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FEAR NOT Brave Investors

Tesla Experiment

 Strange times But remember The Joker once served as the Iranian ambassador for the United Nations.

Apple, Tesla, Fed

The Week That Was - What Lies Ahead?

Editorial

The new all Democratic US government is in the house and what we hear is massive unproductive stimulus, the end of the traditional engine of America, oil and gas and a government that says they cannot control the pandemic. Not inspiring stuff unless you live in a bubble, no not that bubble. The bubble that we can just stop the world's energy source on a dime and somehow have all the power at hand ready to go. That somehow all these actions won't cause rampant energy and food inflation and the devastation to many that would ensue.

Raising your eyes and looking at the stopped car in front of you you may want to hit the brakes.The pandemic is not close to our greatest worry. The  runaway credit bubble in the era of delusion and entitlement has multiple unintended consequences, or are they intended?  The mania is live and well in the stockmarket, the story of the climaxing Game Stock (GME) stock this week tells us a story, some maybe good, as the power of the elite and their bankers is being tested if not wrecked by the herd of small investors and WSB or so called Robn Hood traders. Though on the other hand the stockmarket has lost rationality. The danger is should the bubble pop the consequences of a historic debt crisis in deeply devided social and geopolitical backdrops could be earth shattering as the Fed disregards asset inflation and bubble dynamics.

Comments from Yellen and others on the same page suggest that low rates conveniently push potential debt instability far out into the future. The Fed is poised to expand its balance sheet, by adding liquidity to the tune of $1.5 TN this year with no regard for rampant asset price inflation and bubbles. Now the new administration has control of the blank checkbook and is determined to us it with no long-term thinking or planning; everything is short-term focused. Washington is gambling with our nation’s future, from kicking cans down the road to rolling drums down a hill. 

The jobless claims follows December showing the first a fall in jobs since April. The ECB held its first meeting of 2021 with policymakers sticking ex with extra stimulus from December, but the economic outlook continues to be clouded with the discovery of new Covid-19 strains and the relatively slow pace of the vaccination rollout. The Bank of Japan and Bank of Canada also announced predictable policy settings. Following the first major S&P 500 companies to post earnings for Q4 2020 are money center banks JP Morgan, PNC, Citigroup and Wells Fargo last week we kicked off week 2 with Goldman Sachs, Bank of America and Netflix earnings and finished Friday with Schlumberger earnings

Contents

  • Stockmarkets
  • Energy - Oil and Gas
  • Foreign Exchange
  • Gold and Silver
  • Fixed Interest & Banks
  • Risk Radar
  • Geopolitcs and Economy
  • Week ahead

 

Stock Markets

Highlights - USA

  • The S&P500 rallied 1.9% (up 2.3% y-t-d)
  • The Dow added 0.6% (up 1.3%).
  • The Utilities were little changed (up 0.8%).
  • The Banks were off 2.9% (up 6.0%) after the rest of the major banks reported, and the Broker/Dealers fell 1.2% (up 4.2%).
  • The Transports fell 0.7% (up 2.8%). The S&P 400 Midcaps rose 1.6% (up 6.8%), and the small cap Russell 2000 jumped 2.1% (up 9.8%).
  • The Nasdaq100 surged 4.4% (up 3.7%). The Semiconductors advanced 2.7% (up 10.0%). The Biotechs rose 2.3% (up 7.4%).
  • With bullion rallying $27, the HUI gold index recovered 1.5% (down 3.6%).

 US Indices W 1 22 2021

Highlights - Europe

  • France's CAC40 declined 0.9% (up 0.1%).
  • The German DAX equities index increased 0.6% (up 1.1%).
  • Spain's IBEX 35 equities index dropped 2.6% (down 0.5%).
  • Italy's FTSE MIB index fell 1.3% (down 0.7%)
  • U.K.'s FTSE equities index declined 0.6% (up 3.6% y-t-d).

In Europe - how we closed 2020

CAC 2020

DAX 2020

FTSE MIB 2020

IBEX 2020

Highlights - Asia

  • Japan's Nikkei Equities Index added 0.4% (up 4.3% y-t-d).
  • South Korea's Kospi index gained 1.8% (up 9.3%).
  • China's Shanghai Exchange rose 1.1% (up 3.8%).

Japan's Nikkei Equities Index and China's Shanghai Exchange 2020 Closes

Nikkei 2020

Shanghai Composite 2020

Australia - ASX 200 Close for 2020

ASX 2020

Highlights - Emerging Markets

  • EM equities were mixed.
  • Brazil's Bovespa index dropped 2.5% (down 1.4%), 
  • Mexico's Bolsa sank 2.6% (up 1.4%).
  • South Korea's Kospi index gained 1.8% (up 9.3%).
  • India's Sensex equities index slipped 0.3% (up 2.4%).
  • China's Shanghai Exchange rose 1.1% (up 3.8%).
  • Turkey's Borsa Istanbul National 100 index  rose 1.2% (up 4.5%).
  • Russia's MICEX equities index fell 2.0% (up 2.9%).

IPO mania was back in full force with Snowflake an indication of, which more than doubled on debut.

From rebalance as a natural reversion after the bull mania we have surged with another speculative rush. This after Dow ended the second quarter with a 17.8% gain, the biggest quarterly rally since the first quarter of 1987, when it ripped up 21.6%. IS that enough to rebalnce and go higher? The S&P 500 had its biggest one-quarter surge since the fourth quarter of 1998,  soaring nearly 20%. The Nasdaq Composite jumped 30.6% for the quarter, its best quarterly performance since 1999.

Stock valuations, as measured by forward price-to-earnings ratios are near their highest level since the 2000 dot-com boom.

