Post by Admin/YBB on May 4, 2024 5:27:25 GMT -6
Pg 9. PREVIEW & REVIEW (consolidated). CVS (Pharmacy, Caremark, Aetna, etc) sank on huge earnings miss and lowered guidance that shocked analysts. CVS said that the causes were rising Medicare Advantage (MA) costs, growing MA enrollments, but reductions in MA reimbursements. The MA plans are Government-funded, but privately managed, and they became Medicare Disadvantage for CVS financials. CVS said that it will adjust/cut some benefits.
DATA THIS WEEK. Consumer credit on TUESDAY; wholesale inventory on WEDNESDAY; UM sentiment, Treasury budget 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. French Thales (THLLY; yield 1.9%; fwd P/E 18.6; businesses are defense, aerospace, cybersecurity, and it’s like the best of the US LMT & PLTR; a new unit cortAIx created for embedding AI into its systems; pg 13);
Adobe (ADBE; it will benefit from AI, but has missed the AI-rally so far; offers Firefly AI tools; pg 14).
BEARISH.
Pg 10, TECH TRADER. Apple’s/AAPL earnings report was BAD, and its stock fell ahead of the report. But the stock bounced because the report wasn’t worse than expected, and AAPL announced a huge buyback plan and an increase in the dividend. Its AI strategy is unclear (besides licensing AI from others).
Pg 11, FUNDS. With the expectations of higher rates for longer, use the BARBELL approach with stocks and bonds. That means cyclicals (XLF, VIS) and defensive (VPU) stocks, and ballasts (SHY, VCIT) and lower-rated FR/BL (BKLN) for fixed-income. Several stocks are also mentioned.
Pg 15: BIG MONEY POLL.
US Equities, 12-mo – 53% bullish
Most Attractive Global Market – 57% US
Favorable Equity Category – 45% large-caps
Favorable Equity Sector – 32% tech, 21% energy
Unfavorable Equity Sector – 29% real estate, 19% utilities
Favorable Fixed-Income Category – 40% Treasuries, 19% investment-grade corporates
Favorable Fixed-Income Duration – 64% short-term, 28% intermediate-term
Investing Approach, 12 mo – 50% growth, 50% value
Oil, 12 mo - $89.57/bbl
Gold, 12 mo - $2,359/troy oz
Bitcoin, 12-mo - $58,928
US Economy, 12-mo – 43% soft landing, 42% no landing
GDP, 2024 – 2% by 54%
Inflation, 2024 – 3% by 48%
Fed Funds, 2024 – 4.75-5.00% by 38%, 5.00-5.25% by 25%, 5.25-5.50% by 15% (current)
Treasuries, 12-mo -
2-yr 4% by 20%, 4.25-4.50% by 35%
10-yr 4.25% by 23%, 4.50% by 18%, 4.00% by 17%
Dollar, 12-mo – 43% weaken, 30% UNCH
Pg 23, FUNDS. Comanager Scott DIAMOND of go-anywhere muni GSMIX (ER 0.72%; no-load/NTF at Fidelity and Schwab) is betting big on Puerto Rico (PR). It has 42% in BBB & blow + NR (lot of it in PR). The duration range is 2-8 years, now 5.8 years. Fund takes advantage of muni market dislocations. There are 3 managers who split states among them; 10 analysts also monitor potential credit upgrades/downgrades.
Pg 24, INCOME. Dividend strategies vary. OEFs LCEYX, VDIGX focus on dividend-growth, and INUTX on higher current dividends. (In the ETF space, dividend-growth VIG, higher current-income VYM, dividend-blend SCHD)
Pg 25, ECONOMY. Weaker economic data rekindled hopes for earlier rate cuts, but don’t count on that if the market rallies right away. The FOMC Statement was hawkish (lack of progress on inflation), but POWELL was more dovish at Q&A (no rate hike). CME FedWatch is now projecting 2 rate cuts in 2024 (vs 1 cut last week). Despite Powell’s comments, financial conditions are accommodating (not restrictive) when rates are compared with inflation or GDP.
Pg 26, Q&A/Interview. Dev KANTESARIA, Valley Forge Capital (2007- ; hedge fund). This hedge fund may own up to 20 positions, now only 8. He likes large-caps with secular growth that have high operating leverages, low capex needs, good free cash flows, and pricing power.
