Thursday, May 27, 2021

Morning Note: The Economy, and Costs, are Looking Up -- And -- The Global disOrder

The second reading of Q2 GDP came in unchanged at +6.4%, the GDP Price Index, however, was revised up. No surprise, right? I mean, you've been out and about...

In other econ news, headline durable goods orders missed their estimate, however, take out defense and aircraft and they blew away expectations to the upside. And weekly jobless claims came in at a better than expected 406k.

I.e., the economy, and the costs of interacting in it, continues to look up...

Asian equities rallied overnight, with 11 of the 16 markets we track closing higher.

No worries in Europe this morning, with 15 of the 19 bourses we follow in the green as I type.

U.S. equities are mostly higher to start the day: Dow up 207 points (0.60%), SP500 up 0.25%, SP500 Equal Weight up 0.48%, Nasdaq 100 down 0.16%, Nasdaq Comp down 0.07%, Russell 2000 up 0.72%.

The VIX (SP500 implied volatility) is down 1.50%. VXN (Nasdaq 100 i.v.) is down 0.76%.

Oil futures are down 0.08%, gold's down 0.16%, silver's up 0.19%, copper futures are up 1.87% and the ag complex is up 0.85%.

The 10-year treasury is down (yield up) and the dollar is down 0.04%.

Led by metals miners, base metals futures, ALB (lithium miner) oil services stocks and bank stocks -- but dragged by solar stocks, gold miners, Verizon, tech stocks and gold -- our core mix is up 0.31% to start the session.

I've taken the risk of late to declare that indeed "it's different this time." Although -- while $10 trillion of money printing and aggressive suppression of interest rates makes for an ahistorical setup (well there is the 1940s analog I keep referring to) -- I'm thinking beyond immediate financial market setups.

In the years to come we'll be traversing the weeds and exploring/exploiting the ramifications of what has been a relatively slow-moving sea change in geopolitics, but yet is now gathering some serious momentum. Per the following from Peter Zeihan's must read Disunited Nations:
"China and India did not have a single century in the past two millennia when they were not at war within themselves or under assault from a foreign power. Instead, from the American-enforced end of British colonial rule in India in the late 1940s and China’s joining of the American-led alliance against the Soviets in the 1970s, the two have had the most security and wealth in their long histories."
The Americans have changed their mind about their alliance..."
"There is no effort to ride herd."

"... the questions become: Who will still benefit from some lingering connection to the Americans? And who can go it alone?"

And I'll add, while indeed America has lost the stomach to "ride herd", China has become ever-more belligerent as it attempts to secure the global resources necessary to perpetuate its state authority over an aging, ever-more demanding citizenry. 

Have a great day!

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