From Barron’s, April 1, 2024 (Part 1, Market Week+)
Mar 30, 2024 10:17:26 GMT
chang, Norbert, and 8 more like this
Post by yogibearbull on Mar 30, 2024 10:17:26 GMT
From Barron’s, April 1, 2024 (Part 1, Market Week+)
Pg 27, TRADER. A great 2024/Q1 ! The SP500 is up +10.2% in Q1 following a good +24% in 2023. Some are pointing to FOMO or bubble, but this sucker is going up for now. However, 2024 overall may be just OK, so don’t get carried away.
Hot IPOs are back. 2022-23 were bad years for IPOs, but this bull market is opening the IPO window wide. The ETF IPO is up +50% over 1 year. But it’s nowhere close to the IPO boom of 1999. The IPOs feed on the successes of the recent ones, so more are surely coming.
UPS (yield 4.5%; fwd P/E 17.6) provided such optimistic guidance that analysts were skeptical, and its stock fell. Of course, it provided poor guidance just in January, and it’s going through a bad stretch now, so skepticism is warranted. But patient long-term investors should do well.
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 5/1/24+ hold (cycle peak 5.25-5.50%)
FOMC 6/12/24+ cut
FOMC 7/31/24+ hold
FOMC 9/18/24+ cut
FOMC 11/7/24+ ?
(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 +0.84%, SP500 +0.39%, Nasdaq Comp -0.30%, R2000 +2.54%. DJ Transports +3.31%; DJ Utilities +0.95%. (Rotating spot small-cap R2000 +2.54%) US$ index (spot) +0.11% (remains too strong over 100), oil/WTI futures +3.15%, gold futures +2.75%.
YTD (index changes only), DJIA +5.62%, SP500 +10.16%, Nasdaq Comp +9.11%. (Rotating spot small-cap R2000 +4.81%)
SENTIMENTS
(ALL sentiments remain good and steady, but they peaked in mid-December)
NYSE cumulative (5-day) A/D LINE rose for a 2nd week; ratio of winners:losers 2:1
FUND INFLOWS +/OUTFLOWS-: Stocks +|0, taxable bonds +|0, munis +|+, money-market funds -|-. (NEW FORMAT: 4wMA|weekly change)
AAII Bull-Bear Spread +27.6% (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 75.77% (overbought); (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 77.7% (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 30, INTERNATIONAL TRADER. Airbus (EADSY; fwd P/E 24.2) may not be able to benefit from the troubles of Boeing/BA as it has problems of its own. Its backlog has grown to a record, but would the airlines wait 10+ years for delivery? Then, there are servicing and maintenance issues with some of its models. So, it has a huge potential, but would that be realized?
Pg 32, OPTIONS. Options work well for difficult and messy situations like Boeing/BA (is that for Broken Airplanes?). There were huge and belated management changes. Recommended is bull or bear spread, depending on investor inclinations.
SP500 VIX 13.01 (low), Nasdaq 100 VXN 16.66, options SKEW 155.44 (high), bond MOVE 86.38 (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 (Germany +1.69%, Sweden -0.74%) and a down week in ASIA (Australia +1.66%, HK -2.53%).
TREASURY* 3-mo yield 5.46%, 1-yr 5.03%, 2-yr 4.59%, 5-yr 4.21%, 10-yr 4.20%, 30-yr 4.34%;
REAL yields 5-yr 1.83%, 10-yr 1.88%, 30-yr 2.07%;
FRNs Index** 5.30% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose ^DXY 104.55, +0.1% (pg 50). GOLD rose to 2,214, another record (Handy & Harman spot, Thursday; pg 52); the gold-miners rose. (^XAU was at 127.00, +6.53% 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, “Trump’s DJT Stock Boosts His Net Worth by Billions – and Raises Big Questions Ahead of the Election”. DJT stock became a reality via a SPAC merger; it shot up to a market value of $8.4 billion, while there are little revenues. Most of that stock is under 6-mo lockup but that may be changed by a friendly board. Trump himself owns 58.2% of DJT and he is now #350 in Bloomberg’s Billionaire List. Besides the lockup, these are new liquid assets that may be used for loan collateral. Another twist is that while there are rules about political donations, there are almost none to invest in a company controlled by a candidate. There are also no rules against hyping or promoting DJT stock at election rallies (although Musk got into trouble tweeting/posting nonpublic details about TSLA). This is an interesting and unprecedented combination of economic and political interests. The former DWAC had huge legal, financial and regulatory issues and those didn’t just disappear when it became DJT – look at 84-page risk disclosure in the merger prospectus.
