Turning to Dudley Do-Right, in this case we are not referencing the Canadian Mountie lionized in the “Rocky and Bullwinkle Show,” but rather the esteemed New York Fed President William Dudley, who said last Thursday (Dudley), "For the first time in quite a while, gains in middle-wage jobs actually outnumber gains in higher- and lower-wage jobs nationwide...I believe this is an important development in the economy, because, if it were to continue, it would create more opportunities for workers and their families who have been struggling up to now.”
Of course those “strengthening economic” comments elicited this hawkish quip from the San Francisco Fed President John Williams (Williams), "If we wait until we see the whites of inflation's eyes, we don't just risk having to slam on the monetary policy brakes, we risk having to throw the economy into reverse to undo the damage of overshooting the mark and that creates its own risks of a hard landing or even a recession.”
B-A-N-G…those comments came out after Thursday’s closing bell and caused the 30-year T-bond to follow the 10-year T-note out above its 50-day moving average (DMA) early Friday morning (read: higher interest rates). Plainly stocks were paying attention to that interest rate action because the S&P 500 (SPX/2183.87) lost a quick ~8 points Friday morning. The Spoos’ slide took the SPX right down to the 2175 level that we have said, if violated, should lead to further selling. That would be consistent with what our proprietary model has telegraphed for over a week, as it looked for a very short-term trading top.
As for Obamacare, last week Aetna followed Humana and UnitedHealth by announcing it is going to reduce its participation in “public exchange counties” by 70 percent in 2017. Obviously, something is very wrong causing me to recall what Senator Orrin Hatch said back in 2013 (Hatch), “I will predict that within that year—now I may be wrong on this—but within the immediate future the Democrats are going to throw their hands in the air and say, 'It's not working. It's unaffordable. And we have to go to a single-payer system.’”
To be sure, something’s gotta give, but rather than rewriting the entire Obamacare bill, wouldn’t it be easier just to lower the age for Medicare participation to zero?
Turning to GaveKal, as most of you know I love the sagacious folks at GaveKal, and I own their mutual funds. They have a way of rotating the prism 180 degrees in an attempt to glean net worth-changing insights. They are the ones that first turned me on to the concept of “intangible capital” (Capital), which has led to so many profitable investments for all of us. My friend Steve Vannelli, GaveKal’s lead portfolio manager, is a really smart guy and a great investor. You will get a chance to hear from him, as well as myself, this coming Wednesday when we do a joint conference call to discuss the current “state of the state” and GaveKal’s relatively new GaveKal Knowledge Leaders Developed World ETF (KLDW/$27.08), which is now available on the Raymond James platform (KLDW). The call is at 4:15 p.m. (ET) on August 24th with the dial-in number of (877) 525-8156 and the passcode 60116738.