The Morning Call--Shrinkflation

 

The Morning Call

 

6/4/21

 

The Market

         

    Technical

 

            Thursday in the charts.

            https://www.zerohedge.com/markets/dollar-spikes-most-9-months-meme-mania-dominates-markets

 

            The most bearish chart of the day.

            https://www.zerohedge.com/the-market-ear/cdo-8mtpn

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

The May final services PMI was reported at 70.4 versus consensus of 70.1; the final composite PMI was 68.7 versus 68.1.

https://www.advisorperspectives.com/dshort/updates/2021/06/03/march-markit-services-pmi-business-activity-growth-rate-accelerates-to-record-high-in-may

 

The May ISM nonmanufacturing index came in at 64 versus predictions of 63.

                          https://www.advisorperspectives.com/dshort/updates/2021/06/03/ism-services-may-all-time-high

 

May light vehicle sales were 16.9 million units versus estimates of 18.0 million.

 

May nonfarm payrolls were up 559,000 versus forecasts of 650,000; average hourly earnings were up 0.5% versus +0.2%.

                                  https://www.zerohedge.com/markets/may-payrolls-miss-559k-jobs-added-below-expectations-unemployment-rate-drops

 

                        International

 

April Japanese household spending rose 1.1% versus expectations of -2.2%.

 

April EU retail sales fell 3.1% versus projections of -1.2%.

 

The May EU construction PMI was 50.3 versus 50.1 recorded in April; the UK May construction PMI was 64.2 versus 62.3.

 

                        Other

 

            The Fed

 

              The Fed says that it will begin winding down its corporate bond purchases.

              https://www.cnn.com/2021/06/02/business/federal-reserve-corporate-assets-program-pandemic/index.html

 

            Biden’s Plan

 

$2 trillion in taxes, $6 trillion in spending, $22 trillion in borrowing.  What could go wrong?

              https://thehill.com/opinion/white-house/556250-2-trillion-in-taxes-6-trillion-in-spending-22-trillion-in-borrowing-what

 

              Biden signals willingness to alter tax plan.

              https://www.zerohedge.com/political/biden-signals-major-changes-tax-proposal-win-gop-support-sending-markets-higher

 

            Inflation

 

              Shrinkflation.

              https://fee.org/articles/shrinkflation-the-latest-consequence-of-reckless-federal-spending-explained/

                     

              Container ship charter rates ‘out of control’.

              https://www.zerohedge.com/markets/container-ship-scores-charts-fantasy-charter-rate-135000day

 

     Bottom line.

 

            More on valuations.

            https://www.advisorperspectives.com/dshort/updates/2021/06/03/the-q-ratio-and-market-valuation-may-update

 

            Illusions of safety.

            https://humbledollar.com/2021/05/illusions-of-safety/

 

            May dividend by the numbers.

            https://politicalcalculations.blogspot.com/2021/06/dividends-by-numbers-for-may-2021.html#.YLkQ-vlKiUk

 

Your father’s stock market is not coming back.  I include this because it is thought provoking not because I believe it.

https://fortune.com/2021/06/02/changing-stock-market-meme-stocks-day-trading-reddit-crypto-investing-robinhood-btc-tsla-gme-eth-amc-nfts/?7j3g0c

               

This is not your grandfather’s mania (note.  This author as well as the one immediately above both work for the same company.)

https://theirrelevantinvestor.com/2021/06/03/this-isnt-your-grandfathers-mania/

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

            The real ‘Lord of the Flies’---very interesting read.

            https://www.theguardian.com/books/2020/may/09/the-real-lord-of-the-flies-what-happened-when-six-boys-were-shipwrecked-for-15-months

 

            The geek in pictures.

            https://www.powerlineblog.com/archives/2021/06/the-geek-in-pictures-keynesian-crime-wave-edition.php

 

            Invisible sculpture sells for $18,000.  The emperor’s new clothes?

            https://www.zerohedge.com/personal-finance/italian-artist-sells-invisible-sculpture-18000

 

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The Morning Call---Where is that boom?

