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Nick, do you think the market will do some just in case selling during the last hour or two? The market seems a bit too happy considering the close vote count in both the House and the Senate. A deal that could get votes from the Freedom Caucus may not get votes from the Senate Progressive Caucus, (the AOC caucus). From what little detail I can gather it appears student loan debt relief is getting the ax along with at least a portion of new IRS agents. Student loan relief was probably getting axed by the Supreme Court anyway. That ruling is coming next month. If ~44MM Americans have to start paying off student loan debt in September, discretionary spending is going to suffer. Or maybe Biden will just kick the can down the road again.
Attached below is a chart of the 20-day moving average for the CBOE put-call ratio. This chart goes back to January 2020 which gives a sense of the ratio pre-pandemic, pandemic bottom and the complete overshoot - nothing could ever go wrong again - peak at the end of 2021. This chart makes a strong suggestion that the market bottom was October of 2022. I will look for a successful retest of support before beginning to re-enter the market.
The administration trotted out their Treasury under secretary to confirm they won't use the 14th Amendment to cure the debt ceiling impasse. The market appears to think that means they almost have a deal with McCarthy and the band of pranksters. I'm not so sure. If they don't before the market opens on Tuesday 5/30 the market may not be so sanguine.
A decade ago my partners and I were shipping 20-25 containers a month out of Asia. Contract prices to the West Coast were roughly double the current spot price. When we began in late 2008 the spot price was about half what it is today and we were only shipping a couple of containers a month. Considering the cost per unit, ocean shipping was basically free. The ocean freight business is a tough one. If this goes on much longer, ships will be taken out of service and a new cycle will begin.
The bulls are winning this morning as the SPX is tackling resistance at 4,200 again. The short term high was on May 19 @ 4,211.
The Gulf Stream along the eastern US coast, the Canadian Maritimes and Western Europe has been slowing as well. It's going to create warmer summers and colder winters, especially in Northern Europe. It's the same problem; fresh water from melting ice is disturbing the flow.
Here's an over simplified explanation: As the Gulf Stream moves warm water northward, water evaporates making the water more dense. As it becomes more dense it sinks creating momentum. Adding additional fresh water slows that momentum.
One area that doesn't have to worry about weather change is Southern Florida as it will be mostly under water by the end of the century. Fun times.
We've got some very short term, (hourly), resistance in this area of the SPX.
A few of my favorites unmentioned by AI:
“I would challenge you to a battle of wits, but I see you are unarmed!”
“To thine own self be true..."
“We know what we are, but know not what we may be.”
“Suspicion always haunts the guilty mind.”
And it only starts there with the round globe lies. Gravity is a deep state invention. Before they created gravity to keep us down, everyone could fly...they kept it out of the Bible but it's still in the Apocrypha. Air used to be oxygen but now it's only 21% oxygen. Having trouble breathing? Deep state. And they're about to flip the magnetic poles, that's why they're melting the ice so it can flip easier. I can go on all day with this. Stupid people will believe anything and most will pay you to lie to them. I went into the wrong profession.
This is the 21st Century version of kicking grandma to the curb.
You're on a roll this morning Elroy.
This is so last year, we've already had a president who can do that..:)
Nick, looking at a short term chart of the SPX, (10 minute/3 week), the market is not down, it's still flat as a pancake with a little six day hill of hope-apathy-fear. The short term bottom is ~4,100 and top is 4,187. Other technicals suggest that we're close to the top for today barring any breakthrough on the debt ceiling.
One of the things we've learned about Uncle Joe is that just when we think he's sleeping away peacefully in his rocker he may unleash his Dark Brandon alter ego to smite the non-believers with the 14th Amendment. And I sayeth unto you; the debt of the United States shall not be questioned..:)
For anyone interested in the legal side of the debt ceiling, this seems to be a solid lawsuit. Forwarded to my Twitter feed from Lawrence Tribe. The article appeared in The New Republic.
The Lawsuit That Might Force Biden to Ignore the Debt Ceiling
An organization representing government workers is making a preemptive strike against the mounting default crisis.
During the two years they spent holding power in Washington, Democrats failed to disarm the debt ceiling time bomb that Republicans have repeatedly wielded over the past decade. Now they are wrestling with the potential consequences of the latest and greatest standoff over raising it. President Joe Biden and Speaker Kevin McCarthy are reportedly making little progress in negotiations over the trillions in unpopular spending cuts and new restrictions that the House GOP wants to enact in exchange for not blowing up the economy.