Biggest SPX Stock Winners and Losers Last Week

 SPX Top Stocks 1 22 2021

S&P 500 Index Technical Analysis via @KnovaWave

After SPX rallied to new all time highs, closed the week testing tenkan san & +4/8 Murrey Math Daily & Chikou break retest. We have a number of alternatives of degree (iii) or (iv) of 5, Keep it simple support is Tenkan and Kijun as Chikou rebalances.

The break up was from above the 200dma. The balance from sharp reversal after the initial 3 wave down from the SPX wave 5 extension as Covid19 fed impulse accelerated under the tenkan. From there we had seen the ABC or 1-2-3 spinning around the 61.8% of the move. Support began at the October 2019 lows. A manic wave 5 or 3 of some degree was a resolution for the ages. Note the 100% extension from the emotive element and MM levels when the spit kicks in. A manic wave 5 or 3 of some degree was a resolution for the ages.  Note the 100% extension from the emotive element and MM levels when the spit kicks in.

 SPX D 1 22 2021

Weekly SPX spat the break channel it had been tracing since the break of v of (III) or (V). Key is spit or retest of MM 8/8.. Major support is previous highs and Tenkan. We look for 3 waves down and reactions to keep it simple with the alternatives in the daily.  Keep an eye on the putcall ratio with recognition to the sheer size of contracts AND keep in mind the stimulus distortion. The spit per channel fractal and Adams rule launched back over the cloud where we were encased AND we are back testing it. Watch if a spit or clear break support as chickou rebalances

SPX W 1 22 2021 

A reminder that Apple Inc $AAPL, Microsoft Corp $MSFT, Amazon.com Inc $AMZN, Facebook Inc $FB, and Google-parent Alphabet Inc $GOOGL make up approximately 23% of the total weight of the S&P 500. With that comes gyrations that are an outsized impact on broader markets.

Semiconductors SMH

Watching Semiconductors cleanly with Murrey Math levels and Tenkan - keys are previous high at +1/8 and Chikou rebalance patterning. Weekly +2/8 around 250 key number recognition factor also.

SMH W 1 22 2021

Apple $AAPL

 AAPL W 1 22 2021

Amazon $AMZN

Amazon high was MM +3/8 and from there has built a large weekly flag which it closed under after breaking the Tenkan and Kijun, watch if Kijun closes through Tehkan for a bigger move.

AMZN W 1 22 2021 

Energy and Commodities

Highights

  • The Bloomberg Commodities Index fell 1.7% (up 1.4% y-t-d). 
  • WTI crude slipped nine cents to $52.27 (up 8%).
  • Gasoline gained 1.3% (up 10%),
  • Natural Gas sank 10.6% (down 4%).
  • Copper added 0.7% (up 3.0%).
  • Wheat dropped 6.1% (down 1%).
  • Corn sank 5.8% (up 3%).
  • Bitcoin sank $2,939, or 8.1%, this week to $33,322 (up 14.6%).
  • Risk markets continue to respond to a Conronvirus outbreak and failed negotiations between Congress and the White House over an additional economic stimulus package to boost economic demand.
  • U.S. producers production still under pre Laura levels.
  • Higher crude prices prompt some U.S. producers start drilling again with rigs up for the ninth week in a row.

BDI Freight Index

 BDI W 1 22 2021

Copper

Copper has been a leader in the risk on movement, The weekly channel since the low has maintained the speed of the move with support at the tenkan.

 Copper W 1 22 2021

US Crude Oil (WTI)

In any break key is crowd behavior to help tell the story. We watch ABC corrections from here. he March breakdown, Support Tenkan and Kijun. In any break key is crowd behavior to help tell the story. We watch ABC corrections from here.

WTI D 1 22 2021

WTI after it's huge run continues to rebalance chikou indicative of extreme crowd behavior in a series of fractals. We have completed 5 waves as marked, from here we watch 3 develop to confirm.

 These are special times, recall "After we regained the pattern 261.8% from the extreme (-$40) move. The climax of the larger acceleration lower after broke the weekly uptrend, a fractal of the sharp and all the way to all time lows to negative pricing we have seen mirror replications." Support is previous channels, tenkan and Kijun. Above we have 50wma and Murrey Math time and price Above we have 50wma and Murrey Math time and price.

 WTI W 1 22 2021

US Natural Gas (Henry Hub)

US Natural Gas continues to work the lows that were either (5) or (iii) of (5). After a b or ii down we have bounced over tenkan and Kijun into cloud. Key is that 3 wave low. Above top of cloud. So far consistent failed breaks despite the strength of spitting the previous low and -2/8 with an island reversal to test the Kijun and downtrend line but fell back to Tenkan The big question is was that a completed move down there or a 3? Support at cloud.

NG D 1 22 2021 

Natty continues in large sideways pattern between weekly kijun and tenkan as they suppress. Above Cloud and 50wma. Support is downward channel and previous low. Talking fractals, remember the tenkan/kijun kiss of death brought it down from the $2 range. Much work here churning away. .

NG W 1 22 2021 

Key Energy Reports

 

Precious Metals

Highlights

  • Gold gained 1.5% to $1,856 (down 2.3%).
  • Silver jumped 2.8% to $25.556 (down 3.2%).

Gold

Gold exudes strength after it back tested the previous wave 3 after finally cracked the Tenkan after correcting in 3 waves from 1556 to Murrey Math +3/8. In sight of the intraday high of $1765.43 reached on May 18. We have overcome the negative divergence between the weekly chikou, Silver spread and the recent highs. Support Tenkan & Kijun. From there does the 5 play out? Watch Fibs and chikou.

