Long French Bulldogs/Short Yorkshire Terries

Posted on July 24, 2020 by macromon

Great article to destress on a summer Friday by the always excellent Tracy Alloway of Bloomberg. Any ideas what’s driving the bubble in French Bulldogs?

47857057-0DCB-4A8C-BF45-239919C92B13

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US Facing Mounting Debt Amid Global Pandemic – ABC

Posted on July 21, 2020 by macromon

Good interview with Professor Barry Eichengreen of UC Berkeley, a good friend of GMM, and odds on favorite to be a Nobel laureate one day.   We agree with him that now is not the time to worry about the public debt as we are already down this rabbit hole and the economy is on the verge of complete implosion, risking plunging our society into anarchy without another rescue package.

We also hate what we see: large well-capitalized corporations and entities getting PPP loans, which will be forgiven, some dead beats using their PPP loans to buy Teslas, trade stocks, and gamble in Las Vegas, not to mention the lack of planning and total incompetence of the policymakers.    He quotes Voltaire’s famous exhortation,  used many times here at the Global Macro Monitor,  “do not let the perfect be the enemy of the good.”

Voltaire

No MMT Discussion? 

Did you also notice not one peep about the Fed buying up all the Treasury debt and effectively monetizing the deficit…err MMT…and supporting other debt markets?

We heard some bozo on CNBC today saying the Treasury is having no problem floating its debt to the market.  Are. You. Fricking. Kidding. Me?  What market?

Nobody really knows for certain,  but our priors are if the U.S. Treasury was completely dependent on the markets to finance itself – that is no central bank (Fed and foreign) buying of its marketable debt — the 10-year yield would be well north of 6 percent, and that is very generous, in our opinion.

Do Your Homework

Folks, do your homework.   Granted, it’s impossible to completely grasp all the intricacies of the global economy and markets with their infinite feedback loops, and futile to even try,  but at least try and grasp the basics.

You can start by tuning out the talking heads and reading some Eichengreen, the most brilliant economic historian we have access to today.

 

Treasury Securities Held By The Federal Reserve

FED_2

Federal Reserve Balance Sheet:  Total Assets

FED_1

Is Dollar Demand Infinite? 

Good for gold and, if contained, and capital flows to the emerging markets in the short-term.

 

Dixie

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Context and Stock Valuations

Posted on July 20, 2020 by macromon

The S&P500 Index ETF (SPY) closed up 0.79 percent today while the equal-weighted  S&P500 Index ETF (RSP) was down 0.53 percent.  Based on the closing prices of both ETFs from Yahoo Finance,  SPY is now up 1.80 percent year-to-date versus a -7.75 percent move lower for the RSP.  It’s all about the big caps.

At today’s close, our favorite valuation metric is at a record level of  165.63 percent of nominal GDP, and that assumes current GDP is in the process of posting a 26.7 percent print for Q3, after printing down 34.7 percent in Q2, which is the Atlanta Fed’s GDP now estimate.   The metric is now 4.64 percent above the last record posted on February 19th, and 15.89 percent above the high set during the dot.com bubble in Q1 2020.

We do not know where the market tops, nor does anyone else but keep this metric as your context, folks.

Sort of like a gas gauge, the tank is close to empty, running on fumes (or wampum), but you do not know the exact spot where the engine stops, but stop it will.  The stock market can’t outpace the economy, forever.

We sold at 3025 late last year, shorted and covered at 3125, and have done nothing, except add a gold position.   Our trading days are pretty much over and it really doesn’t bother us, as it used to, watching from the sidelines missing a 10 percent-plus move.

We are also happy for those who have timed this big move, and the for stock pickers, such our very own, Coach Carol, who have been in the right stocks and have absolutely killed it.

We are fortunate to have the liberty to couch surf until the stock market gets significantly cheaper, and we do mean significant.

MarketCap_GDP

Biden Tax Plan

We also wonder when Mr. Market begins to price in Joe Biden’s tax plan?

Our guess?  Sometime soon, and we expect there will be a deluge of tax selling in the next few months.  In a rational world, there should be.

In an efficient market, there should have been.

We suspect, however, the Fed. coupled with all the buybacks, the stock market has temporarily morphed into a commodity market, which trades almost completely on supply and demand technicals with almost zero inherent information about economic fundamentals (see our donut shop analogy in this post).

Until it doesn’t, as all of history tells us it will again someday.

Tax Foundation

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Sweden Pays Price For Not Locking Down

Posted on July 20, 2020 by macromon

“There is no pain-free solution to living with COVID-19”

Lots of B.S. out there about how “Sweden did it right.”  Take a few minutes and watch the following video.

We have always maintained, from day one,  that to lock down or to stay open was a false choice.  Sweden is almost as close to a laboratory case as we are going to get, which illustrates that if consumers don’t feel safe from the virus, the economic results will be the same, or even worse,  as “keeping everything open” or locking things down.  False choice.

We posted in April,

Reopening The Economy

Yes, we get it, the country has to get back to work.

Not so simple, however.  We are faced with a false choice.

Imagine the disaster when the COVID cases begin to spike in Georgia?  That, among many worse things, would clip 20 percent off the S&P in one day.

