This Is What Whales Are Betting On United Airlines Holdings

A whale with a lot of money to spend has taken a noticeably bullish stance on United Airlines Holdings. Looking at options history for United Airlines Holdings (NASDAQ:UAL) we detected 30 strange trades. read more.....»»

Category: blogSource: benzingaJan 14th, 2022

Top investor Kyle Bass warns the Fed could crash the stock market this year — and predicts oil prices will surge this summer

Stocks could plunge 25% if Fed officials hike interest rates and reduce bond holdings as expected, Bass said. Kyle Bass.Reuters Kyle Bass warned the Federal Reserve's inflation fight could send the stock market down 25%. The Hayman Capital boss predicted a surge in oil prices when the global economy reopens this summer. Bass cautioned against buying Chinese stocks, citing fraud and regulatory risks. Veteran investor Kyle Bass warned stocks could crash this year, predicted an oil-price surge within months, and blasted buyers of Chinese equities as irresponsible, in a CNBC interview this week.Federal Reserve officials, under pressure to curb soaring inflation, are widely expected to hike interest rates and trim the central bank's bond holdings in the coming months."There's no way the stock market goes up this year, and it probably goes down pretty aggressively, if they stick to that plan," Bass said.The Hayman Capital Management boss added that raising short-term interest rates by just 100 or 125 basis points could spark a 25% drop in the stock market. That scale of decline would likely spook the Fed and lead to it scrapping its plans for further tightening, he said.Bass predicted that West Texas Intermediate, the benchmark US oil price, would jump from $83 a barrel to $100 in the first half of this year. He suggested the global economy's reopening would reignite energy demand, and the recent shift of capital spending from hydrocarbons to clean energy would result in supply constraints."Buckle your seatbelts," he said, adding that he doesn't expect hydrocarbon demand to fall over the next 20 years, as a global transition to renewable energy will take 40 or 50 years.Finally, Bass cautioned against gambling on Chinese stocks rallying this year. "People who are betting on a bounce, that's a fool's game," he said.The hedge fund manager highlighted the risk of accounting fraud due to a lack of financial audits in China, and the prospect of further regulatory crackdowns on Chinese companies."People investing in Chinese equities are breaching their fiduciary duties to their investors," he said.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 14th, 2022

The ETF betting against Ark"s disruptive tech stars has seen AUM soar and returns nearly mirror Cathie Wood"s losses since inception

Since November, Ark's flagship fund has declined by about 32%, while the SARK ETF has gained 39%. Spencer Platt/Getty ImagesTuttle Capital's Short Innovation ETF has seen assets soar amid a period of poor returns for Ark.The SARK ETF seeks to generate inverse returns of ARK Invest's flagship innovation ETF.Since its launch in November, SARK has returned nearly 40% while ARKK has fallen 32%.Sign up here for our daily newsletter, 10 Things Before the Opening Bell.Ark Invest's pain has been Tuttle Capital's gain over the past two months, as the latter's Short Innovation ETF sees its assets under management soar to new records.Tuttle Capital's SARK ETF seeks to generate inverse daily returns of Ark Invest's flagship Disruptive Innovation ETF. The ticker symbol "SARK" stands for "Short ARK." So far, Tuttle is doing a pretty good job in achieving its objective. While the ARKK ETF was down 3% on Thursday, the SARK ETF was up about 2.8%. The timing couldn't have been better for Tuttle Capital, which launched the ETF in November. Since then, Ark's flagship fund has declined by about 32%, while the SARK ETF has gained 39%. The strong performance for SARK has helped drive a surge in assets under management since its inception, rising 2,900% from its first-week base of $5 million in November to $150 million as of Wednesday. Still, that pales in comparison to the ARK ETF's $15 billion in assets. But Ark's Cathie Wood isn't fazed by the short bets against her holdings, according to a November interview with Bloomberg. "This is what makes a market, right? I never worry about anyone shorting the stocks underlying Ark or with this new ETF," Wood said.Still, the weakness in ARK has been ongoing since high-growth tech stocks peaked in February 2021. And the decline has been exacerbated in recent weeks by a hawkish pivot from the Federal Reserve. The prospect of higher interest rates and a reduction in the Fed's balance sheet after two years of stimulus has led to a re-rating in the high-tech growth stocks that Wood is known for investing in. The nearly year-long pain in ARK's flagship ETF has led to its asset being cut in half, from a prior peak of about $28 billion. Based on the fund's 0.75% expense ratio, the $14 billion decline in AUM represents a $105 million loss in annual revenue for Ark Invest.Wood is feeling the pain along with her investors, revealing in a recent market update that the ARK ETFs make up more than half of her retirement account and a considerable amount of her net worth."I do want you to know that, of course, we've been through a very difficult time since the significant rotation from growth into value started nearly a year ago in mid-February, and I want you to know that we're in there with you," Wood said.KoyfinRead the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 13th, 2022

New York"s sky-high sports betting tax rate could make it hard for companies like DraftKings and FanDuel to profit in the state

New York in January became the largest US state to embrace online sports betting, but the state has one of the highest tax rates on the country. FanDuel is one of four gambling companies now taking mobile sports bets in New York.Ron Vesely/Getty Images New York in January became the largest US state to embrace online sports betting.  Companies including DraftKings, FanDuel, Caesars Sportsbook can now take mobile sports bets  there. But the state's 51% tax rate could be a big hurdle in the industry's path to profitability. New York last week became the largest US state to embrace online sports betting. On January 8, the Empire State began allowing gambling companies including DraftKings, FanDuel, Caesars Sportsbook, and Rush Street Interactive to take mobile sports wagers. Five more operators are slated to enter the market ahead of the Super Bowl, the most bet-on event in the US. New York's roughly 20 million residents could be a boon for the nine sports betting platforms with licenses in the state.But its sky-high tax rate on gambling revenue will make it a more challenging market for operators than others like New Jersey.New York's 51% tax rate is among the highest in the nation, tied with New Hampshire, Robert Linnehan, a sports betting regulatory reporter for XLMedia's, told Insider. (That tax rate is for operators, not individual gamblers.)That'll make it harder for operators to profit off their customer bases in the state, said Jason Ader, CEO of SpringOwl Asset Management and 26 Capital Acquisition Corp."Everybody wants to be in New York because it's a trophy market in terms of the size of the state and its importance, but the tax rate is really prohibitive," Ader said. "It's very hard to make money in sports betting. Put 51% tax rate on it and it's maybe a bit more like a fool's gold rush than a gold rush."Sports betting is generally not yet a profitable business in the US. Companies are spending heavily on marketing and promotions to acquire customers.The operators in New York, such as DraftKings and FanDuel, may be better off keeping their most valuable sports bettors wagering in nearby New Jersey.The Garden State's tax rate on sports betting is much lower than New York's, at 14.25% for mobile and online sports betting. And some avid New York-based gamblers have already been crossing state lines to place their bets there legally, since New Jersey regulated online sports betting in 2018. The New York sportsbooks may be incentivized to focus their marketing and promotions on casual and first-time bettors, and encourage the whales and sharps to stay in New Jersey.Read more about how New York could impact the sports betting industryRead the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 13th, 2022

Warren Buffett"s Berkshire Hathaway may be buying Japanese stocks again, based on its latest bond issue

Buffett hedged the currency risk of his $6 billion bet on Japanese stocks by issuing yen-denominated debt. He might be repeating the strategy. Warren Buffett.JOHANNES EISELE/AFP via Getty Images Warren Buffett's Berkshire Hathaway may be doubling down on Japanese stocks. The investor's company might be hedging further purchases by issuing yen-denominated bonds. Berkshire issued yen debt before revealing its $6 billion bet on Japanese stocks in 2020. Sign up here for our daily newsletter, 10 Things Before the Opening Bell. Warren Buffett may be buying more Japanese stocks, if Berkshire Hathaway's latest disclosure is any indication.The famed investor revealed stakes worth a combined $6 billion in five Japanese trading companies in August 2020. He made sure to hedge against the Japanese yen falling against the US dollar — Berkshire issued close to $6 billion of yen-denominated debt in the year before it disclosed the new positions.Buffett's company filed to issue an unspecified amount of yen debt this week. That may indicate it's boosting its stakes in the Japanese quintet of Itochu, Marubeni, Mitsui, Mitsubishi, and Sumitomo."It could be the case that Berkshire is buying more of each of these names, increasing ownership towards 9.9%," James Shanahan, an equity analyst at Edward Jones, told Insider. "This may have been going on already, with Berkshire preferring to keep this activity private."On the other hand, Buffett might be issuing more yen debt because his Japanese bets have risen in value, and he wants to hedge against the resulting increase in currency exposure, Shanahan noted.Berkshire's Japanese holdings are worth a combined $8.7 billion today, despite the yen falling 10% against the dollar since August 2020. That significantly exceeds the $7 billion carrying value of Berkshire's yen debt at the last count, Shanahan said, meaning the company isn't fully hedged against currency movements.Buffett has struggled to find bargains with US stocks near record highs, private equity firms and special-purpose acquisition companies (SPACs) pricing him out of acquisitions, and Berkshire's rising stock price making share buybacks less attractive.The investor is also itching to deploy a big chunk of Berkshire's cash reserves, which swelled to a record $149 billion in the third quarter of 2021. Doubling down on Japanese stocks, and capitalizing on a weak yen and cheap financing in the process, may have struck him as the best option available."If the portfolio is close to 100% leveraged, Berkshire is effectively holding a portfolio of high-quality Japanese stocks yielding 3.7% on a weighted-average basis, fully funded by debt at an average cost of 0.6%!" Shanahan said.Read more: The Smead Value Fund beat 99% of its peers in 2021. Its managers share where they're putting their money in 2022 — including 3 stocks they're betting big on.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 6th, 2022

Should You Bet on Cathie Wood in 2022?

Two of ARK Invest's most popular ETFs were down double digits in 2021. Is it time to buy? (1:00) - Breaking Down ARK Invest's Performance In 2021(12:30) - Gaining Exposure To High Flying Tech Stocks(16:00) - Will Inflows Impact How Cathie Woods Will Invest Going Forward?(22:20) - Learning From The Fidelity Magellan Mutual Fund(30:50) - Episode Roundup: ARKK, ARKG, CTRU, QQQ, QQQM, XBI, FMAG      Welcome to Episode #297 of the Zacks Market Edge Podcast.Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.This week, Tracey talks with Zacks Director of ETF Research, Neena Mishra, who is also the Editor of Zacks ETF Investor portfolio, and is the host of the ETF Spotlight podcast, about Cathie Wood’s ARK Invest ETFs.ARK Innovation and ARK Genomic Revolution ETFs have been some of the hottest ETFs the last few years. But both ARK Innovation and ARK Genomic Revolution finished in the red in 2021.Where do they go from here in 2022?Should investors be taking a look at the ARK Invest ETFs or should they just stick with the indexes like the Nasdaq 100 (QQQM) and the SPDR S&P BioTech ETF (XBI)?The ARK Invest ETFs and Cathie Wood1.       ARK Innovation ETF ARKKIn 2020, the ARK Innovation ETF, Cathie Wood’s flagship ETF, was the hottest ETF in the United States. Big bets on “pandemic winners” like Zoom Video and Teladoc drove the ETF to a 150% gain.But despite having a 10% position in Tesla, which gained nearly 50% on the year, ARK Innovation finished 2021 down about 24%. Since inception on Oct 31, 2014, the ARK Innovation ETF has returned 374%, easily beating the S&P 500 over that period, which was up 138%.Will ARK Innovation return to form in 2022?2.       ARK Genomic Revolution ARKGARK Genomic Revolution is just as old as ARK Innovation, with inception on Oct 31, 2014. It, too, had a fantastic 2000 with gains over 200%.But ARKK also came back down to earth in 2021, falling over 30%. Still, since inception, ARKG is up over 200% versus the S&P 500 up about 138%.ARKG also owns Teladoc, same as ARKK, in its top 5 positions, which was down 54% in 2021. Other prominent holdings, such as Exact Sciences, were also down double digits on the year.Will its healthcare innovator companies make a rebound in 2022?3.       ARK Transparency ETF CTRUARK Invest is not resting on its laurels as it continues to launch new ETFs, including ARK Transparency ETF, which launched in Dec 2021.But it’s not using Cathie Wood’s expertise, instead CTRU is designed to track the Transparency Index, which is a list of the 100 most transparent companies.So far, few investors have been interested in CTRU as it has taken in little money since launching.Are investors only interested in active ARK investing or will CTRU ultimately become an investor favorite? 4.       Invesco Nasdaq 100 ETF QQQMIf you’re trying to keep your fees down, Neena pointed out that the QQQM, the NASDAQ 100 “mini”, mostly tracked the ARKK ETF until 2020.QQQM has an expense ratio of just 0.15% whereas ARKK’s expense ratio is 0.75%.She recommends that traders use QQQ while long-term investors use QQQM, as it has a lower expense ratio.While ARKK outperformed in 2020, it was the reverse in 2021 as QQQM has gained 10.7% over the last 6 months but ARKK has fallen 24.3%.Should investors just stick with the QQQM index?5.       SPDR S&P Biotech ETF XBISimilarly, the SPDR S&P Biotech ETF has tracked with ARKG over the years as well.ARKG outperformed in 2020, but XBI has taken back the crown over the last 6 months, falling just 15.5% while ARKG was down 34.5% during that time.XBI has an expense ratio of just 0.35% versus ARKG’s of 0.75%.For buy and hold long-term investors, the expense ratio could really add up.XBI is equal weight, so you don’t get higher concentration among a few names, as you do in ARKG but ARKG investors are betting on Cathie’s expertise and research.Will ARKG get its mojo back in 2022?What Else Should You Know About the ARK Invest ETFs and 2022?  Tune into this week’s podcast to find out. Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How to Profit from Trillions on Spending for Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report SPDR S&P Biotech ETF (XBI): ETF Research Reports ARK Innovation ETF (ARKK): ETF Research Reports ARK Genomic Revolution ETF (ARKG): ETF Research Reports Invesco NASDAQ 100 ETF (QQQM): ETF Research Reports ARK Transparency ETF (CTRU): ETF Research Reports To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksJan 5th, 2022

