The Morning Call---Little consensus among economists

 

The Morning Call

 

2/28/23

 

The Market

         

    Technical

 

            Monday in the charts.

            https://www.zerohedge.com/markets/stocks-bonds-rally-despite-rising-rate-hike-odds-inflation-expectations

 

Note: the S&P tried to close back above the lower boundary of its very short-term uptrend but failed, thus, voiding that trend.  It remains above its 200 DMA which is now the focal point of support.  Let’s see if it can hold.

 

            Charts to watch.

            https://www.zerohedge.com/the-market-ear/charts-we-are-watching-approaching-must-hold-levels

 

            The near-term importance of the 200 DMA.

            https://www.zerohedge.com/the-market-ear/200-day-moving-average

 

            Investors are bracing for an increase in Market volatility.

https://www.wsj.com/articles/investors-are-bracing-for-spike-in-market-volatility-fb94e890?mod=markets_lead_pos1&utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=247816669&_hsenc=p2ANqtz-9eSK7q8cg-sCRV8NeGbFfSk8CnsC3z3et9i-MZynEIdaYZlAQBSvYqQSH38zR-pBkgA1oSdXHl83WYA4khJpGIWa_x3Q&utm_content=247816669&utm_source=hs_email

 

 

Two-year Treasury yield makes a new high.

https://www.capitalspectator.com/macro-briefing-27-february-2023/#more-19737

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          January pending home sales were up 8.1% versus expectations of +1.0%.

                          https://www.zerohedge.com/markets/us-pending-home-sales-explode-higher-january

 

The February Dallas Fed manufacturing index came in at -13.5 versus estimates of -2.0.

                          https://www.zerohedge.com/personal-finance/stupid-slow-dallas-fed-manufacturing-production-plunges-contraction

 

                        International

 

January Japanese industrial production fell 4.6% versus predictions of -2.6%; January retail sales were up 1.9% versus +0.3%; January YoY housing starts were up 6.6% versus +1.0%; January YoY construction orders were down 14.0% versus -2.2%.

 

                        Other

 

            Inflation

 

              This analyst argues that disinflation in now the trend.

              https://investorplace.com/hypergrowthinvesting/2023/02/this-1-chart-proves-why-disinflation-remains-the-trend/

 

Scott Grannis doesn’t go quite that far; but he is still optimistic about lower inflation.

http://scottgrannis.blogspot.com/2023/02/inflation-fears-are-overblown.html

 

                Recession

 

              But so far, no recession, at least where the consumer is concerned.

              https://www.nakedcapitalism.com/2023/02/people-got-used-to-higher-prices-and-are-outspending-even-raging-inflation-they-dont-want-this-thing-to-land.html

 

                  However, the math argues against a continuing strong consumer.

              https://www.advisorperspectives.com/commentaries/2023/02/27/no-landing-scenario-at-odds-with-feds-goals

 

                  Little consensus among economists.

              https://www.cnn.com/2023/02/27/economy/nabe-economic-outlook-february/index.html

 

                  Sub prime used car auto lender goes belly up.

              https://www.zerohedge.com/markets/subprime-auto-lender-and-used-car-retailer-collapses-distress-cycle-finally-arrives

 

 

    News on Stocks in Our Portfolios

 

Bank of Nova Scotia press release (NYSE:BNS): Q1 Non-GAAP EPS of C$1.85 misses by C$0.17.

Revenue of C$7.98B (-0.9% Y/Y) misses by C$280M

 

Bank of Nova Scotia (NYSE:BNS) declares CAD 1.03/share quarterly dividend, in line with previous.

 

What I am reading today

 

           

                        Fascinating research focuses on the origins of life.

            https://legalinsurrection.com/2023/02/fascinating-new-research-focuses-on-origins-of-life/

 

                The Berkshire Hathaway annual report.

            https://fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/2023/02/25/2022ar.pdf

 

                Knowing what you don’t know.

            https://ritholtz.com/2023/02/what-if-dunning-kruger-explains-everything/

 

 

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Monday Morning Chartology

 

The Morning Call

 

2/27/23

 

 

The Market

         

    Technical

 

The S&P had another lousy week.   It ended below the lower boundary of its very short-term uptrend; if it remains there through the close today, that trend will be voided. It also attempted to challenge its 200 DMA but failed.  If the very short-term uptrend can’t be sustained, then this DMA is clearly the next line of defense. It is still too soon to give up on this rally but we are a short hair away.

