Monday, November 11, 2019

Some Magical Thinking Going On In The Corporate Debt Market

In last Thursday's video I said the following, with regard to present under-the-surface risks compared to what we faced leading into the last "great recession":

Sunday, November 10, 2019

Chart, and Quote, of the Day

This chart and accompanying stats, along with Friday's video commentary and last week's weekly message, adds to our presently defensive narrative:

Saturday, November 9, 2019

Friday, November 8, 2019

Careful On The Slopes

IMA's CEO and Chief Investment Officer Vitaliy Katsenelson, in a recent Real Vision interview, offered up the perfect analogy for the market environment we in our view presently face:

Video Commentary: Quick Look At General Conditions

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Quote of the Day: Scariness In The Debt Market

In yesterday's video I mentioned the scariness of what we're seeing in the private equity space, in leveraged loans, and in collateralized loan obligations (CLOs).

Thursday, November 7, 2019

This Week's Message: Greed In Markets Isn't Good If You're Bullish On Stocks -- Or -- Who's Swimming Naked?

Personal note: Chatting with Nick after the close this afternoon I found myself venting on behalf of anyone who might be exposed to this market on a short-term basis. I don't know that in my 35 years of doing what I do I've seen a more myopic, purely headline driven market. Of course the now-huge preponderance of algorithmic trading is (in terms of dimension and influence) a relatively (as in the past decade or so) new thing, and not to mention the social media platforms upon which traders become totally distracted -- and led through a veritable labyrinth of theories on everything from macro economics to day trading -- makes for utter short-term confusion in markets; particularly today, with its intense political and geopolitical backdrop.

Video Commentary: Legitimate Trade Optimism, What Lies Beneath, And How Our Hedge Plays Out

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Wednesday, November 6, 2019

Tuesday, November 5, 2019

Quote of the Day: China Now Playing Hardball

All of the promising trade rhetoric coming from President Trump and company of late appears to have given Xi the green light to go for the jugularemphasis mine...

This Morning's Log Entry

11/5/19 Tuesday

As I suggested in Sunday's blog post, given the latest momentum, historical precedent (past years like 2019), seasonality, odds of soft Brexit and huge incentive to ink a “Phase 1” U.S./China trade deal, the year-end (return, as opposed to risk/return) setup looks good for equities. Potential problem being, sentiment is ramping up notably, and — given the abysmal predictive track record of the short-term consensus — that’s a contrarian indicator. 

Monday, November 4, 2019

Bonus Quote of the Day

I mentioned the prospects for the following in this morning's video commentary. If I'm right about the White House's present stock market-centricity (a no-deal "phase 1" would play pure havoc with markets), China may very well get what it's after; despite the political push back the Administration is bound to receive from both sides of the aisle:

Quote of the Day: Feels Familiar

The following reply to hedge fund consultant Thomas Thornton's blurb this morning (about the market rallying on trade rhetoric) echoes our latest video message:

Video Commentary: Wind Machines Set On High

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Sunday, November 3, 2019

Quote of the Day: Insiders Fading Recent Rallies

Considering seasonality (November and December tend to be very good months for stocks), Friday's better than expected jobs number, the Fed's recent rate cut and its dovish cooing, and the market's propensity to trade higher on anything suggesting trade war(s) are not due to escalate (the White House -- as the latest tweets, etc., suggest -- clearly gets that message), a strong year-end for stocks is making a lot of sense. Although, I have to say, considering the consensus pessimism coming into what turned out to be a very good October (markets love to disappoint the consensus), perhaps a strong year-end makes a little too much sense.

Friday, November 1, 2019

Quote of the Day

Here's a bit more from the IMF's latest Global Financial Stability Report that speaks to our concerns over the present level of stock and bond prices relative to the underlying fundamentals (i.e., valuations):

Market Commentary (video)

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Thursday, October 31, 2019

Quote of the Day

"There's much more to the game of stock speculation than to play for fluctuations of a few points. 
It takes a man a long time to learn all the lessons of all his mistakes. They say there are two sides to everything, but there is only one side to the stock market; and it is not the bull side or the bear side, but the right side. It took me longer to get that general principal fixed firmly in my mind than it did most of the more technical phases of the game of stock speculation."
Jesse Livermore 

This Week's Message: Absolutely, There is A Bubble

Yes, there is a bubble out there! How do I know that? Well, think about it; if indeed the economy is as good as even Fed chair Powell suggested yesterday, why on Earth would they even dream of lowering interest rates, and why would they commit to not raising them till they see the whites of inflation's eyes virtually pressing against the ends of their noses, if not the back of its head as it races right past them? There has to be something that has the Fed exceedingly concerned if they feel they have to stimulate an already humming economy.

Wednesday, October 30, 2019

Quick Fed-Meeting Followup and Bonus Quote of the Day

The market, after a bit of hemming and hawing, traded higher on this "Fed day". You might think it was the quarter-point rate cut that did the trick, but of course we knew that was coming, and the market actually traded lower on the announcement itself. What traders saw as a green light to buy was Powell's comment that there'll be no rate increases until inflation rises "significantly".

Quote of the Day

I agree with Kevin Muir, strategist with East West Investment Management, in a recent Real Vision interview with regard to the real-world efficacy of yet more monetary stimulus (which is on its way a little later today):

Prudence Demands

While I'll no doubt have more to offer by way of commentary on this morning's Q3 GDP report, in a nutshell 1.9% growth is better than the 1.6% economists had forecast, and we can thank ourselves, us consumers, for keeping the economy afloat (although Uncle Sam did pitch in as well):

Tuesday, October 29, 2019

Quote of the Day

The S&P 500 just dropped 8 pts in a matter of seconds on the following:

Chart of the Day

Consumers are beginning to fret a bit about the future (recessions in grey):



Just another friendly reminder of why we're treading cautiously for now on our clients' behalf.

