Post by Admin/YBB on Jun 24, 2023 8:10:09 GMT -6
Pg 10-11. Fed stress tests for banks with assets over $100 billion on WEDNESDAY.
REVIEW. Charitable GIVING fell in 2022 (also in 1987, 2008, 2009). Giving by foundations, bequests, corporations held up better than from individuals.
PREVIEW. If recession is delayed and cyclicals are performing, then why not RAILROADS? They may be ready for catchup rebounds – NSC, UNP, CSX, CNR, CP. News of derailments and accidents have hurt the rail industry and SAFETY concerns have been raised. But no new REGULATIONS are coming soon from DC. Rail freight volume peaked in 2014, bur remains steady.
DATA THIS WEEK. Durable goods report, new home sales, consumer confidence on TUESDAY; wholesale inventories on WEDNESDAY; personal income and expenditures (core PCE +4.7% yoy), Chicago business barometer on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Boston Beer (SAM; it has another new idea – Twisted Tea, a hard iced tea; it’s making up for the declining/collapsing hard-seltzer business; Bud Lite’s/BUD misfortunes are also helping SAM; it’s cutting costs through automation; it’s a big fish in small beyond-beer/specialty-beer pond; Barron’s 02/2022 bullish recommendation was a bit premature but it still likes SAM; pg14);
Cadre (CDRE; yield 1.5%; makes and distributes safety gear for law enforcement; 2021 IPO; stock fell on a secondary offering (2nd); growth by acquisition; Chairman/CEO KANDERS still owns 37%; pg 15).
BEARISH.
Pg 12: OIL isn’t going away anytime soon (it will eventually). The current global production of 100 million barrels/day will continue for years until ALTERNATE energy is ready (and billions will be needed for ENERGY TRANSITIONS). After a tough 2020-22, several drillers emerged from bankruptcy, have low/no debt, pay no dividends, but are starting buybacks. The onshore FRACKING (much more in the news) can contribute incrementally and in short spurts, but the OFFSHORE drilling platforms can produce much higher volumes steadily for years. There are shallow-water (< 500’) and deep-water (10,000’) rigs. The latter have lease rates now of $500K/day (vs the pandemic low of only $125K/day), operating expenses of $150K/day and may produce 20,000 barrels/day for 20-25 years, so they can be profitable even with oil under $50. New deep-water rigs cost $1 billion (recovered in 5-6 years at the current daily lease rates) and very few were built in the tough years. New long-term rig contracts at higher lease-rates will be more profitable after the old lower lease-rate contracts expire. Stocks mentioned are NE, VAL, SDRL, RIG, DO, and oil servicer SLB.
Pg 16: Offshore Tether now has $83 billion in deposits for its STABLECOIN USDT. It keeps most of that money in, surprise, T-Bills. Tether USDT has maintained its peg and liquidity through the CRYPTO- Winter as well as the Ice-Age; it ranks 3rd behind Bitcoin and Ethereum in digital assets. Think of stablecoins as CRYPTO “cash” backed by something – currencies, miscellaneous assets, gold, etc. There are also stablecoin derivatives. Cryptos are in the crosshairs of the US regulators and that hampers Tether’s US competitors (COIN, USDC/Circle, etc). The EU also has crypto regulations but those are seen more friendly than those in the US.
Pg 30, TECH TRADER. With the AI-rally in techs, the tech IPO market should be strong, but it isn’t. Many IPO experts think that the AI-based unicorns aren’t yet ready for the public market. Institutional and retail investors are wary of being greater fools and don’t care for unprofitable revenues. And why go public when the VCs are the willing greater fools (for now). Recent IPO CAVA (Mexican foods) was strong. Pending IPOs may be Arm Holdings (spinoff from SFTBY) and a few others. But you may have to wait for 2024 for the IPO market to pick up. ETF IPO.
Pg 31, FUNDS. Scott BARBEE of deep-value small-cap AVALX does old fashioned bargain hunting (P/B < 1 combined with other criteria). His current holdings include natural-resources (gold, energy, timber), retail, etc; he is avoiding most banks with potential exposure to underwater holdings that are obscured by the HTM accounting. (By MFO @lewisbraham)
Pg 32, FUNDS. Mark COSTA of international small-cap value BISAX (and other funds) says that the US notions of SC, MC, LC don’t apply to foreign markets – the largest telecom in a country may be just a SC by the US definition (so the “SC” field globally may be quite different). He looks for quality stocks with good balance sheets and some margins of safety. His holdings include Irish bank, Brazilian and UK aerospace, Luxembourg telecom, etc.
Pg 34, ECONOMY. GERMANY has a very strong job market (unemployment rate < 3%, even lower than in the US) but is also in recession. The German service sector is doing better than its manufacturing sector. What the ECB has described as an enigma can also happen in the US (i.e. a strong job market in a recession). So far, the US has seen a strong job market but only a slowing economy. Unemployment is a lagging indicator. The FED’s dilemma is how to continue monetary tightening without throwing the US economy into recession (Elsewhere in this issue, columnists have argued that strong job market means no recession, but the German example refutes that notion).
Pg 62, OTHER VOICES. Greg DAVIS, Vanguard. After several years of ZIRP, higher RATES now are benefiting savers. The fed funds may peak around 5.50% and may remain high for quite some time. Back are money-market funds, T-Bills/Notes, CDs, and bonds. INFLATION isn’t tamed yet and market volatility may be high. Stock valuations are near fair value. Foreign markets may outperform the US markets. A mild recession may be within 12 months. Stay the course with proper asset allocation.
