Post by Admin/YBB on Sept 16, 2023 5:33:17 GMT -6
Pg 10. FOMC Statement (expected – hold) and POWELL’s presser on WEDNESDAY. The BOE, SNB, Riksbank (Sweden) announce monetary policies on THURSDAY. The BOJ announces monetary policy on FRIDAY.
PREVIEW & REVIEW (consolidated). At a CA conference, Bill GROSS and Jeffery GUNDLACH traded some barbs. Gross likes dividend stocks and MLPs. Gundlach likes CMBS, FR/BL, longer duration bonds.
DATA THIS WEEK (seriously shrunk but supplemented from the link below). Housing starts on TUESDAY; existing home sales, LEI on THURSDAY; manufacturing PMI. Services PMI on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
Data This Week Link,
www.barrons.com/market-data/market-lab?mod=md_subnav#consensus-estimate
BULLISH. Mercury Systems (MRCY; fwd P/E 28.6 (at profit trough); new CEO BALLHAUS after efforts to sell the company failed; 2023 is a transition year; past rapid growth via M&A caused execution problems; activists Starboard Value and Jana Partners are involved; business – electronics and chips for aerospace/defense; pg 16);
Small-caps (earnings estimates are going up for R2000/IWM companies; relative valuations are very attractive; the Fed is about done raising rates; M&A are picking up; SCs should benefit from government infrastructure stimulus programs; attractive sectors are tech, IT, industrial, healthcare, engineering & construction; better SC indexes are IJR, SPSM; EXTRA).
BEARISH.
Pg 12. Chip-designer Arm/ARM is now trading in nosebleed territory with fwd P/E > 100, P/S > 25. 45% of the revenues are from mobile phones, then from IoT, cloud computing, autos. AI is also a growing opportunity. Arm licenses its chip designs and get an average royalty of about 6c/device.
Arm underwriters GS (lead), JPM, BCS, MFG also did well as the IPO was at the top end of the range and it went up significantly on the 1st day. The next IPOs may be Instacart, Birkenstock, Klaviyo, all with GS as the lead underwriter. Success with these IPOs may help the GS CEO David SOLOMON; they may also release a flood of tech IPOs.
Pg 14, TECH TRADER. ARM IPO mania (fwd P/E > 100), AAPL launch hoopla and AI Senate hearings may have overshadowed the real important news of the US DOJ vs GOOGL trial. While the outcome is uncertain, it will have huge implications for the search business and for GOOGL, AAPL, MSFT. Elsewhere, ORCL sank on results below expectations – the high hopes from AI and cloud computing businesses were dashed by its headaches from the Cerner acquisitions (electronic medical records); ADBE fell even with a good report; CRM made some news with its annual conference.
Pg 23, FUNDS. DIVIDEND-oriented funds are attractive with the market at high levels. Short-term bonds are attractive now due to yield-curve inversion, but that won’t remain so for long. Mentioned are dividend-growth VIG, DGRO, VDIGX; current-dividend VYM; dividend-blend SCHD; equity-income VEIPX; income-builder/global-allocation TIBAX, etc. (By @lewisbraham at MFO)
EXTRA, FUNDS. Mutual fund/OEF CASH is only 4.9% vs 5.5% in 2023/Q1, high of 6.3% in 10/2022, and an all-time low of 3.5% (when?). This means that there is less cash to fuel this rally or to buy on the dips; the SP500 fwd P/E is 19. Cash yields are also attractive.
Pg 25, ECONOMY. Forget about what the rates will do in 2023 (nothing) and focus on when and at what pace the rate cuts may be in 2024. The ongoing QT also makes the effective fed fund rate a bit higher. Inflation is coming down. The Fed wants to avoid policy flip-flops. The FOMC meeting is on Tuesday-Wednesday and there will be new SEP projections. The government shutdown may also affect the economy (and so will the UAW strike if it lingers).
