{"id":1444429,"date":"2023-12-17T20:10:00","date_gmt":"2023-12-18T01:10:00","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1444429"},"modified":"2023-12-17T20:10:00","modified_gmt":"2023-12-18T01:10:00","slug":"it-seems-we-have-hit-a-point-where-a-wall-is-in-the-way-of-kicking-the-can-much-further","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/it-seems-we-have-hit-a-point-where-a-wall-is-in-the-way-of-kicking-the-can-much-further\/1444429\/","title":{"rendered":"It Seems We Have Hit A Point Where A Wall Is In The Way Of “Kicking The Can” Much Further"},"content":{"rendered":"

It Seems We Have Hit A Point Where A Wall Is In The Way Of “Kicking The Can” Much Further<\/span><\/p>\n

\n

By Peter Tchir of Academy Securities<\/em><\/p>\n

I\u2019ve been doing a lot of thinking about \u201ckicking the can.\u201d Not because \u201ckicking the can\u201d has been effective, but because we seem to have hit the point where a wall is in the way, stopping us from \u201ckicking the can\u201d much further<\/strong>. This is more apparent on the geopolitical front, where the Middle East seems to need serious, long-term solutions. While we aren\u2019t there yet with China and Taiwan, it seems that solutions like \u201cone country, two systems\u201d will be tested sooner rather than later.<\/p>\n

But, since it is the holiday season in the U.S. and much of the world, let\u2019s stick to a more positive message.<\/p>\n

From Stalemate to Victory \u2013 the Fed<\/h3>\n

As you can tell from the immediate post-FOMC reaction and Thursday\u2019s T-Report \u2013 Unthinking the Fed, <\/a>I\u2019m struggling to process the shift in tone. Much of that came out during Thursday\u2019s Bloomberg TV interview <\/a>(Academy\u2019s section starts at the 41 minute mark). We did focus on my \u201cpet theory\u201d that the Fed is far less interested in creating a recession during an election year, than they were, say, in 2023<\/strong>. Also, they might not need to.<\/p>\n

Maybe that is the problem, I\u2019ve been arguing that the Fed has done too much already. That they should be on pause and thinking about cutting. Not every analyst has had that view, and until Wednesday, it didn\u2019t seem like the Fed did either. Sure, they had slowed the hiking process rather dramatically, but they were still portraying a Fed that could hike or cut with equal probability. That does not seem to be the case. It is telling that they didn\u2019t trot out multiple speakers to dissuade the market from their exuberance.<\/p>\n

So maybe I\u2019m just too jaded to accept that the Fed might actually be on the same page as we are. Maybe I have some self-destructive tendencies that make me want to snatch defeat from the jaws of victory (I am a contrarian, after all).<\/p>\n

While it is difficult to love a market at or near all-time highs, we can always go higher. Just because August didn\u2019t follow trend and everyone seems to be betting on a rally into year-end, doesn\u2019t mean it can\u2019t happen.<\/p>\n

Maybe it is simply time to accept that the stalemate is over, victory conditions have been achieved, and we can move on? Maybe this applies beyond the battle with the Fed?<\/p>\n

From Stalemate to Victory \u2013 Russia\/Ukraine<\/h3>\n

While there is no sign of the stalemate ending, it seems that most people involved, directly and indirectly, have to face the reality that some form of \u201cabsolute\u201d victory is unlikely. If that acceptance occurs, should we be thinking about what a victory looks like?<\/strong><\/p>\n

What opportunities and risks are there if Russia and Ukraine agree to some sort of serious ceasefire\/peace agreement in 2024? Are we (or your company) prepared for the opportunities that rebuilding Ukraine would create? That impact could be immediate and large if the agreement includes the use of some or all of Russia\u2019s frozen dollar reserves.<\/strong><\/p>\n

One of the things that also prevents \u201crebuilding\u201d is the availability of funds \u2013 it seems plausible that there will be readily available funds for this rebuilding as it is in the interest of not just Ukraine, but Europe too! Europe, more than the U.S., needs to get Ukraine up and running as quickly as possible so it can export commodities again, and more importantly, so that displaced Ukrainians can return home.<\/p>\n

I\u2019m now spending more time thinking about what a peace agreement could mean for markets and the global economy, than I am thinking about how the war can progress.<\/p>\n

From Stalemate to Victory \u2013 China Trade<\/h3>\n

I\u2019m still looking for some attempt to create better relationships between the two countries.<\/p>\n

