Post by Admin/YBB on Sept 9, 2023 4:11:09 GMT -6
From Barron’s, September 11, 2023 (Part 1, Market Week+)
On this Monday, 9/11/23, keep the 9/11/2001 (Tuesday) victims in your prayers.
Pg 33, TRADER. If this SP500 RALLY fails to make a new high (+8% away), then it may reverse and fall sharply instead. The rates are peaking, the earnings should improve going forward, but is that all in the market already? Comparisons are being made with the dot. com era 2000.
The utilities selloff is overdone (XLU). But Avista/AVA is very attractive. The buyout from Canadian HRNNF was rejected by regulators and AVA now has some catching up to do. It should be able to raise rates.
With the upcoming CEO change, Walgreens (WBA; fwd P/E 6 only) is attractive. The stock is depressed, and reasons are many. The market wants the new CEO from the healthcare industry (its recent missteps vs CVS were in healthcare).
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 9/20/23+ hold (cycle peak 5.25-5.50%)
FOMC 11/1/23+ hold
FOMC 12/13/23+ hold
(Cuts in mid-2024) (Next week I will add more FOMC dates from 2024)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.75%, SP500 -1.29%, Nasdaq Comp -1.93%, R2000 -3.61%. DJ Transports -3.96%; DJ Utilities +0.59%. (Rotating spot utilities XLU +0.86%) US$ index (spot) +0.79% (remains too strong over 100+), oil/WTI futures +2.29% (adds to a large move last week), gold futures -1.10%.
YTD (index changes only), DJIA +4.31%, SP500 +16.10%, Nasdaq Comp +31.48%. (Rotating spot utilities XLU -10.38%)
SENTIMENTS
In hindsight, several sentiment indicators PEAKED around 7/20/23.
NYSE cumulative (5-day) A/D LINE fell; ratio of winners:losers 1:3.
AAII Bull-Bear Spread +12.6% (above average).
%Above 50-dMA for NYSE-listed stocks 36.25% (negative); Scale: oversold < 30, negative < 50, positive > 50, overbought > 70 (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 52.6% (positive); Scale: oversold < 30, negative < 50, positive > 50, overbought > 70 (a proprietary index for %Above 75-dMA for selected 1,800 stocks). Unclear what day of the week it is released, but it seems to lag other sentiment indicators (Barron’s updates it on late-Fridays). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
Pg 36, INTERNATIONAL. UBS’ rescue of Credit Suisse now looks great; it got a good deal in a fire sale. Behind UBS’ blockbuster quarterly aren’t earnings, but just a massive revaluation of the acquisition goodwill (from $3 billion to $32 billion). Restructuring the combo will be expensive going ahead, but it will become profitable eventually. Skeptics may look at ING or LYG.
EXTRA. EMERGING MARKETS. MEXICAN stock market will be happy regardless of who wins the next Presidential election. The race is between AMLO’s handpicked SHEINBAUM vs GALVEZ, both women engineers by background. The economy is strong; peso is stronger than even the mighty dollar; inflation has been tamed to +4.6% while the prime rate is still +11.25% (so, rate cuts are ahead and bonds are attractive too); oil/gas sector is healthy; annual budget deficit is 4% of the GDP, yet the total debt is 50% of the GDP; the ETF EWW is up +25% over 12 months. AMLO didn’t jump wholeheartedly on the US onshoring/near-shoring wagon (i.e. manufacturing in/around the US), and that may change with the next President. In the EMs, Mexico and India are the bright spots for moves away-from-China.
EXTRA. COMMODITIES. Heat, wildfires, storms, floods have caused high AG-COMMODITY prices. Olive oil has doubled in 12 months; cocoa is at 12-yr high. Russia-Ukraine war has also disrupted grain and fertilizer supplies. Many companies (MDLZ, UL, NSRGY, etc) may be unable to pass through their higher commodity prices; beneficiaries may be DE (ag-equipment), BG, etc. Some governments have restricted commodity exports; others are controlling retail prices. There are several commodity-based ETFs (PDBA, etc).
