Year: 2021

Commentary for the week ending 05/01/2021

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Well, another week, and another trillion dollars or so of spending proposals by the Democrats.  Actually, Biden is proposing a total of about 6 trillion dollars in federal spending.  In the meantime, the economy is improving on its own but Biden, of course, like every President before him, is taking credit for it.  Presidents actually have very little to do with the macro economy, it is the Fed and Congress which has the greatest impact on the economy.  As for economic impact of the spending plans, there are already signs of supply pushes on inflation – commodity prices in cooper, gold, oil, etc. are rising.   This will eventually lead to increased consumer prices and wage increases (i.e., inflation).  The Fed seems to think that they will be able to control it once inflation goes above their target rate of 2% for an “extended period” (whatever that means in Fed speak).  I fear that they will not be able to so, and they will be forced to “slam on the brakes” with huge increases in the fed fund rate.  So be prepared – I think that the ten year note will be at least 2% by the end of this year, and very much higher by the end of 2022.   read more

April 2021 Analysis Summary

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Economic Phase:  Continues 5-3 in favor of continued Expansion.  Specifically indicating Phase 2 (late Expansion).  No change from last month end.

  • Expectation:  continued growth of the economy and sectors that are highly correlated to economic expansion
  • As others have noted, inflation will likely continue to inch up as well

Retirement ETF Portfolio:  No additional BUY signals.  No SELL signals read more

Commentary for week ending 04/17/2021

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First, an amusing anecdote:  I received a note from my broker on a stock in my personal portfolio – Westrock (WRK).  It has been upgraded from “sell” to “hold”.  These kinds of upgrades always amuse me – if I sold the stock based on the recommendation, how can I hold it?  As for Westrock, it is a corrugated packaging company (i.e. it makes cardboard boxes).  It is up about 74% since the March 2020 lows, so actually the broker may be right to rate it is a hold (although CFRA rates it a “buy”).  I believe that the stock is probably good long term stock as the economy is improving and hopefully the company will restore the old dividend soon (it was cut 42% due to COVID).   read more

Commentary for the week ending 04/10/2021

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 One more comment on the infrastructure bill.  Every time someone questions the items truly unrelated to infrastructure like child care, the government representative brings up broadband (about $100 billion of the bill).  I think most people would agree that improving broadband is important and I also agree it should be part of the bill.  But not the other unrelated items!  Mentioning broadband is just another attempt at obfuscation by the administration.   read more

Commentary for week ending 04/03/2021

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Sorry I am bit late for this post.  “Close enough for government work” as the old saying goes.  Speaking of “government”, I assume you have all seen the “infrastructure” bill proposed by President Biden.  I put “infrastructure” in quotes because only about $583 billion of the $2 trillion are for true infrastructure improvements.  The rest are “wish list” items including money for “transformative” projects (whatever that means), child care (!), and other liberal agenda items unrelated to infrastructure.  I think we all agree that we need to improve roads, bridges, airports, etc. but not put money into unrelated items, especially since we are already so far in debt.  As stated before, I would have cut the COVID relief bill in half and spend about a half trillion for infrastructure improvements.   read more

March 31 2021 Analysis Summary

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Economic Phase:  5-3 in favor of continued Expansion.  Specifically indicating Phase 2 (late Expansion).  No change from last month end.

  • Expectation:  continued growth of the economy and sectors that are highly correlated to economic expansion
  • As others have noted, inflation will likely continue to inch up as well

Retirement ETF Portfolio:  BUY signal for XLU (SPDR Utilities).  No SELL signals read more

Monday 3/29 Dagnino article on Bond Markets

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On Monday Dagnino wrote an article on the Bond Market.  He is right.  His takeaways in his own words:
  • The markets have been tightening by raising the cost of long-term money. The Fed cannot do anything about it. They cannot lower interest rates because they are at zero percent.
  • More debt (stimulus) cannot overcome the tightening caused by rising bond yields.
  • The business cycle is much closer to the end of Phase 2 (strong growth phase) than the beginning of Phase 1 (beginning of the expansion phase). 
The most important point is that third bullet:  when we hit end of Phase 2 the economy will overheat and begin to top off.  The market generally leads the economy by 6 months.  So it is important to keep careful watch on things.  Individual stocks and individual sectors will lead and roll over earlier than others.  In the meantime inflation should continue to climb.

 

 

https://seekingalpha.com/article/4416604-bond-market-is-tightening-fed-is-in-box-economy-will-pay?mail_subject=george-dagnino-the-bond-market-is-tightening-the-fed-is-in-a-box-the-economy-will-pay&utm_campaign=rta-author-article&utm_content=link-0&utm_medium=email&utm_source=seeking_alpha read more

Commentary for the week ending 3/27/2021

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Some of you may have noticed the significant declines in VIPS and BABA.  As I told you a few weeks ago, I was surprised by the outsize gains in VIPS and advised you to take some profits if you have them in this stock.  And in this past week, that proved to be prescient as VIPS (and BABA) have declined because of a large hedge fund being forced to liquidate their holdings due a large margin call.  I am still positive on both stocks, and would advise holding them if you have them.  On BABA, be advised that the Chinese government has had some run-ins with the founder Jack Ma, but I doubt that the government will push much further, since BABA is a key source of both pride and revenue for the country.  As for the rest of the stocks, stay the course, and I believe you will be rewarded over the long term.  And also note that the fund is diversified into 20 stocks giving a 5% weighting to each stock, thus lessening the impact of any one stock crushing the performance of the entire fund. read more