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Post by yogibearbull on Aug 5, 2023 11:42:10 GMT
Pg 11, PREVIEW & REVIEW (consolidated). TRAVEL is booming, but why are travel stocks (LUV, HLT, EXPE, BKNG, ABNB) suffering? Maybe they ran up too much in anticipation. DATA THIS WEEK (seriously shrunk but see the link below). CPI (+3.3%, core +4.8%) on THURSDAY; PPI (core +2.5%), UM consumer sentiment on FRIDAY. www.barrons.com/magazine?mod=BOL_TOPNAVData This Week Link, www.barrons.com/market-data/market-lab?mod=md_subnav#consensus-estimate BULLISH. Nike (NKE; lagging stock may rebound strongly; excess inventory issues should disappear as global recovery continues; China is its 2nd biggest market; direct-to-consumer sales are improving, now 45%; pg 12); Flying Taxis (new eVTOLS; multiple rotors and batteries create redundancies for safety; 50-100 mile range now; the FAA certification by 2025; the EU is moving fast too; JOBY, ACHR, LILM, EVEX, EH, EVTL, many were SPAC conversions before the SPAC bubble burst; pg 13). BEARISH. Pg 21, FUNDS. ACTIVE bond ETFs (ICSH, JPST, MINT; FBND, BOND, TOTL; SRLN, etc) have been around for years (unlike the active equity ETFs). The active bond strategies are hard to replicate. Active bond ETFs have lower costs, (marginal) tax-efficiency and transparency. But they may be volatile during market downturns or credit events. The newest are PYLD (a cousin of PIMIX), BINC, INCM (a cousin of hybrid FKINX). Pg 22, INCOME. With GE turnaround making good progress, the CEO CULP is thinking about restoring a decent dividend (current 1c; possibly $1.30-2.00). GE Healthcare/GEHC has been spun off, and GE Power/Vernova will be spun off in 2024. Lot of debt has been paid down. Pg 23, TECH TRADER. Amazon/AMZN Q2 was great. But Apple (AAPL; fwd P/E 30; P/S 7) was struggling – 4th quarterly revenue decline due to weakness in phones and laptops. The situation may improve with the upcoming iPhone 15 & 16. Unclear what the next big thing for AAPL is. It’s buying back stock. But AAPL is a value, no-growth stock priced like a growth highflyer. Prefer AMZN over AAPL. Pg 24: Morgan HOUSEL, Author and Blogger; Partner, Collaborative Fund (a VC firm). Investors should be aware of individual behavioral issues; what may work for others may not work for you at all. Don’t chase tips. Don’t worry about common risks but only about huge, sudden and unknown risks (9/11, Lehman, Covid, etc). While we don’t know what the next big risk will be, be prepared so that it won’t knock you down. Don’t try to be rational but try to be reasonable. Don’t get overwhelmed by greed and/or fear. Have sufficient cash reserves (he has 20%). Use DCA for long-term investing. Pg 26, ECONOMY. Higher rate older bonds are being CALLED on short notices. Despite rising rates, some older bonds may be REISSUED at marginally lower rates (their ratings may have improved too). Allan SLOAN writes about his old 5% NJ Transit muni that was called unexpectedly and reissued at 4.25%. Pg 54, OTHER VOICES. Dana PETERSON, Conference Board. Soft landing or recession? Too early to call. Consumer confidence is at a 2-yr high. The job market is tight; the unemployment rate is historically low. But the consumer debt is rising. Binge buying for appliances and travel packages may be easing. Consumers are spending more on in-home streaming/entertainment and less on external entertainments. Housing has slowed as mortgage rates are 7%+. Some firms are reducing hiring; layoffs are rising. Many CEOs are projecting a recession in 12-18 months. So, lots of crosscurrents. (EXTRAS from online Friday that didn’t make the weekend paper version) See Column Topics. It seems some consolidation/rearrangement of Columns is going on. None LINK
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Post by Capital on Aug 5, 2023 13:49:11 GMT
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Post by Deleted on Aug 5, 2023 19:19:29 GMT
"Pg 24: Morgan HOUSEL, Author and Blogger; Partner, Collaborative Fund (a VC firm). Investors should be aware of individual behavioral issues; what may work for others may not work for you at all. Don’t chase tips. Don’t worry about common risks but only about huge, sudden and unknown risks (9/11, Lehman, Covid, etc). While we don’t know what the next big risk will be, be prepared so that it won’t knock you down. Don’t try to be rational but try to be reasonable. Don’t get overwhelmed by greed and/or fear. Have sufficient cash reserves (he has 20%). Use DCA for long-term investing."
