Market Outlook for May 5, 2024
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- Опубліковано 27 чер 2024
- 0:00 - 13:33 FOMC
13:34 - 18:30 Jobs data
18:31 - 27:17 Nominal rates
27:18 - 33:28 US Debt
33:29 - 35:10 Real yields
35:11 - 38:39 Mortgage rates and OAS
38:40 - 49:52 SPY
49:53 - 51:27 Earnings Calendar
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www.markmeldrum.com/product/a...
www.markmeldrum.com
CFA/Applied Series subscriptions:
www.markmeldrum.com/subscript...
BTC fund flows:
bitcoinetffundflow.com/
US JOBs:
www.bls.gov/news.release/pdf/...
ECI:
www.bls.gov/news.release/pdf/...
Productivity:
www.bls.gov/news.release/pdf/...
Earnings calendar at sectorspdr:
www.sectorspdrs.com/earningsc...
This Week in Earnings:
lipperalpha.refinitiv.com/wp-...
ICE Mortgage:
www.icemortgagetechnology.com...
SPGlobal MBS Index
www.spglobal.com/spdji/en/ind...
Money Market flows:
www.ici.org/research/stats/mmf
Fed Balance Sheet:
www.federalreserve.gov/moneta...
LINK TO S&P SPREADSHEET:
www.spglobal.com/spdji/en/doc...
SIFMA:
www.sifma.org/resources/resea...
Freddie Mortgage Rates:
www.freddiemac.com/pmms
Treasury:
home.treasury.gov/resource-ce...
SOMA
www.newyorkfed.org/markets/so...
EFFR
www.newyorkfed.org/markets/re...
Reverse Repo
www.newyorkfed.org/markets/de...
FedWatch Tool:
www.cmegroup.com/markets/inte...
STIR analytics
www.cmegroup.com/tools-inform...
Forward Curves:
www.chathamfinancial.com/tech...
Economic calendar:
www.dailyfx.com/economic-cale...
Meldrum the madman shorted Tesla! He shorted an actual cult! God speed
He’s the goat
Mark this argument on excess government debt was brought up last year in your podcast.
Your argument was that this point was overblown. Since the Fed owns most of that debt, the interest expense the treasury pays goes back to the treasury. You argued you got to look at it from a net effect.
Now it appears you dropped the net interest expense argument and concerned about the alarming increase of gross interest expense.
What changed in your thinking from then to now?
I kicked Peter Schiff to the curb for sounding like a broken clock.
Now hearing you use his exact same view on rates and monetary policy and long miners with gold busting out has me some sending my apologies to poor Schifffy
"We don't see the stag and the flation"
Nice phrase!
Hello Mark, you mentioned that your prediction in the videos are 90% right. If you look at your portfolio returns from the last 10 or 20 years, in how many years have you outperformed the S&P500?
Hey mark. Have you thought about uploading these in a podcast format (uploading audio). It seems like it would be a high ROI as you already make these.
Thanks for your work on these
What did you like about the ABR earnings so you decided to add shares?
Thank you
if you think the Fed has to cut rates (due to debt servicing), and nothing in the market breaks in the meantime. Isn't this a bullish setup for the market? Or is market being nervous that something 'might' break in between? I am trying to understand the recent volatility.
Do you have a good resource that shows the percentage of interest expense on government debt to GDP? I figure this will be higher as well, but probably a better way to look at the debt situation versus absolute amounts in 2010 vs 2024
29:55 You said before, when we look at debt level we should also consider GDP, if our interest expense triples, do you see our GDP growth increase enough to cover the interest expense? Thanks.
Hi Mark, 2 questions!
1. When will you be uploading in the applied series your positions, I would like to analyze your positions and see the themes behind them?
