Post by Admin/YBB on Dec 2, 2023 8:45:14 GMT -6
Pg 12. PREVIEW & REVIEW (consolidated). If the MORTGAGE RATES decline, then the home sellers may remain on the sidelines waiting for more rate declines and prices may remain weak – contrary to expectations. But housing is local, and areas/cities will be affected differently.
DATA THIS WEEK. Durable goods report, factory orders on MONDAY; JOLTS report, ISM services PMI on TUESDAY; international trade deficit on WEDNESDAY; consumer credit on THURSDAY; UM Sentiment, jobs report (+140,000 to +175,000), unemployment rate (3.8-3.9%) 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. Pepsi (PEP; yield 3%, dividend Aristocrat; fwd P/E 20.5; buybacks; businesses – drinks, snacks, global distribution; recent scare from the new weight-loss drugs will pass; pg 13);
Citigroup (C; strong deposit base; unrealized HTM/AFS losses of $33.8 billion only, industry-wide $558 billion; low CRE exposure; attention to cybersecurity; slowing US economy helps the Fed in its mission of taming inflation; soft landing or mild recession, C is ready for either; stock a laggard but turning around under the CEO Jane FRASER, 03/2021- ; pg 14);
RPM International (RPM; yield 1.8%, dividend Aristocrat; fwd P/E 20.5; buybacks; growth by acquisition; should benefit from global infrastructure projects; founding SULLIVAN family is still involved – founder’s grandson is Chairman/CEO; brands DAP caulk, Rust-Oleum paints, Varathane stains, Plastic Wood filler, TremCo (roofing), Flowcrete (flooring), Dryvit (insulation), & many other products for construction industry; pg 21).
BEARISH.
Pg 18. The new/forthcoming EU legislation for AI may be helpful for the industry and may favor incumbents (MSFT, GOOGL, AMZN, META) over startups. These will require licensing payments for the use of copyrighted data for AI model training. With the next deadline of December 6, one issue is whether the regulations should apply at foundational level or final applications level. The EU standards may eventually become the international AI standards. The EU approach is better than the US ad-hoc executive-orders approach for AI.
Pg 20. As the COVER story mentioned that Nvidia/NVDA is #1 winner from AI, but #2 winner is Microsoft/MSFT. It has rapidly growing Azure cloud and partnership with OpenAI with 49% economic interest. The recent Board and management chaos at OpenAI only strengthened Microsoft’s hand; it now has an observer status at the new Board. Then, MSFT has Windows OS, Office suit, Teams, GitHub software development tools, Bing and Copilot ($30/mo/user), etc. Stock has a lot of room to run from the current all-time highs. It would be hard for MSFT to mess things up.
Pg 22. Several tributes for Charlie MUNGER (died just a month short of 100) by BARRY and SERWER (he had a scheduled interview for 1/1/24). He was rich but modest in his living. He pushed BUFFETT (93)/BRK into paying fair prices for great companies, rather than paying cheap prices for undervalued garbage. His “Lollapalooza Effect” (that sometimes the whole is more than the sum of its parts) is best seen in Geico. He also had the “best 30-second mind” (without filters, and some may call his 1-liners frank or crude). Buffett-Munger personal/business friendship went back to 1959 after a chance meeting; despite their personal differences, they never had a fight (the worst was that CM would tell WB to think it over and “see” that CM was right) (He was happy to play 2nd fiddle to Buffett, but otherwise, was no pushover himself). A new edition of Poor Charlie’s Almanack (384 pages) will be out on 12/5/23 that includes a forward by WB AND a rebuttal by CM.
Munger’s passing may not change anything at BRK (fwd P/E 20; P/B 1.4; 19.4% of market value is in $150 billion cash, mostly T-Bills), but may change Buffett himself, now without a sounding board. WB still has 15% economic stake in BRK and 30% voting control and those will go into a liquidating trust (over 10+ years) after WB. There is now the trio – Buffett, ABEL (likely successor), JAIN; son Howard is the likely Chairman after WB.
Pg 24, FUNDS. MID-CAP dividend oriented FAMEX (ER 1.2%) lets winners run (for high levels of compounding), but cuts losers quickly. It has a concentrated portfolio of around 30 stocks, with the top 10 accounting for 54% of assets. Fund is often on the edge of its diversified classification.
EXTRA, FUNDS. QQQ had its best month since 07/2022. It has benefitted from the AI hype and a slight pullback in rates (but a lot in rate expectations).
EXTRA, FUNDS. Cathie WOOD’s ARKK also had a blockbuster month. However, there have been heavy outflows, and will that reverse?
