Wednesday, September 23, 2020

The Morning Call---More debt = slower growth

 

The Morning Call

 

9/23/20

 

The Market

         

    Technical

 

The Averages  (27288, 3315) recovered a part of Monday’s losses, though volume was down, breadth improved only slightly, the VIX continues to show signs of elevated investor uncertainty and both remain in very short term downtrends.  I continue to believe that the long term bias is to the upside and will remain so until QEInfinity/Forever ceases or is discredited.  Meanwhile, support exists at the indices’ 100 DMA’s (26208/3159), their 200 DMA’s (26208/3097) and the lower boundary of their short term trading ranges (18213/2991).

 

Gold fell again, finishing below the July/August minor support level.  Barring a quick reversal, this is a negative for gold.  TLT was also down, ending back below its 100 DMA (now resistance) and the trend of lower highs. The dollar was up another 3/8%, closing near the upper boundary of its short term downtrend and setting a new higher low and higher high.  So, each of these indices is challenging boundaries of recent consolidation ranges, appears to be breaking out which, if successful suggests a stronger economy/higher interest rates.

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/stocks-silver-dollar-bonds-oil-rally-vix-election-hump-worsens

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Month to date retail chain store sales improved significantly from the prior   week.

 

Weekly mortgage applications were up 6.8% with purchase applications up 3.4%.

 

July existing home sales were up 2.4%, in line.

https://www.calculatedriskblog.com/2020/09/nar-existing-home-sales-increased-to.html

 

The September Richmond Fed manufacturing index came in at 21 versus estimates of 10.

                          https://www.advisorperspectives.com/dshort/updates/2020/09/22/richmond-fed-manufacturing-improved-in-september

 

                        International

 

The September Japanese flash manufacturing PMI came in at 47.3 versus consensus of 48.0; the services PMI was 45.6 versus 47; the composite PMI was 45.5 versus 48.0.

 

The September German flash manufacturing PMI came in at 56.6 versus expectations of 56,5; the services PMI was 49.1 versus 53; the composite PMI was 53.7 versus 54.1.

 

The September EU flash manufacturing PMI came in at 53.7 versus forecasts of 51.9; the services PMI was 47.5 versus 50.8; the composite PMI was 50.1 versus 51.7.

 

The September UK flash manufacturing PMI came in at 54.3 versus projections of 54.1; the services PMI was 55.1 versus 56; the composite PMI was 55.7 versus 56.3.

 

October German consumer confidence was reported at -1.6 versus predictions of -1.0.

 

                        Other

           

                          Is the US economic recovering fading?

                          http://www.capitalspectator.com/is-the-us-economic-recovery-fading/

 

Two thirds of the hotel properties in the US say that they will not last another six months at current occupancy rates.

                          https://www.zerohedge.com/markets/us-its-great-depression-two-thirds-us-hotels-say-they-wont-last-six-more-month-current

 

            Fiscal Policy

 

The CBO just released its latest projections for US government debt growth.  You know that mounting government debt is one of the pillars of my forecast of a declining long term secular economic growth rate.  At the risk of being repetitious, the primary reason is ‘crowding out’; that is the government sucks so much money out of the private economy to service its debt that there is less investment capital available to fund economic growth.  And since government expenditures do little to enhance productivity, inflation increasingly becomes a problem.

              https://www.zerohedge.com/markets/budget-office-releases-latest-long-term-debt-forecast-and-its-terrifying

 

            The coronavirus

 

              September US coronavirus stats.

              https://www.calculatedriskblog.com/2020/09/september-21-covid-19-test-results.html

 

              Experts worry about the rush for results.

              https://www.zerohedge.com/geopolitical/experts-worry-leading-covid-19-vaccine-adopt-trial-shortcuts-rush-results

 

Bottom line

 

              Does the Market realize no help is coming?

              https://www.zerohedge.com/markets/did-market-just-realize-no-help-coming

 

              The easiest thing in investing.

              https://theirrelevantinvestor.com/2020/09/21/the-easiest-thing-in-investing/

 

              Intangible capital and the value factor.

              https://alphaarchitect.com/2020/09/21/intangible-capital-and-the-value-factor-has-your-value-definition-just-expired/

 

    News on Stocks in Our Portfolios

 

Mastercard (NYSE:MA) declares $0.40/share quarterly dividend, in line with previous.

 

Nike (NYSE:NKE): FQ1 GAAP EPS of $0.95 beats by $0.47.

Revenue of $10.6B (-0.6% Y/Y) beats by $1.45B.

