Post by Admin/YBB on Apr 15, 2023 4:54:03 GMT -6
From Barron’s, April 17, 2023 (Part 1, Market Week+)
Pg 27, TRADER. BANKS may lead the market. The 1st batch of earnings from big banks were good. Now, the other banks will be watched for earnings, deposits, assets (HTM and loan portfolios). Banks affect the economy through their credit policies.
GOLD may rally to new highs and beyond (all-time inflation-adjusted high would be $3,000, but it won’t go there right away). Peaking RATES, declining DOLLAR and heavy CENTRAL BANK purchases (157 tons in Jan-Fed; leading buyers were Turkey, China, Russia) have improved prospects for gold. Recent BANK failures have also provided an additional boost.
Brookfield Infrastructure Corporation (BIPC, a subsidiary of BIP) is buying the largest shipping container firm Triton/TRTN. TRTN expanded during the pandemic and locked-in many long-term leasing contracts. It has refinanced much of its debt.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
FOMC 5/3/23+ +25 bps (cycle peak 5.00-5.25%)
FOMC 6/14/23+ hold
FOMC 7/26/23+ hold
FOMC 9/20/23+ cut
FOMC 11/1/23+ cut
FOMC 12/13/23+ hold
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +1.20%, SP500 +0.79%, Nasdaq Comp +0.29%, R2000 +1.52%. DJ Transports +2.01%; DJ Utilities -1.48%. (Rotating spot banking KBE +0.77%) US$ index (spot) -0.51%, oil/WTI futures +2.26%, gold futures -0.48%.
YTD (index changes only), DJIA +2.23%, SP500 +7.77%, Nasdaq Comp +15.83%. (Rotating spot banking KBE -19.18%)
SENTIMENTS
NYSE cumulative (5-day) A/D LINE rose for 2nd week; ratio of winners:losers 2:1.
AAII Bull-Bear Spread -8.4%.
%Above 50-dMA for NYSE-listed stocks 44.27% (low) (StockCharts $NYA50R; $SPXA50R for the SP500 is also included in the bottom panel),
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 50.7% (a proprietary index for %Above 75-dMA for selected 1,800 stocks). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
Pg 31, INTERNATIONAL TRADER. UEDA (MIT PhD) is the new BOJ Governor. He may be changing the longstanding monetary easing policy now that inflation in Japan is back after decades of deflation. But he may take small incremental steps. Yen may strengthen and that may hurt big Japanese exporters who dominate the Japanese stock indexes. BRK/BUFFETT recently increased stakes in several Japanese trading houses.
EXTRA. Fashion retailer Zara’s Spanish owner Inditex (IDEXY; fwd P/E 20.5; dividends are based on 60% payout and may include bonuses) has plans for growth in the US. Its 1st US store opened in 1989 in NYC and there are only 101 US stores now; it plans to add 30 stores this year. It will impose a small fee for online sales returns.
Pg ? (EXTRA), EMERGING MARKETS. HK has suddenly become friendlier to CRYPTO businesses (unlike the Mainland China). It is planning to compete with Singapore for crypto businesses. A new regulatory framework for cryptofinance was released in February 2023; $6.5 million has been budgeted for crypto industry as part of the Web3 development. The firms must register by June 1, 2023, and apply for licenses by June 2024. In Singapore, 169 crypto firms registered in January 2020, but only 11 have been licensed so far, and there was a spectacular collapse of Terra/Luna.
Pg 32, OPTIONS. A recent GS study noted that asymmetric-alpha wins with volatility, i.e. by using puts and calls on high conviction stocks. This by exploiting the mistakes made by short-term options traders looking for homeruns.
(SP500 VIX 17.07, Nasdaq 100 VXN 22.22 (high), options SKEW 132.36 (high), bond MOVE 118.84 (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 58, COMMODITIES (from Part 2). Ken SEITZ, Nutrien/NTR CEO. Canadian NTR is a leading producer of potash and other FERTILIZERS; it sells fertilizers, SEEDS and ag-SERVICES through its retail stores in 7 countries; it has been expanding recently in Brazil. The ags’ supply-demand were changed drastically by Russian-Ukraine war. Prices of the ags have been strong. Europe uses natural gas (expensive in Europe) as feedstock for nitrogen fertilizer. The constraints have all been on the supply side – from Russia, Ukraine, Belarus, China, etc (reasons vary). The demand has been going up. Climate and sustainability are big issues for the ags.