 

 

 

The long bond was down fractionally on the week; though it did, nonetheless, manage to reset its 100 DMA from support to resistance.  It is now in short and intermediate term downtrends and below both DMAs.  The next visible support is the lower boundary of its long term trading range which is so much lower that it doesn’t even show on this chart.  Not a good sign for bonds.

 

Bond volatility sharply higher.

https://www.zerohedge.com/the-market-ear/brutal-moves

 

 

GLD continued its downward momentum which, as I have noted previously, is not surprising given the rise in both interest rates and the dollar.  Still, it remains in both intermediate and long term uptrends and above both DMA’s---though it is rapidly approaching the latter.  It does have that enormous gap down open three weeks ago plus another one from last week.  So, it is positioned to rebound if either economic or geopolitical landscape were to turn sour.

 

 

 

The dollar smoked again last week.  It continues in both short and intermediate term uptrends and is now within shouting distance of challenging both DMAs---which represent some pretty stiff resistance.  Let’s see if UUP can maintain its upward momentum.

 

            However, there are plenty of people who believe that the dollar is headed lower,

            https://www.bloomberg.com/news/articles/2023-02-24/usd-dollar-strength-peaks-bringing-relief-for-global-inflation-trade?srnd=premium&sref=loFkkPMQ

 

 

 

 

 

            Friday in the charts.

            https://www.zerohedge.com/markets/hawkish-rate-re-awakening-triggers-dows-worst-week-sept

 

           

 

    Fundamental

 

       Headlines

 

              The Economy

                         

                        Last Week Review

 

The stats last week were heavily weighted to the plus side, though the primary indicators were evenly split (3/3),  Unfortunately, the positive indicators pointed to a more robust economy while the negative data centered around inflation.  That combo is not what the Fed (or the Market) wants to see.  Hence, the poor Market reaction.

 

So, it would appear that the consensus on the ‘higher for longer’ scenario continued to gain momentum.  But as you know, I remain a skeptic as to how long ‘longer’ is.  My view is that the Fed will ‘chicken out’ and that we will not see 2% inflation unless some exogenous event causes it.  I take comfort in that outlook because history is on my side---these guys in the Fed (except for Volcker) believe that they are so smart that they can ‘fine tune’ their way to that 2% goal.

 

Bottom line:  Regrettably, 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.

 

Unfortunately, the alternative scenario is the Fed ‘chickens out/moves the goalpost’---meaning continuing irresponsible fiscal and monetary policies, i.e., slower secular growth, higher secular inflation and lower multiples.

                                

                                 Has the recession already started?

                         https://www.realclearmarkets.com/articles/2023/02/24/the_very_serious_possibility_recession_has_already_happened_883667.html

                                

       Headlines

 

              The Economy

 

                        US

 

January durable goods orders fell 4.5% versus consensus of -4.0%; ex transportation, they were up 0.7% versus 0.0%.

 

                        International

 

The February EU economic sentiment index was 99.7 versus estimates of 101; the February industrial sentiment index was 0.5 versus 2.0; the February services sentiment index was 9.5 versus 12.4; the February consumer confidence index was -19, in line.

                                   

 

                         Other

 

                                                   Seasonal adjustments to the economic data can be potentially misleading.

                           https://www.axios.com/2023/02/23/retail-sales-seasonal-data-weird

 

                                                   Update on big four economic indicators.

                           https://www.advisorperspectives.com/dshort/updates/2023/02/24/the-big-four-real-personal-income-in-january

 

                                                   Housing market posts biggest drop in value since 2008.

                           https://www.bloomberg.com/news/articles/2023-02-22/us-housing-market-posts-2-3-trillion-drop-biggest-since-2008?sref=loFkkPMQ

 

                             Geopolitics

 

                 At last, somebody is waking up.

                 https://www.zerohedge.com/geopolitical/western-leaders-privately-admit-ukraine-cant-win-war

 

 

           Bottom line

 

             The latest from BofA.

             https://www.zerohedge.com/markets/hartnett-next-great-bull-markets-starts-after-next-recession-when-fed-forced-bail-out-us

 

 Talk about an optimist.  I get his bullish interpretations of the charts; but if you believe the stats (see last week’s link to Political Calculations) earnings estimates are coming down.

https://allstarcharts.com/sell-side-analysts-are-chasing/

                                                  

      News on Stocks in Our Portfolios

 

                        

 

What I am reading today

 

 

Monday morning humor.

https://luxurylaunches.com/travel/chinese-man-first-class-lounge-loophole.php 

 

 

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The Morning Call---This cycle is no different

 

The Morning Call

 

2/24/23

 

The Market

         

    Technical

 

            Thursday in the charts.

            https://www.zerohedge.com/markets/0dte-call-buyers-rescue-stocks-hawkish-hobbling-bonds-bid

 

            Critical levels to watch.

            https://www.zerohedge.com/markets/scariest-chart-bulls-are-ctas-about-sell-220-billion-stocks

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

January personal income rose 0.6% versus forecasts of +1.0%; January personal spending was up 1.8% versus +1.3%; the January PCE price index was up 0.6% versus +0.3%.

