Wednesday, November 25, 2020

Chart of the Day: Are the latest gains "durable"?

In our client review meetings these days I of course expound on much (the good and the bad) of what you've read herein, and when it comes to the historic chasm that separates current stock prices from underlying fundamentals I typically declare that the major averages would need to decline by easily two-thirds (a bit more than the '08 experience) to catch down to present reality. 

This Week's Message: This Ain't About Capitalism...

As I've suggested herein of late, it's not a stretch to surmise that the near-term path of least resistance for the stock market is most likely higher (not a prediction mind you!).

Morning Note: "Obvious Things"

Asian stocks were mixed overnight, with 9 of the 16 markets we track closing lower. Same for Europe this morning, with 9 of the 19 bourses we follow currently in red. U.S. major averages, save for the Nasdaq, are giving a little back so far this session; Dow down 176 points (0.58%), S&P 500 down 0.27%, Nasdaq up 0.13%, Russell 2000 down 0.53%.

Tuesday, November 24, 2020

Morning Note: Gold's Woes, and a couple tweaks...

Positive vaccine news, improving global data, political certainty and an incoming US treasury secretary with a penchant for easy money has stocks in rally mode this week. 

Monday, November 23, 2020

Morning Note: How To Tell Good From Bad Economists

Optimism pretty much reigns globally this morning, as positive news on Astrazeneca's vaccine added to recent promising reports from Pfizer and Moderna, and the readings from purchasing manager surveys (PMIs) say business, particularly among global manufacturers, is picking up notably, as are costs, per our view on inflation going forward.

Friday, November 20, 2020

Macro Update: A Little Something for Everybody

I've been hinting that many of what we deem to be pertinent data points have been flashing threatening signals of late. However, per this week's analysis, not yet to the point that has us lowering their scores.

In fact, thanks to an uptick in mortgage purchase applications (our only needle-mover this week), our overall score moved yet another notch closer to the green; this week we're at -4.08.

Morning Note: Careful What You Ask For!

U.S. stocks have found sanguinity at the open this morning, after getting rocked a bit overnight by news that the Treasury has no interest in expanding emergency assistance measures and asked the Fed to return all remaining funds to the government. Secretary Mnuchin's comment this morning that folks are misinterpreting the message I suspect helped calm the waters a bit.

Thursday, November 19, 2020

Well, Wow!!

So, a little bit ago I stuck my head in the fridge and saw this can labeled "Starbucks Doubleshot Energy" and, well, the following happened. 

Read at your leisure... 😎

Regular readers may have noticed that I've warmed a bit more lately to the notion that there may very well be some upside left in stocks from here (of course, particularly short-term, one never knows). And that's despite the reality that 20 million Americans remain on some form of unemployment assistance, that we're operating amid a corporate debt bubble that is not only the largest in history, but its credit quality in the aggregate is, well, horrendous; some $1.4 trillion of corporate debt literally sits on the balance sheets of insolvent companies yet to implode, and, well, there's more (read this week's main message), but you get the gist. 

Morning Note: No Limits

Asian stocks traded mostly higher overnight, with 10 of the 16 markets we track closing in the green. Europe's nearly across-the-board weak this morning, with all but 2 of the bourses we track in the red. U.S. major averages are mixed: Dow down 45 points (-0.15%), S&P 500 flat, +0.02%, Nasdaq up 0.55%, Russell 2000 down 0.21%.

Wednesday, November 18, 2020

Morning Note: Windy Out There!

Asian equities traded mostly positive overnight, with 11 of the 26 markets we track closing in the green. Europe is beginning the day in opposite fashion vs yesterday (all but 2 bourses were down), with all but one of the 19 bourses we track trading nicely higher. U.S. major averages are a bit mixed this morning: Dow up 96 points (0.32%), S&P 500 up 0.14%, Nasdaq down 0.11%, Russell 2000 up 0.39%.

This Week's Message: A New Paradigm: A Synopsis of Our View on Probabilities From Here

It is virtually impossible for general conditions to get back to pre-covid levels, if, for example, general conditions include the balance sheet condition of US institutions.

Tuesday, November 17, 2020

Quote of the Day: "The One Reality"

While our present view of probabilities going forward has us exploiting what we believe to be truly viable opportunities, we recognize the uniqueness, and immense challenge inherent in what's about to unfold. And we do not envy the new investor who is just now entering the fray, with uber-high expectations.

Inflation and Interest Rates May Not 'Quite' Go Hand-in-Hand Next Year...

As I've suggested lately herein, I'm leaning toward the rising inflation camp as we move firmly into 2021. Which is a position at odds with that of a number of economists/macro thinkers whom I have great respect for. 

Morning Note: "A key in 2021"

Asian equities fared okay overnight, with 12 of the 16 markets we track closing modestly in the green. Europe, on the other hand, is in a sour mood this morning; all but 2 of the 19 bourses we track are trading lower as I type. U.S. Major averages are taking a breather this morning as well: Dow down 316 points (-1.06%), S&P 500 down 0.77%, Nasdaq down 0.34%, Russell 2000 down 1.47%.

Monday, November 16, 2020

Morning Note: A Unique Display

In last Monday's morning note we put numbers to an impressive rally on the back of news that Pfizer's covid vaccine was looking to be hugely (90%) effective. And here we are, one week later, and reports from Moderna suggest the same for theirs (94% effective!). 

Saturday, November 14, 2020

Friday, November 13, 2020

Macro Update: Forget About Normalcy...

While 6 of the 49 inputs to our proprietary macro index saw their scores change this week, they essentially balanced each other out: Our overall score remained stuck at -6.12 for the third consecutive week:

Morning Note: I'm Relatively Constructive, However, The Irremediable Looms...

Asian equities traded in mixed fashion overnight, with half of the 16 markets we track closing higher, half lower. Europe, holding up against rising covid numbers and faltering Brexit trade talks, is seeing 12 of its 19 bourses we follow in the green so far this morning. U.S. major averages are holding up against the same in terms of covid, and appear unconcerned over the domestic political backdrop: Dow up 198 (0.68%), S&P 500 up 0.69%, Nasdaq up 0.39%, Russell 2000 up 1.78%.

Thursday, November 12, 2020

Morning Note: "One Major Problem In Investing"

Asian stocks took a breather last night from what's been an impressive rally of late; 12 of the 16 markets we track closed in the red. Europe's giving some back this morning as well, with 14 of the 19 bourses we follow trading lower. U.S. major averages, save for the Nasdaq, are not feeling it either: Dow down 149 points (0.51%), S&P 500 down 0.30%, Nasdaq up 0.27%, Russell 2000 down 0.55%.

Wednesday, November 11, 2020

Morning Note: Bad Breadth

Asian equities on-balance continued their winning streak overnight, with 11 of the 16 markets we track closing in the green. Europe's once again in the green as well, with 17 of the 19 bourses we track trading higher, as I type. U.S. major averages, however, are mixed: Dow down 45 points (0.15%), S&P 500 up 0.46%, Nasdaq up 1.38%, Russell 2000 down 0.72%.

Tuesday, November 10, 2020

Chart of the Day: Leaders Rolling Over

While what's worked (namely the FAAMGs) year-to-date has been rolling over of late, concentration among the S&P 500's largest 5 positions (FAAMG) still sits way above the previous tech-bubble high (top).

Morning Note: Folks Like Company

Asian equities put in another positive performance overnight, with 13 of the 16 markets we track closing higher. Europe's following suit this morning, with 16 of the 19 bourses we follow in the green thus far. U.S. major averages, on the other hand, are all over the place: Dow up 77 points (0.27%), S&P 500 down 0.65%, Nasdaq down 1.93%, Russell 2000 up 0.11%.

Monday, November 9, 2020

This Week's Message: Just a Peek Into The End-Game of the Debt Super-Cycle

I thought the following section of an email conversation with a savvy friend and long-time client on Sunday would be instructive for our readers. It was in response to his feedback regarding a superb essay that I discovered over the weekend and excerpted from -- in response to my friend's emailed question/comment regarding Saturday's blog post -- to emphasize much of what I've been writing about over the past year+.

I'll add parenthetic clarity where I think it's needed. I'll also add emphasis where my comments relate to today's rally.

Speaking of today's rally; while the Dow closed up over 800 points (2.95%), the S&P 500 managed only a 1.17% gain, while the Nasdaq Composite actually closed down 1.53%. Our core allocation closed up 1.21%:

Morning Note: Stay Tuned...

Vaccine optimism has global stocks screaming higher this morning. Pfizer's vaccine, in a large study, reportedly prevented 90% of infections. Cause for celebration (or at least great anticipation), for obviously much more than investment purposes!

Saturday, November 7, 2020


The following from Hoisington Capital Management's (home of revered macro thinker Lacy Hunt) latest must-read quarterly newsletter should sound very familiar to clients and regular readers:   emphasis mine...

