The Morning Call
The Market
Technical
The
indices (DJIA 15273, S&P 1692) continued their slow decline. The Dow closed within its short term trading
range (14190-15550) and once again below its 50 day moving average; while the
S&P finished within its short term uptrend (1667-1821) and above its 50 day
moving average. Hence on a short term
basis, the Averages continue out of sync (directionless).
Both of the
Averages are well within their intermediate term (14882-19882, 1583-2169) and long
term uptrends (4918-17000, 715-1800).
Volume
was flat. Breadth was mixed though the
flow of funds indicator plummeted. The
VIX declined fractionally, closing within its short term trading range and its
intermediate term downtrend.
GLD
continued to inch higher. However, it
remains within a very short term, a short term and an intermediate term
downtrend.
Bottom line: the
Markets’ drift lower continues. While
the follow through from the Fed’s no taper spike as been surprising dismal,
there is enough negative noise out of Washington
that the current modest decline is also unexpected---at least for me. This suggests confusion within investor
ranks; so it maybe that the next unanticipated event may decide price
direction.
If stocks
continue to the upside, our Portfolios will use the advance to lighten up on
any stock trading in its Sell Half
Range
Update
on margin debt (medium):
Update
on sentiment (short):
Fundamental
Headlines
Yesterday’s
US economic data was generally upbeat: weekly mortgage and purchase
applications were up as were August durable goods orders and new home
sales. Foreign stats were mixed: German
consumer confidence hit a six month high while the Chinese Beige Book (compiled
by a New York based firm) reflected a marked economic slowdown---in sharp
contrast to the numbers coming out of the Chinese government (and we know those
guys lie).
As
I suggested in the Technical section above, investors seem to have shifted into
neutral---waiting to see the results of the annual budget Kabuki dance and the
debt ceiling negotiations. I am not
terribly pessimistic that a government shutdown/debt default/credit downgrading
will occur for the simple reason that too many republicans remember the pain
(blame) from the last occasion (2011)---although it is clearly possible that
our ruling class will cause as much heartburn as possible before coming up with
solutions to both problems. However, investors are getting use to these periodic
ordeals, so I am not sure the wrangling process in DC will hammer the Markets
any worse than has already been done.
Furthermore, I
don’t think that the solutions themselves will be Market negative. Again, these clowns have been kicking the
fiscal profligacy can down the road for decades. Doing it again (which I expect that they
will) shouldn’t come as a surprise.
Indeed, the Market drift in the face of the daily dirge from the media
suggests that to me that investors fully expect resolutions on par with those
of the past ten years.
Just
to be sure that you have the latest---as of last night (1) the senate is going
to strip out the Obamacare defunding from the continuing resolution and send it
back to the house, (2) rumors are that the house will attach a number measures
to a new CR---like delaying Obamacare for a year, removing federal employees
exemption from Obamacare, approving the Keystone pipeline---and send it back to
the senate.
One other item
that is illustrative of the lack of sincerity by out ruling class to curb
spending: both the house and senate versions of the continuing resolution
contain a level of spending in excess of that mandated by the sequester. In other words, these yahoos are playing the
high moral ground to their respective constituents but both sides are violating
the very essence of the principal of cutting back on government spending. And you wonder why I don’t think that
anything substantive is going to change?
A
great summary of the current state of fiscal policy (medium and a must read):
Bottom
line: since the assumptions in both our
Economic and Valuation Models reflect a
compromise-at-the-last-minute-kick-the-can-down-the-road solution, I expect
this scenario; so it won’t prompt any changes to our Models. Therefore by definition, it won’t change my
judgment that stocks are considerably overvalued.
QEInfinity and
its after effects remains my largest concern.
However, until the Markets have had enough of the Fed buying the
government deficit, holding interest rates low penalizing savers and enriching
speculators (the banksters) and encouraging similar irresponsible behavior by
other central banks in order to protect their country’s (trade)
competitiveness, we won’t experience the (unintended) consequences. And I have no clue when that will occur.
.......in my opinion, that stocks are way over valuing the likely
earnings that can be produced from an economy on the current trajectory of the US
Thoughts
on the emerging markets (medium):
Three
big lies (medium):
Scarcity,
risk and debt (medium):
The
latest from Stephen Roach (medium and today’s must read):
Investing for Survival
No
investment strategy works all the time (medium):
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