cancel
Showing results for 
Search instead for 
Did you mean: 
     
Highlighted
Frequent Contributor

From Barron’s, September 7, 2020 (Part 2)

 

 

Pg 6, Up and Down Wall Street: Summer squalls after a Summer rally? $1.7 trillion in market value went to money heaven, but remember, investors made $13.1 trillion net from the March bottom. While there may be several causes, some fingers are being pointed to SoftBank/SFTBY CEO “MasaSon who was playing with options to the tune of a few billions [!] and controlling up to $50 billion of tech highflyers. When investors trade options, the options dealers have to hedge and buy/sell appropriate amounts of stocks. Insider selling has picked up.

With very low rates and huge deficits, is the US headed for Japan-style stagnation? CBO projects that the total US federal debt will be 100%+ of GDP for FY 21. The annual federal budget deficit for FY20 may be $3.3 trillion [16.5% of GDP!] due to Covid-19 related stimulus. CBO also sees $1+ trillion annual budget deficits through 2030. Some say, so what? Low interest rates reduce outlays for debt servicing; average interest rate for the US debt is 2% now, probably 1.3% in 2023 and 2.1% in 2030. New MMT suggests that a country that can issue its own currency can keep issuing cheap debt; and if and when inflation rises, just raise taxes. But David Rosenberg says that excessive debt can be deflationary and negative real rates may cause economic stagnation as in Japan. Also consider what the debt is used for? To boost productivity and improve essential infrastructure; or to provide income for displaced workers, build bridges to nowhere, etc [as in Japan and China] ? Analog is when corporations use debt for nonproductive buybacks, or people take on extra debt for property/asset speculation – result is boom and bust.

 

Pg 9, Streetwise: There is confusion on when to start taking Social Security, early at 62, at full retirement age [FRA 66-67], or late at 70? Additional considerations arise for couples with different ages and income levels. Experts say that if you don’t need the money and have long life-expectancy, then delay, but beware that if you die early, there is no residual. Hough still has 14 years to think and decide but he is inclined to delay.

 

Pg 10-11: EU and UK meet again on Monday on stalled Brexit negotiations as October-end deadline for agreement approaches. ECB monetary policy on Thursday.

Hedge-funds are lightening up on tech and healthcare and moving into economically sensitive cyclicals [financials, industrials, consumer-discretionary, communication services]. The move may have been early and probably caused hedge-funds to lag major indexes.

Schlumberger’s [SLB] exit from fracking may mark the end of decade-long growth for US fracking. SLB cited pressures from Covid-19 and wants to focus on its core business. Fracking peaked in 2018 and oil/gas equipment XES is down -56% YTD.

 

Data this week [bad reports keep coming but some may be better than expected]: Small business optimism index, consumer credit on Tuesday; JOLTS report on Wednesday; PPI, wholesale inventories on Thursday; CPI, Treasury budget on Friday.

 

Closed: US on Monday.

 

Bullish Recommendations: Home fitness Peloton [PTON; +300% YTD; high demand means 6-7 weeks delays for deliveries; another good report may beat both low guidance and high expectations on Thursday; pg 12];

Japanese stocks [yield 2.4%; fwd P/E 2020 20.7, P/E 2021 14.9; P/B 1.2; value play; ultralow rates; Abenomics may continue in some form in spite of PM Abe’s departure; several good industrial/manufacturing companies; negatives well-known (economy, demographics); companies still have high retained earnings and are cash-rich (dividends increased, debt reduced but capex remain low); Warren Buffet/BRK just bought $6 billion worth in 5 trading companies; mentioned are ETFs EWJ, DXJ (hedged), OEFs HJPNX, MUFOX and several stocks, DKILY, KYCCF, MKTAY, SFTBY, TM, SNE, NTDOY; pg 13];

big banks [BAC, C, JPM, PNC, RF, WFC; new rules (CECL issued 2016/effective 2020) require booking losses upfront and build extra reserves (short-term negatives) that could be released later into earnings (JPM, C, RF have outsized loan-loss reserves); low rates and uncertain economy are also negatives; banks are also required to provide future guidance when many businesses have withdrawn or stopped providing guidance; but prices are now attractive, KBE -30.5% YTD; pg 19].

 

Bearish Recommendations: Zoom Video [ZM; blowout Q1 and Q2; business travel may be disrupted forever and what kid hasn’t used or heard of Zoom; company has been providing lowball guidance that are very easy to beat; stock may have peaked last week at +500% for the year and at $120 billion market-cap; rapid growth may end due to Covid-19 treatments and competition; pg 30].

