Post by Admin/YBB on Sept 30, 2023 7:47:51 GMT -6
Pg 12, PREVIEW & REVIEW (consolidated). EV sales are growing rapidly from a small base. The total annual auto sales now are 15.4 million, still below the pre-pandemic 17 million. But there is a larger dealer inventory for EVs at 97 days vs 57 days for the ICE autos. So, there is an oversupply of EVs, and their production may have to be cut. EVs are less popular in the colder regions unless one can keep them plugged in heated garages.
DATA THIS WEEK (seriously shrunk but supplemented from the link below). Construction spending, manufacturing PMI on MONDAY; JOLTS report on TUESDAY; durable goods orders, factory orders, services PMI on WEDNESDAY; international trade deficit on THURSDAY; consumer credit, jobs report (+150,000 to +155,000), unemployment rate (3.7%) 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. General Dynamics (GD; yield 2.4%; a dividend Aristocrat; fwd P/E 14.8; huge order backlog; commercial Gulfstream business adds cyclicality; defense stocks aren’t affected by government shutdown; pg 11).
BEARISH.
Pg 12. BITCOIN has languished (trading range $25K-$30K) and CRYPTO trading has become boring (at only 15% of the peak volume in 2021). Crypto VOLATILITY has also collapsed. Companies such as BLK, COIN, Fidelity, BEN, etc are betting on the launch of physical/spot-crypto ETFs. Crypto MARKET MAKERS have reduced exposures. Crypto quote bid-ask have widened, and retail spreads have also increased. VENTURE CAPITAL funds for cryptos have been slashed. Crypto STOCKS (COIN, HOOD, etc) are suffering. The SEC has had some setbacks in the COURTS over crypto regulation (but GENSLER/SEC has hinted that he may just ignore the courts); speculations are that the SEC may approve some form of physical/spot crypto ETF OR continue to delay under the pressures from courts, Congress, and industry. Bitcoin-halving event is in 04/2024 (that’s when the mining-fees are halved). Some fear a crypto nap-to-death if the retail crowd doesn’t comeback (they are now into AI, NVDA, etc).
Pg 14. AUTO INSURANCE spikes (+19.1% y-o-y; much higher for some consumers) are driving people nuts. Factors include higher car prices, driving habits (they became worse during/after Covid), souring claim/repair expenses, complexity/specialization of hybrids/EVs, weather events, etc. There won’t be any relief soon as more rate increase requests are pending with the state regulators. Underwriting claims and expenses are 112.2% of premiums (the combined ratio); reserves are helping some. A lengthy UAW strike may drive up car and parts prices further. Some customers have reacted by reducing coverage (or increasing deductibles); the number of uninsured drivers (illegal in most states) is also increasing. Mentioned are ALL, HIG, PGR, TRV; all lagging; rating agency A.M Best has issued a negative outlook for auto insurers.
Pg 18, COVER STORY (More). LABOR will have a hard time making up for benefits lost over the years despite the aggressive tactics of UAW of striking GM, F, STLA simultaneously and prolonging the strike; it affects PARTS availability and distribution too. Labor feels left out by years of corporate cost-cutting and globalization and now sees its opportunity in the rebound with government stimulus and reshoring efforts; labor markets are also tight. Unionization has gained favor since 2018. But it would be an uphill battle. The US private labor force is only 6% unionized (vs 17% in 1983). Other labor unions are watching the UAW. There have been recent successes at UPS, airline pilots, and Hollywood writers. More strikes are coming – LV hospitality workers, airline flight attendants, Kaiser healthcare workers, etc.
Pg 20, INCOME. Suggests that big techs AMZN, GOOGL, META start paying 1-2% dividends from their free cash flows. Several big techs pay dividends (AAPL, MSFT). There are 100 non-dividend payers in SP500, but others pay up to 55% of their free cash flows.
EXTRA, INCOME. In a dismal BOND YEAR (for intermediate/long Treasuries; investment grade bonds), HY is the only bright spot. A 3rd down year for bonds has never happened before (but there is always the 1st time). Many newer HY have shorter maturities. The risk now is that the economy will slow down due to FED monetary tightening, high OIL prices, LABOR unrest. HY defaults are gradually rising. HY spreads of around 4% are too low. These HY may have a tough time for re-fi/rollovers. The HY now may be overvalued relative to investment-grade.
