On the heels of stocks tumbling and gold surging, we have just witnessed something that hasn’t been seen in 46 years!
We Haven’t Seen This Since 1973
April 9 (King World News) – Here is what Peter Boockvar wrote today as the world awaits the next round of monetary madness: As we are on the cusp of a slew of earnings reports in the coming 6 weeks and with the amazing stock market rally over the past 3+ months I’m including a valuation refresher for a metric other than a P/E ratio for the S&P 500 just to provide context. It’s instead the P/S (price to sales ratio) to avoid the games people play with earnings per share. Keep in mind though, valuation means nothing for stock performance in the short term but is a key determinant of long term returns.
The March NFIB small business optimism index was basically unchanged at 101.8 vs 101.7 in February. Plans to Hire rose 2 pts after falling 2 pts in February. Finding the right help remains the biggest issue for small business as Positions Not Able to Fill rose 2 pts to match the highest on record, dating back to 1973. This led to an increase in current compensation plans and those planned for the future. While wage gains are no longer accelerating, fortunately they are now running above the rate of inflation…
NEW BONUS INTERVIEW
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There was no or little change in some other key categories: Capital Spending plans, those that Expect a Better Economy, those that Expect Higher Sales and only a 1 pt rise in those that said it’s a Good Time to Expand (to 23 but was 30 last October) and 1 pt increase in the Profit Outlook (off the lowest level since December 2017). In another good forward looking indicator, Plan to Increase Inventory fell 2 pts to -1, the lowest since December 2017 “with stocks viewed as too large” according to NFIB. Inflation pressures moderated as those that plan Higher Selling Prices fell 1 pt to 12, the least since January 2018 but that’s still twice the average over the past 5 years.
The NFIB remains optimistic notwithstanding the slower trend, “Economic growth hit a small pothole in the first quarter with a government shutdown and bad weather all around. The most recent economic data indicate that the economy is headed back toward stronger growth.” The stock market is certainly confident of that while Treasury yields are more suspect. Bring on earnings season to help reconcile!
I want to make one last point in the discussion about the Fed and the cries for rate cuts. I’ll say again that with the cost of money already so low, rate cuts won’t matter. Here is what the NFIB said about credit for its constituents:
“Three percent of owners reported that all their borrowing needs were not satisfied, unchanged and historically very low. Thirty-three percent reported all credit needs met (down 1 pt) and 51% said they were not interested in a loan, unchanged. Six percent reported their last loan was harder to get than the previous one, unchanged and historically low.”
Bottom line, while it’s good to see that access to credit and the cost of money is not a business issue, we’ve reached the point of diminishing returns in terms of the effectiveness of easy monetary policy to alter behavior.
Also of importance…
BONUS INTERVIEW: To learn which company’s Chairman just told investors today, “Both projects, independent of each other, have the opportunity to give us 10-20 times the current share price!” CLICK HERE.
***KWN has now released the powerful KWN audio interview with Egon von Greyerz and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***Also just released: Trey Reik – Sub-$1,300 Gold Will Be Short Lived CLICK HERE TO READ.
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