Post by Admin/YBB on Oct 21, 2023 8:07:05 GMT -6
Pg 11. PREVIEW & REVIEW (consolidated). Rite Aid/RAD/RADCQ went bankrupt. 516 companies YTD did the same, the worst since 2010. Companies with weak balance sheets are getting squeezed by higher rates (some short-term HY funds may be affected). They may also have company specific issues, e.g., the opioid lawsuit liabilities for Rite Aid.
DATA THIS WEEK. Housing starts, new home sales on WEDNESDAY; Q3 GDP (+3.1% to +3.3%), personal income and expenditures (core PCE +3.6%) on THURSDAY; UM consumer sentiment on FRIDAY. (Seriously shrunk but supplemented from the link below).
www.barrons.com/magazine?mod=BOL_TOPNAV
Data This Week Link,
www.barrons.com/market-data/market-lab?mod=md_subnav#consensus-estimate
BULLISH. BMW (BMWYY; yield 8.9% (variable); fwd P/E 4 only (adjusted for high cash); becoming a strong player in EVs with 15% of its Q3 sales (excluding hybrids); minority stake in joint-venture in China; pg 12);
Asset/money managers (AB, AMG, BEN, BLK, FHI, IVZ, TROW; dividend yield 0.0-8.9%; fwd P/E 7.2-17.3; market-cap 3.0-94.4 billion; should benefit from rising investor interest in bonds; pg 13);
Athleisure (LULU, ADDYY, PUMSY, GPS, NKE, AEO, ONON, Alo Yoga, Outdoor Voices, Vuori, etc; activewear or workout clothes have become common with hybrid work-from-home, and companies are promoting them for casual office-wear too; high-margin activewear is also generic (exceptwith for logo) with many similar entries; pg 21).
BEARISH. Change Company (private mortgage lender; abused its CDFI/Treasury designation, 2018- ; by 2022, Change became the top originator of nonqualified mortgages, starting out from nowhere 5 years before; the community development standards were developed for the underserved groups (minorities, low-income); The Treasury and the SEC are now reviewing Change’s CDFI status – actually, the Treasury revoked Change’s CDFI certification in 08/2023 but the matter is now stuck/pending in a US District Court (CA); lots of details (too many?) on how the cooperation among the government, nonprofits and for-profit businesses becomes bad (many conflicts were deliberately hidden); pg 18).
Pg 14: CRYPTO industry (Coinbase/COIN, Grayscale, Blockchain Association, etc, joined by BLK, Fidelity, ARK, etc) is lobbying Congress for physical/spot-Bitcoin ETFs; crypto firms have spent almost $6.6 billion in Q2 alone on political lobbying; $45 billion since 2020. It is becoming a 2024 election campaign issue, especially in the swing states (TX, FL, OH). The SEC decided not to appeal an adverse ruling in the SEC vs GBTC/Grayscale and that has fueled speculation that physical/spot-crypto ETF approval may be close, but the Court has only thrown the ball back into the SEC’s “court” and GENSLER/SEC may still foot drag. But the crypto industry is pushing on Congress to act on crypto regulation, and not wait for this court drama to play out. They also want a shield from overreaching SEC enforcements and fines based on 1930s and 40s securities laws (legal experts differ on whether they apply to cryptos). Industry wants a lesser role for the SEC and a larger role for the CFTC or the establishment of a new crypto regulating agency. SBF/FTX case is being overlooked as just a “bad apple”.
EXTRA, FUNDs (some duplication). After the SEC setbacks in the courts, and the SEC decision not to appeal the most recent adverse court ruling in SEC vs GBTC/Grayscale, there is hope in the market for the approval of physical/spot-crypto ETFs within months (pending are from BLK, Fidelity, IVZ, ARK, Grayscale, etc). The most immediate beneficiary may be Grayscale GBTC (at double-digit % discount now) if its conversion to ETF is also approved. But the court has only asked the SEC to reconsider and to come up with new reasons for rejection (as its old reasons weren’t valid) or approve it; GENSLER/SEC may continue to foot drag by claiming a new 240-day review period for GBTC to take into account the changed situation, but that is seen as unlikely.
