The Morning Call---Mark Cuban on the Reddit phenomema

 

The Morning Call

 

2/4/21

 

The Market

         

    Technical

 

            Wednesday in the charts.

            https://www.zerohedge.com/markets/big-shorts-bitcoin-bond-yields-black-gold-all-bounce

 

            The VIX ‘feels’ low.

            https://www.zerohedge.com/the-market-ear/cq097fn-7f

 

            The dollar breaks its short term downtrend.

            https://www.zerohedge.com/the-market-ear/cwj4wtjbvj

 

            One interpretation of the current bounce in equity prices.

            https://www.zerohedge.com/markets/bounce

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly jobless claims were reported at 779,000 versus projections of 830,000.

 

Q4 nonfarm productivity fell 4.8 versus estimates of -2.8%; unit labor costs rose 6.8% versus +4.0%.

                             

The January services PMI came in at 58.3 versus expectations of 57.5; the composite PMI was 58.7 versus 58.0.

 

The January ISM nonmanufacturing index was 58.7 versus consensus of 56.8.

                          https://www.calculatedriskblog.com/2021/02/ism-services-index-increased-to-587-in.html

 

                        International

 

The January EU construction PMI was 44.1 versus the prior reading of 45..5; the January German construction PMI was 46.6 versus 47.1 prior; the January UK construction PMI was 49.2 versus 52.9 forecast.

 

                          January EU retail sales were up 2.0% versus predictions of +1.6%.

 

                        Other

                  

 The CBO’s outlook and the GDP output gap---if Rogart and Reinhart are correct (too much debt inhibits economic growth) this gap won’t be closed even in 2025.

             http://econbrowser.com/archives/2021/02/cbo-outlook-and-the-output-gap

 

             The case against inflation.

             http://blog.yardeni.com/2021/02/inflation-is-up-for-discussion.html

 

             Ditto Europe.

             https://www.ft.com/content/cf8139b7-fdf0-471d-8ed1-420ca4449652

 

The Fed

 

  The Fed punchbowl fueling rampant home price appreciation.

  https://www.zerohedge.com/personal-finance/feds-monetary-punchbowl-fueling-rampant-home-price-appreciation-aei

 

 The Bank of England leaves QE unchanged, prepares for negative rates but warns   of inflation???

https://www.zerohedge.com/markets/boe-keeps-policy-unchanged-tells-banks-start-preparing-negative-rates-if-necessary-sees

 

The coronavirus

 

  Just a few weeks delay.

  https://marginalrevolution.com/marginalrevolution/2021/02/just-a-few-weeks-delay.html

 

              Long haul coronavirus suffers cast new light on chronic fatigue sufferers.

              https://www.nakedcapitalism.com/2021/02/long-haul-covid-cases-cast-new-light-on-chronic-fatigue-sufferers.html

 

            The short squeeze

 

              Winners and losers in the Reddit fueled squeeze.

              https://www.zerohedge.com/markets/meet-hedge-fund-made-killing-reddit-fueled-squeeze

 

              Gambling is reckless.

              https://www.pragcap.com/three-things-i-think-i-think-yolo-gambling-is-stupid/

 

              Counterpoint from Mark Cuban (must read).

              https://blogmaverick.com/2021/01/31/the-store-of-value-generation-is-kicking-your-ass-and-you-dont-even-know-it/

 

            Bottom line.

 

              More valuations.

              https://www.advisorperspectives.com/dshort/updates/2021/02/03/regression-to-trend-another-look-at-long-term-market-performance

                          https://www.advisorperspectives.com/dshort/updates/2021/02/03/the-q-ratio-and-market-valuation-january-update

 

             January dividends by the numbers.

            https://politicalcalculations.blogspot.com/2021/02/dividends-by-numbers-in-january-2021.html#.YBrunuhKiM8

 

    News on Stocks in Our Portfolios

 

What I am reading today

 

            Visa considering adding bitcoin to its network.

            https://www.zerohedge.com/markets/visa-says-no-reason-why-it-cannot-add-bitcoin-its-network

 

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The Morning Call--Valuations at historic highs.

