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."

Friday, July 24, 2020

Morning Note: Huge Fish to Fry

Asian equities got hammered -- China hugely -- overnight on some serous tit-for-tatting with the U.S.. Europe is as well this morning, with every bourse we track notably in the red. While U.S. equities, especially tech, are also feeling some pain at the open; Dow down 125 points, S&P 500 down .8%, Nasdaq down 1.9% and the Russell 2000 off .13%.

Thursday, July 23, 2020

Morning Note

Asian equities were mixed overnight, Europe as well this morning, while U.S. stocks are on balance off a bit; Dow down 110 points, S&P 500's off .2%, Nasdaq down .2%, with the Russell 2000 bucking the early-morning trend, up .3%.  

Wednesday, July 22, 2020

Morning Note

Asian equities (save, ironically, for China and Taiwan) were rocked overnight on news that the U.S. ordered China to close its Houston consulate within 72 hours. U.S. equity futures tanked on the news as well, but, being that traders are eyeballing other factors these days, no big deal (would've been a colossal deal for markets a year ago), at least at the moment. The Dow's up 72 points (.26%), the S&P's up .24%, Nasdaq's .27% higher, Russell 2000 is essentially flat as I type. Europe's mixed, 12 markets that we track down, 7 up.

Tuesday, July 21, 2020

Quote of the Day

Bloomberg's "macro man" Cameron Crise echoed today our message in Sunday's video commentary. I.e., he and I -- with regard to the present setup for stocks and commodities -- are on the same page:

Morning Note: Commodities Working For Us -- And -- Lessons To Be Learned

Asia was bid virtually across the board last night, with the Philippines being the only market not making it nicely into the green. Europe's nothing to sneeze at either this morning, with 15 of the 19 bourses we track trading higher as I type. The U.S. on the other hand is somewhat of a mixed bag, with the Dow up 250 points, the S&P 500 and the Russell 2000 ahead by .45% and 1.14% respectively, but with the Nasdaq Comp trading off by .4%.

Monday, July 20, 2020

PWA Core Portfolio Update (video)

Note: Today's video commentary is targeted specifically to PWA clients and is not intended to be investment advice for non-client subscribers to the blog.

In today's video presentation I walk you through each transaction in each of our core portfolio positions so far this year, illustrate the year-to-date results for a live portfolio, discuss our current hedge, express my current market view, and so on.

Charts of the Day: Don't Chase

In the video commentary that you clients will receive shortly, while explaining our maneuvers this year within the tech sector I touch on the record concentration among very few stocks within the major cap-weighted averages.

Quote of the Day: How to gain a huge competitive advantage...

Hedgeye CEO, Keith McCullough, in his morning note mentions the asset allocation component that offers "a huge competitive advantage." I agree!

Thursday, July 16, 2020

Not Just Me

Well, unexpected/abrupt change of plans, so, while there'll still be little from me herein till next week, I did want to share the following from widely followed and hugely respected economist/strategist John Hussman. Mainly because he makes reference to the period I've been reviewing -- and commenting much on -- of late.

Wednesday, July 15, 2020

Quotes of the Day

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:

Morning Note: Sliding Into Second

Last Wednesday I wrote the following about the prospects for bank earnings:
"Earnings season kicks off next week. There seems to be a bit of optimism (interestingly) around bank earnings. At first blush, given conditions, and interest rates, that's counter-intuitive. If indeed banks surprise to the upside, it'll virtually have to be about trading revenue and, as I've recently learned, the billions in fees they grabbed by underwriting those small business stimulus loans. Although a few, if not all, of the bigs say they're donating those to charity..."

Tuesday, July 14, 2020

This Week's Message: Traders oblivious, for now, to hugely impactful stuff...

Bringing you this week's message a day early. Tomorrow I'll be tying up a few loose ends; possibly implementing a marginal move in portfolios that we've decided upon but have been fiddling a bit with in terms of entry point(s). Today's action impacted pricing to the point that may have us holding off a bit, or going even more incrementally. I.e., one thing we absolutely are these days is patient. Not that we aren't normally, but, trust me, the time to be uber-patient in your core investment decisions is when the rest of the world isn't.

When You "Typically" (as in no guarantees) See This Sort of Price Action

Bloomberg's "macro man" Cameron Crise made his case this morning as to why stocks are historically risky right here. Should sound very familiar to regular readers.

