The Morning Call--Inflation surprises the highest on record

 

The Morning Call

 

5/28/21

 

 

The Market

         

    Technical

 

            Thursday in the charts.

            https://www.zerohedge.com/markets/small-caps-jump-big-tech-dumps-bidens-budget-busts-bonds

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          April pending homes sales fell 4.4% versus expectations of +0.8%.

                          https://www.advisorperspectives.com/dshort/updates/2021/05/27/pending-home-sales-drop-4-4-in-april

 

April personal income fell 13.1% versus projections of -14.1%; personal spending was up 0.5%, in line.

https://www.zerohedge.com/economics/feds-favorite-inflation-indicator-explodes-fastest-rate-1992-incomes-crash-record

 

The April PCE index was up 0.6%, in line; the core PCE index was up 0.7%, also in line.

 

 

The May Kansas City Fed manufacturing index came in at 32 versus 40 reported in April.

                          https://www.advisorperspectives.com/dshort/updates/2021/05/27/kansas-city-fed-survey-continued-expansion-in-may

 

                        International

 

May EU consumer confidence declined 5.1%, in line; the economic sentiment index was 114.5 versus 112.1; industrial sentiment index was 11.5 versus 11.3; the services sentiment index was 11.3 versus 6.5.

 

                        Other

 

              Average new home sales price reaches record high.

              https://politicalcalculations.blogspot.com/2021/05/average-new-home-sale-prices-in-us.html#.YK_Ko6hKiUk

 

              The era of engagement with China is over.

  https://www.bloomberg.com/news/articles/2021-05-26/biden-s-asia-czar-says-era-of-engagement-with-xi-s-china-is-over?srnd=premium&sref=loFkkPMQ

 

The Fed

 

  When will the Fed is your friend end?

  https://www.ft.com/content/9f9d00da-afb1-4b51-9a0f-6344df914bd8

 

 

Fiscal Policy

 

  What is there is a debt crisis?

  https://www.realclearmarkets.com/articles/2021/05/27/some_day_there_may_be_a_debt_crisis_so_sell_federal_assets_now_778667.html

 

  The latest madness: QE = savings.

  https://www.zerohedge.com/markets/latest-mmt-madness-qe-savings-really

 

Biden’s Plan

 

  Biden’s new budget proposal includes retroactive capital gains taxes.

  https://www.zerohedge.com/markets/stocks-snap-lower-biden-budget-suggests-retroactive-capital-gains-tax-hike

 

            Inflation

 

              Summers warns Biden.

              https://www.cnn.com/2021/05/26/economy/inflation-larry-summers-biden-fed/index.html

 

                  Inflation surprises the highest on record.

              https://www.zerohedge.com/markets/us-inflation-surprises-are-highest-record

 

 

     Bottom line.

 

            Do low interest rates justify high valuations?

            https://compoundadvisors.com/2021/do-low-interest-rates-justify-high-valuations

 

            Two profit measures with much different results.

            https://www.zerohedge.com/markets/two-profit-measures-two-different-stories-gdp-profits-are-unchanged-while-sp-profits-soar

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

            Sometimes the ignorance is just stunning.

            https://www.adamsmith.org/blog/sometimes-the-ignorance-is-just-stunning

           

Friday morning humor.

            https://twitchy.com/samj-3930/2021/05/24/best-social-media-analogy-ever-ricky-gervais-sums-up-twitter-in-a-perfectly-hilarious-and-sorta-painful-bit-watch/

 

            The spacefaring paradox.      

            https://slate.com/technology/2021/05/spacex-starship-space-travel-paradox.html

           

 

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The Morning Call-$6 trillion?

 

The Morning Call

 

5/27/21

 

The Market

         

    Technical

 

            Wednesday in the charts.

            https://www.zerohedge.com/markets/small-caps-surge-amid-massive-short-squeeze-dollar-dead-cat-bounces

 

            Bond investors on hold.

            http://www.capitalspectator.com/treasury-markets-reflation-pricing-is-on-hold-for-now/

 

            The inflation adjusted yield of the S&P is at a 50 year low.

            https://sentimentrader.com/blog/the-sps-inflation-adjusted-yield-just-plunged-to-a-record-low/

 

            Trends in the markets.

            https://compoundadvisors.com/2021/tuesday-trends-5-25-21

 

            Gold reversal.

            https://www.zerohedge.com/the-market-ear/cabsycd4cd

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          Weekly jobless claims totaled 406,000 versus predictions of 425,000.

