Wednesday, June 23, 2021

Morning Note: Groceries

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

During a client review meeting the other day I got an earful about the "ridiculous rise in grocery prices" (words to that effect), but I was able to quell the frustration by informing them that the ag futures ETF in their portfolio is up nearly 30% since we bought it a year ago ("so, while you're paying it at the store, you've benefited from it in your portfolio"):

Here's economist Peter Boockvar (he and I presently share similar views on inflation) this morning: Emphasis mine...

"There is a story on BN today saying “US restaurants, faced with higher food and labor costs, are raising menu prices at a much faster pace than historical rates, insistent on preserving profits after an arduous year. From local restaurants to national chains like Chipotle Mexican Grill, owners have boosted prices by as much as 5% in the past few weeks alone. Even at fast food companies that were locked in price wars just a couple of years ago to win over cost conscious customers, increases aren’t taboo anymore.” They interviewed Andrew Koumi, an owner of 6 Green Market Cafe’s in Tampa, Florida and he said he “isn’t too worried about standing out with his price increases, because ‘everyone’s doing it. Some people are doing it really drastically.”"

Of course the debate rages on; will higher inflation turn out to be something transitory (temporary), or structural (longer lasting)? Transitory would be nice, and oh so convenient for Wall Street -- but I dunno. More on that in our upcoming weekly message. 

Asian equities were mixed overnight, with 8 of the 16 markets we track closing higher.

Europe's leaning red this morning, with 11 of the 19 bourses we follow trading lower as I type.

U.S. stocks are mostly higher to start the day: Dow flat, SP500 up 0.16%, SP500 Equal Weight up 0.13%, Nasdaq 100 up 0.28%, Nasdaq Comp up 0.38%, Russell 2000 up 0.59%.

The VIX (SP500 implied volatility) is down 1.86%. VXN (Nasdaq i.v.) is down 0.60%.

Oil futures are up 1.30%, gold's up 0.93%, silver's up 1.72%, copper futures are up 2.21% and the ag complex is up 0.56%.

The 10-year treasury is down (yield up) and the dollar is down 0.22%.

Led by MP (rare earth miner), oil services stocks, metals miners, silver and base metals futures -- but dragged by utilities stocks, solar stocks, consumer staples stocks, Asia-Pac stocks and healthcare stocks -- our core portfolio is up 0.43% to start the session.

While the following from Lasse Hege Pederson's Efficiently Inefficient speaks to the difficulty in going against the grain when stocks are tanking (cheap), today's historically high valuations and sketchy fundamentals for much of what folks continue to chase means the same can be said when stocks are expensive. Of course that's what bubbles are made of:

"...companies only become cheap when other investors abandon them. Hence, cheap stocks are often out of favor or bought during times when others panic. Going against the norm is harder than it sounds"

Have a great day!

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