The Morning Call---The two sides of our deficit/debt problem

 

The Morning Call

 

6/18/25

 

The Market

         

    Technical

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/trump-threats-hard-data-dump-sink-stocks-crypto-bonds-dollar-bid

 

                Tuesday in the technical stats.

            https://www.barchart.com/stocks/momentum

            https://www.barchart.com/stocks/sectors/sectors-heat-map

 

            Everyone is short the dollar.

            https://www.zerohedge.com/markets/biggest-pain-trade-long-us-dollar-latest-fund-manager-survey-finds-everyone-short-buck

 

            Strategic silver.

            https://www.zerohedge.com/the-market-ear/strategic-silver-fuelling-missiles-and-gpus

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly mortgage applications fell 2.6% while purchase applications were down 3.0%.

           

Weekly initial jobless claims totaled 245,000 versus projections of 245,000.

 

                          Month to date retail chain store sales grew faster than in the prior week.

 

                          May industrial production declined 0.2% versus forecasts of +0.1%.

 

May housing starts were down 9.8% versus an anticipated decline of 0.8%; May building permits were off 2.0% versus -1.5%,

                          https://www.zerohedge.com/personal-finance/housing-starts-permits-plunge-weakest-covid-lockdowns

 

                          The June housing index came in at 32 versus predictions of 36.

                          https://www.advisorperspectives.com/dshort/updates/2025/06/17/nahb-housing-market-index-builder-confidence-june-2025

 

                        International

 

April Japanese machine orders declined 9.1% versus estimates of -9/7%; the May trade balance was -Y647.6 billion versus -Y893 billion.

 

May UK CPI was +0.2%, in line; core CPI was also +0.2% also in line.

 

May EU CPI was 0.0%, in line.

 

                        Other

 

                          Implications of the recent retail sales and industrial production data.

                          https://bonddad.blogspot.com/2025/06/industrial-and-manufacturing-production.html

 

            Monetary Policy

 

              Ed Yardini’s thoughts on today’s FOMC meeting.

              "UNCONDITONAL SURRENDER"

 

              From ZeroHedge: no change but watch the dot plot.

              https://www.zerohedge.com/markets/fomc-preview-fed-too-uncertain-change-anything-watch-hawkish-dots

 

              Don’t raise the inflation rate target.

              https://www.econlib.org/mission-accomplished/

 

            Fiscal Policy

 

              The absurdity of our ruling class’s approach to the big, beautiful bill.

              https://allisonschrager.substack.com/p/fair-weather-hawks

 

              Senate changes to the big beautiful bill.

              https://mishtalk.com/economics/the-senate-makes-big-changes-to-trumps-one-big-beautiful-bill/

 

              The potential good news for our deficit/debt problem.

              https://www.advisorperspectives.com/commentaries/2025/06/16/deficit-narrative-may-find-cure-artificial-intelligence

 

              Counterpoint.

              https://www.zerohedge.com/political/open-letter-president-addressing-our-debt

 

DOGE probably won’t/wouldn’t have worked because congress/Trump would have just spent the savings on something else.

              https://www.realclearmarkets.com/articles/2025/06/17/spending_cuts_wont_shrink_government_and_may_well_expand_it_1116944.html

 

 

              Government cannot create prosperity.

              https://www.realclearmarkets.com/articles/2025/06/17/contra_klaus_schwab_government_cannot_create_prosperity_1116989.html

 

            Recession

 

              Update on recession odds.

              https://politicalcalculations.blogspot.com/2025/06/us-recession-odds-holding-mostly-steady.html

 

              Update on big four recession indictors.

              https://www.advisorperspectives.com/dshort/updates/2025/06/17/the-big-four-recession-indicators-real-retail-sales-fall-1-0-in-may

 

Despite all the doomsday forecasts, the economy is still making progress. I would add: in spite of the machinations of our ruling class (tariffs, deficit spending). It is a tribute to American ingenuity and hard work.

https://www.foxnews.com/opinion/lefts-tariff-doomsday-predictions-fall-flat-trumps-america-thrives

 

            Geopolitics

 

              The redirection trap.

              https://www.zerohedge.com/geopolitical/trump-falling-hershs-prophetic-redirection-trap-iran-3-views-whats-next

 

    Investing

 

            The uncertainty of uncertainty.

            https://alhambrapartners.com/weekly-market-pulse-the-uncertainty-of-uncertainty/?src=news

 

             Five Star manager on investing in AI.

            https://www.marketwatch.com/story/this-five-star-fund-manager-says-even-smart-investors-have-been-missing-the-greatest-theme-of-our-time-393b40ba

 

            What if you missed the Markets best N days?

            https://www.aqr.com/Insights/Perspectives/So-What-If-You-Miss-the-Markets-N-Best-Days

 

            Managing the noise.

            https://ritholtz.com/2025/06/manage-the-noise/

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

           

 

 

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The Morning Call---Another great argument for dividend growth investing

 

The Morning Call

 

6/17/25

 

The Market

         

    Technical

 

