Post by Admin/YBB on Jul 22, 2023 4:11:46 GMT -6
From Barron’s, July 24, 2023 (Part 1, Market Week+)
Pg 22, TRADER. The FED isn’t removing the punch bowl yet. Investors who tuned out media noises and experts and just plodded along did great. But it may be reasonable now to take some profits from growth and tech and deploy them into lagging cyclicals (or, just run to the bank). The SP500 is +18.2% YTD but that is badly lagging Nasdaq +34%. The CME FedWatch projects only 1 more rate hike, then holds, and then cuts in early-2024, a scenario that the Fed hasn’t confirmed. INFLATION is too high, and the LABOR market remains tight. Fed’s annual JACKSON HOLE conference is from August 24-26 (an important source of news and/or Fed shifts). The market is also ignoring the possibility of RECESSION – the LEI has fallen for 15 months, and the yield-curve has been inverted for a year.
Goldman Sachs (GS; yield 3%; P/B 1.1) came out even below its lowered-guided expectations for Q2. Its moves into consumer banking have been a disaster. The CEO David SOLOMON is often in the news about his extracurricular activities (night DJ, etc). But it may be ready to rebound. The M&A is expected to pick up despite the FTC.
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 7/26/23+ hike +25 bps (cycle peak 5.25-5.50%)
FOMC 9/20/23+ hold
FOMC 11/1/23+ hold
FOMC 12/13/23+ hold
(Cuts in 2024)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +2.08%, SP500 +0.69%, Nasdaq Comp -0.57%, R2000 1.51%. DJ Transports +2.56%; DJ Utilities +2.28%. (Rotating spot bank KBE +6.76%) US$ index (spot) +1.18%, oil/WTI futures +2.19%%, gold futures +0.21%.
YTD (index changes only), DJIA +6.28%, SP500 +18.15%, Nasdaq Comp +34.07%. (Rotating spot bank KBE -10.83%)
SENTIMENTS
NYSE cumulative (5-day) A/D LINE rose; ratio of winners:losers 2:1.
AAII Bull-Bear Spread +29.9% (high).
%Above 50-dMA for NYSE-listed stocks 81.04% (overbought) (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 71.6% (overbought) (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 (COMMODITIES). The safe GRAIN-CORRIDOR deal for Russia-Ukraine expired. PUTIN complained that the West didn’t keep its end of the deal in relaxing some restrictions on Russia (it was in the news that Russia was even offered reentry into the SWIFT payment system, but that may have been too late). Grain prices rose. Putin may yet reconsider – lots of Ukraine grain exports were going to China and Turkey, the 2 countries that still have working/talking relationship with Russia. There may be a related announcement at the upcoming African Summit in late-July. Meanwhile, Ukraine has developed an alternate route for grain exports via Danube River to Romania or Moldova, but Russia says that it may be subject to bombing (i.e not safe).
Pg 37, OPTIONS. Literally, after a torrid (stock) Summer, prepare for “Fall”. Volatility is unbelievably low. The Fed has successfully raised rates without tanking the economy (so far). Even the Russia-Ukraine war is now a nonevent for the market (how ironical?). Market historians point to the euphoria that preceded the dot. com era or the GFC 2008-09. Many professional traders in their 30s at firms don’t have perspectives beyond how they can make trading profits today and earn big bonuses. Suggested is cautious call-writing (the most basic and conservative options strategy).
(SP500 VIX 13.60 (low), Nasdaq 100 VXN 19.61, options SKEW 142.55 (high), bond MOVE 106.66 (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 50: An up week in EUROPE (Belgium +5.09%, Netherlands -3.51%) and a down week in ASIA (India +1.47%, China -2.89%) (India is prominently featured in this week’s Barron’s).
TREASURY* 3-mo yield 5.50%, 1-yr 5.35%, 2-yr 4.82%, 5-yr 4.09%, 10-yr 3.84%, 30-yr 3.91%. REAL yields 5-yr 1.86%, 10-yr 1.49%, 30-yr 1.62%.
DOLLAR rose, ^DXY 101.09, +1.2% (pg 58). GOLD rose to $1,961, +0.4% (Handy & Harman spot, Thursday; pg 60); the gold-miners fell. (^XAU was at 126.48, -0.53% for the week; strange when both gold and stock market rose)
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 16, COVER STORY, “America’s Bet on WIND POWER is Running Into a Big Problem”. Construction delays, higher costs (and not-in-my-backyard/view) are making the future difficult for wind power in the US. OFFSHORE installations are complicated requiring different techniques for shallow and deep seas; approvals take long. LAND-based wind power is cheaper and easier to install technologically but has other issues. Many companies are in bad financial shape and are looking to renegotiate or get out of long-term contracts and commitments. Big companies cite unprofitability and are also doing the same – SHEL, TTE, DNNGY, EQNR, IBDRY, EDPFY, ENGIY. BIDEN administration points to infrastructure initiatives, tax credits and is willing to allow states to shift some Inflation Reduction Act funds to wind power industry. Some states are also renegotiating contracts to prevent walkouts; state utilities regulators are agreeing to electricity rates tied to inflation.