One solution would be for the Biden administration to recognize that the debt ceiling is unconstitutional. The Fourteenth Amendment declared in 1868 that the “validity of the public debt authorized by law ... shall not be questioned.” A logical reading of that language is that Congress cannot authorize spending that exceeds the nation’s tax revenues and then later forbid the Treasury to pay off that debt. But Biden aides are reportedly downplaying the use of this option to progressive lawmakers.
A recent lawsuit could nonetheless force their hand. The National Association of Government Employees, or NAGE, filed a federal lawsuit against the Biden administration earlier this month to block it from enforcing the debt ceiling. The union argued in a court filing last week that the debt ceiling violates the public debt clause and that abiding by it is already injuring NAGE’s members. A hearing on a preliminary injunction is set for next Wednesday. While its chances of success are uncertain, the lawsuit itself underscores the constitutional netherworld in which the nation’s leaders now find themselves.
Most debates over the debt ceiling’s constitutionality imagine that it will not become a courtroom matter until the bomb actually goes off. When that happens, the Biden administration will essentially have two choices. Treasury Secretary Janet Yellen can stop paying off existing debts and thereby default on the national debt for the first time in American history. Alternatively, she can “prioritize” making those debt payments over things like paying civil servants and mailing out checks to veteran pensioners. That would bring the United States into a state of technical default while theoretically mitigating some of the damage.
If Yellen instead chose to continue issuing new bonds to cover existing debt, that would violate the debt ceiling and likely set up a showdown at the Supreme Court. Most observers imagine in this hypothetical scenario that Biden or Yellen or a lawyer working for them would just say “Fourteenth Amendment!” while issuing the bonds; conservative legal scholars have argued that ignoring the debt ceiling on those grounds would itself be unconstitutional. “The idea that the Fourteenth Amendment gives the president unilateral power to borrow is dangerous nonsense,” Michael McConnell, a former federal judge, recently argued in a New York Times op-ed.
NAGE’s lawsuit spins some of these assumptions on their head. Most discussions of the debt ceiling depict it as a burden imposed upon the executive branch by Congress. The union argued that the debt ceiling actually amounts to a line-item veto for the president to wield at his own discretion. What appears to be a restriction based on the political dynamics of the situation is actually, according to the filing, an unconstitutional transfer of congressional power.
“Already near the debt limit, the last Congress adopted in the current fiscal year a budget that would require adding $1.5 trillion in debt without identifying or indicating any priority of payments once the limit on indebtedness was reached,” the lawsuit claimed. “Congress then failed to raise the debt ceiling or increase taxes and effectively offloaded the dirty work of repealing parts of the spending that Congress itself had just approved.”
The Supreme Court previously struck down a line-item veto in the 1998 case Clinton v. New York. Writing for the court, Justice John Paul Stevens noted that the Constitution had carefully and deliberately laid out the process by which bills become law. Deviations from that “finely wrought” structure are unconstitutional, especially when they result in “truncated versions” of the laws that were actually passed by Congress.
It would be one thing if Congress had laid out the order in which federal spending must be “prioritized” after the debt ceiling is met, the union noted. But it argued that Congress effectively delegated that power to decide which federal spending must be cut or canceled to the executive branch. By crafting a debt ceiling, Congress ceded a core legislative power to another branch of government and compromised its authority over federal spending.
Some legal scholars have already pointed out that the debt ceiling’s existence amounts to a constitutional no-win scenario for a president. Law professors Neil Buchanan and Michael C. Dorf recently noted that Congress had placed the executive branch in a “trilemma,” in which he must violate the Constitution in some way. “Once we hit the debt ceiling, Biden will bump into a constitutional obstacle no matter what he does,” they wrote in a Los Angeles Times op-ed. “Failing to spend appropriated funds, raising taxes, or borrowing money to pay the bills would all infringe on Congress’ constitutional powers.”
NAGE’s lawsuit also emphasized this quandary for the president. “The Debt Limit Statute has placed the President in an impossible position, without legislative permission or constitutional authority as to how to proceed,” the union said in its original complaint. “Under Article II of the Constitution, the President is obligated to execute all the laws, without exception, and may not be placed by Congress in a position where the President has to determine what laws are of continuing force and require payment, once the limit on total indebtedness is reached.”
What makes the union’s lawsuit noteworthy is also how it avoids some of the procedural questions that might bedevil other debt ceiling lawsuits. The U.S. technically already hit the debt ceiling on January 19, as Yellen informed Congress at the time. The Treasury has avoided default thus far by relying on what it describes as “extraordinary measures,” or certain creative accounting maneuvers. In this case, Yellen told lawmakers that she would suspend the Treasury’s investment and reinvestment in various civil servant retirement funds that were authorized by law, to give the country some breathing room.
