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Market Outlook for July 14, 2024
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- čas přidán 15. 08. 2024
- 0:00 - 1:43 Introduction
1:44 - 17:55 Economic data
17:56 - 21:44 Nominal rates
21:45 - 25:01 Real yields
25:02 - 26:39 Mortgage rates and OAS
26:40 - 34:25 New positions
34:26 - 51:08 ABR
51:09 - 1:01:56
1:01:57 - 1:03:59 MXN and EWW
1:04:00 - 1:11:57 SPY and earnings calendar
Instagram: / applied_level
Twitter: / appliedlevel
www.markmeldru...
www.markmeldru...
CFA/Applied Series subscriptions:
www.markmeldru...
CPI:
www.bls.gov/cpi/
PPI:
www.bls.gov/ne...
WSJ story on reddit:
www.reddit.com...
COMEX stocks:
www.cmegroup.c...
Earnings calendar at sectorspdr:
www.sectorspdr...
This Week in Earnings:
lipperalpha.re...
ICE Mortgage:
www.icemortgag...
SPGlobal MBS Index
www.spglobal.c...
Money Market flows:
www.ici.org/re...
Fed Balance Sheet:
www.federalres...
LINK TO S&P SPREADSHEET:
www.spglobal.c...
SIFMA:
www.sifma.org/...
Freddie Mortgage Rates:
www.freddiemac...
Treasury:
home.treasury....
SOMA
www.newyorkfed...
EFFR
www.newyorkfed...
Reverse Repo
www.newyorkfed...
FedWatch Tool:
www.cmegroup.c...
STIR analytics
www.cmegroup.c...
Forward Curves:
www.chathamfin...
Economic calendar:
www.dailyfx.co...
Sub industry suggestions:
1. Warehouse retail such as Costco, Walmart, Target, Home Depot etc.
2. Fast food restaurants: Chipotle, Cava, Qdoba
Costco and Walmart would be interesting to get another read on consumers
Second this.
Third this
Why does the market either rally or sell off rapidly in the last 15 mins of every trading day?
Industries Suggestions:
-Modern brokers, eg IBKR
-Financial clearing & data providers, eg CBOE
Came for the weekly rant on the data providers
Industries:
- Footwear apparel
- Parcel shipping
- Downstream energy
- Luxury goods
- Nuclear energy
- Cybersecurity
- Rail transportation/freight
I'd like to see a sub industry related to tech. Cyber security seems to be a good one
Hello, Mark. I have three questions for you this week:
1. Have you ever created a synthetic position on a stock (not on ETF level)? What are the advantages and disadvantages of such a move? Is it tax-efficient? Let's take ABR as an example: currently, ABR has a nice dividend yield. So, if I create a synthetic position on ABR, I'll get my dividend smuggled in as capital gains, right? If I sell only the put and then get assigned the position, I'll get a lower buying price plus the dividend in the price of the put, but I'll have to pay normal dividend and withholding taxes on the next dividends after the stock assignment. Am I correct?
2. What do you think about the Trump play that seems to be going on? Are you leaning in or not?
3. Political one-you don't need to answer if this is too personal: What do you think about the incoming Trump presidency and his recent VP pick, Vance?
Industry suggestions:
- Uranium mining/energy production
Can’t wait for the live stream
Software or cybersecurity
Hi, Mark ! 3 questions on ENB, Natural and retail investors.
1. Could you speak a bit more on the reasoning behind your new position in ENB? I like it due to its mixed portfolio in midstream and utility, just like Altagas (one of my holdings).
2. Do you see impressive growth over the next decade in the industry (utility/midstream/natural gas) or steady gains that are reliable and realistic? It seems to me that it has strong growth prospects domestically and abroad due to the abundance and cheapness of natural gas in North America. Plus, North America seems competitively advantaged in energy-intensive businesses for Southeast Asia demand.
3. Reading many 10-Ks, history about a company, and reading transcripts, I had the experience of adoring a company. I wish to stay objective. What would you advise a retail investor to maintain as guides or rules to discern the company for what it is and not be enchanted by it?
As someone mentioned, warehouse retail and fast food would be interesting, I also think given how diverse the customer discretionary sector is, maybe something like gambling or travel (cruise lines)
I sold ABR aug 16 $10 puts for .55. The premium on Friday was incredible and quite a cushion on the $10 strikes. I had also shorted the $15 calls last week so it seems I’ve stepped into a short strangle. Let’s see how the earnings call goes.
Dr. Meldrum,
You mentioned to gauge Vegas health based on LVS. But Las Vegas sands does not have a presence in Las Vegas anymore after the sale of Venetian. They are play on Macau and Singapore. They are looking to develop something in Japan.
Thanks,
Ivan Kauffman did sell 17,000 shares or so on July 2nd, could this have been seen as a red flag?
