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Another Day of Dull Drifting
Daily Rap 06-09-2023
Today was a bit like yesterday in that there were no economic data or real earnings results to influence trading, and an early rally of about 1% in the Nasdaq was largely eradicated by midday, with the Dow and S&P also about flat.
In the afternoon, the market essentially just drifted sideways, finishing with the small gains that you see in the box scores.
Without a Care in the World
Away from stocks, green paper was a little higher while fixed income was lower, particularly at the short end. The metals were mixed, with silver gaining a few pennies while gold lost a few dollars. The miners were weaker in dull apathetic trading once again.
Last year's posts for Ask Fleck
Q: if one were to short via buying puts on the S&P then do you think december is a long enough duration to capture this potential decline? i have heard enough catalysts which in theory should manifest by the fall so i am assuming december should be long enough. clearly nothing is a guarantee but i want to give myself enough time to scale in and at least protect a portion of my longs via this hedge if markets keep going higher.
Fleck: I think October will be far enough, so December ought to work also. But I would pace my buying to be sure there isn't another surge higher.
(posted: 6/9/2023)
Q: Welcome back from you break. Thought I would pass on some notes from a Wall St broker dinner with WMT.
- 1st stage of consumer pain is general merchandise doing worse and grocery better - that has happened. WMT seeing the 2nd stage which is downgrading within staples. The 3rd stage is they are paying for more of the grocery bill on credit. This has spiked.
- The price gap is widening because brands are still raising prices but private label is not. Private label price gaps are running at 30% vs. 18-20% normally. In the last 4-6 weeks they have seen a greater level of vendor funded promotions.
- 90-120 day lag between change in perception and change in behaviour. Their surveys show even the upper income perception is showing signs of changing perception. Planning for flat comps in 2H but buying inventory at even lower levels in case that's optimistic.
- Pricing needs to come down on the supplier side and WMT are pushing suppliers hard. Disinflation not deflation, but perhaps a concern that volumes don't pick up as much as promos rise and y/y pricing comes down.
Fleck: Thanks for the data.
(posted: 6/9/2023)
Q: Do you think the US Government is going to try to inflate the debt away through financial repression? If you do, what do you think their chances of succeeding are? 0%, 25%. 50%, 75%, 100%
Fleck: Not in an organized way, but as we have seen the Fed is the engine of inflation. Thus, there is/will be continued inflating away of the debt, just because the Fed creates inflation.
(posted: 6/9/2023)
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