2. What is your opinion on mass layoffs? From both a philosophical/humanitarian, and economical perspective.
I completely agree with your thesis that utilities will outperform in the next 3-5 years due to the buildout. Have you considered the utility construction/engineering companies that are contracted to build the infrastructure? These companies are not subject to the same regulation as the utilities, so could significantly outperform. For example Quanta (PWR) is the largest utility related engineering company in the US and gets a lot of the CAPEX contracts from utility companies (it has outperformed significantly past 5 years). Was thinking of a risk reversal but options are illiquid. Would be cool to see something like this in the sector studies. Edit: just went through their earnings and they have been increasing their revenue from fiber/5G infrastructure builds which adds to the buildout you suggested in the communications sector study.
You mentioned ABR is navigating a tough environment. Can you talk a little about why the current environment is tough for the company?
Hey Mark, agree that the quarterly productivity reading was not as positive as the FED would of liked. However, the year on year number is highly correlated with with the CPI inflation rate and this is now down to 1.8% y/y (you see an overlay of these series in Yardeni's charts). How much weight do you give to the longer arc number as opposed to the monthly/quarterly data?
I have been watching your videos but don't recall seeing anything on short squeeze. Can you please help how to interpret indicators like short interest, percent of float, call put ratio etc? Like always thanks for much for all you do!!
Would you be willing to share some of the tax rules that you have learnt over the last month?
Mr. Meldrum you are the GOAT. I'm curious about your thoughts on the slight changes to the FOMC statement's specific sentence around "confidence". Am I crazy to think the FOMC has subtly meta-communicated something important on the potential for more hawkishness, though at face value it is dovish as you described. Confidence technically isn't there to cut, and the FED is adamant about 2% inflation target. If CPI isn't down significantly on May15, we now have a few months sequence of "bumps" which really aren't bumps anymore. That would mean confidence isn't growing, thus current policy is not enough to tackle inflation down to 2%. This maintains the plaguing "higher for longer" narrative at the very least, with the door still open to a hike. Repricing to higher yields would take effect to new highs if that were the case right? From the april 30th COT report, we have the most short ZT's since Feb 20', and a near full unwinding/ nullification of the bond futures bullish move from the reaction to NFP. Back in Nov'23 when the treasury futures were bottoming the way orderflow took off on these key data such as NFP was a whole different level of bullish imbalance. For now, it seems large participants are still interested in selling any short term rally in bond prices on these major data release which are providing them liquidity to offer into. After the first 4 months of this year going from 5-6 cuts priced to 1-2, even with the dynamics of the treasury and the economy looming from the effect of the debts/rates, this is a massive shift in perspective/speculation over a short period of time so would it be crazy to think this is not the peak rate because there is no explicit confirmation even if all of the surface level communication in the statement/ Q&A seem to indicate we're at peak rate. Thank you so very much for all your efforts.
Hi Dr. Mark,
I completed FRM Part 2 last year in August. I really liked the Factor Risks in Investing Risk, that really intrigued me to Quantitative and Factor Investing. Hence chose CFA L1 and want to get more deep in to this field (factor investing). What steps would you recommend I take to better myself in the same and in process of doing so carve out a career for myself in this field.
Thank you!!
In the US debt portion when you comparedd the value of debt and interest rate, wont it be more accurate if we adjust the debt levels with inflation?
Brilliant call on Tesla. Great idea doing a short risk reversal. Too scary for my blood though. Say Mark, what financial ratios are most important when doing fundamental analysis? I know you don’t really focus on that, instead seeing if they have a good story, but I’m interested in hearing any particular ratios that I should pay attention to. Price to book and PE I like and ROE. Thanks and you’re the man!
You mentioned about Short on ES @5200. What other option would you recommend to hedge downside risk. Can you recommend some ETF which one can buy mostly like insurance against overall portfolio?
Is VRE an equivalent holding if you were bullish Canadian REITs? Or would it have too much bloat that would drag overall performance instead of just holding the top REITs a la carte?
Could you explain what you mean when you say once the $35 billion mark on MBS is exceeded any excess is added to treasuries, how does this work? Once the $35 billion is exceeded will the FED start buying MBS? Will this put upward pressure or downward pressure on rates?
