September 21, 2021
What You Need to Know Today:
Next clue on Evergrande crisis will come from People’s Bank on Wednesday
Anyone watching the China Evergrande crisis–that’s China’s banks–and investors and financial markets around the world–might get some guidance on Wednesday when the People’s Bank of China resumes daily open-market operations after a holiday break. At the least, the bank will tell all interested parties how much extra liquidity–if any–it’s providing to the financial system.
Next clue on Evergrande crisis will come from People’s Bank on Wednesday
Anyone watching the China Evergrande crisis–that’s China’s banks–and investors and financial markets around the world–might get some guidance on Wednesday when the People’s Bank of China resumes daily open-market operations after a holiday break. At the least, the bank will tell all interested parties how much extra liquidity–if any–it’s providing to the financial system.
China Evergrande misses interest payments to banks
Evergrande misses interest payments to two of its biggest bank creditors. The company owes banks $88.5 billion with nearly half due in less than a year.
Special Report: 10 Greatest “Savings Account Stocks”–#2 Taiwan Semiconductor
Today, September 20, I’m making Taiwan Semiconductor Manufacturing (TSM) my second pick in my Special Report: 10 Greatest “Savings Account Stocks.”
Will a 5% drop bring out the buy on the dippers? Not, I’d argue, until the People’s Bank makes a move
The Standard & Poor’s 500 fell another 1.70% today and it’s now down 3.94% from the September 2 high. As the index dropped last week (again) and over the weekend, lots of Wall Street money managers said Hey, stocks were over-valued and news from Beijing and Washington (and places in between) is negative, but if stocks drop 5% we will be buyers. It looks like might get to test that conviction sooner than anyone expected. Which way will things break on another decline?
Stocks have yet to start noticing slowing economy in second half of 2022
Just about all of the Pandemic stimulus programs–checks for households, no-cost small business loans, enhanced unemployment payments–will have expired by sometime in 2022. Which is leading economists to project a slowdown in the U.S. economy for the second half of 2022. No matter what the size of the Biden administration budget finally turns out to be. U.S. fiscal policy will go from stimulating economic activity to acting as a drag on the economy. The Brookings Institution’s Hutchins Center calculates that the economic impact from federal, state and local-government taxes and spending turned negative in the second quarter of 2021 and will remain that way into 2023.
Special Report: 10 Greatest “Savings Account Stocks”–#1 Microsoft
You know how a savings account works, right? You deposit money in a bank. The bank uses your deposit to make a loan. Out of its profits, the bank pays you interest. That interest payment is a pittance today. 0.5% if you’re very, very lucky. But the national average is just 0.06%. What I’m calling “savings account stocks” work the same way that a bank savings account does. (Share prices do fluctuate but in the long run I’d argue that these stocks are as safe as a bank savings account.) And they pay an annual return that’s 10X–or much, much more–higher–than the paltry 0.5% now offered by the highest yielding savings accounts. How do these stocks work and why are they so much better than bank savings accounts? You–investors–give the company capital by buying newly issued shares or company bonds. The company invests that cash in making widgets or apps or whatever. And the company returns the bulk of the profits from those investments to the owners of its stock in the form of dividends, stock buybacks, and the appreciation in share price that results from the growth of the company’s business over time. I’m posting the first of my 10 Greatest “Savings Account Stocks” today and my Special Report will name a total of 10 great “savings account stocks” in posts over the next week. Today’s Greatest Savings Account Stock Pick: Microsoft (MSFT). The average annual return on Microsoft shares has been 28% over the last 10 years. Beats that 0.5% on a savings account, no?
Live Market Report (20 minute delay)
| Symbol | Name | Last Price | Jubak's Gain/Loss | Jubak's Gain/Loss % |
|---|---|---|---|---|
Next clue on Evergrande crisis will come from People’s Bank on Wednesday
Anyone watching the China Evergrande crisis–that’s China’s banks–and investors and financial markets around the world–might get some guidance on Wednesday when the People’s Bank of China resumes daily open-market operations after a holiday break. At the least, the bank will tell all interested parties how much extra liquidity–if any–it’s providing to the financial system.
China Evergrande misses interest payments to banks
Evergrande misses interest payments to two of its biggest bank creditors. The company owes banks $88.5 billion with nearly half due in less than a year.
Special Report: 10 Greatest “Savings Account Stocks”–#2 Taiwan Semiconductor
Today, September 20, I’m making Taiwan Semiconductor Manufacturing (TSM) my second pick in my Special Report: 10 Greatest “Savings Account Stocks.”