I requested Housel's book "The Psychology of Money" from my local library. It's popular and there is a long wait time. Has anyone here read it?
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Post by bizman on Aug 5, 2023 20:33:39 GMT
"Pg 24: Morgan HOUSEL, Author and Blogger; Partner, Collaborative Fund (a VC firm). Investors should be aware of individual behavioral issues; what may work for others may not work for you at all. Don’t chase tips. Don’t worry about common risks but only about huge, sudden and unknown risks (9/11, Lehman, Covid, etc). While we don’t know what the next big risk will be, be prepared so that it won’t knock you down. Don’t try to be rational but try to be reasonable. Don’t get overwhelmed by greed and/or fear. Have sufficient cash reserves (he has 20%). Use DCA for long-term investing." I requested Housel's book "The Psychology of Money" from my local library. It's popular and there is a long wait time. Has anyone here read it? Yep. Morgan is one of my favorite writers and thinkers. He also has a podcast that goes over some of the same territory as his blog posts. Lots of food for thought. Slightly off-topic, William Bernstein said in a recent podcast interview (paraphrasing), that when it comes to personal finance, half of everything is mathematics, and the other half is Shakespeare. In other words, knowing yourself is the most important part of the whole enterprise, and making tradeoffs that work for you. IMO, Morgan is one of the best at helping one tackle the behavioral side of finance.
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Post by Deleted on Aug 6, 2023 0:36:00 GMT
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Post by richardsok on Aug 6, 2023 13:37:55 GMT
Article looks paywalled to me. Can you summarize with a couple of key points?
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Post by anitya on Aug 6, 2023 15:48:48 GMT
Paywalled article title - Hedge fund titan says the greatest credit bubble in human history is set to pop but he is not worried. At the least tell us why the titan thinks there is a bubble, when he expects it to pop, and why he is not worried.
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Post by yogibearbull on Aug 6, 2023 16:21:15 GMT
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Post by anitya on Aug 6, 2023 20:03:56 GMT
Thanks. Link worked. Good read. Nassim Taleb was only mentioned in the passing. The hedge fund referenced evidently made 105% average annual return from Jan 2008 to Dec 2019. They did not include 2020 info because I presume that would distort (to the upside). The HF manager’s assessment / reasons of debt bubble are the usual stuff we talk about. He does not know when it is going to pop because of the usual refrain - markets can remain irrational longer than …. He says retail investors should not focus on risk adjusted returns but on building wealth long-term and that the main risk retail investors need to worry about / focus is themselves - rash / impulsive behavior. Finally, he asks us to follow Warren Buffet advice on investing and buy a broad low cost index.
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Post by uncleharley on Aug 6, 2023 20:13:04 GMT
Do they expect long term interest rates to climb or by debt bubble do they expect a lot of defaults? Or both? The reason I ask is because the 10yr treasury rate broke above a flag pattern this week on the weekly chart. The breakout projects a 35% climb in the 10 yr rate over the next yr or so.
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Post by yogibearbull on Aug 6, 2023 20:32:51 GMT
There is talk in the media, and Barron's, about 30-yr possibly moving to 6%+. Nothing like that is in the market.
