The Morning Call
12/10/20
The
Market
Technical
Wednesday in the
charts.
Uptrends
everywhere.
https://sentimentrader.com/blog/uptrends-uptrends-everywhere/
Fundamental
Headlines
The
Economy
US
Weekly jobless claims were 853,000 versus
consensus of 725,000.
https://www.zerohedge.com/economics/initial-jobless-claims-jump-most-march-lockdowns-strike
October wholesale sales rose 1.1% versus
expectations of up 0.9%; sales rose faster lowering the inventory to
sales ratio.
The October JOLTS
(job openings) report showed 6.652 million jobs available versus predictions of
6.3 million.
November CPI came in at +0.2% versus
estimates of +0.1%.
International
The October UK
trade balance was -L1.7 billion versus projections of +L0.5 billion; industrial production was up
1.3% versus +0.3%; manufacturing production was up 1.7% versus +0.3%; GDP
growth was +0.4%, in line.
November Japanese
PPI was flat, in line.
Other
ECB keeps its version of QEInfinity/Forever on
track.
https://www.zerohedge.com/markets/ecb-boosts-qe-eu500bn-euro-jumps-lack-dovish-surprises
The
coronavirus
Update on the coronavirus stats.
Free market vaccines.
https://johnhcochrane.blogspot.com/2020/12/free-market-vaccines.html
China
Tensions continue to rise.
Falling
behind.
https://www.zerohedge.com/geopolitical/america-surrenders-china
Bottom
line. Rising inflation expectations.
https://thereformedbroker.com/2020/12/09/inflation-expectations-now-above-pre-pandemic-levels/
I have noted in
our discussions about the bond market that a gradually rising rate of inflation
(interest rates) has historically been a good thing for the stock Market
because it generally denotes an improving economy (corporate profitability) but
without significant wage or raw material price pressures. A spiking inflation rate usually indicates
the aforementioned price pressures; and that has not proven to be a plus for
equities Given the pin action in bonds,
the dollar, commodities and gold, it appears that investors believe that an
increase in inflation may be in the offing.
If that proves to be the case, then investors will soon (may have
already) begin to deal with the initial rate of increase; and then, if it is thankfully
low, the timing of any acceleration in the rate of increase.
If
we are lucky enough for inflation to behave tamely, then all will remain well
in stock land (all other things being equal); though there could be a brief
period of uncertainty until it is clear that inflation is under control. However, if the alternative scenario
develops, it could very well initiate the mean reversion process that I harp on
repeatedly. And I want to emphasize that
such a reversion would NOT be an overvalued Market in an otherwise stable
economy but rather an overvalued Market in an economy whose growth has been for
the last decade, is and will continue to be throttled by too much debt (see
below) and a grossly irresponsible monetary policy. In short, a mean reversion to a faltering
mean.
I am not saying
that this is imminent. Indeed, as long
as the Fed pumps in liquidity and the Markets believe that is a
positive---meaning bond markets remain stable---then QE will remain the key
determinant of stock price direction. But
if inflation (interest rates) continues to increase, it will likely mark the
beginning of the end. How long ‘the end’
lasts is unknowable right now. But rapidly
rising inflation coupled with loss of faith in the Fed would likely trigger the
end of the end.
Drowning in debt.
https://247wallst.com/business/2020/12/08/companies-are-drowning-in-cash-and-in-debt/
JP Morgan doubles
down on bitcoin.
News on Stocks in Our Portfolios
Exxon
surges after DE Shaw goes activist.
https://www.zerohedge.com/markets/exxon-surges-after-de-shaw-goes-activist
Cisco (NASDAQ:CSCO) declares
$0.36/share quarterly dividend, in line with previous.
What
I am reading today
Linguistic inflation.
https://www.adamsmith.org/blog/welcome-to-the-linguistic-inflation-of-the-joseph-rowntree-foundation
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