The Morning Call---No asset class is remotely ready for inflation.

 

The Morning Call

 

2/29/24

 

 

The Market

         

    Technical

 

            Wednesday in the charts.

            https://www.zerohedge.com/markets/stocks-slip-crypto-rips-dips-record-etf-volumes

            Note: the S&P again managed to stay above the upper boundary of that wedge formation---by               the barest of margins. Still that has to be taken as a positive. That said, investors are clearly                     trying to figure out just how positive to be. This is not a time to be committing funds.

 

    

            Goldman Sachs’ funds flow guru warns equities have entered a period of euphoria.

            https://www.zerohedge.com/markets/return-yolo-was-not-my-bingo-card-feb-goldman-flows-guru-warns-us-equities-have-entered

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly initial jobless claims totaled 215,000 versus predictions of 210,000.

 

January personal income was up 1.0% versus estimates of +0.4%; personal spending was up 0.2%, in line.

 

January PCE was up 0.3%, in line; core PCE was up 0.4%, also in line.

 

                        International

                       

  January Japanese industrial production fell 7.5% versus expectations of   down 7.3%; January retail sales were up 0.8% versus 0.6%; January YoY housing starts were down 7.5% versus -7.7%; January YoY construction orders was up 9.1% versus +4.0%.

 

January German retail sales declined 0.4% versus forecasts of +0.5%; the February unemployment rate was 5.9% versus 5.8%; the February preliminary CPI was up 0.4% versus +0.5%.

 

                        Other

 

            The Fed

 

              Steve Forbes thinks that the Fed should lower rates at its next meeting.

              https://www.youtube.com/watch?v=wM91ujDE3dY&list=PLpndQ-APwbNXDxxBubkkkDQrTaJXt_ix0

 

            Fiscal Policy

 

              (2^nd est.) Q4 GDP was up $334 billion while government debt was up $834 billion.

              https://www.zerohedge.com/markets/us-gdp-grew-334-billion-q4-growth-cost-834-billion-debt

 

            Inflation

 

              How we measure inflation is all wrong.

              https://www.cato.org/blog/we-are-still-measuring-inflation-all-wrong-2

 

              The market capitalization of the new home market fell in January.

              https://politicalcalculations.blogspot.com/2024/02/market-cap-of-us-new-homes-decreases-to.html

 

              More data on home prices.

  https://wolfstreet.com/2024/02/27/the-most-splendid-housing-bubbles-in-america-feb-2024-update-20-city-index-drops-for-2nd-month-from-double-top-biggest-price-drops-from-2022-peak-san-francisco-seattle-portland-denver-phoenix/

 

 

           Recession

 

             The latest Q1 GDP growth nowcast.

            https://www.capitalspectator.com/us-recession-risk-stays-low-with-moderate-q1-growth-nowcast/

 

                Government Shutdown

 

              Congressional leaders announce deal to avert shutdown.

              https://www.zerohedge.com/political/heres-what-will-be-affected-during-impending-government-shutdown

 

             The Financial System

 

              Flawed valuation threatens $1.7 trillion private credit boom.

https://www.bloomberg.com/news/articles/2024-02-28/how-private-credit-market-boom-is-hiding-potential-valuation-problems?srnd=homepage-americas&embedded-checkout=true&sref=loFkkPMQ

 

              Pension plan sells Manhattan office tower for $1.00.

              https://www.zerohedge.com/markets/who-could-be-next-largest-canadian-pension-fund-sells-manhattan-office-tower-1

           

                Civil Strife

 

              The government and CBS.

              https://www.powerlineblog.com/archives/2024/02/cbs-gov-con.php

 

Hey, wait a minute. What is good for the goose should be good for the gander: FBI wants reporter to surrender over January 6^th reporting.

https://www.theblaze.com/news/blaze-news-investigative-writer-steve-baker-says-fbi-wants-him-to-self-surrender-friday-in-dallas-over-his-jan-6-reporting

                       

     Bottom line

 

              No asset class is remotely ready for inflation.

              https://www.zerohedge.com/markets/no-asset-class-remotely-ready-more-inflation

 

            The downside to trading.

            https://newsletter.rationalwalk.com/p/too-clever-by-half

 

    News on Stocks in Our Portfolios

 

What I am reading today

 

            Leaked Russian files outline criteria for nuclear strike.

            https://www.ft.com/content/f18e6e1f-5c3d-4554-aee5-50a730b306b7

 

                        Quote of the day.

            https://cafehayek.com/2024/02/quotation-of-the-day-4559.html

 

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---The Fed and fiscal policy assure the dollar's decline

 

The Morning Call

 

2/28/24

 

 

The Market

         

    Technical

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/big-shorts-bitcoin-black-gold-bid-yield-curve-bear-steepens

 

Note: the S&P held above the upper boundary of that wedge formation---by the hair on its chinny, chinny chin. Await follow through.

