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Who’s Afraid Of Jerome Powell?

Who’s Afraid Of Jerome Powell?

Authored by Tom Luongo via Gold, Goats, ‘n Guns blog,

baller (ˈbɔːlə)
n
slang someone, usually a man, who lives in an extravagant and materialistic manner, tending to be something of a socialite

My wife…

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Who's Afraid Of Jerome Powell?

Authored by Tom Luongo via Gold, Goats, 'n Guns blog,

baller (ˈbɔːlə)
n
slang someone, usually a man, who lives in an extravagant and materialistic manner, tending to be something of a socialite

My wife and I got sucked into watching the Dwayne Johnson series Ballers on HBOMax over the weekend. Aside from being hilarious, it struck me how much of a microcosm of our world this seemingly alien world of twentysomething millionaires and rapacious billionaires really is.

When you drill into the details, the world of Ballers really isn’t that far from ours.

For those that don’t know the setup, broke former NFL bad boy Johnson is trying to turn a new leaf “monetizing his friendships” to help NFL players hold onto all that money they are making at an age when they have zero ability to contemplate their own mortality.

One storyline from the first season is especially relevant. A kid with a good heart, Vernon, banking on his next big contract, is out of money having spent it all on being ‘loyal’ to his friends and family, throwing parties, inviting 40 people to a business lunch, etc.

His loyalty is so out of control he has to borrow money from Johnson (who’s broke mind you) to bridge him until the contract comes through. Of course there are complications and hilarity ensues. The typical Hollywood fantasy fare. Nothing groundbreaking, eventually things work out (mostly).

Johnson has to endure a lot to get Vernon to see the truth, put limits on the situation and get Vernon to properly save his money. The pitch is the right one: put it to work and pay everyone for the long term, not just for tomorrow.

Sound familiar?

No, because that’s exactly what we don’t preach in this world of central bank issued easy money. This shouldn’t be a central conflict, it should be a given.

Because this background for this story is playing out at every level of our society, all a consequence of too much money flowing around finding ways to corrupt everything it touches.

Ballers is all about the corruption money brings to those few thousand people in the NFL and their organizations because of the millions of people who spend too much money on a passing fancy, entertainment.

The NFL, like all pro sports, is nothing but a money funnel with a Federal Reserve sized Hoover attached to it. It’s the ultimate corruption of e pluribus unum. From many to one.

Take a little bit from all of us, time and again to help us relieve the stress of the shitty world they’ve built. Give some of it to the rubes who play the game, who blow it on hookers, high end cars, and drugs, while the lion’s share gets sucked right back up into the same oligarch class that created it in the first place.

But it’s no different than you or me, buying shit we don’t need on credit, self-medicating with pro sports, alcohol, video games, day-trading cryptos on Robinhood, yelling at racists on Twitter or my personal favorite, a ridiculous board game collection.

We’re all ballers to one degree or another, spending easy money on distractions rather than facing the reality that the most unsustainable thing about our society is the money which makes it all happen.

And before anyone revokes my libertarian creds, I pass no judgment on this. It’s all voluntary exchange, mostly. At the very least it has the appearance of being voluntary.

That said, here we are waiting to hear from the philosopher kings at the FOMC and the markets are melting down around our ears.

The tantrums that have begun are no different than those pitched by Vernon’s friends over having the barest amount of fiscal discipline imposed on them.

Everywhere I look everyone is saying some version of the same thing, “Hey man, Don’t take the punch bowl away.” They’d say it a lot more colorfully on Ballers, but being white I’m not allowed to use that language.

From Chairman Xi leading off this year’s virtual Davos with a plea not to hike rates to the howls from the Financial press including some Austrians, pleading that he can’t possibly raise rates because it would cause a market meltdown and blow out the Federal budget, Powell is now off everyone’s invite list to party on the yacht.

I get the feeling that some folks would rather be right about their hyperinflation theories rather than actually figuring out what’s really going on.

But the reality is that something has changed and the markets are finally coming to that conclusion.

For months I’ve been arguing that Jerome Powell ignited a firestorm when he raised the Reverse Repo Rate by 0.05%, pulling trillions in base liquidity from overseas markets while handing U.S. banks all the collateral they needed.

It’s created a political firestorm on Capitol Hill who tried to oust him from the Chair and failed. They got three of his fellow hawks, but not the king. He was able to run out the political clock on both Build Back Better and opposition to his reappointment.

But it doesn’t happen if Powell doesn’t have the backing of the people behind him.

