Market Briefing For Thursday, Aug. 5
Turmoil and speculation about everything from the Fed (eventual) moves, to MEME stocks (absurdly trying to include AMD in that category, which does not make sense, though if it wants to zoom even higher, trimming a bit might be needed, although we'll continue to reserve judgement on taking profits for this one), to of course whether COVID / Delta will restrain the economy (yes).
Some traders are on a tear to run stocks insanely higher, whereas what we're thinking about in terms of shakeout for S&P and NDX over these months just ahead is a 'reversion to the mean', neither euphoria nor catastrophe (SPX, NDX).
I'll not 'sink my teeth' into the backdrop as you already know we avoiding short side activity, all along since nailing the bottom in March of last year. What will happen 'if' we can get a meaningful S&P break, will be like 'filling a cavity' in a tooth without other issues. Once repaired, your 'bite' will be 'as if' the hole was never there. Hence with so many stocks down aside the big leaders, I remain optimistic that after correction, we shall see more of the 'Roaring '20's'.
The Tesla (TSLA) and other lithium-ion battery issue I mentioned the other day was this fire, very hard to extinguish. Perhaps 'hybrids' aren't such a bad idea for now, although autos & power-generator industry are speeding to full-'lectric.
Timing of a shakeout is odd, because we should be there essentially now. It's 'odd' because internally the market has experienced rotating 2021 corrections essentially all year, and too many presumed-technical-types think 'the market' is at a record, when it's (granted there are a few beyond FANG+) momentum leaders that did the heavy lifting, thus generally are the 'un-corrected' variety.
That matters because the hedge funds (more so than patient mutual funds by the way, in some cases whereas other funds do incredible volume turnover) at this point are overly-concentrated in that handful of heavy-lifters I've noted. It's as if they were at the gym consuming proteins and amino acid drinks to boost their energy levels. But guess what? After the buzz generated for a 'workout', muscles want to relax so you tend to unwind. Stocks too: reversion soon.
In-sum:
There are pundits trying to get a clear read on the economy or stocks. The reality is it can't be finessed at the moment. Focusing on GM's demand is not the answer (sales are high, problems exist), Semiconductor demand has been hobbled by fires, floods, COVID and .. demand. Seriously, all of those (GM).
So drops in certain stocks 'now' don't reveal much about the future, however I think they have to be respected at least with an 'eye' on the exits if needed. I'd like to point out that when stocks ignore good news it's often a warning, but I'll exempt the typical good news selling on favorable earnings reports. There still is not a consensus on how heavily COVID / Delta will impact 'actual' earnings it seems, partially because there's understandable resistance among citizenry to contemplate again limiting 'outings', travel or even cruises.
These won't be shutdown presumably, but they will become less 'inviting' with restrictions, so that's going to limit improved profitability. So Royal Caribbean (RCL) wants 100% ship load factors (who doesn't in the industry). They're not going to get it, and of course if one ship has numerous cases (not positive but sick), shares won't drop to the degree I predicted when I called COVID 'WuFlu' early in 2020, but they will be hit. Most such stocks remain off their rebound highs.
We're just focused on a delay in some of the economic revival forthcoming as schools start, parents freak (understandably) as kids go to school with unclear direction as to defending against the virus, and still envision upside that I term 'The Roaring 20's' of this generation, the first part of which is behind.
Disclosure: This is an excerpt from Gene Inger's Daily Briefing, which is distributed nightly and typically includes one or two videos as well as charts and analyses. You can subscribe ...
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One thing about the integrated circuit (IC Chips) industry is that the production equipment is constantly changing, and always very expensive. In addition, setup time for a production line is long and tedious. Thus a full-speed rush to build additional production might take most of a year. That, coupled with another wave of production lines becoming a bit obsolete at the time when demand was projected to drop, all lead to a lack of production capability that would satisfy the sudden demands.
If there had been a bit more wisdom available then perhaps production capability in the "not quite bleeding edge" technology might have been easily able to produce the parts that were a bit bigger and a previous generation, but still totally adequate for the tasks. Amazing how clear hindsight can be sometimes.
Quite an interesting article.And certainly an "average" that includes a few exceptions is not as informative as would be useful.
And what will that latest version of the WuFlu bring? We can't even guess.
But here is a scary question: What if a significant portion of the world population DOES die?? Say 10% or even 20%???? What effect would that have on the rest?? Has anybody stopped to think about that, even?? Probably it would affect "the market," don't you think??
I have reflected on the 'genocide' concept; as well as the CCP 'possibly' trying to demoralize the American people with this virus.... if it were used in a biowar not inadvertently released. However the outcome can be the same; hence we are in a biowar with the CCP and I emphasize the CCP since the Chinese people also are in the sights of their leadership's 'weapon'. Ideally this would threaten the CCP itself; along with their crackdown on fintech and so on. I'm limiting further comments on this website since there's a rumor I'd like to be compensated at least a bit for my work :). All the best and thanks for commenting; I'll have more comments soon if the virus doesn't do us all in (it almost got me early this year).