Market Outlook for April 28 2024
ฝัง
- เผยแพร่เมื่อ 15 พ.ค. 2024
- 0:00 - 0:49 Intro
0:50 - 17:47 GDP
17:48 - 27:07 Nominal rates
27:08 - 31:01 Real yields
31:02 - 32:16 Mortgage rates and OAS
32:17 - 58:47 TSLA
58:48 - 1:02:22 SPY
1:02:23 - 1:04:43 Earnings Calendar
www.markmeldrum.com/product/a...
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CFA/Applied Series subscriptions:
www.markmeldrum.com/subscript...
BTC fund flows:
bitcoinetffundflow.com/
US GDP:
www.bea.gov/sites/default/fil...
TSLA investor presentation:
digitalassets.tesla.com/tesla...
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...
I have to say that I find the GDP analysis ( Y = C + I + G + (X-M)) super interesting from a kpi perspective. Never seen it that way and I spent quite a bunch of time studying economics in all its depth. Really nice!
Mark,
I totally agree that Tesla appears to be in trouble. That said, I wouldn't touch the stock / options with a ten foot pole. Tesla's investors aren't connected to reality. It doesn't appear that any amount of reality can dissuade them from investing in the company.
Would there be a certain threshold at which the situation would become so ridiculous that you would consider selling calls / buying puts?
Are you still planning to set the website up to alert users automatically when videos get added? Would be very helpful.
Hi Mark,
Its undeniable that governments with a high debt burden will resort to increasing their tax bases, but specifically the Buy, Borrow, and Die strategy so far has been out there as a sort of "loophole" to significantly lower one's tax liability. What's your stance on taxing unrealized cap gains - the fact that inheritors get a step-up in the cost basis, for example?
Have a good one, Mark.
Hi Mark,
Did today’s (Sunday April 28th) 12:00-13:30PM Applied Series live Q&A not take place? I’ve saw the “Live” status on MM website but once clicked it said “the session has not started yet”. Am I missing something?
What do you think of the idea cheap oil has ended and that this means that the period of deflation is over. Also, compounded with the fact that amount of GDP for a country is highly correlated with its energy use?
Thanks for doing these Dr. Mark! Just curious if we are still going to get This week in CFA stuff videos? I noticed we didnt have one for last week as well
Any ideas when will be the updated course for 2025 would be available for sale by Mark?
Can you please make an “understanding” video on mining royalties companies for the applied series?
Thanks for the video mark, I had one question if you could shed some light on this topic,
As you mentioned if US fed are in a similar situation like BOJ, and they will decrease the funds rate near 0, what will happen to the status of the dollar as a reserve currency.
Hi Mark,
Great video as always. Regarding Tesla Autonomous Taxi…
They already have this in some cities (like Phoenix)
Where a company called Waymo has autonomous taxi/uber services
Works great. Used it to get home from bars…. Very weird having no driver going down highway though
How much importance do you attach to the rate of change when looking at data like gdp in Canada? Also you have experience in higher education, is the international students at Canadian universities a source of funding and if so is the income generated a meaningful amount used to subsidize Canadian student or is that hooey?
How much weight do you give to Technical Analysis? You mention a few patterns and moving averages from time to time. Wondering if you see it as necessary knowledge or purely supplemental to a fundamental decision. Thanks as always!
Hi Mark! In a previous Q&A video you were not thrilled about FCX Q1 earnings, or was it guidance, I can't recall. Could you share what you didn't like? Thanks!
Hi, is there any type of forward/futures market for mortgage rates. Also when you say that US will need to cut rates because of its debt, wouldn’t lowering rates increase the PV of their existing Debt, thereby increasing Debt/GDP further?
Would you be able to go through some of the market data subscriptions you have for IBKR? What would you recommend for someone that would like live market data for US equity markets and option?
Hey I know this a quick review but to guess future cash flows or earnings. Do I use the g= RR( retention rate)* RoE. And to forecast sales can I use sales/ CV coefficient of variations of sales
hello dr Meldrum. Was wondering what you believe the key to success is for retail investors.
Hello, I'm interested in buying the applied series and saw high praise in the comments. How difficult is it to understand and how much value does it provide to non CFA candidates/retail investors who is managing a small personal portfolio?