And who backs Powell? The New York Fed, that’s who.

That leads you to the conclusion that all is not hunky dory in Oligarchville. That, shock of shocks, narcissists only like each other when they are sucking our lives and souls away. But when they start taking from each other, that’s when the knives come out.

It seems incredible to me that many people won’t consider this idea, that these people don’t like each other, and aren’t willing to hand over their business and their wealth without a fight?

Because that’s what’s implied when everyone jumps up and down and screams at Powell to “Save them!” from deflationary forces.

And he looks down from the Marriner-Eccles building and says, “No.”

It’s time to put it all in order. With ‘Build Back Better’ dead there is no more insane new spending to monetize. There is no reason for the Fed to keep up QE or rates at the zero-bound. Savings is down, money is circulating again. Inflation isn’t transitory.

People want to work. COVID-9/11 is behind us. The anger over losing two years is just getting started but that’s a different wrinkle to this story for another day.

If the Fed isn’t intimidated by the recent weakness in stocks, in truth a healthy correction after a massive run, and raises rates on Wednesday we have our answer as to what Powell and friends are willing to do. Whatever your opinion of it is, it will not be a ‘policy error’ but a clear-eyed understanding that it’s time to rein it in, change the direction of the big boat, and begin living within our means.

If he doesn’t it won’t be the opposite signal. It will simply mean that they’ll take another couple of months to nail down the particulars, namely getting proper control over the O’Biden administration, and begin hiking on schedule per the current expectations in the Eurodollar futures market.

Has anyone looked at the ratings for pro sports? Old media? Hollywood box office receipts? All down. Netflix is getting killed because it’s growth cannot sustain its valuation, much like a lot of the NASDAQ. This is something that should have happened two or three years ago, just like Tesla.

But didn’t because of COVID-19 and the massive wealth transfer the stimulus provided to them during the absence of sanity oceans of money always produces.

That said, these are all unsustainable Ponzi scheme masquerading as viable industries based on cheap money and malinvestment in politically-motivated production.

Now I’m not suggesting for a second that Powell is some kind of saint or anything. He’s no savior sent down to redeem us sinful ballers from our excesses. No sir. He represents the very people that helped create this mess.

But at the same time, they want to remain where they are. They are not willing to hand their power and their money over to another group within the cartel.

They didn’t get where they were putting their money on the table to bail out anyone else.

And they won’t this time.

All I’m doing here is assessing what everyone’s real motivations are and who they answer to. To quote another, far more classic television show“The universe is run by the interweaving of three elements: Energy, matter, and enlightened self-interest.”

And, to me, where’s the enlightened self-interest angle for the NY Boys, represented by Powell, for turning over their business to a bunch of European and Chinese commies?

When you step back and really look at what’s happening, they have already told Europe, China and all those emerging markets currently whining, the post-COVID world you created is your mess now.

This is why I’m convinced the Fed will hike and hike aggressively this year, maybe starting on Wednesday.

There is no deal possible between Wall St., City of London and Europe. In that game, Europe loses. If China wants to play hardball and default on foreign-held property debt, fine. Have fun attracting any capital in the future.

All the fiscal projections of the U.S.’s insolvency are great (and accurate) but I hate to burst anyone’s bubble, literally, but you CAN taper a Ponzi scheme if you’re 1) the biggest Ponzi and 2) control the flow of funds into them.

And if you don’t think Powell and his backers at the NY Fed aren’t willing to sacrifice a few thousand points on the Dow or even a few points of GDP, to restructure the US’s finances for the long term while the Fed hands them all the collateral and liquidity they need to keep playing while everyone else craps out, I do believe you are terminally naïve.

It’s what they call playing hard ball.

There are two ways to reset the monetary system. The first option is printer go brrr and default by switching out the old currency for a new one. The other is collapse the old system by returning risk and rebuilding it after the malinvestment is gone.

Paul Volcker chose the latter to finally establish the Dollar Reserve Standard as the only game in town. Nixon set the process in motion, Volcker closed the deal. It’s what established today’s game.

We are at an inflection point in history, both monetary and geopolitical.

I discussed this in my latest podcast with Alex Krainer and believe the rules of the game have fundamentally changed. The next game will look a lot different than the baller one we’ve been playing.

Those who won’t adjust to that or admit it should be very afraid of what Jerome Powell does next.

*  *  *

Join my Patreon if you hate the game, not the playa.

