Post by Admin/YBB on Feb 20, 2021 8:06:37 GMT -6
Pg M1, Trader: Mixed week for stocks as 10-yr yield rose to 1.344%. But this bull is not quitting soon. Cyclical recovery continues with strong economic data. Atlanta Fed’s GDPNow shows real GDP growth at +9.5% for Q1 and that is before Stimulus3. BoA sees +6% GDP growth in 2021. At some point, good economic news will stop benefitting the stock market. In his Congressional testimony, the Fed Chair Powell would likely renew his pledge to keep rates low until the economy and the job market are better. So, stop worrying about the Fed flipping based on market’s inflation-expectations, and look for yield-curve to steepen sharply [3M-10Y, 2Y-10Y spreads, etc]. There will be winners and losers; the latter may be highflying growth stocks and bond-proxies [utilities, REITs, consumer-staples]. Worry about inflation when it gets here.
Bank stocks [+16% YTD; ETFs KBWB, KBE] remain attractive as the yield-curve steepens. Banks may raise dividends and resume buybacks. Economic activity, IPOs, M&A will rise. Goldman Sachs/GS [with Marcus] and Morgan Stanley/MS [with Eaton Vance, E*Trade] are expanding into retail. BoA/BAC is the most interest sensitive among the banks [so, Buffett/BRK has indeed done his homework].
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.
ZIRP [0-0.25% fed fund rate] through December 2021 FOMC meeting.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html ]
For the week [index changes only], DJIA +0.11%, SP500 -0.71%, Nasdaq Comp -1.57%, Russell 2000 -0.99%. DJ Transports +0.75%; DJ Utilities -1.24%. [Rotating spot 10-yr yield+11.67% (15 bps)] US$ index (spot) -0.16%, oil/WTI futures -0.39%, gold futures -2.51%.
YTD [index changes only], DJIA +2.90%, SP500 +4.01%, Nasdaq Comp +7.65%. [Rotating spot 10-yr yield +47.25%]
Pg M4, Europe: UK-based online trading platform IG Group [IGG.uk/IGGHY; fwd P/E 8.5] recently acquired Chicago-based online brokerage Tastytrade. Is it late or early on Covid-19 inspired at-home trading trend? Did it pay too much? Options industry volume is at all-time high and grew by +24% annually since 2017; that for Tastytrade grew at 3x that.
Pg M4, Emerging Markets: Several non-Chinese emerging/frontier-market techs are attractive and owned by ETF EMQQ. But some of these next-wave techs may just as well soar or crash.
Pg M6, Commodities: Pandemic has caused food prices [grains, meats, etc] to rise [+3.9% in 2020, almost 2x average inflation] – demand is up [domestic and export] but there have been supply-chain disruptions. Prices for both the foods-at-home and foods-away-from home are affected. There will be further upward pressure on food prices as the economy reopens and the wholesale channels to restaurants and offices fill up.
Pg M5, Options: If you have high conviction in rising bond yields and steepening yield-curve [with ZIRP for fed funds], pair selling-puts with buying-calls in regional banks [SIVB, RF, KEY, FRC, FITB, TFC, MTB, PNC; ETF KRE].
[SP500 VIX 22.05, SKEW 141.53 (high)] [Yahoo Finance data]
finance.yahoo.com/quotes/%5EVIX,%5ESKEW?.tsrc=fin-srch
Pg M27, M32: An up week in Europe [Spain +0.95%, Switzerland -1.32%] and an up week in Asia [Taiwan +3.44%, New Zealand -0.95%]. The equity CEF index [data to Thursday] was in line with the DJIA and its discount was -5% [wide fluctuations between -4% to -16% over the last few months].
Treasury rates 3-mo yield 0.04%, 2-yr 0.11%, 5-yr 0.59%, 10-yr 1.34%, 30-yr 2.14% [Treasury data*]. Dollar fell, DXY 90.34, -0.12% [M35]. Gold [Handy & Harman spot, Thursday] fell to $1,780 -2.43% [M38]; the gold-miners fell. [^XAU was at 136.78, -3.49% for the week]
*Treasury Yield-Curve www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
Top FDIC insured savings deposit rates*: Money-market accounts 0.61%; 3-mo Jumbo CD 0.40% [most are 0.25% or below], 1-yr CDs 0.70%; 5-yr CDs 1.00% [M33].