Futures Tread Water With Traders Spooked By Spike In Yields

Futures Tread Water With Traders Spooked By Spike In Yields After futures rose to a new all time high during the Tuesday overnight session, the mood has been decided more muted after yesterday's sharp rates-driven tech selloff, and on Wednesday U.S. futures were mixed and Nasdaq contracts slumped as investors once again contemplated the effect of expected rate hikes on tech stocks with lofty valuations while waiting for the release of Federal Reserve minutes at 2pm today. At 730am, Nasdaq 100 futures traded 0.3% lower amid caution over the impact of higher yields on equity valuations, S&P 500 Index futures were down 0.1%, while Europe’s Stoxx 600 gauge traded near a record high. The dollar weakened, as did bitcoin, while Brent crude rose back over $80. “The sharp rise in U.S. yields this week has sparked a move from growth to value,” said Jeffrey Halley, senior market analyst at Oanda Asia Pacific. “Wall Street went looking for the winners in an inflationary environment and as a result, loaded up on the Dow Jones at the expense of the Nasdaq.” Concerns related to the pandemic deepened as Hong Kong restricted dining-in, closed bars and gyms and banned flights from eight countries including the U.S. and the U.K. to slow the spread of the omicron variant. Meanwhile, a selloff in technology stocks extended to Asia, where the Hang Seng Tech Index tumbled as much as 4.2%, sending the gauge toward a six-year low. Traders are now caught in a quandary over deepening fears on global growth combined with a faster tightening by the Federal Reserve. “Earlier we thought that rate hikes wouldn’t be on the table until mid-2022 but the Fed seems to have worked up a consensus to taper faster and hike sooner rather than later,” Steve Englander, head of global G-10 FX research at Standard Chartered, said in a note. “But we don’t think inflation dynamics will support continued hiking. We suspect the biggest driver of asset markets will be when inflation and Covid fears begin to ebb.” Data on Tuesday showed mixed signs on U.S. inflation. Prices paid by manufacturers in December came in sharply lower than expected. However, figures showing a faster U.S. job quit rate added to concerns over wage inflation. With 4.5 million Americans leaving their jobs in November, compared with 10.6 million available positions, the odds increased the Fed will struggle to influence the employment numbers increasingly dictated by social reasons. The data came before Friday’s monthly report from the Labor Department, currently forecast to show 420,000 job additions in December. In premarket trading, tech giants Tesla, Nvidia and Advanced Micro Devices were among the worst performers. Pfizer advanced in New York premarket trading after BofA Global Research recommended the stock. Shares of Chinese companies listed in the U.S. extended their decline after Tencent cut its stake in gaming and e-commerce company Sea, triggering concerns of similar actions at other firms amid Beijing’s regulatory crackdown on the technology sector. Alibaba (BABA US) falls 1.2%, Didi (DIDI US) -1.8%. Here are the other notable premarket movers: Shares in electric vehicle makers fall in U.S. premarket trading, set to extend Tuesday’s losses, amid signs of deepening competition in the sector. Tesla (TSLA US) slips 1.1%, Rivian (RIVN US) -0.6%. Beyond Meat (BYND US) shares jump 8.9% premarket following a CNBC report that Yum! Brands’ KFC will launch fried chicken made with the company’s meat substitute. Recent selloff in Pinterest (PINS US) shares presents an attractive risk/reward, with opportunities for the social media company largely unchanged, Piper Sandler writes in note as it upgrades to overweight. Stock gains 2.3% in premarket trading. Senseonics Holdings (SENS US) shares rise 15% premarket after the medical technology company said it expects a U.S. Food and Drug Administration decision in weeks on an updated diabetes- monitoring system. MillerKnoll (MLKN US) shares were down 3.1% in postmarket trading Tuesday after reporting fiscal 2Q top and bottom line results that missed analysts’ estimates. Annexon (ANNX US) was down 23% postmarket Tuesday after results were released from an experimental therapy for a fatal movement disorder called Huntington’s disease. Three patients in the 28- person trial discontinued treatment due to drug-related side- effects. Wejo Group (WEJO US) shares are up 34% premarket after the company said it’s developing the Wejo Neural Edge platform to enable intelligent handling of data from vehicles at scale. Smart Global (SGH US) falls 6% postmarket Tuesday after the computing memory maker forecast earnings per share for the second quarter. The low end of that forecast missed the average analyst estimate. Beyond Meat (BYND) shares surge premarket after CNBC KFC launch report UBS cut the recommendation on Adobe Inc. (ADBE US) to neutral from buy, citing concerns over the software company’s 2022 growth prospects. Shares down 2% in premarket trading. Oncternal Therapeutics (ONCT US) shares climb 5.1% premarket after saying it reached consensus with the FDA on the design and major details of the phase 3 superiority study ZILO-301 to treat mantle cell lymphoma. In Europe, the energy, chemicals and car industries led the Stoxx Europe 600 Index up 0.2% to near an all-time high set on Tuesday. The Euro Stoxx 50 rises as much as 0.6%, DAX outperforms. FTSE 100 lags but rises off the lows to trade up 0.2%. Nestle dropped 2.4%, slipping from a record, after Jefferies cut the Swiss food giant to underperform. Utilities were the worst-performing sector in Europe on Wednesday as cyclical areas of the market are favored over defensives, while Uniper and Fortum fall following news of a loan agreement.  Other decliners include RWE (-2.4%), Endesa (2.1%), Verbund (-1.3%), NatGrid (-1.2%), Centrica (-1.2%). Earlier in the session, technology shares led a decline in Asian equity markets, with investors concerned about the prospects of higher interest rates and Tencent’s continued sale of assets. The MSCI Asia Pacific Index fell as much as 0.6%, the most in two weeks, dragged down by Tencent and Meituan. The rout in U.S. tech spilled over to Asia, where the Hang Seng Tech Index plunged 4.6%, the most since July, following Tencent’s stake cut in Singapore’s Sea. Declines in tech and other sectors in Hong Kong widened after the city tightened rules to curb the spread of the omicron variant. Most Asian indexes fell on Wednesday, with Japan an exception among major markets as automakers offered support. The outlook for tighter monetary policy in the U.S. and higher Treasury yields weighed on the region’s technology shares, prompting a rotation from growth to value stocks.   Read: China Tech Selloff Deepens as Tencent Sale Spooks Traders Asian equities have underperformed U.S. and European peers amid slower recoveries and vaccination rates in the past year. With omicron rapidly gaining a foothold in Asia, there is a risk of “any further restriction measures, which could cloud the services sector outlook, along with disruption to supply chains,” said Jun Rong Yeap, a strategist at IG Asia Pte.  Philippine stocks gained as trading resumed following a one-day halt due to a systems glitch. North Korea appeared to have launched its first ballistic missile in about two months, just days after leader Kim Jong Un indicated that returning to stalled nuclear talks with the U.S. was a low priority for him in the coming year. India’s key equity gauges posted their longest run of advances in more than two moths, driven by a rally in financial stocks on hopes of revival in lending on the back of capex spending in the country. The S&P BSE Sensex rose 0.6% to 60,223.15 in Mumbai, its highest since Nov. 16, while the NSE Nifty 50 Index advanced 0.7%. Both benchmarks stretched their winning run to a fourth day, the longest since Oct. 18. All but six of the 19 sector sub-indexes compiled by BSE Ltd. climbed, led by a gauge of banking firms. “I believe from an uncertain, volatile environment, the Nifty is now headed for a directional move,” Sahaj Agrawal, a head of derivative research at Kotak Securities, writes in a note. The Nifty 50 crossed a significant barrier of the 17,800 level and is now expected to trade at 19,000-19,500 level in the medium term, Agrawal added. HDFC Bank contributed the most to the Sensex’s gain, increasing 2.4%. Out of 30 shares in the Sensex, 18 rose, while 12 fell In FX, Bloomberg Dollar Spot index slpped 0.2% back toward Tuesday’s lows, falling as the greenback was weaker against most of its Group-of-10 peers, SEK and JPY are the best performers in G-10, CAD underperforms. Scandinavian currencies and the yen led gains, though most G-10 currencies were trading in narrow ranges. Australia’s dollar reversed an Asia-session loss in European trading. The yen rebounded from a five-year low as investors trimmed short positions on the haven currency and amid a decline in Asian stock markets. Treasuries were generally flat in overnight trading, with the curve flatter into early U.S. session as long-end outperforms, partially unwinding a two-day selloff to start the year with Tuesday witnessing a late block sale in ultra-bond futures. 10-year yields traded as high as 1.650% ahead of the US open after being mostly flat around 1.645%; yields were richer by up to 2bp across long-end of the curve while little change from front-end out to belly, flattening 2s10s, 5s30s spreads by 0.5bp and 1.8bp; gilts outperformed in the sector by half basis point. Focus expected to continue on IG issuance, which has impacted the market in the past couple of days, and in U.S. afternoon session FOMC minutes will be released. IG dollar issuance slate includes EIB $5B 5-year SOFR and Reliance Ind. 10Y/30Y/40Y; thirteen borrowers priced $23.1b across 30 tranches Tuesday, making it the largest single day volume for U.S. high-grade corporate bonds since first week of September. European peripheral spreads widen to core. 30y Italy lags peers, widening ~2bps to Germany with order books above EU43b at the long 30y syndication. Ten-year yields shot up 8bps in New Zealand as its markets reopened following the New Year holiday. Aussie yields advanced 4bps. A 10-year sale in Japan drew a bid-cover ratio of 3.46. In commodities, crude futures were range-bound with WTI near just below $77, Brent nearer $80 after OPEC+ agreed to revive more halted production as the outlook for global oil markets improved, with demand largely withstanding the new coronavirus variant. Spot gold puts in a small upside move out of Asia’s tight range to trade near $1,820/oz. Base metals are mixed. LME nickel lags, dropping over 2%; LME aluminum and lead are up ~0.8%.  Looking at the day ahead, data releases include the December services and composite PMIs from the Euro Area, Italy, France, Germany and the US. On top of that, there’s the ADP’s December report of private payrolls from the US, the preliminary December CPI report from Italy, and December’s consumer confidence reading from France. Separately from the Federal Reserve, we’ll get the minutes of the December FOMC meeting. Market Snapshot S&P 500 futures little changed at 4,783.25 MXAP down 0.4% to 193.71 MXAPJ down 0.9% to 626.67 Nikkei up 0.1% to 29,332.16 Topix up 0.4% to 2,039.27 Hang Seng Index down 1.6% to 22,907.25 Shanghai Composite down 1.0% to 3,595.18 Sensex up 0.7% to 60,300.47 Australia S&P/ASX 200 down 0.3% to 7,565.85 Kospi down 1.2% to 2,953.97 STOXX Europe 600 up 0.1% to 494.52 German 10Y yield little changed at -0.09% Euro up 0.2% to $1.1304 Brent Futures down 0.4% to $79.72/bbl Gold spot up 0.3% to $1,819.73 U.S. Dollar Index down 0.13% to 96.13 Top Overnight News from Bloomberg The U.S. yield curve’s most dramatic steepening in more than three months has little to do with traders turning more optimistic on the economy or betting on a more aggressive timetable for raising interest rates The surge in euro-area inflation that surprised policy makers in recent months is close to its peak, according to European Central Bank Governing Council member Francois Villeroy de Galhau Some Bank of Japan officials say it’s likely the central bank will discuss the possible ditching of a long-held view that price risks are mainly on the downward side at a policy meeting this month, according to people familiar with the matter Turkish authorities are keeping tabs on investors who are buying large amounts of foreign currency and asked banks to deter their clients from using the spot market for hedging-related trades as they struggle to contain the lira’s slide Italy is trying to lock in historically low financing costs at the start of a year where inflationary and political pressures could spell an end to super easy borrowing conditions North Korea appears to have launched its first ballistic missile in about two months, after leader Kim Jong Un indicated he was more interested in bolstering his arsenal than returning to stalled nuclear talks with the U.S. A More detailed breakdown of overnight news from Newsquawk Asia-Pac equities traded mostly in the red following the mixed handover from Wall Street, where the US majors maintained a cyclical bias and the NDX bore the brunt of another sizeable Treasury curve bear-steepener. Overnight, US equity futures resumed trade with mild losses and have since been subdued, with participants now gearing up for the FOMC minutes (full Newsquawk preview available in the Research Suite) ahead of Friday’s US jobs report and several scheduled Fed speakers. In APAC, the ASX 200 (-0.3%) was pressured by its tech sector, although the upside in financials cushioned some losses. The Nikkei 225 (+0.1%) was kept afloat by the recent JPY weakness, whilst Sony Group rose some 4% after its chairman announced EV ambitions. The KOSPI (-1.2%) was dealt a blow as North Korea fired a projectile that appeared to be a ballistic missile, but this landed outside of Japan’s Exclusive Economic Zone (EEZ). The Hang Seng (-1.6%) saw its losses accelerate with the Hang Seng Tech Index tumbling over 4% as the sector tackled headwinds from Wall Street alongside domestic crackdowns. China Huarong Asset Management slumped over 50% as it resumed trade following a nine-month halt after its financial failure. The Shanghai Comp. (-1.0%) conformed to the mostly negative tone after again seeing a hefty liquidity drain by the PBoC. In the debt complex, the US T-note futures held a mild upside bias since the resumption of trade, and the US curve was somewhat steady. Participants also highlighted large short-covering heading into yesterday’s US close ahead of the FOMC minutes. Top Asian News Asian Stocks Slide as Surging Yields Squeeze Technology Sector China’s Growth Forecast Cut by CICC Amid Covid Outbreaks BOJ Is Said to Discuss Changing Long-Held View on Price Risks Gold Holds Gain With Fed Rate Hikes and Treasury Yields in Focus European equities (Stoxx 600 +0.1%) trade mixed in what has been a relatively quiet session thus far with the final readings of Eurozone services and composite PMIs providing little in the way of fresh impetus for prices. The handover from the APAC region was predominantly a soft one with Chinese bourses lagging once again with the Hang Seng Tech Index tumbling over 4% as the sector tackled headwinds from Wall Street alongside domestic crackdowns. Meanwhile, the Shanghai Comp. (-1%) conformed to the mostly negative tone after again seeing a hefty liquidity drain by the PBoC. Stateside, the ES and RTY are flat whilst the NQ lags once again after yesterday bearing the brunt of another sizeable treasury curve bear-steepener. In terms of house views, analysts at Barclays expect “2022 to be a more normal yet positive year for equities, looking for high single-digit upside and a broader leadership”. Barclays adds that it remains “pro-cyclical (Industrials, Autos, Leisure, reopening plays and Energy OW), and prefer Value to Growth”. Elsewhere, analysts at Citi stated that “monetary tightening may push up longer-dated nominal/real bond yields, threatening highly rated sectors such as IT or Luxury Goods. Alternatively, higher yields could help traditional value trades such as UK equities and Pan-European Financials”. Sectors in Europe are mostly higher, with auto names leading as Renault (+3.4%) sits at the top of the CAC, whilst Stellantis (+0.6%) has seen some support following the announcement that it is planning for a full battery-electric portfolio by 2028. Elsewhere, support has also been seen for Chemicals, Oil & Gas and Banking names with the latter continuing to be supported by the current favourable yield environment. To the downside, Food and Beverage is the clear laggard amid losses in Nestle (-2.6%) following a broker downgrade at Jefferies. Ocado (+5.5%) sits at the top of the Stoxx 600 after being upgraded to buy at Berenberg with analysts expecting the Co. to sign further deals with new and existing grocery e-commerce partners this year. Finally, Uniper (-2.4%) sits near the bottom of the Stoxx 600 after securing credit facilities totalling EUR 10bln from Fortum and KfW. Top European News U.K. Weighs Dropping Covid Test Mandate for Arriving Travelers German Energy Giant Uniper Gets $11 Billion for Margin Calls European Gas Extends Rally as Russian Shipments Remain Curbed Italian Inflation Hits Highest in More Than a Decade on Energy In FX, notwithstanding Tuesday’s somewhat mixed US manufacturing ISM survey and relatively hawkish remarks from Fed’s Kashkari, the week (and year) in terms of data and events really begins today with the release of ADP as a guide for NFP and minutes of the December FOMC that confirmed a faster pace of tapering and more hawkish dot plots. As such, it may not be surprising to see the Buck meandering broadly and index settling into a range inside yesterday’s parameters with less impetus from Treasuries that have flipped from a severe if not extreme bear-steepening incline. Looking at DXY price action in more detail, 96.337 marks the top and 96.053 the bottom at present, and from a purely technical perspective, 96.098 remains significant as a key Fib retracement level. JPY/EUR/AUD/GBP/NZD - All taking advantage of the aforementioned Greenback fade, and with the Yen more eager than others to claw back lost ground given recent underperformance. Hence, Usd/Jpy has retreated further from multi-year highs and through 116.00 to expose more downside potential irrespective of latest reports via newswire sources suggesting the BoJ is expected to slightly revise higher its inflation forecast for the next fiscal year and downgrade the GDP outlook for the year ending in March. Similarly, the Euro is having another look above 1.1300 even though EZ services and composite PMIs were mostly below consensus or preliminary readings and German new car registrations fell sharply, while the Aussie is retesting resistance around 0.7250 and its 50 DMA with some assistance from firm copper prices, Cable remains underpinned near 1.3550 and the 100 DMA and the Kiwi is holding mainly above 0.6800 in the face of stronger Aud/Nzd headwinds. Indeed, the cross is approaching 1.0650 in contrast to Eur/Gbp that is showing signs of changing course following several bounces off circa 0.8333 that equates to 1.2000 as a reciprocal. CHF/CAD - The Franc and Loonie appear a bit less eager to pounce on their US peer’s retrenchment, as the former pivots 0.9150 and latter straddles 1.2700 amidst a downturn in crude pre-Canadian building permits and new house prices. SCANDI/EM - Little sign of any fallout from a slowdown in Sweden’s services PMI as overall risk sentiment remains supportive for the Sek either side of 10.2600 vs the Eur, but the Nok is veering back down towards 10.0000 in line with slippage in Brent from Usd 80+/brl peaks reached on Tuesday. Elsewhere, the Zar is shrugging off a sub-50 SA PMI as Gold strengthens its grip on the Usd 1800/oz handle and the Cnh/Cny are still underpinned after another PBoC liquidity drain and firmer than previous midpoint fix on hopes that cash injections might be forthcoming through open market operations into the banking system from the second half of January to meet rising demand for cash, according to China's Securities Journal. Conversely, the Try has not derived any real comfort from comments by Turkey’s Finance Minister underscoring its shift away from orthodox policies, or insistence that budget discipline will not be compromised. In commodities, crude benchmarks are currently little changed but have been somewhat choppy within a range shy of USD 1/bbl in European hours, in-spite of limited fresh newsflow occurring. For reference, WTI and Brent reside within USD 77.26-76.53/bbl and USD 80.25-79.56/bbl parameters respectively. Updates for the complex so far include Cascade data reporting that gas flows via the Russian Yamal-Europe pipeline in an eastward direction have reduced. As a reminder, the pipeline drew scrutiny in the run up to the holiday period given reverse mode action, an undertaking the Kremlin described as ‘operational’ and due to a lack of requests being placed. Separately, last nights private inventories were a larger than expected draw, however, the internals all printed builds which surpassed expectations. Today’s EIA release is similar expected to show a headline draw and builds amongst the internals. Elsewhere, and more broadly, geopolitics remain in focus with Reuters sources reporting that a rocket attack has hit a military base in proximity to the Baghdad airport which hosts US forces. Moving to metals, spot gold and silver are once again fairly contained though the yellow metal retains the upside it derived around this point yesterday, hovering just below the USD 1820/oz mark. US Event Calendar 7am: Dec. MBA Mortgage Applications -5.6%, prior -0.6% 8:15am: Dec. ADP Employment Change, est. 410,000, prior 534,000 9:45am: Dec. Markit US Composite PMI, prior 56.9 9:45am: Dec. Markit US Services PMI, est. 57.5, prior 57.5 2pm: Dec. FOMC Meeting Minutes DB's Jim Reid concludes the overnight wrap As you may have seen from my CoTD yesterday all I got for Xmas this year was Omicron, alongside my wife and two of our three kids (we didn’t test Bronte). On Xmas Day I was cooking a late Xmas dinner and I suddenly started to have a slightly lumpy throat and felt a bit tired. Given I’d had a couple of glasses of red wine I thought it might be a case of Bordeaux-2015. However a LFT and PCR test the next day confirmed Covid-19. I had a couple of days of being a bit tired, sneezing and being sniffly. After that I was 100% physically (outside a of bad back, knee and shoulder but I can’t blame that on covid) but am still sniffly today. I’m also still testing positive on a LFT even if I’m out of isolation which tells me testing to get out of isolation early only likely works if you’re completely asymptomatic. My wife was similar to me symptom wise. Maybe slightly worse but she gets flu badly when it arrives and this was nothing like that. The two kids had no real symptoms unless being extremely annoying is one. Indeed spending 10 days cooped up with them in very wet conditions (ie garden activity limited) was very challenging. Although I came out of isolation straight to my home office that was still a very welcome change of scenery yesterday. The covid numbers are absolutely incredible and beyond my wildest imagination a month ago. Yesterday the UK reported c.219k new cases, France c.272k and the US 1.08 million. While these are alarming numbers it’s equally impressive that where the data is available, patients on mechanical ventilation have hardly budged and hospitalisations, while rising, are so far a decent level below precious peaks. Omicron has seen big enough case numbers now for long enough that even though we’ve had another big boost in cases these past few days, there’s nothing to suggest that the central thesis shouldn’t be anything other than a major decoupling between cases and fatalities. See the chart immediately below of global cases for the exponential recent rise but the still subdued levels of deaths. Clearly there is a lag but enough time has passed that suggests the decoupling will continue to be sizeable. It seems the main problem over the next few weeks is the huge number of people self isolating as the variant rips through populations. This will massively burden health services and likely various other industries. However hopefully this latest wave can accelerate the end game for the pandemic and move us towards endemicity faster. Famous last words perhaps but this variant is likely milder, is outcompeting all the others, and our defences are much, much better than they have been (vaccines, immunity, boosters, other therapeutic treatments). Indeed, President Biden directed his team to double the amount of Pfizer’s anti-covid pill Paxlovid they order; he called the pill a game changer. So a difficult few weeks ahead undoubtedly but hopefully light at the end of the tunnel for many countries. Prime Minister Boris Johnson noted yesterday that Britain can ride out the current Omicron wave without implementing any stricter measures, suggesting that learning to live with the virus is becoming the official policy stance in the UK. The head scratcher is what countries with zero-covid strategies will do faced with the current set up. If we’ve learnt anything from the last two years of covid it is that there is almost no way of avoiding it. Will a milder variant change such a stance? Markets seem to have started the year with covid concerns on the back burner as day 2 of 2022 was a lighter version of the buoyant day 1 even if US equities dipped a little led by a big under-performance from the NASDAQ (-1.33%), as tech stocks got hit by higher discount rates with the long end continuing to sell off to start the year. Elsewhere the Dow Jones (+0.59%) and Europe’s STOXX 600 (+0.82%) both climbed to new records, with cyclical sectors generally outperforming once again. Interestingly the STOXX Travel & Leisure index rose a further +3.11% yesterday, having already surpassed its pre-Omicron level. As discussed the notable exception to yesterday’s rally were tech stocks, with a number of megacap tech stocks significantly underperforming amidst a continued rise in Treasury yields, and the rotation towards cyclical stocks as investors take the message we’ll be living with rather than attempting to defeat Covid. The weakness among that group meant that the FANG+ index fell -1.68% yesterday, with every one of the 10 companies in the index moving lower, and that weakness in turn meant that the S&P 500 (-0.06%) came slightly off its record high from the previous session. Showing the tech imbalance though was the fact that the equal weight S&P 500 was +0.82% and 335 of the index rose on the day. So it was a reflation day overall. Staying with the theme, the significant rise in treasury yields we saw on Monday extended further yesterday, with the 10yr yield up another +1.9bps to 1.65%. That means the 10yr yield is up by +13.7bps over the last 2 sessions, marking its biggest increase over 2 consecutive sessions since last September. Those moves have also coincided with a notable steepening in the yield curve, which is good news if you value it as a recessionary indicator, with the 2s10s curve +11.3bps to +88.7bps over the last 2 sessions, again marking its biggest 2-day steepening since last September Those moves higher for Treasury yields were entirely driven by a rise in real yields, with the 10yr real yield moving back above the -1% mark. Conversely, inflation breakevens fell back across the board, with the 10yr breakeven declining more than -7.0bps from an intraday peak of 2.67%, the highest level in more than six weeks, which tempered some of the increase in nominal yields. The decline in breakevens was aided by the release of the ISM manufacturing reading for December, since the prices paid reading fell to 68.2, some way beneath the 79.3 reading that the consensus had been expecting. In fact, that’s the biggest monthly drop in the prices paid measure in over a decade, and leaves it at its lowest level since November 2020. Otherwise, the headline reading did disappoint relative to the consensus at 58.7 (vs. 60.0 expected), but the employment component was above expectations at 54.2 (vs. 53.6 expected), which is its highest level in 8 months and some promising news ahead of this Friday’s jobs report. Staying with US employment, the number of US job openings fell to 10.562m in November (vs. 11.079m expected), but the number of people quitting their job hit a record high of 4.5m. That pushed the quits rate back to its record of 3.0% and just shows that the labour market continues to remain very tight with employees struggling to hire the staff needed. This has been our favourite indicator of the labour market over the last few quarters and it continues to keep to the same trend. Back to bonds and Europe saw a much more subdued movement in sovereign bond yields, although gilts were the exception as the 10yr yield surged +11.7bps as it caught up following the previous day’s public holiday in the UK. Elsewhere however, yields on bunds (-0.2bps), OATs (-1.1bps) and BTPs (+0.9bps) all saw fairly modest moves. Also of interest ahead of tonight’s Fed minutes, there was a story from the Wall Street Journal late yesterday that said Fed officials are considering whether to reduce their bond holdings, and thus beginning QT, in short order. Last cycle, the Fed kept the size of its balance sheet flat for three years after the end of QE by reinvesting maturing proceeds before starting QT. This iteration of QE is set to end in March, so any move towards balance sheet rolloff would be a much quicker tightening than last cycle, which the article suggested was a real possibility. As this cycle has taught us time and again, it is moving much faster than historical precedent, so don’t rely on prior timelines. Balance sheet policy and the timing of any QT will be a major focus in tonight’s minutes, along with any signals for the timing of liftoff and path of subsequent rate hikes. Overnight in Asia markets are trading mostly lower with the KOSPI (-1.45%), Hang Seng (-0.85%), Shanghai Composite (-0.81%) and CSI (-0.67%) dragged down largely by IT stocks while the Nikkei (+0.07%) is holding up better. In China, Tencent cut its stake in a Singapore based company yesterday by selling $ 4 billion worth shares amidst China's regulatory crackdown with investors concerned they will do more. This has helped push the Hang Seng Tech Index towards its lowest close since its inception in July 2020 with Tencent and companies it invested in losing heavily. Moving on, Japan is bringing forward booster doses for the elderly while maintaining border controls in an effort to contain Omicron. Futures are indicating a weaker start in DM markets with the S&P 500 (-0.25%) and DAX (-0.11%) both tracking their Asian peers. Oil prices continued their ascent yesterday, with Brent Crude (+1.20%) hitting its highest level since the Omicron variant first emerged on the scene. Those moves came as the OPEC+ group agreed that they would go ahead with the increase in output in February of 400k barrels per day. And the strength we saw in commodities more broadly last year has also continued to persist into 2022, with copper prices (+1.12%) hitting a 2-month high, whilst soybean prices (+2.49%) hit a 4-month high. Looking at yesterday’s other data, German unemployment fell by -23k in December (vs. -15k expected), leaving the level of unemployment at a post-pandemic low of 2.405m in December. Finally, the preliminary French CPI reading for December came in slightly beneath expectations on the EU-harmomised measure, at 3.4% (vs. 3.5% expected). To the day ahead now, and data releases include the December services and composite PMIs from the Euro Area, Italy, France, Germany and the US. On top of that, there’s the ADP’s December report of private payrolls from the US, the preliminary December CPI report from Italy, and December’s consumer confidence reading from France. Separately from the Federal Reserve, we’ll get the minutes of the December FOMC meeting. Tyler Durden Wed, 01/05/2022 - 08:07.....»»

Category: blogSource: zerohedgeJan 5th, 2022

US Aviation on Collision Course With AT&T (T), Verizon (VZ)?