Remaining Careful, Despite Positive Near-Term Prospects

Here's the close to my latest entry to our internal market log:
"While, again, I see a good chance that stocks trade higher in the near-term, the market faces somewhat of a double-edged-sword setup. Should, as some economists expect, the headline data begin to improve, traders will fret over the Fed becoming therefore less accommodative. Should, on the other hand, the data sour even more rapidly, traders will fret that the Fed is behind the curve and, thus, won’t be able to skirt a near-term recession.

Monday, October 28, 2019

Market Update (video)

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Saturday, October 26, 2019

Quote of the Day: Be Very Careful What You Ask For!

As we've been suggesting for months, the efficacy of Fed rate cuts at this juncture, in our candid view, is virtually nil; except for their potential positive impact on asset prices (stocks in particular) and the -- albeit short-lived -- igniting of animal spirits (increased economic activity) that might produce. 

Friday, October 25, 2019

Double-Trouble (potentially) In The Auto Loan Market

There are two troubling aspects to the following snippets from this morning's Bloomberg article titled "Subprime Auto Giant's Loans Souring at Fastest Clip Since 2008".

Headline of the Day

Stocks just caught a nice flurry of buying on the following headline, taking the S&P 500 to within a virtual tick of its all time high:

Thursday, October 24, 2019

Today's Log Entry: You'd Think New Highs Right Here

10/24/19 Thursday

Despite the suspect state of general conditions, I’m frankly surprised that the equity market isn’t screaming higher right here. The Fed’s been essentially tamed, earnings are coming in better than (albeit reduced) expectations, a soft Brexit, whenever it happens, is a done deal and all indications are that there’ll be a “phase 1” (fundamentally meaningless, but, then again, fundamentals are not remotely driving the equity market currently) trade deal signed come 11/29.

This Week's Message: Being Responsible -- And Some Additions To My "Charts That Trouble Me" File

Many long-time clients have mentioned to me recently that it's been, well, a long time since they've heard me sound so bearish on the market. While I completely understand where they're coming from -- and while I know the word has left my lips during some client review meetings -- I don't know that "bearish", as in committed to the notion that the market has nowhere to go but down from here, completely captures my current thinking. 

Tuesday, October 22, 2019

Taking Outsized Risks for Undersized Rewards!

Typically we'd view a low yield spread between high yield (junk) bonds and high quality (investment grade) bonds as a positive sign with regard to present general conditions. Of course context is everything!

Monday, October 21, 2019

Heightened Global Risk - OR - Treading Cautiously Amid The Likelihood Of New Highs

Bloomberg opinion editors just penned a piece titled "The World Economy Is Stumbling Toward Disaster". And while the title is a bit much, I do sympathize with much of what concerns them.

Here are a few snippets, this will sound familiar to regular readers:   emphasis mine...

Quote of the Day

Hold this quote close as you consider the messaging herein of late regarding the under-the-surface pressures we're seeing, particularly in the corporate debt market, and as the equity market meanders its way further into history's longest expansion:

Market Update (video)

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Friday, October 18, 2019

Quote of the Day: More Prudence Justification

As I intimated yesterday, the IMF's latest Global Financial Stability Report is a robust, deep dive into what lies beneath the surface of the world economy. And, alas, as I also suggested, it more than justifies our currently guarded approach to the equity markets.

Thursday, October 17, 2019

Quotes of the Day: Justifies Prudence

I'm currently poring over the just-released IMF Global Financial Stability Report, and the deeper I go the more confident I am that hedging our portfolios right here is the definition of prudence.

Wednesday, October 16, 2019

Chart of the Day: One Really Good Reading, Amid Otherwise Uninspiring Data

On balance, today's data deluge wasn't much to write home about: Mortgage purchase apps were down 4% week-on-week, retail sales missed economists' estimates, business inventories slowed, the Fed's Beige Book (an anecdotal report comprised of inputs from each of the 12 Federal Reserve districts released 2 weeks before each policy meeting) characterized economic activity as "slight to modest", and the Treasury International Capital Report showed foreign investors selling long-term U.S. securities in a big way in August (net -$41.1 billion).

Quote of the Day: This Is A Big Deal Folks!

Clients and regular video blog viewers have heard me say that, in a macro sense, our job here at PWA is to first assess probabilities in terms of the direction of the next 'big' move in financial markets and the economy, and, second, to maintain a firm handle on what lies beneath the surface in order to anticipate the depth and the length of that next big move.

This Week's Message: The Bullish Case For Stocks, How To View It, And Whether We Should Play It...

Listening to Bloomberg Asia last evening I caught a segment where Bloomberg’s reporter, after referencing the IMFs latest downgrade of global growth (they estimate that “90% of the world will experience a growth slowdown this year”) and the Brookings Institute characterizing present global general conditions as a “synchronized stagnation”, accurately listed the plethora of global headwinds that he suggests virtually have to “entrench a period of gloom”.

Newsflash of the Day

While finishing this week's message (coming to you earlier this week) I noted the trading action that occurs on headlines and tweets. While typing, lo and behold, I noticed the S&P 500 (which was trading notably lower on the morning) shooting higher on the one-minute chart.

Tuesday, October 15, 2019

Quote of the Day

Not to continue to sound so dang gloomy amid a bull market that is now threatening new highs, but it's the kind of stuff referenced below bubbling under the surface, along with an on-balance waning macro backdrop, that is so dang troubling!

Market Commentary (video)

I do more talking than charting in this morning's video; touching on Brexit, China, corporate earnings, corporate debt and -- from the 6:18 point forward -- our thinking with regard to client portfolios heading into next year.


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Monday, October 14, 2019

Chart of the Day: Freight Data Not Good!

Cass Information Systems highly-touted (as a leading economic indicator) freight index report was just released for September. 