            Monday in the charts.

            https://www.zerohedge.com/market-recaps/ww3-ww3-stocks-oil-gold-crypto-swing-wildly-mideast-headline-roulette

               

                Monday in the technical stats.

            https://www.barchart.com/stocks/momentum

            https://www.barchart.com/stocks/sectors/sectors-heat-map

 

            Retail goes on another short squeeze spree.

            https://www.zerohedge.com/markets/retail-goes-historic-short-squeeze-spree-sparking-hedge-fund-bloodbath

 

            Margin debt rose 8.3% in May.

            https://www.advisorperspectives.com/dshort/updates/2025/06/16/margin-debt-jumps-may-2025

 

JP Morgan trading desk turns tactically bearish; although to me this commentary smacks of being too finely tuned.

https://www.zerohedge.com/markets/markets-are-due-pullback-after-correctly-calling-high-and-low-jpmorgans-desk-turns

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          May retail sales fell 0.9% versus predictions of -0.7%.

                          https://www.zerohedge.com/personal-finance/us-retail-sales-tumbled-may-gas-prices-fell-car-buying-stalled

 

The June NY Fed manufacturing index was reported at -16 versus consensus of -5.5.

                          https://www.advisorperspectives.com/dshort/commentaries/2025/06/16/empire-state-manufacturing-survey-june-2025

 

                        International

 

The June EU economic sentiment index came in at 35.3 versus expectations of 23.5; the June German economic sentiment index was 47.5 versus 35.0; the June German current conditions index was -72 versus -74.

 

                        Other

                       

                          Update on household net worth.

                          https://scottgrannis.blogspot.com/2025/06/household-net-worth-update.html

 

            Overnight News

 

The Senate’s draft tax bill calls for increasing an investment credit for semiconductor manufacturers, a potential boon for chipmakers that the Trump administration is urging to increase the size of their US projects. The measure would increase the tax credit to 30% of investments in plants, up from 25%.

 

The US and Japan failed to reach an agreement on a trade package on the sidelines of the G7 summit, an outcome that leaves the Asian nation inching closer to a possible recession as the pain of US tariffs hits its economy.

 

The BOJ will cut its bond purchases by ¥200 billion ($1.34 billion) per quarter starting next year, versus the current reduction of ¥400 billion per quarter. It stood pat on rates, as expected. JGB futures slid and the yen erased losses.

 

            Inflation

 

I am not sure how to square this data with the recent trend in lower inflation; but it does suggest that it may be too soon to get jiggy.

https://econbrowser.com/archives/2025/06/tariffs-and-consumer-prices-at-high-frequency

 

    Investing

 

            Three charts that will surprise you.

            https://awealthofcommonsense.com/2025/06/3-charts-that-will-surprise-you/

 

            Another great argument for dividend growth investing.

            https://www.advisorperspectives.com/commentaries/2025/06/16/investment-signal-noise

 

            The Middle East conflict complicates the macro outlook.

            https://www.capitalspectator.com/the-israel-iran-conflict-complicates-the-macro-outlook/

 

    News on Stocks in Our Portfolios

 

What I am reading today

 

            Very bad advice.

            https://collabfund.com/blog/very-bad-advice/

 

            Milei’s gift to the pope.

            https://www.wsj.com/opinion/javier-mileis-gift-for-pope-leo-free-market-hayek-fatal-conceit-f0e79eef?mod=opinion_lead_pos9

 

           

 

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Monday Morning Chartology

 

The Morning Call

 

6/16/25

 

The Market

         

    Technical

 

This chart is fairly self-explanatory---the S&P has been on a sizz, remaining above all DMAs and in uptrends across all time frames. Except last Friday, it dipped below the trendline off its 4/7 low. We need follow through to determine if this is a trend reversal or just a one (few) day reaction to the middle east turmoil. My gut is that we are in for a correction of some sort. How big---to be determined.

https://www.zerohedge.com/the-market-ear/tactical-backdrop-has-decisively-turned

 

 

 

The bond vigilantes still have the bond market by the throat, leaving TLT in downtrends across all time frames and below all DMAs. This reinforces my guess that the next move in stocks is down.

 

 

 

 

GLD continued on its push higher---unusual when interest rates are rising but also calling into question the longevity of the recent downtrend in inflation. At the moment, it remains well within a very short term uptrend and in uptrends across all other time frames as well as above all DMAs. ……stay with what works.

