The Morning Call--It doesn't matter what the Fed says today, what matters is what it does when the s**t hits the fan

 

The Morning Call

 

4/12/22

 

 

The Market

         

    Technical

 

            Monday in the charts.

            https://www.zerohedge.com/markets/bonds-bitcoin-big-tech-battered-us-misery-reaches-40-year-highs

 

            Setting up for a bounce?

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

 

            Better measures of the yield curve.

            https://scottgrannis.blogspot.com/2022/04/better-measures-of-yield-curve.html

 

            More analysis.

            https://econbrowser.com/archives/2022/04/10yr-3mo-term-spreads-and-probit-model-recession-forecasts

           

            The slump in Treasury prices ignites global bond sell off.

            https://www.bloomberg.com/news/articles/2022-04-11/treasury-10-year-yield-rises-to-2-75-for-first-time-since-2019-l1u3898r?srnd=premium&sref=loFkkPMQ

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

March consumer inflation expectations was 6.6% versus estimates of +6.2%.

https://www.zerohedge.com/economics/fed-losing-control-gloom-spreads-consumer-inflation-expectations-soar-mindblowing-66

 

The March small business optimism index came in at 93.2 versus predictions of 90.0.

 

                          March CPI rose 1.2%, in line; core CPI was up 0.3% versus +0.5%.

 

                        International

 

The February UK unemployment rate was 3.8%, in  line; February average earnings were up 5.4%, also in line.

 

March Japanese PPI was reported up 0.8% versus consensus of +0.9%; March German PPI was +2.5%, in line.

 

The April EU economic sentiment index was -43 versus projections of -28; the April German economic sentiment index was -41 versus -48; the April German current conditions index was -30.5 versus -35.0.

 

                        Other

 

                          Mortgage rates the highest since 2007.

                          https://finance.yahoo.com/news/housing-market-just-hit-level-173737330.html

 

                          Update on six high frequency economic indicators.

                          https://www.calculatedriskblog.com/2022/04/six-high-frequency-indicators-for_11.html

 

            The Fed

 

It doesn’t matter what the Fed says today, it is what it does when the s**t hits the fan.

              https://www.zerohedge.com/markets/fed-scared-shtless

 

              David Stockman excoriates the Fed.

              https://www.zerohedge.com/markets/david-stockman-coming-bond-bear-market-and-what-comes-next

 

            Recession

           

              Recession risk is rising say economists.

              https://www.wsj.com/articles/recession-risk-is-rising-economists-say-11649592002

 

     Bottom line.

 

            How do you know when it is a bubble?

            https://blogs.cfainstitute.org/investor/2022/04/08/equity-risk-premium-forum-dont-bet-against-a-bubble/

 

            When stock and bond performance is correlated.

            https://evergreengavekal.com/ride-away-right-away/

 

            The latest from John Mauldin.

            https://www.advisorperspectives.com/commentaries/2022/04/08/other-possibilities

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

           

                        America’s narcissism epidemic.

            https://www.zerohedge.com/medical/what-are-effects-americas-narcissism-epidemic

 

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

 

4/11/22

 

 

The Market

         

    Technical

           

            The S&P was off last week, mostly on the prospects of a tighter than expected monetary policy. In the process, it managed to reset its 100 DMA to resistance, having just reset to support the prior week. That said, the pin action could have been a good deal worse. The index challenged its 200 DMA, then bounced enough to not only negate the challenge but also fill Wednesday’s huge gap down open. However, it ended the week on its back foot with another challenge of its 200 DMA. Follow through.

 

 

 

The long Treasury’s reaction to the Fed news was more pronounced than that of equities---it headed straight down and didn’t look back. It is now near a challenge of the lower boundaries of both its intermediate term uptrend and short term downtrend---each should offer some support. Plus, there are still three gap down opens overhead that need to be filled. A bounce or at least some backing and filling seems likely.

 

Gold had a decent week, shrugging off all the higher interest rates talk. It even appeared to have broken to upside out of a developing pennant formation. That lends support to equity investors take that any Fed tightening will be short lived. Of course, I am much more respectful of the bond market’s interpretation of the future than those of the stock/gold markets. So, I wouldn’t get too jiggy short-term. On the other hand, longer term, GLD is in uptrends across all timeframes and above both DMAs. So, until something breaks, the assumption is that the long term trend remains to the upside.

 

 

 

 

            Nothing has changed. The dollar’s chart continues to be the healthiest of the lot. My assumption remains that irrespective of what happens, investors continue to believe that the dollar is a safe place to be.

