Tuesday, October 18, 2022

Morning Note: Key Highlights

For this morning's note we'll review some key highlights from our latest messaging:

From yesterday: 

A key input to our, for now, mild recession thesis remains the relative strength of the US consumer... Bank of America echoed this morning what we heard recently from JP Morgan; that the consumer sits on bank balances notably greater than pre-Covid levels... 2 to 5 times greater according to BofA:

HT Jack Farley

Also from yesterday:
"...suffice to say that, as I've been stressing herein and on the videos, while we're entering what has been the best growing season for equities, and, make no mistake, a lot of manure (very negative sentiment [fertilizer]) has been spread all over the market -- making us somewhat sanguine amid some crazy volatility of late -- our overall assessment of conditions says odds still favor at least a bit more pain before this one's in the books... Whether (assuming the bottom isn't indeed already in) it defies the season and occurs between here and New Year's Eve, or sometime thereafter, of course remains to be seen.

Now, regardless of whether there's ultimately more pain to come (our base case), or equity market spring is indeed upon us, we're not remotely arrogant enough to pretend that we'll be able to catch the bottom on the nose and perfectly time the shift into early bull-market mode with the requisite adjustments to our overall allocation... What we are certain of, however, is that there is indeed a market spring in the offing (precisely when, again, we don't know), and that the go-forward global macro setup will be utterly rife with value opportunities."

From last Friday:

"...we remain bullish on Brazil going forward, this from Bloomberg yesterday is key to our thesis:

“Brazil traders are betting that one of the world’s most hawkish central banks will change tack and cut interest rates as soon as March, as the economy cools and inflation expectations dive.”"


From last Thursday:

"Not saying it's time to get greedy right here, but of course we're getting closer by the day:

"...be greedy when others are fearful"
--Warren Buffett"


From last Wednesday:

"This is meaningful in the sense that when the market bottoms, it'll likely coincide with the likes of the following investment advisor sentiment reading (as of yesterday):

"The bull-bear spread expanded to -19.1%, from a -16.4% difference a week ago. That is the fourth consecutive negative spread, and the largest since 2009. Similar readings (peaking at -17.6% in Jun) were shown early last summer, when 11 straight weeks of negative difference ended early Jul. The Mar-2020 lows had a -11.6% negative spreadLarge negative differences signal diminished risk and allow for accumulation. "

Of course this in no way means we're there yet... Call it simply a box (a bottoming [conditions] box) to check at this point..."

Asian equities were rallied overnight, with 15 of the 16 markets we track closing higher.

Europe's up big so far this morning, with all of the 19 bourses we follow trading in the green as I type.

US stocks are up big as well to start the session: Dow by 561 points (1.86%), SP500 up 1.98%, SP500 Equal Weight up 2.10%, Nasdaq 100 up 2.10%, Nasdaq Comp up 2.08%, Russell 2000 up 2.26%.

The VIX sits at 30.85, down 1.66%.

Oil futures are down 1.81%, gold's up 0.19%, silver's up 0.78%, copper futures are down 1.13% and the ag complex (DBA) is down 0.55%.

The 10-year treasury is up (yield down) and the dollar is down 0.08%

Among our 34 core positions (excluding options hedges, cash and short-term bond ETF), 32 -- led by MP Materials, Sweden equities, cyber security stocks, Albemarle and Disney -- are in the green so far this morning. The 2 losers at the open are ag and base metals futures.

"Another lesson I learned early is that there is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market to-day has happened before and will happen again. I’ve never forgotten that." 
--Jesse Livermore 

Have a great day!

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