Post by Admin/YBB on Apr 15, 2023 6:56:46 GMT -6
Pg 12-13.
REVIEW. Gloomy Q1 EARNINGS do have a silver lining – Q1 REVENUES should rise except for the techs, and then the earnings may bottom in Q2. The Q1 margins will fall across the board. Investors will now pay special attention to bank reports.
PREVIEW. BRK/BUFFETT increased stakes in several Japanese trading firms. The Japanese economy and market are struggling, its population is declining. The BOJ monetary policy has been loose for a long time but that may be changing under the new BOJ Governor UEDA.
DATA THIS WEEK. Housing market index on MONDAY; housing starts on TUESDAY; existing home sales, LEI on THURSDAY; manufacturing PMI, services PMI on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Life insurance (CRBG (AIG’s life insurance business), EQH (61% stake in AB), GL, PRI, RGA, UNM, VOYA (a large asset management arm); yields and low P/Es, P/Bs; risks – VAs (with guarantees), CREs, the P/Bs aren’t adjusted for unrealized losses (similar to the HTM issue with banks); pg 14);
Plumbing and HVAC supplier Ferguson (FERG; fwd P/E 14; the old UK-based Wolseley sold the European operations, and became the US-listed FERG; its North American customers include contractors and maintenance professionals; it also sells to DIYs via build.com; risk is from 40% revenues from the cyclical construction industry; pg 16).
BEARISH.
Pg 22, FUNDS. The ETNs have RISKS that are different from those of the ETFs. The ETNs are just unsecured IOUs of the sponsor and don’t hold anything. So, the risks are that the sponsor may get into trouble; the sponsor may close or shut ETNs in what may be untimely for holders; or delist them. The ETN supporters cite their tax-efficiency and lack of tracking errors. (The ETNs continue to have high leverage as they were excluded from recent reforms that limited the ETF leverage)
Pg 23, INCOME INVESTING. Like a phoenix, the allocation 60-40 funds rose from the ashes in 2023; 2022 was an absolute disaster when both stocks and bonds tanked. Mentioned are DODBX, FBALX, OAKBX, PRWCX / ITCTX, SEBLX, STFBX, VBIAX, WLVIX (several notable omissions).
Pg 24, ECONOMY. An unconventional look at the data by Allan SLOAN (an award-winning independent journalist) citing Campbell HARVEY (Duke U; his U Chicago PhD thesis was on yield-curve inversions and recessions). The YIELD-CURVE has been inverted since Fall 2022. While that may often precede recessions, this time may be different because this inversion was caused by the FED actions. The Fed also pays high interest on bank reserves and money-market repos; as the Fed earnings have become negative, it no longer sends billions to the Treasury. All this has caused harm to the economy. Then, the INFLATION measures CPI and PCE (Fed’s favorite) have been elevated and are far from Fed’s +2% average inflation target. But why look at their rolling annual changes? Instead, look at the changes from Summer 2022 when the rate hikes began, and annualizes those; then the CPI is +3.2% and PCE +3.3% (both annualized), not that far from Fed’s +2% inflation target.
EXTRA. The IMF Managing Director Kristalina GEORGIEVA is less upbeat about the global economy. She sees global growth +2.8% in 2023, +3.0% in 2024; rising global debt; debt restructuring needs for poor countries; high inflation; contracting bank lending; risks from CREs to banks and shadow banks; costly deglobalization/fragmentation. All that differs from the cheery outlook from the US Treasury Secretary Janet YELLEN.
Pg 25, TECH TRADER. The good news is that techs have cut costs – layoffs; reduced cloud spending/capex (that affected #1 AWS/AMZN, #2 Azur/MSFT), etc. The bad news is that their customers have also done the same. The outlook for techs is poor.
Pg 26, FUNDS. Larry PITKOWSKY, GoodHaven Capital Management (GOODX). The midcap value manager reorganized the firm in 2019 to become the controlling owner and the sole portfolio manager. Value has been out of favor, but it is coming back. He focuses on high-quality, growing businesses bought with big margins of safety. He is willing to be patient but not forever. He has a long list of companies that he keeps his eyes on. These are uncertain times, but he sees inflation coming down due to high rates and isn’t concerned (yet) with some bank failures.
Pg ? (EXTRA): Stephen ROACH, Yale U; formerly at MS. High sticky inflation will lead to slow growth, i.e. STAGFLATION. The FED may have to pause to give some breathing room to banks/financials. The Fed kept rates low for too long and then bumped them up too quickly. Some banks failed from deposit runs, but their CRE exposures may cause the next disaster. The post-pandemic real estate environment has changed. CRYPTOS are another concern.
Pg 58, UNTITLED INTERVIEW. This space has been used for OTHER VOICES by non-Barron’s authors, but this week is a piece on COMMODITIES by the new high-profile hire Andy SERWER (see Part 1).
