Daily Archives: January 5, 2022

Market veteran Jim Bianco tells Yahoo Finance the Federal Reserve could break the back of the red-hot rally in stocks as it attempts to cool inflation with interest rate hikes.

"I think that is the number one risk right now in 2022," the president of Bianco Research said inside of DoubeLine's California headquarters where he will be presenting his key themes at the bond giant's annual Roundtable Prime event. [The risk] is that the high inflation rate is perceived to be persistent, which pushes the Fed hard to do something about it and in the process of doing something about it, it puts the rally of the stock market at risk."

To be sure, the broader stock market is in no way positioned for a potential Fed heavy hand.

The S&P 500 advanced a stellar 27% last year. Apple started the first trading day of 2022 by reaching the coveted $3 trillion market cap level for the first time. Tesla shares continue to be on fire, same with Ford in part fueled by money sloshing around in the markets chasing hot stocks.

Bulls are even using market history to support their bullish thesis.

Truist Advisory Services co-chief investment officer Keith Lerner found that going back to 1950, when the S&P 500 had a total return of at least 25% in a year, stocks usually rose in the following year. The outcome during that 71-year stretch: stocks advanced 82% of the time, or 14 out of 17 instances.

The average gain: 14%.

But Bianco is more cautious on risk, and justifiably so given the trading levels of stocks.

Adds Bianco, "My concern is the Fed makes a mistake. I think the market is concerned the Fed makes a mistake, too. Unfortunately the Fed is very good at one thing that they wouldn't like to be good at that is they raise rates until they break something. That is a real fear in the market. They will start a rate hiking campaign this spring, and it will go through the rest of this year and there will be multiple rate hikes. When are they going to end? They will go too far and raise rates too much, and either the financial markets have a hiccup or the economy slips into recession or the plumbing of the financial system has a problem."

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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This is the No. 1 risk to the stock market right now, according to Jim Bianco - Yahoo Finance

The rally in Coca-Cola's stock (KO) is just beginning, said one closely watched beverage analyst on Wall Street.

"We see the company exiting FY21 transition year stronger for four reasons: 1) strong emerging markets despite still low vaccination rate, 2) on-premise recovering faster than originally forecasted, 3) restructuring and portfolio rationalization led to a more focused and agile organization, and 4) gross margin benefiting from incidence model. In addition, the valuation is compelling in light of improved fundamentals with a good line of sight for EPS to grow a 12% CAGR through FY23 reaching $2.71 that year, ex. potential divestiture of bottling assets," said Guggenheim's Laurent Grandet.

Grandet lifted his rating on Coca-Cola to Buy from Neutral with a revised price target of $66. He also increased his earnings projections on Coke for the next three fiscal years.

Coke's shares rose 1% to $59.86 in pre-market trading Tuesday.

The analyst's call comes as Coke has surprisingly been a top-performing stock these past three months.

Bottles of Coca-Cola soft drinks are displayed at a supermarket in the Brooklyn borough of New York. (Photo by Ramin Talaie/Corbis via Getty Images)

We say surprising as the company along with rivals in the packaged foods space continue to battle high levels of inflation that is weighing on profit margin potential. And for Coke specifically, 40% of its U.S. sales are on-premise and 30% is on-premise overseas (or tied to going out at restaurants, sporting events, etc.) not a stellar place to be amid the ongoing, unpredictable pandemic.

Shares of Coke have rallied to the tune of 12% in the past three-months, according to Yahoo Finance Plus data. The S&P 500 has returned 9.4% during that same stretch.

But Grandet believes now is the right time to play Coke's stock, citing better expense management under CEO James Quincey, a gradual return to normalcy in people going out to places and the recent acquisition of sports drink brand BodyArmor.

Adds Grandet, "We think the company is emerging leaner, and more agile with a portfolio focused on larger and more profitable brands that should drive better efficiency. The savings should help support marketing investments in 2022 back to 2019 level which should benefit the top line. In addition, the acquisition of BodyArmor now included in our model could add 300 points of growth to the North America segment and 100 basis points to the consolidated company in FY22."

