The obstacle course. But not the regular obstacle course. I have done many of those. These are usually more fun than one can imagine and either run for time or training, but run individually. Then there are the giant obstacle courses. The ones that make you say "Whoa." These are the courses that are run in full gear and require teamwork to get through. These are also run for time as well as training, but finishing first here, ahead of the rest of your team is not something you want to live with. One may not ever live down the reputation of having left team members behind, even just in training. Strong kids help the weak kids, Fast kids help the slow. There are only two possible outcomes. Either we all finish together, or we never finish at all.
Still, the first time you see the size of these obstacles, you are blown away. Most of them are about as high as might be a hovering Huey in a situation where actually landing the craft would be either impossible or unwise. There's a reason for that. Afraid of heights? We have to make you un-afraid of heights. A kid could get hurt out here. Big smile. I have the 40 or 50 shoulder separations/dislocations (Maybe 100? I stopped counting decades ago. I just get them back in the socket and keep moving. Yes, I laugh when I watch professional athletes act like they've been shot when they lose a shoulder. Yes, it hurts for about a month each time.) to prove it. That's why you learn to write, or really do anything with either hand. That's why you learn to shoot with either hand and either eye. That's why you learn to ocean swim with one, two, and three limbs tied down, even when there's white caps. We're amphibious. We adapt. That's why we rock.
In his "Mad Money" intro last night (Tuesday), Jim Cramer referred to the rest of this week as the "Earnings Gauntlet"... he's right, earnings are almost overwhelming right now. Just last night, traders were dazzled by Advanced Micro Devices (AMD) ... go Lisa, go Lisa, go Lisa... Queens, NY rules. We were simply stunned by what they were doing at Alphabet (GOOGL) . You'll see in the disclaimer that I am long that one... the position is just a small overnight rental, which is too bad, but still a whole lot better than a sharp stick in the eye. Traders seemed disappointed in Texas Instruments (TXN) , and Microsoft (MSFT) despite the superb performance by Azure (Yes, long that one too). Overnight, traders or should I say, algos have seemed uncertain with what to do with Visa (V) .
If that seems like a lot, there is a whole lot more coming your way. Maybe that's why stocks barely moved on Tuesday. The Nasdaq large cap indices closed down small. Small to mid-cap indices closed up small. The S&P 500 and Dow Industrials both closed about as close to "unchanged" as can happen in this electronic age where price discovery is executed in microseconds by algorithms, and securities trade in decimals out to four places and not Spanish pieces of eight. The transports once again differentiated themselves, largely on the backs of Sarge faves United Parcel Service (UPS) , and FedEx (FDX) . Rock and Roll, Hoochie Koo.
All that is wonderful. I love the meaty part of "earnings season." Not only do I get to, but I have to work my brain about as hard as I can. This time it's different though. This time, earnings, even high profile earnings such as we have this week are not the alpha dog. Heck, corporate earnings are not just playing second fiddle here, earnings are now third banana to both the FOMC this afternoon, and then President Biden's address later tonight. Seems to me that the FOMC would have been wise to push out their policy meeting until Friday. Can't do that, the schedule is set ahead of time? What, are we not sentient beings? How can one opine on the trajectory for monetary policy in front of the financial media ahead of a massive public disclosure of planned fiscal policy from the Executive branch, and then followed by the first of three estimates for Q1 GDP in the morning? I mean... gee whiz... C'mon, Man.
Tonight, President Biden will obviously highlight the administration's accomplishments over his first 100 days in office. Progress in the fight against the pandemic will likely come up first. Then he will go into, and ask for cooperation on his $2.3 trillion infrastructure and jobs package that comes on top of a series of stimulus packages, the most recent of which ($1.9 trillion) having come on his watch. After addressing infrastructure and jobs, the president will lay out another (third in as many months) costly plan ($1.8 trillion?), this one centered around social structure. This is not a political piece and you will not get my opinion on such matters here. This is strictly about the money.
