Post by Admin/YBB on May 20, 2023 4:02:57 GMT -6
From Barron’s, May 22, 2023 (Part 1, Market Week+)
Pg 32, TRADER. AAPL now has a market-cap that exceeds that of the small-cap R2000. 5 biggest stocks (AAPL, MSFT, GOOGL, AMZN, NVDA) account for 25% of the SP500 market-cap and they have a combined fwd P/E of 31 vs 17.4 for the SP500. This concentration in big stocks has exceeded that during the dot. com bubble. For diversification, consider SP500 value SPYV, equal-weight SP500 RSP and money-market funds.
On the US RESHORING theme for MANUFACTURING, consider PH, AIT, MSM, HLMN, GWW; ETF XLI. Things look bleak now due to recession fears and the regional banking crisis but get ready for rebound; (there are various government incentives for reshoring too that are prompting several foreign companies to setup operations in/around the US).
So, you like PORSCHE and want to buy it. But which ADR to buy? Not the Porsche holding company POAHY (37% discount due to corporate complexity and the past VW emission scandals) that is only 25% Porsche cars and 53% VW (and that has its own ADRs VWAGY, VWAPY). For Porsche cars, buy DRPRY.
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 6/14/23+ hold (cycle peak 5.00-5.25%)
FOMC 7/26/23+ hold
FOMC 9/20/23+ hold
FOMC 11/1/23+ cut -25 bps
FOMC 12/13/23+ cut -25 bps
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.38%, SP500 +1.65%, Nasdaq Comp +3.04%, R2000 +1.89%. DJ Transports +0.92%; DJ Utilities -4.62% (large move). (Rotating spot industrial XLI +1.32%) US$ index (spot) +0.51%, oil/WTI futures +0.22%, gold futures -1.78%.
YTD (index changes only), DJIA +0.84%, SP500 +9.18%, Nasdaq Comp +20.94%. (Rotating spot industrial XLI +1.60%)
SENTIMENTS
NYSE cumulative (5-day) A/D LINE rose; ratio of winners:losers 4:3.
AAII Bull-Bear Spread -16.8% (low).
%Above 50-dMA for NYSE-listed stocks 48.12% (marginal) (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 41.0% (low) (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 36, INTERNATIONAL TRADER. After initial concerns, the BRAZILIAN markets like the “new” President LULA (77; he was President before). Real has rallied; inflation is +4.2% while the prime rate is 13.75% (so, rates can be slashed). His fiscal framework will produce some surplus if the debt servicing is excluded. Beneficiaries will be bonds and stocks (EWZ fwd P/E 7 only; attractive sectors are consumers, banks, real estate).
EMERGING MARKETS. (Place holder)
COMMODITIES. (Place Holder)
Pg 37, OPTIONS. Options strangle (buying both calls and puts) would work if the market goes up or down a lot; but there would be a loss if the market doesn’t move.
(SP500 VIX 16.81, Nasdaq 100 VXN 19.68, options SKEW 135.52 (high), bond MOVE 127.51 (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 50: A flat week in EUROPE (Netherlands +3.54%, Denmark -1.42%,) (German DAX at a new high) and an up week in ASIA (Taiwan +3.67%, Singapore -2.72%).
TREASURY* 3-mo yield 5.29%, 1-yr 5.02%, 2-yr 4.28%, 5-yr 3.76%, 10-yr 3.70%, 30-yr 3.95%. REAL yields 5-yr 1.57%, 10-yr 1.46%, 30-yr 1.66%.
DOLLAR rose, ^DXY 103.19, +0.5% (pg 58). GOLD fell to $1,962, -2.9% (Handy & Harman spot, Thursday; pg 60); the gold-miners fell. (^XAU was at 127.84, -4.25% for the week) (Barron’s recent bullish call on gold was a dud again)
Top FDIC insured savings deposit rates** (This feature has been discontinued)
US SAVINGS I-Bonds^, NEW rate from May 1, 2023, is 4.30%; the fixed rate is +0.90%, the semiannual inflation is +1.69%.
*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, ENERGY Roundtable “10 Ways to Play Oil Rebound/ 10 Stocks to Play a Resurgent Energy Sector”. It was held via Zoom on May 9 with the panelists Helima CROFT, RBC Capital; Dan PICKERING*, Pickering Energy; Christyan MALEK*, J.P. Morgan/JPM; Karim FAWAS, S&P. Only 2/4 provided specific names (marked *).
