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    1. Eye on the Market

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    Eye on the Market by Michael Cembalest

     

    Eye on the Market

    Michael Cembalest, Chairman of Market and Investment Strategy offers timely commentary on the economy, markets and investment portfolios

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    The End of the Affair

    The End of the Affair. The affair with market catalysts of the last decade is over now, and a new era of investing begins. A look at a world of higher inflation, more regionalized trade and investment and more capital scarcity.

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    LATEST COMMENTARY

    Silicon Valley Bank failure

    One of these things is not like the other, and that thing is Silicon Valley Bank.

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    Winter Heating

    US economy stays warm, large language model battles get hot

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    American Gothic

    The Federal debt and how the Visigoths may try to break the system if no one fixes it.

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    The End of the Affair

    The End of the Affair. The affair with market catalysts of the last decade is over now, and a new era of investing begins. A look at a world of higher inflation, more regionalized trade and investment and more capital scarcity.

    Read more

    Holiday Eye on the Market: Non-Fungible Trainwreck

    A discussion of the YUCs, the MUCs, FTX and three rules for investors: the Gensler Rule, the Sirens Rule and the Summers Rule. Our 2023 Outlook will be released as usual on January 1st.

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    Little Red Wagon

    A preliminary read on midterm election results given the context of prevailing market and economic conditions.

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    A CH₄, HR4346 and mRNA-1273 Thanksgiving

    My list of things I am thankful for this year: CH4, HR4346 and mRNA-1273. Of course, your mileage may vary.

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    Reruns

    Three reruns for investors. First, in almost every post-war bear market, equity declines preceded the fall in earnings, growth and employment. As a result, we’re more focused on changes in manufacturing surveys than on the other victims of a recession as a sign of the bottom. Second, Graham Allison’s rising power conflict analysis and its historical precedents come back into focus with the latest US policies cutting off high performance semiconductor exports to China. Third, another press article on a small country as a prototype for a renewable future that does not address its irrelevance for larger developed or developing economies.

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    Arrested Development

    Three topics this week: the repricing of risky credit, labor markets and a COVID recap. While equities are pricing in a much greater probability of recession now, the credit markets are just getting started. One canary in the coal mine: the Citrix financing, which will be followed by a string of even weaker credits. On labor markets, the Fed is facing the tightest labor supply conditions in decades. Can second chance policies easing the path to employment for people with criminal arrest records help increase the labor supply, or will the Fed have to crush the economy to restore desired levels of wage and price inflation? Lastly, an update on bivalent vaccines and inhalable vaccines, as the latter offers the best chance of actually reducing infection and transmission.

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    On CPI, S&P, GHG and the IRS

    Three topics in this month’s Eye on the Market. First, an update on the Fed, inflation and corporate profits since we believe the June equity market lows may be retested in the fall. Second, a detailed look at what would have to happen for the climate bill’s projected GHG savings to actually occur; the answer matters given the implications for the US natural gas industry. And finally, will all the new IRS agents really stick to auditing taxpayers above $400k? Data from the GAO suggests there may not be enough of them to meet the Administration’s revenue targets.

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    The second gear of the Manchin-Schumer bill

    Whenever there’s a tax/spending bill passed by Congress, the Congressional Budget Office “scores” the bill with respect to its impact on deficits, debt and GDP.

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    Long Hot Summer Reading List

    Most summer reading lists are carefully curated, inspirational elegies to the human spirit. This is not that. See today’s note for links to reading materials on energy, economics, finance, the Supreme Court, geopolitics and COVID/cancer research as this long hot summer rolls on. Also, a look at the recently unearthed “Shakespeare’s Annotated Guide to Bitcoin”.

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    Independence Days

    Europe’s energy crisis, China’s commodity trade war with Australia and other examples of resource nationalism (India and Indonesia restrictions on exports of wheat, sugar and palm oil) have reinforced the following: relying on essential food and energy imports is a risky proposition with respect to supply, price, currency stability and national security.

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    Eye on the Market 12th Annual Energy Paper

    The Elephants in the Room. We start with a global summary of the energy landscape, including the energy crisis in Europe. We continue with a detailed assessment of the hydrogen economy, whose liftoff is still many years away.

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    Dearly beloved

    JP Morgan CEO Jamie Dimon stated last week that he expects a “hurricane” resulting from the end of the largest fiscal and monetary experiment in history, and from the ongoing impact of Russia’s invasion of Ukraine on food and energy prices.

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    Bear Market Barometers

    The slowdown induced by central bank tightening is just starting. You can be patient when adding risk to portfolios; earnings will eventually decline and markets are not pricing in high risk of recession.

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    The Tide Goes Out: Growth Trade Aftermath

    A combination of rising rates, the Russian invasion of Ukraine and years of investor acceptance of unprofitable new companies (the “YUCs”) led to a sharp repricing of growth stocks in Q1 of this year.

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    Dude, Where’s My Stuff?

    The global supply chain mess will require increased vaccination and acquired immunity, semiconductor capacity expansion and the end of extraordinary housing/labor supports to resolve. A close look at some very anomalous charts on shipping, semiconductors, inventories, labor shortages, foreclosures and mortality.

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    Your Fall 2021 syllabus

    Greetings students. We look forward to seeing you back on campus. Your Fall 2021 syllabus is attached. Syllabus update: Biology BI66 “The Origins of COVID” has been cancelled until further notice.