 

The Morning Call

 

2/3/21

 

The Market

         

    Technical

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/stocks-crypto-bond-yields-jump-wsb-game-stopped

 

            Is a larger correction coming?

            https://www.zerohedge.com/markets/larger-correction-coming

 

            Bottom line.  Market technicals remain the immediate story.  The Reddit crowd took a licking yesterday as their ‘most shorted’ targets declined substantially and their newest mark, silver, could not sustain their initially onslaught.  I said yesterday that this whole Reddit phenomena may be over and the pin action would support that judgment.  However, I think it is too early to write it off.  Stay watchful---I would not get sucked into yesterday’s Market bounce back.   

               

            Yellen gets ethics waiver to lead investigation of the Reddit phenomena.

            https://www.zerohedge.com/markets/yellen-gets-ethics-waiver-lead-regulatory-crusade-against-hft-after-taking-700k-citadel

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly mortgage applications were up 8.1%, purchase applications up 0.1.

                                   

The January ADP private payrolls report showed job increases of 174,000 versus predictions of 49,000.

                          https://www.zerohedge.com/personal-finance/adp-employment-rebounds-january-after-december-drop

 

                        International

 

The January Japanese services PMI came in at 46.1 versus estimates of 45.7; the Chinese Caixin services PMI was 52.0 (no forecast provided); the German services PMI was 46.7 versus 46.8; the EU services PMI was 45.4 versus 45.0; the UK services PMI was 39.5 versus 38.8.

 

The January Japanese composite PMI was 47.1 versus consensus of 56.7; the Chinese composite PMI was 52.2 (no forecast provided); the German composite PMI was 50.8, in line; the EU composite PMI was 45.4 versus 45.0; the UK composite PMI was 41.2 versus 40.6.

 

The January EU CPI was reported at 0.2% (no estimate provided); PPI was 0.8% versus 0.7%.

 

                        Other

 

              December median household income.

              https://politicalcalculations.blogspot.com/2021/02/median-household-income-in-december-2020.html#.YBmdcehKiM8

 

              Regional Fed manufacturing indices overview.

              https://www.advisorperspectives.com/dshort/updates/2021/02/01/january-regional-fed-manufacturing-overview

 

              Bankruptcies declined 29.7% in 2020.

              https://www.calculatedriskblog.com/2021/02/us-courts-bankruptcy-filings-decline.html

 

              Framing lumber prices doubled YoY.

              https://www.calculatedriskblog.com/2021/02/update-framing-lumber-prices-almost.html

 

Fiscal Policy

 

  The argument in favor of Biden’s $1.9 trillion stimulus plan.

  https://www.nytimes.com/2021/01/29/upshot/biden-economic-stimulus.html

 

  The fiscal dilemma keeps getting worse.

  https://www.zerohedge.com/political/has-joe-biden-lost-his-mind

 

Bottom line.  Valuations exceed dot.com highs.

            https://www.ft.com/content/d424625f-6cff-4cd2-bb6a-ff95ec440899

 

  An interview with Howard Marks.

  https://themarket.ch/interview/howard-marks-the-biggest-risk-is-rising-interest-rates-ld.3537

 

    News on Stocks in Our Portfolios

 

Emerson Electric (NYSE:EMR) declares $0.505/share quarterly dividend, in line with previous.

 

What I am reading today

 

            The benefits of an open society.

            https://www.adamsmith.org/blog/johan-norberg-and-open-societies

 

            The loss of organizational IQ.

            https://coyoteblog.com/coyote_blog/2021/02/every-service-organization-has-lost-20-organizational-iq-points-during-covid-banks-have-lost-40.html

 

            Quote of the day.

            Quotation of the Day... - Cafe Hayek

 

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The Morning Call---Is it over?

