Market Outlook for June 30, 2024
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- čas přidán 7. 07. 2024
- 0:00 - 16:49 Economic data
16:50 - 25:13 Nominal rates
25:13 - 32:44 Real yields
32:45 - 33:55 Mortgage rates and OAS
33:56 - 43:15 New positions
43:16 - 50:28 Bad reactions
50:29 - 55:09 SPY
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CFA/Applied Series subscriptions:
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COMEX stocks:
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Earnings calendar at sectorspdr:
www.sectorspdrs.com/earningsc...
This Week in Earnings:
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ICE Mortgage:
www.icemortgagetechnology.com...
SPGlobal MBS Index
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Money Market flows:
www.ici.org/research/stats/mmf
Fed Balance Sheet:
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LINK TO S&P SPREADSHEET:
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SIFMA:
www.sifma.org/resources/resea...
Freddie Mortgage Rates:
www.freddiemac.com/pmms
Treasury:
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SOMA
www.newyorkfed.org/markets/so...
EFFR
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Reverse Repo
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FedWatch Tool:
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STIR analytics
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Forward Curves:
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Economic calendar:
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I will not say "babe wake up,..." but instead: thank you for your continuous output of valuable information. Highly appreciated!
Your short Tesla timing was spectacular. Standing in front of a steamroller
Something in PCE did jumpstart that long end sell off since it happened at that time.
Noticed PCE inflation expectation numbers are more headlined off the median but if you look at the mean number it’s actually substantially higher.
Fiscal repression is your thesis - lower rates by the Fed and higher debt by national/state/municipal governments ... sounds like a steeper yield curve to me as the market reacts...
Agreed. Unless the central bank goes full japanese (YCC).
Economists from the IMF and Northwestern University published a paper arguing that the recent bout of inflation in the U.S. and Europe was demand driven, not supply driven. The authors are Domenico Giannone and Georgio Primiceri if you want to look it up.
Hi mark,
Tysm for your weekly market wisdom, always look forward to it every week. Quick question
1) since TLT didn't react much the next morning of the debate, I read somewhere and possibly attribute the selloff to Japan. Seems like Japan was dumping Treasuries given the yen destabilized given no intervention and given hawkish BoJ. The way I understand it is Japanese investors sell tsy for JGB due to higher yield prospect. Given interest differential shouldnt yen strengthen(with Fed waiting to cut)?? Understand that their inflation print was higher, don't know how much it would offset? Also given Fed is expected to cut (not hike atleast) and short end bull steepening gradually shouldnt low hedging FX swap hedging costs incentive Japanese investors to hold TSY instead of selling them?
What do you think? Could you explain the Japanese + TSY + yen dynamic? Also how much do you attribute the sell off to that?? Both Thursday and Friday selloff accelerated after 4pm (could it be index selling?), wanted to add to my July 93C and September 95C (NFP and gen weakness) but restrained given the magnitude of the selloff+ presidential debate (debt problems) narrative.
Sorry for the long question, appreciate your insights! Thanks
Thank you, as always, for the market outlook.
I still have a bit of confusion about ABR, could you please explain how ABR's loan portfolio(structured business) serves as a pipeline to support its agency business? My understanding is they primarily deal in bridge loans which are collateralized as CLOs for financing (once these loans are securitized, they cannot be resold). Also, borrowers use these loans to renovate multifamily real estate which then generates rental income to repay the loans. How does this align with originating mortgage related loans sold to GSEs given that these loans are not mortgage related? Who finances the borrowers' permanent financing loans? Thanks.
Hello Prof. Meldrum
For the economic reports section of the Sector Studies, can we get the retail’s reports?
I was wondering which reports are coming next.
And you mentioned in the Energy sector that EOR is doing wonders for oil companies to go back to the uncomplete whale and get huge FCF increases. Do you think this trend will continue for the next decades or new drillings are needed to provide the need for next 20 years of India’s growth like the past 20 years of growth in China?
Hi Mark,
Thank you again for your videos. I was wondering what your thoughts on Nike are after the recent significant sell off after the earnings miss/worsened guidance.
Hello, could you please explain why we use a constant cost of capital in a dcf (e.g. discounting all cash flows at 9% regardless of how far out in the future they are) instead of using higher rates for cash flows that are further out? The yield curve is upward sloping so shouldn’t the discount rate increase?
