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Giving voice to those who challenge a prevailing sentiment in financial markets.

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Construction Spending, Happy Canada Day
Good morning contrarians! Stock futures are down again with copper as bonds see bids, continuing the risk-off theme…

It’s a summer Friday before a long holiday weekend without much on the calendar. Just construction spending at 1000 really warrants interest. That would normally make for a quiet day, but the overall mood seems to be tilted more toward ‘risk off’ than quiet. Just look at bond yields and copper.

The general calculation remains this: a Fed hellbent on removing liquidity from the system will be bad for the economy, which will be bad for stocks. The Fed needs to do this to rein in inflation. Until you see substantial progress on inflation, the Fed will not back off and investors will remain cautious if not downright negative on risk assets.

Rough Quarter Concludes With Fresh Inflation Data: Daily Contrarian, June 30
Good morning contrarians! The latest PCE data is out this morning as stock futures drop anew, concluding their worst first half of the year in two generations…

Today’s briefing and podcast are free for all, so check them out here:
Sentiment Sinks: Daily Contrarian
Good morning contrarians! Sentiment appears to have taken a turn for the worse. Stocks sold off significantly yesterday and are moving lower this morning as investors turn jittery over consumer confidence…

More on this and what to expect from markets today is discussed in today’s briefing and podcast which is free today:

Home Prices, Consumer Confidence: Daily Contrarian, June 28
Good morning contrarians! Stock futures are pointing to a higher open as China loosens Covid restrictions…

Two major economic data releases today are Case-Shiller home prices at 0900 and CB Consumer Confidence at 1000. There are no earnings of note.

More on this and other things that may move markets today in today’s briefing and podcast, available here:
Russia Bond Default, Crypto Fund Blow-Up No Concern to Markets (Yet)
Good morning contrarians! Stocks are moving higher in the pre-market despite a couple of negative headlines around Russia bond defaults and a crypto hedge fund blowup…

These events may yet be able to unwind without any systemic risk (the crypto hedge fund is small and Russia’s bonds, well, apparently not a concern either). But if there are many more such events, somebody is going to be left holding the bag. This would typically be the type of thing investors can point to as the proverbial ‘canary in the coal mine.’

Except investors appear to have decided that it’s time for risk-on. That was the story of last week at least and so far in the early going today it appears to be the story now as well. Is it too early to be piling into risk assets? Or is this an opportune time to snap up bargains, as Howard Marks said?

You tell me!

Fed Will Reverse Course on Rate Hikes, And Soon: Deer Point Macro (Podcast)
New episode is live! @deerpointmacro joins the flagship podcast to discuss his view that the Federal Reserve will only hike interest rates once more before easing -- potentially as early as September.


Content Highlights
  • The Fed is not some magical organization that can control all parts of monetary economics (2:50);
  • The Fed can create demand for credit, but banks have to provide supply. And banks are pushing back (5:03);
  • What to make of the Fed’s rate hikes this year? How has that affected bank portfolios? (9:37);
  • The eurodollar market plays a significant role in Fed policy and its implications. An explanation (13:24);
  • The Fed stands to raise once more, at its next meeting in July, before having to cut rates in September (16:21);
  • Inflation is stubbornly persistent. Doesn’t this force the Fed to raise rates? (19:57);
  • Background on the guest (30:14);
  • Markets don’t really react to ADP employment data, but for economic detective work it can be vitally important (31:48);
  • How this all translates to asset prices: good for bonds but commercial banks are maybe not as safe as some would think. But regional banks may be a better bet (35:11);
  • What about cryptocurrencies? (36:34);
  • Quick discourse on the so-called ‘Fisher effect’ that posits that inflation rises as Fed funds increase — over the long term (39:14).
Initial Jobless Claims, More Powell: Daily Contrarian, June 23
Good morning CommonStock! Stocks and cryptos are pointing to a rebound in the pre-market, but copper and bond prices might be more telling…

Initial jobless claims are out at 0830. Economists expect 227,000 new claims, down a bit from the 229,000 seen last week. This is an important metric to watch as many are saying that employment needs to slow before there can be any progress on inflation. Inflation of course being the one thing that is going to keep the Fed’s foot on the gas pedal of rate hikes.

Jay Powell returns to Capitol Hill for his second day of testimony, this time in front of Congress. Not expecting much to come from this as he is just likely to repeat his comments from yesterday.

In practical terms, employment is still too strong for the economy to slow by any reasonable magnitude. But that can’t persist with the Fed raising rates to slow down economic activity. That, at least, is the simple calculation. There’s a lot of room for nuance and many ways we can presumably still avoid economic contraction. But none of that is going to be resolved this week.

More here:
Powell Testimony Today
Good morning contrarians! Stocks are dropping in the pre-market and due to give back yesterday’s gains…

Federal Reserve chair Jerome Powell starts two days of testimony in Washington, D.C. today. Powell addresses the Joint Economic Committee and take questions from the politicos. Don’t expect anything in the way of nuanced or educated questions from these folks. They’ll all be trying to score political points for the cameras.

Still, some details may emerge regardless. Investors will be looking for any indication for when the Fed may stop its interest rate hikes and quantitative tightening. Specifically they’ll be looking for what Powell says the Fed will consider victory over inflationary pressures.

Ultimately it may not matter what Powell says. For one, it’s just Powell. For another, it’s just talk. He’s been known to throw markets a bone during times like these but remember what happened the last time he did that? To refresh your memory: he said rate hikes of more than 50 basis points were not being actively considered. Obviously that lack of active consideration didn’t last very long as the Fed raised by 75bps at their last meeting.

More here:
post media
We can expect markets to move today for sure but yes lots of back and forth between Fed officials. Yesterday, Ballard said QT does not have that far to go and then this afternoon, someone else was like a recession is most likely happening lol.
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Existing Home Sales: Daily Contrarian, June 21
Good morning contrarians! Stocks are pointing to a higher open after the long weekend. Dead cat bounce?

Existing home sales at 1000 is the main economic data release of the day. This data release is unlikely to move markets, but it points a pretty ominous picture of the U.S. real estate market, which drives a lot of U.S. consumer confidence — and therefore U.S. consumer behavior, which basically drives the world economy.

There is no immediate catalyst for the bounce in risk assets this morning. Remember these things are typical of bear markets and quickly give way to selling as the trading day wears on. Concerns about the economy are pretty rampant. Higher interest rates are the root cause of this. It’s difficult to see how any kind of sustained buying can develop while the Fed remains hellbent on raising rates to rein in inflation. So until inflation comes down, this is the reality of the situation.

At least these are my views this morning.

More on this here:
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