 

The Morning Call

 

6/3/21

 

The Market

         

    Technical

 

            Wednesday in the charts.

            https://www.zerohedge.com/markets/reddit-rebels-rout-big-shorts-bonds-bitcoin-bullion-bid

 

            Speculators bet the farm on stocks.

            https://www.zerohedge.com/markets/speculators-bet-farm-stocks

 

            Markets have never been so good.

            https://www.zerohedge.com/markets/markets-have-never-had-it-so-good

 

            Oil breaks out of a trading range.

            https://www.zerohedge.com/the-market-ear/cwk-91vont

 

            Gold needs a pause.

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

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          Weekly jobless claims totaled 385,000 versus predictions of 390,000.

 

Q1 final nonfarm productivity came in at 5.4% versus forecasts of 5.5%; unit labor costs rose 1.7% versus -0.4%.

 

The May ADP private payroll report showed job increases of 978,000 versus expectations of 650,000.

                          https://www.zerohedge.com/personal-finance/adp-employment-surges-may-led-services-rebound

 

                        International

                       

The May Japanese final services PMI was 46.5 versus 49.5 in April; the final composite PMI was 48.8 versus 51.0 in April.

 

The May Chinese Caixin final services PMI was 55.1 versus 56.3 in April; the final composite PMI was 53.8 versus 54.7 in April.

 

The May German final services PMI was 52.8, in line; the final composite PMI was 56.2, in line.

 

The May EU final services PMI was 55.2 versus estimates of 55.1; the final composite PMI was 57.1 versus 56.9.

 

The May UK final services PMI was 62.9 versus consensus of 61.8; the final composite PMI was 62.9 versus 62.0.

 

                        Other

                       

                          April median household income.

                          https://politicalcalculations.blogspot.com/2021/06/median-household-income-in-april-2021.html#.YLfPvahKiUk

 

                          Where is that boom?

                          https://alhambrapartners.com/2021/05/31/weekly-market-pulse-wheres-that-confounded-boom/

 

                          May regional Fed bank manufacturing indices overview.

                          https://www.advisorperspectives.com/dshort/updates/2021/06/02/may-regional-fed-manufacturing-overview

 

            The coronavirus

 

              Tucker Carlson outs Fauci.

              https://www.zerohedge.com/covid-19/was-lie-tucker-carlson-levels-fauci-after-foia-emails-connect-dots

 

 

            The Fed

 

The Fed released its last Beige Book which unsurprisingly noted improvement in economic activity and mounting shortages in both goods and labor.

https://www.calculatedriskblog.com/2021/06/feds-beige-book-national-economy.html

 

            Biden’s Plan

 

              Biden’s budget will lead to slower economic growth.

              https://www.zerohedge.com/economics/bidens-budget-plan-may-lead-us-weaker-growth-and-less-jobs

 

            Inflation

 

              Are investors lowering their inflation expectations?

   https://www.wsj.com/articles/investors-inflation-bet-loses-some-steam-11622626202?mod=hp_lead_pos5

 

  Inflation will be a shock.

              https://www.zerohedge.com/markets/larry-fink-warns-inflation-will-be-pretty-big-shock

 

    Bottom line.

           

            More on the risks to profit margins.

            https://www.marketwatch.com/story/why-stocks-could-tumble-even-as-the-post-pandemic-u-s-economy-grows-11622569396?mod=home-page

 

                        Lots of liquidity.

            http://blog.yardeni.com/2021/06/lots-of-liquidity.html

 

            Update on valuation.

            https://www.advisorperspectives.com/dshort/updates/2021/06/02/p-e10-is-the-stock-market-cheap

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

            A thought on the mood of the American electorate.

            https://www.realclearmarkets.com/articles/2021/06/02/theres_a_revolutionary_spirit_enlivened_in_america_779696.html

 

            An interesting quiz on crime in the US.

            https://www.nytimes.com/interactive/2021/06/02/upshot/crime-murder-trends-quiz.html

 

            The benefits of meditation.

            http://traderfeed.blogspot.com/2021/06/how-we-sabotage-our-trading.html

 

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The Morning Call--Fast economic growth but no profits

 

The Morning Call

 

6/2/21

 

The Market

         

    Technical

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/nasdaq-dips-russell-rips-tail-risk-insurance-costs-soar

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly mortgage applications fell 4.0% while purchase applications were down 3.1%

 

Month to date retail chain store sales grew slightly less rapidly than in the prior week.

