Oh Lael … oh James … (TWTW – Apr 4-8, 2022)

Oh Lael … oh James … (and oh Bill …)

“I could have titled this one a general important public announcement, with the header: Attention, attention, please be advised the FEDs no longer have your backs. Act accordingly going forward …”

Well, surprise … ICYMI … the US FED is … behind the curve …

Forget transitory anything, forget uncomfortably high near term … the US FED now seems to be saying hey, sorry, we’ve fuc*ed this up rather badly … and oh yeah, sorry too that we now need the FED Funds to move by 50 bps pretty much at every upcoming FOMC meeting scheduled for the remainder of 2022.

Market participants? oh, sorry, we no longer have your back … kindly take that under advisement.

James Bullard: we need 3.5% FED funds by year-end => Click HERE!

Formerly dovish Lael Brainard: oh … and these bond purchases we’ve conducted and that have gotten us to a USD 9 Trillion balance sheet at the FED … well, yes, we know, you’d rather we didn’t sell them for a while, but guess what … we’re going to begin selling some of them rather shortly … (any bidders out there … with inflation where it stands and bonds whose prices previously were goosed up by the same … FED?) Click HERE!

William Dudley (former FED Governor) => click HERE!

  • To be effective, it (the FED) will have to inflict more losses on stocks and bond investors than it has so far …

in Bill’s mind, the FED hasn’t yet accomplished much …

Recession … here we come … FED’s intentions will be for soft landing, but they likely won’t achieve it …

Need to generate slack in labour market … (there is none … obviously at 3.6% unemployment …)

Funny (sort of …) factoid: the add that played before I got to listen to Dudley was a pampers add … Fasten your seatbelts everyone …

Latest developments/news:

10 years bond yield … 2.704% (moving up rather fast lately …)

FED unwinding balance sheet … not going to help bond prices … The FED, imo, was the price insensitive buyer … they may now be the indiscriminate seller … but the potential buyers will be leery of bidding …

US Wants more Oil from Canada – finally … Realizing that Canadian oil is the logical secure supply, ethically produced barrel … WOW, it certainly has taken some time. Too bad the Keystone XL pipeline wasn’t earlier approved uh 🙁

Elon Musk now on Twitter’s board – from being one of the most followed folks on Twitter, as well as one of the most controversial, Elon now has become a significant shareholder, AND a board member, having acquired just under 10% of the company’s stock. Of course the stock this week, rocketed higher on the announcement of Elon having taken a stake

Manure in demand – Don’t laugh, that’s a thing … it is a thing illustrative of all things fertilizer related also going up, on account of Russia / Ukraine otherwise being a significant source of supply … which now is offline, and likely will remain so with sanctions et al.

CAD has been very strong of late – Finally, the CAD seems to have gained some strength from … presumably oil prices at or above USD100 per barrel …

Chrystia’s budget – The Libs unveiled their latest “budget” … which one likely can file in the category most familiar to our PM – namely the one labelled “and the budget will take care of itself … or balance itself … or something to that effect” … lol (NOT). in it: CAD 56 Billion deficit, with NDP claiming “victory” of sort, by virtue of having sold their support to the minority government in exchange pretty much for Canadians now getting a dental plan. The country’s finances overall will be in shambles, but we will all be able to smile about it … haha

CI Investments – looking to IPO up to 20% of their US brokers network, which has overall AUM significantly greater than that of their Canadian salesforce. click HERE! 

my best guess? CI’s stock price has been hit pretty hard of late, down under $20 after pushing modestly higher than 30 a few months back. Is it possible some questioned the economics of building that whole brokers network, respectively the debt accumulated as a result of it? I guess we will see …

Latest weekly performance: Factors; Sectors; Thematic:

  • Several factors continuing to fare notably better than the reference index …

 

  • The “defensive” side prevailing last week, including … notably Energy, which is holding its own rather firmly of late …
  • Financials – is it recession fears related … / not liking that flattening yield curve profile … Will next week’s expected 50 bps BoC hike help in this regard?

  • The bear rally looks to be over, with Thematics all under pressure this past week, safe for the relatively defensive “health” angle
  • Even clean energy took part in the downside
  • and Travel and Leisure … what is that all about? The pent-up demand argument making way for the … what if recession hits in Q3 already (provided we aren’t already in one …)

YTD performance: Factors; Thematic; Sectors:

  • same on a YTD basis – several factors notably ahead of the S&P/TSX benchmark …

  • With this week’s retreat, the recent rebound could be over … for now … better luck maybe past the anticipated 50 bps hike on tap soon …
  • The category is likely to remain a “trading” category for now … buy when oversold … hope for a meaningful bounce; repeat …

  • Clear winners … Clear “losers”
  • the lines appear well defined, and may continue to play out this way until recession risk is cleared, geopolitical risk possibly removed, and redistribution across market participants has been completed.
  • Canadian Technology – notably worse performing this US Tech … and yet relative multiples still favoring US …

Good luck out there – have a great week-end 🙂

Do I dare mentioning that with the FED possibly now the enemy, this bull market may soon have to be pronounced dead? After all we need a catalyst for that pronouncement, and what better than policy ultimately doing what it’s supposed to be doing, but unfortunately to a point where … recession ensues … ?