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

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.

Morning Note

Roughly a half-hour before the open the Dow future contract is trading about a half-percent higher, S&P 500's contract is up .35% and the Nasdaq future is up 0.13%. Oil and copper are up nicely, silver's down and gold's catching a tiny bid (up .08%). Ag commodities (our newest core position) are mixed. The 10-yr treasury is trading lower (yield higher), European sovereigns are up (yields lower) across the board.

Monday, June 1, 2020

Evening Note

Among the many indicators we monitor outside of the components of our own macro index are Markit's individual country purchasing managers indices.

Morning Note

Rioting in the U.S., demonstrations in Hong Kong as Beijing tightens its grip, pandemic still in play, Chinese state-run ag companies halting imports of U.S. products, and, as I type, the Dow's up 45 points, treasuries are taking a hit and European equities are extending their strong rally. Asian equities were strong across the board overnight.