Open Mind

The market is looking for ideas, ideas other than that the economy is going into recession on the backs of a FED led move down.

Yesterday we got two signs that the recession talk may be off, with good industrial production and retail sales numbers. And yesterday, the Atlanta FED GdpNow forecast of second quarter GDP forecast was raised to 2.6 % from its initial May 3rd estimate of 1.6 %.

As I mentioned yesterday, outside the box thinking may be in order. The current inflation is a mix of supply problems combined with long-term demand enhancements that started with Bernanke’s 2011 QE program and the culmination of 9 trillion dollars of Fed Balance sheet growth. It is true that the FED is planning to reduce the balance sheet but there is no real plan to eliminate all 9 trillion. So demand will remain above normal.

With so many forecasters pointing to a recession/crash, there would seem to be a lot of room on the other side of the scale.

America needs to get back to work, and if it does, real demand will grow for basic working products. This is a time to invest in building blocks. Climate change and infrastructure are the drivers. As an example, one thing I am close to, regenerative agriculture is a force to reduce expenditures on petroleum usage and increases in condition monitoring which requires semi-conductor-based equipment. On the other hand, I don’t think this is a time to invest in NetFlix, Facebook, or Disney, to me these stocks reflect entertainment excess.

And as I said yesterday, we can live with higher interest rates in this kind of environment.

Trading today..

Yesterday’s market action was good. Today we are starting off with Powell’s narrative on being tough on inflation front and center. With these declines I am adding to long positions mentioned previously. SPX 3945 would be the ideal buying point marker.

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