The Morning Call
3/24/20
The
Market
Technical
The Averages (18591, 2237) blew off another massive
addition to QEInfinity and continued their dramatic deterioration. Momentum remains undeterred to the downside
with almost no visible support until ~ 15399/1810. That said, on a very short term basis, stocks
are very oversold; plus, the VIX declined yesterday (a big down day).
TLT, GLD and UUP continued
their volatility. TLT soared again,
remaining technically strong. GLD rallied
on big volume, finishing in an uptrend as well as halting its downward momentum
by closing above its 100 DMA (if it remains there through the close on
Wednesday, it will revert to support) and the 200 DMA (if it remains there through
the close on Thursday, it will revert to support). The UUP was off fractionally but that didn’t
impact its push higher. Overall, the message
remains that investors are seeking safety.
Monday in the
charts.
Fundamental
Headlines
While it looked
last week like the likely coronavirus induced economic slowdown was finally
starting to show up in the numbers, positive comparisons remain. Yesterday, the February Chicago Fed national
activity index was better than anticipated.
Likewise, overseas, March EU consumer confidence was down but not as
much as expected.
The two main headlines
yesterday were:
(1)
the inability of the senate to come up with a compromise
fiscal stimulus bill to offset the damage being done by the mandated shutdown of
the country. The only thing worse than
our political class trying to buy its way out of a self-induced crisis is our
political class trying to buy its way out of a self-induced crisis on a partisan
agenda.
Overnight, the news got better with both parties
talking up the likelihood of a compromise bill.
(2)
more on yesterday’s Fed neutron bomb liquidity
injection.
And apparently
there is more where that came from.
Other headlines:
The
coronavirus
Latest
data
***overnight
update.
***overnight,
Trump says coronavirus restrictions will be lifted soon.
Coronavirus deaths
by country and US state.
Potential good news on the coronavirus.
More good news.
(China)
More. (South
Korea)
More.
(Italy)
Solutions
Reopen. Fast.
Trump weighs
easing ‘stay at home’ restrictions.
The case for guaranteeing lost income.
A proposal for social insurance.
The worse policies are made during crises.
How big a fiscal package is needed?
Bottom line: while there is not yet any solid indication
of peak infections/deaths from the coronavirus, we are starting to get some positive
anecdotal evidence. Further, our ruling
class is working overtime generating ideas/programs to not only address curbing
the spread of the virus but also the economic fallout. Those efforts will almost surely generate positive
results (though the question is, will they be worth it?).
Specifically,
(1)
the Fed’s massive QEV will probably mitigate some
of the concerns that I have expressed regarding a financial crisis in the
corporate debt markets. It likely won’t
stop the initial bankruptcies but it should short circuit the transmission of
insolvencies to other entities, i.e. the Fed will buy the debt of the bankrupt
company. So, while the Fed actions won’t
prevent problems/bankruptcies, it will lessen their impact on the financial system. That said longer term, this will only make
worse the mispricing of risk/the misallocation of assets which renders the economy
less efficient in the rational distribution of resources/stimulating growth,
(2)
signs are growing that Trump is coming to the realization
that the cure for the coronavirus is more harmful than the disease itself. In addition, the statistics on
infections/deaths in China, South Korea and Italy are starting to provide a
pattern of the overall impact on the virus which is not nearly as bad as the
doomsayers would have us believe.
I
am starting to see a dim light at the end of the tunnel at this moment---and
with it the ability to quantify the economic damage.
My strategy
remains: when the stocks of companies that you want to own are down 50% or more
and/or are selling into their Buy Value Ranges, that is the time to put cash
reserves to work---you know sell high, buy low.
That said, I am no Market timing guru; so, a slow steady buy program on
down days is the best I can do at buying low.
S&P dividend expectations.
Managing your money through a draw down.
Buying during a crisis.
Buying during a massive liquidity impulse.
Latest from David Tepper.
Subscriber Alert
Earlier this year, AbbVie Inc (ABBV) was Added to
the Dividend Growth and High Yield Buy List, but neither Portfolio purchased
share. At the open, the Dividend Growth
and High Yield Portfolios will Buy ABBV.
The
Fed continues to shovel liquidity into the Markets. In my opinion, that will ultimately lead to
increased inflationary pressures in the economy. Accordingly, all our Portfolios are Adding to
their positions in the Gold Miners ETF (GDX) at the Market open.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
International
March
EU consumer confidence came in at -11.6 versus estimates of -14.2.
The
January Japanese leading economic indicators were 90.5 versus consensus of
90.3; the March Japanese flash manufacturing PMI came in at 44.8 versus
consensus of 43.7; the services PMI was 32.7 versus 41.8; the composite PMI was
35.8 versus 42.5.
The
March German flash manufacturing PMI was 45.7 versus forecasts of 39.6; the
services PMI was 34.5 versus 42.3; the composite PMI was 44.8 versus 39.0.
The
March EU flash manufacturing PMI was 45.7 versus projections of 39.0; the
services PMI was 28.4 versus 39.0; the composite PMI was 31.4 versus 38.8.
The
March UK flash manufacturing PMI was 48.0 versus expectations of 45.0; the
services PMI was 35.7 versus 45.0; the composite PMI was 37.1 versus 45.1.
Other
What
I am reading today
How not to kill your spouse
and other tips for working from home.
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for Survival’s website (http://investingforsurvival.com/home)
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