Evening Note and Quotes of the Day

Quick one this evening. If you haven’t yet, be sure to take in today’s video commentary.

As for today’s market, in a nutshell, the Dow and the S&P 500 took a bit of a hit, the Nasdaq was just a tad to the green, while the Russell 2000 got slammed -1.8%. Our core portfolio mix closed flat on the session.

Just a couple things:

First I’d like to circle back on this week’s “strong” retail sales number. As we addressed Monday, the month-on-month number was very good, year-on-year, however, not so much.

I pointed out in a recent macro update that last month’s big bounce in consumer income was all about government stimulus payments and that big weekly addition to unemployment benefits. Analyst Michael Lebowitz warned today that the good news on retail sales deserves a huge caveat as well:

“There are approximately 4.3 million households in forbearance. If they had to make mortgage payments instead of consume goods, what would retail sales have been?

This recovery is sending all kind of false signals. Be careful of false narratives built on confusing data.”

Lastly, in this morning’s video I essentially illustrated for you what amounts to a high degree of turbulence presently existing in the equity market setup, along with past results when the featured convergence occurred historically.

Here’s Mandelbrot on how “conventional finance” tends to ignore such things, and why such ignorance is dangerous:

“Turbulence is dangerous. Its output—the pressure or velocity of water, the average or change in price—can swing wildly, suddenly. It is hard to predict, harder to protect against, hardest of all to engineer and profit from. Conventional finance ignores this, of course. It assumes the financial system is a linear, continuous, rational machine. That kind of thinking ties conventional economists into logical knots.”


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