The Morning Call---You can't raise rates and not expect a reaction

 

The Morning Call

 

10/29/21

 

The Market

         

    Technical

 

Thursday in the charts.  Note: yesterday, the S&P reset is short term trend from a trading range to an uptrend---again.

            https://www.zerohedge.com/markets/dollar-dives-amid-crypto-chaos-biden-unveils-big-spending-bill

 

            What has been driving the recent rise in stock prices.

            https://www.linkedin.com/in/edward-yardeni/detail/recent-activity/

 

            NASDAQ melt up.

            https://www.zerohedge.com/the-market-ear/cvnn18fplg

 

Pandemonium in the bond markets.  As the article suggests, the bond guys appear to be embracing the economic slowdown/recession scenario.  Typically, this is not good for equities.  See above---confused?

            https://www.zerohedge.com/markets/96-billion-reasons-why-treasury-var-shock-about-get-worse

 

                More.

            https://www.zerohedge.com/the-market-ear/surging

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

September pending home sales fell 2.3% versus expectations of being unchanged.

https://www.calculatedriskblog.com/2021/10/nar-pending-home-sales-decreased-23-in.html

 

September personal income declined 1.0% versus forecasts of -0.2%; September personal spending was up 0.6% versus up 0.5%; the September PCE price index was +0.2%, in line.

https://www.zerohedge.com/economics/feds-favorite-inflation-indicator-30-year-high-savings-rate-plunges

 

The October Kansas City Fed manufacturing index came in at 25 versus 10 recorded in September.

 

                        International

 

September Japanese unemployment rate was 2.8%, in line; September preliminary industrial production fell 5.4% versus -3.2%; September YoY housing starts up 4.3% versus +7.5%; September YoY construction orders up 27.3% versus -2.0% in August.

 

Q3 EU flash GDP growth was +2.2% versus estimates of +2.0%; October flash CPI was +0.8% versus +0.5% in September.

 

                        Other

 

                          Updating some important economic indicators.

                          https://scottgrannis.blogspot.com/2021/10/miscellaneous-chart-updates.html

 

                          Will services offset weakness in manufacturing?

                          https://www.advisorperspectives.com/commentaries/2021/10/27/will-services-offset-weakness-in-manufacturing

 

                          Another winner from the bureaucrats.

                          https://www.zerohedge.com/markets/shippers-fear-catastrophic-fallout-crazy-california-port-fees

 

The Fed

 

  You can’t raise rates and not expect a reaction.

  https://www.zerohedge.com/markets/rabo-you-cant-raise-rates-and-prop-our-current-idiotic-system

 

Biden’s Plan

 

  Another gem from our ruling class.

  https://www.zerohedge.com/political/biden-wants-give-separated-illegals-450000-person

 

    News on Stocks in Our Portfolios

 

AbbVie (NYSE:ABBV): Q3 Non-GAAP EPS of $3.33 beats by $0.11; GAAP EPS of $1.78 misses by $0.22.

Revenue of $14.34B (+11.2% Y/Y) beats by $40M.

 

AbbVie (NYSE:ABBV) declares $1.41/share quarterly dividend, 8.5% increase from prior dividend of $1.30.

 

Exxon Mobil (NYSE:XOM): Q3 Non-GAAP EPS of $1.58 beats by $0.06; GAAP EPS of $1.57 beats by $0.07.

Revenue of $73.79B (+59.7% Y/Y) beats by $1.74B.

 

W.W. Grainger (NYSE:GWW): Q3 GAAP EPS of $5.65 beats by $0.33.

Revenue of $3.37B (+11.6% Y/Y) beats by $50M.

 

What I am reading today

 

            The value of disagreeing respectfully.

            https://thereformedbroker.com/2021/10/28/the-disrespect/

 

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The Morning Call---Valuation Math

 

The Morning Call

 

10/22/21

 

 

The Market

         

    Technical

 

            Thursday in the charts

            https://www.zerohedge.com/markets/bitcoin-bonds-black-gold-big-caps-slide-trump-truth-spac-soars

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          September existing home sales rose 7.0% versus consensus of +3.5%.

