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.Weird?
We are all conditioned to see NDX & techs outperforming SPX when Treasury rates go down. But look what happened this past week:
Treasury yields fell during the first 3 days of last week and rose hard on Friday & Thursday. In fact, the rise in Treasury yields over the week all took place on Friday. And tech stocks rallied & outperformed the S&P on Friday & on Thursday.
What gives? We sure don’t know but we can take a guess. Perhaps, the stronger than expected NFP report on Friday on the heels of stronger than expected Jobless claims took away some of the fears about downside risk to the U.S. economy.
The week as a whole was ho-hum:
- Dow flat; SPX up 20 bps; RSP down 6 bps; NDX up 54 bps; SMH up 76 bps; RUT up 97 bps; IWC up 2.4%; DJT down 1.6%; VIX down 2.5%
Sectorwise:
- BAC down 13 bps; GS up 69 bps; JPM up 92 bps; KRE up 3.5%; AAPL up 2.3%; AMZN up 29 bps; GOOGL up 2.4%; META up 2.4%; MSFT down 9 bps; NVDA up 1.6%; NFLX down 2.5%; CLF down 4.7%; FCX down 3.3%;
Commodities were almost shot with Dollar up strong with UUP up 89 bps & DXY up 73 bps;
- Gold down 3.4%; GDX down 6.8%; Silver down 9.9%; SLV down 9.6%; Copper down 2%; CLF down 4.7%; FCX down 3.3%; Oil down 4.1%; Brent down 4%; Nat Gas down 8.2%; OIH down 5.7%; XLE down 3.2%;
EM non-China were mostly down except India thanks to much stronger than expected results for PM Modi’s party in state elections:
- EEM down 1.8%; EWZ down 1.7%; EWY down 1.8%; INDA up 2%; EPI up 1.8%; SMIN up 31 bps; Indian private banks HDB up 6.3%; IBN up 5.1%
Treasury yields rose hard in the belly of the curve but sill fell at the long end:
- TLT up 1.6%; EDV up 2.5%; ZROZ up 3.1%; 30-yr yield down 9.4 bps; 20-yr down 8.4 bps; 10-yr up 1.4 bps; 7-yr up 5.2 bps; 5-yr up 9.9 bps; 3-yr up 14 bps; 2-yr up 17 bps; 1-yr up 9 bps;
Short rates shot up because the expectations of a March rate cut by the Fed now seem overdone. The NFP report suggested that the Fed will take longer to cut rates with the current soft landing scenario. But when they begin to cut, they will cut 250 bps in a soft landing scenario & cut 400 bps in a hard landing scenario, as Priya Misra said on Bloomberg Surveillance on Friday. Below is a clip of Rick Rieder & El-Erian on Bloomberg Open on Friday post-NFP:
Why do a very few of luminaries focus on income?
- Guy Berger@EconBerger – Thu Dec 7 – An income-based explanation for “vibecession”: 1) Even though we haven’t had an actual recession over the past 2 years, inflation-adjusted personal income per capita (blue) have behaved in a recessionary way. 2) That’s true even though “the economy is good” (orange)
With all that, everything depends on what Chairman Powell says in his Presser on Wednesday December 13. Will he play the Grinch or will he let the markets play their hunches?
Before we move to our usual next 1-2 week visibility, below are two clips about 2024:
First Goldman’s CIO of public investing Ashish Shah saying 2024 will be the year of bonds:
Then JPM’s Head of Technical strategy Jason Hunter saying the S&P will go down to 3,500 in 2024:
And now a chart that did surprise us:
- Bespoke@bespokeinvest – Dec 9 – Here’s the S&P so far during Biden’s Presidential Election Cycle versus the average path the S&P has taken during all prior election cycles since 1928. Amazing how close the two are at this point closing in on the end of year 3. Almost up the exact same amount.
