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Things you need to know.

  • Stocks surge yesterday and continue to push higher in the pre-mkt.
  • Earnings from AMZN and GOOG due out after the bell…both names quoted up in the pre-mkt.
  • A little history lesson – because this is a teachable moment.
  • RH raises even more money from investors (not the gov’t) to support its financial position in a show of support.
  • Oil explodes higher – up nearly 5% in two days – kissing $55/barrel!
  • Try the Chicken Fricassee

Sell off?  Don’t be ridiculous – What me worry?  Don’t be foolish – stocks staged a comeback, albeit partial, but it was still somewhat of a comeback…in that 1 step forward 2 steps back price action that we’ve seen of late….Futures which had been all of the map on Sunday night/Monday morning positioned themselves for a rise as the sun rose over the Atlantic and the opening bell prepared to ring… the end of the day the Dow added 230 pts or 0.76%, the S&P’s up 60 pts or 1.6%, the Nasdaq up 332 pts or 2.55% and the Russell up 52 pts or 2.53%.  Transports which also got whacked on Friday rallied 162 pts or 1.3%.

And as the day wore on, there was more talk of what the reddit traders were doing besides attempting to trade GME, AMC, BB, TR etc.… and a quick look found them (possibly) lurking in the silver markets…. Silver which has been a blasé trade of late garnering no mention in the media or otherwise suddenly found itself surging…. up 10% for what reason?  No one could really pinpoint a reason, so it seemed appropriate to point your fingers at the reddit traders. I mean why not?  Were they now attempting to attack the silver market in what would be reminiscent of what the Hunt Brothers did in March of 1980.    Now to be fair – this idea was quickly denied by one of the participants…saying that only 3% of the posts had anything to do with silver – so why was anyone pointing their fingers at them?  Well, because it is easy now to point your fingers at the reddit traders to explain away anything that moves well beyond what appears to be reasonable or logical……. But hey – it is a new world and nothing seems to make much sense lately….

Now – here is a lesson – because it is a teachable moment….it was 1980 –

The Hunt brothers – Nelson, Lamar and Billy tried to ‘corner the silver mkt’ (this means going long in a big way, vs going short in a big way)…….they had invested heavily (via margin)  in silver futures contracts – exposing Bache Halsey, Prudential Bache and Prudential Securities…to the risk….and when the price of silver dropped below the minimum margin requirement they were issued a $100 million margin call and guess what? They could not meet that obligation and the price of silver collapsed sending tremors through the precious markets and the stock market.    In the end – a consortium of US banks came together and provided a $1.1 billion loan –a sort of ‘home equity line of credit’ – which allowed them to make everyone whole and survive the ordeal…so this is not the first time that Wall St came to the rescue of one of its own…. Capisce?  It was not the gov’t, it was not the treasury, it was Wall St. (Here is a hint – because they had to, they were all exposed to the risk – the same way some members of the community came to save RH during this crisis – they had to, they were all exposed to the risk – Capisce?  This is not rocket science).    And if that isn’t enough – for all of your RH traders – you should read up on the 1998  Long Term Capital drama – that also shook global markets to their core –  sending tremors around the world….…..and how the street came together again  – (with the exception of Lehman Brothers – key point) – to save Merriweather’s life when his ‘trade idea’ failed exponentially….… yes,  Wall St – has a history of protecting their own – right or wrong but they do protect their own, a lesson that may be tough to swallow, but is a lesson that you should understand.  ….and when they do not, it ain’t pretty…. Think about what happened to Lehman brothers and Dickie Fuld….during the GFC (Great Financial Crisis) when he was begging to be saved by the street… what was a  ‘payback is a bitch’ moment! But then think of what happened to markets around the world after that event…. because the Lehman tentacles were far and deep….it became a global crisis….

