Another session yesterday was filled with intrigue that seems innocuous on the surface but raises concerns. The tech story has dominated headlines, but I have been worried about private equity for a year, and now it's become a more pronounced issue. But the action in big banks, a fan favorite on the Street, is also not sitting right.

Blue Owl Swoons

When I was stationed in North Dakota, one evening at dusk along a dusty road, I watched a giant white owl glide through the sky in search of prey. Up to that point, I had never considered owls to be birds of prey; as a child, I always saw them in cartoons and commercials as symbols of intelligence.

I’m sure that was the message the folks who founded Blue Owl Capital Inc (OWL) were trying to convey, and it worked. The firm was given the royal treatment out of the gate, and “smart” folks on the Street couldn’t stop singing their praises.

 That owl I saw in North Dakota was majestic, hardly any wing flapping at all, but when it had time to dive, it was also magnificent in its role as a ‘predator.’ Although the jury is out and management keeps saying things are fine, I think ‘predator’ is a more accurate symbol. I’m concerned about the industry and potential contagion, but we aren’t at the panic stage – yet. 

Lots of red on the screen, but not many disasters. Just more evidence that the ‘old economy’ is coming back, as seen in the action in Deere & Co. (DE) and Caterpillar (CAT). A strong Philly Fed Manufacturing report corroborated that action.

 

All the intrigue beneath the surface isn’t foreboding or nefarious. Check out how many names are outperforming the market right now. This is beautiful. It’s a stock market, and most are doing well.

It's fine to feel less bullish and less bearish sometimes; “neutral” is the right impulse.

SCOTUS Tariff Watch

Today could be the day for the ruling on President Trump’s tariffs. I think the U.S. Supreme Court (SCOTUS) will say the White House didn’t have the authority to use the International Emergency Economic Powers Act (IEEPA), but will not order refunds, as the administration has other avenues to pursue tariffs immediately.

Today’s Session

Yesterday, President Trump warned that fourth-quarter GDP would come in much lower than expected due to the government shutdown. Often, we ask ourselves why political parties (mostly the minority at the time) would engage in shutting down the government when it comes to Trump being in office. The deciding factor is the media. Headlines this morning don’t mention the shutdown or lost momentum.

The good news is that the moment is still ramping in the private sector, with consumer spending and business investment. This report goes down with an asterisk.  The internals have to be the focus, not headlines.

Core PCE came in at 3.0%; the street was looking for 3.0%. If members of the Fed who want to hike rates try to use this as justification, my question is, how do higher rates bring down medical costs and car insurance?

Meanwhile, spending continues to outpace income. This is the best survey on consumer sentiment in my book. Folks think things will get better, including inflation moving lower.

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