The Morning Call
5/30/17
The
Market
Technical
The
S&P remains above both moving averages and well within uptrends across on
timeframes. In addition, it closed that
overhead gap and has broken above its former all time high---though the follow
through has not been all that impressive and the Dow has yet to challenge its
all-time high. The latter needs to occur
before we can say that a challenge of the upper boundaries of the Averages’
long term uptrend is in the offing.
Bond
investors seem unconcerned with rising inflation, a stronger economy or a
tighter Fed. TLT is trading with a
slightly upward bias, trapped between the upper boundary of its short term downtrend
and its 200 day moving average on the upside and the lower boundary of its long
term uptrend and its 100 day moving average on the downside. One or the other of these narrowing boundaries
will be broken at some point, providing fuel for a move in the direction of the
break.
One
guy’s opinion (short):
Like
the bond investors, the gold bugs appear to doubt that rates are going up. GLD has made a decent recovery from its mid-April
sell off, developing a very short term uptrend and resetting its moving
averages to support. Its next test will
clearly be the upper boundary of its short term trading range.
For
the trifecta, dollar bettors seem unimpressed with the prospects for an
improving US economy or a tighter Fed/higher interest rates. UUP is in a very short term downtrend and
below both its moving averages; not a signal of dollar strength.
In
the wake of a positive equity market, the VIX took a shellacking last
week. It is now well below both moving
averages (both now resistance), below the lower boundary of its intermediate
term trading range (if it closes there today, it will reset to a downtrend) and
below the lower boundary of its long term trading range (if it remains there
through the close Friday, it will reset to a downtrend.
Fundamental
Headlines
Last week’s
economic data was about as dismal as it could get. The stats were overwhelming negative (nine
negative, four positive) including the primary indicators (four to one). The score: in the last 86 weeks, twenty-eight
were positive, forty-seven negative and eleven neutral. That sets me up to revise our short term
forecast back down, which I will do this week, if the numbers are poor. But just to be clear, that doesn’t alter the
improved long term secular growth rate assumption in our Model stemming from a
less punitive regulatory regime.
At the FOMC meeting last
week, the Fed did what it does best: which is to ignore the data, give an
endless ‘on the one hand, on the other hand’ (data dependent) analysis and then
conclude that raising rates and beginning to taper its balance sheet by the end
of the year is the right policy. I
should note that even the Fed staff pointed out that the lousy first quarter
numbers were likely not due to seasonal factors. But f**k the staff, we got a problem (too
easy too long) which we created and now we got to do what we got to do---which
is to try to normalize monetary policy and pray it won’t knock the economy and
the Markets off track.
Good luck with
that, at least with respect to the Markets. As you know, I believe that QE Infinity (except
for QEI) has done little to improve the economy (see above) and so its absence
will likely do little to harm it (or in the present case, make any normal
slowdown worse). However, it has served
as rocket fuel for the equity markets and want of it will almost surely
reintroduce stock prices to gravity.
And just to
prove that all central bankers ignore the data and pursue a policy that they
think best for the unwashed masses, Draghi stated that the ECB would continue
its version of QEInfinity despite the ongoing major improvement in the EU
economy.
Bottom line: the economy appears to be slowing back down,
the Fed seems focused on trying to unwind its disastrously over expansive monetary
policy and investors don’t give a rat’s ass.
Our Portfolios are 50% cash.
More on valuation (medium):
Investing for Survival
Investment/general biases
Anchoring: people tend to focus on the first piece of information
given too much when making a decision. Example:
despite what people think, those who go first in a negotiation have the
advantage as “the mind tries to make sense out of whatever you put before it.”
News
on Stocks in Our Portfolios
Tiffany (NYSE:TIF) declares $0.50/share quarterly dividend, 11.1% increase from prior dividend of $0.45.
Revenue of $7.92B (+4.6% Y/Y) beats
by $60M.
Revenue of $2.19B (-4.8% Y/Y) misses
by $40M.
Revenue of C$6.58B (-0.2% Y/Y)
Economics
This Week’s Data
April
personal income rose 0.4%, in line; personal spending also increased 0.4%, also
in line.
Other
Politics
Domestic
International War Against Radical
Islam
The Saudi’s are not our friends
(medium):
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