RR Reading http://rrreading.com/ Thu, 12 May 2022 11:30:48 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://rrreading.com/wp-content/uploads/2021/03/rrrreading-icon-70x70.png RR Reading http://rrreading.com/ 32 32 Global wheat production faces weather threats as U.S. food prices climb • Farm Policy News https://rrreading.com/global-wheat-production-faces-weather-threats-as-u-s-food-prices-climb-farm-policy-news/ Thu, 12 May 2022 10:42:32 +0000 https://rrreading.com/global-wheat-production-faces-weather-threats-as-u-s-food-prices-climb-farm-policy-news/

Bloomberg writers Megan Durisin, Kim Chipman, Jen Skerritt and James Poole reported today that “As Russia’s invasion stifles Ukrainian wheat exports, driving up the prices of bread and noodles, the global harvest faces an additional test: extreme weather conditions.

Droughts, flood and heat waves threaten production from the United States to France and India, composition decrease in production in Ukraine. Almost every major producing region faces some threat or another. The only notable exception is Russiawhich is shaping up for a bumper crop and should benefit from higher prices and limited supply elsewhere.

“Wheat crops almost everywhere are under threat”, by Megan Durisin, Kim Chipman, Jen Skerritt and James Poole. Bloomberg News (May 12, 2022).

“Hot and dry weather is a growing concern” in the EUwhile the “drought [is] torments her WE central plains” and “[Canadian] growers are now trying to plant in fields that are either too wet or too dry,” the Bloomberg article states.

“Wheat crops almost everywhere are under threat”, by Megan Durisin, Kim Chipman, Jen Skerritt and James Poole. Bloomberg News (May 12, 2022).

India faces “blistering heat”, while “there are concerns about [China’s] winter wheat after unusual autumn flooding.

The Bloomberg article added that “Russia also experienced favorable weather conditions and could harvest a near-record harvest.”

Meanwhile, Keith Bradsher reported in today’s New York Times that, “China’s winter wheat harvest next month is one of great uncertainties in a global economy already struggling with high commodity prices, especially in regions heavily dependent on crops from Russia and Ukraine.

If China’s harvest fails in the coming weeks, it could push food prices up even further, deepening hunger and poverty in the world’s poorest countries.

And Reuters writers Naveen Thukral and Hallie Gu reported today that “The wheat harvest in Argentina for the 2022/23 season should be around 19 million tons, down from 22.1 million tons harvested during the previous season, the Rosario Cereals Exchange (BCR) announced on Wednesday.

Specifically on production variables in the United States, Patrick Thomas and Kirk Maltais reported in today’s Wall Street Journal that “farmers are in a race against time to get their crops in the ground this week, with corn, soybean and wheat planting well behind their usual pace.”

And as for edible oils, Laura Reley reported in today’s Washington Post that “extreme weather and war in Ukraine have tight global supply of four most commonly used types of vegetable oil — staple ingredients as ubiquitous in home kitchens as they are in restaurants and packaged foods. In low-income countries, cooking oil represents one of the largest weekly expenses for poor and sour families.

As production variables shift in major global growth regions, US food prices continue to climb.

Rachel Siegel reported on the front page of today’s Washington Post that, “Inflation eased slightly in Aprilshowing some of the slowest gains since last summer, although it remains at its highest for 40 years and still has a long way to go before Americans feel relieved.

“Inflation pressure continues, despite slight slide”, by Gwynn Guilford. The Wall Street Journal. (May 12, 2022).

“Data released Wednesday by the Bureau of Labor Statistics gave policymakers nascent hope that soaring inflation could begin to slow: prices pink 8.3 percent in April compared to a year ago, and 0.3 % compared to the previous month. On the other hand, March the prices were raised 8.5 percent over the previous year, and a stronger 1.2 % compared to the previous month.

“The food index increased by 0.9% in April compared to March, his 17th consecutive monthly increase,” the Post article said.

Bloomberg writer Zijia Song reported yesterday that “Egg prices soar in new US inflation datapushed by a deadly bird flu that has killed nearly 10% of the country’s chickens, adding to already rising food prices.

“Egg Prices Rise in US Inflation Data as Bird Flu Wipes Out Hens,” by Zijia Song. Bloomberg News (May 11, 2022).

“A dozen eggs in the grocery store cost 23% more in April than in March, $2.52. It’s the largest increase among consumer products tracked by the US Bureau of Labor Statistics, in a report released Wednesday.

Also yesterday, Reuters editors Trevor Hunnicutt and Jarrett Renshaw reported that “US President Joe Biden Wednesday blamed Russia’s war on Ukraine for the latest global food price spike and visited a family farm in Illinois where he pledged to support farmers across the country as they seek to fill the supply gap.

The Reuters article explained that “The White House on Wednesday announced actions to help American farmers boost food production and reduce food prices, including doubling funding for domestic fertilizer production and increasing technical assistance for nutrient management tools.

“The administration will also increase the number of counties eligible for double crop insurance for planting a second crop on the same land in the same year, the White House said.”

