Post by yogibearbull on Dec 26, 2020 18:23:42 GMT
[Due to post length limitation, Up and Down Wall Street, Streetwise and Cover Story (now only in online designation) that are in Part 1 won’t be repeated in Part 2.]
www.barrons.com/magazine?mod=BOL_TOPNAV
Pg 8-9: No important meetings noted.
Hacking of software provider SolarWinds/SWI left multiple government agencies and 18,000+ companies vulnerable; some cannot even determine whether they were hacked or not. This will lead to significant increases in security-software spending. Beneficiaries will include CHKP, PANW, CRWD, FEYE, SCWX; some of these stocks have runup already.
EV battery maker QuantumScape [QS; a recent SPAC merger] is suddenly hot [+390% since late-November; $51-59 billion market-cap]. There may be a short-squeeze going on.
Data this week: Dallas Fed Texas manufacturing survey on Monday; home price index [6+ yr high?] on Tuesday; ISM Chicago PMI, pending home sales, international trade deficit, mortgage applications, wholesale inventories on Wednesday; weekly initial jobless claims on Thursday.
Closed: Bond market closes early on Thursday, December 31 but stock market has normal hours [for tax-related procrastinators; it is the trade date that counts for 2020 tax year, not the settlement date]. Stock and bond markets are closed on Friday, January 1.
Bullish: Residential and commercial swimming pool servicer POOL [volatile stock; business was good pre-pandemic but is a huge beneficiary of pandemic; demand for pool services is high and existing pools need to be maintained; life of pools is not very long (7-10 years); new pool contractors are backed up by 3-6 months and each new pool brings new business for POOL; a small competitor is LESL, October IPO; pg 12]; home and local business services website YELP [hurt badly by pandemic but a good rebound play; drastically changed business model from sales teams to self-service, doing more business with larger national chains, added request-a-quote feature, etc; antitrust investigation of GOOGL (with some competing services) may be a plus; pg 13]; airlines [DAL, LUV, ALGT, European RYAAY, Brazilian GOL; bulls looking for post-pandemic rebounds (2022 earnings), bears looking for industry collapse, so opportunities from widely divergent opinions; domestic travel is at 35% of pre-pandemic level, international only at 20%, business travel may never recover fully (much replaced by online meetings?); industry is looking for stimulus money to survive through 2020-21; pg 23].
Bearish: See other stories.
Pg 10: China has put its foot down on Ma and his BABA and Ant [its IPO was deferred]. Chinese regulatory crackdown on Chinese big techs continues; US-China trade risks also remain [delisting threats, sanctions, tariffs]. The market reaction has been much harsher than that the US regulatory noises had on the US big techs.
Pg 15: Just the rumors of possible autonomous car [iCar?] added $145 billion to Apple’s/AAPL market-cap. There are also reports of AAPL’s new battery technology. These rumors have been around for years and it is unclear how AAPL may enter the car business, if at all – own manufacturing vs 3rd party manufacturing vs software and/or battery partnerships with existing car manufacturers. Musk [TSLA] taunted that Cook [AAPL] could have had TSLA for only $60 billion in 2017/18.
Some interesting and cheap small techs include YELP, AIRG, NDCVF, etc.
Pg 17: Several global ESG bond issuers are listed. Those from the US are Inter-American Development Bank, International Finance Corporation, CBRE, KEYS, KRC, HPQ, BBY, CSCO, NVDA, GWW, ADBE. The ESG screen is an additional quality screen.
Pg 25: Todd McClone and Casey Preyss of all-cap, EM high-quality growth WBENX [also EM small-cap growth WESNX] say that there is a whole wide world out there: $50+ billion market cap EM companies that no one has heard about; world’s largest $350 billion market-cap Chinese spirits company Kweichow Moutai, etc. Fund is overweighted in China and Taiwan and those economies have recovered faster from pandemic. Several of WBENX holdings come from EM-SC-growth WESNX. They are the most bullish on EM growth in 10 years due to multiple factors that favor EM growth now.