 Gold W 1 22 2021

Silver

Silver  did a fractal of the sharp C up to breakdown level above the cloud fed by divergence from gold reverting. no  Silver reverseds with much more violent impulse than gold . Given that we have to repsect this is a iii  but  here is also a chance this is an A  

 Silver W 1 22 2021

Forex Markets

Highlights

  • For the week,the the U.S. dollar index declined 0.6% to 90.212 (up 0.3% y-t-d).
  • Majors for the week. For the week on the upside, he euro 0.7%, the British pound 0.7%, the Swiss franc 0.6%, the Australian dollar 0.2% with none on the downside.
  • Minors for the week  For the week on the upside, tthe Swedish krona increased 1.2%, the Norwegian krone 0.9%, the New Zealand dollar 0.8%, the South African rand 0.6%, and the Singapore dollar 0.1%. On the downside, the Brazilian real declined 3.1%, the Mexican peso 0.9% and the South Korean won 0.3%. The Chinese renminbi was about unchanged versus the dollar this week (up 0.71% y-t-d).

Australian Dollar - AUDUSD

Aussie dollar continues higher after it completed 5 waves in emotive fashion. with vigor spitting the 100% panic muster. It has closed over the 50 Wma in 5 waves The AUDUSD pulled up close to 0.7806 on Thursday just shy of the three year high of 0.7820 from January 6. Support Tenkan and Kijun.

AUD D 122 2021

New Zealand Dollar - NZDUSD

The Kiwi mirrored the AUD and has closed over the panic breakdown (0%) correcting all of the panic muster wave and running to the 38% Fib & 6/8 confluence.  Support the Tenkan, which is pivotal. Resistance 6/8 spits.

NZD W 1 22 2021

Canadian Dollar - USDCAD

The Loonie continues to correct in ABC after spitting the 261% Fib & Weekly 8/8 after 5 waves lower. We closed at the old 100% 61.8% confluence. Use Fib s for support and resisitance until Tenkan and Kijun catch up, 

CAD W 1 22 2021
Euro - EURUSD

The Euro tested and broke both the channel after ABC (IV) then retested the tenkan to spit the +1/8 in 5 waves from there we closed the week back testing the tenkan (orange). A question of degree on recent high - 1 complete or 1 of 3?, Watch 3 waves to see development for continuation. Resistance is Fibs as marked.  Watch for impulse off Chikou rebalance and Kijun above. Again governed by EURGBP and Bund volatility. 

EUR W 1 22 2021

British Pound - USDGBP

 

EuroPound - EURGBP

Back testing top of outer band and tenkan of Brexit. Johnson price reaction.after its classic ABC out of failure following the X wave. Tenkan will give us a clue if normalcy is returning to the channel trade.

EURGBP W 1 22 2021 

Japanese Yen - USDJPY

Japanese Yen still stuck in channel trade, a series of failures and sharp bounces after X led 3 wave panic. Any change will come from the weekly Kijun Tenkan kiss. Use your #USDJPY Murrey 6/8 0/8 grid for now. #EURJPY #AUDJPY will determine risk on/off

JPY W 1 22 2021

 Mexican Peso USDMXN

The Peso has been correcting in ABC since it collapsed and spat 261% right back to the 100% Fib  We have seen violent moves with outisde uncertainty from oil and COVID19. Use the Gann octave and the extension fibs to help measure the noise. 

MXN W 1 22 2021


Turkish Lire USDTRY

Turkish markets reacted to another two percent hike in interest rates to 17% boosted sentiment towards the Lira. The USD/TRY has fallen to 3.3800 and is set to test its 200-day moving average at 7.3100 assuming the US Dollar remains weak. Keep an eye on geopolitical risk factors. 

 TRY W 1 22 2021

Bitcoin

Bitcoin has exploded after it spent a year consolidating under the 61.8% spit. Each tenkan and kijun tap has seen an explosive kiss of life. Use Murrey Math levels for higher corrections and target as algos control the herd here, support is the cloud and sharp ABC, 1-2 moves.

 BTC W 1 22 2021

Bond Markets (and Fed Watch)

Investment-grade bond funds saw inflows of $6.946 billion, while junk bond funds posted outflows of $1.260 billion (from Lipper).

Highlights - Treasuries

 TNX W 1 22 2021

Investment-grade bond funds saw inflows of $8.248 billion, while junk bond funds posted outflows of $905 million (from Lipper). .

"Investors are flooding the state and local government debt market with cash, driving the biggest weekly influx ever into mutual funds focused on the riskiest municipal securities. Buyers added $2.6 billion to municipal-bond mutual funds in the week ended Wednesday, the 10th straight inflow and the third biggest on record… High-yield funds collected $1.1 billion, outpacing the previous record of $796 million in 2017…" Bloomberg (Danielle Moran and Romy Varghese)

  • Three-month Treasury bill rates ended the week at 0.07%.
  • Two-year government yields slipped a basis point to 0.12% (unchanged y-t-d).
  • Five-year T-note yields declined two bps to 0.43% (up 7bps).
  • Ten-year Treasury yields were unchanged at 1.09% (up 17bps).
  • Long bond yields added a basis point to 1.85% (up 20bps).
  • Benchmark Fannie Mae MBS yields fell four bps to 1.44% (up 10bps).

All good while markets hold up but take note that the loosest financial conditions in history have supported a record $1.4 trillion of corporate debt issuance. While easy credit availability has supported economic activity,  funding new investment whilst keeping vulnerable companies afloat. THe combination of urban shifts through virus and riots fears has fueled a booming MBS market and record low mortgage rates pushing strong housing markets into Bubble risk territory.

Highights - Mortgages

  • Freddie Mac 30-year fixed mortgage rates declined two bps to 2.77% (down 83bps y-o-y).
  • Fifteen-year rates slipped two bps to 2.21% (down 83bps).
  • Five-year hybrid ARM rates fell back 32 bps to 2.80% (down 48bps).
  • Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down four bps to 2.91% (down 104bps).

