Wednesday, June 30, 2021

This Week's Message: Critical Thinking Is Critical, Right Here...

As I sit here staring at a blank screen, thinking that I've sufficiently (and some!) expressed our primary theme/thesis herein of late, I glance over at an adjacent screen featuring our core positions and notice today's top 10 performers, in the following order:

Morning Note: "As Expected", if you're not in the Roaring 20s camp...

Payroll company ADP's monthly private sector jobs report released this morning shows 692k net new jobs taken for June. That was 92k ahead of expectations, although, ironically, May's number was revised down by precisely 92k. As you might expect all but 48k occurred in the services sector, with more than half in the leisure/hospitality space.

Tuesday, June 29, 2021

Morning Note: Oddities Emerge...

"I've done a ton of research" was the phrase the young basketball player who sparked up a crypto conversation with me on Saturday kept repeating throughout our friendly, call it debate.

Monday, June 28, 2021

Morning Note: An Unlikely Source of Truth

Here's yet another quote that should sound familiar:

“Not surprised by high asset valuations, it’s tied to easy Fed policy.”

Sunday, June 27, 2021

Saturday, June 26, 2021

Macro Update: Risks, Opportunities and An Unusual Breadth Reading In Stocks (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:

Friday, June 25, 2021

Morning Note: Don't Drink and Invest!

While we're seeing a bit of choppiness, if not topiness, in US data of late (I'll be scoring our macro index later this morning), the global setup appears relatively solid for the time being.

Thursday, June 24, 2021

Morning Note: It Can Pay to Raise Interest Rates, for Some Countries

As we've reported, lip service aside, U.S. central bankers (as a voting majority) have zero desire -- or room, frankly -- to tighten monetary conditions for far into the foreseeable future.

Wednesday, June 23, 2021

This Week's Message: More On Inflation, On China-driven Inflation and A Few Timely Portfolio Tweaks

Gotta stick with the inflation theme, as, like I keep saying, getting that one (essentially the dollar) right over the next few years will we suspect be key to investment success.

This chart of the US Dollar Index will look familiar to video watchers:

Morning Note: Groceries

Quick note this morning; saving the good stuff for our main weekly message (coming today or tomorrow).

Tuesday, June 22, 2021

Morning Note: Appropriately Careful Right Here

Given last week's selloff -- sparked by what, in reality, amounted to utterly benign lip service (though sufficient to trip a few trading algos into sell mode) to those who believe the Fed should essentially do their job and allow interest rates to do their job with regard to rising inflation -- markets are a little on edge this morning awaiting J. Powell's testimony before the Select Subcommittee on the Coronavirus Crisis. 

Monday, June 21, 2021

Morning Note: What Is Virtually for Certain

Last week, the worst since last October for the Dow, saw stocks jittery out of the gate -- rightly so as it turns out -- then fold after the Fed announced that 2023 will likely see the beginning of a campaign to wean the economy off of what amounts to a negative (adjusted for inflation) interest rate regime.

Imagine the disruption in those asset markets folks -- by design -- thought were immune to consequential losses due to the promise of perpetual central bank support. Well, as you noticed, several asset markets just gave us, and the Fed, a sneak preview.

Saturday, June 19, 2021

Macro Update: Housing Headaches, Crowded Commodities, and the Reality of the Interest Rate -- and Currency! -- 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: 

Friday, June 18, 2021

Morning Note: The Punch is Spiked, The Market's Addicted

Friday's our deep-dive day around here, and given the week we've had I'm anxious to get to the scoring of our index, checking correlations, assessing the technicals, yada, yada -- and getting back to you with our weekly macro update. Soooo, this morning's note's going to be short and sweet.

Thursday, June 17, 2021

Morning Note: Yesterday's sting...

 Here's from yesterday morning's note:

"Jittery trading so far this week says that markets fear that the Fed may hint that they are aware of inflationary forces that may indeed turn out to be something more than simply "transitory" and, thus, outline what they might actually do about it.
While in my view that makes perfect sense, the number it'd do on markets makes such a confession -- at this particular meeting -- while indeed possible, a lower probability than them focusing on the millions of folks who remain out of work, disappointing retail sales yesterday, yada yada... Without, by the way, remotely acknowledging the fact that hugely generous government benefits pretty much explains both data points (excessive unemployment benefits [disincentive to take a job], and the comedown off of the last stimulus check resulting in lower than expected retail sales)."

Here's from yesterday evening's note:

"So what got the dollar rising and the other stuff featured above falling today?

