The Morning Call---Inflation or no?

 

The Morning Call

 

5/13/21

 

The Market

         

    Technical

 

            Equities had another tough day.  The S&P finished below the lower boundary of its short term uptrend; if it remains there through the close on Friday, it will reset to a trading range.  To be sure, we have had a string of negative economic surprises; but we have had them before and the Fed bailed the Market out.  We witnessed the S&P breaking its short term uptrend back in March but the Fed kept pumping and all was well.  At this point, my assumption is that this will turn out to be just another bit of consolidation in what has been a red hot Market.  Even if it confirms its challenge of its short term uptrend, the S&P still has a way to go before meeting other support levels and inflicting real damage: 100DMA (3932); 200 DMA (3692); lower boundary of its intermediate term uptrend (3219).

 

            Wednesday in the charts.

            https://www.zerohedge.com/markets/stagflation-surge-sparks-purge-stocks-bonds-bitcoin-bullion

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          Weekly jobless claims were 473,000 versus estimates of 490,000.

 

The April budget deficit was $226 billion versus expectations of $220   billion.

                          https://www.zerohedge.com/markets/us-spends-90-more-it-collects-first-7-months-fiscal-2021

 

April PPI came in at +0.6% versus consensus of +0.3%; core PPI was +0.7% versus +0.4%

 

                        International

 

                        Other

 

                          The NY Fed’s Q1 report of household debt.

                          https://www.calculatedriskblog.com/2021/05/ny-fed-q1-report-total-household-debt.html

 

                          Housing prices continue to soar.

                          https://www.zerohedge.com/markets/home-prices-soar-most-record-fed-continues-bubble-blowing-policies

 

             Inflation

 

Some perspective on yesterday’s CPI number.   This author is contending that a cyclical slowdown in economic activity later in the year will lessen inflationary pressures.  Therefore, the current spike is a temporary phenomenon.  Certainly, recent history (abundant liquidity, stunted growth) would support that notion in the face of monetarists screaming about coming inflation.   I think that the monetarists have been wrong because investors/consumers believed that disinflationary forces  were at work (i.e., too much debt, low cost foreign labor, technological improvements, etc.) and bet their money accordingly. 

 

Further, I believe that those forces are unlikely to subside.  As you know, I am firming in agreement that recent rapid improvement in the US’s economic growth rate will be temporary (cyclical) and that the long term secular growth rate of the economy will continue to be burdened by too much debt.

 

But clearly, with the spike in inflationary pressures investor/consumer psychology  regarding inflation may be changing.  The $64,000 question is, will that change in psychology be temporary?  If not, the current move higher in inflation will likely not be transitory.  I don’t know the answer but I am building a small position in gold.

              https://www.pragcap.com/lets-talkf unne-about-inflation/

 

              This article addresses the issue of forecasting with certainty  (must read).

              https://www.zerohedge.com/markets/hubris-backing-forecasts-should-be-great-concern-not-comfort

 

     Bottom line.

 

            Four investing lessons from David Swenson.

            https://ofdollarsanddata.com/4-investing-lessons-from-david-swensen/

 

            The trash crash.

            https://www.ft.com/content/ad2563e9-f90e-4fa8-89d7-d0126e277f9d

 

    Subscriber Alert

 

            The stock prices of Accenture ($279), UPS ($210) and Genuine Parts ($127) have traded into their Sell Half Price Range.  Indeed, they have all traded well above their Sell Half Price, but I have let them run in the midst of this upward trending Market.  I will Sell Half of each position at the Market open.

 

    News on Stocks in Our Portfolios

 

UPS (NYSE:UPS) declares $1.02/share quarterly dividend, in line with previous.

 

What I am reading today

 

            The key to the energy crisis.

            https://www.institutionalinvestor.com/article/b1rs5mm6bzktfg/The-Key-to-the-Energy-Crisis-Lies-in-a-Ron-White-Joke

 

 

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