Post by Admin/YBB on Jun 8, 2024 3:59:22 GMT -6
From Barron’s, June 10, 2024 (Part 1, Market Week+)
Pg 24, TRADER. Just buy MSFT, NVDA, AAPL (20%+ of SP500 on 5/28/24, vs 19.88% on 9/1/20) and dump everything else? Strange, but that would have worked fine! 2023 was the year of Magnificent 7, now maybe Magnificent 5, or 3. Historically, the top 3 SP500 stocks have never accounted for 25%; more typically, top 10 have accounted for 20% for over 40 years. Remember that NVDA, now bigger than AAPL, and soon may be bigger than MSFT, is in a cyclical-tech business. Buyers of cyclical stocks at the top (or, at good multiples of peak earnings) are rarely rewarded. Anyway, this big-tech market is supported by lot of hot air.
OIL is weak despite production restraint by the OPEC+. Demand is weak, but new supply is coming from several countries. A US recession may be avoided – in fact, lower oil prices benefit the economy. While weak oil prices aren’t good news for oil investors now, the medium-term prospects for oil remain good.
On Internet rumors, meme stock GameStock/GME woke up again. It issued new stock in May to raise $933 million (for what?) while the going was good. Its fundamental value may be only $7, but it has had 52-week range of $9.95-64.83. Stay away.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
FOMC 6/12/24+ hold (cycle peak 5.25-5.50%)
FOMC 7/31/24+ hold
FOMC 9/18/24+ hold
FOMC 11/7/24+ cut
FOMC 12/18/24+ hold
(Probabilities for some rate-ranges aren’t high, so there can be some unexpected moves.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.29%, SP500 +1.32%, Nasdaq Comp +2.38%, R2000 -2.10%. DJ Transports -1.41%; DJ Utilities -2.78%. (Rotating spot energy XLE -3.44%) US$ index (spot) +0.26% (remains too strong over 100), oil/WTI futures -1.90%, gold futures -0.76%.
YTD (index changes only), DJIA +2.94%, SP500 +12.10%, Nasdaq Comp +14.13%. (Rotating spot energy XLE +8.20%)
SENTIMENTS
Sentiments are deteriorating.
NYSE cumulative (5-day) A/D LINE fell; ratio of winners:losers 2:3 .
FUND INFLOWS +/OUTFLOWS-: Stocks +|0, taxable bonds +|-, munis -|-, money-market funds +|+. (NEW FORMAT: 4wMA|weekly change)
AAII Bull-Bear Spread +7.0% (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 48.27% (negative); (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 50.1% (positive, barely); 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 27, INTERNATIONAL. JAPANESE RALLY has more room to run. There have been huge shifts in the economy and the markets. Deflation is changing to inflation; corporate governance has improved; trauma of the great market collapse may be behind. Nikkei 225 finally reached an all-time high. Weak yen is still benefitting exporters, but too much yen weakness is bad, so the BOJ has been defending yen.
EXTRA. In the recent EM ELECTIONS, the long-ruling ANC party lost majority in South Africa; President Claudia SHEINBAUM is the handpicked successor to AMLO in Mexico; Prime Minister Narendra MODI returns to power for his 3rd term, but with a coalition government because the expected landslide for his party didn’t materialize. At least these results were clear and uncontested, but the interests of the EM investors often differ from those of the local voters.
Pg 28, OPTIONS. Robinhood/HOOD has transformed itself from a meme stock into a savvy fintech. (It recently bought crypto exchange Bitstamp) There are attractive options plays ahead of early-August earnings release – pair buying-calls with selling-puts.
SP500 VIX 12.22 (low), Nasdaq 100 VXN 15.88 (low), options SKEW 140.18 (high), bond MOVE 91.82 (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 41: An up week in EUROPE (Netherlands +4.67%, Norway -1.40%) (ECB started cutting rates; several European markets are at/near highs) and a good week in ASIA (Taiwan +3.46%, New Zealand -1.24%) (India at a new high as PM Modi returns with a coalition).
TREASURY* 3-mo yield 5.52%, 1-yr 5.17%, 2-yr 4.87%, 5-yr 4.46%, 10-yr 4.43%, 30-yr 4.55%;
REAL yields 5-yr 2.18%, 10-yr 2.13%, 30-yr 2.24%;
FRNs Index** 5.32% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose, ^DXY 104.94, +0.25% (pg 46). GOLD fell to $2,311, -2% (Handy & Harman spot, Thursday; pg 48); the gold-miners fell. (^XAU was at 136.20, -6.17% 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 S3, COVER STORY, “Investing in SPORTS Has Arrived. Here’s the State of Play”. Sports now have an ecosystem. Sport teams and leagues are hot. There are broadcast rights (TV, cable, digital/streaming), stadiums, concessions and their maintenance/upkeep. (There is also sports betting) The US private-equity investors are gobbling up the US and overseas sports franchises. However, there are limited opportunities for retail investors; industry has poor governance and high valuations. Some investors are also getting into college sports. Mentioned are MSGS, BATRA, MANU, FWONK, TKO. (This Cover is really in the Guide to Wealth SUPPLEMENT, Part 2.)
