Tuesday Macros

August Raising Its Ugly Risk Off Mode...China One Culpit... Treas Soar...Powell

Today is starting in a very risk off fashion again... S+P is near its lows of the overnight session, down 20 points... And treasuries are right up against the low yield of yesterday at 1.22 again this morning. The low overnight was 1.215... We see that as minor resistance today, with 1.18 and the potential of the third time down at 1... But first risk off trading.

Delta variant continues to plague markets, but not so much business transactions, nonetheless the fear is there. New Zealand announced a 3 day lock-down due to one case...seems extreme... But the big news overnight is the continued crackdown from China on their international big names, like Aliba. Chinese equities closed down 2% across the board . The latest are headlines about further Chinese regulation, triggering a fifth consecutive day of selling in the nation's bellwether technology stocks. China's top legislative body, the National People's Congress Standing Committee begins a four day meeting in Beijing today... Even, SEC, Gary Gensler, is warning against investing in China... BB daybreak reports "SEC Chief Gary Gensler warned Americans not to invest in Chinese firms."Thus not a good start of the day for risk...

Treasuries... While the amount of issuance this year remains the largest we have ever seen, there continues to be insatiable demand for cusips paper. The unsated demand for haven cusips from corporations, central banks, hedge funds and other asset gatherers, has soared. There is over 6.8 trillion in cash or short term instruments on corporation balance sheets that has to be constantly invested (45% higher than the 5 year average). 440 billion in dry powder held by alternative investment firms, and 7.2 billion of treasuries held by foreign entities(2nd highest ever). So even after 8.5 YOY trillion of issuance as of July 31, according to Sifma, the demand continues to dwarf the supply... Latest tic data shows a huge reversal of treasury buying from hedge funds, who had been sellers, and of course the Japanese...HF were buyers of 27 billion in the latest month of tic data, after selling 150 billion in the previous 5 months... While the tic data is lagging, it does seem that the trend is continuing.

Powell today... There are those that think that Powell will send us a message today when he hosts a town hall meeting at 1.30 for educators... We are not one of those. While there could be some questions about the Fed and inequality, we don't see tapering questions, unless there is a plant... Do not expect much.. But Fed governors are being added to the calendar for speaking...Rosengren was last night... Bullard is now tomorrow right before the FOMC Minutes... But the real headlines this week are fear of Delta variant, Chinese crushing of their global markets, and political fall out from DC...

Today... While we are a hawk, bear, on treasuries, we know when the long term trends are not working... And we have been constructive on treasuries until we clearly break 1.42 on the upside... So for today, 1.22 will be minor resistance, next 1.18, and finally the 1 we hit twice... The window from now to Powell's real speech next week at Jackson Hole could see a rally of the 10 year to .99.. The window is open for those that want to push it... Inflation is real, but for now fear and uncertainty have taken the front seat of markets... So beware... Small caps are trading horribly.

FJ43 said:

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Historic increase in food stamp benefits is on the way

https://www.cnn.com/2021/08/16/politics/food-stamps-benefits-historic-increase-biden/index.html

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this is actually inflationary because it is going into the hands of consumers directly.

$30,000 Millionaire said:

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FJ43 said:

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Historic increase in food stamp benefits is on the way

https://www.cnn.com/2021/08/16/politics/food-stamps-benefits-historic-increase-biden/index.html

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this is actually inflationary because it is going into the hands of consumers directly.

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I watched a lady selling a stack of 'food stamps' the other day to get cash to go into a liquor store.

Meanwhile that same liquor store had help wanted signs on the front door.

Free market, man. It still exists.

WWR falling off a cliff

I remember when we would love buying WWR when it dipped below $5.

WOW?!