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Tyler Durden Wed, 01/26/2022 - 12:25

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Government

Six Commodities Investments to Buy as Putin Wages War on Ukraine

Six commodities investments to buy amid the sustained attack of Ukraine by Russia’s President Vladimir Putin and rising inflation provide potential to…

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Six commodities investments to buy amid the sustained attack of Ukraine by Russia’s President Vladimir Putin and rising inflation provide potential to profit even as the market has been pulling back so far in 2022.

The six commodities investments to buy include those involved in oil, gold and grain due to current supply shortages that are showing no signs of abating anytime soon. Putin’s order for Russian troops to invade Ukraine on Feb. 24 has disrupted the neighboring nation’s agricultural production, led to the theft of grain and imposed an ongoing blockade in the Black Sea to stop farmers from exporting their crops.

Crude oil inventories are down to a “dangerously low point” across Europe, North America and Organisation for Economic Co-operation and Development (OECD) Asia, just as spare production capacity from OPEC+ nations slid to the lowest levels since April 2020, according to BofA Global Research. Inventories of petroleum products also have fallen to “precarious levels” for middle distillates and even gasoline as the market heads into the peak of the U.S. summer driving season, the investment firm added.

As a result, refined petroleum cracks — the differences between crude oil and the prices of the wholesale petroleum products such as gasoline — recently have “spiked to record levels,” contributing to volatility, BofA wrote. In addition, strategic oil barrels held by OECD governments already are low and likely to decline steeply going forward, leaving consumers exposed to future negative supply shocks, BofA predicted.

Pension Fund Chairman Recommends Broad Commodity Funds

Bob Carlson, a pension fund chairman who also leads the Retirement Watch investment newsletter, recommended Cohen & Steers MLP & Energy Opportunity Fund (MLOAX) to all the portfolios in his June 2022 issue. 

Oil and natural gas should be good investments as Europe looks to reduce dependence on Russian exports, Carlson told me. Plus, energy producers in the United States are focused on increasing cash flow and earnings, not maximizing drilling expenses in the short run to increase output, he added.

Bob Carlson, who leads Retirement Watch, meets with Paul Dykewicz.

Good investment opportunities can be found with companies that provide the pipelines, storage facilities and other infrastructure needed to supply the world with oil, natural gas and other energy sources, Carlson continued. 

“One of the attractive qualities of these investments is that their revenues are independent of the prices of the commodities,” Carlson counseled. “The firms charge fees for their services, and the fees often are adjusted for inflation. Their revenues and earnings depend on the volume of commodities passing through their facilities, not the price of the commodity.”

Key energy service companies provide total returns, aided by current income and price appreciation, through investments in energy-related master limited partnerships (MLPs) and securities of industry companies, Carlson pointed out. Those businesses are expected to derive at least 50% of their revenues or operating income from exploration, production, gathering, transportation, processing, storage, refining, distribution or marketing of natural gas, crude oil and other energy resources.

Chart courtesy of www.stockcharts.com

Cohen & Steers Fund Leads List of Six Commodities Investments to Buy

Cohen & Steers MLP & Energy Opportunity Fund recently held 53 positions and had 50% of its portfolio in the 10 largest positions. Top holdings of the fund included Enbridge (NYSE: ENB), Cheniere Energy (NYSEAMERICAN: LNG), Williams Companies (NYSE: WMB), TC Energy (NYSE: TRP) and Energy Transfer (NYSE: ET).

The fund has achieved strong returns since April 2020. Indeed, it has been on an upward trajectory since the second half of December 2021.

“Crucially, oil prices have held up well even in the face of a slowing Chinese economy and widespread lockdowns,” according to BofA. “Given that most China indicators point to a major decline in mobility across the country, any improvement in the COVID-19 situation in large Chinese cities could send oil prices much higher.”

Carlson’s Chooses DBA to Join Six Commodities Investments to Buy

Despite the evils of war, investors still can profit from the rise in grain prices and other commodities through the futures markets, even as many other equities slip. Instead of buying futures directly, investors can purchase diversified agriculture commodities through Invesco DB Agriculture Fund (DBA), Carlson said.

That ETF seeks to track changes in the DBIQ Diversified Agriculture Index Excess Return. The ETF also earns interest income from cash it invests primarily in treasury securities, while holding them as collateral for the futures contracts.

The major holdings in the index are soybeans, wheat, corn, coffee and live cattle. The index is reconstituted each November.