 

                          April construction spending rose 0.2% versus expectations of +0.5%.

                          https://www.calculatedriskblog.com/2021/06/construction-spending-increased-02-in.html

 

The final May manufacturing PMI came in at 62.1 versus projections of 61.5.

https://www.advisorperspectives.com/dshort/updates/2021/06/01/may-markit-manufacturing-survey-record-in-orders-supply-chain-still-affected

 

The May ISM manufacturing index was reported at 61.2 versus consensus of 60.9.

https://www.calculatedriskblog.com/2021/06/ism-manufacturing-index-increased-to.html

 

The May Dallas Fed manufacturing index was 34.9 versus 37.2 in April.

                          https://www.advisorperspectives.com/dshort/updates/2021/06/01/may-dallas-fed-manufacturing

 

                        International

 

                          April German retail sales declined 5.5% versus predictions of -2.0%.

 

                          April EU PPI came in at 1.0% versus forecasts of +0.9%.

 

                        Other

 

                          Update on framing lumber prices.

                          https://www.calculatedriskblog.com/2021/06/update-framing-lumber-prices-down-from.html

 

                          US meat supply under threat.

                          https://www.zerohedge.com/commodities/cyber-attack-hits-jbs-global-meat-processing-operations

 

                          OPEC agreed to increase production in July.

                          https://www.zerohedge.com/markets/opec-agrees-boost-oil-output-july-demand-rises

 

            The Fed

 

              Bill Gross on Fed policy.

              https://www.zerohedge.com/economics/bill-gross-fed-cant-keep-its-pedal-metal-much-longer

 

            Inflation

 

              The inflation reset.

              https://ritholtz.com/2021/06/the-inflation-reset/

 

              Counterpoint.

              https://www.zerohedge.com/markets/reset-required-why-morgan-stanley-sees-pain-next-6-months

 

     Bottom line.

 

            Investor amnesia.

            https://investoramnesia.com/2021/05/23/times-of-fraud-mania-chicanery/

 

            Fast economic growth without profit expansion (must read).

            https://www.zerohedge.com/markets/margin-story-fast-economic-growth-without-profits

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

            The irresponsibility of socially responsible corporations.

            https://www.washingtonexaminer.com/opinion/op-eds/the-irresponsibility-of-the-socially-responsible-corporation

 

            This astrophysist is not impressed with current UFO sightings.

            https://www.nytimes.com/2021/05/30/opinion/ufo-sightings-report.html

 

 

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Tuesday Morning Chartology

 

The Morning Call

 

6/1/21

 

The Market

 

    Technical

 

As you can see, after two unsuccessful challenges of the lower boundary of its short term uptrend, the S&P has hugged that boundary ever since.  The good news is that it has not attempted another challenge.  The bad news is that it is struggling to make headway.  Stay tuned for more directional information. In the meantime, my premise remains: ‘I can’t see an end to this uptrend as long as the money keeps flowing with abundance and in the absence of any major negative exogenous event.’            That said the question that the Street now seems to be pondering is, is tapering good news or bad news? 

 

Here is the argument for it being good news.

https://www.advisorperspectives.com/commentaries/2021/05/28/the-fed-will-likely-taper-but-dont-expect-a-tantrum

 

 

 

 

 

The long bond remains stuck in a very short term trading range---it can’t make a new high and has been unable to trade down through that 133 level.  This suggests that the bond investors have been stewing over the issue of tapering being good or bad news for at least a couple of months.

 

GLD investors don’t appear to be suffering from the same uncertainty as the boys in bond and stock land---though this is a much less liquid market so I would not call it a great indicator.  That said, the chart remains strong.  Gold is having some difficulty pushing through the upper boundary of its very short term uptrend; but that is to be expected.

https://www.zerohedge.com/the-market-ear/cc5dgdwykz

 

The dollar’s pin action on Friday could possibly be a telling signal.  As you can see, it tried to push above that short term downtrend off its March high but fell back.  If it goes on and successfully challenges the 24 level (lower boundary of the short term trading range), it will reset the short term trend to down and would also be a sign that dollar investors are betting on either a weaker economy or higher inflation or both.