(These EXTRAs would have been included if Barron’s hadn’t dropped those as features)
Pg 37, OPTIONS. With uncertainties around, and stock and bond markets signaling divergent economic scenarios, be prepared for anything, especially for panic by others. Recommended is selling puts on blue-chips that you want to buy on declines.
(SP500 VIX 13.84, Nasdaq 100 VXN 19.15, options SKEW 138.18 (high), bond MOVE 104.34 (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 51: A down week in EUROPE (Denmark +0.99%, Netherlands -2.43%, Greece -4.24%) and an up week in ASIA (India +1.81% (G-20 now), HK -1.99%).
TREASURY* 3-mo yield 5.55%, 1-yr 5.42%, 2-yr 4.98%, 5-yr 4.39%, 10-yr 4.26%, 30-yr 4.33%;
REAL yields 5-yr 2.13%, 10-yr 1.93%, 30-yr 2.01%;
FRNs Index** 5.39% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose, ^DXY 105.06, +0.70% (pg 58; rising since mid-July, now near February high). GOLD fell to 1928, -0.7% (Handy & Harman spot, Thursday; pg 60); the gold-miners fell. (^XAU was at 113.16, -3.60% for the week)
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
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
**Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS)
www.treasurydirect.gov/auctions/announcements-data-results/frn-daily/
www.treasurydirect.gov/marketable-securities/
***For local rates www.depositaccounts.com/banks/rates-map/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 20, COVER STORY, “More Americans Are Working Into Their 80s. What’s Keeping Them on the Workforce”. Many OLDER folks in their 70s and 80s are continuing to work, some by choice, others out of necessity. LONGEVITY may be another factor (for many, it’s a long time after early retirement at 55 or normal retirement 65-70). Almost half of the baby boomers may remain in the workforce in their 70s. Many older folks don’t have much in retirement SAVINGS. Look at DC (some call it a retirement home for the aged and senile). Companies are accommodating the physical needs of their older workers. Complaints of age discrimination are also rising. There is also a shortage of younger skilled workers.
Pg 7, UP AND DOWN WALL STREET. The US CONSUMER is in good shape – household WEALTH is near all-time high; some excess savings still remain (lower, but more than the Fed estimates). But consumer CONFIDENCE is low. One reason may be the higher prices the consumers see for everyday items – gasoline, groceries, restaurants, etc. TINA is dead as cash is paying generous yields. Corporate bond issuance is up despite higher rates; they are also attractive. September is often a tough month for stocks (October is another). (Just last week, Barron’s said that THIS September may be different, but now by changing its tune, it has covered itself for whatever happens)
PennyMac/PFSI mortgage REIT PMT also has fixed-to-floating-rate preferreds PMT.pra and PMT.prb with their floating-rates tied to some spread over the LIBOR. But the LIBOR ceased to exist on 6/30/23. Most have switched from LIBOR to SOFR (plus a small compensating spread). But PennyMac didn’t switch from LIBOR and is using a little noticed prospectus provision to just extend the term for the fixed-rate regime (of course, a switch to SOFR + spread would cost PennyMac more, so PennyMac would rather hurt its preferreds holders).
Pg 11, STREETWISE. In the no-win Disney/DIS vs Charter/CHTR standoff, DIS may blink first. Basically, DIS produces contents that are carried over to the consumers via subscription bundles over the networks of companies such as CHTR (cable and broad band; #2); that is why the term “carriage dispute” is also used for this. Everybody gets cuts along they way. But now, CHTR is facing declining subscribers (lost to streaming) and still has higher fees for the contents (that is DIS status quo position). CHTR says that this isn’t sustainable for it and DIS says that it needs the cash flow to fund its own streaming operations (expensive). So, CHTR viewers have Disney-blackout (after 8/31/23), but DIS is also losing cash flow at the rate of $4 billion/yr. Both CHTR and DIS will lose from a long and drawn-out standoff.
