Have you noticed that store shelves are starting to get emptier and emptier? During the panic shopping that was sparked by the start of the COVID pandemic in 2020, there were very intense shortages of certain items, but those shortages did not last very long at all. But now there are widespread shortages in just about every sector of our economy, and they are starting to become quite painful. Unfortunately, we are being told to expect the shortages to intensify as we head into the holiday season. That is extremely alarming, because in many areas the shortages are already quite severe.
I had been away from the news for a couple of days, and when I came back there were lots more stories about our ongoing shortages. For example, the following comes from an excellent piece by Matt Stoller…
There are shortages in everything from ocean shipping containers to chlorine tablets to railroad capacity to black pipe (the piping that houses wires inside buildings) to spicy chicken breasts to specialized plastic bags necessary for making vaccines. Moreover, prices for all sorts of items, from housing to food, are changing in weird ways. Beef, for instance, is at near record highs for consumers, but cattle ranchers are getting paid much less than they used to for their cows.
In my entire life, I have never seen anything like this.
Even the Federal Reserve is admitting that we have a major problem at this point. In fact, in the latest Beige Book the Fed referred to the shortages a whopping 80 times.
In certain parts of the country, these shortages are really beginning to sting. A reader just emailed me about what is going on in his section of Connecticut, and he said that I could share this with all of you…
I am just a regular guy in Connecticut, who has been watching things very closely, especially from a Biblical perspective. I wanted to quickly share with you an experience my wife and I had about two weeks ago at a medium-size, family run grocery store near Waterbury, CT.
Seemingly overnight, we noticed there were little yellow signs on the shelves, where certain SKUs used to be. Not entire lines, but individual SKUs. For example, a flavor of oatmeal, certain cereals, etc. The signs said something to the effect of: “This item is no longer available due to supply chain constraints”. I would say there were a few hundred signs in total throughout the store. It wasn’t until we got to the juice/water aisle that we noticed the larger problem: there was no Gatorade (?) and no bottled water (gallon jugs).
I have befriended the manager over the years, so I asked him where the water is, and he told me “…they only will give us so many bottles”. I asked who ‘they’ is, and he said the manufacturer: they were being rationed. As he said this, a truck driver happened to walk by and joined in on the conversation. He told us that he just got back from Maine, after a three-day trip- a trip that normally takes him a few hours. He said he, and all of the other truck drivers, sit at the warehouses for days, waiting for their trucks to be filled. To be clear, I asked him how long it normally takes, and he said a few hours at the most.
On our way out, I remembered that we needed dog food, so we went to the pet aisle, and there was no cat litter, and no dog food, save a few little bags of the cheapest stuff. All of the things Steve Quayle has been saying about food and water shortages suddenly became reality. I always believed him, but now I was seeing it, at the very local level.
We then decided to go to PetSmart to get the dog food. Empty. The entire dog food shelf was empty except for a few bags!
Are similar things happening in your part of the country?
If so, please feel free to email me and let me know.
We need to share intel with one another, because the mainstream media is not telling us the truth.
Of course the shortages would not be as severe if we could actually unload all of the container ships that are backlogged at our ports. Right now, dozens of container ships are sitting along the west coast waiting to be unloaded…
The number of container ships at anchor or drifting in San Pedro Bay off the ports of Los Angeles and Long Beach has blown through all previous records.
The latest peak: There were an all-time-high 73 container ships in the queue in San Pedro Bay on Sunday, according to the Marine Exchange of Southern California (the tally inched back to 69 on Tuesday). Of the ships offshore Sunday, 36 were forced to drift because anchorages were full.
Theoretically, the numbers — already surreally high — could go even higher than this. While designated anchorages are limited, the space for ships to safely drift offshore is not.
This is the same problem that I talked about the other day.
At one time we had more able-bodied workers than we knew what to do with, but now there is an extreme shortage of workers all over the globe.
Sadly, it has gotten to a point where we don’t even have enough people to drive our kids to school…
School districts around the country are struggling to fill thousands of bus driver positions as worker shortages lead to late arrivals and last-minute scrambles to bring retired workers back onto payrolls.
The shortages are so bad in some places that districts are taking extraordinary steps to get kids to school as students return to in-person classes this fall. Philadelphia’s school district will pay families $300 a month, or $3,000 for the year, to opt out of transportation services and get their kids to school on their own. Albemarle County Public Schools in Virginia is offering a $2,500 bonus to new drivers — $100 more than the school district in the county seat, Charlottesville, is offering.
This is the worst labor shortage that the U.S. has ever faced, and it just keeps getting worse.
So where did all the people go?
Without enough able-bodied workers, our economy is experiencing a whole host of difficulties right now. And when you consider everything else that has been going on, it shouldn’t be a surprise that Joe Biden’s approval rating just sunk to a new record low…
Eight months after President Joe Biden’s inauguration, his job approval rating has fallen six percentage points to 43%, the lowest of his presidency. For the first time, a majority, 53%, now disapproves of Biden’s performance.
