Post by Admin/YBB on May 18, 2024 6:38:57 GMT -6
Pg 9. PREVIEW & REVIEW (consolidated). FOMC Minutes on WEDNESDAY.
TRAVEL costs have normalized. Fall air travel is cheaper than that in Summer; Tuesdays and Wednesdays have better discounts. But there are issues related to Boeing plane delivery delays, and longer times at airport security checkpoints.
DATA THIS WEEK. Existing home sales on WEDNESDAY; new home sales on THURSDAY; durable goods orders, 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. Nestle (NSRGY; yield 3.2%; fwd P/E 19.0 (2024), 17.6 (2025); buybacks; 20% stake in Frenck L’Oreal/LRLCY; 158-yr old Swiss food giant operates in 190 countries; finally turning around after lagging for years; brands – Nestle, Nescafe, Nesquik, Perrier, Gerber, Purina, Libby’s. Carnation, Coffee Mate, Nature’s Bounty, etc; pg 14).
BEARISH.
Pg 10: AI is getting into smartphones. These new feature-rich phones (Samsung Galaxy S24, Google Pixel 8, but AAPL MIA) may lead to a new upgrade cycle. Phones with 30+ TOPS (trillion operations per second) will require more advanced chips from QCOM, MediaTek (Taiwan), GOOGL (in-house); chip designer ARM will also benefit. Risks are that consumers won’t care about these new features at premium prices ($800-1,500); other AI-enabled devices will proliferate (smart glasses, VR headsets, wearable brooches).
Pg 12: Global TRADE WAR is bad for the US ECONOMY. Concerned about the flood of cheap CHINESE products, the US has imposed sharply higher TARIFFS on solar panels, semiconductors, EVs, ship-to-shore cranes, selected medical products, aluminum, steel, etc; tariffs on graphite, batteries, etc will follow in 2026. Under the state incentives and directives, China is able to quickly gain technological and cost advantage in many new areas, but it then has to export the excess products (remember this the next time someone says that China just copies the Western technology). These tariffs escalate the ongoing US-China tensions. Tariffs tend to add to INFLATION as trade affects most components of the CPI except housing. If the US revokes China’s designation as Permanent Normal Trade Relations, that may noticeably hurt the US GDP. The costly moves for regionalization/ onshoring/ near-shoring should benefit small/medium-sized companies; commodities and the EMs should also benefit. But private-equity would be hurt by higher costs from trade friction because that would prevent faster turnarounds or quicker exits. For now, China has only protested and taken measured steps to retaliate; but it’s watching the US elections and the related rhetoric. China can put restrictions on foreign company operations in China and can limit exports of critical minerals and components to disrupt Western production. China’s export mix has also changed with more exports now going to the EMs than to the US or Europe. Other countries have also added tariffs – the EU, Brazil, India, etc.
Pg 15, FUNDS. Salim RAMJI, New CEO of Vanguard (07/2024- ). An industry veteran, he is an outsider for Vanguard. He says that he is a new convert to the Vanguard’s principles and has been reading Bogle’s books. He would spend the first few months listening to people and won’t make any drastic changes soon, including the Vanguard’s policy of staying away from cryptos, leveraged ETFs, commodity ETFs. Vanguard has had tremendous asset growth, but it has withdrawn from some retail products (or imposed lots of retail fees) and some foreign markets. Customer complaints have grown (the company offices and support still operate only M-F 8-8 despite a 24/7 online presence).
Pg 23: You can now generate your online AVATAR by using the virtual-presenter features of AI. Synthesia in London took multiple photos and made several voice recordings of Jack DENTON, a Barron’s reporter, and the result was an AI-Denton that was visibly indistinguishable, but not so while speaking. A concern is that AI-persons can be made to say or do things that the real person won’t, but people watching may not be aware of this AI angle. Many companies use the likeness of celebrities for their AI-videos. The exploitation potential is huge, and regulators should address related privacy and rights issues before this goes too far. (CGI has been used in the movies for years, but it’s expensive. AI makes this technology accessible to the masses.)
Pg 24, FUNDS. Grayscale ETP GBTC (up-listed as ETF in January) has a very high ER of 1.5%, but many holders with huge gains have tax handcuffs. Still, there have been record outflows and it may soon lose the title of the biggest spot-Bitcoin ETP to BlackRock IBIT (ER 0.25%). The 1940 Act funds can be sued for excessive fees, but not the 1933 Act funds that these new spot-Bitcoin ETFs are. (However, following the model used by iShares/BLK, SPDR/STT, etc, Grayscale is planning to launch a lower-ER cousin of GBTC.) (By @lewisbraham at MFO)
Pg 25, INCOME. The US CONSUMER is tired. Lower inflation doesn’t mean lower prices. The household debt is rising, and so are debt delinquencies. The UM sentiment has been dropping. This may be trouble for securitized debt (ABS; lower-rated floating-rate) that is popular with many bond funds. There are several pure-play ABS funds (newer JSI). But the credit spreads are now too low to compensate their risks.
