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From Barron’s, July 13, 2020 (Part 1)

 

 

[Italics-bold within the brackets are my additions/elaborations] [New M* Discussions doesn’t allow any colors for cut-and-paste from WORD]

 

Pg M1, Trader: An up week, but what’s up with Nasdaq Comp up +4%? SP 500 has been flat for a month with high daily volatility – sort of volatile-flat market. VIX remains elevated [although much lower than its peak]. This month may not be flat. Be prepared for long-tail risks. And now comes the dreaded Q2 with revenues down -12% y-o-y, and earnings plunging -44%. Just because we all know that it is coming doesn’t mean that it won’t hurt [when it pours, many people get wet and some houses get washed away]. And keep fingers crossed on those amazing techs [they better deliver]. We may also get clarity on states reopening as Covid-19 cases rise, and on the new DC stimulus [by late-July] or see a consumer income cliff down as the previous stimulus expires.

Pay attention to Q2 cash flows over earnings. This is a lost year form earnings with SP 500 trading at fwd P/E 25 of depressed earnings and no one seems to care. But cash flow does matter. Just look at Denny’s/DENN. It fell sharply, rebounded strongly, but then tanked again on announcement to raise funds via equity issuance. There were signs – high debt, high cash burn rate, low cash on hand, tapped out credit lines. There are others in similar situation, FELE, KMT, PNR. A worry is that some companies are having trouble converting credit-based sales into cash, e.g. PLUG, CROX, F [oh, TSLA too, but that lives in another world].

 

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.

ZIRP [0-0.25% fed fund rate] through March 2021 FOMC meeting.

http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html ]

 

For the week [index changes only], DJIA +0.96%, SP500 +1.76%, Nasdaq Comp +4.01%, Russell 2000 -0.64%. DJ Transports +0.83%; DJ Utilities +0.57%. [tech XLK +2.67%]. US$ index (spot) -0.53%, oil/WTI futures -0.25%, gold futures +0.80%.

YTD [index changes only], DJIA -8.63%, SP500 -1.42%, Nasdaq Comp +18.33%. [tech XLK +17.90%]

 

Pg M4, Europe: Dutch chip-equipment maker ASML is attractive. Its EUL process in 2010 allowed smaller and more powerful chips. Smartphones are driving the growth of the chips market.

 

Pg M4, Emerging Markets: China encouraged public to buy stocks on July 6 but turned cautious after its stock markets soared. Regulators also raised margin requirements and the PBOC hinted on tapering some stimulus. China doesn’t want a repeat of 2014-15 runup and crash. China A-shares’ weight in global indexes is rising gradually from 5% to 20%. Don’t chase hot stocks. Most valuations are at early 2018 levels and some old economy stocks are trading P/B of 0.5.

 

Pg M7, Commodities: Lumber has rebounded strongly after Q1 selloff. Homebuilding has picked up as home inventories are low. Demand for entry-level homes is rising.

 

Pg M5, Options: Election uncertainties are rising. Low rates are providing support for the market. Sell SPY puts and buy calls to bet on volatility [this risk-reversal strategy isn’t for the fainthearted].

 

[SP500 VIX 27.29, SKEW 135.68 ] [Yahoo Finance data]

[10-Yr T-Note futures-options based TYVIX has been discontinued; last quote 5/15/20. A new TLT-options-based TICKER? will replace it in Fall]

 

Pg M27, M32: An up week in Europe [Belgium +1.76%, UK -1.18%, Greece -4.72%] and a good week in Asia [China +6.77%, Philippines –2.41%]. The equity CEF index [data to Thursday] outperformed the DJIA and its discount was -7.5% [wide fluctuations between -4% to -16% over the last few weeks].

Treasury rates 3-mo yield 0.13%, 2-yr 0.16%, 5-yr 0.30%, 10-yr 0.65%, 30-yr 1.33% [Treasury data*]. Dollar fell, DXY 96.66, -0.5% [M35]. Gold [Handy & Harman spot, Thursday] rose to $1,812, +2.3% [9-yr high]; the gold-miners rose [M38]. [^XAU was at 135.90, +6.96% for the week]

*Treasury Yield-Curve https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=y...