 

 

 

 

 

            Friday in the charts.

            https://www.zerohedge.com/markets/bonds-stocks-battered-hawkish-fed-flexes-europe-panics

 

            Institutional selling has been relentless.

            https://www.zerohedge.com/markets/morgan-stanley-every-uptick-during-rally-institutional-selling-has-been-relentless

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        Review of last Week

 

Last week the economic data were overwhelmingly negative (no primary indicators). Overseas stats were slightly to the positive side.

 

So, the numbers continue to validate my outlook:  the economy is struggling to grow (but no recession), hampered by irresponsible monetary and fiscal policies, getting no support from the global economy and threatened by (1) seemingly mounting inflationary forces and (2) continued supply chain disruptions because of the conflict in Ukraine.

 

In other news, the Fed released the minutes of its latest FOMC meeting which were quite hawkish, pointing to a faster runoff of its balance sheet and as well as a more rapid rise in the Fed Funds rate. Though the Market did experience a two day selloff, it wasn’t that dramatic indicating that equity investors didn’t appear all that concerned. On the other hand, the bond crowd uninverted the yield curve(s) which supports my notion that the Fed will chicken out and start easing much sooner and at lower rate levels than suggested in their communique.

 

SocGen agrees.

https://www.zerohedge.com/markets/shocking-quant-guru-calculates-fed-can-only-hike-1-it-must-halt-cycle

 

Jeffrey Snider thinks that the whole discussion is meaningless.

https://www.realclearmarkets.com/articles/2022/04/08/the_fed_will_do_what_it_does_and_it_wont_matter_826121.html

 

 

                        US

 

 

                        International

 

February UK GDP grew +0.1% versus expectations of +0.3%; the February balance of trade was L-9.2 billion versus L-11.5 billion; February industrial production was down 0.6% versus +0.3%; February manufacturing production down 0.4% versus +0.3%.

 

                        Other

           

                          Is today’s energy shortage worse than 1970’s oil shock?

                          https://www.zerohedge.com/energy/todays-energy-shortage-worse-1970s-oil-crisis

           

            Inflation

 

              Food prices soaring.

              https://www.bloomberg.com/news/articles/2022-04-08/food-prices-jump-most-on-record-as-war-sparks-supply-chaos?srnd=premium&sref=loFkkPMQ

 

              JP Morgan warns of imminent acute agricultural supply shock.

              https://www.zerohedge.com/markets/jpmorgan-warns-imminent-acute-agricultural-supply-shock-and-how-trade-it

 

              Higher interest rates are starting to impact housing prices.

              https://www.cnbc.com/2022/04/07/rising-mortgage-rates-cause-more-home-sellers-to-lower-asking-prices.html

 

              Oil price slides as Chinese lockdown escalates.

              https://www.zerohedge.com/energy/oil-tumbles-near-pre-invasion-lows-china-lockdowns-escalate

 

     Bottom line

 

            The math of a drawdown.

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

 

            The latest from Wall Street’s biggest bear.

            https://www.zerohedge.com/markets/atlas-slugged-one-bank-turns-apocalyptic-inflation-shock-worse-rate-shock-starting

           

    News on Stocks in Our Portfolios

 

          

What I am reading today

 

            There is a negative in every positive.

            https://ritholtz.com/2022/04/the-b-side/

 

            The Defense Department releases 1500 pages of classified information on UFO’s.

            https://www.zerohedge.com/technology/pentagon-report-claims-ufos-left-radiation-burns-unaccounted-pregnancies-after

 

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The Morning Call---S&P stuck in a range

 

The Morning Call

 

4/8/22

 

 

The Market

         

    Technical

 

            Thursday in the charts.

            https://www.zerohedge.com/markets/stocks-oil-dump-n-pump-yield-curve-un-inverts

 

            S&P stuck in a range.

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

 

            Ed Yardini’s Market risk proxy remains low.

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

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

February consumer credit rose by $41.8 billion versus estimates of +$16.6 billion.

                          https://www.zerohedge.com/markets/shocking-us-consumer-credit-numbers-savings-long-gone-credit-card-debt-soars

 

                        International

 

March Japanese consumer confidence came in at 32.8 versus consensus of 34.0.

 

                        Other

                       

                          The hard truth about solving the energy crisis.

                           https://www.wired.co.uk/article/global-energy-crisis-price-rise-solution?utm_source=digg

               

                                  Some interesting non-Market related charts.