The president, after outlining what he sees as required, will go into, at least in part... how to pay for this all. That will lead to his plan to adjust U.S. Tax codes. We all have read about and expect to hear that President Biden plans to increase the top income tax rate from 37% to 39.6%, and for the threshold to be taxed at that rate to drop to $400K annually for households. We expect to hear that for earners that report $1 million or more (top 0.3% of all earners) that capital gains taxes would be essentially doubled from 20% to 39.6%, being taxed as ordinary income. The Obama era 3.8% healthcare surcharge remains in place, so really 23.8% becomes 43.4% in this plan.
It does look like there will be no adjustment made to estate taxes at this time, which likely comes as a huge relief for the wealthiest of wealthy Americans. Might tick off the progressive side of the president's own party too. Currently, the estate tax is a 40% levy that kicks in upon death for individuals leaving more than $11.7 million to heirs or for married couples leaving more than $23.4 million to heirs. So, this is something that very, very few of us would ever have to worry about. That said, this crew includes many who support our elected officials, and thus very likely would have little chance of getting through Congress. I mean.... It is what it is.
Most interestingly, the president is going to expand the IRS, with an approximately $80 billion investment in an attempt to recover an estimated $700 billion through increased enforcement. What? Was that a collective gasp I just heard?
Don't look now, but ahead of this afternoon's FOMC policy statement and press conference that itself comes well ahead of the presidential address, the US Ten Year Note has been on the move. What gave up just 1.58% on Tuesday afternoon, pays nearly 1.65% as night turns to day. The US Dollar Index has also been climbing overnight, from a rough 90.9 on Tuesday afternoon to more than 91 this morning.
What that tells us is that although there will be no hint of any eventual changes in monetary policy made in the statement, that Fed Chair Jerome Powell will be pressed on just how transitory the very nature of the kind of inflation seen now seen across the economy actually is, and what the prospects for an earlier than projected tapering of asset purchases mighty be. Understand that Powell is going to have to walk a walk this day at a level that I don't know can be done. Growth and inflation are both shouting out that current levels of accommodation might be inappropriate.
That said, the president's spending plans are screaming "You know, somebody has to buy all this debt." So who is going to buy all this debt if the correct path of monetary policy is to pull back just as the already way, way, way beyond perverse spending really heats up? You? Me? The Chinese? Don't bet on it.
It's time to play the music
It's time to light the lights
It's time to meet the muppets on the Muppet Show tonight.
- Sam Pottie, Jim Henson... copyright Walt Disney Music Company
The Water's Fine
Everyone in the pool. JP Morgan Chase (JPM) CEO Jamie Dimon wrote in a memo to all U.S. based employees, that it "would fully expect that by early July", these employees will be back in the office in a rotational way. All business leaders are up against this same kind of decision. There are times that the mantle of leadership weighs more than at others. This is the time of the winter soldier. We all know that in general, while many folks have maintained an incredible level of productivity from home, that nothing beats what the pressure of competing face to face can bring, and nothing beats the ability of dropping in on associates as a means of getting immediate answers to current issues. Folks respond to pressure.
I understand the business needs to get everyone back together, just for the sake of team building, if not more. I have no doubt that by most office based businesses, this can be done relatively safely. What I seriously doubt is the ability of many employees to get back and forth between the office and home safely. In some states, the office may have a parking lot, and one might be able to drive back and forth. In most cities, however, employees will have to rely upon mass transit. Not everyone will be vaccinated. Every household with children will have unvaccinated people in the home. Crowded buses. Crowded rail cars. Face to face with folks you don't know for 60, 90 or 120 minutes. What could possibly go wrong?
Economics (All Times Eastern)
08:30 - Goods Trade Balance (Mar-adv): Expecting $-86.9B, Last $-86.72B.
08:30 - Wholesale Inventories (Mar-adv): Expecting 0.7% m/m, Last 0.6% m/m.
10:30 - Oil Inventories (Weekly): Last +594K.
10:30 - Gasoline Stocks (Weekly): Last +86K.
The Fed (All Times Eastern)
14:00 - FOMC Policy Decision.
14:30 - FOMC Press Conference.
Today's Earnings Highlights (Consensus EPS Expectations)