Pg 44: An up week in EUROPE (Denmark +5.00%, Belgium -0.09%) (French CAC at a new high) and an up week in ASIA (S Korea +3.01%, Philippines -0.22%).
TREASURY* 3-mo yield 5.14%, 1-yr 4.77%, 2-yr 4.08%, 5-yr 3.60%, 10-yr 3.52%, 30-yr 3.74% (wide 1m-3m spread of 85-108 bps has been a puzzle). REAL yields 5-yr 1.29%, 10-yr 1.22%, 30-yr 1.46%.
DOLLAR fell, ^DXY 101.58, -0.5% (pg 54). GOLD rose to $2,019, +0.8% (Handy & Harman spot, Thursday; pg 56); the gold-miners rose. (^XAU was at 141.54, +2.06% for the week)
Top FDIC insured savings deposit rates** (This feature has been discontinued)
US SAVINGS I-Bonds^, current rate 6.89% (annualized) is valid until 4/28/23 (unless changed by Treasury); the fixed/base rate +0.40%. Rates change on May 1 & November 1. New semiannual variable rate from May 1 will be 1.694% ( the needed 6-mo of the CPI data are all in); based on the fixed rate of +0.40% to +1.00%, the 4/12/23 estimates for the combined rate on May 1 are 3.79-4.40%.
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**For local rates www.depositaccounts.com/banks/rates-map/
^Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS) www.treasurydirect.gov/marketable-securities/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 18, COVER STORY “This Startup (TELLUS) Promises Rates 13x Higher than a Typical Savings Account. There’s One Problem: It Isn’t a Bank”. NONBANK fintech Tellus (not to be confused with Canadian telecom Telus/TU) offers high-rate “Boost” accounts “backed” by real estate – residential, rental properties, bridge-loans, speculative-loans, distressed-loans. It claims to have several banking partners, but several have denied any formal product relationships; it also declined to answer a list of questions from Barron’s. (At best, its program looks like Corporate Notes offered by several companies, and at worst, it looks like banking) Its physical location is in a tiny commercial building that houses tutoring and massaging services. Tellus App was originally launched as property operations/management app, but it has had the deposit feature since 2019. Initially, it required depositors to be accredited-investors, but that requirement was dropped in 2020. It has video ads on TikTok, Facebook, Instagram, etc. During Covid, it ignored the forbearance directives, and tenant requests, and foreclosed on properties; there are now lawsuits involving those. It’s unclear why Tellus doesn’t come under the SEC or the CA state banking regulators – they declined to say if there were any investigations in-progress.
Pg 7, UP AND DOWN WALL STREET. It may be a costly mistake for the markets to ignore the FED’s warnings on rate cuts (none in 2023). Progress on INFLATION has stalled; Atlanta Fed’s sticky prices remain high; inflation-expectations are rising. The Q1 reports would show pressures on corporate earnings. So, listen markets, NO RATE CUTS in 2023 unless the stock market collapses to SP500 of 3,500 or below.
Russia, China, France, Saudi Arabia (and BRICS) would like to change the role of DOLLAR as the global reserve currency. Bilateral and multilateral trade pacts are growing. But there is no global alternative to the dollar yet. On the other hand, high US twin-deficits and repeated debt-ceiling problems have created doubts among the foreigners.
Pg 11, STREETWISE. BLUE-CHIPS may be better than COMMODITIES (gold, oil, zinc, ags, etc). Commodities have large prices swings but don’t offer durable competitive advantages. Commodity fans point to long super cycles of 1-2 decades (the current one began in 03/2020). Commodity funds mentioned are OEF BICSX and ETF COMT. But HOUGH isn’t impressed; his next project may be a firm called “Don’t Bother” that would charge 25 bps with $5 million minimum to do nothing but only invest in indexed funds (sadly, there are some index funds within retirement plans just doing that).
