Friday, August 10, 2018

The Morning Call--Why isn't Pence on vacation like everybody else?


The Morning Call

8/10/18

The Market
         
    Technical

The Averages (DJIA 25509, S&P 2853) traded down on flat volume.  Breadth was mixed.  They remain strong technically. In addition the Dow’s 100 DMA remains right on its 200 DMA but has ceased declining---at least for the moment.  However, the VIX finished back above the lower boundary of its short term trading range, negating Tuesday’s break.  

The major technical story continues to be the pin action of TLT (increase in interest rates).  Yesterday, it was up noticeably on volume (likely responding to weaker than expected July PPI and June wholesale sales), ending back above (1) its 100 DMA, one day after the DMA reverted to resistance---calling that change in trend into question and (2) the lower boundary of its long term uptrend, negating last Wednesday’s break.


          The dollar rose, remaining in a strong technical position and appears to be confirming a move to higher rates.  GLD was down but is in a solid downtrend which also points towards higher rates.
           
            Bottom line:  the Averages remain quite strong technically speaking. The assumption remains that they are going to challenge their all-time highs with the S&P only points away.
           
            TLT’s bounced in a big way, leaving it within a long term uptrend (declining rates).  GLD and possibly UUP investors seem to disagree.
          
            Yesterday in the charts.

    Fundamental

       Headlines

            Three economic stats released yesterday: weekly jobless claims fell; July PPI was lower than estimates month over month, though the year over year number was up; and June wholesale inventories rose but sales declined.  I know that we haven’t got much a read on the economy is this week’s data, but a tamer than expected PPI and falling wholesale sales are hardly signs of an accelerating economy.

            Just when I thought that we would get through a whole week without the ruling class coming up with another idea to screw with the electorate, VP Pence announces that the administration wants to spend another $8 billion on a ‘space force’.  Now, I don’t have an objection to giving a more targeted attention to the military aspects of space.  But the US is already doing it---in the Air Force.  If the AF is not doing a good job, fire somebody; but why build an entire new bureaucracy for the taxpayers to support?  Furthermore, if Trump wants to spend more money on space defense, then take some of the funds allocated in the current monstrously large defense budget. To be sure, $8 billion dollars spent over five years is a wart of goat’s ass relative to present budget deficit/national debt.   But why add to it; and why give the rest of the ruling class a reason to assume that there is plenty of money to spend on their own pet projects?

            In the last year, I have been linking to articles addressing the problem of the growing dollar shortage within the international financial system.  Venezuela and Argentina were easy enough to write off given their recent history.  However, the problem now appears to be coming to a NATO ally---Turkey.

            ***overnight, lira plunges (medium):

            Bottom line: the larger the budget deficit becomes, the more difficult it is for the economy to grow, the higher stock prices go, the more overvalued they become.  Cash is an important asset to own in this environment.
      
            This from Lord Rothschild (medium):

            More on stock buybacks (medium):

            More on valuations (medium):

    News on Stocks in Our Portfolios
 
Accenture (NYSE:ACNbuys hardware engineering firm Mindtribe and intends to acquire embedded software company Pillar Technology for undisclosed terms.
The acquisitions will help expand Accenture Industry X.0, which helps companies from software to industrial to utilities shift to digital products and services.
San Francisco-based Mindtribe has 40 employees and creates connected hardware integrated with digital services for faster and shorter development cycles.
Pillar Technology has 320 employees across offices in Iowa, Michigan, and Palo Alto, California. The company specializes in rapid/agile development of embedded software used in smart products like autonomous vehicles. 
United Parcel Service (NYSE:UPS) declares $0.91/share quarterly dividend, in line with previous.

C.H. Robinson Worldwide (NASDAQ:CHRW) declares $0.46/share quarterly dividend, in line with previous.

Nike (NYSE:NKE) declares $0.20/share quarterly dividend, in line with previous.

Economics

   This Week’s Data

      US

            June wholesale inventories rose 0.1% versus expectations of 0.0%; however, wholesale sales fell 0.1%.

            July CPI rose 0.2%, in line; ex food and energy, it was up 0.2%, also in line.

     International

    Other

            More on the China tariffs (medium):

            Counterpoint (medium):

            Quote of the day (medium):

What I am reading today

            North American megadroughts (medium):

            A ‘hard knocks’ finance lesson (medium):

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