Green Tuesday, Delta Economy, Policing Cryptos, Lockheed vs General Dynamics
I see a red door
And I want it painted black
I want them to turn black
– Paint it black, Jagger, Richard (The Rolling Stones), 1966
Every now and then, the human brain grabs “ugly”. Unwelcome. He is. Doing nothing is not an option. A noble warrior crumbles deep in the jungle. Semi conscious. Warm to the touch. Too hot. A little over three kilometers of help. Nine line? Medivac will take too long. Course. Run as fast as you can. You can do it. That’s why you train so hard. God is with you. Nice kid. He would do that for me. He would do that for any of us. Eight of you stay here, defensive perimeter. Keep the radio. You four with me. Three of us die with Jacques. Patrick on point. Luis in the rear. Let’s go. Hail Mary full of grace …
Three and a half decades later. Back to the moment. This moment. Let my heart rate slow down. Tuesday. Markets weakened just after the opening bell. It could get “ugly”. In the middle of the morning. The support rushes. Then more. Equity markets, at least at the large cap level, no … make all caps rally. The S&P 500 goes from -0.7% to + 0.6%. The S&P 500 and the Nasdaq Composite both find support close enough to their 21-day EMAs… which is where love has been found for two weeks now. Not as big as the 50-day SMA, but certainly a door that needs to open if that 50-day line is to come into play.
“It’s awesome.” I was taking profit at what appear to be highs for some Sarge favorites such as Advanced Micro Devices (AMD) and Walt Disney (DIS), not to mention a slew of material names that were underwater until recently. It’s haircut time. I have been added to United Parcel Service (UPS). I was relaunching a new feature at Abbott Labs (ABT). I thought about shaving Walmart (WMT), Target (TGT), Home Depot (HD) and that newly strengthened long position on Amazon (AMZN), and pulled my finger off the trigger. No, I will not sell anything from this basket.
The realization was that I was not alone. Traders across the stock market were doing what I was doing. Shave winners and replenish pandemic coins. Aside from energy trading high for its own bad reason, pharmaceuticals and biotechs have led the way. I really should never have sold my damn Moderna (MRNA). At least I held onto Pfizer (PFE), even stepped up that one.
Transaction volumes have increased. The scale was generally positive, but not as decisive as one might expect on such a green day. In fact, the losers were just ahead of the winners for those names listed by the Father Duffy statue (Times Square). Stocks listed closer to George Washington (Wall Street) performed better.
You already know it. The delta is spreading as we said. Delta does not discriminate by age as the previous variations did. We also knew that. Businesses are quickly preparing for a “continuous” economy. GDP estimates for the Chinese economy are small. Here, economic growth was already well below expectations. Fools behave as if the current spread will not change human behavior in the second half of the year. I think this virus, which clearly does not behave like all viruses known before, will force us to change our habits if we haven’t already. More permanent than temporary.
Municipalities are already taking steps to try to ensure that economic activity does not stop. Vaccine passports? Guarantees nothing beyond the fact that the guy eating next to you also doesn’t care beyond his own myopic world. This card that the CDC issued to you has two more points if you received the Pfizer or Moderna vaccine, three more if you received the Johnson & Johnson (JNJ) vaccine. You’re going to need those extra seats. You may need a second card. Anti-vaccines? Don’t complain. Not that this is all your doing. There are a lot of places on earth where vaccines are not yet readily available, so there would always have been mutations … but you have certainly contributed to the problem.
Everyone in the military stands in line and gets their flu shot every year. You do not have the choice. Some years it makes you sick for a day or two. The other years are fine … but entire units are never taken offline by the flu. It’s your life now. Because it is so difficult to vaccinate the world’s population on time, this virus will continue to make replication errors, creating mutations. Our messenger RNA vaccines (which are more easily adjustable than the old-fashioned vaccines, and therefore our best weapon in this fight) will have to keep pace. Over the next decade, we will sometimes have to hide ourselves and maintain a social distance.
The virus also has more power to control fiscal and monetary policy than data or any of our leaders individually. It is sad.
I couldn’t foresee this thing
It happens to you
You’ll have to…
Paint them black.
Field Marshal Matt Dillon
As a child, I always watched “Gunsmoke” with my dad. James Arness, before becoming a TV star, was seriously injured in Anzio. Not only was he a tough cowboy on the subway. He was an infantryman. He was the real thing. In our house, he walked on water. It was a very long time ago.
