Friday, March 20, 2020

The Morning Call---Still no bankruptcies

The Morning Call


The Market
The Averages  (20087, 2409) rallied modestly yesterday---very modestly given that (1) there was a short squeeze and (2) the indices were oversold.   Both charts remain technically broken with the nearest support ~ 15399/1810.

                 Today is a quad witching.  This expert expects volatility.

TLT, GLD and UUP continued their volatility.  TLT moved up smartly and remains technically strong.  GLD maintained Wednesday’s downside reversal, finishing below its 100 DMA (now resistance) and its 200 DMA (if it remains there through the close on Monday, it will revert to resistance).  The UUP spiked yet again, closing back above its 100 and 200 DMA’s and the upper boundary of its short term trading range---if it remains there through the close today, it will reset to an uptrend. 

             The muni market is getting massacred.

The question remains, are TLT, GLD and UUP reflecting a Market rattling credit/liquidity event?
            The dollar shortage continues.
                The agony of margin calls.

            How selloffs have ultimately played out.

             Thursday in the charts.



The coronavirus economic fallout is starting to appear in US numbers.  While the February leading economic indicators rose, weekly jobless claims, the March Philadelphia Fed manufacturing index and the Q4 trade deficit were disappointing.

            Overseas, the data was mixed. January EU YoY construction output was above expectations, February Japanese CPI YoY was in line and the March German preliminary business climate index came in below estimates.

Two headlines out of the White House yesterday.

(1)   White House working with drug companies on new virus therapies.
                    The bear case on the coronavirus.

                   A concerned note from the in-house optimist.

                  Don’t conflate this political crack up with recession.
                  Sending a $1,000 check to every person won’t solve the crisis.

                 The argument for doing nothing.

(2)   Trump says he may intervene in the Saudi/Russia oil price war.

                  Oil surges 24%.

            Plus, the Bank of England joined the crowd, lowering rates and hiking QE.

            Bottom line:  hopefully, we have seen the bottom in oil prices.  If so, we can scratch it off our list of uncertainties.  Unfortunately, ‘hopefully’ is the operative word.  So, this problem is apt to continue to be with us for a while.

            So far there is no indication of peak infections/deaths from the coronavirus.  On the other hand, 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?).  So, while there may be no light at the end of the tunnel at this moment, I believe that it is coming---and with it the ability to quantify the economic damage.

            Also, there has been no negative event in the credit market despite some pretty loud signaling from the TLT, GLD and UUP markets and desperation moves by the central banks.  Maybe the financial system gets held together by chewing gum and baling wire.  But I continue to worry about a major bankruptcy (ies) triggering a chain reaction in the corporate debt market.

            Estimating future stock returns.

            P/E’s at the bottom.

            Should I buy stocks now?

Goldman expects more downside.

            For the bears

    News on Stocks in Our Portfolios
Tiffany (NYSE:TIF): Q4 Non-GAAP EPS of $1.80 beats by $0.05; GAAP EPS of $1.66 misses by $0.11.
Revenue of $1.36B (+3.0% Y/Y) in-line.

   This Week’s Data


            The February leading economic indicators rose 0.1%, in line.


            The January EU trade surplus was E8.7 billion versus estimates of E20.5 billion.

            February German PPI came in at -0.4% versus forecasts of -0.1%.




            The decline in restaurant traffic.

            What does invoking the Defense Production Act mean?

What I am reading today


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