In the filing, the union argued that this amounted to a legal injury for its members. “The debt issuance suspension period continues in effect and continues to diminish the value of the assets of the benefit plans of the CSDRF and Thrift Savings Plans in which [NAGE’s] members are participants,” it claimed. “While [Yellen] is required by 5 U.S.C. 8348 to make good on these losses when the debt issuance suspension period ends, there is presently no end in sight or increase in the debt ceiling, and the retirement plans continue to lose value.”
Maryland Representative Jamie Raskin told The Washington Post in a recent interview that, in his view, the Supreme Court is usually “fastidious” about whether a party has legal standing in a particular lawsuit, which would insulate ignoring the debt ceiling from legal challenges. NAGE argued that it had overcome the standing hurdle, albeit from the opposite direction. “Aside from this actual injury, [NAGE’s] members face certain and imminent harm when the United States runs out of cash to pay its bills,” the union also noted. “Although individual members may or may not be furloughed, and there will be different degrees of individual injury from layoffs, all of [NAGE’s] members face an imminent and certain injury from delay in their paychecks, whether for days, weeks, or months.”
Naturally, this is not how things are supposed to work. When Congress added the public debt clause to the Fourteenth Amendment during the Reconstruction era, its drafters’ immediate concern was various Civil War debts. But they also made clear that they had much broader aspirations in mind. “I have no doubt that every man who has property in the public funds will feel safer when he sees that the national debt is withdrawn from the power of a Congress to repudiate it and placed under the guardianship of the Constitution than he would feel if it were left at loose ends and subject to the varying majorities which may arise in Congress,” Massachusetts Senator Benjamin Wade told his fellow lawmakers during the drafting debates.
Will the Supreme Court agree? It’s impossible to say. Predictions about how the court would rule on particular cases are difficult even when they traverse familiar areas of constitutional law. The Supreme Court has heard vanishingly few cases on the public debt clause’s meaning since its enactment, however, and none of the court’s current members have ever been part of one. If the dispute reaches the justices, it might be one of the highest-stakes cases they ever hear. Nothing less than the integrity of the national debt and the stability of the American financial system would be on the line.
Apparently Kohl's has found a way to make a small profit. They're up 16% today on earnings of 13 cents a share. Let me do the math; that's 52 cents a year on a share price of $22.28 or 43X earnings. Hum, KSS at 43X earnings or MSFT at 34X earnings. Now there's a difficult choice..:).
I'm not dead.
They hire the people to bribe people making the tax codes.
This is the image of a market with no direction for the last 13 months. SPX 3,900 was the mid point for 10 months and became support in March. There are good arguments for the market to rise from here, continue in this channel and to take another dive down into the mid-3,000s. That's why I'm on the sidelines in fixed income for now. About 2/3s of my portfolio will mature at the end of the month and I'll likely switch to a lower return, more liquid investing vehicle.
I don't think we disagree. Small companies pay a lot of taxes. The system has been designed like that for decades, if not longer. The current tax system is designed to ensure mega cap companies pay almost no taxes. Roughly twice as many companies now pay no taxes. I wouldn't be so negative about the current 21% rate if there was a minimum AMT. When you compound zero tax, billions in free cash flow, corporations as people and money as speech, democracy has no place in that system.
More on the Trump tax cuts from the tax policy center - hint..it's bad news:
According to a December 2017 analysis released by the Tax Policy Center (TPC), the law was expected to raise the after-tax income of 80.4% of households in 2018, but that cut was not distributed evenly or progressively. The analysis revealed that the tax break would hit 93.7% of taxpayers in the highest-earning quintile, and only 53.9% of those in the lowest quintile.
Even so, on average, every quintile was expected to receive a tax break.
That is no longer expected to be true once individual tax cuts expire after 2025. At that point, the TPC estimates that the majority of taxpayers—53.4%—will face a tax increase: 69.7% of those in the middle quintile (40th to 60th percentile) will pay more, compared to just 8% of the highest-earning 0.1%.
The 35% tax rate was at best a chimera and at worst a red herring used by the corporate class to whine in front of Congress. Here's a sample of real tax rates paid by corporations under the Trump rules in 2021. And it's not just the corporate class that pays almost nothing. Our federal tax on investment income has averaged about 6% over the last decade or so. It's not difficult and it's perfectly legal. Corporations and the investor class need an AMT. How about 20%? Let's not pretend that the Bush or Trump tax cuts were anything more than a giveaway to the top 10%.