Top FDIC insured savings deposit rates*: Money-market accounts 1.09%; 3-mo Jumbo CD 0.50%, 1-yr CDs 1.10%; 5-yr CDs 1.34% [M33].

*For local rates https://www.depositaccounts.com/banks/rates-map/

 

Pg 22: Cover Story, “Barron’s Midyear Roundtable: 37 Picks from Our Investment Pros”. Details to follow in Part 2.

Todd Ahlsten, Parnassus Investments:

James Anderson, Baillie Gifford:

Rupal Bhansali, Ariel Investments:

Scott Black, Delphi Management:

Abby Cohen, Goldman Sachs:

Sonal Desai, Franklin Templeton:

Henry Ellenbogen, Durable Capital:

Mario Gabelli, Gamco:

William Priest, Epoch Investment Management:

Meryl Witmer, Eagle Capital:

 

Pg 7, Up and Down Wall Street: Tech is becoming a crowded play. Nasdaq Comp is up +18% YTD – it has several companies that are benefitting from at-home trend during the pandemic and have good chances of doing well in the post-pandemic period. But this can/may be overdone. AAPL, MSFT, AMZN represent 28.6% of the reconstituted [6/26/20] R1000 Growth. Techs are 28% of SP500 while some economically sensitive sectors have puny weights, utilities 3.0%, real estate 2.8%, energy 2.5%, materials 2.5%. Some ask, jokingly, how long will it take for SPY to look like QQQ? [well, that may take a while, but you get the idea]

The Fed has been buying bonds of companies that don’t need government help [well, it promised to buy mostly investment-grade corporates and recently fallen-angels; it is the trickle-down theory]. Some stimulus/bailout money has gone to zombie companies [YRCW, NVAX, etc].

Gold at 9-yr high [+19% YTD] may continue to rally until it becomes a front/top page media story.

 

Pg 10, Streetwise: Covid-19 pandemic is accelerating cord-cutting [i.e. streaming, live TV, virtual TV (vMVPD)]. This is bad for cable companies that offer bundled services – as they lose subscribers, the remaining subscribers have to pay more; some are diversifying into other businesses [CMCSA (home-security), T (content)]. However, pure-play cable CHTR [pay-TV, broadband] is doing well.

 

More later….

YBB
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Re: From Barron’s, July 13, 2020 (Part 1)

Thanks Yogi....

After reading my Barrons last week I noted that there were a few references to some volatility and questioning of the market rallying against  some of the same cautionaries we have being highlighted this week.  So Friday the Banks and even the oil majors rallied sharply.  While some of Tech stalled AMZN keeps on knocking the ball out.  The first week of July has traditionally  been a strong week for stocks.  Earnings issues or not I still like GS and MS especially their preferreds.  GS rocketed higher on Fri after ditching the $200 handle earlier in the week.  "IMO" we have NOW consolidated the 3135 to 3150 S&P resistance and will next head for and make 3200 with 3260 being the next strong upside resistance.  Many companies have already declared their to be paid in Aug and Early Sept dividends.   More might be discerned possibly examining the Regional banks for forthcoming dividend cuts.  

Yes cash flow / revenues do matter but there are going to be more Zombie companies out raising cash in the debt markets and it seems likely the ALWAYS too slow to react Ratings agencies will have to once again AFTER the most pain has been inflicted, downgrade to junk large swaths of their BBB+, BBB, and BBB-  rated commercial debt to JUNK.  And Now the fallen angels even get Fed support. Beware large Bid to Ask bond quotes.  Gov Murphy has announced the NOT!  Bush 41 NO New Taxes, but expected "increased revenue" requirements for 2021.  There may still be something left that NJ does not tax?  Maybe they will go down the path of the "NEW" Democrats and attack the elderly with state income taxes on  SS?  They can't squeeze anything out of them on interest income.  The list of states with shaky bond ratings is likely to grow?  What kind of budgeted shortfalls will CT have on shortfalls in their 12% hotel room taxes?  Revenue matters in the MUNI markets too.  

Another great week for the XLK.  Of late I have wondered why we do not find any MLM, VMC,GVA or SUM in the top ten holdings of the XLB ?   Apparently you do get TECH in the XLK.  AMZN blasting through $3200....

