Our focus today is on interest rates and money supply.
Money supply is very high, and has been coming down slightly (overall supply down $400B, excess reserves down $200B) and this impacts stocks negatively.
Interest rates have risen, and continue to rise today. This is not a surprise to us, but could be to the market.
Risky investments and 'bets' are less attractive when interest rates rise. We see that this morning. Stocks of US banks are down today.
We are also amazed by the movement in Dollar Tree since they raised their prices from one dollar to one dollar and twenty five cents. Every item in the store, except for greeting cards, is now 25% more expensive. This has doubled the stock price due to the increase in profits.
If a 25% raise doubles the share price. Why not raise it another $0.25 to 1.50? Why not two dollars? It sure seems 'too easy' for this company to be valued so much more highly from such as simple change.
We also looked at other stocks in banking and they are down.
We looked at stocks that have higher market capitalizations ($10 Bln and up, then $200Bln and up) and those are falling today.
As a final thought, without giving any detail, we believe we see ($CS or Credit Suisse) the reason why the FED FOMC has so much trouble with Quantitative Tightening and removing excess liquidity and excess reserves from the banking system. We believe it is time for Chair Jay Powell to accelerate QT as much as possible, but also understand this could destroy our banking system and 'pop' the asset bubble even more than has been done so. Did I mention that the S&P 500 Index is trading above 4,000 again?
Good luck in the markets today. We are absolutely bearish on a personal perspective, and our personal portfolio is net short.
Our model portfolio from the CQNS / SV algorithms is always net zero long = short. However, we are less confident that the market has the ability to rise in the short term to make this model really profitable. We personally like a rising model better than a falling one, maybe because it seems more patriotic to have stocks go up (and profit), than to have stocks go down (and profit). Either way, the model has been doing well, but the feeling is different.
Finally, the model does need orderly markets with sufficient liquidity and trading volumes to work. That is why we stopped our trading and went 100% cash about two weeks ago. Liquidity and volumes fell around Thanksgiving and we are waiting for them to come back.
Stock Market BLOG
President and Investment Advisor Representative