Post by Admin/YBB on Apr 22, 2023 7:49:00 GMT -6
Pg 12-13.
REVIEW. NATURAL GAS got a break when an Appeals Court blocked Berkeley, CA 2020 ordinance banning natural gas piping in new constructions. It’s unclear how it will affect similar pushes elsewhere.
PREVIEW. CHINA’s Q1 GDP grew at +4.5% that was better than expected; the improvement should continue in Q2. However, this may be a consumer-led bounce rather than recovery. Wage growth has been lackluster and household debt is high. Exports, responsible for past GDP growth, have been declining. It would be hard for the huge economy to suddenly shift from exports to consumers. Then, there are US-China tensions in several areas.
DATA THIS WEEK. New home sales, consumer confidence, home price index on TUESDAY; durable goods report on WEDNESDAY; Q1 GDP (+1.8%) on THURSDAY; UM sentiment, personal income and expenditures (core PCE +4.5%) on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. IAC (Barry Diller (81) wants a cut for the data used by generative AI chat-bots but may be limited in what he can do without going through the trade groups; pg 14);
TJX (yield 1.70% and growing; fwd P/E 22; off-price retailer focusing on in-store promos/treasure-hunts (no home deliveries); store brands T.J. Max, Marshalls, Home Goods, Sierra Trading Post; closed some nonessential businesses; minor online presence; risks include lower consumer spending, inflation, recession, shrinkage/theft; pg 16).
BEARISH.
Pg 17, FOLLOW UP. Tesla/TSLA cut prices to improve affordability. Margins have suffered some, but availability is still an issue (long waits are normal). The long-term growth remains intact. Stock is volatile and may trade in the range of $100-200.
Pg 17: BoA/BAC said not to worry about its $99 billion (was $109 billion on 12/31/22) unrealized losses for its HTM bond portfolio of $624 billion (NOT marked to market). It said that its deposit franchise was in good shape, and that it has lots of low-rate deposits (depositors getting 0.01-0.03%, pay attention). On the other hand, BRK has $100+ billion in T-Bills; BRK has 13% stake in BAC. (Defense seems similar to what Schwab/SCHW said – the HTM unrealized losses will remain unrealized as there is plenty of other liquidity or resources)
More stories related to the Cover story on cars (Part 1).
Pg 21: Tesla/TSLA (as an underwriter), GM (as an agent) etc are selling auto insurance and are competing with traditional insurers ALL, PGR, Geico/BRK, etc.
Pg 23: DETROIT is rebounding with auto manufacturing (Big Two with big EV plans), techs, sports. It's an example of successful cooperation among the government, businesses and universities. Ford/F has been prominent in these efforts.
EXTRA: After new IRS rules released on 4/17/23, only 16 EVs and 4 plug-in hybrids qualify for full tax credits; some more qualify for partial credits but the rest don’t qualify. There is an exception for leasing that makes tax credits available for EVs that otherwise don’t qualify on purchases. The IRS requirements include US assembly, sourcing of EV batteries, price caps, etc.
EXTRA: Big trucks (class 8) are going electric. HYLN – Hypertruck ERX has an all-electric range of 75 miles only but uses natural-gas-powered generator as range-extender for longer trips. Acceleration is controlled for safety but is still higher than for diesel powered trucks.
Pg 25: BIG MONEY POLL. Data below are for 2023 or 2023-yearend (YE) or the next 12 months. I have skipped projections for 2024 and some beyond.
US Stocks over 12 mo: 36% bullish, 28% bearish
SP500 by YE: 3,598-4,187
SP500 Earnings, 2023: $212.98
Current Asset Allocation: 62% equities, 21% fixed-income, 9% “cash”, 8% other
“Cash”: 43% m-mkt funds, 34% ST bond funds, 9% T-Bills, 8% CDs, 4% HY online
Better Asset Classes in 12 mo: 52% bonds, 48% stocks
Attractive Global Markets: 43% Europe, 40% US, 34% EMs, 17% China, 14% Japan
Style Preference: 54% value, 46% growth
Oil/WTI in 12 mo: $78
Gold in 12 mo: $2,106
US GDP, 2023: 0-2% by 89%
Inflation at YE: 4-5% by 72%
Fed funds at YE: 4.50-5.25% by 66% (so, 1 hike, several holds, then some cuts)
2-yr T-Note in 12 mo: 3-4% by 67%
10-yr T-Note in 12 mo: 3-4% by 76%
Dollar in 12 mo: 57% weaker, 20% stronger
Bank questions didn’t indicate concerns
Pg 29, FUNDS. Several funds use OPTIONS to boost income – ETFs JEPI, JEPQ, QYLD, DIVO; CEFs EXG, IGD.
