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Frequent Contributor

From Barron’s, July 6, 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: Ready for Summer time stock market melt up [+10%+] ? There are several +/- but the market doesn’t want to go sideways or down. For the up-move to be sustainable, rally must broaden. Ahead of Q2 earnings season in 2 weeks, Citi Economic Surprise Index has surged to a record high from record low in April. Investors are looking beyond horrible Q2 earnings and any earnings beating dreadful estimates would be positive. But the market may get ahead of itself with a strong Summer rally and then it may end badly – be careful what you wish for.

European recovery play includes ETF EZU.

 

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 +3.25%, SP500 +4.02%, Nasdaq Comp +4.62%, Russell 2000 +3.85%. DJ Transports +4.88%; DJ Utilities +5.00%. [Stoxx Europe 600 +2.78%]. US$ index (spot) -0.22%, oil/WTI futures +5.61%, gold futures +0.65%.

YTD [index changes only], DJIA -9.50%, SP500 -3.12%, Nasdaq Comp +13.76%. [Stoxx Europe 600 -11.43%]

 

Pg M4, Europe: Car-racing videogame maker Codemasters [CDM.uk] is growing by acquisitions [FIA World Rally Champion, Slightly Mad Studios].

 

Pg M4, Emerging Markets: EM green bonds are attractive. It is a tiny market with $200 billion AUM. [Green bonds commit the funds to environment-friendly projects]

 

Pg M6, Commodities: Commodities did poorly in 2020/H1 but uranium has been resilient [+30% YTD].

 

Pg M5, Options: Walking and home gym are replacing commercial gyms. This has benefitted PTON and private Mirror [being acquired by LULU]. Bullish LULU investors may sell-puts and buy-calls.

 

[SP500 VIX 27.68, SKEW 146.34 (high)] [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 L28, L54: A great week in Europe [Spain +4.53%, Switzerland +1.31%] and an up week in Asia [New Zealand +3.56%, Japan –2.18%]. The equity CEF index [data to Thursday] outperformed the DJIA and its discount was -8% [wide fluctuations between -4% to -16% over the last few weeks].

Treasury rates 3-mo yield 0.14%, 2-yr 0.16%, 5-yr 0.29%, 10-yr 0.68%, 30-yr 1.43% [Treasury data*]. Dollar fell, DXY 97.22, -0.2% [M23]. Gold [Handy & Harman spot, Thursday] rose to $1,790 [hit $1,800 briefly, 9-yr high]; the gold-miners rose [M26]. [^XAU was at 127.06, +3.38% 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 1.49% [L55].

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

 

Pg 15: Cover Story, “3 Scenarios for Playing the Covid-19 Economies in the 2nd Half”. Stock market is indicating signs of recovery before the actual economic data. 3 scenarios for 2020/H2 include 1) Bear Case with recovery faltering as Covide-19 cases keep rising on reopening and SP500 falling to 2,500, 2) Base Case that the public learns to live with Covid-19, and monetary and fiscal stimulus will support the economy; SP500 may rise to 3,300, 3) Bull Case with Covid-19 treatment(s) available and SP500 rising to 3,500.

 

Supplement, Funds Quarterly Q2. Excerpts will be posted in Part 3 in Mutual Funds forum.

 

Pg 7, Up and Down Wall Street: Wall Street views Covid-19 crisis as manageable – new cases are rising but treatments are on the way. Some are looking at earnings beyond 2020 [fwd P/E 19] and 2021 [fwd P/E 17] and to 2022 [fwd P/E also 17]. Some are also preparing for Democratic sweep in 2020 elections that cannot be ruled out – that may have implications for taxes [higher] and regulations [more]. JC Penny century bonds issued in 1997 [AMZN IPO was that year] are trading at 1c; bankrupt stock JCPNQ would likely be wiped out in bankruptcy restructuring but those crazy retail app traders are keeping it around 30c. BRK-A/B is badly lagging as Warren Buffett [turns 90 in August] has lost his golden touch; David Portnoy of Barstool Sports says that WB is too old and washed up; what is he going to do with $150 billion in “cash” that he didn’t deploy in March stock and bond crashes. Convertibles did well in H1; TSLA is now the largest convertible issuer; a CEF is AVK.