Highlights - Federal Reserve

  • Federal Reserve Credit last week jumped $90.6bn to $7.372 TN. Over the past year, Fed Credit expanded $3.258 TN, or 79%. Fed Credit inflated $4.561 Trillion, or 162%, over the past 428 weeks.
  • Fed holdings for foreign owners of Treasury, Agency Debt last week jumped $24.4bn to a record $3.541 TN.
  • "Custody holdings" were up $128bn, or 3.8%, y-o-y. M2 (narrow) "money" supply surged $369bn last week to $19.548 TN, with an unprecedented 46-week gain of $4.040 TN.
  • "Narrow money" surged $4.171 TN, or 27.1%, over the past year.
  • For the week, Currency increased $10.8bn. Total Checkable Deposits jumped $45.8bn, and Savings Deposits surged $315.2bn. Small Time deposits dipped $2.8bn.
  • Retail Money Funds were little changed. Total money market fund assets declined $8.3bn to $4.307 TN. Total money funds surged $673bn y-o-y, or 18.8%.
  • Total Commercial Paper slipped $2.7bn to $1.058 TN. CP was down $56.9bn, or 5.1%, year-over-year.
  • The Fed QE infinity programme is a yield curve control policy with long government bond yields coming down. Bond supply and continued central bank resistance to more negative policy rates limits the move. Central banks have been cutting rates and adding liquidity to avoid systematic failure.

Highlights - European Bonds

  • Greek 10-year yields increased three bps to 0.69% (up 7bps y-t-d). Ten-year Portuguese yields jumped seven bps to 0.07% (up 4bps). Italian 10-year yields surged 14 bps to 0.75% (up 21bps). Spain's 10-year yields rose seven bps to 0.12% (up 8bps).
  • German bund yields gained three bps to negative 0.51% (up 6bps). French yields rose four bps to negative 0.28% (up 6bps). The French to German 10-year bond spread widened one to 23 bps.
  • U.K. 10-year gilt yields increased two bps to 0.31% (up 11bps). .

Highlights - Asian Bonds

  • Japanese 10-year "JGB" yields added one basis point to 0.05% (up 3bps y-t-d).

On the Risk Radar

Fed Warnings on Possible Medium To Long Term Risks

Fed Financial Stability Report Risks May 2020

Geopolitical Tinderbox Radar

Trade Imbalances IMF

Italy CDS
Turkey Geopolitical

Economic and Geopolitical Watch

Job Losses

With the lack of stimulus and continued lockdowns initial jobless claims jumped to the highest level in three months last week, in what was a second straight weekly increase. November's job report again showed the effect of return to school as highlighted by well over 1 million women leaving the workforce and many men also to take care of their children not returning to work. What is clear is the disconnect from the realities by pundits, particarlarly partisn biased rhetoric of the true damage to the economy, the social fabric and the selling of that as a new normal. Covid19 brought with it a new reality of brutal times for workers.

Over 14.5 million are collecting traditional jobless benefits, up from 1.7 million a year ago, with no end in sight. on Thursday, the Labor Department reported under 800,000 Americans applied for unemployment benefits for the second time since the crisis.  With the Covid shutdown we lost over 22 million jobs in March and April. The September employment report, the last before the election, showed a slower pace of job growth than in August. There were 616,000 nonfarm payrolls, from 1.37 million in August. The unemployment rate expected dropped to 7.9% from 8.4%.As economies slowly reopened, the economy generated than 12 million jobs in May through September. Still a huge shortfall in jobs, and the big question is will they come back?

US Politics

US President-elect Joe Biden will be sworn in as America’s 46th President on Wednesday. Investors will be wary of any potential for armed protests in the lead-up to the event, especially as impeachment proceedings against US President Donald Trump continue. The primary concern in the markets will likely remain Biden’s expansive fiscal stimulus agenda. Biden announced a larger than expected $US1.9 Trillion worth of spending last week that will see higher direct payments to individuals, more money to combat the pandemic, and beefed-up support for state governments.

Stay alert to the political and geopolitical shifts with the world in flux. Government policies related to the environment, trade and tech sit high on the watch list.  Political and economic agendas that Influence policy-making is top of the list. For the US it is not just external threats, including increased political tensions between countries but also internal threats highlighted by the partisan impeachment devide. Politics influence all, directly or indirectly. 

The virus and psychological affect on domestic and trade relationships have impacted growth strategies with unexpected consequences   In a  fully fledged stock mania, nothing matters until it does. That is the feral nature of greed.

Global Watch

Hot Spots

  • Geopolitical tensions with China and India are on the rise as China increases military hardware near the China and India's Himalaya border, a potential negative shock not priced by markets.
  • US prepared to sanction Turkey over its purchase of Russian S-400 air defence systems last year.
  • China tightened its grip on Hong kong and threats with Taiwan continue. Secretary of State Mike Pompeo lifted communication restrictions between American and Taiwanese officials on Saturday. Pompeo said the restrictions had been imposed decades ago "in an attempt to appease the Communist regime in Beijing.”
  • Russia is showing the affects of low energy prices, filtering into the socio economic dynamic
  • A Brexit deal was concluded on Christmas Eve and moving rapidly through the approval process from both sides for the official start of the UK outside of Europe on Jan. 1st.
  • For emerging markets the lower US dollar is helping the Fragile 5. Argentina and Turkey are still red letter risks with Covid however.
  • Over $4 trillion of EM debt matures by the end of 2020, of which around a third is denominated in foreign currency, according to the Institute of International Finance. Nevertheless Banks are telling investors to buy, buy, buy, who is selling you should ask?

