Post by Admin/YBB on Sept 16, 2023 3:32:08 GMT -6
From Barron’s, September 18, 2023 (Part 1, Market Week+)
Pg 28, TRADER. The markets were rangebound for the week (and for 2 months) despite lots of news. The upcoming FOMC meeting shouldn’t cause big waves although the new SEP projections will be available. The economic focus should now shift to 2024. The stock market may muddle through with the SP500 to 4,750 by the yearend.
OK, so you blinked and missed Nvidia/NVDA. But there are other opportunities to jump on the AI bandwagon – Big Techs AMZN, GOOGL, MSFT; AI users ADBE, CRM, NOW; AI picks-and-shovels ETN, VRT; even the old school DE, UNH, UPS.
The drop in Visa/V shares is temporary and presents an opportunity. V has a complex capital structure with trading A shares, nontraded B shares (held by the US banks issuing Visa cards), and trading C shares (held by foreign banks). V is proposing to exchange half of B shares for C shares, and the rest half of B shares for new B-2 shares with even more restrictions. So, the float would increase some.
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
FOMC 1/31/24+ hold
FOMC 3/20/24+ hold
(Cuts in mid-2024)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.12%, SP500 -0.16%, Nasdaq Comp -0.39%, R2000 -0.24%. DJ Transports +0.86%; DJ Utilities +2.34%. (Rotating spot Equal-weight SP500 RSP -0.05%) US$ index (spot) +0.23% (remains too strong over 100+), oil/WTI futures +3.73% (adds to notable up-moves in last 2 weeks), gold futures +0.28%.
YTD (index changes only), DJIA +4.44%, SP500 +15.91%, Nasdaq Comp +30.97%. (Rotating spot Equal-weight SP500 RSP +4.48%)
SENTIMENTS
In the hindsight, several sentiment indicators PEAKED around 7/20/23.
NYSE cumulative (5-day) A/D LINE was flat; ratio of winners:losers 1+:1.
AAII Bull-Bear Spread +5.2% (below average).
%Above 50-dMA for NYSE-listed stocks 39.76% (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 41.8% (negative); 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 32, INTERNATIONAL. VIETNAMESE economy is doing well, but its stock market isn’t (VNM crashed last year). There aren’t many stocks to choose from. It may tap into the ADR market. Growing sectors are IT, electronics, semis, infrastructure, and multinationals dominate. Strangely, the exports are declining. It is still an FM, not an EM; the foreign ownership is limited to 30% (for banks) to 49% (others), a concern for the MSCI.
Pg 33, OPTIONS. Thomas PETERFFY’s Interactive Broker/IBKR is adopting AI more than other brokers. Recommended is pairing call-buying with put-selling for IBKR.
EXTRA. OPTIONS. Quarterly TRIPLE-WITCHING isn’t good for retail investors. A recent study points to a possible manipulation of the markets – opening prices for SP500 are often lower than the special opening quotation (SOQ) based on SP500 stock option expiry prices on the triple-witching Fridays; the manipulation may be in the previous thin after/pre- market sessions. (By Mark Hulbert)
(SP500 VIX 13.79, Nasdaq 100 VXN 18.69, options SKEW 142.92 (high), bond MOVE 96.61 (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 48: A good week in EUROPE (UK +2.57%, Netherlands +0.06%, Greece -2.34%) (ECB hinted rates peaking) and an up week in ASIA (Japan +1.89%, HK -2.06%).
TREASURY* 3-mo yield 5.56%, 1-yr 5.43%, 2-yr 5.02%, 5-yr 4.45%, 10-yr 4.33%, 30-yr 4.42%;
REAL yields 5-yr 2.18%, 10-yr 1.98%, 30-yr 2.08%;
FRNs Index** 5.39% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose, ^DXY 105.33, +0.2% (pg 50; rising since mid-July, now near 12/2022 high). GOLD was flat at 1928, UNCH (Handy & Harman spot, Thursday; pg 52); the gold-miners rose. (^XAU was at 118.67, +4.87% 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%.
