The Morning Call
3/27/20
The
Market
Technical
The Averages (22552, 2630) had their third good day in a
row. Clearly, momentum has, at least,
temporarily halted their move to the downside.
And the indices still have room to move to the upside before they
challenge the upper boundaries their short term downtrends (~23272/2757). It is entirely possible that they could do so
given the huge buyside that exists in the institutional rebalancing that will
occur at quarter’s end.
That said, I still
think the evidence points at the current up move being a rally in a bear market
versus a bounce off of a bottom: (1) stocks remain oversold, though this
condition has almost been corrected, (2) the VIX is not reflecting a reduction
in risk adverseness among investors, (3) both indices experienced gap up opens on
Tuesday [which need to be filled] and (4) some of the most powerful rallies
occur during bear markets. There is almost
no visible support until ~ 15399/1810.
TLT, GLD and UUP continued
their volatility. Gold and the long bond
rose while the dollar took a beating---which may be an indication of a
lessening in the dollar funding shortage.
Thursday in the
charts.
Fundamental
Headlines
We could see signs
of the impact of the coronavirus in yesterday’s numbers. Weekly jobless claims were horrible while the
March Kansas City Fed manufacturing index, the February trade deficit and February
wholesale inventories are reflected economic weakness. The final reading on Q4 GDP was in line but
irrelevant.
Overseas,
February UK retail sales and April German consumer confidence were both well
below expectations.
All eyes remain on
the spread of the coronavirus.
The shutdown is
killing the economy.
We need to be
talking about how this crisis ends.
Safety protocols.
More on data
analysis.
The coronavirus in
New York.
Bottom line: each
day that passes, we get a better feel for the progress of the infection/death
rate of the coronavirus. Not that we have
a clear picture of how to properly react.
But the more information we have, the more likely the right protocols
can be discerned to balance medical health with economic health. The major question is, will the ruling class
make the right decision or demagogue the issue for their own benefit. Regrettably, I don’t have the answer.
Insolvency in the corporate debt and dollar denominated
foreign debt market remains a huge risk to the financial markets. Until there is more clarity on this problem, downside
risks remain to the securities markets.
Finding
the weak spots.
Bargains in the muni
market.
Subscriber Alert
One of the main
pillars of my investment strategy is to Buy/Own the stocks of companies that
consistently raised their dividends, the obverse of which is to avoid non-dividend
paying companies, those don’t consistently raise their dividends and those that
have cut their dividends. This week,
Boeing eliminated its dividend. While the
company is faced with its own idiosyncratic problems that might justify giving
it a reprieve, management of the company had a role in those difficulties (i.e.
sloppy engineering on the 737 Max and spending billions that could be used to
pay dividends on buying back stock which, incidentally, greatly enriched that management).
The
stock has bounced hard in the latest rally.
Accordingly, the Dividend Growth Portfolio will use that price advance
to Sell its Holding of BA.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
The
March Kansas City Fed manufacturing index was reported at -18 versus consensus of
+2.
February
personal income was up 0.6% versus estimates of +0.4%; personal spending was up
0.2%, in line.
The
February core PCE price index rose 0.2%, in line.
International
February
Chinese YoY industrial profits fell 38.3% compared with the January reading of -3.3%.
Other
Is
inflation in our future?
Hotel
occupancy rate declines to all-time low.
What
I am reading today
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