Will the barbershops and massage parlors on Peachtree Street in Atlanta still have customers when the new cases begin to tick up even though their open signs are out?

We have to get this right, folks.  Listen to the scientists and  F the politics. — GMM, April 21st

Yes, there has been a huge spike in COVID cases in Georgia since April 21st, up over 500 percent.

GA_Covid

How the good people of Georgia elected — strike that — let Brian Kemp take the reigns as governor defies all rationality.

 

NPR

Click here to read article

Then, again, we are not exactly living in a period of enlightenment.  If it’s not in the National Enquirer, it’s fake news, no?

Locking Down Is Super Regressive

We did have an epiphany however that locking down the economy is super regressive and disproportionately hurts the working class, who can’t work from home.  There has to be a better way.  Maybe next January.

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Two Stocks To Watch After Monday’s Long Red Candlesticks

Posted on July 19, 2020 by macromon

Here are the two stocks we are watching after last Monday’s big reversals and long red candlesticks.  Tesla (TSLA) and Netflix (NFLX) have been the highest fliers in the bull market.

NFLX_4

Both are bellwethers of the 11-year old bull market with Tesla up 258.77 percent year-to-date and Netflix up 52.36 percent.

We are sellers of both. See our Friday post,  Has Netflix Peaked?

TSLA

Watch for the break and close below of 20-day moving average at 488.01.

NFLX_Jul19

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Susan Rice — The Next VEEP?

Posted on July 19, 2020 by macromon

Susan Rice, who served as President Obama’s  Ambassador to the United Nations and  National Security Advisor, has skyrocketed in the prediction markets over the past few days as Biden’s VEEP choice.

Biden has already locked himself into choosing a woman running mate as does owe the African-American community for pulling his ass out of the fire and saving his candidacy in the South Carolina primary, especially Congressman James Clyburn.

She wasn’t even on the radar a few weeks ago.

When choosing a candidate, the most important question is:  Is she/he presidential timber?  Rice, definitely fits the bill, more so, we believe, than the others on the shortlist.  We like her.

Rice opposed the 2003 invasion of Iraq. In a December 2002 NPR interview, Rice said, “Its clear that Iraq poses a major threat. It’s clear that its weapons of mass destruction need to be dealt with forcefully, and that’s the path we’re on. I think the question becomes whether we can keep the diplomatic balls in the air and not drop any, even as we move forward, as we must, on the military side. … The [George W. Bush] administration frankly owes the American public a much fuller and more honest assessment of what the costs will be of the actual conflict, as well as the aftermath, the post-conflict reconstruction. And the costs are going to be huge.  – Wikipedia

We are going to buy some contracts tonight for a 250 percent return in a two-week holding period.  Good risk/reward.   Beat that, Tesla.

Fluid situation.  Stay tuned.

Susan_Rice

 

 

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The World’s Scariest Chart

Posted on July 19, 2020 by macromon

We are now in this war. We are all in it- all the way. Every single man, woman, and child is a partner in the most tremendous undertaking of our American history. We must share together the bad news and the good news, the defeats and the victories—the changing fortunes of war. — President Franklin Roosevelt, Dec 1941 Fireside Chat 

…the one who doubts is like a wave of the sea, blown and tossed by the wind… Such a person is double-minded and unstable in all they do.  – Book Of James 1: 6-8

Great work by my good friend, Professor Constantin Gurdgiev of Macroview.eu

The U.S. case curve is accelerating, that is going parabolic — for all the math geeks, the second derivative, that rate of change of the rate of change — has flipped back to positive.  The death curve will follow.

The Coming COVID Apocalypse

As the good professor just posted,

This is dangerous and will collide with the coming flu season and general election.

Don’t be surprised if you begin to hear the drumbeats of delaying or canceling the November election.

Think forward, folks.  Take to heart the words of the great one.

Scariest Chart_4  Hat Tip:  Coach Carol 

Stages of Controlling The COVID Pandemic

To gain control of an exponential growth pandemic:

Stage One – get the case curve to bend down, i.e., negative second derivative as Europe did months ago;

Stage Two – flatten the case curve,  the first derivative goes to zero. That is, the rate of change is zero. No new case, such as New Zeland, who essentially eradicated COVID (see chart below but don’t confuse with total case curve)

Stage Three –  tScariest chart

 

Scariest Chart_2

It Could Have Been Avoided

All of the above is not surprising to us given the colossal failure of leadership in America and how the U.S. body politic has morphed into a spectrum divided between the a fact-based population and the conspiracy (National Enquirer in the chart)  based, as we posted last October, even before COVID was a word,

The New Political Spectrum 

We are starting to wonder if facts matter anymore.

The post-modern nightmare now seems fully realized in today’s culture, where there is no reality only constructions of reality.  There is no truth, there are no facts.  It’s true only if you believe it’s true.

We reject this nonsense and are becoming convinced the new political spectrum is not about the left and the right anymore but it is bookended by a fact-based reality versus the conspiracy dominant, or, what we call the National Enquirer based.

