Monday, August 21, 2017

Monday Morning Chartlogy

The Morning Call

8/21/17

The Market
         
    Technical

            This is the most important chart today.  On Friday, the S&P closed below the lower boundary of its short term uptrend; if it remains below it through end of trading on Tuesday, the trend will reset to a trading range.  As you can also see, it is very near its 100 day moving average; so much so that if the S&P does continue to decline, that MA will soon revert to resistance.  To be clear, neither of these support levels has been successfully challenged yet.  Plus the Dow remains some distance from its comparable support levels.  So while the yellow light has started to flash, we don’t know if this will ultimately be a negative.   Time will tell us.



            The long Treasury continues to perform well, trading above its 100 and 200 day moving averages, within its short term trading range and it long term uptrend.  It has made five higher lows and now three higher highs.  Bond investors continue to bet on a weak economy and low inflation/rates.



            Gold also had a good week, finishing above its 100 and 200 day moving averages and in a very short term uptrend.  However, note that (1) on Friday, it traded above the upper boundary of its short term trading range intraday, but failed to hold above it and (2) then closed below its prior high.  While not terribly alarming, it does suggest GLD may have lost momentum.



            The dollar’s chart remains ugly.  UUP is solidly in a downtrend and below its 100 and 200 day moving averages.  There is some good news, i.e. it held above the lower boundary of its short term trading range and made a higher low.  That is not a lot for the dollar bulls to hang their hat on; but it is better than a sharp stick in the eye.



The VIX had another volatile week, closing up noticeably; that following another big up move in the preceding week.  It finished above its 100 and 200 day moving averages (both support) and above the upper boundary of its short term downtrend for the second day (if it ends there today, it will reset to a trading range).  This pin action clearly provides substance to my open questions as to whether the VIX made or is making some kind of bottom extending back to late July and if I was premature resetting the intermediate term from trading range to downtrend. 



    Fundamental

       Headlines

            The latest from Lord Rothschild (medium):

       Investing for Survival
   
            Thoughts on ‘long term’ investing.
           
    News on Stocks in Our Portfolios
 
           .

Economics

   This Week’s Data

 The July Chicago national activity index was reported at -0.01 versus forecasts of 22.0

   Other

Politics

  Domestic

  International War Against Radical Islam


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Saturday, August 19, 2017

The Closing Bell

The Closing Bell

8/19/17

Statistical Summary

   Current Economic Forecast
                       
2016 actual

Real Growth in Gross Domestic Product                          1.6%
Inflation (revised)                                                              1.6%                        Corporate Profits (revised)                                                     4.2%

2017 estimates (revised)

Real Growth in Gross Domestic Product                      -1.25-+0.5%
                        Inflation                                                                         +.0.5-1.5%
                        Corporate Profits                                                            -15-0%



   Current Market Forecast
           
            Dow Jones Industrial Average

                                    Current Trend (revised):  
                                    Short Term Uptrend                                 20772-23283
Intermediate Term Uptrend                     18695-25946
Long Term Uptrend                                  5751-24198
                                               
                        2016    Year End Fair Value                                   12600-12800

                        2017     Year End Fair Value                                   13100-13300

            Standard & Poor’s 500

                                    Current Trend (revised):
                                    Short Term Uptrend     (?)                           2430-2715
                                    Intermediate Term Uptrend                         2220-2994
                                    Long Term Uptrend                                     905-2763
                                               
                        2016   Year End Fair Value                                      1560-1580
                       
2017 Year End Fair Value                                       1620-1640         

Percentage Cash in Our Portfolios

Dividend Growth Portfolio                          59%
            High Yield Portfolio                                     55%
            Aggressive Growth Portfolio                        55%

Economics/Politics
           
The Trump economy is providing an upward bias to equity valuations.   By volume, the data flow this week was weighed slightly to the positive: above estimates:  the August housing market index, July retail sales, weekly jobless claims, the preliminary August consumer sentiment reading, the August NY and Philly Fed manufacturing index and July import/export prices; below estimates: weekly mortgage and purchase applications, July housing starts, month to date retail chain store sales, July industrial production, June business inventories/sales; in line with estimates: the July leading economic indicators

But the primary indicators were negative: July retail sales (+), July housing starts (-), July industrial production (-) and the July leading economic indicators (0).  So the data pattern was very similar to two weeks ago, i.e. mixed---stronger overall data, but weaker primary indicators.  So I will score it the same: neutral: in the last 97 weeks, twenty-nine were positive, fifty-two negative and sixteen neutral. 