MALEK*: SHEL, TTE, XOM, MRO, GLPEY, Aramco (Saudi), FANG
PICKERING*: AR, PR, FANG, DO, SLB
OIL/GAS prices have been very volatile due to COVID crash in 2020 and RUSSIA-UKRAINE war in 2022; the other GEOPOLITICAL issues are from Iran, Iraq, Venezuela, etc. Russia-Ukraine war may be at a stalemate stage now due to huge military support provided to Ukraine by the US/West, but Russia can wait this out, or there may be a brokered peace. Saudis and the OPEC are also doing a balancing act between the US and Russia. ENERGY prices have been in a wide trading range (energy stocks and oil/gas prices have also acted differently). This despite the recent production cuts by the OPEC/OPEC+ and the US shale producers’ reluctance to add production but it is due to the fears of global slowdown.
There are ESG pressures to shift to alternative energies, but the ENERGY TRANSITION will take time and will be expensive. The future of oil will be DEMAND-driven, and CHINA will be a huge swing factor and whether the new China will act like the old China. The oil demand may finally peak in 2028-30. Energy is now only 4-5% of the SP500, but the sentiment will turn from hated to popular when that reaches 7%+. The long-term outlook for energy is bullish if oil prices can stay above $70s or $80s (but the short-term is anybody’s guess); the bottom for oil may be in $60s due to the OPEC/OPEC+ interventions and the US SPR filling(s); the top may be $150-250 depending on the turn of global events. Wait for the emerging ALTERNATIVE energy sector to shakeout, but if you must invest there, look at DNNGY, ENGIY, NEE, TESLA(!). Investors may consider 10% exposure to energy with 100-0 or 85-15 split now between traditional-alternative energy (and that would change gradually in the future in the favor of alternate energy). There may be lot of industry consolidations (among the old and new energy). The developed world is much ahead in energy transitions than the developing world and demand for oil will linger on for a long time (global schedules are from 2030-80).
After the US, EU and UK sanctions, and price-caps (for others), the Russian oil is now flowing to Asia (China, India, etc), and some of it is refined and shipped back to Europe (initially, the crude oil involved was under the price-caps, but now some may be over the price-caps and Europe may have to decide whether it really wants that oil). Russia just took its NATURAL GAS off the global markets. Europe has stockpiled enough natural gas for its current and future uses. Several LNG facilities will come on line in 2025-26 in the US and elsewhere. China would rather use cheaper COAL than import expensive natural gas. So, the factors for natural gas are quite different than those for oil.
Pg 6, UP AND DOWN WALL STREET. A doomsday scenario isn’t priced in the market. Regional banks seem to have steadied. The FED may pause or hike. The LEI has fallen for 13 months, the longest such run since 03/2009. UBS noted that the exposure to the US stocks was 2*SD below the average (globally? The US investor data don’t show that) and cash levels are high. The UM sentiment is below average (that is contrarian, like the other sentiment indicators noted in Part 1). But the market has no worries. The big AI stocks are hot, but the equal-weight SP500 has also done well, indicating good breadth.
The FTC Chair Lina KHAN is blocking most M&As on antitrust or anticompetitive grounds. So, blocked are AMZN + HZNP, PFE + SGEN, META + Within, UNH + Change Healthcare, etc. The biotech ETF XBI has sold off because many biotech startups and emerging growth companies count on being acquired by bigger companies, and their valuations have suffered. If Khan has her way, she may also unwind some of the past M&As (ILMN + Grail may be just the start, but how far back she would go?). The FTC may not prevail in all of its blocks, but this sends a chilling message, and industry M&A has cooled off. It may force many companies to buy tiny companies that may be under the radar of the FTC.
Pg 8, STREETWISE. The hype of HYDROGEN for industrial uses has failed to deliver again despite the US incentives through Infrastructure Act and Inflation Reduction Act; the ETF HDRO has been a disaster. Hydrogen is abundant but green/clean hydrogen from electrolysis of water requires lots of electricity. Then there are grey (from steaming the natural gas), blue, turquoise, pink and brown hydrogen. Companies involved in hydrogen production and distribution include LIN, APD, etc, but many large companies produce their own in-house. Consumer applications via fuel cells (BLDP, BE, PLUG) aren’t yet ready for prime time. So, technology is improving rapidly but much of it isn’t yet sensible business-wise.
