Post by Admin/YBB on May 18, 2024 4:00:06 GMT -6
From Barron’s, May 20, 2024 (Part 1, Market Week+)
Pg 28, TRADER. The stock market celebrated the inflation news prematurely. The DJIA was just above 40,000; the meme stocks are back. But the inflation trends over a few months show it rising. The stocks and bonds may soon reverse. Economic growth is slowing. Retail sales rose only in nominal terms – they were flat in real terms. At some point, recession fears will emerge. Investors seem exhausted (Remember that poor seasonality is May 1 – October 30).
SMALL-CAPS may be rebounding. Play with ETFs (IJR, SPSM, VIOO; good omission of IWM) and selected SCs – ELF, LPG, TBBK, ABM, ROAD, SLVM.
UBER (fwd P/E 48) is attractive on growth prospects in Asia. It’s buying German Delivery Hero’s/DHER Foodpanda business ($950 million) in Taiwan and will also have 3% stake ($300 million) in DHER.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
FOMC 6/12/24+ hold (cycle peak 5.25-5.50%)
FOMC 7/31/24+ hold
FOMC 9/18/24+ cut
FOMC 11/7/24+ hold
FOMC 12/18/24+ cut
(Probabilities for some rate-ranges aren’t high, so there can be some unexpected moves.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +1.24%, SP500 +1.54%, Nasdaq Comp +2.11%, R2000 +1.74%. DJ Transports -0.62%; DJ Utilities +0.96%. (Rotating spot utilities XLU +1.50%) US$ index (spot) -0.76% (remains too strong over 100), oil/WTI futures +2.30%, gold futures +1.90%.
YTD (index changes only), DJIA +6.14%, SP500 +11.18%, Nasdaq Comp +11.16%. (Rotating spot utilities XLU +14.23%)
SENTIMENTS
Sentiments peaked in mid-December and a minor peak was at March-end. A minor bottom was in mid-April.
NYSE cumulative (5-day) A/D LINE rose for a 4th week; ratio of winners:losers 2:1
FUND INFLOWS +/OUTFLOWS-: Stocks +|+, taxable bonds +|+, munis +|+, money-market funds +|+. (NEW FORMAT: 4wMA|weekly change)
(All + unusual, meaning new money came from under the mattress? From Banks?)
AAII Bull-Bear Spread +17.6% (above average). (Thursday-Wednesday)
(Sentiment Scale: v low << avg - 1*SD; low < avg - 1*SD; below avg, avg, above avg for in-between; high > avg + 1*SD, v high >> avg + 1*SD)
ybbpersonalfinance.proboards.com/thread/141/aaii-sentiment-survey-weekly?page=12&scrollTo=1285
%Above 50-dMA for NYSE-listed stocks 64.66% (positive); (StockCharts $NYA50R for NYSE; $SPXA50R for the SP500 in the bottom panel),
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 65.1% (positive); a proprietary index for %Above 75-dMA for selected 1,800 stocks that is published midweek but is updated by Barron’s only on late-Fridays (so, it typically LAGS). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
(Common Scale for %Above: oversold < 30-; 30 < negative < 50-; 50 < positive < 70-; overbought > 70; note that Delta MSI itself uses all in/out using 50% neutral value, but the same graduated scale is used here for both sources of %Above.)
Pg 31, INTERNATIONAL. VIETNAMESE economy is booming (growth +5% in 2023, +6% in 2024). It has benefitted from the move away from China. Its communist party has taken a pragmatic business-friendly approach for the last 15 years. But there is recent political turmoil and fears of reversion to the old ways, but optimists say that is unlikely. The ETF VNM fell sharply. Attractive sectors are IT, semis, ecommerce, and those benefiting from foreign fund flows.
Pg 32, OPTIONS. There is no B&H or DCA for options. Wait for major pending news before putting on options play – let the fund managers and those with itchy fingers play the guessing game of using options before the uncertain news. Also, continue selling puts on stock you want to buy at lower prices. (Bad misfire – says to wait for the CPI report next Wednesday, but that was LAST Wednesday. The next CPI report will be on 6/12/24.)