This makes three weeks in a row that I have graded the overall data as neutral.  It is a bit early to call this a trend.  Still it suggests that the economy may have ceased to deteriorate.  That clearly doesn’t mean that it is improving or imply that our forecast should be changed---only a string of positive weeks would do that.  Nevertheless, it could mean that the odds may be declining of further economic weakening.

Overseas, the numbers were upbeat from around the globe with more good news out of Europe, China returning to the plus side and Japan having its first good week in a long time. 

On fiscal policy, the good news is that Trump again used his executive power to (1) lower regulatory barriers for infrastructure projects and (2) appoint an expert to review Chinese theft of US intellectual property---which as you know, has been a sore spot with me.  In addition, NAFTA trade talks began.  The latter may or may not prove to be good news; but I choose to be hopeful.

The bad news is that Trump’s newest reality show is getting very poor ratings from both the chattering and ruling classes.  While I don’t really give a s**t what either of them think, the resulting political turmoil could easily to slow or terminate progress on the Trump/GOP fiscal program.  To be sure, gridlock is not the worst thing that could happen to us but the absence of healthcare and tax reform would be a disappointment.

Bottom line: this week’s US economic stats were mixed, confirming the pattern for the last 18 months---the economy struggling to keep its head above water.  The improving EU economy and signs that China may be following in its footsteps have to help at some point; and, indeed, they may be behind the mixed data we have been getting of late. 

Longer term, I remain confident in my recent upgrading our long term secular growth rate assumption by 25 to 50 basis points based on Trump’s deregulation efforts.  This week’s move reducing regulatory barriers to infrastructure spending will almost surely help.  However, any further increase in that long term secular economic growth rate assumption stemming from enactment of the Trump/GOP fiscal policy is still on hold as the Washington morality play unfolds.

Our (new and improved) forecast:

A positive pick up in the long term secular economic growth rate based on less government regulation.  This increase in growth could be further augmented by pro-growth fiscal policies including repeal of Obamacare, tax reform and infrastructure spending; though the odds of that are uncertain and getting worse by the day. 

 Short term, the economy has seemingly flattened out; though that doesn’t alter our former recession/stagnation forecast.  A pickup in global economic activity may have halted further deterioration---‘may’ being the operative word.
                       
                       
       The negatives:

(1)   a vulnerable global banking system.  Nothing this week.

(2)   fiscal/regulatory policy.  This week: 

[a] Trump continued his purge of the regulatory system, slashing the process for gaining approval for infrastructure building projects.  As you know, it is on this front that the Donald has furthered his/GOP fiscal reform.  Also as you know, I have already raised our long term secular economic growth rate assumption based on the scope of deregulation.  This latest move will almost surely help.

[b] negotiations for modernizing the NAFTA trade treaty have commenced.  Certainly, this was needed to readjust the playing field.  That doesn’t mean that it will be a success; so I am not scoring at such.  But I am hopeful.

[c] also on the trade front, Trump appointed an individual to look into the Chinese pirating of US intellectual property.  I have already dwelled on this issue sufficiently; so you know I believe it to be a positive.

[d] unfortunately, no one seems to be giving credit for these moves because once again, Trump’s communication skills proved to be sorely lacking.  I pursued this subject in Wednesday’s and Thursday’s Morning Calls, so I won’t be repetitious except to summarize: {i} it increases the probability of gridlock, {ii} which of course lessens the odds that fiscal reform will occur and {iii} if it gets worse, it could spawn more violence and further divide an already divided country.

