Those eyes. Usually around 06:30. Maybe as late as 7 a.m. on a slow day. Morning column written, checked and submitted. I open the door slowly. The wife and the dog sleep in a dark room. I am a morning person, the wife most certainly is not. The dog needs to be fed. Just a crack of light enters the room. Those eyes, fluorescent green or yellow find my own and focus. It takes a second, maybe two. "Mooshi" realizes that this means breakfast (and prayer). She hops to, and off we go.
It is during that millisecond that I see her yellow eyes that I am taken back to another place, another time. Late night. A nearly quiet night. The moon visible atop the canopy of treetops from inside a small clearing. Unarmed, except for a buck knife on one hip, a Ka-Bar on the other, boot knife on my lower right leg, pilot's knife dangling from my utility vest, and two throwing knives taped to my back.
Those eyes. So many. Fluorescent, yellow eyes, just off, in the tree line. Speaking among themselves, so it seemed. Threatening, growling, harassing upon will. The forest is their home, not mine. Charging my location just enough to get close, then retreating back to the group. Over and over. Appear large? Throw rocks and dirt. Maybe they'll get bored. Harassed for hours it seemed. All night it was. Gone by morning. No sleep. No fight to the death.
Wolves
Wolves travel in packs, and hunt in groups. Smart enough to seek both sustenance and just social enough to warn those not belonging in their neck of the woods to just get lost. Certainly not social like Mooshi, though those eyes have evolved not at all over millennia.
Markets have certainly recovered nicely off of the lows of late September. Now, here in mid-October, it feels like it did that cold night back in 1980-something. The wolves are visible and noisy. They harass from the treeline, and at times come way too close for comfort. This time the alpha wolf is a virus, a darned virus that seems to be spreading once again across Europe, and across parts of the U.S.
The rest of the pack react to the virus, the alpha and each other. You know them well. They go by names that you hear every single day. Pelosi, Mnuchin, McConnell. Noisy? Certainly. I will never know if that pack of wolves was trying to tell me to get out of their woods, trying to do me harm, or perhaps just curious.
Who or what have we found here? These "newsmakers" or "policy setters" know what impact their actions or lack of action will have upon the average Joe or Jane. Still, politics must be played. That average Joe or Jane must be used in ways that they probably would not like if they understood. The threat is still noisy, still harassing from just out of reach. The frustration of it all.
From All Directions
On the virus itself, cases of new infection suddenly have hit levels not seen since last spring, in some cases, even topping the numbers of those awful, dark days. Suddenly, finding toilet paper and paper towels requires some detective work. Oh no... not again. Seen Clorox (CLX) ? Only very recently, and certainly not well stocked. How about Lysol? Not since March. Guess they'll never catch up now.
Paris, France has a new curfew. London, England imposes new restrictions. Think Europe beat this virus, or handled this better than any other Western society? Think again. Take a look at caseloads in Germany, France, Spain, Italy, Belgium, the U.K. Tragic. The slope of those curves is terrifying. Let's not forget that Europe is a few weeks ahead of North America in terms of seasonal change. The slope of the curve is awful north of our border, in Canada, as well. The "indoor" season beckons, and terrifies.
Domestically, the epicenter(s) of the pandemic shifted from north to south as residents of northern cities left the comfort of heated homes for the great outdoors, and those of southern cities fled the hot and humid outdoors for the comfort of air conditioning. Now, the cycle reverses. Yet again. Northerners head back indoors. Southerners head back outdoors. The virus hunts more effectively indoors. Epicenters shift.
Of course this occurs just as a number of horses carrying relief to the troops, such as AstraZeneca (AZN) , Johnson & Johnson (JNJ) , and Eli Lilly (LLY) find that conditions on the fastest of routes are forcing necessary detours. You getting this, Nancy? Steven? Mitch? Hello. Knock, knock. Anyone home?
Markets
Equity markets closed lower for a second day on Wednesday, after a pretty nifty four-day run that capped a smart-looking two-to three-week rally into earnings season. The "blame" for Wednesday's decline was the lack of progress on putting together a fiscal package that gets help into households and small businesses that employ many of the people in those households sooner rather than later.
The spark that led to a fire came from Treasury Secretary Steven Mnuchin when just prior to lunchtime he was quoted saying, "Getting something done before the election and executing on that will be difficult." Just like that, the Nasdaq Composite gave up 0.8%, the S&P 500 0.7%,and the small-cap Russell 2000 0.9%. Oddly, the Dow Transports (pretty much all by themselves) did gain on the day, led higher by the rails, aerospace & defense as well as trucking. J.B. Hunt Transport (JBHT) seemed to be the star of the day.
