Morning Note: Blame it on Wood, Why Folks Own(ed) AT&T — And — Yes, Geopolitically-Speaking, It’s Different This Time

In yesterday’s morning note I featured my weekend comment regarding the positioning of speculators who trade lumber futures:

“Lumber net longs dropped notably, now nearly neutral. Speaks to the huge, unsustainable runup in price, and evidence of project delays and cancellations.”

Evidence of that implied pullback in production exhibited itself in this morning’s housing starts numbers for April:


That represents a major miss relative to expectations! 

Yes, blame the price of lumber — and I suppose labor (willingness) as well. (Note: the big decline you see (February) just prior to the latest on the graph, that one was all about the weather (in Texas in particular).

Permits, while also coming in below expectations, actually ticked up a bit, but that was all in multifamily. Single family housing permits declined as well.

After rallying bigly on news that it’s selling its media stake, AT&T reversed course in yesterday’s session — and is taking it the chin bigly this morning as well. What is likely a long-term win for shareholders (shedding a ton of debt and ending up with 71% ownership of a new streaming giant when the deal’s done) isn’t enough — for the moment — to offset the disappointment of a dividend cut that’ll take this huge yielder from roughly 6.5% to what’ll likely settle in at around 4% going forward (based on current price).

Yep, lots of folks like AT&T for the yield. We do as well. But, as a core position, it’s always been first and foremost a telecom/coming-5G play for us. It’s still that — more so now — of course, but nevertheless we’ll be reassessing whether or not it remains the best use of ~1.5% of our portfolio (there’s lots we like in the resource and emerging markets space these days)…



Asian equities were strong overnight, with 14 of the 16 markets we track closing notably higher.

Europe’s mostly green as well so far this morning, with 13 of the 19 bourses we follow up as I type.

U.S. stocks are mixed to start the day: Dow down 82 points (0.24%), SP500 down 0.13%, SP500 Equal Weight down 0.11%, Nasdaq 100 up 0.17%, Nasdaq Comp up 0.30%, Russell 2000 up 0.48%.

The VIX (SP500 implied volatility) is up 2.28%. VXN (Nasdaq 100 i.v.) is down 0.20%.

Oil futures are down 0.68%, gold’s down 0.05%, silver’s down 0.31%, copper futures are up 0.52% and the ag complex is up 0.92%.

The 10-year treasury is down (yield up) and the dollar is down 0.34%.

Led by MP (rare earth miner), uranium miners, emerging market equities, solar stocks and wind stocks — but dragged by AT&T, oil services stocks, gold miners, energy stocks and Verizon — our core portfolio is up 0.16% to start the day.


Yes, indeed, it is different this time. And, no, I’m not talking COVID, I’m talking the developing structural shifts in the geopolitical landscape that, from a purely investing perspective, has us thinking supply chains, inflation, etc…

“The Americans have lost interest in being the global policeman, security guarantor, referee, financier, and market of first and last resort. The people who remember the world wars personally are almost gone, and the oldest of those born after the age of the Soviet nuclear threat have already voted in three presidential elections.

It is difficult to justify an Order when the people doing the justifying weren’t even alive when the circumstances that necessitated its creation occurred.”  — Zeihan, Peter. Disunited Nations 


Have a great day!
Marty
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