As an addendum, Friday, Steve Bannon left the White House.  Bannon has been a lightning rod to liberals as a major player in the alt right; and that focus became more intense following the Trump response to the Charlottesville tragedy.  Plus, he had a reputation as a disruptive force within the West Wing. held very tough trade protectionist positions and was at odds with Gary Cohn, who, for better or worse, is viewed by many as the only adult in the White House.  So many observers believe that Bannon’s departure is a plus for trade policy as well as stability within the administration.  

Things could get worse (today’s must read):
     
(3)   the potential negative impact of central bank money printing:  The key point here is that [a] the Fed has inflated bank reserves far beyond any comparable level in history and [b] while this hasn’t been an economic problem to date, {i} it still has to withdraw all those reserves from the system without creating any disruptions---a task that I regularly point out it has proven inept at in the past and {ii} it has created or is creating asset bubbles in the stock market as well as in the auto, student and mortgage loan markets.  

This week, both the Fed and the ECB released minutes of prior meetings.  Both were dovish.  Both expressed concerns about the effect of monetary tightening on securities markets.  No s**t, Sherlock.  As you know, my thesis from the beginning has been that QE did little to improve the economy, so its termination will have little adverse consequence; but it is a primary reason for the sky high equity valuations, so unwinding it will likely mean lower prices.

The battle between data and theory (medium):

(4)   geopolitical risks: the North Korean/US standoff took a positive turn this week as Un appeared to back off threats of more missile launches.  We can only hope that it lasts.

But…………..

Still there remains plenty of hotspots that could explode any minute: Syria, the Qatar sanctions, US/Russian confrontation, Trump’s aggressive language on Iran and Venezuela, 

I am not trying to fear monger war; but I do think that Trump’s aggressive attitude toward foreign opposition is overdone and increases the risk of a costly misstep.

(5)   economic difficulties around the globe.  This week, the stats continued upbeat out of Europe, mixed out of China and positive for Japan for the first time in a long while.

[a] second quarter EU GDP growth was in line with estimates while July UK retail sales were stronger than anticipated,

[b] the IMF raised its 2017 economic growth forecast for China; though the country reported retail sales and industrial production below consensus,
               
[c] Japan reported second quarter GDP, business spending and private consumption above expectations,

In sum, our outlook remains that the European economy is out of the woods while China is struggling to do the same.  As for Japan, one week does not a trend make.  Follow through.

            Bottom line:  our near term forecast is that the US economy is stagnating though there is a possibility that the improved regulatory outlook and a now growing EU economy may be halting any worsening.  Further, if Trump/GOP were to pull off a (near) revenue neutral healthcare reform, tax reform and infrastructure spending on a reasonably timely basis, I would suspect that sentiment driven increases in business and consumer spending would return. 

That said, this week was the worst of the Donald’s term (if that is possible); enough so that it likely lowers the odds of successfully implementing the Trump/GOP fiscal program.  However, that wouldn’t be a negative for the economy; it just wouldn’t be a plus.  In other words, the hope of the economy returning to its long term secular growth rate will remain just that---a hope.

However, Trump’s drive for deregulation and improved bureaucratic efficiency is and will remain a decided plus.  As you know, I inched up my estimate of the long term secular growth rate of the economy because of it. 

The Market-Disciplined Investing
         
  Technical

The indices (DJIA 21675, S&P 2425) had another volatile day, closing down again.  Volume was flat (despite option expiration); breadth was weaker.  Importantly, (1) the S&P finished below the lower boundary of its short term uptrend; if it remains there through the end of trading on Tuesday, it will reset to a trading range, (2) it did so on day when it traded up intraday by nine points on the [good] news of Bannon’s departure from the White House and (3) it is a short hair away from violating another support level---its 100 day moving average. 

However, it is too soon to be getting beared up: (1) the S&P’s break of its short term uptrend has not been confirmed and (2) to establish a true Market downtrend, the Dow must also penetrate the lower boundary of its short term uptrend and that hasn’t happened; indeed, it is almost a 1000 points away from doing so.  Bottom line, the Averages may be about to experience a hiccup; but they are a long way from confirming that they are rolling over.