Regarding an insider buying $ABR -- isn't there a lock-out period before earnings? From my understanding, they cannot buy before material information is released. Would appreciate if you could lay out the rules on this! Thanks.
What is the 5y5y breakeven rate useful for?
Questions regarding the two digit dividend yield on AGNC. According to the annual report, "...We use our investments as collateral for our financing arrangements and certain hedge transactions... As a result, we could be required to sell assets at adverse prices and our ability to maintain or grow our total comprehensive income could be reduced." Over the past decade, the dividend per share has declined from $2.61 to $1.44 as of 2024. On top of that, the shares issuance also dilutes the dividend per share. My question are:
1. Do you buy and hold on AGNC just to collect the dividends or do you have a target price as now we are heading into a rate cut cycle which is good for capital appreciation on Agency securities?
2. Given the possible potential of a dividend cut/dividend dilution on common shares issuance mentioned above, would buying the preferred shares be a better option in the next rate hike cycle? If not, what is your exit strategy on the common shares?
Thank you!!
Hi Prof, how about passenger airlines?
I enjoyed following DAL in its beautiful run up, leveraging premium services the past year. They now have too much capacity it seems and I am seeing price decreases in CPI. They have interesting metrics such as trasm, asm etc. Quite a fun industry
Hello Dr. Mark. 2 questions.
1. What does a negative term premium imply?
2. Powell in his testimony to the Senate said that the zirp era is over and we will never be back to 0 rates again. What's your opinion on that since you believe we will return to ZIRP inevitably?
You sometimes track moves of other central banks around the world in Market Outlook and most of them either hold or lower rates now. What do you think about Russian Central Bank projected to raise rate from 16% to 18% in July due to hot inflation data? How rapid lowering of rates in the US (in "something breaks" scenario) can affect Russian monetary policy?
What strategy would you use in a closed portfolio where you couldn't contribute funds?
Do you have a price target for COPX? What is your timeline?
I don't align with your thesis on why Tesla's data is worth zero.
Fully connected cities will still need sensor data from cars, which Tesla already has. Cars will still need to navigate in unpredictability in terms of roadwork/pedestrians/getting on/off freeways, merging lanes etc. Decisions made by a car in traffic (even in an fully connected city) will also be computed. They just cannot be a fixed ahead in time. This will need data to train models, which can then make the right decisions on time.
Your analogy is also not a good match. It oversimplifies how to someone would come to a conclusion "I am a price sensitive customer". That determination itself would be ever changing and require reams of data on customer and their preferences. A customer being price sensitive can depend on where they are, who they are with, if their income situation has changed recently, who are they buying for etc. These determinations are always made with a lot of data points. There is a case to be made against using too many data points, but it always starts with knowing more and then reducing to what is not needed.
Liability is also another concern. When a pedestrians don't transmit data, or city traffic lights stop transmitting data, and a car makes a mistake. Who owns liability in case of accidents. Cars will still need their own independent decision making to add redundancy to the system.
Finally, countries like US are not ready for fully connected cities, there is a lot of distrust in use of data (insurance, law enforcement etc). Making US have fully connected cities will have a longer runway. Tesla does have room to create a world where some cars are automated (if they can pull it off).
That is my take anyway. Tesla's data is not worth 0 in value.
Hi Mark,
Thanks for the valuable insights you bring to us every week. I am wondering what is your opinion on the prolonged rally for the equipment rental companies like URI and CAT. Do you see this as part of a longer trend or just a good performance over the last couple of quarters?
How to read conditional vs aggregated probabilities in CME FedWatch Tool?
Commercial mortgages as a sub industry would be very interesting - especially given all the recent news and your expertise long time following of ABR. Although… would there be a lot of overlap with the REITS and mREITS videos?
Dr Mark .. In applied series there good content on options but I feel like it’s light on how to trade future ES/MES . Just one or two videos I think…are there more I may be missing .? Can you give one simple example of buying put option on MES . ? Marking required / gain loss per 100 point fall /rise in SPY?
What do you think in following insider trading for going long/short in a stock/option? Do you know where can we get this data?
Hi Mark, curious for your opinion here - if tipping culture went away in US and Canada due to restaurants now paying their wait staff higher wages, do you feel that the cost would be fully passed on to the consumer? So even though it’s not “Mandatory” to tip 18% on a meal anymore, your meal is going to be 18% more expensive anyways
Is there any logic in looking at the money market auction results to try and estimate the timing of rate cuts priced in by the market using hypothetical forwards? For example taking the rate of a 1 month bill, and then using a hypothetical forward rate that prices cuts in to derive a rate equivalent to at the recent auction rates? How could one adjust this method given the single price auction results, are bids publicly available? Thanks Mark
Why annualized rates need to be de-annualized when valuing derivative contracts?
Is AGNC at a point where you would consider selling covered calls or do you think it needs to go higher?
would love to see you cover the data center sub-industry next!
