From Barron’s, March 11, 2024 (Part 2)
Mar 9, 2024 15:15:11 GMT
uncleharley, Capital, and 3 more like this
Post by yogibearbull on Mar 9, 2024 15:15:11 GMT
Pg 11. PREVIEW & REVIEW (consolidated). There is too much hype about AI. Unchecked growth of AI may lead to serious issues including for national security. Beware that some industry players are just talking their books while pretending to offer suggestions. Now the AI is contributing little to the bottom line but may be distracting company executives and investors. Also keep in mind that AI models trained on existing data can only go so far in creating new information.
DATA THIS WEEK. CPI (+3.1% yoy; core +3.7%) on TUESDAY; PPI, retail sales, business inventories on THURSDAY; UM consumer sentiment, capacity utilization, industrial production 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. Lat Am online retailer Mercado Libre (MELI; fwd P/E 44.4; it’s AMZN-like, while AMZN is still trying to get footing in Lat Am; MELI accepts digital payments, bypassing expensive (for businesses) credit cards; pg 14);
Chemicals-cleanup stocks (ACM, MEG, RSG, XYL, Aclarity; A also makes detection instruments; the forever chemicals like PFAS, PFOA, PFOS, etc require special handling; they end up in landfills, wastewater, fresh water supply, human blood streams, polar bears; these were in many household products from CC/DD, MMM, CTVA, etc and they face massive liabilities; but these chemicals are also essential for the semi chip industry and that can be handles with proper restrictions; pg 15).
BEARISH.
Pg 12, FUNDS. Eyebrows were raised when Vanguard Chairman & CEO Tim BUCKLEY announced his sudden retirement/departure at the young age of 55. Under his 6-yr tenure, Vanguard AUM has grown by 80% to become #2 in asset management, the overseas operations were cut abruptly, but customer complaints rose sharply in various social-media venues (Vanguard still has M-F, 8am-8pm customer service; personally, I have gotten account alerts on Friday night about attempted unauthorized access that locked my account and I couldn’t get hold of anybody until Monday 8am). Its app is bad. There has been tremendous growth in its ETFs and robo-advisors/PAS, but it has aspirations for more advisory services, and for that, client and customer services have to improve a lot. Greg DAVIS, President and CIO, will become the temporary CEO while Vanguard looks around, but Davis has a good chance of becoming the permanent CEO.
EXTRA, FUNDS. Not really news – most ACTIVE large-cap (LC) funds lagged passive LC index funds, according to SPIVA. In rising markets, it’s hard for active funds to beat market-cap based index funds that are driven by more money flowing into the winners. The underperformance was widespread – small/mid-cap funds, foreign funds, bond funds (they did alarmingly poor). The only bright spots were muni and EM debt funds that beat their indexed counterparts.
Pg 20: TECH valuations are generally high. But it’s a silly season for some stocks (techs, non-techs) with high P/S (S = sales) in 10s, 20s, 30s: ARM 34.9, NVDA 19.6, WIND 19.4, LLY 17.9, V 16.0. These hypergrowth stocks are vulnerable to selloffs on even minor disappointments in earnings and/or guidance. Several companies report both GAAP and inflated non-GAAP earnings, with stock-based compensation accounting for much of the difference. When looking at P/Es, first determine whether GAAP or non-GAAP earnings are used.
Pg 22: T/A Feature (skip if don’t care for T/A). The SP500 is up +25% since 10/2023 and is now +12% above 200-dMA (an overbought level). The recent moves have been unrelated to bond yields or the dollar (this bull has its own mind). The VIX is saintly calm at 14.74. Short-term 20-dMA has been rising since 11/2023 with SP500 remaining above or just bouncing off it. On down days, decliners outnumber advancers by a large margin. The ratio of SP500/IVV and SP SC 600/IJR seems to be topping out (meaning that the LC outperformance relative to SC may have run its course). A mild CORRECTION (decline between -10% to -20%) can be expected soon; there have been 6 pullbacks since 10/2023 but none qualified as correction. Support levels may be 4,818 (-6.6% below hi-close) and 4,600 (-10.8% below hi-close).
Pg 23, FUNDS. HY muni are attractive. Mentioned are OEF VWALX and ETFs HYMB, HYD, FMHI (active).
Pg 24, TECH TRADER. LEGACY TECHS are also benefiting from AI – IBM, CRM, HPE, DELL, SAP. German SAP has shifted to cloud-based ERP and subscription models. It can data-mine large client databases (with their permission for anonymized analyses). It has improved margins by cutting costs, capex and jobs.
Pg 25, INCOME. Office REITs are in a slump due to high vacancies. But there are attractive REIT sectors – strip malls (KIM), industrial (PLD), casinos (VICI), senior housing (WELL).
