The Morning Call--The lack of value in value

 

The Morning Call

 

9/30/20

 

The Market

         

    Technical

 

The Averages  (27452, 3335) retreated modestly yesterday, with both marking a new higher high.  Another plus is that September’s the negative seasonal influence is in the rear view mirror.  On the other hand, they both have those gap up opens down below, which, as you know, I believe will have to be filled.

           

A look at the stock market during another contested presidential election.

            https://blairbellecurve.com/what-happens-to-the-stock-market-during-a-contested-presidential-election/

 

Gold was up again, maintaining its rebound off its 100 DMA.  Still, short term, it remains in a trend of lower highs and lower lows.  TLT rose, ending right on its 100 DMA (again) and continuing its struggle to keep its trend of higher lows intact. The dollar continued its slump but remained in a developing trend of higher lows.  So, the individual indices continue to send inconclusive messages.

            https://www.zerohedge.com/markets/gold-futures-jump-back-1900-real-yields-tumble

 

                Gold, the dollar and real yields.

            https://www.zerohedge.com/commodities/gold-dollar-real-yields

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/bonds-bullion-bid-stocks-dollar-skid

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly mortgage applications declined 4.8% while purchase applications were off 1.9%.

 

                          September consumer confidence came in at 101.8 versus forecasts of 89.5.

                          https://www.advisorperspectives.com/dshort/updates/2020/09/29/consumer-confidence-bounces-back-in-september

 

                                                  The September ADP private payroll report showed an increase of 749,000                         versus consensus of 650,000 jobs.

                          https://www.zerohedge.com/personal-finance/adp-employment-beats-expectations

 

The final Q2 GDP growth rate was -31.4% versus projections of -31.7%; the PCE price index was -1.6% versus -1.8%; and corporate profits were down 10.7%.

https://www.zerohedge.com/markets/final-q2-gdp-revision-shows-us-economy-shrank-314

 

 

 

                        International

 

July Japanese leading economic indicators were 86.3 versus expectations of 86.9; August retail sales were up 4.6% versus +0.2%; August industrial production was up 1.7% versus +1.5%.

 

August German retail sales were up 3.1% versus predictions of +0.5%; the unemployment rate was 4.4% versus 4.6%.

 

The September Chinese manufacturing PMI was 51.5 versus estimates of 51.2; the nonmanufacturing PMI was 55.9 versus 54.9; the Caixin (small business) manufacturing PMI was 53.0 versus 53.1.

 

The final Q2 UK GDP growth rate was -31.4% versus forecasts of -31.7%; business investment was -26.5% versus -31.4%.

 

                        Other

 

                          New home market cap highest since 2006.

                          https://politicalcalculations.blogspot.com/2020/09/us-new-home-market-cap-highest-since.html#.X3N4h2hKiM8

 

                          Will housing save the economy?

                          http://www.capitalspectator.com/will-housing-save-the-us-economy/

 

                          Chemical activity barometer rises in September.

                          https://www.calculatedriskblog.com/2020/09/chemical-activity-barometer-rises-in.html

 

                          An optimist’s view (must read).

                          http://blog.yardeni.com/2020/09/the-glass-is-more-than-half-full.html

 

                          A pessimist’s view.

                          https://www.zerohedge.com/economics/weve-reached-endpoint-monetary-and-fiscal-policy-wont-help

 

            The Fed

 

              Research in a bubble.

              https://johnhcochrane.blogspot.com/2020/09/fifty-shades-of-qe-research-in-bubble.html

 

              Negative rates are a huge mistake.

              https://www.zerohedge.com/markets/fed-study-shows-ecb-made-huge-mistake-negative-rates

 

              September bond issuance smashes record (again).

              https://www.zerohedge.com/markets/bond-issuance-smashes-monthly-record-6th-time-past-7-months

 

            The coronavirus

 

              Overnight update.

              https://www.zerohedge.com/geopolitical/new-research-hints-lower-herd-immunity-threshold-eu-approves-new-rapid-covid-19-test

 

              Disease panic versus medical reality.

              https://www.aier.org/article/disease-panic-vs-medical-reality/

 

              What happened to common sense?

              https://www.zerohedge.com/medical/denmark-nears-pre-covid-normality-no-masks-or-distancing-schools-just-common-sense

 

            China

 

              China’s leaders cannot be trusted.

              https://www.project-syndicate.org/commentary/china-xi-jinping-regime-cannot-be-trusted-by-chris-patten-2020-09

 

Bottom line.  The lack of value in value.

  https://www.advisorperspectives.com/commentaries/2020/09/29/the-astonishing-lack-of-value-in-value

 

  BofA lists 29 favorite value stocks and 8 value traps.

  https://www.zerohedge.com/markets/its-time-buy-value-here-are-bank-americas-29-favorite-value-stocks

 

    News on Stocks in Our Portfolios

 

            Exxon.  It is always darkest before the dawn.

