Macro Update: Flat (but telling), Latin American Cats -- And -- My Latest Musings

Mixing it up a bit, we'll do this week's macro update in writing...

For starters, our own general conditions index scored no change on the week, with an overall macro score of  29.17:

Quote of the Day: That's Risky

"Even though the S&P's hitting new highs I'm hard-pressed to find people that are really enjoying this and that are excited about this move. Most people that I know, professional traders, are all holding their heads down and complaining about how this is hurting and how nothing's working."

Morning Note: "Lean Into the Future"

Of all the companies to miss revenue expectations, in this environment, Amazon... Hmm... Its stock price this morning (off nearly 7%) says traders were caught a bit off guard. 

Of course it's not that Amazon is suffering in the least, it's that the operative word above is "expectations." And human nature being what it is, there's that "recency bias" (always anticipating more of the latest) that forever rocks markets as economic and market regimes begin to change... More on that in our upcoming macro update...

Morning Note: Know the Game You're Playing, and Know Your Opponent!

So, status quo it was for the Fed yesterday. Here's from this week's main message, posted yesterday:

This Week's Message: Immediate and Intermediate-Term Conditions

This week's main message comes from my most recent entry to our internal market log:

7/25/2021 Immediate and intermediate-term conditions:

Morning Note: The Trader's Ultimate Challenge

Three heavyweights (to put it mildly) -- Apple, Microsoft and Google -- per their after-the-bell earnings releases yesterday scored knockouts. I.e., they soundly beat analysts' estimates.

Morning Note: The Essential Challenge of Risk Management

If you're the type who cares to follow day-to-day market gyrations.. well, like I said last Tuesday, 

"One thing's for certain, it's going to be one volatile summer for asset markets!"

While heavyweight earnings releases (Apple, Google and Microsoft today) can certainly move the equity market, a Fed policy meeting announcement (tomorrow) can move everything. 

Quote and Chart of the Day: "The minute the equity market stops rising..."

You've heard me make the point over and over again (as recently as this weekend's video) that the Fed simply can't let the stock market go (not suggesting they'll succeed indefinitely), as our economy is essentially levered to its continued rise.

Morning Note: We'll Take Brazil over Beijing Right Here...

As I record the year-to-date results of the world's major equity markets (part of our weekly macro exercise), two areas have been jumping out at me for the past several months, Asia (China in particular) and Latin America.

Quote of the Day: We'll "be talking about big shovels"

Pulitzer Prize-winning author and economic historian Daniel Yergin is considered one of the world's most influential energy pundits. He was the featured guest in today's Smarter Markets podcast.  

As clients will note below, his commentary jibes to a virtual T with our long-term thesis (which we're expressing in our core portfolio) on the energy, and the mining, space:   

Macro Update: Conditions Continue to Wane (but no worries at this juncture) -- And -- "We're Not Very Correlated to the U.S. Market" Right Here... (video)

Bloomberg opinion columnist, Allianz Chief Economist, Ex-Pimco CIO and Queens College, Cambridge President Mohamed El-Erian is on the same page we are on inflation going forward:

"Inflation is not going to be transitory. I've been pretty certain in my mind about three prior calls (all were spot on). This is the fourth one."

"I have a whole list of companies that have announced price increases, that have told us they expect further price increases, and that they expect them to stick."

Among other things, I make mention of the latter in this week's video, below...

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:

Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Morning Note: A Bloat of a Different Color

 Bloomberg's "Macro Man" Cameron Crise is making sense this morning:

Morning Note: Yeah, Inflation is a Thing Right Now...

Hmm... there are 9.2 million job openings in this country and new weekly unemployment claims are up 3 weeks in a row (419k reported this morning; 69k more than expected). Somethin ain't right... ?

Well, according to the Wall Street Journal:

This Week's Message: What's Happened to the Inflation Trade/Setup? -- And -- Today's Key Questions...

Clients and regular readers know that our overall macro thesis includes a view that has odds favoring inflation running "hotter" well into the foreseeable -- beyond the present "transitory" rise in prices that was inevitable given the dead-stop/fast-rebound (pent-up-demand) nature of COVID providing cover for the most aggressive fiscal and monetary action the world has ever seen (including, on the monetary side, an utter breaching of the Federal Reserve Act of 1913 [forbids the Fed from buying corporate securities, which they did anyway], which of course, on top of taking personal incomes [via "stimulus" checks], in the aggregate, above prepandemic levels) -- takes the concept of moral hazard to a whole new level!

Morning Note: Builders Playing It Safe -- And -- "Resilience Lies in Expanding Our Awareness"

In yesterday's morning note I pointed to consumer sentiment around the present home buying impulse (non-existent) as an explanation for June's disappointing building permits number. In their evening note yesterday Bespoke Investment Group had the following take:

Morning Note: It's the materials, but it's becoming the sentiment as well (in housing)...

Housing data (starts and permits) were out this morning, painting a mixed picture. Starts exceeded expectations by 53k, although May was revised down by 26k. Single family accounted for 1.13 million of the 1.643 million total.

Market Commentary (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:

Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Morning Note: Not Over-Thinking It Right Here -- And --- "Sitting Tight" is Fine, When...