Pg 25, INCOME. CEFs at discount: NEA (muni), LDP (preferred), AFT (junk FR/BL), ASGI (infrastructure; no leverage), WIW (TIPS). Funds of CEFs are also mentioned without providing any names (so, here are some ETFs of CEFs: CEFS, FCEF, PCEF, all hybrids; XMPT (muni); YYY(HY); SABA (upcoming hybrid from transformed GIM); there are also some CEFs of CEFs, but that‘s overdoing it.).
Pg 26, TECH TRADER. Enough about the Magnificent 7. What are the Unloved 11 techs? HPQ (PCs w/AI), HPE (commercial computing), SFTBY (Masa SON had bad “Vision”; still owns lots of ARM & other stuff), CSCO (networking), TXN (semis; has own fabs), TSEM (semis; regulators rejected acquisition by INTC), GFS (semis), GLW (glass, displays, optical communications), OKTA (ID management software company had a data breach), CIEN (telco equipment), IBM (into everything, but not a leader in anything).
Pg 27, ECONOMY. UK tax cuts in an election year may set a bad example for many countries (including the US) facing elections in 2024. Loose fiscal policy will counter monetary tightening by the BOE. It’s also reducing employer contributions to National Insurance to 10% (from 12%). It’s unlikely that these moves to increase the deficit will help PM SUNAK who is behind in polls. The BOE reaction may be higher rates for longer if inflation rises.
Pg 54, OTHER VOICES. Marc CHANDLER, Bannockburn Global Forex/FFBC. CHINA’s economy is changing, but not in the way the world has been expecting. China has 18% of world’s population, but only 13% of world’s consumption. Its GDP is only 54% from consumption, but a whopping 40% from investments. This despite the fact consumption has gone up a lot from a very low base. But it lacks social safety nets (those in the old era were dumped in the name of market reforms) to make further progress and to discourage people from saving more. It’s a disaster that many Chinese have invested in now collapsing property sector. The Government is trying to shift those savings into manufacturing (its export engine) and infrastructure (that is already overbuilt). In a vicious circle, China is generating excess wealth from its coal-based power for industries and is reinvesting those into green energy projects overseas. How is that for its and world’s environmental goals?
Pg 55, RETIREMENT. CREDIT CARD balances are at a record $1.08 trillion with 29% of that debt by people 60+. Even retiree millionaires 65+ have high card debt. Some are paying cards every month but are compromising their retirement by excess withdrawals. Review income streams and spending and try to live within Bengen’s initial 4% w/COLA (accounting for the worst cases), or maybe 5% w/COLA, but no more (certainly NOT 8% w/COLA from all-stock funds). Involve family members in financial conversations to avoid awkwardness when it comes up out of the blue.
(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. Durable goods report, factory orders on MONDAY; JOLTS report, ISM services PMI on TUESDAY; international trade deficit on WEDNESDAY; consumer credit on THURSDAY; UM Sentiment, jobs report (+140,000 to +175,000), unemployment rate (3.8-3.9%) 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. Pepsi (PEP; yield 3%, dividend Aristocrat; fwd P/E 20.5; buybacks; businesses – drinks, snacks, global distribution; recent scare from the new weight-loss drugs will pass; pg 13);
Citigroup (C; strong deposit base; unrealized HTM/AFS losses of $33.8 billion only, industry-wide $558 billion; low CRE exposure; attention to cybersecurity; slowing US economy helps the Fed in its mission of taming inflation; soft landing or mild recession, C is ready for either; stock a laggard but turning around under the CEO Jane FRASER, 03/2021- ; pg 14);
RPM International (RPM; yield 1.8%, dividend Aristocrat; fwd P/E 20.5; buybacks; growth by acquisition; should benefit from global infrastructure projects; founding SULLIVAN family is still involved – founder’s grandson is Chairman/CEO; brands DAP caulk, Rust-Oleum paints, Varathane stains, Plastic Wood filler, TremCo (roofing), Flowcrete (flooring), Dryvit (insulation), & many other products for construction industry; pg 21).
BEARISH.
Pg 18. The new/forthcoming EU legislation for AI may be helpful for the industry and may favor incumbents (MSFT, GOOGL, AMZN, META) over startups. These will require licensing payments for the use of copyrighted data for AI model training. With the next deadline of December 6, one issue is whether the regulations should apply at foundational level or final applications level. The EU standards may eventually become the international AI standards. The EU approach is better than the US ad-hoc executive-orders approach for AI.
Pg 20. As the COVER story mentioned that Nvidia/NVDA is #1 winner from AI, but #2 winner is Microsoft/MSFT. It has rapidly growing Azure cloud and partnership with OpenAI with 49% economic interest. The recent Board and management chaos at OpenAI only strengthened Microsoft’s hand; it now has an observer status at the new Board. Then, MSFT has Windows OS, Office suit, Teams, GitHub software development tools, Bing and Copilot ($30/mo/user), etc. Stock has a lot of room to run from the current all-time highs. It would be hard for MSFT to mess things up.
