Interesting TACs of the Week (August 19 – August 25, 2017)

Summary – A top-down review of interesting calls and comments made last week in Treasuries, monetary policy, economics, stocks, bonds & commodities. TAC is our acronym for Tweets, Articles, & Clips – our basic inputs for this article.

Editor’s Note: In this series of articles, we include important or interesting Tweets, Articles, Video Clips with our comments. This is an article that expresses our personal opinions about comments made on Television, Tweeter, and in Print. It is NOT intended to provide any investment advice of any type whatsoever. No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Macro Viewpoints & its affiliates expressly disclaim all liability in respect to actions taken based on any or all of the information in this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerance.

 

1.Inertia?

The markets seem to be in the grips of inertia. What is happening continues to happen slowly without any force. The Dollar keeps breaking down; global sovereign yields keep going down with the 10-year JGB yield close to zero, the 10-year Bund yield at 38 bps, & the 10-year Treasury with a weekly close below 2.20%. It is OK for Gundlach to say – “wait for the other side of cycle“. But when will the other side come? And what do you do until it comes except stay in positive carry trades. No wonder Corporate bonds keep finding buyers and stocks keep meandering without any real correction.

What is going on with Gold? With Dollar breaking down, with Treasury yields falling across the 30-5 year curve & Bunds-JGB yields also falling, why was Gold only up 37 bps on Friday and only up 33 bps on the week? Or is resistance at 1,300 bigger than Dollar & rates?

Also why are rates falling when Copper & other industrial metals are outperforming Gold so handily? Or are Copper et al rallying only because of China? After all, China was up big this week and is threatening to break out. Smart guys seem to like these breakouts in metals:

 Carter Worth of CNBC Options Action concurs:

So if they like commodity stocks, what do they not like? At least one was clear.

The picture for FANGs is getting gloomier. Our view on Amazon’s acquisition of Whole Foods was that the transaction was like acquisition of Gillette in early 1995, a transactions that signaled a long term bottom in beaten-down consumer brand stocks. We see a drive among other major players to build alliances to blunt if not reverse Amazon’s march.

Google seems even more at risk with both its fiasco with ex-employee Damore but more importantly with questions about censorship & other dictatorial practices. The White House is not friendly towards Amazon, Google, Facebook and the Congress could get involved too. Google could be the easiest to break up by demanding a separation of search from Gmail & related functions. Could there be a legislative and/or executive demand to prevent Google from amassing data on customers? Facebook could also be subject to the same demands. These are not near term concerns but they do tend to reduce the charm and multiples of FANGs.

 

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