Whether we like it or not, incumbents do best in elections when the economy is doing well. <\/strong>Almost anything done with China will help in that direction, at least in the near-term, which is what may be directing the actions of many incumbents looking to get re-elected. My apologies if this sounds too cynical, but my view is that most politicians view their jobs as being politicians, so to keep their jobs, they need to get re-elected. Cynical or not, that is my working assumption and shapes why I think that we can get something in the headlines in the next month or two (Treasury Secretary Yellen heading back to China seems good on this front).
\n\tMany economic advisors to the Democratic party were very vocal about how detrimental tariffs were for the economy. <\/strong>There must be some who are still prodding the administration to ease back on tariffs. Whether it is cutting tariffs or just creating a \u201cpathway\u201d to reducing tariffs, the markets would likely respond well. At the very least, there is an argument to be made, depending on how it is done, that easing tariffs should reduce prices, and in turn reduce inflation.
\n\tChips. <\/strong>Clearly defining what is mission critical for the U.S. with respect to the military and AI could help the chip sector, as it would reduce uncertainty about which chips may or may not come under scrutiny. Just some clarity could help markets.
\n\tWhile nothing to do with the U.S., <\/strong>China itself seems overdue for some more aggressive stimulus.
\n\tFood. <\/strong>That is one area where (hands down) the U.S. dominates China and could create some good bargaining positions for the U.S. in any negotiations.<\/p>\n

So, rather than being worried about what has gone on, maybe it is time to think about what happens next.<\/p>\n

For clarity, Academy\u2019s Geopolitical Intelligence Group is adamant that China remains the number one concern in D.C. on the National Security front. <\/strong>We will not, as a nation, jeopardize the nation\u2019s future in our dealings with China. Having said that, there is plenty of room to come up with a deal that is (or at least seems to be) more economic in nature \u2013 which is what I\u2019m betting on.<\/p>\n

From Stalemate to Stalemate<\/h3>\n

It is unclear how we get to \u201cvictory\u201d by almost any definition in the next few weeks (or even months) in the Middle East or with respect to the tensions surrounding China and Taiwan, especially with Taiwan heading into a crucial election. Those both seem to fit the \u201ckicking the can into a wall\u201d metaphor, but today, we are erring on the positive side.<\/p>\n

Bottom Line<\/h3>\n

Rates. <\/strong>Difficult to like here, so slightly bearish bias. The rising debt, the growing percentage of our budget spent on interest, etc. were (and are) real. It shouldn\u2019t have pushed 10s to 5%, but it makes sub-4% somewhat untenable.<\/p>\n

Equities. <\/strong>Difficult to like here, but slightly bullish bias, favoring the \u201claggards.\u201d My inclination is to step away from the punch bowl, but am I just snatching defeat from the jaws of victory? I cut positions but am buying dips. So, a timid bullishness, even with the laggards, which I continue to favor.<\/p>\n

<\/a><\/p>\n

While I\u2019m cautious about leaving early, it has been one heck of a party!<\/strong><\/p>\n

Since November 9th, the Nasdaq 100 and the S&P 500 have underperformed the equal weighted indices. They got beat up pretty badly by the Russell 2000 and have been left in the dust by Regional Banks and ARKK. I use ARKK as a proxy for \u201cdisruption\u201d and early in the year it was performing more or less in line with the Nasdaq 100, which surprised me. I view it as very high beta and would have expected it to trounce the Nasdaq 100 in such a strong market (it is finally doing that).<\/p>\n

When I look at this chart, it gives me optimism for the IPO market and for M&A coming into 2024 \u2013 typically good for stocks!<\/strong><\/p>\n

Credit. <\/strong>It is tight by recent measures, but I think that it can go tighter. People seem to want to fight the spread tightening. While it is difficult to pound the table for credit, especially since M&A activity could result in an even bigger (and longer duration) calendar than expected, I wouldn\u2019t fade it just yet.<\/p>\n

For once, let\u2019s enjoy the victory and keep on enjoying it for a little longer.<\/strong><\/p>\n

I\u2019m looking to add more risk on dips, as whatever ranges we thought applied to markets at the start of the week have materially moved with the Fed Put back in play!<\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nSun, 12\/17\/2023 – 15:10<\/span><\/p>\n

\u200bhttps:\/\/www.zerohedge.com\/markets\/it-seems-we-have-hit-point-where-wall-way-kicking-can-much-further<\/a>\u00a0<\/p>\n

\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

It Seems We Have Hit A Point Where A Wall Is In The Way Of “Kicking The Can” Much Further By Peter Tchir of Academy…<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1444429","post","type-post","status-publish","format-standard","hentry","category-news","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1444429","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/comments?post=1444429"}],"version-history":[{"count":0,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1444429\/revisions"}],"wp:attachment":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media?parent=1444429"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/categories?post=1444429"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/tags?post=1444429"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}