    If you wanted to play in the big room at Vegas, you are living it. Understand risk and the madness of crowds for your own sanity and wealth.

  • Continued volatility with the engulfing uncertainty of the Coronavirus and in commodity markets, particularly in oil and other commodities, not to mention unrest in Iran, Libya and Iraq. 

 

Trade Wars

  • Despite all the US and Chinese rhetoric  continues as the end of the Trump admin nears
  • Trump did say Phase 2 will be difficult and he sees the virus more important then trade with China..
  • In addition to rising tensions with China, the United States Trade Representative said last month said that the USTR is considering a new round of tariffs on $3.1 billion in European exports from France, Germany, Spain and the U.K..

Fat Tail Virus Risk

Following Pfizer's vaccine the week before Moderna’s Covid-19 vaccine  gained approvalto an emergency use authorization and rollout. Moderna’s drug, like Pfizer’s, is a two-dose vaccine and was found in clinical trials to be more than 94% effective. The U.S. is recording at least 216,600 new Covid-19 cases and at least 2,600 virus-related deaths each day, based on a seven-day average calculated by CNBC using Johns Hopkins University data.

COVID has methodically dispersed itself in areas like California and New York. Troubling development for hospitals and healthcare systems facing limited capacity and scarce resources. Ominously, outbreaks have slammed many northern states early in the winter season. Over the coming weeks, the virus can be expected to shadow cooler weather advancing south

CNB on December 23: "The U.S. began vaccinating the population against the coronavirus last week, but mass adoption is not a guarantee. Nearly 4 in 10 Americans say they would 'definitely' or 'probably' not get a vaccine, according to a Pew Research Center survey of 12,648 U.S. adults from Nov. 18 to 29."

Several countries are tightening restrictions and contemplating lockdowns as infections accelerate, prompting concerns about the impact on world economies attempting to recover. Earlier this month when adjusting for population, the number of new coronavirus infections in Europe has now overtaken the United States in new cases per million people, based on a seven-day average.

Covid Global cases 11 15 2020

  • AstraZeneca and Johnson and Johnson (J&J) announced they had received permission to resume trials on a COVID-19 vaccine. AstraZeneca was on track to have a vaccine ready before the end of the year, while J&J had said its candidate would be ready by early next year.
  • The US deals with a number of pharmaceutical giants have topped roughly $10.79 billion as part of Operation Warp Speed, a program led by several departments within the federal government to accelerate the development, manufacturing, and distribution of vaccines and treatments to fight the coronavirus.
  • The operation aims to provide at least 300 million doses of a coronavirus vaccine by January 2021. The companies are Moderna Johnson & Johnson Sanofi and GlaxoSmithKline Pfizer and BioNTech Novavax and AstraZeneca
  • Hopes and fears of reopening can outweigh mixed earnings results. No surprise after increased testing, weeks of protesting, people in large airconditioning indoors we have record daily U.S. cases. The U.S. reported 1000 deaths 4 days in a row with coronavirus cases,
  • There does appear to a concerted effort to put the blame on an economy reopening and miraclously the mass ongoing priotests have nothing to do with that. Take that for what it is worth. There is little mention of the younger age group in the new cases and much lower mortality rate. Fear is the feature. Use commonsense in your own protection, spreading and decision making.

 

Banks

The major money cents banks have released earnings with mixed results for Q4:

 

  • Banks stocks have benefited from the Federal Reserve partially lifting its hold on share buybacks, saying that banks can resume repurchases in the first quarter of 2021 as long they don't exceed the average quarterly profits from their past four quarters. The change came after the Fed found that all major banks passed a second round of stress tests, indicating the firms can continue lending to businesses and households even if the economy dipped into a new recession.
  • Potentially the top six banks can buy back $11 billion in the first-quarter. Goldman Sachs shares after the announcement led the rally with a 7.7% increase. Morgan Stanley and JPMorgan jumped 6.4% and 4.9% at intraday highs. Within minutes of the announcement all three banks have announced plans to resume buybacks in the new year.
  • Last year Morgan Stanley continues in its aim to become the leading wealth and investment services firm with another aggressive aquisition. $MS announced an intention to buy Eaton Vance $EV for $7 billion. This follows the bank completing its $13 bln acquisition of E*TRADE $ETFC.
  • In times of recession and credit tightening Banks risk becomes problematic, though since 2008 the World's Central Banks have been quick to loosen the strings. Add massive QE and purcahse failing assets.
  • Banks are benefiting from the Federal Deposit Insurance Commission intending to ease the Volcker Rule, which restricts banks from making large investments into venture capital. The Volcker Rule was enacted in the wake of the 2008 financial crisis, and the new changes could potentially free up billions in bank capital. Bank stocks rose. otal Non-Financial Debt (NFD) expanded $737 billion during Q3 to a record $60.113 trillion. Through the first three quarters of 2020, NFD surged an unprecedented $5.740 trillion, or 14.1% annualized. NFD was up $6.181 trillion over the past year (11.5%) and $8.817 trillion (16.7%) over two years. For perspective, NFD expanded on average $1.830 trillion annually over the past decade. NFD has ballooned 71% since the end of 2008. 

BE AWARE: Stay rational and be prepared for many alternatives, either way. With crisis comes opportunity. From a market point of view this is not unprecedented, many other bubbles have popped with similar results. What is unprecedented is the pandemic, the mass media and social media fear mongering, the massive QE and printing and the strange era of entitlement and no responsibilty fed down from politicians to the youth of today for electoral purproses.

Put all that together and we see the result.  Again this isn't unprecedented just a different catalyst and fuel. Stay tuned. take a breath and think clearly. Oh and now we have the riots to throw on the kindling ....

