SEC annual disclosures have wide ranges. Almost 65.3% of funds have no investments from their managers and only 16.5% have $1+ million. This may be more significant for new funds. (There can be issues of suitability for fund managers. Also, the amounts relative to salaries may be more meaningful than the absolute $amounts.) (by @lewisbraham at MFO)
Pg 24, INCOME INVESTING. CASH-BOND mixes are attractive now. That means money-market funds, T-Bills/Notes (held to maturity), CDs, short/intermediate-term bond funds. Use ladders and/or DCA.
Pg 25, TECH TRADER. Google’s Bard CHATBOT described itself as a 6-ft tall male with brown hair, blue eyes who is young, friendly, curious and techy – a typical Silicon Valley male? Strangely, Bing Chat had a similar self-description, but the free Chat GPT refused to describe itself.
Pg 26: Oliver CHEN, Cowen. RETAILERS are adjusting to the post-pandemic reality of online and in-store sales combo – omni-distribution is the key now. The value-oriented (COST, WMT; GO, etc) and luxury (LVMUY, etc) retailers are doing better, while the vast middle is squeezed. The job market and consumer spending remain strong. Higher rates and inflation are negatives. The INVENTORY cycle has been slow to adjust to rapid changes. The AI will benefit retailers, while privacy restrictions (by AAPL, GOOGL, etc) have hurt retailers.
Pg 54, OTHER VOICES. Karen PETROU, Federal Financial Analytics. The FDIC deposit insurance needs reform. Many banks hold large uninsured deposits that can cause quick bank runs. After the 1930s, there were banking crises in the 1980s, the GFC 2008-09, and now. The PUBLIC has come to assume that in a crunch, the US government will step in to protect all depositors, and that is exactly what happened. The government justified this by saying that the failed banks posed systemic risks to the US (and yet, those escaped the scrutiny of the SIBs). The US banking REGULATORS also failed as these failures occurred while they were watching these banks (everyone blamed social-media for the quick runs and collapses). The current uniform FDIC limit of $250 K per individual or entity doesn’t work (there are some workarounds and commercial services such as IntraFi to distribute deposits among the FDIC insured banks). Some ideas include transactional-account guarantee program that was used during the GFC 2008; unlimited FDIC insurance for individuals (natural persons), etc. But ad-hoc bank rescues are not the solution. Book, Engine of Inequality: The fed and the Future of Wealth in America, 03/2021.
(EXTRAS from online Friday that didn’t make the weekend paper version)
Daniel HOUSTON, CEO of Principal Financial/PFG. Businesses include insurance and annuities (mostly VAs now), asset management, retirement plan administration; a mix of institutional and retail businesses; targets are small/medium-size companies. This banking crisis doesn’t affect PFG directly. Almost 60% of its US staff is in Des Moines, IA and its hiring is mostly from Midwestern universities. His goals are stability, growth, profitability, and proper risk management.
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
REVIEW. SoftBank/SFTBY has again rescued the office-space-rental company WeWork (2021 SPAC merger) through another restructuring that will massively dilute the shareholders of this depressed stock. But bankruptcy will be avoided.
PREVIEW. UBS is now huge (#2 globally; #1-MS) and that may be its risk. There is a merger integration risk with the acquired/rescued Credit Suisse that will consume lot of time, energy and resources. Some good UBS advisors and wealthy clients may go elsewhere.
DATA THIS WEEK. Dallas Fed Texas manufacturing outlook on MONDAY; home price index, consumer confidence on TUESDAY; pending home sales on WEDNESDAY; final Q4 GDP on THURSDAY; UM sentiment, personal income and consumption (core PCE +4.7% yoy) on FRIDAY.
MONEY-MARKET FUND assets rose to $5 trillion. Weekly inflows have been strongest since 04/2020.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Bank preferreds (good yields; favorable tax treatment; bank preferreds are ahead of common stocks but count for bank capital if noncumulative (preferreds dividends must be paid before any common dividends); new BTFP and Discount Window support should benefit bank preferreds; risk – those from failed banks may be worthless, newly issues preferreds cannot be redeemed at face value for 5 years; from big banks/SIBs BAC-Q, JPM-M, MS-P, WFC-Z; from big regional banks FITB-A, RF-E; from speculative regionals NYCB-A, FRC-N; ETFs PFF, PREF; CEF JPS; pg 13);
Health insurer Humana (HUM; fwd P/E 17.8; growth from Medicare Advantage (but exiting employer MA plans) and senior-wellness (home care, pharmacy services, primary care) businesses; pg 15).
BEARISH. Schwab (SCHW; cash-sorting – lot of cash is leaving Schwab because its brokerage accounts don’t offer money-market funds as core/settlement account and Schwab Bank rates are paltry; 50% of 2022 revenues were from net interest revenues; the HTM portfolio is carried at par, but if marked-to-market, losses would well exceed the capital base; Schwab points out that the AFS portfolio (already market-to-market) will provide ample liquidity; insiders bought stock to boost confidence; stock may remain weak; a full-page ad on its government SNVXX and retail-prime SWVXX money-market funds is on pg 21; pg 14).