Will a 5% drop bring out the buy on the dippers? Not, I’d argue, until the People’s Bank makes a move
The Standard & Poor’s 500 fell another 1.70% today and it’s now down 3.94% from the September 2 high. As the index dropped last week (again) and over the weekend, lots of Wall Street money managers said Hey, stocks were over-valued and news from Beijing and Washington (and places in between) is negative, but if stocks drop 5% we will be buyers. It looks like might get to test that conviction sooner than anyone expected. Which way will things break on another decline?
Stocks have yet to start noticing slowing economy in second half of 2022
Just about all of the Pandemic stimulus programs–checks for households, no-cost small business loans, enhanced unemployment payments–will have expired by sometime in 2022. Which is leading economists to project a slowdown in the U.S. economy for the second half of 2022. No matter what the size of the Biden administration budget finally turns out to be. U.S. fiscal policy will go from stimulating economic activity to acting as a drag on the economy. The Brookings Institution’s Hutchins Center calculates that the economic impact from federal, state and local-government taxes and spending turned negative in the second quarter of 2021 and will remain that way into 2023.
Call to Action: Sell November VIX Calls at 18 and Roll into December Calls at 19
Huge surge in volatility this morning. It’s as if everybody woke up and said, “Hey, you know there are risky trends in the world.” As of 12:30 p.m. New York time today, Monday, September 20, the CBOE S&P 500 Volatility Index is up 29.51% to $26.08. I think there’s more volatility ahead so today I’m going to sell the VIX November 17 Call Options with a strike price of 18 in my Volatility Portfolio and buy some more time with a purchase of the VIX December 22 Call Options with a strike price of 19.
Wall Street has started to fret about third-quarter profit warnings
Profit warnings for the third quarter, which ends on September 30 for most companies, have started to worry Wall Street. So far most of the revisions have come from materials producers such as PP Industries (PPG) and Sherwin-Williams (SHW). PP Industries, for example, lowered its sales number for the quarter by $250 million. That’s a decent-sized hit on Wall Street’s projected $4.3 billion in sales. Sherwin-Williams said that limited availability of raw materials is hampering its ability to meet demand. Quarterly sales could fall by a low single digit percentage year over year. But there are signs of a more extensive problem.
Just what this market needs: Republicans say they will vote against raising the debt ceiling
I doubt that, when push comes to shove, Congress will walk away from its responsibilities and allow the Federal government to go into default. But I suspect that Republicans won’t vote to raise the debt ceiling, which would allow the federal government to meet its commitments on spending it has already approved, without another government shutdown. On Friday, Senate minority leader Mitch McConnell declared that Senate Republicans will not vote to increase the Treasury’s authority to continue borrowing.
Saturday Night Quarterback says, For the week ahead expect…
I expect that the the financial markets will remember this week that the Federal Reserve will actually say something after its meeting on Wednesday, September 22. Even if the Fed doesn’t change policy at all, the central bank will deliver a new set of economic projections with views on inflation and GDP growth that could add volatility to an already nervous markThe CME Fed Watch Tool, which looks at prices in the Fed Funds Futures market to calculate market expectations for an interest rate move by the Federal Reserve, says there’s a 0% chance of a change in interest rates at Wednesday’s meeting. The odds for a Fed interest rate increase go up to only 1.8% at the November 3 meeting according to the CME Fed Watch. And are only 1.7% for the December 15 meeting. In other words the market is utterly convinced that the Fed will do nothing.
China’s Evergrande crisis is a really big deal even if Beijing again intervenes to “save” the company
Without government intervention China Evergrande, one of the country’s biggest property developers, will be forced into a bankruptcy reorganization. The company used promises of above-market returns to raise billions in financing from individual investors through unregulated money management products. Now protesters daily storm the company’s offices as Evergrande falls further and further behind on payments to more than 70,000 investors. Construction of unfinished properties with enough floor space to cover three-fourths of Manhattan has come to a halt and a million homebuyers are stuck having made payments to Evergrande but without homes to show from their cash.The housing ministry told Evergrande’s main banks this week that the developer won’t be able to make interest payments due September 20. Evergrande’s stock is down 90% from the 2020 high.
How high will it go? VIX climbs another 11% today setting up test of top of recent range next week
The CBOE S&P 500 Volatility Index (VIX) closed at 20.69 today, up another 10.7%. That took the “fear index” above the 200-day moving average at 19.98. The VIX had previously moved above the 50-day moving average at 17.86. I’d be surprised if we don’t see more market nerves driving more buying of S&P hedges to send the VIX higher next week.
