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Adam Johnson
Adam Johnson anchored several business programs at Bloomberg Television over five years, interviewing CEOs, heads of state, and Nobel laureates. His daily video investment blog, Insight and Action was sponsored by a major U.S. lender. Previously he managed global risk assets for ING Furman Selz and Louis Dreyfus, trading oil futures, listed equities and equity options. Adam began his career at Merrill Lynch with a degree in economics at Princeton.
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Ready for Takeoff… Again
Normalization Not Recession
- Domestic leisure travel returns to pre-Covid levels though Business and International remain subdued
- US airlines are likely post profits in Q2 despite high fuel costs as consumers willingly pay higher fares
- My favorite carrier is once again in the Buy Zone on recession fear but could more than double into 2023
Pre-flight Inspection – I have been waiting to buy my favorite airline at the right price, and plunging markets amid surging fear provide opportunity at last. Investors have become obsessed with the two Rs of Recession and Rates, unable to focus on the two Es of Earnings and Employment… or the overwhelming willingness of consumers to make up for lost time and go on vacation. Air fares may be near record highs, but so too are load factors for US domestic travel. Amid the surge, US carriers are returning to profitability. Curiously however, the stock market assumes otherwise. Airline stocks have plunged once again on recession angst. I think the selling and fear are overdone. I’m a buyer.
July 01, 2022
Read MoreRecession… What Recession?
Top Industrial Guides Up
- Stellar earnings beat and higher quarterly guidance paint very different picture from recession narrative
- Cheap valuation in both absolute and historic terms provides compelling entry point near one-year low
- Wall St analysts bullish on this beaten down industrial and see notable 12-month appreciation potential
Morning in America? – Recession is not only the consensus call among Wall Street strategists and media-loving pundits, it has become their Gospel. The notion that the Fed will dodge a so-called hard-landing, and effectively engineer growth as it simultaneously raises rates, is deemed impossible by these oft-quoted experts… but what if the experts are wrong? Or, what if we’re already in a recession (Q1 was down) and by the time we realize it, we will have already have come out and resumed growing? The bond market may have figured this out. The benchmark 10-yr note has retreated from a five year high of 3.20% a few weeks ago to about 2.70% today. The message is that the Fed’s entire rate-hike cycle of the next several months was fully priced in, and now we need to think about the opposite… rate CUTS that get us back to growth. I recognize this “soft-landing” scenario is all very theoretical, but the country’s leading renter of industrial equipment is telling investors the future looks bright, having recently beaten estimates and raised guidance. Management sees broad-based demand across multiple sectors, and I think it’s an important data point. Ditto the bond market. Our road ahead looks much brighter than consensus would have us believe.
July 01, 2022
Read MoreOnce in a Blue Moon
Biotechs at Extreme Lows
- Covid syphoned considerable resources from Health Care and put capital hungry Biotechs in deep freeze
- Biotech ETF (XBI) has fallen 65% from last year’s all-time high as investors continue to cut exposure
- XBI trades at the same level witnessed during depths of 2020’s Covid plunge and 2018’s recession scare
Blue Moon – The expression “once in a blue moon” pays homage to the 13th full moon within a 12-month period happening once every three years… an extra lap as the moon orbits the earth faster than the earth orbits the sun. While blue moons aren’t actually blue, they are somewhat rare, and the biotechnology sector is having a blue moon moment of its own. The SPDR S&P Biotech ETF (XBI) has fallen 65% from last year’s all-time high, returning to the previous lows of March 2020 and December 2018. While the selling pressure is enough to make investors blue in the face, I think this blue moon is buyable. One fifth of the companies in the biotech index trade at a discount to cash… that has never happened before. When traders sell an entire sector to five-year lows, and in many cases push the price of stocks below cash per share, buyers invariably emerge.
July 01, 2022
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2.78
As in the US 10-yr yield falls as low as 2.78% on Friday, down from a high of 3.50% two weeks ago.
#ContemplatingFedCUTs?
14
As in China-to-US shipping rates decline 14% last week, the first YoY decrease since June of 2020.
#RoadToNormalization
78.4
As in ISM Prices Paid for Manufacturing Orders falls to 78.4, its fourth consecutive monthly decline.
#HasInflationPeaked?
“My ideal investing is stuff that looks a little crazy now and in 3-5 years is obvious.”
– LinkedIn Co-founder Reed Hoffman
#AmericanIngenuity
“Consumer response to price increases appears more grumpy than fearful.”
– Amherst Pierpont Economist Stephen Stanley
#Let’sHopeSo
“It can be loud, stinky and hard work, but I think we are compensated well.”
– Port of LA Dockworker Jamie Hipsher
#Over$100k/yr
