Birthdays and Sector Rotation

By Jeff Kelly on March 15, 2024

“A father holds his daughter’s hand for a short while, but he holds her heart forever.” 

The Ides of March. In our family March 15 has always had much greater meaning. It’s the day our first daughter was born. I have a great deal of trouble telling you what occurred at any point in the past few days, but I remember that day with clarity and detail.

It was a beautiful bright sunny Wednesday morning. The expected birthdate had past 10 days prior. The Doctors advise to Sandra was to “walk a lot”. They were not so quick to induce labor. Sandra woke me in the morning saying she was having contractions.

Soon it was on to the hospital and many hours of labor. Suffice it to say, if men had to endure labor there would be no babies. But then there she was. A head full of hair, all 10 fingers and toes. So grateful for her health and Sandra’s bravery.

After I left Sandra that evening, I went by the grocery store to pick up something for dinner. I told each person I encountered I was a new dad and showed them the picture taken just after she was born. In those days it was a polaroid, but spectacularly beautiful nonetheless.

Happy birthday boops! I love you more than ever. I hope your day is wonderful and filled with joy and laughter.

Markets have been more schizophrenic than usual. We saw continued weakness in bonds with several inflation measures coming in higher than expected. The equity markets are down modestly on the week. There has been significant rotation among different sectors. Energy had the best week while interest rate sensitive, real estate, was the worst. Technology and consumer discretionary also had poor weeks. Markets can correct in many ways, sometimes it’s through broad declines that hit most stocks. Other times money rotates through the sectors without leaving the market. So far it appears to be more rotational than exiting.

Crypto Funds are seeing the biggest inflows ever. The hope springs eternal.

This isn’t usually a good sign for short-term prices. Maybe it’s different this time.

The continued weakness in bonds is concerning. At some level the strength in equities is a result of expected lower interest rates. With the recent rise in many commodity prices, higher inflation numbers and increasing economic strength it’s hard to see the case for Fed rate reductions.

We are getting close to month and quarter end. If there is to be a larger correction, we’ll likely see it next week. The final week of the month and quarter tends to have a more positive bent.

CHARTS FROM THE WEEK PAST

The evolution of auto insurance costs since 1950, presenting a rather stark picture, especially when considering the sharp increase following the pandemic.

Key takeaways from yesterday’s CPI report include a 12-month change of 20.6% in auto insurance costs, 5.8% for rent, 4.5% for restaurant meals, with decreases in rental cars (-10%), toys (-6.2%) and airfare (-6.1%).

Semiconductors outperformed the S&P 500 by the largest margin since 2000.

I would point out there was no “Chips Act” in 2000 handing money to semi companies.

Analysts have lowered Q1 EPS estimates for S&P 500 companies by 2.2% since December 31, which is below the 5-year average (-3.7%) and the 10-year average (-3.4%) for a quarter.

Big numbers from rail traffic.

Intermodal units went up 12% last week and 7.9% on the year. Acceleration.

Lots of unrealized losses on bank balance sheets.

Someday it will matter but that time isn’t now.

Last week saw the largest weekly outflow from tech stocks ever.

Ever is a long time and this isn’t how bull markets end.

The weight of high momentum stocks in U.S. markets has never been higher.

Demark signal attempt to show exhaustion levels.

We have seen one trigger for the S&P 500.

High Yield debt shows no signs of stress.

The rise of private credit may have something to do with spreads and yield staying low. Major refinancings are occurring with little or no problems.

The Move Index (treasury bond volatility) has stayed relatively high, particularly relative to the VIX index (equity volatility).

Per Bloomberg, news story tracker, number of stories mentioning “Magnificent Seven” peaked in early February, along with the stocks.

The U.S. is producing more crude oil than any other country.

ALSO, more than any of the years the current Presidential Candidate, and former President was in office.

U.S. equity markets dwarf the rest of the world.

Mortgage Purchase Index from MBA mortgage has moved higher over past couple weeks … 2-week rate of change (orange) is +15.8% … but in level terms (blue), still a lot of ground to make up.

U.S. stocks moving 25% in 5 months has happened 10 times.