Pg 22. Several tributes for Charlie MUNGER (died just a month short of 100) by BARRY and SERWER (he had a scheduled interview for 1/1/24). He was rich but modest in his living. He pushed BUFFETT (93)/BRK into paying fair prices for great companies, rather than paying cheap prices for undervalued garbage. His “Lollapalooza Effect” (that sometimes the whole is more than the sum of its parts) is best seen in Geico. He also had the “best 30-second mind” (without filters, and some may call his 1-liners frank or crude). Buffett-Munger personal/business friendship went back to 1959 after a chance meeting; despite their personal differences, they never had a fight (the worst was that CM would tell WB to think it over and “see” that CM was right) (He was happy to play 2nd fiddle to Buffett, but otherwise, was no pushover himself). A new edition of Poor Charlie’s Almanack (384 pages) will be out on 12/5/23 that includes a forward by WB AND a rebuttal by CM.
Munger’s passing may not change anything at BRK (fwd P/E 20; P/B 1.4; 19.4% of market value is in $150 billion cash, mostly T-Bills), but may change Buffett himself, now without a sounding board. WB still has 15% economic stake in BRK and 30% voting control and those will go into a liquidating trust (over 10+ years) after WB. There is now the trio – Buffett, ABEL (likely successor), JAIN; son Howard is the likely Chairman after WB.
Pg 24, FUNDS. MID-CAP dividend oriented FAMEX (ER 1.2%) lets winners run (for high levels of compounding), but cuts losers quickly. It has a concentrated portfolio of around 30 stocks, with the top 10 accounting for 54% of assets. Fund is often on the edge of its diversified classification.
EXTRA, FUNDS. QQQ had its best month since 07/2022. It has benefitted from the AI hype and a slight pullback in rates (but a lot in rate expectations).
EXTRA, FUNDS. Cathie WOOD’s ARKK also had a blockbuster month. However, there have been heavy outflows, and will that reverse?
Pg 25, INCOME. CEFs at discount: NEA (muni), LDP (preferred), AFT (junk FR/BL), ASGI (infrastructure; no leverage), WIW (TIPS). Funds of CEFs are also mentioned without providing any names (so, here are some ETFs of CEFs: CEFS, FCEF, PCEF, all hybrids; XMPT (muni); YYY(HY); SABA (upcoming hybrid from transformed GIM); there are also some CEFs of CEFs, but that‘s overdoing it.).
Pg 26, TECH TRADER. Enough about the Magnificent 7. What are the Unloved 11 techs? HPQ (PCs w/AI), HPE (commercial computing), SFTBY (Masa SON had bad “Vision”; still owns lots of ARM & other stuff), CSCO (networking), TXN (semis; has own fabs), TSEM (semis; regulators rejected acquisition by INTC), GFS (semis), GLW (glass, displays, optical communications), OKTA (ID management software company had a data breach), CIEN (telco equipment), IBM (into everything, but not a leader in anything).
Pg 27, ECONOMY. UK tax cuts in an election year may set a bad example for many countries (including the US) facing elections in 2024. Loose fiscal policy will counter monetary tightening by the BOE. It’s also reducing employer contributions to National Insurance to 10% (from 12%). It’s unlikely that these moves to increase the deficit will help PM SUNAK who is behind in polls. The BOE reaction may be higher rates for longer if inflation rises.
Pg 54, OTHER VOICES. Marc CHANDLER, Bannockburn Global Forex/FFBC. CHINA’s economy is changing, but not in the way the world has been expecting. China has 18% of world’s population, but only 13% of world’s consumption. Its GDP is only 54% from consumption, but a whopping 40% from investments. This despite the fact consumption has gone up a lot from a very low base. But it lacks social safety nets (those in the old era were dumped in the name of market reforms) to make further progress and to discourage people from saving more. It’s a disaster that many Chinese have invested in now collapsing property sector. The Government is trying to shift those savings into manufacturing (its export engine) and infrastructure (that is already overbuilt). In a vicious circle, China is generating excess wealth from its coal-based power for industries and is reinvesting those into green energy projects overseas. How is that for its and world’s environmental goals?
Pg 55, RETIREMENT. CREDIT CARD balances are at a record $1.08 trillion with 29% of that debt by people 60+. Even retiree millionaires 65+ have high card debt. Some are paying cards every month but are compromising their retirement by excess withdrawals. Review income streams and spending and try to live within Bengen’s initial 4% w/COLA (accounting for the worst cases), or maybe 5% w/COLA, but no more (certainly NOT 8% w/COLA from all-stock funds). Involve family members in financial conversations to avoid awkwardness when it comes up out of the blue.
(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).