Iron Sights
So Humid. So hot. Arkansas hot. Smoke mixes with beads of sweat. Burning. Eyesight blurred. You've got this. 1200 meters. No scope. Toss the eye pro. Aim low. Exhale. Slow the heartbeat. Squeeeeeeeze. The weapon erupts. Six to eight round burst. Bingo. Up and moving. Next obstacle. Where? Just keep moving.
Just Keep Moving
Now, we stand at the precipice. The eve of first quarter earnings season. That next obstacle. Trading volumes have been dreadfully thin all week. Small Caps as represented by the Russell 2000 give up more than a percent one day, only to recapture the lost ground the very next. This is a technical battle at the 200 day line for those who are yet to grasp what that's all about.
The Fed? In a world where a thought on the markets or the economy can seem dated later on during the same day, we peruse the minutes of a policy meeting three weeks old for clues. Meaningless clues. What a core group of thinkers might do next. The take away from those minutes, by the way, was simply that those who comprise the FOMC just don't know. The incredible reality is that we all knew already, and for quite some time, they never know. We don't know either. There lies the thrill. The challenge.
Straight from those Minutes.. "A majority of participants expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving the target range unchanged for the remainder of the year." Listen, the Federal Reserve Bank has a dual mandate. Price Stability. Maximum Sustainable Employment. That's it. Safe to say that both of these stated missions have not only been largely achieved, but have been for quiet some time now. The nation, even if not stated, puts the onus of fostering economic growth on monetary policy. I really don't know how much return in terms of growth, that a nation with it's own central bank is able to generate through such policy relative to risk. They can certainly injure growth through policy error. Late 2018 is a prime example.
From The Upper Deck
It would appear from the cheap seats, that growth above trend once monetary policy embraces the experimental would be reliant upon an increased imbalance in fiscal policy. That growth, in turn would be unsustainable unless the ecosystem were in near entirety able to hit an unknown level of velocity where increased growth becomes organic. The problem will forever be that in order to find the level where economic growth, or lack thereof is truly authentic, the twin addictions to loose monetary and loose fiscal policies must be abandoned. That brings pain. Therefore, this will never happen in earnest.
Nations will never abandon the debt super-cycle that they have created unless there is a public loss of faith in fiat. Central banks will never complete any tightening cycle unless forced to chase consumer level inflation. Core inflation is back to where it was in late 2015, which is 2.0% year over year.
What would core inflation look like if we omitted the Shelter (+3.4%), and Medical Care Services (+2.3%) line items? The truth is, that for middle to lower class Americans, while wages have stagnated for decades, putting a roof over a family's heads, and trying to keep them healthy leaves them without disposable income, and negatively impact household budgets. Energy gets away from them here, and these folks are going to hurt. Real bad. Repairing the yield curve prior to discussing any short term rate increases seems elementary. Allows for a more normalized credit market. Allows the velocity of money to increase. If that then increases inflation, then you chase. It's not that hard.
And, The Field Goal Is ...
Good !! In perhaps the greatest kicking of any can yet seen on the global stage, no offense to my friends in Greece... The United Kingdom will not come barreling out of the European Union tomorrow (Friday). Major equity indices reacted to the short-term agreement with... uhm.. actually, they did not react at all. But, hey, we've still got earnings. The UK will apparently have to participate in EU parliamentary elections on May 23rd, but not interfere with any multi-year budgeting or future leadership.
If they don't screw that up, they have until October 31st. See how tough this is... for both sides. Clear example of why you never, ever lower your flag, or take a knee at the behest of another. I really don't understand why they ever did. Never. I'd rather die poor, honor in tact.
Cooling IPO Market
Perhaps this is a good thing. For market bulls and for those still interested in getting involved in these new issues both. The now dismal performance of Lyft (LYFT) , since it dampened the early hoopla around both direct competitor Uber and social media, image sharing platform Pinterest it would seem.
We should hear from Uber on Thursday (today), as the firm is expected to file it's prospectus. The plan? To raise $10 billion. If the offering is priced between $48 and $55 a share, that puts the firm's valuation in a range spanning between $90 billion and $100 billion, which is far lower than forecasts of $120 billion that had been spoken of. A formal price range will still not be mentioned for a few weeks yet as the shares are not set to trade in the secondary market (at the NYSE) until May 10th. As for Pinterest, that deal comes to market in a week's time (April 18th). The plan there is to raise $1.2 billion as the price range mentioned runs from $15 to $17 for 75 million shares. A market cap of $10 billion is the running estimate.
Understand that a world where these unicorns draw less interest than previously thought is better for you the investor in general. As these stocks that are not represented in any equity index draw investment capital away from existing stocks that do possibly hold membership in any of the other indices or ETFs. This, in turn causes algorithmic response. From there, anything happens.
The Line Up
- Today is the big event. Disney's (DIS) investor day. The fun does not get going until after the closing bell, gang. Could be some nice day-trading opportunity in this name this afternoon.
- The Defense Department has announced that the much coveted, $10 billion JEDI cloud computing contract is down to two firms "within the competitive range." The two are not named. Still thought to be in the running are Amazon (AMZN) , Microsoft (MSFT) , IBM (IBM) , and maybe even Oracle (ORCL) . This is the competition that Alphabet (GOOGL) had walked away from months ago.
- You kids see the deal that Delta Air Lines (DAL) cut with American Express (AXP) ? It ain't just earnings. Not only does Delta not own any Boeing (BA) 737 Max jets (so they won't have to cancel flights), but in a reworked deal with Amex, the airline will be paid up to $7 billion a year by 2023, more than double the payment from last year.
Economics (All Times Eastern)
08:30 - Initial Jobless Claims (Weekly): Expecting 211K, Last 202K.
08:30 - PPI (Mar): Expecting 1.9% y/y, Last 1.9% y/y.
08:30 - Core PPI (Mar): Expecting 2.5% y/y, Last 2.5% y/y.
09:30 - Fed Speaker: Fed Gov. Richard Clarida.
09:35 - Fed Speaker: New York Fed Pres. John Williams.
09:40 - Fed Speaker: St. Louis Fed Pres. James Bullard.
10:30 - Natural Gas Inventories (Weekly): Last +23B cf.
13:00 - Thirty Year Bond Auction: $16B.
16:00 - Fed Speaker: Fed Gov. Michelle Bowman.
Today's Earnings Highlights (Consensus EPS Expectations):
Before the Open: (CBSH) (.90), (FAST) (.67)
(Disney, Amazon, Microsoft and Alphabet are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells DIS, AMZN, MSFT or GOOGL? Learn more now.)