The Trump tax cuts were designed by and for the billionaire class and no one else. The law cut corporate tax rates permanently and individual tax rates temporarily. It also removed the ACA mandates and caused insurance rates to move up for participants. Anyone who thinks the Trump tax cuts are fair to average Americans either does not care what happens to working Joe and Jane or doesn't understand the law. It's a truly vicious swipe at the now want-to-be middle class. At the end of 2025 the working class will get screwed unless there's a Democratic administration and Congress.
Most of us here are lucky enough to be in the investor class but we're not crass enough to think the American working class can continue to get screwed as they have been for the last 40+ years. Trump and McConnell put that on steroids. As DeSantis said yesterday, he will create a true Handsmaid's society if elected. His model SC judge is crooked Clarence. He envisions eight years as president and bringing the SC to a 7-2 advantage while getting rid of radical left judges like Roberts.
According to Pew, lower income families have grown by 14%, the middle class has shrunk by 18% and the investor class has grown by 50% over the last 50 years. I don't remember a time when corporations were doing poorly in the US but I do remember a time when corporations weren't people and money wasn't speech. I think we were much better off then, even those who have benefited from the Bush and Trump tax cuts. Billionaires own the SC as it's the only non-democratic institution. We now know they want the other two branches. They almost got the administrative branch in 2020. I'm sure they've learned how to manage this better in 2024.
Wall Street got a bit nervous today, (SPX down over 1%), as it seems more clear that McCarthy does not have a plan that both the president and his crazy caucus will agree on. And it's not a few sticking points, it's the entire Republican plan which appears to have been written by the oil and gas lobby. Apparently it's 315 pages long with 275 pages of carveouts for oil and gas. This according to Sheldon Whitehouse, RI Senator and chair of the budget committee.
As for the budget cuts, here's the breakdown according to the NYT. We know McCarthy has committed to leaving defense and veterans benefits alone so here's the actual cuts. Basically shut down half the government. CBO says 700,000 people will lose their jobs. More likely with the knock-on effects, it's 10X that number.
Thanks for the details Court. It was the reference to copper moving down that threw me off. I thought EVs use over 2X the amount of copper as ICE vehicles.
That's one of the big reasons I moved to fixed income for now. I'm more in the make a reasonable income without losing money phase of my investing life..:).
I didn't follow that reference. Some detail? Thanks.
I assure you, none of us pay much attention to the MSM. If you think vaccines are a 'scam', and AGW is an invention of the deep state and/or the MSM or that there's some truth to the 'big lie', you're welcome to any or all of those opinions but this isn't the board to air that laundry. Any ideas or information you have regarding market direction, sector rotation, company earnings, etc. are more than welcome.
OK, that didn't take long. The XLC, XLK and XLY all have similar chart patterns and all did very well from the bottom, or near the bottom, of the recession. So we should say:
Comms, tech and discretionary will do very well from near the bottom of a recession. During the Great Recession all three doubled in two years. But that was not the time to sell as tech, for example, was up 17X by January of 2022. And we all thought the market was overbought at the end of 2019. I know I did.
There might be an opportunity this summer if Kevie and the Freedumb caucus tank the economy.
That's certainly counter intuitive Nick. I would think they'd be the first to fall and then recover as the recession subsides. I'll do some research on the 2008 recession and get back to you.
Speaking of history, the following sectors did well in a Full Recession: Communication Services, Technology and Consumer Discretionary.
Respectfully disagree. There is no room for flat earthers, if you get my point.
Kunstler is another right wing nut. From his Wiki page:
Kunstler is a harsh critic of both the Republican Party...and also the Democratic Party and their "underhanded attempts" to get rid of Donald Trump, a man whom Kunstler sees as showing "strength". He was also a promoter of the concept of a so-called "deep state" working to overthrow and thwart Trump. He endorsed Trump for re-election and declared that he intended to do "everything he can to prevent the Democrats from winning the election."
In an interview with American Conservative, Kunstler attacked gay marriage, describing it as "cultural mischief" that would further damage "a struggling institution". He is a subscriber to the conspiracy theory that the 2020 United States presidential election was fraudulent, describing it as a "fraud-inflected election" on his website, and he suggests that the 2021 storming of the United States Capitol was the work of left-wing groups.