 

Pg 16: Jenny Davis, Baillie Gifford international BGITX is focusing on Covid-19 trends [e-commerce; disruptors; telemedicine] and US-China trade relations [US delisting is not a big issue; assessing other tech risks]. The US is 70% of MSCI world index but has only 25% of global GDP. So, quality-growth opportunities can be found elsewhere in Europe, Asia, Latin America.

 

Pg 27: Comanager Karina Funk of ESG BIAWX looks for companies with sustainable advantages [for revenue growth, cost improvements, franchise value]. Large-cap growth fund’s top 10 holdings account for 42.2%.

 

Pg 29: Why funds [DWS, Artisan, Grandeur Peak, Wasatch, etc] didn’t suspect [or act on] fraud at German payment processor Wirecard? Short-sellers were screaming for years but nobody listened. And then, suddenly, billions were missing and Wirecard filed for bankruptcy. Other examples include Enron, Valeant, etc. Reasons may be that funds don’t have the means/tools to detect fraud, or they don’t care [they are managing other people’s money (OPM)]. Some fund managers think that fraud allegations are priced into the market and they can trade in and out before the fraud becomes official, and then it is too late for whosoever caught still holding them. Forensic accounting and financial metrics evaluation [that may turn out to be based on fraudulent data] are quite different. There are only a few firms that specialize in forensic accounting, Olstein Funds, JAG Capital, etc; don’t expect that from typical 1-2 fund portfolio managers supported by 3-5 analysts, some in training.

 

Pg 31: Dividends from mid-caps: FLO, GBCI, SON, INGR, OGS. Beware of value traps. Mentioned are OEFs KMDVX, MARFX.

 

Pg 33: Looking beyond good jobs reports, many temporary layoffs are now becoming permanent; in fact, temporary vs permanent unemployment is becoming a distinction without a difference. Probabilities of finding job within a given month are about 40% for temporarily unemployed and 20% for permanently unemployed. Going forward, watch the number of total unemployed for 15-26 weeks. High unemployment has negative implications for households and economy. Rate of small business failures is concerning.

 

Pg 34: Alex Friedman and Larry Hathaway, Jackson Hole Economics, and formerly, UBS. Is K-type recovery even a recovery? Small businesses [30 million accounting for 50% of GDP and total workforce and 85% of new employment] are disappearing faster than ever [bad lower part of K]. Few tech giants and the stock market are doing quite well [good upper part of K]. This divergence cannot continue forever. Many Americans have used up their emergency savings while 3 richest Americans control more than half of the US wealth. Monetary policy seems to favor big/rich getting bigger/richer, while the fiscal policy to help the broad public is stalled in DC. If things don’t change quickly, the United States may as well become Ununited States.

 

Extras from Friday – I try to guess on Friday which features will make it in the weekend edition but the following guesses didn’t make it. Almost 75-80% of the weekend edition is now available by 9:00 PM Central on Friday. Barron’s revised website has “Interests” tabs similar to columns topics and that makes it easier to find potential items for the weekend edition. This is also the reason for earlier postings on Saturday – I do wait for my paper delivery [typically between 5:00-6:30 AM Central] to fill in some data.

Vanguard total stock market funds [including all classes of 2 series] have $1+ trillion AUM. They have benefitted from trend toward passive investing and from flows from feeder target-date funds with heavy flows from workplace retirement plans.

 

UK-based Baillie Gifford has cut stake in TSLA from 7% in 2019/Q4 to 4%+ now. Electric vehicle [EV] stocks are hot and include LI, XPEV, NIO, etc.

YBB
16 Replies
Highlighted
Participant ○○

Re: From Barron’s, September 7, 2020 (Part 2)

Whether or not there has been market manipulation, my "paper" gains have been substantial. I may take some of these and put them aside for a while.

0 Kudos
Highlighted
Frequent Contributor

Re: From Barron’s, September 7, 2020 (Part 2)

What Masa Son of SoftBank did, as is being reported, is quite alarming. Apparently, he bought $4-5 billion in highflying tech stocks directly, and then bought $4-5 billion in call options on those long positions with notional value of $50 billion or so. That he could do this as a foreigner founder/CEO of a Japanese company without triggering any US regulatory oversight or restrictions is even more alarming. Wait until hackers and all sort of bad players from China, Russia, Middle East get a wind of this and try to game the US market.

