NQ Holding For Now + CAPE?
So we read thru the Minack Advisors article on ZHedge and of course we have to shed some of our thoughts on it.
First of all we agree with their inclination for using “real yields” second, their assertion that the relationship between rates and earnings multiples changed over the last decade is correct and rates are not the only cause.
Interest rates however, may just be the byproduct of the actual cause. Here at Magnelibra Econemotions have written at length about the real elephant underpinning global equities. We like to refer to these elephants as "Non-Zero Sum Players" (NZSPs) aka Global Central Banks and sovereign wealth funds.
It is clear that over the last decade QE policies and negative real yields have afforded these entities an artificial negative WACC. So if your cost of investing is free or in some cases like the SNB you are paid to take risk, well then why wouldn't valuations be pushed past historical norms?
Let’s just call it what it is then, Zero risk, because when your cost of funds is inverted, i.e. let’s be honest someone is paying you to take risk.
So this Zhedge article should use NZSPs and take into consideration or quantify their presence statistically as a deflator to the over shoot of CAPE. That is our opinion as to why CAPE isn't relative as a fundamental indicator of value right now. Here is the chart Minack Advisors used:
A link to the full article is, HERE check it out and read it when you get time.
Alright let’s check out the settlement for the markets that Magnelibra Econemotions covers and those covered by Magnelibra’s Commodity Trading Advisory.
US Treasury yields rose 6.4bp in the 30Y to 1.732% and the 10Y hit 0.969% +4.6bp. The US yield curve continues to steepen out as the short end remains anchored while the long end gets hit and drifts. Here is our futures curve charts showing the NOB (10s30) and FOB (5s30) continue steepening:
We also saw new sector highs in the Equities and FX Currencies accompanied by a new low for the year in the US Dollar Index:
We noticed that the Nasdaq vs the SP500 futures chart is putting in a triple top here so we must be mindful of this spread:
The 200dMA in the 2xRTY vs NQ continues to hold the line, but Value seems like its in favor here still and could lead to a break to the upside preference for Value over Tech:
Finally we will share with everyone the our position tracker which is our proxy to the CTA program Magnelibra employs called the Global Futures Benchmark Program. Our Founding Subscribers get this with their support and receive this positions tracker as well as first hand mentorship, QnA access to us. The positions tracker is currently in a Hedged Long mode and continues on into next week this way, no changes were made on Friday except the Wk1 SP3650 put was a fully realized hedged loss and is no longer a part of the program as it has expired:
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Alright that’s it, we are still cognizant of the volatility due to Covid and the Elections and the fact that Trump will not concede and we fully expect him to take this all the way to the Supreme C. As far as Covid, it is flu season in the Northern Hemisphere and thus an uptick now should be expected. In fact here is our chart of current CDC data:
We also want our readers to be aware of the uptick in atmospheric activity and that the up coming alignment of Jupiter and Saturn on Dec. 21st may usher in some climate volatility with an uptick in volcanic activity and or earthquake activity. We are avid followers of this stuff as we know these events do matter to markets some times.
Anyway, thanks for reading please subscribe, please share your thoughts as we are all in this together, we all affect one another in some way, shape or form and Magnelibra Econemotions believes our mindset is transcending and that it is a duty for all of us to promote positivity and encouragement.
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