Monday, May 23, 2022

Morning Note: The Good News

As I've expressed in recent video commentaries, a stock market bounce right here makes some technical sense. However, as I've also pointed out, while we're open to all possibilities, the likelihood that we've seen the ultimately worst remains somewhat low. I.e., the conditions that often surround a durable bottom in stocks have yet to come together...

Bloomberg macro analyst Cameron Crise agrees, as it relates to present Fed policy:
"...going back to the Eisenhower Administration, the S&P 500 has never bottomed after a significant decline with the Fed hiking this aggressively or yields rising this fast."

The good news is that a bottom -- we're assuming Friday wasn't it -- is indeed somewhere out (or down) there. I.e., while there remains notable hedge-worthy risks in the present setup, serious long-term opportunities will emerge as things continue to shake out.

Nowhere is patience more a virtue than when we're talking investing...

On another note, as expected, China is stepping on the stimulus pedal:

(Bloomberg) -- 

A total of 33 specific measures from six perspectives are intended to further stabilize the economy, China National Radio reports, citing decision made by a State Council meeting chaired by Premier Li Keqiang.

  • Fiscal policies: China will implement tax rebate to more industries and increase the total tax rebate amount by over 140b yuan
    • Will extend the social insurance payment delay to the end of the year and expand the measure to more difficult sectors
  • Financial policies: China will double the quota of inclusive SME loan support tool this year
  • Supply-chain related policies: China will improve its measures for production resumption and ensure cargo transportation runs smoothly
    • Will increase domestic and international passenger flights in an orderly manner
  • Measures to boost consumption and effective investment: China will cut purchase tax on passenger vehicles by 60b yuan
    • Will support some necessary housing demand with city-specific property measures
  • Energy security measures: China will start a series of energy projects
  • Relief measures for jobless people: China will link the social insurance standard with increase of consumer prices

This is meaningful with regard to commodities going forward, as well as to global equities in general. 

Asian equities were mixed overnight, with 9 of the 16 markets we track closing lower.

Europe's in rally mode so far this morning, with 13 of the 19 bourses we follow trading up as I type.

US stocks are green to start the session: Dow up 404 points (1.29%), SP500 up 1.11%, SP500 Equal Weight up 0.84%, Nasdaq 100 up 0.96%, Nasdaq Comp up 1.01%, Russell 2000 up 0.93%.

The VIX sits at 29.42, down 0.03%.

Oil futures are up 0.50%, gold's up 0.60%, silver's up 0.81%, copper futures are up 1.24% and the ag complex (DBA) is up 0.36%.

The 10-year treasury is down (yield up) and the dollar is down 0.89%.

Among our 38 core positions (excluding cash and short-term bond ETF), 36 -- led by Dutch Bros, MP Materials, energy stocks, financial stocks and Latin American Equities -- are in the green so far this morning. The 2 losers so far this morning are treasury bonds and carbon credits.

I can't say that over the years I've agreed all that often with economist Larry Summers, however, at the moment, I do.

Here's his weekend tweet in its entirety:
"I am very concerned that we may headed into a new era of Brandeisian populist antitrust policy that will make the US economy more inflationary and less resilient.

The statements on policy coming from @FTC@TheJusticeDept better reflect legal doctrines of the 1960s than economic understandings of the last two decades. An Administration that prides itself on factual analysis and “looking at the science” is taking a non analytic approach.

Yes it is imperative to promote competition and yes there are many errors in the Bork/Chicago bias in favor of any market outcome.

But attacks on “largeness on its own terms”, increases in the market share of industry leaders without regard to their efficiency, shrinkage of small business market shares, private equity ownership, or destruction of communities are presumptively problematic.

There are real risks. Policies that attack bigness can easily be inflationary if they prevent the exploitation of economies of scale or limit superstar firms. Likewise, policy focused on protecting competitors or communities or limiting layoffs are likely to raise costs & prices

Policies that attack vertical integration or limit contracting between firms and their suppliers and distributors may reduce efficiency and, by lengthening supply chains, reduce resilience.

We need more focus on tariffs and other trade restrictions which undermine competition raise prices and reduce resilience in products ranging from gas at the pump to baby formula and automobiles to new homes."

Have a great day!


  1. Thanks Marty. Reading your blog will be my daily routine.

  2. My pleasure Sam, glad it's helpful