Pg 54, OTHER VOICES. William PESEK, Asia opinion author; formerly with Barron’s and Bloomberg. Strong DOLLAR has become a problem for Asia and the EMs. While all eyes are on Japan, several countries have been forced to defend their currencies. Indonesia recently raised rate by +25 bps. Philippines and Thailand have postponed their planned rate cuts, waiting for the US Fed to ease first. The situation looks like before the 1997 Asian currency contagion that some blame on the US Fed tightening in mid-1990s. Weakening Japanese yen has its own dynamics that forces other Asian countries to devalue to remain competitive. Chinese economy is in trouble despite claims of +5% GDP growth. Post pandemic global debt is high. Trigger for the race to bottom in currencies may be a currency war between Japan and China.
Pg 55, RETIREMENT. BONDS require patience when money-market funds remain attractive. But bonds will benefit as the rates have peaked (Powell said so). Gradually extend duration (GVI, etc) and add credit risks (EMB, etc). (Editor picked a weak article that was turned in late)
EXTRA. Frequent changes in the RMD rules are confusing. For tax-deferred accounts (T-IRA, 401k, 403b), the RMD age is 73 now (was 72 in 2023, 70.5 in 2020) and it will remain so until 2033. The RMD amount depends on the yearend balances, age-related IRS factor, and other factors such as marital status, very young spouse, beneficiaries. The 1st RMD can be delayed to April 1 of the following year but beware of the tax impact of double RMDs then. The RMD can be postponed if working. (There is a special 55.0-59.5 rule that avoids 10% penalty for premature withdrawals from a current 401k/403b; not so for old 401k/403b or T-IRA). The RMDs from T-IRAs can be aggregated and taken from any one T-IRA, and it’s similar for 403b, but not for 401k. There are different rules for inherited accounts for spouses, nonspouses, trusts, and whether the deceased had started taking the RMDs. The QCDs are allowed from T-IRAs. The Roth IRAs no longer require RMDs. (R-IRA rules are simple in retirement if 5 years beyond Roth Conversions, but nightmarish otherwise.)
EXTRA. Tax-deferred multiyear annuities (MYGAs) are paying higher rates. On maturity, these can be rolled over into another MYGA (via 1035 exchange), or annuitized, or withdrawn after 59.5 by paying taxes (10% penalty applies before 59.5). MYGAs are issued by insurance companies, so watch their ratings; there is coverage by (unfunded) state guaranty associations, but the resolutions may be long and messy (importantly, no FDIC coverage). These can also be bought from banks and brokers (with high commissions for the selling agents/brokers). There are stiff surrender penalties. Laddering MYGA is also possible. (MYGA money is almost captive for the insurers, so they pay higher rates)
NOTE. It’s very irritating that Barron’s has stopped mentioning TICKERS for most companies mentioned. I now have to look them up. Sometimes this takes time as there are similar names, especially for banks.
Accessible from PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
DATA THIS WEEK. Consumer credit on TUESDAY; wholesale inventory on WEDNESDAY; UM sentiment, Treasury budget 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. French Thales (THLLY; yield 1.9%; fwd P/E 18.6; businesses are defense, aerospace, cybersecurity, and it’s like the best of the US LMT & PLTR; a new unit cortAIx created for embedding AI into its systems; pg 13);
Adobe (ADBE; it will benefit from AI, but has missed the AI-rally so far; offers Firefly AI tools; pg 14).
BEARISH.
Pg 10, TECH TRADER. Apple’s/AAPL earnings report was BAD, and its stock fell ahead of the report. But the stock bounced because the report wasn’t worse than expected, and AAPL announced a huge buyback plan and an increase in the dividend. Its AI strategy is unclear (besides licensing AI from others).
Pg 11, FUNDS. With the expectations of higher rates for longer, use the BARBELL approach with stocks and bonds. That means cyclicals (XLF, VIS) and defensive (VPU) stocks, and ballasts (SHY, VCIT) and lower-rated FR/BL (BKLN) for fixed-income. Several stocks are also mentioned.
Pg 15: BIG MONEY POLL.
US Equities, 12-mo – 53% bullish
Most Attractive Global Market – 57% US
Favorable Equity Category – 45% large-caps
Favorable Equity Sector – 32% tech, 21% energy
Unfavorable Equity Sector – 29% real estate, 19% utilities
Favorable Fixed-Income Category – 40% Treasuries, 19% investment-grade corporates
Favorable Fixed-Income Duration – 64% short-term, 28% intermediate-term
Investing Approach, 12 mo – 50% growth, 50% value
Oil, 12 mo - $89.57/bbl
Gold, 12 mo - $2,359/troy oz
Bitcoin, 12-mo - $58,928
US Economy, 12-mo – 43% soft landing, 42% no landing
GDP, 2024 – 2% by 54%
Inflation, 2024 – 3% by 48%
Fed Funds, 2024 – 4.75-5.00% by 38%, 5.00-5.25% by 25%, 5.25-5.50% by 15% (current)
Treasuries, 12-mo -
2-yr 4% by 20%, 4.25-4.50% by 35%
10-yr 4.25% by 23%, 4.50% by 18%, 4.00% by 17%
Dollar, 12-mo – 43% weaken, 30% UNCH
Pg 23, FUNDS. Comanager Scott DIAMOND of go-anywhere muni GSMIX (ER 0.72%; no-load/NTF at Fidelity and Schwab) is betting big on Puerto Rico (PR). It has 42% in BBB & blow + NR (lot of it in PR). The duration range is 2-8 years, now 5.8 years. Fund takes advantage of muni market dislocations. There are 3 managers who split states among them; 10 analysts also monitor potential credit upgrades/downgrades.