Pg 27: After 10 years, the SEC finally approved Rule 18f-4 in October that limits traditional fund leverage to 50% of gross assets [or 100% of net assets]; derivative-based direct and inverse ETFs will be limited to +/- 2x leverage. Exceptions include existing +/- 3x ETFs [TQQQ, SOXS, FAS, TECL, SPXL, TNA, etc]; ETNs will not be restricted at all as they are debt instruments from the sponsors. There will be new competition in +/- 2X ETFs that may lower their ERs [e.g. Nasdaq 100 2x QLD has ER of 0.95%], but an unintended consequence of banning +/- 3x ETFs will be more +/- 3x ETNs [coming GDXU, etc]. Direct and inverse leverage ETFs/ETNs remain niche areas and some brokerages don’t even allow trading them [Vanguard Brokerage, etc]. However, these days many funds employ some leverage through derivatives, especially bond funds and alternatives funds.
Pg 28: Neel Kashkari, Minneapolis Fed President, Treasury official responsible for TARP, 2008-09. The US is at a crossroad: the stock and bond markets are at highs, while the unemployment also remains high [still 10+ million] and many businesses are struggling. Fed’s super-easy monetary policies are supporting the larger economy even though they may hurt savers, retirees, pension funds, insurance companies. Global rates are low not because of central banks but due to macroeconomic factors, savings vs investments, demographics, technology. The Fed has been successful at containing this healthcare crisis. Some of Fed’s facilities were underutilized but were effective in building business confidence. Early CARES Act by Congress was also very effective. He believes in strong banks and high capital requirements and that may lead to further consolidation and restructuring. Banks cannot just look at their Covid-19 experiences when consumers and businesses got huge support from Fed’s monetary policy and Congress’ fiscal policy [CARES Act, next stimulus]. Near collapse/freeze in short-term markets in March revealed a structural financial problem – why do companies and banks rely so much on short-term funding that can freeze up or disappear overnight and then look for support from the Fed and Congress? In fact, community banks and small banks did fine in March. There is some thing wrong here.
Social disparity has become such a huge issue that Minnesota Fed, Atlanta Fed, Boston Fed held a summit on the issue – some may say that isn’t Regional Feds’ job. But when only medians and averages are looked at, some big things are missed. There is a growing sentiment that the Fed and others should also look at deeper economic details. Some actions may be taken via existing banking supervision and Community Reinvestment Acts [CRA] but some new legislation(s) may be necessary. He is not concerned about rising government debt during the pandemic. The US has extraordinary debt capacity and high debt can be addressed in better times. He is certainly not for unlimited government spending forever. A strange thing happened during pandemic – savings went up! With businesses shut, people homebound and CARES Act stimulus, there wasn’t much people could spend on, but then also think of those workers whose jobs were gone. It is important for Administration, Fed and Congress to work together. The federal government and state and local governments should also work cooperatively. He suggests that politicians should focus on things that they can agree on – education, infrastructure, rural broadband, immigration reforms, etc. Note that he made an unsuccessful run for Governor of CA in 2014.
Pg 30: Christopher Smart, Barings Investment Institute. With end of pandemic investing in sight, old worries may be back in 2021 [valuations, liquidity, solvency, demographic, tech disruptions, geopolitical, changing world order, etc]. Analysts can stop being amateur epidemiologists and return to what they know – traditional financial analysis. Companies may resume providing guidance. Politicians can stop politicizing the science. We do have a challenging Winter ahead. Then the elevated markets may remain so, or even go higher, with vaccine-driven economic recovery. Beware of risks from high unemployment, slow or stalling recovery. Stock-pickers may have to sort out winners and losers. Investors who did well in the rudderless 2020 and thought that they did well only due to their smart chart-reading may have to reflect on that again as markets reveal their treacherous side again.
Pg 31: Muni budget crunch is pressuring public payrolls [7% decline to the lowest level since 2001] and there has hasn’t been much rebound. There is no help yet for state and local budgets from stimulus except for some specific services [schools, transportation, healthcare]. Property and sales taxes are already high in many jurisdictions. Several local services have been affected. Public payroll is 15% of total payroll.
