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What’s your poison? GME? AMC? APE? Or how about Bed Bath & Beyond (BBBY), which rallied 18% yesterday as it secured new funding? Either way, you can be sure that meme stocks are going to get some love after the Biden administration poured more petrol on the inflation fire by cancelling student debt. It’s a patent absurdity…CNBC says it will cost the average taxpayer $2,000. It’s nothing but an out and out wealth transfer from those who didn’t go to college, or who already paid it off, to those who did and still owe money. Pretty simple stuff and bound to add to inflation pressure by putting more money into the pockets of the ‘degenerates’ who trade meme stocks. And retail is key. According to JPM, short covering stopped but retail buying did not. Retail traders net bought $2.5bn in the equity market this past week, according to the JPM Retail Radar. The market ain’t what it used to be.

Meanwhile, following on this topic, an old question just received something of an answer: just how much did policy contribute to the inflation mess compared to supply chain stuff? Rather a lot, it seems. Remember all the gaslighting that it was just supply bottlenecks – the transitory argument…which has morphed conveniently into ‘Putin’s price rise’. All hokum. NY Fed analysis shows 60 percent of US inflation over the 2019-21 period was due to the increase in demand for goods while 40 percent owed to supply-side issues that magnified the impact of this higher demand. “Our work shows that inflation in the US would have been 6 percent instead of 9 percent at the end of 2021 without supply bottlenecks,” it says. The wording is careful; the other way to put it is that inflation would be 3% if it were not for policy failures.

Author Julian di Giovanni writes, with a straight face, that “Put differently, fiscal stimulus and other aggregate demand factors would not have driven inflation this high without the pandemic-related supply constraints”. How about, ‘put differently, inflation wouldn’t be about to breach 10% if it had not been for blinkered approach of the Fed and the flippant disregard for monetary inflation by the central bank and the disastrous helicopter money policy of the White House.’ For which you can read across to the disastrous BoE and frankly ridiculous UK Treasury policies – all the result of original sin that was Covid lockdowns, a true calamity. I’m sure forgiving student loan debt will help, though…

A real positive start to the session in Europe came after Wall Street snapped a three-day losing streak ahead of the start of the Jackson Hole event today. The FTSE 100 reclaimed the 7,500 level after a pop of around 0.5%, with broadly similar gains across the European bourses. More stimulus from Beijing to boost the faltering Chinese economy has probably helped but really we are just knocking around levels traded through August and it looks like markets have found near-term bottoms until Jackson Hole shakes out and the summer dog days give way to September’s usual angst – particularly the case in election years with the midterms ahead. A softer dollar has also underpinned, or reflected, risk appetite in the last 24 hours. Hawkish comments from arch dove Neel Kashkari helped send the 10yr Treasury yield above 3.1%, the highest in two months. As crude oil rallied, and US Treasury yields rose to their highest since June, energy, real estate and financials led the gains on Wall Street as the S&P 500 rose 0.3% and the Nasdaq edged up 0.4%. In FX, the dollar has retreated again and given some relief to major peers. GBPUSD recaptured 1.1860 and EURUSD is back at parity.

Today sees the start of the Jackson Hole Symposium but also the preliminary US GDP data, weekly unemployment claims and ECB meeting minutes. The minutes come from last month’s meeting when it raised rates by 50bps and though there is no formal forward guidance anymore, it’s likely to be parsed for clues about where policymakers are likely to go next.  As for JH, it’s all about Powell and the question is how restrictive and for how long? Labour market indicators don’t shout the Fed should pivot.


Tesla shares begin trading on the 3-for-1 split basis today. Latest on Tesla from Bernstein – hard to argue with – is that whilst it’s a clear winner from the “Inflation Reduction Act”, its valuation is still way too high. “TSLA’s valuation is higher than all other major auto makers combined, and appears to imply huge volume AND industry leading profitability going forward, which is historically unprecedented,” analyst Toni Sacconaghi wrote. “We believe risk/reward at current levels is not attractive for longer-term investors.”

UK interest rate futures price in the BoE bank rate peaking at 4.5% in May 2023…meanwhile a Bloomberg model indicates a 60% probability sterling will fall to $1.14 by the end of the year.

German growth not as bad as feared at +0.1% vs the 0.0% reading expected.

South Korea’s central bank raised rates for a fourth straight month.

The onshore yuan yesterday closed at the lowest level against the US dollar in two years. USD/CNY closed at 6.6854, its highest since August 27th, 2020.

A Which? report indicated, surprise surprise, UK consumer confidence is plunging. Some 93% are worried about energy bills…the government answer will be to kick the can down the road. The squeeze on the consumer is only going to deepen, meaning less to spend, less to save – retail pullback from equity markets assured, less in pension pots etc.

US mortgage demand continued to weaken, down1% last week compared with the previous week, with volume 21% below where it was a year ago…meanwhile home prices fell for the first time in three years and by the most since 2011.

Salesforce beat on earnings and revenue expectations for the quarter but gave weaker guidance for the rest of the year. Shares fell 7% in after-hours trading. Adjusted EPS hit $1.19 versus $1.02 expected whilst revenues rose 22% to $7.72bn. The company also announced a $10bn share buyback programme.

Nvidia fell after it missed earnings expectations though the numbers were broadly in line with its preliminary earnings reported a fortnight ago.

Snowflake jumped 16% after it beat analyst expectations, with revenues of $497m beating estimates of $467m.

Crude oil is firmer, with spot WTI breaking the Aug 11-12 highs to rise back above $95 after yesterday’s larger-than-expected crude draw of 3.3m barrels. Brent likewise higher and north of its mid-Aug highs above $100, looking to take out the early Aug highs at $102 next with bullish momentum indicated but near-term resistance likely around the 50-day SMA.

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