Friday, August 31, 2018

Imagine Being 'Basically' (Competitively) Shut Out of Half of the Rest of the World's Markets!

Our (the U.S.) economy amounts to 24.3% of the world economy. Can you imagine a situation that takes us out of the trading mix (on competitively favorable terms) on 50% of the rest?

Well, frankly, you need to:

Thursday, August 30, 2018

Before You Get Too Enamored With the "New All Time High"

Before you get too crazy over the S&P 500 eclipsing its January 26 (all-time) high, recall that, per last week's video commentary, a more pertinent benchmark for diversified portfolios -- the NYSE Composite Index -- has a good ways yet to go:

China's Picking Up Where We're Presently Leaving Off!

Was talking with a friend yesterday about the ultimate (we're not nearly there yet) risk of the dollar losing its "world reserve currency" status if America truly adopts fundamentally less-global policies over the long-term.

Tuesday, August 28, 2018

Today's Economic Data Dump: Anything But Dumpy!

All we can say about today's economic data releases is that anyone who would suggest that the presently flattening yield curve points to severe risk of near-term recession is really -- for whatever  unsupported-by-the-evidence reason(s) -- aching for a recession. 

Here's our summary:

A Problem With Yesterday's US/Mexico Trade News

Well, there's a problem with yesterday's announced trade deal with Mexico. 

Sunday, August 26, 2018

This Week's Message: The Fed's Clearly Behind the Curve

If I had a nickel for every time I've read, or heard, an "expert" proclaim that the Fed is forever the culprit who brings on U.S. recessions, well, I'd have me some serious nickels.

Charts of the Day: Lots of stuff moving!

Whenever I find myself on the freeway I take visual note of what you might call the big-rig-to-regular-car ratio. When it looks to me like there's a disproportionate number of semis relative to Subarus on the road I'm thinking the economy's in pretty decent shape. And I've been seeing lots of trucks these days! 

Generally, I find that what my eyes tell me while driving is confirmed by my charts.

Thursday, August 23, 2018

Bonus Quotes of the Day: Not 1974

Two things worth quoting in CNBC's article titled Stocks Fall As Worries About US-China Trade, Trump Legal Issues Dampen Investor Sentiment.

Market Commentary: Not Chasing the S&P (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:

Quote of the Day: Not Something to Celebrate

If there's one fundamental reality we all need to understand -- regardless of whether or not we agree with the present international trade track we're on -- is that it is NOT in any way good news for the world's largest economy that the #2 may be under some stress. 

Wednesday, August 22, 2018

Bonus (and most important) Quotes of the Day: It's Definitely the Economy, However...

Larry Kudlow, President Trump's top economic adviser, nailed it this morning (to regular readers this should sound familiar):

Quote of the Day: U.S. Offerings Are Hugely Popular Elsewhere!

U.S. offerings are exceedingly popular in Asia -- the home of 4.5 billion potential customers (nearly 14 times potential U.S. customers!). 

Tuesday, August 21, 2018


In this week's message we reiterated our position that a protracted trade war "would indeed lead ultimately to a serious global recession."

Sunday, August 19, 2018

This Week's Message: Our Trade-Risk Rotation Theory

Clearly, recent technical trends favor the economically defensive sectors over the cyclical. We should view this as a legitimate red flag that the bull market may be moving into its later stages; as traders rotate (their buying) away from economically sensitive stocks to those that tend to fare better when expansions begin to peter out.

Friday, August 17, 2018

Is Tech Finally Giving Way?

Coming into this year our analysis of general conditions dictated that we maintain a moderate target weighting (presently 14% of equities) to technology. That's despite the huge momentum the sector had coming into the year, and our acknowledgement of the S&P 500's historically high weighting (presently 26+%) to the sector. We reference the latter because we recognized that we would likely under-perform the S&P should tech continue its epic run.

Thursday, August 16, 2018

Stat of the Day: Very Low 'Current' Recession Risk In This Consumer Driven Economy

While our PWA [Macro] Index has dropped from the low 80s to the low 40s (still a historically decent reading) during the course of this year, the driver of 2/3rds of U.S. economic activity -- based on his/her credit performance -- is doing just fine.
Here's Bespoke Investment Group on the subject:

Chart of the Day: No Pros When It Comes To tariffs!

Here's Bespoke Investment Group on the effect of tariffs on ironically the metals and mining industry group:
"You can say whatever you want about tariffs and the pros and cons on both sides of the argument, but with respect to the metals and mining companies, keep your ‘pros’ to yourself.  The group has been stuck in a downtrend ever since the topic of tariffs first came up, and it’s now basically in full flush mode."

Quote of the Day: Hoping Cooler Heads Prevail

We titled our August 11 blog post
"Hugely Broad Tariff Risk! But imagine the upside if/when cooler heads prevail..."
The Dow's up 324 points as I type, here's the story:

Wednesday, August 15, 2018

Quote of the Day: Markets Will Fall Despite the Fundamentals

Ironically, given this morning's economic reports (they were net strong) and the drop in stock prices (as well as this year's overall lackluster results despite the strong fundamental setup coming in), last evening I found myself going over my old notes in Jack Schwager's instructive book A Complete Guide to the Futures Market.

Tuesday, August 14, 2018

Charts of the Day: Small Business Owners Feeling Good About Their Prospects!

Being that small businesses employ 2/3rds of American workers, we take the National Federation of Independent Business (NFIB) monthly survey seriously.