Hi Mark,
1/ As far as I remember, you mentioned few times that the US debt balooning could be a big global problem some day in future. However in case US real GDP growth will be sound & sustainable, US will be keeping its economic leadership and somehow resolve its fiscal issues, do you still see the ever-growing US debt to be a problem?
2/ There is a conflict of US/EU/UA vs Russia (due to RU invasion into UA), hence the west imposed trade & financial sanctions against RU, which led to some decrease of USD & EUR share usage in global trade mainly in favor of CNY, INR etc. If the countries will continue to develop usage of various non-USD currencies (even after the conflict is resolved), do you see a real danger to USD strong global positioning and through that the threat against attractiveness of US debt securities?
Thanks a lot
Hi Mark,
You have stated that FED interest rate decisions largely affect only money market rates while capital market rates are predominately affected by GDP growth. I’m confused because the jobs report came out last Friday-FED rate cuts were priced back in for the year based on the numbers-driving rates along the capital market curve down for the day. Could you help explain how FED rate decisions has this effect all the way up to the 30 year in this instance?
Hey mark, how do you see that the fed was always hitting its treasury cap of 60 billion over the last year? And do they have to reinvest the excess proceeds from prepayments into treasuries?
Dr Mark, for a beginner level, can you help understand what does "increase or decrease beta exposure means? also how that's achieved in a portfolio. If I have stocks in the portfolio with all Beta greater than 1 (holding them with profits) and I am expecting market to go down, how to reduce beta (selling the holdings???). Like always thanks for much for all you do!!
Hi Mark,
1. I am a retail investor in Canada, and I use RBC, but it sucks for analysis and reporting. Do you still recommend Koyfin?
2. Killam's average portfolio age is 28, and CAPREIT's seems to be above 30. This means they are holding a lot of class 3 properties. Is this a concern?
Thanks!
Hello Mark! You mentioned that your conviction on your TLT short put is based on the fact that, sooner or later, the Fed will have to step in and drop interest rates. Most likely by both cutting the Fed Funds at the front end and re-instating QE at the back end of the curve. I agree with this analysis. However, I wonder whether there might be more convex expressions to this ultra long duration sentiment than TLT, such as for example tech, biotech, private equity, etc. Basically what I am asking is: is TLT the optimal expression of a long duration play?
Hi Mark,
Can you provide a source for the data or study at 00:08:20? I don't doubt the numbers but I'm wondering if any mention of the cause or type of debt was investigated. For instance was it discretionary or non-discretionary.
Have you given in yet on getting your lower prices for the Canadian apartment REITs? IIP still yet to hit $11.50 and KMP has not dropped below $16
'nonfarm' figures sound as if they were more relevant when subsistence agriculture or similar was more common in the US? Does the inclusion of farm figures in today's economy still skew the data enough for it to justify it remaining as a category or is it just used for consistency across time?
Hi Mark,
1) may I know if you are still planning to do Fed Balance Sheet video in applied series as Rev Repo and Reserve videos have been up for quite sometime.
2) would you consider doing Forex option tutorial video in applied series? The quote convention for Fx option is very different from stock option. A video on Fx option will help a lot to understand the market.
Hi Mark,
Could you explain a bit more about why you don't want currency risk on your TFSA? I assume its similar in RRSP but at same time since it has a US dividend advantage you are still willing to hold US stocks in it?
Also at the current point in the rate hiking/economic cycle which do you think is better ABR or AGNC? You seem to be more favourable towards ABR. Have you seen something in AGNC's earnings that has pushed you away. I remember in previous years you were big fan of AGNC, especially as an income strategy.
Hi Mark, few questions: 1. Saw a presentation done by Advent Capital Mgmt that showed a portfolio of 100% convertible debt outperformed a 60/40 (S&P/Bloomberg Agg Total Return) allocation from 1998-2023. What are your thoughts on using convertible debt as your fixed income allocation given their asymmetrical return profile? Especially now that coupons will be higher on new issues.
