Thursday, January 7, 2021

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


The Morning Call




The Market




            Wednesday in the charts.



            Will the dollar weakness continue?



            The dollar’s technical picture may be changing.



            Global economy braces for $13 trillion in debt maturities.







              The Economy




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



                          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.





                          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.



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.




                          For the economic optimists.



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



                          Heavy truck sales down 5% YoY.



            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.



              Here is some additional commentary.



            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.






              Update on valuations.



              ‘Cash on the sidelines’ is hogwash.



              Contrarian tilts for your portfolio.



              The case against value stocks.



    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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