 

 

General Mills (NYSE:GIS): FQ1 Non-GAAP EPS of $1.00 beats by $0.13; GAAP EPS of $1.03 beats by $0.15.

Revenue of $4.36B (+9.0% Y/Y) beats by $150M.

 

General Mills (NYSE:GIS) declares $0.51/share quarterly dividend, 4.1% increase from prior dividend of $0.49.

 

What I am reading today

 

            A ray of hope in college discourse.

            https://wearenotdivided.reasonstobecheerful.world/student-led-movement-depolarize-politics-college-campus/

               

 

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Tuesday, September 22, 2020

The Morning Call---Do Nothing

 

The Morning Call

 

9/22/20

 

The Market

         

    Technical

 

The Averages  (27147, 3281) had another rough day.  The good news is that (1) the S&P closed both of its July gap up opens [the Dow filled one] and (2) the indices closed well off their intraday lows.  The bad news is that (1) both of the indices are now in very short term downtrends and (2) given their September historical record of poor price performance, additional downside seems likely.  That said, they both have lots of support levels in relatively close proximity that could keep the current decline modest---their 100 DMA’s (26208/3159), their 200 DMA’s (26208/3097) and the lower boundary of their short term trading ranges (18213/2991).

 

Gold fell 2%, finishing right on the July/August minor support level.  TLT was up ½%, ending right on its 100 DMA (now resistance) and the trend of lower highs. The dollar spiked ¾%, breaking the trend of lower highs---the first positive development since March.  So, each of these indices is challenging boundaries of recent consolidation ranges.  Follow through.

 

            Paper gold no longer as important.

            https://www.zerohedge.com/markets/paper-gold-no-longer-important-bofa-finds-physical-demand-now-key-gold-prices

 

 

            Monday in the charts.

            https://www.zerohedge.com/markets/banks-bader-ginsburg-and-limey-lockdowns-slam-stocks-silver-usd-soars

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                        International

 

                        Other

 

                          The latest from Ed Yardini (optimist).

                          http://blog.yardeni.com/2020/09/what-in-world-is-going-on-recovery-from.html

 

                          The latest from John Mauldin (pessimist).

                          https://www.advisorperspectives.com/commentaries/2020/09/18/stall-speed-economy

 

                          Household net worth increased $6 trillion in Q2.

                          https://www.calculatedriskblog.com/2020/09/feds-flow-of-funds-household-net-worth.html

 

                The Fed

 

Powell begins two days of testimony before congress today.  The Fed has released     his prepared remarks.

https://www.zerohedge.com/economics/fed-releases-powells-congressional-hearing-prepared-remarks-defends-poor-uptake-main

 

            The coronavirus

 

              Overnight update.

              https://www.zerohedge.com/geopolitical/us-suffers-most-new-covid-19-cases-5-weeks-doctors-warn-apocalyptic-fall-live-updates

 

              An open letter from Belgian doctors to Belgian bureaucrats and Belgian media.

              https://docs4opendebate.be/en/open-letter/

 

              CDC steps on its own d**k again.

              https://www.zerohedge.com/geopolitical/stunning-reversal-cdc-says-it-published-new-guidance-risks-airborne-covid-19-error

 

            Bottom line  Do nothing

              https://www.zerohedge.com/markets/value-margin-safety-art-doing-nothing

 

              Morgan Stanley turns bearish.

              https://www.zerohedge.com/markets/nasdaq-plunge-dead-ahead-investors-dump-most-qqqs-20-years

 

              More on valuations.

              https://www.appliedfinance.com/valuation-analysis-time-to-reconsider-large-cap-value-growth-allocations/

 

  How big a drawdown can you survive?

  https://thereformedbroker.com/2020/09/21/how-big-a-drawdown-can-you-survive/

 

              When to change.

              https://humbledollar.com/2020/09/when-to-change/

 

              Negativity is not an investment strategy.

              https://awealthofcommonsense.com/2020/09/negativity-is-not-an-investment-strategy/

 

    News on Stocks in Our Portfolios

 

 

What I am reading today

 

            Discovery of an ancient city in China.

            https://www.nationalgeographic.com/history/2020/08/mysterious-carvings-evidence-human-sacrifice-uncovered-ancient-city-china/

 

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

 

 

 

Monday, September 21, 2020

Monday Morning Chartology

 

The Morning Call

 

9/21/20

 

The Market

         

    Technical

 

            The S&P remains above both DMA’s and in intermediate and long term uptrends.  Still, it is now developing a very short term downtrend; although, there is lots of support at its 100 DMA, 200 DMA, and the lower boundaries of its short term trading range and intermediate term uptrend.  As you know, I believe that the Market’s bias will remain to the upside as long as the Fed continues to pump money into the financial system.  However, shorter term, a test of one or more of the above mentioned support levels would not be surprising.