Do you read research reports on stocks by firms like CFRA or Morningstar and take their ratings into consideration when placing trades?
What is your take on U.S. Congress and Senate Trading? There are ETFs that track this, is this a good idea? Where to get this data?
Hi Dr meldrum , thanks for this market outlook once again. I followed your applied series since one year already and I would love to see you analyze data centers industry which is less technical than biotech but quite interesting if we want to understand the limit of AI.
Thanks a lot again for your precious content.
Hello Mark! How do you think the deflationary effect of AI and the inflationary effect of a possible Trump's victory would counterbalance each other? Will AI be more a long term view rather than a mid one ( Trump's inflation)? Thanks in advance
Hi Mark,
You mentioned that Trump favors a low-rate environment and suggested that Powell might lose his job if he doesn't listen to Trump. However, considering the competitive dynamics with China, I believe that Trump's trade policy could be more effective with a rather high interest rate, provided the U.S. economy is robust enough to withstand it.
Here's why I think so:
- China's current economy heavily relies on exports, which would be significantly harmed by high tariffs.
- Domestic demand in China is quite weak.
- China needs the Fed to cut rates so that the People's Bank of China (PBOC) can follow suit, as China aims to keep its currency within a specific range.
Therefore, Trump's tariffs would damage China's export sector, and higher U.S. interest rates would leave no room for the PBOC to cut rates, thereby keeping China's borrowing and consumption weak.
I think there's a chance that Trump might like this scenario to happen as well. What are your thoughts on this perspective?
Would be good if you could do the PPI report for sector studies. I couldn't really understand the Final Demand services less, trade transportation and warehousing
Can you please do Railroads next? it is a nice complement to Ocean shipping to follow the journey of a commodity or a container from Origin to Destination.
Are utilities effected by the trump trade? There was large downside on Monday and i'm not sure if that was associated with treasuries or if Trump has some plan with utilities.
Dr Mark is there any stock outside OXY that you have analyzed as potential takeover target? I have been following RIVIAN and feel like although it has challenges, one of the bigger player may come and acquire it ? In general what should one be looking to pick such stocks outside reading what’s all available on the web ? what’s your views on this type of strategy
7:22
7:58 - 11:06
12:38 - 17:55
Dr. Meldrum,
In your slide on rates you mention that there is talk about 10Y getting to a 3 handle. But you said there another 19 basis points to get to that. Did you mean a 4 handle? If not, the curve would get further inverted. In your opinion, do you think the 10Y can get back to 2.5 given all the fiscal deficits. If there are fiscal deficits all across the developed countries, where are we going to get the money for US 10Y.
Since banks borrow on the short term and lend on the long term. How come banks remain profitable with negative Net interest margin?
Lastly, when the Fed does QE and injects 6T into the economy. Does the amount money in circulation actually increase due to fraction reserve banking? If so, what is your estimate of this increase?
Thanks, I greatly appreciate your generosity in sharing your knowledge
Sir Mark, what is the UK stock you were talking about with good fundamentals?
Do you ever trade options on QQQ? Thinking of using your allocation factory strategy if it corrects 5 percent or more. Any thoughts on that?
Subindustry suggestion. Not sure that it's defined as subindistry per se but maybe you could do an overview of business development companies (BDCs), as we've seen you hold positions in stocks like ARCC. I tend to think of them as banks with a REIT structure (yes, I'm aware that's an crass oversimplification but it helps).
What do you think of Obama? Specially, Obamacare, his impact on Washington politics, social media, and debt spending
What are your thoughts about this speculative trade I just made:
I sold July 19 puts at $14 on ABR (with a $0.35 premium, which equates to a 2.5% return), and I'm planning to sell at $14 if assigned. That 2.5% return over two days is incredibly high when annualized. What am I missing here?
Mark, thank you for everything you do. I consider you as a role model for myself. Also passed all CFA exams on the first attempt thanks to your website several years ago.
I've got a more general question: what portion of your time do you allocate to activities not related to investing? And how do you think about distributing your time between investment and non-investment topics? For example, I know you like philosophy, Pink Floyd and Led Zeppelin. But don't you struggle to learn/enjoy it all? I am curious about many things but have to manage my priorities harshly. Would be great to her about how you think about it. Thanks again.
A speaker from the Federal Reserve will be presenting to my undergrad finance class next week. A frequent criticism I've heard is that the Fed makes decisions with lagging, backward-looking data. So, I'm planning to ask a question about how changes in data collection may impact the Fed's decision making in the future (e.g. using things like real-time rent data, which is available online, instead of Owner's Equivalent Rent surveys). Do you have any suggestions for improving my question, or perhaps ideas for a different question altogether? What would you ask a Fed speaker if given the chance?
Cybersecurity
Can one of my kids or grandkids inherit my Applied Series Subscription after me considering I bought Applied Series before July 31st?
