In this week’s main message I mentioned “the fascinating developments all around us”, referring to the high level of stocks (compared to pre-pandemic prices), the likes of GameStop and the euphoria (in some circles) over cryptocurrencies.
To add more to our present-day fascinations, the European Central Bank meets today, and in her prepared remarks Christine Lagarde acknowledged rising inflation, then lauded the stimulating effect of negative interest rates. Think about that in terms of the European consumer: i.e., we’ll penalize you for saving a dime, while, in the process, we’ll promote higher prices for everything you spend your dimes on, and, to the extent that you’re able to invest a dime or two, we’ll force you into assets at historically-high prices…
And, speaking of inflation, if you listen to the Fed, it’s no big deal, not at all! Well, so far this morning, I’ve been reading and typing, which I can’t say has gotten more expensive lately — oh, wait, I’ve also been eating.
Here’s the one-year chart of our ETF position that invests in food (ag futures):
“The last time we saw such an upbeat zeitgeist that did not coincide with an immediate equity market correction was in 1999 when the dotcom bubble was in full bloom.
Typically in the past, when our gauge is at such high levels, it would indicate a 100 per cent probability of lower share prices over the next 12 months. This is despite the current powerful US economic growth expectations buoyed by fiscal stimulus and business reopening.”
While of course history in no way has to repeat (previously prescient indicators can lose their efficacy as markets evolve), such setups should never be ignored — as the world seems to be doing, presently...
Now, that (indicators losing their efficacy as markets evolve) said, I can’t say that my studies of economic and market history offer much hope with regard to the evolution of human nature…
Asian equities bounced off of a couple sessions of pain last night, with 10 of the 16 markets we track closing higher.
Europe’s in rally mode this morning, with all but 2 of the 19 bourses we follow in the green thus far.
U.S. major averages, however, are mixed to start the day: Dow down 98 points (0.29%), SP500 down 0.07%, SP500 Equal Weight down 0.10%, Nasdaq 100 up 0.01%, Nasdaq Comp up 0.18%, Russell 2000 up 0.28%.
The VIX (SP500 implied volatility) is down 1.54%. VXN (Nasdaq 100 i.v.) is down 2.37%.
Oil futures are up 0.15%, gold’s down 0.50%, silver’s down 1.19%, copper futures are down 0.02% and the ag complex (food) is up 0.84%.
The 10-year treasury is up (yield down) and the dollar is up 0.19%.
Led by solar stocks, AT&T, ALB (lithium miner), wind stocks and India — but dragged by metals miners, Verizon, silver, materials and gold miners — our core mix is up 0.04% to start the session.
Speaking of the evolution (lack thereof) of human nature, here’s 18th Century poet Friedrich von Schiller:
“Anyone taken as an individual is tolerably sensible and reasonable — as a member of a crowd, he at once becomes a blockhead.”
Have a great day!