(EXTRAS from online Friday that didn’t make the weekend paper version)
See Column Topics. It seems some consolidation/rearrangement of Columns is going on. I will continue for a while my regular Part 1 and Part 2 organization (formally, the separate insert for Part 1 was dropped a while ago, but I have kept the arrangement because a single-part would be too long for some venues.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
Pg 27, TRADER. BANKS may lead the market. The 1st batch of earnings from big banks were good. Now, the other banks will be watched for earnings, deposits, assets (HTM and loan portfolios). Banks affect the economy through their credit policies.
GOLD may rally to new highs and beyond (all-time inflation-adjusted high would be $3,000, but it won’t go there right away). Peaking RATES, declining DOLLAR and heavy CENTRAL BANK purchases (157 tons in Jan-Fed; leading buyers were Turkey, China, Russia) have improved prospects for gold. Recent BANK failures have also provided an additional boost.
Brookfield Infrastructure Corporation (BIPC, a subsidiary of BIP) is buying the largest shipping container firm Triton/TRTN. TRTN expanded during the pandemic and locked-in many long-term leasing contracts. It has refinanced much of its debt.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
FOMC 5/3/23+ +25 bps (cycle peak 5.00-5.25%)
FOMC 6/14/23+ hold
FOMC 7/26/23+ hold
FOMC 9/20/23+ cut
FOMC 11/1/23+ cut
FOMC 12/13/23+ hold
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +1.20%, SP500 +0.79%, Nasdaq Comp +0.29%, R2000 +1.52%. DJ Transports +2.01%; DJ Utilities -1.48%. (Rotating spot banking KBE +0.77%) US$ index (spot) -0.51%, oil/WTI futures +2.26%, gold futures -0.48%.
YTD (index changes only), DJIA +2.23%, SP500 +7.77%, Nasdaq Comp +15.83%. (Rotating spot banking KBE -19.18%)
SENTIMENTS
NYSE cumulative (5-day) A/D LINE rose for 2nd week; ratio of winners:losers 2:1.
AAII Bull-Bear Spread -8.4%.
%Above 50-dMA for NYSE-listed stocks 44.27% (low) (StockCharts $NYA50R; $SPXA50R for the SP500 is also included in the bottom panel),
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 50.7% (a proprietary index for %Above 75-dMA for selected 1,800 stocks). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
Pg 31, INTERNATIONAL TRADER. UEDA (MIT PhD) is the new BOJ Governor. He may be changing the longstanding monetary easing policy now that inflation in Japan is back after decades of deflation. But he may take small incremental steps. Yen may strengthen and that may hurt big Japanese exporters who dominate the Japanese stock indexes. BRK/BUFFETT recently increased stakes in several Japanese trading houses.
EXTRA. Fashion retailer Zara’s Spanish owner Inditex (IDEXY; fwd P/E 20.5; dividends are based on 60% payout and may include bonuses) has plans for growth in the US. Its 1st US store opened in 1989 in NYC and there are only 101 US stores now; it plans to add 30 stores this year. It will impose a small fee for online sales returns.
Pg ? (EXTRA), EMERGING MARKETS. HK has suddenly become friendlier to CRYPTO businesses (unlike the Mainland China). It is planning to compete with Singapore for crypto businesses. A new regulatory framework for cryptofinance was released in February 2023; $6.5 million has been budgeted for crypto industry as part of the Web3 development. The firms must register by June 1, 2023, and apply for licenses by June 2024. In Singapore, 169 crypto firms registered in January 2020, but only 11 have been licensed so far, and there was a spectacular collapse of Terra/Luna.
Pg 32, OPTIONS. A recent GS study noted that asymmetric-alpha wins with volatility, i.e. by using puts and calls on high conviction stocks. This by exploiting the mistakes made by short-term options traders looking for homeruns.
(SP500 VIX 17.07, Nasdaq 100 VXN 22.22 (high), options SKEW 132.36 (high), bond MOVE 118.84 (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 58, COMMODITIES (from Part 2). Ken SEITZ, Nutrien/NTR CEO. Canadian NTR is a leading producer of potash and other FERTILIZERS; it sells fertilizers, SEEDS and ag-SERVICES through its retail stores in 7 countries; it has been expanding recently in Brazil. The ags’ supply-demand were changed drastically by Russian-Ukraine war. Prices of the ags have been strong. Europe uses natural gas (expensive in Europe) as feedstock for nitrogen fertilizer. The constraints have all been on the supply side – from Russia, Ukraine, Belarus, China, etc (reasons vary). The demand has been going up. Climate and sustainability are big issues for the ags.
