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%.


The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.