(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.
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
REVIEW. Gloomy Q1 EARNINGS do have a silver lining – Q1 REVENUES should rise except for the techs, and then the earnings may bottom in Q2. The Q1 margins will fall across the board. Investors will now pay special attention to bank reports.
PREVIEW. BRK/BUFFETT increased stakes in several Japanese trading firms. The Japanese economy and market are struggling, its population is declining. The BOJ monetary policy has been loose for a long time but that may be changing under the new BOJ Governor UEDA.
DATA THIS WEEK. Housing market index on MONDAY; housing starts on TUESDAY; existing home sales, LEI on THURSDAY; manufacturing PMI, services PMI on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Life insurance (CRBG (AIG’s life insurance business), EQH (61% stake in AB), GL, PRI, RGA, UNM, VOYA (a large asset management arm); yields and low P/Es, P/Bs; risks – VAs (with guarantees), CREs, the P/Bs aren’t adjusted for unrealized losses (similar to the HTM issue with banks); pg 14);
Plumbing and HVAC supplier Ferguson (FERG; fwd P/E 14; the old UK-based Wolseley sold the European operations, and became the US-listed FERG; its North American customers include contractors and maintenance professionals; it also sells to DIYs via build.com; risk is from 40% revenues from the cyclical construction industry; pg 16).
BEARISH.
Pg 22, FUNDS. The ETNs have RISKS that are different from those of the ETFs. The ETNs are just unsecured IOUs of the sponsor and don’t hold anything. So, the risks are that the sponsor may get into trouble; the sponsor may close or shut ETNs in what may be untimely for holders; or delist them. The ETN supporters cite their tax-efficiency and lack of tracking errors. (The ETNs continue to have high leverage as they were excluded from recent reforms that limited the ETF leverage)
Pg 23, INCOME INVESTING. Like a phoenix, the allocation 60-40 funds rose from the ashes in 2023; 2022 was an absolute disaster when both stocks and bonds tanked. Mentioned are DODBX, FBALX, OAKBX, PRWCX / ITCTX, SEBLX, STFBX, VBIAX, WLVIX (several notable omissions).
Pg 24, ECONOMY. An unconventional look at the data by Allan SLOAN (an award-winning independent journalist) citing Campbell HARVEY (Duke U; his U Chicago PhD thesis was on yield-curve inversions and recessions). The YIELD-CURVE has been inverted since Fall 2022. While that may often precede recessions, this time may be different because this inversion was caused by the FED actions. The Fed also pays high interest on bank reserves and money-market repos; as the Fed earnings have become negative, it no longer sends billions to the Treasury. All this has caused harm to the economy. Then, the INFLATION measures CPI and PCE (Fed’s favorite) have been elevated and are far from Fed’s +2% average inflation target. But why look at their rolling annual changes? Instead, look at the changes from Summer 2022 when the rate hikes began, and annualizes those; then the CPI is +3.2% and PCE +3.3% (both annualized), not that far from Fed’s +2% inflation target.
EXTRA. The IMF Managing Director Kristalina GEORGIEVA is less upbeat about the global economy. She sees global growth +2.8% in 2023, +3.0% in 2024; rising global debt; debt restructuring needs for poor countries; high inflation; contracting bank lending; risks from CREs to banks and shadow banks; costly deglobalization/fragmentation. All that differs from the cheery outlook from the US Treasury Secretary Janet YELLEN.
Pg 25, TECH TRADER. The good news is that techs have cut costs – layoffs; reduced cloud spending/capex (that affected #1 AWS/AMZN, #2 Azur/MSFT), etc. The bad news is that their customers have also done the same. The outlook for techs is poor.
Pg 26, FUNDS. Larry PITKOWSKY, GoodHaven Capital Management (GOODX). The midcap value manager reorganized the firm in 2019 to become the controlling owner and the sole portfolio manager. Value has been out of favor, but it is coming back. He focuses on high-quality, growing businesses bought with big margins of safety. He is willing to be patient but not forever. He has a long list of companies that he keeps his eyes on. These are uncertain times, but he sees inflation coming down due to high rates and isn’t concerned (yet) with some bank failures.
Pg ? (EXTRA): Stephen ROACH, Yale U; formerly at MS. High sticky inflation will lead to slow growth, i.e. STAGFLATION. The FED may have to pause to give some breathing room to banks/financials. The Fed kept rates low for too long and then bumped them up too quickly. Some banks failed from deposit runs, but their CRE exposures may cause the next disaster. The post-pandemic real estate environment has changed. CRYPTOS are another concern.
Pg 58, UNTITLED INTERVIEW. This space has been used for OTHER VOICES by non-Barron’s authors, but this week is a piece on COMMODITIES by the new high-profile hire Andy SERWER (see Part 1).
(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.
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).