Pg 26, ECONOMY. INFLATION isn’t cooling. Recent monthly changes in the CPI have ticked up. Typically, the monthly inflation bottoms in May and then rises, so inflation data won’t be pretty going forward. With higher costs related to climate issues, defense, global trade frictions, infrastructure projects, and deficits, inflation may remain sticky. David RANSON (HCWE) says that gold and oil relative to their median prices forecast PPI 1-3 year ahead better than other economic indicators. Those and the rally in Dr Copper may delay the Fed rate cuts.
Pg 27, TECH TRADER. Google/GOOGL (fwd P/E 20) is incorporating AI into its travel and mapping apps, and into its ecosystem (Gmail, camera, Search, etc). Its annual developers conference starts on Tuesday. Google ad revenues have grown even as its market share has shrunk to 55% (vs 75% in 2015). Others are also developing AI enhanced travel apps (EXPE, BKNG, ALK, etc).
Pg 54, OTHER VOICES. Laura ROSNER-WARBURTON, MacroPolicy Perspectives. Cooling HOUSING inflation should be the data that the FED is looking for to cut RATES. Housing is 34% of CPI, and 15% of PCE, via owners’ equivalent rents (OERs). The pandemic distorted this data in 2021-22. There has also been some building of new apartments. So, the new/renewal OERs have been stable after 2022, but this has yet to be reflected in the overall OERs. Other parts of CPI and PCE already show lower growth.
Pg 55, RETIREMENT. The famous BENGEN RULE is a 4% initial withdrawal plus annual COLA. But there are several flexible considerations – age, life-expectancy, withdrawal adjustments, portfolio allocation, etc. According to David BLANCHETT (PGIM), an initial withdrawal rate of 4.3-5.5% may be possible with upward adjustments later. TIAA studies have shown that higher withdrawal rates are possible when around 33% guaranteed-income annuities are included in the portfolio. Couples should look at combined life-expectancies, and then those for the survivor. Also consider other income streams – pensions/annuities, Social Security, survivor benefits.
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.
LINK
Accessible from PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
TRAVEL costs have normalized. Fall air travel is cheaper than that in Summer; Tuesdays and Wednesdays have better discounts. But there are issues related to Boeing plane delivery delays, and longer times at airport security checkpoints.
DATA THIS WEEK. Existing home sales on WEDNESDAY; new home sales on THURSDAY; durable goods orders, 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. Nestle (NSRGY; yield 3.2%; fwd P/E 19.0 (2024), 17.6 (2025); buybacks; 20% stake in Frenck L’Oreal/LRLCY; 158-yr old Swiss food giant operates in 190 countries; finally turning around after lagging for years; brands – Nestle, Nescafe, Nesquik, Perrier, Gerber, Purina, Libby’s. Carnation, Coffee Mate, Nature’s Bounty, etc; pg 14).
BEARISH.
Pg 10: AI is getting into smartphones. These new feature-rich phones (Samsung Galaxy S24, Google Pixel 8, but AAPL MIA) may lead to a new upgrade cycle. Phones with 30+ TOPS (trillion operations per second) will require more advanced chips from QCOM, MediaTek (Taiwan), GOOGL (in-house); chip designer ARM will also benefit. Risks are that consumers won’t care about these new features at premium prices ($800-1,500); other AI-enabled devices will proliferate (smart glasses, VR headsets, wearable brooches).
Pg 12: Global TRADE WAR is bad for the US ECONOMY. Concerned about the flood of cheap CHINESE products, the US has imposed sharply higher TARIFFS on solar panels, semiconductors, EVs, ship-to-shore cranes, selected medical products, aluminum, steel, etc; tariffs on graphite, batteries, etc will follow in 2026. Under the state incentives and directives, China is able to quickly gain technological and cost advantage in many new areas, but it then has to export the excess products (remember this the next time someone says that China just copies the Western technology). These tariffs escalate the ongoing US-China tensions. Tariffs tend to add to INFLATION as trade affects most components of the CPI except housing. If the US revokes China’s designation as Permanent Normal Trade Relations, that may noticeably hurt the US GDP. The costly moves for regionalization/ onshoring/ near-shoring should benefit small/medium-sized companies; commodities and the EMs should also benefit. But private-equity would be hurt by higher costs from trade friction because that would prevent faster turnarounds or quicker exits. For now, China has only protested and taken measured steps to retaliate; but it’s watching the US elections and the related rhetoric. China can put restrictions on foreign company operations in China and can limit exports of critical minerals and components to disrupt Western production. China’s export mix has also changed with more exports now going to the EMs than to the US or Europe. Other countries have also added tariffs – the EU, Brazil, India, etc.