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    The Needle and the Damage Done

    The cost of engineering a US recovery as the world waits for a vaccine; Biden agenda on taxes/spending; Tech stocks (2020 vs 1999); COVID and The Fountainhead; US election rules, dates and process in light of derogatory comments on mail-in voting by the President and Attorney General

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    The Bounce

    The US recovery; The flood of money and market returns; Globalization lives; Reducing COVID mortality through vascular treatments; Realistic timetables for never-been-done before vaccines; Sweden’s COVID experiment is not what you think

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    Zoom Room

    In this week’s Eye on the Market, we review topics from our recent client Zoom calls. Topics include: risk of inflation, second waves of infection, the effectiveness of lockdowns and Biden’s taxation and spending agenda.

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    The Day After

    Tracking the rebirth of the US consumer with real time data as a function of infection levels and state policy. Additional topics: no evidence yet of material second waves of COVID infection, and a round-up of the latest news on vaccine trials (Moderna, Oxford, Sinovac) and anticoagulants.

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    Ready or Not: The US prepares to reopen

    An update on the COVID-19 crisis as the US prepares to reopen despite having one of the highest infection rates in the world. Additional topics: monoclonal antibodies and anti-viral trials; the growing gap between markets and the economy; S&P 500 earnings haves and have-nots; regional equity performance (Europe loses again) and leveraged loans at a time of rising bankruptcies.

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    State's Rights

    In this week’s note, we discuss the latest news on US infection trends and reopening plans, Remdesivir trial results and whether US fiscal stimulus is “enough”.

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    Are we there yet?

    Lockdown relaxation and economic reawakening…are we there yet?

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    COVID and culture

    In this week's note, we take a close look at country and regional virus data, and examine the pitfalls of over-extrapolating trends that often reverse.

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    The equity rally and herd immunity

    After the equity rally, P/E multiples are back at around 16x 2021 consensus earnings.

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    Man vs Nature Part II

    Virus trends and head-fakes, convalescent plasma and U.S. vs. China lockdowns.

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    Man vs Nature: what the government can and cannot fix

    There are things the government can try and fix during a pandemic and other things which it can't.

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    John Stuart Mill and the road from ruin to recovery

    There are some difficult days ahead as quarantines and lockdowns grow. I want to share something with you from John Stuart Mill as we head into the unknown.

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    The pandemic gap

    A lot of data is being made available on the coronavirus, but most of it requires careful analysis before drawing conclusions.

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    Berning Man

    Confounding almost every forecast we saw last week, Senator Biden appears to have emerged from Super Tuesday with a sizeable delegate lead. Why might the night have turned out so differently from what was expected just a few days ago?

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    COVID-19 update

    A Coronavirus update: severity, consequences and implications for investors.

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    Millions and Trillions

    Answers to questions on the coronavirus, US megacap stocks, the cost of Democratic Healthcare plans, the Iowa caucus and the problem with the student loan system.

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    Rotten Tomatoes

    Consensus reactions to the Phase I US-China deal are very skeptical, but may be missing the broader point. A brief note on what happened, and the alternatives.

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    Ghosts of Christmas Past

    After a very positive year for investors in 2019, we expect lower positive returns on financial assets in 2020 as some Ghosts of Christmas Past reappear.

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    War of the Worlds

    How a discussion about China and Hong Kong morphed into a chart war about Trump, Hoover, Taft, Rachel Maddow and Anderson Cooper.

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    The Armageddonists

    While recessions and bear markets are a fact of life, something peculiar happened after the Global Financial Crisis: the rise of the Armageddonists.

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    Warren Peace

    A close look at the Progressive Agenda, China’s deteriorating welcome mat in DC and US Tech IPOs.

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    Active Management and QE-distorted markets

    Michael Cembalest analyzes the performance of over 6,700 domestic and international active equity managers and discusses the challenges they face.

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    Cold Turkey

    A brief comment on a proposal from leading Presidential candidates to ban hydraulic fracturing everywhere, immediately.

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    So long Yellow Brick Road

    It was a long, hot summer at the Heritage Foundation. An update from the front lines of the Trade War.

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    Lost in Space: The Search for Democratic Socialism in the Real World

    Michael went on a search for Democratic Socialism in the real world, and ended up halfway around the globe from where he began.

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    Listen when people tell you who they are

    Michael discusses how he should have taken Trump at his word on tariffs, and the impact of the widening trade war on global growth and equity markets as proposed tariffs approach pre-war levels.

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    Smoot Hardly

    The US-China trade war, prescription drug price legislation and the 2020 election.

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    Energy Outlook 2019: Mountains and Molehills

    Topics: unattainable objectives of the Green New Deal; overview of the world’s decarbonization challenges; Germany’s energy transition; Trump’s War on Science.

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    SPECIAL REPORTS

    Annual Outlooks Energy Outlooks
    Annual Outlooks

    Outlook 2021: The Hazmat Recovery

    In response to the worst pandemic in 50 years and a country at war with itself over lockdowns, individual freedoms and election results, the Fed and Congress airdropped an unprecedented amount of stimulus with vaccine airdrops to follow.

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    Market Outlook 2020: Ghosts of Christmas Past

    After a very positive year for investors in 2019, we expect lower positive returns on financial assets in 2020 as some Ghosts of Christmas Past reappear.

    Read more
    Energy Outlooks

    2022 Annual Energy Paper

    Accessible PDF

    Read more

    2021 Annual Energy Paper

    Accessible PDF

    Read more

    Tenth Annual Energy Paper

    Read more
    Read more
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