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%.

The VIX (SP500 volatility) is up 1.2%, to 22.91. VXN (Nasdaq vix) is up 1.47%, to 28.95.

Oil futures are down 1.1%, gold's down $15, silver's down 2.8%, copper futures are off 2% and the ag complex is mostly red, as I type.

Well, my anticipated (I've been in the minority on this, by the way) spike in the dollar I've been writing about this week could be starting to take shape (emphasis on "could be"). The USD index is trading up 0.80% as I type, with the Euro off nearly 1%. Which explains the hit commodities are taking this morning.

Given our core portfolio's allocation to commodities, it's suffering the rare (of late) underperformance (relative to stocks) thus far this morning, -0.59%. 

Per recent commentary herein, we've been looking for a better entry point -- given the recent strong run up in the space -- to increase our diversified weighting across the commodities complex; thinking a bounce in the dollar would give us that opportunity. We'll see if this morning's action morphs into something actionable for us...

This morning's July jobs report came in better than expected, alleviating some of the pressure on stocks that we saw building in pre-market action. 1.8 million payrolls were added, following June's +4.8 million. Keep in mind, that nevertheless leaves us still down 12.9 million since February. I.e., we've quite the hole to dig out of! All eyes on stimulus from here...

I watched an excellent RealVision interview last evening with portfolio manager and author of "The Anti-Bubbles" and "The Energy World Is Flat" Diego Parrilla. He made a profound, albeit, when you hear it, obvious statement with regard to bubbles:

"'s not about ratios, it's not about numbers, it's about beliefs. If you want to find the bubble, tell me the belief."


Forget record recession, forget foreclosures, forget bankruptcies, when you have government stimulus and an unconstrained Federal Reserve, valuations, corporate earning's, etc., simply don't matter. Buy stocks on every single dip!

Yep, that's clearly the overwhelming belief these days... 

Have a great day!

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