For some context, I've gone through MIT's opencourseware finance theory course in my free time and have a math background but not business/finance related. Thanks!
For acquiring sector knowledge, is it useful to complement MM’s Sector Studies from Applied Series with reading Moody’s sector scorecard (methodology for assigning credit scores to companies in a particular sector) and/or reading Moody’s report for biggest companies in a given sector? Does the fact that Moody’s is focused on credit side of business diminishes its value for retail stocks investors?
In the theta sleeve of the portfolio construction series you mention that selected targets may not be good candidates every month. Is there a certain ROI that you try to achieve with each option? For example at what price does GM need to drop to before you sell a $43/$42 put? Or what price does NEM need to drop before you sell a $37.50 put again? Do you just wait until those strike prices show 20 delta and then start to consider selling the put?
What is the purpose of assigning par value to the additional equity shares issued by a public company and recording par value of the newly issues shares separately from the additional paid-in capital? Can’t it be done as a one-line item?
Hi Dr mark, quick question on inflation and currency rates! How would you, in a practical way, do an analysis of the how they correlate? Is there a proven model that can be applied to do this analysis?
Hey Mark. In this video you said that you are back to short beta. Does the expected high deficit spending (fiscal support) on election year give you any pause on those shorts?
Hi Mark,
Sorry if you answered this already, but where can I find the weekly trades that you mentioned you would replicate in a paper portfolio? I remember you saying this in one of the market outlook videos but don't remember if you stated a start date or the location. Cheers!
Hi Dr Mark,
Do you think ABR is a better investment than AGNC?
Hey Mark, I would like to ask you how do I choose a sector to be expert in as you have mentioned lately, like yours is the REITs, I actually think of Tech as it will be promising in the future or this is not the case ?? but I think this sector is very volatile in these periods, I would be happy to have your advice, Thanks
I signed in and checked the website but couldn't have founf the applies gold mining video. Have I missed it? I really would like to give that one a try.
Hi Mark - if and when the Fed cuts rates, would the long end of the YC necessarily fall making going long duration compelling?
With LT rates around 4.5% and ordinarily the YC is upwards sloping, so if ST rates get cut the long end may not move or even go higher!
Particularly if cuts happen and stimulate growth and inflation.
Hi Mark, I have good knowledge in analysis technique but I don’t know how to start, I feel lost through all of these. For example: integrating economy with sectors to create the context same as in financial analysis techniques.
So how should I start and make sensible conclusions?
Thank you in advance.
Dr. Meldrum, AGNC had its Q1 earnings last week. Can you explain what the CEO means when setting their dividend policy based on ROE, Cost of Capital, and Leverage? Isn't AGNC earnings more than cover their dividend ($0.58 Net Spread + Dollar Roll Income vs. $0.36 Dividend per Quarter) and isn't a REIT suppose to pay out 90% of their income? 😕
Mark two questions please: (i) duration is struggling, beta is struggling. Where to find diversification? Gold, oil, floating rate debt? (ii) Do you see the yield curve becoming uninverted? What happens when it occurs?
On your point about reacting to data points, and going from one to the next. Has it always been this way? Only been involved for 5 years or so and it seemed to me like that is just the way it is, and always has been. Seems like nothing happens until the next datapoint hits and then big move. Presumably a lot of automation involved.
When you sell puts do you still sell them in pairs? i.e. AGNC is at 9.15, you sell 30 puts at $9 and 30 puts at $8 (assuming they are liquid)
Hello,
ABR earnings are next Friday, on their last earnings call they stated this quarter and the next to be their most challenging, how robust do you think their book value is (been flat around 13$ per share) ?
Saludos!
How are you thinking of entering your short beta position? Selling futures again?
How do you value an ETF like XHB, XLE, etc.? Is the price just the weighted average of the constituents?
I prefer using options for risk management but for a small portfolio it limits the security selection, do you recommend building a portfolio by buying shares or continue building the portfolio with an income strategy until options can be used?
How would a really long term investor (20y+) construct a capital allocation model if his investments are mainly held to maturity? The investor is generally unconcerned about fair value risk metrics. Would the expected return on bonds would be the YTM? And the expected volatility infer some sort of default risk?