2. Would you have ever been interested in working in the treasury department of a company? Or is that not a very interesting line of work in your opinion?
3. Do you ever tune into the annual Milken Institue Global Conference? Many panels involving big names in the capital markets so if so, any takeaways this year?
Thoughts on bill C-63 in canada? Is it concerning we are moving away from free speech?
Dr. Mark, can you explain how you would handle the short reversal on tsla for education purposes? not interested in advice but want to know what you would do if tsla started climbing higher? thx
Hey mark, hope all is well. Sorry for the long question but i think your viewers would find some value in your response.
I’ve heard you cover this topic before, that you should be able to talk about financial events and other topics in finance just as sports fans know everything about their favorite teams.
Studying for L2 now, it seems like i have a grasp on the concepts but when it comes to job interviews(24 with sales background/finance degree) it’s difficult to communicate my knowledge and display competency.
I was observing the way you’re able to communicate so smoothly in handling live Q&As, is this something that comes with time? I can comprehend the ideas but putting together all these different ideas and knowledge in my brain to concisely handle certain questions just stumps me sometimes.
what areas (for let’s say somebody looking to break into a financial analyst or maybe trading role) would you recommend practicing talking about so I am better able to display my knowledge and competency.
there’s just so many conflicting opinions and views regarding the outlook of the economy and it seems like I have a broad understanding of what’s going on, but kind of feel a bit of imposter syndrome when discussing it. Maybe i am trying to get into the weeds too much without having a very firm grasp on the basics?
What practical advice would you recommend to help with this issue?
Best,
Mark, do you believe that long term rates in the US treasury market will go back to below 4% like the market bulls seem to believe is almost destined to happen at some point, either after inflation is beat or we enter recession?
And if so, how do we calculate what is the interest rate sensitivity of all our assets? In particular, how do you do this for equities?
I notice some of my holdings are much more sensitive to Fed news, like BN for example. But I don't know how to systematically analyze this.
Do you do any channel trading? I remember a video you did on DuPont, which has been trading in a very clear channel for a while now. I recall you said you could sell puts on DuPont but couldn't really buy puts at the top of the channel because there wasn't much liquidity.
Instead of looking at average interest cost and debt level - don't we have metric for interest cost in $$?
Hi Mark, what about potential rate cuts and your SPY bearish Beta exposure. I remember you mentioned that with rate cuts you'd immedietelly close your bearish Beta exposure. Is that still the case now in case something breaks?
Also, I didn't see SPY giving much pullback from 6 rate cuts in Dec'23 transitioning into just 1 cut this year. Why is that? AI? I remember market going 300 points up on sole 6 rate cuts narrative...
I'm curious on where you define the distinction between "wealth management" and "savings management". Is that threshold in line with the late Charlie Munger's $100,000 threshold from one of his memorable quotes?
Question: You’ve just passed CFA L3 in Feb 2024 and you’re 29 years old with 4 years work experience in portfolio management. What would be your next steps?
Hi Mark,
1. What are your thoughts regarding XLU and XLP both outperforming QQQ and SPY over the last month. Can XLU be a reliable leading indicator of where smart money flocks to safety (mainly for long-only funds) before a steeper market correction occurs.
2. There has been increasing talk lately regarding Japan's intervention to protect the Yen. Understanding that Japan is holding the majority of US debt, if the Yen continues to weaken, and the BOJ intervenes by selling US treasuries, how would the US respond? The gloom and doom articles point to this as the "reverse carry trade". What are you thoughts?
AGNC is currently trading around $9.50/share and the dividend yield is around 15 percent which is higher than the average return on the market. What do you think about buying AGNC at these price levels?
How is it a bull flattener when the belly outperformed the long end?
