New Month, New Quarter

Well, August finished up as the best month for the stock market in decades. Why, I have no idea, except “Stocks only go up!” (for those whose memories don’t go back to March).

To start, things are quiet, except I noticed:

• long Treasury bond futures are definitely trending down: maybe someone is listening to Powell saying that inflation is finally going to rip (“FAIT”: Flexible Average Inflation Targetting). The seem to have forgotten about R*.
• soft commodities strong, especially soy beans. Corn, dropping however. $DBC probably a good way to get exposure to a balance portfolio of softs,
• precious metals pretty flat. Although gold is the “anti-dollar” as Anantha Nageswaran describes it in the FT today, it does have a tendency to be somewhat risk on in terms of its correlation with the SPX (0.2 beta according to unicorn bay),
• the FT getting very bearish about the dollar, but sceptical that it will help the US economy,
• $TSLA after a stunning run is a bit weaker today; it’s price performance has been nothing short of insane. I am not sure exactly why, but it must be in at least some small part fashion, and the rise of ESG funds and ETFs.
• Turkish Lira falls a bit more against the Euro,
• there is a strong contango in the VIX (Sept is 28, Nov is 31),
• Unicredit is trading at about half it’s regulatory capital.

Labour market stronger than expected

Statistics on the labour market are always difficult to get, and with so many schemes to pay money to employers to bribe them into not sacking workers, things are murkier than ever. This post from the St. Louis Fed suggests that the job losses have been less than expected, and are recovering well.

I don’t really understand the technical details of this post, but the bottom line seems to be that the labour market is stronger than expected, with employment down less than 9% compared to January 2020. I can’t observe anywhere in the US directly, and I am not out and about much in the UK. My perception is that there is a lot of working from home, still, which is still working, and may even represent improving efficiency.

A separate post (no link, sorry) suggested that hourly wages were increasing. I don’t know the detail, but I would have thought that this would point to a weak market, as firms would lay off their less productive (and presumably worse paid) employees, leaving the average for the remainder higher (but with no individual worker having any more pay, at least per hour).

Wrap

$AAPL is now worth more than the FTSE ($Z). Up about 4% today. $TSLA is down, also about 4%, after announcing it would issue extra equity capital via a so-called ATM (At The Market) issue, which seems to be a sort of inverted share buyback programme. This seems to be favoured only by no-income biotech stocks at an early stage, and seems very unsuitable for an issuer like $TSLA, but we shall see. There is a lot of talk about the insiders cashing out. Overall, most equity indexes were up.

In other markets, DX a bit stronger, most commodities down including LB (lumber). This has risen insanely, alongside $AAPL and $ZM, the complete opposite of $JETS. $TLT was up, so it’s hard to classify this as risk on or risk off. $TOPX was flat in spite of Warren.