Chart courtesy of www.stockcharts.com

Gold Funds Featured Among Six Commodities Investments to Buy

Carlson also is recommending gold through iShares Gold Trust (IAU). He described it as the “cheapest, most liquid way” to invest in the shiny yellow metal.

Gold has had its ups and downs in the face of rising global inflation, Russia’s invasion of Ukraine, China’s increasing military flyovers of nearby Asian nations and other geopolitical conflicts. At the same time, the U.S. dollar has been appreciating amid high inflation after the Fed recently raised interest rates by 0.5% and promised additional increases later in 2022.

However, there are many risks for the U.S. dollar, so continuing to hold gold remains a good hedge, Carlson counseled.

IAU has retreated since early March, so investors seeking to buy it now that it is rebounding still may do so. Those who believe inflation may stay through 2022 can try to capture gains before the trend no longer is a friend.

Chart courtesy of www.stockcharts.com

Skousen Calls GLD One of the Six Commodities Investments to Buy

“Gold has done far better than stocks, which are down 15-25% this year,” said Mark Skousen, who is recommending SPDR Gold Shares (NYSE Arca: GLD) in his Forecasts & Strategies investment newsletter. 

Mark Skousen, head of Forecasts & Strategies, meets with Paul Dykewicz.

GLD has risen nearly 16% since Skousen recommended it about two years ago. Gold climbed 2021 in anticipation of rising inflation, but its performance has been flat so far this year. If gold truly is an indicator of inflation, the previous yellow metal’s stagnant price may be signaling that price inflation will wane heading into 2023.

The investment objective is for the GLD shares to reflect the performance of the price of gold bullion, after subtracting the trust’s expenses. The trust, formed on November 12, 2004, physically holds gold bars.

The trust’s shares are designed for investors who want a cost-effective and convenient way to invest in gold, according to the company’s prospectus. Skousen, who also leads the Five Star Trader, Home Run Trader, TNT Trader and Fast Money Alert services, recently was a featured speaker at the Vancouver Resource Investment Conference and advised attendees that he recommended gold as a minor holding in every portfolio.

Chart courtesy of www.stockcharts.com

EPD Is Another of the Six Commodities Investments to Buy

Oil has done much better as an inflation hedge than gold, Skousen said. One example is his recommendation of Enterprise Products Partners (EPD, $27, 7% yield), up 27% year to date.

EPD has been the “best performer” in the Forecasts & Strategies investment newsletter so far this year, Skousen said. Enterprise Products Partners is one of the largest publicly traded partnerships and a key North American provider of midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, refined products and petrochemicals. 

The company’s services include natural gas gathering, treating, processing, transportation and storage. In addition, Enterprise Products Partners provides NGL transportation, fractionation, storage and import and export terminals. It further offers crude oil gathering, transportation, storage and terminals, along with petrochemical and refined products transportation, storage and terminals, as well as a marine transportation business.

I personally have owned Enterprise Products Partners since shortly after the 2020 stock market crash when I bought the stock as it started to recover. The stock has been trending upward since the end of 2021.

Chart courtesy of www.stockcharts.com

Money Manager Picks One of Six Commodities Investments to Buy

A seasoned investment professional told me that she likes farm machinery company Deere (NYSE: DE) to profit from agriculture. Michelle Connell, a former portfolio manager who now serves as president of Dallas-based Portia Capital Management, said she still likes Deere despite its 14% drop after it reported results last week.

Michelle Connell, CEO, Portia Capital Management

Deere’s key issues are supply-related, since demand for agricultural equipment remains strong, especially for the company’s machinery that is more environmentally friendly than its rivals, Connell continued.

Deere is also focused on providing the farming industry with autonomous equipment, Connell counseled. Wall Street analysts expect Deere to have a better story and performance in the second half of 2022 and in full-year 2023.

Connell cited the following to support her recommendation of Deere: 

-More than half its revenues come from large agriculture.

-If the war in Ukraine continues, U.S. farmers will benefit from higher prices for their crops.

-Increased agricultural profits mean that that farmers and farming corporations will be more likely to buy large, expensive farm equipment.  

Deere has fallen back since its recent high on April 20, so investors should be able to purchase shares at reduced prices, Connell continued.

Chart courtesy of www.stockcharts.com

Supply Chains May Improve as China Starts to Lower COVID Curbs

China is easing its COVID-19 restrictions and it could allow goods produced there to start flowing normally again in the coming weeks. China’s lockdowns have affected an estimated 373 million people, including roughly 40% of its gross domestic product (GDP). Disrupted supply chains have affected products such as rice, oil and natural gas.