Pg 22, FUNDS – INCOME. GOLD is rising due to inflation and geopolitical tensions. Gold-bullion ETFs are GLD, IAU, etc. Gold-mining ETFs are GDX, GDXJ, etc. Some gold-miners pay variable dividends. Attractive are NEM, FNV, etc. (Ratio GDX:GLD or $XAU:$GOLD has lot of catching up to do – i.e., the gold-bullion has moved but the gold-miners not so much yet.)
Pg 23, FUNDS. Stock picks by AI have been disappointing as seen by lagging performance of AI-powered ETFs AIEQ, KOMP, WIZ. A problem is that the AI selections are based on lots of historical data and overweighted industrials and financial but underweights techs: Their proponents say that beating the market isn’t their objective, and that they should be used as supplements for other holdings (remember that when you see their ads next time).
Pg 24, ECONOMY. Several big-name SPINOFFs are attractive. – GEHC (from GE; forthcoming GE Vernova), SDZNY (from NVS), KVUE (from JNJ), VLTO (from DHR), KLG (from K), etc. While overall numbers of spinoff haven’t risen (17 YTD; expect 7 more), some of the recent ones have been huge. Spinoff activity is driven by activists, easier access for capital, parent company’s desire for simplification/focus, foreign markets. Investors often make the mistake of dumping the newly received shares of spinoffs; that also presents buying opportunities. Almost 35% of spinoffs are taken over within 2 years. (OK, but why is this under Economy?)
Pg 25, TECH TRADER. Netflix/NFLX beat earnings, subscriber numbers and margin expectations. It raised monthly subscription fees, cracked down on password sharing, and focused on more new and original content.
INTC also offered its path to profit recovery. TSM (Taiwan) now has 80% of the global market share for advanced chips and that may be just one international incident away from total chip supply disruption. INTC wants faster government investments in the US R&D, quicker disbursements from government infrastructure plans, and reforms in immigration policies to favor STEM areas.
Pg 26, FUNDS – Q&A. David SAMRA, international value ARTKX. He looks for undervalued stocks with strong balance sheets and good management; the expected return is 30%+ (time?). In some cases, his fund/firm becomes a minority shareholder – important in Europe to effect changes. Consumer-oriented companies are attractive now due to high inflation and rates. He also looks for indirect beneficiaries of AI.
EXTRA, FUNDS. With long-term rates rising (bond vigilantes are back), bonds and bond-proxies have slumped. Consider these DIVIDEND-ETFs: Dividend-growth VIG, current-dividend VYM, dividend-blend SCHD, international VIGI. M* recently upgraded some ratings on them and calls them “best in class”.
Pg 54, OTHER VOICES. Charles LIEBERMAN, Advisory Capital Management; formerly, the NY Fed and Chase. The long-term RATES are rising (while the short-term rates have flatlined), but they haven’t slowed the economy. Much of the YIELD-CURVE inversion is gone. So, is the FED monetary policy really tight? Companies are still dipping into the BOND market. BANKs have excess deposits due to weak loan demand (and they can park that cash at the Fed at generous 5.4%). This time WAS different in that after the yield-curve inversion, there was no recession, nor decline in the long-term rates (but bond vigilantes are taking care of that now by lifting the LT rates). MORTGAGE rates are high and that has weakened housing demand, but homebuilders continue with construction to make up for housing inventory shortfall – it’s difficult to find available but affordable housing. Consumers still have excess SAVINGs from the pandemic as the estimates for those had been too pessimistic. RESHORING is providing a floor, if not boost, to economic activity. So, overall, the economy and consumers are in good shape. The bad news then is that the Fed may have to do more to cool things or stick with higher rates for longer.