Friday, November 6, 2020

Macro Update: Fuggetabout Tomorrow

Our proprietary macro index (-6.12) broke even on the week; with two inputs improving, two deteriorating:

Morning Note: Swept Up In Moods

The Bureau of Labor Statistics (BLS) October jobs report (released this morning) looks markedly better than this week's ADP report (mentioned in yesterday's morning note). Nonfarm payrolls increased by 638k vs 580k estimated. Permanent jobs losses remain at 3.7 million (among the 20 million still without work), but "remain" is the operative word. I.e., the number came in flat in October after major increases over the previous two months. More on this to come in this week's macro update.

Thursday, November 5, 2020

Morning Note: Don't Be the Dolt

Well, that warm, fuzzy feeling you might be having over this week's rally in stocks maybe should be tempered a tiny bit.

I'm not talking politics, I'm talking economics.

Wednesday, November 4, 2020

Market Commentary (video)

In today's video commentary I illustrate the messy internals in today's equity market rally, reflecting a shift in election expectations, I make the case for commodities and I briefly touch on a handful of our weekly analyses.


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

In this morning's note I alluded to a rotation that's taken place the past few weeks, from the high-flying techy names to the value "reflation" names. I also suggested that the premise beneath today's reversal of that trend is ultimately faulty.

Morning Note: Whimsical

If you look at the major U.S. stock market indices this morning you'd think all's well on Wall Street. But if you open a few doors and peak inside, well, hmm...

Tuesday, November 3, 2020

Morning Note: A Wiley Sort of Market???

If you're looking for something pithy and provocative on the election this morning, well, you won't find it here. And if you're baffled by this morning's 580-point Dow rally, I hear ya. That said, if all I knew at the moment was that the dollar was down 0.74% (that's big), I'd say, given the present setup, and where the dollar -- and stocks -- have been of late, a big stock market rally today is a no brainer. 

Could it be that "the market" is already looking past the election? Perhaps, but a 35 VIX (pricing of volatility in SP500 options) says that traders, despite this week's rally, are hugely on edge. Let's hope it's not a Wile E. Coyote sort of edge, if you know what I mean.

Monday, November 2, 2020

Core Performance Update (video)

See year-to-date results for global equity markets and commodities beneath the video player below.

Morning Note: Entering New Territory

October Purchasing Managers Indices (PMI) were released last evening for much of the world, and, per much of the world scoring above 50, much of the world's economy improved (vs September) last month. That, I suspect, plus -- in the face of covid lockdowns and a contentious U.S. election -- some dip-buying following the worst week since March for global stock markets has stocks in rally mode this morning.

Saturday, October 31, 2020

Core Positioning Update (video)

SPECIFICALLY FOR CLIENTS: Here's our latest positioning update where I illustrate the whys and wherefores of the adjustments we've made since mid-year, including how we're currently handling our cash/fixed income exposure, as well as why we're about to re-establish a modest position in AT&T.

Note: Where I make reference to a sector that has "performed well" this year, I'm speaking on a relative basis (coming off of the March low); 7 of the 11 primary U.S. equity sectors remain notably in the red on the year; as do 41 of the 47 foreign equity indices we formally track.

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:

Friday, October 30, 2020

Macro Update: Pulling Forward

For the second week in a row our macro assessment, via our proprietary index, shows net improvement. The PWA Macro Index gaining 2.14 points, to -6.12:

Missing Out On the Most Important Phase of the Business Cycle!

Taking a break from this morning's macro grind, I thought I'd share this short back and forth between myself and Nick in our firm's chatroom a little while ago:

Morning Note: With the End of Uncertainty

Asian equities, save for Vietnam's, took a bath overnight, with all but 1 of the 16 markets we track closing in the red. Europe, on the other hand, is showing a little strength this morning, with 10 of the 19 bourses we follow trading higher. U.S. major averages look more like Asia did last night so far this morning: Dow down 179 points (-0.67%), S&P 500 down -0.90%, Nasdaq down -1.57%, Russell 2000 down -1.07%.

Thursday, October 29, 2020

Chart of the Day: Tim Cook on Q4, "I dunno"

 This (big decline in what folks expend to spend on Christmas this year):

Explains this (Apple offering no calendar Q4 guidance): 

Morning Note: Abnormal Reaction -- And -- Man's Search for Meaning

Just in the course of my morning routine of perusing overnight and early morning data and developments, the Dow went from up mid-double digits (surrendering a 300+ rally in futures trading last night) to down 220 points to up 155 as I type. I would tell you to buckle up, but you're not trading this noise, right? Say "right."

Wednesday, October 28, 2020

This Week's Message: The Inevitable Consequence

Hmm.... I find myself struggling a bit to get this week's message going. The plethora of stuff we can cover has me doubly challenged. My aim is to hook you from the get go (as this is directed to you clients, and I want you understanding the whys and the wherefores that instruct our decisions regarding your money). And while hook you I may, my main objective is to get you all the way to the net before releasing you back into the turbulent waters we find ourselves swimming in these days. 

So I'll keep brevity in mind as I focus on relevance...

Morning Note: Sell Mode

Lack of a bazooka stimulus plan happening pre-election in the U.S. and covid numbers spiking the world over has global equities in sell mode once again this morning. 11 of the 16 Asian markets we track closed lower overnight. 18 of the 19 European bourses we follow are trading down (big) as I type. U.S. major averages are off notably across the board: Dow down 630 points (-2.30%), S&P 500 down -2.26%, Nasdaq down -2.56%, Russell 2000 down -2.74%.

Tuesday, October 27, 2020

Morning Note: Words To Live By

Asian equities closed mostly lower overnight (but not bad considering yesterday's rout in U.S. markets), with 10 of the 16 markets we track in the red. Europe's definitely having a rough go of it, with 16 of the 19 bourses we follow currently trading lower. U.S. stocks are struggling to find direction this morning: Dow down 110 points (-0.40%), S&P 500 down -0.15%, Nasdaq up 0.37%, Russell 2000 down -0.42%.

Monday, October 26, 2020

Quick note on today's action...

Well, you know me, it's hard to stay silent on a morning when the Dow was at one point down over 900 points, so allow me to blab for a couple of minutes on what I'm thinking.

Morning Note: Too Easy to Forget

Asian equities leaned lower overnight, with 10 of the 16 markets we track closing in the red. Constructive Brexit headlines can't overcome a notable spike in Covid-19 cases across Europe, with all 19 bourses we track currently trading lower. Stalling stimulus talks and higher Covid numbers has the dollar rising and U.S. stocks falling so far this morning: Dow down -652 points (-2.35%), S&P 500 down -1.98%, Nasdaq down -1.51%, Russell 2000 down -2.64%.

Friday, October 23, 2020

Macro Update: The Hand We're Dealt

This week saw a notable improvement in our proprietary macro index; up 4 points to a net overall score of -8.16.

Morning Note: "At the right price, markets function"

Asian equities traded mostly higher overnight, with 11 of the 16 markets we track closing in the green. European markets are liking the news out of their auto sector, plus I suspect optimism around Brexit isn't hurting either, as 16 of the 19 bourses we follow are in the green as I type. U.S. stocks are searching for direction this morning as disappointing earnings reports from chip makers has tech trading a bit lower: Dow up 28 points (0.10%), S&P 500 up 0.13%, Nasdaq down -0.35%, Russell 2000 up 0.17%.

Thursday, October 22, 2020

Morning Note: The "Worst Risk-Reward Profile" (of credit markets)

Asian equities traded in mixed fashion overnight, as 9 of the 16 markets we track closed in the red. Less than rosy economic reports and rapidly rising covid numbers have European stocks down nearly across the board this morning; 16 of the 19 bourses we follow are lower as I type. U.S. major averages remain choppy, as traders await final word on a pre-election "stimulus" package; Dow down 116 points (-0.41%), S&P 500 down -0.40%, Nasdaq down -0.65%, Russell 2000 down 0.19%.

Wednesday, October 21, 2020

This Week's Message: With Clarity Comes Opportunity, But Patience Is Key...

I'm taking this week's main message from an entry to our internal log that I penned last weekend (adapted/edited to be featured herein).

While, in it, I pull no punches, I want to be careful not to leave you with an all-hope-is-lost feeling. 

Morning Note: For Every Complex Problem

Asian equities traded mostly higher overnight, with 10 of the 16 markets we track closing in the green. While the pound and the euro are loving the positive Brexit (talks) news this morning, European equities aren't feeling it; 17 of the 19 bourses we follow are trading lower as I type. US major averages (save for the Russell) were initially liking the sound of a 48-hour deadline (call it an extension) to get another trillion or three of much needed "stimulus" (call it "support") approved; at the moment, however, not so much: Dow down -48 points (-0.17%), S&P 500 down -0.09%, Nasdaq down -0.07%, Russell 2000 down -0.87%.

Tuesday, October 20, 2020

Morning Note: Toppy Phenomena

Asian equities traded mostly higher overnight, with 10 of the 16 markets we track closing in the green. Europe's doing well as well, with 13 of the 19 bourses we track up as I type. U.S. major averages are reflecting newfound optimism that a stimulus deal will happen by the end of the day (decent [but not guaranteed] bet I suspect): Dow up 206 points (0.73%), S&P 500 up 0.70%, Nasdaq up 0.42%, Russell 2000 up 0.26%.