                          https://www.advisorperspectives.com/dshort/updates/2021/10/21/existing-home-sales-up-7-in-september

 

September leading economic indicators were up 0.2% versus predictions of +0.4%.

                          https://www.advisorperspectives.com/dshort/updates/2021/10/21/cb-leading-economic-index-moderate-growth-in-september

 

                        International

 

September Japanese CPI came in at +0.4% versus -0.2% in August; the October flash manufacturing PMI was 53.0 versus expectations of 51.5; the October flash services PMI was 50.7 versus 47.8; the October flash composite PMI was 50.7 versus 47.9.

 

September UK retail sales declined 0.2% versus consensus of+0.5%; ex fuel, they were -0.6% versus +0.2%; The October flash manufacturing PMI was 57.7 versus 55.8; the October flash services PMI was 58.0 versus 54.4; the October composite PMI was 56.8 versus 54.0.

 

The October German flash manufacturing PMI was 58.2 versus estimates of 56.5; the October flash services PMI was 52.4 versus 55.0; the October flash composite PMI was 52.0 versus 54.0.

 

The October EU flash manufacturing PMI was 58.5 versus forecasts of 57.0; the October flash services PMI was 54.7 versus 55.5; the October flash composite PMI was 54.3 versus 55.2.

 

                        Other

 

                          Fair trade is a myth.

                          https://www.aier.org/article/fair-trade-is-still-a-fraud/

 

                          Our political class’s failure to admit failure.

                          https://brownstone.org/articles/the-rationing-is-already-here/

 

                          Economic progress is about destroying (some) jobs.

                          https://www.adamsmith.org/blog/rather-missing-the-point-about-economic-development

 

                          Stats on job quitters.

                          https://www.linkedin.com/in/edward-yardeni/detail/recent-activity/

 

                          LA port traffic.

                          https://www.calculatedriskblog.com/2021/10/la-area-port-traffic-solid-imports-weak.html

 

                          Median house price growth decelerating.

                          https://www.calculatedriskblog.com/2021/10/median-house-price-growth-decelerated.html

 

              The Fed

 

              Will the slowing economy delay tapering?

              https://www.capitalspectator.com/will-slowing-economic-growth-delay-feds-tapering/#more-16899

 

            Biden’s Plan

 

              Biden’s plan is a lot more expensive than $3.5 trillion.

              https://www.nytimes.com/interactive/2021/10/20/upshot/democrats-trim-reconciliation-bill.html

 

Inflation

 

  Latest stats on food prices.

              https://politicalcalculations.blogspot.com/2021/10/the-average-cost-of-food-at-home-for.html#.YXGo7BrMKUk

 

                  Nickel prices hit seven year high.

              https://www.zerohedge.com/commodities/nickel-prices-jump-seven-year-high-supply-woes-mount

 

                  Used car prices hit record high.

              https://www.zerohedge.com/markets/used-car-prices-hit-record-high-next-cpi-expected-soar

 

                  Inflationary storm forces Unilever to raise prices.

              https://www.zerohedge.com/commodities/inflationary-storm-forces-unilever-raise-prices-fastest-seven-years

 

              The case for transitory inflation.

              https://ritholtz.com/2021/10/inflation-inputs/

 

            The coronavirus

 

              Fauci lied again.

              https://www.breitbart.com/politics/2021/10/20/nih-contradicts-fauci-admits-funding-gain-of-function-research-at-wuhan-lab/

 

     Bottom line.

 

I haven’t linked to a John Hussmann Market critique lately.  But with the equities at historically high valuations, I thought a review of his valuation math would be helpful.

            https://www.advisorperspectives.com/commentaries/2021/10/21/the-wealth-is-in-the-denominator

 

            Thiel weighs in on bitcoin.

            https://www.bloomberg.com/news/articles/2021-10-21/thiel-says-he-was-underinvested-in-bitcoin-price-may-rise?sref=loFkkPMQ

 

    News on Stocks in Our Portfolios

 

Johnson & Johnson (NYSE:JNJ) declares $1.06/share quarterly dividend, in line with previous.

