Post by Admin/YBB on May 6, 2023 7:31:26 GMT -6
Pg 10-11. BOE monetary policy decision on THURSDAY.
REVIEW. OIL prices fell sharply due to lower industrial demand from CHINA. This was contrary to the expectations of strong oil prices due to the OPEC production cuts and generally rising global demand. If prices don’t stabilize, the OPEC may cut production further.
PREVIEW. Generative AI (ChatGPT, Bard, etc) may cause job losses for teachers, telemarketers, HR, lenders, legal offices, architects, interior designers, etc. Online educational materials company Chegg/CHGG cited revenue losses already from ChatGPT; IBM also cited generative AI for job cuts. (There is a full-length feature on it too).
DATA THIS WEEK. Wholesale inventories on MONDAY; small business optimism index on TUESDAY; Treasury budget, CPI (+5%, core +5.4%) on WEDNESDAY; weekly initial jobless claims, (wholesale) PPI (+2.4%, core +3.3%; PPI << CPI means that the CPI would decrease in future) on THURSDAY, UM consumer sentiment on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. New weight-loss drugs (tirzepatide/ Mounjaro (LLY), semaglutide/ Ozempic/ Wegovy/ Rybelsus (NVO); primarily developed and tested for DM II, but their weight-loss side effects have been amazing; costs $1,000/mo but insurance coverages (including Medicare) may vary depending on whether prescribed for DMII or obesity; potential competitors include PFE, AMGN; pg 12);
Carrier (CARR; fwd P/E 14.7; debt/EBITDA 3.5, high but should come down; acquired German heat pump and climate-control company Viessmann Climate Solutions – this should be good long-term but the stock sold off on potential earnings hit; selling noncore business to focus on pure HVAC businesses; heat pumps will drive growth; competitor TT; pg 17);
Biofuel stocks (small players DAR, OPAL, AMTX, CLNE, CLMT; majors BP, CVX, SHEL; refiners VLO, MPC, CVI; renewable fuels from cooking oil, grease, farm byproducts, corn, manure/ landfill/ sewage gases; the CA 2011 law on Low Carbon Fuel Standard (LCFS) for transportation was a big driver, but now prices of those LCFS credits have fallen due to oversupply; several states are launching similar programs; the Feds have another clean-fuels program via blending with renewable fuels since 2005, but a national LCFS program is unlikely; the Inflation Reduction Act provides subsidies for some biofuels; ethanol from corn accounts for 70% of biofuels today; high costs of biofuels is also a negative; there may be consolidation in this growing industry; pg 18).
BEARISH.
Pg 9: Just watch collapsing regional BANKS (ETF KRE) for now and bargain hunt later (although some have started to dip their toes; JPM upgraded CMA, ZION). After some declared the end of the regional banking crisis prematurely, more regionals started collapsing – PACW, WAL, etc. There are reports of manipulation by shorts using social-media and the SEC is being urged to ban short sales of financials, as was done in the GFC 2008. There are attractive valuations (BAC, BANF, CFG, CVLY, PLBC, etc). (Issues of underwater Treasuries/MBS and CREs and potential bank runs won’t go away until there is some reform of the FDIC deposit insurance system)
Pg 21: The TIAA & its Brazilian partner Cosan/CSAN are accused of using aggressive & harsh practices for land-grab in BRAZIL. The TIAA denies the accusations & says that the farmland was acquired by proper legal means; the accusations don’t involve the TIAA directly but involve various 3rd parties that the TIAA relied on. There are restrictions on the foreign ownership of land in Brazil, so TIAA formed a holding company in partnership with Brazilian Cosan in which a Brazilian billionaire Rubens OMETTO has a controlling interest, but the TIAA has the most economic interest. The TIAA has also formed partnerships involving several US pensions funds (private & public). The TIAA’s biggest ag exposure now is in Brazil. (These stories go back several years & it is unclear what recent news prompted Barron’s article).
Pg 23: Vanguard S.O.S. was launched by 107 environmental groups in April 2022 to pressure Vanguard Group on climate issues and proxy voting policies; it has been running negative ads. Vanguard maintains that it handles ESG and sustainability quietly in the background. But notably, it withdrew from the Net Zero Asset Managers (NZAM) initiative. (By MFO @lewisbraham)
Pg 24, INCOME INVESTING. Several PHARMA stocks offer current dividends and dividend-growth: BMY, GILD, MRK, PFE, etc.
Pg 24, TECH TRADER. PC and smartphone sales are down, but iPhone sales are up (so, Apple continues to gain market share). Apple products are expensive, but its customers are loyal and they like the Apple ecosystem – iPhones, Apple Music, Apple TV+, iCloud, Apple Store (and the newest, Apple Savings). Apple stock is also expensive (yield 0.55%; fwd P/E 28; buybacks), but it may have more upside.
