Pension pulse end of days for markets a gaseous mixture contains

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"We are in the sweet spot between Amazon investment cycles where new fulfillment/data centers are driving accelerating revenue growth while incremental capacity utilization is driving margin expansion," analyst Heath Terry wrote in a note to clients Friday. "We still remain in the early stages of the shift of compute to the cloud and the transition of traditional retail online and, in our opinion, the market is underestimating the long-term financial benefit of both to Amazon."

"We are raising our topline and operating margin estimates for FY:18 and beyond reflecting the continued momentum in Prime and accelerating growth in its two more profitably businesses, AWS and advertising," Stifel analyst Scott Devitt wrote in a note to clients Friday.

"We believe that strong Prime member growth, and fast seller FBA [Fulfillment by Amazon] adoption will continue to advance Amazon’s Prime + FBA flywheel effect that is likely to be supportive of a ~20% rev growth CAGR (’17-’22)," analyst Eric Sheridan wrote in a note to clients Thursday. Our "upward revision [of subscription services revenue] also reflects announced Prime membership fee increase."

"Amazon’s share in its key markets continues to expand, supported by strong fulfillment infrastructure and Prime lock-in, while the earlier stage higher margins businesses of AWS and advertising are contributing to more meaningful profit growth," analyst Justin Post wrote in a note to clients Friday.

It was a month ago where I was wondering whether a quant style crash has arrived and went over daily and weekly charts of Amazon ( AMZN), Facebook ( FB), Twitter ( TWTR) and Tesla ( TSLA) using the 50, 100 and 200-day and week moving averages.

Importantly, while buying the big dips on big tech has proven to be a winning strategy, especially for hedge fund quants, there will come a time when the music stops for these Boom Boom markets and momentum traders will get their head handed to them.

• Higher oil prices lead to higher gas prices and in a debt-laden economy, higher gas prices pretty much wipe out Trump’s tax cuts for most Americans, which is why he came out to tweet against OPEC on Friday morning. I found it interesting that Minister Mohammed bin Hamad Al Rumhi of Oman came out shortly after to state oil prices probably won’t rise much beyond recent highs near $75 a barrel this year (of course, OPEC is petrified of Trump nor does it want oil prices too high to risk a global recession).

• More importantly, the Fed has raised rates six times and will continue to raise for the foreseeable future, global PMIs are rolling over, which means a global economic slowdown is ahead, so even if oil prices keep creeping up this summer, it will only add fuel to the fire by tightening financial conditions even more.

All this to say, those playing the "sector rotation" into energy ( XLE) or metals and mining ( XME) thinking this is a sustainable rally really need to ask themselves some tough questions as to how sustainable this rally in cyclical energy shares really is.

I still maintain that going forward, US long bonds ( TLT) will offer the best risk-adjusted returns. The rise in oil prices and the rise in long bond yields only makes me more certain that a slowdown is ahead and I’d be jumping on US long bonds at this level, especially if the 10-year Treasury yield surpasses 3% which it might (but I still have my doubts).

To recap, I’m preparing for a second half global ‘synchronized’ economic downturn, and as such I’m recommending investors to trim risk in their portfolio by investing at least 50% in US long bonds ( TLT) and overweighting consumer staples ( XLP) and interest-rate sensitive sectors like utilities ( XLU), telecoms ( IYZ) and REITs ( IYR) and underweighting cyclical sectors like energy ( XLE), financials ( XLF), metals and mining ( XME), industrials ( XLI) and emerging market shares ( EEM).

What about oil and commodity prices and rising labor costs? What about them? There was a brief rally and energy shares caught up but I remain very cautious on this sector for the simple reason that I can distinguish between cyclical inflation due to higher oil prices and a lower US dollar and structural deflationary headwinds which remain alive and are gaining steam.

You see while Jeff Bezos can raise the Amazon Prime rate by $20 and reap billions in gains, more than half of 60-somethings say they’re delaying retirement because they can’t afford to retire, and this despite the triple-digit gains in the stock market over the last nine years and its positive impact on Americans’ savings.

Inequality, the retirement crisis, high structural unemployment, especially among young workers and increasingly among older workers, are all part of the deflation theme I’ve long been worried about. High debt will only exacerbate structural deflation.