The Morning Call
12/1/17
Fellow fun lovers. I am down with
a nasty viral infection; so today will short and sweet and nothing
tomorrow. Hopefully I am back on track
Monday.
The
Market
Technical
The
technical picture became a bit more confused yesterday. Certainly not for the stock crowd though
breadth continues to be weaker than the pin actin suggests. The Treasury and GLD drifted lower (stronger
economy/higher rates), while the dollar did the same (weaker economy/ lower
rates). Bottom line: the indices are
technically strong and point to higher prices/stronger economy/higher rates. Other indicators not so much so.
Overseas,
the November Chinese manufacturing and nonmanufacturing PMI were ahead of
forecasts while the final November EU manufacturing PMI was also higher than
anticipated.
Of
course, at the top of everyone’s list is the senate tax reform bill. However, there has been selective
interpretation of related news events.
For instance, Senator John McCain said that he would support the bill. The fans went wild, stock prices spiking.
Then the senate’s
joint committee on taxation, issued a report that said the proposed tax cuts
would only generate $458 billion in increased revenue. In other words, the $1.4 trillion in tax cuts
would result in net addition to the deficit of $1 trillion. Don’t get me wrong, I don’t have any more
faith that one group of eggheads with their model are any more likely to be
right than another group of eggheads with their model that said the tax cut
would pay for themselves. But that is
the point, we are dependent on the outcome of a standoff between two groups of
morons. Well, needless to say that report did comport
with the ‘everything is awesome’ narrative.
So investors took sides, decided that the senate committee was the
bigger group of morons and therefore should be ignored.
Here
is where we are at this moment (medium):
Bottom line: there is nothing in this senate to commend
itself to taxpayers or investors. We are
now in the dreamweaver phase of the market, which can last longer than most
rationale people would never expect.
Just be sure you have built your cash reserves.
Fundamental
Headlines
Yesterday’s
US data were upbeat: the November Chicago PMI and weekly jobless claims were
better than expected; October personal income was above estimate, while
personal spending and the PCE price indicator were in line
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