Friday, February 28, 2020

Morning Notes

Sharing some morning notes:

Future Fed Chair hopeful Kevin Warsh said before the market opened to expect globally-coordinated central bank action if this keeps up. Equity futures quickly retraced half of their pre-market losses.

Thursday, February 27, 2020

Now vs The Previous Double-Digit Drawdown - And - Brief note on today's action and on our core mix...

Here's from my commentary herein last Sunday evening:
"...Dow futures are presently trading 340 points lower; which should come as no surprise to anyone.
Frankly, given the fragilities showing up in much of the global macro data that we've been pointing to for months, and, not to mention, the underlying leverage in the corporate space, when we factor in the economic realities of the coronavirus we really should be looking at much worse in terms of stock price action."

Quote of the Day: "Boggles The Mind"

If the present selloff in stocks continues, I strongly suspect we'll see the Fed step in with a rate cut -- possibly even before their next meeting.

Tuesday, February 25, 2020

Brief note on this morning's action, and on our core mix...

While stocks do believe it or not fall on occasion, it seems so odd these days that I find myself compelled to comment. Keeping in mind that day-to-day fluctuations are never, ever, ever, a factor in what makes for good, smart, investment management -- it's all about underlying general conditions!

Consumer Continues to Feel Good: But a little less so on the jobs market...

The Conference Board's Consumer Confidence Survey (one of three consumer sentiment surveys we track) for February was released this morning, and while the overall score missed expectations it was slightly higher than January's.

Monday, February 24, 2020

This Week's Message: The Weber-Fechner Law In Action

If it seems like I've been picking on policymakers and their penchant for printing, borrowing and, thus, punting economic excesses, stresses and strains into the future, well, I indeed have. For, in their attempts to allay the necessary pain/purging that is part and parcel to virtually all cyclical phenomena, they in effect camouflage (and exacerbate) the inflation of real-world issues until they grow too heavy to punt any further down the road. At which point market forces, having been held too long at bay, must resort to the most extreme and painful measures if they're to effectively clear a path for healthy, sustainable growth going forward.

Brief note on this morning's action, and on our core mix...

Not much to add here to recent messaging; so I'll just reiterate that a day like today (still very early) should come as zero surprise to anyone. And I don't say that because of the coronavirus necessarily, but because days like today are natural, necessary occurrences, particularly if/when we're in the latter stages of a long bull market.

Sunday, February 23, 2020

This Is A Test Of The Emergency Broadcast System

While there's a lot of time left between now (Sunday afternoon) and tomorrow's open, Dow futures are presently trading 340 points lower; which should come as no surprise to anyone.

Friday, February 21, 2020

Brief note on today's action, and on our core mix...

As I type the Dow's down 186 points (0.64%), the S&P 500 is down 0.78% and the Nasdaq Comp is down 1.19%. 

Thursday, February 20, 2020

Macro Update

All of this week's data reports that flow to our proprietary macro index have been released, allowing me to score our index a day early. Just finished, here's a recap:

Wednesday, February 19, 2020

Quote of the Day: Amazing!!

Last Sunday afternoon I said to Nick; "let's see what happens when Apple cuts its outlook because its prize [growth] market is for all intents and purposes on lock down." 

Ironically, the announcement came Monday (Presidents' day) afternoon, and, lo and behold (tongue in cheek), the stock gaped down roughly 4% (that's nothin based on the news) at the open on Tuesday. However, by today's (Wednesday's) close it was back to within a buck of its pre-warning price. Amazing!!

Chart of the Day: Retail Mortality

So I totally get what Amazon does to the brick-and-mortar retail space, but still, given the presumed strength of the consumer, there has to be more (perhaps the corporate debt reality I keep pounding on herein) to what you see below than simply online shopping.

This Week's Message: The Secret Sauce

No kidding, it absolutely makes some sense to us that amid what you already know about the coronavirus and its impact on the global economy, as well as the frightening data points charted for you below, that global stocks are holding near their all-time highs and may (as in maybe) very well continue right on through them in the weeks to come. 