Monday, October 19, 2020

Morning Note: The Prelude (well, reminiscent of a past prelude)

Asian stocks traded mostly higher overnight, with 12 of the 16 markets we track closing in the green. Europe, not so much this morning; 11 of the 19 indexes we follow are trading lower as I type. The U.S. major averages, trading on virtually nothing (for the moment) but the prospects for fiscal stimulus, have been all over the place as today's session gets underway. At the moment: Dow down 24 points (-0.06%), S&P 500 down -0.13%, Nasdaq down -0.25%, Russell 2000 up 0.44%.

Sunday, October 18, 2020

Random notes from our research thread...

Being surrounded by what I feel blessed to say is an amazing support team allows me to spend most of my time deep in the weeds of markets and of macro conditions.

Saturday, October 17, 2020

Macro Update: Yep, Unprecedented...

I'll let JPMorgan CEO Jamie Dimon set the stage for this week's macro update:
“The word unprecedented is rarely used properly. This time, it’s being used properly. It’s unprecedented what’s going on around the world, and obviously Covid itself is a main attribute. The economy would be in shambles without the safety net of the CARES Act. In a normal recession unemployment goes up, delinquencies go up, charge-offs go up, home prices go down; none of that’s true here. Savings are up, incomes are up, home prices are up. So you will see the effect of this recession; you’re just not going to see it right away because of all the stimulus.”

Friday, October 16, 2020

Morning Note: Financial Gravity Suspended

Friday is definitely on my top-7 list of favorite days of the week, as it's the day I score our macro index, so I'll be keeping this morning's note short and sweet.

Thursday, October 15, 2020

Morning Note: There's Absolutely A Market For Treasuries

Increasing covid case numbers and lack of agreement on US fiscal stimulus has markets in a risk-off mood round the world. All but two of the 16 Asian equity markets we track closed lower overnight. Europe -- seeing rising covid numbers and proposing new lockdowns -- is red (19 of 19 markets we track) across the board. US major averages are all off this morning as well: Dow down 162 points (-0.57%), S&P 500  down -0.76%, Nasdaq down -1.19%, Russell 2000 down -0.66%.

Wednesday, October 14, 2020

This Week's Message: No Hunch or Hyperbole

The treasury secretary told Bloomberg News this morning that:


Yep.... hmm... well... uhhhh... yyyyeah... that's good. Because, well, here's how the future of Federal debt is shaping UP:

Morning Note: The Great One's Greatest Discovery

Quick one for you this morning (our main weekly message to follow soon).

Asian equities were mixed overnight; 9 markets we track down, 7 up. While Brexit headlines remain concerning, the pound (unlike yesterday) is suggesting something constructive is in the works (+0.83% this morning). European stocks are leaning green, with 11 of the 19 bourses we follow presently higher on the session. US major averages are mixed: Dow +17 points (0.06%), S&P 500 up 0.09%, Nasdaq up 0.07%, Russell 2000 down -0.26%.

Tuesday, October 13, 2020

Quote of the Day: B, B, & B Battening Down

Well, time will tell if the stock market has it right this go-round, or if indeed we're staring down the latter stages of the third epoch bubble in one-fewer decades (remarkable, if so, but explainable, as I'll attempt to do in tomorrow's weekly message).

Morning Note: Patient

Investor expectations in Europe are tanking (per September survey readings), covid cases in Germany are rallying at their fastest pace since April and UK's Boris Johnson says a no-deal Brexit is essentially no big deal. I.e., the euro and the pound are getting pounded this morning, therefore, the dollar's in rally mode. Therefore, while stocks are feeling it, commodities are definitely taking it in the chin.

Monday, October 12, 2020

Quote of the Day: Goes With Our Charts of the Day: Hmm...

In my earlier "Charts of the Day: Hmm..." post I featured visuals showing the session's rise of NDX (Nasdaq 100 Index) and VXN (tracks implied volatility of NDX) and noted that days like today -- both rallying hard -- were rare.

Coincidentally, Bloomberg's Ye Xie noticed it as well and dug into the weeds a bit to find out just how rare the phenomenon has been, and what it typically spells in terms of near-term risk.

Well, following the other 4 times this (and a few other times that were a little less pronounced) has occurred since 2001, VXN did indeed serve as a legitimate short-term warning signal:

"(Bloomberg) -- It’s deja vu all over again. A surge in tech
stocks Monday was accompanied by higher volatility, offering an
eerie reminder of the August stocks melt-up that laid the
groundwork for September’s correction. In fact, it’s only the
fifth time since 2001 when the NDX rose more than 3% and VXN
increased at least 0.8 points. If we lower the threshold for the
NDX to a 2% gain, it’s still a fairly rare occurrence. And the
historical performance in the next two weeks aren’t really


For us, this is simply short-term stuff and nothing actionable at this point. But it's worth noting that all occurrences either came amid bear markets or, in one instance (2015), a double-digit correction. 

Charts of the Day: Hmm...

As I type the Nasdaq 100 Index (read tech) is staging one heck of a rally, up 3.21% on the day thus far (although giving a bit back the past hour or so):

Morning Note: Moved by Hopes

Either because of, in spite of, or oblivious to a concerted effort by China to cheapen its lately-strengthening currency (one could make attendant bull or bear cases for the rest of Asia) Asian equities mostly rallied overnight, with 12 of the 16 markets we track closing in the green. Brexit talks this week are all the talk in Europe, and the action in equities and currencies (despite the warning cries) says the UK won't be busting out without a trade deal (the overwhelming political risk makes that my base case as well); all but 4 of the bourses we follow are trading higher so far this morning. U.S.'s major averages, expecting more stimulus (it'll come, whether it's pre or post election), anticipating special stuff out of Apple's big day tomorrow, and betting that positives will emerge from bank earnings results this week are nicely higher as I type: Dow up 269 points (0.94%), S&P 500 up 1.44%, Nasdaq up 2.13%, Russell 2000 up 0.51%.

Friday, October 9, 2020

Macro Update, More on the Debt Mess, and a Synopsis of Our General Thesis

"The real opportunities in macro, you have to wait for. You don't always have to be doing something.

Having lived a few of these markets before, you have to be very careful because you can lose P&L very quickly by getting too excited."

--Raoul Pal, 10/9/2020 RealVision Daily Briefing

Raoul is RealVision's founder and CEO, and one of today's great macro thinkers. Of course I'm quoting him today because, as clients and regular readers know, his comments echo our present thinking...

Morning Note: Playing Rope-A-Dope

Equity markets across the globe are looking to close out their best week since August; things must be really looking up! Right?

Thursday, October 8, 2020

Morning Note: "Social Sciences Always Start From Problems"

The on again stimulus talks are giving legs to this week's rally, in the face of another 840k folks filing first-time unemployment claims (worse than expected), while nearly 11 million stay on the rolls (although that was fewer than expected). Asian equities rallied overnight nearly across the board, with 14 of the 16 markets we track in the green. Europe's nothing to sneeze at either; 15 of the 19 bourses we follow trading higher this morning. U.S. major averages are up across the board as I type: Dow up 88 points (0.31%), S&P 500 up 0.57%, Nasdaq up 0.36%, Russell 2000 up 0.73%.

Wednesday, October 7, 2020

This Week's Message: All One Can Do

I think it's safe to say that history has never concluded a setup like the current without seeing stocks suffer a significant, protracted bear market in the process (the Feb/March experience btw doesn't come close). So the question has to be, how does one manage a portfolio amid historic certainty that before the next true expansion or bull market gets underway stocks will experience major, extended losses? 

Morning Note: Beholden to stocks...

Equity markets are attempting to claw back yesterday's losses, as the President claws back yesterday's no-stimulus-till-post-election pledge: A perfect example of how tweet-possessed traders have become, and how strong the belief in the reflexive nature of the stock market; i.e., that rising stock prices engender robust animal spirits (economic action), and vice versa.

Tuesday, October 6, 2020

Morning Note: Financial Progress Is, Alas, Cyclical

Asian stocks for the most part continued their rally into the week, with 12 of the 16 markets we track closing higher overnight. Same for Europe, with 14 of the 19 we follow in the green so far this morning. U.S. major stocks are more or less hanging in there as well: Dow up 116 points (0.41%), S&P 500 up 0.12%, Nasdaq flat -0.01%, Russell 2000 up 0.99%.

Monday, October 5, 2020

Quote of the Day: The Popular Mind

If I had a nickel for every time someone has asked me since the market recaptured, say, the first 50% of the Feb/March selloff how stock prices can so defy economic reality, well, yeah, lots of nickels...

Morning Note: Risk Is Rallying

Optimism over US fiscal stimulus prospects and positive commentary around the President's present condition is overcoming news of re-lockdowns in New York City, Spain, France, UK and the Czech Republic as global markets get underway this week.

