The Morning Call--Who's next?

 

The Morning Call

 

3/31/21

 

The Market

 

    Technical

 

            Tuesday in the charts.

                https://www.zerohedge.com/markets/stocks-sink-feds-kaplan-admits-challenges-due-excess-risk-taking

 

            Bulls run as liquidity floods the Market.

https://realinvestmentadvice.com/technically-speaking-bulls-run-as-liquidity-floods-market/?utm_medium=email&utm_campaign=Technically%20Speaking%20Bulls%20Run%20As%20Liquidity%20Floods%20Market&utm_content=Technically%20Speaking%20Bulls%20Run%20As%20Liquidity%20Floods%20Market+CID_e4eae8ae1ca4654939b28a4b20a6c3de&utm_source=RIA%20Email%20Marketing%20Software&utm_term=READ%20MORE

 

 

                        Oil sells off.

            https://www.zerohedge.com/the-market-ear/c3o1wmwfpk

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly mortgage applications fell 2.2% while purchase applications were down 1.5%.

 

Month to date retail chain store sales declined at approximately the same rate as in the prior week.

 

The January Case Shiller home price index increased 0.9%, the same rate as in December.

https://www.advisorperspectives.com/dshort/updates/2021/03/30/january-s-p-case-shiller-home-price-index-national-index-up-11-2-yoy-nsa

 

March consumer confidence was reported at 109.7 versus expectations of 96.9.

https://www.advisorperspectives.com/dshort/updates/2021/03/30/consumer-confidence-highest-in-a-year

 

The March ADP private payroll report shows job increases of 517,000 versus predictions of 550,000.

   https://www.zerohedge.com/economics/adp-employment-data-disappoints-march-service-sector-jobs-soar

 

International

                          

Final Q4 UK GDP grew 1.3% versus forecasts of +1.0%; business investment grew 5.9% versus the Q3 report of 13.2%.

 

February Japanese industrial production  was down 2.1% versus estimates of -1.2%; February YoY housing starts were down 3.7% versus -4.8% in January; February YoY construction orders were up 2.5% versus +14.1% in January.

 

The February German unemployment rate was 4.5% versus 4.6% in January.

 

The March Chinese manufacturing PMI came in at 51.9 versus consensus of 51.0; the nonmanufacturing PMI was 56.3 versus 51.4 in February,

 

The March flash EU CPI was up 0.9% versus +0.2% in February.  

 

 

                        Other

                            

                           Real house prices and the price-to-rent ratio.

                          https://www.calculatedriskblog.com/2021/03/real-house-prices-and-price-to-rent.html

 

                          Median household income in February.

                          https://politicalcalculations.blogspot.com/2021/03/median-household-income-in-february-2021.html#.YGNqxp1KiUk

 

 

                        The Fed

 

              Time to abandon autopilot monetary policy.

              https://www.ft.com/content/835efc35-3688-4795-ada1-ecb566a3aa9d

 

            Fiscal Policy

 

Biden readies tax hikes.  Like Biden’s infrastructure spending program, I am going    to defend the notion of tax hikes at least until we get more details.

              https://www.nysun.com/national/now-he-tells-us-biden-readies-radical-tax-hikes/91460/

 

First of all, there is no question that there is massive inequality in income.  CEOs are earning multiples more than their average employee---at a vastly wider margin than twenty years ago.  I see that as unfair.  A major reason is that CEO’s benefit from stock buyback programs which, as I have pointed out numerous times, was made possible by easy monetary policy, i.e., the company awards stock to CEO as part of his/her compensation, company borrows money cheaply, uses the proceeds to buy back stock (as opposed to investing to increase productivity) which drives the price of said stock up, CEO sells stock.  That is just one of the many beefs I have with the current irresponsible monetary policy; and it has contributed to the unbalanced distribution of gross income in America.  I see nothing wrong with raising the tax rates on these gains---AS LONG AS the funds are used to either pay down debt or fund productivity enhancing infrastructure projects. 