YBB
Highlighted
Frequent Contributor

Re: From Barron’s, September 7, 2020 (Part 2)


@yogibearbull wrote:

What Masa Son did, as is being reported, is quite alarming. Apparently, he bought $4-5 billion in highflying tech stocks directly, and then bought $4-5 billion in call options on those long positions with notional value of $50 billion or so. That he could do this as a foreigner owner of a Japanese company without triggering any US regulatory oversight or restrictions is even more alarming. Wait until hackers and all sort of bad players from China, Russia, Middle East get a wind of this and try to game the US market.


And who is going to be the counter party to all the trades placed by these bad actors? In the securities industry there is a know your customer requirement For all brokerages and financial institutions that requires vetting a new customer by compliance department and forwarding certain information to govt agencies before account can be opened. Masa Son was allowed to trade because his identity was known to the brokerages where he placed trades and met all the requirements for having sufficient Assets to make the trades.

Foreign investors are subject to identification procedures of the Patriot act And bank secrecy act  Which require vetting, review of passports and identity of a customer before account can be opened. Financial institutions are subject to periodic audits and fines for failure to follow patriot act and bank secrecy act. US banks are prohibited from dealing with foreign shell banks which conceal the identity of their customers. Bank transactions are also subject to surveillance by IRS, homeland security and the FBI and are subject to rules which prohibit money laundering.

0 Kudos
Highlighted
Participant ○

Re: From Barron’s, September 7, 2020 (Part 2)

YBB,

A related question about the tech sell off on Thursday and Friday.  MS* gives the following fair values for Tech stocks:

                     mkt price on         MS* Fair value

                     Friday

MSFT           214.25                    228

AMZN        3294                       3500

APPL           120.96                         71

GOOGL      1581                        1600

FB                282.73                     265

NFLX           516.05                     200

---------------------------------------------

APPL and NFLX prices are high for a reason. The other three seems to be fairly valued.

I lost money in the Tech sell off on The last two days. I have tech mutual funds and etf. Is there hope that this sell off is mostly over.

SRT

0 Kudos
Highlighted
Frequent Contributor

Re: From Barron’s, September 7, 2020 (Part 2)


@sthanga wrote:

YBB,

A related question about the tech sell off on Thursday and Friday.  MS* gives the following fair values for Tech stocks:

                     mkt price on         MS* Fair value

                     Friday

MSFT           214.25                    228

AMZN        3294                       3500

APPL           120.96                         71

GOOGL      1581                        1600

FB                282.73                     265

NFLX           516.05                     200

---------------------------------------------

APPL and NFLX prices are high for a reason. The other three seems to be fairly valued.

I lost money in the Tech sell off on The last two days. I have tech mutual funds and etf. Is there hope that this sell off is mostly over.

SRT


What’s the reason why AAPL and NFLX prices are high? You do know that AAPLs revenue for first 3 Qtrs were $210B. FYI 2/17/20 Forbes had an article that AAPL at 320 (80 today) was overvalued and it’s fair value should be 280 (70 today). At the time AAPL PE was 23. today It is 37 while AMZN PE is 130.

Best way to recover from tech selloff is to buy more Tech. I bought MSFT at Friday’s close at 215, down 17 from Thursday ( -7.3%).

0 Kudos
Highlighted
Frequent Contributor

Re: From Barron’s, September 7, 2020 (Part 2)

Thanks again for the summary, YBB!

Win
Highlighted
Explorer ○○○

Re: From Barron’s, September 7, 2020 (Part 2)

Thanks Yogi !!

OH BIG BIG Surprise...!!! Some obscure raskellion has caused volatility and another impending scandal in the US and global markets, which may be confirmed as the basis for a bubble imploding now instead of a week earlier or a few more weeks down the road.  So many of us are shocked...SHOCKED !!! to find out that we are swimming with the Sharks when investing in the markets.  BOTs, computer programs, insider trading,  turn the page and yet another WFC scandal?  This time it was bait and switch in annuities?  The Robin Hood crowd of pure speculations.  Occasional real economic signals that ZIRP Everlasting may not be immortal?  The 4th qtr of 2018 completely irrelevant to the next new normal ?  

BIG banks many with EXCESS excess reserves against loan losses are there for the retirees to advantage income from a combo of preferred and common shares.  Part 1 suggesting bond ladders to manage retirement distributions ....  Bond interest if it existed in a sense of a real return after inflation is still 100% taxable in CASH$ accounts and for awhile longer there is still a tax advantaged status in Bank dividends. BAC's ... MRK an ETN an ideal candidate for your Roth accts.   A Congress passionately detesting Bank dividends to middle class retirees that it thinks no longer exist may act against banks on dividend payouts but can not as easily impede debt service as MRK pays out.  