COVID scares notwithstanding, per our latest technical analysis (recent videos), stocks have been looking heavy for quite some time. 

And while this morning's, and last week's downward volatility may seem unusual, actually, what's been unusual is the lack of any serious corrective action, given extended valuations, debt setups, geopolitics, bad breadth, and so on.

This Week's Message(s): Highlights From the Past Week

Well, your inbox is going to get a little skinnier over the next few days, as this will be my last post until early next week. Our youngest and I will be deep in the northern California woods, enjoying a little disconnection from the outside world.

Therefore, my shortened workweek has me making this week's main message an easy one. Call it main messages, or highlights, from the past week's commentary herein.

Morning Note: "The Necessary Maturity"

From yesterday morning's note:

Morning Note: Hot CPI, Hedging Oil -- And -- Successful Investors and Poker Players Think Alike...

We've made our case; that the Fed finds itself in the worst of corners, and its board members are not remotely willing to take measures that would actually fulfil their mandate of low, steady inflation. For, if they do, they'll catch the blame for popping the mother of all asset bubbles.

Morning Note: Bullish Themes -- And -- Redistribution Is Cyclical Phenomena

Four quotes from my weekend reading:

"U.S. Treasury Secretary Janet Yellen signaled she’ll prod multilateral development banks to rein in their lending for fossil fuels, part of a global effort to make the financial system greener. 

The remarks reflect an effort by finance ministers and central bankers around the world to push lending institutions to support goals for slashing greenhouse-gas emissions and stop money flowing into projects that add to pollution."

Quote of the Day: There Just Isn't Enough Stuff Like Copper (that they can get to fast enough)

In this week's video update I finished my intro by saying:

"...so, unique opportunities, but not without volatility like we've seen the last 2 or 3 months."

Macro Update: Consumer Credit Up, Global Sentiment Off (a bit), Economists Surprised -- And -- Rotation or Consolidation? (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:

Morning Note: "The Summation of Wisdom"

Given China's posture lately toward its own (publicly listed Chinese companies seeing intense scrutiny and hamstringing restrictions), not to mention Xi's utterly belligerent tone toward the rest of the world of late, one might think that the country is suddenly willing to allow its securities markets (not to mention its economy) to suffer for the good of the empire.

Morning Note: The Domain of Policymakers

So what's got traders hitting the sell button this morning? Is it the delta variant that, per last weekend's video, we believe has been playing a bit of havoc in non-US markets of late? Is it a weaker-than-expected recovery? Is it the lack of an agreement on infrastructure? Those would be the 3 most cited presumed catalysts by the media this morning.

Quote of the Day: Take That One to the Bank!

Just listened to a Bloomberg interview clip (with a former ECB Chief Economist) associated with today's announcement that the European Central Bank (ECB) will allow an "overshooting" of its raised inflation target going forward. I.e., they raised their target to 2% and, at the same time, stated that they'll allow inflation to exceed it going forward. 

Morning Note: An Unabashed Will to Spend Comes With Consequences...

We looked at the following graph in last weekend's video update:

This Week's Message: Seeing's One Thing, Sitting's Altogether Another...

My schedule the next few days has me bringing this week's main message to you early, and keeping it relatively brief. 

I can't tell you how many times, since late-summer 2019 I've been labeled a "bear" by clients and associates. All the while, when you consider our core asset mix, in late-'19, and since -- while it's evolved notably to comport with our general view of the world and concerns over certain areas of the stock market -- you certainly wouldn't say we've run for cover, we're just not all-in the stock market like we were, say, from the bottom in '09 to December '19.

Morning Note: Jittery

Traders seem a bit jittery as we start the week. Gold's rallying (+1.25%) and the VIX (goes up when options traders hedge, or speculate on, the downside) is up 6%. Oil futures were up bigly in the premarket -- on news that OPEC talks broke down over the weekend -- although they've done a complete 180 since (down 0.40% as I type). Emerging markets are taking a hit, as China hits its own tech sector for not toeing the China line, and rising COVID cases are clearly a concern. And, to aptly top it all off, the S&P 500 itself (with its highest weighting to tech stocks since 1999 [if not ever]) is barely lower while its individual losers lead its gainers by nearly 3 to 1 (oof!, if tech ever takes a serious breather)... The S&P 500 Equal Weight (treats all equally) was down 5 times the cap weighted index at the open.

Quote and Chart of the Day: Uncharted Territory...

Numerously herein of late we've stated that the debt and interest rate setup, and what we believe the Fed virtually has to resort to in their attempt to facilitate massive government deficits without piercing debt and asset bubbles, takes us to the 1940s playbook.

Macro Update: June's Countertrend Market Action, Breadth, Valuation, and, Yes, Inflation (video)

This week's macro update runs longer than usual, so I thought I'd break it down for you, in case you'd like to skip the topics that we've more or less covered in earlier posts.

Morning Note: How "The Big Money" Is Made (and, frankly, not lost)...

So, if the headlines got it right on how good this morning's jobs number was, then our view of what's driving stocks these days says they should be tanking.

Morning Note: Know (the mind of) your opponent...

All eyes will be on the June jobs print tomorrow, and, if you're a stock market bull, be careful what you wish for.