Pg 55, RETIREMENT. American retirees have huge amounts of assets ($18 trillion; almost 60% of retirement savings) tied to REAL ESTATE. Many want to downsize but the replacement homes may be quite expensive (at high mortgage rates; but some can pay cash), leaving aside little for other retirement expenses. There are geographical variations. Some retirees have moved from expensive CA, FL, etc, to more affordable Midwest, but most want to do just the reverse. Some are moving in temporarily with their adult kids – selling now into the hot markets but waiting for the markets to cool a bit before buying. CGs over $250K/500K are taxable. (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. Housing starts, new home sales on WEDNESDAY; Q3 GDP (+3.1% to +3.3%), personal income and expenditures (core PCE +3.6%) on THURSDAY; UM consumer sentiment on FRIDAY. (Seriously shrunk but supplemented from the link below).
www.barrons.com/magazine?mod=BOL_TOPNAV
Data This Week Link,
www.barrons.com/market-data/market-lab?mod=md_subnav#consensus-estimate
BULLISH. BMW (BMWYY; yield 8.9% (variable); fwd P/E 4 only (adjusted for high cash); becoming a strong player in EVs with 15% of its Q3 sales (excluding hybrids); minority stake in joint-venture in China; pg 12);
Asset/money managers (AB, AMG, BEN, BLK, FHI, IVZ, TROW; dividend yield 0.0-8.9%; fwd P/E 7.2-17.3; market-cap 3.0-94.4 billion; should benefit from rising investor interest in bonds; pg 13);
Athleisure (LULU, ADDYY, PUMSY, GPS, NKE, AEO, ONON, Alo Yoga, Outdoor Voices, Vuori, etc; activewear or workout clothes have become common with hybrid work-from-home, and companies are promoting them for casual office-wear too; high-margin activewear is also generic (except
BEARISH. Change Company (private mortgage lender; abused its CDFI/Treasury designation, 2018- ; by 2022, Change became the top originator of nonqualified mortgages, starting out from nowhere 5 years before; the community development standards were developed for the underserved groups (minorities, low-income); The Treasury and the SEC are now reviewing Change’s CDFI status – actually, the Treasury revoked Change’s CDFI certification in 08/2023 but the matter is now stuck/pending in a US District Court (CA); lots of details (too many?) on how the cooperation among the government, nonprofits and for-profit businesses becomes bad (many conflicts were deliberately hidden); pg 18).
Pg 14: CRYPTO industry (Coinbase/COIN, Grayscale, Blockchain Association, etc, joined by BLK, Fidelity, ARK, etc) is lobbying Congress for physical/spot-Bitcoin ETFs; crypto firms have spent almost $6.6 billion in Q2 alone on political lobbying; $45 billion since 2020. It is becoming a 2024 election campaign issue, especially in the swing states (TX, FL, OH). The SEC decided not to appeal an adverse ruling in the SEC vs GBTC/Grayscale and that has fueled speculation that physical/spot-crypto ETF approval may be close, but the Court has only thrown the ball back into the SEC’s “court” and GENSLER/SEC may still foot drag. But the crypto industry is pushing on Congress to act on crypto regulation, and not wait for this court drama to play out. They also want a shield from overreaching SEC enforcements and fines based on 1930s and 40s securities laws (legal experts differ on whether they apply to cryptos). Industry wants a lesser role for the SEC and a larger role for the CFTC or the establishment of a new crypto regulating agency. SBF/FTX case is being overlooked as just a “bad apple”.
EXTRA, FUNDs (some duplication). After the SEC setbacks in the courts, and the SEC decision not to appeal the most recent adverse court ruling in SEC vs GBTC/Grayscale, there is hope in the market for the approval of physical/spot-crypto ETFs within months (pending are from BLK, Fidelity, IVZ, ARK, Grayscale, etc). The most immediate beneficiary may be Grayscale GBTC (at double-digit % discount now) if its conversion to ETF is also approved. But the court has only asked the SEC to reconsider and to come up with new reasons for rejection (as its old reasons weren’t valid) or approve it; GENSLER/SEC may continue to foot drag by claiming a new 240-day review period for GBTC to take into account the changed situation, but that is seen as unlikely.