Barrons seems always to like reporting the most costly share classes in it's fund picks... Why would the retail investor not find the BAWAX a better way to own the Brown Advisory Sustainable Growth Fund ?  How does BGITX compare to a ARTYX or even a WCMRX ?  Baillie Gifford seemingly more of a small boutique fund family not widely available on some brokerage platforms....ARTYX illustrating how Emerging markets have out performed developed markets.  But WCMRX a FOCUS fund illustrates how it has become a stock pickers' market off the 12/24/18 lows.  So as with the BAWAX a "focused" strategy with a strong skilled manager(s) generally is going to outperform funds carrying too much ballast in the bottom 20% of the fund's AUM.   

0 Kudos
Highlighted
Explorer ○○○

Re: From Barron’s, September 7, 2020 (Part 2)

SRT ....sthanga

Predictions especially about the future are hard to make. But we can observe a lot by just watching.  The "FAANGMT" used to be a great place to invest until too many people came to that realization.

We will know a lot more about this selloff, the rotations, and if dead cat bounces are just that or signaling a ST bottom, by Tuesday Afternoon.   Thursday and Friday were chances to nibble at TECH.  Next week's market will indicate whether it is time to be a little more aggressive in buying those Techs, that are not going the way of JDS Uniphase.  The election outcomes are still very uncertain and if the Joe-Camel |\ ah regime is successful then a half dozen other economic biases are still unknown unknowns. 

There is a certain school of thought that  more fiscal and monetary intervention  asserting  and as it is increased, the more frequent will be the periods of extreme volatility.  

0 Kudos
Highlighted
Contributor ○○

Re: From Barron’s, September 7, 2020 (Part 2)


@NomasDOZ wrote:

ARTYX illustrating how Emerging markets have out performed developed markets.   


ARTYX is up 48% YTD TR - it's doing a little better than my EM equities!

0 Kudos
Highlighted
Frequent Contributor

Re: From Barron’s, September 7, 2020 (Part 2)


@NomasDOZ wrote:

Predictions especially about the future are hard to make. But we can observe a lot by just watching.  The "FAANGMT" used to be a great place to invest until too many people came to that realization.

We will know a lot more about this selloff, the rotations, and if dead cat bounces are just that or signaling a ST bottom, by Tuesday Afternoon.   Thursday and Friday were chances to nibble at TECH.  Next week's market will indicate whether it is time to be a little more aggressive in buying those Techs, that are not going the way of JDS Uniphase.  The election outcomes are still very uncertain and if the Joe-Camel |\ ah regime is successful then a half dozen other economic biases are still unknown unknowns. 

why do you think AAPL is not a good place to invest because too many people own it? 60% of AAPL shares are institutionally owned b/c of its earnings record and size. AAPL has reduced the number of shares by over 25% since 2011 as it’s earnings have increased which contributes to price increase.

 

just what kind of a dead cat bounce will occur? On March 23 AAPL closed at 224. it closed At 500 on Aug 28,  the day before the 4x1 split Which was 223% above the March 23 close. Friday after the sell off it closed at 121, only down 2.4% from its split price.

Are you long or short on AAPL? 

if you don’t like AAPL what would you buy?

0 Kudos
Highlighted
Participant ○

Re: From Barron’s, September 7, 2020 (Part 2)

Intruder and NomasDOZ.

Thanks for your replies. 

I am leaning towards just keeping the growth/Tech stocks that I have. I am not thinking of more Tech at this time.

SRT

0 Kudos
Highlighted
Explorer ○○○

Re: From Barron’s, September 7, 2020 (Part 2)

On Friday I bought AAPL in my CASH$ Acct ADDING 2 shares @ $110.39.  Bringing that position up to 6 shares.

On Friday I bought AAPL in my Roth Acct I ADDING 3 shares at $110.75.  Bringing that position up to 7 shares. 

On Friday I bought AAPL in my RO / IRA I ADDING 4 shares  @ $110.79.  Bringing that position up to 24 shares.

Previously I let go some shares from all three accounts between $455 and $460.  So I did not sell at the height of the euphoria, but I have now bought back AAPL shares at less than I sold the pre-split shares for.  For AAPL it has turned out that despite the Split and the ensuing hysteria the company remains solid with roughly the same earnings and revenue growths as before the split now divided by 4.  