Morning Note: Never-Changing Human Nature -- And -- Don't Hold Your Breath

Asian equities traded mostly lower last night, with 10 of the 16 markets we track closing in the red. Same for Europe so far this morning; 14 of 19 bourses trading lower. In the U.S. the Dow (thanks in no small measure to JP Morgan and Boeing), up 70 points as I type, is bucking declines in the Nasdaq (-1.3%) and the S&P 500 (-5%). The Russell 2000 is flat to start the day.

Monday, July 13, 2020

People Doin Stuff....

Today's Dow gave back a 500+ point rally to close flat, the S&P 500 and the Nasdaq both gave up notable gains, and some, down nearly 1% and 2% respectively. Smallcaps rallied after their muted open, but gave it all back, and some, as well, closing down 1.4%.

Morning Note

Asian equities picked up where the U.S. left off Friday, with all but 2 of the 16 markets we track closing higher last night. Europe's following suit this morning, with only 3 out of 19 bourses trading lower this morning. The U.S. (save for small caps) remains in rally mode; the Dow's up 310 points as I type, the S&P 500 is trading higher by .9%, the Nasdaq's up 1.3% and the Russell 2000 is flat.

Sunday, July 12, 2020

Fed Put Suffices

Sharing below my characterizations (in terms of what they say about the state of the equity market) of the multiple analyses we perform on a weekly basis:

Friday, July 10, 2020

Macro Update

Our proprietary macro index improved by 5.77 points this week to -38.46. While a long way from positive, and still screaming deep recession, that's a far cry from the -82.69 it scored back on June 1st. 

Morning Note: Knee-jerk reactions, economic cycles, and crony capitalism at its worst...

The Dow future contract went from down ~200 points a little while ago to slightly positive just after news hit that the U.S. producer price index actually declined last month versus expectations of a slight increase. The other major averages went from notably red to green as well.

Thursday, July 9, 2020

Morning Note: "The Day's Still Young"

Asian stocks closed mostly in the green overnight, with the Chinese state continuing to succeed mightily in their quest to mask reality by pumping China and Hong Kong equity markets.

Wednesday, July 8, 2020

This Week's Message: Never Share Your "Secrets", and Thoughts on Systems (economics and markets specifically) and on Galileo

Every Wednesday I, in "This Week's Message", attempt to offer up content that's a bit more pithy on present happenings than perhaps you'll find in our daily messaging. 

Sitting here this afternoon I'm honestly feeling a bit numb after spending much of the morning working on a study I've assigned to myself on the rate-of-change dynamics in the price of a certain asset class and what they possibly say about future price movements in the stock market. I actually have about a century's worth of data to score, so it's a bit monotonous, and time consuming, but so far intriguing. Upon conclusion I'll likely highlight my findings herein. If they're indeed telling, well, then I won't be telling much about the study itself. For, if, say, you happen to discover a legitimate market signal beneath all of the noise, you never ever share it, as it'll only "work" as long as the crowd isn't using it.

Morning Note: Concentrate (well, please don't!)

Asian stocks traded mixed last night, with 7 of the 16 markets we track closing in the red. China saw another strong rally on blatant and, for now, unrelenting state intervention. I illustrated yesterday how ugly such shenanigans tend to play out before all's said and done.

Tuesday, July 7, 2020

Evening Note: What the Bulls are Missing...

Today's selloff came late for the S&P and the Nasdaq, and didn't capture the level of volume most of the recent down days have exhibited. I.e., while volume indeed increased as stocks sold off, taking the entire trading session into account, the 27% below the 20-day average volume figure says today was more about stubborn buyers than it was passionate sellers.

Morning Note: Back In The Twilight Zone

Asian equities traded mixed overnight, with 10 of the 16 markets we track closing in the red. Chinese stocks -- aided by the state -- continue to rally. The last time we saw such blatant state-influenced pricing of China's markets ended very badly.

Monday, July 6, 2020

Evening Note: The Most Bullish Chart for Stocks Right Now

Believe it or not I won't be raining all over the stock market's parade today, at least not when it comes to today's S&P 500 breadth.

Chart of the Day: Things That Happen When You're In A Bubble

Hedgeye's Keith McCullough, who, like us, has intimate experience with modern history's greatest bubble/bear markets, is singing our tune this morning:

Quote of the Day: We're Not Alone

As we continue to mine the data for evidence that the latest in stock market action owes to some fundamental basis, we continue to come up with little more than fool's gold.

Alas, we're not alone:

Morning Note: Beware, Reattachment Can Be Painful

Last night saw a huge rally in Asian equities -- China and Hong Kong in particular (up nearly 6% and 4% respectively) -- on, well, you guessed it, political and policymaker pumping. 

