E Merry Month Of May

Today the unhinged markets of Monday went into normal mode as the rest of the world's markets re-opened. And then some panic arose because we are in the Merry Month of May, during which smart money is supposed to sell and go away. This is a reliance of the pre-air conditioner age when Wall Street biggies got away from the hot city to travel to Europe or jump on their yachts in Newport, RI and left trading to coolies and underlings.

In fact, it has not been the dominant behavior pattern in my lifetime, because there was a way of cooling brokerage offices.

Photo by Annie Spratt on Unsplash

But when markets are over-heated, like our US markets now is, the old adage comes into play, especially if there is a guru holding forth. Today there are two, first economist Mohammed El Erian, who published a signed editorial in today's Financial Times warning that “the Fed's framework puts recovery at risk” in which he essentially attacked the US central bank's taste for permitting inflation, and for fostering higher corporate tax plans from the Pres. Biden.

The second guru was Janet Yellen, now US Treasury Secretary, but a former Fed board member, who in an interview with The Atlantic said that interest rates may need to rise, This after she mostly warned about deflation rather than inflation earlier. With a rate hike it will become harder for borrowers to raise funds also putting the recovery at risk. This reminded people of the last round of “taper tantums”.

The impact was to chop the indexes, the DJIA by 0.7%; the S&P 500 by 1%, the Nasdaq by 2.03%. Luckily our more global holdings were less affected. But there were some horror stories.

*Nutrien, the Canadian global seed, and fertilizer vendor, reported sales up to C$4.66 bn, nicely up from the consensus forecasts of C$3.99 bn at record levels. Moreover, while its eps met the forecasts but did not beat at 29¢/sh and earnings before interest, taxes, depreciation, and amortization (EBITDA) was $806 mn, NTR also upped its forecasts for the rest of the year, largely because of growing demand south of the border in the USA, and now expects to sell more crop inputs this spring and for the full year, because crop prices and cash margins are so high, so more acres are being seeded. EBITDA per US retail outlets hit 11%, another record. Despite a strong loonie, potash EBITDA rose 33% in US outlets and nitrogen by 27%. NTR reports in International Financial Reporting Standard, why I am not converting to US$s.

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