Pg 25: ECONOMY. The JOBS report was very strong; the WAGE growth was also high. This may cause the FED to raise RATES further. The rate hikes so far have caused the regional BANKING crisis/contagion and increased the likelihood of a RECESSION, but the sticky inflation still remains high. The REAL rates are positive using the 12-mo inflation-expectations. POWELL said that it won’t be appropriate to cut rates in 2023 (while hold or hike would be data dependent). Yet, the CME Fedwatch, based on fed fund futures trading, shows no more rate hikes, and cuts later in 2023. Who would you believe, the Fed or the market?
EXTRA. ECONOMY. While INFLATION now is well above the FED’s +2% average inflation target, POWELL suggested that it can be brought down without causing a RECESSION. The recent +25 bps hike to 5.00-5.25% may be the last one but Powell kept his options open. The LABOR market remains strong and consumer spending may sustain the economy. But Powell also said that the US banking system was sound and 3 recent regional bank failures may represent the end of the crisis (yet, the next day, 3 other regionals, PACW, WAL, FHN and several others sold off).
Pg 26, FUNDS. Matthew FINE, TAVFX. The concentrated (about 30 holdings) global value fund has done well since 2020. It also looks for companies emerging out of bankruptcies. Third Avenue (1986- ) founder Marty WHITMAN passed away in 2018.
Pg 54, OTHER VOICES. Thomas HOENIG, George Mason U; former VC of the FDIC; former Kansas City Fed President. The FED Report on SVB failure by the VC of Fed Supervision Michael BARR was interesting in what it contained and what it omitted. It pointed out problems at SVB (industry concentration, poor asset and liquidity management) and lax Fed supervision. But it didn’t dwell on the HTM accounting issues that caused recent investor panics and bank runs. The Fed also has a multi-tier approach for bank supervision with different rules for large, medium and small banks – Congress, in fact, created these differential rules after lobbying by the small and medium banks. Report didn’t name names but just “the supervisors”. It called an alarming staff presentation on February 14 (that specifically pointed to SVB problems) as merely informational. It said that there were alerts, warnings, letters but didn’t say who was responsible for follow ups or noncompliant behavior(s)? Now the reality is that these problems of underwater HTM Treasuries/MBS and CREs are widespread at banks and there may be more problems at small/medium banks. (Barr is new to the Fed and his role is novel (he is only the 2nd Fed VC of Supervision), so he may have deliberately avoided finger-pointing and the blame-game).
(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. OIL prices fell sharply due to lower industrial demand from CHINA. This was contrary to the expectations of strong oil prices due to the OPEC production cuts and generally rising global demand. If prices don’t stabilize, the OPEC may cut production further.
PREVIEW. Generative AI (ChatGPT, Bard, etc) may cause job losses for teachers, telemarketers, HR, lenders, legal offices, architects, interior designers, etc. Online educational materials company Chegg/CHGG cited revenue losses already from ChatGPT; IBM also cited generative AI for job cuts. (There is a full-length feature on it too).
DATA THIS WEEK. Wholesale inventories on MONDAY; small business optimism index on TUESDAY; Treasury budget, CPI (+5%, core +5.4%) on WEDNESDAY; weekly initial jobless claims, (wholesale) PPI (+2.4%, core +3.3%; PPI << CPI means that the CPI would decrease in future) on THURSDAY, UM consumer sentiment on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. New weight-loss drugs (tirzepatide/ Mounjaro (LLY), semaglutide/ Ozempic/ Wegovy/ Rybelsus (NVO); primarily developed and tested for DM II, but their weight-loss side effects have been amazing; costs $1,000/mo but insurance coverages (including Medicare) may vary depending on whether prescribed for DMII or obesity; potential competitors include PFE, AMGN; pg 12);
Carrier (CARR; fwd P/E 14.7; debt/EBITDA 3.5, high but should come down; acquired German heat pump and climate-control company Viessmann Climate Solutions – this should be good long-term but the stock sold off on potential earnings hit; selling noncore business to focus on pure HVAC businesses; heat pumps will drive growth; competitor TT; pg 17);
Biofuel stocks (small players DAR, OPAL, AMTX, CLNE, CLMT; majors BP, CVX, SHEL; refiners VLO, MPC, CVI; renewable fuels from cooking oil, grease, farm byproducts, corn, manure/ landfill/ sewage gases; the CA 2011 law on Low Carbon Fuel Standard (LCFS) for transportation was a big driver, but now prices of those LCFS credits have fallen due to oversupply; several states are launching similar programs; the Feds have another clean-fuels program via blending with renewable fuels since 2005, but a national LCFS program is unlikely; the Inflation Reduction Act provides subsidies for some biofuels; ethanol from corn accounts for 70% of biofuels today; high costs of biofuels is also a negative; there may be consolidation in this growing industry; pg 18).