                          https://www.zerohedge.com/personal-finance/feds-favorite-inflation-signal-prints-hot-americans-spending-surged-jan

 

  The February Kansas City Fed manufacturing index came in at -9 versus   expectations of +1.

 

                        International

 

Q4 German GDP declined by 0.4% versus estimates of -0.2%; the March consumer confidence index was -30.5 versus -30.4.

 

January Japanese CPI was up 0.4% versus projections of +0.3%.

 

                        Other

 

                          Has housing bottomed?

                          https://www.pragcap.com/has-housing-bottomed/

 

                          Housing is the canary in the coal mine.

                          https://www.zerohedge.com/markets/us-housing-recession-canary-coal-mine

 

            The Fed

 

              Real interest rates are still negative.

              https://www.zerohedge.com/markets/inflation-raises-challenge-fed-get-real-rates-positive

 

            Fiscal Policy

 

The Fed is trying to lower inflation; fiscal policy is increasing it.  While the headline is correct, The Hill gives Trump a pass on his contribution to this problem, i.e., shutting the economy down in the first place.

  https://thehill.com/opinion/finance/3866603-the-fed-is-trying-to-lower-inflation-bidens-actions-are-increasing-it/?utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=247135847&_hsenc=p2ANqtz-816YKw04BbrqdDUwkFtHgHQ7XkjSHOmIA-bS-RROVOGZpV_gVgoYAXdX4Zed-y2UsndsU9w3Enc9uZ__bRZNeIo5Xe4w&utm_content=247135847&utm_source=hs_email

 

 

Having already proven that she inept at managing the Fed, Yellen is now trying her hand at foreign affairs---good luck with that.

https://www.nytimes.com/2023/02/23/business/yellen-ukraine-g20.html

 

            Geopolitics

 

              The Ukraine war’s prelude to what?

              https://townhall.com/columnists/victordavishanson/2023/02/23/the-ukraine-wars-prelude-to-what-n2619874

 

     Investor Alert

 

In our quarterly review of Cummins, Inc. (CMI) it failed to meet the minimum financial criteria for inclusion in the Dividend Growth Universe/Portfolio.  Accordingly, at the open, the Dividend Growth Portfolio will Sell its holding of CMI.

 

    Bottom line

 

            This cycle is no different.

            https://www.zerohedge.com/markets/do-not-be-fooled-it-return-normal

 

            2023 quarterly S&P dividend forecast.

            https://politicalcalculations.blogspot.com/2023/02/winter-2023-animated-snapshot-of-future.html#.Y_etKHbMKUk

 

            Cash is no longer trash.

            https://www.capitalspectator.com/desperately-seeking-yield-23-february-2023/

 

            An analysis of the current equity risk premium.

            https://www.wisdomtree.com/investments/blog/2023/02/23/the-most-important-charts-for-2023

 

    News on Stocks in Our Portfolios

 

EOG Resources press release (NYSE:EOG): Q4 Non-GAAP EPS of $3.30 misses by $0.10.

Revenue of $6.72B (+11.3% Y/Y) beats by $630M.

 

EOG Resources (NYSE:EOG) declares $0.825/share quarterly dividend, in line with previous.

Declares special dividend of $1.00 per share.           

 

What I am reading today

 

            Shocking discovery from new Webb telescope.

            https://www.kare11.com/article/news/nation-world/webb-space-telescope-massive-galaxies-discovery/507-9a71db8b-28bb-49c9-b781-379baa925e46

           

                        The Swedish model of funding education.

            https://www.adamsmith.org/blog/fixing-uk-school-education

 

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---Forget the Fed stopping to 'watch and wait'

 

The Morning Call

 

2/23/23

 

The Market

         

    Technical

 

            Wednesday in the charts.

            https://www.zerohedge.com/markets/bonds-dollar-bid-fed-minutes-spark-selloff-stocks-gold

 

Note: the S&P closed right on the lower boundary of the very short term uptrend off its October low.  Let’s see if it holds.