Here's why it's so "highly-touted":

Quotes of the Day: "A Cacophony Of Noise"

In Friday's post I suggested that nothing consequential occurred last week with regard to trade negotiations with China. In their morning message Bespoke Investment Group pretty well spells it out: 

Saturday, October 12, 2019

Friday, October 11, 2019

This Week's Message: The Problem With The Central-Banks-Can-Save-The-Day-Narrative...

This week's message is an excerpt from my latest entry to our firm's internal market log, followed by the contents of a file I created a mere two weeks ago titled "Charts That Trouble Me".

Market Update (video)

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Thursday, October 10, 2019

Bonus Quote of the Day

The following, from Greenspan’s 2014 book, speaks (screams) to what we’re presently experiencing!

Quote of the Day: Looking past the end of traders' noses...

This, from Evercore's head of China research, is essentially what the market's rallying on this morning:

Pre-Market Update (video)

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Wednesday, October 9, 2019

Chart of the Day

The market's in rally mode this morning on news that China, despite the hits it's taken this week from the U.S. (blacklisted companies, restricted visas and threat of capital controls), is coming tomorrow with a "limited" offer on trade.

Pre-Market Update (video)

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Tuesday, October 8, 2019

Equity Market Update (video)

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Monday, October 7, 2019

Yeah, but...

Last Friday I penned a quick note titled "Wow!! But...", and poured two glasses of cold water on the day's big rally.

Specifically: 1) the fact that bonds rallied hard as well, and 2) that, for stocks, it occurred on notably below-average volume.

Well, today, after trading higher for better than half the session, the S&P gave up the ghost and closed about 20 points off of its intraday high. While a roughly .7% decline isn't huge (it's the equivalent of about 185 Dow points), it's still nonetheless notable -- just not enough to put Wow!! in today's title.

As for its importance, well, frankly, there wasn't any. For today's late-day selloff to be meaningful, in terms of signaling something pernicious in the immediate underlying conditions, you'd need to see bonds rally; as frightened money would've flown to safety. Didn't happen (didn't happen in safe-haven gold either, by the way).

Here I added today to the chart I showed last time (bonds green, stocks white):


Bonds and stocks now moving together for three days running. 

Today's explanation? Well, if I hadn't seen any news I'd say the most likely excuse would be that a voting Fed member must've said that the economy's good and that they can go easy on rate cuts, or maybe a good data point or two was reported (i.e., in both cases, it would mean good news is bad news [and the Fed's gonna get busy], which is clearly what explained the rally last Thursday and Friday), but we didn't get either. So who knows? Maybe it was indeed simply meaningless action.

Well, just like last Friday, that's the message today's volume action sent. I.e., volume today was, once again, notably below average (suggesting that today was more about reluctant buyers than it was raging sellers):


Stay tuned... much more to come this week -- and it's indeed likely to turn out to be at least near-term meaningful: Fed chair Powell gives a speech tomorrow, and China's trade negotiators will be in Washington Thursday and Friday... 

Quote of the Day

Bloomberg's macro model agrees with ours:
"Sell-side equity analysts’ 7.7% estimated earnings growth for the coming 12 months is way more bullish than the Bloomberg Intelligence macroeconomic model suggests it ought to be."

Saturday, October 5, 2019

Quote of the Week: Chilling!

Amid optimism over next week's scheduled U.S./China trade talks, prospects for a more accommodative Fed, the impeachment noise, and a crazy volatile week for stocks, the following didn't receive nearly enough fanfare in my opinion. And, for me, frankly -- given the now-obvious (although we've been warning about this since early '18) nature of what has the U.S. economy threatening to catch down to much of the rest of the world -- is probably the most chilling of recent developments:

Friday, October 4, 2019

Wow!! But....

Wow! Really strong day today! But, while I hate playing the party pooper, well... there are a couple of buts.

This Week's Message: Our Base Case Remains Bearish (next big move), But Near-Term New Highs Are A Distinct Possibility

This week’s data was consistent with my current assessment of general conditions; an overall deteriorating macro setup, although not to the point where we can make the recession call – at least not in the U.S..

Today’s September jobs report came in below expectations and punctuated the overall slowing economic backdrop, but it could’ve definitely been worse.

Thursday, October 3, 2019

Charts of the Day

Per this morning's video commentary, I was looking for a pop today. But I gotta tell ya, the fast-diminishing of today's rally I was seeing about 10 minutes before the close made a lot of sense to me. I mean what short-term trader would want to go long into tomorrow's before-the-open jobs report when the supporting data of late say it may not be good??

Market Update (video)

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Wednesday, October 2, 2019

A Silver Lining Maybe?

As you've noticed, I'm not presently constructive on stocks, but I'm forever open minded.

This Also Has Our Attention!

Here's my brief commentary from September 12th:

Quotes of the Day: This Has Our Attention!

Brief Market Update (video)

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Tuesday, October 1, 2019

It's Not Just Us!

A famous person complained this morning that the dismal outlook for U.S. manufacturing expressed in today's ISM report was all about the Fed allowing the dollar to rise to the point where "our manufacturers are being negatively affected".

Closer To The Point Of No Return

Oppenheimer Chief Strategist John Stoltzfus, on Bloomberg discussing this morning's disappointing (to put it mildly) release of the Institute for Supply Management (ISM) September Manufacturing Survey, says it's all about the trade war:

Monday, September 30, 2019

Quote of the Day

Yale economist, and renowned global thinker, Stephen Roach echoes our latest messaging herein:

This Morning's Log Entry: What Explains The Market's Resilience in Q3?

9/30/19 Monday

Despite all of the headwinds, although the S&P remains only marginally higher than it was all the way back to January ’18, the market held up remarkable well in Q3. Hmm....

Saturday, September 28, 2019

Tech Sector Technicals Not So Good, And My Take On Friday's U.S./China News (video)

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Friday, September 27, 2019

This Week's Message: A Walk Through the Data

We just finished our weekly scoring of the PWA Macro Index and would like to show clients what we're seeing; which in the aggregate illustrates why, for the time being, we remain cautious.