What a good way to think about it?
You said you were looking to short beta. What strategy do you plan on using? Selling calls on SPY? Also, are you looking for another multiple expansion before you short beta?
Do you still sell puts on those high dividend payers that you introduced a few years back, ARR, O, RWT, TWO?
Hello Mark,
When the Treasury conducts refunding operations, it typically issues new securities across various maturities, including shorter-term (such as 2-year) and longer-term (such as 10-year) securities. In a scenario where the Treasury is issuing new debt to replace maturing securities and meet its financing needs, increased supply of 2-year Treasury securities can put downward pressure on their yields.
Alternatively, as the market is absorbing this new supply, can this lead to lower prices (and consequently higher yields) if demand doesn't match the increased supply? How sure can we be that supply meets demand as not to create a surplus of 2-year treasuries that ultimately lead to higher yields instead of lower ones?
Additionally, market participants may interpret the Treasury's actions during refunding as a signal of its expectations for future interest rates and economic conditions. If the Treasury is issuing a significant amount of shorter-term debt, it could imply that policymakers expect short-term interest rates to remain low or even decline in the near term, which can influence market expectations and impact yields on 2-year Treasuries.
Thanks,
Omar
I’m curious to hear your thoughts on META earnings and their capex. It’s a highly contentious topic that has analysts split on the future of the company. Some thinks they’re just burning their cash horses without a return, but others say the roi on their capex has put them further ahead than their competitors.
Hi Mark, how often do you check in on the performance of your external managers? Are they more fixed income focused or is it fairly diverse between FI and Equity? Also any idea on how much of an allocation you have in the private credit sector? Seems to be the hot spot for institutional money but I am unsure on the best way to get exposure outside of mutual funds with steep fees
Does the UAW try to unionize a company's entire workforce or just the factory workers?
Tesla's factory workforce only accounts for about 20% of its total workforce, which is a smaller proportion compared to other automakers. Given this, does Tesla's workforce composition make it less vulnerable to the impact of UAW unionization efforts?
Hi Mark, did you see the treasury buyback program that was just announced (May 1st)? What's the purpose for such program? Is it to inject liquidity to the system?
Also, as an applied level subscriber, I would love to understand more about Quarterly Refunding Announcement. I understand each action on its own, but I am having a hard time to comprehend the big picture (why those things were done).
Passed L3 in Feb 2024. When reading 10-Ks I’ve noticed that there are concepts in financial statements that I know I’ve learned in L1 & L2 but forgot. In that respect, is it a good idea to read the whole CFA curriculum or watch MM review video again to refresh everything or is reviewing opportunistically when needed a better strategy?
Would you be as confident in Canadian apartment reits if you didn’t have to keep a certain amount of your capital in Canada? I love your investment thesis but as an American investor I’m a little worried about the currency risk here
Hi Mark, what are the odds AI boosts productivity enough to get us out of this deficit hole? For example, cost savings from labour-replacing AI applications
Buying a house and not sure how much money I should pull out of my brokerage account to use as a down payment, especially given interest rates on mortgages are over 7 percent. I would be able to earn a higher return in my brokerage account than the interest on mortgage, however lower monthly payments also comes with lower stress levels and more income I can keep from employment. But with companies like AGNC and ABR providing dividend yields of over 13 percent, it's tough to justify pulling funds out of my brokerage account to increase my down payment.
Just curious if you think the peace of mind from a lower mortgage payment (or even no mortgage payment) is worth the opportunity cost of any potential earnings in the market.
I read an article about a $1.7 million public toilet built in San Francisco. I just don’t understand how something like this would cost that much to build besides corruption. Do you know what goes into these costs/projects at the public level? Spending seems to be the name of the game..
They estimated 1.7m but it got done for 200k by a private company. The locals celebrated it with a private band show and everything
That's literally 3rd world levels of corruption. Take it from a South African - the minute the country was "liberated" the assets of the state became fertile ground for looting, graft (tenderpreneurship😂) and mismanagement. Not to mention out of control fiscal expenditure on "welfare"
Hi Mark. What do you think about buying TLT and waiting for interest rates to drop in the US? What are the risks? Do you think future rate cuts is already priced into TLT?