Friday, July 3, 2020

Macro Update: A Better Look, Commodities, and A Monster Mountain Left to Climb

This week saw a notable improvement in our macro index, with a net gain of 7.69 points taking it to -44.23. Still scary-low, but a far cry from its all time low -82.69 on 6/1.

Wednesday, July 1, 2020

Quote of the Day: Gravity Doesn't Care About Narratives

In his morning commentary Hedgeye's Keith McCullough spoke to our earlier post with regard to commodities ("flation"), as well as to our latest reporting on the bearish action in corporate credit:

This Week's Message: Flation is a virtual certainty...

The Dow future contract went from trading ~200 points lower to a hundred points higher by the open on news from ADP that private sector payrolls grew by north of 5 million (2 mill+ in June and a revised 3 mill+ in May) over the past two months, plus other headlines suggesting that two potential COVID vaccines are looking good in early-stage trials. 

Tuesday, June 30, 2020

Evening Note: Conviction This Time?

Another big rally in the major equity averages today! The Dow closed up 217 points, but the big moves were in the Nasdaq, +1.87%, and the S&P 500, +1.54%. Which means tech (dominates both indexes) had a great day.

Morning Note: The Bull, The Bear, And The Simply Objective Participant

FYI I'm on the road all week so I'll be light in terms of frequency and content herein for the next few days.

U.S. equities are all over the place this morning. Over the past couple of minutes the Dow has gone from nearly positive to down triple digits, to down 70 as I type. The S&P has been green to red and back to green presently, the Nasdaq has stayed green by roughly a half-percent. 

Monday, June 29, 2020

Evening Note: Shorts Getting Tired of Getting Killed

U.S. equities staged an impressive rebound off of Friday's deep selloff. The Dow gained 580 points, the S&P jumped nearly 1.5%, the Nasdaq Comp up 1.2% and The Russell 2000 spiked a whopping 3.1% in today's session.

Morning Note: Setups Not Supportive

Last week's (for most of Asia) downward momentum in equities carried through to last night's session, with all but 2 of the 16 markets we track trading notably lower. Not so much for Europe, as 10 or the 19 bourses we follow are trading higher so far this morning. The U.S. is looking to rebound a bit off of Friday's drubbing with the Dow threatening a 170-pt open, the S&P set to start the day roughly .5% up, the Nasdaq just barely in the green and the Russell 2000 in rally mode with its future contract pointing to a 1.4% open.

Friday, June 26, 2020

Macro Update: You Heard Correctly, But No!

This week's macro update is going to be short and sweet. The Mrs. and I are heading out early afternoon to meet up with a 3-yr old who's ready for some serious Meemaw and Peepaw action this weekend.

Morning Note: Huge Risk When These Two Converge

Asian equities followed the U.S.'s lead from yesterday, with all but 3 of the 16 markets we track closing higher. Europe's trading mostly in the green this morning (15 of 19 markets up), while U.S. equity futures are pointing a 200-pt decline in the Dow, and .4%, .15% and .26% dips for the S&P, the Nasdaq Comp and the Russell 2000 respectively.

Thursday, June 25, 2020

Evening Note: One past, many possible futures...

Super quick evening note. It's the Mrs.' birthday and, well, you know...

Stocks staged a big turnaround today sparked by news that the central bank is inviting commercial banks to their we're-bailing-out-the-riskiest-risk-takers party.

Wow! Moral Hazard (and Cronyism) To the Extreme!

Well, folks, suffice to say that the powers-that-be are not only committed to preserving the bubble, but to inflating it even further in the process.

Quote of the Week

As you know, we do our own work; as we absolutely have to if we are to have confidence/conviction in how we manage portfolios.

Morning Note: The Only Certainty

Yesterday marked the third day in a row with a triple-digit move in the Dow. Of course the key distinction being that yesterday's move was down, while Monday's and Tuesday's were up.

Wednesday, June 24, 2020

This Week's Message: Same concerns, only...

I'm typing this week's message on a day when, at least at the moment, the Dow is down some 750 points. Multiple headlines say a surge in COVID cases would be the culprit.

Morning Note

The headline this morning reads:
"Dow futures slump 240 points on COVID surge and trade tensions"

Tuesday, June 23, 2020

Evening Note: Market Misreading -- And -- Have Folks Already Scratched That Itch?

