By Jeffrey Cohen, Investment Advisor Representative
US Advanced Computing Infrastructure, Inc.
We noticed a few things today and last night while thinking about the markets.
1. Mornings on social media are mornings wasted. I just spent 30 minutes on financial twitter trying to get a handle on things...and now I cannot get the phrase 'vibe-recession' out of my head.
2. Inflation is now a global phenomenon. When did that happen? I thought inflation was based on currency growth (broadly speaking, including velocity of money) minus economic growth. Now, everyone has inflation, including Indonesia, Europe, Latin America. What makes sense is the US Dollar becoming the world's global currency, along with just a few others. When we interlink the Euro, Great British Pound, Chinese Renminbi (Yuan) and other dollar-tied currencies together, then the US Dollar impacts those countries. We have seen many countries deflate or weaken their currency so they can sell into the US less expensively, but that means their prices of globally priced goods rise (like oil, gold, and most likely foodstuffs).
This does not apply to Japan, which has pursued an independent monetary and fiscal policy from the US. Japan has inflation, but it is 'high' at 2.5%. The Japanese Central Bank spent a significant amount of yen recently defending low Japanese Government bond yields, and Japan's inflation is high at 2.5%. Link here, thank you Trading Economics.
3. The market is trading in just a few, active stocks with volume. This may not 'really' be true but it sure seems like it. Most stocks we track are trading well below their normal volumes. However, a few stocks are 'hot' and seem to be getting most of the attention. Our model called them out, and we were too 'chicken shit' to put our capital into them on Tuesday morning when first called. Their options were expensive to us (4% per month ATM calls), and the spreads were high pre-market (up to 10% spread between bid and ask). However, during the day these stocks moved quickly and decisively. Interestingly enough, the moves in pre-market were most of the moves by market close. You had to be in pre-market, or in the first few minutes of trading, or you missed the rally.
4. Cannabis industry is in trouble. Declining prices for weed, along with reductions in discretionary spending (income and savings) means significant declines in business for major 'axe and shovels' providers like Hydrofarm $HYFM and GrowGeneration $GRWG. Their footprints have increased, but their sales decreased. A good provider of pricing information is the Cannabis Business Times, link here.
5. The S&P 500 and other stock market indices are recovering significant territory on low volume. The S&P 500 is trading at 4,151.94 as we write this. The market was 'over-priced' in our opinion at 4452, or 8% higher (300 points). The market corrected from ~4,600 to ~3,600, or 22% (1,000 points).
I keep thinking 'when did this happen' but I realize it happened starting at the recent bottom at June 16, 2022. US Treasury long-term yields peaked on that day, along with the VIX, and most US equity indices hit a bottom. Remember that date, June 16, 2022. That was right around when we sold out of our bearish bet on regional banks. Thank goodness we eeked out a profit on that large-ish position. Since then, the regional banks have recovered nicely, and continue to move sideways / higher.
The core, macro-economic and monetary news is worse now. Political tensions are rising between NATO, China and Russia, and the world is slipping into a global recession / depression with widespread inflationary pressures. Globally, we see short-term interest rates rising (if only to defend against the USD strengthening too much), and a world battle to end zero-interest rates.
There is more to discuss, much more. We don't know what the markets will do today, Friday, but we plan to have an insightful and entertaining livestream this morning.
Good luck out there. GLTA.