What would have to happen for you to change your mind on long TLT? You seem convinced rates must drop but could they stay higher for longer?
Shorting the market has been painful, long duration has been painful as well. Although we understand the rationale behind these two trades but they haven’t been working out. Shall we review and look at them from a different perspective? You mentioned when you have a trade, you always think from the opposite perspective to see if you can defend your own opinion. Did you do that and if so, can you share with us your thought process? Thanks
Is negative retained earnings a concern for equity investors? For example Deutsche Telecom has negative €30 billion retained earnings as of 2023 accumulated for at least the past 5 years.
I personally disagree with the negative beta outlook for the market, as I've disagreed with it a few months ago when you've had it initially before the market rallied.
This is a market that clearly wants to go up, and it is exceedingly rare that during any given year, a market top is reached in March or April, unless there is a strong catalyst for it. Market tops usually come in January or in Q4. If anything, it might trade sideways for a while, but I don't see more than a -10% down move from the top that was reached in March.
I'm selling OTM puts on SPY whenever there is a down movement that spikes volatility, and buying OTM calls as the general position when there seems to be a consolidation from that down move.
In essence, I believe that any short term dip is buyable.
Apart from the yield curve inversion indicator and the FED possibly holding rates high for too long, what is your thesis for short Beta? The consumer is still reasonably strong, although rGDP showed a slower growth rate in consumption compared to the previous readings, it still remains fairly healthy. The economy continues to add jobs and Ed Yardeni suggests that the retiring baby boomers (richest generation in history) will continue to spend their large retirement savings on airfares, hotels, food, health care services. I expect payroll employment in these industries to remain strong and help the economy remain resilient. As you suggest fiscal stimulus will continue and private non-residential capital spending rose to a record high in the last GDP report. Corporate profits still remain high, but will be keeping an eye on the second reading of GDP. I guess everything always looks pretty good before a recession so you can't put too much weight on past data. If you are still of the belief that the FED will cut in June due to high debt levels, wouldn't this be the correct move by the FED? OR is it that if you get any hint that the FED will not cut in June and perhaps not until November then you think something will eventually break?
Hello, after obtaining my high school diploma, if I wish to pursue my studies in the field of financial markets and trading, which major should I study?
Hi Mark,
I have a general question about stock valuations. Assume a stock is trading at its fair value of $100. The company has revenue growth of 2% and cashflow margins of 20%.
Assuming all factors remain the same, will the stock keep trading at $100 indefinitely?
Is there a back of the envelope calculation that someone can do to determine how the stock price would change overtime?
The stock will return its cost of equity rather thru price appreciation or dividends
The stock will return its cost of equity thru price appreciation or dividends
Hi Mark,
i’ve heard you say that autonomous vehicles are “decades away” in the future many times now. I’m curious if you could give more explanation for why you think so when there’s already Waymos driving around big cities and teslas software has been getting better and better with every iteration. Have you had the chance to drive tesla fsd in the last month or so?
This is the fundamental divergence between Tesla bulls/bears I believe. I don't think bears are realizing that not all "autonomy" is created equally. The approach matters. The LIDAR approach by Waymo is not as scalable as the Neural Network / End-to-end approach by Tesla. If you fundamentally disagree with the approach by Tesla then hey, that's what makes a market and I'm okay with that.
But to say that everyone is working towards autonomy and everyone will get there...is missing the point. Everyone may eventually get there, but it matters how fast the first one will be and how long it will be before everyone else gets there.
I've heard professor say over and over that autonomy may work in the U.S., but not in Costa Rica. Which makes me more confident in making a claim that he hasn't spent much time looking into the neural network approach by Tesla vs. the LIDAR/Radar approach by others.
The whole point of full vision approach is that it is highly scalable as Neural Networks scale well. It's meant to mimic what a human does (end-to-end). Just like how a human can drive in America and then also drive in Costa Rica, I don't see why Tesla would not be able to. Again, if you fundamentally disagree with the End to End and Vision only approach, then that's completely fine. But I've never heard him talk about it or try to state why that approach wouldn't work.
