Thursday, July 29, 2021

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:

"The status quo scenario would be where the Fed points to the millions who remain unemployed, the threat of the Delta variant, and any other looming threat they can come up with, and, therefore, remains firmly on the present path; while the Administration pushes forward with its aggressive social and infrastructure agenda. In this case the inflation trade is a high probability -- and historically-substantial -- winner. Gold (longer-term) comes to life, as the Fed will diligently suppress interest rates… Tech underperforms, but doesn’t [have to, necessarily] get killed…"

And, per the headlines around a bipartisan infrastructure bill being all but inked, status quo on the Administration front as well.

In terms of the Fed, Powell had the guts to pound on the need for substantial labor market progress, while we're literally staring down over 9 million job openings (a record) and, yes, he pressed the notion that inflation is concentrated in merely a few "reopening" areas of the economy (utter hogwash!). But, AGAIN, he, his crew and their predecessors have blown up asset bubbles to the point where they've no choice but to leave their tools for fighting inflation gathering dust far into the foreseeable future.

And, yes, the dollar's taking it on the chin this morning, which comports (as does all of the above) with our longer-term thesis.

Asian equities rallied overnight, with all but 1 of the 16 markets we track closing higher.

Europe's following suit this morning, with all but 2 of the 19 bourses we follow in the green thus far.

US stocks are green across the board: Dow up 169 points (0.49%), SP500 up 0.43%, SP500 Equal Weight up 0.69%, Nasdaq 100 up 0.19%, Nasdaq Comp up 0.22%, Russell 2000 up 1.16%.

The VIX (SP500 implied volatility) is down 4.59%. VXN (Nasdaq 100 i.v.) is down 2.15%.

Oil futures are up 0.98%, gold's up 1.01%, silver's up 2.59%, copper futures are 0.77% and the ag complex is down 0.26%.

The 10-year treasury is down (yield up) and the dollar is down a not-small 0.42%.

Led by ALB (lithium miner), MP (rare earth miner), base metals miners, gold miners and silver -- with KRBN (carbon credits) and ag commodities our only positions in the red so far this morning -- our core mix is up 0.69% to start the day. 

Always remember, for every buyer there's a seller, and vice versa. As investors (and/or advisors) it's our task to forever ponder, explore, consider and speculate on the mind(s) of the people on the other side of whatever trade or investment we're considering. For, of course, it may indeed by they who are right in any given instance...

Or, in the words of Viktor Frankl:

To put the question in general terms would be comparable to the question posed to a chess champion: “Tell me, Master, what is the best move in the world?” There simply is no such thing as the best or even a good move apart from a particular situation in a game and the particular personality of one’s opponent.

Have a great day!

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