 

Second, the universe has known that the social security system was headed for bankruptcy but no one in our political class had the cojones to address the problem.  The math of the solution is pretty simple: (1) cut benefits, (2) increase the social security tax, (3) raise the age at which benefits are payable or (4) some combination of all.  Whatever the correct mix, at least, initiating legislation that deals this issue is a necessary first.

 

To be clear, I have no idea whether the ultimate enacted solution will be a plus or minus for the economy.  But I like the fact that a necessary conversation has been started. 

 

              More details.

              https://www.zerohedge.com/political/largest-tax-hike-generations-could-pay-75-bidens-next-spending-plan

 

                Bottom line.  Who’s next? 

                        https://www.zerohedge.com/markets/blain-market-has-1929-1987-2000-writ-bold-blood-letters-all-over-it

 

 

            Today’s Stock Market Lesson

 

              The two most powerful forces in the Market.

              https://compoundadvisors.com/2021/the-2-most-powerful-forces-in-markets

 

    News on Stocks in Our Portfolios

 

What I am reading today

 

            Misdemeanor prosecution.

            https://marginalrevolution.com/marginalrevolution/2021/03/misdemeanor-prosecution.html

 

            More reasons for optimism.

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

 

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The Morning Call--Biden's new spending plan

 

The Morning Call

 

3/30/21

 

The Market

         

    Technical

 

            Monday in the charts.

            https://www.zerohedge.com/markets/crypto-jumps-small-caps-dump-archegeddon-hits-banks-bonds-bullion

 

            The validity of seasonal trading patterns.

            https://www.marketwatch.com/story/april-has-been-bullish-for-stocks-but-you-shouldnt-bet-on-a-repeat-this-year-11616745891?mod=home-page

 

            Bond seasonality is turning bullish.

            https://www.advisorperspectives.com/commentaries/2021/03/29/dont-look-now-but-bond-seasonality-is-turning-bullish

 

Bonds and bullion dumped as cryptos and the dollar rally.

https://www.zerohedge.com/markets/bonds-bullion-are-being-dumped-bitcoin-dollar-surge

 

US yields surging further.

https://www.zerohedge.com/the-market-ear/c1d-oguboq

 

How a blowup at a hedge fund is rattling markets.

https://www.bloomberg.com/news/articles/2021-03-29/goldman-block-trade-what-to-know-about-bill-hwang-viacom-discovery-stock-sale?srnd=premium&sref=loFkkPMQ

 

 

And a behind the curtain look at how the above happened.

https://www.zerohedge.com/markets/how-goldman-and-morgan-stanley-broke-ranks-and-triggered-biggest-margin-call-lehman

 

 

            Buffett indicator screaming sell.

            https://www.zerohedge.com/the-market-ear/cqomz5sy6y

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

The March Dallas Fed manufacturing index came in at 28.9 versus 17.2 recorded in February.

                          https://www.advisorperspectives.com/dshort/updates/2021/03/29/march-dallas-fed-manufacturing

 

                        International

 

                        The February Japanese unemployment rate was 2.9% predictions of 3.0%.

 

March EU consumer confidence came in at -10.8, in line; industrial sentiment was 2.0 versus 0; services sentiment was -9.3 versus -14.4.

 

March German CPI was +0.5%, in line.

 

                        Other

                       

                          The March regional Fed banks manufacturing survey.

                          https://www.advisorperspectives.com/dshort/updates/2021/03/29/march-regional-fed-manufacturing-overview

           

                          Framing lumber prices continue to rise sharply.

                          https://www.calculatedriskblog.com/2021/03/update-framing-lumber-prices-up-sharply.html

 

                          Long live debtism.

                          https://blogs.cfainstitute.org/investor/2021/03/24/capitalism-is-dead-long-live-debtism/

           

                          Survey of inflation expectations.

