The Morning Call
9/27/21
I am back but still travelling. I won’t be home until Tuesday, so I am taking
a pause this weekend to catch up.
The
Market
Technical
As you can see,
the S&P recently successfully challenged its short term uptrend and reset
to a trading range. Subsequently, it attempted
to break below its 100 DMS but failed (good news) and is now pushing above the
very short term downtrend off its September 2nd high. The key to watch this week is whether it can hold
above that downtrend line. If so, then
the worst may be over; if not…………
After what looked
like an upside breakout from a developing wedge pennant formation, TLT did an
abrupt about face and plummeted last week to close right on the lower boundary
of that pennant formation. So, like the
S&P, the long bond is at a technical junction---which we must wait to see
how it responses directionally.
https://www.ft.com/content/7200b459-265a-44fc-a31c-3843e4802f75
While GLD remains in a downtrend off its August 2020
high and has reset both DMA’s to resistance, it remains in uptrends across all
timeframes. Its first trendline challenge
will be its very short term uptrend about seven points lower. In other words, the short term trend is
clearly down, the long term trend is clearly up; but gold is nearing an inflection
point.
The dollar has
rallied in the last couple of weeks, continuing the upward bias off the January/May
double bottom and remaining above both DMA’s.
I see no reason to doubt more upside.
Investors appear
to be discounting a strong economy and higher rates. I have my doubts at least about the former.
Friday in the
charts.
Fundamental
Headlines
The
Economy
Review of Last 3 Weeks
Week of 9/6: Not much US data released. What was reported was slightly negative with
one minus primary indicator. Overseas,
the numbers were evenly divided.
Week of 9/13: US
stats were overwhelming positive including two primary indicators. Overseas, the data was abysmal.
Week of 9/20: US
data in aggregate was negative; however, primary indicators were a net plus (two
to one). Overseas, the numbers were
horrible, again.
In sum, the US
continues to grow but at a diminishing pace.
Overseas, conditions are decidedly worse---which won’t help our own
progress.
The big economic
news last week was the FOMC meeting and the subsequent narrative. While rates were left unchanged, Powell stated
that tapering will likely conclude by mid-2022, implying that it needs to start
pretty quick to meet that objective.
Consensus is that means that it will be formally announced at the
November FOMC meeting. (Note that has nothing to do with actually reducing the monstrous
size of its balance sheet.)
Powell emphasized that
rate hikes are a totally different matter, meaning don’t expect anything
anytime soon. However, the ‘dot plot’ (forecasts for growth, inflation and
interest rates by individual FOMC members) suggests otherwise.
https://www.ft.com/content/719c11ec-fb24-40b3-a661-518aa3bc6028
Finally, Powell
did sound a bit more concerned about inflation than he has of late, suggesting
that fears of stagflation may be increasingly well founded.
In sum, it appears
that QE is at least temporarily coming to an end; the risk being that it is too
little, too late---a mistake that the Fed has consistently made in the
past. But for the moment, it is too soon
to make that call.
Bottom line. ‘As
you know my opinion is that following an initial snapback (which appears to
be over), the US economy will likely return to its former subpar secular growth
rate, stymied by an irresponsible mix of fiscal/monetary policies.’
https://www.zerohedge.com/markets/coming-reversion-mean-economic-growth
US
International
Other
Household net worth to disposable income hits
record high.
https://www.zerohedge.com/markets/has-be-mistake
Wrangling over the debt ceiling is a charade.
https://www.pragcap.com/its-time-to-break-the-debt-ceiling/
The
Fed
Lessons not learned.
Biden’s
Plan
Watch what they do, not what they say.
http://gregmankiw.blogspot.com/2021/09/a-magic-trick-from-bidens-economists.html
Inflation
Inflation in the shadow of debt.
Mohamed El Erian rightly points out the potential danger
of stagflation. The only problem I have is his comment about
congress passing Biden’s plan for improving productivity via physical and human
infrastructure spending. He ignores the preponderance
of evidence that points to slower economic growth in the presence of high
national debt as well as the fact that ‘human’ infrastructure spending is political
parlance for social spending for which there has been very little return on
investment.
The
coronavirus
How much longer
are we going to tolerate the Constitutional abuse by our ruling class?
https://americanconsequences.com/buck-sexton-bidens-authoritarian-covid-19-battle/
Another victory
for truth by Project Veritas.
Bottom line.
Josh sure had it right
that the beginning of tapering will bring psychological relief; but he glosses
over the valuation adjustment that will likely accompany it.
https://thereformedbroker.com/2021/09/20/the-taper-when-it-comes-will-feel-like-a-relief/
More
optimism.
https://ritholtz.com/2021/09/what-if-things-go-right/
News on Stocks in Our Portfolios
What
I am reading today
What
we really know about climate change.
Why do we sleep?
https://aeon.co/essays/a-quantitative-theory-unlocks-the-mysteries-of-why-we-sleep
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website (http://investingforsurvival.com/home)
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