Post by Admin/YBB on Apr 1, 2023 9:53:42 GMT -6
Pg 10-11.
REVIEW. MLB (baseball) season began with new rules. Several regional sports networks are under financial pressures (SBGI, BATRA, etc).
PREVIEW. Altria/MO increased dividend, and continued with restructuring and transition into smokeless tobacco – it cut ties with Juul Labs, bought (private) NJOY, and may sell its stake in Anheuser-Busch InBev/BUD.
DATA THIS WEEK. ISM manufacturing PMI, construction spending on MONDAY; JOLTS report, durable goods, factory orders on TUESDAY; ADP national employment report, ISM services PMI, international trade deficit on WEDNESDAY; weekly initial jobless claims on THURSDAY; consumer credit, jobs report (+200,000 to +225,000), unemployment report (3.6%) on FRIDAY.
CLOSED. US markets on Good FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Animal healthcare Zoetis (ZTS; fwd P/E 30; R&D, drugs, insurance; monopolistic pure play; was spun off from PFE a decade ago; pg 15).
BEARISH. Regional banks with high CRE exposures (VLY, PACW, OZK, PPBI, WAFD, INDB, TRMK, AX, SFBS, FUNC, SASR, PFS, DCOM, FFWM, OCFC; bank regulators have guidelines for exposures to CREs, construction, land developments; these banks are outside of those guidelines but claim that they are OK because these are their “specialty” (have we heard that before?); pg 13).
Pg 12: CRYPTO industry is going on counterattack against the SEC, the CFTC and other federal agencies. While fighting the SEC will be hard and costly, some say that the SEC is moving aggressively into areas which first need clarifications by the Congress and/or the courts. Mentioned are Coinbase/COIN, Ripple, Binance.
More TIKTOK stories, probably too many (See Cover Story is in Part 1)
Pg 18: Negative SENTIMENTS by Congress (bipartisan), White House (President and the Cabinet) and courts may lead to a ban on TikTok (but see below for how the younger generations feel). The last time, the courts blocked former President Trump’s push for a sale of TikTok. On this go around, a SALE/SPINOFF may be pushed first, and if China blocks that, then a BAN may follow.
Pg 19: Gen Z, 46% of TikTok users, would be the most unhappy with a BAN on TikTok. After the recent hearings with TikTok CEO CHEW, TikTok was flooded with counterpoints to questions raised, even mocking some questioners’ tech/IT naivety. PETITIONS are circulating to protest a ban. Millennials, 34% of TikTok users, are the next biggest users of TikTok although they are more into Facebook, Instagram, YouTube. A TikTok ban may create political BACKLASH from the younger generations.
Pg 21: Any BAN on TikTok may also have restrictive provisions for social-media that may apply to both the US and Chinese (BABA, BIDU, etc) companies. A SALE/SPINOFF or ban may also lead to negative responses by China in other aspects of already tense US-China trade relations. There may be US restrictions for the Chinese companies listed in the US (there has been some recent progress on these), and the US companies in China may have to follow the model of YUM (US) and YUMC (China) split of a few years ago. For investing in China, look at the OEFs MCHFX, WBEIX; ETF CHIQ.
Pg 22: HOUSING Roundtable (inaugural; virtual). Panelists were Carl REICHARDT, BTIG; Bill SMEAD, Smead Capital; Carly TRIPP, Nuveen Real Estate Investments; Mark ZANDI, Moody’s.
Higher mortgage RATES mean that sellers tend to remain put with their low-rate mortgages. And lower housing AFFORDABILITY is keeping many buyers away, especially the first-time buyers (unless they get gifts from grandparents). RENTING is more favorable than BUYING now. Typically, the ratio of new:existing houses on the market is 1:10, but that is now 1:4 or 1:5; the market is bifurcated. Markets that had PANDEMIC booms are suffering the most now. REMOTE WORK is here to stay. More LOCALS are also returning to the market; previously, many out-of-area/state buyers were causing distortions. Also, institutional money in single-family housing is introducing new uncertainties for renting and pricing. But institutions are more into multifamily housing. Moreover, there are now institutional real estate PRODUCTS that investors can own instead of multiple houses, or ever bigger houses.