SP500 VIX 11.99 (low), Nasdaq 100 VXN 15.85 (low), options SKEW 147.85 (high), bond MOVE 89.35 (Yahoo Finance data).
(Low VIX, high SKEW combo is a sign of nervous bulls)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 45: An up week in EUROPE (Denmark +3.22%, Norway -0.45%) and a good week in ASIA (Taiwan +2.95%, Japan +0.33%).
TREASURY* 3-mo yield 5.46%, 1-yr 5.14%, 2-yr 4.83%, 5-yr 4.44%, 10-yr 4.42%, 30-yr 4.56%;
REAL yields 5-yr 2.12%, 10-yr 2.10%, 30-yr 2.23%;
FRNs Index** 5.32% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR fell ^DXY 104.50, -0.8% (pg 50). GOLD rose to $2,403, +1.3% (Handy & Harman spot, Thursday; pg 52); the gold-miners rose. (^XAU was at 149.23, +4.91% for the week)
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
US SAVINGS I-Bonds**, Rate from 5/1/24 – 10/31/24 is 4.28%; the fixed rate is 1.30%, the semiannual inflation is 1.48%.
(NOTE – The Social Security COLA for 2025, based on the Q3 average of CPI-W, is ?, est +3%)
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS)
www.treasurydirect.gov/auctions/announcements-data-results/frn-daily/
www.treasurydirect.gov/marketable-securities/
***For local rates www.depositaccounts.com/banks/rates-map/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 16, COVER STORY, “ENERGY Roundtable”. 4 panelists met via Zoom on 5/9/24. After highlights of their discussion, their recommendations follow.
Energy has been affected by GEOPOLITICS – Russia-Ukraine war, Israel-Hamas conflict, Israel-Iran spat. Yet, oil has no geopolitical risks priced in now. Saudi Arabia is diversifying away from oil as fast as it can. Almost 67% oil Middle Eastern oil now goes to Asia (unlike in early 1970s). The US has become the largest global oil producer. If Iran shuts the Straight of Hormuz, it will also cutoff sea access for its own oil. It’s in the interests of all parties to keep oil flowing despite their differences and disagreements.
But there are long-term RISKS for oil – falling capex, lower bank loans, energy transition. The oil sector is no longer dominated by wildcatters who wanted to just drill. Oil prices may rise as the peak Summer driving season approaches around Memorial Day, so $100 oil? Maybe, or not. The OPEC and Russia have restricted production. But global demand for fossil fuels is still rising. This reduced supply but rising demand is bullish for fossil fuel energy for now even if the oil prices remain where they are now (and until the alternative energy is ready for prime time).
RENEWABLE/CLEAN energy is also very cheap now – nuclear, biofuels, solar, wind. The clean energy index is down 80% from its peak in 02/2021. AI will boost demand for data centers and those will need huge amounts of power from the utilities that generate electricity from natural gas, etc. Renewables now are taking market share from coal, not from fossil fuels. A weak link now is the power transmission grid – there are regulatory delays and long lag times to develop the related infrastructure. There is a strange complement of fast-moving AI and slow-moving utilities. Some massive data centers are being built near nuclear power plants because the land around them is plentiful (as no one wants to live there) and long transmission lines aren’t needed. Some utilities are building small modular power plants near the data centers. But the general utilities sector has many bottlenecks – regulatory, capex, transmission grids.
Equity INVESTORS should be cautious because some futuristic technologies aren’t ready or profitable yet. Keep low exposure in alternative energy, maybe 0-10% (but White/GMO is at 33%). The energy benchmarks are still fossil fuel based. Many institutions (pension and endowment funds) have exited the fossil fuel sector. The fossil fuel sector investors should focus on yields, shareholder-yields, free cash flow yield, etc, because at the end, there may not be much left – get what you can get your hands on now and forget about potential capital gains. It’s just the reverse for alternative energy – companies that survive the current slump may go up 2x, 3x, 4x, 5x. The Inflation reduction Act is pumping money into the renewable sector and even small rate cuts by the Fed would have outsized upside effects. Pick a basket of high-quality alternative energy companies. Conservative investors may just stick with oil majors assuming that they will be able to make through the energy transition.