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Rocket Mortgage and Quicken Loans Parent Stock Could Be Hurt | hake mark https://rrreading.com/rocket-mortgage-and-quicken-loans-parent-stock-could-be-hurt-hake-mark/ Wed, 11 May 2022 22:32:02 +0000 https://rrreading.com/rocket-mortgage-and-quicken-loans-parent-stock-could-be-hurt-hake-mark/

Rocket companies (RKT), which owns Rocket Mortgage and Quicken Loans, is facing squeezed margins and falling profits. The reason is that real estate refinance volumes and new mortgage applications are drying up.

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Rocket Mortgage is a leading direct-to-consumer mortgage lender. It uses the same business model as Geico uses to sell car insurance without agents. However, this is do not profitable enough to keep RKT’s stock from falling even further.

The reason is, as the The Wall Street Journal just announced, new mortgages are down 25% from a year ago. This is based on data released by the Federal Reserve Bank of New York on Tuesday, September 10. This is mainly due to new refinances being down 40% year-on-year and purchases of issued mortgages being flat. The WSJ said this was due to the Federal Reserve’s two rate hikes, the latest being a 50 basis point hike on May 4.

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As a result, Rocket Companies is suffering. He earns most of his money by flipping the mortgages he generates. Rocket Mortgage and/or Quicken loans return the loans they originate within days of closing. This is called “gain on sale” (GOS) revenue, and it is down significantly.

Additionally, Rocket retains the right to service the loan (MSR or Mortgage Service Rights). This MSR revenue is stable but not growing as fast as GOS revenue. Historically, MSR revenue has been Rocket’s second largest line of business. But GOS revenues are falling so dramatically that the MSR line may actually overtake GOS. This is not a good sign for RKT stocks.

Poor results at rocket companies

On May 10, Rocket Companies announced that its GOS revenue fell to $687.17 million, now below its MSR revenue of $796.6 million. This is the first time the GOS has fallen below the MSR line, as the last quarter its GOS line was $993.5 million against $926.8 MSR revenue. This implies that over time, the MSR revenue line could also drop.

Moreover, the underlying reason is that its GOS revenue margins have dropped. In the first trimester, they went from 3.74% to 3.01%. As rates rise, the company cannot cover its increased earnings on financing costs as quickly. Moreover, the volume of mortgages it generates is starting to plummet. People are pulling out of refinancing and buying homes.

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Where That Leaves RKT Stock

The problem for RKT stocks is that there is still no end in sight for further rate increases. Today, the Bureau of Labor Statistics reported that inflation has been stubbornly high at 8.3% over the past 12 months. As a result, the Fed will have to keep raising rates to destroy inflationary expectations.

As a result, it is very possible that RKT stock will fall further and easily fall below its book value. As of March 31, this amount had fallen to $8.7 billion, down $1 billion in 3 months from the end of December 31, 2021.

Given that the market capitalization of RKT stock is currently $15.5 billion, this implies that it could drop 43.8% just to reach a price-to-book multiple of 1.0x at 8.7. billions of dollars.

Also, the book value could continue to drop, I estimate RKT stock could drop 50% from here. Value investors generally want to see a margin of safety. They like to wait for a stock to trade at two-thirds of its book value. So for now, defensive investors are going to let it drop until it drops 50-60% further to $3.00-$3.50.

What can investors in RKT shares do?

First, investors who are already in the stock might be willing to lower the average and continue to lower their base in the stock as it falls. Another strategy, which can be implemented in conjunction with this, is to write covered call options.

For example, for every 100 shares you hold, you can sell 1 out-of-the-money call option a few weeks later. Here is an example of how it could work. Look at the table below.

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This shows that a month later, calls on June 17 allow you to sell your 100 shares for $8.99. That’s over 22% more than today’s price. In addition, you receive, at the midpoint, 20 cents per share, or $20 per contract (before expenses). It goes into your account and stays there immediately.

This is actually a hedge that provides a dividend of 2.7% (i.e. $0.20/$7.33) on the current price of $7.33. If RKT stock does not reach $8.99 before the close of business on June 17, your shares will not be sold. If the stock goes above that price, you can sell it at $8.99 and keep the capital gain.

In effect, you receive coverage during the following month. This helps you hold onto your stock and weather the storm if RKT stock continues to drop.

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By the way, don’t forget to “follow” me completely and be sure to download the Newsbreak app to become a registered subscriber. This way you can also see all my articles in the past. Click the link under my profile name.

This is not financial advice and you should not rely on my analysis when buying or selling stocks. I do not undertake to encourage you to buy or sell securities.

I rely on the “editor’s exclusion” of the Investment Advisers Act 1940 to provide this information without any personalized or individualized investment advice.

Mark Hake writes about InvestorPlace.com, Barchart.com, Medium.comand Newsbreak.com as well as a Beehiiv free newsletter on stocks and cryptos.

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Ex-Everton and Real Madrid star James Rodriguez wants Liverpool to win the Champions League https://rrreading.com/ex-everton-and-real-madrid-star-james-rodriguez-wants-liverpool-to-win-the-champions-league/ Wed, 11 May 2022 09:55:19 +0000 https://rrreading.com/ex-everton-and-real-madrid-star-james-rodriguez-wants-liverpool-to-win-the-champions-league/

Former Real Madrid and Everton midfielder James Rodriguez hopes Liverpool can prevail in the Champions League final despite their links with their opponents.