These findings are from a Sept. 1-17 Gallup poll that was conducted after the U.S. military evacuated more than 120,000 people from Afghanistan. The United States’ exit from the nation’s longest war was marred by the Taliban’s quick takeover of most of the country and a suicide bombing at the airport in Kabul, which killed 13 U.S. service members. Over the same period, COVID-19 infection rates, nationally, were surging, leading to hospital overflows in some regions.
And there are some parts of the nation where his approval rating is absolutely disastrous. Just check out the latest numbers from Iowa…
Just 31% of Iowans approved of how Joe Biden is handling his duties as president while a whopping 62% disapprove. Biden’s disapproval number is below the lowest ever measured by ace pollster J. Ann Selzer for former presidents Donald Trump (35%) and Barack Obama (36%).
“This is a bad poll for Joe Biden, and it’s playing out in everything that he touches right now,” Selzer told the Des Moines Register.
Less than a year ago, a lot of Americans were viewing Biden as some sort of a “savior” figure.
That didn’t exactly work out, did it?
Many of us have been warning that shortages and high levels of inflation were coming for a very long time, but of course most of the population is not interested in such warnings.
They just want to be told that everything is going to be okay.
But the truth is that everything is not going to be okay, and the pain that we have experienced so far is just the beginning.
* * *
S&P 500, Nasdaq rise on tech gains, Dow slips
The S P 500 and tech-savvy Nasdaq closed higher on Monday October 18 bolstered by gains in technology stocks and upbeat corporate earnings The S P…
The S&P 500 and tech-savvy Nasdaq closed higher on Monday, October 18, bolstered by gains in technology stocks and upbeat corporate earnings.
The S&P 500 was up 0.34% to 4,486.46. The Dow Jones fell 0.10% to 35,258.61. The NASDAQ Composite rose 0.84% to 15,021.81, and the small-cap Russell 2000 was up 0.10% to 2,267.84.
Dow Jones retreated on mixed global cues. New data showed that China's economy grew at its slowest pace in a year, rising by 4.9% YoY in the third quarter from a 7.9% jump in the previous quarter year-over-year. Analysts said power shortage, supply concerns, and upheavals in the property market slowed the growth rate.
Market participants would be closely watching the quarterly earnings of big companies due to report this week. Overall, markets were upbeat after the better-than-expected quarterly results of major financial companies in the previous week. Analysts now expect around a 32% jump in earnings of the S&P 500 companies in the latest quarter, Refinitiv data showed.
Consumer discretionary and technology stocks led gains in the S&P 500 index on Monday. Utilities and healthcare sectors were the bottom movers. However, only four of the 11 critical stock segments of the index stayed in the positive territory.
Stocks of State Street Corporation (STT) jumped 2.48% after reporting strong quarterly results on Monday before the opening bell. Its total revenue was up 7.4% YoY to US$2.99 billion, while its net income surged 29% YoY to US$714 million in Q3, FY21.
Shares of Albertsons Companies, Inc. (ACI) was up 3.89% in intraday trading after it increased the dividend amount following its quarterly results. Its net sales and other revenue were US$16.50 billion, while the net income was US$295.2 million in Q2, FY21.
The Walt Disney Company (DIS) stock declined 3.34% after analysts downgraded it to "equal weight" from "overweight."
Dynavax Technologies Corporation (DVAX) stock was up 1.53% after Valneva SE reported positive results from its Phase 3 trial for a Covid vaccine candidate using its ingredients.
In the consumer discretionary sector, Home Depot, Inc. (HD) gained 1.31%, Lowe's Companies, Inc. (LOW) rose 1.18%, and Starbucks Corp (SBUX) rose 1.77%. Target Corp (TGT) and Chipotle Mexican Grill, Inc. (CMG) rose 2.76% and 1.58%, respectively.
In technology stocks, Apple Inc. (AAPL) rose 1.21%, NVIDIA Corporation (NVDA) gained 1.83%, and Adobe Inc. (ADBE) rose 1.81%. Oracle Corporation (ORCL) and Advanced Micro Devices Inc. (AMD) rallied 1.14% and 4.03%, respectively.
In the utility sector, The Southern Company (SO) fell 1.07%, Dominion Energy, Inc. (D) declined 1.31%, and XCEL Energy Inc. (XEL) decreased by 1.77%. In addition, WEC Energy Group, Inc. (WEC) and FirstEnergy Corp. (FE) plummeted 1.03% and 1.30%, respectively.
Futures & Commodities
Gold futures were down 0.21% to US$1,764.65 per ounce. Silver decreased by 0.48% to US$23.238 per ounce, while copper fell 0.33% to US$4.7138.
Brent oil futures decreased by 0.93% to US$84.07 per barrel and WTI crude was down 0.28% to US$81.50.
The 30-year Treasury bond yields was down 1.04% to 2.029, while the 10-year bond yields rose 1.20% to 1.595.
US Dollar Futures Index increased by 0.02% to US$93.960.dollar gold silver commodities markets us dollar
Happy Anniversary ’87 Crash!
