YOUR QUIVER | January 13, 2023 Today's RundownCIO | Nadine Terman @SolsteinCapital details what she's seeing in global financial markets. Upgrades, Downgrades and EarningsStocks were down in the morning with Big Banks’ earnings season boofs. Yes, boof is a word…looked it up this morning. $C reported adj EPS below consensus but set FY23 rev guidance above consensus; the co’s 4Q profit declined by -21%, and they stashed some cash for credit losses. $WFC reported 4Q EPS slightly above guidance with lower-than-expected rev, but then said expenses should hike to $16bn (!!) given regulatory and severance expenses, and the economy will worsen—so stock is down pre-market, in case you had to guess; note to mgmt. teams, if you cut your profits in half because of bad behavior, investors won’t be happy. $JPM beat expectations but warned of a “mild recession” as a base case. $BAC actually beat due to higher rates offsetting ibanking declines. Various firms downgraded $TSLA after it cut px on some US and EU models up to 20%. BTIG downgraded $FTNT. $DAL reported adj EPS above consensus but gave a weak 1Q EPS guidance and then a strong FY23 EPS guidance. BofA upgraded $CAT. Way to go for giving us the one meaningful upgrade this morning in a sea of red. Consumer Sentiment UpUS short-term inflation expectations fell to the lowest in roughly 2 yrs, giving consumer sentiment a boost.1-yr px expectations fell to 4% in early Jan, the lowest since Apr 2021. The sentiment index rose to 64.6 (table below), a 9-mo high, besting estimates. On a negative note, though, consumers expect inflation to rise 3% over the next 5-10 yrs, and the Fed watches that figure like a hawk, pun intended. Also to note, 2/3rds of consumers expect an economic downturn in the next year. The Big Reopening + Golden SharesDec Trade Data out of China points to the reopening affecting production more than consumption so far. Check out the $8.8bn m/m increase in the Trade Balance to $78bn, the fastest increase since June. With the USD weakening, China could see capital inflows versus outflows, which would support the economic recovery effort. More consumption/investment as well a stronger currency. But they’re back at it again. Chinese gov entities are going to take “golden shares” in units of $BABA and Tencent to have greater control over Internet players. It would allow the gov to nominate directors and affect decisions. Cue new investigations by Congress aimed to limit Chinese tech use and access. Time for EZ Reversal?That’s what ASR is calling for. After a strong 3 mo rebound in EZ equities, ASR makes the case for an overstretched situation that typically (86% of the time) is followed by underperformance in the next 8 weeks (relative underperformance of -3.2%). They point to a weakening USD/strengthening euro and falling nat gas prices as a tailwind that won’t have the same impact going forward. Maybe sell EZ calls versus buy them, and ASR recommends buying bank put options given their muted IVOL and potential negative impact from a downturn. Sounds like they’re worried about the credit cycle too. Doomsday ClockSounds like folks are creating one, so that we can all hear the tik-tik as we get closer to a payments default in the US. Yellen’s going to advise on ways to avoid running out of cash. But the GOP in the House is demanding big spending cuts in exchange for increasing the debt ceiling, and of course the Dems are balking. So, we’re going to keep hearing that ticking sound until folks realize the importance of being solution-oriented. I remember when we started our first fund back in 2011. S&P basically downgraded America. Fun times. An Important FactorASR also out with a good piece talking about how cheap Value securities lost their bond hedge characteristics. Also talking about how the Size factor seems cheap but has too much exposure to Cyclicals and Low Quality. ScaramucciIs anyone in the world surprised he did a deal with FTX? He’s saying that SkyBridge can buy back the stake it sold to FTX. Mega Materials MillionsState-owned Swedish miner LKAB discovered 1mm metric tons of rare earth metals. The oxides are used in EVs and wind turbines plus magnets, glass screens, speakers, and other things you find at Best Buy. Since EZ imports 99% of rare earth elements from China, you know who’s not as excited today…but Xi’s got 10-15 years before this new discovery eats into his lunch. It's Just FineAfter all the news about the criminal tax fraud scheme by the Trump Org, what’s the fine? $1.6mm. Yep, just with mm’s and no b’s. Have to believe the legal costs were more than that fine. |