China markets are starting to look attractive especially their own or pirated TECH.  "Full many a gem of purest ray serene the dark unfathomed caves of ocean bear..."  This past week we found a CHINA GEM right here on our own left coast, as MATX rocketed 33% higher on Friday after reporting very strong revenue gains in their EXPRESS ocean freight business from China.  Hundreds of millions of $s of PPE were shipped in the 2 qtr and the company reported big revenue and earnings increases from that.  Previously analysts had panned the stock speculating on the loss of revenues from the expected dearth of vacationers traveling to the company's other markets, ALASKA and Hawaii, not requiring gear and food .   The vessels sailing from China do not make calls in Korea and Japan as many other carriers do before sailing for Long Beach and Oakland. 

Lumber has been strong but RYN and ACAZF seem yet to have reacted.   My local Lowes is chronically short of PT decking material.  ACAZF / ADN:TO has though declared their most recent +8% dividend. The ex date was 6/30.  But the stock is still down Month to date maybe on the shadow of the ex trading?   RYN just paid out their 2nd QTR dividend on 6/30.  On Friday RYN got a 4.6% pop and ACAZF put on a 2.8% gain.  Maybe there will be follow through on forest products?  Might the recent July Dip in FAST be a buying opp ?  "I'd rather be a hammer than a nail or deck screw......."

Unlike MM funds FDIC insured bank accounts are insured to preserve and guarantee "THE BUCK $". 

The SPY will look like the QQQ ? And as I already pointed out the materials Spyder XLB will continue to not own the Materials in any significant  weighting. The fatal flaw in "THE Indexes" is that perhaps 90% of the US Retail investors have been sold on John Vogel.  Just as in Bond FUNDS, retail investors in stock index funds are a dangerous bunch.  It is not nice when millions of retail investors start selling the same group of 30, 100, 200, 500, 1000, and 2000 stocks ALL at the same time. On the other hand when a stock goes up 33% in one day we can "ASSUME" the dividend is safe?  

 

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Re: From Barron’s, July 13, 2020 (Part 1)

"SP 500 has been flat for a month"

The main Markets tab on the M* main page shows Morningstar US Market PR USD index is pretty much flat as well for the past one month.   https://www.morningstar.com/indexes/spi/mstar/quote

For my Morningstar Portfolio performance tracking, I chose Morningstar US Market Index.  There it shows this index has returned 6.39% for the last one month.   I know they are different indices but still how is it possible for Morningstar US Market Index to return that much?   

 
 
 Trailing Total Returns
ReturnIntraday 1-Week 1-Month 3-Month YTD 1-Year 3-Year (Ann.) 5-Year (Ann.) 10-Year (Ann.) Since
Purchase
(Ann.)
 Enter
Custom
Time
Total0.00 1.14 4.65 11.86 2.39 9.10 10.54   11.57 
Personal0.00 1.14 4.65 11.87 4.45 11.28 11.70   12.42 
Index0.00 1.79 6.39 15.44 -1.38 5.84 9.22   9.80 
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Frequent Contributor

Re: From Barron’s, July 13, 2020 (Part 1)

@Anitya , SP500 was flat for a month, DJIA down, Nasdaq Comp up. Don't know what M* index is.   https://stockcharts.com/h-perf/ui?s=$SPX&compare=$INDU,$COMPQ&id=p81680683742

YBB
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Re: From Barron’s, July 13, 2020 (Part 1)


@yogibearbull wrote:

@Anitya , SP500 was flat for a month, DJIA down, Nasdaq Comp up. Don't know what M* index is.   https://stockcharts.com/h-perf/ui?s=$SPX&compare=$INDU,$COMPQ&id=p81680683742


I added a second sentence in my previous post ( I was editing while you were replying).  Makes me wonder if the M* Portfolio, My Performance tracking is correct.

In My Performance, I changed the "Compare to" to S&P 500 and it shows S&P 500 returned 6.24% for the past one month.  So, obviously, the Performance tracking tool is wrong.  Likely, my performance shown in that tool is also wrong.