Pg 7, UP AND DOWN WALL STREET. Despite a roaring stock market, the venture-capital (VC) market is in a funk as the IPO window for many Unicorns remains shut. Unicorns have a combined private-market valuation of $5 trillion, but that may be slashed in half if brought to the IPO market now; even the new funding rounds are at those low levels. The growth-by-acquisition model is also broken due to antitrust sentiments in the US, EU, UK. Tighter credit conditions and the collapse of Silicon Valley Bank have also hurt. At some point within the next 2-3 years, there will be a reckoning when dozens of these firms run out of cash and their private-market troubles will spill over into the public markets. (The IPOs are late bull market phenomenon, so give this bull some time)
Apple’s/AAPL (fwd P/E 29, P/S 7) next big growth opportunity will be in INDIA (despite a recent setback by Foxconn that cancelled/delayed semi chips manufacturing facilities in India; the Indian government points to a business issue between Foxconn and its local partner). In 5 years, India may account for 15-20% of sales vs only 2% now and 18% in China.
Pg 11, STREETWISE. RESHORING/ONSHORING is a big investment theme in the US. Broadly, it includes manufacturing in and around the US (Canada, Mexico) to tap into federal infrastructure stimuluses. Dead are the old pre-pandemic notions of globalization, JIT-manufacturing and the working capital just being in transit. Automation/robotics is becoming more important because the US labor costs are high. Foreign companies are making selective decisions on US reshoring. There will be setbacks as with the TSM AZ chips facilities that were delayed and may have to even bring temporary workers from Taiwan. Beneficiaries of the US reshoring will be ROK, EMR, ETN, TT, APH, KEYS, GWW; several of these have run up already, but there is more room to run.
The yield-curve has the steepest inversion in 40+ years! But don’t just get stuck at the short end. 5-10 yr corporates with 5.00-5.50% yields are attractive; an ETF is SCHI.
(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….)
(I took plenty of breaks in between to prepare these Summaries)
Accessible from Morningstar (M*), PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
Pg 22, TRADER. The FED isn’t removing the punch bowl yet. Investors who tuned out media noises and experts and just plodded along did great. But it may be reasonable now to take some profits from growth and tech and deploy them into lagging cyclicals (or, just run to the bank). The SP500 is +18.2% YTD but that is badly lagging Nasdaq +34%. The CME FedWatch projects only 1 more rate hike, then holds, and then cuts in early-2024, a scenario that the Fed hasn’t confirmed. INFLATION is too high, and the LABOR market remains tight. Fed’s annual JACKSON HOLE conference is from August 24-26 (an important source of news and/or Fed shifts). The market is also ignoring the possibility of RECESSION – the LEI has fallen for 15 months, and the yield-curve has been inverted for a year.
Goldman Sachs (GS; yield 3%; P/B 1.1) came out even below its lowered-guided expectations for Q2. Its moves into consumer banking have been a disaster. The CEO David SOLOMON is often in the news about his extracurricular activities (night DJ, etc). But it may be ready to rebound. The M&A is expected to pick up despite the FTC.
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 7/26/23+ hike +25 bps (cycle peak 5.25-5.50%)
FOMC 9/20/23+ hold
FOMC 11/1/23+ hold
FOMC 12/13/23+ hold
(Cuts in 2024)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +2.08%, SP500 +0.69%, Nasdaq Comp -0.57%, R2000 1.51%. DJ Transports +2.56%; DJ Utilities +2.28%. (Rotating spot bank KBE +6.76%) US$ index (spot) +1.18%, oil/WTI futures +2.19%%, gold futures +0.21%.
YTD (index changes only), DJIA +6.28%, SP500 +18.15%, Nasdaq Comp +34.07%. (Rotating spot bank KBE -10.83%)
SENTIMENTS
NYSE cumulative (5-day) A/D LINE rose; ratio of winners:losers 2:1.
AAII Bull-Bear Spread +29.9% (high).