2. Negativish opinions for the near term
- Wayne Whaley@WayneWhaley1136 – Dec 9 – I think you need to be careful with the equity seasonals next wk. I see S&P 28-12 in the Dec opex wk last 40 yrs but its a very early opex this yr falling on the 15th. I also see S&P 16-24 from Dec 8-15 with the Nasd 14-26 for an avg 1.09% loss from Dec8-15. caution
Now a “be careful” tweet from someone almost always bullish:
- Ryan Detrick, CMT@RyanDetrick – Dec 9 – Two charts from @FrankCappelleri that caught my 👀 in a recent report. 10-yr oversold and near support. Also, the US Dollar could be forming a bullish bottoming pattern. Given stocks have enjoyed these two going lower, this could be important.
Calling for a low in volatility:
- SpotGamma@spotgamma – Dec 8 – we’ve been amazingly locked in the heavy gamma range of 4550-4600 for the last 17 sessions. with that, today was about as low as our 1 day estimated spx range gets at just 55bps. this likely marks a terminal low in volatility with fomc + opex next week.
Finally is the fuel for the rally nearly spent?
- David Marlin@Marlin_Capital – Dec 8 – CTA long positioning is at its highest level in 8+ years after $225B in buying over the last month. $SPY $QQQ $IWM
3. Positivish opinions for the near term
- Jeffrey A. Hirsch@AlmanacTrader – Dec 8 – December’s quarterly option expiration week, next week, has a solid bullish history. DJIA up 73.2% of the time avg weekly gain 0.46% since 1982. Week after better, DJIA up 75.6% of the time with 0.80% avg weekly performance. https://jeffhirsch.tumblr.com/post/736170642720899072/decembers-quarterly-options-expiration-week
Next is not merely for the near term:
- Larry Tentarelli, Blue Chip Daily@bluechipdaily – Dec 10 – $SPX $NDX $INDU all closed at 23-24 month weekly closing highs. All 3 are trending over rising weekly MAs and are set up for potential multi-year base breakouts.
Does the positive action in the Financials have a broader message?
- Dean Christians, CMT@DeanChristians – Dec 9 – With a breadth composite for Financials triggering a new thrust signal last week, the probability of an imminent broad market peak looks less likely.
And,
- Urban Carmel@ukarlewitz – $NYSI will cross +500 today after being negative, a good sign. Over 1000 is excellent
4. Harvard-Penn-MIT Heads
Needless to say that we, like so many, were appalled at what we heard from the Heads last week. We keep calling them Heads for the obvious next clause “should roll” figuratively speaking. Just to highlight what we had written about the Indian-Israeli bond, look what Sanjeev Sanyal (the Principal Economic Advisor to the Government of India) and an ex-banker (Global Strategist & Managing Director at Deutsche Bank till 2015), tweeted:
- Sanjeev Sanyal@sanjeevsanyal – If the heads of Penn/MIT/Harvard are not forced to resign after that performance, it will be a sign that the US too is past the point of no return. It is already too late for Europe. So, if US cannot turn back, we in India should make our own arrangements.
Yes, the head of Penn has resigned. We await news of resignation of the other two heads, especially Harvard.
It gives us solace & hope to have read the letter (reproduced below) from Mr. Bill Ackman to Ms. Gay, the current President of Harvard. Kudos to him for his outspoken leadership:
Dear President Gay, Since my letter to you of November 4th to which you did not reply or even acknowledge, I have received substantial feedback and input from senior members of the Harvard faculty about a number of the issues I raised in my letter concerning free speech, antisemitism, and the impact of the Office of Equity, Diversity, Inclusion and Belonging (OEDIB) at Harvard. I thought to share this feedback with you now as it may inform your testimony and potential questions you may receive from the Congress on Tuesday.
Free Speech at Harvard
In several of your communications since October 7th, you have emphasized Harvard’s commitment to free speech as the reason why the university has continued to permit eliminationist and threatening language on campus – i.e., calls for Intifada (suicide bombings, knifings, etc. of Israeli civilians) and the elimination of the state of Israel “From the River to the Sea.” You explained your tolerance for these protests on October 13th: “[O]ur university embraces a commitment to free expression. That commitment extends even to views that many of us find objectionable, even outrageous.”