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Post by anitya on Aug 6, 2023 20:35:44 GMT
uncleharley , I do not recall discussing such detail. For reference, he thinks US stock market is currently overvalued by multiple measures which is not how you are betting. His commentary is not geared towards anticipating any specific event - I think they have their tail risk hedges most of the time. Edit: Since we are talking about valuations, I will share what I was thinking recently. FYI - I do not try to be scientific or precise because I think if there is such a thing as a butterfly effect, that is in the markets. I see US equities are projecting to return about 8.5%, using a risk free rate of 4%. (Prof Damodaran would have equity valuation info on his website.) I see VCIT yield to maturity at 5.5%, giving me a 3% equity return over corporate bonds. That on balance does not make me hesitant to own equities over corporate bonds. I tend to see corporate bonds and equities as substitutes.
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Post by uncleharley on Aug 6, 2023 21:43:04 GMT
There is talk in the media, and Barron's, about 30-yr possibly moving to 6%+. Nothing like that is in the market. It wouldn't be in the market yet because the 10 yr rate backed down a bit on Friday. The breakout could fail. And of course, a projection is not a prediction. However, it is a valid projection that may become important. We shall see.
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Post by Chahta on Aug 6, 2023 22:35:35 GMT
There is talk in the media, and Barron's, about 30-yr possibly moving to 6%+. Nothing like that is in the market. At least the curve will not be inverted. Let's hope the process is slow not fast. Would that be good for one's 50% bonds?
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Post by uncleharley on Aug 7, 2023 19:59:08 GMT
The break has been tested and confirmed. The longer term treasuries have begun their move. 6% within the next 6 to 8 weeks is a reasonable target for the 30 yr. Personally I can see the 10 and 30 yr running farther and longer than that, however that run would not be in a straight line and depends on developments that are uncertain at this point in time.
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Post by yogibearbull on Aug 7, 2023 21:41:40 GMT
Just for fun, I calculated the loss in the value of 30-yr if bought at 4.25% & if the long rates move to 6.25%. Loss of -19.3%. That may imply some unexpected credit event. Of course, there is lot of speculation. A while ago, wirh recession calls, people were projecting collapse of 30 yr to 2-3%. But with only soft landing & possible premature Fed pause, some are calling for 6%+ 30-yr. Reality may be somewhere between 2-6% for 30-yr - that is my BOLD prediction . I did enter an order for 52-wk T-Bill for 8/8/13 (tomorrow) Auction. Expected is 5.3% locked in for 1 year. This is my first 52-wk purchase in a long while. I have been just rolling into 26-wk T-Bills lately.
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Post by anitya on Aug 8, 2023 1:16:34 GMT
When I looked at new issue available at Fidelity, Agency bonds have much higher YTM than lower rated corporates. Both are not call protected. Is not that a sign that corporate bonds are overvalued?
Followed Yogi into tomorrow's auction
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Post by steadyeddy on Aug 8, 2023 1:19:37 GMT
A 6% 30 year bond will spell doom to the stock market. Ain't happening under Private Equity Powell's watch....
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Post by anitya on Aug 8, 2023 19:25:08 GMT
When I looked at new issue available at Fidelity, Agency bonds have much higher YTM than lower rated corporates. Both are not call protected. Is not that a sign that corporate bonds are overvalued? Followed Yogi into tomorrow's auction yogibearbull , Fidelity shows my order for the 1 yr Treasury auction got filled at 94.883, which comes to a yield of 5.117%[Edit: 5.39%]. Is that what you received (I presume)? There are at least 5 issues available now in the secondary market that mature between 8/15 - 8/30/24 that have YTM no less than 5.3%. I have participated in the Treasury auction three times and have been disappointed each time by the yield I received in the auction relative to what was available in the secondary market.