Thursday, September 26, 2019

Quote of the Day

With regard to the possibility of a near-term trade deal with China, I posed the following question (among others) in a post yesterday:
"Is the global economic damage already done sufficiently reparable to -- in the near-term -- stave off the next downturn?"
Here's from Daiwa's chief equity strategist last night:

Pre-Market Update (video)

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Wednesday, September 25, 2019

Bonus Quote of the Day

Sorry to seem so doom and gloomy of late, but we feel the need to keep clients abreast of what's bugging us while the market meanders around all time highs:

Quote (and related concerns) of the Day

Here's from Bloomberg macro strategist Cameron Crise this morning (China-related comments from the President [several times over] this morning -- and the resulting rally in stocks -- suggest he's onto something):

Pre-Market Update And An Important Dive Below The Surface (video)

In this morning's video commentary I make no mention of impeachment risk, of China's last-evening statement that the U.S. is going to have to remove a lot from their proposed trade deal to get it done or of the President's, therefore, conflicting statement this morning that a deal may be near; just the short-term technicals and, more importantly, some of the below-the-surface stuff that has us presently concerned:

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Tuesday, September 24, 2019

Bonus Quote of the Day: Ironically, America Laid These Foundations!

Also from Alan Greenspan's latest work:
"America laid the foundations of a liberal trading regime by slashing tariffs on dutiable imports from an average of 33 percent in 1944 to 13 percent just six years later. It also laid the foundations of global economic management with the creation of the International Monetary Fund and the World Bank at a conference at a hotel in Bretton Woods, New Hampshire, in July 1944. The General Agreement on Tariffs and Trade (later the World Trade Organization) followed in 1947. It laid the foundations of global political management with the creation of the United Nations in 1944–46.

Quote of the Day: Good Old Fashion Republican Wisdom

While I suspect that all of my readers will nod approvingly as they read the first paragraph below taken from Alan Greenspan's 2018 book Capitalism in America, I also suspect that many these days will struggle with the second; which, make no mistake, explains the U.S.'s preeminence every bit as much as the first:

Chart of the Day

As we've been reporting herein, the consumer remains the heavy-lifter for the U.S. economy, and, thus, we need to be very sensitive to any signals suggesting that maybe he/she's feeling a bit weak in the knees.

PMIs Confirm Our Concerns

As I continue to stress herein, our presently cautious stance stems from our assessment of conditions, both technically (the market/asset class trends) and fundamentally (from a macro economic perspective).

This week's global PMI (Purchasing Managers Index) releases essentially keep us (fundamentally) there.

Monday, September 23, 2019

Quote of the Day: Looming Stress

As you've noticed, we're not entirely constructive on the stock market these days. 

Brief Market Update, And A Look Inside The Tech Sector

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Last Evening's Log Entry

9/22/19 Sunday

Friday saw equities sell off right into the close on news that China’s trade negotiators cut their trip short and headed back to Beijing. It was curious that there was no immediate explanation from the White House designed to calm markets. In fact, earlier in the day a White House trade adviser suggested that if a deal doesn’t come soon that tariffs on Chinese imports could go to 50% or 100%, followed up a bit later by Trump saying that he wasn’t interested in a partial deal.

Friday, September 20, 2019

Headline of the Day.... and context...

Dow's down triple-digits on the following:
"CHINA DELEGATION CANCELS US FARM VISIT TO MONTANA - AGRICULTURE OFFICIALS TO RETURN TO CHINA SOONER THAN EXPECTED"
Yes, that's a near-term concern. The chart we featured earlier, however, is a longer-term, bigger, concern!

Bonus Quote of the Day!!!

I'm with Fed Bank of Boston President Eric Rosengren (he dissented yesterday) on the risks of cutting interest rates in a tight labor market/low interest rate environment.  emphasis mine...

Quote, And Chart, Of the Day

As the Nasdaq 100 futures one-minute chart (below) ticks along on the computer screen to my left this morning, I'm reminded of the following Jesse Livermore quote:

Thursday, September 19, 2019

Bonus Quotes of The Day: Not The Tone We're Looking For!

Not the tone we're looking for:

Quote of the Day: Life Is Funny!

Couldn't help it!

And, c'mon, just laugh... we could use a little bipartisan humor these days...

This Week's Message: The Market Still Looks Heavy (video)

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Wednesday, September 18, 2019

The Latest Consumer vs Business Data Match Our Index

As we've been reporting of late, the consumer is in pretty good shape. In fact, he/she is doing virtually all of the heavily lifting on behalf of the economy these days.

No Need To "Further' Spike The Punch Bowl...

Didn't do a pre-market video this morning, as any short-term technical signals can easily be blown out when the Fed announces its interest rate decision at 11am (pdt), and when Chairman Powell makes his followup statement and fields questions from the media.

Tuesday, September 17, 2019

No Worries In Today's Data Releases

I wonder if the members of The Federal Open Market Committee (the Fed) were too preoccupied by their discussions over the data today (day one of their two-day policy meeting) to take note of today's data? 

If not -- if they indeed took a peak -- those who favor little or no tweaking (the hawks) had to have looked at their dovish counterparts (those clamoring for a .50% rate cut) and said "see what we mean!"

Today's Log Entry: Call It (the market's odds tomorrow) 50/50

9/17/19 Tuesday

Something very weird is going on with overnight repo rates!

Pre-Market Update and A Quick History Lesson On Fed Rate Cuts and The Stock Market (video)

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Monday, September 16, 2019

Today's Log Entry

9/16/19 Monday

Before the weekend attack on Saudi oil production I had odds at better than 50/50 that the Fed would sound a hawkish tone, while cutting 25 bps; upsetting equity markets, gold (currently trading on prospects for lower-yields, as opposed to Armageddon) and bonds in the process. However, given the palpable geopolitical uncertainty the weekend wrought, my best guess, as I type, is that the fed will tilt dovish, while still cutting 25 bps; which could very well spark a notable rally in stocks.

