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Things you need to know:

  • Welcome Back! We are now in the throes of the election cycle
  • While Eco data is improving – virus cases remain stubborn around the world
  • 56 Days until the election…will we have a winner on the 4th?
  • Who decides the efficacy of a vaccine – Trump or the Scientists?
  • Gold and Oil under pressure as the dollar strengthens…
  • Try the Matalgliati Pasta & Beans… So good.

I’m back! All rested and ready to go… so what happened during the week I was off? I mean it was a big vacation week for so many around the world… so what could have possibly happened?

On Friday August 28th – the S&P stood at 3484 and by Friday September 4th the S&P stood at 3426 – a mild pull back about 1 ½%… or so… the Nasdaq stood at 11,695 on the 28th and closed at 11,313 on Friday the 4th  – a 3% sell off… again nothing to write home about – but what I failed to mention is that between the August 28th and September 2nd– both indexes had surged higher as talk of how technology could only go up… and how the remote working/schooling issue was alive and well… How the economy was on the mend and how we are that much closer to a vaccine and both the DNC and RNC conventions were now history… The S&P rising to 3580 or +11% ytd while the Nasdaq surged to 12,074 or +35% ytd… and then it happened… seemingly out of the blue… out of left field so to say… the market went into meltdown mode – the S&P suffering an intraweek decline of 7% from high to low before settling down 4% on Friday and the Nasdaq – suffered an intraweek decline of 10% before settling down only 7%… causing the headlines to warn of another ‘Tech Wreck’ sending shivers thru the spines of so many of the newest traders to hit the street…

Even Justin Waring – Investment Strategist at UBS’s Global Wealth Management – who might be all of 30 years old – was stunned… saying that:

The areas that have been punished the most in this selloff are the ones that benefitted the most…”  (Brilliant observation..!) Oh, and he went onto say that: “the drivers (for the selloff) are a little bit unclear…” 

Unclear? Really? Dude – don’t even get me started… say it for what it is… valuations had become way over extended, new complex derivative strategies employed by so many on the street including none other than Masayoshi Son (of Softbank Fame) has forced 5 names in the universe to go to stratospheric levels – dragging the indexes to new highs – it becomes a bit of a short term problem, no? Have you been listening to the chatter at all? (see the WSJ story – Softbank’s Bet on Tech Giants Fueled Powerful Market Rally – Japanese conglomerate led by billionaire Masayoshi Son placed billions in options bets on fast rising tech stocks – $50 billion in fact, in options).

I mean even Davey Portnoy of Barstool Sports fame told the world that all you have to do is ‘scramble some letters together and buy that ticker symbol – because stocks can only go up’… in fact in my opinion – he helped to fuel the Robinhood trading community frenzy that we have all witnessed… I mean, even CNBC’s Mike Santoli came up with a ‘Robinhood Indicator’… as if you were now going to make investment decisions based on a ‘Robinhood Indicator’? (the same firm that is about to get whacked with a $10 million fine for not disclosing how they ‘sell’ your trading data to the big wholesalers… ) And Davey – while a vibrant and excitable internet personality – was now your financial advisor? He would take to Twitter to announce how he just committed $500k to a stock that he threw a dart at – as if that really represented the common man? As if that really represented the retail investor? He would then tweet about it causing all of his groupies to jump on board… in a herd like mentality… And that the next time you saw him – it would be on his new ‘mega-yacht’… and you are ‘unclear’ about why the selloff happened?

When Zoom moves up 46% in one day – because they reported better than expected numbers – when the stock was already up 400% on the year – does it cause anyone to question – WTH (what the hell) is going on? I mean – has ZM benefitted from the pandemic – yes, and that is evident, but let’s be honest – up another 46% in one day because they gave an upbeat report and guidance… the stock had already priced that in… but the momo guys felt the need to light it further on fire and the complex derivative plays sent the stock soaring as the sellers of those call options needed to protect themselves… and the 46% move up on the 1st ended in tears for some (the brain trusts that bought the stock up and thru the high $400’s… ) as the ‘crash in tech’ took that stock right back down to $369/share by Friday. And that is just but one example of the mania that appears to be permeating the psyche.

Either way – the week limped to a close – as many of the newest ‘tech traders’ licked their wounds… and yes… ‘history does in fact repeat itself’… and the stretched valuations will snap back to the mean… now that being said – let’s not hold a funeral just yet… because both the S&P and Nasdaq remain in positive territory for the year – but we are now solidly in the ‘fall season’… September/October tend to be erratic – and with the added benefit of a Presidential election looming – we can expect even more volatility in the days ahead. So the message here is clear – ‘protect yourself’… talk to your advisor – (not the Robinhood one).