The VIX (14.3) actually fell 8 ½ %, probably the result of the bulls shorting it on the thesis that the ‘buy the dip’ crowd is close by.  Nevertheless, it finished above its 100 and 200 day moving averages [both support].  It also finished above the upper boundary of its short term downtrend for the second day; if it remains there through the close on Monday, it will reset to a trading range. This pin action clearly provides substance to my open questions as to whether the VIX made or is making some kind of bottom extending back to late July and if I was premature resetting the intermediate term from trading range to downtrend. 

The long Treasury fell fractionally, but still ended above its 100 and 200 day moving averages (both support), the lower boundaries of its short term trading range and its long term uptrend and has now made a third short term higher high.  That is a lot of support. 
           
The dollar declined, closing in a short term downtrend, below its 100 and 200 day moving averages and did not make a new higher high. 
           
 GLD also fell, but finished above the lower boundary of its very short term uptrend and its 100 and 200 day moving averages (both support).  Somewhat ominously, intraday, it traded above the upper boundary of its short term trading range, then couldn’t hold above that boundary or the prior day’s high---perhaps signaling a loss of momentum. 

Bottom line: the indices not only had a rough day but did so on supposedly good news (Bannon’s resignation).   Importantly, the S&P fell below the lower boundary of its short term uptrend.  Even if this challenge is confirmed, as I noted above, the Dow is a long way from a similar break.  So at the moment, the assumption has to be that the Averages are just experiencing a hiccup.


Fundamental-A Dividend Growth Investment Strategy

The DJIA (21675) finished this week about 66.3% above Fair Value (13032) while the S&P (2425) closed 50.6% overvalued (1610).  ‘Fair Value’ will likely be changing based on a new set of regulatory policies which has led to improvement in the historically low long term secular growth rate of the economy (though its extent could change as the effects become more obvious); but it still reflects the elements of a botched Fed transition from easy to tight money and a ‘muddle through’ scenario in Japan and China.

The US economic stats continue to point to a weak economy.  If I am correct about the economy slowing/stagnating, short term that means Street economic growth forecasts will begin declining.  The question is when; and more important from a Market standpoint, given investor proclivity for interpreting bad news as good news, whether they will even care.  I can’t answer that latter issue except to say that someday, bad news will be bad news; and mean reversion will likely occur.

Fiscal policy is in disarray not only because the republican congress can’t get its house in order but also because the Donald insists on making himself rather than the good of the country the issue.  I don’t want to overly dramatize the impact of Trump’s response to the Charlottesville tragedy, but I believe that it is safe to say that it clearly didn’t improve the odds of successfully passing all or a part of the Trump/GOP fiscal program.  The good news is that the worst case scenario is gridlock which is not all that bad.  The bad news is that my hoped for improvement in the long term economic secular growth rate is little more than a wet dream at the moment.  And that in turn means lower equity valuations based on slower growth.

Mohamed El Erian on the failure of the ruling class (medium):

Finally, the central banks continue to confuse, obfuscate and pursue a policy that has destroyed price discovery---and it is being done not to have some potential positive effect on the economy, but to avoid a Market hissy fit.  Not something that I believe is in the best long term interests of the economy or the Markets.    As you know, I have long time believed that the loss of faith in or the dismantling of QE will result in correcting the mispricing and misallocation of assets; and that most assuredly will not be a plus for equity prices.

Net, net, my biggest concern for the Market is the unwinding of the gross mispricing and misallocation of assets caused by the Fed’s (and the rest of the world’s central banks) wildly unsuccessful, experimental QE policy.   While I am encouraged about the changes already made in regulatory policy, fiscal policy remains a mess.  Whatever happens, stocks are at or near historical extremes in valuation, even if the full Trump agenda is enacted; and there is no reason to assume that mean reversion no longer occurs.