Hi Mark, I am getting close to retirement and started investing into high quality Canadian Preferred Shares. What's your thoughts on preferred?
Congratulations on timing your exit from this great nation.
Massive Alternative Minimum Tax increase in jan 2024, cap gains changes, and now an additional massive exit tax being discussed by our glorious leaders - you made it out my friend!
This is sad as hell. West world won with USRR and now is becoming one... :/
Hello Mark,
I just bought the L1 QM module and I was going through LM2 the video isn’t working, could you help ?
I tried changing the browser and refreshing the website and it is not working
Hi Mark, would making a sector study overview of the cyber defence industry be interesting for you at all? I know it's rather niche, but given the prevalence of hacking these days it seems like an area that could have potential at first glance. With that being said, I'd imagine these projects could bear a degree of liability in the event a defence company fails to protect a database they are contracted to secure.
Hi Mark, have you ever considered using EDV instead of TLT for duration exposure?
what's the duration of EDV?
You've mentioned before that you wouldn't keep more than 2% of your portfolio in a single stock. However Buffett and Munger are known for being against diversification. For someone with a brokerage account worth less than $1 million, how do you feel about having a more concentrated portfolio (say 10-20%) in single stocks to try and build wealth?
Hi Mark, I have a quite a high conviction that there's an opportunity in the small modular reactors niche. I compare my conviction level to yours towards Canadian reits. With a small portfolio of 10k (cdn) with a 150$ weekly contribution. What would be the things to do and not to do in building a sizeable position in that particular niche market ?
Apple announced $110 billion in share repurchases last week, and the company added almost $200 billion in market cap the next day. Theoretically speaking, should share buybacks impact market cap? I don't see any value being created here.
Please do not stop sharing the par rates!
second that
Can you explain why having a short position against your long positions is better than just reducing long exposure? Are long positions higher beta?
Taxes and external management of long exposure. Portfolio he manages himself is like "play area".
Going through the Applied Level, and I am confused about shorting options.
Say I short a put for income, I collect the premium and if the underlying's price goes my way, I have nothing to worry about, right?
Also, could you explain what it means to close a position in an option?
Q1 -correct.
Q2. If you sell a put, then to close it you just buy the same one.
@@MarkMeldrum wouldn't closing the put hurt my returns, if I have to pay to buy it back?
If you're long a call for example, I know you'd close your position as you'd get more as you'd sell the option's intrinsic value time value + time value. But with regards to puts, when would you close your positions?
@SomeOne-gi2gp that is not what you asked. You simply asked what it means to close an option.
Hi Mark, just curious in which account (TFSA, RRSP, Margin) do you hold ABR?
RRSP and margin
@@MarkMeldrum thanks for replying.
Dr Mark, for a beginner level fixed income student can you please help understand what does it mean "increase or reduce duration", also how that's achieved in a portfolio. My understanding of duration is that it's %change in portfolio by a % change in Interest rate. Like always thanks for much for all you do!!
increase duration means shift your portfolio to FI instruments with higher duration, which means longer maturity, lower interests, higher grade, but mostly just longer maturity
In practice, buy longest gov bonds.
avoid callable, MBS and HY (and of course short dated T bills/notes)
last note - you can buy STRIPs (I'll let you google these : ) )
Stephanie Kelton and MMT seem to be back in the spotlight again. With deficits as far as the eye can see, hasn't the US already adopted this theory since the GFC? If inflation is a disciplining factor, do you think MMT could ever work?
Professor,
in your opinion, what do you think is a fair tax rate?
He turned sour above 50% and with intention to introduce wealth tax, IIRC.
Would you consider sticking to market and economic commentary? I understand it often ties into politics/tax policy but you’re constantly repeating the “politicians are idiots” narrative and your stance is well established.
1st
Are you doing any synthetics on CAR.UN? Would you advise against this because of the high interest rates?
You mentioned ABR is navigating a tough environment. Can you talk a little about why the current environment is tough for the company?