The Morning Call--Already back to 2% inflation?

 

The Morning Call

 

 1/31/23

 

The Market

         

    Technical

 

            Monday in the charts.

            https://www.zerohedge.com/markets/hawkish-fed-expectations-shift-sparks-selling-bonds-bullion-big-tech

 

Note: the S&P closed back below the upper boundary of its short term downtrend, negating last Thursday’s challenge.  Not great news for the bulls.  But a number of our stocks made gap down opens which generally builds in a reversal to at least fill those gaps.  Plus, we need follow through before we assume upward momentum has been broken.

 

            Is the market pricing in a debt ceiling shutdown?

            https://theirrelevantinvestor.com/2023/01/29/a-government-shutdown/

 

            What is the most mispriced risk in the Market?

            https://www.zerohedge.com/markets/what-most-mispriced-risk-markets-2023

 

            Are we setting up for a dollar reversal?

            https://www.zerohedge.com/the-market-ear/are-we-setting-dollar-reversal

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          Month to date retail chain store sales grew faster than in the prior week.

 

The January Dallas Fed manufacturing index came in at -8.4 versus expectations of -11.

                          https://www.advisorperspectives.com/dshort/updates/2023/01/30/dallas-fed-manufacturing-growth-slows-in-january

 

                        International

 

                          Q4 EU GDP grew +0.1% versus projections of -0.1%.

 

The December Japanese unemployment rate was 2.4%, in line; December preliminary industrial production was -0.1% versus -1.2%; December retail sales were up 1.1% versus +0.6%; December YoY housing starts fell 1.7% versus +0.5%; January consumer confidence was 31.0 versus 30.5.

 

December German retail sales were down 5.3% versus estimates of +0.2%; the January unemployment rate was 5.5%, in line.

 

The January Chinese manufacturing PMI was 50.1 versus consensus of 49.8; the January nonmanufacturing PMI was 54.4 versus 47.3.

 

                        Other

 

                          ‘Hard’ versus ‘soft’ economic data.

                          https://www.tker.co/p/weekly-macro-soft-vs-hard-data

 

                          US employment cost index up less than anticipated.

                          https://www.zerohedge.com/markets/us-employment-cost-index-surges-record-507-yoy

 

            Inflation

           

              Already back to 2% inflation?

              https://www.cato.org/blog/pce-inflation-fell-21-second-half-77-first-0

 

              Inflation and consumer spending cooled in December.

              https://apnews.com/article/inflation-federal-reserve-system-economy-business-34cdecfdb5f7f12748b31d6e2d9ff893

 

              German industry to pay 40% more for energy than pre-crisis.

              https://www.zerohedge.com/economics/price-shock-just-starting-german-industry-pay-40-more-energy-pre-crisis

 

            Recession

 

              The serious mortgage delinquency rate increased slightly in December.

              https://www.calculatedriskblog.com/2023/01/fannie-mae-mortgage-serious-delinquency.html

 

                  Has the housing market bottomed?

              https://www.zerohedge.com/markets/has-housing-market-bottomed-surprising-result-little-known-market-indicator

 

  Real disposable income per capita continues to rise.

              https://www.advisorperspectives.com/dshort/updates/2023/01/29/real-disposable-income-per-capita-continued-to-inch-up-in-december

 

            Geopolitics

 

              More on the Rand study, Ukraine and the likelihood of success.

              https://www.nakedcapitalism.com/2023/01/why-despite-rands-recommendation-the-ukraine-war-is-unlikely-to-end-in-a-negotiated-settlement.html

 

              The war that went wrong (must read).

              https://www.zerohedge.com/geopolitical/hedges-ukraine-war-went-wrong

 

     Bottom line

 

            Simple but hard.

            https://ritholtz.com/2023/01/simple-but-hard/

 

    News on Stocks in Our Portfolios

 

 

What I am reading today

 

            How to define poverty.

            https://www.adamsmith.org/blog/but-heres-the-thing-we-have-beaten-poverty

 

 

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

 

 

 

Monday Morning Chartology

 

The Morning Call

 

1/30/23

 

 

The Market

         

    Technical

 

The S&P had a great week (1) successfully challenging its 200 DMA and resetting it to support and (2) initiating a challenge of the upper boundary of its short term downtrend; if it remains there through the close today, it is reset to a trading range. If that occurs, the next resistance exists at is the 23.6% Fibonacci retracement level (~4200).  So, the technical picture is getting stronger and appears to be reflecting better economic numbers (see below).