Pg 15, FUNDS. Salim RAMJI, New CEO of Vanguard (07/2024- ). An industry veteran, he is an outsider for Vanguard. He says that he is a new convert to the Vanguard’s principles and has been reading Bogle’s books. He would spend the first few months listening to people and won’t make any drastic changes soon, including the Vanguard’s policy of staying away from cryptos, leveraged ETFs, commodity ETFs. Vanguard has had tremendous asset growth, but it has withdrawn from some retail products (or imposed lots of retail fees) and some foreign markets. Customer complaints have grown (the company offices and support still operate only M-F 8-8 despite a 24/7 online presence).
Pg 23: You can now generate your online AVATAR by using the virtual-presenter features of AI. Synthesia in London took multiple photos and made several voice recordings of Jack DENTON, a Barron’s reporter, and the result was an AI-Denton that was visibly indistinguishable, but not so while speaking. A concern is that AI-persons can be made to say or do things that the real person won’t, but people watching may not be aware of this AI angle. Many companies use the likeness of celebrities for their AI-videos. The exploitation potential is huge, and regulators should address related privacy and rights issues before this goes too far. (CGI has been used in the movies for years, but it’s expensive. AI makes this technology accessible to the masses.)
Pg 24, FUNDS. Grayscale ETP GBTC (up-listed as ETF in January) has a very high ER of 1.5%, but many holders with huge gains have tax handcuffs. Still, there have been record outflows and it may soon lose the title of the biggest spot-Bitcoin ETP to BlackRock IBIT (ER 0.25%). The 1940 Act funds can be sued for excessive fees, but not the 1933 Act funds that these new spot-Bitcoin ETFs are. (However, following the model used by iShares/BLK, SPDR/STT, etc, Grayscale is planning to launch a lower-ER cousin of GBTC.) (By @lewisbraham at MFO)
Pg 25, INCOME. The US CONSUMER is tired. Lower inflation doesn’t mean lower prices. The household debt is rising, and so are debt delinquencies. The UM sentiment has been dropping. This may be trouble for securitized debt (ABS; lower-rated floating-rate) that is popular with many bond funds. There are several pure-play ABS funds (newer JSI). But the credit spreads are now too low to compensate their risks.
Pg 26, ECONOMY. INFLATION isn’t cooling. Recent monthly changes in the CPI have ticked up. Typically, the monthly inflation bottoms in May and then rises, so inflation data won’t be pretty going forward. With higher costs related to climate issues, defense, global trade frictions, infrastructure projects, and deficits, inflation may remain sticky. David RANSON (HCWE) says that gold and oil relative to their median prices forecast PPI 1-3 year ahead better than other economic indicators. Those and the rally in Dr Copper may delay the Fed rate cuts.
Pg 27, TECH TRADER. Google/GOOGL (fwd P/E 20) is incorporating AI into its travel and mapping apps, and into its ecosystem (Gmail, camera, Search, etc). Its annual developers conference starts on Tuesday. Google ad revenues have grown even as its market share has shrunk to 55% (vs 75% in 2015). Others are also developing AI enhanced travel apps (EXPE, BKNG, ALK, etc).
Pg 54, OTHER VOICES. Laura ROSNER-WARBURTON, MacroPolicy Perspectives. Cooling HOUSING inflation should be the data that the FED is looking for to cut RATES. Housing is 34% of CPI, and 15% of PCE, via owners’ equivalent rents (OERs). The pandemic distorted this data in 2021-22. There has also been some building of new apartments. So, the new/renewal OERs have been stable after 2022, but this has yet to be reflected in the overall OERs. Other parts of CPI and PCE already show lower growth.
Pg 55, RETIREMENT. The famous BENGEN RULE is a 4% initial withdrawal plus annual COLA. But there are several flexible considerations – age, life-expectancy, withdrawal adjustments, portfolio allocation, etc. According to David BLANCHETT (PGIM), an initial withdrawal rate of 4.3-5.5% may be possible with upward adjustments later. TIAA studies have shown that higher withdrawal rates are possible when around 33% guaranteed-income annuities are included in the portfolio. Couples should look at combined life-expectancies, and then those for the survivor. Also consider other income streams – pensions/annuities, Social Security, survivor benefits.
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.
LINK
Accessible from PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