Please do airlines next!
Would you recommend to sell puts on DHI now
If the PPI is being driven by margin increases for wholesalers and retailers, is it right to expect improvements in performance for listed retail players?
Dr Mark - any idea what’s going on with Next era
Housing data is positive today, why did stocks start red?
The bulk of my options activity, similar to you, is selling puts at strikes below the market that I would be comfortable at owning the underlying. For this specific strategy, is there an easy way in IBKR to see what your margin is (without calculating it)? In the main IBKR dashboard there appears to be a Maintenance Margin number but I think that it is (or is approximately) the face value of the capital required if all puts were ITM and executed.
Given the huge runup in SPY, what would your recommendation be for someone starting a passive allocation? It constantly feels like the wrong time to allocate a large percentage.
It looks like T-bills and the bond market are now trending together. Good traders in the 80s often talked about confirming moves in the bond market, and they frequently mentioned this phenomenon. By “trending together,” I mean that both are below some key moving averages. For example, the 3-month and the 10-year are trading under the 50-week simple moving average.
In December, the 10-year was below the 50-week SMA while the 3-month was not. Fast forward to today, they are now both below. I have considerable confidence in the trend continuing in TLT.
Could you discuss the yield curve theory behind this common bond market trader rule of thumb? Would be interested in your thoughts.
Hi Dr. Mark, I recently purchased the Applied Level series. As a CFA L2 (age 20) candidate with very limited market experience, can you pls guide me how to prioritize and approach these materials to maximize my learning and understanding.
I was reading a BNN Bloomberg article, and they were arguing that the assassination attempt would strengthen the so-called Trump trade, and one of the elements mentioned was a curve steepener, in part due to his policies spurring growth. I'm curious as to why that would be part of the Trump trade, considering that he's been vocal about interest rates being too high (based on what I believe you said, although I could remember incorrectly).
Thoughts on the Judge? "Whatever in creation exists without my knowledge exists without my consent."
Hi Dr Mark
I have 2 questions:
1/ What are the rules about the use of your name of social networks like LinkedIn ?
To complement the CFA level 1, I spent around 10 months to learn in details your courses Applied Options and Portfolio Construction & Management. Can I add this my "Education" or in "Licences & Certifications" ?
2/ How one must properly react to the short report on ABR this Friday. I sold put only because the source of the report was Viceroy. What is the right approach to breaking price moving news like that where time is of the essence ?
Thank you
Will the new positions be a separate video in the applied series or part of the market outlook? I typically watch the MO on YT rather than on your site just because when i load YT i just see the video on the home screen if it's out or not. I know your longer-term plan is to move people away from YT to your site any chance you can create some sort of notification on uploads?
Dr. Mark, if Trump wins the election it's been widely rumored that he'll explore policies similar to the Plaza Accord to reduce the trade deficit. Besides increasing allocation to international equities, any other creative ideas on how to play this? Just thinking of ways to get as much ex-US currency exposure as possible. Cheers.
Mark please can you ask CeriFi to improve the app user interface.It’s difficult to find videos since they’re all listed in random order under certain categories
Why does the market either rally or sell off rapidly in the last 15 mins of every trading day?
Look up “Market on close orders”. That is the result of market makers balancing their risks and reconciling their books with client orders at the end of the day I believe.
The reason they want to get the end of day prices is because of DOW theory I believe. DOW theory postulate's that closing prices are the most accurate because they are the price where participants are willing to hold their risk/positions overnight and into the next day. So getting the closing price is important in this sense. Hope this helped, but if MM says otherwise he knows more than me. Opening prices have a commonality with MOC orders, imbalances between buys and sells determines the gap in open or close.
Google "market on close orders" it's likely due to market makers balancing risk in their book.
Sub industry suggestion: Construction and Engineering. I think there will be some interesting targets in there who will perform the build out for utility and telecom companies.
Airlines would be great
If I'm not mistaken TSMC is on the 18th. ASML it's on the 17th.
Hi Mark, to purchase the "all included option" within applied level before end of month, do I just purchase the applied level bundle and apply my CFA L1 pass evidence to satisfy for the grandfathered option?
Correct
@@MarkMeldrum Purchased, thanks for the great content
Hey mark what do you think about the pharmacy sector in the us with the latest report from the FTC denouncing Pharmacy Benefit Manager causing drug prices to increase ? Could there be a potential opportunity in retail pharmacy if regulation occurs ? I’ve seen some
names down more than 50% over the past five years
Sub-industry - Coal ?
I hear u selling puts, why not buying calls?
Why putting yourself in an obligation rather that a right?
Hi Prof. Hope all is well. what is the possible explanation for higher PPI when CPI is lower.
Thinner margin for corporations
Industry suggestion: airlines
Nuclear energy
Downstream energy 🙏