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February 2021

Despite Wall Street Hype, Inflation is Not Imminent

Retail sales rose a record 5.3% M/M in January after three months in a row of decline.  No doubt the $600 checks from the late December “helicopter” money drop played a large role.  The Atlanta Fed now says that their GDP model pegs the current quarter’s growth at +9.5% (Annual Rate (AR)).  In addition, Industrial Production was up nearly 1% (0.9%) in January.  So, why worry?  Infections and hospitalizations are …Read More

Markets Are Bubbly – The Economy, Not So Much

Not a Bubble?  The equity markets have been driven by momentum and speculation these past few weeks, not by underlying business fundamentals.  We had GameStop, followed by Silver, then Pot stocks, and now SPACs, all driven by retail.  PE ratios are in the top 1% of their historical range.  Junk bond yields are at all-time-record low levels (sub 4%).  In January, the worst stocks based on business fundamentals, significantly outperformed …Read More

The Economy: Damaged Labor Markets; An Inflation Head Fake

On Friday, February 5, markets were set to rise no matter what the employment data showed.  If they beat to the upside, that would validate the reflation/pent-up demand narrative.  If they disappointed, well, that would simply mean more fiscal and monetary largesse (which financial markets love).  Either way, heads markets rise; tails, ditto. Labor Market Signals: Positive, Negative and Mixed As it turns out, there was validation for every viewpoint …Read More

Bubble Markets Display Bizarre Behavior

Right Before They Tumble Like the Dot.Com bubble of the late ‘90s, the typical signs of an approaching bubble bust were on full display in the equity markets last week (week ending January 29th).   GameStop (GME) and other failing or troubled companies (AMC, Blackberry, Nokia, Bed Bath) have become the darlings of the WallStreetBets (WSB) crowd (a gang of small retail investors tethered together via social media).  Last week, they …Read More