Post by Admin/YBB on Oct 7, 2023 8:37:51 GMT -6
Pg 10. FOMC Minutes on WEDNESDAY. Q3 earnings season starts with big banks reporting on FRIDAY.
PREVIEW & REVIEW (consolidated). Due to auto-signups and auto-escalators in 401k/403b, millennials are ahead of boomers in retirement savings at comparable points.
DATA THIS WEEK (seriously shrunk but supplemented from the link below). Wholesale inventories on TUESDAY; PPI (+1.6% y-o-y; core +2.3%) on WEDNESDAY; CPI (+3.6% y-o-y; core +4.1%; with this data, the variable I-Bond rate for November 1 and Social Security COLA for 2024 will also be determined) on THURSDAY; UM consumer sentiment 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. Bookings Holdings (BKNG; fwd P/E 17.8; strong stock performance may continue; low operational costs; geographic diversity – the US, Europe, Asia; offers airfares + car rentals + hotel bookings; free cash flow is being used for buybacks; pg 13);
AGCO (yield 1%; fwd PE 7.8; cyclical business of farm equipment manufacturing; joint-venture on precision-ag (computerized-ag) with TRMB (some of these products were seen at the CES-LV); farm income has been in an uptrend; pg 14).
BEARISH.
Pg 11: Post-pandemic rush to TRAVEL is over. Some unlucky travelers caught Covid (despite all required vaccinations) during their vacation trips; next time, they may just chill at home. Domestic travel has fallen, and so have the airfares. Airline stocks are mixed due to differences in leisure vs business and domestic vs foreign travel; there are higher fuel costs too. But many Americans are still willing to go to low-budget locations. One beneficiary is the cruise industry (CCL, NCLH, RCL); they combine travel, stays and sightseeing in one relaxed budget package. Land resorts are also popular (MAR, RHP), with some combining leisure with business and remote work.
Pg 15: A new NLRB rule may hold franchising companies (MCD, etc) responsible for franchise workers. For example, MCD with only 5% company owned stores has 95% stores owned by franchisees with 800,000 workers. The NLRB will soon issue rules on joint-employers that may hold both franchiser and franchisee responsible for various labor issues, from conduct to unionization. The rule may also apply to companies using subcontractors or temporary staffing services. Unions have pushed for these new rules that will hold companies more responsible for most workers whether employed directly or indirectly. But for many companies, this extended responsibility/liability will be a serious problem. It may even kill the franchise model. Business trade groups and companies are lobbying Congress against the rule and may also fight it in the courts. BTW, NLRB is an “independent” federal agency whose board members and general counsel (who is also independent of the board) are appointed by the President with the consent of the Senate.
Pg 16: Global climate issues may no longer be far into the future. The EU will roll out new CARBON-based TARIFFs this month that will impose penalties on environmental polluters. This Carbon Border Adjustment Mechanism will be implemented gradually, initially requiring just data submissions, with some fees starting in 2026 and then ramping up by 2034. It will have far-reaching implications for global free trade. Companies relying on fossil fuels may be affected more. Various INDUSTRIES would be affected – mining, iron, steel, aluminum, cement, chemicals, fertilizers, electricity, hydrogen, etc; OIL products won’t be included initially but will be added by 2030. The heavy industry groups that would be most affected are silent (stunned?). The COUNTRIES affected most will be Canada, Brazil, South Africa, Turkey, China, India, etc (the US is not high on the list). The US has just asked for exemptions (from this anti-free-trade EU regulation) or may retaliate in other ways. Other countries may also impose reciprocal carbon-fees/tariffs, or shift their exports. So far, most countries have limited small carbon-fees for their domestic companies, but the EU move will include importers (i.e. the exporters to the EU). Generally, the US and EU have government programs that provide long-term incentives for energy transitions, but this EU tariff will kick in soon.
Pg 28, INCOME. Attractive PREFERREDs include the ETFs EPEI, PFF; the CEFs FFC, JPC; and individual preferreds from C, GS, WFC, etc (both with nomnal prices of $25 & $1,000). Also look at JUNIOR CORPORATE bonds from ENB and APOS/APO.
Pg 29, TECH TRADER. After the expected Q3 y-o-y decline in revenues (it’s the 4th such quarterly decline), Apple (fwd P/EBITDA 18.5) needs a break. Stock is down -10% since August; it still has the largest market-cap. The iPhone launch was so-so. Minor new VR products are coming in 2024. It isn’t buying any big company; Apple Car may be a mirage. This columnist suggests some new areas for AAPL – own search engine, generative AI, etc. Apple has followed others in technology but has been very successful at delivering better products than others (iPad, iPhone, etc are just recent examples). The DOJ antitrust case against Alphabet/GOOGL may impact AAPL-GOOGL relationship. It’s time for Apple to do something big and unexpected.
