Post by Admin/YBB on Aug 12, 2023 7:58:21 GMT -6
Pg 9, FOMC Minutes on WEDNESDAY.
PREVIEW & REVIEW (consolidated). BACK-to-SCHOOL stuff is expensive too; parents may have to cut back on spending. They will buy less stuff despite overall sales being higher. Consumers are also cutting back in other areas and shopping more at discount stores and mass merchants (WMT, COST, TGT).
DATA THIS WEEK (seriously shrunk but supplemented from the link below). Retail sales, business inventories on TUESDAY; housing starts, capacity utilization, industrial production on WEDNESDAY; LEI on THURSDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
Data This Week Link,
www.barrons.com/market-data/market-lab?mod=md_subnav#consensus-estimate
BULLISH. Comcast (CMCSA; fwd P/E 11; buybacks; stock peaked in 2021, but has been rebounding; it has moved beyond the dying cable business (but old perceptions remain that it’s just a cable company) and into broadband, streaming, wireless/cell phones, theme parks, media (owns NBC, CNBC, MSNBC; Sky Group; animation and film studios); free cash flow should rise as capex comes down; may soon sell 33% stake in Hulu back to DIS at min $27.5 billion by 01/2024; CEO is founder’s son, Brian Roberts (1% economic ownership, but 33% voting control); pg 10);
NextEra Energy (NEE; yield 2.7%; fwd P/E 21.9; growth-utility; largest renewable energy business in the US (#2 is BRK); it is also the largest electric utility in the US; owns 50%+ of NEP; new CEO John KETCHUM, 2022- ; pg 12);
Kenvue (KVUE; May IPO but JNJ retained 90% of the shares; ongoing $40 billion tax-free exchange-offer/stock-swap at 7% discount by JNJ with precise ratio to be determined August 14-16; unlike spinoffs, JNJ holders have to opt-in by August 18; JNJ retains talcum powder liability within the US and Canada only; this device was used by GE for SYF in 2015 and by others (PFE, DD, etc); pg 16).
BEARISH.
Pg 13: Ray McGUIRE, New President of Lazard/LAZ (1848- ). Yield 5.8%; P/E 15.8. Substantial foreign businesses (UK, France, etc). The firm specializes in M&A (out of favor now; peaked in 2021) and asset management (AUM $239 billion). Fed rate hikes have increased the cost of capital. Firm is refocusing for generative AI, energy transition, deglobalization/reshoring, aging, cybersecurity. It also has a new CEO Peter ORSZAG; iconic leaders in the past were several David-Weill(s), Andre Meyer, Felix Rohatyn, Bruce Wasserstein, etc. McGuire is the stepfather of Cole Anthony, Orlando Magic basketball (NBA).
Pg 15. THE BACK STORY. Kenneth PRINGLE looks back at the Fed’s role in the hedge fund LTCM’s rescue in 1998 (25th anniversary soon) to avoid a global market meltdown. The LTCM was founded by MERRIWETHER and was advised by 2 Nobel Laurates copartners (SCHOLES, MERTON; their names are often omitted, as by Barron’s). It had borrowed almost $100 billion from banks in a nontransparent way and was done in by the unexpected Russian default that wasn’t in any mathematical models. Bankers and creditors were assembled in the NY Fed’s Manhattan Office on 9/23/1998 and weren’t let out until they “agreed” to a “joint 14-party, $300 million per party” rescue. LTCM was one of the TBTFs. Political and economic purists say that the government should just let the markets work, and if some big players collapse, so be it. The former Fed Chair GREENSPAN at the time mentioned the “unwritten Fed commitment” to halt severe market declines; this was seen during the 1987 Black Monday crash, 1998 LTCM rescue, 2000-2003 dot. com bubble/burst, GFC 2008-09 (although Lehman was let go and that caused an unexpected and unforeseen run on the money-market funds), pandemic 2020, 2023 regional banking crisis and several rescues, etc. This also creates a moral hazard, gross misallocation of capital and causes bubbles, bursts and bailouts. The former Fed Chair Ben BERNANKE (also a Nobel Laurate and a main player in GFC rescues) defends the Fed by saying that all funds for the rescue of LTCM came from creditors, not from taxpayers.
Pg 21, ECONOMY. For signs of INFLATION, listen to the Main Street, not the Wall Street (or the Government). The economy is just a step away from some disaster that may throw it into a recession (despite the happy talk of soft landing). Also, inflation is the change in prices, so after inflation goes down, high prices will remain, straining household budgets. The Government says that airfares are falling, but that is a bad joke on the flying public that is paying higher air fares. The next FOMC Statement is on 9/20/23 and the expectations are for a rate-hold (but the expectations diverge beyond that). The 2-yr Treasury yield is almost full % below the 1-yr yield.
Pg 22, FUNDS. Baird is known for its good bond funds at reasonable ERs. Its strategic muni combines HY muni (up to 30%, but now 9%) with Treasuries; taxable bonds can be up to 20%. Bond derivatives may be used to adjust duration (unusual in that most Baird bond funds avoid derivatives). Non-rated bonds rely on in-house bond analyses.
