Sunday, March 18, 2018

Headline of the Day: Bitcoin a serious threat, not! -- And -- Blockchain itself, however, is another proposition altogether.

From day-one, when anyone asked me how I felt about bitcoin I'd reply, "I absolutely love the concept, but fuggetaboutit if you think it's going to take over the world. I mean, imagine the threat to the global monetary system. The powers that be will have nothing of it, I promise."

Saturday, March 17, 2018

We Still Think the Market's a Bit Behind the Inflation Curve

On balance, last week's economic data releases were decent; better than decent when we look at consumer confidence, jobs-related data and industrial production. We're seeing virtually no signs presently of any heightened risk of a near-term recession; which is of course what we're forever on the watch for as we consider our equity exposures.

Friday, March 16, 2018

Don's Mom

The mother of the best economist I know passed away on this day in 2008. The tribute he penned to her a decade a go is timeless, and most inspiring. 

We Had A Huge Trade Surplus In January!!

Wow! We had a huge trade surplus in January!

Well, not by popular definition, but certainly by your investment consultant's 😇.

Wednesday, March 14, 2018

Why Media Headlines are Virtually Worthless

Now, it is true that the Dow is down over 100 points as I type. And it is true that retail sales unexpectedly dropped last month (something we'll dig into and apply to our model). However, does the message implied by the following headline paint an accurate picture of this morning's move in the Dow?

Data of the Day: Small Business Owners Continue to Like What They See

Small business is the employer of U.S. citizens, and, thus, the internals of the National Federation of Independent Business monthly survey account for 3 (of the 49) inputs to the economic component of our macro index. 

Tuesday, March 13, 2018

This Week's Message: Why We Like Financials Right Here -- And March Trends

This week we raised our financial sector target weighting to 18% (from 16%) of equities, making it our single heaviest position (previously tied with materials and industrials [still at 16% each]). Here's why:

Market News of the Day: Protectionism putting the bull market to the test...

For the umpteenth time, we emphasize that, while our analysis of current conditions favors equities going forward, we see a U.S. push toward protectionism as the development that will put the data, and, thus, our thesis, to the test. 

We Remain Constructive on Tech, However........

The following headline crosses my screen after what was a strong start for the market this morning:
The S&P 500 and the Nasdaq turn negative as tech rolls over.
We do remain constructive on tech going forward, however, per the following, not as much as we were this time last year:

Sunday, March 11, 2018

Milton Friedman on Steel Tariffs (VIDEO)

If you suffer any ambiguity over the steel and aluminum tariff debate, allow Milton Friedman six minutes to clear it up for you:

Saturday, March 10, 2018

Data of the Day: Capex easy to do going forward...

While getting a jump this morning on our internal weekly macro update, one of the inputs to our index -- the "corporate financing gap" -- jumped out at me. By comparing non-residential fixed investment (i.e., business capital investment) to corporate cash flows this indicator gauges corporate America's wherewithal to expand. 

Quote of the Day: More than Goldilocks

In yesterday's blog post we suggested that the stock market (participants in the aggregate) -- based on its strong positive response (Dow +441) to the February jobs report -- is betting that interest rates will remain tepid despite the economy picking up some real steam. 

Our suggestion lies partly in the fact that when January's healthy jobs report featured a surprise pickup in wages (exceeded estimates, while February's missed) -- presumed inflationary -- the market tanked (Dow -667):

Thursday, March 8, 2018

Let's Talk Economics, Not Politics!

Here's the headline:
(Bloomberg) -- China’s exports surged and its trade surplus unexpectedly widened in February, illustrating the lopsided nature of global commerce that Donald Trump is preparing to introduce protectionist measures against. Overall exports rose 44.5 percent in February from a year earlier and those to the U.S. surged 46.1 percent, customs data showed...
Here's one possible spin:

Wednesday, March 7, 2018

Video Commentary: More On Current Conditions

This morning's video commentary piggy backs onto last night's with a little deeper dive into our ongoing research and assessment of current conditions.

Highly recommended for clients!