Pg 25, ECONOMY. For the incumbent Conservatives and Prime Minister SUNAK, this will be a tough election. With the economy in technical recession, the budget proposal was a balancing act.
Pg 26, Q&A/Interview. David KELLEY, J.P. Morgan. He doesn’t see a US recession; inflation will be down to +2%; unemployment will remain will stay below 4%. Of course, some external geopolitical shock(s) may change all that, but as for oil, the US is a net oil exporter. The fed fund futures market is now accepting the reality of higher rates for longer. He likes Japan. Domestic 60-40 portfolios aren’t attractive, but they are fine with broader stock and fixed income exposures, including alternatives. His long worry list includes geopolitics, crypto euphoria, popularity of indexing weaking the price-discovery function of the US markets, divisive domestic politics, social-media influencers, investors holding excessive cash (nobody became a billionaire just by holding cash), small-caps (40% of R2000 companies are unprofitable), China that may be cheap for good reasons.
Pg 54, OTHER VOICES. Burton MALKIEL, no intro needed! This US BULL MARKET run driven by Magnificent 7 may continue for a while. High valuations alone don’t kill bull markets. And there are differences now from the craziness of the dot .com bubble era of 2000. Irrational exuberance now, yes, bubble, no. Even those worried about bubbles (many are bond “experts”) should know that bubbles can keep growing until a sudden burst. Young people should invest regularly with dollar-cost averaging (DCA) and use broad-based low-cost funds. Older folks should review their risk exposures, keep short-term needs in money-market and short-term bonds, and know that systematic withdrawals on the way out in declining markets can be treacherous (there is no pleasant flipside to DCA).
Pg 55, RETIREMENT. LTCI is a hot topic of debate – to buy it in 40s and 50s when premiums are lower with passable medical underwriting OR retain risks for end-of-life care (in-home, nursing home, hospice). But planning is essential in either case as costs of $500K - $2 million would be difficult to handle for others taking care of your affairs – personal and financial. It is said that poor have Medicaid, rich can bear high costs, but the people in the middle may be squeezed. There are life insurance policies with LTCI riders, and joint-life policies. A 3-yr coverage for planning for end-of-life care should be enough.
Ad Supplement, TOP 1,200 FINANCIA ADVISORS has features on remote financial advisors and Q&A with a handful of advisors. These are followed by a state-by-state listing of financial advisors.
NOTE. I did call Barron’s to inform them that Barron’s Digital was still showing LAST WEEK’S paper. The Rep said that they are aware of the upload failure of the new version and are working on it.
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
DATA THIS WEEK. CPI (+3.1% yoy; core +3.7%) on TUESDAY; PPI, retail sales, business inventories on THURSDAY; UM consumer sentiment, capacity utilization, industrial production 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. Lat Am online retailer Mercado Libre (MELI; fwd P/E 44.4; it’s AMZN-like, while AMZN is still trying to get footing in Lat Am; MELI accepts digital payments, bypassing expensive (for businesses) credit cards; pg 14);
Chemicals-cleanup stocks (ACM, MEG, RSG, XYL, Aclarity; A also makes detection instruments; the forever chemicals like PFAS, PFOA, PFOS, etc require special handling; they end up in landfills, wastewater, fresh water supply, human blood streams, polar bears; these were in many household products from CC/DD, MMM, CTVA, etc and they face massive liabilities; but these chemicals are also essential for the semi chip industry and that can be handles with proper restrictions; pg 15).
BEARISH.
Pg 12, FUNDS. Eyebrows were raised when Vanguard Chairman & CEO Tim BUCKLEY announced his sudden retirement/departure at the young age of 55. Under his 6-yr tenure, Vanguard AUM has grown by 80% to become #2 in asset management, the overseas operations were cut abruptly, but customer complaints rose sharply in various social-media venues (Vanguard still has M-F, 8am-8pm customer service; personally, I have gotten account alerts on Friday night about attempted unauthorized access that locked my account and I couldn’t get hold of anybody until Monday 8am). Its app is bad. There has been tremendous growth in its ETFs and robo-advisors/PAS, but it has aspirations for more advisory services, and for that, client and customer services have to improve a lot. Greg DAVIS, President and CIO, will become the temporary CEO while Vanguard looks around, but Davis has a good chance of becoming the permanent CEO.
EXTRA, FUNDS. Not really news – most ACTIVE large-cap (LC) funds lagged passive LC index funds, according to SPIVA. In rising markets, it’s hard for active funds to beat market-cap based index funds that are driven by more money flowing into the winners. The underperformance was widespread – small/mid-cap funds, foreign funds, bond funds (they did alarmingly poor). The only bright spots were muni and EM debt funds that beat their indexed counterparts.