In recent times, Kunstler has had financial problems,[11] and was described as "seethingly angry" about his writing income falling to only a few thousand dollars annually because of "the tidal wave of free content on the web". In addition, his "lucrative college speaking fees" have disappeared, which he blames on "the rising hysteria on campus against threatening ideas". Kunstler now uses Patreon to crowdfund his writing. My note: This couldn't possibly be because he's a total nutter.
In an interview with Doug Casey published on October 13, 2021, Kunstler called the COVID-19 pandemic a "scam", and on October 11 he published the debunked vaccine conspiracy theory that the vaccine would kill people "steadily over the weeks and months" and went on to name hydroxychloroquine and ivermectin as "effective" treatments.
It's the Russian way. Russian troops were promised flowers if they invaded Ukraine, but no one told them they would be on their graves.
And one more:
Putin says this battle in Ukraine is between Russia and NATO. Russia has lost 14,000 soldiers, 100 fighter planes, 100 helicopters, 500 tanks, 1,500 armored vehicles, 3 ships, 230 heavy guns and 6 generals. NATO hasn’t shown up yet.
Unfortunately for AZ and others Mead is still critical, only 7 ft. higher than it was in March and still 177 feet below full.
gfp927z, don't take my editorial as a personal attack, there are a few issues that I understand well and it really chaps my hide when nonsense is passed off as fact, especially in semi-literate publications like Forbes. Editorial below:
Climategate was total BS. A manufactured crisis as real as the stolen election. And, that nonsense was settled a decade ago. The author, Charles Kadlec is, (or more likely was), a conspiracy nut. Forbes should be ashamed but of course they're not. They're just a generally substandard group of editors and writers trying to make a living publishing mostly drivel with a sprinkling of hogwash.
Big oil are not the bad guys. They provide a product that allows us to continually grow our economy until we have better, less climate harming products to do the same. If there's a bad guy it's us eight billion humans demanding that we live better lives while ignoring that the sheer number of us and the general affluence and apathy are the problem. The earth is apparently not big enough to sustain us in the life style to which we've become accustomed.
The answers are not simple but they are straight forward; worldwide carbon budgets on consumers and producers, and taxes to fund carbon mitigation projects. I don't see any path to that end. McKibben and Hansen's idea that we should limit CO2 to 350 ppm seems almost quaint. We'll be at 450 ppm shortly after the end of the decade.
And Barron's apparently has a different point of view. To be fair, hedge funds most likely have a much shorter timeline than your normal investor so both may be correct. If we're taking a longer point-of-view, I'd agree with Barron's. However, I'm on the sideline with energy at least until we get through the summer and Q2 earnings reports.
10 Stocks to Play a Resurgent Energy Sector, From Our Roundtable Experts
Our energy roundtable predicts higher crude prices as global demand grows faster than supply. What’s ahead for U.S. shale, the majors, and the energy transition.
https://www.barrons.com/articles/energy-oil-gas-stock-picks-roundtable-f0171204?mod=hp_HERO
I believe you called that a few days ago.
Barring any existential issues the market has an upward bias.
I'm open to anyone who's smart and cares about democracy. About 50ish and successful outside of politics would be nice.
It appears that the Donald still has tight control over the Republican party. They walked out of negotiations over the debt ceiling a few minutes after he posted the following on Truth Social:
“REPUBLICANS SHOULD NOT MAKE A DEAL ON THE DEBT CEILING UNLESS THEY GET EVERYTHING THEY WANT (Including the 'kitchen sink'). THAT’S THE WAY THE DEMOCRATS HAVE ALWAYS DEALT WITH US. DO NOT FOLD!!!”
Yesterday and today have widened the BB width by about 20%. PPO looks slightly positive and RSI is under 60. Barring any existential issues the market has an upward bias. Energy and Health Care sectors are up while Communications, Discretionary and Financials are down.
Hound of the day is LUMN. They had a terrible 2022 and lost over half their value. Apparently falling knife investors were so convinced that $6 was the bottom they've followed it down to $2.35. This is another one trading at a small portion of their enterprise value, (~12%). Seeking Alpha analysts are all over the place from a strong buy to a sell. Wall Street is equally confused; two strong buys, two strong sells and nine other analysts in between.
I asked the Magic 8 Ball and it said; Reply hazy, try again. If the 8 ball doesn't know, no one does..:)
PFE has come into a pandemic inheritance and just spent it all on one big purchase. I assume when they say they'll reduce costs it's across the combined companies. PFE is always on my watch list or in my portfolio. They're back at the 2018 high as we seem to have forgotten that COVID is still on pace to kill over 100,000 people in the US this year. I'll be watching for a few quarters as it takes time to digest a meal this large.