So almost anything ‘tech’ took it on the chin last week – even the WFH (Work from Home) ETF – which was launched in June and had risen 22% by Wednesday’s high ended the week down 14% leaving that group up 8% ytd… and the FAANG+M names… also under pressure – but let’s not cry just yet… they all remain WELL above the starting levels on January 1st – so there is no reason to jump ship – unless of course you are one of those people that ‘just got into the market’ – then yes… you don’t feel so warm and cozy… but hey – you have to start somewhere… and if you are a long term investor – then just sit tight… you’re gonna get your chance to average ‘down’… no worries… it’s about patience.

And the move from Growth to Value continues… (and that is not surprising considering the rhetoric)… the SGX (S&P Growth ETF) lost 8% last week, while the SVX (S&P Value ETF) only gave back 3% and in the days ahead – I suspect that value (which is still down on the year) will play catch-up as we move into the height of the election… and the polls go back and forth… will it be Joey & Kamala or will it be Donny & Mikey? 

Overnight – Stocks in Asia all managed to stabilize and move higher… Japan releases it revised 2nd qtr GDP number and it was worse than the original report… coming it at a negative 28.1% vs. the prior negative 27.8%… but it did beat the consensus estimates of negative 28.6%… Takuji Okubo – Director at the Economist Corporate Network tell us that the 2nd qtr was ‘definitely the worst’ but that the concerns over the pace of the recovery ‘seem normal’… Normal? What could possibly be normal about anything that has happened in 2020 anywhere in the world? Geo-Political issues remain front and center between the US and Beijing… with China accusing the US of ‘bullying’… as they launched a ‘Global Data Security Initiative’ this morning. This is where Xi Xi tells us that China will not use technology to impair other countries’ critical infrastructure or steal data while making sure that the Chinese service providers do not install ‘backdoor entrances’ that allow the Chinese gov’t to ‘infringe upon anyone’s personal information’… Now that is laughable, I mean it’s almost hysterical… saying that companies need to respect the laws of the host country… again – I am LMAO… (laughing my A.. Off). By the end of the day – Japan gained 0.8%, Hong Kong +0.14%, China + 0.54% and ASX +1%.

European markets though are under a bit of pressure this morning… Technology continues to struggle… the Eurozone announced their 2nd qtr GDP at negative 14.7% a bit better than the expectation… of negative 15%. The UK is about to ‘ramp up’ its preparations for BREXIT… (remember that issue?) British Exit from the Eurozone… the FT reported that PM BoJo (Boris Johnson) intends to offer up legislation to override the withdrawal agreement reached in January – which is about to set the whole process ablaze as the EU warns of no more negotiations if he pursues this action… (all a game of chicken really – to see who caves first… more to come).  Additionally – the US is not the only nation to see a surge in virus cases… the UK reported 3000 new cases on both Sunday and Monday – leaving that country to confess that the situation is getting worse… while other parts of Europe continue to deal with the ongoing drama… The ECB (European Central Bank) is due to announce a new policy decision on Thursday… so investors await… As of 6:30 am – the FTSE -0.25%, CAC 40 -1.34%, DAX -0.83%, EUROSTOXX -1.05%, SPAIN -1.13% and ITALY -1.52%.

US futures were mostly higher but have turned lower in the early morning hours… the Dow is now down 120 pts, the S&P down 35 pts, the Nasdaq down 315 pts and the Russell down 5 pts. Looks like the ‘tech wreck’ from last week continues… again – this is not surprising at all… think about it… it’s a disaster out there… the economy, the virus, the riots, the discontent, the angst, and the ugly political discourse all leaving Americans concerned… and the kid from UBS told us that the stocks getting hit the worst are the ones that benefitted the most (Surely he nailed it!) Trump talks of a potential vaccine in the near future while Biden and Harris warn us that they do not intend on getting the vaccine because Donny is the President… as if Donny is downstairs in the basement of the WH mixing this himself. HELLO??? Pfizer, JNJ, AstraZeneca, Moderna, Regeneron… Hey! It’s about the SCIENCE and the FDA (Food and Drug Admin), the NIH (Nat’l Institute of Health) and the CDC (Centers for Disease Control) all Non- Partisan agencies… last time I checked it was their responsibility to opine of the efficacy of any new vaccine developed by any of a number of Bio-Tech/Pharma companies… not the President’s.

