The Morning Call
6/12/26
The
Market
Technical
Thursday in the
charts.
Summary:
Traders dealt with Trump's rhetoric intraday-flipping from 'blowing
the shit out of Iran' to a 'no strikes, deal pretty much
wrapped up' sparking a plunge in oil (ignoring denials), spike
in stocks, and big drop in yields (shrugging off hot headline PPI and
ECB rate-hikes). Gold and bitcoin rallied as the dollar dropped. CNN
reports that this is the 38th time that President Trump has declared a
peace deal is imminent...
Thursday in the
technical stats.
https://www.barchart.com/stocks/momentum
https://www.barchart.com/stocks/market-performance
https://www.barchart.com/stocks/sectors/rankings
https://www.barchart.com/stocks/signals/new-recommendations
S&P breaks
support. Given yesterday’s pin action, the author’s probability of a support
break appears a bit overstated. However, a key point he makes is that the next
test is where the next high occurs, i.e., will this rally be short lived, roll
over and simply set a lower high or will go on to make a new higher high. I am
not making that prediction (given my abysmal record on this rally). I include
it as a thought exercise.
https://talkmarkets.com/article/sp-500-breaks-supportthe-80-top-signal-spacex-ipo-trap-1781183628
Net equity goes
positive.
https://www.zerohedge.com/markets/net-equity-supply-goes-positive-first-time-pandemic
Summary:
Federal Reserve Flow of Funds data released yesterday showed that net supply
went from a -$216 billion annualized pace in 4Q25 to +$124 billion in 1Q26. Pressure
will remain on supply, not least as buybacks are likely
to disappoint. That will also squeeze the near-record ROE. Make
of that what you will, but my hunch is taking equity out of the market when
firms are deluging the market with it is the safer path.
The dollar
debasement unwind.
https://www.zerohedge.com/the-market-ear/great-debasement-unwind
Summary:
The dollar debasement trade was one of the defining narratives of the past two
years. Gold surged, bitcoin exploded and investors rushed to position for a
weaker dollar. The problem is that the dollar appears to have other plans.The
dollar was supposed to be dead. Instead, DXY is trading above the key 100
level, above range highs, above the downtrend line and above a rising 200-day
moving average.A decisive close above 100.5 could force a painful reassessment
for the "dollar debasement" crowd. The squeeze risk is growing.
Friday morning
setup: US stock futures and global markets are higher, extending their rally
while oil hit the lowest level in months following fresh reports that the US
and Iran are nearing a provisional agreement to end their war, even if top
leadership has yet to sign off. Meanwhile, all eyes are on SpaceX - the world's
biggest IPO- where shadow markets are pricing a spike of at least 35% for
SpaceX on its debut, while online market see odds of a 30% close at roughly
breakeven. As of 8:00am ET, S&P 500 futures rose 0.6% after the
benchmark climbed 1.8% in the previous session. Pre-market, all Mag 7 are
higher led by GOOGL and META. Treasuries held steady after Thursday's
gain: 10Y yields are at 4.46%. The DXY dollar index fell 21bp to 99.639.
Commodities are all lower: WTI fell $3.90 to $83.81 while Brent slid
almost 4% to head for its first close below $88 a barrel since the first week
of the war. Base/precious metals are unchanged; ags are all lower. Today's
US economic data calendar includes June University of Michigan sentiment at
10am.
Fundamental
Headlines
The
Economy
US
International
April
Japanese industrial production was up 0.5% versus consensus of +0.8%; capacity utilization
fell 0.8% versus +2.0%.
April UK GDP
declined 0.1%, in line; April industrial production was flat versus +0.1%;
April YoY construction output was down 1.0% versus _-1.1%; the April trade balance was -L8.4 billion versus -L4.1
billion.
The May German CPI
declined 0.2%, in line.
Other
Economic charts of the week.
https://www.carsongroup.com/wp-content/uploads/2026/06/ChartsoftheWeekJune1-5.pdf
Overnight
News
The US insurance
industry’s standard setter has begun to examine credit risks linked to data
center projects, which are increasingly showing up in insurers’ investment
portfolios.
Big companies and
startups, chafing at rapidly escalating artificial intelligence costs, are
increasingly turning to tools that tap into cheaper AI models, including some
from China. That’s raising pressure on industry leaders OpenAI and Anthropic to
lower their prices, a prospect that could hurt their ability to grow into
profitable enterprises.
Iran
Overnight news.
Fiscal
Policy
Social Security is a political concept; there
is no looming insolvency.
Why is our ruling class abandoning economic
freedom?
https://reason.com/2026/06/10/why-are-republicans-and-democrats-abandoning-economic-freedom/
Inflation
My
favorite optimist argues for a declining inflation rate---and I think
that he may be right. That doesn’t mean that it is returning to its lows. So my
forecast of ‘inflation is as good as its going to get’ remains but I will
likely modify it by ‘inflation is as bad as its going to get’.
http://scottgrannis.blogspot.com/2026/06/inflation-likely-to-subside-growth.html
And he has some support.
Counterpoint.
And another.
https://www.capitalspectator.com/us-10-year-yield-risk-premium-continues-to-rise/
And a counterpoint to the counterpoint: Inflation
is high but is it broad?
https://stayathomemacro.substack.com/p/inflation-is-high-is-it-broad
Finally, sort of an in between.
https://bonddad.blogspot.com/2026/06/producer-prices-suggest-5-yoy-cpi-and.html
AI
An
entire industry propped up by bad math.
https://garymarcus.substack.com/p/an-entire-industry-is-being-propped
Frontier dreams meet the cost curve.
Summary:
We have argued for some time that agentic and complex workflows delivered by
frontier models would be expensive to run, constrained by physical bottlenecks,
and vulnerable to unrealistic expectations of frictionless deployment cost.
That judgement now looks less contrarian than it did when we first set it out
in February. Amazon has now removed its
token leaderboard, Microsoft has cancelled Claude
Code subscriptions, and there have been multiple reports of unexpectedly
large token bills. The salient point is that even the most powerful
technologies must pass through the prosaic discipline of cost curves, capacity
constraints, and marginal returns. Adoption is therefore becoming less
about what frontier models can do in principle and more about the price and
scarcity of the inputs required to make AI operational at scale. Compute,
power, cooling, memory bandwidth, and inference budgets are real and binding
constraints.
Investing
Equity supply surge---what happens next.
https://www.advisorperspectives.com/commentaries/2026/06/11/equity-supply-surge-historically-next
Investor Alert
The share price of
Cisco (CSCO) has reached its Sell Half Range. Accordingly, the High Yield
Portfolio will Sell one half of its position at the Market open.
News on Stocks in Our Portfolios
What
I am reading today
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