                          https://econbrowser.com/archives/2021/03/a-bunch-of-year-ahead-inflation-forecasts

 

            Fiscal Policy

 

Biden to introduce major spending bill Wednesday.  Even though I am not in general all that positive about more big government spending programs, there are circumstances under which they can be a plus.  One, if they finance infrastructure spending (i.e., projects that improve the national productivity---roads, bridges, airports, etc.).  Two, if they are paid for with something besides more debt (i.e., taxes).  The current narrative out of the administration is that most of the spending is for infrastructure and that it intends to pay for those projects with tax increases.  Of course, the current narrative lacks specifics on both; so, my point here is that it is too soon to say whether Biden’s plans would be good or bad fiscal policy. 

https://www.zerohedge.com/political/biden-float-3-trillion-plan-wednesday-moderate-dems-push-back-tax-hikes-pay-it

 

            Inflation

 

              Inflation is always a political choice,

              https://www.zerohedge.com/markets/inflation-always-political-choice

 

            Bottom line

                

              Anything can happen.

              https://allstarcharts.com/anything-can-happen/

 

              Is the SPAC bubble about to burst?

              https://www.nakedcapitalism.com/2021/03/ponzis-go-boom.html

 

              Stock buybacks soar.

              https://www.zerohedge.com/markets/zero-lessons-learned-stock-buybacks-soar-all-time-high

 

              The positives and negatives of a transaction tax.

              https://www.advisorperspectives.com/commentaries/2021/03/29/macroview-could-a-transaction-tax-be-a-good-thing

 

              Ed Yardini raises his outlook for 2021/22 S&P earnings and year end valuation.

              http://blog.yardeni.com/2021/03/high-octane-earnings.html

           

    News on Stocks in Our Portfolios

 

FactSet Research Systems (NYSE:FDS): FQ2 Non-GAAP EPS of $2.72 misses by $0.01; GAAP EPS of $2.50 misses by $0.08.

Revenue of $391.79M (+6.0% Y/Y) in-line.

 

What I am reading today

 

            Human creativity is boundless.

            https://marginalrevolution.com/marginalrevolution/2021/03/maine-markets-in-everything-those-new-service-sector-jobs.html

 

            Thirty of the best nature photos from the Tokyo International Foto awards (must   see).

                        https://www.boredpanda.com/tokyo-international-foto-awards-nature-winners-tokyofotoawards/?utm_source=ritholtz&utm_medium=referral&utm_campaign=organic

 

 

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

 

 

 

Monday Morning Chartology

 

The Morning Call

 

3/29/21

 

The Market

 

    Technical

 

 

The S&P started last week on its back foot  but ended it on a very positive note.  Still, it (1) has not regained the lower boundary of its former short term uptrend and (2)  has not made a new high.  But certainly, that finish is promising.   Plus, it has plenty of support from both DMA before it mounts a challenge of any other trend lines.  As I said last week, the S&P recent performance is more of a loss of upside momentum than a warning bell that more downside is in the offing.  My Market assumption remains: ‘while valuations continue to reach historical extremes, I can’t see an end to this uptrend as long as the money keeps flowing with abundance and in the absence of any major negative exogenous event.’

 

Is a massive fund liquidating stocks?

https://www.zerohedge.com/markets/massive-fund-liquidating-stocks

 

The risk appetite is soaring.

https://www.zerohedge.com/the-market-ear/ckmi9jwd09

 

Markets rally on Powell’s easy money promise.

https://realinvestmentadvice.com/market-rallies-on-powells-easy-money-promise-03-27-21/?utm_medium=email&utm_campaign=Real%20Investment%20Report%20Market%20Rallies%20On%20Powells%20Easy%20Money%20Promise&utm_content=Real%20Investment%20Report%20Market%20Rallies%20On%20Powells%20Easy%20Money%20Promise+CID_da447a3cc8dcb83e56fa3ff5f3fb5a8c&utm_source=RIA%20Email%20Marketing%20Software&utm_term=READ%20MORE

 

 

The long bond’s performance last week was the mirror image of the S&P’s---starting the week on a positive note but falling on Thursday and Friday. The good news is that the lower boundary of its short term trading range is holding.  The bad news is that if it doesn’t, there is considerably more downside before it reaches support.  I continue to believe that its current price performance is and will be reflective of investor bets on inflation.

