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Let’s recap – just to make sure we are all on the same page:

Friday night, US Stocks get slammed, falling more than 600 pts and sending warning signals that the coronavirus was getting worse. All day pundits on TV telling investors/traders to sit back, that this was different this time. It was not like SARS or Ebola, or Legionnaires disease, that saw the markets take a hit over a period of weeks. NO, this was different.

Mohammed El-Erian, Allianz’s Chief Economic Advisor, and well known voice on the markets takes to the airwaves and suggests that this time it was different. The headlines had him quoted all over the place warning investors not to buy declines in the stock market like they might have done before the coronavirus. Saying:

“It is big. It’s going to paralyze China. It’s going to cascade throughout the global economy…” Then, leaving this as his final call: “We should pay more attention to this. And we should try and resist our inclination to buy the dip…”

So how’d that work out?

While stocks did sell off on Friday, as the coronavirus continued to get worse, stocks began to rebound on Monday as calm appeared to settle around the world. Yes, we saw the Chinese market get slammed on Monday (-7%). But that was explainable. Markets there had been closed for a week for the holiday. Angst over being unable to access cash or stocks created the selling pressure that everyone expected. In fact, it was so expected that the Chinese government injected some $173 billion of liquidity into the system and cut rates to try and stop the bleed. While that did not do too much on Monday, or maybe it did, maybe without it the Shanghai/Shenzhen would have been down twice as much. It apparently has filtered through the psyche of global investors and caused some of the “financial panic” to subside.  European and US markets bucked the trend and rose.

On Tuesday, trading in China did an about face, rising just over 1% and sending the signal that the selling panic of Monday was just that, a selling panic that may have been overdone. Slowly Asian investors put their toes back in the water and boom, all good. The feel good mood then travelled around the world with European markets taking their cue from the Asia action and before you knew it. All of the angst appeared to dissipate. European macro data was improving, negotiations over BREXIT began, there were no tanks in the streets of the UK and the focus returned to the fundamentals, pushing any talk of the virus on the back burner. Meanwhile, the virus continued to spread. So there was NO relief.

As the night became day, US futures pointed to a jump in stocks. All of the early indications were that stocks were poised to surge on the opening on Tuesday. And surge they did. As the bell rang, the Dow, S&P, Nasdaq and Russell all exploded higher. Within minutes, the Dow was banging its head on UP 350 pts. With the others in tow. Most investors (myself included) assumed that the initial spurt higher would find resistance and then back off a bit as investors continued to monitor the impact of a virus going wild. YET, they did NOT seem to care. Stocks continued to surge. Then the focus turned to the debacle in Iowa. The first state in line to express their opinion about who should be the Democratic Presidential candidate to challenge Donny in November.

By now, you’ve heard, the “app” that was designed by a technology firm called SHADOW (still a private firm) failed miserably, unable to do what it was supposed to do: do the math of the caucus results in each district and send that data back to the Democratic headquarters. This sent the results into a tailspin. The results that everyone expected, Sanders, was replaced by Petey. Yes folks, the word yesterday during the day had Petey way out in front with Bernie and Lizzy in third and fourth place. THAT was the real reason that stocks continued to surge. You see, what became clear is that the country is NOT voting socialist, they are not voting to “give it all away for FREE.” While the country understands that there will be a challenger in November. It does not have to be someone that wants to turn the US into Venezuela.

Immediately, there were calls for a “do-over.” The Biden camp sent a harshly worded letter to the state chair and then took to the airwaves to tell their side of the story. As the day wore on, the others appeared to make the case for why they really won this caucus. But as the time ticked by, stocks moved higher and higher on an apparent “Petey win,” seemingly unable to control themselves with the Dow up 507 pts at 2 pm. Every sector was enjoying the company of buyers as the algos were programmed to cancel any inline sell interest, leaving a void in prices causing the buyers to have to pay up. Exactly what they did on Friday, when the news was more negative, causing the algos to initiate sell orders while at the same time instructing the buyside to cancel interest in line and bid lower, leaving a void in prices on the way down. So on Friday, we sold off 600 pts and by Tuesday night we have regained 550 of those points as the automation continues to wreak havoc on the marketplace in every direction.

Then at mid-day, Mikey Bloomberg announces that he is prepared to spend even more money on his campaign (as he is now convinced more than ever that he needs to be on the ballot) to assure himself a spot in the next debate, allowing Americans that do not know him the opportunity to see him live and in action on the debate stage, challenging the likes of Bernie and Lizzy. The markets surged again.

Adding fuel to the fire, TSLA and Lonnie Musk appear to be all the rage as street analysts all suddenly raise their estimates and commentary on the stock and the man, suggesting that TSLA sits at the intersection of ESG investing, Technology investing, Space travel. All of which is true. But suddenly is worth more money. Ron Baron, of Baron Capital and a very successful investor, owns 1.6 million shares of the stock. He was featured on CNBC’s Squawk Box with Becky Quick. She prompted him to tell “his story” about the stock and inform the viewer about why he owns it and why this will be a trillion-dollar company in short order. The algos went wild, sending that stock up another $180 or 24%, before backing off and closing up only $107 or 13%, bringing its total move in two days up $236 or 36%. Word that short sellers were dropping like flies was only fueling the move higher.