Pg 6, UP & DOWN WALL STREET. A strong stock market and rising household wealth are leading this economy. That would explain a lot of conundrums over mixed economic data. The jobs report was stronger than expected but the unemployment rate rose. Atlanta GDPNow has fluctuated in 2-4% range within just a month. The FOMC meeting is on Wednesday and there will be a new Summary of Economic Projections (SEPs) – guidance may be for higher rates for longer. The CME FedWatch is at 1 rate cut for 2024.
2017 Tax Cuts and Jobs Act (TCJA) will expire in 2025. The cost of extending it through 2034 will be $4 trillion, but the cost of letting it die is unknown. Chances are that some aspects of TCJA will be saved – individual taxes, etc. Historically, June and July of presidential election years are difficult. There is high election uncertainty. The CDS on US Treasuries are rising. The US markets have ignored the US elections so far.
Pg 8, STREETWISE. By now, Nvidia/NVDA and AI is a well-known story. But Broadcom/AVGO (yield 4%; fwd P/E 30; P/FCF 14; CEO Hock TAN) has been a huge quiet beneficiary of AI. Its origin was in the old HP that spun off its medical equipment, instruments, lab equipment and supplies, and semis business as Agilent/A to private equity. In turn, private equity had an IPO for the semis part, Avago. Then, Avago bought Broadcom, kept that name, but retained the ticker AVGO. Since then, AVGO has made several software acquisitions – Computer Associates, Symantec, VMWare. AVGO now is #2 in semis (behind #1 NVDA) and is also strong in software and networks. Its custom ASIC chips (dedicated/ specialized, high-efficiency, low-power chips) are in high demand, and AI-ASIC is a natural extension; customers include GOOGL, META, MSFT, AAPL, with TikTok/ByteDance rumored to be a new customer.
Now that 5G capex is behind them, telecoms T and TMUS are expanding their broadband offerings using bundles (phone, TV, Internet) and taking market share from cable.
(More later….)
Accessible from PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
Pg 24, TRADER. Just buy MSFT, NVDA, AAPL (20%+ of SP500 on 5/28/24, vs 19.88% on 9/1/20) and dump everything else? Strange, but that would have worked fine! 2023 was the year of Magnificent 7, now maybe Magnificent 5, or 3. Historically, the top 3 SP500 stocks have never accounted for 25%; more typically, top 10 have accounted for 20% for over 40 years. Remember that NVDA, now bigger than AAPL, and soon may be bigger than MSFT, is in a cyclical-tech business. Buyers of cyclical stocks at the top (or, at good multiples of peak earnings) are rarely rewarded. Anyway, this big-tech market is supported by lot of hot air.
OIL is weak despite production restraint by the OPEC+. Demand is weak, but new supply is coming from several countries. A US recession may be avoided – in fact, lower oil prices benefit the economy. While weak oil prices aren’t good news for oil investors now, the medium-term prospects for oil remain good.
On Internet rumors, meme stock GameStock/GME woke up again. It issued new stock in May to raise $933 million (for what?) while the going was good. Its fundamental value may be only $7, but it has had 52-week range of $9.95-64.83. Stay away.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
FOMC 6/12/24+ hold (cycle peak 5.25-5.50%)
FOMC 7/31/24+ hold
FOMC 9/18/24+ hold
FOMC 11/7/24+ cut
FOMC 12/18/24+ hold
(Probabilities for some rate-ranges aren’t high, so there can be some unexpected moves.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.29%, SP500 +1.32%, Nasdaq Comp +2.38%, R2000 -2.10%. DJ Transports -1.41%; DJ Utilities -2.78%. (Rotating spot energy XLE -3.44%) US$ index (spot) +0.26% (remains too strong over 100), oil/WTI futures -1.90%, gold futures -0.76%.
YTD (index changes only), DJIA +2.94%, SP500 +12.10%, Nasdaq Comp +14.13%. (Rotating spot energy XLE +8.20%)
SENTIMENTS
Sentiments are deteriorating.
NYSE cumulative (5-day) A/D LINE fell; ratio of winners:losers 2:3 .