Wednesday, September 30, 2020

Quote of the Day: The "Real Second Wave"

Okay, just one more before I go quiet for a few days. This speaks as much as anything as to why we continue to sound a cautious note...

Macro strategist Julien Brigden tweeted this today above a Bloomberg news search titled "job cuts, firings, layoffs."

This Week's Message: Where We Presently Stand

In a recent weekly message we scratched the surface of the presently popular inflation/deflation debate among some of today's brightest macro thinkers. This week we're going to take a deeper dive into that discussion and clue you in to where we presently stand on the issue and how we expect to manage it going forward.

Morning Message: The Carnival

In yesterday's morning note I pointed out what motivates policymakers these days (the market). If you happen to struggle with that, with my cynicism that is, well, struggle away. 

It's not that I don't get that a buoyant market leads to confidence and a buoyantly-spending consumer, it's that 36 years of experience and the study of 360+ years of history tells me that such irresponsible pumping of markets and allocation of public resources tends to ultimately lead to extreme financial pain, not only for the unsuspecting investors who get sucked in, but for the folks who truly need the help, as deflating bubbles deflate the desire, if not the means, to consume beyond one's basic necessities, destroying opportunity in the process.

Tuesday, September 29, 2020

Morning Note: Forgive Me My Cynicism

“We definitely need another round of stimulus here, not only for confidence for the American public and workers, but also for the markets,” Michelle Connell, the owner and president of Portia Capital Management, said on Bloomberg Television. “Going into this election, that would definitely help.”
Allow me to tweak that statement just a bit to capture the fundamental belief that guides the powers-that-"stimulate"- in today's top-down, big-government world:

Monday, September 28, 2020

Quotes of the Day: "Rushing Out" Onto That Ice

In Saturday's video commentary I suggested that the last time the ice on the lake (my metaphor for equity markets) was this thin and the temperature this warm the ice ultimately broke.

Morning Note: World in Rally Mode This Morning

Surprisingly good industrial production numbers out of China (I'll suspend the caveats galore this morning), a bit of optimism over Europe's 2021's prospects/hope over Brexit talks this week, and the anticipation of another bazooka fiscal stimulus package in the U.S. -- and/or a bit of that Pavlovian dip-buying -- has world markets rallying this morning. 

Sunday, September 27, 2020

God's Greatest Work

Well, faithful readers, I'll be giving you a break next Thursday thru Sunday. No morning notes, no quotes of the day, no macro update, etc., to take in, as I'll be attempting at least to force upon myself a rare few days of disconnectedness. 

Typically, when I find myself away from my normal surroundings I remain engaged (connected) until the clock strikes one (pt), but this time the plan is to be fully engaged in what I'll say is -- outside of first my family, then markets and economies -- my one true passion, fly fishing. And it'll have my fullest attention while markets are trading the latter part of next week.

Hence, me re-posting the message below (I'll be joining a dear friend whom I first met in early fall 2008 and introduced to my readers back in 2010, this time on the Missouri River in Helena, Montana). 

Only continue if you're in the mood for something non-financial...

Saturday, September 26, 2020

Macro and Market Update (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:

Friday, September 25, 2020

Morning Note: Seeing That Commodities Dip We Were Hoping For, But Wait...

Asian equities were mixed overnight, 10 markets we track closed up, 6 down. Europe's suffering so far this morning, with only 3 of the 19 markets we track trading higher. U.S. stocks are starting the day in the red as well: Dow down 100 points (-0.37%), S&P 500 down -0.38%, Nasdaq down -0.19%, Russell 2000 down -0.52%.

Thursday, September 24, 2020

Morning Note: Speaking of the Dollar

Asian equities, no surprise, got hammered overnight, with all but 2 of the markets we track closing notably in the red. Europe's sliding as well this morning, with all but 3 of the 19 bourses we follow trading lower. U.S. stocks have been all over the place this morning: As I type: Dow down 40 points (-0.15%), SP500 down -0.16%, Nasdaq down -0.10%, Russell 2000 down a big -1.48%. 

Wednesday, September 23, 2020

Morning Note: The Rise of Leverage

Asian equity markets were mixed overnight; 9 down, 7 up. Europe's hanging in there; 13 of the markets we track are higher, 6 are trading lower as I type. The U.S.'s major averages are struggling one hour into today's session: Dow (despite Nike) down 38 points (0.14%), S&P 500 down -0.53%, Nasdaq down -0.85%, Russell 2000 down -1.08%.

This Week's Message: "Awesome Time to Be Alive"

We'll start this week's message off by looking at the data I shared in our internal research call yesterday afternoon. The topic was the day's market internals.

The reason I'm using yesterday's action as my segue to this week's message is because in a number of ways it serves as a nice microcosm of the 2020 equity market to date. 

Tuesday, September 22, 2020

Morning Note: Messy

Asian equities continue to struggle this week; 13 of the 16 markets we track closed down notably overnight. European stocks are fairing better this morning with 15 of the 19 bourses we follow presently in the green. U.S. stocks are struggling just a bit to start the day: Dow down 36 points (0.13%), S&P 500 flat, up 0.06%, Nasdaq flat, up 0.03%, Russell 2000 down -0.60%.

Monday, September 21, 2020

Morning Note: Nowhere to Hide (This Morning)...

Yet another jolt to the U.S. political setup, Covid breaking above March's numbers in Europe and a concerning report on major global banks and their alleged relationships with "dangerous players" over the past two decades has world asset markets on edge this morning. 

Saturday, September 19, 2020

Charts of the Day: Comfortable Being in the Minority

In yesterday's macro update I mentioned that 

"...not everyone agrees with our presently cautious bent. I mean, some folks actually believe now's the time to take the leap and buy the recent dip with both fists."

Well, that's putting it mildly!

Friday, September 18, 2020

Macro Update: Is the Reopening Bounce Fading?? -- And -- Careful Taking That Leap!

Our proprietary macro index gave up 4 points this week; net score -14.00.

Quotes of the Day: Lower Interest Rates Explain Much About Stocks of Late

Yesterday I asked you to

Morning Note: "It Ain't Ever Different"

Asian equities, on balance, rallied a bit overnight, with 10 of the 16 markets we track closing in the green. Europe, on the other hand, is struggling so far on the session, with only 3 of the 19 bourses we track presently in the green. U.S. equity averages are essentially flat. Dow down 58 points (-0.21%), S&P 500 down -0.08%, Nasdaq up 0.15%, Russell 2000 up 0.28%.

Thursday, September 17, 2020

Morning Note

Asian equities got hammered overnight, with all but 2 of the markets we track closing in the red. Europe, while well off the session lows, is taking a beating this morning as well; all but 5 of the 19 bourses we follow presently trading lower. U.S. stocks, also presently off the session lows, are red across the board as I type: Dow down 63 points (-0.22%), S&P 500 down 0.85%, Nasdaq down 1.42%, Russell 2000 down 1.31%.

This Week's Message: History's Rhymes

In our effort to keep you informed as to what we're thinking in the here and now we're forever highlighting herein the at-the-moment trends and developments that instruct our entries into, exits out of, and hedges on various asset classes and securities. Underneath it all of course is the broad macro picture, global general conditions, if you will, that command our attention (analyzing, interpreting, testing, hypothesizing) on virtually a 24/7 basis. 

Wednesday, September 16, 2020

Morning Note: More on the Disconnect

Asian equities had a mixed session overnight, with 7 of the 16 markets we track closing lower. Same for Europe this morning, 9 of the 19 bourses we follow currently in the red. And "mixed" pretty much characterizes U.S. stocks to start today's session: Dow up 91 points (0.32%), S&P 500 up 0.11%, Nasdaq down -0.19%, Russell 2000 up 0.75%.

Tuesday, September 15, 2020

Quotes of the Day: Beware the "Self-fulfilling Mechanisms"

Just began digging into the latest Bank for International Settlements Quarterly Review (always a must read, but only if you're, like me, a total geek), released yesterday, and can't help but quote from the opening few paragraphs, as they so echo what you've been reading herein the past months:

Morning Note: Untutored Traders Are Not To Be Chastened, Well... Not Just Yet...

Better than expected data out of China inspired a rally in Asia that saw all but 3 of the 16 markets we track closing higher overnight. Europe, riding a sentiment survey that bested all economists' expectations, is following suit so far this morning; 15 of the 19 bourses we follow in the green. And not to be left out this morning are the U.S. equity markets: Dow up 133 points (0.48%), S&P 500 up 0.87%, Nasdaq up 1.51%, Russell 2000 up 0.47%.

Monday, September 14, 2020

Morning Note: A "Fascinating", And Telling, Development, and more....

Optimistic vaccine headlines and a bit of merger mania saw Asian equities rally overnight (12 of the 16 markets we track closed in the green) and has Europe, on balance, in rally mode as well this morning (12 of the 19 bourses we track up on the session thus far). U.S. equities are bouncing back from two weeks of decline rather nicely: Dow up 319 points (1.30%), S&P 500 up 1.52%, Nasdaq up 2.06%, Russell 2000 up 1.27%.