Pg 30, ECONOMY. While the ECB has so far lagged the US FED, it may cut rates in EUROPE first (the BOE may do the same in the UK). INFLATION is cooling (Europe is much more affected by the swings in ENERGY prices) and growth is sluggish (GERMANY is in recession and CHINA is a bigger factor for Europe). The ECB may not wait to reach the +2% inflation goal (it’s about +4% now). On the other hand, the US economy remains strong, and the US Fed is too focused on achieving +2% average inflation target. The DOLLAR has been strong because of this (despite the budget, debt and the DC issues facing the US). Contrary to Fed’s expectations of continued growth in the US, many economists now think that the US economy will start to contract soon for a few quarters. (At uncertain points like this, it may be helpful if the US Fed Chair was an economist himself, rather than a businessman who just listens to other economists.)
Pg 58, OTHER VOICES. Larry HATHEWAY, Cofounder of Jackson Hole Economics; formerly UBS. 2023 looks to be turning into the 3rd year of bond market rout while investors thought that the worst was over in 2022. Yields have risen at both ends, short (due to the Fed actions) and long (due to bond vigilantes?). The author is more reassuring for bond investors (that the worst will really be over in 2023), but not for equity investors. He cites the Fisher Equation (by the same Irving FISHER who infamously predicted just 9 days before the 1929 crash that the stocks had reached “a permanently high plateau”. But otherwise, he was among the best US economists ever.):
Nominal Yields = Real Yields + Expected Inflation
The real yields are expected to fall, and 4 reasons are given (well, may be at some point; just look at the rising TIPS yields now.). Inflation expectations are falling. So, the nominal yields are headed lower. Annual budget deficits and total federal debt are side issues, not huge problems like in some countries (e.g. Belgium, Italy, Japan, etc). The US bond market is uniquely deep and liquid and keeps attracting global inflows (so, worry when that stops). Bond investors shouldn’t worry too much. But things may change if there is a US recession, not a soft landing. But even then, it would be the stock investors who would be hurt more.
Pg 55, RETIREMENT. Most HYPERTENSION isn’t worth treating because of the adverse side effects of hypertension meds. However, making LIFESTYLE changes (diet, exercise, avoiding alcohol and smoking) to reduce hypertension is desirable. Hypertension in young and middle-aged people is indeed serious; likewise, it would also be serious for older folks who have already taken most of the lifestyle steps. Key is the totality of patient’s health. (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).
PREVIEW & REVIEW (consolidated). Due to auto-signups and auto-escalators in 401k/403b, millennials are ahead of boomers in retirement savings at comparable points.
DATA THIS WEEK (seriously shrunk but supplemented from the link below). Wholesale inventories on TUESDAY; PPI (+1.6% y-o-y; core +2.3%) on WEDNESDAY; CPI (+3.6% y-o-y; core +4.1%; with this data, the variable I-Bond rate for November 1 and Social Security COLA for 2024 will also be determined) on THURSDAY; UM consumer sentiment 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. Bookings Holdings (BKNG; fwd P/E 17.8; strong stock performance may continue; low operational costs; geographic diversity – the US, Europe, Asia; offers airfares + car rentals + hotel bookings; free cash flow is being used for buybacks; pg 13);
AGCO (yield 1%; fwd PE 7.8; cyclical business of farm equipment manufacturing; joint-venture on precision-ag (computerized-ag) with TRMB (some of these products were seen at the CES-LV); farm income has been in an uptrend; pg 14).
BEARISH.
Pg 11: Post-pandemic rush to TRAVEL is over. Some unlucky travelers caught Covid (despite all required vaccinations) during their vacation trips; next time, they may just chill at home. Domestic travel has fallen, and so have the airfares. Airline stocks are mixed due to differences in leisure vs business and domestic vs foreign travel; there are higher fuel costs too. But many Americans are still willing to go to low-budget locations. One beneficiary is the cruise industry (CCL, NCLH, RCL); they combine travel, stays and sightseeing in one relaxed budget package. Land resorts are also popular (MAR, RHP), with some combining leisure with business and remote work.
Pg 15: A new NLRB rule may hold franchising companies (MCD, etc) responsible for franchise workers. For example, MCD with only 5% company owned stores has 95% stores owned by franchisees with 800,000 workers. The NLRB will soon issue rules on joint-employers that may hold both franchiser and franchisee responsible for various labor issues, from conduct to unionization. The rule may also apply to companies using subcontractors or temporary staffing services. Unions have pushed for these new rules that will hold companies more responsible for most workers whether employed directly or indirectly. But for many companies, this extended responsibility/liability will be a serious problem. It may even kill the franchise model. Business trade groups and companies are lobbying Congress against the rule and may also fight it in the courts. BTW, NLRB is an “independent” federal agency whose board members and general counsel (who is also independent of the board) are appointed by the President with the consent of the Senate.