Each time was followed by a decline of some magnitude.

The VIX index, equity volatility, has begun to move higher.

This likely presages a short-term correction.

Reshoring mentions continue to be high.

Another reason for economic strength.

Business applications continue to grow. There has been no slowdown since the pandemic.

Last week, small options traders spent 46% of their total volume on buying call options to open.

Over nearly 25 years of history, the only time this level of speculative activity did not precede at least a pullback is during the options mania from the summer of 2020 through the fall of 2021.

One of the reasons valuations are higher than historic levels.

It takes many less workers to generate 1 million in revenue.

NATO, despite what some politicians say, is incredibly important.

From the 1970s to the 1990s, the two most watched telecasts of the year were the Super bowl and the Oscars.

Their relative audience sizes are shown here. In the 1970s, the Super bowl TV audience was ~20% larger than the Oscars. Now, the Super bowl is about 500% larger. The Oscars are no longer the second most-watched telecast of the year. In 2022, it was the 23rd most-watched telecast. In 2023, it was the 15th most-watched telecast. Nearly all the telecasts with larger audiences were NFL games.

More than 60% of our growth leading data inputs (90 series in total) are now improving quarter over quarter, which is bullish for commodity prices.

While we get minute by minute updates on which of the ancient presidential candidates passed gas or slurred his words, Hati is burning.

In our hemisphere, right now.

Barrons’s cover joins the list of magazines with a bullish message.

This is not bullish.

Australia abolishes almost 500 tariffs starting July 1, 2024. A great idea!

Joe Oltmann, a prominent far-right voice in Colorado politics, says Biden should be tried and executed. I’m pretty sure this is a Federal Crime.

DCF Guns owner calls for the killing of President Biden

Interesting conversation on car sales, more evidence of economic strength.

WEEKEND HOMEWORK

Great book on the 2020 elections-facts and data vs. tin foil hats.

Many searched for evidence of voter fraud in 2020, only a few were unbiased professionals . . . and only one has written a book about his experience.

If you value the integrity of our elections—or want a behind-the-scenes look at an attempt at overturning one—Disproven by Ken Block takes you out of the voting booth and into the chaos that was the attempt to challenge the results of the 2020 U.S. presidential election.

In November 2020, data specialist Ken Block received a phone call from the Trump Campaign. They wanted to hire him to find evidence of election fraud. What followed were late night and early morning requests to assess fraud claims at a blistering pace and ultimately find definitive evidence about the role voter fraud played in the outcome of the 2020 presidential election.

Multiple subpoenas later, Block reveals the truth about being one of the few professionals hired to prove the Trump Campaign’s allegation that voter fraud cost Donald Trump the 2020 presidential election. He explains what the voter data tells us and exposes the sobering truth that our federal elections are operating on hundreds, if not thousands, of disparate voting systems prone to error—a threat to national election integrity.

Disproven is an insider’s look at the results of an inflammatory claim, a flawed system, and the changes drastically needed before the results of another election are threatened or contested.

A fun podcast with great stories. Of course, since she was in New York Trump owed her money and didn’t pay. She had to get a judgement to get her funds. Seems like an ongoing problem.

Barbara Corcoran — How She Turned $1,000 into a $5B+ Empire: PR Stunts, Sales Techniques, Critical Early Wins, Fighting Trump, and Becoming a Real Estate Mogul (#725)

Barbara Corcoran has been an investor/Shark for the past 15 seasons on ABC’s four-time Emmy-award-winning show, Shark Tank. She is also the founder of an eponymous real-estate company, which she started with a $1,000 loan after leaving her job as a waitress in New York City. Over the next 25 years, she would parlay that $1,000 into a $5 billion real-estate business. Barbara is the host of the top business channel on Patreon, Barbara in Your Pocket, which provides exclusive content created for entrepreneurs at every level.

Selection Sunday this weekend. Time to get ready to fill out those brackets. I’m sure this is my year. I’m finally going to win the pool. I will be sure of this right up until the first game on Thursday. Then it’s all downhill from there. Remember to get outside. Have a wonderful weekend.