A Little Clarity on the Mucky Protectionism Debate

Here's a slice of my end of a friendly dialogue regarding current events. I'm offering this up to inject some clarity into the very mucky protectionism debate:

Tuesday, March 6, 2018

Video Commentary: Putting Tomorrow's (literally tomorrow's) Volatility Into Perspective, and More on the Current Setup

The President's chief economic adviser -- one the capable advisers (who adamantly opposed the recently unveiled tariff scheme) we referred to in an earlier post -- announced his resignation this evening. As I type, Dow futures are pointing to a 400 point decline at the open. 

Here's some perspective:

This Week's Message: Hey, Chicken and Paper Clips Say There Ain't No Inflation -- And -- This Week's Vision Test

In a recent weekly message we suggested that a strong two-day rally in stocks at the time was based on false pretenses: the notion that the economy isn't in fact exhibiting the kind of strength that would see interest rates notably higher over the foreseeable future, and that that's a good thing for stocks. 

Again, we think the data, and market history, fly directly in the face of such thinking.

Monday, March 5, 2018

Quote of the Day: What Could Bring the Bears Back...

Economist Ed Yardeni echoes our chief concern for the market coming into this year (as expressed in our 2017 year-end letter), and the idiosyncrasy that we've stated will likely mute the specifics of what might otherwise test our bullish thesis going forward:

February Surveys Confirm Our View of Present Conditions

This morning's releases of the services sector surveys by Markit Inc. (PMI Services Index) and the Institute for Supply Management (ISM Non-Manufacturing Index) essentially confirm what our macro analysis tells us about the current state of the U.S. economy.

Sunday, March 4, 2018

Pins and Needles Over Protectionism

Much like other head-scratching phenomena (read tweets and other public commentary of an impulsive nature) of the past year+, the latest calls for anything but knee-jerk reaction. It does, however, demand that we assess our various areas of exposure to what in my humble view is the most ill-advised impulse thus far. 

Saturday, March 3, 2018

Quote of the day: These things take time...

Bespoke Investment Group's guidance on present circumstances mirrors ours:

One More on Tariffs

Okay, we'll do just one more very quick post on the potential economic/market/political effects of tariffs. 

Going forward we'll wait for the details and monitor the immediate impact on market technicals and begin assessing the potential longer-term fundamental implications for both our U.S. and non-US exposures, if any:

So much for this being about U.S. Jobs:

Friday, March 2, 2018

The Simple Sad Truth About Tariffs (Q&A)

In this morning's video commentary I suggested that I'd offer up more on protectionism and markets over the weekend. Thinking about it, the brief mention in this morning's written post pretty much sums up the why of the market's negative reaction:

Video Commentary: The Correction and Our Assessment of Present Conditions

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:

Present volatility -- per all of our commentary -- makes sense, however....

We've been strongly suggesting that the correction has yet to run its course, which means days like the last three (we'll see about today) were in the offing with or without the ill-timed (always ill-timed!!) announcement that the U.S. is about to do a number on its own consumers, its exporters, its manufacturers who import all manner of components, and of course its key international relationships.

Thursday, March 1, 2018

Oops! Scratch the Earlier "Market-Centric Trump!" Post

Forgive all of the intrusions this morning, this should be the last time I bug you today! But I want you to understand that recent volatility has at this point nothing to do with the fundamental market setup.

Headline from a minute ago:

Quote of the Day: The Fed and the Financial Sector

Bloomberg sees financials as the sector to benefit the most under the new Fed regime. As evidenced by it being our current top sector weighting, we happen to agree (although a financials-friendly Fed is not the only thing that has us bullish on the space):

Market-Centric Trump!

Per this morning's blog post, I'm thinking the pending tariff announcement could (depending on severity) be a negative event for the stock market. I suggested that the President is very market focused and would ultimately look to escape any measure that clearly hits stocks in a bad way.

Another Potential Catalyst for Volatility -- And the Market's Definitely In the Mood For (or in need of) Volatility!

We've been pounding aplenty herein on the normalness and, frankly, the necessity (this bull market is overdue for a pause/shakeout) of present volatility! So the bottom line is that stocks remain ripe for some pain, regardless of the catalyst. I.e., the market has to be in the mood to correct for, say, a more hawkish Fed stance -- and/or something else -- to set things in motion.