Friday, August 28, 2020

The Morning Call--Fed policies are part of the problem

 

The Morning Call

 

8/28/20

 

The Market

         

    Technical

 

The Averages  (28492, 3484) continued to climb and for the first time in a number of days, on higher volume.  But there remain a number of negatives (1) on Monday, both of the indices made a gap up open, joining those two gap up opens made three weeks ago, (2) the VIX continues to reflect investor concern [it was actually up yesterday on a stock price up day for the second day in a row] (3) the indices’ breadth remains in overbought territory while the rest of the Market weakens. So, there are good reasons to expect a selloff.  Nonetheless, I am sticking with my assumption that the Market’s bias remains to the upside long term.

           

Gold retreated below the uptrend off its June low---the first negative indicator in a long time.  TLT was hammered (down 1 ¾%), again, on increased volume.  The bad news is that it remains below its 100 DMA (now resistance) and has now made a lower high.  The good news is that on Tuesday, it created a huge gap down open that needs to be filled.  The dollar rallied but not enough break even the very shortest term downtrend.  The cumulative pin action is pointing to an improving economy/higher rates.   

 

            Divergences everywhere.

            https://www.zerohedge.com/markets/correction-watch-divergences-are-developing-between-large-us-stocks-everything-else

 

            Thursday in the charts.

            https://www.zerohedge.com/markets/powell-pelosi-pentagon-pummel-stocks-bonds-bullion

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          July pending home sales rose 5.9% versus forecasts of +3.0%.

                          https://www.advisorperspectives.com/dshort/updates/2020/08/27/pending-home-sales-rise-5-9-in-july

 

July personal income was up 0.4% versus estimates of up0.2%; personal spending was up 1.9% versus 1.5%.

 

The July trade balance was -$79.3 billion versus expectations of -$73 billion.

July wholesale inventories declined 0.1% versus projections of -0.6%.

 

The August Kansas City Fed manufacturing index came in at 23 versus consensus of 2.

                          https://www.advisorperspectives.com/dshort/updates/2020/08/27/kansas-city-fed-survey-manufacturing-activity-rose-in-august

 

                        International

 

August Japanese CPI was up 0.3% versus predictions of up 0.6%, core CPI was up 0.3%, in line.

 

August EU consumer confidence came in at -14.7, in line; economic sentiment was 87.7 versus 85.0; industrial sentiment was -12.7 versus -14.4; services sentiment was -17.2 versus -24.4.

 

September German consumer confidence declined 1.8% versus estimates of +1.2%.

 

                        Other

 

                          America’s coming double dip (must read from Stephen Roach).

                          https://www.zerohedge.com/markets/americas-coming-double-dip

 

                          Hotel occupancy down 30% YoY.

                          https://www.calculatedriskblog.com/2020/08/hotels-occupancy-rate-declined-303-year.html

 

                          Quality adjusted price inflation in much higher than measured.

                          https://marginalrevolution.com/marginalrevolution/2020/08/the-quality-adjusted-rate-of-price-inflation-is-much-higher-than-measured.html

 

            The coronavirus

 

              The latest fatalities stats.

              http://econbrowser.com/archives/2020/08/cdc-covid-19-fatality-count-and-excess-deaths

 

               Most Americans are misinformed on the coronavirus.

              https://www.usatoday.com/story/opinion/2020/08/26/covid-19-misinformed-americans-too-scared-too-careless-column/3430354001/

 

              The Gallup Pool shows public school enrollment will decline by 76%-83%.

              https://nalert.blogspot.com/2020/08/the-gallup-poll-finds-that-public.html

 

I am not sure that the government/single payer approach is the right one for solving the health insurance problem; but the pandemic spotlights a huge problem that has to be addressed.

              https://www.nakedcapitalism.com/2020/08/threadbare-us-system-denounced-as-study-shows-12-million-lost-employer-tied-health-care-during-pandemic.html

 

            The Fed

 

              Summation of Powell’s Jackson Hole address (must read).

              https://www.zerohedge.com/markets/after-inflation-targeting-heres-what-fed-will-do-next

 

              Just how easy has Fed monetary policy been this year?

              https://www.themoneyillusion.com/the-fed-hasnt-done-much-monetary-stimulus-this-year/

 

            Bottom line.  Fed policies are part of the problem.

            https://www.zerohedge.com/markets/one-bank-finally-tells-truth-fed-policies-have-become-part-problem

 

  A bear market still lurks.

              https://www.advisorperspectives.com/commentaries/2020/08/27/march-was-a-correction-bear-market-still-lurks

 

              Ultra rich stockpile cash.

              https://www.advisorperspectives.com/commentaries/2020/08/27/ultra-rich-tiger-21-stockpiles-cash-as-u-s-economy-fears-grow

 

              Lessons from long term Market returns.

              https://novelinvestor.com/peter-bernstein-lessons-from-long-run-market-returns/

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

            Claiming social security during the pandemic.

            https://www.usatoday.com/story/money/2020/08/26/the-smart-way-to-claim-social-security-benefits-during-the-coronavirus-pandemic/113460080/

 

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