 

 

 

The long bond was up ever so slightly on the week---but it couldn’t mount a challenge of its 200 DMA and it made a lower high.  Not very encouraging to the bond folks and not reflective of a ‘Fed pivot/Fed lucks out’ scenario.  As you know, I almost always favor the bond market’s judgment over the stock market’s.  But it is too soon to assume the upbeat economic/Fed narrative is overdone.  Nonetheless, the long bond needs to trade better for the stock market’s Goldilocks storyline to hold.

           

            Pay attention to the bond market.

            https://allstarcharts.com/will-rates-hold/

 

 

 

 

GLD continued its romp higher.  Likely, it is a reflection of the renewed uncertainty over recession, inflation and the debt ceiling.

 

 

 

 

 

 

The dollar couldn’t hold the lower boundary of its short-term uptrend.  The good news, if there is any, is that it didn’t blow through that support and pick up downside momentum.  One would think that if investors were convinced of the ‘Fed lucks out’ scenario, UUP would be performing better.  So, like bonds and gold, the dollar’s pin action is not reflective of the stock market’s enthusiasm.

 

 

 

            Friday in the charts.

            https://www.zerohedge.com/markets/massive-short-squeeze-sparks-surge-stocks-despite-hawkish-shift-rates

 

Investors’ dilemma.

https://www.zerohedge.com/markets/somethings-gotta-give

 

Buyback blackout ends with a bang.

https://www.zerohedge.com/markets/buyback-blackout-ends-bang-why-goldmans-trading-desk-sees-rally-lasting-until-mid-feb

 

    Fundamental

 

       Headlines

 

              The Economy

                         

                        Last Week Review

 

Last week the stats in the US were overwhelmingly positive (three upbeat primary indicators, one neutral and two negative), while overseas they were just slightly on the plus side. The US numbers continued to show an economy not quite as weak as had been feared and inflation subsiding.

http://scottgrannis.blogspot.com/2023/01/gdp-up-inflation-down.html

 

This data keeps alive the hope for the ‘Fed lucked out’ scenario.  As to whether or not the Fed buys that narrative, we will get some feedback from the FOMC which meets this week. 

 

As you know, of late, Fed members have sounded quite hawkish.  And I hope that they stick with their guns---because as I have noted previously, slowing inflation is not the same thing as bringing it back to two percent.

 

Unfortunately, whatever the rhetoric, I will have a tough time believing it, simply because of the Fed’s past inconsistencies and its unwillingness to stay tough in the face of difficult economic/Market headlines. 

 

Bottom line: there still is always a chance that the Fed could luck out, at least in the short term. But…. Regrettably, the economy is too deep in the doo doo for the ‘lucked out’ scenario to prevail long term.  Years of fiscal profligacy have left us with a debt to GDP ratio far in excess of the boundary marked by Rogoff and Reinhart as the level at which the servicing of too much debt negatively impacts the growth rate of the economy.  And years of irresponsible monetary expansion have led to the misallocation of resources and the mispricing of risk. 

 

 

Correcting those self-inflicted wounds won’t be easy. It will take years of fiscal and monetary restraint to do so.  And that would mean less fiscal stimulus and interest rates staying higher for longer than many now expect. 

 

So, I believe that the Fed will stay tight as long as it is convenient to do so.  If we/the Fed get ‘lucky’, then the Markets will hopefully stay reasonably calm as the Fed pursues its QT.  If not, then expect turmoil and the Fed ‘chickens out’.  Short term, whether the Fed ‘chickens out’ or ‘lucks out’,  stocks will likely enjoy a push higher.

 

And speaking of ‘lucking out’ (must read).

https://www.advisorperspectives.com/commentaries/2023/01/27/things-in-atlanta-are-dropping-like-a-stone

 

And another ‘get lucky’ article.

https://www.bloomberg.com/news/articles/2023-01-27/fed-sees-soft-landing-as-silver-lining-of-temp-jobs-decline?srnd=premium&sref=loFkkPMQ

 

Longer term, I am not so positive---meaning continuing irresponsible fiscal and monetary policies, i.e. slower secular growth and higher secular inflation.

 

       Headlines

 

              The Economy

 

                        US

 

 

                        International

 

                          Q4 German GDP fell 0.2% versus estimates of flat.

 

The January EU economic sentiment index as 99.9 versus predictions of 97.0; the industrial sentiment index was 1.3 versus -0.6; the services sentiment index was 10.7 versus 7.9; consumer confidence was -20.9, in line.

                        

                         Other

 

                           A warning from Jeffrey Snider.

                           https://www.realclearmarkets.com/articles/2023/01/27/dollar_providers_biding_time_betting_on_collapse_878163.html

 

                           More from Ed Yardini on Q4 GDP and inflation numbers.