(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.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
Pg 32, TRADER. AAPL now has a market-cap that exceeds that of the small-cap R2000. 5 biggest stocks (AAPL, MSFT, GOOGL, AMZN, NVDA) account for 25% of the SP500 market-cap and they have a combined fwd P/E of 31 vs 17.4 for the SP500. This concentration in big stocks has exceeded that during the dot. com bubble. For diversification, consider SP500 value SPYV, equal-weight SP500 RSP and money-market funds.
On the US RESHORING theme for MANUFACTURING, consider PH, AIT, MSM, HLMN, GWW; ETF XLI. Things look bleak now due to recession fears and the regional banking crisis but get ready for rebound; (there are various government incentives for reshoring too that are prompting several foreign companies to setup operations in/around the US).
So, you like PORSCHE and want to buy it. But which ADR to buy? Not the Porsche holding company POAHY (37% discount due to corporate complexity and the past VW emission scandals) that is only 25% Porsche cars and 53% VW (and that has its own ADRs VWAGY, VWAPY). For Porsche cars, buy DRPRY.
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 6/14/23+ hold (cycle peak 5.00-5.25%)
FOMC 7/26/23+ hold
FOMC 9/20/23+ hold
FOMC 11/1/23+ cut -25 bps
FOMC 12/13/23+ cut -25 bps
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.38%, SP500 +1.65%, Nasdaq Comp +3.04%, R2000 +1.89%. DJ Transports +0.92%; DJ Utilities -4.62% (large move). (Rotating spot industrial XLI +1.32%) US$ index (spot) +0.51%, oil/WTI futures +0.22%, gold futures -1.78%.
YTD (index changes only), DJIA +0.84%, SP500 +9.18%, Nasdaq Comp +20.94%. (Rotating spot industrial XLI +1.60%)
SENTIMENTS
NYSE cumulative (5-day) A/D LINE rose; ratio of winners:losers 4:3.
AAII Bull-Bear Spread -16.8% (low).
%Above 50-dMA for NYSE-listed stocks 48.12% (marginal) (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 41.0% (low) (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 36, INTERNATIONAL TRADER. After initial concerns, the BRAZILIAN markets like the “new” President LULA (77; he was President before). Real has rallied; inflation is +4.2% while the prime rate is 13.75% (so, rates can be slashed). His fiscal framework will produce some surplus if the debt servicing is excluded. Beneficiaries will be bonds and stocks (EWZ fwd P/E 7 only; attractive sectors are consumers, banks, real estate).
EMERGING MARKETS. (Place holder)
COMMODITIES. (Place Holder)
Pg 37, OPTIONS. Options strangle (buying both calls and puts) would work if the market goes up or down a lot; but there would be a loss if the market doesn’t move.
(SP500 VIX 16.81, Nasdaq 100 VXN 19.68, options SKEW 135.52 (high), bond MOVE 127.51 (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 50: A flat week in EUROPE (Netherlands +3.54%, Denmark -1.42%,) (German DAX at a new high) and an up week in ASIA (Taiwan +3.67%, Singapore -2.72%).
TREASURY* 3-mo yield 5.29%, 1-yr 5.02%, 2-yr 4.28%, 5-yr 3.76%, 10-yr 3.70%, 30-yr 3.95%. REAL yields 5-yr 1.57%, 10-yr 1.46%, 30-yr 1.66%.
DOLLAR rose, ^DXY 103.19, +0.5% (pg 58). GOLD fell to $1,962, -2.9% (Handy & Harman spot, Thursday; pg 60); the gold-miners fell. (^XAU was at 127.84, -4.25% for the week) (Barron’s recent bullish call on gold was a dud again)
Top FDIC insured savings deposit rates** (This feature has been discontinued)
US SAVINGS I-Bonds^, NEW rate from May 1, 2023, is 4.30%; the fixed rate is +0.90%, the semiannual inflation is +1.69%.
*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, ENERGY Roundtable “10 Ways to Play Oil Rebound/ 10 Stocks to Play a Resurgent Energy Sector”. It was held via Zoom on May 9 with the panelists Helima CROFT, RBC Capital; Dan PICKERING*, Pickering Energy; Christyan MALEK*, J.P. Morgan/JPM; Karim FAWAS, S&P. Only 2/4 provided specific names (marked *).