%Above 50-dMA for NYSE-listed stocks 81.04% (overbought) (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 71.6% (overbought) (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 (COMMODITIES). The safe GRAIN-CORRIDOR deal for Russia-Ukraine expired. PUTIN complained that the West didn’t keep its end of the deal in relaxing some restrictions on Russia (it was in the news that Russia was even offered reentry into the SWIFT payment system, but that may have been too late). Grain prices rose. Putin may yet reconsider – lots of Ukraine grain exports were going to China and Turkey, the 2 countries that still have working/talking relationship with Russia. There may be a related announcement at the upcoming African Summit in late-July. Meanwhile, Ukraine has developed an alternate route for grain exports via Danube River to Romania or Moldova, but Russia says that it may be subject to bombing (i.e not safe).
Pg 37, OPTIONS. Literally, after a torrid (stock) Summer, prepare for “Fall”. Volatility is unbelievably low. The Fed has successfully raised rates without tanking the economy (so far). Even the Russia-Ukraine war is now a nonevent for the market (how ironical?). Market historians point to the euphoria that preceded the dot. com era or the GFC 2008-09. Many professional traders in their 30s at firms don’t have perspectives beyond how they can make trading profits today and earn big bonuses. Suggested is cautious call-writing (the most basic and conservative options strategy).
(SP500 VIX 13.60 (low), Nasdaq 100 VXN 19.61, options SKEW 142.55 (high), bond MOVE 106.66 (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 50: An up week in EUROPE (Belgium +5.09%, Netherlands -3.51%) and a down week in ASIA (India +1.47%, China -2.89%) (India is prominently featured in this week’s Barron’s).
TREASURY* 3-mo yield 5.50%, 1-yr 5.35%, 2-yr 4.82%, 5-yr 4.09%, 10-yr 3.84%, 30-yr 3.91%. REAL yields 5-yr 1.86%, 10-yr 1.49%, 30-yr 1.62%.
DOLLAR rose, ^DXY 101.09, +1.2% (pg 58). GOLD rose to $1,961, +0.4% (Handy & Harman spot, Thursday; pg 60); the gold-miners fell. (^XAU was at 126.48, -0.53% for the week; strange when both gold and stock market rose)
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 16, COVER STORY, “America’s Bet on WIND POWER is Running Into a Big Problem”. Construction delays, higher costs (and not-in-my-backyard/view) are making the future difficult for wind power in the US. OFFSHORE installations are complicated requiring different techniques for shallow and deep seas; approvals take long. LAND-based wind power is cheaper and easier to install technologically but has other issues. Many companies are in bad financial shape and are looking to renegotiate or get out of long-term contracts and commitments. Big companies cite unprofitability and are also doing the same – SHEL, TTE, DNNGY, EQNR, IBDRY, EDPFY, ENGIY. BIDEN administration points to infrastructure initiatives, tax credits and is willing to allow states to shift some Inflation Reduction Act funds to wind power industry. Some states are also renegotiating contracts to prevent walkouts; state utilities regulators are agreeing to electricity rates tied to inflation.
Pg 7, UP AND DOWN WALL STREET. Despite a roaring stock market, the venture-capital (VC) market is in a funk as the IPO window for many Unicorns remains shut. Unicorns have a combined private-market valuation of $5 trillion, but that may be slashed in half if brought to the IPO market now; even the new funding rounds are at those low levels. The growth-by-acquisition model is also broken due to antitrust sentiments in the US, EU, UK. Tighter credit conditions and the collapse of Silicon Valley Bank have also hurt. At some point within the next 2-3 years, there will be a reckoning when dozens of these firms run out of cash and their private-market troubles will spill over into the public markets. (The IPOs are late bull market phenomenon, so give this bull some time)
Apple’s/AAPL (fwd P/E 29, P/S 7) next big growth opportunity will be in INDIA (despite a recent setback by Foxconn that cancelled/delayed semi chips manufacturing facilities in India; the Indian government points to a business issue between Foxconn and its local partner). In 5 years, India may account for 15-20% of sales vs only 2% now and 18% in China.
Pg 11, STREETWISE. RESHORING/ONSHORING is a big investment theme in the US. Broadly, it includes manufacturing in and around the US (Canada, Mexico) to tap into federal infrastructure stimuluses. Dead are the old pre-pandemic notions of globalization, JIT-manufacturing and the working capital just being in transit. Automation/robotics is becoming more important because the US labor costs are high. Foreign companies are making selective decisions on US reshoring. There will be setbacks as with the TSM AZ chips facilities that were delayed and may have to even bring temporary workers from Taiwan. Beneficiaries of the US reshoring will be ROK, EMR, ETN, TT, APH, KEYS, GWW; several of these have run up already, but there is more room to run.
The yield-curve has the steepest inversion in 40+ years! But don’t just get stuck at the short end. 5-10 yr corporates with 5.00-5.50% yields are attractive; an ETF is SCHI.
(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….)
(I took plenty of breaks in between to prepare these Summaries)
Accessible from Morningstar (M*), PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).