Poltical Spectrum – GMM, October 2019

Also, see these posts:

The Global Supply & Demand Shock Of The Coronavirus, January 31st
Is America Already Waving The White Flag?, March 23rd
Florida Should Quarantine Itself, March 28th
The Plan Is, There Is No Plan,  April 21st
America’s Bearish Day At The Beach,  April 25th
A Colossal Failure Of Presidential Leadership,  June 29th
Canada Crushed The COVID Curve As The U.S. Struggles,  July 5th

We leave you with this,

Scariest Chart_3

…This is distressing.  Our generation(s) are failing its big test, which almost ensures a prolonged economic depression…

Newport & Huntington v Omaha Beach

Sacrificing the beach to sit at home on the couch and watch reruns of the Dodgers and Lakers is hardly a test.  How long would we have lasted on the beaches of Normandy and the stress of the Great Depression?  That beach in the above picture is hardly Omaha beach and those on the beach are not exactly patriots storming the beach, though we are empathetic to thier plight, even if LA is in the midst of a record-breaking heatwave and the Orange County beaches are open for business.

Our lack of discipline, some of which is the result of failed political leadership, is only going to prolong the health and economic crisis.  A double-minded country is unstable in all her ways.

If sitting on the couch awhile longer to protect the last few of the Greatest Generation and America’s vulnerable is too big of a sacrifice then, “Houston, we have a [big freaking] problem.”  COVID has exposed some very big cracks in American society.

If you want to go to the beach that’s fine as long as it doesn’t put others at risk.  But it does, not only your immediate family but entire communities and the country.  – GMM, April 25th

Our “Call To Duty” Hardly Compares To The Greatest Genenation

Wearing a mask, sitting on your couch. and watching Netflix hardly compares to the “call to duty” of the Greatest Generation.  We have failed and we have failed miserably.

It is a surprise given the deep, dark Jonestown-esque shit coming out of these bat shit crazy Idjits?

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America Loses A True Saint

Posted on July 18, 2020 by macromon

If you’re not crying and want to make the world better after watching the following video, where is your heart, Tin Man? 

He couldn’t get a library card because of the color of his skin.  What a disgrace and stain on the USA. 

Rep. John Lewis (D-GA) won the Young People’s Literature award with his co-writer Andrew Aydin and artist Nate Powell for “March: Book Three.” The graphic novel recounts Lewis’ experience during the civil rights movement.

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John Lewis, R.I.P.

Posted on July 17, 2020 by macromon

This is hard to take.

The country and the U.S. Congress have lost another Great American and Saint.  First,  Congressman Elijah Cummngs. and now Congressman John Lewis.

This one really hurts.

Thank you for making the world a better place, rest in peace, brother.

 

“Our nation is founded on the principle that we do not have kings. We have presidents. And the constitution is our compass. When you see something that is not right, not just, not fair, you have a moral obligation to say something. To do something. Our children and their children will ask us, “What did you do? What did you say?” For some, this vote may be hard. But we have a mission and a mandate to be on the right side of history.”  — Rep. John Lewis

 

 

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Has Netflix Peaked?

Posted on July 17, 2020 by macromon

Our crack stock picker, Coach Carol,  thinks the probability favors the affirmative.  Personally,  I think Netflix, the service, is…rhymes with rap.

CK

The attraction of most of these streaming services, in my opinion, is their new content, and Amazon Prime is getting really good.

NFLX_5

…Netflix’s latest quarterly results seem to confirm that notion, as the streaming giant added more paid subscribers over the past six months than ever before in its history. Nearly 16 million people signed up for the service in the first quarter alone, with another 10 million subscribers added by the end of June. That brings Netflix’s global paid memberships to 193 million, up 26 million since the beginning of 2020. To add some perspective, Netflix added just 12 million subscribers in the first half of 2019 and less than 28 million in the entire year.

Considering the circumstances under which the record subscriber growth was achieved, Netflix was sensible enough not to gloat about it. Instead the company struck a pensive tone in its letter to shareholders. “We live in uncertain times with restrictions on what we can do socially and many people are turning to entertainment for relaxation, connection, comfort and stimulation,” the letter reads, after the company had already acknowledged its fortunate position in a similar letter published in April. “At Netflix, we’re acutely aware that we are fortunate to have a service that is even more meaningful to people confined at home, and which we can operate remotely with minimal disruption in the short to medium term,” the company had said back then.

Looking ahead, Netflix expects subscriber growth to slow down significantly in the second half of the year, as some demand may have been moved up in response to the pandemic. The company expects to add 2.5 million subscribers by the end of September, which would mark the lowest level of growth since 2016. — Statista

NFLX

The Stock

Netflix (NFLX) closed down 6.52 percent today after last night’s earnings release but was able to hold its 20-day moving average.  The stock has carved out two Doji candlesticks over the past two days, however, which is a huge red warning flag, especially after Monday’s long red candle.

Watch Netflix carefully, folks, as it is a bellwether of the bull market and was the best performing stock of the past decade, only to be recently eclipsed by Tesla, which is now up around 260 percent year-to-date.

 

NFLX_4

 

NFLX_2

NFLX_3

 

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