Thursday, March 11, 2021

Morning Note: "Eventually" is the Least of the Central Banker's Concerns -- And -- Confusing Technology With Intelligence

We've been spending a lot of time herein of late on interest rates, their recent rise, the monster financial market risks should they continue to rise, and, thus, the assuredness that central bankers will do everything within their legal capacity (and more) to stem that tide before (or immediately after) it crashes into the stock market's shore.

Well, make no mistake, it's not just U.S. central bankers I'm referring to. I mentioned in yesterday's video how, Tuesday night, China stepped right in and bought up stocks (on a mere 3.5% pullback). And, lo and behold, while the European Central Bank (ECB) held pat on interest rates yesterday, its leader said in no uncertain terms that they do not like the recent rise in rates and stand ready to speed up bond purchases, big time, to solve that problem. EU-member government bonds promptly rallied (yields fell) on that news...

Have a look at the size (and crazy growth) of the ECB's balance sheet:

Yes, eventually, that matters. But, alas, "eventually", in the minds of myopic central bankers, is not the least bit their concern these days.

By the way, U.S. equity futures loved the ECB news; they immediately ramped higher on President Lagarde's comments.

India and Indonesian markets were closed overnight, the remaining 14 that we track leaned green; 10 traded up on the session.

Save for Turkey, Norway, Poland and Switzerland, European stocks (the other 15 bourses we follow) are trading decently higher this morning.

U.S. major averages are in rally mode: Dow up 206 points (0.64%), SP500 up 0.90%, SP500 Equal Weight up 0.66%, Nasdaq 100 up 1.83%, Russell 2000 up 1.24%.

Oil futures are up 1.23%, gold's down 0.11%, silver's down 0.79%, copper futures are up 1.87% and the ag complex is up 0.32%.

The 10-year treasury is down (yield up) and the dollar down 0.10%.

Led by MP (rare earth minerals miner), uranium miners, industrial metals miners, emerging market equities and tech, our core portfolio is up 0.48% to start the session. Our leading losers this morning are Verizon, AT&T, silver, financials and gold.

While the newbie retail trader is always great sport for balding boomers like yours truly -- not to say that many of them haven't enjoyed some serious success of late, trading the likes of GameStop, for example -- I do marvel at their capacity for recency bias (assigning all importance to recent events over historic ones), their confidence (well, overconfidence) and, by all appearances, their utter lack of scrutiny.

Jim Kwik, in his really good, insightful and instructional book Limitless (I've encouraged all of our kids to read it), shares Rony Zarom's theory:
"“In a digital-first world, where millennials obtain all their answers to problems at the click of a mouse or swipe of a finger, the reliance on technology to solve every question confuses people’s perception of their own knowledge and intelligence. And that reliance may well lead to overconfidence and poor decision-making,” says Rony Zarom, founder of the video collaboration platform newrow."

Have a nice day!

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