(NOTE1 – the current semiannual inflation is +2.0562% (CPI-U, unadjusted) & next month’s data on 10/12/23 will be used for the I-Bond rate on November 1)
(NOTE2 – the Social Security COLA will also be known on 10/12/23. It is based on the Q3 average of CPI-W and the estimates now are around +3.2% COLA for 2024)
*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 18, COVER STORY, “Why the UAW Strike Isn’t the Biggest Issue for Ford/F and GM”. The main issue for them is the growing market share of EVs; they have EV businesses too, but they are running at huge losses and still require large capex (the cost of catching up with the leader TSLA). The UAW’s unusual action to partially STRIKE at some facilities of all 3 (GM, F, STLA) and demands for high compensation (wages + benefits) with reduced work hours may be just a bump in the road. TSLA’s success comes from its long lead in the EVs and its strategy of launching expensive premium models first and mass-market models later. EVs are simpler to manufacture but there are issues with EV batteries and EV ranges.
The ICE and EV buyers are different at the companies that offer both – the current customers prefer ICEs but the new customers (the early EV adopters shopping around) prefer EVs. The US and global customers have different preferences for size. Business customers are hard-nosed about reliability and costs. It’s a tough balancing act to satisfy all these constituents. Traditional auto manufacturers also have complicated hybrids (mostly add-ons) to fallback on. Their stocks are depressed, priced for their EV failures, an extreme scenario. But future prospects are positive if the UAW strike doesn’t linger – the interest rates are peaking, the annual auto sales are rising, their EV business should become profitable with higher volumes.
Pg 7, UP AND DOWN WALL STREET. PRIVATE MARKETS are venturing out into retail/mass-markets. BX, JPM, PRU, HLNE, etc are gradually making complex private- equity and credit available to retail customers. Some have $250K-$25MM (notation K or M = thousand; MM = million or thousand-thousand) minimums and up to 10 year lockups. These may be illiquid and leveraged investments with high fees (base % + some % of profits). ALTERNATIVES now have $11.2 trillion AUM, but the retail accounts for only $1 trillion. Some firms are using nontraded-fund and interval-fund structures with lower minimums and limited periodic redemptions. But only the sponsoring firms benefit from these investment vehicles at the expense of investors.
The ultrahigh net worth investors ($30MM+ in assets) have about 50% of their money in alternative investments. Surprisingly, 18 million households may qualify as the SEC’s accredited-investors ($200K+ income or $1MM+ net worth; unchanged since 1982, so not so stringent now). The SEC has revised some rules for private-equity but the industry has filed a lawsuit. BTW, the employees of thousands of private and venture-backed companies bypass these accredited-investor requirements by buying their company’s private stocks; but these are very illiquid. Nasdaq/NDAQ spinoff Nasdaq Private Market (NPM) is helping by providing some liquidity for private company stocks.
The public markets are also shrinking – the number of listed companies peaked in 1997 although the total market-cap is much higher; many public markets now are quite concentrated in Big Techs. There are also lots of mutual funds/OEFs and ETFs.
Pg 9, STREETWISE. 2 negative new books on PRIVATE-EQUITY (PE) are discussed (by MORGENSEN + ROSNER and by BALLOU). It is mentioned that KKR is buying the 2nd book’s publisher Public Affairs / Hachette / Lagardere but I couldn’t verify this (KKR did buy a competitor, Simon & Schuster). These books focus on the social impacts of PE (very short-term, exploitive orientation; generous contributions to politicians, etc), but the author HOUGH focuses on their disappointing returns. The PE founders / owners live on high fees of 1.5-2.0% plus 20% of profits above some benchmark, but for investors, the PE performance is mixed, highly variable, and requires large investments with long lockups. Private-credit is an extension of PE that may use hold-to-maturity accounting instead of mark-to-market, so, some PE quotes may be misleading. Other problems include lack of great LBO deals now; reliance on % of profits fees since the GFC 2008, a period that has seen massive government stimuluses, and this fee may easily reverse. On the plus side, PE can control the companies they are involved with. Publicly traded PE firms are APO, BX, CG, KKR.
