[Market Madness] Edition 0112
Rough Week
Ugly week
Administrative topics and a general market recap
Well folks, another rough week in the U.S. markets; the week before and this past week were a lot the same in that regard. Stimulus hopes died as the bill did not leave the senate (which also likely means that another bill will not be released before November), news broke on Donnie’s downplaying of the virus, and stocks continued their selloff between brief moments of gains.
We are going to have a great deal of interesting weeks leading into November, and not even directly because of the upcoming election. We have begun to witness a potential market correction that could turn into a longer trend downward, or sideways as the financial world and the economic world continue to disagree regarding the nature of the recovery path and aftermath of the coronavirus.
Here are some general themes that we will cover off on in this edition:
Macroeconomics
Investor Speculation
Jobless claims
The Fed
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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: -1.66%
S&P 500: -2.49%
NASDAQ: -4.06%
Asia and Europe 5 Day Performance
Nikkei 225: +0.87%
Hang Seng: -0.78%
FTSE 100: +4.02%
DAX: +2.80%
Rates, Spot Prices, and ‘Good to Knows’
U.S. Dollar Index: 92.97
US 10 YR: 0.671%
Crude OIL: $37.39
Spot Gold: $1,939.40
Market Madness Portfolio: +4.39% YTD
TEDRATE: 0.14
LIBOR (3 month): 0.249%
COVID 19 Global Cases: 26,918,965 (updated Sept. 13, 2020)
‘Absolute raging mania’
“The stock market is in a mania fueled by the Federal Reserve and investor speculation that will end badly in coming years, longtime hedge fund manager Stanley Druckenmiller told CNBC on Wednesday.” (excerpted from article)
Well now you’ve heard it for real folks. We’ve talked about this here, but since I’m not a longtime billion dollar hedge fund manager, my begs for mercy go undetected. But that is okay, as long as I can say Stanley Druckenmiller and I agreed on financial ideas — then maybe I will sound cooler than I am!
Joking aside, this is some pretty heavy stuff. Behind the smoke and mirrors of retail investor involvement and the life support provided by the Federal Reserve, there is still a big economic mess to clean up. The Fed stepped up to the plate when things started to hit the fan, ensuring liquidity was available in the markets and propping up the large corporates that were left on the side of the road by the virus, whether it was from total operational closure or from a breakdown of their supply chains. What we are left with now is a real challenge: how to bring expectations back down to earth and meet the more gloomy reality that we have been covering up? That, my friends, is not going to be easy. These past two weeks have been a clear indicator of the challenges we are likely to face in the coming months and maybe even years.
The Fed will eventually have to begin reducing the efforts of their economic life support, allowing the economy to begin standing on its own two feet again, if not only for the Fed’s own need to survive as an entity. We have watched volatility re-enter the markets in the form of a massive tech-sector selloff that brought the rest of the market down with it. The speculative nature of investments has surpassed the point of excess, and the unwinding of the upward momentum with more realistic and grounded fundamentals and forward looking predictions, will likely bring about the loss of many more billions in market capitalizations by the biggest names on the Street.
Atom Finance has some really cool breaking-news features that allows an average retail investor like me stay up to date on macroeconomic news as well as company-specific news. Over the past month or so, I was seeing a ridiculous number of price target upgrades for many companies, something that I think really helped fuel the mania from the inside. Nearly every firm on the street was upgrading big name companies to match with the rise back up from the March lows. Keep in mind that the fundamentals of these companies had largely remained unchanged, if had gotten worse because of closures and lost revenue opportunities. So it remains particularly odd to me to see price target upgrade after upgrade based on largely speculative or circumstantial backing.
And on another side of the coin (which we’re seeing a shortage of here in the U.S.) is the picture of the economy. Jobless claims held steady this past week, but that doesn’t help when market-watchers and leaders are looking for improvements. We’re still seeing just under 1 million new jobless claims each week, which is scary. Granted the total number of people on unemployment assistance is going down, it seems to be somewhat of a revolving door for the time being — some people leave the assistance program and others join. The latest, ‘slimmed-down’ stimulus proposal by the Senate was rejected when it was put up for vote, putting the potential for consumer-relief on pause once again.
As with many things, it is easy to get ahead of oneself when looking at the bigger picture; which is why we must take things one week at a time for now. The Fed is meeting Tuesday and Wednesday of this week to discuss the recent market activity and provide an update about the status of the economy. A decision on rates and other activities will be announced on Wednesday afternoon at 2:00PM ET. Until then, we wait and continue to hope for calmer heads to prevail and for the markets to have a good day on Monday.
Read more here, here, here, and here.
Quick Takes
To fill in the gaps
JP Morgan calls traders back to the offices by September 21. (via WSJ)
Rio Tinto CEO to step down amid destruction of ancient historical ground. (via WSJ)
Friday marked 19 years since the day life in the U.S. changed forever. 9/11 - never forget. (via WSJ)
Some large corporates reject implementation of Donnie’s sought after payroll tax cut. (via WSJ)
Gilead to make a $20 billion acquisition. (via WSJ)
Wildfires ravage California’s “Bay Area.” (via CNBC)
Reports suggest audio recording with Donnie suggest that he downplays COVID 19 threat. (via WSJ)
Citigroup announces new CEO, Jane Fraser — she becomes the first woman to lead a major Wall Street bank. (via WSJ)
More behind the recent market movements. (via WSJ)
General Banter
What’s on my mind
I am banter-less this week. There are enough crazy things that happened in the news outside of finance from which you can draw banter!
Reader’s Corner
A place for suggestions
The reader is on a tropical beach somewhere and is out of the office this week. Suggestions to follow in the next edition!
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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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