By Jeffrey Cohen, Investment Advisor Representative
US Advanced Computing Infrastructure Inc.
Good morning to my cherished friends, clients, followers, family, and friends.
This morning the markets look weakly higher.
There was some news this morning to share, and we see markets that opened slightly, and weakly higher but are now flat.
1. The Case-Shiller US National Home Price Index is moderating. Housing prices were rising quickly, and that curve is now flattening. We think it is because of increasing interest rates on conforming 30-year fixed rate mortgages. Fewer home purchases likely means less spending in the economy.
This is likely not the case for rental properties (in our opinion) which we think are driven by different factors. Rents are likely to move higher due to previous buying up of smaller, rented homes by large investment trusts while prices were lower.
2. The news in ZeroHedge and CNN were, well, about general interest topics. Lots of domestic news about violence, politics, medicine and just regular stuff. Not much discussion of markets or the economy In our words, the fix is in and our attention is being diverted away from money and markets. It could be rational behavior by those operators who show what is in demand. When we enter a bear market (again), people lose interest in stocks and investing.
3. Market breadth was very, very negative and bearish in both US corporate fixed income (bonds) and equities (stocks). New lows were significantly larger than new highs, and decliners outnumbered advancers. This is another sign of a bear market (yesterday's results).
4. Energy prices are down in the US. Gasoline was trading close to $2.50 per gallon wholesale, and is now at $2.61/gallon. This is a significant decline from a few weeks ago, and will help give us a reduced inflation reading (CPI). Oil is also trading lower, down to $90.50.
5. Currencies (non-US) are trading lower (meaning less valuable when compared to the US Dollar). We spent time in our morning video discussing the Japanese Yen at 138.50. We read that the Chinese Remnbi is also around 7.0, which is also very weak. These two export-focused economies are keeping inflation out and driving their export markets by lowering domestic income from export-related businesses. It also increases the price (and lowers demand) for imported products.
6. Copper grade #1, in contracts of 25,000 pounds, is trading lower at around $3.50 / pound. This is a sign of weakness for economic inputs. We also saw silver and gold trading lower. This will hurt the price of $FCX, which is a large copper producer.
7. Bitcoin is trading around $20,000 again. Dogecoin is around $0.063
8. Interest rates for savers in accounts of $100 or more have reached 2.20%. This higher saving rate helps lower the expected return for risk-based assets for the retail investor class.
9. The Federal Reserve Bank is not really tightening the money in circulation. They are not really doing quantitative tightening (QT) like they said they would. Sure, the amount of assets the FRB has liquidated is positive since April 2022, but it is $114B. That is miniscule and most likely not significant. We also discussed how the FRB is lowering the prices for MBS just as they might have to sell some. This is a market subsidy to market makers paid for by the taxpayer (which is you and me).
10. The Consumer Price Index (CPI) reading by the Bureau of Labor Statistics (BLS) will likely read lower and slower growth during the next reading. The largest component of growth is energy prices, and those are falling (at least for gasoline and oil, but not for coal). This recent fall in energy will support a 'friendly' inflation reading.
Well, that's all folks. The US equity markets are trading down today.
We will be focusing on building out a CQNS UP run model portfolio today. Stay tuned for more updates!
By Jeffrey P. Cohen
Investment Advisor Representative
US Advanced Computing Infrastructure Inc.
Update: 1430 ET today: The market fell hard today, and indiscriminately.
The market looked stronger this morning pre-market. However, it quickly headed lower.
The market fell after Federal Reserve Board (FRB) Chairman Powell gave a fire and brimstone speech. We listened to it live and in replay mode, and were assured that the FRB would maintain its fight against inflation (bringing it back to 2%) with a tenacious and relentless focus, regardless of the cost to our society.
This caused the financial markets to teeter on the brink. The US Dollar rose, interest rates (the long ones) rose, global stocks fell (except mainland China), and it looked like the bear market was in full bloom. High risk (high BETA) stocks fell dramatically.
However, today, the picture looks different. It seems like things are settling down.
We are worried about the size and amplitude (dramatic) financial markets movements based on a speech that was most likely a distraction meant to send the markets lower. It cost us a significant drawdown. We were uncomfortable for the weekend and Monday, but survived to trade another day.
Now, Copper and other precious metals are back in their range. The US Dollar has moderated and interest rates seem to have calmed down (but they are still elevated).
We made a video, and hope you like it. It is early pre-market, 0700 ET this morning.
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By: Jeffrey Cohen
Stock Market BLOG
President and Investment Advisor Representative