 

What I am reading today

 

More background on how crypto currencies work.  If you own a crypto currency, you need to read this.

            https://slate.com/technology/2021/10/tether-crypto-danger-ben-mckenzie.html

 

            More data showing the failure of our education system.

            https://www.the74million.org/article/naep-long-term-unprecedented-performance-drop-american-13-year-olds/

 

            The use and misuse of anger.

            https://www.nakedcapitalism.com/2021/10/more-on-the-use-and-misuse-of-anger.html

 

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The Morning Call--Valuation distortions wrought by the Fed

 

The Morning Call

 

10/6/21

 

 

The Market

         

    Technical

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/big-tech-bitcoin-breakevens-black-gold-surge-debt-limit-doubts-loom

 

            A bit more detail:

 

(1)   the long bond was down, making a three month low.  Also, it finished for the second day below its 200 DMA [now support]; if it remains there through the close on Thursday, it will revert to resistance.  Remember that the 100 DMA is already resistance,

https://www.zerohedge.com/the-market-ear/yieldsmatter

 

(2)   the dollar was up,

 

(3)   despite the S&P’s rally, it remained below its 100 DMA [now support]; if it stays there through the close today, it will revert to resistance.

 

In sum, the indices appear to be discounting inflation but in the presence of good economic growth.  I continue to question the latter.

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly mortgage applications fell 6.9% while purchase applications dropped 1.7%.

 

The September services PMI came in at 54.9 versus projections of 54.4; the September composite PMI was 55.0 versus 54.5.

https://www.advisorperspectives.com/dshort/updates/2021/10/05/august-markit-services-pmi-slowest-rise-in-9-months

 

The September ISM nonmanufacturing Index was 61.9 versus estimates of 60.0.

                          https://www.advisorperspectives.com/dshort/updates/2021/10/05/ism-services-report-september-shows-slight-growth

 

The September ADP private payroll report showed job increases of 568,000 versus predictions of 428,000.

                          https://www.zerohedge.com/personal-finance/adp-signals-bigger-expected-jobs-gain-september

 

                        International

 

August German factory orders were down 7.7% versus expectations of -2.1%.

 

August EU retail sales were up 0.3% versus forecasts of up 0.8%.

 

The September German construction PMI came in at 47.1 versus 44.6 in August; the September EU construction PMI was 50.0 versus 49.5 in August; the September UK construction PMI was 52.6 versus projections of 54.0.

 

                        Other

 

                          Fossil fuels are back---everywhere except in America.

                          https://townhall.com/columnists/stephenmoore/2021/10/05/fossil-fuels-are-back--everywhere-except-in-the-usa-n2596940

           

            Biden’s Plan

 

I suggested in Monday’s Morning Call that Manchin could likely be ‘bought’.  Welcome to the swamp.

              https://www.zerohedge.com/markets/im-not-ruling-anything-out-stocks-soar-after-manchin-hints-caving

 

Inflation

 

              Inflation is back with a vengeance in Latin America.

              https://www.nakedcapitalism.com/2021/10/inflation-is-back-with-a-vengeance-in-latin-america.html

 

              OPEC opt against big output boost.

              https://www.wsj.com/articles/opec-russias-gradual-oil-hike-pushes-prices-to-seven-year-high-11633356803

 

            China

 

              China’s risky business crackdown.

              https://www.project-syndicate.org/commentary/china-risky-business-crackdown-common-prosperity-campaign-by-raghuram-rajan-2021-09

 

     Bottom line.

 

            Update on valuations.

            https://www.advisorperspectives.com/dshort/updates/2021/10/05/p-e10-september-2020-update

 

            Valuation distortions wrought by the Fed.

            https://www.zerohedge.com/markets/we-have-one-market-concerned-about-current-valuations-and-we-have-another-corner-where

 

            For the bulls.

            https://www.advisorperspectives.com/commentaries/2021/10/05/putting-the-yield-spike-in-perspective

 

            Earnings well above trend.

            https://www.zerohedge.com/the-market-ear/cjujrnheim

 

            Checking your portfolio frequently is generally bad for your financial health.

            https://alhambrapartners.com/2021/10/03/weekly-market-pulse-zooming-out/

 

            September dividends by the numbers.

            https://politicalcalculations.blogspot.com/2021/10/dividends-by-numbers-in-september-2021.html#.YVyNnprMKUk

 

                        Soros cashing out.

            https://www.zerohedge.com/markets/soros-cashing-out-stocks-putting-some-capital-cryptocurrencies

 

 

    News on Stocks in Our Portfolios

 

CVS Health (NYSE:CVS) declares $0.50/share quarterly dividend, in line with previous.

