Quick update to yesterday's post on gold...

In yesterday morning's blurb on gold we began with:

While the price action in gold has confirmed (as we've hinted) our near-term (bearish) sentiment on its prospects, others (the majority I suspect) clearly see it differently.

And ended with: 

Again, if we're right on the present economic setup, we may see a reversal in sentiment, and a continued slide in the price, in the coming weeks.

Here's a newsflash from yesterday afternoon:

Despite recent price action, folks remain bullish on gold...

While the price action in gold has confirmed (as we've hinted) our near-term (bearish) sentiment on its prospects, others (the majority I suspect) clearly see it differently.

Financial sector bullishness...

Back on September 7th we briefly explained why we remain stubbornly bullish on financials. Here's a chart of the moves in major sectors since then: 

Crazy Strong U.S. Job Market

Any "authority" who'd have you believe that the U.S. job market is anything but strong has been politically captured in the worst way.

Charts of the Day: October, the good and the "bad"

Well, if we live through today, September didn't deliver September. I mean, September is notorious for its abysmal historical stock market performance, and this year it turned out okay.

Careful with that populism folks!

Not being from Great Britain, I can't really say whether I would have voted for Brexit. I will say this, I love freedom, and I, therefore, respect the British people's right to... umm... limit freedom. Or, more palatable perhaps, I love freedom, and I, therefore, applaud the British people in their exercising the freedom to break from the EU and chart their own course going forward (sincerely).

Quote of the Day: The Key to Successful Investing

While we forever remind you that we (here at PWA) -- on behalf of our clients -- are investors, as opposed to traders, in our perpetual endeavor to understand what motivates market players we've found that studying the methodology of short-term traders helps us put short-term volatility into perspective.

This Week's Message: Businesses Are Looking to Invest/Expand

One of our chief complaints/concerns over the past couple of years has been an historic lack of capex  spending (investing on the part of companies in business-expanding capital), relative to past expansions.

Recessions in red:             click each insert below to enlarge...

Gold/Dollar Update

Back on September 7th we pondered herein the positive year-to-date correlation between gold and stocks:

"So what gives? Why is gold rising while stocks appear locked in a strong bull market? Are they indeed presently inspired by the same developments?"

A win for U.S. solar manufacturers, a loss for U.S. consumers!!

One step closer to a win for U.S. solar manufacturers, one step closer to a loss for U.S. consumers, and, ironically, the industry itself:   emphasis mine...

Cat shows global growth accelerating...

One of our favorite under-the-radar global economic indicators is Caterpillar's global sales. Cat's global sway, and the cyclical nature of its business, makes its sales results a true harbinger of global economic activity.

Chart of the Day: No worries about sentiment...

As we've been reporting herein, the macro economic setup supports the notion that the present bull market has more to run.

This Week's Message: The Fed, the Military, and the Housing Market

In this week's message we're going to jump around a bit.

For starters, I received inquiries pre and post yesterday's Fed announcement. Here was my response to a client who asked about how I saw the Fed meeting playing out and how it would impact gold and stocks specifically:

Tech Volatility to Ignore, and Some to Respect...

The following essentially serves as a good example of market myopia. I.e., how short-term trading can shake up stock prices and, alas, have an unsuspecting long-term investor wondering or, worse yet, acting.

Things Don't Always Work Out the Way They Ought To!

Remember back when the Fed started creating money like mad and sending it by the billions to the banks, in return for their holdings in treasury bonds and mortgage backed securities? For many legitimate analysts and too many illegitimate fear-mongers/gold purveyors this was a phenomenon that was certain to bring on rampant inflation and mass financial destruction. After all, the production of "paper money" at a pace far exceeding the production of goods and services had to push the prices of goods and services to the moon, right?

Sector Positioning

It's our intent here at PWA, and the primary purpose of this blog, to (between portfolio review meetings) keep our clients abreast of the thinking behind their portfolio allocations. With that in mind, here's a snip from an internal record which shows year-to-date returns by sector, our present target exposures, adjustments we've made within the past year or so, and our view of some of the prevailing and potential key themes that are most likely to either support or diminish the prospects for each going forward.

The Customers Live Elsewhere!

While we strive to maintain our focus herein on all things market and economic, every now and again we'll risk touching subscribers'/clients' nerves on topics that we believe impact/relate to markets and economics, but nonetheless spark ideologically-inspired rebuttals, if not rebukes (we're talking politics of course).

The Global Answer

I'd say that the most commonly uttered client question in review meetings of late has been, words to the effect, "How can the market be doing so well with all of the uncertainty in the world?"

Analysts are Loving Financials Right Now. Bummer!

As we've hinted a number of times herein, we presently like financials. The one thing that bothers me, however, is that Wall Street does too. 

Chart of the Day: Producer Price Inflation deserves attention...

Not to beat a dead horse, but, to add to our Monday message on input costs, here's the latest look at the Producer Price Index:

This Week's Message: You gotta give me data!

Hedge fund legend Julian Robertson fears a forming bubble in the stock market:

"The market as a whole is quite high on a historical basis," he said. "I think that's due to the fact that interest rates are so low. But there's no real competition for the money other than art and real estate."

 "I think we need interest rates to appreciate, to go up, because I think we are creating a bubble," he added.

Why Europe remains prominent in our portfolios. With a word of caution going forward...

Bespoke Investment Group's morning message spoke to why we remain bullish on European equities.

Worried about U.S. small businesses? Well, they're not.

We think the monthly NFIB small business survey is important to pay attention to.

Here's why (optimism reading and past recessions [red shaded areas]):  

Worried about the U.S. labor market?

Worried about the state of the U.S. labor market? Don't be.