**Breaking News – at 6:36 am….9 Biopharm CEO’s pledge to make safety the main focus in vaccine development – Whew! Glad we got that cleared up… Now can we move on? 

Either way – do not expect this argument to go away at all… the election is now less than 56 days away and who knows if we’ll even have a winner on November 4th which is just another potential time bomb for the markets… because again – the markets just want clarity… good or bad, they just want clarity.

No significant eco data today.   

Gold is down $12 at $1920/oz on the back of a stronger dollar… but the decline could have been worse but for the growing fears of a stalling economic recovery due to surging virus cases around the world.  It has now broken short term trendline support at $1923 as traders now look for $1900 to be the next stop.

Remember – that gold is an inflation hedge – that being said – I suspect gold will remain in the $1900/$2000 range thru the fall… and may see additional interest when the election rhetoric gets even uglier.

Oil – continues to decline… a move that started last week the commodity had to make a decision as the trendlines converged… which way would it go? Would it break out or break down? My guess was that it was ready to break out – clearly I was wrong… it broke down… as the chatter all last week and into the weekend was about the rise in expected covid cases after the long weekend and what that would do to demand – you can add in the stronger dollar as well – that puts pressure on the price of oil…  so they whacked it… leaving it sitting just on its intermediate term trendline… at $37.60… it needs to find support here.

This morning the S&P is at 3379 – we will surely open below 3400 – taking us back to another century… trendline support is at 3298… or 4% from here… that is NOT out of the question at all… and would represent an 8% pullback from the recent high of 3580… Well within the normal trading band… valuations are stretched for some sectors and we are seeing money being raised from many of the Go-Go growth names… and moved into some value names. If you are invested in the market – Bravo – sit tight and talk to your advisor if you get worried… I would offer a word of caution as we move into the fall… I wouldn’t necessarily go chasing names here – September/October are volatile months… sit tight, do your homework and be patient.

Take good care –

Kenneth Polcari
Chief Market Strategist, Consultant

Maltagliati Pasta w/Cannelloni Beans

Fresh Maltagliati Pasta and Cannelloni Beans (Maltagliati – pronounced:  Ma – tal – ya- ti)
5 years ago –  I had the incredible experience of being in Manciano Italy – a town/village of some 3k families… set in  the hills of Tuscany – in the Province of Grosetto – it was an incredible place… Today’s recipe comes from one of the local restaurants…it is easy to make and is a great fall/winter dish- kind of like Pasta Faggioli but different…

Fresh Maltagliati pasta is a pasta which is made from scraps and left over after other pastas have been made. The random shapes of maltagliati pasta have become so popular in some parts of Italy that some companies actually deliberately manufacture this pasta. Maltagliati literally means “badly cut” and refers to the odd shapes – and although originated in Emilia Romana – you can be sure that Italians have been using their freshly made pasta scraps for many years- because – Why would you throw out perfectly good pasta?  In the event you cannot get it – you can just as easily break up lasagna to make the “Maltagliati”.

For this you will need:  Maltagliati Pasta, Cannelloni beans, water, olive oil, garlic, onions and s&p.

Begin by sautéing some crushed garlic in olive oil on med heat – careful not to burn the garlic – now add I diced onion – sauté some more – maybe 10 mins.

Next – 2 cans of Cannelloni beans – do not strain. Add three cans of water – season with s&p… bring to a boil and then turn heat to simmer. Stir occasionally.  After 20 mins… remove 2 ladles of beans and set aside… now in a food processor – blend the remaining beans to form a thick soup – return to the pot and add back the beans. Now – take your fresh pasta and add directly to the soup and cook*. Fresh pasta will cook in like 3 mins… so be careful… Serve immediately in warmed bowls with plenty of fresh grated Parmigiana cheese.
*In the event that it looks like you may need a bit more water to accommodate the pasta – feel free to add here and bring to a boil before you add the pasta… but in the end – you do not strain it – you cook the pasta directly in the pot .  If you use box pasta – boil the pasta separately for about 7 mins…strain – reserving 2 mug-fulls of the pasta water.  Add 1 mug of the pasta water to the beans, then add back the semi cooked pasta to finish cooking in the “soup”. If it thickens too much – add the other mug of water…

Buon Appetito.