  • Expect the Fed Stability Report warning on what happens if the pandemic worsens to be the go tto by Fed speakers (We are all watching to see if I spike aftet the Floyd protests and riots with no social distancing).
  • The backdrop is the Covid-19 crisis. Despite that the stockmarket is up over 40% from lows and stubborn bears and bulls alike are frustrated based on cognitive biases.
  • We continually focus on overcoming our biases and as the accompanying chart highlights stocks and the economy are NOT the same thing despite what we are told by our influencers and biased or selective recalls. 

 

"Negative yields on long-dated government securities are more reflective of distorted market conditions than of stronger sovereign credit profiles, Fitch Ratings says. Lower interest service costs support sovereign creditworthiness, but this must be weighed against the impact of the economic conditions leading to lower yields and historically high government debt levels in a number of countries.- Fitch"

Akio Morita mistakes

The Week Ahead - Have a Trading Plan

 

Central Bank Watch speeches, reports and rate moves

Monday: January 25, 2021

  • 03:45 EUR ECB President Lagarde Speaks
  • 11:15 EUR ECB President Lagarde Speaks
  • 18:50 JPY Monetary Policy Meeting Minutes

Tuesday January 26, 2021

  • None Seen

Wednesday January 27, 2021

  • 14:00 USD FOMC Statement
  • 14:00 USD Fed Interest Rate Decision
  • 14:30 USD FOMC Press Conference

Thursday January 28, 2021

  • 03:00 EUR ECB's Enria Speaks
  • 10:00 EUR German Buba Wuermeling Speaks
  • 18:50 JPY BoJ Summary of Opinions

Friday January 8, 2021

  • None Seen

Improvements in some economic indicators, such as home sales, manufacturing activity and  in employment data have bolstered investor confidence and helped extend the rally in stocks. Support in markets comes from the Fed’s balance sheet which has ballooned to $7.2 trillion, and the central bank committed to monthly purchases of $80 billion in Treasury securities and $40 billion in mortgage securities.

Economic Events in the Week Ahead:

Sunday, January 24, 2021

  • None Seen

Monday, January 25, 2021

  • All Day Holiday Brazil - Public Holiday
  • 03:45 EUR ECB President Lagarde Speaks
  • 04:00 EUR German Business Expectations (Jan)
  • 04:00 EUR German Current Assessment (Jan)
  • 04:00 EUR German Ifo Business Climate Index (Jan)
  • 08:30 USD Chicago Fed National Activity (Dec)
  • 10:30 USD Dallas Fed Mfg Business Index (Jan)
  • 11:15 EUR ECB President Lagarde Speaks
  • 11:30 USD 3-Month Bill Auction
  • 11:30 USD 6-Month Bill Auction
  • 13:00 USD 2-Year Note Auction
  • 18:00 KRW GDP (QoQ) (Q4)
  • 18:50 JPY Monetary Policy Meeting Minutes
  • 21:00 NZD Credit Card Spending (YoY)

Tuesday January 26, 2021

  • All Day Holiday Australia - Australia Day
  • All Day Holiday India - Republic Day
  • 00:00 JPY BoJ Core CPI (YoY)
  • 00:00 SGD Industrial Production (MoM)
  • 02:00 GBP Employment Change 3M/3M (MoM) (Nov)
  • 02:00 GBP Unemployment Rate (Nov)
  • 03:00 CHF World Economic Forum Annual Meetings
  • 03:00 EUR Spanish PPI (YoY)
  • 03:30 HKD Trade Balance
  • 06:00 GBP CBI Distributive Trades Survey (Jan)
  • 07:00 GBP Steel Production (Metric Ton) (Dec)
  • 08:55 USD Redbook (MoM)
  • 09:00 USD House Price Index (MoM)
  • 09:00 USD S&P/CS HPI Composite - 20
  • 10:00 USD CB Consumer Confidence (Jan)
  • 10:00 USD Richmond Manufacturing Index (Jan)
  • 10:00 USD Richmond Services Index (Jan)
  • 10:30 USD Dallas Fed Services Revenues (Jan)
  • 10:30 USD Texas Services Sector Outlook (Jan)
  • 13:00 USD 5-Year Note Auction
  • 13:00 USD 52-Week Bill Auction
  • 16:00 KRW Consumer Confidence (Jan)
  • 16:30 USD API Weekly Crude Oil Stock
  • 18:30 AUD MI Leading Index (MoM)
  • 19:01 GBP BRC Shop Price Index (YoY)
  • 19:30 AUD CPI (QoQ) (Q4)
  • 19:30 AUD CPI Index Number (Q4)
  • 19:30 AUD NAB Business Confidence (Dec)
  • 19:30 AUD NAB Business Survey (Dec)3% '
  • 20:30 CNY Chinese Industrial profit (YoY) YTD

Wednesday January 27, 2021

  • 02:00 EUR GfK German Consumer Climate (Feb)
  • 02:45 EUR French Consumer Confidence (Jan)
  • 03:00 CHF World Economic Forum Annual Meetings
  • 04:00 EUR Italian Trade Balance Non-EU (Dec)
  • 04:00 CHF ZEW Expectations (Jan)
  • 06:00 EUR France Jobseekers Total
  • 07:00 USD MBA 30-Year Mortgage Rate
  • 07:00 USD MBA Mortgage Applications (WoW)
  • 07:00 USD MBA Purchase Index
  • 07:00 USD Mortgage Market Index
  • 07:00 USD Mortgage Refinance Index
  • 08:30 USD Durable Goods Orders (MoM) (Dec)
  • 10:30 USD Crude Oil Inventories
  • 14:00 USD FOMC Statement
  • 14:00 USD Fed Interest Rate Decision
  • 14:30 USD FOMC Press Conference
  • 16:00 KRW Manufacturing BSI Index (Feb)
  • 16:45 NZD Trade Balance
  • 18:50 JPY Retail Sales (YoY) (Dec)
  • 19:30 AUD Export Price Index (QoQ) (Q4)
  • 19:30 AUD Import Price Index (QoQ) (Q4)
  • 21:30 SGD Unemployment Rate (Q4)