Both Verizon (VZ) and AT&T (T) remain firm on their decision to commercially launch their C-band 5G wireless service on Jan 5 in order to better compete with countries like China. The aviation industry appears to be in a potential stalemate with the telecom sector as two leading operators refuse to pay heed to the pleas from U.S. officials for the deferment of their 5G expansion plans by about two weeks. Both Verizon Communications Inc. VZ and AT&T Inc. T remain firm on their decision to commercially launch their C-band 5G wireless service on Jan 5 in order to better compete with other countries like China. With the impasse heading for a likely showdown in the legal arena, the new year has apparently brought with it fresh challenges for the Biden administration.The bone of contention relates to the likely interference of 5G waves within the C-Band spectrum with certain flight operations. The Federal Aviation Administration (“FAA”) has raised concerns that the commercial launch of the C-band wireless service in the 3.7-3.98 GHz frequency band could cause the airwaves to interfere with radar or radio altimeter signals that measure the distance between the aircraft and ground. Data from these devices are fed to the cockpit safety system that helps pilots gauge the air safety metrics and prevent mid-air collision, avoid crashes and ensure a safe landing.In order to avert any potential disruption in essential safety sensors, the FAA had earlier issued certain flight restrictions that would prevent pilots from operating the automatic landing option and other cockpit systems during inclement weather conditions. The FAA followed it up with a ‘Safety Alert for Operators’ in the last week of December. The alert includes recommended action in the form of ”Notice To Air Missions,” primarily based on previously issued restrictions. This, in turn, is likely to significantly affect air cargo and commercial air travel at most of the biggest airports and highest traffic destinations across the country, with airlines warning that about 4% of daily flights are likely to be delayed, canceled, or diverted.Although the directives are primarily intended to make 5G expansion and aviation coexist without compromising passenger safety, various airline industry groups have raised concerns about the safety of flights. In an SOS, U.S. Transportation Secretary Pete Buttigieg and FAA Administrator Steve Dickson requested AT&T and Verizon to defer the proposed 5G expansion plans by about two weeks, within which a buffer zone was expected to be identified around airports for safe cohabitation.   Rebuffing the requests as “irresponsible abdication of the operating control required to deploy world-class and globally competitive communications networks,” both AT&T and Verizon vowed to go ahead with their plans. Although they rejected any broader restrictions on the usage of the C-Band spectrum, they pledged not to deploy 5G around airports for about six months. The firms argued that the proposed exclusion zones were identical to those followed by their counterparts in France and FAA’s apprehensions lacked concrete evidence and were merely blown out of proportion.  The FAA has countered these claims by pointing out that France uses a different 5G spectrum compared to that of the United States and it is reportedly further away from the spectrum used for radio altimeters. Various airline trade groups have backed the concerns echoed by FAA and have threatened to seek legal help for the safety of passengers and avert the potential loss of billions if normal flight operations are affected.Amid all the cacophony, the firm stance by AT&T and Verizon signify that the stakes are relatively high for the carriers as they aim to capitalize on the immense 5G potential and generate healthy ROI. For the record, Verizon was the largest bidder with $45.5 billion worth of bids in the FCC-led C-Band auction for mid-band airwaves that generated about $81.2 billion in gross proceeds, followed by AT&T at $23.4 billion. The auction offered 280 MHz of spectrum for potential 5G deployments over the next few years. While Verizon secured 3,511 of the 5,684 licenses up for grabs, AT&T claimed 1,621.By virtue of its auction bids, Verizon has secured an average of 161 MHz of C-band nationwide spectrum. The C-Band offers significant bandwidth with better propagation characteristics for optimum coverage in both rural and urban areas than mmWave, which has a short range and requires a high density of sites to achieve coverage. Consequently, it is deemed a prized asset for carriers like Verizon and AT&T that lack considerable mid-band spectrum holdings.It remains to be seen how the saga unfolds in the coming weeks and whether it goes on to be one of the biggest slugfests in 2022. Zacks Top 10 Stocks for 2022 In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022? From inception in 2012 through November, the Zacks Top 10 Stocks gained an impressive +962.5% versus the S&P 500’s +329.4%. Now our Director of Research is combing through 4,000 companies covered by the Zacks Rank to handpick the best 10 tickers to buy and hold. Don’t miss your chance to get in on these stocks when they’re released on January 3.Be First To New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AT&T Inc. (T): Free Stock Analysis Report Verizon Communications Inc. (VZ): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksJan 3rd, 2022

Top 10 Themes For 2022: Part 2

Top 10 Themes For 2022: Part 2 Picking up where we left off with the first five of Deutsche Bank's Top 10 Themes For 2022, here is Part 2 of what the bank thinks will be the biggest themes of the coming year. Themes covered include i) Antitrust (or competition) renaissance; ii) The end of free money in stock markets; iii) Space: a worrying geopolitical frontier; iv) Central Bank Digital Currencies: Growing into reality and v) ESG bonds go mainstream. (click here for Part 1 which covers the following themes 1) An overheating economy; 2) Covid optimism; 3) A hypersonic labor market and inflation; 4) Corporate focus on asset efficiency; 5). Inventory glut. ) * * * 6. Antitrust (or competition) renaissance, by Luke Templeman Like it or not, US companies will likely face tougher competition in 2022. The rest of the western world is likely to follow suit. An executive order issued by President Biden in July argued that over the last several decades, “competition has weakened in too many markets”. It blamed this for widening racial, income, and wealth inequalities, as well as suppressing worker power. A “whole-of-government” effort was promised on 72 initiatives. That followed just months after the chair of the Federal Trade Commission was given to Lina Khan who is known for her work on anti-trust and competition issues. If Biden’s initiatives have teeth, companies may be about to witness a sharp reversal of the trend towards less competition seen over the past few decades. The following charts show just two indicators that life has become more difficult for new companies in the US. The result of diluted competition is that corporate profit margins have grown. Last quarter’s results showed that profit margins in S&P 500 companies have hit multi-decade highs (despite covid) and have almost doubled to 11.2 per cent (on a four-quarter rolling basis). That has helped corporate earnings comfortably outpace GDP over the last two decades. Of course, falling costs of labor and capital over the last few decades have helped boost profits. But in a textbook competitive market, these advantages should be competed out and/or passed onto customers. The tighter competition has been, in part, due to consolidation after rule changes in the 1980s gave corporates the confidence to ramp-up mergers and acquisitions. Hence a lower number of large firms in many markets. For instance, only a handful of mobile carriers and airlines compared with their numbers 20 years ago. Meanwhile, there is an open-ended question of whether some large technology groups stifle or promote competition. Some argue that scale delivers cheap goods to customers; other say it reduces innovation and the incentive to spend on capex and workers. Regardless of the reason for less competition, Biden appears to have the political will to boost it. And this desire will be undergirded by the will of workers. Post-covid, many workers, particularly low paid staff, have significantly greater bargaining power. As a result, long-standing discontent with wages lagging profits are morphing into action. Large firms, including Amazon, Disney, and McDonald's, have all given pay rises since covid. So, with political will at the top supported by worker power at the bottom, the companies stuck in the middle should expect that 2022 will usher in an era of greater competition, an easier time for new entrants, and more hurdles to mega-acquisitions. It could mean that companies come to see high profit margins as an anomaly rather than the norm. * * * 7. The end of free money in stock markets, Luke Templeman “Will the stock market crash in 2022 as the Fed tapers and likely raises rates?” While many investors fret over this question, the forgotten theme that may accompany the end of free money is not whether stock markets will crash. Rather, it is how investors may be forced, for the first time in a decade, to consider how the end of free money may reorder equity markets on the inside. The end of stimulus is certain to slow the money flow into equity markets. And if rising interest rates push bond yields higher, investors will have options elsewhere in bond markets and other rate-sensitive investments that have been ignored in recent years. As investments aside from equities become more appealing, frustrated active asset managers may finally witness the return of fundamental investing. Equity markets will be shocked by the return of fundamentals. After all, in the era of free money, many frustrated ‘value’ managers have given up. The following charts show that as markets recovered from the financial crisis, traditional ‘value’ investing became very difficult. The reason for the underperformance of ‘value’ is not simply explained by the outperformance of technology ‘growth’ stocks. It is also because the financial crisis catalyzed the era of super-cheap money. A significant proportion of this poured into equity markets, much through passive funds which bought the index. As a result, all stocks began to move in similar ways regardless of the profitability of the underlying companies. The following chart shows that between the 2008 financial crisis and covid, the dispersion (or spread) of stock returns disconnected from the dispersion of returns on equity. In other words, even though corporate profits were more different, their stock prices remained similar. Since covid, stock markets have flirted with the idea of once again discriminating between companies with strong and weak profitability. But the stimulus-fuelled rally has largely ended that. Investors are, once again, simply throwing their money at the entire stock market, particularly in passive funds. In 2022, as equity markets lose the flood of money that has propped up all stocks over the last decade, investors may be forced to become more discerning. There are signs this is beginning to happen. Postcovid, the dispersion of returns is higher than it has been in almost a decade. Accelerating the return of fundamentalism could be a tightening in business conditions. Wage pressure, exposure to ESG issues, and the Biden administration’s desire to increase competition, will likely have a disproportionate effect on poor quality companies that investors have hitherto propped up. That will further highlight the gap to market values and widen the differences between companies. None of this means overall equity markets will crash. Rather, it may lead to a reordering within equity markets as we witness the return of fundamental value investing. Finally, active managers may be back in vogue. * * * 8. Space: a worrying geopolitical frontier, Galina Pozdnyakova Against the backdrop of rising geo-political tensions between several countries, 2022 is shaping up to be the year when tensions over the potential for the militarization of space become a top geo-political negotiation topic. The problem is that most parties have an incentive to avoid agreeing on new rules. Many would rather keep space as a ‘wild west’. Of course, several countries have national space laws, and international treaties such as the Outer Space Treaty of 1967 are in place. Yet they do not adequately govern modern weaponisation of space technologies. And with no consensus over boundaries and control over space objects, and blurred lines between defence and weapons systems, the risk of conflict is rising. The reality of the military threat in space will be amplified in 2022 as politicians digest recent high-profile events. The Russian ASAT test in November showed that the country can take down satellites – an ability also demonstrated by the US (2008), China (2007) and India (2019). Meanwhile, France recently became the fourth country to launch electromagnetic-monitoring military satellites, following the US,  China, and Russia. The importance of space has surged in the past few years as falling launch costs have led to an increased number of satellites in orbit and, thus, and increased dependence upon them. Aside from military uses, future conflicts will certainly target communications, GPS, and finance applications that all rely on satellites. Countries have quickly taken the military risks of space more seriously. Over autumn, QUAD leaders agreed to finalize “Space Situational Awareness Memorandum of Understanding” this year. Separately, the UK pushed a resolution on “threatening and irresponsible space behaviours” which passed the first stage at the UN and will be reviewed in December. Responding to the threats, new military space divisions have popped up over the last two years. Japan’s Space Operations Squadron and the UK’s Space Command were both created since 2020. They follow the creation of China’s Strategic Support Force in 2015, and the US Space Force in 2019. The latter will receive a 13 per cent budget increase in 2022. The 2022 completion of the Chinese space station, Tiangong, will also mark a shift in soft space power. It will increase China’s scientific research capabilities and its collaboration with other countries. The station’s advanced technologies and equipment, as well as modular design, will allow for multiple use cases. Meanwhile, the International Space Station is only approved to operate until 2024. So 2022 will likely be the year where space becomes the next frontier of an arms race between key global powers. Layering these issues on top of existing geopolitical tensions will create an unusual situation for world leaders. Everyone wants everyone else to play by the rules. Yet the rules of space are antiquated and there is a heavy incentive for most powers to avoid cementing new ones. The tensions above the Earth appear set to amplify tensions on it. Space threats are already becoming a topic of geo-political negotiation and, in 2022, they will likely become front-and-center. * * * 9. Central Bank Digital Currencies: Growing into reality, Marion Laboure There is a clear move towards a cashless society (as a mean of payment) and CBDCs is set to progressively replace cash. The question is no longer « if » but « when » and « how ». Today, 86 per cent of central banks are developing a CBDC; 60 per cent are experimenting at the proof-of-concept stage. Central banks representing about a fifth of the world’s population are likely to issue a general purpose CBDC in the next two years. We believe that a large majority of countries will have a CBDC live in the next five to six years. Emerging economies will lead the race. They will move quicker and with higher adoption than advanced economies. The Bahamas and the Eastern Caribbean are live; China will be live in February 2022. In five years, many emerging economies will have moved; including many Asian countries. The ECB/Fed will soon start piloting projects and, if successful, are expected to be live around 2025-26. The main barriers for advanced economies are: cultural/privacy; low interest rates; older demography, heavily reliance on cards. A CBDC itself is not going to rebalance the international order between the US and China. But this is the Chinese global, 360 strategy with very advanced payments technologies which is creating an advantage to pay in their currencies and will continue to gain market share. China benefits from advanced payments systems (especially settlement technologies) that could change the deal and attract merchants and vendors to use this new, more efficient currency. The Chinese government has made tremendous efforts to internationalize the renminbi, like the US intervention in the early twentieth century. China aims to become a world leader in science and innovation by 2050. China is also massively investing in advanced technologies and is currently the second largest investor in artificial intelligence enterprises after the US. Indeed, China appears on track to have an “AI ecosystem” built by 2030. * * * 10. ESG bonds go mainstream, Luke Templeman Amongst the many themes turbocharged by the covid catalyst, ESG bond issuance is one of the most prominent. In 2022, ESG bond issuance is set to go mainstream. Investors have taken notice. In fact, the holdings of ESG bond exchange-traded funds have tripled to over $45bn since the covid outbreak. As the chart below shows, that surge of interest follows years of very little growth. The growth of ESG bonds appears to have breached a tipping point. Not just because investors are keen to hold ESG debt, but also because corporates see that ESG issues now affect their business and investment risk. Indeed, in our recent survey, 19 per cent of corporate debt issuers say that over the last 12 months, environmental factors have impacted their rating. A smaller, but still material proportion, report that social and governance factors have had an impact. Now that there is a firm nexus between ESG issues and business risk, ESG instruments (primarily bonds) have become a gateway through which corporates begin to address their impact on problems like climate change. Since early last year, over half of corporates have either offered their first ESG instrument or are currently preparing to do so. Some of the strongest issuance in 2022 will likely be of sustainability-linked bonds. These bonds, which have quickly become very popular, generally offer corporates an interest rate discount if they hit certain ESG targets. From a base of close to zero two years ago, sustainability-linked bonds have comprised up to half the ESG bond issuance in the second half of 2021. Investors have quickly fallen in love with sustainability-linked bonds. Just over half of investors say these types of bonds are the most promising instrument out of a pool of ESG assets. That is over double the next highest response, which is European green bonds, with 21 per cent. Driving sustainability-linked bonds is the sudden growth in the number of businesses that publish quantifiable ESG performance targets. Indeed, a third of corporate debt issuers have already started to do so since 2020. A further 21 per cent will begin publishing in the next 12 months and that will leave only 6 per cent without any plans to do so. Aside from investor demand and published corporate targets that have laid the platform for the growth of sustainability-linked bonds in 2022, corporates have discovered the ‘signalling’ benefits. Just over 60 per cent of companies in our survey said the main benefit of their company’s ESG instrument was that it “enables us to convey our sustainability strategy”. A further 22 per cent say these instruments expand their investor base. Meanwhile, half say there are pricing benefits. Definitions on how to do ESG investing ‘well’ differ given the breath-taking pace at which it is evolving. Regardless, corporates and investors have now created the market for ESG bonds. With companies starting to publish specific ESG targets, it seems inevitable that in 2022 there will be a surge in issuance from corporates and strong appetite from investors. Tyler Durden Thu, 12/23/2021 - 16:50.....»»

Category: blogSource: zerohedgeDec 23rd, 2021

Is the S&P 500 Due for a Major Pullback? 3 Ultra-Safe Stocks

Given the rate at which the virus is spreading, the market could be headed for a major pullback. So it may be good idea to play safe. The one big thing on everyone’s minds at the moment is Omicron and the way that it is spreading. For investors, it isn’t just the fear of getting infected or worse, hospitalized. It’s also a concern about what it could do to the market, if people rush back indoors. And of course, the things that will be hit first will be travel, airlines, hotels, restaurants and so on that we were all betting on as reopening stories.For the most part, people are sticking with their holiday plans, and making the most of test kits, masks and other precautions to stay safe. But it is feared that right after the holiday season things could fall dramatically. And by then we could be in pretty bad shape considering that Omicron is much more contagious than Delta. Of course, the Biden administration’s free test kits for at-home testing will come in handy. The government has said that it will buy 500 million test kits and deliver them free of cost to people who want them starting January.It’s extremely unlikely that the catastrophic situation that we had when the virus first hit will repeat this time because 200 million people are already vaccinated, we have better therapeutics and people in general know what to do to stay safe. A lot of infrastructure is also in place to allow people to operate remotely. But the risks can’t be ignored.And they are in addition to other concerns about inflation, supply chains, product shortages and labor issues that we were already in the midst of.While the stock market has been one of the best places to put your money in this year, the stage seems set for a major pullback in the S&P 500. And that’s going to hurt a lot of people. So you may be wondering what to do to tide over the situation.One tried and tested strategy for times like this, sometimes overlooked because it’s so easy, is to select stocks with a low beta. A low beta stock refers to a stock with a beta value less than 1. Stocks that have historically performed in line with the S&P 500 (usually the S&P 500, but may also be with respect to the Dow Jones Industrial Average or Nasdaq 100) will have a beta value of 1. Stocks that don’t move as much as the index have a beta value less than 1 and stocks that move more than the index have a beta value that’s greater than 1. So basically, beta is a volatility measure with respect to some index, usually the S&P 500. When there are significant uncertainties in the market, it makes sense to pick low-beta stocks because they will not be as volatile.And if it also pays a dividend and has a relatively sound growth profile, it makes all the more sense to invest in.At Zacks, we also have a system of ranking stocks in our universe on the basis of their near-term performance (over the next month). So a stock with strong upside potential would have a Zacks Rank #1 (Strong Buy), if the chances are slightly lower, it would have a Zacks Rank #2 (Buy), then #3 for Hold, #4 for Sell and #5 for Strong Sell.These three stocks combine the above factors, so they may be considered ultra-safe-Broadcom Inc. AVGOBroadcom is a premier designer, developer and global supplier of a broad range of semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor (CMOS)-based devices and analog III-V based products.Headquartered in San Jose, CA, Broadcom’s semiconductor solutions are used in end products such as enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays.In the last quarter, Broadcom’s results were more or less in line with estimates. The company is seeing ongoing strength in the 5G infrastructure and data center markets and the breadth and depth of its product offerings is helping sales. In the last 30 days, the Zacks Consensus Estimates for its 2022 (ending October) and 2023 earnings moved up. The estimate for 2022 increased $2.02 (6.5%) while the estimate for 2023 increased $2.82 (8.5%).After growing a sedate 11.6% this fiscal year, Broadcom’s revenue is expected to grow 4.7% the following year. Its earnings are expected to grow 17.9% and 9.4%, respectively.The company pays a dividend that yields 2.23%. And best of all, it has a beta value of 0.93.Bank of Nova Scotia BNSBank of Nova Scotia is one of Canada’s leading banks offering retail banking and wealth management services primarily to customers in Canada, the U.S., Mexico, Peru, Chile, Colombia, the Caribbean and Central America. Bank of Nova Scotia is headquartered in Halifax, Canada.In the last quarter, the company’s reported earnings came in 8.5% above the Zacks Consensus Estimate. And management expressed confidence in its diversified business model, which has demonstrated its resilience through the pandemic. They also believe that the bank is well positioned to achieve its full earnings power in the upcoming year. Bank of Nova Scotia’s estimates continue on an upward trajectory. And in the last 30 days, the estimate for 2022 (ending October) increased 43 cents (7.1%) while the estimate for 2023 increased 52 cents (8.1%).Analysts currently expect its 2022 revenue and earnings to grow a respective 3.0% and 6.6% while the 2023 revenue and earnings to grow a respective 5.8% and 3.7%.If that feels like very low growth, it’s worth remembering that Bank of Nova Scotia also pays a dividend that yields 4.2%. And the best part, for the purposes of this topic, is that the beta value for the stock is 0.94.DENSO Corp. DNZOYDENSO develops, manufactures and sells automotive parts in Japan, rest of Asia, North America, Europe and elsewhere. It provides a very broad range of products from wind shield wipers to cooling and heating systems, powertrains and other automotive electronics. It is based in Kariya, Japan.The company’s focus on advanced technologies has positioned it for success in a world that is moving toward an electric and self-driving future. As a result, it is able to sign lucrative deals with companies like Toyota and Honeywell.In the last quarter, DENSO’s earnings missed the Zacks Consensus Estimate by 36.4%. However, its estimates for both 2022 (ending March) and 2023 moved up. The last 30 days saw the Zacks Consensus Estimate for 2022 increase 20 cents (10.5%) while the estimate for 2023 increased 30 cents (12.9%).DENSO Corp’s revenue is currently expected to grow 8.1% in 2022 and 12.1% in 2023. Its earnings are expected to grow 177.6% and 24.2%, respectively, in the two years.DENSO's dividend yields 1.22%. Its beta is 0.94.3-Month Price TargetImage Source: Zacks Investment Research Zacks Top 10 Stocks for 2022 In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022? From inception in 2012 through November, the Zacks Top 10 Stocks gained an impressive +962.5% versus the S&P 500’s +329.4%. Now our Director of Research is combing through 4,000 companies covered by the Zacks Rank to handpick the best 10 tickers to buy and hold. Don’t miss your chance to get in on these stocks when they’re released on January 3.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Broadcom Inc. (AVGO): Free Stock Analysis Report Bank of Nova Scotia The (BNS): Free Stock Analysis Report Denso Corp. (DNZOY): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksDec 23rd, 2021

Warren Buffett revealed 2 big bets, defended his tax habits, and admitted several mistakes this year. Here are his 8 highlights of 2021.