(EXTRAS from online Friday that didn’t make the weekend paper version)
See Column Topics. It seems some consolidation/rearrangement of Columns is going on.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
On this Monday, 9/11/23, keep the 9/11/2001 (Tuesday) victims in your prayers.
Pg 33, TRADER. If this SP500 RALLY fails to make a new high (+8% away), then it may reverse and fall sharply instead. The rates are peaking, the earnings should improve going forward, but is that all in the market already? Comparisons are being made with the dot. com era 2000.
The utilities selloff is overdone (XLU). But Avista/AVA is very attractive. The buyout from Canadian HRNNF was rejected by regulators and AVA now has some catching up to do. It should be able to raise rates.
With the upcoming CEO change, Walgreens (WBA; fwd P/E 6 only) is attractive. The stock is depressed, and reasons are many. The market wants the new CEO from the healthcare industry (its recent missteps vs CVS were in healthcare).
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
FOMC 9/20/23+ hold (cycle peak 5.25-5.50%)
FOMC 11/1/23+ hold
FOMC 12/13/23+ hold
(Cuts in mid-2024) (Next week I will add more FOMC dates from 2024)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.75%, SP500 -1.29%, Nasdaq Comp -1.93%, R2000 -3.61%. DJ Transports -3.96%; DJ Utilities +0.59%. (Rotating spot utilities XLU +0.86%) US$ index (spot) +0.79% (remains too strong over 100+), oil/WTI futures +2.29% (adds to a large move last week), gold futures -1.10%.
YTD (index changes only), DJIA +4.31%, SP500 +16.10%, Nasdaq Comp +31.48%. (Rotating spot utilities XLU -10.38%)
SENTIMENTS
In hindsight, several sentiment indicators PEAKED around 7/20/23.
NYSE cumulative (5-day) A/D LINE fell; ratio of winners:losers 1:3.
AAII Bull-Bear Spread +12.6% (above average).
%Above 50-dMA for NYSE-listed stocks 36.25% (negative); Scale: oversold < 30, negative < 50, positive > 50, overbought > 70 (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 52.6% (positive); Scale: oversold < 30, negative < 50, positive > 50, overbought > 70 (a proprietary index for %Above 75-dMA for selected 1,800 stocks). Unclear what day of the week it is released, but it seems to lag other sentiment indicators (Barron’s updates it on late-Fridays). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
Pg 36, INTERNATIONAL. UBS’ rescue of Credit Suisse now looks great; it got a good deal in a fire sale. Behind UBS’ blockbuster quarterly aren’t earnings, but just a massive revaluation of the acquisition goodwill (from $3 billion to $32 billion). Restructuring the combo will be expensive going ahead, but it will become profitable eventually. Skeptics may look at ING or LYG.
EXTRA. EMERGING MARKETS. MEXICAN stock market will be happy regardless of who wins the next Presidential election. The race is between AMLO’s handpicked SHEINBAUM vs GALVEZ, both women engineers by background. The economy is strong; peso is stronger than even the mighty dollar; inflation has been tamed to +4.6% while the prime rate is still +11.25% (so, rate cuts are ahead and bonds are attractive too); oil/gas sector is healthy; annual budget deficit is 4% of the GDP, yet the total debt is 50% of the GDP; the ETF EWW is up +25% over 12 months. AMLO didn’t jump wholeheartedly on the US onshoring/near-shoring wagon (i.e. manufacturing in/around the US), and that may change with the next President. In the EMs, Mexico and India are the bright spots for moves away-from-China.
EXTRA. COMMODITIES. Heat, wildfires, storms, floods have caused high AG-COMMODITY prices. Olive oil has doubled in 12 months; cocoa is at 12-yr high. Russia-Ukraine war has also disrupted grain and fertilizer supplies. Many companies (MDLZ, UL, NSRGY, etc) may be unable to pass through their higher commodity prices; beneficiaries may be DE (ag-equipment), BG, etc. Some governments have restricted commodity exports; others are controlling retail prices. There are several commodity-based ETFs (PDBA, etc).