In my letter to you, however, I noted that In The Foundation for Individual Rights and Expression (FIRE) Free Speech Rankings, Harvard has consistently finished in the bottom quartile in each of the past four years. I note that Harvard’s ranking has deteriorated each year, receiving its lowest free speech ranking ever for the 2023 academic year, last out of 254 universities with a rating of 0.00, the only university with an “abysmal” speech climate.
After sending my letter, I reached out to the faculty to reconcile your free speech absolutist commitment with Harvard having the lowest free speech ranking of any university. The faculty had a lot to say on this issue, as well as on antisemitism and the OEDIB. Notably, they were willing to share their views so long as I committed to keep their identities confidential. I have quoted their remarks below:
On Free Speech
“Years ago, Harvard stopped being a place where all perspectives were welcome.”
“Harvard is a place where loud, hate-filled protests appear to be encouraged, but where faculty and students can’t share points of view that are inconsistent with the accepted narrative on campus.”
“Harvard became a place where if you toed the party line, there was applause. If you disagree, you are drowned out. The gatekeepers of speech continue to further narrow what they deem acceptable speech.”
“The primary problem with speech at Harvard is that if you say the wrong thing, you will be cancelled, which leads to self-censorship. The result is what you actually think is not what you say.”
“Saying anything that doesn’t highlight the importance of slavery and colonialism as animating forces of history is not acceptable speech. Lived experience and ideology become the dominant forces of conversation. All of the courses follow the same playbook ideology. Ideology poses as coursework.”
On Antisemitism, Support for Hamas, and the Protests Against Israel
When I asked members of the faculty about the causes behind the Israeli/Gaza protests and the tolerance for antisemitism on campus, they explained: “Whiteness at Harvard is deemed fundamentally oppressive. Indigenous peoples are presented as in need of justice and reparations. Jews are presented as white people. It is therefore ok to hate Israel and Jews as they are deemed to be oppressors.”
I asked: “Why are the protests only about Israel versus other conflicts in the Middle East and around the globe where Palestinians and other civilians were killed?”
“Israel is the rare case where we have a hot conflict between people that are deemed ‘white’ versus people of color.”
The Office of Diversity, Equity, Inclusion and Belonging (ODEIB)
“The primary animating force of the ODEIB is racism-colonialism and the denial of indigenous rights. The ODEIB is a home for people who are perceived to have been victimized.”
“The ODEIB was meant to include Asians, but it does not. It is focused on communities that experienced colonialism.”
“Recency matters. India is not included because they got autonomy 70 years ago.”
“The ODEIB is at the service of black students, to a lesser extent brown students, and to a lesser extent LGBTQ students.”
“It’s about whiteness versus people of color.”
“The DEI framework prioritizes people on the oppressed side of the narrative.”
Hiring Practices at Harvard
One topic which emerged when I spoke to the faculty was the issue of hiring at Harvard, an issue about which the faculty clearly has a lot of consternation.
When I asked why Harvard’s faculty has shifted sharply leftward in recent years, they explained:
“Each department decides whom they want, and the university can accept or reject the candidate. Left-leaning faculty appoint other left-wing faculty because they get to decide whom to hire and promote. It’s a bit like the Twitter algorithm which continues to feed you the points of view you want to hear. Eventually, each department reaches the tipping point.”
One senior member of the faculty shared that it is made abundantly clear that they cannot hire new faculty members unless they meet ODEIB requirements. That is, the candidate has to be a woman, person of color, or have LGBTQ+ status.
Straight white males are “off the table.” Asians and those of South Asian (i.e., India) heritage are similarly disadvantaged in the process as they are deemed successful, overachieving minorities.
A number of the faculty bemoaned that in many cases they cannot hire the substantially more qualified person if he is a white or Asian straight male as the proposed candidate “has to be a woman or BIPOC person.” I was told that behind closed doors, it is common to hear: “I clearly don’t think this is the strongest candidate, but we can see where the train is headed. I therefore have no choice but to vote for the [lesser-qualified candidate.]”