 

Pg 9, Streetwise: Restaurant stocks are taking a hit again on reopening slowdown/faltering. But beneficiaries of at-home trend are doing great [WING, CMG, DPZ, PZZA, etc].

 

More later….

YBB
4 Replies
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Explorer ○○○

Re: From Barron’s, July 6, 2020 (Part 1)

Thanks Yogi....

PG M-1 certainly looks to ME like Barrons is spinning an oxymoron.  Summer melt up?  Based on what?  The first week of July is a fairly consistent in producing up week for the markets.  The market won't go down ?  Side ways is what occurred into June 11th and June 25th and 26th?  The S&P hitting a stalling multiple times @ 3135 to 3150 looks like strong upside RESISTANCE leading into the "SUMMER DOLDRUMS".  +3% pullbacks do not look like a sideways market to me unless you just exclude all sectors BUT TECH.  A subsequent paragraph with ONE WEEK ! increases of 4% to 5% in some major market averages.  How is the market flat against those kinds of ULTRA ST moves?  Barrons ignoring where those averages came from?  Earnings beating dreadful estimates... Well a lot of those dreadful estimates ARE actually going to assert. The fundamentals to me still look really lousy.  The .TNX clutching to the 0.6% handles?  Is Powell just prevaricating about ZIRP everlasting NEVER morphing into NIRP?  Where can the US bond market go from here?  Isn't this Bill Gross's American Revolution and Vietnam war victors moment ?  Bill has called the bottom in rates and the peak in the bond market at least 4 times in the last 5-7 years.  After losing every previous call is he finally on the mark? The immense hatred lumped on THE BANKS by members of Congress at last week's Congressional hearings.  Suggestions that dividend cuts are insufficient vs a sentiment that bank dividends should be confiscated altogether.  After the buy backs had already been ended. This time is different and they have all done what Lloyd Blankfien was roundly condemned for in 2009.  How can the market have a SUMMER RALLY as that coincides with TRUMP falling on his sword over and over again?  Where was the PAYROLL. tax cut 2 years ago for the working poor and struggling middle class?  There are press releases this W/E with some WALL STREET banks like BAC predicting $3K GOLD in 2022.    Food inflation is making a WALL ST star out of CAG.  The debate is just starting on how to make the allocations of bailouts to the most profligate state pension systems where muni bond including Revenue bond P&I is at risk to being subordinated to pension obligations that are often 2X what the AARR failures have been.  Now the pensioners in the private sector with their smaller pensions against their High Ten vs the public sector high 3, private sector pensioners who get no COLAs ever are to pay the taxes to the Feds to pay to bailout the unsustainable insanity  "Madame Death" sounded the alarms as to 10 years ago ?  What happens to +2 month old issues of Barrons?  Old issues and Trump are in the garbage can ready to be collected while Biden and his radical socialist VP a "masked" player to be named later, are in the White House ready to get elected. ...Or is the market already ahead of itself up against strong resistance.  The "STRONG SUMMER RALLY" is more likely in the twinkling of an eye and ends by the 10th of July.  With another +3% to 5% retrenchment it will probably be safe to step back in and buy the Biden Presidency.  Aggregates and materials, Copper, which will continue in high demand for Ganging Alt energy high copper content Gig generations.  The Alt energy names and other usual suspects like TESLA, ALB.  And of course the TECHs.  But many of the TECHs now trading in slices will soon become targets for being physically sliced up.    It already has been a stock pickers market and only some narrow sectors have been the most powerful in contributing to the major Market averages V recovery.