Pg 18: With 2023 revenues of only $3.4 million and net loss of $50 million, the market value of $8.4 billion (for P/S 2,512) may be unsustainable and DJT may crash. A trigger may be the reduction of 6-month lockup by its friendly board. It’s a super-meme stock with only 28% float, 12% short interest (but borrowing costs are around 150%). Buyers may see it as an election play. There is a convertible filing for $65 million with the conversion price of $11.50 only (unusual because conversion price is typically set much higher than the current trading price). A Secondary isn’t ruled out.
Pg 7, UP & DOWN WALL STREET. The stock market is too quiet with low VIX; Treasury volatility MOVE too. Obvious dangers and negative news are being ignored in the period between the earnings seasons. The notion that VIX is down because of the options writing ETFs is wrong. Stock correlations have fallen, so indexes are hiding lots of volatility underneath. But periods of low volatility can last a while.
GAME-FIXING scandals cannot be far behind as SPORTS BETTING becomes popular. There are several ongoing investigations. NJ may raise tax rates on legal gambling to 30% from 15%. FLUT and DKNG sold off on the news. But these issues don’t affect big companies in the long run.
The ROTATION from growth (IWF) to value (IWD) is most obvious in AI. So, instead of pricey NVDA, look at SQ, ETSY, V, etc; copper plays NGLOY, TECK. For other value plays, consider BAC, RTX, GEHC, etc.
Pg 10, STREETWISE. PELTZ/Trian vs IGER/DIS has added some management risks to the stock. Iger seems to be already doing much of what Peltz wants, but there is some old history between the firms and their people.
Toyota (TM; fwd P/E 11) has been slow to latch on to the EVs and now its stock looks good as anti-Tesla (TSLA; fwd P/E 60). Hybrids are making a comeback, a positive for TM. Cheap Chinese EVs from BYD, etc are coming even as EVs are in a slump, a negative for TSLA.
(More later….)
LINK
Pg 27, TRADER. A great 2024/Q1 ! The SP500 is up +10.2% in Q1 following a good +24% in 2023. Some are pointing to FOMO or bubble, but this sucker is going up for now. However, 2024 overall may be just OK, so don’t get carried away.
Hot IPOs are back. 2022-23 were bad years for IPOs, but this bull market is opening the IPO window wide. The ETF IPO is up +50% over 1 year. But it’s nowhere close to the IPO boom of 1999. The IPOs feed on the successes of the recent ones, so more are surely coming.
UPS (yield 4.5%; fwd P/E 17.6) provided such optimistic guidance that analysts were skeptical, and its stock fell. Of course, it provided poor guidance just in January, and it’s going through a bad stretch now, so skepticism is warranted. But patient long-term investors should do well.
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 5/1/24+ hold (cycle peak 5.25-5.50%)
FOMC 6/12/24+ cut
FOMC 7/31/24+ hold
FOMC 9/18/24+ cut
FOMC 11/7/24+ ?
(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 +0.84%, SP500 +0.39%, Nasdaq Comp -0.30%, R2000 +2.54%. DJ Transports +3.31%; DJ Utilities +0.95%. (Rotating spot small-cap R2000 +2.54%) US$ index (spot) +0.11% (remains too strong over 100), oil/WTI futures +3.15%, gold futures +2.75%.
YTD (index changes only), DJIA +5.62%, SP500 +10.16%, Nasdaq Comp +9.11%. (Rotating spot small-cap R2000 +4.81%)
SENTIMENTS
(ALL sentiments remain good and steady, but they peaked in mid-December)
NYSE cumulative (5-day) A/D LINE rose for a 2nd week; ratio of winners:losers 2:1
FUND INFLOWS +/OUTFLOWS-: Stocks +|0, taxable bonds +|0, munis +|+, money-market funds -|-. (NEW FORMAT: 4wMA|weekly change)
AAII Bull-Bear Spread +27.6% (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 75.77% (overbought); (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 77.7% (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 30, INTERNATIONAL TRADER. Airbus (EADSY; fwd P/E 24.2) may not be able to benefit from the troubles of Boeing/BA as it has problems of its own. Its backlog has grown to a record, but would the airlines wait 10+ years for delivery? Then, there are servicing and maintenance issues with some of its models. So, it has a huge potential, but would that be realized?