MALEK*: SHEL, TTE, XOM, MRO, GLPEY, Aramco (Saudi), FANG
PICKERING*: AR, PR, FANG, DO, SLB
OIL/GAS prices have been very volatile due to COVID crash in 2020 and RUSSIA-UKRAINE war in 2022; the other GEOPOLITICAL issues are from Iran, Iraq, Venezuela, etc. Russia-Ukraine war may be at a stalemate stage now due to huge military support provided to Ukraine by the US/West, but Russia can wait this out, or there may be a brokered peace. Saudis and the OPEC are also doing a balancing act between the US and Russia. ENERGY prices have been in a wide trading range (energy stocks and oil/gas prices have also acted differently). This despite the recent production cuts by the OPEC/OPEC+ and the US shale producers’ reluctance to add production but it is due to the fears of global slowdown.
There are ESG pressures to shift to alternative energies, but the ENERGY TRANSITION will take time and will be expensive. The future of oil will be DEMAND-driven, and CHINA will be a huge swing factor and whether the new China will act like the old China. The oil demand may finally peak in 2028-30. Energy is now only 4-5% of the SP500, but the sentiment will turn from hated to popular when that reaches 7%+. The long-term outlook for energy is bullish if oil prices can stay above $70s or $80s (but the short-term is anybody’s guess); the bottom for oil may be in $60s due to the OPEC/OPEC+ interventions and the US SPR filling(s); the top may be $150-250 depending on the turn of global events. Wait for the emerging ALTERNATIVE energy sector to shakeout, but if you must invest there, look at DNNGY, ENGIY, NEE, TESLA(!). Investors may consider 10% exposure to energy with 100-0 or 85-15 split now between traditional-alternative energy (and that would change gradually in the future in the favor of alternate energy). There may be lot of industry consolidations (among the old and new energy). The developed world is much ahead in energy transitions than the developing world and demand for oil will linger on for a long time (global schedules are from 2030-80).
After the US, EU and UK sanctions, and price-caps (for others), the Russian oil is now flowing to Asia (China, India, etc), and some of it is refined and shipped back to Europe (initially, the crude oil involved was under the price-caps, but now some may be over the price-caps and Europe may have to decide whether it really wants that oil). Russia just took its NATURAL GAS off the global markets. Europe has stockpiled enough natural gas for its current and future uses. Several LNG facilities will come on line in 2025-26 in the US and elsewhere. China would rather use cheaper COAL than import expensive natural gas. So, the factors for natural gas are quite different than those for oil.
Pg 6, UP AND DOWN WALL STREET. A doomsday scenario isn’t priced in the market. Regional banks seem to have steadied. The FED may pause or hike. The LEI has fallen for 13 months, the longest such run since 03/2009. UBS noted that the exposure to the US stocks was 2*SD below the average (globally? The US investor data don’t show that) and cash levels are high. The UM sentiment is below average (that is contrarian, like the other sentiment indicators noted in Part 1). But the market has no worries. The big AI stocks are hot, but the equal-weight SP500 has also done well, indicating good breadth.
The FTC Chair Lina KHAN is blocking most M&As on antitrust or anticompetitive grounds. So, blocked are AMZN + HZNP, PFE + SGEN, META + Within, UNH + Change Healthcare, etc. The biotech ETF XBI has sold off because many biotech startups and emerging growth companies count on being acquired by bigger companies, and their valuations have suffered. If Khan has her way, she may also unwind some of the past M&As (ILMN + Grail may be just the start, but how far back she would go?). The FTC may not prevail in all of its blocks, but this sends a chilling message, and industry M&A has cooled off. It may force many companies to buy tiny companies that may be under the radar of the FTC.
Pg 8, STREETWISE. The hype of HYDROGEN for industrial uses has failed to deliver again despite the US incentives through Infrastructure Act and Inflation Reduction Act; the ETF HDRO has been a disaster. Hydrogen is abundant but green/clean hydrogen from electrolysis of water requires lots of electricity. Then there are grey (from steaming the natural gas), blue, turquoise, pink and brown hydrogen. Companies involved in hydrogen production and distribution include LIN, APD, etc, but many large companies produce their own in-house. Consumer applications via fuel cells (BLDP, BE, PLUG) aren’t yet ready for prime time. So, technology is improving rapidly but much of it isn’t yet sensible business-wise.
(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.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).