“There is nothing more
powerful than a market that has changed its mind.” – Art CashinOn the eve of the 34th Anniversary of the ’87 Crash
“There is nothing more powerful than a market that has changed its mind.” – Art Cashin
On the eve of the 34th Anniversary of the ’87 Crash let’s put things in perspective. For those who may be unaware, on October 19, 1987 the market suffered its largest single one-day percentage loss (22.6% for DJIA & 20.5% for S&P 500). It was a day that changed the market forever.
The quotation above is from this morning’s market commentary from the venerable Art Cashin. With his usual wit and wisdom Art vividly captured what led to the infamous Black Monday and how the “Plunge Protection Team” (PPT) rescued the market the next day.
As you can see in the chart here, the PPT was able to stop the plunge but market volatility continued for the remainder of 1987 – and into early 1988. In a year like 2021 with S&P 500 up 20.8% year-to-date on September 2 before correcting about 5% “Octoberphobia” invokes fears of crashes and big selloffs. While some continuing volatility and weakness is to be expected for the remainder of October what happened in 1987 is not likely to happen in October 2021.
First off the market had been on a tear for three years off the July 1984 low and DJIA was up 43.6% YTD on August 25, 1987 – a far cry from the 20.8% this year. This year’s May-September rally of 11.7% pales in comparison to the 21% jump from May-August 1987. Yes the market has roughly doubled from the March 2020 Covid low, but the overvaluations, interest rate and geopolitical scenario is nowhere near as precarious today as it was in 1987.
And furthermore after the 1987 Crash regulators added varying levels of circuit breakers that will stop trading and close the market if necessary so that the market is not allowed to drop that much in one day any longer. And the PPT has evolved to be even more powerful.
But as Art states above the market is powerful force that will push those circuit breakers to their limits as it did when Covid hit in March 2020, the “flash crash” in May 2010 and when the bailout plan was rejected in October 2008.
Rising headline inflation, surging energy costs and persistent supply chain disruptions have the potential to temper equity market gains here in the near term. And the Fed has accelerated its projected timetable for interest rate increases. The Fed is also expected to announce that they will begin tapering bond purchases in the fourth quarter. We anticipate the Fed will move gradually which will still be a positive for the market.
Next year is likely to be less bullish as the midterm elections tend to make the market more vulnerable to economic, monetary, fundamental and geopolitical headwinds, but for now the strong seasonal tailwinds are like to lift the market into early to mid-2022. On October 8, we issued our Seasonal MACD Buy Signal for DJIA, S&P 500 and NASDAQ.inflation monetary fed crash
Central Banks Will Have To “Pick Their Poison”
Central Banks Will Have To "Pick Their Poison"
Earlier today we pointed out the fireworks taking place in the gilt short-end, where 2Y yields…
Earlier today we pointed out the fireworks taking place in the gilt short-end, where 2Y yields surged by the most since 2010, spiking by as much as 17bps to 0.75% while GPB 3M libor soared the most since the Lehman failure.
The sharp move followed the latest weeked comments from BOE Governor Bailey (the Bank of England seems to be using the weekends of late to prime the markets for imminent rate hikes as DB's Jim Reid noted) who said inflation “will last longer and it will of course get into the annual numbers for longer as a consequence… That raises for central banks the fear and concern of embedded expectations. That’s why we, at the Bank of England have signalled, and this is another signal, that we will have to act. But of course that action comes in our monetary policy meetings.”
So going back to Deutsche Bank, chief credit strategist Jim Reid wrote that "the Bank of England might be the most interesting developed market central bank at the moment" as this morning we are pricing in around 35bps of hikes this year followed by nearly another 80bps next year. This takes place as respondents to DB's latest monthly survey think they’ll be making a policy error with 45% thinking they are risking being too hawkish versus 20% who thought they might be too dovish, 20% thinking they’d get it about right and 16% not sure.
This, to Reid, highlights how difficult the current set up is where inflation is rising but the growth outlook is murky, especially since there are valid arguments on both sides of the interest rate ledger. Incidentally the risk of a policy error was seen as the other way round for the Fed and ECB in the survey (i.e. too dovish).
Summarizing the dilemma facing the BOE, Reid writes that perhaps ex-Governor Mervyn King’s assertion in 2008 that the NICE (non-inflationary consistently expansionary) era was over was a decade or so too early: "maybe it better fits the current environment. If inflation is stubbornly higher in an era of relatively low structural growth and high debt then life as a central banker becomes the most difficult it’s been for at least 40 years." The bottom line - all else equal - is that central bankers can’t solve for all three and "will have to pick your poison."
So will market pricing materialize?
Well, the silver lining for the BOE, and as shown in the Reid Chart Of The Day below, is that since the GFC, UK futures markets have been repeatedly too hawkish in their expectations. So if traders believe that the post GFC regime survives "then there is every chance that the BoE will have to stop or reverse course before these futures market levels are realized. However if you think something has changed regarding inflation then these forecasts are hardly excessive."
Finally some context: "the BoE has been around since 1694 and base rates were never below 2% in the 314 years before the GFC."
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