Fire Hydrant of Freedom

The charts will not print, but hopefully the commentary is worthy:
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Weekly Market Update May 17, 2024

Paul M. DeSisto, CFA
May 17, 2024


Fed Funds 5.25% - 5.5%, US Ten Year 4.422%, Oil $79.99



Inflation figures reported this week showed a very slight reduction in the inflation rate, which nonetheless further energized a May rally in stocks being led by Artificial Intelligence-oriented technology stocks. The April 3.4% CPI rate, down a tenth of a point from March, was enough to remove the threat of a hike in Fed Funds and increase the chance of a rate cut in September to 67%.

There is market adage, “Sell in May, and Go Away,” based on stocks’ historical lethargy as the summer begins and market participants go on vacation. While not foolproof, it has been true often enough to warrant attention. Stocks may have gotten ahead of themselves and could be due for a significant correction. One useful study is to compare the yield on stocks to that of bonds. A stock’s yield is simply the inverse of its price earnings ratio. According to FACTSET, as of May 10th the forward P/E of the S&P 500 is 20.4 times. A P/E of 20.4 gives an earnings yield of 4.9%. That is higher than the ten-year treasury yield’s 4.42%, the first time since the dot.com crash of 2000 that the earnings yield has topped the ten-year. An earnings yield higher than the bond yield is one sign of an overpriced market. It deserves mentioning that the 20.4 P/E is above the 5-year average (19.1) and above the 10-year average (17..





The run-up in stocks this month suggests a momentum-driven market. To measure momentum, market technicians may use the Relative Strength Index, a momentum oscillator that measures the speed and change of price movements. The RSI oscillates between zero and 100. Traditionally the RSI is considered overbought when above 70 and oversold when below 30. The Dow Jones Industrial, Standard and Poor’s 500, and NASDAQ Composite are all pushing up against the 70 level. (Unsurprising, given last week’s Weekly Market Update that discussed the weakness of small cap stocks, the Russell 2000 is not so overbought.) The indices may go even higher for a while, but there will be a correction.



Despite the euphoria that came out of the inflation report, inflation has merely cooled. Prices are still rising, even if at a slower rate. Things cost more than they used to and will cost still more next year. It does not mean that things are getting better, just that they are getting worse more slowly. Higher prices have required Americans to spend more of their savings to maintain their lifestyle. The national savings rate has declined to 3.2%, the lowest in 17 years. The consumer seems to have been “tapped out,” with the University of Michigan’s consumer sentiment index falling to a six-month low on inflation and unemployment fears. With a stock market correction becoming more likely, and with short-term bonds offering real yields (yields adjusted for inflation) of 2%, it makes sense for even the most aggressive investor to maintain a portfolio of short-term fixed income investments within their accounts.

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I would add that from a peak of 19 (which is not a super high number, upper 20s would be in my mental map) it is back down to 13.   From 86 oil is now 79.   After fading from 2400 to 2300,  Gold is back above $2400.

Silver, which I had sort of laughed at through the years of silver ads on FOX, continues to move strongly up-- working from memory, silver meandered in the low to mid 20s, but now is over 31.

Regarding paying for defense lawyers, we don't get to say the accused is guilty before he gets a trial and therefore the legal fees fall on him.

With regard to QI, as I understand it, the gist of QI theory is that by the nature of police work, an officer is abnormally likely to be accused by the people he is policing.  If he has to worry about getting sued all the fg time, we will not have many people willing to do the work.

https://www.wsj.com/articles/joe-biden-executive-privilege-recordings-robert-hur-interview-edward-siskel-265ab86b?mod=opinion_lead_pos2
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Isn't this admission that his I-don't-recall testimony won't hold up to public scrutiny?

We have the transcript but can't listen for credibility in his voice?  (Yes we can.)  He waived Exe. Priv. when they released the transcript. 

Among the things he couldn't remember was when he was Vice President.  A tape of that is more damaging than written words.
https://www.nbcnews.com/politics/joe-biden/full-text-robert-hur-biden-classified-documents-interview-pdf-rcna142956

(Did Trump have privilege when the perfect Ukraine call was released?  WHen the Georgia find-the-votes call?  He was POTUS then.)

Testimony that led the prosecutor Hur to conclude Biden was too old and senile to be held accountable, was for the same crime his opponent is charged with multiple felonies and real prison time for.  And we can't hear it?
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WSJ:

"The privilege claim is bogus on two grounds. First, once a President waives a privilege right, it can’t be reclaimed. Mr. Biden conceded that the interview wasn’t privileged, and there’s no legal basis to say that a recording is different from a transcript.

Even if Mr. Biden had first claimed privilege over the interview, that wouldn’t pass legal muster because the interview subject didn’t concern his presidential duties or White House deliberations. It concerned his handling of documents while in the Senate, as Vice President, or as a private citizen.

Mr. Siskel’s claim that the goal is to protect the Justice Department’s “law enforcement investigations” also doesn’t work. Such a claim of law-enforcement privilege typically attends to a continuing investigation, but Mr. Hur’s work is complete. He has filed his report and closed up shop.

Mr. Siskel complains in his letter that the transcript should be sufficient and the “absence of a legitimate need for the audio recordings lays bare your likely goal—to chop them up, distort them, and use them for partisan political purposes.” No doubt partisanship is at play, as it was for Democrats on Capitol Hill against Mr. Trump.

But Republicans want the audio to judge the tenor and credibility of Mr. Biden’s responses and Mr. Hur’s conclusion that the President’s faulty memory was cause not to bring an indictment in the case. The White House claim of privilege over the recordings isn’t intended to protect executive power. It’s intended to avoid presidential embarrassment.

That’s a political goal, not a legitimate legal justification."

Hamas handmaidens have taken to waking University of Michigan Regents and then noisily “protesting” (read intimidating):

https://pjmedia.com/robert-spencer/2024/05/16/in-michigan-leftists-have-started-knocking-on-doors-in-the-middle-of-the-night-n4929108