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Things you need to know

  • Eurozone confidence data     is lowest in 3 yrs
  • BoJ leaves rates     unchanged
  • Both those continents     reporting ongoing weakness yet no one cuts rates (they are already     negative)
  • US economy is robust and     we are cutting  –

 Stocks marched in place on Monday as it waits and waits for tomorrow.  The Dow gained 29 pts, while the S&P gave up 5 pts, the Nasdaq gave back 36 pts and the Russell lost 10 pts.  It continues to be the waiting game… global mkts and global investors sit and wait for what the FED says and does.  Now look – we have beaten this to death already….the FED is sure to cut rates tomorrow and the bookies are telling us that we can expect a  25 bp cut….Fed Funds confirm that but as we also know – those same investors are waiting to hear what Jay Powell will say and how he says it.  They are especially curious to hear if he intends on halting the ‘balance sheet reduction’ program as well as listening for  additional interest rate cuts into the balance of the year.  Again, the expectation is for additional cuts (black box algo’s will be very disappointed if he doesn’t say it) while the balance sheet reduction theme is gaining more traction as we get closer to Wednesday. 

 We see how swiftly the mkts react to the news, how quickly the ‘smart logic algo’s’ read the headlines and react…..what they can’t do is understand the tone or the meaning of the spoken word vs the written word….and as I pointed out yesterday – headlines can create a narrative that is not necessarily true.  Case in point was yesterday’s WSJ headline about Friday’s GDP report.   The journal made it sound as if the 2.1% GDP print on Friday was a negative (because it compared it to the 1st Q 3.1% GDP print) when in reality they should have compared it to what the expectation was and that would have produced a much more positive headline – since the expectation was for 1.8% and we got 2.1%.  Just sayin’…..

 So that being said – it will be very important to listen to what he says.  How will he define the US economy and how will he define the global economy.  What role will the ongoing  and seemingly endless trade war with China play in the FED’s decision.  Again yesterday, we heard Donny screaming about how the FED should announce a BIG rate cut vs. a number of small ones….Ah, Hello Mr. President – Rates are ONLY 2.5% – there isn’t much ‘wiggle’ room and there isn’t anything in the foreseeable future that is screaming for such a cut.  

 Rates are negative in Europe and Asia and it still supposedly hasn’t helped those economies– yet you’d never know that by mkt performance – US mkts are all up big…..S&P and Nasdaq better than 20% while the Dow and Russell are not far behind at +17%….European mkts area all ahead by double digits ytd – with France being the outperformer at +17% and the Eurostoxx returning 16% ytd, Asian mkts see China up 28% ytd, Australia up 21% while Japan and Hong Kong are ahead by 8%.     By your own admission – our economy is on fire – historically low unemployment, rising wages, improving macro data points, strong corporate performance, US corporations bringing money back to the US (thanks to tax reform) etc.  So what are we really talking about?  Are we lowering rates to help the US or the rest of the world?  If it’s the rest of the world – then just say that – because US macro data is not calling for it at all….. and what is 25 bps really going to do for us?  We are about to find out – because Jay is going to explain it all. 

 Overnight the BoJ (Bank of Japan) left rates UNCHANGED as expected but made it very clear that they stand ready to cut rates if the economy loses steam…saying “Will not hesitate to take additional easing measures if the economy loses momentum…”  And that is exactly what Mario Draghi (ECB President) said last week….so here is what I say…..If these guys are ‘ready’ to cut rates and their economies are in trouble – (as everyone seems to think) then what are they waiting for?    Why, exactly are they NOT cutting rates to help their economies and we are?    By the end of the day – Asian mkts all ended the day a bit higher….Japan +0.43%, Hong Kong + 0.14%, China + 0.42% and ASX +0.28%.

 European mkts have begun the day a bit lower…..Eurozone sentiment data continues to show that there is no end in sight for the EZ – Economic confidence is now at a 3 yr low -with the French performing the worst…..PMI’s across the zone (Production, orders and managers in the service sector) all appear to be more pessimistic about what the future looks like – which is exactly what Mario intimated yet failed to respond to….oh yes, he acknowledged the trouble and said he was ready to act – but just not right now.  Confused yet?  This morning – earnings are also a bit weaker as investors digest those weaker numbers along with the weaker macro data….. FTSE +0.14%, CAC 40 – 0.90%, DAX – 1.56%, EUROSSTOXX – 1.14% , Spain -1.73% and Italy – 1.80%, 

 US futs are all pointing lower this morning….Dow – 32 pts, the S&P – 7 pts, Nasdaq -32 pts and the Russell – 3 pts. Eco data today includes – Pers Income – exp of +0.4%, Pers Spending of +0.3%, and Real personal Spending of +0.2% (which is always confusing because what is Personal Spending vs. Real Personal Spending? – Personal spending are expenses that are coonsidered personal – dining out, non-essential expenses while REAL: personal spending is money spent on everything – (non-essentials and essentials)   Either way – why is this important? Because Personal spending speaks to the health of the consumer and our economy is consumer driven.  Pending home sales will be out at 10 am and expectation is for +0.5% m/m and +0.7% y/y.  Housing has been a thorn in the side of this recovery…so this will be a closely watched stat. 

 China trade talks are happening now – and we await any word of progress – but like many are now saying  – no one expects anything from this visit.  The sense is that this trade war is far from over….let’s see what Jay has to say about this.  I still think that 3025 is a level of resistance for the mkt……but much will depend on how the mkt interprets the FED comments tomorrow.   Earnings will continue to be the focus as it is a big week – more than 150 names are reporting. 

 Oil – is up 50 cts at $57.34/barrel…. It has now surged up and thru  the 50 day resistance and appears to want to try and challenge the next trendline at $58.20.    Brent crude is expected to fall by 3% as worries over demand build.  Yet – supply risks remain a concern as Iran continues to cause trouble in the Strait of Hormuz. 

Take good care.


Perciatelli in a Lemon/Butter/Sesame Seed Sauce

This is simple yet delicious….I mean – it takes only 10 mins to make….as long as it takes to boil the pasta.

 Bring a pot of salted water to a boil – add the pasta. 

In a large sauté pan – slowly melt two sticks of  butter on med low heat…..once melted add in fresh squeezed lemon juice – stirring as you add… – taste as you go…you do not want it to be all lemon – just enough of a hint so that you know it’s there.

 In a separate pan – toast the sesame seeds – do not BURN – just toss and toast – now set aside.

 Once the pasta is done – strain (reserve a mugful of water) and add to the butter/lemon sauce.  Toss to coat.  Now add in 2 handful of grated Pecorino Romano cheese and the toasted sesame seeds – toss and serve immediately…..It is a great summer dish –  Simple.

 Buon Appetito.