What the heck am I talking about? Look at the stocks that are leading this market and the news that’s driving them. I’m seeing solid earnings news and multiple new highs for companies that sell soda, beer and breakfast sandwiches.
What about Treasury bonds, as tracked by something like the iShares 20+ Year Treasury Bond ETF (TLT)? If you looked at the broad stock averages, you’d think the economy was going great and they should plunge in price. But they’re hanging in there just fine, with yields only moving a handful of basis points off their lows from February despite the rally in stocks.
|Beverages, bonds and cheap breakfast … Economic indicators?|
Meanwhile, banks are lagging badly and reporting truly dismal earnings news. Credit losses are surging, profit margins are slumping, and revenue and earnings growth are nowhere to be found.
Home builders are also staring to cut back on construction amid softening in sales. Housing starts plunged 8.8% in March, more than four times the drop that economists expected. Permit issuance also tanked to a seasonally adjusted annual rate of 1.09 million. That was the lowest in a year, with weakness in both single-family and multifamily activity.
Everything I’m seeing “fits” with the late-cycle thesis I’ve laid out for you here in Money and Markets over the past few months. So does the wild divergence between various stocks and asset classes that I highlighted today.
Unfortunately, I can’t go into as much detail here as I wish I could. For more, I urge you to check out my blockbuster new documentary video “The Unseen Hand.” It’s online now for a limited time, and it explains why markets are behaving the way they are … and how you can take advantage of them.
As always, I welcome any feedback you might have in the comment section below. So feel free to sound off on the divergences between stocks and sectors, the divergence between Treasury bonds and stocks, or anything else you have on your mind.
The Doha meeting has come and gone … but oil markets have generally shrugged the failure off. Why is that happening, what’s next, and what kind of policy actions can we expect as the next several weeks unfold? Those were the topics you covered in recent website comments.
Reader Donald L. said: “Unsuccessful attempts to fix the market price of oil are reflective of the fact that it’s simply not possible to fix the price of a commodity that is fungible and has many suppliers. The human desire to cheat is just too strong.”
Reader Bonnie E. added: “As I understand it, the meeting in Doha was supposed to be about the psychological impact on the price of oil. In reality, the whole notion of putting a cap on production at near-full production levels is absurd. But then they couldn’t even pull that off.”
Reader Rob R. put the meeting in a broader context, mentioning the problems caused by countries relying too much on specific resource prices. His take: “Everywhere I look, I see populist governments that have been supported by single or narrow commodity markets – Venezuela, Brazil, Russia, etc.
“Diverse economies are difficult to build, take time, and pay strong dividends in terms of resilience and stable leadership practices. We’ll see this played out over and over again as in past. This will continue to create risk and opportunity.”
As for the economy and potential policy responses, Reader Craig R. said: “Our government has been feeding the public inaccurate and misleading numbers on inflation, unemployment and GDP growth for many years. Why is it that the pundits are only concerned with the legitimacy (or lack thereof) of China’s numbers as opposed to our own?”
And Reader Mike said: “I actually hate to type this, but it sure feels like what is next. Next up will be massive money printing action by the Fed. The reality is, we have nearly $20 trillion in federal debt and no clear or rational way of paying it off. So we’re either going to see a massive, specific devaluation of the U.S. dollar … more money printing as previously noted … a move to a world or geographic monetary system … or a serious outbreak of war.
“I’m going to go with massive money printing for now. Obama wants to kick these problems down the road to the next POTUS. So, as bad as my choice for what happens next is, we’d better pray that this is what happens because all of the other possibilities are far worse.”
I appreciate the feedback. I believe the primary driver of market action right now in oil (as well as gold and many stocks) is the U.S. dollar. In turn, it’s being driven by shifting perceptions about what the ECB, Fed, and BOJ will do in the next few days with policy. So I’m keeping an eye on that and will update you with the investment implications of whatever comes next right here in Money and Markets.
As for the longer term, it’s all about the credit and economic cycle. Those powerful forces will ultimately drive asset prices regardless of what central bankers say or do. That’s why I made my documentary, “The Unseen Hand,” and why I recommend you take some time to watch it while it’s still available online.
Negative interest rate policies that central banks have enacted are hurting … central banks? That’s what the Financial Times just reported. Reserve managers are being forced to chase yield in riskier bonds and stocks in order to bolster their own returns. That’s because they have to cover their operating expenses and provide some payola to their political masters at national finance ministries. What a strange world this is, no?
Sick of waiting forever while your chip card gets processed at the cash register? Don’t lose hope. Visa (V) is working with retailers to update the hardware and software that process chip-based purchases in order to speed up point-of-sale transactions. Many stores have been griping the process takes too long, resulting in customer frustration and lost sales.
The Taliban detonated a deadly truck bomb in Kabul, killing at least 28 and wounding more than 300. The Afghanistan attack appeared to target the Directorate of Security for Dignitaries, a security agency that protect top-level government officials.
What do you think of the fact that central bank NIRP policy is now hurting returns for central banks themselves? How about the use of chip cards? Do you get annoyed by processing delays? Share your thoughts below.
Until next time,
P.S. If you haven’t seen “THE UNSEEN HAND” … if you haven’t learned the secret of The Golden Ratio … time is running out for you. We cannot leave it online past this week and it may go offline at any time without notice.
Don’t miss out — Click this link to view the 30-minute video TODAY!