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Portfolio/My Performance vs Quote/Performance Data Discrepancy


@Anitya wrote:

@yogibearbull wrote:

@Anitya , SP500 was flat for a month, DJIA down, Nasdaq Comp up. Don't know what M* index is.   https://stockcharts.com/h-perf/ui?s=$SPX&compare=$INDU,$COMPQ&id=p81680683742


I added a second sentence in my previous post ( I was editing while you were replying).  Makes me wonder if the M* Portfolio, My Performance tracking is correct.

In My Performance, I changed the "Compare to" to S&P 500 and it shows S&P 500 returned 6.24% for the past one month.  So, obviously, the Performance tracking tool is wrong.  Likely, my performance shown in that tool is also wrong.


I checked the details for some funds and the data are quite off from that in Quote/Performance pages. I have send an email to support@morningstar.com .

YBB
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Re: From Barron’s, July 13, 2020 (Part 1)

Thanks yogi, the thought that M* ought to put you on the payroll came to mind, but I know you're not doing this for money.

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Re: Portfolio/My Performance vs Quote/Performance Data Discrepancy


@yogibearbull wrote:

@Anitya wrote:

@yogibearbull wrote:

@Anitya , SP500 was flat for a month, DJIA down, Nasdaq Comp up. Don't know what M* index is.   https://stockcharts.com/h-perf/ui?s=$SPX&compare=$INDU,$COMPQ&id=p81680683742


I added a second sentence in my previous post ( I was editing while you were replying).  Makes me wonder if the M* Portfolio, My Performance tracking is correct.

In My Performance, I changed the "Compare to" to S&P 500 and it shows S&P 500 returned 6.24% for the past one month.  So, obviously, the Performance tracking tool is wrong.  Likely, my performance shown in that tool is also wrong.


I checked the details for some funds and the data are quite off from that in Quote/Performance pages. I have send an email to support@morningstar.com .


SOLUTION: Widest differences were for 1mo. M* Portfolio/My Performance has option for custom dales. Playing with that on Sunday, 7/12/20, 1wk matched exactly with 7/3/20-7/10/20 [F to F]. But 1mo didn’t match at all with 6/10/20-7/10/20 or 6/9/20-7/10/20 [Quote/Performance probably uses this rolling 30day or 31day month definition], but instead matched exactly with 4wks 6/12/20-7/10/20. Confusingly, M* uses different definitions for 1mo across its different platform [4wks, 30days, 31days]. Other performance data differences were smaller and may also be explained by different dated used internally for rolling 3mo, 1yr, 3yr, 5yr, 10yr. Best matches were for YTD where this date/day confusion was not likely. Let us see what the customer support response is [if they don’t see this].

YBB
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Re: Portfolio/My Performance vs Quote/Performance Data Discrepancy

Good to know YTD is correct.  

I did not know MY Performance is calculated based on rolling periods.  That tab only says, "Trailing Total Returns."

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Re: Portfolio/My Performance vs Quote/Performance Data Discrepancy


@Anitya wrote:

Good to know YTD is correct.  

I did not know MY Performance is calculated based on rolling periods.  That tab only says, "Trailing Total Returns."


No difference - trailing/rolling periods to the current date.

In my research on this, I found that an alternate use was that of the most recent full calendar periods [week, month, year] near the current date. But these won't change daily as M* data does [except when Monthly or Quarterly tabs are used in Quote/Performance].

YBB
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Re: Portfolio/My Performance vs Quote/Performance Data Discrepancy

M* Support has responded. 

Although it didn't address the issue of time window [e.g. whether 1mo is 4wks (that I found for Portfolio/My Performance) or 30days], it mentioned 2 other points that explain the small differences from Quote/Performance.

1. Portfolio/My Performance doesn't include dividends, while Quote/Performance includes dividends. Support said that this difference was intentional but didn't explain further.

2. Portfolio/My Performance data for Friday, 7/10/20 were not updated Friday night or over the weekend, but will be updated on the next working day, Monday, 7/13/20.

For me, this methodology difference [for dividends] and time lag make Portfolio/My Performance data less useful as daily portfolio monitoring tool.

YBB
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Re: Portfolio/My Performance vs Quote/Performance Data Discrepancy

Point 2 makes M* sound like a Govt organization.  Absolutely makes no sense.

 

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