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Market Futures Sink As Oil Breaks Above $80

This morning market futures are pointing lower as oil breaks above $80 and bond yields rise. Furthermore, investors need to fasten their seat belts, for a busy week full of economic data, Fed minutes, and corporate earnings. The market gets a rest from…

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This morning market futures are pointing lower as oil breaks above $80 and bond yields rise. Furthermore, investors need to fasten their seat belts, for a busy week full of economic data, Fed minutes, and corporate earnings. The market gets a rest from data today due to the Columbus day holiday. Between CPI, PPI, Retail Sales, and JOLTs, all set for release this week, the Fed will have a new round of data to guide their tapering decision. Expect more tug of war in the markets as investors deal with new data.

What To Watch Today

Economy

  • No notable reports scheduled for release

Earnings

  • No notable reports scheduled for release

Politics

  • The U.S. House of Representatives and Senate are both out of session until Oct. 18.
  • The World Bank Group and the International Monetary Fund (IMF) kick off their annual meetings in Washington D.C. They will release the World Economic Outlook tomorrow morning.

Courtesy of Yahoo

Oil Breaks Above Key Resistance

This morning oil futures are pointing significantly higher with oil breaking above key resistance levels going back to 2009. While oil is very overbought, and a very overcrowded trade, at the moment, such does not mean prices can’t surge higher given the bottlenecks in the system. There is a good bit of overhead resistance as oil prices move into the $90-$100 range, and the bigger issue becomes the inflationary backlash of higher prices on consumption and economic growth.

Stock Futures Are Lower To Start The Week

“Stock futures were slightly lower on Monday to start the week as traders eyed surging energy prices and the start of earnings season around the corner.

Dow Jones Industrial average futures fell 107 points, 0.3%. S&P 500 futures lost 0.5% and Nasdaq 100 futures shed 0.7%. The Dow is coming off its best week since June.” – CNBC

As noted in “Is The Great Bear Market Of 2021 Over?” We need to see some follow through buying this week in markets to confirm the break above resistance last week. If we fall back below the 100-dma, stocks will retest recent lows. The risk is that continued failures to advance will lead to a break of support and a deeper correction will ensue.

Great Bear Market 10-08-21, Is The Great “Bear Market” Of 2021 Finally Over? 10-08-21

GDP Revised Down As Expected.

Futures also took a hit as Goldman Sachs cut its economic growth forecast. Goldman cut its 2022 growth estimate to 4% from 4.4% and took its 2021 estimate down a tick to 5.6% from 5.7%. The firm cited the expiration of fiscal support from Congress and a slower-than-expected recovery consumer spending, specifically services.” – CNBC

Such is not a surprise and is a function of the “second derivative” effect we have discussed since the beginning of this year.

In Q2 of this year, G.D.P. estimates started that quarter at 13.5% and ended at 6.5%. The third quarter started at 6% and is now tracking at 1.3%, as shown below.

As we discussed in “The Coming Reversion To The Mean,” the “second derivative” effect of economic growth is manifesting itself. To wit:

“We are at that point in the recovery cycle. Over the next few quarters, the year-over-year comparisons will become much more challenging. Q2-2021 will likely mark the peak of the economic recovery.09/24/21

Reversion Economic Growth, The Coming “Reversion To The Mean” Of Economic Growth

When writing that blog, our estimates were for a cut in growth to 3.9%. We are currently closer to 1%.

Secondly, fourth-quarter growth will also remain under significant pressure for several reasons:

  1. Year-over-year comparisions remain challenging.
  2. Manufacturing surveys look to slow in a challenging enviroment.
  3. Employment continues to quickly revert to long-term norms.
  4. Liquidity continues to turn negative.

The last point is the most problematic. The massive surge in economic growth in 2020 was a direct function of the massive direct fiscal injections into households. With that support gone, economic growth will revert to normality, particularly in an environment where wage growth does not keep up with inflation.

Payrolls Report

The BLS Jobs report was weaker than expected, with job growth of 194k. Expectations were for a gain of between 475k and 500k jobs. The BLS revised the prior month higher to 366k from 235k. The unemployment rate did fall from 5.1 to 4.8%, however, it was in part due to people dropping out of the workforce. 183k people left the workforce causing the participation rate to fall from 61.7 to 61.6%. With the number of job openings so high and jobless benefits ending we find it surprising people are leaving the workforce. Also interesting was temporary help fell slightly. With so many job openings one would expect many companies to hire temporary workers to fill gaps until they can hire permanent workers. The graph below from True Insights shows payroll growth is starting to fall back in line with pre-pandemic rates of 150-200k per month.