(These EXTRAs would have been included if Barron’s hadn’t dropped those as features)
Pg 37, OPTIONS. With uncertainties around, and stock and bond markets signaling divergent economic scenarios, be prepared for anything, especially for panic by others. Recommended is selling puts on blue-chips that you want to buy on declines.
(SP500 VIX 13.84, Nasdaq 100 VXN 19.15, options SKEW 138.18 (high), bond MOVE 104.34 (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 51: A down week in EUROPE (Denmark +0.99%, Netherlands -2.43%, Greece -4.24%) and an up week in ASIA (India +1.81% (G-20 now), HK -1.99%).
TREASURY* 3-mo yield 5.55%, 1-yr 5.42%, 2-yr 4.98%, 5-yr 4.39%, 10-yr 4.26%, 30-yr 4.33%;
REAL yields 5-yr 2.13%, 10-yr 1.93%, 30-yr 2.01%;
FRNs Index** 5.39% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose, ^DXY 105.06, +0.70% (pg 58; rising since mid-July, now near February high). GOLD fell to 1928, -0.7% (Handy & Harman spot, Thursday; pg 60); the gold-miners fell. (^XAU was at 113.16, -3.60% for the week)
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
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
**Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS)
www.treasurydirect.gov/auctions/announcements-data-results/frn-daily/
www.treasurydirect.gov/marketable-securities/
***For local rates www.depositaccounts.com/banks/rates-map/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 20, COVER STORY, “More Americans Are Working Into Their 80s. What’s Keeping Them on the Workforce”. Many OLDER folks in their 70s and 80s are continuing to work, some by choice, others out of necessity. LONGEVITY may be another factor (for many, it’s a long time after early retirement at 55 or normal retirement 65-70). Almost half of the baby boomers may remain in the workforce in their 70s. Many older folks don’t have much in retirement SAVINGS. Look at DC (some call it a retirement home for the aged and senile). Companies are accommodating the physical needs of their older workers. Complaints of age discrimination are also rising. There is also a shortage of younger skilled workers.
Pg 7, UP AND DOWN WALL STREET. The US CONSUMER is in good shape – household WEALTH is near all-time high; some excess savings still remain (lower, but more than the Fed estimates). But consumer CONFIDENCE is low. One reason may be the higher prices the consumers see for everyday items – gasoline, groceries, restaurants, etc. TINA is dead as cash is paying generous yields. Corporate bond issuance is up despite higher rates; they are also attractive. September is often a tough month for stocks (October is another). (Just last week, Barron’s said that THIS September may be different, but now by changing its tune, it has covered itself for whatever happens)
PennyMac/PFSI mortgage REIT PMT also has fixed-to-floating-rate preferreds PMT.pra and PMT.prb with their floating-rates tied to some spread over the LIBOR. But the LIBOR ceased to exist on 6/30/23. Most have switched from LIBOR to SOFR (plus a small compensating spread). But PennyMac didn’t switch from LIBOR and is using a little noticed prospectus provision to just extend the term for the fixed-rate regime (of course, a switch to SOFR + spread would cost PennyMac more, so PennyMac would rather hurt its preferreds holders).
Pg 11, STREETWISE. In the no-win Disney/DIS vs Charter/CHTR standoff, DIS may blink first. Basically, DIS produces contents that are carried over to the consumers via subscription bundles over the networks of companies such as CHTR (cable and broad band; #2); that is why the term “carriage dispute” is also used for this. Everybody gets cuts along they way. But now, CHTR is facing declining subscribers (lost to streaming) and still has higher fees for the contents (that is DIS status quo position). CHTR says that this isn’t sustainable for it and DIS says that it needs the cash flow to fund its own streaming operations (expensive). So, CHTR viewers have Disney-blackout (after 8/31/23), but DIS is also losing cash flow at the rate of $4 billion/yr. Both CHTR and DIS will lose from a long and drawn-out standoff.
(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 + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).