Bottom line: the assumptions on long term secular growth in our Economic Model are beginning to improve as we learn about the new regulatory policies and their magnitude.  Plus, there is a tiny ray of hope that fiscal policy could make progress though its timing and magnitude are unknown.  I continue to believe that the end results will be less than the current Street narrative suggests---which means Street models will ultimately will have to lower their consensus of the Fair Value for equities. 

Our Valuation Model assumptions are also changing as I raise our long term secular growth rate estimate.  This will, in turn, lift the potential ‘E’ component of Valuations; but there is a decent probability that short term this could be at least partially offset by the reversal of seven years of asset mispricing and misallocation.  In any case, even with the improvement in our growth assumption, the math in our Valuation Model still shows that equities are way overpriced.

                As a long term investor, with equity valuations at historical highs, I would want to own cash in my Portfolio and would use the current price strength to sell a portion of your winners and all of your losers.
               

DJIA             S&P

Current 2017 Year End Fair Value*              13200             1630
Fair Value as of 8/31/17                                  13032            1610
Close this week                                               21675            2425
Over Valuation vs. 8/31
             
55%overvalued                                   20199              2495
            60%overvalued                                   20851              2576
            65%overvalued                                   21502              2656
            70%overvalued                                   22154              2737


* Just a reminder that the Year End Fair Value number is based on the long term secular growth of the earning power of productive capacity of the US economy not the near term   cyclical influences.  The model is now accounting for somewhat below average secular growth for the next 3 to 5 years. 

The Portfolios and Buy Lists are up to date.


Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973.  His 47 years of investment experience includes institutional portfolio management at Scudder. Stevens and Clark and Bear Stearns, managing a risk arbitrage hedge fund and an investment banking boutique specializing in funding second stage private companies.  Through his involvement with Strategic Stock Investments, Steve hopes that his experience can help other investors build their wealth while avoiding tough lessons that he learned the hard way.








Friday, August 18, 2017

The Morning Call--S&P at key technical support level

The Morning Call

8/18/17

The Market
         
    Technical

The indices (DJIA 21750, S&P 2430) had another volatile day but was monkey hammered.  Volume rose; breadth was weaker.  While yesterday’s pin action was only a single day, the upward momentum of the Averages is now being challenged.  The S&P closed right on the lower boundary of its short term uptrend and the 100 day moving average (~2414) is close by.  However, the Dow remains well above its corresponding levels.  So it is too soon to be getting squirrelly about the Market.  As always follow through is key,

The VIX (15.5) spiked 32%, closing back above its 100 day moving average, negating Wednesday’s break [now support] and above its 200 day moving average [now support].  It also finished above the upper boundary of its short term downtrend; if it remains there through the close on Monday, it will reset to a trading range. This pin action clearly provides substance to my open questions as to whether the VIX made or is making some kind of bottom extending back to late July and if I was premature resetting the intermediate term from trading range to downtrend. 

The long Treasury rose on volume, ending above its 100 and 200 day moving averages (both support), the lower boundaries of its short term trading range and its long term uptrend and has now made a third short term higher high.  That is a lot of support. 
           
The dollar was up slightly, but still closed in a short term downtrend, below its 100 and 200 day moving averages and did not make a new higher high. 
           
 GLD moved up again, finishing above the lower boundary of its very short term uptrend and its 100 and 200 day moving averages (both support) and is now back in the proximity to the upper boundary of its short term trading range. 

Bottom line: the indices had a rough day.   Importantly, the S&P is now at key technical support levels.  If it successfully challenges those marks, that may create the first sign of cognitive dissonance since last November.  On the other hand, the Dow is some distance away from a similar challenge.  Plus the ‘buy the dip’ crowd can’t be far away.  Until they are no longer able to sustain the indices’ upward momentum, it is simply too early to assume that there is any danger of a major technical breakdown.
           
    Fundamental

       Headlines

            Yesterday’s economic data was once again mixed: weekly jobless claims declined more than expected and the Philly Fed manufacturing index was stronger than forecast while July industrial production (primary indicator) was below estimates and the July leading economic indicators (primary indicator) were in line.

Overseas, the news was a bit more positive.  July UK retail sales were stronger than anticipated and the ECB released the minutes of its last meeting which confirmed Wednesday’s rumor that it is not considering a change of policy in the near future.

