The Morning Call
8/3/20
The
Market
Technical
The S&P
continues to plod forward, though breadth is a bit overextended, the Dow is not
following suit and the VIX is not helping.
Still, the upward momentum, however labored, is there; and my assumption
is that it will remain so until, as or if the Fed steps on its own dick.
While
the long bond was off fractionally on Friday, it has maintained its journey to
all time highs. TLT and GLD are both
having an easier time than stocks pushing higher; though they are all being
helped along by the same force (QEInfinityForever). TLT and GLD also have the added advantage of
a weak economy.
Gold remains the
standout performer. It is now
challenging the upper boundary of its long term uptrend for the second time in
a week. Of course, given its current ten
day spike, it has left several gap up opens and breadth is well
overbought. So, some consolidation is
likely in the near future. The question
is, will it occur after it has made a new all-time high or falter before it
does so?
The dollar’s chart
has been and is a mirror image of the above three---technically awful---largely
for the same reasons: a weak economy and QEInfinityForever. As you
can see, it challenged the lower boundary of its short term downtrend on
Thursday and bounced on Friday. While
not a trend changer, it could be signaling an oversold rebound near term.
https://www.zerohedge.com/markets/feds-dollar-debasement-will-trigger-unprecedented-structural-shift
The VIX remains
stuck between its June low and its 200 DMA, offering little indication that
investor confidence is improving.
Friday in the charts.
https://www.zerohedge.com/markets/silver-soars-best-month-79-dollar-dumps-most-decade
Fundamental
Headlines
The
Economy
Review of last week
The overall US
data last week was upbeat; however, the primary indicators were negative. So, the US recovery continues a bit
bumpy---hardly a ‘V’.
Overseas, the
stats were much more positive. If this
trend continues, it will ultimately be a plus for the US.
https://www.advisorperspectives.com/commentaries/2020/07/31/european-resurgence
Longer term,
the economic growth will be influenced by how quickly virus and a vaccine are discovered as well as the
permanent impact this disease/government reaction will have on the spending and
work habits of the nation.
Whatever the
shape of the recovery, I am not altering my belief that long term economy will
grow at a historically subpar secular rate due to the twin burdens of
egregiously irresponsible fiscal and monetary policies---which, by the way, are
becoming even more egregiously irresponsible as a result of measures being
taken by the government and the Fed in dealing with the current crisis.
US
International
The July German manufacturing PMI came in at
51 versus estimates of 50.
The July UK
manufacturing PMI was reported at 53.3 versus forecasts of 53.6.
Other
Fitch
lowers US government credit rating.
https://www.zerohedge.com/markets/ficth-revises-united-states-credit-outlook-negative
Ship
orders collapse.
https://www.zerohedge.com/markets/ship-orders-collapse-will-rate-boom-follow
The
coronavirus
***overnight update.
Tenant versus landlord. The new battleground.
https://www.zerohedge.com/markets/rent-moratorium-expires-landlord-tenant-battles-begin
The
Fed
Powell is a barely adequate fiction writer.
The next iteration of QEInfinityForever.
https://www.zerohedge.com/markets/fed-planning-send-money-directly-americans-next-crisis
China
Xi decides to turn inward.
https://www.zerohedge.com/markets/xis-decision-turn-inward-dangerous-trade
US announces new measures against Chinese
software companies.
Bottom
line. QEInfinity/Forever remains the dominant
investment theme. However, as
you know, I believe that massive injections of liquidity by the global central
banks’ QEInfinity policies have done little to spur economic growth and,
indeed, have inhibited it by destroying the functionality of the pricing of
risk and the efficient allocation of capital; and that there will be an
ultimate price to pay both for the economy and the securities markets.
https://www.zerohedge.com/markets/insanely-stupid-chase-stocks-economy-plunges
That said,
throughout the entire QEInfinity experiment, investors have shown a complete disregard for its consequences and
instead have used the increased liquidity to bid up asset prices to grossly
inflated valuations. Until that changes,
the bias in stock prices will remain to the upside.
I believe that
the Averages and most segments of the Market are overvalued [as determined by
my Valuation Model]. This is not a time
to be buying equities.
Nonetheless,
there are certain segments of the Market that have been punished severely
with the stocks of the companies serving those industries down 30-70%. As a result, I will be putting cash to work
in these beaten up stocks on any Market decline.
News on Stocks in Our Portfolios
Donaldson (NYSE:DCI) declares $0.21/share quarterly dividend,
in line with previous.
Illinois Tool Works (NYSE:ITW): Q2 GAAP EPS of $1.01 beats by $0.31.
Revenue of $2.56B (-29.1% Y/Y) beats by $220M.
Exxon Mobil (NYSE:XOM): Q2 Non-GAAP EPS of -$0.70 misses by $0.10; GAAP EPS of
-$0.26 beats by $0.28.
Revenue of $32.61B (-52.8% Y/Y) misses by $5.55B.
What
I am reading today
Quote of the day.
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