Thursday, January 28, 2021

  • 02:00 CHF Trade Balance (Dec)
  • 03:00 CHF World Economic Forum Annual Meetings
  • 03:00 EUR Spanish Unemployment Rate (Q4)
  • 03:00 EUR ECB's Enria Speaks
  • 04:00 EUR Italian Business Confidence (Jan)
  • 04:00 EUR Italian Consumer Confidence (Jan)
  • 05:00 EUR Business and Consumer Survey (Jan)
  • 05:00 EUR Business Climate (Jan)
  • 05:00 EUR Consumer Confidence (Jan)
  • 05:00 EUR Consumer Inflation Expectation (Jan)
  • 05:00 EUR Selling Price Expectations (Jan)
  • 05:00 EUR Services Sentiment (Jan)
  • 05:00 EUR Industrial Sentiment (Jan)
  • 08:00 EUR German CPI (MoM)
  • 08:30 USD Continuing Jobless Claims
  • 08:30 USD Core PCE Prices (Q4)
  • 08:30 USD GDP (QoQ) (Q4)
  • 08:30 USD GDP Price Index (QoQ) (Q4)
  • 08:30 USD GDP Sales (Q4)
  • 08:30 USD Goods Trade Balance (Dec)
  • 08:30 USD Initial Jobless Claims
  • 08:30 USD Jobless Claims 4-Week Avg.
  • 08:30 USD PCE Prices (Q4)
  • 08:30 USD Real Consumer Spending (Q4)
  • 08:30 USD Wholesale Inventories (MoM)
  • 08:30 CAD Building Permits (MoM) (Dec)
  • 10:00 USD New Home Sales (Dec)
  • 10:00 USD US Leading Index (MoM) (Dec)
  • 10:00 EUR German Buba Wuermeling Speaks
  • 10:30 USD Natural Gas Storage
  • 11:00 USD KC Fed Composite Index (Jan)
  • 11:00 USD KC Fed Manufacturing Index (Jan)
  • 11:30 USD 4-8 Week Bill Auctions
  • 12:15 EUR ECB's Schnabel Speaks
  • 13:00 USD 7-Year Note Auction
  • 18:00 KRW Industrial Production (MoM) (Dec)
  • 18:00 KRW Retail Sales (MoM)
  • 18:00 KRW Service Sector Output (MoM) (Dec)
  • 18:30 JPY Tokyo CPI (YoY) (Jan)
  • 18:30 JPY Unemployment Rate (Dec)
  • 18:50 JPY BoJ Summary of Opinions
  • 18:50 JPY Industrial Production (MoM) (Dec)
  • 19:30 AUD CPI (YoY)
  • 19:30 AUD Housing Credit (Dec)
  • 19:30 AUD PPI (QoQ) (Q4)
  • 19:30 AUD Private Sector Credit (MoM) (Dec)
  • 21:00 SGD Bank Lending (Dec)

Friday, January 29, 2021

  • 00:00 JPY Household Confidence (Jan)
  • 00:00 SGD Business Expectations (Q4)
  • 00:20 JPY Housing Starts (YoY) (Dec)
  • 00:41 JPY Construction Orders (YoY) (Dec)
  • 01:30 EUR French Consumer Spending (MoM) (Dec)
  • 01:30 EUR French GDP (QoQ) (Q4)
  • 02:00 EUR German Import Price Index (MoM) (Dec)
  • 02:45 EUR French PPI (MoM) (Dec)
  • 03:00 CHF KOF Leading Indicators (Jan)
  • 03:00 CHF World Economic Forum Annual Meetings
  • 03:00 EUR Spanish CPI (MoM)
  • 03:00 EUR Spanish GDP (QoQ) (Q4)
  • 03:00 EUR Spanish Retail Sales (YoY) (Dec)
  • 03:30 HKD GDP (YoY)
  • 03:55 EUR German Unemployment Change (Jan)
  • 03:55 EUR German Unemployment Rate (Jan)
  • 03:55 EUR German Unemployment (Jan)
  • 04:00 EUR Italian PPI (MoM) (Dec)
  • 04:00 EUR German GDP (YoY) (Q4)
  • 08:30 USD PCE Price Index (YoY) (Dec)
  • 08:30 Employment Cost Index
  • 08:30 USD Personal Income (MoM) (Dec)
  • 8:30 USD Personal Spending (MoM) (Dec)
  • 08:30 USD Real Personal Consumption (MoM) (Dec)
  • 08:30 CAD GDP (MoM) (Nov)
  • 08:30 CAD IPPI (MoM) (Dec)
  • 08:30 CAD RMPI (MoM) (Dec)
  • 09:45 USD Chicago PMI (Jan)
  • 10:00 USD Michigan Consumer Sentiment (Jan)
  • 10:00 USD Pending Home Sales (MoM) (Dec)
  • 11:00 CAD Budget Balance (Nov)
  • 12:00 USD Dallas Fed PCE (Dec)
  • 13:00 USD U.S. Baker Hughes Oil Rig Count
  • 15:30 USD CFTC speculative net positions
  • 16:00 USD FOMC Member Kaplan Speaks
  • 17:25 USD FOMC Member Daly Speaks

Focus on yourself and what YOU CAN INFLUENCE, set your trading plan and goals in be set for 2020. One suspects it will be a year long Groundhog day for Trump, the GOP and the Democrats. 

