Wednesday, February 17, 2021

The Morning Call--Bonds continue to get slammed

The Morning Call




The Market




Tuesday in the charts.


Complacency at 20 year high.


BofA agrees.


            The ‘dumb’ money is the smartest ever.



            Junk bond buyers throw caution to the wind.



            How this bubble ends.



            Bitcoin soars over $51,000.







              The Economy




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%.






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%.




                          Mortgage debt as a percentage of GDP.



            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.



              Stocks and bonds slammed on higher PPI.



              There is an alternative.



              A new commodities super cycle?



              Earnings upgrades may have peaked.



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



    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.




Visit Investing for Survival’s website ( to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.




No comments:

Post a Comment