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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