Pg 16: Global climate issues may no longer be far into the future. The EU will roll out new CARBON-based TARIFFs this month that will impose penalties on environmental polluters. This Carbon Border Adjustment Mechanism will be implemented gradually, initially requiring just data submissions, with some fees starting in 2026 and then ramping up by 2034. It will have far-reaching implications for global free trade. Companies relying on fossil fuels may be affected more. Various INDUSTRIES would be affected – mining, iron, steel, aluminum, cement, chemicals, fertilizers, electricity, hydrogen, etc; OIL products won’t be included initially but will be added by 2030. The heavy industry groups that would be most affected are silent (stunned?). The COUNTRIES affected most will be Canada, Brazil, South Africa, Turkey, China, India, etc (the US is not high on the list). The US has just asked for exemptions (from this anti-free-trade EU regulation) or may retaliate in other ways. Other countries may also impose reciprocal carbon-fees/tariffs, or shift their exports. So far, most countries have limited small carbon-fees for their domestic companies, but the EU move will include importers (i.e. the exporters to the EU). Generally, the US and EU have government programs that provide long-term incentives for energy transitions, but this EU tariff will kick in soon.
Pg 28, INCOME. Attractive PREFERREDs include the ETFs EPEI, PFF; the CEFs FFC, JPC; and individual preferreds from C, GS, WFC, etc (both with nomnal prices of $25 & $1,000). Also look at JUNIOR CORPORATE bonds from ENB and APOS/APO.
Pg 29, TECH TRADER. After the expected Q3 y-o-y decline in revenues (it’s the 4th such quarterly decline), Apple (fwd P/EBITDA 18.5) needs a break. Stock is down -10% since August; it still has the largest market-cap. The iPhone launch was so-so. Minor new VR products are coming in 2024. It isn’t buying any big company; Apple Car may be a mirage. This columnist suggests some new areas for AAPL – own search engine, generative AI, etc. Apple has followed others in technology but has been very successful at delivering better products than others (iPad, iPhone, etc are just recent examples). The DOJ antitrust case against Alphabet/GOOGL may impact AAPL-GOOGL relationship. It’s time for Apple to do something big and unexpected.
Pg 30, ECONOMY. While the ECB has so far lagged the US FED, it may cut rates in EUROPE first (the BOE may do the same in the UK). INFLATION is cooling (Europe is much more affected by the swings in ENERGY prices) and growth is sluggish (GERMANY is in recession and CHINA is a bigger factor for Europe). The ECB may not wait to reach the +2% inflation goal (it’s about +4% now). On the other hand, the US economy remains strong, and the US Fed is too focused on achieving +2% average inflation target. The DOLLAR has been strong because of this (despite the budget, debt and the DC issues facing the US). Contrary to Fed’s expectations of continued growth in the US, many economists now think that the US economy will start to contract soon for a few quarters. (At uncertain points like this, it may be helpful if the US Fed Chair was an economist himself, rather than a businessman who just listens to other economists.)
Pg 58, OTHER VOICES. Larry HATHEWAY, Cofounder of Jackson Hole Economics; formerly UBS. 2023 looks to be turning into the 3rd year of bond market rout while investors thought that the worst was over in 2022. Yields have risen at both ends, short (due to the Fed actions) and long (due to bond vigilantes?). The author is more reassuring for bond investors (that the worst will really be over in 2023), but not for equity investors. He cites the Fisher Equation (by the same Irving FISHER who infamously predicted just 9 days before the 1929 crash that the stocks had reached “a permanently high plateau”. But otherwise, he was among the best US economists ever.):
Nominal Yields = Real Yields + Expected Inflation
The real yields are expected to fall, and 4 reasons are given (well, may be at some point; just look at the rising TIPS yields now.). Inflation expectations are falling. So, the nominal yields are headed lower. Annual budget deficits and total federal debt are side issues, not huge problems like in some countries (e.g. Belgium, Italy, Japan, etc). The US bond market is uniquely deep and liquid and keeps attracting global inflows (so, worry when that stops). Bond investors shouldn’t worry too much. But things may change if there is a US recession, not a soft landing. But even then, it would be the stock investors who would be hurt more.
Pg 55, RETIREMENT. Most HYPERTENSION isn’t worth treating because of the adverse side effects of hypertension meds. However, making LIFESTYLE changes (diet, exercise, avoiding alcohol and smoking) to reduce hypertension is desirable. Hypertension in young and middle-aged people is indeed serious; likewise, it would also be serious for older folks who have already taken most of the lifestyle steps. Key is the totality of patient’s health. (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).