[Market Madness] Edition 0108
For the Week: Aug. 10 - Aug. 14, 2020
Back at it
Administrative topics and a general market recap
Well folks, it is great to be back! This is going to be a longer piece, as it will be each week. Covering a week’s worth of information is a lot more to sift through than just daily news. As you read, you’ll notice changes to different segments of the newsletter which are largely due to the change in publishing schedule. I’m also making great use of Walling to help me organize my thoughts and keep engagement up between publications.
Over the week, the markets were here and there. A large selloff took place on Tuesday across the indices. The sentiment shifted away from big tech as Putin announced that Russia has the vaccine for COVID 19 — typically we see tech shares fall on rising positive vaccine developments. Over the course of the day, the losses in tech brought the rest of the market down. Going into Wednesday and into the close of the week, markets saw a rebound and then parred small gains/losses until the weekend called us home.
In commodities, we saw gold and silver tumble with the markets on Tuesday and remain at depressed levels into the weekend. Oil moved down on in alignment with the larger markets on Tuesday and recovered slightly into the low $42’s ($42.23). The dollar index has remained in the bounds of $93.00 and $93.50 in the second half of the week.
Here are some general themes that we will cover off on in this edition:
Macroeconomic indicators
Commodities
Equities
Stimulus
COVID 19
Did you miss the last edition? No worries! Get it right here and catch up on the madness. Consider subscribing down at the bottom of this newsletter so you never miss another edition and read from the comfort of your inbox.
In the meantime, if you are interested in my thought process throughout the week as I collect news and ideas for the Sunday publication, please check out my Walling page where I brainstorm and mind-map each week’s edition!
Fundamentals
Where did the markets end last week?
U.S. Indices 5 Day Performance
Dow Jones: +1.81%
S&P 500: +0.69%
NASDAQ: +0.08%
Asia and Europe 5 Day Performance
Nikkei 225: +4.30%
Hang Seng: +2.66%
FTSE 100: +0.96%
DAX: +1.79%
Rates, Spot Prices, and ‘Good to Knows’
U.S. Dollar Index: 93.10
US 10 YR: 0.709%
Crude OIL: $42.23
Spot Gold: $1,943.61
Market Madness Portfolio: +10.29%YTD
TEDRATE: 0.15
LIBOR (3 month): 0.270%
COVID 19 Global Cases: 21,261,598 (updated Aug. 16, 2020)
On stimulus
The fine folks on Capitol Hill have broke for recess to go play in the sandbox until Labor Day. We’ve talked at length in the last edition about Donnie’s executive order for stimulus that still has not panned out and likely will never pan out. Stimulus-based activity is an action done by Congress and not something that can be leapfrogged by POTUS.
This week, there was a lot of focus by Donnie, McConnell, Mnuchin, and Pelosi to try and restart talks for the next round of stimulus. On all sides, the demands are different and still very far apart. Throughout the week, the stalemate continued as different sides were either unwilling nor unable to make compromise.
Now, as congressional leaders leave town for a break, the American people still economically reeling from the impact of COVID 19 are left hanging in the balance. It’s been a major focus of mine all this time to argue for the coming together of sides despite personal political agendas. What we continue to see is decisions to hold tight to their ‘party morals’ and not give in on anything that any side is requesting.
Now, we continue to wait. Nothing will likely happen until their recess ends. In the meantime, I’d suggest you not hold your breath for enhanced unemployment benefits, stimulus check direct payments, or anything else that was outlined to occur in the second round of stimulus.
Read more here, here, here, here, here, and here.
Where we are with economic data
On the economic data front, it was an interesting week. For the first time in more than 20 weeks, initial jobless claims came in under 1 million. Continuing claims totaled 15.5 million, which also came down. This was seen as a win for the labor market, as the trend for jobless claims was trending upward over the past few weeks.
The CPI (Consumer Price Index) was also noted as rising 0.6 percent for the second month in a row. This little increase, some experts are suggesting, comes on the front of initial stimulus impacts. In the reader’s corner, I suggest the recent episode of the Market Huddle podcast, and in it, they discuss a lot of macroeconomic trends like inflation, interest rates and prices on gold. What was particularly interesting to me was the commentary surrounding disinflation or deflation that was suggested as expected in the aftermath of this economic challenge. His big idea behind this is the notion of lending contraction, which is due to consumers using cash instead of credit and repaying other debt obligations, which in a debt-based economy will not lead to economic growth.
Another surprising rise for economic data this past week was the rise in retail sales. Stocks remained somewhat neutral on this topic as bigger topics hang in the balance like stimulus and the potential movement forward on the U.S.-China trade deal and the upcoming election. Many market experts are trying to price in the chances of a victory on either side of the aisle and determine what those outcomes would mean for bigger picture business practices like corporate taxes, regulations and international trade.