This morning, as we look around the globe, the buying frenzy continues. While the virus also continues to get worse, NO ONE cares. Word that some researchers somewhere in the world are close to an “antibiotic” may be part of the reason for today’s move higher. But that’s a stretch. Asian markets continue to move higher, making up lost ground from Monday. All of the focus is on the move higher post the sell off. It’s seemingly ignoring all of the prior comments and concerns over coronavirus. By the end of the day we saw:

Japan +1.02%, Hong Kong +0.42%, China +1.13% and ASX +0.39%.

In Europe, stocks there are following suit. On the data front, the final read on the purchasing managers index (PMI) showed that EZ (Eurozone) business activity began the year with a solid start, beating initial estimates, rising to a five-month high of 51.3. UP from the December read of 50.9. Germany’s service sector continues to grow at its fastest pace, rising from 52.9 to 54.2! Earnings continue to impress, as the season comes to a close.

FTSE +0.77%, CAC 40 + 0.96%, DAX +1.3%, EUROSTOXX +1.01%, SPAIN +0.97% and ITALY +0.96%.

And again, US futures are surging in the pre-dawn hours. Dow futures are up 200 pts, S&P’s up 26, the Nasdaq up 84 pts and the Russell ahead by 14 pts. A possible “cure,” better earnings and a rally in crude oil are sending the algo’s into buy mode. Treasuries as expected have sold off, sending 10 year yields surging, closing yesterday at 1.637%. Gold is now flat, after having surged overnight on the news of more infections, and confusion over market action. Earnings are winding down and we are hearing more and more about how the virus will affect future guidance. But again, no one seems to care (today). Economic data yesterday remains robust and today we await Mortgage Apps, ADP employment – exp of 158k and Markit US Services PMI of 53.2 – bullish, and Markit US composite PMI. Friday will bring us the ADP report where we expect +160k new jobs.

As discussed earlier in the week, the S&P tested 3300 yesterday closing just below. But today, if it holds true, the S&P will surge up and through on its way back to the recent highs of 3330-ish. Questions about valuations remain. Now we are hearing from some asset managers that stocks are “cheap relative to bonds.” Oh boy, time for a drink…

Oil is alive and well, surging by 2% this morning as OPEC and the Russians discuss cutting production to try and “stop the bleed.” As noted we tested the lows of June, August and October of 2019. The markets want to know if buyers are waiting in the wings or if they are gonna walk away to see what’s next. Now that OPEC /Russia is considering cuts, expect that oil will find support at those levels.

Finally, in last night’s SOTU speech, Trump did as expected and laid the groundwork for his campaign, causing Pelosi’s head to explode. Many elected members of congress chose to boycott the speech, which is unacceptable in my mind. But everyone gets to make their own choices. In the end, Pelosi rips up the speech for all to see in a final act of defiance. The next 10 months will be very interesting.

Take good care.  


Tuscan Style Pasta & Ceci

Pasta and Ceci – Tuscan Style –  A simple, hearty vegetarian peasant dish.

Tuscany is the region north of Rome – more Central on the West coast with Florence as the regional capital. It is known for its mountainous terrain, rich artistic influence and incredible culture. It is widely recognized as the birthplace of the Italian Renaissance and was home to Michelangelo, Leonardo Da Vinci, Galileo, Dante and Puccini and the Medici family…

Pasta and Ceci is not the same as Pasta Faggioli. Pasta Faggioli is typically a southern Italian dish featuring tomato sauce, and cannelloni beans. Today’s dish features: Ceci beans, carrots, celery, onions, s&p, vegetable stock, water and a small pasta – like Ditalini, Pennette, Tubettini…etc. Something you eat with a spoon and not a fork.

In a large pot – sauté chopped carrots, celery and onions in a bit of olive oil for 10 mins on a med heat. Next add two cans of Ceci beans – water and all into the pot. Season with s&p. Add enough vegetable stock (or water) to cover the beans and then some and then simmer for about 25 mins. Stirring occasionally along the way.

Next – remove 3 ladles of this mixture and set aside. Puree the remainder of the beans, etc. in the food processor. Put everything back in the pot – including the unblended beans. On med low heat add the pasta – like ½ box – as the pasta grows it absorbs the liquid… so make sure that you add some water if need be… You do not want it soupy – but you need to have enough water so that the pasta can cook.  Stay close to the stove to stir and to make sure it does not dry up… Remember – you can always add some stock or water to make this dish soupier or pull back and make it thick and hearty…

After 6 mins… taste the pasta for doneness. This should now have a thick consistency – but not dry.  Serve in bowl and sprinkle with fresh grated Parmigiana cheese. Remember this is a peasant dish – so it is meant to be filling – no need to serve anything else other than your favorite white wine.

Buon Appetitio.