Friday, September 11, 2020

Macro Update: Blushing Socialists -- And -- The Dollar Bears Close Watching!

Macro conditions, as indicated by this week's scoring of our PWA Macro Index, continue, after last week's hiccup, to show net improvement. Although, not nearly to the point that would have us comfortably allocating assets in a manner reflecting strong odds that the next sustainable expansion is underway. 

Morning Note: Tough Times Yield Good Things, If.....

Asian equities traded mostly higher overnight, with 12 of the 16 markets we track closing in the green. Europe's limping a bit into the U.S. session this morning, with 9 of the 19 bourses we track trading lower. U.S. stocks are (save for small caps) once again catching an early bid: Dow up 190 points (0.69%), S&P 500 up 0.51%, Nasdaq up 0.16%, Russell 2000 down -0.45%.

The VIX (SP500 implied volatility) is down -7.67%. VXN (Nasdaq vol) is down -4.38%. Now, don't be fooled by those steep declines in the pricing of volatility, 27.48 and 36.35 respectively are very precarious levels for stocks broadly.

Thursday, September 10, 2020

Chart of the Day

Well, that dollar/stock market nastiness I keep harping on is playing itself out in today's session as well:

This Week's Message: Bad News Be Good News

It's just a few minutes before the open on this smokey (I live in California) Thursday morning, and despite weekly jobless claims coming in higher than expected, and the U.S. dollar taking a sound beating this morning, U.S. equity futures just turned from notably red to nicely green. Hmm...

Wednesday, September 9, 2020

Quick note on today's action...

Was thinking about jumping on the blog and offering a quick market update, given this morning's strong rally. Nick just made the task easy.

Morning Note: Natural Rhythms

Asian equities followed the U.S. into the red in the overnight session; 14 of the 16 markets we track closed lower. Europe, on the other hand, is rebounding sharply this morning; 17 of 19 bourses are trading notably green thus far. U.S. markets are, as I type, attempting to break a 3-day string of sharp losses with an impressive rally: Dow up 453 points (1.65%), S&P 500 up 1.86%, Nasdaq up 2.25%, Russell 2000 up 0.34%.

Tuesday, September 8, 2020

Morning Note: The Question of the Day

Despite heightened trade tensions between China and the US, as well as border tension between China and India, all but 3 (one being India) of the Asian markets we track closed in the green overnight. Europe, on the other hand, is having a very rough day; all 19 of the bourses we track are trading lower as I type. As is the U.S. so far: Dow down 418 points (-1.49%), S&P 500 down -1.65%, Nasdaq down -2.17%, Russell 2000 down -1.86%.

Saturday, September 5, 2020

This Morning's Log Entry: Short-term Structural Factors Evaporating

On occasion I'll share from our internal market log. In the interest of time, I simply cut and pasted this morning's entry herein and hit "publish." So it lacks the editing I might otherwise perform for public consumption. Therefore, feel free to shoot me an email, or comment below, if you'd like me to clarify any term or statistic featured. I'll get back to you before the weekend's out.

Have a nice one,

Friday, September 4, 2020

Macro Update: How To Couch The Jobs Report -- And -- Circumventing the Rest/Recovery Cycle...

So how do we couch the good news around the latest jobs numbers?

Millions of new jobs have been created over the past few months,


Morning Note: Time Will Tell

Asian stocks for the most part took the U.S.'s lead into their session last night; 13 of the 16 markets we track closed in the red. Europe's fairing a bit better this morning; 10 of 19 indices trading higher so far. U.S. equities are struggling: Dow down 109 points (-0.39%), S&P 500 down -1.25%, Nasdaq down -2.79%, Russell 2000 down -1.16%.

Thursday, September 3, 2020

Today's Market Action, Etc. (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: VIX at All-Time High High

You've noticed that I feature two volatility measures in each morning note; reason being, they can be telling. 

Morning Note: Like Only the Year 2000

Asian equities closed mixed overnight (8 of the markets we track up, 8 down). 12 of the 19 European indices we track are in the green so far this morning. U.S. averages are, save for the 30-stock Dow, are struggling this morning: Dow up 61 points (0.21%), S&P 500 down -0.59%, Nasdaq down -1.79%, Russell 2000 down -0.40%.

Wednesday, September 2, 2020

This Week's Message: The Dollar is Key -- And -- Powell's Restless Sleep

On July 27th I wrote herein:   note the bolded sentence...

Given all that’s evolved over the past several decades, given the complete carry-dependent state of the global economy, there’s only one road for the powers-that-be to take going forward; a steady, unrelenting debasement of the US dollar.

Morning Note: Unamused European Central Bank

Asian equities closed mostly in the green (12 of the 16 markets we track) overnight, Europe's trading mostly higher this morning as well (14 of 19), and the U.S. averages are somewhat mixed as the session gets underway: Dow up 209 points (0.75%), S&P 500 up 0.58%, Nasdaq down -0.13%, Russell 2000 flat +0.04%.

Tuesday, September 1, 2020

Quick Post-Market Note, And A Few Charts...

Following up on this morning's note about the stinky breadth the stock market can't seem to rid itself of.

Morning Note: Ponder This -- Or -- Should We Ride This Rocket?

Asian stocks closed mostly higher, 10 out of 16 markets we track in the green, last night. Europe's mixed, 10 out of 19 bourses in the red. U.S. equities (save for small caps) are somewhat back (Nasdaq still) in rally mode this morning: Dow up 94 points (0.33%), S&P 500 up 0.36%, Nasdaq up 0.96%, Russell 2000 down -0.05%.

Monday, August 31, 2020

Morning Note: Historically-Lofty

Only one Asian equity index, of the 16 we track, closed higher last night, Japan. And that was apparently thanks to news that Warren Buffett is snatching up stock ($6 billion worth) in Japanese commodities traders. That, plus his recent foray into gold miners suggests that he sympathizes with the base case that happens to presently have us more in commodities than we've ever been. 

Europe's not much better so far this morning; 13 of the 19 bourses we track are in the red. 

U.S. equities are troubled a bit this morning as well: Dow down 211 points (-0.74%). S&P 500 flat, -0.09%. Nasdaq up 0.55%. Russell 2000 down 0.65%.

Sunday, August 30, 2020

The Inefficient Hand of Central Planners -- Or -- Rats and Snakes...

During an insightful discussion featuring macro minds Raoul Pal and Larry McDonald, Larry tells of what inspired, then killed, the short-lived Cobra farming phenomenon of late-1800s India:

Saturday, August 29, 2020

The Leaders Are Losing Their Shorts

Each week I track the short-interest (the extent to which traders are betting on a fall) in major averages and select individual securities...

I thought I'd share some of what I added to our research thread this morning. I.e., the more our clients understand what goes on down in the weeds, the more they can put volatility into perspective when it shows up. 

Friday, August 28, 2020

Quote of the Day: The Fed Sees, and Fears, Inflation

Hey, I think I found one!

Yesterday I blogged:

Macro Update: Contextualizing...

Our PWA Macro Index came in unchanged this week at -11.76. 

Morning Note: Vol Is Trying To Tell Us Something...

Asian stocks were mixed overnight; the 16 markets we track split the difference by the close, 8 green/8 red. Japan took the hardest hit on news that the longest-running prime minister in its history is stepping down for health reasons. The yen is our third-best performing core portfolio component this morning. I suspect that's not for defensive reasons (the reason we own it) but out of uncertainty, in that Abe's economic scheme was forever a resoundingly yen-weakening proposition. Europe's messy, with 15 of the 19 bourses we track in the red. The U.S. (save for the Nasdaq) is essentially flat so far this morning: Dow up 24 points (0.08%), S&P 500 flat, +0.05%, Nasdaq up 0.35%, Russell 2000 flat -0.07%.

Thursday, August 27, 2020

This Week's Message: Cash-for-Clunker-esque -- AND -- The Fed Fears Success...

Yesterday, Dan, our operations manager and budding tech analyst offered up a smart and relatively bullish short-term case for Apple.

Morning Note: Nuance

Asian equities were the definition of mixed overnight; 8 of the markets we track up, 8 down. Europe's getting hammered this morning; all but two of the 19 indices we track are in the red as I type. U.S. equity traders, on the other hand, are, for the most part, liking what they heard from Fed Chairman Powell this morning (more on that later). Dow up 178 (0.63%), S&P 500 up 0.24%, Nasdaq flat +0.02%, Russell 2000 flat -0.04%.

Tuesday, August 25, 2020

Afternoon Note: Can't Know the Future, But Can Know the ......

Asian stocks closed mostly higher overnight; 11 of the 16 markets we track in the green. Europe, however, had a rough go of it today; 15 of the 19 indices we follow closed in the red. U.S. equities were mixed, but definitely (price-wise) with a positive tilt: Dow down 60 points (-0.21%), S&P 500 up 0.36%, Nasdaq up 0.76%, Russell 2000 up 0.32%.

