Risk assets are struggling this morning to decide whether to rise or fall. Equity futures are mostly flattish, and other risk assets like Crypto, the Pound and the FTSE are falling approximately -30 basis points in a fairly quiet morning.

Our new economic beacon, crude oil, was strong again this morning with WTI up 1.3% to $116. When you think about it, energy is cheap. Someone asked us how much is gasoline at the pump in London? Europeans don't have a problem shelling out $10 a gallon to get to where they are going. As energy prices rise, people will cut back on un-necessary travel and lower their heat a few degrees, but thats it. Energy is crucial and you can't remove too much from your budget. Given the proliferation of work-from-home, this oil price rise is scary, as people already cut their commute.

Yesterday's stock market indices belied underlying weakness in the advance/decline. Look at yesterday's NYSE advance/decline stats - it wasn't pretty:

Amazon was up 4% on scant news. Sure, they reiterated the 20 for 1 split but that is not material. Google was also up 1% on little news. One plausible reason is that they got a bit cheap. Google at 20X (or even less on forward projections after backing out cash) is certainly interesting at current prices. Amazon is difficult to value, but it was down from $3500 to almost $2000, so some value in the index heavyweights was masking overall weakness in stocks. Investors are scared, and yesterday's advance/decline shows that investors are still scared and looking for safety.

Salesforce (ticker: CRM) rose 8% pre-market on strong earnings & guidance. Lithium stocks are weak as Argentina set a reference price to deter under-invoicing and enhance transparency - seems like the Argentinians are worried about tax evasion :-). In addition, major brokerages like Goldman are calling for a top in lithium pricing, but we haven't seen the evidence that supply is abundant enough to curtail lithiums rise. Lithium is very prevalent in the earth, but it takes 2 or 3 years to build capacity, and it doesn't appear that there is enough actual or planned capacity to transition to EVs. Companies like Ford & GM are making EV predictions, but they don't have battery capacity sourced. Its normal for sell-side analysts to get cautious on commodity pricing. We don't see a pronouncement from the Argentine tax authorities having anything to do with the actual lithium market. The IRS can say what they want, but they can't dictate inflation.

In other pre-market action, HP reported decent numbers and is trading a bit positive. Chargepoint, the EV charging network, reported disappointing numbers & margins, with the stock off -3% pre-market. In a possible harbinger of semiconductor conditions, Ambarella issued a weak second quarter revenue forecast based on the China situation. Finally, Victoria's Secret got positive comments on its turnaround from Wells Fargo, sending shares up 7% after yesterday's close.

Janet Yellen admitted that she didn't understand last year's inflation dynamics. She has plenty of company but what she didn't admit was that keeping rates at zero year-after-year was probably a mistake too. Yellen cited optimism as core inflation without food & energy is moderating. Our readers know that we have been urging people to focus on food & energy - these are the data items that are important this time around.

Yesterday's post re-iterates our stance: wait & pick the good spots. In sports or education, playing against good opponents is helpful but in investing, we want to align with the good securities and bet against the bad ones. A bit of patience and waiting for the good entries is advised in these difficult markets. Heavyweight fighter, Chuck Wepner, is a good sports analogy: Wepner fought Ali, Andre the Giant, and a Kodiak Bear (twice actually, and the bear was pissed off the second time as he remembered getting hit by Wepner :-) - no wonder Wepner lost - pick the winning battles.