Individual investors aren’t buying on the dip–I think they’re waiting for bigger bargains
An interesting–and I think important–post by Ethan Wolff-Mann on Yahoo Finance yesterday. According to Data from Vanda Research, individual investors haven’t been buying the September dip.
Selling my Put on the Russell 2000 before tomorrow’s expiration
Time–and more–to admit that this insurance policy I took out on March 24 against a big drop in stock prices isn’t going to pay off. I paid my premium and other than peace of mind–maybe–I got nothing in return.
Watch my new YouTube video: “Quick Pick Albemarle:
I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. My forty-eighth YouTube video “Quick Pick: Albemarle” went up today.
Watch my new YouTube video: Time to Worry About China Too
I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. My forty-seventh YouTube video “Time to Worry About China Too” went up today.
Special Report: 10 Greatest “Savings Account Stocks”–#1 Microsoft
You know how a savings account works, right? You deposit money in a bank. The bank uses your deposit to make a loan. Out of its profits, the bank pays you interest. That interest payment is a pittance today. 0.5% if you’re very, very lucky. But the national average is just 0.06%. What I’m calling “savings account stocks” work the same way that a bank savings account does. (Share prices do fluctuate but in the long run I’d argue that these stocks are as safe as a bank savings account.) And they pay an annual return that’s 10X–or much, much more–higher–than the paltry 0.5% now offered by the highest yielding savings accounts. How do these stocks work and why are they so much better than bank savings accounts? You–investors–give the company capital by buying newly issued shares or company bonds. The company invests that cash in making widgets or apps or whatever. And the company returns the bulk of the profits from those investments to the owners of its stock in the form of dividends, stock buybacks, and the appreciation in share price that results from the growth of the company’s business over time. I’m posting the first of my 10 Greatest “Savings Account Stocks” today and my Special Report will name a total of 10 great “savings account stocks” in posts over the next week. Today’s Greatest Savings Account Stock Pick: Microsoft (MSFT). The average annual return on Microsoft shares has been 28% over the last 10 years. Beats that 0.5% on a savings account, no?
China’s economy slows at unexpectedly high speed
Retail sales rose just 2.5% in August from a year earlier, China’s National Bureau of Statistics reported today. The estimate from economists surveyed by Bloomberg was for 7% year over year growth. Retail sales grew at an 8.5% pace in July. Industrial production was up 5.3% year over year, down from a 6.4% rate in July. Fixed asset investment grew by 8.9% in the first eight months of the year from the same period in 2020. Economists were looking for 9% growth. Construction investment contracted by 3.2% in t5he first eight months of 2021 from that period in 2020 as the government tightened controls on risky money accounts used to finance property development.
So far it’s just a typical September slump
I found myself humming “I scare myself” this morning as the market continued its September selling. The Dan Hicks and the Hot Licks song pretty much sums up the market action this morning. We all know that stocks go down in September so we’re sending stocks downward. And we all know that September 17 is the Big Bad Day in the month so it’s unreasonable to expect a turn in sentiment before that date. But so far, I’d note, the selling seems “orderly” with the usual candidates bucking the trend and showing up in the green. It’s when those still in the green stocks start tumbling that I’ll really start to worry.
Inflation is moderating–if you want to read today’s numbers that way
This morning the Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose 0.3% in August (on a seasonally adjusted basis.) That comes after a 0.5% increase in July. Year over year the headline CPI rose 5.3% in August. That’s slightly below the 5.4% 12-month increase in July.
Solutions for my YouTube video on September/October risk–What to do? 5 Moves
Back on September 4 I posted a video on YouTube and this site “September and October 2021 Worse Than Usual for Investors?” that argued that September, the worst performing month for the Standard & Poor’s 500 from 1950 through 2020, and October, historically the home of the biggest one-day or one-week stock market crashes, stood a good change of being even worse than usual this year. I cited factors such as the Fed’s September 22 monetary policy meeting, a potential stalemate over the raising the debt ceiling, and economic uncertainty created by the Delta Variant (see last weeks weak jobs report as evidence on that front) as reasons for thinking that we could see a repeat of the historical weakness and volatility this September and October–but with a bit of supercharging. I don’t want to revisit all the reasons I gave in that video–Hey, just watch it, ya know?–but let me add a couple of points that I didn’t mention in the video. Like the effects of the continued shortage of chips on car manufacturers and hence car sales. Like the run-off in federal Pandemic economic help that’s now scheduled for this fall. Like signs of weakness in consumer sentiment and business confidence. Instead of more on “the problem” lets talk about potential solutions- the “what should I do stuff.”
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