Thursday
Overnight, European equities are experiencing a nasty beatdown as those economies appear to be headed once again for a restrictive environment. U.S. equity index futures are participating in this beatdown. The interesting point here is that at least on Wednesday, market breadth was really quite far from dire. Declining volume just barely beat out advancing volume at both of New York's primary exchanges and on notably light trading volume.
The point is that, at least on the second day of this particular selloff, there was still no broad-based profit-taking, still no compelling distribution. Now, does that change on Thursday? I still see the Nasdaq as the stronger of the two significant, broad, large-cap indices. That said, please observe that the S&P 500 did in fact fill the gap created over the weekend.
This, while the Nasdaq Composite merely tested Monday's lows. Must gaps always fill? No. Better question: Do gaps usually fill? Yes. That allows for more than 130 points of downside without really breaking anything trend-wise.
As I write, darkness still reigns. Morning light is still a few hours off, the opening bell even further. Is this morning's expectedly lower opening a buying opportunity? That's entirely up to the virus, how individuals behave around the virus.
Wearing a mask is unmanly? How about infecting someone's grandma because you needed to hang out? That's really manly. Put the stinking mask on. The rest is up to Nancy, Steven and Mitch. Not exactly the faith we might have had in "Willie, Mickey, and The Duke" in centerfield, but it's what we've got.
Economics
Thursday morning could have a fairly significant impact on our domestic outlook in as soon as a few hours. Not only are we to see the weekly counts for both Initial and Continuing Jobless Claims, but regional manufacturing surveys for both the Philadelphia (most important) and New York (Still kind of important) Federal Reserve districts. Friday brings September data for Retail Sales and Industrial Production, so the macro will stay central to the story going into the weekend.
On that note, Fed Vice Chair Richard Clarida spoke on Wednesday -- at length. However, one quote stood out above the rest. After acknowledging that the economic recovery to this point had exceeded expectations, Clarida said, "it will take some time to return to levels of economic activity and employment that prevailed at the business cycle peak in February, and additional support from monetary... and likely fiscal .... policy will be needed." Thanks for the tip.
One should know that the IMF, in their semi-annual report, sees global public debt rising to approximately 100% of planetary GDP at some point this year. I have seen nothing regarding galactic GDPs. However, the IMF thinks that at least advanced economies can borrow and service this explosion of debt as interest rates remain very low. (What if they don't... remain low?)
What will certainly be a reduced rate of growth, and far less tax revenue will be offset by cheap money, also known as easy policies, also known as "QE forever," or just a little further down the road as "Modern Monetary Theory." (So, it's going to be OK?) The IMF, by the way, does not see a broad global necessity to adopt policies such as fiscal austerity as a means for many nations to address this coming reality.
While austerity was embraced in the wake of the last great financial crisis by both the IMF, as well as a number of troubled European economies, and those policies do look like failure in the rear-view mirror, it does stand to reason that though a fiscal response is required, that there is no easy way out. The bough will at some point break. None of us knows when. There will have to be responsible budgeting across the years that follow this crisis, or there will be an eventual crisis of confidence in fiat currencies.
Key to note here? The IMF, at least in my (often misplaced) opinion, has been just plain wrong so often in recent years that I no longer put much faith in the fund's projections, opinions, or guidance on policy. Just sayin'.
Economics (All Times Eastern)
08:30 - Initial Jobless Claims (Weekly): Last 840K.
08:30 - Continuing Jobless Claims (Weekly): Last 10.976M.
08:30 - Import Prices (Sep): Expecting 0.3% m/m, Last 0.9% m/m.
08:30 - Export Prices (Sep): Expecting 0.4% m/m, Last 0.5% m/m.
08:30 - Philadelphia Fed Manufacturing Index (Oct): Expecting 14.8, Last 15.0.
08:30 - Empire State Manufacturing Index (Oct): Expecting 14.5, Last 17.
10:30 - Natural Gas Inventories (Weekly): Last +75Bcf.
11:00 - Oil Inventories (Weekly): Last +501K.
11:00 - Gasoline Stocks (Weekly): Last -1.435M.
The Fed (All Times Eastern)
11:00 - Speaker: Dallas Fed Pres. Robert Kaplan.
11:00 - Speaker: Reserve Board Gov. Randal Quarles.
17:00 - Speaker: Minneapolis Fed Pres. Neel Kashkari.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (SCHW) (0.49), (MS) (1.28), (TSM) (4.27), (WBA) (0.96)
After the Close: (ISRG) (2.01)
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