Pg 30, TECH TRADER. Disappointing Netflix/NFLX earnings had some good points. The ad-supported lower-priced subscriptions grew and the crackdown on password sharing is working, but these will take years to show full effects. Free cash flow was healthy.
Pg 30, INCOME INVESTING. Long-term MUNI (OEFs VWLUX, AFTEX; ETF MUB) and HY muni are now attractive.
Pg 31: ECONOMY. It’s like the tale of 2 cities. The STOCK market is acting fearless with (options-based) VIX of 16.77. But VIX doesn’t capture the ODTE options (same-day expirations) activity and may be understated. The banking crisis and resolutions for the failed banks have calmed the stock market. The BOND market is in a different world with elevated (volatility) MOVE of 120.84 (moreover, 1m-3m and 1m-2m T-Bill spreads are unusually high). Bond market is assuming a Fed pivot. But sticky inflation is too high for the Fed.
Pg 32, ECONOMY. Claudia SAHM, consultant; formerly with the FED. She is credited with the (empirical) Sahm Rule for early detection of RECESSION – when 3-mo rolling average of the unemployment rate rises by +0.5% or more from its 12-mo low. She thinks that the Fed should PAUSE now and let higher rates work through the economy. Rapid rate hikes by the Fed will hurt the LABOR market more than INFLATION. The BANKING crisis has increased the chances of recession. POWELL hasn’t pushed Congress on fiscal policies as did some previous Fed Chairs. She favors early STIMULUS when needed and that is what led her to the Sahm Rule. Things happened very fast during Covid, and one can find fault with something in hindsight, but the consequences of inaction or delayed action would have been much worse. Also keep in mind that one reason the labor markets are tight now is because many retired, quit or DIED during Covid. IMMIGRATION pipeline was also shut. Sure, some actions resulted in inflation now, but that problem can be addressed.
Pg 62, OTHER VOICES. J.W. MASON, CUNY and Roosevelt Institution. Recently we saw asset BUBBLES burst (cryptos, watches) and bank failures. Did FED’s ZIRP cause these? No, they were unintended consequences of the intended behaviors for the ZIRP. It is a reality that most balance sheets will have trouble when rates move out of the assumed ranges. It’s a game of expectations – rates were “low” only because they were unexpected, and rates are “high” now because they are also unexpected.
(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.
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
REVIEW. NATURAL GAS got a break when an Appeals Court blocked Berkeley, CA 2020 ordinance banning natural gas piping in new constructions. It’s unclear how it will affect similar pushes elsewhere.
PREVIEW. CHINA’s Q1 GDP grew at +4.5% that was better than expected; the improvement should continue in Q2. However, this may be a consumer-led bounce rather than recovery. Wage growth has been lackluster and household debt is high. Exports, responsible for past GDP growth, have been declining. It would be hard for the huge economy to suddenly shift from exports to consumers. Then, there are US-China tensions in several areas.
DATA THIS WEEK. New home sales, consumer confidence, home price index on TUESDAY; durable goods report on WEDNESDAY; Q1 GDP (+1.8%) on THURSDAY; UM sentiment, personal income and expenditures (core PCE +4.5%) on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. IAC (Barry Diller (81) wants a cut for the data used by generative AI chat-bots but may be limited in what he can do without going through the trade groups; pg 14);
TJX (yield 1.70% and growing; fwd P/E 22; off-price retailer focusing on in-store promos/treasure-hunts (no home deliveries); store brands T.J. Max, Marshalls, Home Goods, Sierra Trading Post; closed some nonessential businesses; minor online presence; risks include lower consumer spending, inflation, recession, shrinkage/theft; pg 16).
BEARISH.
Pg 17, FOLLOW UP. Tesla/TSLA cut prices to improve affordability. Margins have suffered some, but availability is still an issue (long waits are normal). The long-term growth remains intact. Stock is volatile and may trade in the range of $100-200.
Pg 17: BoA/BAC said not to worry about its $99 billion (was $109 billion on 12/31/22) unrealized losses for its HTM bond portfolio of $624 billion (NOT marked to market). It said that its deposit franchise was in good shape, and that it has lots of low-rate deposits (depositors getting 0.01-0.03%, pay attention). On the other hand, BRK has $100+ billion in T-Bills; BRK has 13% stake in BAC. (Defense seems similar to what Schwab/SCHW said – the HTM unrealized losses will remain unrealized as there is plenty of other liquidity or resources)
More stories related to the Cover story on cars (Part 1).
Pg 21: Tesla/TSLA (as an underwriter), GM (as an agent) etc are selling auto insurance and are competing with traditional insurers ALL, PGR, Geico/BRK, etc.