It is made clear to the faculty that Harvard’s discriminatory approach to hiring should never be acknowledged or written about in an email. One professor said that he has been continually amazed that no one has brought a lawsuit as these practices are clearly illegal.
One faculty member explained that it is not just the administration that has been putting forth these requirements, but that external organizations like The Chronicle of Higher Education (TCHE) do “investigative reporting” where they do racial and gender audits of university departments. TCHE publicly scolds university departments that don’t meet their diversity requirements further reinforcing Harvard’s requirement for ODEIB-preferred candidates.
On all of the above issues, I know you will not rely on my survey of the faculty. I therefore encourage you to commission a highly credible, third-party firm to do an anonymous survey of the Harvard faculty. I am confident it will confirm and reinforce all that I have outlined above.
Discrimination at Harvard Is Not Limited to Antisemitism
The problems at Harvard are clearly not just about Jews and Israel. It is abundantly clear that straight white males are discriminated against in recruitment and advancement at Harvard. That is also apparently true to a somewhat lesser extent for men who are Asians or of Indian origin. The ODEIB is an important culprit in this discrimination on campus as it sees the world in a framework of oppressors and the oppressed, where the oppressor class includes white males, Asians, Jews and other people perceived to be successful and powerful.
While Harvard claims that it is committed to free expression, in practice free expression appears to only happen “behind closed doors” or among faculty and students speaking anonymously.
Conservative voices are squelched and often outright cancelled on campus. Tyler J. VanderWeele and Carole K. Hooven are two recent examples.
In March of this year, Mr. VanderWeele, the John L. Loeb and Frances Lehman Loeb Professor of Epidemiology, a practicing Catholic, was effectively excommunicated from Harvard (saved only by his tenure) when it was discovered he had signed an amicus brief in 2015 which affirmed his view that the definition of marriage was between a man and a woman, and when he surfaced his pro-life views. See: sciencedirect.com/science/articl
Earlier this year, Ms. Hooven, an evolutionary biologist was cancelled and eventually forced to resign because she stated that one’s sex was biological and binary on Fox and Friends. See: link.springer.com/article/10.100
I am saddened that the Harvard I love has lost its way. I am embarrassed for not having been aware and previously taken the time to investigate these issues until antisemitism exploded on campus. I should have paid more attention as it did not take a forensic analysis to surface and better understand these issues.
Discrimination at Harvard is not just illegal, but it is extremely damaging to our nation’s competitiveness, which is critically important in a world with growing geopolitical conflict and turmoil. Harvard should be an institution for our best and brightest, taught by our best and brightest who are in search of Veritas and excellence. Russia, China, and our other competitor nations are not selecting their scientific and educational leaders using Harvard’s diversity, equity and inclusion metrics.
President Gay, beginning with your testimony to Congress on Tuesday, you can begin to address the antisemitism that has exploded on campus during your presidency, the seeds for which began years before you became President. But as I hope you recognize, the issues at Harvard are much more expansive than antisemitism. Antisemitism is the canary in the coal mine for other discriminatory practices at Harvard.
As President you have both the opportunity and the responsibility for addressing these critically important issues. It won’t be easy for you as I have been told that your recent “pivot on antisemitism” is already making the radical left wing of the faculty highly skeptical of you.
When 34 Harvard student organizations came out in support of Hamas’ barbaric terrorism, it was a wake up call for me. I hope that having to face the Congress on Tuesday will be a wake-up call for you.
Sincerely, William A. Ackman, A.B. 1988, MBA 1992 Cc: Ms. Penny Pritzker, Chairman, and The Harvard Corporation Board
If you read Mr. Ackman’s tweet above, you will realize that the problems at Harvard, MIT, Penn & so many other universities go far beyond the explicit public hate we have all seen. The deeper problem is a new cancerous culture that has now pervaded to every educational decision Harvard & others take. Unless a serious purge is commenced to get back to a free & positive culture, mere replacement of 3 heads might remain optics.
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