            Once again, politics held the headlines: (1) rumors circulated that Gary Cohn was resigning, later denied, (2) Senator Coker, a Trump supporter, made a stinging rebuke of Trump and (3) the Donald’s new infrastructure council collapsed.  So the Trump ship continues to list.  But as I noted yesterday, the downside to this political mayhem is gridlock and that historically has been the good news scenario, economically speaking.  While the ruling class’s version of Days of Our Life is full of intrigue and tragedy and makes for great entertainment, it is unlikely to impact the economy or the underlying fundamentals of the Market.

            Bottom line: I have been contending for some time that (1) stocks are grossly overvalued, (2) investors were in a state of extreme complacency [as measured by the VIX making all-time lows] but (3) that sooner or later there would be a spark that would  reintroduce investors to reality.  Last week, even though I thought that the North Korean/US standoff would go nowhere, I wondered if it could serve as that spark.  It didn’t.  This week, even though I believe that Trump’s failings will not lead to anything worse than economic gridlock, I wonder if that could act as the spark. 

To be sure, there were extreme risks in both cases---some idiot lobbing a missile or an intensification of violent civil strife.  But my point is that while Fair Value (as calculated by our Model) reflecting either case may decline, the corresponding move by equity prices to adjust to that decline in Fair Value would be much different from current levels versus if they were at or near current Fair Value.

            BankAmerica on equity valuations (short):

            Update on dividends (short):

            My thought for the day: only losers blame others for their investment mistakes.  No one puts a gun their head to buy a stock.  Ignoring their own shortcomings and failing to take responsibility of their actions only guarantees that they will repeat their mistakes. We all make errors; but by developing a firm investing discipline, the investor will be in a much better position to analyze the reasons for an undesirable outcome and either adjust the discipline to avoid future occurrences or recognize the role that luck plays in the investment process.


       Investing for Survival
   
            The fog of war.

    News on Stocks in Our Portfolios
 
Tiffany (NYSE:TIF) declares $0.50/share quarterly dividend, in line with previous.

Home Depot (NYSE:HD) declares $0.89/share quarterly dividend, in line with previous.

Hormel Foods (HRL -1.4%) earlier today agreed to acquire Fontanini Italian Meats and Sausages from privately held Capitol Wholesale Meats for $425M

Economics

   This Week’s Data

            July industrial production rose 0.2% versus estimates of +0.3%.

            The July economic indicators rose 0.3%, in line.

   Other

            More on consumer debt (medium):

Politics

  Domestic

Victor Davis Hanson on the post Charlottesville moral outrage (medium):

  International War Against Radical Islam


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




Thursday, August 17, 2017

The Morning Call--If everything is so awesome why are the Fed and ECB dovish?

The Morning Call

8/17/17

The Market
         
    Technical

The indices (DJIA 22024, S&P 2468) had a volatile day but ended modestly to the upside.  Volume fell; breadth improved.  The upward momentum as defined by the Averages’ 100 and 200 day moving averages and uptrends across all timeframes remains intact.  At the moment, technically speaking, I see little to inhibit their challenge of the upper boundaries of their long term uptrends---now circa 24198/2763. 

The VIX (11.7) declined another 2 ¼ %, closing (1) below its 100 day moving average [now support]; if it remains there through the close on Friday, it will revert back of resistance but (2) above its 200 day moving average [now support].  If the VIX confirms its descent below the 100 day moving average and further pushes below its 200 day moving average, then clearly, the next resistance level is the former low.  However, I leave open the questions as to whether the VIX made or is making some kind of bottom extending back to late July and if I was premature resetting of the intermediate term from trading range to downtrend. 

                And:

The long Treasury rebounded, ending above its 100 and 200 day moving averages (both support), the lower boundaries of its short term trading range and its long term uptrend.  That is a lot of support. 
           
The dollar retreated, closing in a short term downtrend, below its 100 and 200 day moving averages and failed to make a new higher high.  Let’s see what happens when it challenges its recent higher low.
           