The billionaire investor and Berkshire Hathaway CEO complained the stock market was being treated like a casino, and made a fortune on Apple. Warren Buffett.Carlos Barria / Reuters Warren Buffett revealed two big bets, admitted mistakes, and complained about speculators this year. The Berkshire Hathaway chief defended his tax practices and made a fortune on Apple. Here are billionaire investor Buffett's eight highlights of 2021. Warren Buffett revealed a couple of billion-dollar investments, owned up to making several mistakes, and bemoaned the rampant speculation in markets this year.The renowned investor and Berkshire Hathaway CEO also weathered a tax exposé, resigned as a trustee of The Bill & Melinda Gates Foundation, reflected on his decades-long friendship with Charlie Munger, and saw his Apple investment soared in value.Here are the 8 highlights of Buffett's year:Chevron and VerizonCNBCBuffett started the year in style with his fourth-quarter portfolio update in February. He revealed a $4.1 billion stake in Chevron and a $8.6 billion position in Verizon, answering the question of which mystery stocks he had been buying in recent months.Berkshire also trimmed the largest position in its portfolio, Apple, by 6%. Moreover, it halved its Wells Fargo holdings and exited JPMorgan, PNC, and M&T after slashing its positions in those banks in 2020.The shareholder letterWarren BuffettYouTube / University of Nebraska–LincolnBuffett published his annual letter to shareholders in February. The investor admitted to overpaying when he acquired Precision Castparts in 2016, trumpeted a bunch of Berkshire's subsidiaries, and contrasted his long-term shareholders with the speculators flocking to trendy assets such as meme stocks and cryptocurrencies.Here's a round-up of the best quotes from Buffett's letter. The annual meetingBerkshire Hathaway CEO Warren Buffett talks to reporters while holding an ice cream at a trade show during the company's annual meeting in Omaha, Nebraska May 3, 2014.REUTERS/Rick WilkingBuffett warned rookie traders not to get cocky, bemoaned the lack of bargains in the market, rang the inflation alarm, and admitted to buying "so-so" stocks during Berkshire's annual shareholder meeting in May.The investor also complained about the surge in people treating the stock market like a casino. Moreover, he acknowledged that trimming his Apple stake and selling Costco were likely mistakes, and suggested he avoided bailing out the "big four" US airlines by exiting his positions in them in April 2020.Here are the best quotes from the Berkshire meeting.The tax fracasWarren BuffettGetty ImagesBuffett came under fire in June after ProPublica secured the tax returns of some of the wealthiest Americans, and reported the investor paid only $25 million in federal income tax between 2014 and 2018.The Berkshire boss defended himself by noting that he's pledged to give over 99% of his net worth to philanthropic causes, and has already donated about half of his Berkshire "A" shares since 2006.  The Gates FoundationPaul Sakuma/AP PhotoBuffett resigned as a trustee of the Bill & Melinda Gates Foundation in June. The investor explained that he was barely involved in the foundation's work, and had already stepped down from all corporate boards except his own.He also highlighted his annual donation of $4.1 billion in total to five charities, including the Gates Foundation.Friendship with Charlie MungerSCOTT MORGAN/REUTERSBuffett and his business partner, Charlie Munger, discussed their decades-long friendship in a CNBC interview that aired in June.The pair sharply criticized Robinhood, and Munger called for tighter regulations on derivatives trading after Archegos Capital's meltdown. Buffett underlined the immense contribution that Munger has made to his life.Here are the best quotes.Buybacks, cash, and stock salesWarren BuffettREUTERS/Rebecca CookBerkshire's third-quarter earnings underlined how hard it has been for Buffett to find bargain stocks and businesses this year. That has prompted him to stockpile cash and ramp up share buybacks.The conglomerate sold a net $7 billion of stock in the year to September 30, revealed it was on track to repurchase a record $25 billion of stock this year, and grew its cash pile to an unprecedented $149 billion.  The Apple betWarren BuffettAP ImagesBuffett's biggest success this year might well be his Apple investment.The investor plowed $36 billion into the iPhone maker between 2016 and 2018. The stock has surged by about a third this year, boosting the value of Berkshire's stake to more than $150 billion as of mid-December.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 23rd, 2021

Etihad Airways" CEO says that airlines that fail to follow its sustainability lead may soon be "history"

Travelers and lucrative corporate clients are examing the carbon footprint of their airlines and Etihad will also compete on that metric moving forward. An Etihad Airways Boeing 787-10 Dreamliner nicknamed the "Greenliner" at the Dubai Airshow 2021Thomas Pallini/Insider Etihad Airways CEO Tony Douglas believes that airlines that don't focus on sustainability may be forced out of business. More leisure travelers and businesses are focusing on the emissions of their travel and choosing green airlines.  Etihad is one of the airlines leading the charge in creating a sustainable future for aviation. Etihad Airways is betting all of its chips on sustainable aviation, and says that airlines that aren't doing the same might soon be "history."Tony Douglas, Etihad's chief executive officer, told Insider at the Dubai Airshow in November that airlines will soon compete on environmental performance, and those that aren't making changes now could lose future customers."Increasingly, travelers will make choices that do include carbon emissions and therefore, the environmental performance [of their airline,]" Douglas said. "The people that don't respond in the sort of ways that we've been doing may well be history."Etihad's ultimate goal is to achieve net-zero emissions by 2050 and cut its 2019 emissions in half by 2035. The airline knows how to cut back on emissions but mastering the balancing act between environmental sustainability and economic sustainability remains elusive. On October 23, Etihad flew its self-described "most sustainable flight ever" from London to Abu Dhabi, UAE in which it reduced emissions by 72% to a similar flight two years prior. From reducing plastic waste by using plant-based water bottles to reducing fuel burn by obtaining a more direct air route, the airline was able to reduce waste and save around 64 tonnes of carbon dioxide emissions.  A mixture of 62% traditional jet fuel and 38% sustainable aviation fuel, or SAF for short, powered the flight for additional carbon savings.But replicating those sustainable conditions on every flight would be too costly for Etihad and the airline "would be insolvent within about 20 minutes," Douglas said, based on the cost of sustainable aviation fuel alone."The reason why we actually do these flights is to draw people's attention to the much larger challenges here," Douglas said. "Whilst I can predict an end to the pandemic … I actually don't predict an end to the challenge of commercial aviation sustainability." Sourcing and using sustainable aviation fuel was a challenge as the fuel was brought in from Amsterdam and Etihad wasn't even able to fill the plane with as much of the biofuel as it wanted. "There's no infrastructure to be able to deliver [SAF] directly to aircraft," Douglas, the former chief executive officer of Heathrow Airport, said. "You can't get prices down until availability goes up, but you're not going to get availability to go up until you get prices down."Etihad's focus on sustainability came as a result of a restructuring plan undertaken by the airline after failed investments in foreign carriers such as Alitalia, Jet Airways, and Air Berlin, all of which have permanently ceased flying. "The fallout from that was a transformation plan which had to radically reshape, resize, and get us on a sustainable footing," Douglas said of the investments. "It was analogous to open-heart surgery on the balance sheet." That plan included a fleet renewal centered around leading next-generation aircraft from Airbus and Boeing. Boeing's  787 Dreamliner, which Etihad nicknamed the "Greenliner," is currently Etihad's leading long-haul aircraft. Airbus' A350-1000 XWB aircraft, or the "Sustainable Fifties" in Etihad parlance, joined the fleet in 2019 but won't fly passengers until 2022.An Etihad Airways Boeing 787-10 Dreamliner nicknamed the "Greenliner" at the Dubai Airshow 2021Thomas Pallini/InsiderEtihad travelers are now being incentivized to make sustainable choices with the launch of the airline's "green loyalty" program. Travelers with smaller carbon footprints, whether it be those traveling without extra luggage, will receive extra frequent flyer miles."The idea that this gets passed through to ticket prices to our guests, the traveling public, I actually find reprehensible," Douglas said of so-called green taxes on travelers. "There is a societal need to travel and therefore, penalizing the passenger through increased ticket pricing I actually struggle with conceptually in one sense."Competing airlines are "welcome" to copy Etihad's sustainable game plan, Douglas said, warning that those that don't might lose major corporate clients that are adopting new environmentally-friendly travel policies. "I kind of feel for them because not everybody has the ability to do so," Douglas said of competitors that aren't taking sustainable measures. "Having said that, I think going forward it will be the principle differentiator of who succeeds and who fails."Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 17th, 2021

"Conflicted Congress": Key findings from Insider"s five-month investigation into federal lawmakers" personal finances

Insider's new investigative reporting project reveals the depths of lawmakers' conflicts-of-interest, potential self-dealing, and violations of a federal corruption law. Rebecca Zisser/InsiderFrom Left: Rep. Pat Fallon, Sen. Dianne Feinstein, Senate Minority Leader Mitch McConnell, House Speaker Nancy Pelosi, Sen. Jon Ossoff, Rep. Liz CheneyTom Williams/CQ-Roll Call, Inc via Getty Images; Hannah McKay-Pool/Getty Images; Liz Lynch/Getty Images; Anna Moneymaker/Getty Images; Paras Griffin/Getty Images; David Hume Kennerly/Center for Creative Photography/University of Arizona; iStock; Rebecca Zisser/Insider Dozens of federal lawmakers and at least 182 top staffers have violated a conflict-of-interest law. Numerous members of Congress personally invest in industries they oversee. Few face serious consequences, legally or otherwise. The nation is unabashedly polarized. Republicans and Democrats enjoy little goodwill and less commonality.But in Washington, DC, a bipartisan phenomenon is thriving. Numerous members of Congress, both liberal and conservative, are united in their demonstrated indifference toward a law designed to quash corruption and curb conflicts-of-interest.Insider's new investigative reporting project, "Conflicted Congress," chronicles the myriad ways members of the US House and Senate have eviscerated their own ethical standards, avoided consequences, and blinded Americans to the many moments when lawmakers' personal finances clash with their public duties.  In all, Insider spent hundreds of hours over five months reviewing nearly 9,000 financial-disclosure reports for every sitting lawmaker and their top-ranking staffers. Reporters conducted hundreds of interviews, including those with some of the nation's most powerful leaders.  Today, Insider published the first of more than two-dozen articles and data visualizations that will reveal the:48 members of Congress and 182 senior-level congressional staffers who have violated a federal conflicts-of-interest law.Nearly 75 federal lawmakers who held stocks in COVID-19 vaccine makers Moderna, Johnson & Johnson, or Pfizer in 2020, with many of them buying or selling these stocks in the early weeks of the pandemic.15 lawmakers tasked with shaping US defense policy that actively invest in military contractors.More than a dozen environmentally-minded Democrats who invest in fossil fuel companies or other corporations with concerning environmental track records.Members who regularly chide "the media" but personally pour their money into at least one of the nation's largest news media or social media companies, including Facebook, Twitter, Comcast, Disney, and the New York Times Co.Insider's "Conflicted Congress" is also rating every member of Congress on their financial conflicts and commitment to financial transparency. Fourteen senators and House members have received a red "danger" rating on our three-tier stoplight scale, while 112 get a yellow "borderline" rating.Throughout this week, "Conflicted Congress" will publish investigations into Congress' tobacco ties, cryptocurrency plays, real estate investments, transparency avoidance, lax law enforcement, and crushing student loan debt. Other articles will reveal the 25 wealthiest members of Congress and where they put their money and the 50 most popular stock holdings among members of Congress.Finally, Insider on Friday will publish an exclusive, searchable, and sortable database of all members of Congress' personal finances, including their assets, debts, and sources of outside income. (Data geeks get ready!)  Have a tip for Insider's "Conflicted Congress" reporting team? Confidentially email us at the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 13th, 2021

A crypto whale scooped up 50 billion shiba inus as the meme coin slumped this week

Recent moves by shiba inu whales have driven the cryptocurrency to soar and tumble because of their dominance in the market. id-work/Getty Images A crypto whale scooped up 50 billion shiba inu coins worth $1.8 million on Thursday as its continued to tumble.  Shiba inu has fallen 17% in the past seven days alongside a wider sell-off in cryptocurrencies. On Tuesday, another big holder purchased nearly 100 billion shiba inu coins. Sign up here for our daily newsletter, 10 Things Before the Opening Bell. An ethereum whale purchased close to $1.8 million worth of shiba inu as the dogecoin-inspired coin slid this week during a wider sell-off in digital currencies.The whale — a popular term for a big holder — bought 50 billion of the meme coins on Thursday, according to data from Whalestats, which tracks activity for the 1,000 largest ethereum wallets. That brought the Jiraiya wallet's total holdings to 1.67 trillion shiba inu, worth $59.6 million.It follows another big shiba inu bet on Tuesday, when another whale scooped up close to 100 billion worth $3.5 million, this time on the Binance Smart Chain. Shiba inu has fallen about 17% over the past seven days, and is down 2.9% in the past 24 hours at $0.00003524, according to CoinMarketCap data. Digital currencies have tumbled as fears about the Omicron coronavirus variant detected last week roiled asset markets. Over the past seven days, leading cryptocurrency bitcoin has lost 12.9% and second-place ether, the native token of the ethereum network, has dropped 9.1%. Crypto investors have been bracing for a stronger dollar if US inflation continues to soar. On Friday, official data showed the Consumer Price Index rose 6.8% year-on-year, its highest level since 1982.Shiba inu is in the hands of a few big investors. Its biggest whale holds over 410 trillion of the coin, which is 41% of its total supply, according to CoinMarketCap data. Recent moves by shiba inu whales have driven the cryptocurrency to soar and tumble because of their dominance in the market. In November, the meme coin tumbled by as much as 21% after a big holder moved $2.3 billion worth out of wallets, which spread fears the coins would be sold and pull the price down hugely. A month earlier, shiba inu climbed 22% to hit a new record high, after another whale purchased 276.6 billion coins, worth about $11.5 million.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 10th, 2021

Cathie Wood"s nightmarish 2021: Ark Innovation has plunged 24% as tech has crashed, with 6 out of 8 Ark funds in the red

Ark Invest boss Cathie Wood's year has gone from bad to worse in December, with the flagship ARKK ETF tumbling 10%. Superstar stock-picker Cathie Wood is having a bad 2021.Photo by PATRICK T. FALLON/AFP via Getty Images Cathie Wood's Ark Invest ETFs have taken a hammering in December as investors have avoided tech stocks. With the Fed set to raise interest rates, suddenly, other parts of the market are starting to look more attractive. Ark's Innovation ETF is now down 23.7% for the year, and six out of eight of Ark's ETFs are in the red. Cathie Wood's 2021 has gone from bad to worse in December, with her Ark Invest exchange-traded funds tumbling in highly volatile trading as investors ditch unprofitable tech stocks.Ark Invest's flagship Innovation ETF has dropped more than 10% in December and is now down a whopping 23.7% for the year – putting it in bear-market territory.Six out of eight of Wood's main ETFs are now in the red in 2021. Ark Genomic Revolution has crashed more than 30% and Ark Fintech Innovation is down around 15%.Wood, the founder and CEO of Ark invest, shot to investing stardom last year. Ark's selection of ETFs placed big bets on the technologies of the future – from fintechs to 3D printing – and made huge returns. Investors were flush with cash from government and central bank stimulus programs and they piled into flashy tech names. Ark's Innovation ETF returned around 150% in 2020.Yet many of those tech bets have begun to flop in recent months, as global central banks have started gearing up to turn off the stimulus taps in response to soaring inflation. Concerns about the Omicron variant are also affecting investors.Many tech companies – especially the ones Wood specializes in – are not expected to become properly profitable for many years. With central banks set to raise interest rates in the next year, the far-off returns these companies offer have started to look a lot less attractive compared to other parts of the market.Going into 2022, investors will be faced with less fiscal and monetary stimulus supporting the economy and markets, with the Fed removing liquidity by "tapering" bond purchases, Steen Jakobsen, chief investment officer at Saxo Bank, told Insider."And that means that high-growth stocks, which is built entirely on low rates and high top-line growth, of course is getting impacted massively," he said.Big Ark holdings such as Teladoc, Square and Coinbase have tumbled. Many of Wood's funds would be doing even worse were it not for her big bets on Tesla, which has jumped more than 40% this year.A sort of "inverse Ark Innovation ETF" that's betting against Wood's stock picks – ticker SARK – has soared more than 20% since launching last month, as many investors have spotted an opportunity.Read more: Veteran professor Erik Gordon outlines why he doesn't expect a stock-market crash, calls Cathie Wood a dot-com 'throwback' for her grand claims, and warns against owning meme stocksBut despite investors dumping Ark funds, Wood has remained upbeat. She told CNBC last week that it's the traditional S&P 500 stalwarts that are in a bubble, because they have a less bright future."We are not in a bubble. Our strategies would be flying if we were. I think we have not begun rewarding innovation for what's about to happen and so that's where our conviction comes from," she said.Wood has floated the idea of an "Ark on steroids" fund that would also bet against stocks. And this week Ark is launching its Transparency ETF, designed to track an index of "transparent" companies. Ark Invest did not respond to Insider's request for comment.Looked at from a broader angle, things don't look so bad. The average annualized total return for Ark funds is still around 30% over the last five years.Saxo's Jakobsen said he thinks Ark's funds have a bright future and that investors need to remember their premise."The premise of the Ark funds is not to give you an S&P or a Nasdaq performance. It is to buy into the concept that the future has technology embedded into it, and to be part of the future you need to buy a big number of lottery tickets."Ark's ETFs have been hit hard this year, with the majority of returns in the red.Bloomberg dataRead the original article on Business Insider.....»»

Category: smallbizSource: nytDec 7th, 2021

Biotech stocks have hammered hedge funds this year. Here are 5 funds with soured bets on the sector.

The SPDR S&P Biotech ETF is down more than 22% year-to-date, moving almost exactly opposite the S&P 500's 24% gain over the same period. Traders work on the floor of the New York Stock Exchange (NYSE) on March 18, 202Spencer Platt/Getty ImagesDespite the S&P 500's year-to-date gain of 24%, biotech stocks are down more than 22%.That big divergence in performance has led to a rough year for biotech-focused hedge funds.These 5 hedge funds have suffered big losses on their biotech investments this year, according to The Wall Street Journal. Biotech stocks were all the rage last year after COVID-19 vaccine breakthroughs from mRNA companies like Moderna and BioNTech helped illustrate to investors the potential of betting on innovative drug companies.But fast forward to 2021, and an ongoing decline in the biotech sector has led to a terrible year of returns for some hedge funds that solely invest in the space, according to a report from The Wall Street Journal.The SPDR S&P Biotech ETF is down more than 22% year-to-date, representing nearly the exact opposite of the S&P 500's 24% gain over the same time period. Regulatory concerns surrounding Congress limiting drug pricing, combined with a surge in supply of early stage biotech IPOs has outweighed the successes seen by other successful drug companies.Shares of BioNTech and Moderna are up 270% and 160% year-to-date, respectively, but those gains have done little to boost the performance of these five biotech-focused hedge funds, according to The WSJ. 1. Perceptive AdvisorsYear-to-date gains through November for its main fund: -30%Total Firm AUM: ~$9 billionPerceptive Advisors' largest position as of the third quarter of 2021 is LianBio, which has dropped 39% over the past week. Mirati Therapeutics is the hedge fund's second largest position, according to its 13F filing. Mirati is down 41% year-to-date.2. OrbiMed PartnersYear-to-date gains through November for one of its hedge funds: -40%Total Firm AUM: ~$18 billionOrbiMed's largest position is SpringWorks Therapeutics, according to its 13F filing. SpringWorks is down 11% year-to-date. OrbiMed's second largest position, Prelude Therapeutics, is down 81% year-to-date.3. Logos CapitalYear-to-date gains through November for one of its hedge funds: -25%Total firm AUM: ~$1.4 billionLogos' largest position is ALX Oncology, according to its 13F filing. ALX Oncology is down 65% year-to-date, while its second largest position, Olema Pharmaceuticals, is down 79% year-to-date.4. Cormorant Asset ManagementCormorant Asset Management lost 10% in the month of November, adding to double digit losses it has already seen earlier in the year, according to the report. Total Firm AUM: ~$2.5 billionCormorant's largest position is Erasca, according to its 13F filing. Erasca is down 31% year-to-date, while its second largest position, Turning Point Therapeutics, is down 71% year-to-date.5. Consonance CapitalConsonance Capital decided to close one of its billion-dollar hedge funds in October after suffering heavy losses, according to the report. A spokesman for Consonance told The WSJ that a healthcare private-equity fund it operates has been unaffected by the sell-off in biotech stocks. Top holdings in Consonance Capital, according to its 13F filing, included SpringWorks Therapeutics and Tandem Diabetes Care."It's been a very challenging year," Cormorant founder Bihua Chen said, according to The WSJ report.But there have been some bright spots in the biotech hedge fund sector, with EcoR1 Capital delivering positive returns for its clients so far this year. The $2.9 billion hedge fund has been calling in cash from clients to buy newly cheap biotech stocks, according to the report. Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 6th, 2021

Futures Surge After Powell-Driven Rout Proves To Be "Transitory"