Only reason I can think of is maintaining constant preferences of the value of money through time (as opposed to a quasi-hyperbolic discount rate like the one used in behavioral finance)
Could you please do video on how to keep a track on news effectively. Sources, what to dive deep in, things you should brush through every single day, some good newsletters you follow. Things like that. Would be really helpful. Thanks
Hi Mark, do you invest in anything other than stonks? e.g. artworks, properties, watches, wine, etc.
hey mark , I have a question , how would you do it if you would have to start form the beginning , when it comes to specialising yourself in one industry , for example the energy sector ( oil market ) , appreciate your work thanks
Are there any stock scanner filters that you can set that will tell you which stocks are trading at the bottom of a channel? What filters do you typically use to generate ideas for put targets?
Would it be easy to add the transcripts to your CFA videos? I study your CFA material reading the PDFs and when there is something I don't know I take a look at the CFA readings, and if I still can't quite get it I go watch the videos. My thinking is it'd be convenient to have the transcripts on the side.
I sold some 14 calls on ABR last month and ended up with a short position which im ok with. Im comfortable being short for a bit as i expect them to drop to or below their book value. Historically, does their share issuance generally move the price much?
Mark- thanks for the content.
Thinking about going long the Peso should the USD.MXN hit 18.5 given the Mexican trade balance data you presented and my belief that the US is more likely to cut in July than what is being priced in. What are your thoughts on the Peso and this trade? Thanks!
Hello @Markmeldrum, why does this video pop -up first in CZcams and later on your site? (For example right now 01.07 it is still not on your site)
Thanks, Dr. Mark! For the CFA L3 in August, do you recommend (1) taking/reviewing your mock exams now until they are completed then review weak areas until exam day, or (2) wait until closer to the exam to take/review your mock exams and review until then, or (3) something else?
Dr.Meldrum, can you please share what do you do now with your build up risk reversal position for TSLA -C245/P150 bought TSLA@203 for -11, after quarterly delivery suprise, which brought TSLA@230? Do you consider quarterly delivery, as new information? How have you updated your position?
Can you explain why yields would rise because of irresponsible fiscal spending? Is it because the long end of the curve incorporates inflation expectations and that with continued deficits, this will continue to lead to inflation? I would’ve assumed the long end of the curve would react to this differently, looking at the central bank as the only source of hope (which is lower rates to lower the interest burden) thus indicating lower rates in the future. Seems a bit counterintuitive to me in Fridays reaction, especially with PCE in line with expectations. Appreciate your time, thanks Mark
Bond vigilantes requiring a higher term premia due to higher deficit spending and structural inflation expectations. Remember that Central Banks control the short end of the curve, but the long end belongs to investors and regulators (who dictate how much collateral financial institutions have to keep on their books). That is, until the central bank starts YCC or QE Infinity again...
Hi Mark, given what you mentioned about the debt issue in the US, you said you're currently not adding to your TLT position but are looking to reduce your exposure to TLT? From what i recall you have a sizeable position in TLT. If you are looking to reduce your exposure are looking to sell calls or just hold at the moment?
It seems as though LSEG doesn’t always update their “This week in Earnings” newsletter. Latest I see is June 3rd on their website.
Besides your video description. Where do you get the latest forward 4qtr estimates?
Why does SOFR tend to spike during quarter ends? I saw the rate hit 5.40 percent..higher than normal. Is it related to the QT?
Hello Mark
In one of your past videos you mentioned that you are going to hire analysts, who will cover specific market segments. Will you organize an office space for them or will they work from home?
Hey Mark! you have said a number of times that Canadian residential reits (car.un,...) is your highest conviction trade this year. I was wondering, do you have the same level of conviction about the US residential reits, like EQR? or it's just Canadian reits?
With the cpi data coming so hot, why did it not have a significant impact on Reits like Car.Un, in USA when inflation data as such is released the impact is significant
Hello Mark, I was thinking about your argument on recent videos of technology and AI being deflationary, which I agree has been the case for most of recent history.
However with today trend of dynamic pricing / yield management that is fuelled by IA (even grocery store are now adopting it) aren't we in a completly reversed situation ? Technology now alow prices to be in average higher and sales to increases.
Could the sustained inflation we are going through be a result of the whole market transitioning to fully dynamic price ?