And if you have been under a rock for a week or so, you’ll see how RH has now raised more than $3.4 billion and is apparently looking to raise another billion or so, to save IT” S A..!  Again – Wall St – not the taxpayer, not the gov’t, not the treasury – coming to the rescue. And to be clear – they saved RH not GME – nor Melvin – recall Melvin covered their position and LOST billions on that trade…while Citadel and Point 72 infused more than $3 billion into the fund to help it stabilize and manage itself through the process…. (again, think of their exposure….)

Did you see GME yesterday?  Down $100 to close at $225 as the news reports that short interest is falling (did anyone expect it would not?) ….so, I must ask – what are those guys that paid $350 on Friday doing when they told us it was ‘going to the moon!’     What are the ones that told me that they did not care if it did not make sense doing, that they were not going to sell any stock until the price hit $1000/share?  Hey, How’s that working for you?  I’m just sayin’…. It does not make sense…. In fact – many of the ‘reddit’ names declined yesterday as the hysteria fades….

Ok – enough of the stories…lets discuss what happened yesterday…. stocks rallied, Ford motor made a deal with Google to provide technology in cars and cloud services at factories.  The news was well taken – F added 2.9% while GOOG added 3.5%.  (and Google’s earnings are due out today after the bell…. along with AMZN – so get ready…and if anyone is expecting either to disappoint – you should probably toss your gloves into the ring and go away…. that is like betting against Apple…I mean who does that?)

TSLA surged by 5.8% after an analyst from Piper Sandler raised his price target from $515/sh to $1200/sh claiming that the ‘fireworks aren’t over’…. Hello?  The stock is already trading at $840/sh more than 63% above your original estimate – So, let me ask – Who ever thought the fireworks were over for Lonnie Musk and Tesla?

And Virgin Galactic (SPCE) rose 21% closing at $53.79 after they announced the resumption of the next spaceflight attempt after the aborted launch in December…word is that the ‘launch window’ will open on the 13th with opportunities to fly throughout the month….

And with all the action yesterday – the focus shifts back to the pandemic winners…. strong performance in Consumer Discretionary (XLY) + 2.6% and by far the best performing sector. (think as the economy opens back up – people will go out and buy ‘discretionary things) Not far behind you found Real Estate (XLRE) + 2.26%, Tech (XLK) +2.5%, the Work from Home (WFH) names +2.1% Communications (XLC) + 1.8%, Financials (XLF) + 1.3%. The worst performer?  Consumer Staples (XLP) up 0.09%…. (think staples vs. discretionary items – need vs. want).

Now this morning we wake up and find that US futures are continuing to surge!  Dow futures up 325 pts, S&P’s up 35 pts, the Nasdaq adding 125 pts and the Russell up 22 pts…. European markets are also building on their strong performance from Monday……all up greater than 1.5% except for the UK – up only 0.85%!  All of the Reddit names under pressure – including silver as the ‘frenzy’ begins to collapse under its own weight….in what appears to more fatigue than not.  Silver fell 5% overnight after surging 8% yesterday – making an 8 yr. high on who knows why – after margin requirements were raised and many street analysts warned traders against ‘chasing the rally’. (because there was no logical reason for the action…there is a theme here…just sayin’) And GME which fell 31% on Monday is down another 24% overnight…. now being quoted at $170/$173….and likely going lower….

The WH – welcomed 10 Senate Republicans to discuss the $1.9 trillion relief package – with those Republicans offering up a $600 billion package (which is a starting point) hoping to engage in fruitful, realistic, and honest conversations about what is next.  Nancy and Chucky on the other hand are moving ahead with a push to approve the Biden $1.9 trillion plan via ‘reconciliation’ which does not need a single republican vote to pass. So now we are once again at a crossroads – Will Biden slow it down and reach across the aisle or not?  In any event – signs of progress did help the mood yesterday and is helping the mood this morning.

There is not any eco data today but there are some significant earnings reports- AMZN and GOOG to name just two (after the closing bell) …. the street is expecting AMZN to report $7.34/sh while GOOG is expected to report $15.58/sh. Again – NEWS FLASH – do not expect to be disappointed.