Pg 20: TECH valuations are generally high. But it’s a silly season for some stocks (techs, non-techs) with high P/S (S = sales) in 10s, 20s, 30s: ARM 34.9, NVDA 19.6, WIND 19.4, LLY 17.9, V 16.0. These hypergrowth stocks are vulnerable to selloffs on even minor disappointments in earnings and/or guidance. Several companies report both GAAP and inflated non-GAAP earnings, with stock-based compensation accounting for much of the difference. When looking at P/Es, first determine whether GAAP or non-GAAP earnings are used.
Pg 22: T/A Feature (skip if don’t care for T/A). The SP500 is up +25% since 10/2023 and is now +12% above 200-dMA (an overbought level). The recent moves have been unrelated to bond yields or the dollar (this bull has its own mind). The VIX is saintly calm at 14.74. Short-term 20-dMA has been rising since 11/2023 with SP500 remaining above or just bouncing off it. On down days, decliners outnumber advancers by a large margin. The ratio of SP500/IVV and SP SC 600/IJR seems to be topping out (meaning that the LC outperformance relative to SC may have run its course). A mild CORRECTION (decline between -10% to -20%) can be expected soon; there have been 6 pullbacks since 10/2023 but none qualified as correction. Support levels may be 4,818 (-6.6% below hi-close) and 4,600 (-10.8% below hi-close).
Pg 23, FUNDS. HY muni are attractive. Mentioned are OEF VWALX and ETFs HYMB, HYD, FMHI (active).
Pg 24, TECH TRADER. LEGACY TECHS are also benefiting from AI – IBM, CRM, HPE, DELL, SAP. German SAP has shifted to cloud-based ERP and subscription models. It can data-mine large client databases (with their permission for anonymized analyses). It has improved margins by cutting costs, capex and jobs.
Pg 25, INCOME. Office REITs are in a slump due to high vacancies. But there are attractive REIT sectors – strip malls (KIM), industrial (PLD), casinos (VICI), senior housing (WELL).
Pg 25, ECONOMY. For the incumbent Conservatives and Prime Minister SUNAK, this will be a tough election. With the economy in technical recession, the budget proposal was a balancing act.
Pg 26, Q&A/Interview. David KELLEY, J.P. Morgan. He doesn’t see a US recession; inflation will be down to +2%; unemployment will remain will stay below 4%. Of course, some external geopolitical shock(s) may change all that, but as for oil, the US is a net oil exporter. The fed fund futures market is now accepting the reality of higher rates for longer. He likes Japan. Domestic 60-40 portfolios aren’t attractive, but they are fine with broader stock and fixed income exposures, including alternatives. His long worry list includes geopolitics, crypto euphoria, popularity of indexing weaking the price-discovery function of the US markets, divisive domestic politics, social-media influencers, investors holding excessive cash (nobody became a billionaire just by holding cash), small-caps (40% of R2000 companies are unprofitable), China that may be cheap for good reasons.
Pg 54, OTHER VOICES. Burton MALKIEL, no intro needed! This US BULL MARKET run driven by Magnificent 7 may continue for a while. High valuations alone don’t kill bull markets. And there are differences now from the craziness of the dot .com bubble era of 2000. Irrational exuberance now, yes, bubble, no. Even those worried about bubbles (many are bond “experts”) should know that bubbles can keep growing until a sudden burst. Young people should invest regularly with dollar-cost averaging (DCA) and use broad-based low-cost funds. Older folks should review their risk exposures, keep short-term needs in money-market and short-term bonds, and know that systematic withdrawals on the way out in declining markets can be treacherous (there is no pleasant flipside to DCA).
Pg 55, RETIREMENT. LTCI is a hot topic of debate – to buy it in 40s and 50s when premiums are lower with passable medical underwriting OR retain risks for end-of-life care (in-home, nursing home, hospice). But planning is essential in either case as costs of $500K - $2 million would be difficult to handle for others taking care of your affairs – personal and financial. It is said that poor have Medicaid, rich can bear high costs, but the people in the middle may be squeezed. There are life insurance policies with LTCI riders, and joint-life policies. A 3-yr coverage for planning for end-of-life care should be enough.
Ad Supplement, TOP 1,200 FINANCIA ADVISORS has features on remote financial advisors and Q&A with a handful of advisors. These are followed by a state-by-state listing of financial advisors.
NOTE. I did call Barron’s to inform them that Barron’s Digital was still showing LAST WEEK’S paper. The Rep said that they are aware of the upload failure of the new version and are working on it.
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
