From Barron’s, February 12, 2024 (Part 1, Market Week+)
Feb 10, 2024 11:40:16 GMT
chang, Capital, and 5 more like this
Post by yogibearbull on Feb 10, 2024 11:40:16 GMT
From Barron’s, February 12, 2024 (Part 1, Market Week+)
Pg 25, TRADER. This big-stock RALLY is masking problems underneath; SP500 at 5,000+ is at fwd P/E 20.4. Sticky inflation may remain, and the Fed may keep rates higher for longer. That would be bad for corporate earnings – that may explain the large moves (up or down) after earnings reports. But this volatility isn’t seen yet in VIX. Don’t be surprised by a pullback.
Oversold S KOREAN stock market (P/B 0.2 only) has good potential for rebound. Several upcoming regulatory changes will make it more investor-friendly. Attractive are Samsung Electronics, Hyundai/HYMTF, Korean Airlines, Hankook & Co, etc; the ETF EWY is less attractive due to its concentration in big companies. (There is also Korean-discount due to its neighbor on the North)
Earnings miss by McDonald’s (MCD; yield 2.3%; fwd P/E 23.3; buybacks) provides a buying opportunity for this long-term winner. It’s growing digital app ordering and delivery.
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 3/20/24+ hold (cycle peak 5.25-5.50%)
FOMC 5/1/24+ cut
FOMC 6/12/24+ cut
FOMC 7/31/24+ hold
FOMC 9/18/24+ cut
(Probabilities for some rate-ranges aren’t high, so there can be some unexpected moves.) (These expectations differ a lot from those by the FOMC)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.04%, SP500 +1.37%, Nasdaq Comp +2.31%, R2000 +2.41%. DJ Transports +2.63%; DJ Utilities -2.00%. (Rotating spot small-cap R2000 +2.41%) US$ index (spot) +0.13% (remains too strong over 100), oil/WTI futures +6.31%, gold futures -0.63%.
YTD (index changes only), DJIA +2.61%, SP500 +5.38%, Nasdaq Comp +6.52%. (Rotating spot small-cap R2000 -0.84%) (SWITCHED BACK to YTD)
SENTIMENTS
(ALL sentiments remain OK but peaked in mid-December)
NYSE cumulative (5-day) A/D LINE rose for a 3rd week; ratio of winners:losers 4:3
FUND INFLOWS +/OUTFLOWS: Stocks -|-, taxable bonds +|-, munis +|0, money-market funds +|0. (NEW FORMAT: 4wMA|Weekly change)
AAII Bull-Bear Spread +26.4% (high). (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 58.37% (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 78.9% (overbought); 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 TRADER. INDONESIAN President JOKOWI (nickname; 62) has been in power for 10 years. Elections are in February and the handpicked successor is the Defense Minister (PS) as President and Jokowi’s son (GRR; only 36) as Vice-President. There has been a tremendous growth with lots of infrastructure investments from China and Japan. But it has so far missed the move away from China. It is a major global nickel producer and wants to grow in EV batteries. It’s also building a new Capital. Can you name the 2nd most populous metropolis in the world? That’s Jakarta, Indonesia (1st being Tokyo, Japan).
Pg 32, OPTIONS. Recommended are selling puts on good stocks one would like to buy. EQIX is used for example.
(SP500 VIX 12.93 (low), Nasdaq 100 VXN 16.86 (low), options SKEW 156.62 (high), bond MOVE 106.21 (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 (Netherlands +4.73%, Finland -2.44%) and an up week in ASIA (China +3.37%, Singapore -0.76%).
TREASURY* 3-mo yield 5.44%, 1-yr 4.86%, 2-yr 4.48%, 5-yr 4.14%, 10-yr 4.17%, 30-yr 4.37%;
REAL yields 5-yr 1.86%, 10-yr 1.92%, 30-yr 2.13%;
FRNs Index** 5.305% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose to ^DXY 104.08, +0.14% (pg 50). GOLD rose to 2,024, +0.5% (Handy & Harman spot, Thursday; pg 52); the gold-miners fell. (^XAU was at 109.32, -4.16% for the week)
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
US SAVINGS I-Bonds**, NEW rate from November 1, 2023, is 5.27%; the fixed rate is +1.30%, the semiannual inflation is +1.97%.