(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).
Pg 28, TRADER. The markets were rangebound for the week (and for 2 months) despite lots of news. The upcoming FOMC meeting shouldn’t cause big waves although the new SEP projections will be available. The economic focus should now shift to 2024. The stock market may muddle through with the SP500 to 4,750 by the yearend.
OK, so you blinked and missed Nvidia/NVDA. But there are other opportunities to jump on the AI bandwagon – Big Techs AMZN, GOOGL, MSFT; AI users ADBE, CRM, NOW; AI picks-and-shovels ETN, VRT; even the old school DE, UNH, UPS.
The drop in Visa/V shares is temporary and presents an opportunity. V has a complex capital structure with trading A shares, nontraded B shares (held by the US banks issuing Visa cards), and trading C shares (held by foreign banks). V is proposing to exchange half of B shares for C shares, and the rest half of B shares for new B-2 shares with even more restrictions. So, the float would increase some.
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
FOMC 1/31/24+ hold
FOMC 3/20/24+ hold
(Cuts in mid-2024)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.12%, SP500 -0.16%, Nasdaq Comp -0.39%, R2000 -0.24%. DJ Transports +0.86%; DJ Utilities +2.34%. (Rotating spot Equal-weight SP500 RSP -0.05%) US$ index (spot) +0.23% (remains too strong over 100+), oil/WTI futures +3.73% (adds to notable up-moves in last 2 weeks), gold futures +0.28%.
YTD (index changes only), DJIA +4.44%, SP500 +15.91%, Nasdaq Comp +30.97%. (Rotating spot Equal-weight SP500 RSP +4.48%)
SENTIMENTS
In the hindsight, several sentiment indicators PEAKED around 7/20/23.
NYSE cumulative (5-day) A/D LINE was flat; ratio of winners:losers 1+:1.
AAII Bull-Bear Spread +5.2% (below average).
%Above 50-dMA for NYSE-listed stocks 39.76% (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 41.8% (negative); 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 32, INTERNATIONAL. VIETNAMESE economy is doing well, but its stock market isn’t (VNM crashed last year). There aren’t many stocks to choose from. It may tap into the ADR market. Growing sectors are IT, electronics, semis, infrastructure, and multinationals dominate. Strangely, the exports are declining. It is still an FM, not an EM; the foreign ownership is limited to 30% (for banks) to 49% (others), a concern for the MSCI.
Pg 33, OPTIONS. Thomas PETERFFY’s Interactive Broker/IBKR is adopting AI more than other brokers. Recommended is pairing call-buying with put-selling for IBKR.
EXTRA. OPTIONS. Quarterly TRIPLE-WITCHING isn’t good for retail investors. A recent study points to a possible manipulation of the markets – opening prices for SP500 are often lower than the special opening quotation (SOQ) based on SP500 stock option expiry prices on the triple-witching Fridays; the manipulation may be in the previous thin after/pre- market sessions. (By Mark Hulbert)
(SP500 VIX 13.79, Nasdaq 100 VXN 18.69, options SKEW 142.92 (high), bond MOVE 96.61 (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 48: A good week in EUROPE (UK +2.57%, Netherlands +0.06%, Greece -2.34%) (ECB hinted rates peaking) and an up week in ASIA (Japan +1.89%, HK -2.06%).
TREASURY* 3-mo yield 5.56%, 1-yr 5.43%, 2-yr 5.02%, 5-yr 4.45%, 10-yr 4.33%, 30-yr 4.42%;
REAL yields 5-yr 2.18%, 10-yr 1.98%, 30-yr 2.08%;
FRNs Index** 5.39% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose, ^DXY 105.33, +0.2% (pg 50; rising since mid-July, now near 12/2022 high). GOLD was flat at 1928, UNCH (Handy & Harman spot, Thursday; pg 52); the gold-miners rose. (^XAU was at 118.67, +4.87% 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%.