Stephen BYRD (Morgan Stanley): AES, VST, CEG, BE, RUN
Natasha KANEVA (JP Morgan): No specific recommendations, but discussed big global issues.
Stan MAJCHER (Hotchkis & Wiley): APA, KOS, SHEL
Lucas WHITE (GMO): RUN, FSLR, SDEG, DAR, NTOIY
Pg 6, UP & DOWN WALL STREET. Why has LA become the capital for bond firms? Pimco, TCW, Oaktree Capital, DoubleLine, remnants of Drexel, etc. People in LA don’t look like the type to buy bonds. Author SERWER met with the self-anointed Bond King GROSS (80) at the 5,000-attendee Milken Institute Global Conference Chaired by the true Junk Bond King Michael MILKEN (77; yes, the infamous and now rehabilitated one). The hot topics at the conference were private equity and credits and how to exploit the retail crowd on those. Who’s who of finance and business world were at the Conference. Several rich and famous at the Conference just brushed by Serwer saying “no profiles” – that is the old money (not) talking (and in the fear that some in the government may take notice of what they are up to; remember, the DOJ finally went after Milken in the year when he made more than McDonald’s/MCD); the new money rich are different and flashy. After a storied rise at Pimco, Gross had a falling out with his then colleagues, and his departure and years of lawsuits and bitterness ensued. Gross is down on bonds now and is into AI stocks, utilities, MLPs.
Pg 8, STREETWISE. Even McDonald’s/MCD prices aren’t what they used to be, and consumers have reacted to sticker shock by staying away. So, for a limited time, MCD will offer $5 combo meals from 6/25/24. Other fast foods aren’t doing well either (JACK, SBUX, etc). But there are exceptions – CMG, CAVA, SG, etc.
AI is power hungry, so that is boosting demand for data centers, and that in turn for power from utilities. NATURAL GAS should benefit as it’s a major source for electricity generation. Mentioned are utilities ETR, XEL, and commodity-related stocks BHP, FCX, CAT, ETN, Comeco.
(More later….)
Accessible from PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
Pg 28, TRADER. The stock market celebrated the inflation news prematurely. The DJIA was just above 40,000; the meme stocks are back. But the inflation trends over a few months show it rising. The stocks and bonds may soon reverse. Economic growth is slowing. Retail sales rose only in nominal terms – they were flat in real terms. At some point, recession fears will emerge. Investors seem exhausted (Remember that poor seasonality is May 1 – October 30).
SMALL-CAPS may be rebounding. Play with ETFs (IJR, SPSM, VIOO; good omission of IWM) and selected SCs – ELF, LPG, TBBK, ABM, ROAD, SLVM.
UBER (fwd P/E 48) is attractive on growth prospects in Asia. It’s buying German Delivery Hero’s/DHER Foodpanda business ($950 million) in Taiwan and will also have 3% stake ($300 million) in DHER.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
FOMC 6/12/24+ hold (cycle peak 5.25-5.50%)
FOMC 7/31/24+ hold
FOMC 9/18/24+ cut
FOMC 11/7/24+ hold
FOMC 12/18/24+ cut
(Probabilities for some rate-ranges aren’t high, so there can be some unexpected moves.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +1.24%, SP500 +1.54%, Nasdaq Comp +2.11%, R2000 +1.74%. DJ Transports -0.62%; DJ Utilities +0.96%. (Rotating spot utilities XLU +1.50%) US$ index (spot) -0.76% (remains too strong over 100), oil/WTI futures +2.30%, gold futures +1.90%.
YTD (index changes only), DJIA +6.14%, SP500 +11.18%, Nasdaq Comp +11.16%. (Rotating spot utilities XLU +14.23%)
SENTIMENTS
Sentiments peaked in mid-December and a minor peak was at March-end. A minor bottom was in mid-April.
NYSE cumulative (5-day) A/D LINE rose for a 4th week; ratio of winners:losers 2:1
FUND INFLOWS +/OUTFLOWS-: Stocks +|+, taxable bonds +|+, munis +|+, money-market funds +|+. (NEW FORMAT: 4wMA|weekly change)
(All + unusual, meaning new money came from under the mattress? From Banks?)