Well, it was this afternoon's message from the Fed that, while aside from tinkering with the rate they pay banks on excess reserves and in the overnight repo market, they anticipate lifting their benchmark rate off of zero sometime in the year 2023, and that they may even be inclined to cut back a bit on their monthly bond-buying frenzy by this year-end.

Now, frankly, there's nothing historically-speaking consequential in terms of magnitude there. In fact, historically-speaking, it's far less of a threat than one might've expected given the pace of growth, and inflation, of late."

That "other stuff" I referred to was stocks, commodities and emerging market currencies.

So, essentially, the Fed forecast two more years of a zero policy rate, nudging even then to what remains a historically-low level, and maybe cutting back a bit its asset purchases by year-end (in only, I suspect, mortgage backed securities [the federal government will need the Fed to gobble up what'll remain huge treasury bond issuance well into the future]).

My point? Yesterday the Fed dipped its toe into the market's water just to take the temperature (or temperament) for even the modest of monetary tightening, and while assets (equities in particular) -- at least yesterday -- handled it fairly well by the close, that spike in the dollar and what it portends (should it persist), given the present global macro setup has, I suspect, them lining up to do a bit of, well, like I also said in yesterday evening's note:

"Bottom line: Jerome Powell and company have truly backed themselves into the proverbial corner. I.e., should asset and currency markets even threaten to unravel due to what is, by historical standards, a mere placatory nod to those who see rising inflation as presently more than simply "transitory" phenomena, I highly suspect we'll see the Fed walk back today's dipping-of-their-toes, lickety-split."

As for this morning, while commodities (save for oil) are still feeling yesterday's sting, stocks are opening only modestly lower and treasury bonds are already saying "nothing to see here folks." Although treasuries are likely also getting a lift from this morning's worse than expected weekly jobless claims number. In fact, equity futures were notably lower just prior to that claims number as well (yep, with the stock market trading on easy money, bad economic news is actually good news.) Although the day is still very young...

Asian equities struggled overnight. While 3 of the 16 markets we track were closed, only 3 of the remaining 13 closed the session higher.

Europe's struggling this morning as well. Also with 3 bourses shuttered, only 4 of the remaining 16 we follow are in the green as I type.

U.S. major averages are essentially flat: Dow down up 26 points (0.05%), SP500 up 0.06%, SSP500 Equal Weight up 0.10%, Nasdaq 100 flat, Nasdaq Comp down 0.04%, Russell 2000 up 0.03%.

The VIX (SP500 implied volatility) is down 5.01%. VXN (Nasdaq 100 i.v.) is down 1.63%.

Oil futures are up 0.08%, gold's down 2.19%, silver's down 3.28%, copper futures are down 2.00% and the ag complex is down 1.31%.

The 10-year treasury is up (yield down) and the dollar is up a big 0.46%.

Led by MP (rare earth miner), solar stocks, emerging market equities, energy stocks and tech stocks -- but dragged by silver, gold miners, gold, base metals miners, uranium miners and ag futures -- our core mix is off 0.43% to start the day.

With regard to the intentionally soft tone of the Fed's water-testing yesterday, know that it's not so much about the extent to which they may ultimately begin tightening, it's the fact that they're even talking about it that has markets on edge.

Per James Weatherall in his insightful book The Physics of Wall Street:

"...the psychological effect of a change in stimulus isn’t determined by the absolute magnitude of the change, but rather by its change relative to the starting point."

Have a great day!

Wednesday, June 16, 2021

This Week's Message: The Fed "Threatens"

You've heard or read me express, multiple times of late, that if there were only one element in markets that I could build a macro thesis around presently it would be the U.S. dollar.

Today, by the way, the dollar saw its biggest one-day surge in over a year.

Morning Note: China's Playing With a Beachball

The Federal Reserve winds down its June policy meeting today, rate announcement coming at 11am pt, press conference with J. Powell to follow.

Jittery trading so far this week says that markets fear that the Fed may hint that they are aware of inflationary forces that may indeed turn out to be something more than simply "transitory" and, thus, outline what they might actually do about it.

Tuesday, June 15, 2021

Morning Note: Copper's feeling sick, but not to worry, doctors are standing by...

In our last few macro videos I suggested that copper could see some meaningful near-term downside action before it resumes what I suspect will be a fundamentally-based march further into all-time high territory.

Well, this morning it's seeing it, big time!

Monday, June 14, 2021

Morning Note: Impatience Can Be Costly

I wouldn't expect much action (or much trading volume, let's say) in markets leading into this Wednesday's Fed announcement and press conference. 