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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The rally in Coca-Cola's stock is just beginning: analyst - Yahoo Finance

A reader going by Greg B wrote in recently to protest the topline spending number for the Democrats now-moribund Build Back Better legislation. Democrats claim the bill would cost $1.7 trillion over a decade, assuming some provisionssuch as an expanded child tax creditexpire after just one year. But the real goal is to keep those programs going with new legislation in the future, which means $1.7 trillion might be more like a down payment, with the real cost being a lot higher.

Only a clueless liberal could ever say $1.7 trillion is the top line number, Greg B. wrote. Democrats have proven to be nothing but liars as they tried to use gimmicks and cheat. The Democrats social programs never end.

Greg is right about the gimmicks. As a few Democrats in the Senate objected to the $3 trillion cost of the initial BBB outline, the bills drafters cut the cost by limiting the amount of time key provisions would be in effect. Thats not a Democratic specialty, however. Both parties use those types of accounting tricks. Many of the 2017 Trump tax cuts, for instance, expire in 2026, because keeping them on the books permanently would have broken the Senates budgeting rules. Republicans, like Democrats, shield the full cost of pet policies by phasing them out at the beginning, while hoping future votes keep them going.

[The Newmaverse is Rick Newmans community of commentators, critics, cranks and crazies. Join by following Rick on Twitter or sending Rick your thoughts. Future stories may result.]

But what about those social programs? Do they ever expire? Or does the social safety net always get bigger? Those are important questions, given that BBB could return in modified form in 2022.

Signs that read "Build Back Better" and "Expand Medicare" are seen as U.S. Senator Sherrod Brown (D-OH) speaks about the Build Back Better package outside the U.S. Capitol in Washington, December 15, 2021. REUTERS/Elizabeth Frantz

The biggest social programsSocial Security and Medicareare, in fact, Democratic policies that expanded and calcified over time. Anybody complaining? Both are very popular with members of both parties, and ideas about trimming them routinely go nowhere. Every advanced nation in the world has some form of retirement security, which arguably becomes more necessary as living standards rise and life expectancy increases. Advanced nations also get progressively wealthier, so why shouldn't they provide more benefits for citizens?

But other welfare programs favored by Democrats come and go, and 2021 actually proved that some social programs dont get beyond the pilot phase. The American Rescue Plan Congress passed in March was a purely Democratic construction that only crossed the finish line because Democrats won thin Congressional majorities in the 2020 elections. No Republicans voted for the ARP, which contained a variety of programs that couldnt have drawn bipartisan support.

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Many of them ran their course in 2021 and wont be renewed, even though Democrats still control Congress. A raft of federal unemployment benefits expired in September, and the third stimulus check that went to many families is surely the last. Some Democrats favor universal basic incomea fixed cash payment that goes to most or all adult citizens on a regular basisand the combination of jobless aid and stimulus checks was a form of that. But it was very expensive and never gained mass support. Many Americans actually felt stimulus aid went too far, so that experiment is over.

U.S. Senate Majority Leader Chuck Schumer peers out from behind a mock U.S. Treasury check as he holds a press conference on the expanded Child Tax Credit payments at the U.S. Capitol in Washington, U.S., July 15, 2021. REUTERS/Kevin Lamarque

Most of the ARPs COVID-related provisions, including food and rental assistance, were one-time expenditures. There were two major changes to the Affordable Care Act, one temporary and one permanent. The ARP cut insurance premiums for low-income people covered by the ACA for 2021 and 2022. It also included permanent new cost reductions for middle-income people getting coverage through the ACA. That will sharply cut insurance costs for 1 to 2 million middle-aged Americans who dont yet qualify for Medicare or get coverage through an employer and who were paying upwards of $20,000 per year in premiums before the fix. Both of those changes to the ACA could prove popular.

One of the biggest elements of the ARP was a six-month expansion of the child tax credit, along with a new rule allowing millions of qualifying families to receive half the credit in advance, on a monthly basis. That expired on Dec. 31, 2021. Whether to renew it is one of the most contentious issues among Democrats right now.