Pg 26: Sharmin MOSSAVAR-RAHMANI, Goldman Sachs/GS. She is an economist (so, few stock recommendations). She likes the US (the SP500 is fine; also, energy), but not China (slowing economy; high debt). The US prosperity is multidimensional and no one factor would derail it. The probability of a US recession has receded, and earnings should grow going forward. Stick to high-quality bonds. Inflation is heading lower and the FOMC should hold rates at the next meeting, but then the outlook is unclear – 1 or 2 more hikes, or cuts. The exporters to CHINA will be negatively affected – the US exports to China are low, but those from Australia, Chile, Europe (luxury goods), etc are high. China didn’t reform much when times post-WTO entry were good. It cannot do much about aging demographics and its geopolitical ambitions or policies won’t change; its infrastructure is overdeveloped. The level of stimulus isn’t meaningful. The EMs are also not attractive despite relative under valuations. INDIA is overvalued and there is too much optimism, but there are serious issues with infrastructure, taxes/tariffs, and bureaucracy.
EXTRA, INCOME. Strikes, competition, EVs are hurting AUTO stocks (GM, F, STLA), but they can boost their low dividends instead of buybacks and special dividends. They have ample cashflows and low payout ratios. Hopefully, the UAW strike will settle soon (UAW is partially striking at some facilities of all 3, but the overall effect is to halt most production at all 3). (This previously regular column is now ON/OFF)
Pg 54, OTHER VOICES. Alicia HERRERO, Natixis. Slide in Chinese YUAN will add to its woes. Instead of being a global growth engine in 2023, Chinese economy is in doldrums. Exports are falling despite a weak yuan. The PBOC has been cutting rates and that has led to capital outflows; the foreign reserves aren’t rising despite large trade surpluses. The end of the US Fed rate hikes will be a relief to China. Japan and the Netherlands have joined the US chip ban for China and that is also contributing to its muted growth. Foreign investors keep waiting for a meaningful stimulus. The geopolitical risks are rising from its policies for Russia and Taiwan.
Pg 55, RETIREMENT. MEDICARE drug price negotiations under 2022 Inflation Reduction Act have started with 10 expensive drugs; these prices will go into effect in 2026. The next round will include 15 drugs with prices to go into effect in 2027; and so on with 15-20 drugs annually. Plan D annual (open) enrollment period (AEP) is October 15-December 7. Also check your plan’s drug formulary annually to verify drug tiers. (This seems a new feature on the shrunk Mailbag page that I have missed several times and added later by Edit)
Edit/Add. Supplement – Top 100 Independent Advisors. It has features on advisory firms and lists of Top 100 RIA Firms and Top 100 Independent Advisors.
(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). At a CA conference, Bill GROSS and Jeffery GUNDLACH traded some barbs. Gross likes dividend stocks and MLPs. Gundlach likes CMBS, FR/BL, longer duration bonds.
DATA THIS WEEK (seriously shrunk but supplemented from the link below). Housing starts on TUESDAY; existing home sales, LEI on THURSDAY; manufacturing PMI. Services PMI on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
Data This Week Link,
www.barrons.com/market-data/market-lab?mod=md_subnav#consensus-estimate
BULLISH. Mercury Systems (MRCY; fwd P/E 28.6 (at profit trough); new CEO BALLHAUS after efforts to sell the company failed; 2023 is a transition year; past rapid growth via M&A caused execution problems; activists Starboard Value and Jana Partners are involved; business – electronics and chips for aerospace/defense; pg 16);
Small-caps (earnings estimates are going up for R2000/IWM companies; relative valuations are very attractive; the Fed is about done raising rates; M&A are picking up; SCs should benefit from government infrastructure stimulus programs; attractive sectors are tech, IT, industrial, healthcare, engineering & construction; better SC indexes are IJR, SPSM; EXTRA).
BEARISH.
Pg 12. Chip-designer Arm/ARM is now trading in nosebleed territory with fwd P/E > 100, P/S > 25. 45% of the revenues are from mobile phones, then from IoT, cloud computing, autos. AI is also a growing opportunity. Arm licenses its chip designs and get an average royalty of about 6c/device.
Arm underwriters GS (lead), JPM, BCS, MFG also did well as the IPO was at the top end of the range and it went up significantly on the 1st day. The next IPOs may be Instacart, Birkenstock, Klaviyo, all with GS as the lead underwriter. Success with these IPOs may help the GS CEO David SOLOMON; they may also release a flood of tech IPOs.