 

The Morning Call

 

2/2/21

 

The Market

 

    Technical

                 

            Monday in the charts.

            https://www.zerohedge.com/markets/short-squeeze-stampede-sends-silver-soaring-stocks-surge-overnight-slump

 

            Has the correction arrived?

            https://www.zerohedge.com/markets/morgan-stanley-correction-has-arrived-and-its-likely-get-worse-and-feel-bad

 

            On bubbles.

            https://www.themoneyillusion.com/chestertons-fence-and-stock-prices/

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          Month to date retail chain store sales  improved from the prior week.

 

                          December construction spending rose 1.0% versus expectations of +0.9%.

                          https://www.calculatedriskblog.com/2021/02/construction-spending-increased-10-in.html

 

                          The January manufacturing PMI came it at 59.2 versus projections of 59.1.

                          https://www.advisorperspectives.com/dshort/updates/2021/02/01/markit-manufacturing-hits-record-high-in-january

 

The January ISM manufacturing index was reported at 58.7 versus consensus of 60.0.

                          https://www.advisorperspectives.com/dshort/updates/2021/02/01/january-ism-manufacturing-index-continued-expansion

 

                        International

 

                          Q4 EU flash GDP growth was -0.7% versus forecasts of -1.0%.

 

                        Other

 

              The short squeeze

 

            Understanding a short squeeze.

            http://econbrowser.com/archives/2021/01/flash-mob-finance

 

            The ongoing Reddit phenomena.

            https://taibbi.substack.com/p/suck-it-wall-street

 

            Why Robinhood was forced to restrict trading in GameStop (and other) stock.

            https://www.zerohedge.com/markets/these-are-shadowy-new-york-financial-institutions-forced-robinhood-restrict-trading-certain

 

            A different perspective.

            https://thereformedbroker.com/2021/01/31/wall-street-thanks-you-for-your-revolution/

 

            And a word of caution.

            https://alephblog.com/2021/01/30/decentralized-ponzi/

 

            What the Hunt brothers can teach us about gamma (short) squeezes.

            https://www.zerohedge.com/markets/what-hunt-brothers-can-teach-us-about-gamma-squeezes-0

 

              The Fed

 

              The Fed and the Japanification of America.

              https://www.advisorperspectives.com/commentaries/2021/02/01/the-fed-zombies-the-pathway-to-japanification

 

              The ECB and the Argentinafication of Europe.

              https://www.zerohedge.com/markets/ecb-playing-dangerous-game-collective-action-clauses-bonds

 

            The coronavirus

 

              New cases decline 25%.

              https://www.nakedcapitalism.com/2021/01/new-covid-cases-plunge-25-or-more-as-behavior-changes.html

           

            Bottom line.  Equities had a good day as the impact that the Reddit crowd has had on Market appears to be dwindling.  Indeed, this whole affair could already be over.  I just don’t know.  And until I do know how this circumstance plays out, I believe that this is a time to do nothing.  If you want to better understand what is occurring, I have included a collection of articles above.

 https://www.zerohedge.com/markets/most-shorted-stocks-are-crashing

           

    News on Stocks in Our Portfolios

 

            Exxon vows no cut in its dividend,

            https://www.zerohedge.com/markets/exxon-jumps-after-reporting-first-loss-40-years-vows-no-dividend-cuts

 

Emerson Electric (NYSE:EMR): Q1 Non-GAAP EPS of $0.83 beats by $0.15; GAAP EPS of $0.74 beats by $0.15.

Revenue of $4.2B (+1.2% Y/Y) beats by $230M.

 

UPS (NYSE:UPS): Q4 Non-GAAP EPS of $2.66 beats by $0.52; GAAP EPS of -$3.75 misses by $5.83.

Revenue of $24.9B (+21.1% Y/Y) beats by $2.05B.

 

Franklin Resources (NYSE:BEN): Q1 Non-GAAP EPS of $0.73 beats by $0.03; GAAP EPS of $0.67 misses by $0.03.

Revenue of $2B (+43.9% Y/Y) beats by $40M.