(NOTE – The Social Security COLA for 2024, based on the Q3 average of CPI-W, is +3.2%)
*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, “Walgreens/WBA, CVS, and Other PHARMACY Chains are in a World of Hurt. What’s to Blame”. The RETAIL PHARMACY business has soured. The number of pharmacy stores peaked in 2010 at 22,500 (too many!); their stocks peaked in 2015 (CVS made another run in 2021 but missed); CVS now is better diversified than WBA. The mail order pharmacy business is tiny at 9% of total prescriptions filled, so most people want to pick up their meds in-person. Retail pharmacies count on this foot traffic for other front-store sales. They have had mixed results from store-clinics (many healthcare groups have competing immediate/urgent-care centers). Thefts and shoplifting are huge problems for all retailers. The fast overgrowth in the past led to profit pressures and there have been store closures and bankruptcies (Rite Aid/RADCQ, etc). There is also competition from supermarket pharmacy counters. Generics are a low-profit business (90% of prescriptions). Pharmacists have walked out in protest over poor working conditions. The PBMs control drug pricing through distributors (CAH, etc). As the current pricing and distribution business model is broken, new models are being developed for PBMs-distributors-pharmacy stores. A small number of pharmacy stores isn’t in anybody’s interest.
Pg 7, UP AND DOWN WALL STREET. SP500 made it through 5,000. Taylor SWIFT is going to the Super Bowl in the gambling capital LV. Lots of game related betting is good for Draft King/DKNG, only +283% since late-2022; earnings – forget it, EBITDA – forget that too. But it is making money by issuing lots of its highflying stock. The market is expecting Fed rate cuts at some point and also good corporate earnings. The move in the SP500 has been powered by a handful of mega-caps. MSFT, now the most valuable company in the world, has a market-cap that is 2x the entire SP500 energy sector. The US tech sector is 33% of the total US stock market, well over the 2000 dot.com bubble era. The bond spreads are low, and corporations are rushing to issue bonds. This market is climbing a ladder of optimism (a play on the usual wall of worries). Recession has been deferred. But regional banks are still shaky – now the problems with the former rescuer NYCB (and none of the problems of HTM/AFS portfolio accounting and bad CREs have gone away).
FORSYTH is a fan of CEFs at discount. He now likes muni MYD, VFL, LEO; options-writing equity GDV, ECF, AOD, AGD; term-trusts FTHY, BSL.
Pg 10, STREETWISE. URANIUM prices are near 16-yr high; ETFs URAATOM, URNM; physical SRUUF. Will it follow lithium-like collapse? (From oversupply even with high demand from EVs) Previously, uranium prices collapsed after Japanese 3-11 that caused a severe downturn in the nuclear industry. Mines were put in hibernation and the world lived off the inventory. But Russia-Ukraine war (02/2022- ) changed the global energy scene drastically and nuclear power has had revival in several countries. There are 434 operating nuclear power reactors in the world, and 59 new reactors are under construction, with 23 just in China. New small modular reactors (SMRs) are also possible now.
EXTRA. ESPN/DIS, FOX, Warner Br Discovery/WBD are launching a new SPORTS streaming bundle at $35-70/mo. Cable bundlers will face a difficult choice – join or fight the new move. Another question is how many bundles people will subscribe too?
(More later….)
LINK
Pg 25, TRADER. This big-stock RALLY is masking problems underneath; SP500 at 5,000+ is at fwd P/E 20.4. Sticky inflation may remain, and the Fed may keep rates higher for longer. That would be bad for corporate earnings – that may explain the large moves (up or down) after earnings reports. But this volatility isn’t seen yet in VIX. Don’t be surprised by a pullback.
Oversold S KOREAN stock market (P/B 0.2 only) has good potential for rebound. Several upcoming regulatory changes will make it more investor-friendly. Attractive are Samsung Electronics, Hyundai/HYMTF, Korean Airlines, Hankook & Co, etc; the ETF EWY is less attractive due to its concentration in big companies. (There is also Korean-discount due to its neighbor on the North)
Earnings miss by McDonald’s (MCD; yield 2.3%; fwd P/E 23.3; buybacks) provides a buying opportunity for this long-term winner. It’s growing digital app ordering and delivery.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
FOMC 3/20/24+ hold (cycle peak 5.25-5.50%)
FOMC 5/1/24+ cut
FOMC 6/12/24+ cut
FOMC 7/31/24+ hold
FOMC 9/18/24+ cut
(Probabilities for some rate-ranges aren’t high, so there can be some unexpected moves.) (These expectations differ a lot from those by the FOMC)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.04%, SP500 +1.37%, Nasdaq Comp +2.31%, R2000 +2.41%. DJ Transports +2.63%; DJ Utilities -2.00%. (Rotating spot small-cap R2000 +2.41%) US$ index (spot) +0.13% (remains too strong over 100), oil/WTI futures +6.31%, gold futures -0.63%.