 


            I have been noting for the last month that the long bond was in a consolidation phase.  Here you can see the series of lower highs and higher lows---typical of consolidation.  A break of one those trends would point to a move in the direction of the break.



            While the longer term chart for GLD is positive, you can see that it has been in a fairly tight trading pattern since early August---making progressively lower highs (not good) but holding a minor support level (good).  This is characteristic of consolidation.  So, we wait for a break of one those trend lines to give us directional guidance.

 


            The dollar has been in a solid declining trend since March and trades below both DMA’s.  It made a low in early September near the lower boundaries of both its short term downtrend and intermediate term uptrend and since bounced.  While it can’t make a higher high, it is holding above that last lower low.  However, it needs to successfully challenge the short term downtrend before assuming that any recovery is taking place.

 


               I can’t glean anything of informational value from the VIX chart.

 


               Friday in the charts.

               https://www.zerohedge.com/markets/stocks-suffer-longest-losing-streak-over-year-dollar-dump-continues

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        Last Week in Review

 

The stats last week were negative as were the primary indicators.  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 positive---which continues the pattern of irregular growth.  I think that unfortunately their sluggish performance will serve to restrain our own growth.

             

 In other news, both the Fed and the Bank of England held their regular meetings and, like the ECB in the prior week, left rates and QE unchanged.  So, the beat goes on.

 

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.

 

                        US

                       

 The August Chicago Fed national activity index was reported at .79 versus   estimates of 1.95.

 

                        International

 

                        Other

                       

                           The latest Q3 nowcasts.

                            https://www.calculatedriskblog.com/2020/09/q3-gdp-forecasts_18.html

 

                           You do not solve lockdowns with more central planning (must read).

                           https://www.realclearmarkets.com/articles/2020/09/18/be_serious_you_dont_solve_lockdowns_with_more_central_planning_577838.html

 

                           Global debt is exploding.

                           https://www.zerohedge.com/markets/global-debt-exploding-shocking-rate

 

            The Fed

 

              Fed weighs a second stress test and capping bank dividends.

              https://www.bloomberg.com/news/articles/2020-09-17/fed-weighs-extending-bank-dividend-caps-re-starts-stress-tests?sref=loFkkPMQ

 

            The coronavirus

 

              Nearly 60% of coronavirus business closures are permanent.

              https://nypost.com/2020/09/17/majority-of-covid-19-business-closures-are-permanent-report/

 

            China

 

              Why China’s recovery is not what it seems.

              https://ftalphaville.ft.com/2020/09/15/1600190531000/Why-China-s-recovery-is-not-what-it-seems/

 

            Bottom line.  It ends when the money runs out.

              https://www.zerohedge.com/markets/newton-physics-market-bubble

 

 Part 2: The hazards of being in the grips of growth mania.

              https://www.zerohedge.com/markets/brilliant-brain-dead-risk-timing-manic-markets

 

                Where value resides.

            https://www.zerohedge.com/markets/tug-war-across-markets-hides-trade-lifetime

 

 

    News on Stocks in Our Portfolios

           

            Cisco:  a bargain in the tech sector.

            https://seekingalpha.com/article/4375377-cisco-systems-one-of-bargains-in-tech-sector?utm_medium=email&utm_source=seeking_alpha&mail_subject=csco-cisco-systems-one-of-the-few-bargains-in-the-tech-sector&utm_campaign=rta-stock-article&utm_content=link-0

           

 

What I am reading today

           

            Ten easy ways to save $870,000.

            https://www.marketwatch.com/story/10-easy-ways-to-save-870000-2020-09-17

           

            How big money is powering the search for alien intelligence.

            https://www.sciencemag.org/news/2020/09/how-big-money-powering-massive-hunt-alien-intelligence

 

            The bill for economic inequality is coming due.

            https://www.zerohedge.com/markets/bill-americas-50-trillion-gluttony-inequality-overdue

 

            Picking Ginsburg’s successor.

            https://www.zerohedge.com/political/picking-rbgs-successor-who-when

 

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

 

 

 

 

Friday, September 18, 2020

The Morning Call---It is called distribution

 

The Morning Call

 

9/18/20

 

The Market

         

    Technical

 

The Averages  (27901, 3357) had their first tough day in a week---which may just be related to today’s quad expiration.  Short term, they (1) just made another lower high in a developing trend of lower highs, (2) must still fill two gap up opens lower down and (3) have to overcome September’s negative seasonal predisposition.  So, more downside would not be surprising.  But lots of support exists at their 100 DMA’s (26208/3159), their 200 DMA’s (26208/3097) and the lower boundary of their short term trading ranges (18213/2991).