Pg 44: An up week in EUROPE (Denmark +5.00%, Belgium -0.09%) (French CAC at a new high) and an up week in ASIA (S Korea +3.01%, Philippines -0.22%).
TREASURY* 3-mo yield 5.14%, 1-yr 4.77%, 2-yr 4.08%, 5-yr 3.60%, 10-yr 3.52%, 30-yr 3.74% (wide 1m-3m spread of 85-108 bps has been a puzzle). REAL yields 5-yr 1.29%, 10-yr 1.22%, 30-yr 1.46%.
DOLLAR fell, ^DXY 101.58, -0.5% (pg 54). GOLD rose to $2,019, +0.8% (Handy & Harman spot, Thursday; pg 56); the gold-miners rose. (^XAU was at 141.54, +2.06% for the week)
Top FDIC insured savings deposit rates** (This feature has been discontinued)
US SAVINGS I-Bonds^, current rate 6.89% (annualized) is valid until 4/28/23 (unless changed by Treasury); the fixed/base rate +0.40%. Rates change on May 1 & November 1. New semiannual variable rate from May 1 will be 1.694% ( the needed 6-mo of the CPI data are all in); based on the fixed rate of +0.40% to +1.00%, the 4/12/23 estimates for the combined rate on May 1 are 3.79-4.40%.
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**For local rates www.depositaccounts.com/banks/rates-map/
^Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS) www.treasurydirect.gov/marketable-securities/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 18, COVER STORY “This Startup (TELLUS) Promises Rates 13x Higher than a Typical Savings Account. There’s One Problem: It Isn’t a Bank”. NONBANK fintech Tellus (not to be confused with Canadian telecom Telus/TU) offers high-rate “Boost” accounts “backed” by real estate – residential, rental properties, bridge-loans, speculative-loans, distressed-loans. It claims to have several banking partners, but several have denied any formal product relationships; it also declined to answer a list of questions from Barron’s. (At best, its program looks like Corporate Notes offered by several companies, and at worst, it looks like banking) Its physical location is in a tiny commercial building that houses tutoring and massaging services. Tellus App was originally launched as property operations/management app, but it has had the deposit feature since 2019. Initially, it required depositors to be accredited-investors, but that requirement was dropped in 2020. It has video ads on TikTok, Facebook, Instagram, etc. During Covid, it ignored the forbearance directives, and tenant requests, and foreclosed on properties; there are now lawsuits involving those. It’s unclear why Tellus doesn’t come under the SEC or the CA state banking regulators – they declined to say if there were any investigations in-progress.
Pg 7, UP AND DOWN WALL STREET. It may be a costly mistake for the markets to ignore the FED’s warnings on rate cuts (none in 2023). Progress on INFLATION has stalled; Atlanta Fed’s sticky prices remain high; inflation-expectations are rising. The Q1 reports would show pressures on corporate earnings. So, listen markets, NO RATE CUTS in 2023 unless the stock market collapses to SP500 of 3,500 or below.
Russia, China, France, Saudi Arabia (and BRICS) would like to change the role of DOLLAR as the global reserve currency. Bilateral and multilateral trade pacts are growing. But there is no global alternative to the dollar yet. On the other hand, high US twin-deficits and repeated debt-ceiling problems have created doubts among the foreigners.
Pg 11, STREETWISE. BLUE-CHIPS may be better than COMMODITIES (gold, oil, zinc, ags, etc). Commodities have large prices swings but don’t offer durable competitive advantages. Commodity fans point to long super cycles of 1-2 decades (the current one began in 03/2020). Commodity funds mentioned are OEF BICSX and ETF COMT. But HOUGH isn’t impressed; his next project may be a firm called “Don’t Bother” that would charge 25 bps with $5 million minimum to do nothing but only invest in indexed funds (sadly, there are some index funds within retirement plans just doing that).
(EXTRAS from online Friday that didn’t make the weekend paper version)
See Column Topics. It seems some consolidation/rearrangement of Columns is going on. I will continue for a while my regular Part 1 and Part 2 organization (formally, the separate insert for Part 1 was dropped a while ago, but I have kept the arrangement because a single-part would be too long for some venues.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).