The Morning Call--Valuation distortions wrought by the Fed

 

The Morning Call

 

10/6/21

 

 

The Market

         

    Technical

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/big-tech-bitcoin-breakevens-black-gold-surge-debt-limit-doubts-loom

 

            A bit more detail:

 

(1)   the long bond was down, making a three month low.  Also, it finished for the second day below its 200 DMA [now support]; if it remains there through the close on Thursday, it will revert to resistance.  Remember that the 100 DMA is already resistance,

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

 

(2)   the dollar was up,

 

(3)   despite the S&P’s rally, it remained below its 100 DMA [now support]; if it stays there through the close today, it will revert to resistance.

 

In sum, the indices appear to be discounting inflation but in the presence of good economic growth.  I continue to question the latter.

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly mortgage applications fell 6.9% while purchase applications dropped 1.7%.

 

The September services PMI came in at 54.9 versus projections of 54.4; the September composite PMI was 55.0 versus 54.5.

https://www.advisorperspectives.com/dshort/updates/2021/10/05/august-markit-services-pmi-slowest-rise-in-9-months

 

The September ISM nonmanufacturing Index was 61.9 versus estimates of 60.0.

                          https://www.advisorperspectives.com/dshort/updates/2021/10/05/ism-services-report-september-shows-slight-growth

 

The September ADP private payroll report showed job increases of 568,000 versus predictions of 428,000.

                          https://www.zerohedge.com/personal-finance/adp-signals-bigger-expected-jobs-gain-september

 

                        International

 

August German factory orders were down 7.7% versus expectations of -2.1%.

 

August EU retail sales were up 0.3% versus forecasts of up 0.8%.

 

The September German construction PMI came in at 47.1 versus 44.6 in August; the September EU construction PMI was 50.0 versus 49.5 in August; the September UK construction PMI was 52.6 versus projections of 54.0.

 

                        Other

 

                          Fossil fuels are back---everywhere except in America.

                          https://townhall.com/columnists/stephenmoore/2021/10/05/fossil-fuels-are-back--everywhere-except-in-the-usa-n2596940

           

            Biden’s Plan

 

I suggested in Monday’s Morning Call that Manchin could likely be ‘bought’.  Welcome to the swamp.

              https://www.zerohedge.com/markets/im-not-ruling-anything-out-stocks-soar-after-manchin-hints-caving

 

Inflation

 

              Inflation is back with a vengeance in Latin America.

              https://www.nakedcapitalism.com/2021/10/inflation-is-back-with-a-vengeance-in-latin-america.html

 

              OPEC opt against big output boost.

              https://www.wsj.com/articles/opec-russias-gradual-oil-hike-pushes-prices-to-seven-year-high-11633356803

 

            China

 

              China’s risky business crackdown.

              https://www.project-syndicate.org/commentary/china-risky-business-crackdown-common-prosperity-campaign-by-raghuram-rajan-2021-09

 

     Bottom line.

 

            Update on valuations.

            https://www.advisorperspectives.com/dshort/updates/2021/10/05/p-e10-september-2020-update

 

            Valuation distortions wrought by the Fed.

            https://www.zerohedge.com/markets/we-have-one-market-concerned-about-current-valuations-and-we-have-another-corner-where

 

            For the bulls.

            https://www.advisorperspectives.com/commentaries/2021/10/05/putting-the-yield-spike-in-perspective

 

            Earnings well above trend.

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

 

            Checking your portfolio frequently is generally bad for your financial health.

            https://alhambrapartners.com/2021/10/03/weekly-market-pulse-zooming-out/

 

            September dividends by the numbers.

            https://politicalcalculations.blogspot.com/2021/10/dividends-by-numbers-in-september-2021.html#.YVyNnprMKUk

 

                        Soros cashing out.

            https://www.zerohedge.com/markets/soros-cashing-out-stocks-putting-some-capital-cryptocurrencies

 

 

    News on Stocks in Our Portfolios

 

CVS Health (NYSE:CVS) declares $0.50/share quarterly dividend, in line with previous.

 

What I am reading today

 

           

 

 

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