            https://seekingalpha.com/article/4376969-exxon-mobil-is-always-darkest-dawn?lift_email_rec=false&utm_medium=email&utm_source=seeking_alpha&mail_subject=exxon-mobil-it-is-always-darkest-before-dawn&utm_campaign=nl-morning-briefing&utm_content=link-0

 

            ATT.  Priced for a dividend cut that is not coming.

            https://seekingalpha.com/article/4376900-t-priced-for-dividend-cut-isnt-even-coming?utm_medium=email&utm_source=seeking_alpha&mail_subject=t-at-t-priced-for-a-dividend-cut-that-isn-t-even-coming&utm_campaign=rta-stock-article&utm_content=link-0

 

            Hormel Foods (NYSE:HRL) declares $0.2325/share quarterly dividend, in line with previous.

 

What I am reading today

 

           

 

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The Morning Call--Too much debt, too much money, too much lockdown

 

The Morning Call

 

9/29/20

 

The Market

         

    Technical

 

The Averages  (27584, 3351) continued their rally, with the S&P closing well above the trend of lower highs while the Dow finished right on that trend line.  After bouncing off their 100 DMA last Thursday, the pin action suggests more upside and reinforces my long term view that the Market bias is to the upside.  That is the good news.  The bad news is that both had gap up opens, which, as you know, I believe will have to be filled.

            https://www.zerohedge.com/markets/credit-options-signal-stock-downside-concerns-bofa-outlines-tactical-bullbear-signals

 

            Update on margin debt.

            https://www.advisorperspectives.com/dshort/updates/2020/09/28/margin-debt-and-the-market-up-another-5-in-august

 

Gold had another good day, maintaining its rebound off its 100 DMA.  Still, short term, it remains in a trend of lower highs and lower lows.  TLT declined, ending below its 100 DMA (again) and continuing its struggle to keep its trend of higher lows intact. The dollar slumped but remained in a developing trend of higher lows.  In short, the individual indices continue to send indecisive messages---not really supporting the strong move up in equities.

 

                Monday in the charts.

            https://www.zerohedge.com/markets/gold-silver-stocks-surge-real-yields-tumble

 

            The emerging markets chart that you need to watch.

            https://allstarcharts.com/em-chart-to-watch/

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

                           

The July Case Shiller home price index rose 0.6% versus   expectations of +0.2%.

 

The August trade balance was -$82.9 billion versus consensus of -$81.0 billion.

 

August wholesale inventories were up 0.5% versus forecasts of down 0.2%.

 

Month to date retail chain store sales were down less than anticipated from the prior week.

                           

The September Dallas Fed manufacturing index was reported at 13.6   versus estimates of 5.0.                     

                          https://www.advisorperspectives.com/dshort/updates/2020/09/28/september-regional-fed-manufacturing-overview

 

 

                        International

 

August UK consumer credit rose L.3 billion versus projections of +L1.45 billion.

 

September EU economic sentiment came in at 91.1 versus predictions of 89.0; industrial sentiment was -11.1 versus -10.0; services sentiment was -11.1 versus -15.7; consumer confidence was -13.9, in line.

 

September German CPI came in down 0.4% versus expectations of -0.1%.

 

                        Other

 

                          Is the disinflationary scenario about to make a comeback?

                          http://www.capitalspectator.com/is-the-post-crash-reflation-trade-fading/

 

                          Or is inflation about to ratchet up?

                          https://www.zerohedge.com/economics/inflation-already-here-fed-may-have-major-problem-its-hands

 

            The Fed

 

              Will QEInfinity/Forever ever really end?

              https://www.bloomberg.com/news/features/2020-09-28/after-saving-the-world-economy-central-bankers-face-new-dilemmas?srnd=economics-       vp&sref=loFkkPMQ

 

            Fiscal Policy

 

              $50 trillion in national debt is coming.

              https://www.advisorperspectives.com/commentaries/2020/09/25/great-reset-update-50-trillion-debt-coming

 

            The coronavirus

 

              Overnight update.

              https://www.zerohedge.com/geopolitical/confirmed-covid-19-deaths-top-1-million-mark-many-more-uncounted-live-updates

 

              How accurate is the official coronavirus death toll stats?

              https://issuesinsights.com/2020/09/25/is-the-official-covid-19-death-toll-accurate/

 

            Bottom line.  Too much debt, too much money, too much lockdown.

              https://www.zerohedge.com/political/david-stockman-economys-role-upcoming-presidential-election

 

              If you run out of chips, you are out of the game.

              https://www.zerohedge.com/markets/navigating-q4-2020-paul-tudor-jones-10-investing-rules

 

              Enormous uncertainty despite Fed fueled Market rise.

              https://www.zerohedge.com/markets/enormous-uncertainty-despite-fed-fueled-market-surge

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

            Why isn’t every major bank CEO in jail?

            https://taibbi.substack.com/p/revenge-of-the-money-launderers-b84

 