Pg 21, ECONOMY. Government SHUTDOWNS come and go (despite the PR hoopla & bad TV imagery). But federal DEBT matters more (now 119.5% of the GDP). Moody’s may soon join S&P and Fitch in downgrading the US sovereign debt. Shutdown may cost 0.20% of the Q4 GDP per week that would add to the drag of labor strikes, etc. Stocks may not care, but poor BONDs are another matter. While the FED rate hikes have slowed (3m T-Bills haven’t moved much), the longer end of the YIELD-CURVE has lifted. That may be from a combination of rising debt (from several fiscal stimuli) and a stronger economy. The annual budget DEFICIT now is 7.5% of the GDP, and 2.5% of that is just debt servicing (much higher than it was during the ZIRP). That is too large for an economy near full employment and in good shape (generally, good times are for reducing debt & deficit, bad times are for raising those).
Pg 22: Ron SHAICH, Founder/CEO of Panera Bread (a fast-casual restaurant chain); CEO/Partner of Act III Holdings (a private investment fund); Chairman/Lead Investor in CAVA (June IPO; a Mediterranean restaurant chain). His suggestions for business leaders – be honest; know what is important for the business; be patient, be a good listener; be a transformer (he transformed Panera 4 times; CAVA transformed by acquiring much larger Zoe’s Kitchen); figure out what the consumers want (years ago, he saw the need for fast-casual restaurants, positioned in between fast-food and fine-dining). His basic idea is to identify specialized or niche categories and then become dominant in those.
His other projects include Middle Eastern Tatte Bakery & Café, vegetarian restaurant Life Alive, immersive entertainment Level 99, etc. He treats his founding partners well by offering them the right of first refusal on future funding. His boardroom style is sherpa-management (sherpa play a critical supportive role for Mount Everest climbers). Value creation is a byproduct of a successful consumer product or theme. Pandemic created extraordinary conditions and opportunities, but things will return to normal except for things like Zoom, food delivery, etc. He lets the Fed worry about big issues of economy, jobs, consumer health, etc, but those aren’t big factors in running good businesses. His forthcoming book, Know What Matters: Lessons from a Lifetime of Transformations, 10/2023.
Pg 24, FUNDS. Popular Nasdaq 100 and related ETF QQQ have issues. Nasdaq 100 consists of the largest 100 Nasdaq stocks excluding financials; there is also a small listing fee to be included in Nasdaq indexes. The ETF QQQ is huge at AUM of $197.5 billion, but there is a lower ER, smaller (AUM $14.2 billion) cousin QQQM for retail investors. Alternatives include broader large-cap growth IUSG, VUG; tech VGT, XLK. There are several QQQ-related leveraged ETFs and options-based ETFs (JEPQ). (By @lewisbraham at MFO)
EXTRA, FUNDS. David HERRO, International OAKIX (AUM $19.7 billion). CHINESE stocks peaked in 2021, but Herro isn’t worried about that or China slowdown. Several Chinese stocks are at bargain basement prices. Many European companies with exposure to China will be fine as the luxury goods market in China remains strong – autos, consumer goods, cosmetics. President XI is a bit unpredictable and is paying only lip service to economic recovery. US-China tensions are high.
Pg 25, TECH TRADER. Meta/META should ditch metaverse and smart glasses, and focus instead on AI – chatbots Lima2, Meta AI, specialized chatbots with different personalities (celebrities, etc); text-image Emu; AI Studio for customizable business chatbots. META has partnered with Microsoft/MSFT Bing for some searches.
Pg 54, OTHER VOICES. Paul SANKEY, Sankey Research (Energy). OIL is rising due to GEOPOLITICS and GOVERNMENT interventions – the OPEC production cuts, European energy policies, Russian sanctions (not very effective), drawdowns from the US SPR, etc. Saudi Arabia has also changed its strategy – it’s no longer using production increases to assert its global oil dominance (well, now it wants money for its ambitious expansion plans!). The US FED cannot do much about oil prices. With so much spare capacity with the OPEC (and the US Frackers), oil will be volatile. Energy stocks remain attractive.
Pg 55, RETIREMENT. With STUDENT LOAN payments resuming after a 3-yr break, many will have to decide loan payments vs RETIREMENT contributions. A majority may have to reduce their retirement contributions. But there is help. SECURE 2.0 allows employers to make additional retirement contributions for employees based on their qualified loan payments. Some government loan payments depend on income (AGI) that will be reduced by this device. Some companies also offer direct partial payments to help with the student loan payments (NY Life, etc). Others may just have to work extra (overtime or part-time jobs) to keep up with both student loan payments and retirement contributions. (This is a new feature on the shrunk Mailbag page)
(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).