As we continue to move further from the impetus that sent the U.S. into what is now more widely being called a ‘recession,’ many are left wondering why things look so different than more clear recessions of the past. There are a few clear differentiators:
Much of the current joblessness we are seeing is still deemed temporary, and the onset of joblessness was so quick in nature. The longer we look out, the clearer our understanding will become of what jobs are likely to return and which are likely to be lost in time.
For many, the loss of income or reliance on temporary government assistance was as quick in nature as the level of joblessness was. We’ve seen debt and credit levels come down as consumers looked toward reducing their debt loads in the eyes of newfound additional money.
The timeline remains incredibly unclear moving forward. A lot of outcomes and projections require the timeline for when a vaccine will be both developed and widely available.
Trends that will become more important over time will be the growing disconnect between equity prices and the underlying market conditions, the level of bankruptcy filings by businesses that do not have the capital or debt base to continue burning cash while they wait on the sideline, and what movements happen in investor sentiment — will investors continue to be bullish on markets, projecting prices up and up, or will investors hit the point where they’re happy with their gains and they are selling off because of downside risk, then moving markets down.
Finally, the notion of ‘dumb money’ continues to circle around the vocabulary of market experts, particularly given the recent, almost nonsensical, rises in certain stocks. This ‘dumb money’ refers to retail investors who are pumping money into stocks or companies where no prior research is done, either fundamentally or technically, and is relied on the basis of a news piece. Tesla and Apple are prime examples of this given their recent stock split announcement. Watch this video to learn a little more about this. There is a general disclaimer that should be attached to these market rises and buying on news rather than fundamental or technical happenings, which both provide a more accurate sense of historical patterns as well as the underlying causes of what might move markets in the future.
Read more here, here, here, here, here, and here.
Quick Takes
To fill in the gaps
A disastrous blast took place at a warehouse in Beirut, killing over 150 people. (via WSJ)
Goldman Sachs looks to obtain GM’s credit card business. (via WSJ)
Airbnb to IPO in August. (via WSJ)
A little more insights on Donnie’s payroll tax deferral. (via WSJ)
Tesla joins Apple in conducting stock splits, announcing a 5 for 1 stock split. They’re after the younger Robinhood monies. (via WSJ)
Uber might have to pause service in California depending on their employee’s classifications. (via CNBC)
Russia’s vaccine experiment. (via CNBC)
Apple and Google app stores getting into hot water with Epic Games, maker of Fortnite. (via CNBC)
Kodak insider uses market proceeds from stock market to donate to a charity he started. (via WSJ)
Donnie and Iran. (via WSJ)
Donnie once again changes his rhetoric stance on COVID 19. (via CNBC)
Big Ten, Pac-12 postpone fall football seasons amid COVID 19. (via WSJ)
Grocery games — why some are still so hard to find. (via WSJ)
TikTok using bad tracking data processes that are banned by Google. (via WSJ)
Stein Mart files for bankruptcy, planning to close most (if not all) retail locations. (via CNBC)
Joe Biden names Kamala Harris as VP running-mate. (via WSJ)
China hits back with sanctions on U.S. officials in response to Hong Kong measures. (via FT)
Robinhood reports more trades that both big competitors (Charles Schwab and E-Trade) combined. (via CNBC)
More on the lead up to COVID 19. (via WSJ)
Israel and U.A.E. agree to establish diplomatic ties. (via WSJ)
WeChat worries. (via WSJ)
General Banter
What’s on my mind
I am really enjoying using the Walling page as an idea board to keep my ideas and articles in order throughout the week. The platform is really unique. It reminds me of Notion, but with a twist. To check out Walling, click here. If you have no idea what Notion is, click here.
Reader’s Corner
A place for suggestions
The reader might be interested in listening to the Market Huddle podcast. “Join Patrick and Kevin every weekend when these two traders discuss the week’s action in the markets – always keeping the other’s feet to the fire for bad calls – yet hopefully having some fun while learning a little something in the process.” (excerpted from their website)
I really enjoyed episode 92 with Steve Van Metre, CFP. Here is a link to the podcast and a link to the charts they discuss.
Another great daily read comes from Ehren Stanhope. Originally only posted on Twitter each morning, you can also get “The Daily Look” sent right into your inbox. Here is a recent edition.
Do you like what you have read? Consider subscribing so that Market Madness is hand-delivered to your inbox each day! If you know of anyone missing out on Market Madness, save them the trouble and share it with them!
Behind the Madness
You’ve made it through the madness. I’ve worked really hard to ensure that you leave this page having learned something, and I hope that benefits you in your daily adventure. Thank you again for checking in.
Publishing Schedule: every Sunday
In the meantime, if you are interested in my thought process throughout the week as I collect news and ideas for the Sunday publication, please check out my Walling page where I brainstorm and mind-map each week’s edition!
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