Pg 23: DETROIT is rebounding with auto manufacturing (Big Two with big EV plans), techs, sports. It's an example of successful cooperation among the government, businesses and universities. Ford/F has been prominent in these efforts.
EXTRA: After new IRS rules released on 4/17/23, only 16 EVs and 4 plug-in hybrids qualify for full tax credits; some more qualify for partial credits but the rest don’t qualify. There is an exception for leasing that makes tax credits available for EVs that otherwise don’t qualify on purchases. The IRS requirements include US assembly, sourcing of EV batteries, price caps, etc.
EXTRA: Big trucks (class 8) are going electric. HYLN – Hypertruck ERX has an all-electric range of 75 miles only but uses natural-gas-powered generator as range-extender for longer trips. Acceleration is controlled for safety but is still higher than for diesel powered trucks.
Pg 25: BIG MONEY POLL. Data below are for 2023 or 2023-yearend (YE) or the next 12 months. I have skipped projections for 2024 and some beyond.
US Stocks over 12 mo: 36% bullish, 28% bearish
SP500 by YE: 3,598-4,187
SP500 Earnings, 2023: $212.98
Current Asset Allocation: 62% equities, 21% fixed-income, 9% “cash”, 8% other
“Cash”: 43% m-mkt funds, 34% ST bond funds, 9% T-Bills, 8% CDs, 4% HY online
Better Asset Classes in 12 mo: 52% bonds, 48% stocks
Attractive Global Markets: 43% Europe, 40% US, 34% EMs, 17% China, 14% Japan
Style Preference: 54% value, 46% growth
Oil/WTI in 12 mo: $78
Gold in 12 mo: $2,106
US GDP, 2023: 0-2% by 89%
Inflation at YE: 4-5% by 72%
Fed funds at YE: 4.50-5.25% by 66% (so, 1 hike, several holds, then some cuts)
2-yr T-Note in 12 mo: 3-4% by 67%
10-yr T-Note in 12 mo: 3-4% by 76%
Dollar in 12 mo: 57% weaker, 20% stronger
Bank questions didn’t indicate concerns
Pg 29, FUNDS. Several funds use OPTIONS to boost income – ETFs JEPI, JEPQ, QYLD, DIVO; CEFs EXG, IGD.
Pg 30, TECH TRADER. Disappointing Netflix/NFLX earnings had some good points. The ad-supported lower-priced subscriptions grew and the crackdown on password sharing is working, but these will take years to show full effects. Free cash flow was healthy.
Pg 30, INCOME INVESTING. Long-term MUNI (OEFs VWLUX, AFTEX; ETF MUB) and HY muni are now attractive.
Pg 31: ECONOMY. It’s like the tale of 2 cities. The STOCK market is acting fearless with (options-based) VIX of 16.77. But VIX doesn’t capture the ODTE options (same-day expirations) activity and may be understated. The banking crisis and resolutions for the failed banks have calmed the stock market. The BOND market is in a different world with elevated (volatility) MOVE of 120.84 (moreover, 1m-3m and 1m-2m T-Bill spreads are unusually high). Bond market is assuming a Fed pivot. But sticky inflation is too high for the Fed.
Pg 32, ECONOMY. Claudia SAHM, consultant; formerly with the FED. She is credited with the (empirical) Sahm Rule for early detection of RECESSION – when 3-mo rolling average of the unemployment rate rises by +0.5% or more from its 12-mo low. She thinks that the Fed should PAUSE now and let higher rates work through the economy. Rapid rate hikes by the Fed will hurt the LABOR market more than INFLATION. The BANKING crisis has increased the chances of recession. POWELL hasn’t pushed Congress on fiscal policies as did some previous Fed Chairs. She favors early STIMULUS when needed and that is what led her to the Sahm Rule. Things happened very fast during Covid, and one can find fault with something in hindsight, but the consequences of inaction or delayed action would have been much worse. Also keep in mind that one reason the labor markets are tight now is because many retired, quit or DIED during Covid. IMMIGRATION pipeline was also shut. Sure, some actions resulted in inflation now, but that problem can be addressed.
Pg 62, OTHER VOICES. J.W. MASON, CUNY and Roosevelt Institution. Recently we saw asset BUBBLES burst (cryptos, watches) and bank failures. Did FED’s ZIRP cause these? No, they were unintended consequences of the intended behaviors for the ZIRP. It is a reality that most balance sheets will have trouble when rates move out of the assumed ranges. It’s a game of expectations – rates were “low” only because they were unexpected, and rates are “high” now because they are also unexpected.
(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.
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).