The Morning Call--The higher the rise, the bigger the fall

 

The Morning Call

 

1/6/21

 

The Market

         

    Technical

                       

            Wednesday in the charts.

            https://www.zerohedge.com/markets/big-tech-bonds-battered-bitcoin-bid-blue-wave-gold-pumpedndumped

 

            Will the dollar weakness continue?

            http://www.capitalspectator.com/is-a-weak-us-dollar-a-key-macro-theme-for-2021/#more-15317

 

            The dollar’s technical picture may be changing.

            https://www.zerohedge.com/the-market-ear/clmfdfvwux

 

            Global economy braces for $13 trillion in debt maturities.

            https://www.zerohedge.com/markets/worlds-biggest-economies-prepare-13-trillion-debt-maturity-wall

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          Weekly jobless claims rose 787,000 versus expectations of 800,000.

                          https://www.zerohedge.com/personal-finance/jobless-claims-improved-last-week-thanks-odd-plunge-illinois

 

                          November factory orders rose 1.0% versus projections of +0.7%.

 

The December final services PMI was reported at 54.8 versus estimates of 55.3; the composite PMI was 55.3 versus 55.7.

                       

December light vehicle sales came in at 16.3 million versus November’s   figure of 15.5 million.

                          https://www.calculatedriskblog.com/2021/01/december-vehicles-sales-increased-to.html

 

                        International

 

                          November German factory orders  rose 2.3% versus consensus of -1.2%.

 

                          November EU retail sales fell 6.1% versus predictions of -3.4%.

 

                         

 

December EU consumer confidence was reported at 45.5 versus 45.6 in November; German consumer confidence was 47.1 versus 45.6; UK consumer confidence was 54.6 versus 55.0.

                          https://www.zerohedge.com/markets/saxo-chart-week-oecd-private-sector-confidence

 

December EU economic sentiment was 90.4 versus forecasts of 90.0; industrial sentiment was -7.2 versus -8.1; services sentiment was -17.4 versus -15.0.

 

The December EU construction PMI was 45.5 versus 45.6 in November; the German construction PMI was 47.1 versus 45.6; the UK construction PMI was 54.5 versus 55.0.

                                        

                        Other

 

                          For the economic optimists.

                          https://www.worth.com/what-to-expect-of-economy-in-2021/

 

                          Saudi Arabia cuts oil production to allow Russia to increase its own.

                          https://www.nytimes.com/2021/01/05/business/energy-environment/opec-plus-oil-prices.html

                       

                          Heavy truck sales down 5% YoY.

                          https://www.calculatedriskblog.com/2021/01/us-heavy-truck-sales-down-5-year-over.html

 

            The Fed

 

              The Fed released the minutes of its latest FOMC meeting yesterday.  The tone was more upbeat on the economy than its predecessors, though the Fed left rates and QE unchanged,  and, indeed, suggested that neither would change until well into 2021 or even 2022.  So, QEInfinity will continue.

              https://www.zerohedge.com/economics/fomc-minutes-2

 

              Here is some additional commentary.

              https://www.zerohedge.com/markets/morgan-stanley-fomc-has-begun-envision-how-it-will-taper-qe

           

            Bottom line. We are in a delicate balancing act right now.  Valuations continue to push into the stratosphere.  On the other hand, the Fed continues to pump liquidity into the markets.  Plus, fiscal policy appears to be headed into a more expansionary phase.  As this author points out, it is impossible to know when investor sentiment will begin to factor in price; so, equities can reach even higher valuations  But that will only increase the magnitude of the ensuing mean reversion in price.  At the moment, I am 50% invested; most of my holdings are in low P/E, high yielding stocks, along with some gold. Caution.

                https://www.advisorperspectives.com/commentaries/2021/01/05/waiting-for-the-last-dance

 

                  Counterpoint.

              https://theirrelevantinvestor.com/2021/01/05/one-of-the-great-bubbles-of-financial-history/

 

              Update on valuations.

              https://www.advisorperspectives.com/dshort/updates/2021/01/06/is-the-market-still-overvalued

 

              ‘Cash on the sidelines’ is hogwash.

              https://www.marketwatch.com/story/investors-are-waiting-for-cash-on-the-sidelines-to-juice-the-stock-market-this-is-why-that-idea-is-hogwash-11609795905?mod=home-page

 

              Contrarian tilts for your portfolio.

              https://www.morningstar.com/articles/1016672/contrarian-tilts-for-your-portfolio

 

              The case against value stocks.

              https://blog.validea.com/the-case-against-value-stocks-part-ii/

 

    News on Stocks in Our Portfolios

 

MSC Industrial Direct (NYSE:MSM): Q1 Non-GAAP EPS of $1.10 beats by $0.01; GAAP EPS of $0.69 misses by $0.36.

Revenue of $771.9M (-6.3% Y/Y) in-line.

CVS Health (NYSE:CVS) declares $0.50/share quarterly dividend, in line with previous.

 

What I am reading today

 

           

 

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