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Things you need to know:

  • The surge continues, TSLA & Bitcoin go ‘hyper-parabolic’
  • Investors continue to believe in the ‘Biden plan’ – massive stimulus/infrastructure
  • Markets discounting a ‘pull to the left’ as not an issue… Is Biden strong enough?
  • Trump concedes and promises the peaceful transfer…
  • Try the Stovetop Roasted Chicken in Lemon/Garlic/Herb Sauce

ROOOOAAAAR!!!  Stocks continue to surge as the algo’s go wild… this even after all of the chaos in DC that rocked the capitol building on Wednesday evening – Why? Because everyone thinks that the prospect of more stimulus and a big infrastructure plan coupled with the stability of a Biden Presidency is enough to send stocks surging – and as long as that is the narrative – then guess what?  Stocks will surge, until they don’t…

Notice how Covid-19 and all of its strains don’t even make the front pages any longer – yet arguably it has gotten worse and is expected to get even ‘more worse’ in the weeks ahead – but what the latest moves suggest is that Covid is no longer driving the action… no matter how much the left wants to create continued hysteria.

All of the indexes rising making new intraday highs and new closing highs. The Dow added 211 pts or 0.7%, the S&P up 56 pts or 1.48%, the Nasdaq (which has been under a bit of pressure lately) shot higher – adding 326 pts or 2.56% while the Russell tacked on 39 pts or 0.83%.   Even the Transports closed at a record high adding 105 pts or 0.83%.  Now just to make the point- the Transports are up nearly 100% off the March lows and this quiet move suggests that economic activity in the US is alive and well.

Why? Because when the transports shoot higher that means that there are plenty of trains, planes, trucks and ships – moving and delivering goods to all parts of the country.  And if goods are moving and being delivered around the country then someone is doing something!  Someone is spending money, and someone is delivering all of this stuff. And that also means that there is a demand for energy – think oil… and there too, we have seen some dramatic moves… in both oil prices and oil stocks… the XLE up 45% since the October lows and many of the individual constituents enjoying the company of buyers as well.

And the 10 Yr Treasury? That is moving up as well, piercing 1% a couple of days ago suggesting that all of this stimulus spending will spur inflation – something that hasn’t happened in a decade… and what does well when inflation kicks in? Cyclicals… Cyclical stocks are those that follow the ‘cycle’ of the economy and that includes: Peak to Trough… so think Expansion then Peak then Recession then Recovery and then Expansion… and so it goes… and the stocks that do well in this part of the cycle? Consumer Discretionary (vs. Consumer Staples), Banks, Retailers, Home Builders, Travel and Leisure, Autos to name a few. Now this does NOT mean that you go and shift your whole portfolio into cyclical names… Not at all… it just means be aware of where we are in the cycle… maintaining a well-diversified, balanced portfolio is always the best bet…

And to this point – the Financial ETF (XLF) is up 26% since the election, Consumer Discretionary is up 9% (vs. Consumer Staples that are up 4.5%). GM is up 9% this year while F has gained 7%… but that pales in comparison to what we have seen TSLA do since the 1st of the year… which has surged by 14% (on top of the 580% gain in 2020). I mean – yesterday the market saw investors take the stock up (again) adding $60 billion in market value yesterday ALONE prompting some to sing its praises as they go ‘all in’ while others including the famed housing bubble short investor – Michael Burry to scream out loud that the TSLA stock price is ‘ridiculous’ and he is SHORT the name! (which only ignites the bulls sending the algo’s into a frenzy…)  And on a sidenote – Lonnie (Musk) has now shot past Jeffrey (Bezos) in terms of net worth… essentially saying that ‘mine is bigger than yours’ – Mine being defined as his bank account – so slow down!

Which then brings up BITCOIN… another phenomenon! This ‘asset’ has gone ‘hyper-parabolic’ up another $1500 overnight trading at $41,170.  In the first 8 days of January this asset is up 42% on top of the 222% in 2020… Mikey Novogratz remains the cheerleader followed closely by those guys at Morgan Creek Asset Management and then the ‘Mooch’ (Scaramucci) … who suddenly has also become Bitcoin’s number 1 fan…..launching a new Bitcoin Fund… as so many others have, creating a ‘client friendly’ product with a $50,000 min – allowing it to become available to the mass affluent – essentially ‘democratizing BitCoin like he did to the Hedge Fund Industry a decade ago. (or at least that is what he believes). In any event – like TSLA, Bitcoin has gone ‘hyper-parabolic’ and we all know what happens when something goes ‘hyper-parabolic’… think ‘Tulipmania’. For those of you unaware – this event occurred in the mid 1600’s when speculation in Holland drove tulip prices to extremes before it crashed and burned going down in flames… and this event serves as the parable that defines the danger that excessive greed and speculation can reap… just sayin’… Caveat Emptor (Buyer Beware).