Monday, August 24, 2020

Quote of the Day: Cash is King

While we're presently actively exploring safe ways to generate better yields on the historically (for us) high level of cash we're sitting on, I want to reiterate here the point I've been making of late to some of our largest investors: Yes, we're sitting on an atypically for us large chunk of cash, but, like everything else we do -- while, sure, it's defensive too -- it's strategic. 

Morning Note: More Slices Don't Make More Pie...

It was risk-on overnight in Asia, with 14 of the 16 markets we track closing higher. Europe's feeling it as well this morning; 17 of the 19 indices we follow comfortably in the green so far. The U.S. too; Dow up 270 (+0.97%), S&P 500 up 0.69%, Nasdaq up 0.35%, Russell 2000 up 0.84%.

Saturday, August 22, 2020

Ain't Pretending...

The good news, as we've been reporting herein of late, is that the credit markets -- while ticking ever-so-slightly tighter last week -- have calmed down markedly since the Feb-March panic. I mentioned in a post yesterday that while another equity market selloff from these levels could come swiftly and invoke fears of another liquidity event (all babies going the way of the bathwater), it's our view that the Fed has the liquidity risk properly attended to. And, therefore, such an event we (PWA) would likely exploit to gain exposure to what we're presently after at more opportune prices.

Friday, August 21, 2020

Macro Update: It's All About Folks -- OR -- How's the Traffic Out There?

Housing permits and starts have nearly recaptured their pre-recession uptrend. 

Morning Note: More Bad Breadth. Plus, The Lately-Rising Dollar and What We're Thinking/Doing About It

Asian equities ended the week on a positive note, with 13 of the 16 markets we track closing higher overnight. Can't quite say the same, however, for Europe, at least so far this morning; 11 of the 19 indices we follow trading lower. U.S. equities, while mostly green, continue to exhibit very concerning breadth (adding the S&P 500 Equal Weight Index herein to illustrate the point): Dow up 84 points (0.30%), S&P 500 up 0.11%, Nasdaq up 0.32%, Russell 2000 down -0.96%, S&P Equal Weight -0.36%.

Thursday, August 20, 2020

Quote of the Day: Bad Breadth

Speaking of bad breadth, just after posting this morning's note I saw this from Bloomberg's Andrew Cinko on the details:

Morning Note: Happy to be Patient

Asian equities took a hit overnight, with all 16 markets we track finishing the session lower. Europe's no better this morning; all 19 indices on our radar are in the red. U.S. stocks, on the other hand, are mixed: Dow down 87 points (-0.31%), S&P 500 down -0.15%, Nasdaq up 0.26%, Russell 2000 down -0.74%.

Wednesday, August 19, 2020

This Week's Message: MUCH More to Play Out...

We'll keep this week's message short, given the rundown I presented in last evening's video.

In said video I mentioned that in all bear markets that occurred during a recession since 1927, only one didn't see the first selloff bottom retested or blown through before it was all said and done. That one occurred in 1949, and it was a bear market (20% off of all-time highs) by merely a hair:

Again, in every other case over the past 93 years, recession bear markets were far from over after the initial decline that made the bear official.

The two analogs to today's setup I've referenced most have been 1929 and the tech bubble. The first retest of the initial low occurred ~9 months later in 1929 and ~5 months later during the tech bubble. 


Tech Bubble

We're presently 5 months removed from the initial low this go-round, and the market hasn't even begun to roll over:

2020 Recession Bear Market

With regard to the tech bubble analog, and to reiterate the present state of market internals I touched on in the video, as Schwab's Liz Ann Saunders points out, yesterday's action, for example, punctuated the point.
"Yesterday’s record close in interesting company ... data compiled by
@Bloomberg reveal that historical days when S&P 500 gained 0.28% or more while 42% or less of members were advancing, were only before & during tech bust (obviously, a small sample size)"


Now, when I say "the market" hasn't even begun to roll over, I'm speaking of the S&P 500 Index, which currently is more concentrated in its top 5 positions than I believe it's ever been.

Here's the one-year chart:

Now, if the market is indeed more than, say, the top 5 weightings in a given index, well, then, things aren't quite as robust as they might otherwise appear.

Here's the one-year chart for the S&P 500 Equal Weight Index (i.e., each component weighed the same):

And of course nothing tells that story like a look at the year-to-date results across U.S. sectors.

Of the thirteen featured below, 7 remain in the red on the year:

Of course we should absolutely expect as much given the lousy internals I spoke about in the video.

Yes, as I continue to stress, there's MUCH more to play out before the curtain closes on this particular episode...

Thanks for reading,

Tuesday, August 18, 2020

A Technical Look at the US Equity Market (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:

Morning Note: Mass Distortion in the Housing Market

Asian stocks were mostly green overnight with 10 of the 16 markets we track closing higher. Europe has pretty much surrendered its gains from the open, as I type 15 of the 19 indices we track are in the red. US equities are mixed: Dow down 87 points (-0.31%), S&P 500 flat, Nasdaq up 0.30%, Russell 2000 down 0.94%.

Monday, August 17, 2020

Morning Note: Fundamentals do matter, just not lately...

Asian equities traded mixed overnight, although China saw a nice rally, as its central bank did more of the central bank stuff that world equity markets are lapping up these days. There's of course the obligatory how long can they keep doing this, and/or, how long will markets continue to buy it? questions come to mind, but we'll continue to explore those in other commentary. Europe's having a nice morning so far, with 16 of the 19 markets we track in the green. US equities are mixed: Dow down 75 points (-0.27%), S&P 500 up 0.29%, Nasdaq up 0.70%, Russell 2000 up 0.38%.

Sunday, August 16, 2020

Uncomfortably Comfortable, Or, Getting Tipsy...

Amid all of the fancy fundamental and technical analyses firms like ours perform and peruse, we must never lose sight of the simple fact that what we are truly analyzing -- to repeat the gist of our August 5th message -- under all circumstances, and with no exceptions, are the actions and reactions of human beings; on behalf of themselves and their families, on behalf of their business interests, and on behalf of the political posts/parties they occupy -- the world over.

Friday, August 14, 2020

Macro Update: The Begging Question

Our PWA Macro Index overall score jumped a notable 7.84 points this week to -19.61. Five of our inputs improved enough to warrant positive score changes, while one dropped a notch.

Morning Note: The Crowd

Asian equities traded mostly lower overnight, with 10 of the 16 markets we track closing in the red. Europe's bleeding literally across the board; every one of the 19 equity indices we track is trading lower this morning. U.S. equities are mixed: Dow up 43 points (0.16%), S&P 500 literally flat, Nasdaq down -0.26%, Russell 2000 down -0.19%.

Thursday, August 13, 2020

Morning Note: A Lot Has To Go Right

Asian equities traded mostly higher overnight, with 13 of the 16 markets we track closing in the green. No such luck, however, for Europe this morning; only 4 of the 19 indices we track trading higher. U.S. stocks are mixed as I type: Dow down 31 points (-0.11%), S&P 500 up 0.07%, Nasdaq up 0.47%, Russell 2000 up 0.24%.

Wednesday, August 12, 2020

This Week's Message: Brains to Burn

I'm taking this week's message from my little 2013 book. I'm thinking this essay I penned back in 2010 and featured in Leaving Liberty? is once again timely...

Morning Note: What Investing is About...

Asian equities closed yet again mixed overnight; 7 of the markets we track in the green, 9 in the red. Europe, on the other hand, is yet again beginning the day in impressive fashion; 16 of the 19 markets we track presently trading higher. US equities are nicely higher across the board this morning: Dow up 260 points (+.94%), S&P 500 up 1.27%, Nasdaq up 1.63%, Russell 2000 up 0.79%.

The VIX (SP500 volatility) is getting crushed, -7.78% to 22.22. VXN (Nasdaq vol) is supporting this morning's rally thus far as well, -6.65% to 29.75.

Oil futures are up 1.61%, gold's are up $2, silver's down 1% (futures that is, spot price is up), copper's down -.61% and the ag complex is mostly green as I type.

The 10-year treasury is trading lower (yield higher) and the US dollar index is off by -0.11%.

Our core portfolio is off to a decent start this morning; up 1.05% as I type.

I'll circle back a little later with our weekly message. In the meantime here's Popular Delusion's Dylan Grice on what he thinks investing is "about".

"Everyone thinks investing is about being smart. its more about being different."

I agree, although I'd add objectivity and humility... 

Have a great day!

Tuesday, August 11, 2020

Quote of the Day: Like the Spring of 2000...

In client review conversations -- in response to the disbelief our more veteran/tutored clients express about the present state of market affairs -- I often find myself harkening back to those tech bubble days (spring of 2000) when retail traders threw all caution to the wind and bid tech stocks into the proverbial stratosphere.

Morning Note: Rotation or Harbinger?

Asian equities traded in mixed, by definition, fashion overnight: 8 of the markets we track closed higher, 8 lower. European markets this morning, however, possess no such ambiguity; 18 of the 19 bourses we follow are solidly in the green as I type. US equities are once again starting the day in let's call it confused fashion; Dow up 296 points (+1.07%), S&P 500 up .21%, Nasdaq down -.80%, Russell 2000 up .94%.

