24 Nov TUESDAY WAS SIMILAR TO MONDAY
Bond yields rose again yesterday sending the widely owned tech shares lower. Bloomberg opines that if interest rates continue to rise, mega sized tech firms can decline as much as 20% for as written many times higher rates discount the present and future value of corporate cashflows and profits. An issue at hand is how high will interest rates go.
If one uses historical benchmarks, benchmarks that have all but been discarded partially because of QE, rates could more than triple from current levels. If this were to occur, the carnage would be great.
For what it is worth department, Bloomberg writes it would take about 79 years to recover any investment in US equities if one relies on dividend alone, the greatest period in history going back to 1970 barring the dotcom bubble.
Oil advanced almost 3% yesterday following the coordinated release of reserves from US, Japan, India, China and the UK. Some opined oil’s rally was the result of a smaller than expected release. Others remarked the gain was the realization that crude was only “borrowed” and would have to be replaced at a later date. While others stated the increase was from the realization that such action was futile for the current crisis is the result of western government policies that are unlikely to change in the intermediate future.
There is a growing consensus the West has abdicated its energy independence back to our adversaries and middle eastern theocracies, a precarious position, a view that I share.
What will happen today? Trading is expected to wane as many leave for the long Thanksgiving holiday.
Today’s economic calendar is crowded as initial jobless claims, inventory statistics, a GDP revision, personal spending and income, durable goods, trade data and Minutes from the recent FOMC meeting are all released. Will this data dump influence market direction?
Last night the foreign markets were mixed. London was up 0.10%, Paris down 0.14% and Frankfurt down 0.46%. China was up 0.10%, Japan down 1.58% and Hang Seng up 0.14%.
The Dow should open nominally lower on interest rate fears. The 10-year is up 5/32 to yield 1.65%.