                          https://www.powerlineblog.com/archives/2022/04/the-geek-in-pictures-catch-up-edition.php

 

                The Fed

 

The Fed is about to make a huge policy mistake. Note: the Fed has already made a huge mistake with its irresponsibly aggressive QEForever monetary expansion and zero real rate Fed Funds policies. The author asks the right question at the end of the article---why do we keep trusting monetary policy to a bunch of ivory tower economists who are consistently wrong?

https://www.pragcap.com/the-fed-is-about-to-make-a-huge-policy-error/

 

            Fiscal Policy

 

              US gas production will fall due to lack of new pipelines.

              https://www.zerohedge.com/commodities/us-gas-production-set-fall-lack-pipelines

 

Another great idea from your friendly ruling class: green supply chain rules for corporations.

              https://www.zerohedge.com/political/green-us-supply-chain-rules-set-unspool-and-rattle-global-economy

 

            Inflation

 

              More on home affordability.

              https://politicalcalculations.blogspot.com/2022/04/raw-affordability-of-new-homes-holds.html#.Yk8fz-jMKUk

 

              Goldman warns of higher oil prices.

              https://www.zerohedge.com/commodities/goldman-warns-self-sustaining-physical-financial-deficit-doom-loop-looms-oil-prices

 

     Bottom line

 

            More on valuations.

            https://www.advisorperspectives.com/dshort/updates/2022/04/07/march-2022-market-valuation-inflation-and-treasury-yields

 

    News on Stocks in Our Portfolios

 

What I am reading today

 

            Thoughts on the soundness of artificial intelligence.

                https://marginalrevolution.com/marginalrevolution/2022/04/the-chinese-room-thinks.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--What is the yield curve signaling?

 

The Morning Call

 

4/7/22

 

 

The Market

         

    Technical

 

            Wednesday in the charts.

            https://www.zerohedge.com/markets/feds-volcker-moment-slams-bonds-stocks-crypto-crude

 

Note: the S&P is now in the midst of challenges of both its 100 DMA  and 200 DMA but has a long way to go to the lower boundary of its short term trading range (~4182).

 

            The NASDAQ and real yields.

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

 

            Why the IPO market is shrinking.

            https://blog.evergreengavekal.com/and-just-like-that/

 

            What is the yield curve signaling?

            https://www.calculatedriskblog.com/2022/04/lawler-what-is-yield-curve-signaling.html

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          Weekly jobless claims totaled 166,000 versus forecasts of 200,000.

 

                        International

 

The preliminary February Japanese leading economic indicators came in at 100.9 versus consensus of 102.8.

 

February German industrial production was up 0.2% versus projections of 0.0%.

 

February EU retail sales rose 0.3% versus estimates of +0.6%.

 

                        Other

 

                          Global supply chain risk and resilience.

                          https://www.nakedcapitalism.com/2022/04/global-supply-chain-risk-and-resilience.html

 

                          30 year mortgage rates hit 5%.

                          https://www.cnbc.com/2022/04/05/30-year-fixed-mortgage-crosses-5percent-for-the-first-time-since-2013.html

 

                          Rents increasing sharply YoY.

                          https://www.calculatedriskblog.com/2022/04/rents-still-increasing-sharply-year.html

 

            The Fed

 

The minutes from the latest FOMC meeting were released  yesterday and echoed Lael Brainard’s comments on Tuesday, i.e., more hawkish that has been expected (faster QT and multiple 50 bp rate hikes).

https://www.zerohedge.com/markets/fomc-minutes-signal-bigger-faster-expected-qt-multiple-50bps-hikes

 

              Ed Yardini on Lael Brainard’s speech.

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

 

            Fiscal Policy

 

              These economists were dead wrong on inflation.

              https://thehill.com/opinion/finance/3259197-nobel-economists-were-dead-wrong-on-inflation-dont-expect-an-apology/

 

              Biden’s new wealth tax proposal.

              https://www.powerlineblog.com/archives/2022/04/biden-will-still-respect-you-in-the-morning.php

           

            Recession

 

              Deutschebank expects a recession in the US in late 2023 and in the EU in 2024.

              https://econbrowser.com/archives/2022/04/recession-in-2023

 

     Bottom line

 

            March and Q1 dividends by the numbers.

            https://politicalcalculations.blogspot.com/2022/04/dividends-by-numbers-in-march-2022-and.html#.Yk3O1-jMKUk

 

            March update on valuations.

            https://www.advisorperspectives.com/dshort/updates/2022/04/06/the-q-ratio-and-market-valuation-march-update

            https://www.advisorperspectives.com/dshort/updates/2022/04/05/regression-to-trend-156-above-trend-in-march

 

    News on Stocks in Our Portfolios

 

Automatic Data Processing (NASDAQ:ADP) declares $1.04/share quarterly dividend, in line with previous.

 

What I am reading today

 

           

 

 

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