"What then is time? If no one asks, I know what it is. If I wish to explain it to him who asks, I do not."
-- Augustine of Hippo
Can It Be?
Were we not just celebrating the end of the awful year of 2020? Did our hearts not just skip a beat with optimism at the prospect of a happier and healthier new year?
Memorial Day is now past. The first light of June 1 is now not too far off. Incredible. My father, who is still kicking by the way, was not a young man when he told me to be aggressive in life, because "I feel like I was in high school some fifteen minutes ago." Hmm, that's how I feel, now.
June 1 already, I am stunned. I have been on the mend for well more than a year now. Not yet close to the pre-pandemic level of physical invincibility that I once thought of when I thought of myself. Still, that was foolish pride, and clearly untrue. I had just never come up against something that I could not out think, out run, or out endure before. Hard lesson learned.
All that said, there is no doubt that as the months have ticked by that the lingering symptoms of this most recent global plague do in fact ebb somewhat. Expecting full recovery from this virus is probably expecting too much. How does one know? How can one remember? Immediate concerns evolve over a lost year-plus from making sure that the children know where all of the important papers are and who to call, to frustration with an inability to recapture lost strength and speed.
Perhaps both the worst and best part of recovering from Post-Covid Syndrome or the "Long-Haul," as this now very common post-viral "illness all its own" is often referred to, is to have been athletic over a lifetime. I just happen to know how much weight I could lift or push or pull, or how many reps I could "do" in the execution of various resistance-type exercises. I know my average sustained mile pace for each five-year increment since I was winning races as a young man. I used to have PRs (personal records), then I had age-specific PRs. Now I have post-Covid PRs, which are much easier to set and quite encouraging, by the way.
Having trouble dealing with something like this? Need a friendly ear? I am here. I may not be able to solve all issues. I may not be able to solve any issues. I can understand, though. We are a "Team." All of us. I can hear your cry. You are. Never alone. You are. Warrior.
Morning Prayer (This is a portion of my morning prayer, maybe it can help even just one of you.)
Thank you, oh Lord, for guiding me and protecting me through this night. Through every night. Selfishly, I ask for more guidance and more protection, as I know I will need it. Grateful, I am for every opportunity as well as every challenge. I ask this day for enough situational awareness so as to recognize opportunity granted, as well as the strength to meet and confront every challenge presented. I know that alone, I remain incomplete. I am forever your servant. Amen.
Friday ended quietly as we all had expected that perhaps the entire week would have passed. That was clearly not the case. Over the five-day period, the Nasdaq Composite ran 2.06%, second only to the smaller-cap indices as the Russell 2000 and S&P 600 scored five-day increases of 2.42% and 2.12%, respectively.
You know what else was hot? That's right. The Dow Transports put together a weekly gain of 1.77%. Of all major U.S. equity indices, only the Dow Utilities shaded red last week.
That's a growth story, as in economic growth. On Friday, April PCE data for both headline and core (y/y) consumer-level inflation (3.6%, 3.1%) apparently confirmed what April CPI data had presented earlier in May -- with annual increases of 4.2% and 3.0%, respectively.
How frightened should you and I be of this spate of inflation that thanks to current imbalances in demand and supply will continue for now? Well, the answer to that question, if one is unable to earn more through sheer hard work or increased hours, is obvious. All must be somewhat concerned.
I know that everything in the supermarket costs more. I know that the advertisements that I am sent by retailers for items that I have purchased in the past now offer me "sales" at prices higher than I paid earlier this year for the same goods. Everything from chicken sandwiches to haircuts to gasoline costs not just a little more, but 25% to 40% more depending on where you are.
The big question is just what every policymaker must ask themselves every morning. Supply constraints are very likely transitory. Increased demand is almost surely transitory. Everyone wants to go on a vacation for the first time since the pandemic started. They will not go on two or three vacations. Everyone wants to go to a restaurant for the first time in 15 months. I know many who still have not. Once we get back to "eating out" once a week (or whatever the family habits had been), we will not be making up for 60 or 70 missed meals.
As for labor markets, close to half the states have now pulled back on the weekly federal stipend that had been added to state-level unemployment benefits in order to try to ease labor supply constraints. It will be of keen interest to see just how successful this move is.
I think that maybe working long hours just to earn as much or maybe even less than one had seen in income for the year past may help firms supply goods and services in a more timely manner, while probably doing nothing on the demand side. But we are not here for my gut instinct projections. Let's see what the data tells us moving forward.
