Covid concerns are being 'cited' by skeptical analysts as behind shakiness in the market; although a) they are often dismissive of longer-range concerns (a consideration I sort of agree with; but not until we see how upcoming Covid pills do in-use), and b) I've forewarned Covid resurgence was more than un-vaccinated concerns; hence the urgent pressures for booster shots and so on.

Also markets aren't really spooked by a choice of retaining Powell or bringing Brainard to the Chair of the Fed. It's politically a talking-point but we're looking at 'degrees of dovishness' or 'degrees' of trepidation. Market reactions on real firming will be likely; concentrated in over-owned overextended mega-caps. It is already being felt a bit; but it represses the smaller stocks a bit also, even if they are the ones with better proportional growth prospects for 2022.

Executive summary:

• There are many possibilities remaining up-in-the-air about 2022; and it's by no means clear for any analyst or technician to yet ascertain, beyond a realization that the charts reflect the frustration about how the pandemic influences not just growth; but monetary-policy-shift risk in 2022, as Fed one way or another finally departs from 'emergency' liquidity (after many got obviously spoiled by expansive policies postponing ending the party);

• Friday's most notable 'little reported story' was an interview with Christine Lagarde, saying ECB doesn't yet-envision a rate hike in the coming year;

• The ECB normally doesn't deviate much from Fed policy (they converse frequently); so Christine's remark tells you that Powell is also dovish from a standpoint of doing anything to impede growth in the months ahead;

• Counterpoint: Fed Vice Chairman Clarida suggested growth is so fast (is it?) that the Fed might have to move 'tapering' along faster (may meant to say 'inflation' is moving along so fast);

• Oil dropped as suspected likely this week; and that takes the edge off of the inflationary pressures, at least to a degree; however I suspect Oil will rebound in the week coming up (not just because of the Middle East);

• On Saturday rebels in Yemen claim to have launched 14 'attack drones' at Oil facilities in Saudi Arabia; asked about it, Riyahd won't respond 'yet';

• In Southern Europe; U.S. is delivering 2 more 'coastal patrol boats' to the Ukrainian Navy; a freighter carrying them traverses Dardanelles today;

• Covid vaccine 'boosters' were recommended by CDC 'Advisors' Friday, for all adults (we're more interested in the upcoming 'pills'); we've known for months that there was waning of vaccine efficacy; breakthrough cases provided evidence for this urgency; but even that shouldn't be surprising;

• This goes back to July, when the mass-spread occurred in Provincetown; and virtually all visitors and residents had been fully vaccinated before; it seems that the current frenetic effort is actually tardy considering (and the waning of vaccines occurred faster; so the general regimen wasn't best;

• Dr. Fauci on the 'weekend news shows' will say 'boosters' will become a part of the standard preventative (he uses that word in-lieu of protective, against severe disease, not basic infection) as a regimen starting now;

• Speculation suggests a half million or more 'additional deaths' in Eastern Europe during the coming Winter; so that's a catastrophe that could have been averted too; in-part by using Western vaccines; by common sense; and not Russia's Sputnik V vaccine, which many countries used;

• Closer to home note that Sputnik and China's Sinovac were used heavily in Cuba, Mexico, Venezuela; somewhat in Brazil; until they prohibited it; there are others too (like sad Nicaragua), but I'll not try constructing a list; for now Americans continue heading to Mexican resorts in droves; and then cross their fingers they test negative before flying home to the USA;

• So, upward pressure on short-term interest rates should return after the sharper move and ensuing setback; inflation will remain, Covid or not; it's just the 'pace' of price gains that's debatable and sensitive to Oil too;

• Markets are likely to continue these divergent patterns at the new week's start; and usually the market is 'flattish' ahead of Thanksgiving itself.

On Covid; you've heard about 'lockdowns' here and there; while pundits tend to minimize the significance, because the Covid 'Pills' are coming. They are; and it can't be fast enough. But probably not in time for Christmas; generally. At best, Pfizer's twin-pills cocktail will roll-out in about 3-4 weeks.

In-sum: there are similarities to what the old Fed said in my early years when Arthur Burns was running the 'show'; and he spoke of higher rates being as in a 'transitional mode' to combat inflation. So what we hear as the Fed begins a 'tapering', isn't entirely new. We worry about high valuations; high inflation; the concurrent low valuations in the depressed stocks; and hence bifurcation.

Yes we expect a correction as some point in 2022; but not on 'day one'. Might have an issue late in January or early February; but stay tuned on that. As for the moment, rotating moves are hard to assess because tax activities include both tax selling for gains, not just losses; depending on the stock or holder as they view the prospect of different rates in the coming year.

The week's most profound comment may be attributed to elder statesman Dr. Henry Kissinger (who really is the single individual who opened China back in the 1970's with correct assumptions they would replicate capitalism; but not in terms of how establish wealth would press freedom or overthrow the CCP; a never-spoken but understood assumption). At a Singapore conference he said "we must never become subservient to China".

The defensive rotation continues; with seasonally mixed (but fairly normal by the way) behavior, with monetary policies and Covid concerns thrown in too. New 'record' for the Nasdaq; broad market softer on lighter volume shuffle.

Most professional managers are not engaged in any broad-scale liquidations; at the same time you have Oil hit this week, which eases some inflation fears. This is temporary and partially related to Covid-lockdown demand reductions, especially in China and parts of Europe. The 'structurally-favorable backdrop remains favorable for Oil on a longer-term basis; we expected this retreat. As discussed earlier in this Briefing, I'm expected a rebound in WTI next week.

Energy in general, Oil in particular, will remain attractive into 2022. A political campaign against fossil fuels has contributed to Oil companies more inclined to return capital to investors (and pay dividends) than expand any new drilling activities. That in-itself creates a floor under prices for the foreseeable future; and while it does limit how much the pace of inflation will contract; it's realistic in our view (and we continue to hold stocks like Chevron and Oil itself).

Even metals were boring (Gold defensive after a reasonable bounce lately); at the same time Bitcoin broke (as a preferred pattern to evolve) yesterday, and could barely stabilize on Friday. Interest rates are low; central banks are doing little around the world; and Gold & Silver might surprise and do better than crypto speculation; which isn't something many are considering.

I realize metals are quite slow normally to be of interest, other than to those seriously expecting some calamity near-term, which really isn't the case now; unlike my thoughts many years ago which got me tagged 'top-timer' in Gold (I was shocked by that; I did nothing but hold it in the Letter for a couple years; I did actually play Silver back then and the percentage gain was greater); but at the risk of missing the next Armageddon; it's not quite on the calendar.

Absolutely concur; at the margin noting we already did that by outsourcing for the last 40 years far more than what he intended to be 'the plan'. What really might be implied: how we must recapture our dignity or self-reliance (ie: core manufacturing that has a clear National Security implication, and that includes certain semiconductors). The growing committments and 'fab' building in the USA is part of this, and helps those involved in that part, like AEHR but also it is good for the chip makers themselves (like AMD / INTC / TXN), longer-term.