Monday, August 10, 2020

Morning Note: Explosion of #4s

Asian equities traded mostly in the green overnight; 12 of the 16 markets we track closed higher. Same for Europe this morning; 16 of 19 indices presently in the green. U.S. equities are mixed as I type, with the Dow up 244 points (.91%), the S&P 500 up .18%, the Nasdaq down -0.53% and the Russell 2000 up 1.5%. 

Sunday, August 9, 2020

Quotes of the Day: A Time To Look Silly

As I continue to stress as the stock market continues to seem to defy economic reality; while much indeed changes over time, there's much about human nature that indeed doesn't seem to.

Saturday, August 8, 2020

Macro Update: Assessing the Risk/Reward Setup

Our PWA Macro Index continued its climb out of the abyss this week; coming in at -27.45, a notable improvement of 5.88 points. Three components saw their scores increase, none decreased.

Friday, August 7, 2020

Morning Note: Dollar Rising -- And -- Maybe The Quote of the Year

Asian equities had a rough go of it overnight, with all but 3 of the 16 markets we track trading lower; US moves against select Chinese-owned companies inspired an instant wave of selling. Europe's trading mixed this morning, while U.S. major averages are, save for smallcaps, trading modestly negative: Dow down 100 points (-.36%), S&P 500 down -0.18%, Nasdaq down -0.17%, Russell 2000 up 0.12%.

Thursday, August 6, 2020

Quick Update: Core Portfolio YTD (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:

Morning Note: Stay Tuned, And Stay Hedged...

Asian stocks closed mostly (10 of 16 markets we track) in the green overnight, Europe, however, is not following suit this morning; with 17 of the 19 indices we track trading lower. U.S. equities are essentially flat as I type: Dow up 6 points (+0.02%), S&P 500 down -.14%, Nasdaq down -.10%, Russell 2000 down -0.12%.

Wednesday, August 5, 2020

This Week's Message: What We're Actually Measuring...

Lately, on Wednesdays, I'm finding myself staring for longer than usual at a blank page on my computer screen, shuffling through thoughts on what I might offer up in a "weekly message" that is more than just some regurgitation of the regurgitations I've been offering up on a daily basis.

Morning Note

Asian equities traded higher virtually across the board overnight, Europe's following suit this morning, with only 2 of the 19 indices we track in the red, and the US certainly won't be left out; Dow up 285 points (1.1%), the S&P 500 up .59%, Nasdaq up .28% and the Russell 2000 up .66%.

Tuesday, August 4, 2020

Evening Note

A good friend just sent me Merrill Lynch's latest market narrative. I'm thinking my reply can serve nicely as this evening's note:

Quote of the Day: Who's Selling?

So who's selling their shares into this extended rally off of the March bottom?

Well, not who you'd hope:

Morning Note: Wow! Those Top 5!!

Asian equities were nicely green nearly (with only China's Shenzhen Index closing lower) across the board overnight. Europe's mixed this morning, with 9 of the 19 bourses we track currently in the red. U.S. major averages are on the rise (although barely for the Nasdaq): Dow up 128 points (.48%), S&P 500 up .21%, Nasdaq up 0.02% and the Russell 2000 up .43%.

Monday, August 3, 2020

Morning Note: What A Price-Moving Cohort Has Yet To Appreciate

Asian stocks traded mostly lower overnight, with only 6 of the 10 indices we track in the green. European equities, on the other hand (save for Greece and Hungary) are rallying this morning. The major U.S. averages are trading nicely higher as well; Dow up 200 points, S&P 500 up .72%, Nasdaq up 1.23%, Russell 2000 up .95%.

Friday, July 31, 2020

Macro Update: And A Fundamentally-Sound Theme To Exploit...

Just finished our weekly formal macro exercise, and for the 9th consecutive week our overall assessment has not deteriorated. I.e., things improved during 6 of the weeks off of the June-1st bottom, stayed flat during 3.

Morning Note: Not feeling the love...

Asian equities were mixed overnight, with 10 of the 16 indices we track trading lower. Two of the gainers represent Chinese stocks, and that reflected better than expected economic data. As you know, in a controlled economy you can, well, control many things. You can literally order your factories to produce stuff even when their international customer base isn't in nearly the buying mood to justify it. Voila! Growth! But what a potential mess later on as those inventories pile up... 

Thursday, July 30, 2020

Evening Note: At Best...

I've noticed a developing trend in my end-of-day perusing of credit market internals; it's that most things credit appear to be truly on the mend.

To give you a visual, below is a color-coded handful of the things we track. While this clearly isn't screaming green, rest assured that it's a far tamer look than we were getting just a few weeks ago.



    • LEVERAGED LOAN PRICE INDEX: Ytd: -5.3%, retraced >62% of BM decline…

    • PSP (Private Equity ETF): Ytd: -15.80%, retraced >62% of BM decline.

    • HYG: Ytd: -308 bps, retraced >76% of BM decline…

    • MUNI/TREASURY SPREAD: 122% of 10-yr treas, 61% wider vs equity mkt peak

    • HY SPREAD (1-day behind): 489 bps, 36% wider vs equity mkt peak

    • Ba SPREAD: 342 bps, 60% wider vs equity mkt peak

    • BB-BBB SPREAD: 168 bps, 95% wider vs equity mkt peak

    • CDS Inv Grade Index 70.37


So what gives? I mean, just last evening I illustrated how corporate debt stress -- in terms of debt service relative to key corporate income metrics -- is rising in a manner never seen in the history of all past recessions. Not to mention Q2 GDP declining at an all-time record quarterly pace, and the 1.4 million in first-time unemployment claims filed last week. How on Earth could credit markets be so sanguine right here?

Well, if you listened to Fed Chair J. Powell talk up US monetary policy yesterday, you'd understand completely. Essentially, while he was as straightforward as a fed chair could be in terms of the anything-but-rosy present state of affairs, his commitment to keeping markets afloat was firm, unwavering and unlimited in scope. 

The thing is, however, if the current episode is indeed to fall short of ending in what we'll call massive blood in the financial streets, we have to ultimately be concerned with what we end up with on the other side? For if the authors of The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crisis have it right, central banks at best are merely what they call "agents of carry", and, thus, can at best only succeed in keeping this massive corporate debt bubble inflated. Well, till they can't...      

emphasis mine...
The wealth that is made by the financial players (and businesses and individuals) who are implementing carry trades is not real wealth of the sort that derives from an economy’s greater ability to produce better goods and services that the general population needs and desires. On the contrary, it causes financial asset prices to become hopelessly distorted, unhinged from the real economy, and therefore ends up misdirecting scarce capital into potentially unproductive uses. Over time, the economy will perform progressively more poorly, with income and wealth more and more concentrated in a few hands.
Nevertheless, it is also important to realize that the carry regime, as it progresses, fundamentally weakens the true power of central banks (and by extension governments). This may seem counterintuitive, but as with regulatory capture, central banks are themselves “captured” by carry. During the intensely deflationary carry crashes (such as occurred in 2008), they appear to have no option other than to increase moral hazard further, via even greater intervention and bailouts. In one of the various seemingly contradictory aspects of the carry regime, central bankers seem to have enormous power—their extraordinary power to create high-powered money, set short-term interest rates, and strongly influence financial markets with everything they say—but ultimately they themselves have little latitude to act. Central banks become merely the agents of carry. Their seeming immense power is, in reality, mostly illusory.
If you're unfamiliar with the term "carry trade", it typically refers to the act of borrowing in a low-yielding currency and lending in a higher yielding currency, the differential (the profit) is called "the carry." The authors quoted above use the term to describe any scheme that involves "the use of borrowed funds or else utilize some set of contracts that creates a potential risk of loss greater than the amount of capital initially employed in the trade." Which, alas, describes the myriad of "trades" investors, pension funds, other institutions, etc., have resorted to either out of greed, or need, these years since the last bubble burst. These include everything from currency carry as described above, writing insurance, selling credit default swaps, buying high-yielding equities or junk debt on margin, mortgaging property investments, writing options, and buying leveraged ETFs, to companies borrowing to fund share buybacks, to a whole gamut of other complex financial strategies.

I.e., Suffice to say that the Fed has its back against a ginormous wall of risky debt-financed schemes that allow for very little volatility in financials markets; without, that is, major systemic consequences...

Stay tuned, and stay hedged...

Thanks for reading,

Morning Note: Morning Note: All Juiced Up

Asian equities, having closed before the firework show in the West got underway, actually saw a little green overnight, with 6 of the 16 markets we track trading higher. Europe, on the other hand, being wide awake this morning is seeing nothing but red, with all of the 19 bourses on our radar down, by a bunch. Same for the U.S., with the Dow down 520 points (-2%), the S&P 500 off 1.5%, the Nasdaq lower by 1.1% and the Russell 2000 down 1.7%.

The VIX (SP500 volatility) is screaming higher of course this morning, +13% to 27.31, VXN (Nasdaq volatility) is up 7%, at 32.26.

