Tuesday, September 1, 2020

The Morning Call--Low rates don't justify high valuations

 

The Morning Call

 

9/1/20

 

The Market

         

    Technical

 

The Averages  (28430, 3500) sold off yesterday on higher volume and weakening breadth.  More downside would not be surprising given the negatives overhanging the Market: (1) last week, both of the indices made a gap up open, joining those two gap up opens made four weeks ago, (2) the VIX continues to reflect investor concern, (3) the indices’ breadth remains in overbought territory while the rest of the Market weakens and (4) historically, September is the worst month of the year for Market performance.  Nonetheless, I am sticking with my assumption that the Market’s bias remains to the upside long term.

 

            Panic buying.

            https://www.zerohedge.com/markets/panic-buying

 

Gold bounced, closing above the upper boundary of the pennant formation shown in yesterday’s Monday Morning Chartology and reversing last week’s negative performance.  TLT rallied but not enough to undo the damage done in last week’s selloff.  Its chart remains negative.  The dollar declined, remaining the worst chart of those indicators that I follow. 

 

            The dollar decline is greatly exaggerated.

            https://www.zerohedge.com/markets/lacalle-us-dollar-collapse-greatly-exaggerated

 

            The last time this happened was the day the dot com bubble burst.

            https://www.zerohedge.com/markets/last-time-happened-was-day-dot-com-bubble-burst

 

                Monday in the charts.

            https://www.zerohedge.com/markets/stocks-silver-soar-5th-straight-month-bonds-dollar-dumped     

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

The August Dallas Fed manufacturing index came in at 8 versus forecasts of -2.

https://www.advisorperspectives.com/dshort/updates/2020/08/31/august-dallas-fed-manufacturing-outlook-recovery-continues-in-texas-manufacturing

 

                        International

 

July Japanese unemployment was reported at 2.9% versus estimates of 3.0%; Q2 YoY capital spending fell 11.3% versus -7.2%.

 

August German unemployment was 6.4%, in line; August manufacturing PMI was 52.2 versus 53.0.

 

The August UK manufacturing PMI came in at 55.2 versus expectations of 55.3.

 

The August EU manufacturing PMI was 51.7, in line; August CPI was 0.4% versus -0.2%; August unemployment was 7.9% versus 8.0%.

 

                        Other

           

                          Update on seven high frequency indicators.

                          https://www.calculatedriskblog.com/2020/08/seven-high-frequency-indicators-for.html

 

                          Chinese bank profits crater.

                          https://www.zerohedge.com/markets/challenges-are-unprecedented-chinese-bank-profits-crater-amid-bad-debt-surge

 

The Fed

 

  Monetary policy gone wild.

  https://blogs.cfainstitute.org/investor/2020/08/25/monetary-policy-gone-wild-a-lost-generation-of-us-growth/

 

            The coronavirus

                 

               Latest CDC bombshell.

               https://www.zerohedge.com/medical/ron-paul-cdc-bombshell-only-6-covid-deaths-only-covid

 

              A brief look at the potential for the new Abbott Labs test.

              https://marginalrevolution.com/marginalrevolution/2020/08/the-beginning-of-the-end.html

 

              The state of the American restaurant.

              https://www.nakedcapitalism.com/2020/08/the-state-of-the-american-restaurant-city-by-city.html

 

            Bottom line.  That low rates justify high valuations is a rationalization.

              https://www.zerohedge.com/markets/rationalization-do-low-rates-justify-high-valuations

 

              The new normal.

              https://signalee.com/2020/08/29/new-normal-2-average-inflation/

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

           

 

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

 

 

 

No comments:

Post a Comment