Disbelief? Not that the Taliban would return to power as the United States withdrew from Afghanistan. I think almost everyone had considered the possibility. The shock for most was either the inability or unwillingness of Afghan security forces to resist at all, and how quickly region by region, the nation changed hands. Then again, according to who you listen to... those troops that faded apparently had not been fed, supplied, or even paid in quite some time. The fact was that either due to a lack of support from their own corrupt government or ours, these troops did not fight for control of their country. For us, this was an embarrassing failure in intelligence, preparation, and adaptability. There is no acceptable excuse.
Taliban fighters entered the capital city of Kabul on Sunday, leaving only the airport outside of their immediate control. Afghan President Ashraf Ghani fled for Tajikistan ahead of the Taliban advance after pledging to stand and defend the capital city just a day earlier. Secretary of State Antony Blinken appeared on CNN on Sunday morning, claiming that "This is not Saigon." As someone who grew up in a military family, it sure looked like Saigon.
The truth is that our ARVN allies made a far better showing after the U.S. pulled out of that war, than did the Afghan military here. That collapse happened two years after the U.S. withdrew combat forces. The speed of this resistance-less collapse has left almost all, including the Biden administration in what appears from a distance to be a state of having been shocked and awed. Sunday was, unfortunately, a day of humiliation for the United States of America.
The Blood of Heroes
It's easy to say that a 20-year war had been fought for nothing. That would also be incorrect. The United States was savagely attacked by hostile forces in September of 2001. By November of 2001, the Taliban had been forced out of power in Afghanistan. By 2004, that nation actually held a democratic-style national election. The war, at that point, had been effectively won. The terrorist organization that had made Afghanistan their base of operations prior to 2001, had been defeated, scattered, and forced to hide in places around the world.
By 2011, that organization's reported mastermind/financier, had been killed in what was actually a badly botched operation (in nearby Pakistan), but still killed nonetheless. If the war had not been over after the 2004 election, it was surely over now. The war in Iraq had taken not just a greater share of the headlines, but also the manpower and required expenditure for years at that point. Fought for nothing, though? How does one define nothing?
Was there at any point in these past 20 years... another attack of the size and scale of what happened on 9/11/01 on the U.S. homeland or the American people? Or even lesser attacks? You say nothing. I say your peace has been bought and paid for in blood. Just how do you value blood? Not just any blood, but the blood of heroes? While you complained about traffic, and pretended that this nation was not at war, and while your family had their heads buried in their cell phones, somebody else bled out in a barren land, or came home in pieces. Six thousand U.S. infantry have moved or are moving into the airport at Kabul in order to restore order to the evacuation of Americans and hopefully allies who would surely now suffer for having believed in us. That final bill of sale may yet be paid.
Just Answer Me This...
Forget about nation building. That is quite costly, and we have shown ourselves not to be any good at it. People of other cultures may never value democracy, republican style government or personal freedom the way we do. That said, and this is not just a criticism of the Biden administration, but really of the two prior administrations as well...
Why would any western power ever cede ground taken in a land that touches Iran, and China, and really is not all that far from Russia? What a strategically advantageous place to base US ground and air forces in formidable size? Honestly, is anyone in our administration's cabinet home on this issue? Defend our bases, if not willing to defend a people not welcoming such defense, but leave altogether? Even aside from the strategic location, now we as a nation will have to watch from afar to make sure that terrorist factions do not attempt to move back in, and increase influence in that part of the world.
The negative economic impacts from the spread of the Delta variant of the SARS-CoV-2 virus that causes COVID-19 are becoming apparent everywhere. On Sunday evening (in New York), the Chinese National Bureau of Statistics reported July data for Industrial Production, Retail Sales, Fixed Asset Investment and Unemployment that disappointed in each and every case versus expectations. In fact, the misses for both Industrial Production and Retail Sales were quite sizable. It becomes difficult to see how China can possibly hit year end GDP targets after a month like that.
Here, at home, setbacks in business activity are becoming evident across the nation as July faded into August and beyond. As COVID reasserted itself globally and in the U.S., traffic at all kinds of retail outlets has tailed off after what had looked to be a triumphant recovery had been in place this past spring into early summer. According to the Bureau of Transportation, Americans took less trips at least 10 minutes from home in July than they had prior. According to Brivo, a business that tracks the number of people using credentials to gain access to office space, such visits leveled off last week after months of increases. I found both of those slices of information in the Wall Street Journal on Sunday. There was more. Apparently Earnest Research reports a sharp reduction in credit and debit card spending on travel by mid to late July.
We all saw the NFIB Small Business optimism Index drop significantly from June into July. We all saw the University of Michigan's Consumer Sentiment survey contract precipitously from it's revised July print to that series' advance print for August despite a slight contraction in that same series' number for inflation expectations. We all saw the almost incredible demand from abroad for U.S. 10 Year paper last week. Bid to cover was well above recent norms at 2.6, while foreign accounts took down an astounding 77% of the $41 billion issuance.