 

VIX uprising.

https://www.zerohedge.com/markets/vix-uprising

 

Gold reversed again; this time back down, continuing its recent see saw trading pattern between a series of lower highs and the July/August minor support level.  In other words, consolidating.  TLT was up, making a new higher low but it still can’t push through its 100 DMA (now resistance).  Like GLD, it is in a consolidating pattern marked by lower highs and higher lows. The dollar was down, keeping alive the short term trend of lower highs. 

 

Dollar weakness or dollar crash?

            https://www.zerohedge.com/markets/dollar-weakness-or-dollar-crash

 

In short, all these indices are in some sort of consolidation phase---which is not surprising given the economic and political cross currents investors are now facing.

           

            Thursday in the charts.

            https://www.zerohedge.com/markets/sell-all-things-stocks-bonds-gold-dollar-dumped

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

The Q2 current account balance was -$170.5 billion versus expectations of -$157.9 billion.

 

                        International

 

                          August Japanese CPI was down 0.1%, in line.

 

                          August German PPI was flat versus estimates of -0.1%.

 

                          August UK retail sales grew 0.8% versus consensus of up 0.7%.

 

                        Other

 

                          World Bank warns recovery could take five years.

                          https://www.zerohedge.com/markets/world-bank-warns-global-recovery-could-take-five-years

 

            The Fed

 

              The Fed forecasts its own failure.

              https://www.nationalreview.com/corner/fed-forecasts-fed-failure/

 

              It is not stimulus if it is open ended.

              https://thereformedbroker.com/2020/09/17/its-not-stimulus-if-its-open-ended/

 

              It is tough to raise the inflation rate if you do not know why it is low.

              http://www.capitalspectator.com/its-hard-to-raise-inflation-if-its-unclear-why-its-so-low/

 

            The coronavirus

 

              A tale of two lockdowns.

              https://www.realclearmarkets.com/articles/2020/09/17/a_tale_of_two_lockdowns_sweden_vs_the_philippines_577678.html

 

              Part 2.

              https://reason.com/2020/09/16/how-much-difference-do-covid-19-lockdowns-make/

 

              A long way from normal.

              https://www.zerohedge.com/personal-finance/after-6-months-pandemic-lockdowns-theres-still-long-way-go

 

              How trustworthy is the case count?

              https://politicalcalculations.blogspot.com/2020/09/benfords-law-and-trustworthiness-of.html#.X2Oo7mhKiM8

 

              US ambassador accuses China of a coronavirus cover up.

              https://www.zerohedge.com/geopolitical/they-could-have-contained-it-outgoing-us-ambassador-accuses-china-trying-cover-wuhan

 

            Bottom line.  It is called distribution (must read).

              https://www.zerohedge.com/markets/ultra-wealthy-are-selling-billions-dollars-stock

 

              Interest rates and their impact on stock valuation.

              https://www.advisorperspectives.com/commentaries/2020/09/17/interest-rates-and-their-impact-on-stock-values

 

              Another perspective.

              https://theirrelevantinvestor.com/2020/09/16/rising-interest-rates/

 

    News on Stocks in Our Portfolios

 

            Goldman cuts General Dynamics from Buy to Sell.

            https://seekingalpha.com/news/3614939-general-dynamics-cut-to-sell-from-buy-goldman-on-jet-pressures?utm_medium=email&utm_source=seeking_alpha&mail_subject=gd-general-dynamics-cut-to-sell-from-buy-at-goldman-on-jet-pressures&utm_campaign=rta-stock-news&utm_content=link-3

 

What I am reading today

 

            California fires and climate change.

            https://www.zerohedge.com/political/planets-not-angry-stockman-warns-pelosinewsomharris-climate-howlers-are-truly-dangerous

 

            Prepping your finances for a Biden victory.

                        https://www.marketwatch.com/story/some-wealthy-americans-are-prepping-their-finances-for-a-possible-joe-biden-presidency-this-is-all-going-up-and-you-may-never-see-it-as-good-as-it-is-now-2020-09-16?mod=home-page

 

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