In this morning's message I noted that the trading session had begun with a markedly better look than yesterday's. Well, by the end of the day, other than a few more sectors finding their way into the green, the internals -- just like yesterday -- were nothing befitting a healthy bull market. 

Morning Note: Move along folks, nothing to see here...

So there I was last night, minding my own business (pondering how certain laws of physics make good metaphor for markets, literally), when my peripheral vision catches this on the screen to my left:

Monday, June 22, 2020

Evening Note

This morning I offered up a quick commentary on what I was seeing in today's trading action. That distortion between headline index numbers and the underlying action, while a little less skewed to the bearish case, pretty much lasted till the close.

Chat and Chart of the Day

Here's an excerpt from our inter-office data/research discussion log, and the accompanying chart:

Quick note on this morning's action...

In my morning note I implied that one day's action should never be construed as the stuff of trends. 

Morning Note

Asian equities were mixed overnight, with 9 of the 17 markets we track closing in the red. Europe's mostly red this morning; 13 of the 19 markets we track there are trading lower. U.S. equities are bouncing around a bit with the Dow down .28%, the S&P 500 about the same and the Nasdaq flat as I type.

Saturday, June 20, 2020

Macro Update

Well, the bad news is our macro index just posted its 35th consecutive week below zero. Plus, its net score remains lower than any logged during the past two recessions (back-tested). The good news is this week's score marks the third consecutive weekly improvement.

Friday, June 19, 2020

Chart of the Day (maybe the year)

Of all the charts that would trouble the thoughtful investor, this one might take the cake:

What Might "Crack the Ice"

As I stated in his introduction letter, and, per the below, our new operations manager (Dan Lillibridge) has a thing for markets.

As you might imagine (particularly if you know Nick, Jeannette, and yours truly [not to mention Ryan, who's presently finding currencies fascinating], and now Dan) we often have quite the inner-office dialogue going on around markets and the economy. We have a group chat feed where any of us can log in, comment, ask questions, etc.. 

At times, I find it can be instructive enough to share a bit herein.


Morning Note: Not Why We've Been Adding Commodities

Hard to believe, although it shouldn't be, that we're back to pumping the China trade narrative -- although more subtly at the moment than a year ago -- to pump equity markets. Oh and it's not only us, by the way, China's happy to play the pumper every bit as much themselves.

Thursday, June 18, 2020

Evening Note: In the End, Macro Always Matters -- Plus Our Foreign Macro Update

Analyst Julien Bittel points out essentially the case we started making late last summer when our proprietary macro index rolled into the red (as it did [on a back-tested basis] prior to the previous two recessions as well) and we began hedging portfolios.

Morning Note: Not for the Faint of Heart

Asian equities, save for China and India, closed in the red overnight, Europe's selling off across the board and U.S. equity futures are pointing to a down open this morning.

Wednesday, June 17, 2020

Evening Note and Quotes of the Day

Quick one this evening. If you haven't yet, be sure to take in today's video commentary.

As for today's market, in a nutshell, the Dow and the S&P 500 took a bit of a hit, the Nasdaq was just a tad to the green, while the Russell 2000 got slammed -1.8%. Our core portfolio mix closed flat on the session.

This Week's Message: Volatility and the Current Setup (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:

Yep, FOMO!!

78% of mutual fund managers say stocks are overvalued:

But, per yesterday's morning note (featured quote below) -- and Stage 6 of the Boom/Bust Cycle -- they're playing the game anyway:

From Bloomberg's Lisa Abramowicz this morning:
"It's not just Davey Day Trader buying the recent rally. Fund managers' June cash levels dropped from 5.7% to 4.7%, the biggest decline since Aug'09, while hedge fund net equity exposure soared to 52% from 34%, the highest since Sept'18: BofA Global June Fund Manager Survey."

Yep, FOMO (Fear Of Missing Out)! 

Morning Note: Patience and Caution are Key Right Here...

Quick one this morning...

Asian equities were slightly green in the aggregate overnight. Europe's up a bit this morning while in U.S. equities, the Dow and the S&P are flat, Nasdaq's up .4% and the Russell 2000's down a hair.

Tuesday, June 16, 2020

Evening Note

As I express/explain our relatively bearish thesis during client review meetings I've been making reference to the coming wave of bankruptcies and the simple, apparently unbeknownst to many market participants, fact that the Fed cannot print sustainable corporate cash flow -- nor jobs for that matter.

Charts of the Day

Well, if the stock market (based solely on price action), and much of the media were our guides we'd say we're presently leaving the runway toward a brand new, sustainable, economic expansion.