Housing CORRECTION isn’t fully done yet; the trough may be in late-2024 or early-2025. DEMOGRAPHIC trends favor housing. Housing is quite regional, but in general, urban centers are suffering. Housing should recover eventually, but gradually. The BANKING CRISIS caused flight-to-quality for bonds and that has pushed rates, including mortgage rates, down; housing would be fine with mortgage rates in 6.5-7.0% range although those are out of line with historical 150-175 bps spreads over 10-yr Treasuries. Some HOMEBUILDERS are buying down rates, lowering prices and offering incentives to move houses. Some homebuilders have transitioned from being land developers. Housing stocks have high correlations with housing starts; relevant metrics are P/B, ROE, but not P/E. Homebuilders mentioned are (big) DHI, LEN, PHM; (small) NVR, MTH, THMC.
Pg 27, FUNDS. Bond LADDERS or bond FUNDS? The RATES are peaking but the FED may not be done yet. So, there may be some pain ahead from DURATION risks (bond ladders technically have similar duration risks but individual bonds can be held to maturity). Eventually, in economic slowdown or recession, rates would fall, and bond fund investors would benefit. Treasury ladders don’t require the extensive research that general bond ladders do. A compromise may be a Treasury ladder with some bond funds. (by MFO @lewisbraham)
Pg 28: Barney FRANK (83) of Dodd-Frank was on the Board of Signature Bank (a cushy $300K/yr “job”). When the run began, Frank called and talked to the Fed Chair POWELL, the Fed VC BARR and several lawmakers (this is simply amazing). Signature Bank officers and Frank thought that they had the run situation under control, and were in touch with “authorities”, but unfortunately, the Feds suddenly shut it down along with Silicon Valley Bank. (Some say that the Feds needed another bank to shut with the must-shut SVB). Now, Frank is willing to talk to anybody about why Signature Bank didn’t have to be shut.
Pg 30: Cheryl MICKEL, T Rowe Price (m-mkt funds, ST bond funds, SVs). She saw some opportunities in the turmoil among the US regional banks and the European banking giants. The volatility for 2-yr Treasuries has been huge; some may be from hedging and derivatives. The messages from the Fed/POWELL and the bond markets have been contradictory. DEPOSITS are leaving banks, especially from the smaller banks; smaller banks are also more exposed to the CREs. Lot of this money is moving into the MONEY-MARKET funds, and investors should be fine with the GOVERNMENT money-market funds (these don’t have gates/redemption fees); keep an eye on the huge flows into PRIME -retail and--institutional money-market funds as that yield-chasing money may not be as stable and sudden gates/redemption fees may cause problems; but so far, there haven’t been stresses in the money-markets (as were during the GFC, and then there were post-GFC reforms). It is more a crisis of CONFIDENCE; banks overall are in much better shape now than during the GFC, 2008. But she now considers, “can a bank withstand a RUN?” and does thorough LIQUIDITY analyses; attractive are regionals NTRS, PNC, USB, etc, also, financials AMP, etc. Inverted YIELD-CURVE also makes short-term bond funds attractive for now. The FED may do one more +25 bps hike, and then pause; it may take a long time for (an arbitrary) +2% average inflation objective, if ever. There is some disconnect between the economy and the markets now, and that is OK if this banking crisis remains contained.
Pg 32, INCOME INVESTING. UTILITIES (yield 3.3%; fwd P/E 18) have disappointed YTD, but are defensive plays for slowing economy. Beyond yield, they offer dividend-growth and capital appreciation. Electric utilities should benefit from the clean energy trend.
Pg 32, TECH TRADER. The new CEO RISHER may not be able to help the struggling LYFT. Competition from more diversified UBER is tough. May be, LYFT needs a new owner.
Pg 62, OTHER VOICES. Marc CHANDLER, Bannockburn Global Forex/FFBC. It won’t be easy to dislodge the DOLLAR as the global RESERVE currency. Dollar DIPLOMACY has reduced the attraction of dollar for some countries. The US can also harm the dollar with its domestic policies (high debt, debt-ceiling drama). But there isn’t a viable currency to replace it. Some bilateral or multilateral trade may happen in regional currencies. But the dollar now has a clear dominance in global trade and for central bank reserve assets.
