Yo Pit Crazies,
More Maine pictures this time, since my big premiere goes out this week.
After a few days of clouds and some much-needed rain, the sun finally came out.
This one's from my office window, and you can tell because Pearl's on her couch.
That's my favorite maple on the right. I've got about two more weeks of color out of it before those red leaves go into the compost bin.
Since some students liked the summer aerial video of the G homestead, I figured I'd post some more foliage.
Speaking of the compost bin, I think that's where all of the week's highlights got dumped:
- Micron (MU) posted the biggest quarter in its history: $54.2 billion in revenue, almost four times what it did a year ago.
- PCE inflation came in light at 3.4 percent, against the 3.7 percent everybody expected.
- Login.gov got a spiffy new look and a potential fraud finder, and the White House made it the sign-in for every federal agency.
- President Trump hosted an AI summit at the White House.
- Persian Gulf oil exports are back to pre-war levels.
- Iran's exports sit at zero under the U.S. blockade.
- We have a new Sully. Indian captain Smit Machchhar got stabbed by his own copilot on a Dubai-to-Tel Aviv flight and still helped stop the hijacking.
Yet… interest rates keep climbing. And here's a secret: markets have a hard time pricing a one-way freight train.
Nobody Wants to Stand on These Tracks
Rates are going straight up, and the iShares 20+ Year Treasury Bond ETF (TLT) (a fund that holds long-dated government bonds) and the other bond ETFs are going straight down. Last week the 10-year Treasury yield hit its highest level since 2007. The 30-year touched a level we haven't seen since 2004.
One-way trading drives traders nuts because there's no end to it. Volatility with no end is a dangerous thing, because option prices just keep expanding. The MOVE index (the bond market's version of the VIX) closed above 100 last Thursday after jumping about 30 percent in a single week.
Higher rates will put a strain on federal spending. Maybe, just maybe, that's Fed Chairman Warsh's grand plan. Big tech needs cash to fuel breakneck growth, and Washington needs it to keep wasting everyone's hard-earned tax dollars on fraud.
How much fraud? Haywood Talcove, who runs the government unit at LexisNexis Risk Solutions, told Congress it's around $1 trillion a year. The GAO's official estimate is lower, somewhere between $233 billion and $521 billion.
The new Login.gov might have something to say about that. At some point, Congress will have to act. Lucky for them, they're on vacation for the midterms: the House canceled its last two weeks of September and stays out through October.
Thursday gave us the first real bond price reversal in a while. The 10-year yield fell about five basis points (0.05 percentage points) to 5.24 percent, and stocks rallied modestly as the S&P 500 snapped a three-day losing streak.
TLT 6-Month Chart
What's setting up well: the dividend payers that carried pensioners through the stupid and foolhardy zero percent rate era are getting clobbered.
The Utilities Select Sector SPDR (XLU) went from near $47 two months ago to under $40, and Realty Income (O) dropped about 11 percent in a month. I've got a whole slew of these setting up in Sybil (my stock scanner), but it isn't telling me to do anything yet.
So I'll be patient.
In the meantime, economic growth is generally good for stocks, and we're getting it. Inflation-adjusted consumer spending jumped 0.6 percent in August, the biggest monthly gain in more than a year.
I'm going to chalk up the lethargic SPDR S&P 500 ETF Trust (SPY) lately to anti-USA algos. The S&P 500 slipped half a percent in September. The real story will come out eventually, and sometimes that takes a while.
I expect the VIX (the stock market's fear gauge) below 16 by Friday's close, maybe even near 15. It closed Thursday at 16.39.
Hopefully this was helpful,
Andrew Giovinazzi