*For local rates www.depositaccounts.com/banks/rates-map/
[Bonus from Part 2 include Cover Story (now only in online designation), Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2]
Pg 21: Cover Story, “Oracle is Turning Into a Cloud Giant. Why Its Stock is a Buy”. Founded in 1977, Oracle/ORCL [yield 1.6%; fwd P/E 13.3 only] was hot once, been in rut for years, but is now back kicking with a cloud strategy. Its growth in public-cloud is limited only by its capacity in a market where big players are AWS/AMZN, Azure/MSFT, Google Cloud/GOOGL; none provide a clear picture for their cloud segments. Its private-cloud and database/enterprise businesses are also strong. It is gaining on its industry peer SAP. Chairman & CTO Larry Ellison [77; owns 40%] and CEO Sara Catz don’t talk much . It has grown by acquisition and has also bought 40% of its stock over 10 years.
Pg 6, Up and Down Wall Street: That was a strange Robinson “hearings” on meme stocks – more like talking down and answering questions not asked. Anyway, some companies involved raised funds while going was good [SNDL, etc].
Investors are ignoring rising bond yields and inflation expectations. 10-yr yield is at 1.344% [bottomed at 0.38% on 3/9/20] and projections are for 1.75-2.00% for 2021; but rising mortgage rates may slowdown housing sales. Classical inflation plays such as oil-producers XLE and gold-bullion GLD or gold-miners GDX haven’t done well, and money-market funds are paying nil [they were hot in prior inflationary periods]. So, Wall Street would now like to pitch new ETFs IVOL and INFL for your money.
Pg 9, Streetwise: Kostin/GS has SP500 target of 4,300 for 2021 based on improving earnings [$181 in 2021 vs $178 for 2020] from Stimulus3 and post-pandemic economic recovery. As it is, 67% of SP500 companies beat low 2020/Q4 estimates by 1 SD [2nd best in 23 years, behind only 2020/Q3]; impressively, 2020/Q4 earnings turned out to be +2% higher than those in 2019/Q4 even as the economy shrank – that from the magic of big techs. His assumptions include modest inflation, 10-yr yield 1.85% in 2021, Fed on hold until 2024, weak dollar, resumption of buybacks [so, many outs if his bold predictions don’t pan out]. There is $5 trillion in near 0% money-market funds. Beneficiary of consumer spending will be a diverse group of stocks such as TOL, SCH, MMM, FB, DIS, etc. He thinks that Bitcoin is not investable.
[More later….]
Bank stocks [+16% YTD; ETFs KBWB, KBE] remain attractive as the yield-curve steepens. Banks may raise dividends and resume buybacks. Economic activity, IPOs, M&A will rise. Goldman Sachs/GS [with Marcus] and Morgan Stanley/MS [with Eaton Vance, E*Trade] are expanding into retail. BoA/BAC is the most interest sensitive among the banks [so, Buffett/BRK has indeed done his homework].
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes.
ZIRP [0-0.25% fed fund rate] through December 2021 FOMC meeting.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html ]
For the week [index changes only], DJIA +0.11%, SP500 -0.71%, Nasdaq Comp -1.57%, Russell 2000 -0.99%. DJ Transports +0.75%; DJ Utilities -1.24%. [Rotating spot 10-yr yield+11.67% (15 bps)] US$ index (spot) -0.16%, oil/WTI futures -0.39%, gold futures -2.51%.
YTD [index changes only], DJIA +2.90%, SP500 +4.01%, Nasdaq Comp +7.65%. [Rotating spot 10-yr yield +47.25%]
Pg M4, Europe: UK-based online trading platform IG Group [IGG.uk/IGGHY; fwd P/E 8.5] recently acquired Chicago-based online brokerage Tastytrade. Is it late or early on Covid-19 inspired at-home trading trend? Did it pay too much? Options industry volume is at all-time high and grew by +24% annually since 2017; that for Tastytrade grew at 3x that.
Pg M4, Emerging Markets: Several non-Chinese emerging/frontier-market techs are attractive and owned by ETF EMQQ. But some of these next-wave techs may just as well soar or crash.