Extras from online Friday that didn’t make the paper version.
None
Link
www.barrons.com/magazine?mod=BOL_TOPNAV
Pg 8-9: No important meetings noted.
Hacking of software provider SolarWinds/SWI left multiple government agencies and 18,000+ companies vulnerable; some cannot even determine whether they were hacked or not. This will lead to significant increases in security-software spending. Beneficiaries will include CHKP, PANW, CRWD, FEYE, SCWX; some of these stocks have runup already.
EV battery maker QuantumScape [QS; a recent SPAC merger] is suddenly hot [+390% since late-November; $51-59 billion market-cap]. There may be a short-squeeze going on.
Data this week: Dallas Fed Texas manufacturing survey on Monday; home price index [6+ yr high?] on Tuesday; ISM Chicago PMI, pending home sales, international trade deficit, mortgage applications, wholesale inventories on Wednesday; weekly initial jobless claims on Thursday.
Closed: Bond market closes early on Thursday, December 31 but stock market has normal hours [for tax-related procrastinators; it is the trade date that counts for 2020 tax year, not the settlement date]. Stock and bond markets are closed on Friday, January 1.
Bullish: Residential and commercial swimming pool servicer POOL [volatile stock; business was good pre-pandemic but is a huge beneficiary of pandemic; demand for pool services is high and existing pools need to be maintained; life of pools is not very long (7-10 years); new pool contractors are backed up by 3-6 months and each new pool brings new business for POOL; a small competitor is LESL, October IPO; pg 12]; home and local business services website YELP [hurt badly by pandemic but a good rebound play; drastically changed business model from sales teams to self-service, doing more business with larger national chains, added request-a-quote feature, etc; antitrust investigation of GOOGL (with some competing services) may be a plus; pg 13]; airlines [DAL, LUV, ALGT, European RYAAY, Brazilian GOL; bulls looking for post-pandemic rebounds (2022 earnings), bears looking for industry collapse, so opportunities from widely divergent opinions; domestic travel is at 35% of pre-pandemic level, international only at 20%, business travel may never recover fully (much replaced by online meetings?); industry is looking for stimulus money to survive through 2020-21; pg 23].
Bearish: See other stories.
Pg 10: China has put its foot down on Ma and his BABA and Ant [its IPO was deferred]. Chinese regulatory crackdown on Chinese big techs continues; US-China trade risks also remain [delisting threats, sanctions, tariffs]. The market reaction has been much harsher than that the US regulatory noises had on the US big techs.
Pg 15: Just the rumors of possible autonomous car [iCar?] added $145 billion to Apple’s/AAPL market-cap. There are also reports of AAPL’s new battery technology. These rumors have been around for years and it is unclear how AAPL may enter the car business, if at all – own manufacturing vs 3rd party manufacturing vs software and/or battery partnerships with existing car manufacturers. Musk [TSLA] taunted that Cook [AAPL] could have had TSLA for only $60 billion in 2017/18.
Some interesting and cheap small techs include YELP, AIRG, NDCVF, etc.
Pg 17: Several global ESG bond issuers are listed. Those from the US are Inter-American Development Bank, International Finance Corporation, CBRE, KEYS, KRC, HPQ, BBY, CSCO, NVDA, GWW, ADBE. The ESG screen is an additional quality screen.
Pg 25: Todd McClone and Casey Preyss of all-cap, EM high-quality growth WBENX [also EM small-cap growth WESNX] say that there is a whole wide world out there: $50+ billion market cap EM companies that no one has heard about; world’s largest $350 billion market-cap Chinese spirits company Kweichow Moutai, etc. Fund is overweighted in China and Taiwan and those economies have recovered faster from pandemic. Several of WBENX holdings come from EM-SC-growth WESNX. They are the most bullish on EM growth in 10 years due to multiple factors that favor EM growth now.