                          https://www.zerohedge.com/personal-finance/despite-initial-claims-drop-almost-16-million-americans-remain-government-dole

 

The 2^nd estimate of Q1 GDP growth came in at 6.4% versus forecasts of 6.5%; the PCE price deflator was +3.7% versus +3.5%; core PCE deflator was +2.5% versus +2.3%.

                          https://www.zerohedge.com/economics/q1-gdp-stuck-64-after-revision-core-pce-comes-hotter-expected

 

April durable goods orders fell 1.3% versus expectations of +0.7%; ex transportation they were +1.0% versus +0.8%.

                          https://www.zerohedge.com/economics/us-durable-goods-new-orders-unexpectedly-tumble-april

 

                        International

 

June German consumer confidence was reported at -7 versus consensus of -5.2.

 

                        Other

           

                          The mortgage delinquency rate fell in April.

                          https://www.calculatedriskblog.com/2021/05/freddie-mac-mortgage-serious.html

 

            The Fed

 

              Markets no longer see Jackson Hole as tapering D Day.

              https://www.zerohedge.com/markets/suddenly-market-no-longer-sees-jackson-hole-taper-d-day

 

              Systemic risk abounds.

              https://www.zerohedge.com/markets/systemic-risks-abound

 

            Fiscal Policy

 

              The rise and rise of government debt.

              https://www.realclearmarkets.com/articles/2021/05/26/the_rise_and_rise_of_debt_government_778665.html

 

            Biden’s Plan

 

              Biden unveils $6 trillion 2022 budget.

              https://www.zerohedge.com/political/biden-unveils-6-trillion-budget-will-raise-federal-spending-highest-post-ww2-level

 

            The coronavirus

 

              Biggest failure of medical leadership.

              https://www.zerohedge.com/covid-19/johns-hopkins-prof-half-americans-have-natural-immunity-dismissing-it-biggest-failure

 

     Bottom line.

 

            Today’s stock market illusions.

            https://www.advisorperspectives.com/commentaries/2021/05/25/todays-stock-market-illusions

 

            How to defend against inflation (must read).

            https://www.ft.com/content/88ebab48-edc7-49f1-b535-8c546988d4fd

 

 

    News on Stocks in Our Portfolios

 

Williams-Sonoma (NYSE:WSM): Q1 Non-GAAP EPS of $2.93 beats by $1.08; GAAP EPS of $2.90 beats by $0.99.

Revenue of $1.75B (+41.1% Y/Y) beats by $220M.

 

Medtronic (NYSE:MDT): Q4 Non-GAAP EPS of $1.50 beats by $0.08; GAAP EPS of $1.00 misses by $0.04.

Revenue of $8.19B (+37% Y/Y) beats by $60M.

 

Medtronic (NYSE:MDT) declares $0.63/share quarterly dividend, 8.6% increase from prior dividend of $0.58.

 

Cisco (NASDAQ:CSCO) declares $0.37/share quarterly dividend, in line with previous.

 

BlackRock (NYSE:BLK) declares $4.13/share quarterly dividend, in line with previous.

 

What I am reading today

 

            The secret psychology of sneaker colors.

            https://www.nytimes.com/2021/05/24/style/sneaker-color-psychology.html

           

 

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

 

 

 

The Morning Call--The inflation debate

 

The Morning Call

 

5/26/21

 

The Market

         

    Technical

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/bonds-bullion-bid-stocks-skid-stimmy-less-sentiment-slumps

 

            Watching long duration stocks for a sign of Market direction.

            https://www.zerohedge.com/the-market-ear/c7dby7ys4

 

            The golden chase.

            https://www.zerohedge.com/the-market-ear/cqcvdu17gv

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

                       

              Weekly mortgage applications fell 4.2% while purchase applications rose     

              1.7%.

 

The March Case Shiller home price index was up 13.3% versus +12.3% in February.

https://www.advisorperspectives.com/dshort/updates/2021/05/25/march-s-p-case-shiller-home-price-index-national-index-up-13-yoy

 

April new home sales declined 5.9% versus estimates of +5.6%.

https://www.advisorperspectives.com/dshort/updates/2021/05/25/new-home-sales-down-6-mom

 

May consumer confidence came in at 117.2 versus expectations of 119.2.

 

The May Richmond Fed manufacturing index was reported at 18 versus 17 in April.

 

                        International

           

March Japanese leading economic indicators came in at 102.5 versus 98.9 reported in February.