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Post by yogibearbull on Aug 8, 2023 19:47:35 GMT
anitya , the discounted price for 52-wk T-Bill today was 94.883778 (see link below), so that is 5.116% discount from par (a common way to quote T-Bills). But the yield on purchase price is 1/0.94883778 = 1.05392 or 5.392% and that is the total-return (TR). The Treasury link below shows Investment Rate as 5.351% and that is the bond-equivalent to Treasuries that pay interest every 6 months and then compound. That would be an iterative calculation, but we can double-check with 5.351%: (1 + 0.05351/2)^2 = 1.05422 - close enough to 5.392% TR; numbers don't match because the Treasury may be using some approximation as it does for I-Bonds. So, no reason to be disappointed - 5.392% TR matters to you. www.treasurydirect.gov/instit/annceresult/press/preanre/2023/R_20230808_2.pdfTreasury also shows daily EOD T-Bill rates both ways, as discount and as coupon-equivalent. Link should update for 8/8/23 in about half-hour. Edit/Add: I calculated the EXACT Investment Rate as 5.3212%, not 5.351%. Checking again: (1 + 0.053212/2)^2 = 1.05392% and that matches the TR of 5.392% precisely.
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Post by anitya on Aug 8, 2023 20:45:58 GMT
Not sure how Treasury got to the Investment Rate (coupon equivalent) of 5.351% - very strange and overstates. Thanks
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Post by Deleted on Aug 8, 2023 21:09:30 GMT
Not sure how Treasury got to the Investment Rate (coupon equivalent) of 5.351% - very strange and overstates. Thanks You need to figure out the rate from the discounted price paid, not the redemption price. Does that make sense?
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Post by anitya on Aug 8, 2023 21:34:42 GMT
Not sure how Treasury got to the Investment Rate (coupon equivalent) of 5.351% - very strange and overstates. Thanks You need to figure out the rate from the discounted price paid, not the redemption price. Does that make sense? My post was agreeing with Yogi post immediately before where he shows how Treasury's calculation does not make sense. Please show your calcs how Treasury gets to their 5.351%. IMO, this only has entertainment value and not relevant to future investment process but you can post your reply in this thread. Otherwise, useful Treasury purchase conversation is here - big-bang-investors.proboards.com/post/40457/thread
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Post by yogibearbull on Aug 9, 2023 0:19:23 GMT
I found the correct answer for Treasury 52-wk coupon-equivalent, but it is less satisfying. I will also make a self-standing post on it as it may just get lost in this thread. T-Bill Coupon-Equivalent YieldAccording to several web sources, Treasury simply uses this formula for Coupon-Equivalent Yield of T-Bills, Coupon-Equivalent Yield = 100*[(Par Value - Purchase Price)/Purchase Price]* 360/d, where d = days to maturity. So, Coupon-Equivalent Yield = Total Return * 360/d. d must be counted properly taking into account specific T-Bill issue and maturity dates. Just because their name says 13-wk, 26-wk, 52-wk, that doesn't mean 13*7, 26*7, 52*7 days. Don't ask my why the Treasury wants to put all T-Bills on 360 day standard. The 52-wk T-Bill today (8/8/23) will be issued on 8/10/23 but will mature on 8/8/24, so that is 2-3 days less than a full year (or, 362-363 days). It seems that Treasury used d = 362.76. Price was 94.883778, so TR = (100 - 94.883778)/94.883778 = 5.392%. So, Coupon-Equivalent Yield = 5.392*360/362.76 = 5.351%. That is what Treasury provides, but I don't like this at all. It doesn't related to any realistic TR or YTM that one may calculate. To me, if the TR is 5.392% for 362.76 days (implied by Treasury), I would annualize it as 5.392*365/362.76 = 5.425% annualized. 52-Wk T-Bill Auction on 8/8/23 www.treasurydirect.gov/instit/annceresult/press/preanre/2023/R_20230808_2.pdfwww.investopedia.com/terms/c/couponequivalentrate.aspwww.bogleheads.org/forum/viewtopic.php?t=248337
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pn
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Post by pn on Aug 9, 2023 2:58:23 GMT
Just for fun, I calculated the loss in the value of 30-yr if bought at 4.25% & if the long rates move to 6.25%. Loss of -19.3%. That may imply some unexpected credit event. Of course, there is lot of speculation. A while ago, wirh recession calls, people were projecting collapse of 30 yr to 2-3%. But with only soft landing & possible premature Fed pause, some are calling for 6%+ 30-yr. Reality may be somewhere between 2-6% for 30-yr - that is my BOLD prediction . I did enter an order for 52-wk T-Bill for 8/8/13 (tomorrow) Auction. Expected is 5.3% locked in for 1 year. This is my first 52-wk purchase in a long while. I have been just rolling into 26-wk T-Bills lately. Missing Sara’s old ‘Inflation’ thread that had good discussions of where interest rates are headed.