Pre-Market Update (video)

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Sunday, September 15, 2019

What Might An Uber-Aggressive Fed Deliver?

So the Fed's September policy meeting will happen this Tuesday and Wednesday, with the market's pulse sure to be pounding come 11am (pdt) Wednesday. Yep, even though a quarter-point cut is almost certainly what they'll get, traders in all manner of asset classes will be locked and loaded just in case.

Saturday, September 14, 2019

Bonus Quote of the Day

Donald Broughton, founder and managing partner of Broughton Capital ("a deep-data driven quantimental economic and equity research firm") and the author of the Cass Freight Monthly Report, thoroughly understands economic history:

Quote of the Day: Should Sound Very Familiar

I swear, JP Morgan's Patrik Schowitz must be reading our stuff 😉!

Thursday, September 12, 2019

Can't Blame Them For Trying

Given the color of the latest release of the Eurozone's Industrial Production numbers, we certainly can't fault the ECB for announcing a rate cut and a new round of QE this morning:

Quotes of the Day: This Has Our Attention!

"When prices have been driven by a lot of leveraged buying and the market gets fully long, leveraged, and overpriced, it becomes ripe for a reversal. This reflects a general principle: When things are so good that they can’t get better—yet everyone believes that they will get better—tops of markets are being made."
Dalio, Ray. Big Debt Crises
Leveraged share buybacks (companies borrowing to buy back their own shares) are the first sentence above by definition. And this very much has our attention!

Here's Investopedia on the topic:

"Between 2008 and 2018, companies in the United States spent over $5 trillion buying back their own stock, or over half their profits. As a result, more than 40% of total EPS growth has been from share repurchases.
Leveraged buybacks have made a big comeback in the U.S., where share repurchases have exceeded free cash flow since 2014.

The buyback boom has increased the risk for both bondholders and shareholders. Even investment-grade companies have been willing to sacrifice their credit ratings in order to reduce the number of shares. For example, McDonald’s, whose executives depend on EPS metrics for 80% of their pay, has borrowed so heavily to fund buybacks that their credit rating fell from A to BBB between 2016 and 2018."

Commentary On The Latest Action And General Conditions (video)

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Wednesday, September 11, 2019

Getting Close (to new all time highs)!

Here's the 1-minute chart for the S&P 500 future contract as I type:

The Wisdom of T. Boone Pickens (40-second video clip)

Legendary oil man and trader T. Boone Pickens left the world today, at age 91.

Here's a bit of timeless (and timely!) wisdom from the great capitalist:

Charts of the Day

The first chart below speaks to what we've been preaching herein since our proprietary macro index peaked back in January 2018:

Current Market Sentiment

Here's an internal memo (me to staff) that'll give you the flavor of current (i.e., only for this very moment) market sentiment:
"So last night China exempted a bunch of U.S. products from tariffs... Today Li Keqiang (Chinese Premier) tells U.S. business delegation that "we share wide interests & I believe we have the wisdom to find a solution acceptable to both"... Also this morning, Trump is looking to ease sanctions on Iran... and all we have is a 14-pt move in SPX... and bonds and Gold are still up on the day... That's bearish!   M"


Early-Market Update (video)

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Tuesday, September 10, 2019

Quote of the Day

Bloomberg's Benjamin Dow, in his blog post this morning, speaks to our message in today's video commentary:

Headline of the Day

The Dow went from notably in the red to slightly in the green on this headline this morning:

Pre-Market Update and A Look At the Consumer and Corporate Debt Picture (video)

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Monday, September 9, 2019

Chart of the Day

In Friday's video I offered up my thoughts on the jobs report: Among other (positive and negative) things, I referenced the jump in the number of folks who have taken on more than one job as a sign that there may be some stress building in the lives of consumers.

Here's the chart (grey areas highlight past recessions):



Not a good look...

Last Night's Log Entry: Treading Uncharted Flood Waters

9/8/19 Sunday

Weighing the present bull case against the bear case, while perhaps not (yet) overwhelming, clearly, the bears have the edge.

Nevertheless, and paradoxically, I now place odds that the S&P notches yet another all-time high in the very near future – before a notable correction (if not a full-on bear market) sets in – at better than 50/50.

Pre-Market Update (video)

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Friday, September 6, 2019

This Week's Message: The Good and The Not-So-Good

The good news this week is that our proprietary macro index broke a 5-week string of negative (heightened recession risk) readings, coming in at +4.65.

Pre-Market Update (video)

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Thursday, September 5, 2019

Pre-Market Update And A Look At General Conditions (video)

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Wednesday, September 4, 2019

Finally Breaking Out of This Trading Range?? May Very Well Be!

In my earlier blog post I said:
"While setting a date for September talks would no doubt be good for a couple-hundred+ Dow points, the chasm separating the two sides is wider today than it’s been throughout the entire process."
Well, talks in Washington were just confirmed a few minutes ago, and I got one thing wrong, they'll take place in "early October", as opposed to September. 

Today's Log Entry

9/4/19 Wednesday

Stocks, at least in the pre-market, look to be essentially re-setting the start to September; recouping all of yesterday’s decline.

Pre-Market Update (video)

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Tuesday, September 3, 2019

Not Good News

This morning's release of the all-important (i.e., closely followed by economists and market players) Institute for Supply Management Manufacturing Survey for August came in below 50 (49.1); denoting contraction (or recessionary conditions).

Pre-Market Update (video)

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Monday, September 2, 2019

What Has Investors So Sanguine? And Good Luck If You're Trying To Trade This Thing!

In yesterday's internal log entry, which I shared herein, I made mention of China's better than expected manufacturing purchasing managers survey results. This morning we got the Euro Zone's reports, which, save for France's weren't so good.