I intend to buy more AAPL if it sells off a bit more.  AS a retiree I can hardly expect to earn enough to keep my total annual neg amortizations below 3% if I do not sell some somethings when they are becoming greedy so as to have cash on hand to buy when others become fearful.  No 401-K matches coming in for me over the last 12 years. Only about $2K in earned W-2 income in that period.  Hardly enough to Fund new purchases in the on going regular periods of extreme volatility driven by ZIRP Everlasting and the same continuous question as posed in 2009 and 2010.  What is the exit strategy from Q/E ?  We found out in the 4th qtr of 2018 that there is not going to be one. That just leaves what will happen .... "EVENTUALLY ".  Greenspan champion of a plutocracy,  was interviewed last week on CNBC and predicted inflation as a result of THE FED merging with the US Treasury.  Get your check out yet for your Quarterly estimated taxes to THE US TREASURY ?

And last Friday's rally of 9/4, was indeed a DEAD CAT Bounce.  All we can do now is await the outcomes of whether the worst is over or if we can test S&P 3200 and maybe even 3100 levels.  

AAPL ?  On Friday I even started the FDEQX in the Roth and RO / IRA to get more FAANGMT Exposure after adding 2 more NFLX @ $498 and $493.  AAPL is number 3 behind MSFT and AMZN with GOOGL and FB rounding out the top 5 positions. I like owning the ALB over getting involved with the TESLA conundrums.  I also added 2 more shares of MSFT in this last week at $205 and $201. 

Down near the Friday 9/11, intraday lows the S&P made a full 10% correction.  AS / IF we pass down past a 12% correction I would certainly be getting a lot more aggressive in my BUYING of this CURRENT market.  Will the Sheriff of Nottingham bring even more retribution upon "THEM" ?  Could he opt for the Flamethrower solution ?   

 

0 Kudos
Highlighted
Participant ○○

Re: From Barron’s, September 7, 2020 (Part 2)

Thank you, Yogi. As for the discussion of AAPL here, I only have it in my mutual funds, not as a single stock. I like it there, as well as the physical Apple products -- my phone, my computers. A nephew works there; a niece at Microsoft. So Big Tech is "all in the family." My kids live in the Big Apple -- but that's an entirely different entity.

0 Kudos
Highlighted
Frequent Contributor

Re: From Barron’s, September 7, 2020 (Part 2)

This thread is from last week. The new Part 2 is still under preparation.

YBB
0 Kudos
Highlighted
Explorer ○○○

Re: From Barron’s, September 7, 2020 (Part 2)

I was well aware that this was last week's post but still felt it appropriate to respond to a poster  .... INTRUDER .... questioning my sentiment on AAPL.  I think my skepticism of the euphoria that was going on in AAPL shares and this ostensibly whole group of millennials being driven to and investing with the Robin Hood  platform, using money from every conceptual source, was just euphoria that has been born out with a 10% S&P correction and a violation of the 50DMA.   Apple has come down from the stratosphere and I have added shares well off the recent peak and lower than where I had previously sold shares. I think I would keep buying down into the low $90s.  In the meantime as shares are still nominally $100 , I intend to pursue any further incremental market and AAPL declines with these mutual funds as FDEQX with no mins , and PRMTX.  The FDN and PNQI are also good but O/E funds trade in virtual "slices" and you can add as little as $2 to $4 incrementally increasing gradually as the market sells off further. The ETFs trade in plus $150 increments of whole shares.  Ditto when the markets are rising and you want to fade the euphoria asserting. 

My feeling is that there is more to go to the downsize if only against the calendar seasonality and then of course the unknown unknowns of the election fall outs  and where and what 20 million left in the lurch by the pandemic are doing and where they are going.  So now we enter another "temporary" period of mortgage forebearances?  That takes us through to Jan when it will be  too cold in most of the country to get much accomplished on evictions.  But "EVENTUALLY" continues to lurk and what happens when these virtually bankrupt Towns, cities, and counties start foreclosures for unpaid property taxes ?  An under water landlord is going fight tooth and nail to hold onto property that does not pay even 25% of the cost of owning and servicing of his mortgage ?

0 Kudos
Highlighted
Contributor ○

Re: From Barron’s, September 7, 2020 (Part 2)

FDEQX came on my radar as well. Fidelity is recommending this fund. Why do you like it?

0 Kudos
Announcements