            What is the conflict between Greece and Turkey all about?

            https://www.zerohedge.com/geopolitical/whats-conflict-between-greece-and-turkey-all-about

 

            What is the conflict between Armenia and Azerbaijan all about?

            https://www.zerohedge.com/markets/armenian-azerbaijani-war-rages-south-caucasus

 

            A brain trick to make you more creative.

            https://forge.medium.com/a-brain-trick-to-make-you-more-creative-intuitive-and-happy-da933c57a46

 

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

 

 

 

Monday Morning Chartology

 

The Morning Call

 

9/28/20

 

The Market

         

    Technical

 

            On Friday, the S&P nicely followed Thursday’s bounce, leaving it above its 100 (and 200) DMA---which is the good news.  The bad news is that it has already reset its short term trend to a trading range.  Plus, the Thursday/Friday rebound did not break the trend of lower highs and lower lows.  If it can hold its 100 DMA, then this recent downtrend would just be part of a consolidation phase.  If not, then expect more downside, though it would have to fight its way through multiple support levels for that downside to really be meaningful.

 

The Market’s momentum has turned negative.

            https://www.forbes.com/sites/chuckjones/2020/09/24/the-stock-markets-momentum-has-turned-negative/#519cd90d43f1

 

 

            The long bond has struggled to break out of a pennant formation and the challenge its 100 DMA (now resistance).  While ostensibly successful, the results so far are not awe inspiring.  So, I need more upside follow through to be convinced the prices are headed up (rates down).

            Gold had a terrible week, breaking below minor support and sustaining a trend of lower highs and lower lows.  That said, it remains in uptrends across all time frames and above both DMA’s.  However, it is poised to challenge its 100 DMA, a break of which would fuel more downside momentum.  But for the moment, the worst that can be said is that it is consolidating.

            The dollar has successfully challenged its short term downtrend and reset to a trading range.  However, before getting jiggy about a change in momentum, it still has to overcome resistance in the form of its 100 and 200 DMA’s.  Were that to occur, it would insinuate either a stronger economy or a flight to safety.  At the moment, the long bond is supporting the ‘flight to safety’ alternative while gold and stocks are hinting at the possibility.  So, we need more time and distance to really draw any conclusions about the message.

            I cannot derive a lot of information value from the VIX chart.  It has see sawed around both DMA’s and it can’t sustain a directional trend, although it does remain at an elevated level relative to stocks---which indicates heightened uncertainty/anxiety.  That suggests an inclination to a ‘flight to safety’.

 

 

            Friday in the charts.

            https://www.zerohedge.com/markets/dow-suffers-worst-week-june-dollar-surges-most-six-months

           

    Fundamental

 

       Headlines

 

              The Economy

 

                        Last Week in Review

 

The stats last week were slightly positive but the primary indicators were mixed.  This adds more evidence to the notion that the economy is improving but not likely in ‘V’ shape that is hoped for. Overseas, the indicators were overwhelmingly negative---which continues the pattern of irregular growth.  I think that unfortunately their sluggish performance will serve to restrain our own growth.

             

Whatever the shape of the recovery, I am not altering my belief that long term the 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.

                         https://www.nytimes.com/2020/09/24/business/economy/us-economy-pandemic.html

 

                        US

 

                        International

 

                        Other

                       

            The election

 

              Investors are starting to freak out about the outcome of the 2020 election.

              https://www.marketwatch.com/story/why-stock-market-investors-are-starting-to-freak-out-about-the-2020-election-11600964863?mod=home-page

                        The coronavirus

 

              Overnight update.

              https://www.zerohedge.com/geopolitical/global-covid-19-deaths-expected-top-1-million-monday-live-updates

 

              German minister warns lockdowns will cause more deaths that the virus.

              https://www.zerohedge.com/medical/german-minister-admits-lockdown-will-kill-more-covid-19-does

               

                  Breakthrough research on coronavirus.

              https://www.zerohedge.com/geopolitical/breakthrough-research-severe-covid-19-infections-opens-door-new-treatment

 

                China

 

              China’s second largest property development company in financial trouble.

                           https://www.zerohedge.com/markets/beijing-edge-chinas-2nd-largest-property-developer-plummets-amid-fears-imminent-liquidity

 

 

                        Bottom line.  The economic recovery story is as fake as ever.

              https://www.realclearmarkets.com/articles/2020/09/25/the_economic_recovery_story_is_as_fake_as_ever_578622.html

 

 

    News on Stocks in Our Portfolios

           

            AT&T (NYSE:T) declares $0.52/share quarterly dividend, in line with previous.

           

 

What I am reading today

           

            Art looted 123 years ago.

            https://www.nytimes.com/2020/01/23/arts/design/benin-bronzes.html

              

            Quote of the day.

            https://cafehayek.com/2020/09/quotation-of-the-day-3297.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CafeHayek+%28Cafe+Hayek%29       

 

 

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