@@aarshtrivedi5305 I 100% agree. I did not want to get into the differences between Tesla end to end neural net FSD and the geo-mapping, $150k vehicles with billions of unnecessary sensors that Waymo is putting out only in the biggest cities. I only mentioned Waymo and Cruise because I believe it is a great proof of concept that we're closer than ever to true autonomous future. I fully agree with everything you've said. Many don't understand that the progress towards Teslas FSD is now basically two variables; compute and amount of data. If I remember correctly, as Tesla is now no longer compute constrained they're going to double the FSD miles driven in a month or two. FSD is now is closer than ever.
Still think the BOC lowers rates in June?
Hi Mark, agreed on taxes but do you think that ultra wealthy people have too low of a tax rate?
You should worry less about the taxes UHNW individuals pay and more about how the governments spend/squander/ mismanage the taxes collected
Hi Mark, whenever you short a put. Do you always set aside the cash you'd need to buy the shares in case you get assigned?
You broker will determine the margin (cash) required for a short put.
Hi Mark, I’m currently a subscriber to the Applied Options only. I'm getting this error message when clicking on the link to get access to the free video: “Oops ... you already have access to this content, we're sure you don't want to purchase it again!”
that should be fixed now.
Hello, I think you missed some pretty key context when discussing the Cash Flow being so low for the quarter. This is an event not a trend as you would say. The arson attacks and the red sea conflict contributed to the deliveries mismatch and the high inventory at quarter end. The CFO mentioned on the ER call that the inventory buildup should reverse in Q2 and the company should get back to positive free cash flow. So the low OCF and FCF that you saw this quarter isn't something I see continuing (let's wait until Q2 / Q3 for more data points).
Are you really long $Tesla on a fundamental basis?
@@bigboybernie9669 Yes.
@@bigboybernie9669 Yes.
@@bigboybernie9669 Yes.
@@bigboybernie9669 Yes.
Is the Tesla brand strong enough to withstand a price war and incentivize buyers to stay
Yes, they have one of the highest satisfaction rating out of any company in the world. People switch from somewhere to buy a Tesla, they don't generally ditch their Teslas.
You’ve 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 / plan going forward? As I understand, becoming CFA is the means of achieving something greater in professional and entrepreneurial life?
You become god
Rarely do I laugh out loud, but actually did at the comment that you can't blame the government. Sadly, it's true. Trudeau was shinier than the opposition for the last three elections, and Canadians flocked to him. I wish that I could pack up and leave as you did, but unfortunately, not an option in my case... At least for now.
I calculated the tax hit that I would suffer if I were to liquidate all my real estate investment properties in my holdco. The holdco would pay ~$250k more in capital gain taxes if I were to sell once the new inclusion rate comes in. This is not fair taxation and redistribution of wealth, it's appropriation.
Rant over.
What does it mean to short beta? can anyone educate me
It means being short the market using a proxy like SPY.
Short beta means to short positions with dollar delta beta (dollars weighted by beta) that are equal to the positions that you already have. This way you can hedge volatility of your portfolio in dollar terms.
Are you asking about the short part or the beta part?
I have 2 interpretation
1: shorting the market SP500 so meaning I profit when it falls
2: shorting the volatility of the market meaning I profile when the volatility of the market falls (which I doubt since volatility is stable). That means I profit if there’s a relatively peaceful period ? Idk about that.
Someone please tells me which one is it ?
@@MarkMeldrum usually what is the maturity of your call/put options? Specifically for SPY current case
I’m not a follower of Tesla, but do you see a time where Tesla gets squeezed out of the car market? You’ve got the union momentum, competitors are slowly catching up..maybe they turn into simply being a software/robot company? Providing services to car makers? I’d assume this would be much better in terms of margins, less/no union pressure, etc
No, I am actually puzzled by people who say they have analyzed the market and say that competitors are catching up. For the price of a Tesla, I don't know which other car is offering you the safety, tech and luxury features offered by Tesla. Tesla may (and most likely will) license their FSD (Supervised) software to other OEMs, but the manufacturing advantage that Tesla has is better than most OEMs out there.
Re Canada. Do you see credit ratings easing as a result of low productivity and current and potential future capital net outflows?
Hey Mark. In this video you said that you are back to short beta. Does the expected high deficit spending (fiscal support) on election year give you any pause on those shorts?