Here are the three areas we track, updated this morning with July's results (note today's look versus heading into past recessions [red shaded areas]):   click to enlarge

Monday, August 13, 2018

The Week's Message: Near-Term Mixed

Here's the summary for our market/economic analysis for this week:

The Technicals (long-term trends)

Our long-term technical trend analysis remains notably bullish for the S&P 500. 

Saturday, August 11, 2018

America Prospers From A Prosperous China

In my August 6 blog post I made mention of the following recent commentary by the President:
Over the weekend he boasted that the U.S. market is "stronger than ever" and that Chinese stocks are "down 27%". The U.S. is therefore "winning the trade war."
After updating readers on the returns of U.S. stocks vs. Chinese stocks since the 2016 election (it's a dead heat by the way), I stated the following:

Hugely Broad Tariff Risk! But imagine the upside if/when cooler heads prevail...

UBS compiled its list of companies "most at risk from President Trump's trade war." 

I entirely agree that the present trend toward protectionism puts the listed companies at serious risk. But, my, we're only talking the tip of the iceberg here! 

Friday, August 10, 2018

Market Update: Why Shorts Have Been Losers This Year (video)

In this morning's video I update you on the state of the current market correction as well as general 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:

Wednesday, August 8, 2018

Chart of the Day: U.S. Government Borrowing -- and Foreign Investors Lending -- At Record Pace

Three key takeaways from the chart and highlight below:

Our Latest Log Entry: Washington's Pushing the Needle

Sharing the latest entry to our log:

8/7/18 (Tuesday)

The market continues to hold up remarkably well given the trade war threat, which I attribute 100% to favorable general conditions, as there’s absolutely nothing bullish in the prevailing rhetoric. 

My "remarkably well" comment notwithstanding, given the hugely strong setup coming into the year, the exceedingly positive Q1 earnings results, and I’ll say notably positive Q2 results, tax cuts, etc., the fact that the broad market isn’t up considerably more speaks to the ill-effects/uncertainty of protectionism.

Tuesday, August 7, 2018

Is Capitalism Only For the Elites?

Yesterday The Economist posed the following question to its readers:
"Is capitalism rigged in favour of the elites?"
 Its own Callum Williams set the stage for the debate with:

The Data Say There's Something Wrong With The Present Narrative

In my world -- and, most importantly, on behalf of our clients -- I can't let my politics cloud my thinking. And of course cloudy, no, make that foggy with virtually zero visibility, would be the state of my economic thinking if my guide happened to be a given political narrative. 

Monday, August 6, 2018

In Terms of The "Trade War" and U.S. vs China Stocks, If We Must Go There, Both Sides Are Just Now On Equal Footing

Given the passion many folks have for their politics, I find myself prefacing more blog posts these days with the blunt reminder that we do not play politics at PWA. If, therefore, we strike a nerve, know that that's never our intent. That said, we're willing to run the risk, for if we weren't this investment/economic blog would be of little use to anyone, except perhaps for those only interested in commentary that jibes with their political ideology. We'll assume that's not you, or you'd have unsubscribed long ago. 

For our investment client readers, our willingness to remove our political biases from the business of economic research and portfolio management has to be utter music to your ears, for obvious reasons!


In a recent CNBC interview the President said "we're playing with the bank's money", then followed with a proclamation that the market is up 40% since his election. Over the weekend he boasted that the U.S. market is "stronger than ever" and that Chinese stocks are "down 27%". The U.S. is therefore "winning the trade war."

Sunday, August 5, 2018

This Week's Message: General Conditions Remains Strong, But We're Seeing Some Cracks Here and There

For this week's message we're sharing the general conditions summary of our weekly analysis, which includes my view of the possibilities going forward: 

Open Letter to National Economic Council Director Larry Kudlow

Dear Mr. Kudlow,

On occasion over the years when I tuned into your old CNBC talk show I found my self appreciating your mostly free market way of thinking

Today I'm hoping you can shed some light on your recent change of heart.

Saturday, August 4, 2018

Chart of the Day: Copper's Flashing A Warning Sign!

Copper, the ubiquitous industrial metal, is considered an economic indicator in and of itself. In fact, its price is one of the 84 inputs to our macro index.

Friday, August 3, 2018

Quote of the Day: Service Sector Remains Strong, But....

The good news in today's QOTD is that the service sector is still humming along fine, signaling that -- for the time being -- we need not worry about recession (ISM above 50 denotes confidence and continued expansion). The bad news is that sentiment has waned a bit  of late, and the cause is a totally avoidable top-down creation:

The Trade Gap Widened In June, Great News for the U.S. Treasury!

Good news today for the U.S. Treasury!
"The total deficit in goods and services rose to $46.3 billion for the month, from $43.2 billion in May, the Commerce Department reported Friday. Imports increased by $1.6 billion, to $260.2 billion, while exports declined by $1.5 billion, to $213.8 billion."
Yep, no kidding. Despite all that you're hearing, a widening of our trade deficit is a good thing given the current state of U.S. government affairs.

Thursday, August 2, 2018

Quotes of the Day: "Had we frozen the economic structure in 1950"

The consensus estimate for the July employment report (due out tomorrow morning) is for 192k new jobs created. The unemployment rate is expected to come in at 3.9%.

This morning's jobless claims number extended the record below-300k streak to 178 weeks.

Wednesday, August 1, 2018

The ISM June Manufacturing Index: Telling It Like It Is!

The Institute for Supply Management's monthly manufacturing and services sector surveys are hugely important economic indicators. They essentially give you the take on present conditions and future prospects by the nation's purchase and supply executives. Who better to listen to?