Wednesday, December 16, 2020

Morning Note: Coaxed

Asian stocks followed yesterday's U.S. rally into the night, with 14 of the 16 markets we track closing higher.

Europe's leaning green this morning, with 13 of the 19 bourses we track trading higher as I type.

U.S. major averages (save for the Russell) are barely off to start the day: Dow down 22 points (0.07%), SP500 down 0.01%, Nasdaq down 0.12%, Russell 2000 down 0.52%.

The VIX (SP500 implied volatility) is up 1.40%. VXN (Nasdaq i.v.) is up 0.82%.

Oil futures are down 0.38%, gold's up 0.07%, silver's up 1.32%, copper futures are up 0.34% and the ag complex down 0.19%.

The 10-year treasury is down (yield up) and the dollar is down 0.27%.

Led by silver, base metals, consumer staples, emerging market equities and utilities -- yet dragged by energy, materials, Verizon, banks and AT&T -- our core portfolio is off 0.08% early in today's session.

Economist Peter Boockvar called out the Fed in his note this morning:

"I want to reiterate my belief that all Fed policy is doing at this point is only helping those large companies that have access to the capital markets, those that own stocks and bonds (or Wayne Gretzky hockey cards), those that own a home and they are monetizing the US budget deficit. All of this is fine if you’re included in this group. If not, sorry." 

Well, I'd argue that in the longer-term scheme of things, "all of this" isn't fine even for the group with assets and access to credit. For history suggests that artificially-boosting asset prices far beyond valuation norms (read bubbles) tends to end badly, especially for those who got coaxed onto the bubble (by Fed policy) in its latter stages...

Have a nice day!

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