Shanghai, home to the world’s largest port and 25 million residents, has strained to unload cargo due to strict regulations that have caused shipping containers to stack up. Some Shanghai residents posted videos online to complain about needing food, even though government officials sought to block such public expressions of frustration.

Chinese authorities also drew public criticism for forcibly separating young children with COVID-19 from their parents to prioritize stopping the spread of a new, contagious subvariant of Omicron, BA.2. The variant also has been causing new infections in European nations such as Germany, the Netherlands and Switzerland.

U.S. COVID Deaths Climb Past 1-Million Mark

U.S. COVID-19 deaths crossed the 1-million mark last week and have climbed further to 1,002,726 as of May 24, according to Johns Hopkins University. Cases in the United States, as of that date, hit 83,501,455. America retains the dubious distinction as the country with the highest numbers of COVID-19 deaths and cases.

COVID-19 deaths worldwide totaled 6,280,342 on May 24, according to Johns Hopkins. Cases across the globe have climbed to 526,664,642.

Roughly 77.8% of the U.S. population, or 258,562,059, have obtained at least one dose of a COVID-19 vaccine, as of May 24, the CDC reported. Fully vaccinated people total 221,001,614, or 66.6%, of America’s population, according to the CDC. The United States also has given at least one COVID-19 booster vaccine to 102.9 million people, up about 500,000 in the past week.

New data on so-called “long-haul” COVID patients released on May 24 reported that even though some symptoms improve others may persist, according to the Northwestern Medicine Neuro COVID-19 Clinic. Most of the 52 patients monitored in the Northwestern study reported “brain fog,” numbness or tingling, headache, dizziness, blurred vision and fatigue, even 15 months after initial diagnoses of COVID-19.

The six commodities investments to buy are intended to profit from rising energy, gold and grain prices. Despite the market’s volatility, the highest inflation in 40 years, the Fed’s plan for further interest rate hikes to curb price hikes and increasing federal deficits, investors are finding profitable opportunities in energy, gold and grains.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, Guru Focus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is great as a gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others. Call 202-677-4457 for multiple-book pricing.

 

The post Six Commodities Investments to Buy as Putin Wages War on Ukraine appeared first on Stock Investor.

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Economics

Another Month Closer To Global Recession

We always have to keep in mind that the major economic accounts perform poorly during inflections. Europe in early 2018, for example, was supposed to have…

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We always have to keep in mind that the major economic accounts perform poorly during inflections. Europe in early 2018, for example, was supposed to have been just booming only to have run right into the brick wall that was Euro$ #4. Statistics like Real GDP picked up the downshift, but didn’t quite nail the degree to which the European economy had stumbled.

Initially, Eurostat calculated the quarterly increase for Q1 2018 real GDP to have been +0.282% (annual rate of 1.13%), substantially less than the 0.779% (3.15% annual rate) previously in Q4 2017. It took a couple years for the European bean counters to eventually realize there was basically no increase in output those crucial three months.

And while Q2 GDP was revised higher than originally, Q3 like Q1 was also reduced down to practically nothing. The new figures didn’t put Europe into a “technical recession” (there really isn’t any such thing), yet for all practical purposes the entire economic year of 2018 came to be figured as it truly had been for everyone living through it: a complete bust.


Eurostat would have as much if not more trouble the following year, eventually downgraded real GDP numbers in Q3 and Q4 2019 to reflect how its full economy had gone into recession (pre-COVID) maybe even as early as August or September (as global bond markets, and currencies, had contemporaneously priced).

The problem is usually the trend-cycle component subjectively added to smooth out higher frequency variations. Other data, such as PMIs like S&P Global’s (formerly IHS Markit), or Germany’s ZEW, had caught on to the economic inflection from its outset in real time. Given the limitations of GDP accounting and survey methodology, it would only be a matter of time before the latter caught up to the former.

In 2022, the European economy is again grappling with the serious prospects for recession. Real GDP is already weak and has been over the prior two quarters before the current one. With PMIs having already turned downward some time ago, what might the next (few) benchmark revisions further reveal about where output (GDP) actually could already be?



It’s not so much the level of these sentiment surveys as it is the plain direction and how that direction is following along the path surmised in advance by the global marketplace – including, for once, stocks. S&P Global reported earlier today that its May 2022 manufacturing PMI for Europe dropped to 54.4 from April’s 55.5.

