I've been waiting here to be your guide
Reveal the secrets that you keep inside
No one leave until the night is done
The amplifier starts to hum
The carnival has just begun
- 1998 Curt Cuomo/Paul Stanley, performed by Kiss
They stepped out of the treeline. Fifteen thousand of them. No one counted their numbers. Sure of victory. They had never been defeated before. Not badly, anyway. Every single one of them had faith in the old man. The day before they had pressured both ends of the long blue line. Culp's Hill. Little Round Top. Both ends weakened, and then held. The 20th Maine ran out of ammunition, then fixed bayonets. Heroism. Then, they even pressured the center for a short while, after a tactical error by a politician who never should have been a general officer. The 1st Minnesota basically sacrificed themselves. More heroism. You are free this day because those folks never left that field.
On the last day, they would try a large frontal assault directly aimed at the center of the line. More than a mile away, mostly uphill, open ground, toward a copse of trees that stand even now. The old man assumed that the "Old Goggle Eyed Snapping Turtle" would expect another flanking move. Obviously he needed to strengthen what had already been weakened.
He did not. He was also a veteran engineer, also an old academy graduate. He was already deep. Deep inside the old man's head. Anticipation. He would let them move upon the center of his lines. The withering cannon fire was the least of their problems. Once in range, massed small arms fire by regiments still at full strength, assisted by entire batteries firing grapeshot would not just end this "charge," they would change the direction of history.
Sides of a Coin
Talk about head games. Washington, D.C. Oh, the two sides finally spoke again. The sides are no closer to a deal. There is no agreement on a fiscal package. Just political posturing. This is a disgrace at this point. We see House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer on the screen. We also hear from Treasury Secretary Steven Mnuchin. Both sides claim that the other is unwilling to budge on a number of issues. Does this not mean that one speaking in this way is also unwilling to compromise on these issues? I'm no genius, but I'm no fool, either. I am the American people and both sides now ask me to play one.
A fool, no, I will not be. Not for the likes of you. I am this close >< to voting against every incumbent at every level come November. This close >< regardless of party affiliation. You see, because I am not loyal to either of you. I am loyal only to my Maker, my family and "Old Glory."
Do some of these national leaders feel the same way? Impossible to tell. The time to pass smaller bills where there is agreement has long passed. This is not rocket science, and it is electoral politicking. There is, and will be, a cost.
Recent employment data show us decreasing participation. Common sense tells us that personal income is taking a kidney punch right now. Over the medium to longer term, as households earn less and as businesses due to the pandemic as well as unacceptable sloth on Capitol Hill are unable to assess their needs nor potential revenues, it will lead to business and then household defaults.
Both the Producer Price Index and the Consumer Price Index surprised economists to the upside for July. It did not matter how you sliced the data. Headline, core, month over month, or year over year -- inflation was hotter in July than anyone labeled as a "professional" economist expected. Energy prices have turned upward. Food prices cooled for the month but remain elevated. Transportation costs are rising. Even apparel has started to turn a corner.
With the explosion of money supply as well as necessary deficit spending, the dollar has weakened from where it had been. Asset prices have been on a tear, so why not prices for goods and services? The question is this: How quickly does the economic recovery experienced to this point now slow as incomes drop and as Congress forces businesses to hold off on hiring or planning. Higher prices, less income. This Friday, tomorrow morning, we'll see July data for Retail Sales and Industrial Production. July may look OK. August numbers, still a month away, may end up looking like something out of a monster movie.
Equity markets roared on Wednesday. Risk on!! So it appeared. Appearances, however, can be deceiving. I don't know everything, but Wednesday did leave me somewhat unconvinced even as the S&P 500 flirted with an all-time high, and even as the Nasdaq Composite simply screamed out of a three-day losing streak.
So, what happened?
Information Technology led the way, semiconductors ran wild. Well, Advanced Micro Devices (AMD) and Nvidia (NVDA) ran wild. Healthcare got hot again, led by Biotechs. Discretionary names soared, but did they? That was really the autos, which was really Tesla (TSLA) . By the way, did you kids see what Vroom (VRM) did on Wednesday, and then overnight? Jeez Louise.
Hey, Sarge, I've got a question. How come if Treasuries sold off at the longer end of the curve and banking valuation is driven as you said Wednesday by net interest margin, did the Financials fall out of a tree on Wednesday? Good question. Thank you for bringing that up. True, the spread between what three-month T-bills yield and what the 10-year note yields has expanded rapidly this week/month.
The increase in this spread is indeed a positive when driven by expectations for economic growth. That positive vibe quickly turns sour as these expectations turn away from economic growth and become fear of needing to force higher interest rates in order to try to control inflation. We are a long way from there, but these fears are creeping into a few minds.
I also would like readers to be cognizant that while breadth was mildly positive at both of New York's major equity exchanges on Wednesday, it was in no way decisive. In addition, trading volume decreased significantly from Tuesday both up at Times Square as well as downtown. In fact, trading was very quiet, not exactly what we like to see on "up days."
So, I went out on Cisco Systems (CSCO) on Wednesday, but not as aggressively as I thought I might have earlier in the day. Thank goodness. So much for Catfish Hunter. To make a long story short, CSCO beat expectations on both the top and bottom lines. I did pay $47.78 for the shares on Wednesday. I see a last sale of $45.20 as morning light peaks through my window here on Thursday. I did write to you that I was thinking of selling (writing) some November $50 calls as a means of manipulating net basis.
That said, I got cold feet late in the day. Instead I wrote the Aug. 14 (tomorrow) $47.50 calls for $1.36. My net basis is now $46.42, so the stock is down 6%, I am down 2.6%. Do I cut and run? No way. What I'll do is roll over the weekly call as it expires. Let's say I can knock another dollar off that net basis by selling slightly in-the-money calls against the equity. Well, then, the position is not even worth worrying about at that point.
Instead of an investment, this becomes a strategy based upon the expectation of withering theta. Eventually, through doing this every week until the shares are called away, the investor in most cases ends up with something very close to breaking even, possibly even profitable. When stuck with lemons, we make lemonade. We may have panic points, but we never panic. Not ever.
Economics (All Times Eastern)
08:30 - Initial Jobless Claims (Weekly): Last 1.186M.
08:30 - Continuing Jobless Claims (Weekly): Last 16.107M.
08:30 - Import Prices (July): Expecting 0.6% m/m, Last 1.4% m/m.
08:30 - Export Prices (July): Expecting 0.3% m/m, Last 1.4% m/m.
10:30 - Natural Gas Inventories (Weekly): Last +33B cf.
13:00 - Thirty-Year Bond Auction: $26B.
The Fed (All Times Eastern)
No Public Appearances Scheduled.
Today's Earnings Highlights (Consensus EPS Expectations)
After the Close: (DDS) (-4.34)