Do you recall what the effects where after the wage - price controls by Nixon in 1971? Did it cause more inflation after the 90 days because businesses stopped producing and supply was reduced?
I am curious to get your views on the idea of "wealth" in today's world versus the past. It seems like we focus so much attention on net worth and assets as a proxy for wealth versus a more ancient view that wealth is not so much about ones personal assets but enriching your friends and knowing that their assets, so to speak, are a proxy of your "wealth". I am thinking in the context of Xenophon. More broadly, it seems like in today's world, one needs to protect their wealth via insurance and/or paying taxes, rule of law, etc. Another aspect is support structures and family, which is a form of wealth that seems less prevalent for many people today. In fact, I would argue there is huge carry just to maintain/feel comfortable in your wealth that it won't be taken away in the form of extra insurance to protect your assets and in cases where the other party is not insured or underinsured, home security, etc. Curious what you think.
Reading the Intelligent Investor again, one of the primary recommendations is to limit yourself to issues that are selling not far above their tangible-asset value. GM's current tangible book value per share is $56.5 and was trading at $26.8 at the end of last year. Do union negotiations always prove to be a good buying opportunity for companies like this?
I had a question about deciding between ITM vs OTM LEAPS but you answered with it depends 😅 I initially didn't want to get into the specifics because I wanted to understand the thinking process, but here we go:
- AMZN is now trading at 200. I have AMZN 205 Jan 2026 that is +65%. Should I roll over? If so, at what strike price? I understand black scholes pricing model, but I lack the 'intuition' on how to think about the trade offs. Is it worth estimating the variations of BS options values at different inputs?
Could you kindly elaborate on the mechanism concerning market players hedging away risks from fiscal deficit/inflation/rates and what tools are available to investors today that were not available 10-20+ years ago that now make them immune to these changes and that make monetary policy less effective?
Would be interested to hear how the TSLA risk reversals are following production and delivery beat. Any changes to your position?
Do you use big data analysis to your valuation?
For a passive small cap investor, is S&P small cap index ETF a better pick than Russell 2000 ETF if the fees are same? Does the higher quality of s&p small cap 600 (due to its profitablity screen) make it fair to expect long term outperformance over Russell 2000?
Dr. Mark. Regarding the last Friday's treasury selloff, rather counter intuitive to the lastest PEC report, you put forward one possibility as the realization of the next administration's ignorance of the national debt. I'm having a hard time following that argument because the bond market usually behaves rationally, and the growth trajectory of the deficit should have been priced-in long before the debate. Anything else you could think of as a possible cause, or could just be the whim of the market, as you say.
Hello Mark. I recently listened to a podcast series where, in each episode, they would interview a different fund manager. The premise of the series was to ask them "How do you invest your own retirement portfolio?". It was surprising to hear that ALL of them followed an all-weather approach: a few diversified and uncorrelated buckets with periodical rebalancing, and that is it. Nothing fancy, no options, no active trading, no macro, no fluff. It is funny that the most sofisticated investors/traders choose to ride beta with their money as oposed to seeking alpha. Any opinion?
How would you go about finding hard evidence of personalized pricing occurring at a large scale? Or are you comfortable making investment decisions based on your own anecdotal experiences?
Curious how you are managing your short risk reversal position on Tesla with the massive price increase over past couple of days. Are you closing your positions or still double down?
Hi Mark, would it be wise for an institutional investor to scale your put selling strategy instead of simply using limit orders to buy stocks? Or is it not worth it to them? Can you also speak on the new vehicle sale growth rates between GM and Toyota in the Cox report you referenced last week? Seems like TM is quickly approaching GM. Do you prefer GM over TM due to the current relative values of the two stocks?
Have you actually ever been in a Tesla with the latest FSD? It’s actually quite good. I agree that robotaxi won’t happen on 8/8 but 10 years seems way too far. It’ll be closer to 8/8/2024 than 8/82034.
Do you use freightwave?
Mark do you ever watch any hockey? Brampton is getting an OHL team back this year - always exciting to watch the next generation of stars.. recommend checking it out!!
Dr. Mark, we know you don’t make a point of technical analysis. But how do you think about those quantitative funds which really don’t care about fundamentals at all, most successfully with Renaissance Technologies as an example? Don’t they actually use another kind of much more sophisticated, high level technical analysis? Would like to hear your thoughts. Thanks!
What are your thoughts on high-frequency trading? Are there opportunities for us in that space?
do you see further downside on tlt?