AAII Bull-Bear Spread +17.6% (above average). (Thursday-Wednesday)
(Sentiment Scale: v low << avg - 1*SD; low < avg - 1*SD; below avg, avg, above avg for in-between; high > avg + 1*SD, v high >> avg + 1*SD)
ybbpersonalfinance.proboards.com/thread/141/aaii-sentiment-survey-weekly?page=12&scrollTo=1285
%Above 50-dMA for NYSE-listed stocks 64.66% (positive); (StockCharts $NYA50R for NYSE; $SPXA50R for the SP500 in the bottom panel),
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 65.1% (positive); a proprietary index for %Above 75-dMA for selected 1,800 stocks that is published midweek but is updated by Barron’s only on late-Fridays (so, it typically LAGS). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
(Common Scale for %Above: oversold < 30-; 30 < negative < 50-; 50 < positive < 70-; overbought > 70; note that Delta MSI itself uses all in/out using 50% neutral value, but the same graduated scale is used here for both sources of %Above.)
Pg 31, INTERNATIONAL. VIETNAMESE economy is booming (growth +5% in 2023, +6% in 2024). It has benefitted from the move away from China. Its communist party has taken a pragmatic business-friendly approach for the last 15 years. But there is recent political turmoil and fears of reversion to the old ways, but optimists say that is unlikely. The ETF VNM fell sharply. Attractive sectors are IT, semis, ecommerce, and those benefiting from foreign fund flows.
Pg 32, OPTIONS. There is no B&H or DCA for options. Wait for major pending news before putting on options play – let the fund managers and those with itchy fingers play the guessing game of using options before the uncertain news. Also, continue selling puts on stock you want to buy at lower prices. (Bad misfire – says to wait for the CPI report next Wednesday, but that was LAST Wednesday. The next CPI report will be on 6/12/24.)
SP500 VIX 11.99 (low), Nasdaq 100 VXN 15.85 (low), options SKEW 147.85 (high), bond MOVE 89.35 (Yahoo Finance data).
(Low VIX, high SKEW combo is a sign of nervous bulls)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 45: An up week in EUROPE (Denmark +3.22%, Norway -0.45%) and a good week in ASIA (Taiwan +2.95%, Japan +0.33%).
TREASURY* 3-mo yield 5.46%, 1-yr 5.14%, 2-yr 4.83%, 5-yr 4.44%, 10-yr 4.42%, 30-yr 4.56%;
REAL yields 5-yr 2.12%, 10-yr 2.10%, 30-yr 2.23%;
FRNs Index** 5.32% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR fell ^DXY 104.50, -0.8% (pg 50). GOLD rose to $2,403, +1.3% (Handy & Harman spot, Thursday; pg 52); the gold-miners rose. (^XAU was at 149.23, +4.91% for the week)
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
US SAVINGS I-Bonds**, Rate from 5/1/24 – 10/31/24 is 4.28%; the fixed rate is 1.30%, the semiannual inflation is 1.48%.
(NOTE – The Social Security COLA for 2025, based on the Q3 average of CPI-W, is ?, est +3%)
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS)
www.treasurydirect.gov/auctions/announcements-data-results/frn-daily/
www.treasurydirect.gov/marketable-securities/
***For local rates www.depositaccounts.com/banks/rates-map/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 16, COVER STORY, “ENERGY Roundtable”. 4 panelists met via Zoom on 5/9/24. After highlights of their discussion, their recommendations follow.
Energy has been affected by GEOPOLITICS – Russia-Ukraine war, Israel-Hamas conflict, Israel-Iran spat. Yet, oil has no geopolitical risks priced in now. Saudi Arabia is diversifying away from oil as fast as it can. Almost 67% oil Middle Eastern oil now goes to Asia (unlike in early 1970s). The US has become the largest global oil producer. If Iran shuts the Straight of Hormuz, it will also cutoff sea access for its own oil. It’s in the interests of all parties to keep oil flowing despite their differences and disagreements.