 

As a final note, I believe that the pin action in the long bond is a better predictor of future economic activity than either gold or the dollar.  Meaning in this case, I will go with the uncertainty in the TLT chart.

 

Friday in the charts.

https://www.zerohedge.com/markets/bullion-best-may-tech-wrecks-bitcoins-biggest-bust-decade

 

            This week’s retail investor money inflow showed a large addition to cash funds.

            https://www.zerohedge.com/markets/transitory-retail-buying-frenzy-money-market-funds-see-massive-inflows-investors-turn

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        Review of Last Week 

 

US statistical releases were negative (the primary indicators were neutral) for the fourth week in a row.  This is starting to look like a trend.   If so, it suggests that consumers have satisfied all that pent up demand from the lockdown and blown through the free money from the government.  That would be very disappointing to a lot of analysts.  On the other hand, a weaker economy may reduce inflationary pressures and make inflation a lot more ‘transitory’ than even the Fed has forecast.

 

Overseas, the data flow was meager but what there was, was upbeat.  And that follows four positive weeks. So, the rest of the world is definitely catching up to the US. 

 

Bottom line. ‘As you know my opinion is that following an initial snapback (which may already be over), the US economy will likely return to its former subpar secular growth rate, stymied by irresponsible mix of fiscal/monetary policies.’---which are only getting more irresponsible.

                       

                                US

 

                        International

 

April Japanese industrial production was +2.8 versus estimates of +4.1%; April YoY housing starts were +7.1% versus +3.5%; April retail sales fell 4.5% versus +1.2% in March; April YoY construction orders were up 3.3% versus +12.5% in March;  May consumer confidence was  34.1 versus 34.7 in April; the final May manufacturing PMI was 53.0 versus 53.6 in April.

 

The April German unemployment rate was 4.4% versus 4.5% in March; May German CPI was +0.5% versus predictions of +0.3%; the final German manufacturing PMI was 64.4 versus 64.0.

 

The April EU unemployment rate was 8.0% versus forecasts of 8.1%; the May final manufacturing PMI was 63.1 versus 62.8; the May flash CPI was +0.3% versus +0.6% in April.

 

The final May UK manufacturing PMI was 65.6 versus consensus of 66.1.

 

                    Inflation

 

                          A new inflation index.

                          http://www.capitalspectator.com/introducing-a-new-inflation-index-for-monitoring-price-trends/

                                 

                         The soaring cost of breakfast.

                          https://www.ft.com/content/007bd0a0-f149-427d-937c-ec5b0ef4374d

 

                          The May jump in rents is the biggest on record.

                          https://www.zerohedge.com/economics/and-now-prices-are-really-soaring-may-rent-jump-biggest-record

 

                          High inflation is back.

                          https://www.zerohedge.com/economics/worst-kept-secret-america-high-inflation-back

                             

                         Could core CPI hit 4%?

                         https://www.zerohedge.com/markets/absolute-shocker-core-cpi-hit-4-two-weeks

 

 

         Bottom line.

 

                        How to do ‘long term’.

                        https://www.collaborativefund.com/blog/how-to-do-long-term/

             

                        Bear markets matter more than you think.

                        https://www.zerohedge.com/markets/bear-markets-matter-more-you-think-part-2

 

 

         News on Stocks in Our Portfolios

           

Bank of Nova Scotia (NYSE:BNS): FQ2 Non-GAAP EPS of C$1.90 beats by C$0.14; GAAP EPS of C$1.88 beats by C$0.16.

Revenue of C$7.74B (-2.8% Y/Y) misses by C$120M.

 

What I am reading today

           

            Quote of the day.

            https://cafehayek.com/2021/05/bonus-quotation-of-the-day-649.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CafeHayek+%28Cafe+Hayek%29

 

 

 

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