Pg 14, TECH TRADER. ARM IPO mania (fwd P/E > 100), AAPL launch hoopla and AI Senate hearings may have overshadowed the real important news of the US DOJ vs GOOGL trial. While the outcome is uncertain, it will have huge implications for the search business and for GOOGL, AAPL, MSFT. Elsewhere, ORCL sank on results below expectations – the high hopes from AI and cloud computing businesses were dashed by its headaches from the Cerner acquisitions (electronic medical records); ADBE fell even with a good report; CRM made some news with its annual conference.
Pg 23, FUNDS. DIVIDEND-oriented funds are attractive with the market at high levels. Short-term bonds are attractive now due to yield-curve inversion, but that won’t remain so for long. Mentioned are dividend-growth VIG, DGRO, VDIGX; current-dividend VYM; dividend-blend SCHD; equity-income VEIPX; income-builder/global-allocation TIBAX, etc. (By @lewisbraham at MFO)
EXTRA, FUNDS. Mutual fund/OEF CASH is only 4.9% vs 5.5% in 2023/Q1, high of 6.3% in 10/2022, and an all-time low of 3.5% (when?). This means that there is less cash to fuel this rally or to buy on the dips; the SP500 fwd P/E is 19. Cash yields are also attractive.
Pg 25, ECONOMY. Forget about what the rates will do in 2023 (nothing) and focus on when and at what pace the rate cuts may be in 2024. The ongoing QT also makes the effective fed fund rate a bit higher. Inflation is coming down. The Fed wants to avoid policy flip-flops. The FOMC meeting is on Tuesday-Wednesday and there will be new SEP projections. The government shutdown may also affect the economy (and so will the UAW strike if it lingers).
Pg 26: Sharmin MOSSAVAR-RAHMANI, Goldman Sachs/GS. She is an economist (so, few stock recommendations). She likes the US (the SP500 is fine; also, energy), but not China (slowing economy; high debt). The US prosperity is multidimensional and no one factor would derail it. The probability of a US recession has receded, and earnings should grow going forward. Stick to high-quality bonds. Inflation is heading lower and the FOMC should hold rates at the next meeting, but then the outlook is unclear – 1 or 2 more hikes, or cuts. The exporters to CHINA will be negatively affected – the US exports to China are low, but those from Australia, Chile, Europe (luxury goods), etc are high. China didn’t reform much when times post-WTO entry were good. It cannot do much about aging demographics and its geopolitical ambitions or policies won’t change; its infrastructure is overdeveloped. The level of stimulus isn’t meaningful. The EMs are also not attractive despite relative under valuations. INDIA is overvalued and there is too much optimism, but there are serious issues with infrastructure, taxes/tariffs, and bureaucracy.
EXTRA, INCOME. Strikes, competition, EVs are hurting AUTO stocks (GM, F, STLA), but they can boost their low dividends instead of buybacks and special dividends. They have ample cashflows and low payout ratios. Hopefully, the UAW strike will settle soon (UAW is partially striking at some facilities of all 3, but the overall effect is to halt most production at all 3). (This previously regular column is now ON/OFF)
Pg 54, OTHER VOICES. Alicia HERRERO, Natixis. Slide in Chinese YUAN will add to its woes. Instead of being a global growth engine in 2023, Chinese economy is in doldrums. Exports are falling despite a weak yuan. The PBOC has been cutting rates and that has led to capital outflows; the foreign reserves aren’t rising despite large trade surpluses. The end of the US Fed rate hikes will be a relief to China. Japan and the Netherlands have joined the US chip ban for China and that is also contributing to its muted growth. Foreign investors keep waiting for a meaningful stimulus. The geopolitical risks are rising from its policies for Russia and Taiwan.
Pg 55, RETIREMENT. MEDICARE drug price negotiations under 2022 Inflation Reduction Act have started with 10 expensive drugs; these prices will go into effect in 2026. The next round will include 15 drugs with prices to go into effect in 2027; and so on with 15-20 drugs annually. Plan D annual (open) enrollment period (AEP) is October 15-December 7. Also check your plan’s drug formulary annually to verify drug tiers. (This seems a new feature on the shrunk Mailbag page that I have missed several times and added later by Edit)
Edit/Add. Supplement – Top 100 Independent Advisors. It has features on advisory firms and lists of Top 100 RIA Firms and Top 100 Independent Advisors.
(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).