Pre-market Note to Self: Back to Stage 6

Feeling like sharing from my personal log is apropos this morning. FYI, I tend to be a bit more blunt in my notes to self...

6/16/2020 Tuesday

Trump’s promising a trillion dollars in infrastructure, Fed’s buying corporate bonds, retail sales and industrial production will be bouncing off the bottom this morning, Asia screamed higher overnight, Europe’s rallying hard and U.S. equity futures look to open 3% higher…

Morning Note

Fed corporate bond buying, well, the Fed funding a taxpayer-backed special purpose vehicle to buy corporate bonds (same thing, but ostensibly makes the illegal legal), a pending trillion-dollar stimulus proposal (yes, we're -- at the margin mind you -- adding a bit of materials exposure this morning to our core portfolio) and a revived thrust in FOMO (fear of missing out) has the market in abrupt turnaround mode after last Thursday's (Dow down nearly 1,900 points) epoch drubbing.

Monday, June 15, 2020

Evening Note: Could It Truly Be About Rookie Day Traders and Sports Bettors?

Yet another, let's call it, amazing day in the equity markets. Late last evening the Dow future contract was pointing to a 1,000 drop at this morning's open. By the time the bell rang things had improved, albeit slightly, to where the index began the day somewhere north of 600 points in the red. Then, by a stroke of Fed genius (well, Fed intervention), late morning pdt, stocks reversed course and stayed that way to the tune of +157 Dow points come closing time. As I type, futures are pointing the index to another 450 points higher from there.

Quotes of the Day: On Moral Hazard

Stocks staged an impressive turnaround this morning on this news:

Quote of the Day

More Mandelbrot wisdom:

Morning Note

A sea of red washed over Asian equities last night. Same for Europe so far this morning, although not as deep, while U.S. equity futures are definitely feeling some pain: Dow’s set to open down over 600 points, the S&P 500 future contract is off 2%, Nasdaq’s is down 1.4% and the Russell 2000 contract is trading 2.5% lower as I type.

Sunday, June 14, 2020

Quote of the Day

Just finished reading Benoit Mandelbrot's utterly essential The Misbehavior of Markets again (i.e., this, like Reminiscences, has become a perpetual read for me), therefore, a flurry of quotes are likely to come your way over the next few days.

Saturday, June 13, 2020

Macro Update: Is, per the stock market, the coast clear?

Just completed my weekly macro exercise: Our PWA Index improved for the second consecutive week, going from -61.54 to -57.69. 

Friday, June 12, 2020

Trading Setups

A good friend of mine asked for my thoughts the other day on telemedicine as an investment. He also recently inquired about Disney. I thought my reply may be instructive in terms of trading setups right here as well; in case you're thinking about it:

Quote of the Day: Captures the Essence of How We Approach Portfolio Management

If you're at all watching the latest intraday price moves of the equity markets -- not to mention the day-to-day, week-to-week and month-to-month price moves -- I imagine you're getting a feel for the futility of short-term predictions. While technical analyses do play a role in our process, we view the price fluctuations as essentially the wind, while general macro conditions constitute the all-important tide; the latter being what ultimately determines the prevailing risk/reward setup.

Morning Note

Asian markets showed some calm last night after yesterday's global equity drubbing. Most markets closed in the red, but with the worst being a -2.23% (small only in comparison to yesterday) hit for New Zealand. India, Indonesia and China's Shenzhen Index actually closed up. European equities are rising a bit this morning and U.S. equity futures are pointing to a bounce that would recapture roughly a third of yesterday's decline.

Thursday, June 11, 2020

Evening Note

No doubt you're expecting me to comment on today's big selloff in global equities. So, not to disappoint, allow me to say that today saw a big selloff in global equities. Now, hold that thought.

Morning Note: Much Left to Play Out

Asian equities (save for China, down moderately) got crushed overnight. Europe this morning is deeply in the red across the board. U.S. equity futures are pointing to a bloody session (at least at the open) as well. 

Wednesday, June 10, 2020

Evening Note: The Thing About the Bull Case

After bouncing all around during today's session, U.S. equities, save for technology, finished in the red. 

Quick Note On Today's Fed Announcement and the Stock Market

Fed funds rate remains at "near" zero, and the committee says they'll not raise rates through the end of 2022.

Quotes of the Day: It's 1999!