Pg 12: TIKTOK has troubles in the US again. CEO CHEW at congressional hearings didn’t help; his deference to China on several hot button issues backfired. A few years ago, it almost sold the US operations (ORCL and MSFT were possible buyers), but when pressures declined, not much happened. While its US network has mostly moved to Oracle/ORCL servers (Project Texas), some ties and back-office work remain with the Chinese parent ByteDance and that is raising privacy and security concerns again. China also said that it would oppose an outright sale and it has new laws on national intelligence (especially, Articles 7 and 10 require cooperation with Chinese authorities). The US beneficiaries of ban or sale may be META, YouTube/GOOGL, SNAP. More comprehensive reforms for the US social-media may also follow (privacy, content rights, Section 230, etc).
Pg 20: RETIREMENT PLANNING steps 10-Yrs ahead. Market risks (also called the SOR risks) are the highest during this period. Important are asset allocation (60-40 may be a good compromise), savings rate (also look at 50+ catchups), debt/liability management, contingency planning, income streams (decumulation; need total picture with Social Security, pensions, annuities, portfolio withdrawals), healthcare (including insurance).
Pg 23, ECONOMY. Should the FED choose between solving the BANKING crisis or taming the INFLATION? The fed fund futures market is betting on the former, but POWELL’s words pointed to the latter. There were also mixed messages about the FDIC coverage by Powell and YELLEN. Banks facing reduced asset valuations (direct for AFS portfolio, indirect/implied for HTM portfolio) may turn cautious on lending and this effect may be equivalent to +50 bps rate hike. The Fed has provided $354 billion in short-term collateralized loans on easy terms to banks within days through the new BTFP facility and the existing Discount Window, but that loan growth is now slowing. The US banking problems spread to Switzerland (UBS and government rescue of Credit Suisse) and may spread to Germany (troubled DB).
Pg 24, FUNDS. How much money is invested by fund MANAGERS in the funds they manage may be important. The SEC annual disclosures have wide ranges. Almost 65.3% of funds have no investments from their managers and only 16.5% have $1+ million. This may be more significant for new funds. (There can be issues of suitability for fund managers. Also, the amounts relative to salaries may be more meaningful than the absolute $amounts.) (by @lewisbraham at MFO)
Pg 24, INCOME INVESTING. CASH-BOND mixes are attractive now. That means money-market funds, T-Bills/Notes (held to maturity), CDs, short/intermediate-term bond funds. Use ladders and/or DCA.
Pg 25, TECH TRADER. Google’s Bard CHATBOT described itself as a 6-ft tall male with brown hair, blue eyes who is young, friendly, curious and techy – a typical Silicon Valley male? Strangely, Bing Chat had a similar self-description, but the free Chat GPT refused to describe itself.
Pg 26: Oliver CHEN, Cowen. RETAILERS are adjusting to the post-pandemic reality of online and in-store sales combo – omni-distribution is the key now. The value-oriented (COST, WMT; GO, etc) and luxury (LVMUY, etc) retailers are doing better, while the vast middle is squeezed. The job market and consumer spending remain strong. Higher rates and inflation are negatives. The INVENTORY cycle has been slow to adjust to rapid changes. The AI will benefit retailers, while privacy restrictions (by AAPL, GOOGL, etc) have hurt retailers.
Pg 54, OTHER VOICES. Karen PETROU, Federal Financial Analytics. The FDIC deposit insurance needs reform. Many banks hold large uninsured deposits that can cause quick bank runs. After the 1930s, there were banking crises in the 1980s, the GFC 2008-09, and now. The PUBLIC has come to assume that in a crunch, the US government will step in to protect all depositors, and that is exactly what happened. The government justified this by saying that the failed banks posed systemic risks to the US (and yet, those escaped the scrutiny of the SIBs). The US banking REGULATORS also failed as these failures occurred while they were watching these banks (everyone blamed social-media for the quick runs and collapses). The current uniform FDIC limit of $250 K per individual or entity doesn’t work (there are some workarounds and commercial services such as IntraFi to distribute deposits among the FDIC insured banks). Some ideas include transactional-account guarantee program that was used during the GFC 2008; unlimited FDIC insurance for individuals (natural persons), etc. But ad-hoc bank rescues are not the solution. Book, Engine of Inequality: The fed and the Future of Wealth in America, 03/2021.
(EXTRAS from online Friday that didn’t make the weekend paper version)
Daniel HOUSTON, CEO of Principal Financial/PFG. Businesses include insurance and annuities (mostly VAs now), asset management, retirement plan administration; a mix of institutional and retail businesses; targets are small/medium-size companies. This banking crisis doesn’t affect PFG directly. Almost 60% of its US staff is in Des Moines, IA and its hiring is mostly from Midwestern universities. His goals are stability, growth, profitability, and proper risk management.
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).