Oil's down huge, 4%, gold's off $10, silver's getting hammered, down 3.9%, copper's off 1% and the ag complex is split roughly down the middle.

As you'd expect, the 10-year treasury yield is falling this morning (price rising), while the dollar's flat.

Our core portfolio is feeling the pain as well this morning, down 1.3% as I type. The only core component trading higher is DBA (ag commodities), and that's only by .2%. Of course the put hedges are working nicely, at the moment up 22%.

There's just no sugar-coating this morning's data; the first Q2 GDP reading is like nothing we've seen since the 1940s, down 32.9% annualized. Jobless claims increased for the second week in a row to 1.43 million, while 17 million folks filed for ongoing benefits, up 867 from the prior week.

Sure, stocks are trading lower this morning, but when you match up current levels and macro reality, well, stocks -- historically-speaking -- appear to be punching way above their weight. Good thing, at least for the moment (at least for short-term traders), that there's no steroid (Fed injections, etc.) testing in this particular contest. Of course the natural market athlete (you and me) fears the longer-term side effects of entering the ring all juiced up, while, not to mention, wearing no headgear. 

Wednesday, July 29, 2020

This Week's Message: Some of this month's most pertinent messaging...

Well, being that this is the last weekly message of July, I'm thinking I'll take it easy on m'self and offer up a handful of 
snippets from some of this month's messaging herein:

"...without question, you want to own things that are priced in dollars!

Now, of course U.S. stocks are priced in dollars, right? Right! And, sure, own some (we do), but be careful doing so when they're priced at 1999ish valuations (by several metrics) and the economy has the proverbial Mount Everest yet to climb.

And definitely own other things priced in dollars that aren't historically expensive."

"Our commodities exposure (DBA and DBB being brand new positions) now makes up roughly 20% of our core portfolio; and I suspect we'll be incrementally adding as things progress."

Here's a look at how our commodities positions stack up with stocks since I penned the above:

Click to enlarge...

From "Systems Thinking" on July 2:
"You're about to experience, at least at the open, what I'll call a classic what-others-think-others-are-going-to-do rally.

The linked phrase above was the subtitle to my April 10 post; I recommend you read it (again?) when you have a chance. Here's a snippet:
"My base case that stocks have yet to see the worst is entirely based on data and experience. My illustrating aplenty herein that bear market retracement rallies are the norm is meant to help our readers understand how incredibly risky it is to wade into this snap-back rally as if the bear market is already over. Which, by the way, would make it the shortest on record -- amid the worst economy on modern record! Just seems like a very far-fetched notion if you ask me..."Still my base case, by the way...
In a nutshell -- in the short-run:
"Keynes suggested circa a century ago that trading (as opposed to, I'll say, investing in) markets is not about assessing fundamentals, it's about what traders think other traders are going to do. And for the more savvy traders, it's about what they think other traders think other traders are going to do.""

From "A Better Look, Commodities, and A Monster Mountain Left to Climb" on July 3:
"The next few weeks will be telling, as, per the latest news, a number of states are delaying, and or, reversing certain stages/aspects of their reopening plans.
Half of this week's improvement showed up in the commodity space. Which, coincidentally, is something we anticipated and, therefore, have begun to express in client portfolios.

I should tell you, however, that while rising commodity prices does show up as a positive in our macro index, our bullishness there has everything to do with the prospects for a weaker dollar going forward (and, ultimately, with regard to metals, the prospects for infrastructure spending), as opposed to the prospects for robust economic growth anytime soon."
" a world where the world's governments are willing to weaponize their equity markets against their respective economic woes, not to mention against each other, stock prices can remain detached from economic reality for what can seem like a very long time. History (those charts I alluded to), however, strongly suggests that the reattachment can be most painful..."
From "The Most Bullish Chart for Stocks Right Now" on July 6:
"Now this one guys/gals is the most bullish chart of all for stocks for the remainder of 2020. And it's really incredible. It's the TGA (treasury general account). Think of it as the treasury's piggy bank. The amount you see there amounts to well over a trillion dollars (1.6 in total) of new borrowing (a trillion being the normal entire-year's budget deficit) that essentially wasn't needed to fund the government. They literally issued this debt just to hold onto the cash. So, why? This is an historic first! Well, as you know, or should know, I struggle with conspiracy theories, but this one is so blatant I can't help it. This is Mnuchin essentially assuring that no matter what, whether Congress passes more stimulus, and/or regardless of what the Fed does, he has the firepower to juice the markets during the critical months leading into you-know-what in November.
Yes, this is huge support for stocks, you can bet on it. However, betting big on stocks given everything else going on (and there's lots) is -- despite what I just wrote -- hugely risky. Stocks can still fall in the face of rampant stimulus, I've seen it... If not over the next few months, dear Lord, just wait till we reach the point when they're forced to let up, even modestly, on the life support for stocks:"

From "Quotes of the Day" on July 15:
To add a little more to our messaging herein that the equity market is historically disconnected from economic reality these days, here's The Wall Street Journal's Nick Timiraos quoting from this week's banks' earnings calls:
WFC: “Our view of the length and severity of the economic downturn has deteriorated considerably"
JPM: "The recessionary part of this you’re going to see down the road"
Citi: "The pandemic has a grip on the economy and it doesn’t seem likely to loosen..."

And, lastly, here's from my latest musings in our internal market log: 
"The treasury will issue debt without restraint and the Fed will purchase it likewise, indefinitely.

Commodities -- gold especially -- are the most obvious trade under these circumstances. US equities stand to ultimately benefit as well, however -- and this will produce great anxiety for the Fed along the way (due to extreme global carry) -- with bouts of extreme volatility, given the unavoidable economic stagnation such a scenario creates, and the potential for huge political disruption -- regulation, taxation, etc. -- as growing income/wealth inequality continues unabated (exacerbated, in fact) going forward.

Foreign market equities, emerging markets in particular, stand to outperform the US markedly for several years to come; but -- while we anticipate adding there incrementally in the near-term -- we're going to let the COVID situation and the coming election play themselves out before we go there in a big way.

The immediate question for equity markets being, given the abysmal state of macro affairs, political risk, geopolitical risk and so on, will there be the 50+% correction that will reset valuations, etc., to the point I believe necessary for the US market to recapture any semblance of a “fundamentally” investable setup -- at all or anytime soon? Bottom line; that risk is there, which demands that we hedge our equity exposure against a major drawdown either until one occurs or until the risk abates…"
Thanks for reading!


Chart of the Day: Anti-gravity

In client review meetings these days I find myself often proposing, then dispelling the "this time is different" notion.  

The proposition this time around is that the Fed is explicitly unfettered in what it's willing to do to "save the system."

The dispelling goes like this:

Morning Note: Traders sanguine on a potentially volatile day...

Asian equities were mixed overnight, with 7 of the 16 markets we track trading lower. Europe's mostly lower this morning, with 13 of 19 in the red thus far. While you wouldn't know it by the Dow, up only 20 points (.07%) at the moment, U.S. stocks are in rally mode to start the day: The S&P 500 is up .45%, the Nasdaq's up .65% and the Russell 2000 is up nearly 1%. Remember, the Dow only represents 30 stocks...

Tuesday, July 28, 2020

Quote of the Day: Markets Work in Free Verse...

Here's another snip from Michael Lewis's Panic: The Story of Modern Financial Insanity that has me remembering bubbles past and catching seeming parallels to today's situation. And, with regard to Charles Mackay's classic, at least twice for yours truly:

Morning Note: The Glue

Asian equities finished last night's session mostly in the green, with 10 of the 16 indices we track closing in the plus column. Europe, on the other hand, is struggling this morning, with 14 of 19 bourses in the red. U.S. equities are struggling as well, as I type; the Dow's down 144 points (-.5%), the S&P's off .4%, Nasdaq's down .7% and the Russell 2000 is trading the best so far, only down .2%.

Monday, July 27, 2020

Bonus Quote of the Day: How to manage when "the world goes mad"

Just started Michael Lewis's bestseller Panic: The Story of Modern Financial Insanity.

Quote of the Day

In his morning macro commentary Hedgeye's Keith McCullough agreed with our latest assessment:

Morning Note: Narrow Road Out

Asian equity markets were split down the middle overnight, with Taiwan and Vietnam closing at opposite extremes, +4.2% and -2.8% respectively. European equities are mixed this morning as well, with 8 of the 19 markets we track in the red. The major U.S. averages, on the other hand are green across the board: Dow up 112 points (.4%), S&P 500 up 0.5%, Nasdaq up 1.2% and the Russell 2000 up .5%.

Saturday, July 25, 2020

Macro Update: Calling It Like We See It

Before we dive into this week's macro briefing, allow me to repeat something I wrote in Thursday's morning note:
"To really drive home for you the precariousness of current conditions from a purely asset performance standpoint, just two things you need to know: gold is up 23.5% on the year, and if you're willing to lock up your money for 10 years, the U.S. treasury will pay you 0.58% on it annually."