Hi Mark, do you think the TLT selloff is the wrong move because if public debt grows, fed would be forced to lower rate so long end of the curve should go down? Which means TLT should rally not sellout if neither president is willing to balance the budget
Hello Mark!
1. As a small investor with programming skills, what are the best financial instruments (options?), strategies, and which market (non-US market?) do you see as the best fit for arbitrage opportunities using algorithms?
2. Do you think that having access to the depth of book quotes increase the space of opportunities or chances for arbitrage?
Tesla kicking goals with their lower deliveries YOY right?? Will you look at adding to your RR leading into earnings? What are the risks to you thesis? I worry that a surprise pop in their energy storage or generation streams could push the price higher despite lower vehicle sales/earnings.
Hi Mark
TSLA brakes 227 now based on lower than expected reduction of deliveries. Don’t you think that no matter what to be shown by Musk on 8/8, TSLA bulls will detriment your risk-reversal construction? What would you do to mitigate that risk?
Hello,
I agree with the outlook on us debt but I can't see it imploding for another decade. On the other hand, we can see that interest rates will be cut and will likely be cut faster if the Fed wants to take matters into their own hands. Why is this not bullish for long term bonds and underlyings like tlt? Where will people go if not the US bond market for safe yields at arguably one of the better rates considering upcoming rate cuts? Or do you forsee yields going higher/staying for some reason? The market is priced for quite a bit while there's little love for longer term bonds and I find it hard to believe that they won't move to diversify into safer assets. Especially with rate cuts on the frontier.
Given a 2 year time horizon, why could holding tlt (or leaps) or other long term bonds not be a high return, lower risk strategy? I have to be missing something big for the shorter term scenario.
Thanks
Was researching a drug development company to try and decide if I wanted to buy their stock. I found myself reading highly specific peer reviewed medical research papers in an attempt to determine if a drug in development would be successful. I became fascinated by the science and kept reading study after study. At some point I realized my mindset had moved out of investment analysis and into some fantasy PhD program.
Thought I heard you mention something about making videos for industries and sub-industries (apologies if I misunderstood). However, aren't some industries and sub-industries so scientifically advanced that it would be difficult to do any kind of investment analysis without also having a deep understanding of the science in that particular field?
For example, I would love to invest in the first company that figures out how to profitably mass produce graphene and sell it at a low cost to consumers. But I don't have the knowledge or education to get an edge in that area.
Curious how you would approach making educational videos for highly technical sub-industries.
Thanks for all the content!
CMRE - containership suggestion
One of the annoying aspects about trading US options while living in Canada is that you have to record the exchange rate on every transaction for tax purposes. Did you rely on IB to do that for you (e.g. record that you sold a put for US$ 1.00 but say it’s really CDN$ 1.40) or did you have a spreadsheet for this?
It seems that there could be a time where the taxes payable diverge from US$ gains due movements in the FX and the fact that you have to translate each transaction.
How did you manage this risk and did the situation of ever happen to you?
Are you still holding your TLT shares?
Mark, please provide a link to $440 USD FOR NON-CFA before July 31
If AI adoption starts to lose momentum, could AI stocks be poised to suffer as much as WFH and "play from home" (i.e., Peloton) stocks did when the economy re-opened? From what I recall, many were priced in for absolute perfection in terms of growth and margin expansion, and when that didn't happen, things took a turn for the worse for many of these companies
I want one for railway too
I contacted an external manager. I would be charged 1-1.25% annual fee and total returns are not beating the simple SP500 etf. Is it worth going with an external manager if they are lagging behind virtually free SPY etf? Can’t seem to find the any reason.
No. Absolutely not.
Total return is not the only metric. Is their Sharpe/Sortino better than the benchmark? Low beta correlation perhaps? Sometimes, you might prefer lower potential returns if volatility is also lower.
Why does Cathie Wood’s ARK investment vehicle still exist despite blowing up billions of dollars of investors’ money?
Hi Dr. Mark, Could you kindly publish a video on the US debt situation and its implications and what one can do differently? Applied Series Subscriber here
Yes plz.
In the meantime you can check John Mauldin or Lyn Alden. Both have covered this topic extensively. I use free subscription for their newsletters
Hi Dr. Mark, regarding the End of quarter and end of month Reverse repo, that is common why?
Window dressing.