 

What I am reading today

 

           

 

 

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The Morning Call--Trouble in the energy complex

 

The Morning Call

 

10/5/21

 

 

The Market

         

    Technical

 

            Monday in the charts.

            https://www.zerohedge.com/markets/stocks-havent-done-covid-crash-march-2020

 

            Problems in the energy complex.

            https://www.zerohedge.com/energy/worlds-largest-commodity-traders-face-massive-margin-calls-natgas-arb-explodes

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Month to date retail chain store sales grew very slightly slower than in the prior week.

 

August factory orders rose 1.2% versus estimates of 1.0%; ex transportation, they were up 0.5% versus +0.9% in July.

 

The August trade balance was -$73.3 billion versus forecasts of -$70.5 billion.

 

                        International

 

August EU PPI came in at 1.1% versus predictions of 1.3%; the September services PMI was 56.4 versus 56.3; the September composite PMI was 56.2 versus 56.1.

 

The September Japanese YoY CPI was +0.3% versus -0.4% in August; core September YoY CPI was +0.1% versus consensus of +0.2%; the September services PMI was 47.8 versus 42.9 in August; the September composite PMI was 49.9 versus 45.5 in August.

 

The September German services PMI was 56.2 versus expectations of 56.1; the September composite PMI was 55.5 versus 55.3; the September UK services PMI was 55.4 versus 54.6; the September UK composite PMI was 54.9 versus 54.1; September YoY UK auto sales were -34.4% versus -22.0% in August.

 

                        Other

 

                          Business cycle indicators at the beginning of October.

                          https://econbrowser.com/archives/2021/10/business-cycle-indicators-as-of-the-beginning-of-october

 

                          Third quarter auto sales plunged.

                          https://www.cnn.com/2021/10/01/business/auto-sales-third-quarter/index.html

 

                          Broader inflation signs beginning to show.

                          https://www.wsj.com/articles/broader-inflation-pressures-begin-to-show-11633339800?mod=hp_lead_pos1

 

            Biden’s Plan

 

This is a discussion from one of the liberals I like to read on the ongoing wrangling over the $3.5 trillion ‘human’ infrastructure bill.  Thank God for the wisdom of our Founders.

              https://www.nakedcapitalism.com/2021/10/so-how-far-will-house-progressives-retreat-to-get-a-version-of-bidens-build-back-better-program.html

 

 

            China

 

              John Mauldin on Xi’ changing plans.

              https://www.advisorperspectives.com/commentaries/2021/10/01/xis-changing-plan

 

    News on Stocks in Our Portfolios

 

What I am reading today

 

            A new secession movement.

            https://www.city-journal.org/the-new-secession-movement

 

This author makes a valid point about, at least, some of the income inequality we see in America today.  However, that is not the whole picture---the corporate elite that enriched themselves thanks to (1) the change in the law allowing management to be compensated with stock options, (2) the easy money provided by the Fed that allowed those same executives to do stock buybacks, (3) which drove up their companies’ stock price, which drove up the price of their options, (4) which led to the largest differential in compensation between management and the average worker in history. 

                        https://www.forbes.com/sites/johntamny/2021/10/03/soaring-wealth-inequality-sets-the-stage-for-soaring-opportunity/?sh=523e751773c8

 

 

                        David Stockman amplifies on another aspect of the Fed  created inequality.

            https://www.zerohedge.com/personal-finance/david-stockman-banking-ponzi-scheme-thats-savaging-depositors

 

                        Britain’s Brexit problems.

            https://www.bloomberg.com/news/articles/2021-10-04/why-brexit-britain-is-isolated-vulnerable-and-running-on-fumes?srnd=premium&sref=loFkkPMQ

 

 

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