(EXTRAS from online Friday that didn’t make the weekend paper version)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
REVIEW. MLB (baseball) season began with new rules. Several regional sports networks are under financial pressures (SBGI, BATRA, etc).
PREVIEW. Altria/MO increased dividend, and continued with restructuring and transition into smokeless tobacco – it cut ties with Juul Labs, bought (private) NJOY, and may sell its stake in Anheuser-Busch InBev/BUD.
DATA THIS WEEK. ISM manufacturing PMI, construction spending on MONDAY; JOLTS report, durable goods, factory orders on TUESDAY; ADP national employment report, ISM services PMI, international trade deficit on WEDNESDAY; weekly initial jobless claims on THURSDAY; consumer credit, jobs report (+200,000 to +225,000), unemployment report (3.6%) on FRIDAY.
CLOSED. US markets on Good FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Animal healthcare Zoetis (ZTS; fwd P/E 30; R&D, drugs, insurance; monopolistic pure play; was spun off from PFE a decade ago; pg 15).
BEARISH. Regional banks with high CRE exposures (VLY, PACW, OZK, PPBI, WAFD, INDB, TRMK, AX, SFBS, FUNC, SASR, PFS, DCOM, FFWM, OCFC; bank regulators have guidelines for exposures to CREs, construction, land developments; these banks are outside of those guidelines but claim that they are OK because these are their “specialty” (have we heard that before?); pg 13).
Pg 12: CRYPTO industry is going on counterattack against the SEC, the CFTC and other federal agencies. While fighting the SEC will be hard and costly, some say that the SEC is moving aggressively into areas which first need clarifications by the Congress and/or the courts. Mentioned are Coinbase/COIN, Ripple, Binance.
More TIKTOK stories, probably too many (See Cover Story is in Part 1)
Pg 18: Negative SENTIMENTS by Congress (bipartisan), White House (President and the Cabinet) and courts may lead to a ban on TikTok (but see below for how the younger generations feel). The last time, the courts blocked former President Trump’s push for a sale of TikTok. On this go around, a SALE/SPINOFF may be pushed first, and if China blocks that, then a BAN may follow.
Pg 19: Gen Z, 46% of TikTok users, would be the most unhappy with a BAN on TikTok. After the recent hearings with TikTok CEO CHEW, TikTok was flooded with counterpoints to questions raised, even mocking some questioners’ tech/IT naivety. PETITIONS are circulating to protest a ban. Millennials, 34% of TikTok users, are the next biggest users of TikTok although they are more into Facebook, Instagram, YouTube. A TikTok ban may create political BACKLASH from the younger generations.
Pg 21: Any BAN on TikTok may also have restrictive provisions for social-media that may apply to both the US and Chinese (BABA, BIDU, etc) companies. A SALE/SPINOFF or ban may also lead to negative responses by China in other aspects of already tense US-China trade relations. There may be US restrictions for the Chinese companies listed in the US (there has been some recent progress on these), and the US companies in China may have to follow the model of YUM (US) and YUMC (China) split of a few years ago. For investing in China, look at the OEFs MCHFX, WBEIX; ETF CHIQ.
Pg 22: HOUSING Roundtable (inaugural; virtual). Panelists were Carl REICHARDT, BTIG; Bill SMEAD, Smead Capital; Carly TRIPP, Nuveen Real Estate Investments; Mark ZANDI, Moody’s.
Higher mortgage RATES mean that sellers tend to remain put with their low-rate mortgages. And lower housing AFFORDABILITY is keeping many buyers away, especially the first-time buyers (unless they get gifts from grandparents). RENTING is more favorable than BUYING now. Typically, the ratio of new:existing houses on the market is 1:10, but that is now 1:4 or 1:5; the market is bifurcated. Markets that had PANDEMIC booms are suffering the most now. REMOTE WORK is here to stay. More LOCALS are also returning to the market; previously, many out-of-area/state buyers were causing distortions. Also, institutional money in single-family housing is introducing new uncertainties for renting and pricing. But institutions are more into multifamily housing. Moreover, there are now institutional real estate PRODUCTS that investors can own instead of multiple houses, or ever bigger houses.