Tuesday, February 18, 2020

Bonus Quote of the Day: When Most People Are Wrong...

The key Marks refers to below requires a constant deep dive into the state of general conditions, an understanding of crowd behavior, and patience:

Quote of the Day: "Every Decade or So"

Market extremes seem to occur "every decade or so". Hmm....
 “Buy low; sell high” is the time-honored dictum, but investors who are swept up in market cycles too often do just the opposite. The proper response lies in contrarian behavior: buy when they hate ’em, and sell when they love ’em. “Once-in-a-lifetime” market extremes seem to occur once every decade or so...
--Howard Marks 

Monday, February 17, 2020

Threatening Japanification!

As I type the news out of China remains concerning. While there will be the resumption of some production over the next few days, more than enough of the country remains on lock-down to hit its economy in a big way. Which (the economic hit) explains the willingness to take the huge risk of resuming some production in the face of still no vaccine.

Sunday, February 16, 2020

Consumer Debt Picture

While I am hugely concerned over the state and complexion of present debt in the system, the issues are not concentrated in residential real estate this go round:

Saturday, February 15, 2020

Quote of the Day: Prospects Were Already Tentative

Per yesterday's note, quote-worthy pundits are hard to come by -- above all they have to exhibit objectivity: I.e., goes without saying that their perspectives had to have been compelling enough to keep me engaged for a few years, supported by data, and, importantly, they (perspectives) would've had to have evolved as conditions change. In other words the bearish "experts" who perennially warn of doom, and the bulls who do the opposite aren't worth a minute of your time.

Something To Think About -- And -- Acting Accordingly

Ponder the following:
"Where do we stand today? In my opinion, there’s little mystery. I see low levels of skepticism, fear and risk aversion. Most people are willing to undertake risky investments, often because the promised returns from traditional, safe investments seem so meager."

Thursday, February 13, 2020

"Round One To Liquidity": "Liquidity" Being The Punch Bowl

Regular readers will note that I tend to quote the same people over and over, and over, again. Well, as clients will attest, we do our own work, but that doesn't mean we don't respect the work of others; of a shortlist of others, that is.

Quote of the Day: Where's Wall Street Coming From?

Hedgeye CEO Keith McCullough understands how it works:

Wednesday, February 12, 2020

Quote of the Day: "Too Much Wretched Excess!" -- And -- It Ain't Easy Playing the Curmudgeon

Well, I'm not as old as Charlie Munger, Warren Buffett's revered business partner, but my take on present conditions kinda has me feeling like an old curmudgeon these days.

Today's Data Dump -- And -- Your Q4 Earnings Update

Unlike last Wednesday -- where I green and red-dotted the day's releases -- this morning's data dump was less than inspiring.

Chart of the Day: The Only One You Need!

If it's any mystery to you how the market can continue to assail new heights amid all of the world's uncertainty and all of the data we've presented herein, I believe I can sum it up with one chart.

Tuesday, February 11, 2020

Chart of the Day: Job Openings Closing

Thought about holding this for the weekend macro update, but this morning's release of the BLS's Job Openings and Labor Turnover (JOLTS) report deserves its own blog post.

Really Bad Breadth

Came across a statistic this morning that caught my attention. While our own breadth measures have been signaling potential trouble ahead, or, at a minimum, anything but a healthy market environment, the following punctuates just how bad current market breadth actually is.

This Week's Message: Classic Bubble Blowing and Buying

While the weight of the evidence says that the equity market has formed your textbook, classic bubble, the Fed still has room to move interest rates notably lower to catch down to the rest of the world, and seems more than willing to increase the size of its massive balance sheet ever-further, despite the risk, and despite the history of bubbles and of its propensity for expanding them at their later stages.

Friday, February 7, 2020

Macro Update

Just completed our weekly macro analysis. Here's a recap:

On Today's Jobs Number

Really good headline jobs number, but, as always (and as evidenced by the rally in gold and bonds, and the drop in stocks* on the news) the devil is in the details.

Thursday, February 6, 2020

Quote of the Day: Pendulum's Swing

Another potentially timely Howard Marks quote:

Charts of the Day: Peak Optimism?