It seems like the rationale for longer term rates remaining lower than shorter term rates (inverted yield curve) is the expected slowdown due to Fed efforts to bring inflation down to 2%. In the last week or two we’ve had a few reports of talking heads saying they no longer are projecting a recession. And then you get into the semantics of what is ‘officially’ designated as a ‘recession’.
Market sentiment prior to today and yesterday probably had been that not having a ‘recession’ on the immediate radar lengthens the time to a future drop in interest rates. But long term rates did go down today – see below link –
www.marketwatch.com/story/treasury-yields-slide-as-china-growth-fears-drive-investors-into-bonds-be98074a?mod=home-page
Excerpts:
Data showed that China’s exports and imports each posted double-digit declines for July, increasing fears of a global economic slowdown and sparking a move into government bonds. . . .
Markets are pricing in an 86.5% probability that the Fed will leave interest rates unchanged at a range of 5.25%-5.5% on Sept. 20, according to the CME FedWatch Tool. The chances of a 25-basis-point rate hike to a range of 5.5-5.75% at the subsequent meeting in November is priced at 27.7%.
The central bank is mostly expected to take its fed-funds rate target back down to around 5% or lower by March or May.
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Post by uncleharley on Aug 9, 2023 18:41:30 GMT
Just for fun, I calculated the loss in the value of 30-yr if bought at 4.25% & if the long rates move to 6.25%. Loss of -19.3%. That may imply some unexpected credit event. Of course, there is lot of speculation. A while ago, wirh recession calls, people were projecting collapse of 30 yr to 2-3%. But with only soft landing & possible premature Fed pause, some are calling for 6%+ 30-yr. Reality may be somewhere between 2-6% for 30-yr - that is my BOLD prediction . I did enter an order for 52-wk T-Bill for 8/8/13 (tomorrow) Auction. Expected is 5.3% locked in for 1 year. This is my first 52-wk purchase in a long while. I have been just rolling into 26-wk T-Bills lately. Missing Sara’s old ‘Inflation’ thread that had good discussions of where interest rates are headed.
It seems like the rationale for longer term rates remaining lower than shorter term rates (inverted yield curve) is the expected slowdown due to Fed efforts to bring inflation down to 2%. In the last week or two we’ve had a few reports of talking heads saying they no longer are projecting a recession. And then you get into the semantics of what is ‘officially’ designated as a ‘recession’.
Market sentiment prior to today and yesterday probably had been that not having a ‘recession’ on the immediate radar lengthens the time to a future drop in interest rates. But long term rates did go down today – see below link –
www.marketwatch.com/story/treasury-yields-slide-as-china-growth-fears-drive-investors-into-bonds-be98074a?mod=home-page
Excerpts:
Data showed that China’s exports and imports each posted double-digit declines for July, increasing fears of a global economic slowdown and sparking a move into government bonds. . . .
Markets are pricing in an 86.5% probability that the Fed will leave interest rates unchanged at a range of 5.25%-5.5% on Sept. 20, according to the CME FedWatch Tool. The chances of a 25-basis-point rate hike to a range of 5.5-5.75% at the subsequent meeting in November is priced at 27.7%.
The central bank is mostly expected to take its fed-funds rate target back down to around 5% or lower by March or May. Yes, the long-term rates went down yesterday and are going down today, however the trend for the 10 yr treasury rate is up since the last breakout. I prefer to follow the trend rather than daily wiggles.
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