Pg 22, FUNDS – INCOME. GOLD is rising due to inflation and geopolitical tensions. Gold-bullion ETFs are GLD, IAU, etc. Gold-mining ETFs are GDX, GDXJ, etc. Some gold-miners pay variable dividends. Attractive are NEM, FNV, etc. (Ratio GDX:GLD or $XAU:$GOLD has lot of catching up to do – i.e., the gold-bullion has moved but the gold-miners not so much yet.)
Pg 23, FUNDS. Stock picks by AI have been disappointing as seen by lagging performance of AI-powered ETFs AIEQ, KOMP, WIZ. A problem is that the AI selections are based on lots of historical data and overweighted industrials and financial but underweights techs: Their proponents say that beating the market isn’t their objective, and that they should be used as supplements for other holdings (remember that when you see their ads next time).
Pg 24, ECONOMY. Several big-name SPINOFFs are attractive. – GEHC (from GE; forthcoming GE Vernova), SDZNY (from NVS), KVUE (from JNJ), VLTO (from DHR), KLG (from K), etc. While overall numbers of spinoff haven’t risen (17 YTD; expect 7 more), some of the recent ones have been huge. Spinoff activity is driven by activists, easier access for capital, parent company’s desire for simplification/focus, foreign markets. Investors often make the mistake of dumping the newly received shares of spinoffs; that also presents buying opportunities. Almost 35% of spinoffs are taken over within 2 years. (OK, but why is this under Economy?)
Pg 25, TECH TRADER. Netflix/NFLX beat earnings, subscriber numbers and margin expectations. It raised monthly subscription fees, cracked down on password sharing, and focused on more new and original content.
INTC also offered its path to profit recovery. TSM (Taiwan) now has 80% of the global market share for advanced chips and that may be just one international incident away from total chip supply disruption. INTC wants faster government investments in the US R&D, quicker disbursements from government infrastructure plans, and reforms in immigration policies to favor STEM areas.
Pg 26, FUNDS – Q&A. David SAMRA, international value ARTKX. He looks for undervalued stocks with strong balance sheets and good management; the expected return is 30%+ (time?). In some cases, his fund/firm becomes a minority shareholder – important in Europe to effect changes. Consumer-oriented companies are attractive now due to high inflation and rates. He also looks for indirect beneficiaries of AI.
EXTRA, FUNDS. With long-term rates rising (bond vigilantes are back), bonds and bond-proxies have slumped. Consider these DIVIDEND-ETFs: Dividend-growth VIG, current-dividend VYM, dividend-blend SCHD, international VIGI. M* recently upgraded some ratings on them and calls them “best in class”.
Pg 54, OTHER VOICES. Charles LIEBERMAN, Advisory Capital Management; formerly, the NY Fed and Chase. The long-term RATES are rising (while the short-term rates have flatlined), but they haven’t slowed the economy. Much of the YIELD-CURVE inversion is gone. So, is the FED monetary policy really tight? Companies are still dipping into the BOND market. BANKs have excess deposits due to weak loan demand (and they can park that cash at the Fed at generous 5.4%). This time WAS different in that after the yield-curve inversion, there was no recession, nor decline in the long-term rates (but bond vigilantes are taking care of that now by lifting the LT rates). MORTGAGE rates are high and that has weakened housing demand, but homebuilders continue with construction to make up for housing inventory shortfall – it’s difficult to find available but affordable housing. Consumers still have excess SAVINGs from the pandemic as the estimates for those had been too pessimistic. RESHORING is providing a floor, if not boost, to economic activity. So, overall, the economy and consumers are in good shape. The bad news then is that the Fed may have to do more to cool things or stick with higher rates for longer.
Pg 55, RETIREMENT. American retirees have huge amounts of assets ($18 trillion; almost 60% of retirement savings) tied to REAL ESTATE. Many want to downsize but the replacement homes may be quite expensive (at high mortgage rates; but some can pay cash), leaving aside little for other retirement expenses. There are geographical variations. Some retirees have moved from expensive CA, FL, etc, to more affordable Midwest, but most want to do just the reverse. Some are moving in temporarily with their adult kids – selling now into the hot markets but waiting for the markets to cool a bit before buying. CGs over $250K/500K are taxable. (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).