Pg 24, INCOME. Dividend strategies vary. OEFs LCEYX, VDIGX focus on dividend-growth, and INUTX on higher current dividends. (In the ETF space, dividend-growth VIG, higher current-income VYM, dividend-blend SCHD)
Pg 25, ECONOMY. Weaker economic data rekindled hopes for earlier rate cuts, but don’t count on that if the market rallies right away. The FOMC Statement was hawkish (lack of progress on inflation), but POWELL was more dovish at Q&A (no rate hike). CME FedWatch is now projecting 2 rate cuts in 2024 (vs 1 cut last week). Despite Powell’s comments, financial conditions are accommodating (not restrictive) when rates are compared with inflation or GDP.
Pg 26, Q&A/Interview. Dev KANTESARIA, Valley Forge Capital (2007- ; hedge fund). This hedge fund may own up to 20 positions, now only 8. He likes large-caps with secular growth that have high operating leverages, low capex needs, good free cash flows, and pricing power.
Pg 54, OTHER VOICES. William PESEK, Asia opinion author; formerly with Barron’s and Bloomberg. Strong DOLLAR has become a problem for Asia and the EMs. While all eyes are on Japan, several countries have been forced to defend their currencies. Indonesia recently raised rate by +25 bps. Philippines and Thailand have postponed their planned rate cuts, waiting for the US Fed to ease first. The situation looks like before the 1997 Asian currency contagion that some blame on the US Fed tightening in mid-1990s. Weakening Japanese yen has its own dynamics that forces other Asian countries to devalue to remain competitive. Chinese economy is in trouble despite claims of +5% GDP growth. Post pandemic global debt is high. Trigger for the race to bottom in currencies may be a currency war between Japan and China.
Pg 55, RETIREMENT. BONDS require patience when money-market funds remain attractive. But bonds will benefit as the rates have peaked (Powell said so). Gradually extend duration (GVI, etc) and add credit risks (EMB, etc). (Editor picked a weak article that was turned in late)
EXTRA. Frequent changes in the RMD rules are confusing. For tax-deferred accounts (T-IRA, 401k, 403b), the RMD age is 73 now (was 72 in 2023, 70.5 in 2020) and it will remain so until 2033. The RMD amount depends on the yearend balances, age-related IRS factor, and other factors such as marital status, very young spouse, beneficiaries. The 1st RMD can be delayed to April 1 of the following year but beware of the tax impact of double RMDs then. The RMD can be postponed if working. (There is a special 55.0-59.5 rule that avoids 10% penalty for premature withdrawals from a current 401k/403b; not so for old 401k/403b or T-IRA). The RMDs from T-IRAs can be aggregated and taken from any one T-IRA, and it’s similar for 403b, but not for 401k. There are different rules for inherited accounts for spouses, nonspouses, trusts, and whether the deceased had started taking the RMDs. The QCDs are allowed from T-IRAs. The Roth IRAs no longer require RMDs. (R-IRA rules are simple in retirement if 5 years beyond Roth Conversions, but nightmarish otherwise.)
EXTRA. Tax-deferred multiyear annuities (MYGAs) are paying higher rates. On maturity, these can be rolled over into another MYGA (via 1035 exchange), or annuitized, or withdrawn after 59.5 by paying taxes (10% penalty applies before 59.5). MYGAs are issued by insurance companies, so watch their ratings; there is coverage by (unfunded) state guaranty associations, but the resolutions may be long and messy (importantly, no FDIC coverage). These can also be bought from banks and brokers (with high commissions for the selling agents/brokers). There are stiff surrender penalties. Laddering MYGA is also possible. (MYGA money is almost captive for the insurers, so they pay higher rates)
NOTE. It’s very irritating that Barron’s has stopped mentioning TICKERS for most companies mentioned. I now have to look them up. Sometimes this takes time as there are similar names, especially for banks.
Accessible from PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).