The Morning Call
1/25/21
Our daughter is undergoing
chemotherapy and we will be helping her and our grandchildren. Back next Monday.
The
Market
Technical
Last week, the
S&P regained its very, very short term uptrend. It remains above both DMA’s and in uptrends
across all timeframes. So, expansive
monetary and fiscal policies continue to work their magic on equity prices and that
will likely remain the case until, as or if they are terminated or an exogenous
event spoils the party.
TLT last week remained
in uptrends across all timeframes except the very short term trend. However, short term, it has successfully
challenged both DMA’s creating some momentum to the downside and keeping alive
the notion that bond investors are getting seriously concerned about inflation. As a result, I continue to watch this
indicator very closely.
Gold’s chart looks
remarkably like TLT’s. Short term, it has confirmed the break below its 100 DMA
though it did fail to successfully challenge its 200 DMA last week. Nonetheless, like TLT on a long term basis,
it remains in uptrends across all timeframes.
So, like TLT, I would leave long term positions intact but pay close
attention to any further downward move.
The chart of the dollar is similar to those of TLT and GLD in that short term, it is in a solid downtrend. The difference is that UUP has done extensive longer term damage to its technical picture. That it remains in an intermediate term trading range is about the most positive thing one could say about its chart.
Bottom line. Equity investors continue to respond
positively to a very easy monetary policy.
Though bond, gold and dollar investors appear to be experiencing some
cognitive dissonance. Historically, a dichotomy
of this kind doesn’t last, suggesting caution.
Friday
in the charts.
https://www.zerohedge.com/markets/bidens-big-week-buoys-big-tech-bullion-batters-bitcoin-black-gold
Global
markets technical condition improving.
https://sentimentrader.com/blog/worldwide-stock-markets-ease-out-of-corrections/
Fundamental
Headlines
The
Economy
Review of the Week
The US datapoints
last week were overwhelmingly positive, including the primary indicators (two
plus, zero minus). So, I rate the week a
positive. This is something of an
outlier versus the recent trend in the dataflow which has been a slow struggle
to advance. Whether last week’s numbers
are indeed an outlier or a sign of things to come is unknowable at present; but
it is clearly brings hope of stronger improvement.
Overseas, the
stats were negative.
https://www.markiteconomics.com/Public/Home/PressRelease/2845534afc634251aaaf93f3acfd1a7e
https://www.markiteconomics.com/Public/Home/PressRelease/abc307a6d9444e1891ef38fd50617f10
The most important
nonstatistical development was Yellen’s testimony before the senate in her confirmation
hearing in which she said that fiscal policy should ‘go big’ meaning to hell
with the national debt to hell with budget deficit, spend, spend, spend. Unfortunately, if that policy is accurately
reflected in Biden’s new stimulus bill, then little of that spending is for
productivity enhancing infrastructure program.
It is mostly transfer payments. As
you might guess, I believe the significance of such a policy is that it exacerbates
the problem of diminishing the country’s level of productivity which, in turns,
lessens the long term secular economic growth rate.
In addition, if this
massive unproductive fiscal stimulus is accompanied by a wildly expansive monetary
policy (which it is) the risk of higher inflation is heightened. And as I have mentioned before that risk seems
to be manifesting itself in the pin action of the dollar and the long
bond. If those trends continue then
sooner or later (1) the Fed will have to taper and/or (2) the aforementioned
anxiety engulfs the equity market and the jig is up.
Another great must
read from Jeffrey Snider.
For the moment, our
base economic scenario remains intact---the US and global economies are
improving but not at the velocity of the initial sharp rebound off the bottom. In other words, a diminishing probability of
a ‘V’ shaped recovery which would lessen any potential inflationary pressures
and leave the Fed free to continue QEInfinity.
Longer term, my
belief is that the economy will grow at a historically subpar secular rate due
to the twin burdens of egregiously irresponsible fiscal and monetary
policies---which continue to become 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 December
Chicago national activity index came in at 52 versus its November reading of 31.
International
The January German
business climate index was reported at 90.1 versus estimates of 91.8.
Other
$15/hour minimum wage would be a disaster.
https://marginalrevolution.com/marginalrevolution/2021/01/federal-minimum-wage-of-15.html
Quote of the day.
Quotation
of the Day... - Cafe Hayek
Get ready of services prices to accelerate.
https://www.zerohedge.com/economics/get-ready-services-prices-accelerate-higher
Crypto vigilantes?
https://www.zerohedge.com/crypto/exit-bond-vigilantes-enter-crypto-vigilantes
Bottom
line.
The latest from Jeremy Grantham
https://www.zerohedge.com/markets/investing-legend-sees-spectacular-crash-next-few-months
News on Stocks in Our Portfolios
Paychex (NASDAQ:PAYX) declares
$0.62/share quarterly dividend, in line with previous.
What
I am reading today
More
on the fast moving extraterrestrial object.
https://www.newyorker.com/magazine/2021/01/25/have-we-already-been-visited-by-aliens
Quote
o of the day (2)
Quotation
of the Day... - Cafe Hayek
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