 GLD moved up, finishing above the lower boundary of its very short term uptrend and its 100 and 200 day moving averages (both support). 

Bottom line: the indices fought through the hysteria over the Trump gaff and another confusing set of FOMC minutes---which is a pretty heavy load to overcome.  So any thoughts of weakening upside momentum is probably a waste of time.  That said, volume and the pin action in bonds, the dollar and gold continue to point to economic weakness.

    Fundamental

       Headlines

            There were only a couple of datapoints released yesterday:  weekly mortgage and purchase applications as well as July housing starts were disappointing.

            Overseas, second quarter EU GDP grew 0.6%, in line and the IMF raised its estimate for 2017 Chinese GDP growth.

In addition, rumors are that Draghi will not signal a policy change in his upcoming speech in Jackson Hole.   ***which were confirmed overnight by the release of dovish ECB meeting minutes.

            ***overnight, July UK retail sales were stronger than anticipated.

            The Fed released the minutes from its last FOMC meeting.  As usual, there was the obligatory ‘on the one hand, on the other hand’ dialectic---a veritable smorgasbord of gems for both hawks and doves to hang on to.  Indeed, reading and listening to the official media analysis of the minutes, there were both dovish and hawkish conclusions.  However, the most important indicator for me is the futures market; and they were basically unchanged as to the likelihood of future Fed tightening.  In short, nothing new.  My bet is that the Fed will remain more dovish than generally expected---but that is one man’s guess.

            How central banking increases income inequality (medium):

            The level of negative yielding global debt surges……but, but everything is awesome. (short):

            Of course, none of this mattered (not that the Fed minutes should have anyway) to the media which remained focused on Trump’s Wednesday clash with reporters as well as the disbanding of two presidential advisory councils.  I have no idea how long this bull baiting goes on; but I suspect that as long as it does, it will hamper efforts to accomplish healthcare and tax reform and infrastructure spending. 
           
            Bottom line:  yesterday’s poor data, the Fed’s indecision and the Draghi rumor of no forthcoming policy change seemed to keep investors hopeful that QEInfinity will last at least a little bit longer.

            The positive stats out of the EU and Chinese economies apparently left investors unconcerned, which is understandable since so far any improvement in the global economy hasn’t shown up in our numbers. 

Nor was anyone worried about the latest episode of the Trump reality TV series.  After all, the worst thing that could happen, economically speaking, is nothing, i.e. gridlock.  As you know my preferred legislative scenario has long been gridlock.  God only knows how much better off this country would be if we had had it the last sixteen years.  To be sure that lowers the odds of healthcare and tax reform and infrastructure spending.  But in the absence of healthcare reform, my biggest worry has been our political class blowing the budget apart by nonrevenue neutral taxing and spending measures.   So from an economic policy point of view, while this intensified political acrimony could result in less than hoped from fiscal policy revisions but it also means our ruling class won’t be able to do anything stupid.

The one potentially bothersome outcome would be further degeneration in the political dialogue that spawns more violence and further rents the social fabric of this country.
           
Earnings update (short):

            My thought for the day: sometimes doing nothing is better than doing something.  But nothing is the enemy of the financial community---it generates no fees or commissions but does generate taxes and trading frictions.  Doing nothing is bad for business. Doing something because your broker says that you should is not a good reason.  I only do something when my discipline, which establishes buy and sell prices well in advance, calls for it.  That is why there are so few times you get a Subscriber Alert announcing any action on my part.

       Investing for Survival

            This is a bit long; but it deals with an important issue in investing---not losing money.

   

    News on Stocks in Our Portfolios
 
Economics

   This Week’s Data

            Weekly mortgage applications rose 0.1% while purchase applications declined 2.0%.

            Weekly jobless claims fell 12,000 versus consensus of down 4,000.

            The August Philadelphia Fed manufacturing index came in at 18.9 versus expectations of 17.0

   Other

            More on auto loans (medium):

Politics

  Domestic

Presented with no comment (short):

  International War Against Radical Islam


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