The Danger of Fighting the “Last War”

Bill Dudley, President of the New York Fed from 2009 to 2018, in a Bloomberg editorial, voices concern the Fed is too worried about deflation, or as he says, the “last war.”  He argues the Fed should be concerned inflationary pressures are more than transitory. He prefers the Fed take on a more hawkish tack sooner rather than later. Per Dudley:

This dovishness increases the risk of a major policy error. If the economic outlook evolves in unexpected ways, Fed officials will almost certainly be slow to respond. Hence, if inflation proves more persistent than anticipated and even accelerates as the economy pushes beyond full employment, they’ll have to tighten much more aggressively than they expect.

A faster pace of tightening would come as a shock for financial markets and could risk tipping the economy back into recession. That’s the danger of fighting the wrong war.

Oil Prices and Rig Counts

The graph below compares oil prices to rig counts. After falling to recent lows, rig counts are rising. However, they are still well less than should be expected given current oil prices. Why are oil producers not adding rigs and producing more oil to take advantage of higher prices? There are a few reasons.

First, OPEC is increasing production and will get more aggressive if prices keep rising. Second, oil producers realize the current economic boom and spike in economic activity, and demand for oil is temporary. It is the result of short-term fiscal stimulus and economic normalization. Lastly, President Biden is threatening to release oil from the strategic oil reserves. If the government indiscriminately caps the price of oil via rhetoric and action, the incentive to produce and add rigs is lessened.

The post Market Futures Sink As Oil Breaks Above $80 appeared first on RIA.

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Tesla And Hertz – Whatever Next…

Tesla And Hertz – Whatever Next…

Authored by Bill Blain via MorningPorridge.com,

“Democracy is absolutely the worst form of government, except for anything else…”

Tesla’s rise into the $1 trillion club is extraordinary – proving…

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Tesla And Hertz – Whatever Next...

Authored by Bill Blain via MorningPorridge.com,

“Democracy is absolutely the worst form of government, except for anything else…”

Tesla’s rise into the $1 trillion club is extraordinary – proving that listening to what the momentum crowd is buying, while suspending disbelief and fundamental analysis is one road to success. Hertz is a lesson in seizing the moment – its stock gains and free publicity from its new EV fleet will likely exceed the cost of the cars!

As I write this morning’s Porridge I am going to try and not sound like a bitter and twisted old man….

I suppose today’s lesson today might be: “Don’t over think it.” Every morning I wake up and try to make sense of the market noise to discern the big forces acting on markets, the underlying rationales, what the numbers really mean, the potential arbitrages, and the direction of trade flow. But I wonder if I’m doing it wrong.

It’s not what I think that matters. The only thing that’s important is what the market thinks.

The market is simply a voting machine where suffrage is simply the price of a stock. If the market believes Donald Trump’s sight-unseen social media empire is worth billions, so be it. If the market believes Meme Stocks are worth trillions, so be it. Whatever the market believes.. so be it.

As so many clever economists and traders have spotted before me.. it’s the madness of crowds that matters. Over the last few years understanding Behaviours has proved far more useful than forensic accounting skills when it comes to stock picking.

I make the mistake of calling out the inconsistencies of the “drivers” like Adam Neumann, Cathie Wood, Elon Musk and the Eminence Noirs driving SPACs and funds – rather than understanding what makes them look so attractive, clever, clearsighted and intuitive to so many market participants. Promise most people you are going to make them unfeasibly rich – and they will listen.

I make the schoolboy error of asking.. how?

Life is full of regrets. If we let them define us – we truly would be miserable.

Do I regret dumping Tesla in the wake of the cave-diving comments scandal? I reckoned it was massively overpriced around $70. Ever since I have pontificated why it’s not worth a fraction of even that valuation. I don’t regret selling, but I acknowledge I’ve been wrong about the price. But not because I got the fundamentals wrong – I misread the crowd. Failing to understand the momentum was my failure. I am less wealthy than I could have been.

