Tuesday, February 11, 2020

The Morning Call---A feeble gesture at reducing the deficit

The Morning Call


The Market

The Averages (29276, 3352) rallied yesterday.  The S&P ended above its all-time high (if it remains there through the close today, it will re-establish a very short term uptrend);  however, the Dow (29373) fell short.  That leaves the indices out of sync---not that unusual when they are in trading ranges.  At the moment, my assumption is that the indices are in a very short term trading range defined by their all-time highs on the upside (29373, 3337) and the mid-December gap up opens (28394/3215) on the downside. 

When everyone agrees, something else happens.

GLD, TLT and UUP continued to move higher, their charts strengthening.  This pin action says ‘safety trade’ to me.  Though clearly, that puts those investors at odds with the stock boys.  Further, the VIX continues to trade like investors are more risk averse than suggested by the indices price action.

            Monday in the charts.

            Six commodity charts to watch.


            No US stats yesterday.  Overseas, the numbers were mixed.  The December Japanese trade surplus was larger than expected; while January Chinese CPI was almost double estimates.

            Other headlines:

(1)   the coronavirus continues to impact local economies; though we still don’t know what its ultimate macroeconomic effect will be.  Watch global logistics shares as virus supply chain signal.

(2)   as I noted in yesterday’s Morning Call, Trump released his FY 2021 budget.  Of course, most executive budgets are just giant wet dreams; so, there is little to be gleaned from this document about what the final budget will look like.  As you might expect, what bothers me about this budget is that it pays weak lip service to reducing the deficit/debt at a time that the economy is about as good as it is going to get.

                 More detail on Trump’s FY2021 budget.
            Bottom line.  the deficit and national debt have reached a magnitude that many experts (with whom I agree) believe will inhibit future economic growth.  And nothing is changing.  So, the coronavirus aside, investor expectations for some kind longer term economic lift off seem ill founded.

                That said, all that matters is the money.

            ***overnight, the liquidity problem in the repo market is back.

    News on Stocks in Our Portfolios


   This Week’s Data


            The January small business optimism index was reported at 104.3 versus forecasts of 103.4.


            The preliminary Q4 UK trade balance was +L7.715 billion versus estimates of -L2.6 billion; GDP growth was 0%, in line; business investment was -1.0% versus -0.6%.

            December UK industrial production was up 0.1% versus expectations of +0.3%; manufacturing production was +0.3% versus +0.5%; GDP growth was +0.3% versus +0.2%.


            Iron and steel primary production employment.

            Living standards have never been better.

What I am reading today

            History is interesting because nothing is inevitable.
            Sinn Fein win upsets Irish politics.

            Ten things that I wish that I had been told when I was 20.

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