The Week Ahead
This brings us into the present. A short week. Those supported by base salaries rejoice. Those reliant upon either their own P/L ratios or commission to earn a living will run the risk of placing too much pressure on their own daily performance as their average per-day gross income requirement increases, even as the number of market participants is likely reduced.
The main event this week will be the BLS survey data for May Employment. Most economists I follow seem to be in the 600Ks to 700Ks in terms of job creation for May, but let's be fair, and let us be fully cognizant that the data reported is most likely rife with error. We all know that the 266K non-farm payroll number for April was widely seen as a disaster, but the fact is that the raw number was more like 1.1M, which was in the ballpark of most publicly made expectations for that print.
You show me the team that decides how to seasonally adjust economic data coming out of mandated economic collapse and going into a rapid, policy-fueled recovery and I'll show you a bunch of kids feeling around in the dark for something unknowable. Seasonally adjusted data, always suspect, has never meant less than now, when there really is no historical comparison -- to anything. The U.S. economy created more than 1M jobs in April, and the BLS will revise that 266K higher this month. Promise? Of course not. Pinky swear? OK, pinky swear.
Investors will need to be on their toes early this week as Computex 2021 kicked this morning in Taiwan and will run through this Saturday. The event began with a keynote address by Advanced Micro Devices (AMD) CEO Lisa Su (Yes, from Queens, NY... how'd you know?), and will also feature presentations by Nvidia (NVDA) and Intel (INTC) .
Note that the Philadelphia Semiconductor Index (+4.41%) easily outperformed both the Nasdaq 100 (+2.06%) and the Technology Select SPDR ETF (XLK) (+1.62%) last week. In addition, and sticking with that theme, Taiwan Semiconductor (TSM) kicked off that firm's annual symposium in North America on Tuesday as that event will launch on Wednesday across Asia.
By the way, I think there are now like three or four Teslas on every block. This is how something becomes "uncool." May have to buy something else just to avoid becoming part of "the Borg."
On the Move
On Tuesday morning, I see the U.S. 10-Year Note giving up 1.62%, after going out on Friday night at 1.58%. That itself was up a few basis points from earlier for the week. Crude prices are spiking on Tuesday morning, with Brent trading around $70.70 and WTI bouncing around $68.10 in response to Tuesday morning projections made for tighter Crude supplies over the second half of the year at the OPEC+ alliance shindig held earlier today.
That brings us to bitcoin, and the entire cryptocurrency complex. I see bitcoin trading with a $36(K) handle this morning after bottoming out above $33K on Saturday night and peaking just below $38K on Monday night. The big event here was a Financial Times article published over the weekend that included an interview with Michael Hsu, the Biden administration's Comptroller of the Currency. Hsu spoke of working with other U.S. regulators in order to create a "regulatory perimeter" for cryptos.
Readers learned that Hsu's office has been meeting with both the FDIC and the Federal Reserve as an inter-agency "sprint team" had been put together in order to act on cryptos before they become too big. Hsu mentioned that "time is of the essence."
Readers will recall that in front of the House Financial Services Committee last week, SEC Chair Gary Gensler mentioned that the Treasury Department had been placing focus on guarding against illicit use of cryptocurrency markets, including being used for money-laundering purposes. We all know that Treasury Secretary Janet Yellen has frequently mentioned cryptocurrencies being used for "illicit finance."
This, of course, all comes on the heels of Lee Reiners' op-ed piece in the Wall Street Journal last week advocating for outright banning of cryptocurrencies if possible. Reiners claims that he has "yet to identify a single task or process that cryptos makes easier, better, cheaper, or faster." He points out that if asked why most holders of cryptocurrencies do so, their answer will almost always be "to make money." In other words, the primary legitimate purpose for holding cryptocurrencies, in Reiners opinion, which is not too far off from my own, would be mere speculation.
Oh. Almost Forgot
Rock on, my friends. Rock on. Victory is at hand, because victory is always just one smart move away.
Economics (All Times Eastern)
09:45 - Markit Manufacturing PMI (May-F): Flashed 61.5.
10:00 - Construction Spending (Apr): Expecting 0.6% m/m, Last 0.2% m/m.
10:00 - ISM Manufacturing Index (May): Expecting 60.8, Last 60.7.
10:30 - Dallas Fed Manufacturing Index (May): Expecting 33.4, Last 37.3.
The Fed (All Times Eastern)
10:00 - Speaker: Reserve Board Gov. Randal Quarles.
14:00 - Speaker: Reserve Board Gov. Lael Brainard.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (CGC) (-0.24)