But there are long-term RISKS for oil – falling capex, lower bank loans, energy transition. The oil sector is no longer dominated by wildcatters who wanted to just drill. Oil prices may rise as the peak Summer driving season approaches around Memorial Day, so $100 oil? Maybe, or not. The OPEC and Russia have restricted production. But global demand for fossil fuels is still rising. This reduced supply but rising demand is bullish for fossil fuel energy for now even if the oil prices remain where they are now (and until the alternative energy is ready for prime time).
RENEWABLE/CLEAN energy is also very cheap now – nuclear, biofuels, solar, wind. The clean energy index is down 80% from its peak in 02/2021. AI will boost demand for data centers and those will need huge amounts of power from the utilities that generate electricity from natural gas, etc. Renewables now are taking market share from coal, not from fossil fuels. A weak link now is the power transmission grid – there are regulatory delays and long lag times to develop the related infrastructure. There is a strange complement of fast-moving AI and slow-moving utilities. Some massive data centers are being built near nuclear power plants because the land around them is plentiful (as no one wants to live there) and long transmission lines aren’t needed. Some utilities are building small modular power plants near the data centers. But the general utilities sector has many bottlenecks – regulatory, capex, transmission grids.
Equity INVESTORS should be cautious because some futuristic technologies aren’t ready or profitable yet. Keep low exposure in alternative energy, maybe 0-10% (but White/GMO is at 33%). The energy benchmarks are still fossil fuel based. Many institutions (pension and endowment funds) have exited the fossil fuel sector. The fossil fuel sector investors should focus on yields, shareholder-yields, free cash flow yield, etc, because at the end, there may not be much left – get what you can get your hands on now and forget about potential capital gains. It’s just the reverse for alternative energy – companies that survive the current slump may go up 2x, 3x, 4x, 5x. The Inflation reduction Act is pumping money into the renewable sector and even small rate cuts by the Fed would have outsized upside effects. Pick a basket of high-quality alternative energy companies. Conservative investors may just stick with oil majors assuming that they will be able to make through the energy transition.
Stephen BYRD (Morgan Stanley): AES, VST, CEG, BE, RUN
Natasha KANEVA (JP Morgan): No specific recommendations, but discussed big global issues.
Stan MAJCHER (Hotchkis & Wiley): APA, KOS, SHEL
Lucas WHITE (GMO): RUN, FSLR, SDEG, DAR, NTOIY
Pg 6, UP & DOWN WALL STREET. Why has LA become the capital for bond firms? Pimco, TCW, Oaktree Capital, DoubleLine, remnants of Drexel, etc. People in LA don’t look like the type to buy bonds. Author SERWER met with the self-anointed Bond King GROSS (80) at the 5,000-attendee Milken Institute Global Conference Chaired by the true Junk Bond King Michael MILKEN (77; yes, the infamous and now rehabilitated one). The hot topics at the conference were private equity and credits and how to exploit the retail crowd on those. Who’s who of finance and business world were at the Conference. Several rich and famous at the Conference just brushed by Serwer saying “no profiles” – that is the old money (not) talking (and in the fear that some in the government may take notice of what they are up to; remember, the DOJ finally went after Milken in the year when he made more than McDonald’s/MCD); the new money rich are different and flashy. After a storied rise at Pimco, Gross had a falling out with his then colleagues, and his departure and years of lawsuits and bitterness ensued. Gross is down on bonds now and is into AI stocks, utilities, MLPs.
Pg 8, STREETWISE. Even McDonald’s/MCD prices aren’t what they used to be, and consumers have reacted to sticker shock by staying away. So, for a limited time, MCD will offer $5 combo meals from 6/25/24. Other fast foods aren’t doing well either (JACK, SBUX, etc). But there are exceptions – CMG, CAVA, SG, etc.
AI is power hungry, so that is boosting demand for data centers, and that in turn for power from utilities. NATURAL GAS should benefit as it’s a major source for electricity generation. Mentioned are utilities ETR, XEL, and commodity-related stocks BHP, FCX, CAT, ETN, Comeco.
(More later….)
Accessible from PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