Sunday, September 1, 2019

Today's Log Entry: Little Optimism Reflected In Futures Traders' Positioning

Note to readers; here are definitions to terms featured in the notes below:

This Week's Message: Typical This Ain't!

Typically, whenever someone says to me how crazy, volatile, unpredictable, etc., the market is, I'll tell them that on a day-to-day basis it's pretty much always been that way.

Friday, August 30, 2019

Pre-Market Update

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Thursday, August 29, 2019

Trade War Vacation Maybe?

Closely weighing the back and forth commentary while considering coming events, the messaging I gather directly from China's state media to the people, as well as the somewhat rooted political positioning (both sides) to this point, I think macro strategist's Cameron Crise's take this morning is a sound one:

Pre-Market Update (video)

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Chart of the Day: Economists Concerned

Per the latest Wall Street Journal Survey of Economists, it ain't just us.

Wednesday, August 28, 2019

Quotes of the Day: Concerning Trends and Under-The-Surface Stressors

Be it via Fed policy, or fiscal manipulation (per below), when the powers that be attempt to undo the negative consequences of their own actions (without undoing those actions themselves), well, history has proven time and again; that's how debt-fueled asset bubbles are formed.

Pre-Market Update, And A Troubling Trend (video)

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Tuesday, August 27, 2019

Mission Impossible For The Fed

If this, from Bank of America's foreign exchange strategist Athanasios Vamvakidis doesn't sound familiar, well, then, you haven't been reading our blog:

Bonus Quote of the Day

These words from one of history's great speculators are most instructive during times like these:

Quotes of the Day: China -- at this point -- isn't biting...

Like I said in this morning's video, despite the fact that no China to U.S. phone calls took place as claimed over the weekend, the market is treating it as near-term bullish nonetheless, as it signals the President's willingness to deal.

Pre-Market Update, And What You Should Know About "Trade Deficits"

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Monday, August 26, 2019

Quote of the Day: A Challenging Market Environment

Macro strategist Cameron Crise characterizes well this challenging environment:     emphasis mine...

Market Update (video)

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Sunday, August 25, 2019

Mulling Over The Latest....

As I mull over all of the latest this Sunday afternoon -- Friday's speech by Fed Chair Powell, China's retaliation, Trump's retaliation to China's retaliation, highlights from this weekend's G-7 summit, violence in Hong Kong, the results of my weekly macro analysis (the PWA Index a little less red (but still red), the technicals continuing to worsen), how currencies are trading as I type, and so on -- I see little that would inspire me to, at this point, offer up anything that smacks of optimism for stock prices going forward. 

Friday, August 23, 2019

This Week's Message: The Risk/Reward Setup

In our year-end 2017 client letter I expressed my general bullishness, as the macro setup was about as good as I'd seen in my 3-decade+ career. I also expressed, however, that a trade war ("protectionism") would put my bullish thesis to the test.

Pre-Market Update (Video)

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This Morning's Log Entry

This morning China finally announced retaliatory tariffs in response to the latest from the U.S. (the 10% on $300 billion beginning 9/1 and 12/15); of course futures immediately rolled over (but not quite as much [yet] as you might expect).

Thursday, August 22, 2019

Manufacturers Ain't Feeling It!

In case you're wondering what happened to this morning's strong rally; at 6:45 am (pdt), exactly when stocks began selling off, Markit's U.S. Manufacturing Purchasing Managers Flash (advanced [i.e., 85% complete]) Index for August was released.

Pre-Market Update (video)

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Wednesday, August 21, 2019

Quote of the Day

I've reintroduced Brexit into our macro narrative of late because it (the UK leaving the EU with no trade deal come 10/31, that is) indeed carries serious ramifications for global markets.

"It Always Is Debt That Gets You"

Economist Diane Swonk, in just over a minute, pretty well sums up our overall messaging herein of late.

Which is, the consumer's in decent shape, the industrial space isn't, and there's huge risk in the corporate bond market. 

When she talks about "the next traunch up" in corporate debt, she's referring to the BBB risk I've been pounding on the past few weeks:

Pre-Market Update (video)

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Tuesday, August 20, 2019

The Risk/Reward Setup

Being committed to always maintaining a discerning, if not skeptical, eye when it comes to data, trends, our own analyses, etc., we are forever challenging and testing our own theses in our perpetual effort to keep our clients' portfolios positioned within the most favorable risk/reward setup.

Bonus Quote of the Day

I sympathize with the following from Zero Hedge this morning:

Pre-Market Update (video)

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Quote of the Day

I couldn't agree more with economist Peter Bookvar. In fact, if the powers that be would take his advice (but it would have to be relatively soon), I'll become a raging bull on the stock market:

Monday, August 19, 2019

Quote of the Day

Couldn't resist the headline ("Everything Seems Like A Trap Now"), as it speaks to my message in this morning's video commentary

Brief Commentary On The Latest Action (video)

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This Morning's Log Entry

8/19/19 Monday

While the weekend didn’t deliver a rolling back of the yet to be rolled out (pending) tariffs effective 9/1 and 12/15, which I thought could happen, and, thus, send stocks sharply higher this morning, stocks are looking to open sharply higher this morning nonetheless.

Sunday, August 18, 2019

Really Gotta Dig Deeper! And, In Closing, A Personal Note to Clients

President Trump's top economic adviser Larry Kudlow did his job well as he made the rounds this morning.

His message being that strong retail sales and low unemployment prove that there's no recession in sight:

Positioned for Pain

Not that they're always right, but folks who speculate in futures for a living are no doubt bright, and you can bet that they're deep in the weeds of information and general conditions when they place their bets.

Saturday, August 17, 2019

Bear Markets Ain't Easy (Video)

Dear Clients,

Today's video commentary is more encompassing, and therefore longer, than most, but these are unusual times, and we are, therefore, taking unusual measures within your portfolios.