Pg M6, Commodities: Pandemic has caused food prices [grains, meats, etc] to rise [+3.9% in 2020, almost 2x average inflation] – demand is up [domestic and export] but there have been supply-chain disruptions. Prices for both the foods-at-home and foods-away-from home are affected. There will be further upward pressure on food prices as the economy reopens and the wholesale channels to restaurants and offices fill up.
Pg M5, Options: If you have high conviction in rising bond yields and steepening yield-curve [with ZIRP for fed funds], pair selling-puts with buying-calls in regional banks [SIVB, RF, KEY, FRC, FITB, TFC, MTB, PNC; ETF KRE].
[SP500 VIX 22.05, SKEW 141.53 (high)] [Yahoo Finance data]
finance.yahoo.com/quotes/%5EVIX,%5ESKEW?.tsrc=fin-srch
Pg M27, M32: An up week in Europe [Spain +0.95%, Switzerland -1.32%] and an up week in Asia [Taiwan +3.44%, New Zealand -0.95%]. The equity CEF index [data to Thursday] was in line with the DJIA and its discount was -5% [wide fluctuations between -4% to -16% over the last few months].
Treasury rates 3-mo yield 0.04%, 2-yr 0.11%, 5-yr 0.59%, 10-yr 1.34%, 30-yr 2.14% [Treasury data*]. Dollar fell, DXY 90.34, -0.12% [M35]. Gold [Handy & Harman spot, Thursday] fell to $1,780 -2.43% [M38]; the gold-miners fell. [^XAU was at 136.78, -3.49% for the week]
*Treasury Yield-Curve www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
Top FDIC insured savings deposit rates*: Money-market accounts 0.61%; 3-mo Jumbo CD 0.40% [most are 0.25% or below], 1-yr CDs 0.70%; 5-yr CDs 1.00% [M33].
*For local rates www.depositaccounts.com/banks/rates-map/
[Bonus from Part 2 include Cover Story (now only in online designation), Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2]
Pg 21: Cover Story, “Oracle is Turning Into a Cloud Giant. Why Its Stock is a Buy”. Founded in 1977, Oracle/ORCL [yield 1.6%; fwd P/E 13.3 only] was hot once, been in rut for years, but is now back kicking with a cloud strategy. Its growth in public-cloud is limited only by its capacity in a market where big players are AWS/AMZN, Azure/MSFT, Google Cloud/GOOGL; none provide a clear picture for their cloud segments. Its private-cloud and database/enterprise businesses are also strong. It is gaining on its industry peer SAP. Chairman & CTO Larry Ellison [77; owns 40%] and CEO Sara Catz don’t talk much . It has grown by acquisition and has also bought 40% of its stock over 10 years.
Pg 6, Up and Down Wall Street: That was a strange Robinson “hearings” on meme stocks – more like talking down and answering questions not asked. Anyway, some companies involved raised funds while going was good [SNDL, etc].
Investors are ignoring rising bond yields and inflation expectations. 10-yr yield is at 1.344% [bottomed at 0.38% on 3/9/20] and projections are for 1.75-2.00% for 2021; but rising mortgage rates may slowdown housing sales. Classical inflation plays such as oil-producers XLE and gold-bullion GLD or gold-miners GDX haven’t done well, and money-market funds are paying nil [they were hot in prior inflationary periods]. So, Wall Street would now like to pitch new ETFs IVOL and INFL for your money.
Pg 9, Streetwise: Kostin/GS has SP500 target of 4,300 for 2021 based on improving earnings [$181 in 2021 vs $178 for 2020] from Stimulus3 and post-pandemic economic recovery. As it is, 67% of SP500 companies beat low 2020/Q4 estimates by 1 SD [2nd best in 23 years, behind only 2020/Q3]; impressively, 2020/Q4 earnings turned out to be +2% higher than those in 2019/Q4 even as the economy shrank – that from the magic of big techs. His assumptions include modest inflation, 10-yr yield 1.85% in 2021, Fed on hold until 2024, weak dollar, resumption of buybacks [so, many outs if his bold predictions don’t pan out]. There is $5 trillion in near 0% money-market funds. Beneficiary of consumer spending will be a diverse group of stocks such as TOL, SCH, MMM, FB, DIS, etc. He thinks that Bitcoin is not investable.
[More later….]