 

            Another strategist looking at 3800.

            https://www.zerohedge.com/the-market-ear/3800-handle

 

            Glass half full or half empty.

            https://www.zerohedge.com/the-market-ear/economy-earnings-glass-half-full-or-half-empty

 

            For the bulls.

            https://investorplace.com/hypergrowthinvesting/2023/02/why-the-new-bull-market-breakout-is-the-real-deal/

 

            Near term headwind for equities.

            https://www.zerohedge.com/the-market-ear/major-near-term-headwind-equities

 

            The yield curve continues to steepen.

            https://www.zerohedge.com/markets/all-recessions-were-preceded-aignificant-bear-steepening-3m30y-about-3-9-months-they

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

                        

 Weekly initial jobless claims totaled 192,000 versus predictions of 200,000.

 

 Q4 (second estimate) GDP grew 2.7% versus consensus of +2.9%; the GDP price index was +3.9% versus +3.5%.

 

The January Chicago Fed national activity index was reported at +.23 versus forecasts of -.25.

 

                        International

 

                          January EU CPI was -0.2%, in line.

 

                        Other

 

                          The latest Q1 GDP nowcasts.

                          https://www.capitalspectator.com/early-median-estimate-for-us-gdp-in-q1-skews-slightly-negative/

 

                          January architecture billings continue to contract.

                          https://www.calculatedriskblog.com/2023/02/aia-architecture-billings-continue-to.html

 

            The Fed

 

The FOMC released the minutes from its last meeting.  The main headline was that the participants unanimously agreed on further rate hikes.

https://www.calculatedriskblog.com/2023/02/fomc-minutes-all-participants-continued.html

 

              The missing pieces from the Fed minutes.

              https://www.zerohedge.com/markets/missing-pieces-fed-minutes-bigger-move-debate

 

              Forget the Fed stopping to ‘watch and wait’.

              https://www.zerohedge.com/the-market-ear/2-utopia

 

              David Stockman takes another swing at the Fed.

              https://www.zerohedge.com/markets/david-stockman-feds-giant-economic-science-experiment

 

            The coronavirus

 

              This from the NY Times: the mask mandates did nothing.

              https://www.nytimes.com/2023/02/21/opinion/do-mask-mandates-work.html

 

            Geopolitics

 

              Who is losing and winning the economic war over Ukraine?

              https://www.nakedcapitalism.com/2023/02/whos-winning-and-losing-the-economic-war-over-ukraine.html

 

              China ready to join forces with Russia.

              https://www.zerohedge.com/geopolitical/china-says-ready-join-forces-russia-defend-national-interests-putin-confirms-xi-visit

 

              If you really want to get depressed, read this.

              https://www.zerohedge.com/markets/neocons-know-monetary-system-collapsing-martin-armstrong-warns-war-checks-all-boxes

 

              The politics of fertilizer.

  https://www.bloomberg.com/news/features/2023-02-20/feed-the-world-without-fertilizer-why-crop-nutrients-are-suddenly-political?srnd=premium&sref=loFkkPMQ&utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=246911572&_hsenc=p2ANqtz-9fxAIrMOGUwn7CCJO_usj3kQnxWdgbrDE7iMsf1HA3CLW_9ZTXLG5rydo9MtBFftjDqAVI3m1ODOhuRPKcjJvTWwlG8w&utm_content=246911572&utm_source=hs_email

 

     Investor Alert

 

Intel cut its dividend.  Therefore, the Dividend Growth Portfolio is Selling its position.

 

    Bottom line.

 

            S&P trailing EPS estimates as of 2/15

            https://politicalcalculations.blogspot.com/2023/02/winter-2023-snapshot-of-expected-future.html#.Y_ZoDnbMKUk

 

            In praise of diversification.

            https://alhambrapartners.com/2023/02/20/weekly-market-pulse-patience-is-required/

 

            REITs as an inflation hedge.

            https://www.institutionalinvestor.com/article/b8xk8kbfntr416/REITs-Can-Hedge-Inflation-But-Not-During-a-Market-Crisis

 

            Short termism is self-defeating.

            https://behaviouralinvestment.com/2023/02/22/short-termism-is-our-default-setting/

 

This is a decent discussion on why buying quality companies is a good investment strategy; but the author misses a key point---you buy their stocks when they are historically cheap----period.  There are any number of ways of doing that but the value bands that our model creates (Buy Level; Sell Half Level) is an effective way of doing so.  It just takes patience to wait for Market psychology to turn really negative and give us an entry point.

https://blog.validea.com/a-detailed-look-at-the-quality-factor-2/

 

    News on Stocks in Our Portfolios

 

What I am reading today

 

           

 

 

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