                           https://www.yardeniquicktakes.com/q4-gdp-report-was-weak/

 

                           The current data support whatever forecast you want to make.

                           https://www.capitalspectator.com/is-us-recession-risk-high-low-or-both/

 

                           Lumber prices have stopped going down.

                           https://markets.businessinsider.com/news/commodities/lumber-prices-soar-housing-market-shows-sign-rebound-home-prices-2023-1

 

                                                

                                                   The rise in car loan defaults.

                           https://www.zerohedge.com/economics/its-perfect-storm-more-americans-cant-afford-their-car-payments-during-peak-financial

 

                        The Fed

 

              The Fed gets its wish.

               https://www.zerohedge.com/markets/fed-gets-its-wish-inflation-below-funds-rate-final-sales-too

 

            Geopolitics

 

              Rand study breaks with US hawks.

              https://www.zerohedge.com/geopolitical/new-rand-study-breaks-dc-consensus-warns-us-against-protracted-conflict-ukraine

 

 

Bottom line

 

  The latest from BofA.

  https://www.zerohedge.com/markets/hartnett-another-3-5-will-feel-bathing-lava-if-youre-bear

 

  Beware of New Metrics.

 https://onveston.substack.com/p/the-easiest-way-to-spot-a-market

 

What I am reading today

 

           

 

 

 

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The Morning Call---A change coming in Ukraine?

The Morning Call

 

1/27/23

 

The Market

         

    Technical

 

            Thursday in the charts.

            https://www.zerohedge.com/markets/bonds-bullion-drop-stocks-dollar-pop-hawkish-rate-hike-odds-shift

 

Note: the S&P closed above the upper boundary of its short term downtrend.  If it remains there through the close on Monday, it will reset to a trading range.  Were that to occur, the next resistance level is the 23.6% Fibonacci retracement level (~4200).

 

            The pain trade is higher.

            https://www.advisorperspectives.com/commentaries/2023/01/26/the-pain-trade-is-higher-for-now

 

Counterpoint

https://www.zerohedge.com/markets/stock-warnings-get-louder-estimates-falling

 

When stocks don’t go down on bad news, that is bullish.

https://www.zerohedge.com/markets/goldman-when-stocks-dont-go-down-bad-news-thats-bullish-signal

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

The November Chicago Fed national activity index came in at -.51 versus consensus of -.18.

https://www.advisorperspectives.com/dshort/updates/2023/01/26/chicago-fed-little-change-in-economic-growth-in-december

 

December new home sales rose 2.3% versus projections of -2.0%.  But that is somewhat misleading.  Read this:

https://politicalcalculations.blogspot.com/2023/01/new-home-market-capitalization-crash.html#.Y9LVKnbMKUk

 

December personal income was up 0.2%, in line; personal spending was down 0.2% versus -0.1%; the PCE price index was up 0.1%, in line.

 

The January Kansas City Fed manufacturing index was -4 versus expectations of -14.

https://www.advisorperspectives.com/dshort/updates/2023/01/26/kansas-city-fed-manufacturing-survey-activity-was-flat

 

                        International

 

January Japanese YoY CPI was 4.4% versus estimates of 4.2%; YoY core CPI was 4.3% versus 4.2%.

 

                        Other

 

                          Toward a sane energy policy.

                          https://www.adamsmith.org/blog/energy-starts-at-home

 

            The Fed

 

              More on M2 and its impact on the economy/inflation.

              https://www.reuters.com/markets/us/us-inflation-roller-coaster-prompts-fresh-look-long-ignored-money-supply-2023-01-26/

 

            Fiscal Policy

 

              How worried should we be if the debt ceiling is not lifted?

              https://www.brookings.edu/2023/01/25/how-worried-should-we-be-if-the-debt-ceiling-isnt-lifted/

 

            Geopolitics

 

An interesting change in the rhetoric about Ukraine; but it is only a starting point---if that.

https://www.nakedcapitalism.com/2023/01/blinken-concedes-war-is-lost-offers-kremlin-ukrainian-demilitarization-crimea-donbass-zaporozhe-and-restriction-of-new-tanks-to-western-ukraine-if-there-is-no-russian-offensive.html

 

     Bottom line

 

            The risks in constantly tinkering with our investment process.

            https://behaviouralinvestment.com/2023/01/24/why-cant-we-stop-changing-our-investment-process/

 

    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--Are we getting any value from the government's debt fueled spending?