DATA THIS WEEK (seriously shrunk but supplemented from the link below). Construction spending, manufacturing PMI on MONDAY; JOLTS report on TUESDAY; durable goods orders, factory orders, services PMI on WEDNESDAY; international trade deficit on THURSDAY; consumer credit, jobs report (+150,000 to +155,000), unemployment rate (3.7%) 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. General Dynamics (GD; yield 2.4%; a dividend Aristocrat; fwd P/E 14.8; huge order backlog; commercial Gulfstream business adds cyclicality; defense stocks aren’t affected by government shutdown; pg 11).
BEARISH.
Pg 12. BITCOIN has languished (trading range $25K-$30K) and CRYPTO trading has become boring (at only 15% of the peak volume in 2021). Crypto VOLATILITY has also collapsed. Companies such as BLK, COIN, Fidelity, BEN, etc are betting on the launch of physical/spot-crypto ETFs. Crypto MARKET MAKERS have reduced exposures. Crypto quote bid-ask have widened, and retail spreads have also increased. VENTURE CAPITAL funds for cryptos have been slashed. Crypto STOCKS (COIN, HOOD, etc) are suffering. The SEC has had some setbacks in the COURTS over crypto regulation (but GENSLER/SEC has hinted that he may just ignore the courts); speculations are that the SEC may approve some form of physical/spot crypto ETF OR continue to delay under the pressures from courts, Congress, and industry. Bitcoin-halving event is in 04/2024 (that’s when the mining-fees are halved). Some fear a crypto nap-to-death if the retail crowd doesn’t comeback (they are now into AI, NVDA, etc).
Pg 14. AUTO INSURANCE spikes (+19.1% y-o-y; much higher for some consumers) are driving people nuts. Factors include higher car prices, driving habits (they became worse during/after Covid), souring claim/repair expenses, complexity/specialization of hybrids/EVs, weather events, etc. There won’t be any relief soon as more rate increase requests are pending with the state regulators. Underwriting claims and expenses are 112.2% of premiums (the combined ratio); reserves are helping some. A lengthy UAW strike may drive up car and parts prices further. Some customers have reacted by reducing coverage (or increasing deductibles); the number of uninsured drivers (illegal in most states) is also increasing. Mentioned are ALL, HIG, PGR, TRV; all lagging; rating agency A.M Best has issued a negative outlook for auto insurers.
Pg 18, COVER STORY (More). LABOR will have a hard time making up for benefits lost over the years despite the aggressive tactics of UAW of striking GM, F, STLA simultaneously and prolonging the strike; it affects PARTS availability and distribution too. Labor feels left out by years of corporate cost-cutting and globalization and now sees its opportunity in the rebound with government stimulus and reshoring efforts; labor markets are also tight. Unionization has gained favor since 2018. But it would be an uphill battle. The US private labor force is only 6% unionized (vs 17% in 1983). Other labor unions are watching the UAW. There have been recent successes at UPS, airline pilots, and Hollywood writers. More strikes are coming – LV hospitality workers, airline flight attendants, Kaiser healthcare workers, etc.
Pg 20, INCOME. Suggests that big techs AMZN, GOOGL, META start paying 1-2% dividends from their free cash flows. Several big techs pay dividends (AAPL, MSFT). There are 100 non-dividend payers in SP500, but others pay up to 55% of their free cash flows.
EXTRA, INCOME. In a dismal BOND YEAR (for intermediate/long Treasuries; investment grade bonds), HY is the only bright spot. A 3rd down year for bonds has never happened before (but there is always the 1st time). Many newer HY have shorter maturities. The risk now is that the economy will slow down due to FED monetary tightening, high OIL prices, LABOR unrest. HY defaults are gradually rising. HY spreads of around 4% are too low. These HY may have a tough time for re-fi/rollovers. The HY now may be overvalued relative to investment-grade.