Friday, August 16, 2019

Bonus Quote of the Day: No Bluffing on Brexit? maybe...

Stocks spiked to the highs they're presently holding this morning on this headline:

Quote of the Day: Remember that Brexit volatility? If not, you may shortly...

Switching topics for a minute; remember all that Brexit volatility of 2016? Well, we're within weeks of potentially revisiting it.

This Week's Message: Near-Term Setup and Longer-Term Possibilities (video)

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Thursday, August 15, 2019

The Undying Faith in Central Banks

If you're wondering what's holding up the longest bull market in history amid what in my view is a steadily deteriorating backdrop, as the 1-minute clip below demonstrates, it's an amazing, and undying (until, that is, it's too late) faith in the power of central banks.



Well, while I respect the gentleman's opinion, that's not my take. 

Interest rates are unequivocally not the problem, and lowering them here will not inspire fundamental economic growth. And the notion that if they're going to fall that "you push the cycle out further" is the definition of cherry-picking history. 

Lots Of Damage To Repair Before We Get Bullish Again!

Take a look at the S&P 500 futures contract action from yesterday's close to now (10 minutes before the open):

Wednesday, August 14, 2019

Quote of the Day: China's Now Playing Offense

Clearly, China is now playing offense.

Here's from Hu Xijin, editor and chief of the state-owned Global Times on Twitter this morning:

What Politicians Will Do When Staring Down Defeat

Sorry, can't help it, this one's simply too revealing not to share.

Video Commentary On The Latest Action

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Tuesday, August 13, 2019

This Evening's Log Entry

8/13/19 Tuesday

Just as the market appeared to be fading (this morning) what looked like your classic snap back rally during a corrective phase lower, the White House announced that it was making some exceptions to the "no-exceptions" 10% tariff on the balance of all Chinese imports. Apparently some items will be exempt, and others won’t get hit with the tariff till 12/15.

Big Rally This Morning -- And -- Data of the Day

Wow! The Dow's up 400 points as I type! All on news that the U.S. and China plan to talk by phone over the next two weeks, and that the U.S. is not going to hit 100% of all remaining imports from China with a 10% tariff come September 1. 

If you've harbored any doubt about where the ultimate concern lies, rallies like this should disabuse of you of that thinking.

Sunday, August 11, 2019

Question of the Day

Bloomberg's Garfield Reynolds asks the essential question of the day:

Headline of the Day

Just so you know it's not just us, this just hit the wires:
"Goldman Sachs Cuts Growth Forecast As Trade War Triggers Recession Fears"

The Present Risk/Reward Setup Demands Action

While typically the third year of a first-term presidency is one where we’d expect market-friendly political forces to provide a tailwind for stock prices, in this age of populism and protectionism we’re seeing precisely the opposite. 

Friday, August 9, 2019

This Week's Message: Caution Warranted!

For this week's message, after commenting on the latest from our proprietary macro index, I'm going to simply copy and paste yesterdays internal log entry, which we posted for you here on the blog (worth reading again!), then re-post this morning's video (worth watching again!). These pretty well sum up our current assessment of general conditions.

Video Commentary: The Short-Term Noise, And My Longer-Term Concerns

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Thursday, August 8, 2019

China's Not Aiming To "Fix" The U.S. Stock Market

While some outlets reported that the market's strong rally today occurred on essentially no news, which could imply that it rallied on a lack-of-news, Bloomberg's Eric Weiner shares (below) my view that -- other than a raft of short-covering (which was likely huge given the levels breached) -- it (the catalyst, that is) was all about last night's yuan fixing, which China set at a level strong enough to allay growing concerns that a currency war was brewing.

Bonus Quote of the Day: More Borrowing To Come, But, Alas, No Expansion To Come With It

Bloomberg analyst Benjamin Dow speaks to the phenomenon I outlined in this morning's log entry; i.e., the stimulus-boosted stock market advance (read bubble) that often comes when central bankers realize the world's in deep doodoo. He also hints at the potential systemic risk that's been subtly speaking to me through the numbers; which is the bulging corporate debt level, too much of it at BBB:

Quotes of the Day: Bonds Look Silly Right Here

There's no pearls of wisdom, or perspective, in macro strategist Cameron Crise's morning muse, just an observation that what's happening in the debt market is getting "pretty silly":

Brief Commentary On The Latest Action (video)

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This Morning's Log Entry


8/8/19 Thursday

Should history repeat – assuming we receive confirmation from the PWA Index over the next several weeks that last week’s -2 was the real deal – stocks will stage a multi-week-to-month rally, purely on monetary and (where it can be had) fiscal stimulus, as authorities attempt to avert the coming recession.

Wednesday, August 7, 2019

Looking Inside The Next Recession

Here's an excerpt from my last Sunday entry to our internal market log, where I express my assessment (the good, the bad and the ugly) of current general conditions, and further explain what I eluded to in this morning's video regarding potential stressors that could make the next recession a rather rough one:

Video Commentary: Tweets, China, The Fed, Globalism, The Economic Cycle and The Charts all in one (albeit brief) sitting...

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Tuesday, August 6, 2019

Options Collar Explanation For Clients (video)

The following is specifically for subscribers whose portfolios we manage:

Dear Clients,

Below is a 10-minute video presentation where Nick explains and illustrates the mechanics of the hedging strategy we're proposing and implementing. This will answer many, if not all, of our questions.

Absolutely take the 10 minutes and take this in!

Thanks!
Marty


This Morning's Log Entry

8/6/19 Tuesday

In classic technical fashion -- after yesterday's drubbing -- U.S. equity futures are rebounding in the premarket this morning. European equities are catching a nice bid as well.

Monday, August 5, 2019

Quote of the Day: China Manipulating Its Currency -- in which direction??

