The Market 2022-2023-2024

[Folster]

I took a look at GSK the other day. The first thing that struck me was a significant drop in revenue that was forecasted for 2022. Analysts are projecting $33B down from $46.6B in 2021. That made me think they sold off a chunk of their business and sure enough they spun-off their consumer healthcare biz now called Haleon (HLN) which I read PFE also spun their consumer healthcare segment into as well. I'm not sure of the specifics, but both firms want to concentrate on developing pharmaceuticals and therapeutics. JNJ also recently made plans to spin off their consumer healthcare and so is 3M so this is an obvious trend in the industry.

Spinning off their consumer staples business could increase margins and multiples, but also cause more volatility in revenue and earnings.

They have quite a bit of debt, but seem to be able to carry it based on the common debt ratios. The dividend yield is also inflated now and will be reduced after the spin-off. It looks like they are targeting 40-60% of net income which will probably be a yield of 4-5%.

Anyway, after their decrease in revenue, I projected annual growth of about 6% a year for the next 5 years using analyst estimates. When I discount the projected cash flows back 5 years with my required return of 10%, I get a target share price of just under $30 after accounting for their debt.

Obviously there are a lot of variables and unknowns with the spin-off, but it seems pretty fairly priced right now, but not a screaming deal. I read that they expect increases in their operating margins so if that can flow through to the bottom line, they could see richer valuations in the future.

 

[elindholm]

I added a bit to my WBD position after a big down day yesterday. Just watering my weeds.

Not PARA, huh?

 

[dscher]

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[dscher]

Feeling a pump and dump tomorrow... We have some interesting levels coming up. Dollar still set to explode higher. Stocks facing heavy resistance. Treasury Bonds ready to rally and in a no win scenario(for stocks) up or down.. the staved off volatility over the past month or so has been quite incredible. IMO.

 

[Folster]

Feeling a pump and dump tomorrow... We have some interesting levels coming up. Dollar still set to explode higher. Stocks facing heavy resistance. Treasury Bonds ready to rally and in a no win scenario(for stocks) up or down.. the staved off volatility over the past month or so has been quite incredible. IMO.

"Quantitative Tightening" Balance sheet run-off thus far.

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[dscher]

"Quantitative Tightening" Balance sheet run-off thus far.

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Exactly. You see that parabolic move in 2020. If we get that to the downside...watch out. Unwinding of that balance sheet can happen very quickly. After all, they have been on record desperately wanting to fight inflation. No better way to do it.

 

[Folster]

Exactly. You see that parabolic move in 2020. If we get that to the downside...watch out. Unwinding of that balance sheet can happen very quickly. After all, they have been on record desperately wanting to fight inflation. No better way to do it.

I'm wondering about the demand for the treasuries. The Treasury loses a massive buyer and the Fed has to compete with the Treasury's new issues. Is there enough appetite for US Treasuries without the Fed? Same question for MBS's. If their truly is a lack of demand, rates will have to go up and the Fed will have to significantly discount the price of their near zero percent bonds in order to compete.

 

[dscher]

I'm wondering about the demand for the treasuries. The Treasury loses a massive buyer and the Fed has to compete with the Treasury's new issues. Is there enough appetite for US Treasuries without the Fed? Same question for MBS's. If their truly is a lack of demand, rates will have to go up and the Fed will have to significantly discount the price of their near zero percent bonds in order to compete.

It's a good question. But it will all depend on the dollar demand moving forward IMO. The dollar could turn into a safe haven much like the yen was throughout the past 30 years or so.. if that's the case money will move to Treasuries as a risk off play if the global economy faces stagflation/deflation. The dollar and US treasuries tend to have a correlation over time. Many of my YouTube experts() believe they are simply deferred bonds. Which does make sense. The dollarization of the global economy ove the past few years alone can't be understated IMO. My theory for a Japanification of the US is still in play from my perspective.

 

[Russ Smith]

not surprisingly Powell tanked the markets by saying they would continue to raise rates in the near term as there is more work to be done. Markets didn't like it although I think it was obvious.