Futures Surge After Powell-Driven Rout Proves To Be "Transitory" Heading into yesterday's painful close to one of the ugliest months since March 2020, which saw a huge forced liquidation rebalance with more than $8 billion in Market on Close orders, we said that while we are seeing "forced selling dump into the close today" this would be followed by "forced Dec 1 buying frontrunning after the close." Forced selling dump into the close today. Forced Dec 1 buying frontrunning after the close — zerohedge (@zerohedge) November 30, 2021 And just as expected, despite yesterday's dramatic hawkish pivot by Powell, who said it was time to retire the word transitory in describing the inflation outlook (the same word the Fed used hundreds of times earlier in 2021 sparking relentless mockery from this website for being clueless as usual) while also saying the U.S. central bank would consider bringing forward plans for tapering its bond buying program at its next meeting in two weeks, the frontrunning of new monthly inflows is in full force with S&P futures rising over 1.2%, Nasdaq futures up 1.3%, and Dow futures up 0.9%, recovering almost all of Tuesday’s decline. The seemingly 'hawkish' comments served as a double whammy for markets, which were already nervous about the spread of the Omicron coronavirus variant and its potential to hinder a global economic recovery. "At this point, COVID does not appear to be the biggest long-term Street fear, although it could have the largest impact if the new (or next) variant turns out to be worse than expected," Howard Silverblatt, senior index analyst for S&P and Dow Jones indices, said in a note. "That honor goes to inflation, which continues to be fed by supply shortages, labor costs, worker shortages, as well as consumers, who have not pulled back." However, new month fund flows proved too powerful to sustain yesterday's month-end dump and with futures rising - and panic receding - safe havens were sold and the 10-year Treasury yield jumped almost 6bps, approaching 1.50%. The gap between yields on 5-year and 30-year Treasuries was around the narrowest since March last year. Crude oil and commodity-linked currencies rebounded. Gold remained just under $1,800 and bitcoin traded just over $57,000. There was more good news on the covid front with a WHO official saying some of the early indications are that most Omicron cases are mild with no severe cases. Separately Merck gained 3.8% in premarket trade after a panel of advisers to the U.S. Food and Drug Administration narrowly voted to recommend the agency authorize the drugmaker's antiviral pill to treat COVID-19. Travel and leisure stocks also rebounded, with cruiseliners Norwegian, Carnival, Royal Caribbean rising more than 2.5% each. Easing of covid fears also pushed airlines and travel stocks higher in premarket trading: Southwest +2.9%, Delta +2.5%, Spirit +2.3%, American +2.2%, United +1.9%, JetBlue +1.3%. Vaccine makers traded modestly lower in pre-market trading after soaring in recent days as Wall Street weighs the widening spread of the omicron variant. Merck & Co. bucked the trend after its Covid-19 pill narrowly gained a key recommendation from advisers to U.S. regulators. Moderna slips 2.1%, BioNTech dips 1.3% and Pfizer is down 0.2%. Elsewhere, Occidental Petroleum led gains among the energy stocks, up 3.2% as oil prices climbed over 4% ahead of OPEC's meeting. Shares of major Wall Street lenders also moved higher after steep falls on Tuesday. Here are some of the other biggest U.S. movers today: Salesforce (CRM US) drops 5.9% in premarket trading after results and guidance missed estimates, with analysts highlighting currency-related headwinds and plateauing growth at the MuleSoft integration software business. Hewlett Packard Enterprise (HPE US) falls 1.3% in premarket after the computer equipment maker’s quarterly results showed the impact of the global supply chain crunch. Analysts noted solid order trends. Merck (MRK US) shares rise 5.8% in premarket after the company’s Covid-19 pill narrowly wins backing from FDA advisers, which analysts say is a sign of progress despite lingering challenges. Chinese electric vehicle makers were higher in premarket, leading U.S. peers up, after Nio, Li and XPeng reported strong deliveries for November; Nio (NIO US) +4%, Li (LI US ) +6%, XPeng (XPEV US) +4.3%. Ardelyx (ARDX US) shares gain as much as 34% in premarket, extending the biotech’s bounce after announcing plans to launch its irritable bowel syndrome treatment Ibsrela in the second quarter. CTI BioPharma (CTIC US) shares sink 18% in premarket after the company said the FDA extended the review period for a new drug application for pacritinib. Allbirds (BIRD US) fell 7.5% postmarket after the low end of the shoe retailer’s 2021 revenue forecast missed the average analyst estimate. Zscaler (ZS US) posted “yet another impressive quarter,” according to BMO. Several analysts increased their price targets for the security software company. Shares rose 4.6% in postmarket. Ambarella (AMBA US) rose 14% in postmarket after forecasting revenue for the fourth quarter that beat the average analyst estimate. Emcore (EMKR US) fell 9% postmarket after the aerospace and communications supplier reported fiscal fourth-quarter Ebitda that missed the average analyst estimate. Box (BOX US) shares gained as much as 10% in postmarket trading after the cloud company raised its revenue forecast for the full year. Meanwhile, the omicron variant continues to spread around the globe, though symptoms so far appear to be relatively mild. The Biden administration plans to tighten rules on travel to the U.S., and Japan said it would bar foreign residents returning from 10 southern African nations. As Bloomberg notes, volatility is buffeting markets as investors scrutinize whether the pandemic recovery can weather diminishing monetary policy support and potential risks from the omicron virus variant. Global manufacturing activity stabilized last month, purchasing managers’ gauges showed Wednesday, and while central banks are scaling back ultra-loose settings, financial conditions remain favorable in key economies. “The reality is hotter inflation coupled with a strong economic backdrop could end the Fed’s bond buying program as early as the first quarter of next year,” Charlie Ripley, senior investment strategist at Allianz Investment Management, said in emailed comments. “With potential changes in policy on the horizon, market participants should expect additional market volatility in this uncharted territory.” Looking ahead, Powell is back on the Hill for day 2, and is due to testify before a House Financial Services Committee hybrid hearing at 10 a.m. ET. On the economic data front, November readings on U.S. private payrolls and manufacturing activity will be closely watched later in the day to gauge the health of the American economy. Investors are also awaiting the Fed's latest "Beige Book" due at 2:00 p.m. ET. On the economic data front, November readings on U.S. private payrolls and manufacturing activity will be closely watched later in the day to gauge the health of the American economy. European equities soared more than 1.2%, with travel stocks and carmakers leading broad-based gain in the Stoxx Europe 600 index, all but wiping out Tuesday’s decline that capped only the third monthly loss for the benchmark this year.  Travel, miners and autos are the strongest sectors. Here are some of the biggest European movers today: Proximus shares rise as much as 6.5% after the company said it’s started preliminary talks regarding a potential deal involving TeleSign, with a SPAC merger among options under consideration. Dr. Martens gains as much as 4.6% to the highest since Sept. 8 after being upgraded to overweight from equal- weight at Barclays, which says the stock’s de-rating is overdone. Husqvarna advances as much as 5.3% after the company upgraded financial targets ahead of its capital markets day, including raising the profit margin target to 13% from 10%. Wizz Air, Lufthansa and other travel shares were among the biggest gainers as the sector rebounded after Tuesday’s losses; at a conference Wizz Air’s CEO reiterated expansion plans. Wizz Air gains as much as 7.5%, Lufthansa as much as 6.8% Elis, Accor and other stocks in the French travel and hospitality sector also rise after the country’s government pledged to support an industry that’s starting to get hit by the latest Covid-19 wave. Pendragon climbs as much as 6.5% after the car dealer boosted its outlook after the company said a supply crunch in the new vehicle market wasn’t as bad as it had anticipated. UniCredit rises as much as 3.6%, outperforming the Stoxx 600 Banks Index, after Deutsche Bank added the stock to its “top picks” list alongside UBS, and Bank of Ireland, Erste, Lloyds and Societe Generale. Earlier in the session, Asian stocks also soared, snapping a three-day losing streak, led by energy and technology shares, as traders assessed the potential impact from the omicron coronavirus variant and U.S. Federal Reserve Chair Jerome Powell’s hawkish pivot. The MSCI Asia Pacific Index rose as much as 1.3% Wednesday. South Korea led regional gains after reporting strong export figures, which bolsters growth prospects despite record domestic Covid-19 cases. Hong Kong stocks also bounced back after falling Tuesday to their lowest level since September 2020. Asia’s stock benchmark rebounded from a one-year low, though sentiment remained clouded by lingering concerns on the omicron strain and Fed’s potentially faster tapering pace. Powell earlier hinted that the U.S. central bank will accelerate its asset purchases at its meeting later this month.  “A faster taper in the U.S. is still dependent on omicron not causing a big setback to the outlook in the next few weeks,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital, adding that he expects the Fed’s policy rate “will still be low through next year, which should still enable good global growth which will benefit Asia.” Chinese equities edged up after the latest economic data showed manufacturing activity remained at relatively weak levels in November, missing economists’ expectations. Earlier, Chinese Vice Premier Liu He said he’s fully confident in the nation’s economic growth in 2022 Japanese stocks rose, overcoming early volatility as traders parsed hawkish comments from Federal Reserve Chair Jerome Powell. Electronics and auto makers were the biggest boosts to the Topix, which closed 0.4% higher after swinging between a gain of 0.9% and loss of 0.7% in the morning session. Daikin and Fanuc were the largest contributors to a 0.4% rise in the Nikkei 225, which similarly fluctuated. The Topix had dropped 4.8% over the previous three sessions due to concerns over the omicron virus variant. The benchmark fell 3.6% in November, its worst month since July 2020. “The market’s tolerance to risk is quite low at the moment, with people responding in a big way to the smallest bit of negative news,” said Tomo Kinoshita, a global market strategist at Invesco Asset Management in Tokyo. “But the decline in Japanese equities was far worse than those of other developed markets, so today’s market may find a bit of calm.” U.S. shares tumbled Tuesday after Powell said officials should weigh removing pandemic support at a faster pace and retired the word “transitory” to describe stubbornly high inflation In rates, bonds trade heavy, as yield curves bear-flatten. Treasuries extended declines with belly of the curve cheapening vs wings as traders continue to price in additional rate-hike premium over the next two years. Treasury yields were cheaper by up to 5bp across belly of the curve, cheapening 2s5s30s spread by ~5.5bp on the day; 10-year yields around 1.48%, cheaper by ~4bp, while gilts lag by additional 2bp in the sector. The short-end of the gilt curve markedly underperforms bunds and Treasuries with 2y yields rising ~11bps near 0.568%. Peripheral spreads widen with belly of the Italian curve lagging. The flattening Treasury yield curve “doesn’t suggest imminent doom for the equity market in and of itself,” Liz Ann Sonders, chief investment strategist at Charles Schwab & Co., said on Bloomberg Television. “Alarm bells go off in terms of recession” when the curve gets closer to inverting, she said. In FX, the Turkish lira had a wild session, offered in early London trade before fading. USD/TRY dropped sharply to lows of 12.4267 on reports of central bank FX intervention due to “unhealthy price formations” before, once again, fading TRY strength after comments from Erdogan. The rest of G-10 FX is choppy; commodity currencies retain Asia’s bid tone, havens are sold: the Bloomberg Dollar Spot Index inched lower, as the greenback traded mixed versus its Group-of-10 peers. The euro moved in a narrow range and Bund yields followed U.S. yields higher. The pound advanced as risk sentiment stabilized with focus still on news about the omicron variant. The U.K. 10-, 30-year curve flirted with inversion as gilts flattened, with money markets betting on 10bps of BOE tightening this month for the first time since Friday. The Australian and New Zealand dollars advanced as rising commodity prices fuel demand from exporters and leveraged funds. Better-than-expected growth data also aided the Aussie, with GDP expanding by 3.9% in the third quarter from a year earlier, beating the 3% estimated by economists. Austrian lawmakers extended a nationwide lockdown for a second 10-day period to suppress the latest wave of coronavirus infections before the Christmas holiday period.  The yen declined by the most among the Group-of-10 currencies as Powell’s comments renewed focus on yield differentials. 10-year yields rose ahead of Thursday’s debt auction In commodities, crude futures rally. WTI adds over 4% to trade on a $69-handle, Brent recovers near $72.40 after Goldman said overnight that oil had gotten extremely oversold. Spot gold fades a pop higher to trade near $1,785/oz. Base metals trade well with LME copper and nickel outperforming. Looking at the day ahead, once again we’ll have Fed Chair Powell and Treasury Secretary Yellen appearing, this time before the House Financial Services Committee. In addition to that, the Fed will be releasing their Beige Book, and BoE Governor Bailey is also speaking. On the data front, the main release will be the manufacturing PMIs from around the world, but there’s also the ADP’s report of private payrolls for November in the US, the ISM manufacturing reading in the US as well for November, and German retail sales for October. Market Snapshot S&P 500 futures up 1.2% to 4,620.75 STOXX Europe 600 up 1.0% to 467.58 MXAP up 0.9% to 191.52 MXAPJ up 1.1% to 626.09 Nikkei up 0.4% to 27,935.62 Topix up 0.4% to 1,936.74 Hang Seng Index up 0.8% to 23,658.92 Shanghai Composite up 0.4% to 3,576.89 Sensex up 1.0% to 57,656.51 Australia S&P/ASX 200 down 0.3% to 7,235.85 Kospi up 2.1% to 2,899.72 Brent Futures up 4.2% to $72.15/bbl Gold spot up 0.2% to $1,778.93 U.S. Dollar Index little changed at 95.98 German 10Y yield little changed at -0.31% Euro down 0.1% to $1.1326 Top Overnight News from Bloomberg U.S. Secretary of State Antony Blinken will meet Russian Foreign Minister Sergei Lavrov Thursday, the first direct contact between officials of the two countries in weeks as tensions grow amid western fears Russia may be planning to invade Ukraine Oil rebounded from a sharp drop on speculation that recent deep losses were excessive and OPEC+ may on Thursday decide to pause hikes in production, with the abrupt reversal fanning already- elevated volatility The EU is set to recommend that member states review essential travel restrictions on a daily basis in the wake of the omicron variant, according to a draft EU document seen by Bloomberg China is planning to ban companies from going public on foreign stock markets through variable interest entities, according to people familiar with the matter, closing a loophole long used by the country’s technology industry to raise capital from overseas investors Manufacturing activity in Asia outside China stabilized last month amid easing lockdown and border restrictions, setting the sector on course to face a possible new challenge from the omicron variant of the coronavirus Germany urgently needs stricter measures to check a surge in Covid-19 infections and protect hospitals from a “particularly dangerous situation,” according to the head of the country’s DIVI intensive-care medicine lobby. A more detailed breakdown of global markets courtesy of Newsquawk Asian equity markets traded mostly positive as regional bourses atoned for the prior day’s losses that were triggered by Omicron concerns, but with some of the momentum tempered by recent comments from Fed Chair Powell and mixed data releases including the miss on Chinese Caixin Manufacturing PMI. ASX 200 (-0.3%) was led lower by underperformance in consumer stocks and with utilities also pressured as reports noted that Shell and Telstra’s entrance in the domestic electricity market is set to ignite fierce competition and force existing players to overhaul their operations, although the losses in the index were cushioned following the latest GDP data which showed a narrower than feared quarterly contraction in Australia’s economy. Nikkei 225 (+0.4%) was on the mend after yesterday’s sell-off with the index helped by favourable currency flows and following a jump in company profits for Q3, while the KOSPI (+2.1%) was also boosted by strong trade data. Hang Seng (+0.8%) and Shanghai Comp. (+0.4%) were somewhat varied as a tech resurgence in Hong Kong overcompensated for the continued weakness in casinos stocks amid ongoing SunCity woes which closed all VIP gaming rooms in Macau after its Chairman's recent arrest, while the mood in the mainland was more reserved after a PBoC liquidity drain and disappointing Chinese Caixin Manufacturing PMI data which fell short of estimates and slipped back into contraction territory. Finally, 10yr JGBs were lower amid the gains in Japanese stocks and after the pullback in global fixed income peers in the aftermath of Fed Chair Powell’s hawkish comments, while a lack of BoJ purchases further contributed to the subdued demand for JGBs. Top Asian News Asia Stocks Bounce Back from One-Year Low Despite Looming Risks Gold Swings on Omicron’s Widening Spread, Inflation Worries Shell Sees Hedge Funds Moving to LNG, Supporting Higher Prices Abe Warns China Invading Taiwan Would Be ‘Economic Suicide’ Bourses in Europe are firmer across the board (Euro Stoxx 50 +1.6%; Stoxx 600 +1.1%) as the positive APAC sentiment reverberated into European markets. US equity futures are also on the front foot with the cyclical RTY (+2.0%) outpacing its peers: ES (+1.2%), NQ (+1.5%), YM (+0.8%). COVID remains a central theme for the time being as the Omicron variant is observed for any effects of concern – which thus far have not been reported. Analysts at UBS expect market focus to shift away from the variant and more towards growth and earnings. The analysts expect Omicron to fuse into the ongoing Delta outbreak that economies have already been tackling. Under this scenario, the desk expects some of the more cyclical markets and sectors to outperform. The desk also flags two tails risks, including an evasive variant and central bank tightening – particularly after Fed chair Powell’s commentary yesterday. Meanwhile, BofA looks for an over-10% fall in European stocks next year. Sticking with macro updates, the OECD, in their latest economic outlook, cut US, China, Eurozone growth forecasts for 2021 and 2022, with Omicron cited as a factor. Back to trade, broad-based gains are seen across European cash markets. Sectors hold a clear cyclical bias which consists of Travel & Leisure, Basic Resources, Autos, Retail and Oil & Gas as the top performers – with the former bolstered by the seemingly low appetite for coordination on restrictions and measures at an EU level – Deutsche Lufthansa (+6%) and IAG (+5.1%) now reside at the top of the Stoxx 600. The other side of the spectrum sees the defensive sectors – with Healthcare, Household Goods, Food & Beverages as the straddlers. In terms of induvial movers, German-listed Adler Group (+22%) following a divestment, whilst Blue Prism (+1.7%) is firmer after SS&C raised its offer for the Co. Top European News Wizz Says Travelers Are Booking at Shorter and Shorter Notice Turkey Central Bank Intervenes in FX Markets to Stabilize Lira Gold Swings on Omicron’s Widening Spread, Inflation Worries Former ABG Sundal Collier Partner Starts Advisory Firm In FX, the Dollar remains mixed against majors, but well off highs prompted by Fed chair Powell ditching transitory from the list of adjectives used to describe inflation and flagging that a faster pace of tapering will be on the agenda at December’s FOMC. However, the index is keeping tabs on the 96.000 handle and has retrenched into a tighter 95.774-96.138 range, for the time being, as trade remains very choppy and volatility elevated awaiting clearer medical data and analysis on Omicron to gauge its impact compared to the Delta strain and earlier COVID-19 variants. In the interim, US macro fundamentals might have some bearing, but the bar is high before NFP on Friday unless ADP or ISM really deviate from consensus or outside the forecast range. Instead, Fed chair Powell part II may be more pivotal if he opts to manage hawkish market expectations, while the Beige Book prepared for next month’s policy meeting could also add some additional insight. NZD/AUD/CAD/GBP - Broad risk sentiment continues to swing from side to side, and currently back in favour of the high beta, commodity and cyclical types, so the Kiwi has bounced firmly from worst levels on Tuesday ahead of NZ terms of trade, the Aussie has pared a chunk of its declines with some assistance from a smaller than anticipated GDP contraction and the Loonie is licking wounds alongside WTI in advance of Canadian building permits and Markit’s manufacturing PMI. Similarly, Sterling has regained some poise irrespective of relatively dovish remarks from BoE’s Mann and a slender downward revision to the final UK manufacturing PMI. Nzd/Usd is firmly back above 0.6800, Aud/Usd close to 0.7150 again, Usd/Cad straddling 1.2750 and Cable hovering on the 1.3300 handle compared to circa 0.6772, 0.7063, 1.2837 and 1.3195 respectively at various fairly adjacent stages yesterday. JPY/EUR/CHF - All undermined by the aforementioned latest upturn in risk appetite or less angst about coronavirus contagion, albeit to varying degrees, as the Yen retreats to retest support sub-113.50, Euro treads water above 1.1300 and Franc straddles 0.9200 after firmer than forecast Swiss CPI data vs a dip in the manufacturing PMI. In commodities, WTI and Brent front month futures are recovering following yesterday’s COVID and Powell-induced declines in the run-up to the OPEC meetings later today. The complex has also been underpinned by the reduced prospects of coordinated EU-wide restrictions, as per the abandonment of the COVID video conference between EU leaders. However, OPEC+ will take centre stage over the next couple of days, with a deluge of source reports likely as OPEC tests the waters. The case for OPEC+ to pause the planned monthly relaxation of output curbs by 400k BPD has been strengthening. There have been major supply and demand developments since the prior meeting. The recent emergence of the Omicron COVID variant and coordinated release of oil reserves have shifted the balance of expectations relative to earlier in the month (full Newsquawk preview available in the Research Suite). In terms of the schedule, the OPEC meeting is slated for 13:00GMT/08:00EST followed by the JTC meeting at 15:00GMT/10:00EST, whilst tomorrow sees the JMMC meeting at 12:00GMT/07:00EST; OPEC+ meeting at 13:00GMT/08:00EST. WTI Jan has reclaimed a USD 69/bbl handle (vs USD 66.20/bbl low) while Brent Feb hovers around USD 72.50/bbl (vs low USD 69.38/bbl) at the time of writing. Elsewhere, spot gold and silver trade with modest gains and largely in tandem with the Buck. Spot gold failed to sustain gains above the cluster of DMAs under USD 1,800/oz (100 DMA at USD 1,792/oz, 200 DMA at USD 1,791/oz, and 50 DMA at USD 1,790/oz) – trader should be aware of the potential for a technical Golden Cross (50 DMA > 200 DMA). Turning to base metals, copper is supported by the overall risk appetite, with the LME contract back above USD 9,500/t. Overnight, Chinese coking coal and coke futures rose over 5% apiece, with traders citing disrupted supply from Mongolia amid the COVID outbreak in the region. US Event Calendar 7am: Nov. MBA Mortgage Applications, prior 1.8% 8:15am: Nov. ADP Employment Change, est. 525,000, prior 571,000 9:45am: Nov. Markit US Manufacturing PMI, est. 59.1, prior 59.1 10am: Oct. Construction Spending MoM, est. 0.4%, prior -0.5% 10am: Nov. ISM Manufacturing, est. 61.2, prior 60.8 2pm: U.S. Federal Reserve Releases Beige Book Nov. Wards Total Vehicle Sales, est. 13.4m, prior 13m Central Banks 10am: Powell, Yellen Testify Before House Panel on CARES Act Relief DB's Jim Reid concludes the overnight wrap If you’re under 10 and reading this there’s a spoiler alert today in this first para so please skip beyond and onto the second. Yes my heart broke a little last night as my little 6-year old Maisie said to me at bedtime that “Santa isn’t real is he Daddy?”. I lied (I think it’s a lie) and said yes he was. I made up an elaborate story about how when we renovated our 100 year old house we deliberately kept the chimney purely to let Santa come down it once a year. Otherwise why would we have kept it? She then asked what about her friend who lives in a flat? I tried to bluff my way through it but maybe my answer sounded a bit like my answers as to what will happen with Omicron. I’ll test both out on clients later to see which is more convincing. Before we get to the latest on the virus, given it’s the start of the month, we’ll shortly be publishing our November performance review looking at how different assets fared over the month just gone and YTD. It arrived late on but Omicron was obviously the dominant story and led to some of the biggest swings of the year so far. It meant that oil (which is still the top performer on a YTD basis) was the worst performer in our monthly sample, with WTI and Brent seeing their worst monthly performances since the initial wave of market turmoil over Covid back in March 2020. And at the other end, sovereign bonds outperformed in November as Omicron’s emergence saw investors push back the likelihood of imminent rate hikes from central banks. So what was shaping up to be a good month for risk and a bad one for bonds flipped around in injury time. Watch out for the report soon from Henry. Back to yesterday now, and frankly the main takeaway was that markets were desperate for any piece of news they could get their hands on about the Omicron variant, particularly given the lack of proper hard data at the moment. The morning started with a sharp selloff as we discussed at the top yesterday, as some of the more optimistic noises from Monday were outweighed by that FT interview, whereby Moderna’s chief executive had said that the existing vaccines wouldn’t be as effective against the new variant. Then we had some further negative news from Regeneron, who said that analysis and modelling of the Omicron mutations indicated that its antibody drug may not be as effective, but that they were doing further analysis to confirm this. However, we later got some comments from a University of Oxford spokesperson, who said that there wasn’t any evidence so far that vaccinations wouldn’t provide high levels of protection against severe disease, which coincided with a shift in sentiment early in the European afternoon as equities begun to pare back their losses. The CEO of BioNTech and the Israeli health minister expressed similar sentiments, noting that vaccines were still likely to protect against severe disease even among those infected by Omicron, joining other officials encouraging people to get vaccinated or get booster shots. Another reassuring sign came in an update from the EU’s ECDC yesterday, who said that all of the 44 confirmed cases where information was available on severity “were either asymptomatic or had mild symptoms.” After the close, the FDA endorsed Merck’s antiviral Covid pill. While it’s not clear how the pill interacts with Omicron, the proliferation of more Covid treatments is still good news as we head into another winter. The other big piece of news came from Fed Chair Powell’s testimony to the Senate Banking Committee, where the main headline was his tapering comment that “It is appropriate to consider wrapping up a few months sooner.” So that would indicate an acceleration in the pace, which would be consistent with the view from our US economists that we’ll see a doubling in the pace of reductions at the December meeting that’s only two weeks from today. The Fed Chair made a forceful case for a faster taper despite lingering Omicron uncertainties, noting inflation is likely to stay elevated, the labour market has improved without a commensurate increase in labour supply (those sidelined because of Covid are likely to stay there), spending has remained strong, and that tapering was a removal of accommodation (which the economy doesn’t need more of given the first three points). Powell took pains to stress the risk of higher inflation, going so far as to ‘retire’ the use of the term ‘transitory’ when describing the current inflation outlook. So team transitory have seemingly had the pitch taken away from them mid match. The Chair left an exit clause that this outlook would be informed by incoming inflation, employment, and Omicron data before the December FOMC meeting. A faster taper ostensibly opens the door to earlier rate hikes and Powell’s comment led to a sharp move higher in shorter-dated Treasury yields, with the 2yr yield up +8.1bps on the day, having actually been more than -4bps lower when Powell began speaking. They were as low as 0.44% then and got as high as 0.57% before closing at 0.56%. 2yr yields have taken another leg higher overnight, increasing +2.5bps to 0.592%. Long-end yields moved lower though and failed to back up the early day moves even after Powell, leading to a major flattening in the yield curve on the back of those remarks, with the 2s10s down -13.7bps to 87.3bps, which is its flattest level since early January. Overnight 10yr yields are back up +3bps but the curve is only a touch steeper. My 2 cents on the yield curve are that the 2s10s continues to be my favourite US recession indicator. It’s worked over more cycles through history than any other. No recession since the early 1950s has occurred without the 2s10s inverting. But it takes on average 12-18 months from inversion to recession. The shortest was the covid recession at around 7 months which clearly doesn’t count but I think we were very late cycle in early 2020 and the probability of recession in the not too distant future was quite high but we will never know.The shortest outside of that was around 9 months. So with the curve still at c.+90bps we are moving in a more worrying direction but I would still say 2023-24 is the very earliest a recession is likely to occur (outside of a unexpected shock) and we’ll need a rapid flattening in 22 to encourage that. History also suggests markets tend to ignore the YC until it’s too late. So I wouldn’t base my market views in 22 on the yield curve and recession signal yet. However its something to look at as the Fed seemingly embarks on a tightening cycle in the months ahead. Onto markets and those remarks from Powell (along with the additional earlier pessimism about Omicron) proved incredibly unhelpful for equities yesterday, with the S&P 500 (-1.90%) giving up the previous day’s gains to close at its lowest level in over a month. It’s hard to overstate how broad-based this decline was, as just 7 companies in the entire S&P moved higher yesterday, which is the lowest number of the entire year so far and the lowest since June 11th, 2020, when 1 company ended in the green. Over in Europe it was much the same story, although they were relatively less affected by Powell’s remarks, and the STOXX 600 (-0.92%) moved lower on the day as well. Overnight in Asia, stocks are trading higher though with the KOSPI (+2.02%), Hang Seng (+1.40%), the Nikkei (+0.37%), Shanghai Composite (+0.11%) and CSI (+0.09%) all in the green. Australia’s Q3 GDP contracted (-1.9% qoq) less than -2.7% consensus while India’s Q3 GDP grew at a firm +8.4% year-on-year beating the +8.3% consensus. In China the Caixin Manufacturing PMI for November came in at 49.9 against a 50.6 consensus. Futures markets are indicating a positive start to markets in US & Europe with the S&P 500 (+0.73%) and DAX (+0.44%) trading higher again. Back in Europe, there was a significant inflation story amidst the other headlines above, since Euro Area inflation rose to its highest level since the creation of the single currency, with the flash estimate for November up to +4.9% (vs. +4.5% expected). That exceeded every economist’s estimate on Bloomberg, and core inflation also surpassed expectations at +2.6% (vs. +2.3% expected), again surpassing the all-time high since the single currency began. That’s only going to add to the pressure on the ECB, and yesterday saw Germany’s incoming Chancellor Scholz say that “we have to do something” if inflation doesn’t ease. European sovereign bonds rallied in spite of the inflation reading, with those on 10yr bunds (-3.1bps), OATs (-3.5bps) and BTPs (-0.9bps) all moving lower. Peripheral spreads widened once again though, and the gap between Italian and German 10yr yields closed at its highest level in just over a year. Meanwhile governments continued to move towards further action as the Omicron variant spreads, and Greece said that vaccinations would be mandatory for everyone over 60 soon, with those refusing having to pay a monthly €100 fine. Separately in Germany, incoming Chancellor Scholz said that there would be a parliamentary vote on the question of compulsory vaccinations, saying to the Bild newspaper in an interview that “My recommendation is that we don’t do this as a government, because it’s an issue of conscience”. In terms of other data yesterday, German unemployment fell by -34k in November (vs. -25k expected). Separately, the November CPI readings from France at +3.4% (vs. +3.2% expected) and Italy at +4.0% (vs. +3.3% expected) surprised to the upside as well. In the US, however, the Conference Board’s consumer confidence measure in November fell to its lowest since February at 109.5 (vs. 110.9 expected), and the MNI Chicago PMI for November fell to 61.8 9vs. 67.0 expected). To the day ahead now, and once again we’ll have Fed Chair Powell and Treasury Secretary Yellen appearing, this time before the House Financial Services Committee. In addition to that, the Fed will be releasing their Beige Book, and BoE Governor Bailey is also speaking. On the data front, the main release will be the manufacturing PMIs from around the world, but there’s also the ADP’s report of private payrolls for November in the US, the ISM manufacturing reading in the US as well for November, and German retail sales for October. Tyler Durden Wed, 12/01/2021 - 07:47.....»»

