Author Archives: Michael Murphy

Dear New World Investor: It’s Spring Break for my eighth-grader, so we headed to the Oregon coast for a few days, hoping the Cascadia tsunami would hold off until we got back. It did, and we came back to the same old, same old: the Fed is more hawkish, the Ukraine army is outperforming, Putin keeps surprising, sanctions aren’t working very well, stocks are down one day and up the next, and the bond market is in a historic and long-overdue rout. After Fed Chairman Powell said the Fed needs to move “expeditiously” to combat high inflation and raised the...

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Dear New World Investor: Happy St. Patrick’s Day! Or as best you can, with headlines like: Yuan Jumps After Report on Saudis Weighing Its Use in Oil Deals (Whoops, there goes reserve currency status for the dollar) U.S. consumer sentiment near 11-year low; near-term inflation worries mount (Whoops, there goes consumer spending, 70% of the economy) Fed raises interest rates for the first time since 2018 (Whoops, there goes easy money – although it’s still cheap) While Fed Chairman Powell reportedly “scoffs” at fears of a recession, Goldman Sachs now sees a 35% risk of recession in 2022. That is...

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Dear New World Investor: Uranium Russian President Putin signed a decree on Tuesday restricting the import and export of specified goods and raw materials “to ensure the security of the Russian Federation.” It did not specify which goods and materials would be restricted, but it may include enriched uranium. If so, this is a huge deal because Russia is such a dominant exporter. It could lead to a panic for enriched material. It also could cause a switch from underfeeding (selling surplus natural uranium after enrichment) to overfeeding (supplementing the natural uranium supplied by the utility with some of the...

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Dear New World Investor: The Fog of War has descended on the stock market, with no one really sure how blocking Russian banks from the SWIFT international bank settlements system, the Nord Stream 2 bankruptcy (if it even happened) possibly slashing natural gas supplies to Europe, $110 oil, and US stagflation – or not – and the Fed’s response will affect equity prices. Click for larger graphic The S&P 500 added 1.7% since last Thursday after the correction dropped the forward Price/Earnings ratio back into a familiar zone. Click for larger graphic The Index is down 8.4% year-to-date. The Nasdaq...

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Dear New World Investor: I was wrong. Putin did invade Ukraine – sort of. He recognized two provinces as countries and then launched a very precise attack on Ukraine’s military installations and airfields. He always plays 3D chess, so he must have something up his sleeve. Perhaps it’s that the West needs Russia’s palladium, nickel, natural gas, oil, uranium, grain, and fertilizer. The price of natural gas, already sky-high, jumped over 60% as Germany said Russia’s Nord Stream 2 gas pipeline would not be allowed to open and President Biden sanctioned the company that owns it. As they say in...

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Dear New World Investor: I could be wrong, but: * * I didn’t think Putin would invade Ukraine on February 16, I don’t think President Biden’s “sense” that there will be an invasion in the “next several days” is any more accurate, and I think if Putin really wanted to invade, he would have done it already. He knows better than blow up the Russian economy, especially when high oil prices are pouring in cash. Diplomacy will win out and he’s going to end up getting what he wants anyway. * * I still think inflation will start falling in...

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Dear New World Investor: Stocks took a big hit today as the headline Consumer Price Index for January came in at +7.5% year-over-year. Due to the base effect, February could be as bad, but March should start a multi-month trend of lower increases. After very strong Treasury auctions this week for both the 3-year and 10-year notes, with record foreign buying, the 10-year yield ticked up today to 2.031% – its first foray above 2% since July 2019. Wall Street is now talking about a half-point Fed funds increase at the March meeting and is very bearish. Goldman Sachs says...

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Dear New World Investor: The consensus forecast for Friday morning’s January payrolls addition is only +150,000, following December’s weak +199,000. Late last summer, Fed Chairman Powell said he wanted to see monthly payroll additions around +1,000,000 before he raised interest rates. Wall Street’s panicky projection of a 1.25 percentage point total rate increase this year (five quarter-point hikes) is now almost a certainty (98.9% probability), according to the Fed funds futures market. Click for larger graphic I think that is absurd. Everyone knows the monthly inflation numbers will start falling in March or April. If inflation is a longer-term problem,...

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Dear New World Investor: So the “hawkish” Fed said no change to their taper plans, they will consider a March interest rate increase, and they won’t sell bonds to reduce their balance sheet, they’ll just let the mortgage bonds mature. Really? With the rate of inflation about to start subsiding quickly in April, Chairman Powell can set himself up to claim victory…at least until the rapidly slowing real GDP growth forces him to back off. December quarter real GDP growth came in at 6.9% this morning, above the Atlanta Fed’s 6.5% forecast and way above the Blue Chip economists’ forecast...

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Dear New World Investor: The S&P 500 lost 3.8% since last Thursday as fears of interest rate increases, the omicron virus, and war in Ukraine ebbed and flowed. The Index is down 5.9% year-to-date. The Nasdaq Composite lost 4.4% as its advance/decline line registered a net negative reading for nine of the last ten days. We’ve seen this movie before. The Nasdaq has imploded at the beginning of the year three out of the last four years. The only year it didn’t was 2019 when the market imploded in December 2018. The Naz is down 9.5% for the year. The...

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