Earnings Week Ahead

Big banks kicked off 4th-quarter earnings reports on Jan 15, helping to set the tone for the broader U.S. stock market, as businesses cope with the eleventh month of the pandemic. Banks reaped the rewards of the initial public offerings and record corporate borrowings during the pandemic. Investors (and algos) will focus pn the conference calls and outlooks. Everyone is expecting the worse. We will see critical updates on production in coronavirus impacted regions and if there is extended halting of operations weighing on multi-nationals.

Last week we heard from Goldman Sachs, Bank of America, Netflix, Halliburton, Logitech International, PetMed Express, Procter& Gamble, US Bancorp, Alcoa Corporation, Bank of New York Mellon Corp, Morgan Stanley, UnitedHealth Group, Union Pacific, IBM, Intel, CSX, Discover Financial Services, Baker Hughes, United Airlines Holdings, Intuitive Surgical, Cyient, Seagate Technology, PPG Industries, Schlumberger, Kansas City Southern, AllyFinancial, and HuntingtonBancshares

This week we hear from:

  • Monday starts us off with Kimberly-Clark 
  • Tuesday with earnings from Johnson & Johnson, General Electric, 3M, AMD, Microsoft and Starbucks/li>
  • Wednesday Earnings Include Boeing, Abbott Laboratories, Apple, Facebook and Tesla
  • Thursday Earnings Include McDonald’s, Mastercard, Visa and Skyworks Solutions
  • Friday Earnings include Honeywell, Chevron, Caterpillar and Eli Lilly

IPO Week Ahead

The US IPO market has eight IPOs slated to raise $4.6 billion this week. The diverse group features three billion-dollar deals, with issuers from diagnostics, software, solar equipment, and more.

Carlyle-backed Ortho Clinical Diagnostics (OCDX) plans to raise $1.5 billion at a $4.9 billion market cap. The company is a pure-play in vitro diagnostics business, providing diagnostic testing solutions to the clinical lab and transfusion medicine communities. The company is profitable on an EBIT basis and had a revenue retention rate of 99% in 2019. It will be leveraged post-IPO at 5.1x net debt/LTM adj. EBITDA.

Acquired by SAP ahead of its proposed 2018 IPO, Qualtrics International (XM) plans to raise $1.2 billion at a $12.6 billion market cap. The company provides a customer and employee experience management platform to its sticky customer base of over 12,000 organizations. Qualtrics has demonstrated growth, though it operates in a highly competitive space with low barriers to entry, and it will continue to be controlled by SAP post-IPO.

Oaktree-backed solar equipment supplier Shoals Technologies Group (SHLS) plans to raise $1.0 billion at a $3.6 billion market cap. Profitable with strong growth, the company designs and manufactures products used in large solar energy projects primarily to connect panels to inverters. While it expects international expansion will help maintain growth, the company has a limited sales track record abroad.

Israel-based ZIM Integrated Shipping Services (ZIM) plans to raise $306 million at a $2.1 billion market cap. ZIM states that it is a global, asset-light container liner shipping company with leadership positions in niche markets. As of September 30, 2020, it operated a global network of 66 weekly lines, calling at 310 ports in more than 80 countries. The company plans to issue dividends worth up to 50% of annual net income.

Residential mortgage producer Home Point Capital (HMPT) plans to raise $250 million (100% secondary) at a $3.0 billion market cap. Home Point Capital utilizes a wholesale mortgage origination channel to connect with nearly 5,000 broker partners, allowing it to serve roughly 300,000 customers. In the 12 months ended 9/30/20, the company had total loan originations of $46.3 billion, representing an annualized growth rate of 133% since 2018.

Brazilian asset manager Vinci Partners Investments (VINP) plans to raise $236 million at a $944 million market cap. Vinci Partners' strategies include private equity, public equities, real estate, credit, infrastructure, hedge funds, and investment products. As of 9/30/20, the firm’s AUM was $8.7 billion.

Southeastern Grocers (SEGR) plans to raise $134 million (100% secondary) at a $725 million market cap. The company operates 420 stores under several banners and is estimated to be the sixth largest conventional supermarket operator in the US. Its median comparable store sales growth was 22% for March through September 2020, and revenue growth accelerated to 17% in the 9mo20. It plans to issue a quarterly dividend (2.75% annualized yield).

Indoor farming services provider Agrify (AGFY) plans to raise $25 million at a $115 million market cap. Highly unprofitable and fast growing, the company claims to differentiate itself with a bundled solution of equipment, software, and services that is turnkey, end-to-end, fully integrated and optimized for precision growing.

IPO data via Renaissance Capital

 

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Last Week's Big Stories

The Week That Was - Last Weeks Recap

  • Into The Vortex - EIA Reports Draw of -134 Bcf in Natural Gas Inventories
  • Around The Barrel - Crude Oil Draws As Product Stocks Rise Strongly
  • OPEC Monthly Oil Market Report January 2020
  • EIA Expects Natural Gas Prices To Rise On Rising Domestic Demand, LNG Exports and Reduced Production
  • EIA Says New Oil Drilling Activity Production Will Not Offset Existing Wells Declines
  • US Employment Continues To Recover From Coronavirus Lockdown
  • Federal Reserve Leaves Rates and Bond Buying Unchanged After Election
  • U.S. New Auto Sales Fell For First Time Since April in Uncertain Times
  • Mexico Business Confidence Improves With Peso and Easing Covid Restrictions
  • RBA Cuts Australian Rates To Record Low 0.25%, Targets Yield Curve
  • US Manufacturing Continues Recovery, New Orders Highest Since January 2004 

Stocks

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Note these charts, opinons news and estimates and times are subject to change and for indication only. Trade and invest at your own risk.

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