Here's Bloomberg's comments on this morning's release of the Job Openings and Labor Turnover (JOLTS) Report (the last line speaks to our position on inflation going forward):

Input Costs are Rising

Yeah, inflation has remained stubbornly low, creating a bit of a conundrum for the Fed. Our view is that, on balance (in terms of the voting members), they'd like to continue nudging rates higher. 

Charts of the Day: Exceedingly Subpar Long-term Results...

While much ado is being made over the stock market's impressive results of late, when we look back a bit and consider its 10 and 20-year performance, the market's got some serious catching up to do.

Quick Followup to Yesterday's Hurricane/Economy Blog Post

Yesterday, I blurted out a quick post after reading a headline suggesting that hurricanes help economies. I prefaced it with a warning that the topic deserves more, and better, than I had time to present. After my little dinner story below, I'll offer up a bit more reasoning...

I asked our youngest over dinner last night if he thought hurricanes hitting communities ultimately help the economy. He answered "yes" almost instantly. "Why?" I asked. He went on to describe with unwaveringly confidence what many respected personalities -- one Fed president no less -- have been suggesting of late; that the aftermath activity will be legitimate economic stimulus.

Really? A Hurricane Can Be Good for the Economy??

The below is just a quick scribble after catching a headline this morning. The topic deserves more, and better, than you'll get here, but you'll get the point.

One of my many pet peeves is the faulty notion that somehow destruction at the hands of Mother Nature is a good thing for an economy. As New York Fed President William Dudley apparently stated in an interview this morning. I only read the headline:

This Week's Message: Believe it or not, we -- for now -- are living in a low-stress market environment. Although gold says otherwise...

At the beginning of each week we update a variety of technical and fundamental indicators/data as our way of monitoring market and economic conditions. We often share our interpretations herein.

Quote of the Day: Again, be careful what you ask for!

Scott Grannis points out how important trade is to your portfolio's bottom line (NIPA is "a measure of profits based on information supplied to the IRS"):

Why We Remain Bullish on Financials

Yesterday, the Canadian central bank raised its policy rate (by .25%) for the second time in 2 months. If you're wondering why we remain bullish on U.S. financials, the comments below from Canada's banking sector answer that question. The U.S. economic backdrop/trend ultimately screams (well, let's say yells, or speaks, certainly more than whispers) for higher U.S. policy rates -- plus, trading at 12.8 times this year's earnings makes them really cheap compared to every other sector, save for telecom (which we're currently avoiding):

Worried About the U.S. Services Sector? Don't be!

Here are Bloomberg's summaries for today's releases of the Institute for Supply Management's August Non-Manufacturing Survey and Markit's Services Sector Purchasing Managers Index:

Brief Market Commentary (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Chart of the Day: Futures traders see volatility picking up...

The VIX Index (aka the Volatility Index, and/or the Fear Index), which tracks the volatility component in S&P 500 options pricing, presently sits at a remarkably low 10.13. However, futures trades on levels 1, 2, 3 and 4 months out (yellow, red, purple and blue respectively) are suggesting that's about to change: 

Trump has smart, experienced folks around him. Question is, will he listen to them?

If any of you happen to be cheering the latest rhetoric regarding foreign trade; specifically the notion that the U.S. will cut off trade with any country doing business with North Korea, and last week's head-scratching (given the timing) threat to abandon an existing trade agreement with South Korea, well, since we're here to talk about your portfolio, you might want to curb your enthusiasm.  

Fasten your seat belts! Maybe...

Have you heard the claim that September is the worst month for the stock market? Well, actually, that's correct -- historically speaking of course.

Worried about U.S. manufacturing? Don't be!

As we finished up our discussion on the economy -- during a client review meeting last week -- I said "if we could only track one indicator it would probably be the treasury yield curve. A close second would be the Institute for Supply Management (ISM) Surveys."

The U.S. market this year (as in all other years) offers nothing for either side of the political aisle to hang its hat on... And that's a really good thing!!

Yes, it's been a nice year for the stock market, the world stock market that is. The majority of our readers live in the U.S., thus, we're generally U.S.-centric in our discussions herein (plus, we are talking the world's largest economy). And, yes, the U.S. stock market has been nothing to sneeze at lately. However, as you'll see below, it's been anything but a world leader.

Quote of the Day: Jobs clarity "may prove elusive" for the next few months...

Economist Carl Riccadonna called today's jobs number perfectly. Yesterday I read his preliminary analysis where he pointed out August's strong tendency to miss consensus expectations. He also pointed out the tendency for the number to be revised upward in subsequent months.

Man! Capitalism and the Freedom to Trade Across Borders are Beautiful Things! Pg2

Here's Bloomberg adding fuel to the free trade argument!       emphasis mine...

The shutdown of almost a quarter of U.S. crude refining capacity in the wake of Hurricane Harvey is presenting a rare opportunity for fuel traders in Asia.

Man! Capitalism and the Freedom to Trade Across Borders are Beautiful Things!

From Bespoke Investment Group's morning message:     emphasis mine...

....gas prices in New York (where the NYMEX future is benchmarked) currently trade $15.48/bbl over where they trade in Rotterdam (Europe’s busiest port) net of quoted shipping costs. In Galveston, Texas (currently under partial operations) gasoline is $9.62/bbl over Rotterdam prices net of quoted shipping costs. In other words, if traders can buy Rotterdam spot gasoline, book passage on a refined product tanker, and sell it forward in New York, they could be looking at $9mm gross margins, including the $3.52 in shipping price. For this reason, we expect PADD 1 product imports to surge, and local gasoline price spikes in the US to be temporary amidst a loose global products market.