Bakes’ Takes Podcast - Episode 17 - 6/27/20

Bakes’ Takes Podcast Show Notes –Saturday June 27, 2020

 

:24 1) President Biden?

:29 2) Energy prices wild ride, respond to question from new XOM employee

:41 3) And now for something completely different! Led Zep and Pink Floyd financed Holy Grail! You’re welcome!

 

Bakes’ Take—Reporters of the Week!

 

1:27 After Stocks’ Huge Quarter, It’s Time to Hedge the Market

By 

Randall W. Forsyth

Updated June 26, 2020 5:00 pm ET / Original June 26, 2020 12:12 pm ET

 randall.forsyth@barron’s.com

 

Through Thursday, the S&P 500 index had recovered 38% from its March 23 lows, Nasdaq Composite up 46% and set record this past week, and the RU2K index of small-cap stocks 43%.

 

3:00 SPY -4.5% YTD, doubt many bought at the low!

 

3:20 The Dow Just Had a Very Bad Week. Why It Could Get Worse.

By 

Ben Levisohn Ben.Levisohn@barrons.com

June 26, 2020 8:19 pm ET

The Fed, future payouts would depend on bank earnings—and bank earnings will start to look worse as pre-coronavirus quarters drop out and are replaced by Covid-impaired results.

 

Florida’s seven-day average of cases grew 7.8%, previous day’s 4.1%. Arizona’s 5.4%, from 2.9%. In Texas, the positivity rate hit 11.8%. Texas Gov. Greg Abbott issued an executive order rolling back parts of the state’s reopening, too little, too late. Florida, for its part, is banning alcohol in bars. Huh?

5:00 “We’re at a challenging point,” says Clifton Hill, a PM at Acadian Asset Management. “The market is worried about a second outbreak.”

5:27 Biden’s lead in the polls over Donald Trump has been widening over the past month, now holding a 10-point advantage over the president, RealClearPolitics’ average of about a dozen national polls. Trump’s approval rating has fallen back near the lowest levels of his presidency. Betting markets like PredictIt, which until early June had Trump well ahead, now give an average 21-point lead to Biden.

5:53 “If the election were held today, we believe Vice President Joe Biden would win as part of a Democratic sweep,” Sara Bianchi, head of U.S. public policy and political strategy research at Evercore ISI, told clients earlier in June.

6:15 FDR GOAT. Trump market positive for now. All the Presidents with down markets, one term. vs. Reagan, Clinton, Obama etc. Stock market picks the president.

220 Trump Election, March low, stocks down for his term, he’s toast.

8:55 Andy Laperriere, head of U.S. policy research at Cornerstone Macro, so-called Biden portfolio.

Bakes’ Take—Hillary ’94, Healthcare then, Long infrastructure, short big tech, now likely not going to work.

9:57 If there is a Democratic sweep, Laperriere expects higher volatility driven by concerns over increased taxes and regulation. He recommends using the iPath Series B S&P 500 VIX Short-Term Futures exchange-traded note (VXX), which tracks the Cboe Volatility Index, or VIX.

I still think VIXM, VIXY, VXX going to work by year end.

It’s month, Q end, researching all 1700+ charts now. Will report back next week

Bulls factors in their favor: The Fed is highly supportive; Congress looks ready to add more stimulus; and treatments are slowly starting to lead to better health outcomes. uncertainty about those outcomes is causing volatility to spike, VIX, rising to the mid-30s on Friday, above its long-term average of 19.

 

11:18 “Right now, volatility in the stock market is heightened, because there is friction between the past, present, and future,” John Petrides, portfolio manager at Tocqueville Asset Management, tells Barron’s. “The future is looking past Covid. The present is dealing with Covid. The past is explaining what Covid has done.”

The volatility is likely to continue.

11:59 India, HK, South China Sea, Taiwan

13:28 No cartoon but NK vs. SK escalating too

https://www.economist.com/leaders/2020/06/18/how-to-end-the-perilous-indo-chinese-border-spat

brutal clash on June 15th. Details remain sketchy. At least 20 Indian soldiers died, many after tumbling into an icy river. India says the Chinese also suffered casualties. China says little (see article). death toll worst in any clash between the two since 1967, first loss of life since 1975.

I wish The Economist attributed the authors, well-turned phrases!

14:26 reckless way to fix problems between two rising nuclear powers that are home to a third of humanity. 

the last thing the wider world needs is an escalating slugfest between a dragon and an elephant over a lofty patch of frozen earth.

15:43 https://www.economist.com/finance-and-economics/2020/06/25/is-investors-love-affair-with-commercial-property-ending

Many banks report losses with a lag and with limited detail, but delinquency rates on commercial-mortgage-backed securities (cmbs)—bundles of loans sold on capital markets—provide a barometer. In America this month they exceeded levels seen during the financial crisis (see chart 4). A fifth of debt payments on shopping properties are late; a quarter of those due on “lodgings”—including student housing, vacant since universities closed—have also been skipped.

 

Again, going through charts for ETF’s to profit from these trends. More next week.

 

https://www.oaktreecapital.com/docs/default-source/memos/the-anatomy-of-a-rally.pdf

18:12 Howard Marks

Positives:                                    Negatives:

Fed                                               Political, financial restraints

                                                      Defaults, bankruptcies

                                                      Inflation, reserve status of 

                                                      Dollar, U.S. credit

                                                      downgrade, increase cost

                                                      of deficits

Curve flattened mostly             Second wave

Health system not swamped   Stress/fatalities

Vaccines, treatments, tests      Vaccine not as soon

Look through COVID-19

Positive economic news           GDP-30% 2q, 10% unemp.

                                                      Return to work slow

                                                      Never re-open, jobs lost

                                                      State and city finances

                                                      Retail, travel, ofc. Buildings

 2022 earnings>2019

 

Good and news on these fronts will create wide swings I believe

 

22:45 Coronavirus Erases Guidance From 40% of S&P 500

Companies that have pulled their outlook have collectively underperformed the broader market; ‘there are still many unknown factors’

https://www.wsj.com/articles/coronavirus-erases-guidance-from-40-of-s-p-500-11593363659?mod=searchresults&page=1&pos=2

by Alison Prang

All lead to increased volatility

23:47 Bakes’ Take—Fan questions of the week!

Text from Harry in Houston!...

Geopolitical—see China, South China Sea, Middle East has been quiet

Covid-demand hit still unfolding—six-month chart coming up

Saudis/Russia game of chicken seems to be over

Regulation-have heard little, President Biden’s platform?

https://www.wsj.com/articles/exxon-mobil-resists-write-downs-as-oil-gas-prices-plummet-11593521685?mod=searchresults&page=1&pos=1

Exxon Mobil Resists Write-Downs as Oil, Gas Prices Plummet

Some accountants have filed an SEC complaint saying the company should write down the value of shale driller XTO Energy. Exxon says it is in compliance with standards.

By 

25:34 Christopher M. Matthews

 

Vs. Shell $22B, BP, Hess, OXY, CHV, too. Ex-accounting analyst Franklin Bennett accuses XOM of fraud, SEC whistleblower. He is security laws atty. , chmn. Prof society of O&G accountants. He says XTO acq. Should be written down by $17B and at least $20B other. Shale co’s wrote down $450B since 2010. 

 

26:55 Oil $10 ‘86--$164 6/08, XOM might have a point, little time spent under $30

 

27:43 Nat Gas--$18 ’05 peak,