Many Democrats want to make this benefit permanent. But it would cost about $190 billion per yearnearly $2 trillion over the traditional 10-year budget windowand at least a few Democratic senators think this is way too expensive. The BBB bill included just one year of the expanded credit, which is one of the main objections of Democratic Sen. Joe Manchin of West Virginia, who sank the latest version of the bill in December by saying he wont vote for it. Manchin wants a more forthright bill that includes funding for the full expected lifespan of Democratic programs, or strips them out altogether.

The fight over the child tax credit proves Greg B. is wrong about Democrats ever-expanding social-welfare plans. Sure, most Dems would like to enlarge that net. But the political system isnt letting them. Theres no grass-roots movement demanding that Congress pass this provision, and theres a good chance voters will boot Congressional Democrats from power in 2022. Along the way, the social safety net is more likely to shrink than grow. Democrats tried, and voters yawned.

Rick Newman is the author of four books, including "Rebounders: How Winners Pivot from Setback to Success. Click here to get Rick Newmans stories by email.

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From the Newmaverse: This is when Democrats social programs die - Yahoo Finance

This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Tuesday, January 4, 2021

On Monday, during a session that by all rights should have been dominated by Apple (AAPL) becoming the first company ever to hit $3 trillion market capitalization, Tesla (TSLA) did what it normally does which is steal the spotlight.

As the iPhone maker set its intraday high-water mark, buzz surrounding the electric vehicle makers blockbuster fourth quarter deliveries hit a crescendo with the stock seeing its best day in nearly a year. Effusive praise from Wall Street included the estimable Dan Ives, who called it a trophy case quarter, and predicted Tesla could see a $2 trillion market cap in less than two years, Yahoo Finances Ines Ferre reported.

The markets rapturous response to Teslas big Q4 coinciding with Apples big milestone is an irony best captured by Ross Gerber, CEO of Gerber Kawasaki Wealth & Investment Management.

The investor was more complementary of Teslas software capabilities than its car manufacturing, something that came under scrutiny last week after it issued a massive recall of nearly half a million vehicles. It also underscored how two of the biggest names in technology remain intertwined years after Apple reportedly approached Tesla about a potential merger, which Elon Musk summarily denied.

Tesla is a better AI technology company than a car company, as we've all learned over the last 10 years, Gerber told Yahoo Finance Live last week, adding that the EV maker will be the most consequential company in the history of business within the next decade.

They build cars, but they're basically building an iPhone on wheels. And so the entire infrastructure that they've been building around service, for example, has been a big challenge for them. They've innovated some amazing things like mobile service.

In fact, very little has materially slowed Teslas ascent not even Elon Musks tax-related stock sale that temporarily put downward pressure on the shares.

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In a note to clients on Monday, Garrett Nelson, senior equity analyst at CFRA Research, boosted Teslas stock to a Buy from a Hold and hiked the 12-month price target to $1,250/share.

He pointed out that Teslas 2021 gains underperformed competitors like Lucid's (LCID) 280% boom and Ford's (F) 136% surge, but the completion of new factories in Texas and Germany sets the stage for further growth in 2022 and beyond.

The EV maker is increasingly popular in Europe, with Electrek reporting Norwegians have adopted its cars at a breathtaking pace. But Chinas vast market is where Teslas present and future lie as does a potential stumbling block for its ambitions.

In a report published on Monday, The Wall Street Journal underscored how the companys opening of a new showroom in Xinjiang, a region at the center of genocide allegations against the Chinese government, militates against Musks image as an iconoclastic rule breaker who frequently tangles with U.S. elected officials on Twitter.

The Xinjiang quandary is one Tesla also shares with a growing number of corporate American powerhouses like Nike (NKE), Walmart (WMT), Intel (INTC) and yes, Apple. The Morning Brief has previously covered the multitude of ways in which Beijings domestic woes, and its unique brand of geopolitical hardball, have ensnared the Sino-American bilateral relationship in a thicket of recriminations and tensions.

While China is a huge part of Teslas success, it also has the potential to inflict reputational damage on its brand as international furor toward Beijing grows more acute.