YTD (index changes only), DJIA +2.61%, SP500 +5.38%, Nasdaq Comp +6.52%. (Rotating spot small-cap R2000 -0.84%) (SWITCHED BACK to YTD)
SENTIMENTS
(ALL sentiments remain OK but peaked in mid-December)
NYSE cumulative (5-day) A/D LINE rose for a 3rd week; ratio of winners:losers 4:3
FUND INFLOWS +/OUTFLOWS: Stocks -|-, taxable bonds +|-, munis +|0, money-market funds +|0. (NEW FORMAT: 4wMA|Weekly change)
AAII Bull-Bear Spread +26.4% (high). (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 58.37% (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 78.9% (overbought); 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 TRADER. INDONESIAN President JOKOWI (nickname; 62) has been in power for 10 years. Elections are in February and the handpicked successor is the Defense Minister (PS) as President and Jokowi’s son (GRR; only 36) as Vice-President. There has been a tremendous growth with lots of infrastructure investments from China and Japan. But it has so far missed the move away from China. It is a major global nickel producer and wants to grow in EV batteries. It’s also building a new Capital. Can you name the 2nd most populous metropolis in the world? That’s Jakarta, Indonesia (1st being Tokyo, Japan).
Pg 32, OPTIONS. Recommended are selling puts on good stocks one would like to buy. EQIX is used for example.
(SP500 VIX 12.93 (low), Nasdaq 100 VXN 16.86 (low), options SKEW 156.62 (high), bond MOVE 106.21 (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 (Netherlands +4.73%, Finland -2.44%) and an up week in ASIA (China +3.37%, Singapore -0.76%).
TREASURY* 3-mo yield 5.44%, 1-yr 4.86%, 2-yr 4.48%, 5-yr 4.14%, 10-yr 4.17%, 30-yr 4.37%;
REAL yields 5-yr 1.86%, 10-yr 1.92%, 30-yr 2.13%;
FRNs Index** 5.305% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose to ^DXY 104.08, +0.14% (pg 50). GOLD rose to 2,024, +0.5% (Handy & Harman spot, Thursday; pg 52); the gold-miners fell. (^XAU was at 109.32, -4.16% for the week)
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
US SAVINGS I-Bonds**, NEW rate from November 1, 2023, is 5.27%; the fixed rate is +1.30%, the semiannual inflation is +1.97%.
(NOTE – The Social Security COLA for 2024, based on the Q3 average of CPI-W, is +3.2%)
*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, “Walgreens/WBA, CVS, and Other PHARMACY Chains are in a World of Hurt. What’s to Blame”. The RETAIL PHARMACY business has soured. The number of pharmacy stores peaked in 2010 at 22,500 (too many!); their stocks peaked in 2015 (CVS made another run in 2021 but missed); CVS now is better diversified than WBA. The mail order pharmacy business is tiny at 9% of total prescriptions filled, so most people want to pick up their meds in-person. Retail pharmacies count on this foot traffic for other front-store sales. They have had mixed results from store-clinics (many healthcare groups have competing immediate/urgent-care centers). Thefts and shoplifting are huge problems for all retailers. The fast overgrowth in the past led to profit pressures and there have been store closures and bankruptcies (Rite Aid/RADCQ, etc). There is also competition from supermarket pharmacy counters. Generics are a low-profit business (90% of prescriptions). Pharmacists have walked out in protest over poor working conditions. The PBMs control drug pricing through distributors (CAH, etc). As the current pricing and distribution business model is broken, new models are being developed for PBMs-distributors-pharmacy stores. A small number of pharmacy stores isn’t in anybody’s interest.
Pg 7, UP AND DOWN WALL STREET. SP500 made it through 5,000. Taylor SWIFT is going to the Super Bowl in the gambling capital LV. Lots of game related betting is good for Draft King/DKNG, only +283% since late-2022; earnings – forget it, EBITDA – forget that too. But it is making money by issuing lots of its highflying stock. The market is expecting Fed rate cuts at some point and also good corporate earnings. The move in the SP500 has been powered by a handful of mega-caps. MSFT, now the most valuable company in the world, has a market-cap that is 2x the entire SP500 energy sector. The US tech sector is 33% of the total US stock market, well over the 2000 dot.com bubble era. The bond spreads are low, and corporations are rushing to issue bonds. This market is climbing a ladder of optimism (a play on the usual wall of worries). Recession has been deferred. But regional banks are still shaky – now the problems with the former rescuer NYCB (and none of the problems of HTM/AFS portfolio accounting and bad CREs have gone away).
FORSYTH is a fan of CEFs at discount. He now likes muni MYD, VFL, LEO; options-writing equity GDV, ECF, AOD, AGD; term-trusts FTHY, BSL.
Pg 10, STREETWISE. URANIUM prices are near 16-yr high; ETFs URA
EXTRA. ESPN/DIS, FOX, Warner Br Discovery/WBD are launching a new SPORTS streaming bundle at $35-70/mo. Cable bundlers will face a difficult choice – join or fight the new move. Another question is how many bundles people will subscribe too?
(More later….)
LINK
