Wednesday, December 6, 2023

The Morning Call---The Taylor Rule says that the Fed should already be cutting

 

The Morning Call

 

12/6/23

 

The Market

         

    Technical

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/lousy-labor-data-sends-yields-lower-bitcoin-big-tech-buck-soar

 

            Rotation is the lifeblood of the Market.

            https://allstarcharts.com/rotation-is-the-lifeblood/

 

            Trading on terror.

            https://marginalrevolution.com/marginalrevolution/2023/12/trading-on-terror.html

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly mortgage applications were up 2.8% while purchase applications declined 0.3%.                     

                           

Month to date retail chain store sales were dramatically lower than in the prior week.

 

Q3 nonfarm productivity rose 5.2% versus consensus of +4.9%; unit labor costs fell 1.2% versus -0.9%.

 

October job openings (JOLTS) report showed a total of 8.83 million openings versus predictions of 9.3 million.

https://www.advisorperspectives.com/dshort/updates/2023/12/05/job-openings-jolts-october-2023

 

The October trade balance was -$64.3 billion versus forecasts if -$64.2 billion.

 

The November services PMI came in at 50.7, in line; the November composite PMI was 50.8, also in line.

https://www.advisorperspectives.com/dshort/updates/2023/12/05/s-p-global-services-pmi-renewed-upturn-in-november

 

The November ISM nonmanufacturing index was 52.7 versus estimates of 52.0.

https://www.advisorperspectives.com/dshort/updates/2023/12/05/ism-services-pmi-continued-expansion-in-november

 

The November ADP private payrolls reported showed job increases of 103,000 versus projections of 130,000.

https://www.zerohedge.com/personal-finance/hospitality-jobs-tumble-first-time-almost-3-years-adp-disappoints

 

The December economic optimism index was 40.0 versus expectations of 45.2.

                       

                        International

 

October German factory orders fell 3.7% versus consensus of +0.1%: the November construction PMI was 36.2 versus 39.0.

 

October EU retail sales were up 0.1% versus predictions of +0.2%; the November construction PMI was 43.3 versus 43.2.

 

                        Other

 

            The Fed

 

              How many rate cuts next year?

              https://www.ft.com/content/ac9b547d-306f-49fe-b940-98a8ae4f1395

 

              The Taylor Rule says the Fed should already be cutting.

              https://mrzepczynski.blogspot.com/2023/12/back-to-monetary-policy-basics-with.html

 

           Fiscal Policy

 

              Why the US is careening towards bankruptcy.

              https://www.powerlineblog.com/archives/2023/12/why-we-are-careening-toward-bankruptcy.php

           

          Inflation

 

           US home prices increased YoY in October.

           https://www.calculatedriskblog.com/2023/12/corelogic-us-home-prices-increased-47.html

 

           The argument that inflation is still with us.

           https://www.zerohedge.com/markets/if-fed-cuts-it-will-repeat-cut-first-errors-2010s-2000s-1990s-1980s-and-ignore-inflation

 

          Recession

 

           Is economic activity lower than it seems?

           https://econbrowser.com/archives/2023/12/is-economic-activity-really-a-lot-lower-than-it-seems

 

           Signs of a weakening job market (see JOLTS report above).

           https://www.wsj.com/economy/jobs/signs-of-a-weakening-job-market-in-five-charts-86b05716?mod=economy_lead_story

 

           So far corporations have dodged the impact of higher interest rates.

           https://www.nytimes.com/2023/11/28/business/economy/corporate-interest-rates.html

 

          The Financial System

        

            Is the banking system safe?

            https://www.nakedcapitalism.com/2023/12/is-american-banking-safe-you-might-not-like-the-answer-from-two-fed-veterans.html

 

    Bottom line

 

            Historical Market behavior during and after a rate pause.

            https://www.zerohedge.com/markets/fed-pauses-what-comes-next

 

            More on valuation.

            https://www.advisorperspectives.com/dshort/updates/2023/12/05/buffett-valuation-indicator-november-2023-update

 

            Is the S&P 500 investable?

            https://alhambrapartners.com/2023/12/03/weekly-market-pulse-is-the-sp-500-still-uninvestable/

 

            Wall Street analysts are bullish on 2024.

            Wall Street Analysts Are Optimistic For 2024 - RIA (realinvestmentadvice.com)

 

            November dividends by the numbers.

            https://politicalcalculations.blogspot.com/2023/12/dividends-by-numbers-in-november-2023.html

 

    News on Stocks in Our Portfolios

 

 

What I am reading today

 

            Quote of the day.

            https://cafehayek.com/2023/12/quotation-of-the-day-4472.html

 

                        A contrarian take on the costs on obesity.

            https://www.adamsmith.org/blog/mr-dimbleby-really-is-wrong-on-this-obesity-costs-the-nation-near-nothing

 

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