Tesla is worth a Trillion dollars plus. Elon Musk is the richest guy on the planet. These are facts.

Tesla, remarkably, has become a great auto-company. It makes good cars. It understands the logistics of super-charging networks. It has front-run the switch from ICE to EVs, making them mainstream, leading a massive industrial shift, and forced the rest of the sector to play catch up. It changed the perception of EVs from milk-carts to desirable luxury status symbols. It will successfully open new plants and sell more cars. It’s the number one selling car in Europe this quarter – possibly because no one else can get hold of chips!

Perversely, Tesla’s success demonstrates momentum can take a company to fundamental strength. For much of Tesla’s life, sceptics like myself predicted it would stumble and fall, brought down most-likely by apparently insurmountable production problems, its debt load, or regulation. It didn’t happen. Instead it survived, thrived and has been able to reap the momentum and build a strong balance sheet on the back of its extraordinary stock price gains. It could potentially acquire whole swathes of its rivals and supply chain.

It’s been an extraordinary climb from likely disaster to undeniable success – and the one constant has been the support of dedicated Tesla fans. Frankly, it flabbergasts me just how Elon got away with it… but he did.

At this point you are expecting a But…

But…. What would be the point?

In the mind of the crowd facts like how 10-year old Telsa only just started making profits on selling cars don’t matter. Its consistently made profits for the last 2.25 years – largely from selling regulatory credits. Prior to that… Tesla racked up losses. It has consistently failed to deliver so many promises on deliveries, automation and new models. None of these facts matter.

It’s what the market believes that matters.

So, there is no point looking at Tesla this morning and trying to explain how it’s worth a trillion – a multiple of the much larger and more profitable Toyota. Let’s not wonder  why many analysts reckon its going higher. There is no point trying to fathom why a $4.2bn order from newly out-of-bankruptcy Hertz caused the stock price to ratchet up $110 bln yesterday.

This morning analysts are predicting Tesla stock will go higher, building from the “breakthrough psychological level of $900, right through the key $1200 milestone level, and then the next level is $1500.” There was nary a mention of its PE, fundamentals, margins or such irrelevancies… just that its going higher.

Meanwhile…

The Hertz trade is fascinating – Hertz has generated tremendous publicity for its re-launch, and enough stock upside to pay for the cars! It steals a march on any other hire firm wanting to build a fleet of EVs. Hertz went bust early in the pandemic and sold its whole fleet. But, as signs of economic recovery first appeared it became the perfect recovery play. After a bidding war, it was bought out from bankruptcy and restarted with a clean sheet. It now has its very own army of meme stock proponents. Its stock price has more than doubled to $12 on the OTC market.

The fact car hire firms are vulnerable businesses in a highly competitive market, or there are now literally hundreds of new EV makers, in addition to the incumbent ICE auto-manufacturers – all now competing in the EV space for Tesla’s lunch – doesn’t matter.

For now.

Always bear in mind Blain’s Market Mantra no 1: The Market has but one objective: to inflict the maximum amount of pain on the maximum number of participants.

Tyler Durden Tue, 10/26/2021 - 08:00

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Government

Pfizer Inc. (NYSE: PFE) Anticipating Vaccine Approval for Children Above 5, US Government Donates Vaccine to Nigeria

The US White House has informed governors to prepare for vaccination of children from five years from next month in anticipation of approval of Pfizer Inc. (NYSE: PFE) and BioNTech SE’s (NASDAQ: BNTX) COVID-19 vaccine for the age group in the coming…

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The US White House has informed governors to prepare for vaccination of children from five years from next month in anticipation of approval of Pfizer Inc. (NYSE: PFE) and BioNTech SE’s (NASDAQ: BNTX) COVID-19 vaccine for the age group in the coming weeks.

Already the Biden administration has bought 65 million pediatric doses of the vaccine, which is enough to vaccinate around 28 million kids who will be eligible once the FDA approves the vaccine for children between 5 and 11 years.

Drugmakers aren’t doing enough to end the coronavirus pandemic 

Pfizer and Moderna (NASDAQ: MRNA) have been doing an excellent job in the fight against the pandemic. Their CEOs are will receive the Edward M. Kennedy Institute Award for Inspired Leaders for creating the coronavirus vaccines. Moderna CEO Stephane Bancel and Pfizer’s CEO Albert Bourla will receive the award on December 2, 2021.