Pg 23, INCOME from real estate stocks: Residential AVB, EQR; malls SPG, KIM; offices BXP; triple-net leases (casinos, hotels, resorts, nightclubs, golf clubs) VICI. (Triple-net lease means that the lessee pays rent, property maintenance, property taxes; investors may like to own triple-net residential properties, but those may be very unprofitable.)
Pg 23, TECH TRADER. 2023 will be the year of efficiency and turnaround for the House of the Mouse. Disney/DIS fans and park visitors will feel the pinch while DIS investors will get some better news (they have been stuck in the unhappiest place on Earth). DIS is raising streaming fees and also pushing cheaper ad-supported streaming (NFLX got out of that). Crackdown on password sharing is also coming to DIS (after NFLX). The era of free or low-priced stuff is over.
Pg 24: Barron’s Jack DENTON reports on his experience from 50th Rolex Fastnet (sailboat) Race in the Irish Sea. Their amateur entry (along with professional entries) was 33’ Woozle Hunter, named after Winnie the Pooh piglet. 40% of the entries dropped out due to high winds and rough sea. Along the 800 miles way to finish, the crew of 6 dealt with engine leaks, poor radio transmission. Their entry won trophy in the amateur category. Investing lessons? One doesn’t have to be a professional; take risks and persevere.
Pg 26: John FRIEDMAN, Brown U. His study with Harvard’s Raj CHETTY and David DEMING examined the careers of graduates with degrees from 12 US elite institutions (8 Ivy Leagues + Stanford + MIT + Chicago + Duke). At less than 1% of the US population, these graduates dominate the US wealthy, the leadership (government and corporate), politics, judiciary, etc. Strangely, these graduates weren’t among the top earners but that was only one criterion among several considered for success. Most of these institutions have a legacy admission system. That may be due to the fact that many of the top institutions rely on donor support (Government R&D helps but that also requires deliverables such as research, contracts and/or training). Test scores also have good correlations with later successes. Supremes recently ruled against race-based affirmative actions and its effect on the top institutions remains to be seen.
Pg 54, OTHER VOICES. Eswar PRASAD, Cornell U. CHINA’s tough policies for its big techs and big companies mean that it has lost its private sector. Its lip service to promote private sector isn’t working. Economic growth has slowed. The population is aging. The property sector is struggling – a major developer recently missed payments. Exports fell by double digits. Monetary stimulus may help in the short-term but it may create more problems in the long-term. He visited China recently and talked to some government officials as well as corporate leaders and could sense the differences in what they felt and said.
(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.
None
Accessible from Morningstar (M*), PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
PREVIEW & REVIEW (consolidated). BACK-to-SCHOOL stuff is expensive too; parents may have to cut back on spending. They will buy less stuff despite overall sales being higher. Consumers are also cutting back in other areas and shopping more at discount stores and mass merchants (WMT, COST, TGT).
DATA THIS WEEK (seriously shrunk but supplemented from the link below). Retail sales, business inventories on TUESDAY; housing starts, capacity utilization, industrial production on WEDNESDAY; LEI on THURSDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
Data This Week Link,
www.barrons.com/market-data/market-lab?mod=md_subnav#consensus-estimate
BULLISH. Comcast (CMCSA; fwd P/E 11; buybacks; stock peaked in 2021, but has been rebounding; it has moved beyond the dying cable business (but old perceptions remain that it’s just a cable company) and into broadband, streaming, wireless/cell phones, theme parks, media (owns NBC, CNBC, MSNBC; Sky Group; animation and film studios); free cash flow should rise as capex comes down; may soon sell 33% stake in Hulu back to DIS at min $27.5 billion by 01/2024; CEO is founder’s son, Brian Roberts (1% economic ownership, but 33% voting control); pg 10);
NextEra Energy (NEE; yield 2.7%; fwd P/E 21.9; growth-utility; largest renewable energy business in the US (#2 is BRK); it is also the largest electric utility in the US; owns 50%+ of NEP; new CEO John KETCHUM, 2022- ; pg 12);
Kenvue (KVUE; May IPO but JNJ retained 90% of the shares; ongoing $40 billion tax-free exchange-offer/stock-swap at 7% discount by JNJ with precise ratio to be determined August 14-16; unlike spinoffs, JNJ holders have to opt-in by August 18; JNJ retains talcum powder liability within the US and Canada only; this device was used by GE for SYF in 2015 and by others (PFE, DD, etc); pg 16).
BEARISH.
Pg 13: Ray McGUIRE, New President of Lazard/LAZ (1848- ). Yield 5.8%; P/E 15.8. Substantial foreign businesses (UK, France, etc). The firm specializes in M&A (out of favor now; peaked in 2021) and asset management (AUM $239 billion). Fed rate hikes have increased the cost of capital. Firm is refocusing for generative AI, energy transition, deglobalization/reshoring, aging, cybersecurity. It also has a new CEO Peter ORSZAG; iconic leaders in the past were several David-Weill(s), Andre Meyer, Felix Rohatyn, Bruce Wasserstein, etc. McGuire is the stepfather of Cole Anthony, Orlando Magic basketball (NBA).