Category: blogSource: zerohedgeDec 1st, 2021

Generation PMCA 3Q21 Commentary: Right Place Wrong Time

Generation PMCA commentary for the third quarter ended September 2021, titled, “Right Place Wrong Time.” Q3 2021 hedge fund letters, conferences and more Right Place Wrong Time Being in the wrong place at the right time is usually just an inconvenience or in market parlance a missed opportunity. In the wrong place at the wrong […] Generation PMCA commentary for the third quarter ended September 2021, titled, “Right Place Wrong Time.” if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Series in PDF Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Right Place Wrong Time Being in the wrong place at the right time is usually just an inconvenience or in market parlance a missed opportunity. In the wrong place at the wrong time, you're likely a victim of poor circumstances. For an investor, a poor selection coupled with an unforeseen shock. The opposite—right place at the right time—implies luck. Right place at the wrong time, according to a certain someone’s significant other, means she’s always waiting for someone who’s invariably late. More than a mere inconvenience. While some of our equity selections have recently been operating on their own schedules, and our timing appears off, we still feel we’re in the right places. The adage ‘better late than never’ comes to mind. Fund manager Bruce Berkowitz once quipped that he suffered from premature accumulation. We have felt similarly over the last few months because many of our positions have either lagged or declined outright despite fundamentals that we believe remain intact. Of course, when our positions are zigging while the markets are zagging, we reexamine our assumptions to ensure we are correctly positioned. We believe that only one of our securities suffered permanent impairment relative to our initial appraisal and we realized a loss because we saw better opportunities for the proceeds. We remain confident in our assessments of our other holdings. They trade well below our estimated FMVs (Fair Market Values) implying substantial upside potential. Though we don’t know when the market will come to its senses and see what we see. Regarding the market in general, we feel like the little boy that cried correction. Though he kept calling for it, and was eventually correct, his too frequent calls were ignored. The S&P 500 is at a ceiling in our TRACTM work. From this level, it’s either moving on to the next ceiling, about 30% higher, or returning to its recent floor, over 20% lower. Neither event must take place all at once. However, with the market’s FMV currently lower, the likelihood of a material rise from today’s levels is low. We expect sideways or downward price action for an extended period until underlying values catch up. And, with the absence of the typical wall of worry, any exogenous shock could lead to a rapid decline. Global Traffic Jam Speaking of poor timing, the concept of Just-in-Time inventories, designed to promote efficiencies, contributed to inefficiencies over the last year. Everyone encountered an IKEA (‘Swedish for out of stock’) problem. Demand has simply overwhelmed supply. With the economy essentially closed in the spring of last year, production was scaled back (i.e., a supply squeeze) only to require a substantial ramp-up over the last year as demand surged from massive government stimulus and vaccines which allowed for widespread reopening and a leap in consumer confidence. But this about-face created a logjam. Delivery times have been near record highs which has fueled higher costs and, in turn, increased prices. In the meantime, companies are adapting, finding other sources of supplies, different means of transportation, and implementing productivity enhancing measures. While this does not occur overnight, the congestion will dissipate. The market must believe this is all transitory too because it hasn’t impacted the overall indexes. This, despite staffing shortages which, for example, has caused FedEx to reroute packages and airlines to cancel flights. Companies have had to boost pay for overtime and raise wages to attract new employees. There has been a record backlog of ships at ports because of staffing constraints and calls for the U.S. National Guard to loan terminals which would assist in moving goods. Rolling blackouts due to power shortages in China led to production slowdowns. For diversification purposes, some companies moved a portion of their manufacturing to Vietnam, only to have to cope with Covid related shutdowns. Despite these cost pressures, demand has been overpowering because profit margins remain at all-time highs. The usual semiconductor deficit is a result of excess demand, spurred by work-from-home and advances in digitalization which increased the need for electronic components at a time when supply hasn’t been sufficient to fulfill needs. Since the length of time between ordering a semiconductor chip and taking delivery rose to a record high, nearly double the norm, new plants are being built, many in the U.S. being subsidized by the government. Nearly 30 new fabs will be under construction shortly in various jurisdictions, which is more than opened in the last 5 years combined. Looks like an eventual overshoot. Time Heals All The pendulum will swing in the other direction. The scarcity issues facing us now will beget surpluses. Look no further than the PPE shortages at the outset of the pandemic which were quickly met by increased production ultimately creating surpluses, even with demand still high. A capital goods spending cycle is clearly upon us as companies expand production which also bodes well for continued economic growth. Some of the issues will immediately halt. How about the crazy story of Tapestry (maker of Coach purses and other brands) announcing it’ll stop destroying returned product? Apparently, employees were hacking up merchandise and tossing it. That’s one way of creating a supply constraint, and a PR nightmare. Used car prices hit another record high—the normal ebb and flow gone. Prices have been leaping higher. But with production of new cars expected to be back to near normal over the next several months, used car prices should moderate. Commodity prices have surged too as inventories haven’t been sufficient to keep up with demand. However, nothing cures scarcity better than higher prices which encourages production. These constraints have pushed U.S. inflation to the highest since the mid '90s. While some argue it’s a monetary phenomenon, as central banks have poured money into the system, it appears to us more related to the overall supply/demand imbalances. A step-up in demand for raw materials and labour, when ports became congested, simultaneously increased shipping costs, and led to other logistical bottlenecks, all of which combined to ignite prices. Housing prices have also lifted materially. Single-family home prices in the U.S. have risen by a record 19.7% in the last year because of ever-growing demand (spurred by demographics, the shift to work-from-home, and low rates) and, perhaps more importantly, a dearth of listings. While construction costs are up, house prices have outpaced so new builds will in due course help level off prices. That’ll be the Economics 101 feedback loop between prices/costs and supply/demand at work. Core PCE, the broadest inflation measure, was 3.6% for September, moderating since the April highs, a positive sign. Since supply disruptions are beginning to alleviate, it bodes well for a further diminution of inflationary pressures especially since most of the rise in inflation is attributable to durable goods which have suffered the brunt of the bottlenecks. As consumer spending moves from goods back towards services, this should help too. Though growth rates should slow, we are still experiencing an economic boom. Look no further than global air traffic which, astonishingly, is running virtually at 2019 levels. The March of Time Watching inflation is important because it directly impacts our pocketbooks in the short term and our real-spending power over time. Not only because inflation erodes purchasing power but because it also influences the level of interest rates which affects the valuations of financial assets. Longer-term interest rates are likely heading higher, not just because they’re coming off a really low base or inflation is rising. Serious supply and demand dynamics in the bond market are in-play. Fewer bonds will be bought (tapering) by the Fed, who’s been buying, a previously inconceivable, 60% of all U.S. 10-year Treasury issuances. Yet extremely elevated deficit spending still requires massive government bond offerings, at a time when foreigners and individuals have been disinterested in bonds at such low yields. Increasing rates will be necessary to attract buyers (i.e., create demand). Interest rates should remain relatively low though. Primarily because inflation should remain low as a result of poor demographics (nearly every developed country’s birth rate isn’t sufficient to generate population growth), the strength of the U.S. dollar which is disinflationary, and high government debt. These factors should temper economic growth rates. Q3 U.S. GDP grew by only 2% over last year. Aggregate demand may be weakening just when supply constraints are diminishing. On a good note, lesser growth may bode well for an extended economic cycle with low interest rates and relatively high market valuations as the Fed may not need to quell growth. On the other hand, debt laden Japan’s growth rate was so slow since 2008 that it slipped into recession 5 times while the U.S. suffered only once. For a Bad Time Call… Speculators have been winning big, but it almost never ends well. Right now, speculation is still running hot—too hot. Call option purchases (the right to buy shares at a set price for a fixed period) have leaped. Investment dealers, making markets as counterparties on the other side of the call option trades, buy sufficient shares in the open market to offset (i.e., hedge) their positions. As stocks run higher, and call option prices increase, higher amounts of shares are bought. Tesla’s run-up to recent highs is a good example as call-option buying was extreme and a disproportionate amount of buying was attributable to dealer hedging. On a related side note, Tesla ran to about 43x book value recently. In our TRACTM work that’s one break point, or about 20% below, the 55x book value level that only a small number of mature companies have ever achieved because it is mathematically unsustainable since a company cannot produce a return on equity capital sufficient to maintain that valuation level. Historically, share prices invariably have materially suffered thereafter until underlying fundamentals catch up. This is probably not lost on Elon Musk who has tweeted about the overvaluation of Tesla and just sold billions of dollars of shares. Insiders at other companies have been concerned about their share prices too which has led to an uptick in overall insider selling. Meanwhile, use of margin debt as a percent of GDP is at an all-time high of 4%, about 25% higher than at the market peaks in 2000 and 2007. Purchases of leveraged ETFs are at highs too. U.S. equity issuances (IPOs/SPACs) are also at all-time highs as a percent of GDP. The record addition of supply of shares should cause problems for the stock market, especially if demand for shares suddenly wanes if interest rates spike, profit margins shrink, or an unforeseen negative event occurs. Stock ownership generally has reached a high (50% of household assets) which doesn’t bode well for stock market returns when other asset classes shine again. The NASDAQ is extremely overbought. Similar levels in the recent past have led to double-digit declines. The fact that so much of the major indexes are now concentrated in so few companies could hurt too. Worrisome, Apple Inc (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT),, Inc. (NASDAQ:AMZN), Alphabet Inc (NASDAQ:GOOGL), and Meta Platforms Inc (NASDAQ:FB) (Facebook) are all at ceilings or have given “sell signals” in our TRACTM work. Buyout valuations paid by private equity firms has doubled over the last 10 years to levels that don’t make economic sense. Cryptocurrencies may have found a permanent role in the financial system; however, demand is too frothy. Just talk to teenagers or Uber drivers. Since it’s in weak hands, demand already running rampant, prices well above cost of producing coins, and supply virtually unlimited as new cryptos keep cropping up, prices could collapse. The overall hype should soon wither. While markets have already ignored the rise in 10-year Treasury yields, further increases could be harmful. Headline risk from inflation worsening in the short term, and rates rising further in reaction, could spoil the party. Valuations of growth companies are the most vulnerable to rising rates given their higher multiples and the more pronounced impact on cash flows which are further out in time. The forward-12-month S&P 500 earnings multiple is just about 30% above its 10-year average. The earnings yield less the inflation rate is at all-time lows. Earnings estimates themselves are likely too high, which is typically the case. Growth expectations are way above trend as analysts extrapolate the recent spectacular growth. But growth must moderate, if only because the comparison over time becomes much more challenging than last year’s trough. The added boost we’ve experienced from lowered tax rates and share repurchases should disappear too. Profit margins should eventually be negatively impacted. Not just from less sales growth but also from escalating costs, particularly on the labour front. Wage pressures are likely, and productivity may drop for a period, if companies cannot hire qualified workers. Job openings have skyrocketed, and job cuts haven’t been this low since 1997. Teens who’ve just graduated high school in California are training to drive trucks. This may be positive for teen employment but yikes! And global oil inventories have been plummeting. The inventory situation is expected to worsen which could lead to $100, or higher, oil prices, a level that would not be favourable for the economy. Investors generally are still expecting above-average returns for U.S. stocks over the next several years. Meanwhile, since valuations are so high, models that have been historically accurate predicting 10-year returns point to negligible returns. Our Strategy We continue to hedge (by shorting U.S. stock market ETFs in Growth accounts or holding inverse ETFs in registered or long-only accounts) principally because valuations have only been this high on 4 occasions in the last 50 years. Since we are not concerned about a recession, and the bear market that usually accompanies one, we’d like nothing better than to cover our hedges after a meaningful market correction. We sleep well at night knowing that we are partially hedged and that our holdings are growing, high-quality companies that, unlike the overall market, trade at substantial discounts to our estimates of FMV. The track record of most of our holdings shows steadily rising earnings over the last several years. And we foresee further growth ahead. Securities that are already detached from FMV can fall even further away if sentiment worsens. However, it doesn’t mean the companies are worse off, only that they’re temporarily losing the popularity contest. While the prices of our Chinese holdings have not gotten materially worse since last quarter, these holdings are still a drag on the portfolios. Since the ones we own are dominant high-quality companies, now trading at less than 40 cents-on-the-dollar in our view—a 60% off sale, we continue to wait for the end of the bear market in these shares. The entire KWEB, a Chinese Internet/technology ETF, is down 54% since February. Meanwhile, economic growth in China is expected to be 5% annually for the next several years, outpacing the U.S. which is expected to grow by less than 2% per year. By 2030, China should have the largest consuming middle class globally. The Chinese growth engine remains attractive. And the companies we hold continue to grow. With valuations so attractive and the stocks nearly universally shunned, we believe a new uptrend should be close. Our Portfolios The following descriptions of the holdings in our managed accounts are intended only to explain the reasons that we have made, and continue to hold, these investments in the accounts we manage for you and are not intended as advice or recommendations with respect to purchasing, selling or holding the securities described. Below, we discuss each of our new holdings and updates on key holdings if there have been material developments. All Cap Portfolios - Recent Developments for Key Holdings Our All Cap portfolios combine selections from our large cap strategy (Global Insight) with our best small and medium cap ideas. We generally prefer large cap companies for their superior liquidity and lower volatility. Importantly, they tend to recover back to their fair values much faster than smaller stocks, so they can be traded more frequently for enhanced returns. The smaller cap positions are less liquid holdings which are potentially more volatile; however, we hold these positions because they are cheaper, trading far below our FMV estimates making their risk/reward profiles favourable. There were no material changes in our smaller cap holdings recently. All Cap Portfolios - Changes In the last few months, we made several changes within our large cap positions all summarized in the Global Insight section below. Global Insight (Large Cap) Portfolios - Recent Developments for Key Holdings Global Insight represents our large cap model (typically with market caps over $5 billion at the time of purchase but may include those in the $2-5 billion range) where portfolios are managed Long/Short or Long only. A complete description of the Global Insight Model is available on our website. Our target for our large cap positions is more than a 20% return per year over a 2-year period, though some may rise toward our FMV estimates sooner should the market react to more quickly reduce their undervaluations. Or, some may be eliminated if they decline and breach TRAC floors. At an average of about 60 cents-on-the-dollar versus our FMV estimates, our Global Insight holdings appear much cheaper, in aggregate, than the overall market. Global Insight (Large Cap) Portfolios - Changes In the last few months, we made several changes within our large cap positions. We bought Altice USA Inc (NYSE:ATUS) and American Eagle Outfitters Inc (NYSE:AEO). We sold Wells Fargo & Co (NYSE:WFC) as it achieved or FMV estimate and TAL Education Group (NYSE:TAL) as it became clear we erred in our assessment once the Chinese government essentially eliminated for-profit education and other opportunities provide better reward vs. risk. Altice USA provides broadband, telephone, and television services to nearly 5 million customers across 21 states. Altice saw a surge in subscribers and plan upgrades with the increase in work from home. As people have returned to work, subscriber growth has slowed and become tougher to predict. At the same time, Altice is upgrading its network, leading to higher capital expenditures, lower free cash flow, and a moderation in share repurchases. Trading at over $35 at the end of last year, shares now trade near $17. We believe investors have become too focused on near-term subscriber trends and not the attractive long-term metrics of the business. Altice should generate close to $1.5 billion in free cash flow and see solid subscriber growth as network upgrades and fresh marketing initiatives bear fruit. Not unlike its peers, Altice carries a large debt-load. Though, management expects debt to decline even as spending accelerates and there are no material debt maturities before 2025. Our FMV estimate is $40. We believe there are numerous avenues for Altice to close the gap between its current share price and its intrinsic value. With large insider ownership already, a management-led buyout would not surprise us. American Eagle Outfitters is a vastly different company than it was just a few years ago. Gone are the days of chasing sales and market share. Management is now laser-focused on cash flow generation, return on investment, and total shareholder return (i.e., stock appreciation, dividends, and share buybacks). Its intimate apparel Aerie brand has metrics that top the retail field and is now close to 50% of revenue, on track to exceed $2 billion in revenue. Meanwhile, American Eagle continues to dominate denim. Years of investments in logistics and its supply chain are paying off. With disruptions everywhere, Eagle’s in-house logistics operations are now a major competitive advantage, enabling the company to achieve higher sales and margins on far less inventory. Our FMV estimate is $35. Income Holdings High-yield corporate bond yields have climbed slightly but at 4.4% remain near all-time lows. Our income holdings have an average current annual yield (income we receive as a percent of current market value of income securities held) of about 5%. Though most of our income holdings - bonds, preferred shares, REITs, and income funds—trade below our FMV estimates, attractive new income opportunities are still not easily found. We have our sights on several securities; however, we believe more attractive entry price points should avail themselves in the months ahead, either as rates rise and bond yields decline or as share prices correct, whether on a case-by-case basis or because of an overall market setback. We recently purchased, VICI Properties, one of the largest U.S. REITs, whose properties include 60 leading casinos (e.g., Caesar’s Palace, MGM, Mirage). Leases are long term with built-in escalators, provide high margins, required capital expenditures are low, and lease renewals are all but guaranteed as the behemoth tenants can’t simply relocate. It yields 5.1% and our FMV estimate is $39, well above the price. We also bought FS KKR Capital, one of the largest U.S. BDCs (business development corp.). The company utilizes its own investment-grade balance sheet (it borrowed $1.25 billion recently at 2.5%) to lend, mostly on a senior-secured basis, mainly to private middle-market U.S. companies. Despite delivering several good quarters recently, it trades at just over a 20% discount to its net asset value and sports an 11.6% dividend yield. All in Good Time We remain concerned about several factors, primarily high market valuations, which could trigger a market decline and reestablish a wall of worry. The average S&P 500 high-to-low annual decline since 1980 has been about 14%. In the last year, it’s only suffered just shy of a 6% correction. Prices have risen too far above underlying values and should revert. Many of our holdings, in contrast, have gone in the other direction, already enduring their own bear markets. We don’t expect to be right all the time. Nor do we need to be, to have respectable performance. But we’ve suffered unduly recently. We can’t turn back time and alter our selections. And we certainly don’t wish to rush time. Time is precious. But we do believe that good things happen to those who wait. And we will continue to wait patiently, biding our time, because our process is designed to select out-of-favour securities, the ones that are underappreciated but whose quality businesses we expect to advance, causing the disconnect between prices and values to alleviate, all in good time. We look forward to recovering from our recent lull and notes from clients stating, “It’s about time!” Randall Abramson, CFA Herb Abramson Generation PMCA Corp. Updated on Nov 26, 2021, 2:09 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 26th, 2021