 

Gold versus the euro as a reserve asset (bear in mind this was written by a Brit).

https://www.ft.com/content/6d6a04d3-2fe6-4461-a9f9-bc3a0cc2a582

 

 

 

 

 

 

The dollar continue to get hammered. That helps explain GLD’s run but is exactly the opposite of what one would expect in an environment of rising interest rates---though if all the speculation about a Fed rate cut sooner than expected proves correct, that would explain it.

https://talkmarkets.com/content/us-markets/the-falling-us-dollar-signals-the-decline-in-the-american-exceptionalism?post=502562

 

 

 

 

 

            Friday in the charts.

            https://www.zerohedge.com/market-recaps/gold-jumps-record-high-oil-soars-retail-buys-ww3-dip-stocks-loses

 

            Friday in the technical stats.

            https://www.barchart.com/stocks/momentum

            https://www.barchart.com/stocks/sectors/sectors-heat-map

           

    Fundamental

 

       Headlines

             

              The Economy

 

                          Week of 5/25

 

US stats that week were quite positive (primary indicators:      four   plus [including one inflation number], two neutral [including one inflation number], zero negative). Overseas, the datapoints were slightly upbeat, though the inflation stats were awful (two neutral, two negative). Much of the positive tilt was due to reports being less bad rather much better.

 

                          Week of 6/2

 

US stats were the mirror image of the prior week, i.e., very negative with down primary indicators outnumbering the positives three to one. Overseas, the data was plentiful but balanced; although there were two plus reads on inflation.

                       

                          Last week

 

There was very few US numbers last week, although they did include one upbeat inflation stat. Overseas, the data was balanced but once again positive inflation figures were a standout.

 

Based on these datapoints, I see no reason to alter my ‘muddle through’ economic forecast. However, as is obvious, the inflation numbers are coming in much better than I anticipated. Indeed, more week of positive price data and I will have to concede that inflation is not ‘as good as it is going to get’---the main import of which is that there will increasing reassure on the Fed to cut rates.

https://www.wsj.com/economy/the-case-for-rate-cuts-is-growing-4eb75bc1?mod=economy_lead_pos3

 

But is it too soon to get jiggy?

https://www.nytimes.com/2025/06/13/business/economy/tariff-trade-war-inflation.html

 

That said, I still think that as long as the US government can’t get its fiscal house in order, the threat of rising inflation is still with us for the long term---and it could be made worse if the Fed gets aggressive in lowering interest rates,

 

One more observation; it is that it is becoming increasingly clear that Scott Bessent, the Secretary of the Treasury, is having a moderating influence on Trump’s propensity to toss grenades; and that is a blessing.

 

Trump’s latest moves notwithstanding.

https://www.ft.com/content/437a6438-742a-42fe-97ff-b427448ce0f6

 

Although I have to say that businesses and investors appear to be getting somewhat immunized to Trump’s drama---witness the continuing flow of positive earnings reports and forecasts. The counter to that is, of course, the bond boys aren’t buying it; and I think that poses a huge risk to an otherwise potentially sanguine outlook.

 

Finally, the Middle East conflict could produce a potentially disaster scenario. Although that risk seems to be receding:

https://www.zerohedge.com/markets/market-rapidly-evolving-positive-outcome-middle-east

 

Because of all these things, I am keeping my yellow warning light flashing.

 

Bottom line. Short term, the odds of recession, in my opinion, remain low and the inflation appears to be moderating. Longer term, current fiscal policy remains a major negative.

                       

                        US

 

                        International

 

                          The Q1 EU labor cost index rose 3.4% versus estimates of up 3.2%.

 

May Chinese YoY industrial production came in at up 5.8% versus projections of up 5.9%; May YoY retail sales were up 6.4% versus +5.0%; May YoY fixed asset investments were up 3.7% versus up 3.9%.

                       

                        Other

                       

                          Weekly economic indices.

                          https://econbrowser.com/archives/2025/06/weekly-economic-index-for-data-released-through-6-7

           

                          The state of freight.

                          https://bonddad.blogspot.com/2025/06/the-state-of-freight.html

 

            Monetary Policy        

 

              Rate cuts are overdue.

              https://scottgrannis.blogspot.com/2025/06/memo-to-fed-lower-interest-rates-are.html

 

            Fiscal Policy

 

              What to watch for now.

              https://www.advisorperspectives.com/commentaries/2025/06/13/what-watch-now

 

              More.

              https://www.advisorperspectives.com/commentaries/2025/06/13/business-owners-need-know-new-tax-bill

 

            Recession

 

                  Wolf Richter’s favorite recession indicator.

              https://wolfstreet.com/2025/06/12/recession-watch-my-favorite-recession-indicator-mid-june-update/

 

                Tariffs

 

              How much of the tariffs can US corporations absorb?

  https://www.bloomberg.com/news/newsletters/2025-06-13/us-corporate-profit-fat-offers-cushion-for-absorbing-tariffs?srnd=homepage-americas&sref=loFkkPMQ

 

      Investing

 

                For those interested in the options market.

            https://politicalcalculations.blogspot.com/2025/06/the-trillion-dollar-equation.html

               

A workshop for traders.

            https://traderfeed.blogspot.com/2025/06/a-different-kind-of-trading-psychology.html

 

                The latest from BofA.

            https://www.zerohedge.com/markets/hartnett-top-20-charts-2020s

 

    News on Stocks in Our Portfolios

 

What I am reading today

 

                Five ways to build incredible resilience.

            https://www.zerohedge.com/medical/5-ways-build-extraordinary-resilience-according-ex-navy-seal-and-paralympic-champion

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.