 

                     The Morning Call           

 

1/26/23

 

The Market

         

    Technical

 

Wednesday in the charts.

https://www.zerohedge.com/markets/wash-out-rinse-weak-hands-repeat-squeeze-gold-rips-equity-traders-buy-fking-dip

 

Note: the S&P intraday fell below its 200 DMA but reversed and ended above it for the fourth day, resetting it from resistance to support.  That puts the index in the narrow range between that MA and the upper boundary of its short term downtrend.  A break of either would likely portend future direction.

 

The stock market just triggered a bullish ‘golden cross’.

https://investorplace.com/hypergrowthinvesting/2023/01/the-stock-market-just-triggered-a-bullish-golden-cross-signal/

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

                        

 Weekly initial jobless claims totaled 186,000 versus predictions of   205,000.

 

  Q4 GDP growth was 2.9% versus consensus of 2.6%; consumer spending     rose 2.1% versus +1.9%; the price index was +3.5% versus +3.3%.

 

  December durable goods orders were up 5.6% versus expectations of +2.4%; ex transportation, they were -0.1% versus -0.2%.

                           https://www.zerohedge.com/economics/us-core-durable-goods-order-growth-weakest-2-years-aircraft-orders-surge

 

  The December trade balance was -$90.3 billion versus forecasts of -$82.5 billion.

 

                           December building permits fell 1.0% versus estimates of -1.6%.

 

                        International

 

                        Other

 

                          The mortgage delinquency rate increased in December.

                          https://www.calculatedriskblog.com/2023/01/black-knight-mortgage-delinquency-rate.html

 

                          Architecture billings continued to decline in December.

                          https://www.calculatedriskblog.com/2023/01/aia-architecture-billings-index.html

 

The Fed

 

  The latest M2 statistics.

  http://scottgrannis.blogspot.com/2023/01/m2-news-continues-to-impress.html

 

              The Bank of Canada raises rates but says the hikes may be over.

              https://www.zerohedge.com/markets/first-pause-bank-canada-hikes-25bps-expected-will-hold-rates-it-assesses-impact

 

            Fiscal Policy

 

Here is a review of some of the provisions in the recently passed Inflation Reduction Act.  Don’t bother with the What Should Be Done section; it is just a lot of ‘shoulds’ which will likely never happen.

              https://www.heritage.org/budget-and-spending/commentary/combat-the-inflation-reduction-acts-central-planning

 

              Are Americans’ getting any value from government’s debt fueled spending?

              https://politicalcalculations.blogspot.com/2023/01/are-americans-getting-real-value-from.html#.Y9F1anbMKUk

 

            Inflation

 

              Inflation maybe cooling, but prices on some items will remain high.

  https://www.cnbc.com/2023/01/25/inflation-is-cooling-but-high-prices-will-stick-around.html?utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=243173116&_hsenc=p2ANqtz-8DyP9P3fYc_FrXuMnAFqW4KxUZsCcE9oZ30ok3WsnMIgZNjjuE-lwR_GwVXAvkxMBtJao4ePPYpCP_-OWvNYqDR2kp5A&utm_content=243173116&utm_source=hs_email

 

            Geopolitics

 

              There is nothing intelligent, strategically important, altruistic, etc., etc. about this.

              https://www.zerohedge.com/geopolitical/german-foreign-minister-just-said-quiet-part-out-loud-ukraine

 

     Bottom line

 

            Hedge fund sees risk in US markets.

            https://www.bloomberg.com/news/articles/2023-01-23/hedge-fund-that-got-china-right-sees-risk-in-us-credit-stocks?sref=loFkkPMQ

 

    News on Stocks in Our Portfolios

 

Mastercard press release (NYSE:MA): Q4 Non-GAAP EPS of $2.65 beats by $0.07.

Revenue of $5.8B (+11.5% Y/Y) beats by $10M.

 

T. Rowe Price press release (NASDAQ:TROW): Q4 Non-GAAP EPS of $1.74 beats by $0.03.

Revenue of $1.52B (-22.4% Y/Y) misses by $10M.

Sherwin Williams press release (NYSE:SHW): Q4 Non-GAAP EPS of $1.89 beats by $0.04.

Revenue of $5.23B (+9.9% Y/Y) misses by $30M.

 

What I am reading today

 

            The lunacy of our political class.

            https://pjmedia.com/vodkapundit/2023/01/25/report-putin-wants-to-buy-u-s-weapons-biden-left-in-afghanistan-but-theres-even-more-n1664501

 

US military trying to ‘box out’ China and Russia from strategic resources in South America.

https://www.nakedcapitalism.com/2023/01/the-us-looks-to-escalate-its-war-with-russia-and-china-in-latin-america.html

 

 

 

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