Pg 27: After 10 years, the SEC finally approved Rule 18f-4 in October that limits traditional fund leverage to 50% of gross assets [or 100% of net assets]; derivative-based direct and inverse ETFs will be limited to +/- 2x leverage. Exceptions include existing +/- 3x ETFs [TQQQ, SOXS, FAS, TECL, SPXL, TNA, etc]; ETNs will not be restricted at all as they are debt instruments from the sponsors. There will be new competition in +/- 2X ETFs that may lower their ERs [e.g. Nasdaq 100 2x QLD has ER of 0.95%], but an unintended consequence of banning +/- 3x ETFs will be more +/- 3x ETNs [coming GDXU, etc]. Direct and inverse leverage ETFs/ETNs remain niche areas and some brokerages don’t even allow trading them [Vanguard Brokerage, etc]. However, these days many funds employ some leverage through derivatives, especially bond funds and alternatives funds.
Pg 28: Neel Kashkari, Minneapolis Fed President, Treasury official responsible for TARP, 2008-09. The US is at a crossroad: the stock and bond markets are at highs, while the unemployment also remains high [still 10+ million] and many businesses are struggling. Fed’s super-easy monetary policies are supporting the larger economy even though they may hurt savers, retirees, pension funds, insurance companies. Global rates are low not because of central banks but due to macroeconomic factors, savings vs investments, demographics, technology. The Fed has been successful at containing this healthcare crisis. Some of Fed’s facilities were underutilized but were effective in building business confidence. Early CARES Act by Congress was also very effective. He believes in strong banks and high capital requirements and that may lead to further consolidation and restructuring. Banks cannot just look at their Covid-19 experiences when consumers and businesses got huge support from Fed’s monetary policy and Congress’ fiscal policy [CARES Act, next stimulus]. Near collapse/freeze in short-term markets in March revealed a structural financial problem – why do companies and banks rely so much on short-term funding that can freeze up or disappear overnight and then look for support from the Fed and Congress? In fact, community banks and small banks did fine in March. There is some thing wrong here.
Social disparity has become such a huge issue that Minnesota Fed, Atlanta Fed, Boston Fed held a summit on the issue – some may say that isn’t Regional Feds’ job. But when only medians and averages are looked at, some big things are missed. There is a growing sentiment that the Fed and others should also look at deeper economic details. Some actions may be taken via existing banking supervision and Community Reinvestment Acts [CRA] but some new legislation(s) may be necessary. He is not concerned about rising government debt during the pandemic. The US has extraordinary debt capacity and high debt can be addressed in better times. He is certainly not for unlimited government spending forever. A strange thing happened during pandemic – savings went up! With businesses shut, people homebound and CARES Act stimulus, there wasn’t much people could spend on, but then also think of those workers whose jobs were gone. It is important for Administration, Fed and Congress to work together. The federal government and state and local governments should also work cooperatively. He suggests that politicians should focus on things that they can agree on – education, infrastructure, rural broadband, immigration reforms, etc. Note that he made an unsuccessful run for Governor of CA in 2014.
Pg 30: Christopher Smart, Barings Investment Institute. With end of pandemic investing in sight, old worries may be back in 2021 [valuations, liquidity, solvency, demographic, tech disruptions, geopolitical, changing world order, etc]. Analysts can stop being amateur epidemiologists and return to what they know – traditional financial analysis. Companies may resume providing guidance. Politicians can stop politicizing the science. We do have a challenging Winter ahead. Then the elevated markets may remain so, or even go higher, with vaccine-driven economic recovery. Beware of risks from high unemployment, slow or stalling recovery. Stock-pickers may have to sort out winners and losers. Investors who did well in the rudderless 2020 and thought that they did well only due to their smart chart-reading may have to reflect on that again as markets reveal their treacherous side again.
Pg 31: Muni budget crunch is pressuring public payrolls [7% decline to the lowest level since 2001] and there has hasn’t been much rebound. There is no help yet for state and local budgets from stimulus except for some specific services [schools, transportation, healthcare]. Property and sales taxes are already high in many jurisdictions. Several local services have been affected. Public payroll is 15% of total payroll.
Extras from online Friday that didn’t make the paper version.
None
Link