Futures Slide As Dollar Jumps, Yields Rebound Ahead Of Massive Data Dump

Futures Slide As Dollar Jumps, Yields Rebound Ahead Of Massive Data Dump For the third day in a row, US equity futures have been weighed down by rising (real) rates even as traders moderated their expectations for monetary-policy tightening after New Zealand’s measured approach to rate hikes where the central banks hiked rates but not as much as some had expected. Traders also braced for an epic data dump in the US, which includes is an epic data dump which includes an update to Q3 GDP, advance trade balance, initial jobless claims, wholesale and retail inventories, durable goods, personal income and spending, UMich consumer sentiment, new home sales, and the FOMC Minutes The two-year U.S. yield shed two basis points. The dollar extended its rising streak against a basket of peers to a fourth day. At 730am, S&P 500 e-mini futures dropped 0.3%, just off session lows, while Nasdaq futures dropping 0.34%. In premarket trading, Nordstrom sank 27% after the Seattle-based retailer posted third-quarter results featuring what Citi called a big earnings per share miss. The company reported higher labor and fulfillment costs in the third quarter while sales remained stubbornly below pre-pandemic levels and profit missed analyst estimates. Telecom Italia SpA surged in Europe on enhanced takeover interest. Oil prices fluctuated as producers and major consuming nations headed for a confrontation. Other notable premarket movers: Gap (GPS US) sank 20% premarket after the clothing retailer reported quarterly results that missed estimates and cut its net sales forecast for the full year. Analysts lowered their price targets. Nordstrom (JWN US) tumbles 27% in premarket after the Seattle-based retailer posted third-quarter results featuring what Citi called a big earnings per share miss. Jefferies, meanwhile, downgrades the stock to hold from buy as transformation costs are rising. Guess (GES US) posted quarterly results which analysts say included impressive sales and margins, and showed the company navigating supply-chain issues successfully. The shares closed 9.2% higher in U.S. postmarket trading. HP (HPQ US) shares are up 8.4% in premarket after quarterly results. Analysts note strong demand and pricing in the personal computer market. Meme stocks were mixed in premarket after tumbling the most since June on Tuesday as investors bailed out of riskier assets. Anaplan (PLAN US) slides 18% in premarket as a narrower-than-expected quarterly loss wasn’t enough to stem a downward trend. Analysts slashed price targets. Autodesk (ADSK US) shares slump 14% in premarket after the building software maker narrowed its full-year outlook. Analysts are concerned that issues with supply chains and the pandemic could impact its targets for 2023. GoHealth (GOCO US) gained 8.4% in postmarket trading after the insurer’s CEO and chief strategy officer added to their holdings. As Bloomberg notes, investors are on the edge as they face a wall of worry from a resurgence of Covid-19 in Europe to signs of persistent consumer-price growth. Damping inflation is now center-stage for policy makers, with ultra-loose, pandemic-era stimulus set to be wound down. The slew of U.S. data as well as Federal Reserve minutes due today may provide the next catalysts for market moves. In Europe, the Stoxx 600 Index erased earlier gains of up to 0.4% to trade down -0.1%, with tech and travel and leisure leading declines. Miners gained 0.8%, tracking higher copper prices on easing concerns over Chinese demand, while travel stocks slid over 1% on prospects of harsher travel curbs: Italy and France are debating new measures to cope with Covid’s resurgence while Germany isn’t ruling out fresh curbs. Oil stocks rose 1.2%, set for their biggest jump in over a month, with crude prices inching higher as investors remained sceptical about the effectiveness of a U.S.-led release of oil from strategic reserves. Here are some of the most notable European equity movers: Mulberry shares surge as much as 24%, the most since March 12, after the U.K. luxury company swung to a 1H profit from a year earlier and reported an increase in sales. Telecom Italia shares rise as much as 10% following a Bloomberg report that KKR is considering to raise its offer for the company after top investor Vivendi said the bid was too low. However, the stock is still trading below the initial non-binding offer from KKR. Golden Ocean gains as much as 9.6%, most since Feb., after earnings. DNB says “Golden Ocean delivered solid Q3 results” and adds “Furthermore, guidance for Q4 should lift consensus estimates and solidify further dividend potential in our view.” Intertek shares gain as much as 6.7%, the most since May 2020, after the company issued a trading update. UBS says the company’s accelerating momentum and reiterated targets are “reassuring.” Aegon shares rise as much as 5.5% after Credit Suisse upgraded its recommendation to outperform from neutral and raised the PT to EU5.30 from EU4.00. IQE shares slump as much as 21% for the biggest intraday drop since March 2020, falling to their lowest level since June 2020 after the semiconductor company said it sees softening demand in 4Q. Genus shares fall as much 15% after the animal genetics firm lowered its FY22 earnings guidance, leading Peel Hunt and Liberum to cut estimates. European stocks are on course for weekly losses, as the return of COVID-19 curbs, rate hike and inflation concerns sparked fears of a weaker economic growth outlook. "There's a two-way pull between macro concerns and what's happening bottoms-up in terms of corporate profits," said Nick Nelson, head of European equity strategy at UBS, adding that while the third quarter has been one of the decade's best reporting seasons for Europe, macro concerns such as a rise in U.S. bond yields and COVID-19 cases have been holding stocks back. Earlier in the session, Asian equities declined, on track for a third-straight session of losses, as higher U.S. Treasury yields continued to weigh on technology stocks in the region. The MSCI Asia Pacific Index slid as much as 0.6%, with Japan stocks leading losses as traders returned from a holiday to access the prospect of tighter U.S. monetary policy to curb inflation. TSMC and Tencent were among the biggest drags on the regional gauge. READ: Samsung Plans $17 Billion Texas Chip Plant, Creating 2,000 Jobs The renomination of Jerome Powell as Federal Reserve chair earlier this week has sent U.S. 10-year Treasury yields to about levels near 1.65%, implying higher borrowing costs. That’s adding to concerns about weak earnings growth in Asia as well as ongoing supply-chain constraints. Investors will now turn their attention to U.S. gross domestic product data and FOMC minutes due out after Asian markets close Wednesday.  “A cautious tone may still seem to prevail for now,” Jun Rong Yeap, a market strategist at IG Asia, said in a note. “Markets continue to shift their expectations towards a tighter Fed monetary policy.” New Zealand’s stock gauge added 0.6% after the central bank raised interest rates by 25 basis points, less than the 50 points that some economists had predicted. Singapore authorities, meanwhile, expect gross domestic product to expand 3% to 5% next year, a slower pace than this year as the country rebounds from the pandemic. Indian stocks fell ahead of the November monthly expiry on Thursday, led by technology companies. The S&P BSE Sensex slipped 0.6% to 58,340.99 in Mumbai to close at its lowest level in two months. The gauge gained 0.3% on Tuesday, snapping four sessions of selloff.   The NSE Nifty 50 Index declined 0.5% on Wednesday, reversing intraday gains of as much as 0.6%. Software exporter Infosys Ltd. was the biggest drag on both gauges and slipped more than 2%. Of the 30 shares in the Sensex, 21 dropped and nine rose.  Investors roll over positions ahead of the expiry of derivatives contracts on the last Thursday of every month. Fourteen of 19 sub-indexes compiled by BSE Ltd. fell, led by a measure of IT companies. “The scheduled monthly expiry would keep the traders busy on Thursday,” Ajit Mishra, vice president research at Religare Broking Ltd. wrote in a note. “We suggest continuing with negative bias on the index while keeping a check on leveraged positions.” In Fx, the most notable movers was the drop in the kiwi: New Zealand’s currency ironically slid to the weakest in nearly two months and the nation’s bond rallied as the central bank’s 25 basis-point rate hike disappointed traders betting on a bigger increase. The central bank projected 2% benchmark borrowing costs by the end of 2022. The Bloomberg Dollar Spot Index advanced a fourth consecutive day as the greenback gained versus all Group-of-10 peers apart from the yen, which reversed its losses after falling to the lowest since March 2017. The euro underperformed, nearing the $1.12 handle amid broad dollar strength even before data showing German business confidence took another hit in November and amid renewed fears that Germany may be considering a full lockdown and mandatory vaccines. RBNZ Governor Adrian Orr said policy makers considered a 50bps move before deciding on 25bps, and he sees the OCR climbing to around 2.5% by end-2023.  Elsewhere, Turkey’s lira stabilized after Tuesday’s plunge. MSCI’s gauge of emerging-market stocks edged lower for a sixth session.   In rates, Treasuries were richer by 1bp to 2bp across the curve, paced by European bonds ahead of a raft of U.S. data preceding Thursday’s market close. 10-year Treasury yields were richer by ~1bp on the day at around 1.655%, slightly trailing bunds; most curve spreads are within a basis point of Tuesday’s close with comparable shifts across tenors. During Asia session, Treasuries were supported by wider gains across Kiwi bonds after RBNZ hiked policy rates, but still erred on the dovish side. Bunds remain supported during European morning as haven demand stems from prospect of a nationwide German lockdown. Italian bonds snapped a two-day decline. In commodities, oil futures in New York swung between gains and losses following an announcement by the U.S. and other nations of a coordinated release of strategic reserves. Focus now turns to OPEC+ on how the group will respond to the moves. The alliance has already said that such releases were unjustified by market conditions and it may reconsider plans to add more supply at a meeting next week. Base metals are well bid with LME nickel adding over 2% to outperform peers. LME copper rises over 1% to best levels for the week. Crude futures fade a modest push higher fading after a brief push through Tuesday’s best levels. WTI trades flat, having briefly printed above $79; Brent prints highs of $83 before fading. Spot gold holds a narrow range close to $1,790/oz To the day ahead now, and there’s a significant amount of US data ahead of tomorrow’s Thanksgiving holiday. That includes the weekly initial jobless claims, the second estimate of Q3 GDP, October’s personal income and personal spending, new home sales, and the preliminary October readings for durable goods orders and core capital goods orders. Over in Germany, there’s also the Ifo’s business climate indicator for November. Finally on the central bank side, there’s the release of the FOMC’s November meeting minutes, and speakers include the ECB’s Panetta and Schnabel, and the BoE’s Tenreyro. Market Snapshot S&P 500 futures down 0.1% to 4,683.50 STOXX Europe 600 up 0.3% to 480.66 MXAP down 0.5% to 196.76 MXAPJ down 0.1% to 643.18 Nikkei down 1.6% to 29,302.66 Topix down 1.2% to 2,019.12 Hang Seng Index up 0.1% to 24,685.50 Shanghai Composite up 0.1% to 3,592.70 Sensex down 0.3% to 58,499.84 Australia S&P/ASX 200 down 0.2% to 7,399.44 Kospi down 0.1% to 2,994.29 Brent Futures up 0.4% to $82.63/bbl Gold spot up 0.1% to $1,791.37 U.S. Dollar Index little changed at 96.57 German 10Y yield little changed at -0.22% Euro down 0.2% to $1.1231 Top Overnight News from Bloomberg Olaf Scholz is set to succeed Angela Merkel as German chancellor after forging an unprecedented alliance that aims to revamp Europe’s largest economy by tackling climate change and promoting digital technologies The European Commission is set to announce the recommendations for the entire EU as soon as Thursday, Politico’s Playbook newsletter reported, citing three unidentified officials and diplomats Italy’s government is debating tough new measures to stem an increase in coronavirus cases, which could include restrictions on unvaccinated people and be approved as soon as Wednesday The ECB’s pandemic purchasing program may enter a “waiting room” rather than be abolished completely once net purchases are set to end in March, Governing Council member Robert Holzmann said at briefing in Vienna The U.K.’s biggest business lobby group has urged Prime Minister Boris Johnson to back down in its dispute with the European Union over Northern Ireland and not follow through with threats to suspend parts of the Brexit divorce deal Polish central bank Governor Adam Glapinski said further weakening of the zloty wouldn’t be consistent with the country’s economic fundamentals, helping lift the embattled currency from 12-year lows The supply crunch that’s helped drive inflation to multi- decade highs shows some signs of easing in the U.S. -- but it’s still getting worse in Europe. That’s the takeaway from the latest readings on Bloomberg Economics’ new set of supply indicators The unraveling of the Turkish lira threatens to erode Recep Tayyip Erdogan’s grasp on the economy and is already emboldening his political opponents. Small protests erupted in Istanbul and Ankara overnight, calling for an end to economic mismanagement that’s unleashed rapid inflation and triggered the currency’s longest losing streak in two decades A more detailed breakdown of global news courtesy of newsquawk Asia-Pac equity indices were mixed following the choppy performance of their US counterparts where energy rallied despite the SPR announcement and tech lagged as yields continued to gain, with the latest RBNZ rate hike, as well as looming FOMC Minutes and US data releases adding to the tentative mood. ASX 200 (-0.2%) was rangebound with the index subdued by losses in tech and gold miners which suffered from the rising yield environment, but with downside cushioned by strength in the largest weighted financials sector and with outperformance in energy after oil prices rallied in the aftermath of the widely anticipated SPR announcement. The strength in oil was attributed to several reasons including a “sell the rumour/buy the news” play and expectations of a response from OPEC+, while an administration official kept the prospect of an oil export ban on the table which is seen as bullish as it would remove US supply from the global market. Nikkei 225 (-1.6%) was the laggard on return from holiday amid flows into the local currency and with reports also suggesting the BoJ is considering tweaking its pandemic relief program. Hang Seng (+0.1%) and Shanghai Comp. (+0.1%) swung between gains and losses with early indecision due to the broad tech weakness tech which was not helped by reports that Chinese cyberspace regulators and police summoned Alibaba (9988 HK) and Baidu’s (9888 HK) cloud unit for telecoms network fraud, although the losses for Chinese bourses were eventually reversed amid gains in the energy heavyweights and after a mild PBoC liquidity injection. Finally, 10yr JGBs opened lower on spillover selling from global peers but gradually pared some of the losses after rebounding from support at 151.50 and with the BoJ in the market for nearly JPY 1.5tln of JGBs with up to 10yr maturities. Top Asian News Shinsei Drops Poison Pill Against SBI in Japan Takeover Saga Morgan Stanley to Repay Hong Kong Staff $5,100 for Quarantine KKR, Equinix Among Suitors for $11 Billion Global Switch Japan to Issue $192 Billion in Debt for Stimulus: Nikkei European equities attempted to claw back some of the week’s losses (Euro Stoxx 50 -0.2%; Stoxx 600 -0.2%) at the open with Monday and Tuesday’s session dominated by ongoing COVID angst in the region. Lockdown measures were enough to see investors shrug off yesterday’s better-than-expected PMI metrics for the Eurozone with today’s slightly softer than hoped for German Ifo report having little sway on price action. Despite the upside seen at the open, optimism has faded throughout the session as speculation mounts over whether the announcement of the German coalition deal (set to be unveiled at 14:00GMT) could prompt further lockdown measures for the nation. Furthermore, reports note that the Italian government is debating potential restrictions on the unvaccinated; measures could be approved as soon as today. On a more positive footing French Finance Minister Le Maire says at the moment he does not see any need for further COVID-related restrictions in France. However, it remains to be seen how long this viewpoint can be sustained. Stateside, futures are a touch softer with losses across the majors of a relatively equal magnitude (ES -0.1%) in the final full session of the week ahead of the Thanksgiving Holiday. Given the shortened week, today sees a deluge of data from the US with releases including key personal income, spending and PCE data for October, a second look at Q3 GDP, final Michigan consumer sentiment data, as well as weekly jobless claims and energy inventory data. All of which is followed by the FOMC minutes from the November meeting. In a recent note, BNP Paribas stated it is of the view that equities will go on to provide the highest returns across asset classes in 2022 with the French bank targeting 5100 (currently 4690) for the S&P 500 by the end of next year. From a European perspective, BNP expects the Euro Stoxx 50 to close 2022 out at 4500 (currently 4300) with the market “too pessimistic” on margins; albeit the Bank concedes that the resurgence of COVID presents a risk to its view. Sectors in Europe are mostly constructive with Oil & Gas and Basic Resources underpinned by gains in the underlying commodities with the former continuing to garner support post-yesterday’s SPR announcement. The Travel & Leisure sector lags peers with the Travel element of the group hampered by reports that the European Commission is preparing new COVID travel recommendations for the whole of the EU. For Leisure names, Entain (-5.0%) and Flutter Entertainment (-3.0%) have been hit by news that over 160 UK MPs and peers are said to be demanding that online gambling limits are lowered. Finally, Telecom Italia (+9.7%) is the best performer in the Stoxx 600 after source reports suggesting that KKR is considering a higher bid for the Co. in an attempt to win over support from Vivendi.   Top European News Scholz Seals Coalition Deal to Become Next German Chancellor Italy Readies Curbs on the Unvaccinated as Covid Cases Rise Booking Agrees to Buy CVC’s Etraveli for About EU1.63b Orange CEO Convicted in $453 Million Arbitration Fraud Case In FX, the Dollar index has gained traction and continued its gains above 96.500+ status in early European hours before eclipsing resistance at 96.700 to a fresh YTD peak at 96.758, with US players also preparing to wind down for the long weekend. Before that, the Buck will be facing a plethora of Tier 1 US data, including Prelim GDP (Q3), weekly Jobless Claims, and monthly PCE in the run-up to the FOMC Minutes – which will be eyed for clues on what could warrant an adjustment of the pace of tapering (Full preview available in the Newsquawk Research Suite). On the downside, immediate support will likely be at yesterday’s 96.308 low before this week’s current 96.035 trough. In terms of early month-end FX flows (on account of the holiday-shortened week), Morgan Stanley’s model points towards USD weakness against most G10 peers. EUR, GBP - The single currency dipped a 16-month low just before the release of the German Ifo survey, which unsurprisingly voiced cautiousness against the backdrop of COVID and supply chain issues – with Ifo forecasting a growth stagnation this current quarter, whilst ING believe that today’s Ifo signals that “The risk of stagnation or even recession in the German economy at the turn of the year has clearly increased.” The currency came under further pressure in what coincided with reports that Germany is mulling a full COVID lockdown and mandatory vaccinations, although the piece failed to cite any sources nor officials and seemed to be more an extrapolation of recent remarks from the German Health Minister. EUR/USD fell through pivotal support at 1.1210 to a current low at 1.1206 ahead of 1.1200. Traders should also be cognizant of several chunky OpEx clips including EUR 1.3bln between 1.1195-1.1200. Ahead, the SPD, Greens and FDP set to unveil their coalition deal at 14:00GMT. ECB speak today include from the likes Schnabel after Panetta and Holzmann failed to spur action across EU assets. Elsewhere, the GBP/USD is flat intraday and saw little reaction to BoE Governor Bailey yesterday, suggesting he does not think the MPC will go back to a hard form of guidance and stated that it is not off the table that they give no guidance at all on rates. Bailey also stated that decisions are made meeting by meeting and that they have a very tight labour market. From a political standpoint, European Commission VP Sefcovic said EU-UK talks on Northern Ireland trade rules will probably drag into 2022. Cable remains within a 1.3353-89 range whilst EUR/GBP trades on either side of 0.8400. Looking ahead, BoE’s Tenreyro speaking at the Oxford Economics Society – with early-Nov commentary from the MPC member suggesting that monetary policy will have to bite if there are signs of second-round inflation effects, but policy cannot fix energy price spikes. NZD, AUD - The Kiwi stands as the G10 laggard following a dovish 25bps hike by the RBNZ, with the board citing optionality. Desks suggest that FX was clearly gearing for a hawkish surprise from the central bank, with markets pricing some 35% of a 50bps hike heading into the meeting given the inflation survey earlier this month. Money markets were also disappointed, with participants flagging that the 2yr swap fell over 15bps despite the RBNZ upping its 2023 OCR forecast to 2.3% (prev. 1.7%). NZD/USD fell further beneath the 0.7000 mark to a current 0.6957 low. AUD meanwhile sees its losses cushioned from another day of firm gains in iron ore, whilst cross-currency flows help the AUD/NZD test 1.0450 to the upside. Nonetheless, the cautious market mood keeps AUD/USD around the flat mark after the pair found support at 0.7200. JPY - The traditional haven outperforms as risk aversion creeps into the market. USD/JPY pivots the 115.00 market after hitting an overnight high of 115.23. Some desks suggest that offers are seen from 115.30 on Wednesday, with more around the 115.50 area, according to IFR citing Tokyo sources. In terms of notable OpEx, USD/JPY sees USD 1.7bln between 115.00-10. In commodities, WTI and Brent Jan futures consolidate following yesterday’s gains post-SPR announcement. The release disappointed the oil bears given the widely telegraphed nature of the announcement coupled with relatively small contributions from members. Desks have also highlighted that the reserves will need to be replenished at some time in the future, and thus, analysts have passed the effects from the SPR release as temporary; although, cautioning that if the desired impact is not achieved, then further action can be taken – with a temporary export ban still on the table. Meanwhile, on the demand side, futures dipped after CNBC reported that Germany could head into a full lockdown, but the piece did not make a mention of officials nor sources but seemed to be more an extrapolation of recent comments from the Germany Health Minister, with an announcement on this matter potentially to come today. Further, tomorrow could see revised travel guidance for the whole of the EU, according to Politico sources, although "The biggest overall change will be a move away from a country-based approach and to a person-based one, which takes into account a citizen’s individual COVID status." Despite this month’s European COVID developments, JPMorgan sees global oil demand growing by another 3.5mln BPD next year to reach 99.8mln BPD (280k BPD above 2019 level); 2023 demand is expected to average around 101.5mln BPD (1.9mln BPD above pre-COVID levels) and suggested that global oil demand is on track to exceed 2019 levels by March 2022 and strengthen further. As a reminder, next week also sees the OPEC+ meeting whereby the group is expected to continue with plans of monthly output increases of 400k BPD, with a risk of a more dovish decision and/or commentary. WTI Jan trades around USD 78.50/bbl (vs high 79.23/bbl) and Brent Jan around USD 82.25/bbl (vs high 83.00/bbl). Elsewhere, spot gold is interestingly unfazed by the rampant Dollar as prices remain caged within a cluster of DMAs (100 around 1,793, 200 around 1,791 and 50 around 1,788). Copper prices are again on the grind higher with LME around USD 9,800/t at the time of writing – with participants citing underlying demand, particularly from China. US Event Calendar 8:30am: 3Q GDP Annualized QoQ, est. 2.2%, prior 2.0% 8:30am: 3Q GDP Price Index, est. 5.7%, prior 5.7% 8:30am: 3Q PCE Core QoQ, est. 4.5%, prior 4.5% 8:30am: 3Q Personal Consumption, est. 1.6%, prior 1.6% 8:30am: Oct. Durable Goods Orders, est. 0.2%, prior -0.3% 8:30am: Oct. Cap Goods Orders Nondef Ex Air, est. 0.5%, prior 0.8%; - Less Transportation, est. 0.5%, prior 0.5% 8:30am: Oct. Cap Goods Ship Nondef Ex Air, est. 0.5%, prior 1.4% 8:30am: Oct. Retail Inventories MoM, est. 0.3%, prior -0.2%; Wholesale Inventories MoM, est. 1.0%, prior 1.4% 8:30am: Oct. Advance Goods Trade Balance, est. - $95b, prior -$96.3b 8:30am: Nov. Initial Jobless Claims, est. 260,000, prior 268,000; Continuing Claims, est. 2.03m, prior 2.08m 9:45am: Nov. Langer Consumer Comfort, prior 50.7 10am: Oct. Personal Income, est. 0.2%, prior -1.0%; 10am: Oct. Personal Spending, est. 1.0%, prior 0.6% 10am: Oct. Real Personal Spending, est. 0.6%, prior 0.3% 10am: Oct. New Home Sales, est. 800,000, prior 800,000 10am: Oct. New Home Sales MoM, est. 0%, prior 14.0% 10am: Oct. PCE Deflator MoM, est. 0.7%, prior 0.3% 10am: Oct. PCE Core Deflator MoM, est. 0.4%, prior 0.2% 10am: Oct. PCE Deflator YoY, est. 5.1%, prior 4.4% 10am: Oct. PCE Core Deflator YoY, est. 4.1%, prior 3.6% 10am: Nov. U. of Mich. Sentiment, est. 67.0, prior 66.8 10am: Nov. U. of Mich. 5-10 Yr Inflation, prior 2.9% 10am: Nov. U. of Mich. 1 Yr Inflation, prior 4.9% 10am: Nov. U. of Mich. Current Conditions, prior 73.2 10am: Nov. U. of Mich. Expectations, prior 62.8 2pm: Nov. FOMC Meeting Minutes DB's Jim Reid concludes the overnight wrap We’ve had a number of requests to bring back our Covid tables in the EMR. At the moment I’m resisting as they take a considerable amount of time. While we work out an efficient form of articulating the current wave on a daily basis, in today’s EMR we show graphs of the daily rolling 7-day cases and fatalities per million in the population for the G7. We’ve also included Austria, given how topical that is, and also The Netherlands, given mounting problems there. These act as a useful reference point for some of the more stressed countries. The cases chart should be in the text below and the fatalities one visible when you click “view report”. Germany is probably the main one to watch in the G7 at the moment and overnight reported 66,884 new cases (a record) compared with 45,362 the day before. A reminder that yesterday we published our 2022 credit strategy outlook. See here for the full report. Craig has also put out a more detailed HY 2022 strategy document here and Karthik a more detailed IG equivalent here. Basically we think spreads will widen as much as 30-40bps in IG and 120-160bps in HY due to a response to a more dramatic appreciation of the Fed being well behind the curve. This sort of move is consistent with typical mid-cycle ranges through history. We do expect this to mostly retrace in H2 as markets recover from the shock and growth remains decent and liquidity still high. We also published the results of our ESG issuer and investor survey where around 530 responded. Please see the results here. As we hit Thanksgiving Eve and a US data dump of a day given the holiday tomorrow, the big story over the last 2-3 business days has been real rates in the US. As recently as Friday, after the Austria lockdown news, 10yr real rates hit -1.2%. Yesterday they traded above -0.95% before closing at -0.97%, +4.0bps higher than the previous close. Our view in the 2022 credit strategy document is that credit is more tied to real rates than nominal rates and if the market attacks the Fed as we expect, then they should go up. However, note that I’ve also said I suspect they’ll stay negative for the rest of my career so while higher real yields are likely, I suspect that this is a trade rather than a structural long-term journey given likely long-term financial repression. Anyway, rising real yields, a fresh covid wave and belief over a less dovish Fed post the Powell reappointment saw a tough day for equities, especially in Europe, before the US managed to eke out a gain into the close. The S&P 500 (+0.17%) was up for the first time in 3 days, whilst Europe’s STOXX 600 (-1.28%) posted its worst daily performance in nearly 2 months. On a sector level, it was the same story in the US, where energy (+3.04%) shares benefitted from climbing oil prices and financials (+1.55%) gained on steeper and higher yields. Larger tech firms retreated on the higher discount rates, with the Nasdaq declining -0.50%. Meanwhile the VIX index of volatility was back above the 20-mark for the first time in over a month, coinciding with a broader tightening of financial conditions. However, we dipped back below 20 into the stronger close. Honing in on bonds now and there was a major selloff yesterday that hit a number of European countries in particular. By the close of trade, yields on 10yr bunds were up +8.1bps, which is their single-biggest daily increase in over a year, actually since the day we found out that the Pfizer/BioNTech vaccine had proven successful in trials and was set to be rolled out. The move came about entirely due to higher real rates, with Germany 10yr inflation breakevens actually down -2.0bps on the day. Similar moves were seen elsewhere on the continent, with yields on 10yr OATs (+8.6bps) and BTPs (+10.5bps) seeing sharp rises of their own, which occurred in part on the back of stronger than expected flash PMI data raising the prospect of a quicker drawdown in monetary stimulus, not least with inflation still running some way ahead of the ECB’s target. For US Treasuries, yields were a touch more subdued, and the yield curve twist steepened. 2yr yields declined -1.8bp whilst every other maturity increased, and all tenors out to 7 years are at post-pandemic highs. The 5yr nominal yield increased +2.2bps to 1.34%. The 10yr was up +4.1bps to 1.67% due, as we discussed above, to real yields. 10yr breakevens were flat (+0.2bp) at 2.63%. The 10 year is 7.5bps off of 2021 closing highs and in the 430 plus business days since the pandemic started there have only been 14 days with a higher close than last nights. Elsewhere yesterday, we had an important piece of news on the energy front, as the US announced that it would be releasing 50m barrels of oil from the Strategic Petroleum Reserve, with the move occurring alongside similar decisions in China, India, Japan, South Korea and the UK. 32m of those 50m will be an exchange, whereby oil is released over the next few months that is then returned over the coming years, while another 18m are coming from an acceleration of an oil sale that Congress had already authorised. Oil prices rose following the release however, with Brent crude (+3.27%) and WTI (+2.28%) both seeing decent advances, in part because the contribution from other nations was smaller than many had anticipated, but also because the potential release from the SPR had been widely reported in advance, thus sending prices lower from their peak around a month ago. Even with the news, there’s no sign that inflationary pressures will be going away just yet, since much of what happens next will depend on the reaction of the OPEC+ group. If they move to cancel plans to increase production, then that could put upward pressure on prices again and help counter the impact of the move from the various energy consumers. And as we’ve been discussing, inflationary pressures have been widening for some time now, stretching beyond specific categories like energy and used cars to an array of other areas. Overnight in Asia stocks are trading mostly in the red with the CSI (-0.03%), Hang Seng (-0.06%), Shanghai Composite (-0.10%), KOSPI (-0.48%) and the Nikkei (-1.35%) all lower. The Reserve Bank of New Zealand has raised interest rates for the second consecutive month and lifted the official cash rate 25bps to 0.75%. There was some who expected 50bps so bonds are rallying with 2yr and 10yrs -5.5bps and -7.5bps lower, respectively. The central bank were pretty hawkish in their comments though. US Treasuries are 2-4bps lower across the curve overnight as well. Staying on New Zealand, the country eased its travel restrictions by allowing fully vaccinated travellers (and other eligible travellers) from Australia without any isolation from Jan 17 and those from the rest of the world from February 14. Elsewhere, South Korea reported its highest ever daily new cases of 4,115 with 586 critical cases with the PM announcing the situation is "more serious than expected". Futures are indicating a slightly weaker start in the US and Europe with the S&P 500 (-0.24%) and DAX (-0.09%) lower. Over in Europe, there’s no sign of the pandemic letting up just yet, with French health minister Veran saying in parliament that “we are sadly well and truly in a fifth wave of the epidemic” as France announced 30,454 new cases yesterday. Austria has been the main country in the headlines recently as it moved into a nationwide lockdown, but the reality is that the trend lines have been moving higher across the continent, raising the prospect of fresh restrictions. In terms of yesterday’s developments, the Netherlands announced that social distancing would be reintroduced on a mandatory basis, and that people should stay 1.5m apart, and Poland saw the biggest daily increase in hospitalisations since April. Elsewhere, Slovakia’s PM said that he was considering following the steps adopted in Austria, and the outgoing Czech PM said that mandatory vaccines for the over-60s were being considered. In spite of the growing Covid wave across Europe, the flash PMIs released yesterday actually proved better than the consensus was expecting, and even saw something of an uptick from the October readings. The Euro Area composite PMI ended a run of 3 successive declines as it rose to 55.8 (vs. 53.0 expected), with both manufacturing (58.6) and services (56.6) rising relative to a month ago. And both the German (52.8) and the French (56.3) composite PMIs were also better than expected. On the other hand, the US had somewhat underwhelming readings, with the flash services PMI down to 57.0 (vs. 59.0 expected), as the composite PMI fell to 56.5. To the day ahead now, and there’s a significant amount of US data ahead of tomorrow’s Thanksgiving holiday. That includes the weekly initial jobless claims, the second estimate of Q3 GDP, October’s personal income and personal spending, new home sales, and the preliminary October readings for durable goods orders and core capital goods orders. Over in Germany, there’s also the Ifo’s business climate indicator for November. Finally on the central bank side, there’s the release of the FOMC’s November meeting minutes, and speakers include the ECB’s Panetta and Schnabel, and the BoE’s Tenreyro. Tyler Durden Wed, 11/24/2021 - 08:07.....»»