Pg 21, ECONOMY. Government SHUTDOWNS come and go (despite the PR hoopla & bad TV imagery). But federal DEBT matters more (now 119.5% of the GDP). Moody’s may soon join S&P and Fitch in downgrading the US sovereign debt. Shutdown may cost 0.20% of the Q4 GDP per week that would add to the drag of labor strikes, etc. Stocks may not care, but poor BONDs are another matter. While the FED rate hikes have slowed (3m T-Bills haven’t moved much), the longer end of the YIELD-CURVE has lifted. That may be from a combination of rising debt (from several fiscal stimuli) and a stronger economy. The annual budget DEFICIT now is 7.5% of the GDP, and 2.5% of that is just debt servicing (much higher than it was during the ZIRP). That is too large for an economy near full employment and in good shape (generally, good times are for reducing debt & deficit, bad times are for raising those).
Pg 22: Ron SHAICH, Founder/CEO of Panera Bread (a fast-casual restaurant chain); CEO/Partner of Act III Holdings (a private investment fund); Chairman/Lead Investor in CAVA (June IPO; a Mediterranean restaurant chain). His suggestions for business leaders – be honest; know what is important for the business; be patient, be a good listener; be a transformer (he transformed Panera 4 times; CAVA transformed by acquiring much larger Zoe’s Kitchen); figure out what the consumers want (years ago, he saw the need for fast-casual restaurants, positioned in between fast-food and fine-dining). His basic idea is to identify specialized or niche categories and then become dominant in those.
His other projects include Middle Eastern Tatte Bakery & Café, vegetarian restaurant Life Alive, immersive entertainment Level 99, etc. He treats his founding partners well by offering them the right of first refusal on future funding. His boardroom style is sherpa-management (sherpa play a critical supportive role for Mount Everest climbers). Value creation is a byproduct of a successful consumer product or theme. Pandemic created extraordinary conditions and opportunities, but things will return to normal except for things like Zoom, food delivery, etc. He lets the Fed worry about big issues of economy, jobs, consumer health, etc, but those aren’t big factors in running good businesses. His forthcoming book, Know What Matters: Lessons from a Lifetime of Transformations, 10/2023.
Pg 24, FUNDS. Popular Nasdaq 100 and related ETF QQQ have issues. Nasdaq 100 consists of the largest 100 Nasdaq stocks excluding financials; there is also a small listing fee to be included in Nasdaq indexes. The ETF QQQ is huge at AUM of $197.5 billion, but there is a lower ER, smaller (AUM $14.2 billion) cousin QQQM for retail investors. Alternatives include broader large-cap growth IUSG, VUG; tech VGT, XLK. There are several QQQ-related leveraged ETFs and options-based ETFs (JEPQ). (By @lewisbraham at MFO)
EXTRA, FUNDS. David HERRO, International OAKIX (AUM $19.7 billion). CHINESE stocks peaked in 2021, but Herro isn’t worried about that or China slowdown. Several Chinese stocks are at bargain basement prices. Many European companies with exposure to China will be fine as the luxury goods market in China remains strong – autos, consumer goods, cosmetics. President XI is a bit unpredictable and is paying only lip service to economic recovery. US-China tensions are high.
Pg 25, TECH TRADER. Meta/META should ditch metaverse and smart glasses, and focus instead on AI – chatbots Lima2, Meta AI, specialized chatbots with different personalities (celebrities, etc); text-image Emu; AI Studio for customizable business chatbots. META has partnered with Microsoft/MSFT Bing for some searches.
Pg 54, OTHER VOICES. Paul SANKEY, Sankey Research (Energy). OIL is rising due to GEOPOLITICS and GOVERNMENT interventions – the OPEC production cuts, European energy policies, Russian sanctions (not very effective), drawdowns from the US SPR, etc. Saudi Arabia has also changed its strategy – it’s no longer using production increases to assert its global oil dominance (well, now it wants money for its ambitious expansion plans!). The US FED cannot do much about oil prices. With so much spare capacity with the OPEC (and the US Frackers), oil will be volatile. Energy stocks remain attractive.
Pg 55, RETIREMENT. With STUDENT LOAN payments resuming after a 3-yr break, many will have to decide loan payments vs RETIREMENT contributions. A majority may have to reduce their retirement contributions. But there is help. SECURE 2.0 allows employers to make additional retirement contributions for employees based on their qualified loan payments. Some government loan payments depend on income (AGI) that will be reduced by this device. Some companies also offer direct partial payments to help with the student loan payments (NY Life, etc). Others may just have to work extra (overtime or part-time jobs) to keep up with both student loan payments and retirement contributions. (This is a new feature on the shrunk Mailbag page)
(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).