BEARISH.
Pg 9: Just watch collapsing regional BANKS (ETF KRE) for now and bargain hunt later (although some have started to dip their toes; JPM upgraded CMA, ZION). After some declared the end of the regional banking crisis prematurely, more regionals started collapsing – PACW, WAL, etc. There are reports of manipulation by shorts using social-media and the SEC is being urged to ban short sales of financials, as was done in the GFC 2008. There are attractive valuations (BAC, BANF, CFG, CVLY, PLBC, etc). (Issues of underwater Treasuries/MBS and CREs and potential bank runs won’t go away until there is some reform of the FDIC deposit insurance system)
Pg 21: The TIAA & its Brazilian partner Cosan/CSAN are accused of using aggressive & harsh practices for land-grab in BRAZIL. The TIAA denies the accusations & says that the farmland was acquired by proper legal means; the accusations don’t involve the TIAA directly but involve various 3rd parties that the TIAA relied on. There are restrictions on the foreign ownership of land in Brazil, so TIAA formed a holding company in partnership with Brazilian Cosan in which a Brazilian billionaire Rubens OMETTO has a controlling interest, but the TIAA has the most economic interest. The TIAA has also formed partnerships involving several US pensions funds (private & public). The TIAA’s biggest ag exposure now is in Brazil. (These stories go back several years & it is unclear what recent news prompted Barron’s article).
Pg 23: Vanguard S.O.S. was launched by 107 environmental groups in April 2022 to pressure Vanguard Group on climate issues and proxy voting policies; it has been running negative ads. Vanguard maintains that it handles ESG and sustainability quietly in the background. But notably, it withdrew from the Net Zero Asset Managers (NZAM) initiative. (By MFO @lewisbraham)
Pg 24, INCOME INVESTING. Several PHARMA stocks offer current dividends and dividend-growth: BMY, GILD, MRK, PFE, etc.
Pg 24, TECH TRADER. PC and smartphone sales are down, but iPhone sales are up (so, Apple continues to gain market share). Apple products are expensive, but its customers are loyal and they like the Apple ecosystem – iPhones, Apple Music, Apple TV+, iCloud, Apple Store (and the newest, Apple Savings). Apple stock is also expensive (yield 0.55%; fwd P/E 28; buybacks), but it may have more upside.
Pg 25: ECONOMY. The JOBS report was very strong; the WAGE growth was also high. This may cause the FED to raise RATES further. The rate hikes so far have caused the regional BANKING crisis/contagion and increased the likelihood of a RECESSION, but the sticky inflation still remains high. The REAL rates are positive using the 12-mo inflation-expectations. POWELL said that it won’t be appropriate to cut rates in 2023 (while hold or hike would be data dependent). Yet, the CME Fedwatch, based on fed fund futures trading, shows no more rate hikes, and cuts later in 2023. Who would you believe, the Fed or the market?
EXTRA. ECONOMY. While INFLATION now is well above the FED’s +2% average inflation target, POWELL suggested that it can be brought down without causing a RECESSION. The recent +25 bps hike to 5.00-5.25% may be the last one but Powell kept his options open. The LABOR market remains strong and consumer spending may sustain the economy. But Powell also said that the US banking system was sound and 3 recent regional bank failures may represent the end of the crisis (yet, the next day, 3 other regionals, PACW, WAL, FHN and several others sold off).
Pg 26, FUNDS. Matthew FINE, TAVFX. The concentrated (about 30 holdings) global value fund has done well since 2020. It also looks for companies emerging out of bankruptcies. Third Avenue (1986- ) founder Marty WHITMAN passed away in 2018.
Pg 54, OTHER VOICES. Thomas HOENIG, George Mason U; former VC of the FDIC; former Kansas City Fed President. The FED Report on SVB failure by the VC of Fed Supervision Michael BARR was interesting in what it contained and what it omitted. It pointed out problems at SVB (industry concentration, poor asset and liquidity management) and lax Fed supervision. But it didn’t dwell on the HTM accounting issues that caused recent investor panics and bank runs. The Fed also has a multi-tier approach for bank supervision with different rules for large, medium and small banks – Congress, in fact, created these differential rules after lobbying by the small and medium banks. Report didn’t name names but just “the supervisors”. It called an alarming staff presentation on February 14 (that specifically pointed to SVB problems) as merely informational. It said that there were alerts, warnings, letters but didn’t say who was responsible for follow ups or noncompliant behavior(s)? Now the reality is that these problems of underwater HTM Treasuries/MBS and CREs are widespread at banks and there may be more problems at small/medium banks. (Barr is new to the Fed and his role is novel (he is only the 2nd Fed VC of Supervision), so he may have deliberately avoided finger-pointing and the blame-game).
(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).