Hedge fund manager Kyle Bass, in a CNBC interview, essentially confirmed the point I made in this morning's video commentary:

Video Commentary on Today's Action

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Throwing Kitchen Sinks At One Another (and a post script for every client to read)

Over the weekend Beijing “asked” state-owned companies to cease purchasing U.S. farm products; which is consistent with how their approach to the trade war has evolved in recent weeks. And, to exacerbate matters, the PBOC, which “fixes” each day the range in which they allow the yuan to trade against the dollar, is as I type allowing an exchange rate of north of the psychologically-important 7. This has global currency markets freaking out, and the President tweeting “currency manipulation!”

Saturday, August 3, 2019

This Week's Message: The Futility of the Fed

ATTENTION, ALL CLIENTS SPECIFICALLY (NOT APPLICABLE TO NON-CLIENT BLOG SUBSCRIBERS), IF THE TERM "OPTIONS HEDGE" IS FOREIGN TO YOU, YOU'VE MISSED A RECENT EMAIL FROM ME AND NEED TO CLICK HERE , WATCH THE VIDEO, THEN CONFIRM (VIA EMAIL TO ME OR TO STAFF) THAT WE ARE TO SEND YOU SOME PAPERWORK.

Here's this week's message:

In case you haven't noticed, there's a lot going on in the world today -- and much of it carries implications for financial markets that demand close scrutiny.

Friday, August 2, 2019

Brief Commentary On Today's Action (video)

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Feels Like A Mexican Border Tactic...

Yesterday's China tariff news that roiled the market is starting to feel like a Mexican border tactic (the 5% threat that got Mexican authorities to Washington the next day to "make a deal"), based on this from CNBC this morning:

This Morning's Log Entry: Unambiguously Negative News!

8/2/19 Friday (Update)

Within a minute of posting the below, stock futures turned positive on this news:
"Trump is "open to delaying or halting the 10% tariff on 9/1" if China were to take action between now and then - CNBC"
Now turning red again.

Like I've been saying since this all began, it'll be the market that ultimately puts an end to it. But, given my comments earlier regarding the EU, and the latest (highlighted in previous blogs) regarding Vietnam, India, etc., there's much more market-moving stuff to play out before this ends...

8/2/19 Friday 

As I type, the S&P future contract is pointing to a 0.4% decline at the open. That’s far too sanguine given the potential downside related to Trump’s decision to apply 10% (albeit that’s not the previously-threatened 25%) tariffs on remaining (till now un-tariffed) Chinese imports. We’ll see…

Thursday, August 1, 2019

Brief Commentary on Today's Action (video)

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Quotes of the Day

Like I said in this morning's log entry, for the moment, bad data will be good news for stocks.

This morning's hugely important ISM Manufacturing Index came in at a "disappointing" (assuming you prefer a strong economy) 51.2, yet again declining from the previous month, while missing economists' expectations. And, yes, the Dow went from essentially flat to up 200 points as I type.

This Morning's Log Entry

8/1/19 Thursday

Yesterday saw the market take a dip when Fed Chair Powell didn’t offer up the promise (or enough of one) of future rate cuts traders were hoping for. Equity futures are coming in flat at the open this morning.

Wednesday, July 31, 2019

My take on the Fed and on the moment's selloff...

I'm listening to Fed Chair Powell field what I have to say are all the right questions, which, in a nutshell, are, 
"if you're data dependent, and, on balance, the data has actually been decent since your last meeting, why are you cutting interest rates now and stopping the runoff of your balance sheet a month early?"

This Morning's Log Entry: China, The Fed, Apple, Vietnam

7/31/19 Wednesday

The first tweet I saw early this morning was from Zero Hedge stating that trade talks in China had collapsed after just a day and a half. Within minutes I knew that that wasn’t the case, because I could see in futures trading that the market didn’t collapse. I then jumped over to this morning’s updates from the South China Post which confirmed half of the only legitimate expectations for this round of talks; that China would pick up the purchase of U.S. farm goods, although only under “favorable terms”. Interestingly, there was nothing definitive with regard to the U.S. lightening up on Huawei (the other half of legitimate expectations). Talks are set to resume in September.

Tuesday, July 30, 2019

This Morning's Log Entry

7/30/19 Tuesday

Woke this morning to a string of tweets from Trump hammering China, literally on the first day of the first in-person negotiations to take place since talks broke down in May. Being that he’s going there this morning suggests to me that the preliminary read from the U.S. team is not good, and that Trump sees things potentially going south.

Monday, July 29, 2019

Quotes of the Day

Ironically, Ray Dalio, the subject of my post earlier this evening, popped up in the Bloomberg article I just read (and sympathize with) subtitled "The Dark Side of Rate Cuts." 

Here's a snippet:   emphasis mine...

Has Dalio Lost His Edge?

I find myself thinking a lot lately about something I gleaned from an interview that took place a few years ago with a prominent hedge fund manager (Colm O'shea). He said that as bull markets near their tops, the smart money managers lose assets (clients), while the perpetual bulls collect the last of the spoils (gain assets/clients).

This Morning's Log Entry: Huge week!

7/29/19 Monday

Huge week for markets this week, as 168 members of the S&P 500 will report earnings, as the Fed will reduce its benchmark interest rate for the first time in over a decade, as the economic data calendar from Tuesday-on is loaded, and as U.S. and Chinese trade negotiators meet in Shanghai.

Sunday, July 28, 2019

Quote of the Day

Bloomberg market strategist Mark Cranfield pretty well echoes our present concerns:

The Market's Feeling Heavy (video)

In last week's "weekly message", I mentioned that, per the technicals, the market feels a bit heavy to me at these levels. Here's some of what I was referring to:

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Friday, July 26, 2019

Quotes of the Day -- And -- Why We Do Our Own Work!!

The following speaks to why we do our own work!

Here's White House top economist Larry Kudlow last July:
"We are getting 3 [percent GDP growth] and it may be 4 for a quarter or two."

Here's yours truly last July: