The Morning Call---Wither September?

 

The Morning Call

 

8/31/23

 

The Market

         

    Technical

 

Wednesday in the charts.

https://www.zerohedge.com/markets/stocks-gold-gain-dollar-pain-soft-landing-narrative-implodes

 

Note: the S&P continued its climb, voiding that very short term downtrend, resetting its 50 DMA from resistance to support and opening the way for a run higher.  There is mixed technical opinion (see below) on that point.  And on the fundamental side, stocks moving up on lousy economic data begs the question, has a recession already been discounted?   I know that I said that I would be nibbling at equities if the S&P pushed back above its 50 DMA.  But with stocks already handsomely priced, September being a notoriously bad month for the Market and the sudden rush of poor economic data, I am too chicken to follow my own advice. I am adding to our long Treasury position.

 

Will September kill the Market’s bullishness?  (Note: the article was clearly written before S&P surge above its 50 DMA on Tuesday.  However, the remainder of the article is still a reminder that September can be rough on your portfolio)

            https://investorplace.com/2023/08/will-september-kill-the-market-bullishness/

 

            Bad is good, again.

            https://www.zerohedge.com/markets/bad-good-again-goldman-flows-guru-says-new-bullish-stromfront-brewing-stocks

 

            Counterpoint.

            https://www.zerohedge.com/markets/bad-news-good-news-juice-stocks-might-soon-run-out

 

            Bonds to buy.

            https://www.zerohedge.com/the-market-ear/big-bond-buy-0

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          July pending home sales rose 0.9% versus estimates of -0.6%.

                          https://www.advisorperspectives.com/dshort/updates/2023/08/30/pending-home-sales-edge-higher-second-straight-month

 

July personal income was up 0.2% versus predictions of +0.3%; July personal spending was up 0.8% versus +0.7%.

 

The July PCE price indicator came in at +0.2%, in line.

https://www.zerohedge.com/personal-finance/feds-favorite-inflation-indicator-jumps-higher-july-wage-growth-slowed

 

August initial jobless claims totaled 228,000 versus consensus of 235,000.

 

                        International

 

July preliminary Japanese industrial production was down 2.0% versus forecasts of down 1.4%; July retail sales were up 2.1% versus -0.1%; July YoY housing starts were off 6.7% versus -0.8%; July YoY construction orders were up 8.7% versus +2.1%.

 

July German retail sales fell 0.8% versus projections of +0.3%; the August unemployment rate was 5.7%, in line.

 

The July EU unemployment rate was 6.4%, in line; August flash CPI was +0.6% versus +0.3%.       

 

The August Chinese manufacturing PMI was 49.7 versus expectations of 49.5; the August nonmanufacturing PMI was 51.0 versus 51.1.

 

                        Other

 

            Recession

 

              An early warning?

              https://www.capitalspectator.com/is-us-economic-resilience-peaking/

 

              EV inventories piling up.

              https://www.zerohedge.com/markets/we-have-turned-away-inventory-us-ev-market-struggles-cars-pile-dealer-lots

 

              Investor home purchases crashing.

              https://www.zerohedge.com/economics/airbnb-bubble-bursts-investor-home-purchases-crash-45-biggest-drop-2008

 

            China

 

              China’s unsustainable, unbalanced growth model.

              https://www.nakedcapitalism.com/2023/08/hoisted-from-comments-chinas-unsustainable-unbalanced-growth-model-and-its-current-economic-wobbles.AC

 

                           China attempts to stabilize finances of troubled shadow banks.

              https://www.bloomberg.com/news/articles/2023-08-30/china-asks-citic-to-examine-finances-of-shadow-bank-zhongrong?srnd=premium&sref=loFkkPMQ

 

  How do we manage China’s decline?

  https://www.nytimes.com/2023/08/29/opinion/china-economy-decline.html

 

  Here is something new and different: an analysis of the Chinese economy that isn’t totally downbeat.           

https://www.advisorperspectives.com/commentaries/2023/08/30/china-contagion-contained

 

    News on Stocks in Our Portfolios

 

 

What I am reading today

 

            The last time (must read)

            https://www.raptitude.com/2021/09/the-last-time-always-happens-now/

 

            The relentless rise of stablecoins.

            https://marginalrevolution.com/marginalrevolution/2023/08/the-relentless-rise-of-stablecoins.html

           

                        Win big, lose big---the range of outcomes.

            https://www.mr-stingy.com/range-of-outcomes/

 

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The Morning Call---The Fed is clueless

 

The Morning Call

 

8/30/23

 

The Market

         

    Technical

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/markets-jolted

 

Note: the S&P exploded higher challenging that very short-term downtrend and its 50 DMA.  If it closes there today, that suggests a push higher, quite possibly to its all-time high (~4818).  In the meantime, it should find some resistance at the upper boundary of its short-term uptrend (~4745); but even that would give the S&P a lot of room to run.

 

            Tuesday’s technical advice from Lance Roberts.

            10 Best Days - A Meme For Every Bull Market - RIA (realinvestmentadvice.com)

 

The bond market is not pointing to a major sell-off.

https://allstarcharts.com/no-defense-at-all/

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly mortgage applications were up 2.3% while purchase applications were up 2.0%.

 

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

https://politicalcalculations.blogspot.com/2023/08/less-than-useful-data-weekly-chain.html

 

The June Case Shiller home price index rose 0.9% versus expectations of up 0.6%.

https://www.advisorperspectives.com/dshort/updates/2023/08/29/home-price-index-sp-case-shiller-positive-momentum-continues-june

 

Q2 2^nd estimate GDP growth was +2.1% versus predictions of +2.4%; the Q2 price index was +2.0% versus +2.2%; Q2 corporate profits were +1.6% versus -5.9%.

 

July job openings (JOLTS) totaled 8.827 million versus projections of 9.465 million.

https://www.advisorperspectives.com/dshort/updates/2023/08/29/job-openings-drop-to-lowest-level-in-over-two-years

 

The July trade balance was -$91.1 billion versus forecasts of -$94.0 billion.

 

The August consumer confidence index came in at 106.1 versus estimates of 116.0.

                          https://www.advisorperspectives.com/dshort/updates/2023/08/29/consumer-confidence-index-conference-board-pulls-back

                                                

 

 The August ADP private payroll reports showed job increases of 177,000 versus consensus of 195,000.

                                                  https://www.zerohedge.com/personal-finance/adp-employment-report-signals-slowdown-labor-market-wage-growth-slows-dramatically

 

 

                        International

 

August Japanese consumer confidence was reported at 36.2 versus expectations of 37.5.

 

The August EU economic sentiment index was 93.3 versus predictions of 93.7; the August industrial sentiment index was -10.3 versus -9.9; the August services sentiment index was 3.9 versus 4.2; the August consumer confidence index was -16, in line.

 

                          August German CPI was +0.3%, in line.

 

                        Other

 

            The Fed

 

              The Fed doesn’t have a clue.

              https://alhambrapartners.com/2023/08/27/weekly-market-pulse-the-fault-is-not-in-r-star/

 

Recession

 

  Credit is least priced for recession.

  https://www.zerohedge.com/markets/credit-least-priced-recession

 

            China

 

              China’s economy: pep talks at the top, gloom on the ground.

              https://www.nytimes.com/2023/08/29/world/asia/china-economic-gloom.html

 

              Is China’s century already over?

              https://issuesinsights.com/2023/08/25/the-china-century-is-over/

 

              The rising danger of a falling China.

              https://danieldrezner.substack.com/p/the-rising-dangers-of-a-falling-china

        

              China and US agree to take steps to ease trade tensions.

              https://apnews.com/article/china-us-raimondo-trade-economy-technology-74718ed644e6041b5a713cb7c5265bfd

 

         Geopolitics

 

           The shifting dynamics of the Ukraine conflict.

           https://www.nakedcapitalism.com/2023/08/zelenskys-latest-tv-interview-shows-how-much-the-ukraine-conflicts-dynamics-have-shifted.html

 

     Bottom line.

 

         Time to manage expectations down for the equity risk premium.

         https://www.capitalspectator.com/so-many-equity-risk-premium-models-so-little-time-part-ii/#more-20745

 

    News on Stocks in Our Portfolios

 

What I am reading today

 

            How to be lucky.

            https://sapientcapital.com/insights/how-to-be-lucky/

 

 

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The Morning Call---Why central bankers are unsure if they have raised rates enough

The Morning Call

 

8/29/23

 

The Market

         

    Technical

 

            Monday in the charts.

            https://www.zerohedge.com/markets/bonds-buck-quiet-stocks-squeeze-higher-event-risk-heavy-week-looms

 

Note: the S&P closed right on the upper boundary of a very short-term downtrend.  A break above it would suggest further upside; a reversal, the opposite.  Follow through.

 

More charts.

https://www.zerohedge.com/the-market-ear/fearless-vix-back

 

            The two-year Treasury flashes a sell signal.

            https://allstarcharts.com/2-year-t-note-flashes-sell/

 

            Three bond charts worth watching.

            https://www.zerohedge.com/the-market-ear/3-charts-we-are-watching-contrarian-bonds

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

                       

 The August Dallas Fed manufacturing index was -17.2 versus predictions   of -21.0.

                          https://www.advisorperspectives.com/dshort/updates/2023/08/28/dallas-fed-manufacturing-business-conditions-weaken-in-august

 

                        International

                         

                          The July Japanese unemployment rate was 2.7% versus estimates of 2.5%.

 

September German consumer confidence was reported at -25.5 versus consensus of -24.3.

 

 

                        Other

                       

              Regional Fed manufacturing overview.

              https://www.advisorperspectives.com/dshort/updates/2023/08/28/regional-fed-manufacturing-overview-august-2023

 

The Fed

 

  Why central bankers are unsure if they have raised rates enough.

  https://www.wsj.com/economy/central-banking/why-central-bankers-are-unsure-whether-theyve-raised-rates-enough-aa57c648?mod=economy_lead_pos5&utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=271988172&_hsenc=p2ANqtz-97_uDtnnJoKquwb7dgKKVbK7hZQdBPX3J9zLbeUrQVOyVZsgg0e-3_LesD7OPRkmw_LBPPUrlLtVocpnhtKpyYGSTl4A&utm_content=271988172&utm_source=hs_email

 

 

Fiscal Policy

 

  With higher interest rates comes a day of reckoning for the federal government

  https://www.barrons.com/articles/high-interest-rates-federal-debt-deficit-budget-fed-448dafdc?mod=past_editions&utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=271988172&_hsenc=p2ANqtz-_vSXgxVtG_XTYujSvu9r-6-9HTqx4UUts7MTJ3QImW3IxZvzcySx-kbxqbXyBYyDjFd9yqXzyTZ7Ni7LTsMk8jDp2sfg&utm_content=271988172&utm_source=hs_email

 

GOP tensions between the house and senate raise the odds of a government shutdown.

https://thehill.com/homenews/senate/4170143-gop-tensions-between-senate-house-raise-shutdown-odds/

 

                Recession

 

              Stocks are underpricing recession.

              https://www.zerohedge.com/markets/us-stocks-are-underpricing-recession-risks

 

              Fannie Mae single family mortgage delinquency rate lowest since 2002.

              https://www.calculatedriskblog.com/2023/08/fannie-mae-single-family-mortgage.html

 

China

 

  China’s slow moving economic disaster.

  https://www.axios.com/2023/08/26/chinas-slow-moving-economic-disaster

 

  The problem with China’s economy.

  https://econbrowser.com/archives/2023/08/the-problems-with-chinas-economy

 

              China’s problems start at the top.

  https://www.nytimes.com/2023/08/26/opinion/china-economy-xi-jinping.html?utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=271988172&_hsenc=p2ANqtz-99eYcMDYuJ2_8rw7WmSb5o64tvLVtsuEkNhnTs2nc60DeDJc5f4xtzqDMk_PyfID4e9IrGj0Wi_fiA4Y4qIw2SOx4uBw&utm_content=271988172&utm_source=hs_email

 

     Bottom line

 

            Timing is hard.

            https://www.ft.com/content/47b49fd1-48fb-4855-9c34-d32348c6df37

 

    News on Stocks in Our Portfolios

 

Bank of Nova Scotia press release (NYSE:BNS): Q3 Non-GAAP EPS of C$1.73.

Revenue of C$8.09B (+2.0% Y/Y).

 

Bank of Nova Scotia (NYSE:BNS) declares CAD 1.06/share quarterly dividend, in line with previous.

 

What I am reading today

              

            Tuesday morning humor.

            https://www.powerlineblog.com/archives/2023/08/rich-men-strike-back.php

 

            Life is a promise; fulfill it.

            https://traderfeed.blogspot.com/2023/08/the-wellness-grid-framework-for.html

 

The curious way your skin impacts your health.

https://www.bbc.com/future/article/20230823-the-curious-ways-your-skin-shapes-your-health

 

The science of cycles.

https://www.advisorperspectives.com/commentaries/2023/08/28/global-job-science-cycles-john-mauldin

 

            We have already spent all the money.

            https://www.adamsmith.org/blog/sorry-but-weve-already-spent-all-the-money

 

 

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Monday Morning Chartology---The budget deficit is exploding

 

The Morning Call

 

8/28/23

 

 

The Market

         

    Technical

 

The S&P ended the week slightly higher than where it started though it was a roller coaster ride.  The most significant point was it touched the upper boundary of a very short-term downtrend and fell back.  I read that as meaning the current correction isn’t over though there are lots of pundits out there that disagree.  Whatever the case, the S&P still hasn’t set a bottom (so far) to this little retreat.  It could be nothing worse than the 8/18 low of 4329.  But there are other candidates: (1) its 100 DMA [~4313], (2) the lower boundary of its short-term uptrend [~4183] and (3)   its 200 DMA [~4145].  That said, the mainstream consensus is that this is just a sell-off in a bull market. 

 

Whatever the case, the task remains to wait till the S&P finds support, evaluate any new economic data then make an educated guess based on the dataflow whether or not, this is indeed a selloff in a bull market.  You know that I am skeptical; but if it continues to appear that scenario is unfolding, I will put some money to work.

          

            A no-rules market.

            https://www.zerohedge.com/markets/no-rules-market-goldman-flows-guru-warns-dip-buyers-are-already-very-full

 

All caught up?

https://www.zerohedge.com/the-market-ear/tme-weekend-all-caught

 

Setting up for a bounce.

https://www.zerohedge.com/the-market-ear/setting-bounce-0

 

 

 

 

TLT’s chart is still ugly on a long-term basis.  However, last week it did get something of a reprieve---making a sharp move up on Wednesday.  That is the good news.  The bad news is that in doing so, it made a big gap up, which as you know, I think will have to be filled.  I think this pin action is more indicative of the high level of investor uncertainty about recession/inflation than it is a sudden turn in opinion.  Of course, I am subject to being wrong.  So, we just have watch the follow through.

 

 

 

Like the long Treasury, GLD made big reversal last week, voiding the test of its 200 DMA, but making a big gap up open in the process---which needs to be closed.  Still, on a long-term basis, its chart is in good shape and there is no reason not to expect another challenge of its all-time high---especially, if bond prices continue to rally.

 

The dollar was up again---making its way to the upper boundary of its short-term uptrend.  It clearly has the most solid chart on a short-term basis.  But usually, a strong dollar is not a plus for stocks; so, we need to keep that in the back of our minds as we watch equities.

 

 

Friday in the charts.

https://www.zerohedge.com/markets/hawkish-powell-horrible-data-spark-yield-curve-pain-nasdaq-gains

 

    Fundamental

 

       Headlines

 

              The Economy

                         

                        Last Week Review

 

Another slow week for economic data. What we got was balanced.  Primary indicators were one positive, one neutral, one negative. Overseas, the data was slightly negative.

 

The results continue mixed---one week positive, one negative---keeping in question whether or not (1) inflation is in the rear-view mirror and (2) we will get a ‘soft’ landing.  

 

The major economic event for the week was Powell’s speech at Jackson Hole.  It was generally anticipated as being of a hawkish tone and that is exactly what we got---meaning rates stay higher for longer. 

https://www.bloomberg.com/news/articles/2023-08-25/powell-signals-fed-will-raise-rates-if-needed-keep-them-high?srnd=premium&utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=271753357&_hsenc=p2ANqtz--9ng1QKGJa5M_0d5v7o16Y7H-vm_lPzEHoHvA8Fv1NiHR3m0o1_eCeeGgYEGoxkjL-MoG3cDGWYzGYdcazrgirJ929Tw&utm_content=271753357&utm_source=hs_email&sref=loFkkPMQ

 

On the other hand, there has been a growing lack of consensus about just how hawkish/dovish the Fed needs to be (which I have tried to document in this letter) as it relates to both (1) inflation and (2) recession.  Which has made the prior narrative [inflation in the rear-view mirror along with a soft land] questionable.

 

Part of the reason for this growing disparity of opinion is simply the lack of consistency in the numbers; and part the mounting concern about the health of the Chinese economy, the world’s second largest.

 

This all spells economic uncertainty and that tends to not be great for the Market.

 

For the moment, I am sticking with my recession forecast though (1) my conviction remains weak and (2) if there is one, I have no idea of its magnitude. 

Economic Downturn Still A Risk To Stocks - RIA (realinvestmentadvice.com)

 

I am also maintaining my position that the Fed loosens at the first sign of trouble.  Although here too, my level of certainty is quite low.  In short, I am just as confused as everyone else.

 

In that kind of environment, the probabilities of a mistake in monetary and/or fiscal policy rises and with it the odds of the one scenario that would screw almost all investors/forecasters/current elected officials, i.e., either the Fed sticks to its guns (made necessary by a lack of improvement in the inflation stats), pushing the economy into a rough recession or the economy falls into a severe recession of its own accord weighted down by years of monetary/fiscal mismanagement. 

 

Longer term, irrespective of how low inflation goes in the short term, irrespective of whether or not we have a recession and if so, how deep it will be, we are still faced with an economy growing at well below its historic secular rate and a base rate of inflation above 2%.

 

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---which unfortunately is not apt to happen.

                                      

                                   Lance Roberts agrees (must read)

                          https://www.zerohedge.com/markets/deficit-surge-will-lead-lower-rates-not-higher

                                                 

              The Economy

 

                        US

                                          

 

                        International

 

The June Japanese leading economic indicators index was reported at 108.9, in line.

 

                    Other

 

 

                The Fed

 

                  A bank failure few are talking about.

                  https://www.realclearmarkets.com/articles/2023/08/25/a_bank_failure_that_few_are_talking_about_975092.html

           

  Fiscal Policy

                The US budget deficit is exploding.

                 https://www.bloomberg.com/news/articles/2023-08-24/bond-market-flashes-warning-as-us-budget-deficit-surges?srnd=premium&sref=loFkkPMQ

  Recession

              US consumers showing signs of stress.

  https://www.nytimes.com/2023/08/25/business/consumer-retail-shopping.html?utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=271753357&_hsenc=p2ANqtz-_qvnrHArmWH9rqXx0cxcWZ55HUefCAzOm1AbAsu7oYFh6M2IiQIc0WI_S63LahQb7IyX1FMAL9nqP9JkiWNgg0TrO8gg&utm_content=271753357&utm_source=hs_email

 

  Household debt at all-time high.

  https://www.cnbc.com/2023/08/25/household-debt-is-at-an-all-time-high-but-2008-was-still-worse.html?utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=271753357&_hsenc=p2ANqtz--MWpX_4yf6FVi4R7jFSjoa_5dtKvo8LJVKSueVrOl32eXPxx2Db1cxoU2NecakGNrJjom2CUt8GoyGnayvhZj3JTLayA&utm_content=271753357&utm_source=hs_email

 

       Bottom line.

 

            The latest from BofA.

            https://www.zerohedge.com/markets/nyet-zero-hartnett-warns-nasdaq-just-peaked-while-brics-11-end-globalization

 

      News on Stocks in Our Portfolios

 

                3M settles litigation over defective earplugs.

            https://www.zerohedge.com/markets/3m-shares-jump-litigation-payout-defective-military-earplugs-viewed-favorably-analysts

 

What I am reading today

 

            The state protects itself while crime against ordinary citizens surges.

            https://www.zerohedge.com/political/state-protects-itself-while-crime-against-ordinary-people-surges

 

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