Pg 32, OPTIONS. Options work well for difficult and messy situations like Boeing/BA (is that for Broken Airplanes?). There were huge and belated management changes. Recommended is bull or bear spread, depending on investor inclinations.
SP500 VIX 13.01 (low), Nasdaq 100 VXN 16.66, options SKEW 155.44 (high), bond MOVE 86.38 (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 (Germany +1.69%, Sweden -0.74%) and a down week in ASIA (Australia +1.66%, HK -2.53%).
TREASURY* 3-mo yield 5.46%, 1-yr 5.03%, 2-yr 4.59%, 5-yr 4.21%, 10-yr 4.20%, 30-yr 4.34%;
REAL yields 5-yr 1.83%, 10-yr 1.88%, 30-yr 2.07%;
FRNs Index** 5.30% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose ^DXY 104.55, +0.1% (pg 50). GOLD rose to 2,214, another record (Handy & Harman spot, Thursday; pg 52); the gold-miners rose. (^XAU was at 127.00, +6.53% 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, “Trump’s DJT Stock Boosts His Net Worth by Billions – and Raises Big Questions Ahead of the Election”. DJT stock became a reality via a SPAC merger; it shot up to a market value of $8.4 billion, while there are little revenues. Most of that stock is under 6-mo lockup but that may be changed by a friendly board. Trump himself owns 58.2% of DJT and he is now #350 in Bloomberg’s Billionaire List. Besides the lockup, these are new liquid assets that may be used for loan collateral. Another twist is that while there are rules about political donations, there are almost none to invest in a company controlled by a candidate. There are also no rules against hyping or promoting DJT stock at election rallies (although Musk got into trouble tweeting/posting nonpublic details about TSLA). This is an interesting and unprecedented combination of economic and political interests. The former DWAC had huge legal, financial and regulatory issues and those didn’t just disappear when it became DJT – look at 84-page risk disclosure in the merger prospectus.
Pg 18: With 2023 revenues of only $3.4 million and net loss of $50 million, the market value of $8.4 billion (for P/S 2,512) may be unsustainable and DJT may crash. A trigger may be the reduction of 6-month lockup by its friendly board. It’s a super-meme stock with only 28% float, 12% short interest (but borrowing costs are around 150%). Buyers may see it as an election play. There is a convertible filing for $65 million with the conversion price of $11.50 only (unusual because conversion price is typically set much higher than the current trading price). A Secondary isn’t ruled out.
Pg 7, UP & DOWN WALL STREET. The stock market is too quiet with low VIX; Treasury volatility MOVE too. Obvious dangers and negative news are being ignored in the period between the earnings seasons. The notion that VIX is down because of the options writing ETFs is wrong. Stock correlations have fallen, so indexes are hiding lots of volatility underneath. But periods of low volatility can last a while.
GAME-FIXING scandals cannot be far behind as SPORTS BETTING becomes popular. There are several ongoing investigations. NJ may raise tax rates on legal gambling to 30% from 15%. FLUT and DKNG sold off on the news. But these issues don’t affect big companies in the long run.
The ROTATION from growth (IWF) to value (IWD) is most obvious in AI. So, instead of pricey NVDA, look at SQ, ETSY, V, etc; copper plays NGLOY, TECK. For other value plays, consider BAC, RTX, GEHC, etc.
Pg 10, STREETWISE. PELTZ/Trian vs IGER/DIS has added some management risks to the stock. Iger seems to be already doing much of what Peltz wants, but there is some old history between the firms and their people.
Toyota (TM; fwd P/E 11) has been slow to latch on to the EVs and now its stock looks good as anti-Tesla (TSLA; fwd P/E 60). Hybrids are making a comeback, a positive for TM. Cheap Chinese EVs from BYD, etc are coming even as EVs are in a slump, a negative for TSLA.
(More later….)
LINK