 

What I am reading today

 

            Tuesday morning humor.

            https://youtu.be/9LqK8GiIMYw

 

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Monday Morning Chartology

 

The Morning Call

 

2/1/21

 

The Market

 

    Technical

 

Last week, the S&P decisively broke a very, very short term uptrend and is now set to challenge the lower boundary of its short term uptrend.  If that is successful, you can see the multiple support levels below it---both DMA’s and the lower boundary of its intermediate term uptrend.  Technically speaking, I am not going to get too worried until, as and if it takes out the 200 DMA.  That said, what is concerning is the ‘why’ of this selloff; that is the speculative activity of the Reddit crowd attacking the institutional shorts.   To be clear, I am not in the least opposed to their effort.  Indeed, I am angered by the steps being taken to shut this process down.   However, it has had the effect of creating liquidity issues among some broker dealers and whenever markets start having liquidity issues, it is time to be worried about my Portfolio, whatever the merits or ethics of the Market’s participants.  BE VERY CAREFUL.

https://www.zerohedge.com/markets/how-does-all-end

 

TLT continues to act immune to the behavior of the equity market---I expected some kind of rally in the midst of the turmoil in equities.  Not to be.  Bond investors appear to be more concerned about the threat of rising inflation. 

 

You would never know that there was any turmoil in the stock market by looking at GLD’s chart.  Last week was a continuation of the short term trend lower; though as you can see, gold unsuccessfully challenged both the upper boundary of the downtrend off the August high as well as its 200 DMA.  As you can also see, those two trends are converging and GLD is getting squeezed between.  There should be a break one way or the other this week.

 

The dollar seems to be perking up a bit.  Not surprising given the rise in interest rates and the volatility in the stock market.  However, it has a lot of resistance to overcome to establish any kind of change in trend.

            https://www.zerohedge.com/markets/could-take-dollar-down-alasdair-macleod-warns-theres-real-crisis-winds

 

 

Bottom line.  The equity market is starting to get a bit squirrely and that is not usually a positive omen for future performance.  On the other hand, with the Fed’s unrelenting pursuit of QEInfinity and the political class’s passion for throwing money at anything that walks, talks and has one, it is hard to imagine a significant selloff---unless, of course, the great unwashed masses finally realize that this insanity can’t go on.  I have no idea what to do accept keep my head down, i.e., have lots of cash.

 

 

            Friday in the charts.

            https://www.zerohedge.com/markets/crypto-jumps-january-hedgies-suffer-greatest-stock-short-squeeze-history

 

    Fundamental

 

       Headlines

 

              The Economy

 

                         Review of the Week

 

The US datapoints last week were overwhelmingly positive, although the  primary indicators were not (two plus, three neutral, one negative).  Still, I rate the week a positive.  This is the second plus week in a row and that hopefully indicates that the worst is behind us.  Nonetheless, I do not think that it augurs for a ‘V’ shaped recovery---just the continuation of a labored effort to improve.

 

Overseas, the stats were neutral.  Still no help there.

 

For the moment, our base economic scenario remains intact---the US and global economies are improving but not at the velocity of the initial sharp rebound off the bottom.  In other words, a diminishing probability of a ‘V’ shaped recovery which would lessen any potential inflationary pressures and leave the Fed free to continue QEInfinity. 

                       

Longer term, my belief is that the economy will grow at a historically subpar secular rate due to the twin burdens of egregiously irresponsible fiscal and monetary policies---which continue to become even more egregiously irresponsible as a result of measures being taken by the government and the Fed in dealing with the current crisis.

                           

                                US

 

 

                        International

                       

 December German retail sales fell 9.6% versus estimates of down 2.6%;    its January manufacturing PMI was 57.1 versus 57.0.

 

December EU unemployment was 8.3%, in line; its January manufacturing PMI was 54.8 versus 54.7.

 

The January UK manufacturing PMI was 54.1 versus consensus of 52.9.

 

 

Other

 

                         

 

    News on Stocks in Our Portfolios

           

 

What I am reading today

           

           

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