(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. Charitable GIVING fell in 2022 (also in 1987, 2008, 2009). Giving by foundations, bequests, corporations held up better than from individuals.
PREVIEW. If recession is delayed and cyclicals are performing, then why not RAILROADS? They may be ready for catchup rebounds – NSC, UNP, CSX, CNR, CP. News of derailments and accidents have hurt the rail industry and SAFETY concerns have been raised. But no new REGULATIONS are coming soon from DC. Rail freight volume peaked in 2014, bur remains steady.
DATA THIS WEEK. Durable goods report, new home sales, consumer confidence on TUESDAY; wholesale inventories on WEDNESDAY; personal income and expenditures (core PCE +4.7% yoy), Chicago business barometer on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Boston Beer (SAM; it has another new idea – Twisted Tea, a hard iced tea; it’s making up for the declining/collapsing hard-seltzer business; Bud Lite’s/BUD misfortunes are also helping SAM; it’s cutting costs through automation; it’s a big fish in small beyond-beer/specialty-beer pond; Barron’s 02/2022 bullish recommendation was a bit premature but it still likes SAM; pg14);
Cadre (CDRE; yield 1.5%; makes and distributes safety gear for law enforcement; 2021 IPO; stock fell on a secondary offering (2nd); growth by acquisition; Chairman/CEO KANDERS still owns 37%; pg 15).
BEARISH.
Pg 12: OIL isn’t going away anytime soon (it will eventually). The current global production of 100 million barrels/day will continue for years until ALTERNATE energy is ready (and billions will be needed for ENERGY TRANSITIONS). After a tough 2020-22, several drillers emerged from bankruptcy, have low/no debt, pay no dividends, but are starting buybacks. The onshore FRACKING (much more in the news) can contribute incrementally and in short spurts, but the OFFSHORE drilling platforms can produce much higher volumes steadily for years. There are shallow-water (< 500’) and deep-water (10,000’) rigs. The latter have lease rates now of $500K/day (vs the pandemic low of only $125K/day), operating expenses of $150K/day and may produce 20,000 barrels/day for 20-25 years, so they can be profitable even with oil under $50. New deep-water rigs cost $1 billion (recovered in 5-6 years at the current daily lease rates) and very few were built in the tough years. New long-term rig contracts at higher lease-rates will be more profitable after the old lower lease-rate contracts expire. Stocks mentioned are NE, VAL, SDRL, RIG, DO, and oil servicer SLB.
Pg 16: Offshore Tether now has $83 billion in deposits for its STABLECOIN USDT. It keeps most of that money in, surprise, T-Bills. Tether USDT has maintained its peg and liquidity through the CRYPTO- Winter as well as the Ice-Age; it ranks 3rd behind Bitcoin and Ethereum in digital assets. Think of stablecoins as CRYPTO “cash” backed by something – currencies, miscellaneous assets, gold, etc. There are also stablecoin derivatives. Cryptos are in the crosshairs of the US regulators and that hampers Tether’s US competitors (COIN, USDC/Circle, etc). The EU also has crypto regulations but those are seen more friendly than those in the US.
Pg 30, TECH TRADER. With the AI-rally in techs, the tech IPO market should be strong, but it isn’t. Many IPO experts think that the AI-based unicorns aren’t yet ready for the public market. Institutional and retail investors are wary of being greater fools and don’t care for unprofitable revenues. And why go public when the VCs are the willing greater fools (for now). Recent IPO CAVA (Mexican foods) was strong. Pending IPOs may be Arm Holdings (spinoff from SFTBY) and a few others. But you may have to wait for 2024 for the IPO market to pick up. ETF IPO.
Pg 31, FUNDS. Scott BARBEE of deep-value small-cap AVALX does old fashioned bargain hunting (P/B < 1 combined with other criteria). His current holdings include natural-resources (gold, energy, timber), retail, etc; he is avoiding most banks with potential exposure to underwater holdings that are obscured by the HTM accounting. (By MFO @lewisbraham)
Pg 32, FUNDS. Mark COSTA of international small-cap value BISAX (and other funds) says that the US notions of SC, MC, LC don’t apply to foreign markets – the largest telecom in a country may be just a SC by the US definition (so the “SC” field globally may be quite different). He looks for quality stocks with good balance sheets and some margins of safety. His holdings include Irish bank, Brazilian and UK aerospace, Luxembourg telecom, etc.
Pg 34, ECONOMY. GERMANY has a very strong job market (unemployment rate < 3%, even lower than in the US) but is also in recession. The German service sector is doing better than its manufacturing sector. What the ECB has described as an enigma can also happen in the US (i.e. a strong job market in a recession). So far, the US has seen a strong job market but only a slowing economy. Unemployment is a lagging indicator. The FED’s dilemma is how to continue monetary tightening without throwing the US economy into recession (Elsewhere in this issue, columnists have argued that strong job market means no recession, but the German example refutes that notion).
Pg 62, OTHER VOICES. Greg DAVIS, Vanguard. After several years of ZIRP, higher RATES now are benefiting savers. The fed funds may peak around 5.50% and may remain high for quite some time. Back are money-market funds, T-Bills/Notes, CDs, and bonds. INFLATION isn’t tamed yet and market volatility may be high. Stock valuations are near fair value. Foreign markets may outperform the US markets. A mild recession may be within 12 months. Stay the course with proper asset allocation.
(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).