Just anecdotally, I belong to a social media group focused on healthy living... such as exercising and eating right, that is more popular globally than it is here at home. The conversation has recently shifted from that kind of talk to more of a concern over COVID and how long the symptoms keep folks down physically. In particular, I have noticed that Australians where the virus is currently spiking, are reaching out to those of us living in countries that had already been hit hard for some guidance. Few of them are prepared mentally for our honest answers.
... The Centers for Disease Control and Prevention gave its nod to booster shots of the messenger RNA COVID-19 vaccines available in the U.S. for people with weakened immune systems. This came one day after the FDA authorized additional doses of both the Moderna (MRNA) and Pfizer (PFE) /BioNTech (BNTX) for such use.
It is now expected that the Biden administration will provide by September, guidance on booster shots in general for the broader U.S. population going forward. The Biden plan is not finalized, but observers now seem to be expecting that an effort to boost immunity for those already fully vaccinated will get underway as soon as October, and much like the original vaccination campaign launched under the Trump administration, will prioritize nursing home residents, healthcare workers, and then age groups beginning with the elderly (in other words, those who were vaccinated first).
Honestly, as an individual who has suffered the virus quite badly, and went on to be vaccinated... I will literally race those in my age group to get my booster shot. You folks who stick to your guns with an anti-vaccination stance have absolutely no idea what you are screwing with. Most of you have never experienced anything close to what this virus can do to you and for how long it can keep you sick.
Last Thursday, nine fiscally conservative or politically moderate Democratic Representatives informed Speaker Nancy Pelosi that they will not consider voting for the massive ($3.5 trillion-ish) budget spending resolution until the House passes the $1 trillion-ish Infrastructure spending bill that has already passed quite easily (and in bi-partisan fashion) in the U.S. Senate.
On Sunday, Speaker Pelosi requested that at the committee level, the House consider moving forward on the infrastructure bill along with the budget resolution. Remember, House Democrats can not lose more than four votes without losing their majority, and if that happens, then it matters not whether the Senate can pass anything with a simple majority through the reconciliation process. Pelosi has these nine moderates on one end of the spectrum, as well as the extremists out on the deep end that not only demand that the larger budget plan pass in order to also pass the infrastructure plan that the nation quite obviously needs, but would also like to grow that plan beyond the already mentioned $3.5 trillion.
Pelosi's task will be far more difficult than uniting her party against a president that most of them saw as some kind of political foe. These Reps have constituencies to answer to, and across those constituencies, priorities vary. My guess is that the budget resolution passes at some point, but contracts in the process. Bumpy road ahead. Plenty of headlines. Algorithms move on headlines. Markets will be more volatile as we move into the Autumn season, and as the fiscal, monetary and pandemic situations evolve.
1) The S&P 500, Dow Industrials and especially the Dow Transport all rallied last week. The Nasdaq indices essentially closed unchanged for the five day period, while smaller caps went backwards. Trading volumes have become completely anemic. Managers have either been on vacation... (Credit card flows imply that this may not be the case.)... or have no conviction in market direction. Aggregate trading volumes for constituent member firms of the S&P 500 have not hit their 50 day trading volume moving average since July 30th. For the Nasdaq Composite, the trading volume slump goes back to July 20th.
2) The U.S. 10 Year Note paid as much as 1.38% on Thursday, and went out at 1.29% on Friday. Yields for U.S. 10 Year paper went as low as 1.25% last night, before some sellers took some profits. The 10 Year trades around 1.27% as I bang out this piece. Remember, the latest Refinitiv Lipper fund flows data for the week ending last Wednesday? $24.7 billion moved into conventional and exchange traded funds. Just $4.2 billion of that flow had been attracted by equity funds. $10.5 billion moved into money market funds, while $10.1 billion moved into taxable and tax exempt bond funds combined.
3) Light macro week ahead with the exception of Tuesday when the Census Bureau reports July Retail Sales and the Federal Reserve reports July Industrial Production. Perhaps just as key from a market allocation or sentiment perspective could be Tesla's (TSLA) AI (artificial intelligence) Day, which is slated for this Thursday.
4) Second quarter earnings season largely comes to a near-completion this week as many of your well-known retailers report. According to FactSet, 91% of the S&P 500 is in the books for the quarter. 87% have surprised to the upside for earnings. 87% have surprised to the upside for revenue. S&P 500 second quarter earnings growth now stands at 89.3% year over year on revenue growth of 24.9%. Expectations for Q3 are currently running at earnings growth of 27.8% on revenue growth of 14.5%. For the full year, earnings growth is now projected at 41.9% on revenue growth of 14.5%, with a significant slowing of growth expected on both fronts for CY 2022. The S&P 500 trades at 21.1 times 12 month forward looking earnings as you rise this morning. Home Depot (HD) , and Walmart (WMT) get the major retailers started for the week on Tuesday morning.
Economics (All Times Eastern)
08:30 - Empire State Manufacturing Index (Aug): Expecting 29.3, Last 43.0.
14:00 - Net long-Term TIC Flows (June): Last $-30.2B.
The Fed (All Times Eastern)
No public appearances scheduled.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (OTLY) (-.10)