Pg 15. THE BACK STORY. Kenneth PRINGLE looks back at the Fed’s role in the hedge fund LTCM’s rescue in 1998 (25th anniversary soon) to avoid a global market meltdown. The LTCM was founded by MERRIWETHER and was advised by 2 Nobel Laurates copartners (SCHOLES, MERTON; their names are often omitted, as by Barron’s). It had borrowed almost $100 billion from banks in a nontransparent way and was done in by the unexpected Russian default that wasn’t in any mathematical models. Bankers and creditors were assembled in the NY Fed’s Manhattan Office on 9/23/1998 and weren’t let out until they “agreed” to a “joint 14-party, $300 million per party” rescue. LTCM was one of the TBTFs. Political and economic purists say that the government should just let the markets work, and if some big players collapse, so be it. The former Fed Chair GREENSPAN at the time mentioned the “unwritten Fed commitment” to halt severe market declines; this was seen during the 1987 Black Monday crash, 1998 LTCM rescue, 2000-2003 dot. com bubble/burst, GFC 2008-09 (although Lehman was let go and that caused an unexpected and unforeseen run on the money-market funds), pandemic 2020, 2023 regional banking crisis and several rescues, etc. This also creates a moral hazard, gross misallocation of capital and causes bubbles, bursts and bailouts. The former Fed Chair Ben BERNANKE (also a Nobel Laurate and a main player in GFC rescues) defends the Fed by saying that all funds for the rescue of LTCM came from creditors, not from taxpayers.
Pg 21, ECONOMY. For signs of INFLATION, listen to the Main Street, not the Wall Street (or the Government). The economy is just a step away from some disaster that may throw it into a recession (despite the happy talk of soft landing). Also, inflation is the change in prices, so after inflation goes down, high prices will remain, straining household budgets. The Government says that airfares are falling, but that is a bad joke on the flying public that is paying higher air fares. The next FOMC Statement is on 9/20/23 and the expectations are for a rate-hold (but the expectations diverge beyond that). The 2-yr Treasury yield is almost full % below the 1-yr yield.
Pg 22, FUNDS. Baird is known for its good bond funds at reasonable ERs. Its strategic muni combines HY muni (up to 30%, but now 9%) with Treasuries; taxable bonds can be up to 20%. Bond derivatives may be used to adjust duration (unusual in that most Baird bond funds avoid derivatives). Non-rated bonds rely on in-house bond analyses.
Pg 23, INCOME from real estate stocks: Residential AVB, EQR; malls SPG, KIM; offices BXP; triple-net leases (casinos, hotels, resorts, nightclubs, golf clubs) VICI. (Triple-net lease means that the lessee pays rent, property maintenance, property taxes; investors may like to own triple-net residential properties, but those may be very unprofitable.)
Pg 23, TECH TRADER. 2023 will be the year of efficiency and turnaround for the House of the Mouse. Disney/DIS fans and park visitors will feel the pinch while DIS investors will get some better news (they have been stuck in the unhappiest place on Earth). DIS is raising streaming fees and also pushing cheaper ad-supported streaming (NFLX got out of that). Crackdown on password sharing is also coming to DIS (after NFLX). The era of free or low-priced stuff is over.
Pg 24: Barron’s Jack DENTON reports on his experience from 50th Rolex Fastnet (sailboat) Race in the Irish Sea. Their amateur entry (along with professional entries) was 33’ Woozle Hunter, named after Winnie the Pooh piglet. 40% of the entries dropped out due to high winds and rough sea. Along the 800 miles way to finish, the crew of 6 dealt with engine leaks, poor radio transmission. Their entry won trophy in the amateur category. Investing lessons? One doesn’t have to be a professional; take risks and persevere.
Pg 26: John FRIEDMAN, Brown U. His study with Harvard’s Raj CHETTY and David DEMING examined the careers of graduates with degrees from 12 US elite institutions (8 Ivy Leagues + Stanford + MIT + Chicago + Duke). At less than 1% of the US population, these graduates dominate the US wealthy, the leadership (government and corporate), politics, judiciary, etc. Strangely, these graduates weren’t among the top earners but that was only one criterion among several considered for success. Most of these institutions have a legacy admission system. That may be due to the fact that many of the top institutions rely on donor support (Government R&D helps but that also requires deliverables such as research, contracts and/or training). Test scores also have good correlations with later successes. Supremes recently ruled against race-based affirmative actions and its effect on the top institutions remains to be seen.
Pg 54, OTHER VOICES. Eswar PRASAD, Cornell U. CHINA’s tough policies for its big techs and big companies mean that it has lost its private sector. Its lip service to promote private sector isn’t working. Economic growth has slowed. The population is aging. The property sector is struggling – a major developer recently missed payments. Exports fell by double digits. Monetary stimulus may help in the short-term but it may create more problems in the long-term. He visited China recently and talked to some government officials as well as corporate leaders and could sense the differences in what they felt and said.
(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.
None
Accessible from Morningstar (M*), PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).