Category: blogSource: zerohedgeNov 24th, 2021

Goldman Fans Can Reap Returns From S&P 500 ETFs in 2022

Goldman Sachs (GS) this week said that it expects the S&P 500 to rise 9% to 5,100 by the end of 2022, as quoted on a Yahoo Finance article. The S&P 500 has now doubled from its COVID-19 bottom of 2,237.40 it touched on Mar 23, 2020. Now, it has reached the level of 4,682.80, with about 25% gains recorded this year. An awesome rally in tech stocks and solid U.S. economic data points were mainly responsible for the S&P 500’s achievement.Goldman Sachs GS this week said that it expects the S&P 500 to rise 9% to 5,100 by the end of 2022, as quoted on a Yahoo Finance article. If achieved, it would mark a 10% total return, including dividends. This makes a strong case for S&P 500 investing, which puts focus on the likes of SPDR S&P 500 ETF SPY, iShares Core S&P 500 ETF IVV and Vanguard S&P 500 ETF VOO.Inside the Investing Rationale of the S&P 500 for 2022Goldman Sach’s chief equity strategist David Costin believes that corporate tax rates will probably remain unchanged next year, unlike many people’s fear that the Biden administration will raise it. S&P 500 earnings should grow by 8% in 2022 to $226 a share based on Kostin's modeling. Kostin sees sales for S&P 500 companies increasing by 9% year over year."Households own half of the $28 trillion in U.S. cash assets, an increase of $3 trillion since before the pandemic. We expect households will shift some of this capital into equities over time," said Kostin, per the Yahoo Finance article.However, hurdles will exist for equities in 2022, mainly in the form of high inflation, a Fed policy tightening and the resultant rise in bond yields. The Fed will start QE tapering from this month and we could see a rise in rates too in 2022. This will likely go against the economic growth momentum and broad-based equity investing.According to Goldman's data, the S&P 500 has historically offered an average 12-month return of 8% in environments of positive but slowing economic activity and rising interest rates. Still, an improving job market and rising industrial activities are a plus. Wall Street has a specific reason to cheer for 2022 as President Biden signed the $1-trillion infrastructure bill (read: 4 Sector ETFs to Make the Most of Infrastructure Bill).Although consumer confidence is wavering due to high inflation, retail sales have been decent. Consumers seem to be splurging on buying homes, motor vehicles and major household durables. The survey also showed that the proportion of the population planning to go on vacation has shot up to the highest level since February 2020, as mentioned in a Reuters article.The United States has largely relaxed travel restrictions and is reopening to completely vaccinated international travelers. The news has boosted enthusiasm for economic and travel recovery. In fact, airlines recently hinted at a solid travel trend.If these were not enough, more companies are trying to come up with antiviral therapies. Recently, Pfizer PFE announced that its experimental antiviral pill cut the rates of hospitalization and death for adults by 89%. Last month, Merck & Co. MRK and partner Ridgeback Biotherapeutics LP submitted their experimental pill to regulators as a study revealed that it lowered the risk of getting seriously ill or dying by half in patients with mild-to-moderate COVID-19 (read: Are Small Caps the Best Bets for 2022? ETFs in Focus).The S&P 500 earnings are likely to increase 8.5% for 2022 after an expected earnings growth of 44.6% for 2021. The revenue growth for 2022 is expected to be 6.9% following an expected 2021 revenue growth of 11.7%, per Zacks Earnings Trends issued on Nov 10, 2021.ETFs in Detail SPDR S&P 500 ETF SPDR S&P 500 ETFfollows the S&P 500 Index, which is composed of five hundred selected stocks, all of which are listed on national stock exchanges and span over 25 separate industry groups.Zacks Rank #2 (Buy) SPDR S&P 500 ETFcharges 9 bps in fees. Microsoft, Apple and Amazon hold the top three stocks of SPY. Information Technology (28.39%), Consumer Discretionary (12.80%), Healthcare (12.72%), Financials (11.18%) and Communication Services (10.77%) have a double-digit exposure to it.iShares Core S&P 500 ETF The iShares Core S&P 500 ETF seeks to track the investment results of the S&P 500 Index. IVV too has Zacks Rank #2.iShares Core S&P 500 ETF charges 3 bps in fees and yields 1.24% annually. Sector and stock holdings in IVV are more-or-less similar as before.Vanguard S&P 500 ETF Vanguard S&P 500 ETFisyet another S&P 500-based ETF which has a Zacks Rank #2. Notably, Vanguard S&P 500 ETF charges 3 bps in fees and yields 1.23% annually.Sector and stock weights of VOO are in line with the above-mentioned ETFs. Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Goldman Sachs Group, Inc. (GS): Free Stock Analysis Report Pfizer Inc. (PFE): Free Stock Analysis Report Merck & Co., Inc. (MRK): Free Stock Analysis Report SPDR S&P 500 ETF (SPY): ETF Research Reports Vanguard S&P 500 ETF (VOO): ETF Research Reports iShares Core S&P 500 ETF (IVV): ETF Research Reports To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksNov 17th, 2021

An investor hailed as "The Chinese Warren Buffett" just revealed a $245 million stake in Berkshire Hathaway — and now counts Buffett"s company among his biggest bets

Li Lu, the fund manager responsible for Berkshire's lucrative bet on BYD, snapped up nearly 900,000 of Berkshire's "B" shares last quarter. Warren Buffett.AP Images Li Lu's Himalaya fund revealed a $245 million stake in Warren Buffett's Berkshire Hathaway. Li was responsible for Berkshire investing in BYD, one of Buffett's best bets in the past decade. Berkshire's vice-chairman, Charlie Munger, described Li as "The Chinese Warren Buffett." A longtime associate of Warren Buffett and Charlie Munger revealed a $245 million stake in Berkshire Hathaway this week. The purchase signals he has confidence in the investing duo, and sees value in their company's shares.Li Lu's Himalaya Capital Management bought nearly 900,000 of Berkshire's "B" shares last quarter, Securities and Exchange Commission filings show. Himalaya counted Berkshire as its third-most valuable holding out of seven on September 30, and the stock made up 11% of its $2.1 billion portfolio.Li has a long history with Berkshire's bosses. He decided to become a professional investor after listening to Buffett lecture at Columbia University in 1993. Munger, the conglomerate's vice-chairman, dubbed him "the Chinese Warren Buffett" in 2019, and noted Li was the only outsider he's ever trusted to invest his money.Moreover, Munger declared in 2010 that he fully expected Li to eventually take a leading position at Berkshire. Li also introduced Munger to BYD, the Chinese electric-vehicle company that has been one of Berkshire's best investments in the past decade.Notably, Himalaya sold 15% of its BYD shares for about $320 million in July. Li may have decided to take some profits and reinvest the bulk of them in Berkshire, given the size of his new stake.Berkshire is a natural fit for Himalaya. Li's fund counted Apple and Bank of America — the two biggest positions in Buffett's roughly $300 billion stock portfolio — among its handful of holdings at the end of September.Even so, this is the first time that Himalaya has listed Berkshire in its portfolio since it began filing quarterly updates with the SEC in early 2017. It's unclear why Li decided to buy the stock after all this time, especially as it's climbed 25% this year and trades close to a record high.Himalaya didn't immediately respond to a request for comment from Insider.Buffett will likely welcome Li's vote of confidence. The Berkshire chief was fiercely criticized for not deploying a chunk of his company's vast cash reserves on cut-price stocks when the pandemic tanked the stock market in 2020.The investor has struggled to find bargains since then, especially as many assets are flirting with record highs, and private equity firms and special-purpose acquisition companies (SPACs) continue to price him out of acquisitions.Berkshire — which sold a net $2 billion of equities last quarter as it cut its pharma and financial bets — has resorted to accelerating share buybacks during the deal drought. In fact, the company is on track to repurchase a record $25 billion of its stock this year.Li may be betting on Berkshire to continue spending its cash wisely, and wagering that Buffett will be ready to pounce during the next market downturn.Read more: Finance guru Whitney Tilson breaks down why Warren Buffett's Berkshire Hathaway is the ultimate 'stay rich' stock — and explains why he's not worried about $7 billion in net stock sales this yearRead the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 17th, 2021