The Morning Call--Bonds continue to get slammed

The Morning Call

 

2/17/21

 

The Market

         

    Technical

 

Tuesday in the charts.

https://www.zerohedge.com/markets/bond-bloodbath-sparks-stock-slump-dollar-crypto-jump

 

Complacency at 20 year high.

https://www.zerohedge.com/markets/complacency-20-year-highs-jpm-models-warn-imminent-correction

 

BofA agrees.

https://www.zerohedge.com/markets/latest-bofa-wall-street-survey-finds-record-number-investors-taking-higher-normal-risk

 

            The ‘dumb’ money is the smartest ever.

            https://sentimentrader.com/blog/excess-upon-excess-as-dumb-money-is-smartest-ever/

 

            Junk bond buyers throw caution to the wind.

            https://theirrelevantinvestor.com/2021/02/16/insatiable/

 

            How this bubble ends.

            https://avc.com/2021/02/how-this-ends/

 

            Bitcoin soars over $51,000.

            https://www.zerohedge.com/markets/bitcoin-soars-51700-traders-predict-parabolic-advance

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly mortgage applications declined 5.3% while purchase applications were down 6.1%.

 

January retail sales surged 5.3% versus consensus of up 1.1%; ex autos, they were up 5.9% versus +1.0%; January PPI was +1.3% versus +0.4% while core PPI was up 1.2% versus +0.2%.

                          https://www.zerohedge.com/personal-finance/core-retail-sales-surge-record-pace-amid-blockbuster-january-report

 

                                               

                        International

 

December Japanese machine tool orders rose 5.2% versus an expected decline of 6.2%; its January trade balance was -Y323.9 billion versus -Y600.0 billion.

 

January UK CPI was -0.2% versus estimates of -0.4%; core CPI was -0.5% versus -0.7%; PPI was +0.7% versus +0.5%.

 

                        Other

 

                          Mortgage debt as a percentage of GDP.

                          https://www.calculatedriskblog.com/2021/02/the-housing-bubble-and-mortgage-debt-as.html

 

            Bottom line.  While stocks managed to eek out another gain yesterday, the long bond continues to get battered (except for junk bonds which really trade like equities).  That suggests that the bond guys are either (1) discounting a strengthening economy versus a concern about rising inflation or (2) completely disagree with the equity crowd.  Whichever the case, I believe that this is an issue to which we must pay close attention; because a major tenant of the stock bull case is that current valuations are justified based on low interest rates.  I don’t know the interest rate level at which this thesis starts to breakdown; but clearly, each uptick in rates brings it closer.

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

 

              Stocks and bonds slammed on higher PPI.

              https://www.zerohedge.com/economics/stocks-bonds-slammed-producer-prices-soar-record-january

 

              There is an alternative.

   https://www.advisorperspectives.com/commentaries/2021/02/16/there-is-an-alternative-to-crazy-expensive-tech-stocks-we-just-need-to-remove-the-kaleidoscope-glasses

 

 

              A new commodities super cycle?

              https://www.ft.com/content/d3c43942-af5c-45df-8797-aed080a61092

 

              Earnings upgrades may have peaked.

              https://www.zerohedge.com/markets/jpmorgan-warns-earnings-upgrades-may-have-peaked

 

              Unfortunate investing traits (another great read from Morgan Housel).

              https://www.collaborativefund.com/blog/traits/

 

    News on Stocks in Our Portfolios

 

Genuine Parts (NYSE:GPC): Q4 Non-GAAP EPS of $1.52 beats by $0.17; GAAP EPS of $1.18 misses by $0.13.

Revenue of $4.25B (-0.7% Y/Y) misses by $60M.

 

What I am reading today

 

            Reasons for optimism---technological environmentalism.

            https://www.adamsmith.org/blog/reasons-for-optimism-technological-environmentalism

           

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.