Housing CORRECTION isn’t fully done yet; the trough may be in late-2024 or early-2025. DEMOGRAPHIC trends favor housing. Housing is quite regional, but in general, urban centers are suffering. Housing should recover eventually, but gradually. The BANKING CRISIS caused flight-to-quality for bonds and that has pushed rates, including mortgage rates, down; housing would be fine with mortgage rates in 6.5-7.0% range although those are out of line with historical 150-175 bps spreads over 10-yr Treasuries. Some HOMEBUILDERS are buying down rates, lowering prices and offering incentives to move houses. Some homebuilders have transitioned from being land developers. Housing stocks have high correlations with housing starts; relevant metrics are P/B, ROE, but not P/E. Homebuilders mentioned are (big) DHI, LEN, PHM; (small) NVR, MTH, THMC.
Pg 27, FUNDS. Bond LADDERS or bond FUNDS? The RATES are peaking but the FED may not be done yet. So, there may be some pain ahead from DURATION risks (bond ladders technically have similar duration risks but individual bonds can be held to maturity). Eventually, in economic slowdown or recession, rates would fall, and bond fund investors would benefit. Treasury ladders don’t require the extensive research that general bond ladders do. A compromise may be a Treasury ladder with some bond funds. (by MFO @lewisbraham)
Pg 28: Barney FRANK (83) of Dodd-Frank was on the Board of Signature Bank (a cushy $300K/yr “job”). When the run began, Frank called and talked to the Fed Chair POWELL, the Fed VC BARR and several lawmakers (this is simply amazing). Signature Bank officers and Frank thought that they had the run situation under control, and were in touch with “authorities”, but unfortunately, the Feds suddenly shut it down along with Silicon Valley Bank. (Some say that the Feds needed another bank to shut with the must-shut SVB). Now, Frank is willing to talk to anybody about why Signature Bank didn’t have to be shut.
Pg 30: Cheryl MICKEL, T Rowe Price (m-mkt funds, ST bond funds, SVs). She saw some opportunities in the turmoil among the US regional banks and the European banking giants. The volatility for 2-yr Treasuries has been huge; some may be from hedging and derivatives. The messages from the Fed/POWELL and the bond markets have been contradictory. DEPOSITS are leaving banks, especially from the smaller banks; smaller banks are also more exposed to the CREs. Lot of this money is moving into the MONEY-MARKET funds, and investors should be fine with the GOVERNMENT money-market funds (these don’t have gates/redemption fees); keep an eye on the huge flows into PRIME -retail and--institutional money-market funds as that yield-chasing money may not be as stable and sudden gates/redemption fees may cause problems; but so far, there haven’t been stresses in the money-markets (as were during the GFC, and then there were post-GFC reforms). It is more a crisis of CONFIDENCE; banks overall are in much better shape now than during the GFC, 2008. But she now considers, “can a bank withstand a RUN?” and does thorough LIQUIDITY analyses; attractive are regionals NTRS, PNC, USB, etc, also, financials AMP, etc. Inverted YIELD-CURVE also makes short-term bond funds attractive for now. The FED may do one more +25 bps hike, and then pause; it may take a long time for (an arbitrary) +2% average inflation objective, if ever. There is some disconnect between the economy and the markets now, and that is OK if this banking crisis remains contained.
Pg 32, INCOME INVESTING. UTILITIES (yield 3.3%; fwd P/E 18) have disappointed YTD, but are defensive plays for slowing economy. Beyond yield, they offer dividend-growth and capital appreciation. Electric utilities should benefit from the clean energy trend.
Pg 32, TECH TRADER. The new CEO RISHER may not be able to help the struggling LYFT. Competition from more diversified UBER is tough. May be, LYFT needs a new owner.
Pg 62, OTHER VOICES. Marc CHANDLER, Bannockburn Global Forex/FFBC. It won’t be easy to dislodge the DOLLAR as the global RESERVE currency. Dollar DIPLOMACY has reduced the attraction of dollar for some countries. The US can also harm the dollar with its domestic policies (high debt, debt-ceiling drama). But there isn’t a viable currency to replace it. Some bilateral or multilateral trade may happen in regional currencies. But the dollar now has a clear dominance in global trade and for central bank reserve assets.
(EXTRAS from online Friday that didn’t make the weekend paper version)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).