Feds funds futures... The future is that the US FED will have an increasingly hard time subduing medium term and long term rates.  Well secured HELOC loans are already "AS LOW AS" 4.99%.  Like the billboards on the highway advertising motel rooms "as low as" $45 a night.  When did the Banks lower the usury on credit card interest and late charges, over drafts, and non-proprietary ATM transactions?  The spreads on credit for borrowers vs safe fixed income for Retirees, Insurance and pension funds has never been wider.  

You may not have to go too far to find GREEN Bonds ?  AQN last year floated out $3 million in GREEN bonds to add additional green Gig capacity to it's US subsidiary Liberty Utilities.  AQN already has over 13% of it's generation sourced from hydro and alt energy.   

Besides URanium, Gold AND copper have been on a tear in the 1st H.  The chart of the CME LB1:COM looks pretty healthy YTD. My local Lowes has been short of supplies of PT decking for over a month.

Gold is slaying the Treasury rates ... ! ! Danger Will Robinson !!  A loose reflection on Dennis Gartman's usual quip. The FED will be invincible until it is not.  

A DEMOCRATIC !! SWEEP !! of the elections ? "MAY" ? !!! have implications on TAXES and REGs?  Even as "THEY" are giving away the store the HIGH SALT State tax increases MUST BE repealed and some of those states that do not already have a state income tax on SS benefits will enact one. The Canadians are going back to the drawing board on the Energy East pipeline even as they already export LPG from their west Coast and the LNG export terminals in BC slowly come back in focus. Sorry TCP and Keystone XL.  The Sierra Club will lobby vigorously in the US Congress for more alt energy construction and then show up in force in support of the NIMBY's dedicated to halting those same structures and "farms".   The inverse chart of what happened to the US major markets in the 6 months after Trump was elected, before Powell stepped in "IT".  

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Frequent Contributor

Re: From Barron’s, July 6, 2020 (Part 1)

NomasDOZ...

You always have at least one reader of your posts...me. 

I enjoy them.

R48

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Participant ○○

Re: From Barron’s, July 6, 2020 (Part 1)

Thank you, Yogi! And thank you, Nomas. Between your two summaries, I can't imagine any scenario for my investments other than RIP (rest in place). As a now 7-year retiree who is living mainly on SS + RMD's (not "income" from investments specifically), I'd be happy with a standstill, or modest moves in either direction.

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Explorer ○○○

Re: From Barron’s, July 6, 2020 (Part 1)

I myself am a Barrons subscriber but living in a low rate C-9 rural area I do not get mine until Monday morning.  Barrons has been an invaluable resource to me in doing a lot of my retirement portfolio plannings.  It still is. I just think we ALWAYS have to question perceptions as often posed by Barrons.  Mark Twain's observations as to history rhyming seems to continue on as being very valid.  I am retired from the private sector . I do not begrudge public sector employees getting generous pensions, I just happen to believe they should have actuarially sound mechanisms for paying those.   I "got out" in 2005 and worked for two more years at about half my previous salary.  I was quite sorry to see my colleagues get the haircuts in 2011, and by surprise. As those were announced in late Dec and it was made known that they would go into effect in a couple weeks the 1st of Jan and the Trustees would not meet again until Feb to approve new pension applications.  My cousin just retired with the MA teachers pension, I think $94K a year with the survivor options is quite fair for what he put in, over 35years.  MA has a separate pension trust for the educators so that they do not have to deal with higher compensated other in state public pension system's participants UNFUNDED obligations raiding their assets with these ridiculous schemes where less than the 20% take more than 50% of the annual gross distributions of public pension trusts whilst their funding ratios continue deteriorating and they continue to pander to some insane concept that public pensioners earn the portions of their plans not earned by politically motivated FAILED Anticipated Actuarial  Rates of Return.  In most of those cases the Educators are making the lion's share of the gross total annual pension contributions but in these single pension plans for all, they are in the bottom 30% in pension awards. So the unsustainable continues on with few even understanding what wage and benefit "decompression" is, let alone thinking of how it is very antithetical to their own professed Ideals .   

I used to get Christmas cards from Teddy Kennedy back when Dems stood for what was in the best interests of the working man and the elderly.   

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