The Morning Call
4/19/21
The
Market
Technical
The S&P
continues its relentless push higher.
Notwithstanding deteriorating technicals and nosebleed valuations, my
Market assumption remains: ‘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.’
Update on margin
debt.
https://www.zerohedge.com/markets/stock-market-leverage-la-la-land-rises-historic-wtf-high
As you can see, the
long bond popped last week, primarily the result of a big unwind in institutional
short positions. That suggests that the
big boys now believe that the risk of significantly higher inflation is now in
their rear view mirror. Maybe so. (See the articles below: Snider disagrees,
Signs the surge is fading and the Mismatch in bank loans and deposits.) Now the question is just how strong is that
conviction?
GLD continued to advance
and is now poised to challenge the downtrend off last October’s high. It is not unusual for gold to respond
positively to lower interest rates; so, the recent pin action in TLT likely helped
GLD’ performance. That said, if interest
rates are falling due to lower inflation expectations, that would have the
opposite effect. A bit confusing to
me. Still, I want to see if GLD can successfully
challenge that short term downtrend before I get too deep in analyzing what
gold investors are discounting.
The dollar had another
tough week. The good news is that it remains in a trend of higher highs and
higher lows. As long as that trend
holds, my assumption is that the dollar is in recovery mode---which makes sense
as the US economy out paces the rest of the globe. My restrained view of the US’s future growth
prospects notwithstanding, I think that this will continue to be the case
(mainly because the rest of the world’s central bankers and political classes
have done an even worse job of guiding their economies than our own.)
https://www.zerohedge.com/the-market-ear/cg0ry-l4np
Friday in the
charts.
https://www.zerohedge.com/markets/bonds-best-week-june-gold-jumps-dollar-dumps
Fundamental
Headlines
The
Economy
Review of Last Week
US statistical
releases, including the primary indicators, turned positive last week as the
February weather related weakened data fads into history. As I noted last week,
investors’ attention will now start shifting from the speed of the recovery to
the magnitude and duration of inflation. Most seem willing to accept for the
moment Powell’s promise that (1) any rise in inflation will be temporary but
(2) if it becomes a persistent problem then the Fed has the tools and resolve
to swiftly bring it under control.
Yeh, right. I remind you that (1) the Fed has never, ever
in its history correctly anticipated and acted promptly to successfully bring
inflation to heel and (2) this Fed [i.e.,
the Bernanke, Yellen, Powell regimes] has folded like a cheap umbrella any and
every time the Markets have thrown a tantrum over a tightening in monetary policy. Why would they act any different the next
time?
Overseas, the data
flow was back on the negative side. While
the overall trend is one of improvement, its erratic progress continues to show
that the rest of the globe’s recovery is weaker than our own.
Bottom line. ‘As I
have tried to highlight, the issue isn’t whether or not the US (world) economy
is rebounding, the issue is its magnitude and duration. As you know my opinion is that following an
initial snapback, the US economy will likely return to its former subpar
secular growth rate, stymied by irresponsible mix of fiscal/monetary policies.’---with the potential
added risk of rising inflation.
Though Jeffrey
Snider disagrees.
US
International
February EU YoY construction output fell 5.6%
versus -2.6% in January.
February Japanese
industrial production declined 1.3% versus estimates of -2.1%; the March trade balance
was Y664 billion versus Y490 billion.
Other
Signs that the economic surge is already fading.
The Fed
The Fed’s balance sheet and speculation.
https://www.zerohedge.com/the-market-ear/cke13ootsr
Fed policy and demographics.
The increasing mismatch in bank loans and
deposits (must read)
Subscriber Alert
As a result of my
quarterly fundamental review of my holdings, MSC Industrial Direct (MSM) and 3M
companies (MMM) failed to meet the minimum criteria for inclusion in my
Dividend Growth and High Yield Portfolios.
Accordingly, they are being Removed from those Portfolios and will be
Sold at the opening this morning.
News on Stocks in Our Portfolios
What
I am reading today
Quote
of the day.
Housing
bubble two point 0?
https://theirrelevantinvestor.com/2021/04/15/housing-bubble-two-point-no/
So, who wants a
hot war in Ukraine?
https://www.zerohedge.com/geopolitical/escobar-so-who-wants-hot-war
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website (http://investingforsurvival.com/home)
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