(NOTE1 – the current semiannual inflation is +2.0562% (CPI-U, unadjusted) & next month’s data on 10/12/23 will be used for the I-Bond rate on November 1)
(NOTE2 – the Social Security COLA will also be known on 10/12/23. It is based on the Q3 average of CPI-W and the estimates now are around +3.2% COLA for 2024)
*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 18, COVER STORY, “Why the UAW Strike Isn’t the Biggest Issue for Ford/F and GM”. The main issue for them is the growing market share of EVs; they have EV businesses too, but they are running at huge losses and still require large capex (the cost of catching up with the leader TSLA). The UAW’s unusual action to partially STRIKE at some facilities of all 3 (GM, F, STLA) and demands for high compensation (wages + benefits) with reduced work hours may be just a bump in the road. TSLA’s success comes from its long lead in the EVs and its strategy of launching expensive premium models first and mass-market models later. EVs are simpler to manufacture but there are issues with EV batteries and EV ranges.
The ICE and EV buyers are different at the companies that offer both – the current customers prefer ICEs but the new customers (the early EV adopters shopping around) prefer EVs. The US and global customers have different preferences for size. Business customers are hard-nosed about reliability and costs. It’s a tough balancing act to satisfy all these constituents. Traditional auto manufacturers also have complicated hybrids (mostly add-ons) to fallback on. Their stocks are depressed, priced for their EV failures, an extreme scenario. But future prospects are positive if the UAW strike doesn’t linger – the interest rates are peaking, the annual auto sales are rising, their EV business should become profitable with higher volumes.
Pg 7, UP AND DOWN WALL STREET. PRIVATE MARKETS are venturing out into retail/mass-markets. BX, JPM, PRU, HLNE, etc are gradually making complex private- equity and credit available to retail customers. Some have $250K-$25MM (notation K or M = thousand; MM = million or thousand-thousand) minimums and up to 10 year lockups. These may be illiquid and leveraged investments with high fees (base % + some % of profits). ALTERNATIVES now have $11.2 trillion AUM, but the retail accounts for only $1 trillion. Some firms are using nontraded-fund and interval-fund structures with lower minimums and limited periodic redemptions. But only the sponsoring firms benefit from these investment vehicles at the expense of investors.
The ultrahigh net worth investors ($30MM+ in assets) have about 50% of their money in alternative investments. Surprisingly, 18 million households may qualify as the SEC’s accredited-investors ($200K+ income or $1MM+ net worth; unchanged since 1982, so not so stringent now). The SEC has revised some rules for private-equity but the industry has filed a lawsuit. BTW, the employees of thousands of private and venture-backed companies bypass these accredited-investor requirements by buying their company’s private stocks; but these are very illiquid. Nasdaq/NDAQ spinoff Nasdaq Private Market (NPM) is helping by providing some liquidity for private company stocks.
The public markets are also shrinking – the number of listed companies peaked in 1997 although the total market-cap is much higher; many public markets now are quite concentrated in Big Techs. There are also lots of mutual funds/OEFs and ETFs.
Pg 9, STREETWISE. 2 negative new books on PRIVATE-EQUITY (PE) are discussed (by MORGENSEN + ROSNER and by BALLOU). It is mentioned that KKR is buying the 2nd book’s publisher Public Affairs / Hachette / Lagardere but I couldn’t verify this (KKR did buy a competitor, Simon & Schuster). These books focus on the social impacts of PE (very short-term, exploitive orientation; generous contributions to politicians, etc), but the author HOUGH focuses on their disappointing returns. The PE founders / owners live on high fees of 1.5-2.0% plus 20% of profits above some benchmark, but for investors, the PE performance is mixed, highly variable, and requires large investments with long lockups. Private-credit is an extension of PE that may use hold-to-maturity accounting instead of mark-to-market, so, some PE quotes may be misleading. Other problems include lack of great LBO deals now; reliance on % of profits fees since the GFC 2008, a period that has seen massive government stimuluses, and this fee may easily reverse. On the plus side, PE can control the companies they are involved with. Publicly traded PE firms are APO, BX, CG, KKR.
(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).