This morning – US futures are… YES… Up again… Dow futures +100, S&P’s up 13, the Nasdaq ahead by 55 pts and the Russell is up 13 pts… Last night Trump showed his face and finally conceded that Joey won the election and that he will ensure a smooth transition and that the ‘thugs’ that defiled the Capitol would pay the price and that violence is never the answer (this after a handful of cabinet members handed in their resignations and a 5th person has died)… he also made it clear that he isn’t going away and that the fight has just begun… Oh joy… what do you think the ‘kids’ are thinking?

Eco data today includes the big NFP (Non-Farm Payroll) report… and the expectation is for an increase of 50K new jobs… but if Wednesday’s ADP report is any guide – we could see a negative jobs number (as ADP did) and that would only cause the stimulus argument to gain more fire… because the thinking would be that we need even ‘more help’. The unemployment rate is expected to rise to 6.8% while hourly earnings show a 0.2% gain m/m.

European markets are higher as well – again on top of nice gains yesterday… a recent study assuring us that the PFE/BioNTech vaccine IS effective against the newest and highly transmissible mutations appearing in Europe, South Africa, the US, parts of Asia and essentially the world… I mean… let’s just assume it’s everywhere and then focus on destroying it… Why do we have to play this game of ‘Where’s Covid Today?”

As of 7 am … The FTSE +0.10%, CAC 40 +0.51%, DAX +0.74%, EUROSTOXX +0.64%, SPAIN +0.26% and ITALY +0.49%.

OIL is also SURGING… up 75 cts at $51.56/barrel… Between the Biden administration’s stance on fossil fuels and the recent cut in production by the Saudi’s – oil traders are scrambling to buy oil… Hmmm… what happened to the virus demand destruction argument? Guess, no one is talking about that anymore either… $53 appears to be the next resistance point – (February high) but like any momentum trade – we could see prices blow right thru that level as the mania continues…

Gold – down $20 this morning as investors look to other assets to put their money… the safety trade is not ‘in vogue’ right now… and overnight it broke thru short term resistance and appears to be finding support at the intermediate level trendline – $1,875…

The S&P closed at 3803 marking the latest new century for the S&P… (the Nasdaq also blasted up and thru 13,000 – another big round number to celebrate) and it appears that early today we will test yesterday’s high of 3811… not sure about you, but I am still waiting for this rally to fade and pullback – it’s called ‘mean reversion’ suggesting that what goes up must come down… and while the day to day movements can be chaotic and unpredictable the market does tend to adhere to this mantra… but it could go on for weeks or months… so in that case – stick to the plan… trim and rebalance where necessary and keep moving forward…

Take good care

Kenneth Polcari
Consultant, Market Strategist


Stovetop Roasted Chicken Parts w/Lemon, Garlic Herb Sauce 

For this you need:  Bone in – split breasts and thighs., s&p vegetable oil and chicken broth.

For the Sauce you need:  1 tspn vegetable oil, 1 large shallot, 1 tsp flour, chopped parsley, minced fresh chives, fresh lemon juice, 2 tblspn of butter and s&p.

Pat the chicken dry with a paper towel. – season with s&p.

Heat the vegetable oil in a large non-stick frying pan.  Add the chicken skin side down and cook for 6 – 8 mins.  Do not move or turn the chicken.

Now turn the chicken over, reduce heat to med low and add 1c of chicken broth – cover and cook for about 15 mins.   Remove chicken and place on a separate platter.  Pour the remaining liquid into a large mug and set aside.

Wipe the pan with a paper towel.  Now add 2 tblspn of vegetable oil to pan and heat.  When hot – return the chicken – skin side down to the skillet and and cook until the skin is a deep golden brown – maybe 5 – 7 mins.

Remove and set aside.  Now measure the reserved liquid and add enough chicken broth to make it 1 cup.

Now the sauce – heat 1 tblspn of oil in a skillet over low heat.  Add the chopped shallot and cook for 2 mins.  Now add in the flour and whisk for 30 seconds. Raise the heat and add in the 1 cup of the reserved liquid and simmer until it is reduced by ½.  Now remove and whisk in the parsley, chives, lemon juice and butter – season with s&p.  Plate the chicken pieces and pour the sauce over the top.  Serve with a green vegetable – maybe French style green beans or steamed broccolini.