Drug companies are in the race to end the Coronavirus pandemic, but their failure to ramp up manufacturing could prolong the pandemic and cost lives. The only way to avert this is by having the Pfizer, and Moderna duopoly is broken in mRNA vaccine production. As a result, people are receiving less effective vaccines or whose protection wanes against variants which means more booster doses and selling of vaccines to countries depending on ability to pay and not need. For the companies that have distributed almost 1 billion doses between them, it means more business.

The US donates Pfizer vaccine to Nigeria. 

The US government is donating 3.5 million Pfizer vaccine doses to Nigeria. A White House official said, “We are sharing these doses not to secure favors or extract concessions. Our vaccines do not come with strings attached. We are doing this with the singular objective of saving lives.”

Panama approved Pfizer’s COVID-19 booster vaccine for high-risk individuals, including hospitalized patients, healthcare providers, people above 55, and nursing home residents.

Please make sure to read and completely understand our disclaimer at https://www.wallstreetpr.com/disclaimer. We may be compensated for posting this content on our website by EDM Media LLC. For questions, comments or suggestions please contact ir@edm.media.

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Spread & Containment

FDA advisors mull use of Pfizer/BioNTech COVID-19 jab in kids

FDA advisors will meet later today discuss the possibility of authorising Pfizer and BioNTech’s COVID-19 vaccine Comirnaty in
The post FDA advisors mull use of Pfizer/BioNTech COVID-19 jab in kids appeared first on .

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FDA advisors will meet later today discuss the possibility of authorising Pfizer and BioNTech’s COVID-19 vaccine Comirnaty in children as young as five years old.

If the Vaccines and Related Biological Products Advisory Committee (VRBPAC) gives the go-ahead, the FDA could approve emergency-use of Comirnaty in five to 11-year-olds in a matter of days, extending the use of the vaccine from its current 12 and upwards bracket.

The advisors could also be called on to consider Moderna’s COVID-19 as well for younger children in the coming weeks, as the biotech has just reported positive interim results from a phase 2/3 trial of its mRNA-1273 shot in kids aged six to 11.

Moderna has said it plans to submit the new data to global regulators including the EMA and FDA shortly.

While the data for both vaccines on stimulating an immune response in younger children looks strong, attention at the advisory committee meeting is expected to focus on safety – and particularly the risk of heart inflammation that has been observed in some recipients.

Both the mRNA vaccines have been linked to cases of myocarditis and pericarditis, particularly in males, so the advisors will have to consider whether that risk outweighs the benefits of vaccination in an age group known to be less likely to develop severe COVID-19.

Pfizer/BioNTech and Moderna have said their clinical trials haven’t generated any additional safety signals in children compared to adults.

Nevertheless, some children with COVID-19 do get very ill, and the risk of so-called ‘long COVID’ – where debilitating symptoms can persist for months even after a mild infection – has led to calls for jabs to be administered as widely as possible.

Vaccinating younger school-age children could also help to reduce circulation of SARS-CoV-2, according to some experts. Pfizer and BioNTech are also running studies in the under-fives with results due later this year.

Pfizer chief executive Albert Bourla said recently that the spread of the delta variant and the “substantial threat” it poses to children means that vaccination should be offered to younger age groups.

As of 21 October, nearly 6.3 million children in the US had tested positive for COVID-19 since the onset of the pandemic, with 118,000 new cases in the previous week and more than a million in the preceding month, according to the American Academy of Paediatrics (AAP).

“At this time, it appears that severe illness due to COVID-19 is uncommon among children,” said the AAP in a recent update.

“However, there is an urgent need to collect more data on longer-term impacts of the pandemic on children, including ways the virus may harm the long-term physical health of infected children, as well as its emotional and mental health effects.”

Comirnaty is already authorised in the US for children aged 12 and above, while mRNA-1272 is currently being reviewed for this age group.

A recent Wall Street Journal report suggested however that the FDA is delaying a decision on Moderna’s jab until it completes a review of its heart inflammation risks, amid some speculation they may be higher than with the Pfizer/BioNTech shot.

Earlier this month, Sweden, Finland and Norway temporarily suspended use of mRNA-1273 in younger people, saying they should be vaccinated with Comirnaty instead, while a review of safety data is undertaken.

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