It also exposes the growing contradiction of American companies forced into a game of "go along to get along" with the Chinese government, even as they take increasingly polarizing social stances at home while paying virtually no political penalty for doing so.

By Javier E. David, editor at Yahoo Finance. Follow him at @Teflongeek

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Tesla, Apple and the new China syndrome - Yahoo Finance

It has been more than a decade since he last took the field, but Terrell Owens is ready to step in should Tom Brady come calling.

Owens, 48, said on his podcast Tuesday that he absolutely could replace Antonio Brown and help the Tampa Bay Buccaneers throughout the postseason.

At the end of the day, I know that I can do it, Owens said. When you think about this country and what its based off of, we are supposed to be a country of second, third, whatever chances. Look at the chances AB had Who's to say that I can't go out there and do it?"

Owens suggestion that he could hop in and join the Buccaneers on a whim is far-fetched. Hes nearly 50 years old and hasnt played since 2010.

The list of former receivers who are still in shape Owens said he has been working out the course of this entire season after an unnamed team owner told him to be prepared earlier this fall is incredibly small. Owens would be near the top of it.

Owens played in the league from 1996-2010, and racked up 15,934 receiving yards and 153 touchdowns. The six-time Pro Bowler had nine 1,000-yard seasons, and was inducted into the Hall of Fame in 2018.

Owens said he reached out to a few people to state his case for helping the Buccaneers, though its unclear how far that went or if the team would be interested in him even with their issues at receiver.

Brown is no longer a Buc after his bizarre exit on Sunday after stripping off his equipment and shirt, which marked the latest issue Brown has faced in recent years. Buccaneers receiver Chris Godwin underwent surgery to repair his ACL and MCL on Monday, too, and is out for the season.

As ridiculous as the idea may sound, and Owens gets that people would be doubting his comeback, hed be needed for only a handful of plays in a few playoff games. That, he said, is doable.

"If you think about where they are in the season, they don't need me for a 16-game season," Owens said. "Three to four games at the max. So, yes, I feel like I can go in, I can contribute at a high level and can be productive.

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Hall of Famer Terrell Owens absolutely wants to replace Antonio Brown and join the Buccaneers - Yahoo Sports

Over the last year, the markets have contended with a global shipping crisis, the ongoing pandemic, and creeping inflation. Despite those risks, a huge number of companies made their public debuts in 2021.

Were talking Coinbase (COIN), Rent the Runway (RENT), Robinhood (HOOD), and, of course, electric vehicle makers Lucid (LCID) and Rivian (RVIN). Not every company that went public performed well, though. While some 399 initial public offerings raised $142.5 billion in 2021, the majority of IPOs ended the year below their initial returns.

And while the 2022 market will start off slow thanks to the continuing pandemic and chip shortage, plenty of big-name firms are primed to hit the public markets this year.

Think Reddit, Flipkart, and Mobileye to name a few. And it doesnt stop there. Yahoo Finance spoke with Avery Spear at Renaissance Capital, who gave us the lowdown on the hottest initial public offerings coming to the markets in 2022.

Vinfast will bring its vehicles to the U.S. in 2022. (Image: Vinfast)

At the top of the 2022 IPO list is Vietnamese automaker Vinfast. A spinoff of Vingroup, a Vietnam-based conglomerate dealing in everything from real estate to health care, Vinfast is pivoting to electric vehicle manufacturing with its eyes on the U.S. and European markets.

As you've seen with Rivian, [electric vehicles are] a very hot space right now, Renaissance's Spear told Yahoo Finance. They've already started taking preorders, which is kind of around where Rivian was when it was coming to the market.

The company debuted two electric vehicles, the VF e35 and VF e36, at the Los Angeles Auto Show in November and plans to open a whopping 60 showrooms in the U.S. in 2022. The company plans to begin taking pre-orders for its vehicles in the first half of next year and have them on the road by the tail end of 2022.

With a projected $60 billion valuation, Vinfast will enter a U.S. market thats riding a wave of EV investments whether thats Tesla (TSLA), which saw its valuation skyrocket in 2021 to $1 trillion, or Rivian, which IPOd in November, raising nearly $12 billion.