 

            The tech wreck continues.

            https://allstarcharts.com/the-tech-wreck-continues/

 

            A sell signal?

            https://www.zerohedge.com/the-market-ear/deja-vu-very-similar-set-last-summers-perfect-sell-signal

 

            The Fed and fiscal policy assure the dollar’s decline.

            https://www.zerohedge.com/markets/fed-and-treasury-ensure-dollar-downside-ahead

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly mortgage applications were down 5.6% while purchase applications were down 5.0%.

 

Month to date retail chain store sales grew at a slower pace than in the previous week.

 

The December Case Shiller home price index fell 0.3% versus consensus of -0.1%.

https://www.advisorperspectives.com/dshort/updates/2024/02/27/sp-case-shiller-home-price-index-upward-trend-decelerates-december-2023

 

 

The second estimate of Q4 GDP growth was 3.2% versus predictions of 3.3%; the second estimate Q4 PCE was 1.8% versus 1.7%; the second estimate of real consumer spending was 3.0% versus 2.8%.

 

The February Richmond Fed manufacturing index came in at -5 versus projections of +3.

https://www.advisorperspectives.com/dshort/updates/2024/02/27/richmond-fed-manufacturing-activity-flat-february-2024

 

The February consumer confidence index was 106.7 versus estimates of 115.0.

                          https://www.advisorperspectives.com/dshort/updates/2024/02/27/consumer-confidence-retreats-in-february

 

                        International

 

The December Japanese leading economic indicators were reported at 110.2 versus expectations of 110.0.

 

The February EU economic sentiment index was 95.4 versus forecast of 96.7; the industrial sentiment index was -9.5, in line; the services sentiment index was 6 versus 9; the consumer confidence index was -15.5, in line.

 

                        Other

 

            Recession

 

              Real wage growth thru January 2024.

              https://econbrowser.com/archives/2024/02/real-wage-growth-thru-january-2024

 

              Will the US economy drive global growth this year?

  https://www.project-syndicate.org/commentary/us-economy-soft-landing-likely-but-not-certain-by-mohamed-a-el-erian-2024-02?utm_source=project-syndicate.org&utm_medium=email&utm_campaign=authnote

 

                        Government Shutdown

 

              House conservatives’ demands stall efforts to avoid March 1^st shutdown.

              https://thehill.com/homenews/house/4490368-house-conservative-demands-shutdown/

 

              But April 1^st may be more critical.

  https://finance.yahoo.com/news/lawmakers-hope-to-avoid-a-march-1-shutdown-an-april-30-deadline-may-be-more-critical-090012917.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuY2FwaXRhbHNwZWN0YXRvci5jb20v&guce_referrer_sig=AQAAAC1V8-m267svNrXbZ6ee2E6mQkGyrA4Q7dojYgQqnrqHO9YDLkSWNf-ah_BeStyoYy33b2EFYs6k_makDGOBihGtkISncoGbfaW7bMKDTOgbu1ocoWa-qnxp4sxIwERT1BYdrk6psN6yhaDfNunalirEL1l7JTt1qYhqj7QmkA4v

 

 

    Bottom line

 

            A bull market may just be getting started.

            https://www.zerohedge.com/markets/stock-bull-market-might-just-be-getting-started

 

            When to take profits?

            https://alhambrapartners.com/2024/02/25/weekly-market-pulse-artificial-intelligence/?src=news

 

            Companies looking to equity to finance growth as interest rates rise.

https://www.bloomberg.com/news/articles/2024-02-27/reddit-campari-aston-martin-turn-to-equity-markets-for-much-needed-cash?srnd=phoenix-americas&embedded-checkout=true&sref=loFkkPMQ

 

 

    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--What happens if we get some actual bad news?

 

The Morning Call

 

2/27/24

 

The Market

         

    Technical

 

            Monday in the charts.

            https://www.zerohedge.com/markets/crypto-rips-mag7-dips-super-short-squeeze-sends-small-caps-soaring

 

Note: yesterday, the S&P confirmed its successful challenge of the upper boundary of its short term uptrend---but just barely so, closing fractionally above that trend line. For the moment, I am going to assume that the challenge has been successful. But a close today below that boundary would reverse the call. Follow through.

 

            Hedge funds dumping tech stocks, retail buying.

            https://www.zerohedge.com/markets/hedge-funds-are-dumping-tech-stocks-retail-buying

 

            Goldman positions for momentum reversal.

            https://www.zerohedge.com/markets/momo-fomo-or-nomo-goldman-trader-shows-how-position-momentum-reversal

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

January new home sales were up 1.5% versus expectations of +0.9%; building permits were down 0.3% versus -1.5%.

https://www.advisorperspectives.com/dshort/updates/2024/02/26/new-home-sales-inch-up-january-2024

 

January durable goods orders fell 6.1% versus forecasts of down 4.5%; ex transportation, they were down 0.3% versus +0.2%.