This morning's modest move lower in large cap equities suggests that, at least as the week gets underway, there's a little jitteriness around the prospects that the committee might hint that they’re maybe talking about when they might drain a bit of the punchbowl.

Sunday, June 13, 2021

Macro Update: General Conditions Improving, Inflation Expectations Waning -- And -- Central Bank Intimidated

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: 

Friday, June 11, 2021

Morning Note: There Must Be Something Wrong With Me -- And/Or -- Economists Should Read Popper

Doing a little thinking out loud (on my keyboard) this morning as I catch some of the noise around inflation prospects among the pundits.

Not sure if it's always been there and I'm just now noticing it, or if the discourse around general conditions -- even when we're not talking meme stocks, cryptocurrency and bubbles in general -- has grown quite rancorous of late. You'd think we're talking politics (or crypto), as opposed to boring old economics!

Thursday, June 10, 2021

Morning Note: Sticky

This week's main message is coming your way shortly, and it's a bit of a read (an important one 😎), so I'll keep the morning note brief.

May CPI was released this morning, and, yes, the month-on-month numbers, particularly in the services space (far more sticky [as in stick around] than the goods space) support our thesis that this go-round inflation -- at a somewhat higher level than we've grown accustomed -- is likely to, well, stick around.

This Week's Message: Positive Equity Market Setup, But Beware a Policy Misstep

In yesterday's note I mentioned that "our modeling" favored the notion that the recent weakness in the tech sector is more about a change in leadership versus the harbinger of something more pernicious.

Here are a number of the key indicators that instruct our theses around equity markets and have us, per yesterday's note, relatively sanguine -- yet nevertheless cautious (the +1s, -1s and 0s denote positive, negative and neutral signals):

Wednesday, June 9, 2021

Morning Note: Leaders Lagging

The tech sector's been struggling a bit of late. 

Having not seen a new high since April 19th, tech really needs to hold that yellow line it's been hugging on the daily chart or we're talking a near-classic, and potentially ugly, head-and-shoulders technical pattern:

Tuesday, June 8, 2021

Morning Note: What's troubling small business owners?

Being that small businesses account for ~2/3rds of U.S. jobs, we take them seriously, In fact, the NFIB Small Business Optimism Index accounts for three of the forty-nine inputs to our PWA Macro Index.


Monday, June 7, 2021

Morning Note: The Lesson

If I had a nickel for every time of late that I've referenced the 90s tech boom (then bust) while discussing the frenzy that's going on in certain spots in today's market, well... I'd need a suitcase to lug them around in.

In his note this morning, economist Peter Boockvar sympathizes, and reminds us (via the 1998 Forbes cover below) of how the newbie traders of the 90s -- SO much like today's -- really thought they had Wall Street's number:

Saturday, June 5, 2021

Macro Update: Slight Uptick -- And -- More on Bubbles, the Fed, Inflation, etc.

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: 

Friday, June 4, 2021

Morning Note: All the Cover the Fed Needs -- And -- My Advice to the "Student"-Trader

So, equity futures were struggling a bit to find direction this morning before the release of the May jobs report. As I type, however, 10 minutes before the market open, and 50 minutes after it was reported that 559,000 folks found jobs, futures are trading nicely in the green.

Thursday, June 3, 2021

Morning Note: Fed Failure Not An Option

Jobs news this morning suggests that last month's hiccup was, well, maybe just a hiccup. Payroll company ADP says 978k folks found jobs in May, which is an astounding 328k more than expected, while weekly jobless claims continue to come down: 387k in this morning's report, vs 385k expected and 21k lower than last week. This Friday's official May jobs number will be telling...

Wednesday, June 2, 2021

This Week's Message: The Dollar's the Loser

A client intimated in a recent meeting that, based on our assessment of probabilities for each of our current core positions going forward, we're not as bearish on stocks as my general vibe (here on the blog) might otherwise suggest.

Morning Note: Well, Acetone's Cheap -- And -- Top-Down Desperation

While, like I keep saying, getting the longer-term inflation story right will be key to investing success the next few years -- a most hotly debated story these days, mind you -- there's no debating that it's presently paying us a serious visit.

Tuesday, June 1, 2021

Morning Note: Always Look to Disconfirm

Weekend and overnight global economic news (impressive Purchasing Mgrs Indices in particular) presumably explains a very nice pop higher in equities as June gets underway. 

But one thing that caught my attention immediately this morning was the pop in the VIX and in VXN (implied volatility for the S&P 500 and the Nasdaq 100 indices); they were up 3.10% and 4.66% respectively. There's typically a strong inverse relationship between the two, as rising implied vol suggests increased hedging among options traders.