Like I said – European markets are all up – in what also appears to be a continuation of the bounce yesterday…. more talk of the ‘recovery’ helping to fuel this latest leg of the rally….as more people get vaccinated and new infections and deaths begin to decline…. across the region (as well as in the US).  It is all about earnings as well – as there is little eco data to drive the action…. At 6:00 am the FTSE +0.75%, CAC 40 + 1.86%, DAX + 1.32%, EUROSTOXX + 1.63%, SPAIN +1.63% and ITALY +1.38%.

OIL is up $1.23 or +2.3% at $54.78 after trading 2.6% higher on Monday….in what is now the ‘virus-recovery rally’!   Toss in the latest supply cuts by OPEC and the excitement over the re-opening of the world all adding to the idea that demand will surge and supplies will ‘dwindle’….and in a move to show real strength – a Bloomberg report tell us that Royal Dutch Petroleum ‘raided the North Sea market on Monday, buying the most benchmark-grade cargoes in a single day in 10 years……..and they also made a bid for 7 more shipments in a flurry of activity….’  And this is sending oil markets higher….so any talk of the reddit traders raiding the oil markets is FALSE – because you CAN explain the surge in oil prices!  😉

Gold is down $12 at $1,851 on the back of the weaker performance in Silver – again in what is called the sympathy trade…. Gold getting caught up in the frenzy as well but there is little chance that they can ‘corner the gold market’.  Now gold remains stuck right here ~$1,850/$1860 ish and appears to be walking UP the trendline drawn from the lows of November.  Sit tight – nothing to worry about.

Bitcoin adding $1568 – now trading at $35,229……

The S&P closed at 3773 – exploding off of the trendline support line at 3719….in what was a real show of strength and this morning’s action appears as if we will once again enter the next century easily piercing 3800 in the moments after the opening bell rings….leaving the all time high of 3877 well within sight…..It is so exciting……and all of that concern that the chaos from last week would cause the broader mkt to collapse….is nothing but a distant memory…but that does not mean we won’t see a push lower once the latest ‘feel good’ mood fades…If the mkt ends the way it is beginning then we will have recaptured all of the losses from Friday….And like I have been saying – the longer term investor has to eliminate the noise and focus on the plan…’s action will definitely be about what to expect from AMZN and GOOG….so sit tight….

Text INVEST to 21000 to get my digital business card – give me a call if you want to discuss what Slatestone can do for you.

Take good care.

Consultant, Market Strategist

Chicken Fricassee

This is a bit easier to make -because this uses boneless/skinless breasts and thighs and with the addition of sour cream and an egg yolk the sauce doesn’t’ disappoint.

For this you need:  2 lbs. of boneless chicken thigh and/or thin sliced breasts, s&p, butter, olive oil, 1 lb. of cremini mushrooms, trimmed and sliced, 1 large onion, dry white wine, flour, 1 large garlic clove pushed thru a garlic press, chicken broth, sour cream, fresh lemon juice, nutmeg.

Now rinse the parts and pat dry with paper towel.  Season with s&p.  Set aside.

Heat up 2 tbsp. of butter and a splash of olive oil – when hot, brown the chicken on both sides….and transfer to a large platter.

Now, add the mushrooms and onions to the skillet and sauté for 5 – 8 mins…. now add about ¼ c of white wine and continue cooking until the wine has evaporated and the mushrooms and onions are cooked.  Now add in 1 tbsp. on flour and the pressed garlic.  Mix well – Now add about 1 c of the chicken broth and bring to a boil…. Add back the chicken pieces and any of the juice that accumulated on the platter – reduce the heat to med low, cover and simmer for 8-10 mins.

Now – remove the chicken and arrange nicely on the platter again…. cover with foil to keep it warm.  Whisk the sour cream (1/3 c) and the egg yolk together.  Now add in about ½ cup of the sauce that is in the skillet to temper the sour cream/egg yolk mixture. Slowly add back to the skillet   Add 2 tsp. of fresh lemon juice, and a shake or two of nutmeg.  Season with s&p to taste – and then pour over the chicken parts – serve immediately with steamed French cut green beans.