FUND INFLOWS +/OUTFLOWS-: Stocks +|0, taxable bonds +|-, munis -|-, money-market funds +|+. (NEW FORMAT: 4wMA|weekly change)
AAII Bull-Bear Spread +7.0% (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 48.27% (negative); (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 50.1% (positive, barely); 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 27, INTERNATIONAL. JAPANESE RALLY has more room to run. There have been huge shifts in the economy and the markets. Deflation is changing to inflation; corporate governance has improved; trauma of the great market collapse may be behind. Nikkei 225 finally reached an all-time high. Weak yen is still benefitting exporters, but too much yen weakness is bad, so the BOJ has been defending yen.
EXTRA. In the recent EM ELECTIONS, the long-ruling ANC party lost majority in South Africa; President Claudia SHEINBAUM is the handpicked successor to AMLO in Mexico; Prime Minister Narendra MODI returns to power for his 3rd term, but with a coalition government because the expected landslide for his party didn’t materialize. At least these results were clear and uncontested, but the interests of the EM investors often differ from those of the local voters.
Pg 28, OPTIONS. Robinhood/HOOD has transformed itself from a meme stock into a savvy fintech. (It recently bought crypto exchange Bitstamp) There are attractive options plays ahead of early-August earnings release – pair buying-calls with selling-puts.
SP500 VIX 12.22 (low), Nasdaq 100 VXN 15.88 (low), options SKEW 140.18 (high), bond MOVE 91.82 (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 41: An up week in EUROPE (Netherlands +4.67%, Norway -1.40%) (ECB started cutting rates; several European markets are at/near highs) and a good week in ASIA (Taiwan +3.46%, New Zealand -1.24%) (India at a new high as PM Modi returns with a coalition).
TREASURY* 3-mo yield 5.52%, 1-yr 5.17%, 2-yr 4.87%, 5-yr 4.46%, 10-yr 4.43%, 30-yr 4.55%;
REAL yields 5-yr 2.18%, 10-yr 2.13%, 30-yr 2.24%;
FRNs Index** 5.32% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose, ^DXY 104.94, +0.25% (pg 46). GOLD fell to $2,311, -2% (Handy & Harman spot, Thursday; pg 48); the gold-miners fell. (^XAU was at 136.20, -6.17% 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 S3, COVER STORY, “Investing in SPORTS Has Arrived. Here’s the State of Play”. Sports now have an ecosystem. Sport teams and leagues are hot. There are broadcast rights (TV, cable, digital/streaming), stadiums, concessions and their maintenance/upkeep. (There is also sports betting) The US private-equity investors are gobbling up the US and overseas sports franchises. However, there are limited opportunities for retail investors; industry has poor governance and high valuations. Some investors are also getting into college sports. Mentioned are MSGS, BATRA, MANU, FWONK, TKO. (This Cover is really in the Guide to Wealth SUPPLEMENT, Part 2.)
Pg 6, UP & DOWN WALL STREET. A strong stock market and rising household wealth are leading this economy. That would explain a lot of conundrums over mixed economic data. The jobs report was stronger than expected but the unemployment rate rose. Atlanta GDPNow has fluctuated in 2-4% range within just a month. The FOMC meeting is on Wednesday and there will be a new Summary of Economic Projections (SEPs) – guidance may be for higher rates for longer. The CME FedWatch is at 1 rate cut for 2024.
2017 Tax Cuts and Jobs Act (TCJA) will expire in 2025. The cost of extending it through 2034 will be $4 trillion, but the cost of letting it die is unknown. Chances are that some aspects of TCJA will be saved – individual taxes, etc. Historically, June and July of presidential election years are difficult. There is high election uncertainty. The CDS on US Treasuries are rising. The US markets have ignored the US elections so far.
Pg 8, STREETWISE. By now, Nvidia/NVDA and AI is a well-known story. But Broadcom/AVGO (yield 4%; fwd P/E 30; P/FCF 14; CEO Hock TAN) has been a huge quiet beneficiary of AI. Its origin was in the old HP that spun off its medical equipment, instruments, lab equipment and supplies, and semis business as Agilent/A to private equity. In turn, private equity had an IPO for the semis part, Avago. Then, Avago bought Broadcom, kept that name, but retained the ticker AVGO. Since then, AVGO has made several software acquisitions – Computer Associates, Symantec, VMWare. AVGO now is #2 in semis (behind #1 NVDA) and is also strong in software and networks. Its custom ASIC chips (dedicated/ specialized, high-efficiency, low-power chips) are in high demand, and AI-ASIC is a natural extension; customers include GOOGL, META, MSFT, AAPL, with TikTok/ByteDance rumored to be a new customer.
Now that 5G capex is behind them, telecoms T and TMUS are expanding their broadband offerings using bundles (phone, TV, Internet) and taking market share from cable.
(More later….)
Accessible from PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
