Good morning.
The stock market’s rising concern over inflation in the past few sessions continues to weigh on stocks, particularly tech stocks. The bigger issue? A massive implosion if interest rates rise too far, too fast. That’s because the global bond markets are sitting on record low yields. That’s allowed governments and companies to take advantage of low rates to get access to cheap capital.
But a small move in the bond market could have massive implications. A bond yielding 1 percent needs to drop in half for the yield to rise to 2 percent, the kind of move that could happen if the current fears over inflation continue to weigh. And governments likely don’t want to see their interest payments on trillions in debt double in a short timeframe. The Fed has set up a powder keg in the markets that could go off, even if their meeting goes well this week.
Rather than buy every dip along the way, investors might want to wait until a near-10 percent pullback before starting to buy, and only focusing on the best companies in their respective industries going forward.
Now here’s the rest of the news:
A New Crippling Kind Of Inflation Just Appeared
Things are even worse once you get beyond the headlines. Further out on the supply chains, prices are rising even more rapidly, suggesting that product shortages and even more inflation are yet to come. When you look at goods that are processed by… [Read Here]
December 15, 2020
Good morning.
The Covid vaccine/stimulus narrative remains in full force. Stocks gave up a strong early morning gain, prompted in part by news of a new bipartisan stimulus package in addition to the first officially delivered vaccine. As it appeared that nothing would happen on the stimulus front yet again, however, we saw a drop in the afternoon.
Not to worry. As with the China trade deal narrative a few years back, we know that the moves these news headlines make will only move the overall markets a few percentage points either way. But they do create some buying opportunities. Combined with last week’s selloff, there are plenty of worthwhile stocks worth owning that are now no longer overbought. Remember, market sell-offs create buying opportunities.
Now here’s the rest of the news:
If You Thought 2020 Was Bad, Watch What Happens In 2021
Analyst Brandon Smith explains 2021 will be far worse that 2020, but at least the lines will be drawn and the fight will be more clear to everyone. Here’s why a financial crisis would make the pandemic look like a kindergartener’s birthday party. [Read Here]
December 15, 2019
“People overestimate what can be done in one year, and underestimate what can be done in ten.” — JCR Licklider
Good Morning. As the market moves to new all-time highs again on a “Phase 2 Trade Deal” with China, a number of troubling signs loom. The largest is the repo market — where banks borrow from other banks overnight, often drawing on their reserves held at Federal Reserve banks to do so.
In the past few months, levels of repo activity have soared, along with overnight rates. This rise could spell some liquidity problems in the market. Should the situation fail to be contained by the repo market, a rush to liquidity could mean a market selloff, even if the overall economy improves. It’s a situation worth watching… and it’s why we continue to advise caution even with markets behaving so bullish lately.
Darren Hardy has, “A Cautionary Tale”
You’ve probably heard of Ivan Pavlov’s experiment where he rings a bell every time he feeds his dog.
After some time, the dog would salivate every time it hears the bell ring, even if there was no food. The dogs have associated the ringing of the bell with the food.
There have been reports of weather people being blamed, threatened, or even hurt be-cause people associate them with the bad weather they’ve reported about, even if these poor weather people have absolutely no control of nature. 🙂