Dodge City has a new Marshall. His name is Gary Gensler, current chairman of the SEC. Gensler on Tuesday called on Congress to grant the SEC additional powers to control cryptocurrency trading and protect investors in what has become the “Wild West” of the financial market. I believe Gensler used the words … “fraud, scams and abuse”. It’s time for someone to take a serious look here. The bipartisan infrastructure bill aims to tax crypto transactions and catch tax evaders, but it arose more from looking under the cushions of the sofa in an attempt to fund this bill than from a need to protect those who might. need protection.
What we do know is that money is easily divisible. Fiat, precious metals, and cryptos are all divisible. Money serves as the unit of account. Fiat and even cryptos perform this function better than metals. Money serves as a store of value. Fiat and gold perform this function better than cryptos because cryptos are far too volatile on a daily basis. Money serves as a medium of exchange. Metals cannot effectively serve this purpose. Cryptos have not legitimately served this purpose.
To be fair, cryptos serve as a medium of exchange not for goods or legal services, but for drug dealers, terrorists, money launderers, cybercriminals, and tax evaders. The only legitimate goal I can think of for independent cryptocurrencies is speculation, and quite frankly speculators are in bed with the demand created by (say it with me) … drug dealers, terrorists, money launderers, cybercriminals and tax evaders.
There are cult members who will defend cryptos by pointing out that all of these harmful activities mentioned were already effectively served by fiat. This is indeed true, but unlike cryptocurrencies, you can use fiat to feed your family, and the money will be gone. You can count on that. Fiat will “switch to crypto” … so what? In fact, once the independent products created through blockchain technology are properly recognized as commodities and not as alternative currencies, then one could consider perhaps moving sovereign currencies away from the mainstream. “fiat” concept and to support them once again with something other than good faith. It is then that the cryptocurrencies will be ready for legitimate use and purpose.
The only thing is that at this point you won’t be referring to Bitcoin, or Dogecoin or Ripple or Ethereum. You will know them as the US, Canadian and Australian dollars, the British pound, the euro and the Japanese yen. Did you think central banks, treasury departments and regulators around the world would allow monetary decentralization that reduces national power to last for a very long time? This is so cute.
Anyone else notices …
… This 10-year Japanese paper was not traded on Tuesday. Oh … the market was open. There have been offers and offers. This was the first time that there had not been a single transaction for this product over a full day since … June. Apparently, when a secondary market comes down to a single dominant buyer and holder, there ends up being a lot less interest. Who knew?
One thing I did last night after closing was to leave Lockheed Martin (LMT) and move to General Dynamics (GD) at least until the dust settled. What dust? Glad you asked. Lockheed on Tuesday bought collective annuity contracts from Athene Holding (ATH) in order to transfer $ 4.9 billion in pension obligations (impacting 18,000 retirees). No additional funding will be required, which is a good thing from a business perspective. Lockheed also had to cut its EPS forecast for the entire year from $ 26.70 to $ 27.00 to $ 21.95 to $ 22.25. Wall Street was $ 26.95 on this metric. The forecast net sales of $ 67.3 billion to $ 68.7 billion and the operating cash flow forecast ($ 8.9 billion) were maintained.
Readers will note that LMT and GD are stuck in base models that date back to last spring after a nice price hike previously. The two, however, are in very different places in these models. As GD flirts with resistance in a breakout attempt, LMT is doing its own thing at the support level.
Nothing can happen here. Wall Street could yawn depending on how many fund managers saw it coming. In this case, I will go back. I love LMT. However, if this support for LMT were to end, I will not be the only one to have allocated these funds to other defense contractors. It’s just risk management, gang … not a long term investment decision.
Economy (All Eastern hours)
8:15 am – ADP employment report (July): Expecting 687K, last 692K.
09:45 – Markit Services PMI (rev-July): Flashed 59.8.
10:00 am – ISM non-manufacturing index (February): Pending 60.4, Last 60.1.
10:30 am – Oil inventories (weekly): Last -4.089M.
10:30 am – Gasoline stocks (weekly): Last -2.253M.
10:30 am – Natural gas inventories (weekly): Last -86B cf.
The Fed (All Eastern hours)
10:00 am – Speaker: Federal Reserve vice President Richard Clarida.
Highlights of today’s earnings (Consensus expectations for BPA)
Before opening: (CVS) (2.07), (KHC) (0.72), (RCL) (-4.38), (SMG) (3.52)
After closing: (EA) (0.64), (MCK) (4.10), (MGM) (-0.37), (QRVO) (2.45), (ROKU) (0.14), (UBER) (-0.32), (WDC) (1.50)
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