 

The February Dallas Fed manufacturing index came in at -11.3 versus predictions of -8.0.

                          https://www.advisorperspectives.com/dshort/updates/2024/02/26/dallas-fed-manufacturing-business-conditions-continue-to-worsen-in-february

 

                        International

 

                          January Japanese CPI came in at 0.0% versus estimates of -0.1%.

 

                          The March German consumer confidence index was -29, in line.

 

            The Fed

 

              The Treasuries market is losing its shock absorber.

              https://www.wsj.com/economy/central-banking/treasury-markets-are-losing-their-shock-absorber-75ed6ea1?mod=economy_lead_story

 

              Soaring stock prices may slow interest rate cuts.

              https://www.thestreet.com/investing/a-soaring-stock-market-may-delay-delay-rate-cuts

 

              So should the data flow.

              https://www.capitalspectator.com/looking-ahead-to-us-economic-data-for-february/

 

            Fiscal Policy

 

              Spiraling public debt risks action by the bond vigilantes.

              https://www.ft.com/content/370e94f6-b6b3-4e8b-99e4-3a94c77276ee

 

            Recession

 

              Cracks in consumption have started to appear.

              https://www.advisorperspectives.com/commentaries/2024/02/26/cracks-consumption-have-started-appear

 

            Geopolitics

 

              NATO freaking out over crumbling Ukraine military.

              https://www.nakedcapitalism.com/2024/02/nato-freakout-over-crumbling-ukraine-military-poland-threatens-us-with-nuclear-development-if-no-aid-package.html

 

     Bottom line

 

            A boom in reverse stock splits.

https://wolfstreet.com/2024/02/23/this-stuff-is-just-funny-we-have-a-boom-in-mega-reverse-stock-splits-to-keep-the-ballooning-number-of-imploded-stocks-listed-a-while-longer/

                       

            What happens if we get some actual bad news?

            https://www.zerohedge.com/markets/stock-rally-driven-less-hopeful-start-year

 

    News on Stocks in Our Portfolios

 

Bank of Nova Scotia press release (NYSE:BNS): Q1 Non-GAAP EPS of C$1.69.

Revenue of C$8.43B (+5.9% Y/Y).

 

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

 

 

What I am reading today

 

           

                        How to overcome performance pressure.

            https://traderfeed.blogspot.com/2024/02/how-to-overcome-performance-pressure.html

 

            Quote of the day.

            https://cafehayek.com/2024/02/quotation-of-the-day-4557.html

 

 

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

 

2/26/24

 

The Market

         

    Technical

 

The S&P continued its positive performance albeit with a minor hiccup. I covered most of the action in last week’s Morning Calls. But to summarize (1) the S&P fell out of a wedge formation but, (2) recovered from the challenge one day longer than our time and distance discipline calls for, (3) surged above the upper boundary of that wedge formation [the upper boundary of its short term uptrend], (4) but did so on a huge gap up open---which as you know, I believe has to be filled. 

 

Overall, I think this pin action a positive for, at least, the short term. Certainly, there is no overhead resistance except at a truly extended level (~6700). On the other hand, (1) we have two stocks that are nearing their Sell Half levels [though admittedly these start to occur well before a Market peak], (2) that gap up open may act as an anchor to upside momentum and (3) as per the links below, Market technicians are sounding warning signals.

 

Bottom line. Momentum remains to the upside, at least short term. I continue to hold the IWN trading position.

 

            Dow divergences.

            https://allstarcharts.com/140-year-old-strategy-is-working/

 

            More divergences.

            https://www.zerohedge.com/markets/market-cracks-below-surface-collapsing-big-money-breadth-marks-growing-bearish-divergence

 

            Potential blow off top.

            https://www.zerohedge.com/markets/markets-general-dynamic-looks-potential-blow-top-nomura-warns

 

                The latest from Goldman.

            https://www.zerohedge.com/markets/goldman-trader-stocks-all-time-high-markets-riskreward-profile-has-changed

 

            More from Goldman.

            https://www.zerohedge.com/the-market-ear/not-even-1999-yet

 

 

The long bond was up on the week, managing to bounce off its 100 DMA. Nevertheless, it made a new lower low; so the trend remains to the downside (higher rates).

