Morning Note: Takes time and discomfort for profits to stick…

Almost couldn’t believe my eyes this morning when I read this quote from the latest commentary of a central banker:

“…highly concerned that an expansion of investment through excessive leverage could cause losses that could be unbearable for investors should there be any price adjustment due to an unexpected shock.”

HT/Peter Boockvar 

Thing is, alas, those were the comments of Lee Ju-yeol, the governor of the Bank of Korea. 

Believe me, such words — as utterly honest/responsible as they are — would not be remotely uttered by Jerome Powell. 

President-elect Biden shared his administration’s stimulus vision last evening, and, well, judging by the action as I type, it’s either loftier than the market believes his party’s thin majority can pass, or its hints (well, promises) of higher taxes on the horizon has traders thinking twice.

We’ll assume it’s a bit of both, for the time being…

Asian stocks leaned lower overnight, with 9 of the 16 markets we track closing in the red.

Europe’s getting hammered this morning, with all but one of the 19 bourses we follow notably in the red as I type.

While the U.S. averages are down more than your average dip-buying day trader has come to expect, note that they (with their tech concentration) don’t come close to reflecting the hit most of the major averages are suffering this morning.

I.e., while the Dow’s down 327 points (1.05%), the SP500’s down 1.08%, the Nasdaq’s down 1.05 and the Russell 2000’s down 1.75%, energy, banks, financials, materials and industrials (all things to like in a fiscally-stimulated world) are off 4.01%, 2.74%, 2.23%, 2.12% and 1.89% respectively.

The VIX (SP500 implied volatility) is up 7.61%. VXN (Nasdaq i.v.) is up 5.53%.

Oil futures are down 2.97%, gold’s down 0.89%, silver’s down 2.92%, copper futures are down 1.86% and the ag complex is up 0.09%%. 

The 10-year treasury is up (yield down) and the dollar* is catching a big bid this morning, up 0.55%.

*Keep in mind, as I keep reiterating herein, while the longer-term fundamental setup for the dollar is lower, the technicals have been calling for a bounce — which we’ve been getting lately — and a rising dollar spells destruction in terms of what the powers-that-be feel they must accomplish going forward. Hence the across the board selloff this morning…

Led lower by the sectors and commodities noted above — with utilities and ag being our only green positions so far this morning — our core mix is off 1.29% as I type.

I’ll leave you with these words of wisdom and experience from macro player Raoul Pal:

“Rule of thumb: When profits come too easily, the tend to go too easily to… it takes time and a decent level of discomfort for sticky profits…”

Have a nice day!


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