 

                        Other

 

      The Fed

 

            Update on the reverse repo market.

            https://www.zerohedge.com/markets/rrp-explosion-fed-reverse-repo-soars-third-highest-incredible-amount-cash

 

     Inflation

 

Inflation is shortages.  This is a decent argument for ‘transitory’ inflation.  However, the key premise that supports his case is  ‘People and corporations seek to lower prices in order to maximize profits and prosperity.’  That is not how it works.  Corporations seek to maximize profits by finding the right balance of volume (demand) and price.  If there is excess money around for (borrowing or from government largess) spending, the right balance will lead to higher prices.

            https://integratinginvestor.com/inflation-is-shortages-and-thankfully-transitory/

 

            Counterpoint.

            https://reason.com/2021/05/24/politicians-play-with-fire-by-risking-inflation/

           

            As an example:

            https://politicalcalculations.blogspot.com/2021/05/the-pandemic-price-escalation-of.html#.YK0ttqhKiUk

 

On the other hand, as the above author points out, the cure for higher prices is higher prices.

            https://www.zerohedge.com/economics/here-comes-hangover-soaring-prices-result-record-crash-home-appliance-buying-plans

                       

                        Inflation, money and supply bottlenecks.

            https://www.zerohedge.com/economics/inflation-money-and-supply-bottlenecks

 

 

     Bottom line.

 

            Confusing market crashes with bear markets.

            https://www.advisorperspectives.com/commentaries/2021/05/24/confusing-market-crashes-bear-markets-part-1

 

            Why investing feels like astrology (must read).

            https://moontowermeta.com/why-investing-feels-like-astrology/

 

            Here is one money manager’s attempt to put the preceding model to work.

            https://www.zerohedge.com/markets/picking-pennies-front-steamroller

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

           

 

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

 

 

 

The Morning Call---Talking bubbles

The Morning Call

 

5/25/21

 

The Market

         

    Technical

 

            The S&P finished back above the lower boundary of its short term uptrend negating its second challenge in as many weeks.  As I have said repeatedly ‘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.’

 

            Monday in the charts.

            https://www.zerohedge.com/markets/bitcoin-bullion-big-tech-soar-dollar-drop-resumes

 

            If gold is a fear hedge……..

            https://www.zerohedge.com/the-market-ear/cjttjtan1u

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                        International

 

The May German business climate index came in at 99.2 versus estimates of 98.2; final Q1 GDP growth was -1.8% versus -1.7%.

 

                        Other

 

                          Update on seven high frequency economic indicators.

                          https://www.calculatedriskblog.com/2021/05/seven-high-frequency-indicators-for_24.html

 

 

       The Fed

 

            The Fed thinks that it can have it all.

            https://www.reuters.com/business/job-inflation-tradeoff-exiled-fed-policy-could-mean-hot-summer-2021-05-24/

 

            Reverse repos near record highs.

            https://www.zerohedge.com/markets/fed-alert-reverse-repo-usage-nears-record-repo-market-set-blow

           

 

      Biden’s Plan

 

Senators reach bipartisan $300 billion highway, roads and bridges spending package.

            https://www.cnbc.com/2021/05/23/senators-reach-bipartisan-agreement-on-300-billion-for-highways-roads-and-bridges.html

                       

      Inflation

 

            A new survey of inflation expectations.

            https://econbrowser.com/archives/2021/05/firm-inflation-expectations-a-new-survey

 

            Inflation, 1970’s, 1980’s and today.

            https://www.zerohedge.com/economics/inflation-1970s-1980s-and-today

 

     The coronavirus

 

            Immunity or conformity.

            https://unclenap.com/immunity-or-conformity/

 

      Bottom line.          

 

            Talking bubbles with Jeremy Grantham.

            https://www.ft.com/content/5ab25e4c-e573-49f0-8a99-0e28092f548d

 

     Subscriber Alert

 

             In my quarterly review of the companies in our Portfolio, CH Robinson (CHRW) and Becton Dickinson (BDX) failed to meet the minimum financial quality standards for inclusion in the Dividend Growth Portfolio.  Accordingly, both positions will be Sold at the Market open.

 

     News on Stocks in Our Portfolios

          

Hormel Foods (NYSE:HRL) declares $0.245/share quarterly dividend, in line with previous.

 

What I am reading today

 

            The municipal bond market may be on the brink of a dramatic change.

            https://www.advisorperspectives.com/commentaries/2021/05/24/the-municipal-market-may-be-on-the-brink-of-a-dramatic-shift

 

            The cardiovascular secrets of giraffes.

            https://knowablemagazine.org/article/living-world/2021/heads-up-cardiovascular-secrets-giraffes

 

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