 

 

 

 

 

GLD had a great week, rallying off its 100 DMA (now support) and beginning a challenge of its 50 DMA (if it remains there through the close today, it will revert to support). On the negative side, it made a large gap up open on Tuesday which needs to be filled. Despite this very positive one week performance, it remains in a short term downtrend. As has been my position for the last four months, until GLD can break above its all-time high, I still see no reason to dabble.

       

 

 

 

 

 

While the dollar’s long term uptrend remains in place, its short term technical picture has been wrecked. To be sure, a gap down open of the order of magnitude shown on the chart begs to be closed. And that is what has been happening since its low in late December. However, last week, the dollar’s advance showed some signs of tiring. As it approached the upper boundary of its short t term downtrend and both its 100 and 200 DMA’s (heavy resistance), it failed to hold the minor uptrend off its December low. Let’s see what kind of follow through we get; remember a weak dollar is generally good for equities.

 

 

 

            Friday in the charts.

            https://www.zerohedge.com/markets/best-week-bullion-2024-mega-caps-melt-bad-breadth

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        Week in review

 

It was a slow week for economic data. The stats in the US were pretty evenly divided as were the primary indicators (one positive, one negative). So, nothing there to prompt any kind of change on outlook nor to relieve concerns that the brief string of upbeat numbers may have been just that---brief. In short, no reason to back off my recession call.

 

One item worth mentioning: the minutes from the last FOMC meeting were more hawkish than anticipated. That in turn has altered the Street narrative, (1) now at least considering that the next Fed move could be to raise rates versus lower them, (2) certainly modifying the rate cut story line to ‘fewer for longer’, but (3) suggesting that my recession forecast is off base, irrespective of the data flow.

https://www.bloomberg.com/news/articles/2024-02-22/senior-fed-officials-bolster-case-for-cautious-approach-to-interest-rate-cuts?srnd=premium&embedded-checkout=true&sref=loFkkPMQ

 

Two issues remain:

 

First, at least for me, is that inflation may not be behind us as I had thought which means the Fed (if you believe its current narrative) could stay tighter for even longer keeping the risk of recession omnipresent for much longer.

 

On the other hand, if you are a cynic like me, you can’t help but think that the Fed will ease (for political reasons) whether it has conquered inflation or not.

 

Second, I (and most of the rest of the universe) believed that we were getting clarity on the question of recession/landing, i.e., that the economy would avoid a hard landing. Last week’s stats certainly raises doubts.

 

Bottom line:

 

(1)   Unfortunately, the inflation risk may not be behind us as per my current forecast. I am not altering it yet but clearly [the Fed thinks that it might be] it is now in question. And any further data suggesting that it is not will likely prompt a change. That, in turn, would amplify the impact of a grossly irresponsible fiscal policy which if left unresolved will ultimately push interest rates and inflation to even higher levels, risking a tighter monetary policy and impeding the economy’s ability to grow.

                              

(2)   Just as unfortunate, the question of recession [what kind of landing] which appeared to be gaining clarity, remains a bit murky. Of course, my forecast had been for some type of growth problem which I was considering changing. Last week’s stats increases my hesitation to do so.

                                               

                        US

 

                        International

 

                        Other

 

            The Fed

 

              The ECB can afford less restrictive stance by summer.

  https://www.bloomberg.com/news/articles/2024-02-23/ecb-can-afford-less-restrictive-stance-from-summer-simkus-says?srnd=premium&embedded-checkout=true&sref=loFkkPMQ

 

 

            Recession

 

              Two January recession indicators.

              https://econbrowser.com/archives/2024/02/cfnai-for-january-wei-for-mid-february

 

              Weekly recession alert indicator.

              https://www.advisorperspectives.com/dshort/updates/2024/02/23/recession-weekly-leading-economic-index

 

              The mortgage delinquency rate fell in January.

              https://www.calculatedriskblog.com/2024/02/ice-mortgage-delinquency-rate-decreased.html

 

            Government Shutdown

 

              Shutdown fears grow.

              https://thehill.com/homenews/house/4484048-gop-shutdown-fears-grow-we-could-be-in-a-world-of-hurt/

 

     Bottom line

 

            The latest from BofA.

            https://www.zerohedge.com/markets/harnett-how-trade-coming-end-us-exceptionalism

 

            Using macroeconomics to aid in investing.

            https://disciplinefunds.com/2024/02/21/how-to-use-macroeconomic-investing-analysis/

 

            The newest ‘it’s different this time’ argument. As always, it’s probably not.

            https://www.capitalspectator.com/will-ai-compensate-for-a-low-expected-equity-risk-premium/

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

            How to keep your memory sharp (avoid dementia)

                Want to keep your memory sharp? Here’s what science recommends. (nationalgeographic.com)

 

            The seven most exciting archeological finds in 2023.

            7 of the most exciting archaeological discoveries in 2023 (nationalgeographic.com)

 

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