Thursday, April 30, 2020

The Morning Call--QEInfinity Forever

The Morning Call


The Market

The Averages  (24633, 2938) had a great day as both of the indices finished above their 4/17 highs.  If they remain there through the close today, they will re-establish very short term uptrends.  If they do, then next resistance exists at their 100/200 DMA’s  (26200/26400; 3010/3020).

Update on margin debt.

GLD rallied while TLT and UUP sold off, indicative of a concern about inflation.

            Wednesday in the charts.



            The trend in bad economic data continues.  Yesterday, March pending home sales, weekly mortgage applications and the initial Q1 GDP growth estimate were less that anticipated.  One bright spot, weekly purchase applications rose.

The economy may have bottomed.

            Or not.

            Overseas, March EU consumer credit growth, April business confidence, economic,  services and industrial sentiment were below estimates while consumer confidence was in line.

            There were two major headlines yesterday:

(1)   Gilead Sciences released a study showing that trials on one of its drugs showed positive recovery results from coronavirus patients.  Clearly, advances in either treatments of or vaccines for the virus is a plus for the health of Americans and their economy.   

(2)   the FOMC wrapped up its latest meeting.  The formal statement following that meeting read pretty much as expected, i.e. the Fed will do whatever it takes to support the economy [cough, cough, the Market].  Meaning that the Fed ‘put’ is alive and well and living on the floor of the NY Stock Exchange. 

The Fed/Powell spend a lot of time congratulating itself on saving the world.  I would have preferred that it tell us how they are going to get out of the business of throwing money at the economy/Market every time it catches cold and how they are going to reduce their engorged balance sheet---but that is just me.  Here is a synopsis and the full text.

  Here is a gem from the Powell presser:  Don’t worry about debt (easy for you   to say, you have a government job, pension and healthcare).
***Today’s main headline will likely be the results of an ECB meeting in  which it left rates unchanged, QEV intact and added another liquidity program.

                      Laguard’s press conference: More of the same is just the ticket.

The coronavirus

            ***overnight update.

            No Payroll Protection Plan check can correct what destroyed my business.
            The psychological toll of the lockdown.


Where is Plan B?

            Update on US coronavirus stats.

            Bottom line: the stats are horrible and will remain so for the near future.  We expected that.  To be sure, steps are already being taken to bring the country out of lockdown.  But the questions are how fast will the numbers recover, by how much and what is that worth?  Much about the speed and magnitude of recovery isn’t knowable right now unless the assumption is that conditions return to the way they were pre-coronavirus within a reasonable timeframe.  And that may happen; but I don’t think it is prudent to be paying current valuations based on that assumption. 

            That said, the Fed is pushing money into the financial system (and promised yesterday to continue to do so as long as there is a question about economic growth) and investors are using that liquidity to buy stocks (the Fed ‘put’) just as they have for the last decade.  As long as that remains the modus operandi, stock prices will have an upward bias.’

            Waiting for a dip.

            The mean reversion of small gap value.

    News on Stocks in Our Portfolios
Mastercard (NYSE:MA): Q1 Non-GAAP EPS of $1.83 beats by $0.10; GAAP EPS of $1.68 misses by $0.05.
Revenue of $4B (+2.8% Y/Y) beats by $20M.

W.W. Grainger (NYSE:GWW) declares $1.44/share quarterly dividend, in line with previous.


   This Week’s Data


            March pending home sales declined 20.8% versus estimates of -10.0%.

            March personal income was -2.0% versus projections of -1.5%; personal spending as -7.5% versus -5.0%; PCE price index was -0.3% versus -0.7%; core PCE price index was -0.1%, in line.

            Weekly jobless claims rose 3,839,000 versus an anticipated increase of 3,500,000.


            March Japanese retail sales fell 4.5% versus expectations of -3.7%; industrial production was -3.7% versus -5.2%; housing starts YoY were -7.6% versus -16.0%; construction orders YoY were -14.3% versus -16.7%; April consumer confidence was 211.6 versus 22.3.

            The April Chinese manufacturing PMI was 50.8 versus forecasts of 51.0; the Caixin (small business) manufacturing PMI was 49.4 versus 50.3; the nonmanufacturing PMI was 53.2 versus 45.1.

            March German retail sales declined 3.6% versus consensus of -7.3%.

            The Q1 EU GDP growth was -3.8% versus projections of -3.5%; CPI was +0.3% versus 0.0%; unemployment was 7.4% versus 7.7%


            Empty promises of fiscal restraint.

            Update on oil.

What I am reading today

            What causes social inequality?

                NASA plans to slam a spacecraft into an asteroid.

                        People hoarding Pepcid AC as possible coronavirus treatment.
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