Wednesday, July 14, 2021

Morning Note: "The Necessary Maturity"

From yesterday morning's note:

"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.

Now, that said, and make no mistake, with this morning's CPI print* they'll be catching some serious heat to do something. So they will... Well, they will say something -- the same something they've been saying -- that this inflation is "transitory" and that they have the tools to handle it if it's not.

Yep, and those tools are the ones I'm talking about that they can't (won't) use."

From our own inflation narrative (from one of the eight cited reasons why we see odds favoring structurally rising inflation over the long-run):

"The Fed's fear of bursting present asset and debt bubbles were it to implement traditional inflation-fighting measures -- thus willing to fall notably behind the inflation curve well into the foreseeable future."

From Fed Chair Jerome Powell's prepared comments to Congress this morning:

"Inflation is being temporarily boosted by base effects, as the sharp pandemic-related price declines from last spring drop out of the 12-month calculation." 
"Measures of longer-term inflation expectations have moved up from their pandemic lows and are in a range that is broadly consistent with the FOMC's longer-run inflation goal."

"Sustainably achieving maximum employment and price stability depends on a stable financial system, and we continue to monitor vulnerabilities here."

Need I say more?


Asian equities struggled overnight, with 13 of the 16 markets we track closing lower.

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

US major averages are mostly (save for the Russell) higher: Dow up 73 (0.21%), SP500 up 0.30%, SP500 Equal Weight up 0.14%, Nasdaq 100 up 0.67%, Nasdaq Comp up 0.46%, Russell 2000 down 0.27%%.

The VIX (SP500 implied volatility) is down 5.02%. VXN (Nasdaq 100 i.v.) is down 3.83%.

Oil futures are down 0.74%, gold's up 0.95%, silver's up 1.35%, copper futures are down 0.71% and the ag complex is up 0.97%.

The 10-year treasury is up (yield down) and the dollar is down 0.34%.

Led by MP (rare earth miner), ALB (lithium miner), ILF (Latin American equities), silver and gold miners -- but dragged by solar stocks, wind stocks, financials stocks, Viacom/CBS and energy stocks -- our core portfolio is up 0.33% to start the day.


Reading my notes on Popper this morning, I came across the following quote.

"A rationalist is simply someone for whom it is more important to learn than to be proved right; someone who is willing to learn from others – not by simply taking over another’s opinions, but by gladly allowing others to criticize his ideas and by gladly criticizing the ideas of others.
The emphasis here is on the idea of criticism or, to be more precise, critical discussion. The genuine rationalist does not think that he or anyone else is in possession of the truth; nor does he think that mere criticism as such helps us to achieve new ideas. But he does think that, in the sphere of ideas, only critical discussion can help us sort the wheat from the chaff.
He is well aware that acceptance or rejection of an idea is never a purely rational matter; but he thinks that only critical discussion can give us the necessary maturity to see an idea from more and more sides and to make a correct judgement of it."

I'll be passing this on to the next youngster who asks me for investing/trading advice. As well as reminding my ego of it everyday as I do my thing. 


Have a great day!
Marty



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