Sept 18
Amy Walter of the esteemed Cook Report posts on X:
Harris national average (+2.6) is about 1.8 pts behind Biden Election Day ‘20 nat’l vote (+4.4). If that were to hold true, Harris would trail in every state but MI/NV & PA on the bubble. Poll averages put her slightly up in MI, tied in NV, on bubble in PA. Trailing everywhere… https://x.com/amyewalter/status/1835671635891753407?s=66&t=hi3LjJ8kVbN50WgSIEfnAg
The Presidential race is a toss up.
This year’s budget deficit is on track to top $1.9 trillion, or more than 6% of economic output. That threshold has been reached only around World War II, the 2008 financial crisis and the Covid-19 pandemic. The country’s fiscal trajectory merits only sporadic mentions by the major-party presidential nominees, let alone a serious plan to address it. See the Journal.
If the U.S. dollar were not the global reserve currency, then the U.S. would be fiscally Fd because as a nation the net savings rate is negative. We borrow to invest. We borrow to consume. We are building a house of straw.
Markets and Stocks
The Fed will announce a rate cut at 2:00 PM this afternoon. The market is betting on a 50 basis point cut. I don’t know and frankly don’t care. What matters is the state of the economy. When the Fed begins a rate cutting cycle with a reasonably strong economy as the backdrop, invariably the equity markets move higher. Today, GDP is expanding at 2-2.5% rate. There are few flashing signs about economic growth. My six month target for the S&P 500 is 6,000.
Importantly, retail sales for August were better than expected. I believe that the Atlanta Fed will raise its GDP forecast.
I believe that the market will break to new all time highs very soon, and that the rally will be broad based including the AI trade as well as semiconductors.
I am pounding the table on NVDA, AVGO, MU, ADI, AMD and ASML as well as TSMC in the fab space.
I like the hyper scalers, with Apple and Meta as my top two choices.
In the financials, I am focusing on AXP, GS, BAC and JPM.
I really like LLY.
Among the industrials, I like CAT, DE and ETN.
Gasoline is at $3.20 a gallon.
The yield on the 10 year Treasury is around 3.60%, the lowest in over a year.
The dollar is trading at the lowest level since January. I am not fussed. I remain a dollar bull.
Gold hit yet another all time high. As the deficit rises, interest in gold and crypto will increase.
Microsoft announces a 10% dividend hike and a $60 billion buyback.
Oracle is going parabolic and will probably go higher.
IBDaily ranks Broadcom number one in the Electronic-Semiconductor Fabless industry.
Bank of America is very positive on HPE.
I agree, my target is $25.
Shares of Toll Brothers have taken off in the last few trading days, hitting an all-time high on Monday. The stock is up 46% so far this year and trading 7.6% above its 10-week line. See IBD.
A major sign of Chinese economic malaise: In 2018, 51,302 new startups were founded in China. Last year, that number dropped to 1,202. See Marginal Revolution.
U.S. freight rates continue to decline suggesting continued weakness in the manufacturing sector.
By a substantial margin, the U.S. is the global leader in the production of crude oil.
Economics
NBER working paper 32945 explains that adoption of cryptocurrencies is often a function of inflation fears. That makes sense to me.
Using proprietary data from the predominant cryptocurrency exchange in India together with the country's Household Inflation Expectations Survey, we document a significantly positive association between inflation expectations and individual cryptocurrency purchases. Higher inflation expectations are also associated with more new investors in cryptocurrencies. We investigate investment heterogeneity in multiple dimensions, and find the effect to be concentrated in Bitcoin (BTC) and Tether (USDT) trading. The results are robust after controlling for speculative demand captured by surveys of investors' expected cryptocurrency returns, and admit causal interpretations as confirmed using multiple instrumental variables. Our findings provide direct evidence that households already adopt cryptocurrencies for inflation hedging, which in turn rationalizes their high adoption in developing countries without a globally dominant currency.
https://www.nber.org/papers/w32945
Politics
China is the enemy of the United States. The ban on Chinese ownership of TikTok USA is good policy.
A three judge panel of federal judges on Monday made pointed remarks that called TikTok’s legal arguments into question, in a landmark case that could determine whether the Chinese-owned video app survives in the country.
The hearing, before the U.S. Court of Appeals for the District of Columbia Circuit, lasted roughly two hours. Three judges asked probing questions of both TikTok and the government about an April law that forces ByteDance, the app’s owner, to sell TikTok to a non-Chinese company before Jan. 19 or face a ban in the United States. The lawyers have asked the judges to deliver a decision in the case before Dec. 6, and legal experts anticipate the losing party will appeal to the Supreme Court.
Two of the judges expressed some skepticism around TikTok’s arguments that Congress lacks the authority to pass such a law, and its defense that it was being unfairly singled out. Neomi Rao, one of the judges, said the company’s legal position relied on “a very strange framework for thinking about” congressional authority.
https://www.nytimes.com/2024/09/16/technology/tiktok-us-ban-case.html
Sociology
Legislation restricting access to alcohol drives right wing political affiliation.
https://www.sciencedirect.com/science/article/pii/S0261379424001082
@EricTopol: Loneliness has been associated with adverse clinical outcomes. A new @uk_biobank report, using Mendelian randomazation, shows most of this is not causal but attributable to co-morbidities and other risk factors.
@NatureHumBehav
https://t.co/xYnNLLcpOB https://x.com/erictopol/status/1835698388047937564?s=66&t=hi3LjJ8kVbN50WgSIEfnAg
People want to belong so much that they will deny truth. But truth is a paramount virtue for a strong society.
Being in a minority, even in a minority of one, did not make you mad. There was truth and there was untruth, and if you clung to the truth even against the whole world, you were not mad.”
― George Orwell https://x.com/therabbithole84/status/1835900927204872498?s=66&t=hi3LjJ8kVbN50WgSIEfnAg