 

[elindholm]

Good week for the doomsdayers. Going to be at least a 3% dip for the week.

 

[Folster]

The froth started coming back much too quickly. I think the Fed will stay on top of this. Earnings haven't even been that impacted yet.

 

[elindholm]

The froth started coming back much too quickly. I think the Fed will stay on top of this. Earnings haven't even been that impacted yet.

Depends where you look. Some earnings are staying strong and some are getting rocked hard.

I'm expecting 2022 to end in the red, but by a relatively modest amount, say 3-5%. Choppy but ultimately flat for the next two months, then a small rise once the 3Q earnings aren't quite as bad as feared. I'm calling 4550-4650 for the year-end S&P 500.

 

[Folster]

I always like Josh Brown's takes.

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[dscher]

I think the Fed will stay on top of this

What can they do at this point? They're trying to fight the massive inflation they've largely created.. they don't really have any bullets left IMO. The only thing they can do is dump rates. It's almost a lose lose. The market obviously can't handle their target rate and any significant easing could be viewed as a significant economic shock that the markets won't love in a hyperinflated environment.

 

[Folster]

Depends where you look. Some earnings are staying strong and some are getting rocked hard.

I'm expecting 2022 to end in the red, but by a relatively modest amount, say 3-5%. Choppy but ultimately flat for the next two months, then a small rise once the 3Q earnings aren't quite as bad as feared. I'm calling 4550-4650 for the year-end S&P 500.

I think a recession in Europe with Putin putting the screws to Germany this winter could cause some big problems and energy spikes which could escalate tensions. I have no idea how this year will end.

 

[Russ Smith]

I can't play that video in a dentist office but if he's saying what I think from the title I agree. 4% for Nasdaq 3 overall seems like a massive overreaction to what seemed like a pretty obvious comment by the fed.

 

[dscher]

Brutal bloodbath day. I thought we get more of a pump into the previous bear market rally high...but that was squashed today. IMO, I don't think we get back to that level now after a day like today.... especially where the major moving averages remain. We're in a downtrend until those resistance levels become support.

 

[dscher]

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[Folster]

I can't play that video in a dentist office but if he's saying what I think from the title I agree. 4% for Nasdaq 3 overall seems like a massive overreaction to what seemed like a pretty obvious comment by the fed.

Perhaps the recent rally was the overreaction. Expectations of a pivot were premature. As we have pointed out, the Fed hasn't even made a dent in their massive balance sheet.

 

[BigRedRage]

Get those savings accounts ready for the dip buffett

 

[Yuma]

I am liking stocks getting cheaper since I am a buyer. I could go for a ten year dip!

 

[Devilmaycare]

I'm convinced now that we really have been seeing a dead cat bounce over the last month and we're going to plummet now. That along with the QT and the coming winter recession over energy and food has me pretty much looking to get out of the market for the time being. I'm going to sell off and then buy back in as we spiral down.

The only thing I think I'm going to hold onto right now is the couple SPACs that I was gambling with. I have the shares at about 25 cents below nav so them dissolving in the bear market might be the way to make money.

 

[elindholm]

Something has to be done about meme stocks. Today's is BBBY. Fell 60% a couple of weeks ago, now back up 27% today. No logic behind any of it, and the plummet was probably just because it got artificially built up the few weeks before. It's just fanbois getting their jollies, but there has to be some way to rein it in.

 

[dscher]

Something has to be done about meme stocks. Today's is BBBY. Fell 60% a couple of weeks ago, now back up 27% today. No logic behind any of it, and the plummet was probably just because it got artificially built up the few weeks before. It's just fanbois getting their jollies, but there has to be some way to rein it in.

It's not gonna happen. Free markets should be kept in a free to choose manner IMO. Many understand the insanity. They stay out. Many don't. They play and likely lose. That's choice. Stock manipulation has been happening for hundreds of years. I think it's a game that you either decide to play and learn to win at or stay out and realize the odds and that you're in over your head. Much like Vegas.

 

[BigRedRage]

yeah meme stocks are nothing new, hedge funds been doing this stuff in the background for a long, long time. Now more people know more things and they are playing too.