Tweet this morning by economist John Hussman:

This Week's Message: A Really Tough Spot

I wrote the following in a post I titled "Wait for It" back on March 23rd. Coincidentally, that was the day the market bottomed:

Tuesday, June 9, 2020

Evening Note

The Dow, the S&P and the Russell 2000 all took pretty good hits during the cash session today. The Nasdaq Comp, however, closed up 0.29%; the usual suspects -- Apple, Facebook, Amazon, Microsoft and Google -- doing their share of the heavy lifting.

Chart of the Day

The graph below illustrates how dramatically stock prices have strayed from fundamentals the past few years, but also take note of the prior two recessions (in red) and how corporate profits bottomed ahead of the bottom in stock prices, dramatically during the '01 recession:

Morning Note: Reminiscent of the Dotcom Bubble

Asian equities were mixed overnight with Australia up 2.4%, Thailand down 2.1%; all other markets landing somewhere in between. Europe's getting hammered across the board and U.S. futures are pointing to a notably lower open with the Dow contract looking at a 346-point drop; the S&P 500, the Nasdaq and the Russell 2000 are set to start the day with declines of 1.1%, 0.4% and 1.6% respectively.

Monday, June 8, 2020

Evening Note

As clients and regular readers are fully aware, our present macro thesis dictates that, while we indeed have exposures in a number of areas that are currently "working" in markets, we remain biased toward mitigating the risk of a potentially substantial downside move in equities.

Morning Note: Us Being Stubborn, and a 32-Year Old Warren Buffett on the Stock Market (2-minute must-watch video)

Asian markets (save for Japan +1.37%) traded slightly higher overnight virtually across the board. European equities are mixed this morning, while in the U.S. the Dow is up 250 points, the S&P is up .38% and the Russell 2000 is surging 1.7%. The Nasdaq, however, is slightly in the red.

Friday, June 5, 2020

Macro Update

We just scored our macro index for the week, and while the improvement in no way compares to what we witnessed with this morning's jobs number, it was notable nonetheless: Improving 21.15 points to an overall score of -61.54, from last week's all-time low of -82.69.

Bonus Must Read Quote of the Day

Definitely not complaining, but still trying to get my head around today's jobs report.

Quote of the Day

Former Goldman Sachs portfolio manager and hedge fund founder Will Meade recalls the year 2000:

Morning Note: Must Read!

The highly-anticipated May employment report was just released, and it has to be the biggest miss vs economists' expectations on record. 

The consensus estimate, which jibed with weekly and continuing jobless claims reported throughout the month, was a loss of 7.7 million jobs. What we got was a gain of 2.5 million. That's awesome! But, per below, it's a total head-scratcher. 

Thursday, June 4, 2020

Quote of the Day: Must Read!

RealVision's Roger Hirst echoes our message herein regarding the economic outcome should the powers-that-be succeed in keeping asset prices buoyed during what is the worst recession since the Great Depression:

Evening Note: Knee-jerk Nature

For this evening's note I'm going to simply cut and paste from a Bloomberg article to point out:

Morning Note: A Study In Behavioral Economics

While the major averages have retraced more than I expected during what I believe to be a bear market rally, the state of global macro affairs and their go-forward setup offers virtually zero odds of companies in the aggregate returning a level of profitability that comes close to justifying present equity market valuations.

Wednesday, June 3, 2020

Evening Note

Have to share this quote from an interview I'm listening to with Stephen Clapham, founder of investment research firm Behind the Balance Sheet:

Quote of the Day: Reckoning

RealVision's always thoughtful Ed Harrison made sense on his blog yesterday. Here's a snippet:

This Week's Message: Not So "Classic" After All

While market history and a veritable plethora of data allow me to continue my this-is-a-classic-bear-market-rally (BMR) narrative, the fact of the matter is that we're at the point where I need to dispense with the word "classic".

Tuesday, June 2, 2020

Evening Note

Wow! At 12:48pm pt this afternoon U.S. stocks literally rocketed higher. I'm looking for a headline, or a tweet, but -- other than the conspiratorial tweets suggesting that the PPT ("Plunge Protection Team" [alleged government operatives]) are at it again via their supposed proxies -- I don't see any.

New Bull Market??

Like I said in the intro to this morning's quote of the day, the market internals (as well as the macro data) we track do not remotely signal that the bear market is anywhere near over (although, of course anything's possible).

Quote of the Day

I've noticed a few headlines and tweets lately implying that the recent "rotation" -- from the up-till-now winning sectors to the up-till-now losing sectors -- is a bullish sign for equity markets. Given macro conditions, and the market internals I've referenced herein of late, that's definitely not my take.