According to Gallup, Americans feel better today about their finances than they have in over 40 years! Well, ironically, per the history of that survey (see below), and what we've been preaching herein, that's troubling.

Quote of the Day: Speaks Volumes About Present General Conditions

I've been slowly taking in Howard Marks's insightful (to put it mildly) book The Most Important Thing Illuminated. His perspectives on cycles and risk match my own to a virtual tee, and -- not that we needed it -- they validate our present balanced  (less correlated to a raging bull market than we've been the past 10 years) approach to the market.

Wednesday, February 5, 2020

Lots of Green In Today's Data Releases , An Earnings Update, And Priced For Perfection

There's lots to parse in today's data dump, and while one can point to mild winter weather, base effects and less-rosy internal breadth to poke holes in some of today's headline readings, bottom line is that global sentiment (much of today's releases are survey/opinion data) has clearly improved over the past month.

Quote of the Day: We Fundamentally Differ From The Pack

Hedgeye Risk Management's CEO Keith McCullough's comment in his morning macro presentation speaks to some our latest messaging:

This Week's Message: The Boom/Bust Cycle, And Thoughts On The Coronavirus

Yesterday, I penned a blog post where I referenced a conversation I had with Nick about the seeming nonsense that the market at these levels, at these valuations, with these sketchy fundamentals, with all of today’s geopolitical uncertainty and so on could attract such bullish sentiment.

Tuesday, February 4, 2020

The Madness of Crowds! Or is it?

Chatting with Nick after the market close today: Both of us marveling at the willingness of investors to buy into a market that trades at its all time high and that, by some metrics, sports record valuations; amid the highest ratio of corporate debt to GDP in history, amid half of all investment-grade corporate debt garnering the lowest-tranche credit rating (and other hugely problematic developments in that space), amid a virus outbreak that has hobbled the second-largest economy in the world, amid the imminent failure of what's been dubbed by some as the greatest trade deal in history (China making good was a stretch even before coronavirus), amid a mixed, at best, global macro setup, amid...well... there's more but I'll stop there.

Troubling Trends Amid The Market Meltup

While today's data releases continue to point to a mixed macro picture -- factory orders up, durable goods orders down -- the following denote troubling trends.

Quick Video Look At The Market

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Quote of the Day: Sentiment and Emotion Dominate

As you may have noticed, I've been making it a point to acknowledge the fact that while my macro assessment is the least optimistic it's been since the last recession, the stock market may absolutely continue its march higher into the foreseeable future -- despite the fundamentals.

Monday, February 3, 2020

Some Uncertainty In The January ISM

I closed an earlier post with:
"I have to say that the US ISM data (albeit barely back in expansion mode) is an unambiguous positive!"

Today's Log Entry


China’s overwhelming stimulus last evening clearly did the trick, for the moment, despite the big selloff in its own market last night. If today’s global rally holds, Chinese stocks will likely stage a relief rally of their own this evening.

The Latest Data: The Good And The Bad Thus Far

This is a really big week for data, below is what we're looking at so far. Let's eat our vegetables first.

Sunday, February 2, 2020

Brief Note On This Morning's Action: Staying In The Shallow End

Last update, yesterday afternoon, Dow futures were pointing to a minus 80-point open; as I type the Dow's trading up 300 (retracing half of Friday's selloff) in today's regular session. Those key currency pairs I featured have flipped back to rally mode as well.

Quick Followup Note To This Morning's Quick Note

That sanguineness I referred to among currency traders this morning has dissipated; still not panicky, but the pairs I referenced earlier have rolled over a bit -- which, in my view, makes more sense given the news.

Quick Note On This Morning's Action

Interesting action in currency markets this morning: Following Friday's rout, generally worse news out of China, and elsewhere, and general (and logical) expectations for the global equity selloff continuing into the start of this week, the most telling currency pairs are signaling relative calm as U.S. equity futures markets open a little later today. 

Saturday, February 1, 2020

January Results

Before wrapping up and going silent for a few days I thought I'd share with you the first calendar month results for our new core allocation.