Morning Roundup

By Mark Masterson on September 10, 2021

Good morning,

Below are the news items moving markets today

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Executive Summary:

 

Before jumping into capital markets, I want to thank all first responders, military, and all others who volunteered after 9/11 to keep America safe and rebuild a frightened nation.

I also want to offer prayers for those families who lost loved ones in the attacks against the U.S. 20 years ago.  For them, the tragedy of 9/11 is as fresh today as it was on that day as we watched it unfold in real time.

9/11 is a somber anniversary.  We can’t forget.  Thank you.

 

Markets look to rebound after some modest weakness this week.

2021 is still one of the least volatile years we have seen in a while.  In fact, the S&P 500’s maximum drawdown this year is only 4.2% (closing basis).

Going back to 1928 only 3 years have had a smoother ride than 2021: 1964 (-3.5%), 1995 (-2.5%), and 2017 (-2.8%).

 

You can see it in the chart below showing the intra-year drawdowns for stocks.  Drawdowns are normal.  Runaway moves are not the norm.

Still no consensus on how the spending bill will unfold.  There will be a compromise -no doubt.

• Not much incremental around the $3.5T spending reconciliation package.
• The Hill the latest to note that Senators Joe Manchin and Bernie Sanders are on a path toward a showdown over the spending plan, with both continuing to draw hard lines around their legislative priorities.
• Reports earlier this week noted Manchin only willing to go as high at $1.5T, while Democrat leadership, including House Speaker Pelosi, has signaled that it would be open to reducing the price tag to satisfy moderates (AP).
•  Washington Post this week also highlighted gaps across Democrats, including taxes.
• From a market perspective, taxes the biggest factor in ongoing negotiations, particularly when considering thoughts that stocks have not priced in the risk of higher corporate taxes.
• White House reportedly looking to put more headlines behind revenue raising measures to appease centrists’ concerns about the deficit.

 

Remember yesterday I posted the below article highlighting how Fed Presidents benefited from their own policy and inside knowledge by placing million dollar trades in individual stocks and ES futures?

• Dallas Fed President Robert Kaplan made million-dollar stock trades in Tesla, Amazon, and Facebook last year  https://markets.businessinsider.com/news/stocks/robert-kaplan-stock-trades-apple-tesla-federal-reserve-president-2021-9

 

Update:  Last night Fed Presidents Kaplan and Rosengren announced they will now sell those individual stocks……Perhaps they are again frontrunning the market as they intend to taper?

• Kaplan and Rosengren to sell stocks to avoid apparent conflict of interest (WSJ)
• Eric Rosengren and Robert Kaplan, the heads of the Boston and Dallas Federal Reserve banks, respectively, will sell their individual stock holdings by Sept. 30 and invest the proceeds in diversified index funds or hold them in cash
• “Kaplan also made multiple buy and sell trades worth more than $1 million in S&P index futures”

Ok – I am a bit old fashioned.  I welcome a conversation to be educated on the value of NFT’s.  I see none.  In fact, all I can see is liquidity induced speculation.  I am open minded and welcome the debate.  Case in point bellow:

Sothebys reportedly auctioned off 101 “Bored Ape” #NFT’s for a mere $24 million.  You can see it below.

2) Each “Bored Ape” averaged $237k.

What do you think – worth it?

Sothebys

 

Someone also reportedly bought an NFT of “Real Estate” previously sold for $500k.

So – they bought a picture of real estate.

 

This one below may take the cake.  Its an article highlighting how the NFT of the Dogecoin dog sold for $4,000,000.  Then, the owner sold off partial ownership for much, much more…..

 

• Money Stuff: Twenty Percent of a Picture of a Dog https://www.bloomberg.com/news/newsletters/2021-09-09/money-stuff-twenty-percent-of-a-picture-of-a-dog?cmpid=socialflow-twitter-business&utm_campaign=socialflow-organic&utm_source=twitter&utm_medium=social&utm_content=markets&cmpid%3D=socialflow-twitter-markets

 

From the article…..

“Just three months after a non-fungible token (NFT) representing an image of the original Shiba Inu dogecoin meme sold for about $4 million, the NFT is now valued at more than $225 million after part of its ownership sold for over 11,000 ether.

 

Investors were able to boost the price of the doge NFT to a record high for NFTs in such a short time by fractionalizing it into nearly 17 billion tokens named DOG with 20% of the supply for sale via a 24-hour auction ended Thursday.”

Bloomberg

 

Folks – sometimes I wonder if we have entered the twilight zone.

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Articles of Interest:

• Biden ordering all federal workers and contractors to be vaccinated (WSJ, Politico, Bloomberg)
• Businesses want US government to provide more details about a new, far-reaching mandate (Bloomberg)
• Biden preparing to call Republicans’ bluff on debt ceiling and force them to vote on it (Politico)
• Manchin, Sanders hurtling toward a showdown on Democrats’ $3.5T stimulus bill (The Hill)
• US HHS outlines measures to lower prescription drug prices, including backing law to let government negotiate prices (WSJ)
• US financial regulators hear from Yellen that failure to address debt ceiling will have financial stability implications, CRE risks also discussed (Bloomberg)
• Fed officials prepare for November reduction in bond buying (WSJ)
• Kaplan and Rosengren to sell stocks to avoid apparent conflict of interest (WSJ)
• Some House Democrats continue to lobby for SALT relief in reconciliation bill (Bloomberg)
• House Democrat voices frustration $3.5T stimulus package being rushed through committee (The Hill)

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Charts of the day:

 

Update on the incredible rush into equities.  Much of this is the retail public in 2021.

$.8T from 2001-2020 in inflows don’t hold a candle to the year to date $1.048 billion in 2021.

 

 

Increase in house prices compared to income per household.  Homes have never been this expensive relative to income.

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Quote of the day

Don’t look for mistakes, look for solutions

Henry Ford