While that’s sounds relatively decent, a level that is often characterized as “robust”, it’s the lowest since September 2020. Furthermore, both markets and the PMI internals point to more erosion and declines ahead; the forward-looking new orders category just dropped under 50 for the first time since June 2020.

At the same time, S&P Global’s Services PMI for Europe was stuck around the 55 level in May for the fourth consecutive month. So much hype and what should have been a true reopening bounce after the European omicron panic, this limited upside only adds more to further downside potential ahead once the bounce fades.

Quite simply, not looking all the great in Europe. Therefore, euro.


But the dollar being up against the European currency, like the dollar’s value higher against any currency, doesn’t indicate better conditions or prospects here in the US. On the contrary, rising dollar means bad everywhere for everyone; the only variances are degree and timing.

As it pertains to timing, the data suggests there may not be as much difference this time (Euro$ #5) compared to last time (Euro$ #4). Whereas in 2018 Europe fell down immediately and it took America almost a year to blunder, too, there does appear to be more synchroneity in 2022.

According to S&P Global’s just-released PMIs for the United States, manufacturing is somewhat better than Europe but still heading in the wrong direction – the manufacturing index at 57.5 in May, down from 59.2 in April though still higher (but suspiciously not much) than omicron-affected January’s 55.5.

And there’s a growing catalog of data which puts this S&P number as an outlier among the goods economy outlier. The ISM’s manufacturing, for instance, much lower already in April. Then there is the recent rash of Fed regional manufacturing surveys that have, to put it mildly, crashed. The Empire and Philly surveys already this month, and today Richmond.


The last of those was down sharply, its headline now -9 from +14 last month, lowest since May 2020 (a recurring theme here). More important, New Orders in Richmond -16 from +6.

Services here in America aren’t faring nearly as well regardless, no surprise in these sentiment figures with GDP or PCE consistently pointing to lack of recovery and ongoing weakness there. The US service sector was wrecked by the combination of coronavirus overreaction as well as the lingering liquidity leftovers from GFC2.

S&P Global put its services index at just 53.5, a seriously low number, therefore the composite not much more at 53.8.



The whole range of global data indicates exactly what markets have been pricing the entire year, since the beginning of Euro$ #5. The more time passes, the more most everything continues in this – not the inflationary – direction.

That direction is firmly toward recession, the very high probability already priced in (inversions). And if the 2-year UST, of all singular measures, really is breaking down as it sure seems to be (see: today’s trading) the whole world might be a lot closer to one still.



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Stocks

Skyworks is deep in the oversold zone but is it the right time to buy?

Since its all-time high above $200 last year, Skyline Solutions, Inc. (NASDAQ:SWKS) has failed to replicate gains. At press time, the stock was trading…

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Since its all-time high above $200 last year, Skyline Solutions, Inc. (NASDAQ:SWKS) has failed to replicate gains. At press time, the stock was trading at $102, down 35.99% year-to-date. The decline in the year is only slightly lower than a minus 39.44% return for a full year. Here is some reason why weakness has heightened this year.

Skyworks belongs to the semiconductor sector, which, up to date, continues to experience high demand and low supply. Strong demand for chips during the pandemic boosted semiconductors’ stocks, including Skyworks. Nonetheless, this year has brought a new set of challenges. 

One of the challenges that have hit Skyline and other semiconductors, in general, is market skepticism. After the strong year 2021, investors were cautious that the bubble could finally burst for semiconductor names. As a result, investors turned to defensive names, which are also good at countering the current inflation.

Macro-economic tides have also been blamed. Supply chain challenges have hit the chip makers and their clients similarly, if not equally. Chip buyers such as Tesla have likewise been affected by Covid-19 outbreaks in China. 

Macro-economic troubles were evident in Skyworks Q3 2022 guidance. Despite reporting above-estimated second-quarter earnings, declines are expected in the third quarter. A non-GAAP EPS of $2.36 in Q3 was short of the $2.63 reported in Q2. The guidance also missed estimates of $2.55. Since then, the stock has been falling and is now in the oversold region.

Skyworks appears deeply oversold but has more room to fall

Source – TradingView

Technically, Skyworks is in the oversold territory, with the RSI pointing at a reading of 24. However, the stock has room to fall as the next support is $93. The stock could rise briefly but faces resistance at $115. Investors should not buy at the oversold level since further declines are possible.

Summary

Skyworks could fall further amid the macro-economic troubles. The next support is $93, but investors should wait further before buying.

The post Skyworks is deep in the oversold zone but is it the right time to buy? appeared first on Invezz.

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