 

GLD remains in a downtrend off its all-time high.  But as I have noted, gold was so extended to the upside, its current retreat has not even broken its very short term uptrend.  Hence, further weakness seems reasonable especially with interest rates and the dollar rising. 

 

 

The dollar continues its slow recovery and is poised to challenge its 200 DMA.  This progress is likely a function of the US being well ahead of most of the world in its coronavirus economic recovery.  However, a strong dollar typically has a negative impact on the economy (it makes our products more expensive to the rest of the world) and a positive effect on inflation (it makes foreign goods cheaper)---which does not exactly match up with the narrative on stocks and bonds.

           

 

 

Friday in the charts.

https://www.zerohedge.com/markets/media-momo-meltdown-small-caps-spacs-slammed-bonds-buck-bounce

 

                New commodity supercycle?

            https://www.zerohedge.com/the-market-ear/celgym4b5p

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        Review of Last Week

 

US statistical releases made for some pretty dismal reading last week.  The overall data as well as the primary indicators (four negative, one positive) were overwhelmingly poor.  That said, much of it reflected February’s performance which was very adversely impacted by weather.  So again, I am not really putting too much weight on these numbers, i.e. I do not think this argues for any diminution of the outlook for continued economic recovery.

 

Overseas, the data flow was the polar opposite---it was almost universally upbeat.  The reason?  Most of it was from March.  These results build on those of the prior week, raising the hope of a meaningful pickup in global growth.                      

                       

                        The burden on EU growth.

                           https://www.zerohedge.com/economics/eurozone-weakness-much-more-covid

 

Bottom line. The US economy continues to recover aided by expansive monetary and fiscal policies.  That should be enough to return growth to its prior long term below average secular rate.  But I believe that those aforementioned policies will put a lid on the economy’s secular growth; and indeed, could adversely impact it via the ignition of inflationary forces.

 

                                US

 

                        International

 

Other

 

                          Update on big four economic indicators.

                          https://www.advisorperspectives.com/dshort/updates/2021/03/26/the-big-four-real-personal-income-in-february

 

 

                          Used car prices up 3% in last two weeks.

                          https://www.zerohedge.com/markets/here-it-comes-used-car-prices-soar-3-just-last-2-weeks

 

            The Fed

 

             QE doesn’t work because it can’t.

              https://www.realclearmarkets.com/articles/2021/03/26/central_banks_dont_do_quantities_of_money_because_they_cant_769956.html

 

 The Fed pushes back against Summer’s warning.  (I remind you that the    Fed has never, ever, ever in its entire history tightened monetary policy before inflation got out of control.)

            https://www.nytimes.com/2021/03/25/business/economy/larry-summers-federal-reserve.html

 

            Bottom line.

 

             Ten dividend growth stocks to beat the Market.

             https://www.advisorperspectives.com/commentaries/2021/03/26/10-dividend-growth-stocks-to-beat-the-market

 

  Is bitcoin really a hedge?

  https://www.zerohedge.com/crypto/henrich-bitcoin-hedge-myth

 

  The latest strategy piece from Morgan Stanley.

  https://www.zerohedge.com/markets/morgan-stanley-asks-will-market-move-towards-fed-or-will-fed-shift-its-reaction-function

 

 

         News on Stocks in Our Portfolios

           

AT&T (NYSE:T) declares $0.52/share quarterly dividend, in line with previous.

 

What I am reading today

           

            Four factors in determining your retirement withdrawal rate.

            https://www.usatoday.com/story/money/personalfinance/retirement/2021/03/25/4-factors-to-finding-your-ideal-retirement-withdrawal-rate/43475903/

 

 

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