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A self-driving vehicle from Mobileye's autonomous fleet. (Credit: Mobileye, an Intel Company)

Sticking with the automotive industry, Intel (INTC) is planning to spin out its Mobileye business in 2022. Acquired by Intel in 2018 for $15 billion, Mobileye is focused on the development of advanced driver assistance systems (ADAS) with an eye toward developing the technology needed to power self-driving cars. The IPO could be valued at as much as $50 billion, and prove to be a boon for chip giant Intel.

In December, the company launched a robotaxi pilot program testing its autonomous capabilities on the streets of Paris. The move will allow employees of the Galeries Lafayette Paris Haussmann to request a ride to work via the robotaxis four days a week. A safety driver will be behind the wheel.

Reddit had a huge 2021 with the explosion of activity on WallStreetBets, and 2022 should be even bigger, as the company goes public. (Photo Illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)

If you didnt know what Reddit was before 2021, the meme stock craze powered by the popular WallStreetBets subreddit changed that. The sprawling message board boasts more than 50 million daily active users, 100 thousand subreddits, and 50 billion monthly views. Yeah, its kind of a big deal. Its no wonder the site is often referred to as the internets front page.

Reddit has been around since 2005 offering users the chance to chat about everything from small town happenings to the best strategies to beating their favorite video games. But WallStreetBets brought even more attention to the service, and played a major roll in the retail investor boom.

Its no wonder the company, which confidentially filed paperwork with the Securities and Exchange Commission, is aiming for a $15 billion valuation when it goes public next year.

A worker at Flipkart, a leading e-commerce firm in India, scans a package on a conveyor belt inside its fulfilment centre on the outskirts of Bengaluru, India, September 23, 2021. REUTERS/Samuel Rajkumar

Walmart-backed (WMT) Flipkart is expected to join the public markets in 2022 with a valuation of $38 billion. The India-based company, which competes directly with Amazons own India site, offers everything from apparel to home appliances, with 100,000 sellers and 100 million registered users.

Just this month, Flipkart and Walmart invested $145 million in Indian produce company Ninjacart as a means to bolster its grocery delivery service, a category that has taken off dramatically in India.

Finally, theres software robot company Automation Anywhere. The SoftBank-backed firm helps businesses develop pieces of software, otherwise known as bots, that automate tasks like data entry for everything from human resources departments to sales and marketing.

It's robotic process automation, which, again, is kind of a hot area, Spear said.

The idea is to speed up operations by cutting down the amount of time it takes to do traditionally manual tasks. According to Spear, the company is valued at just below $7 billion.

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The 5 most anticipated IPOs of 2022 - Yahoo Finance

The Tennessee Titans could be getting one of their biggest offensive weapons back on the field in time for the playoffs.

Titans head coach Mike Vrabel said on Monday that running back Derrick Henry is close to returning from injured reserve, and they'll discuss opening his three-week return window in just a couple of days.

The Titans lost Henry to a foot injury midway through their Week 8 game against the Indianapolis Colts. Henry went in for foot surgery just a day after the game, which had a 6-8 week recovery timetable. It was possible for him to return in time for the playoffs, but no one was making any promises.

Henry's injury was a pretty big blow to the Titans, but they've managed to do well since he went down. They've won five of their eight games, including a 34-3 smackdown of the Miami Dolphins in Week 17. That game didn't just eliminate the resurgent Dolphins from the playoffs, it helped put the Titans in charge of their own destiny: a win over the Houston Texans in Week 18 would give them the No. 1 seed in the AFC, which includes home field advantage and a first-round bye.

That first-round bye is hugely important for the Titans and for Henry. If they can sit out the first week of the playoffs, that gives Henry extra time to get himself to full strength before he's dropped directly into the intense and unforgiving fire of the NFL playoffs. If the Titans can keep on being the same team they've been all season, they should be able to make it past the Texans with the No. 1 seed in their possession.

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Titans RB Derrick Henry could return to practice this week, be ready for playoffs - Yahoo Sports