Things you need to know.
- To call it a circus is insulting the circus – Lack of understanding is dangerous.
- GME down another 11% to end the day at $40.69.
- Yellen pushes for the ‘big package’ and appears to throw support behind Bitcoin.
- Oil retreats as Texas comes back online – although the state is still a mess.
- US futures attempting to push higher.
- Try the Pasta and Peas
Oh boy, “WHERE do I begin, to tell the story of how great an online brokerage is, that sweet love story that is older than the sea …. where do I start?” (Think the theme from Love Story – Where do I begin – December 1970 – it is a classic)
Did you watch the show? Come on – you did, right? First – taking a poll – Does Vlad look like: A – David Brenner. B. David Cassidy or C. Helen Reddy?
To describe it as a circus – insults the circus…. The house financial services committee – well they have a lot of work to do if they are in fact a ‘financial services’ committee. What the hearing showed us – is that the elected officials on that committee not only know extraordinarily little about the underlying issues, but they do not even know some of the rules of the road. One of them asking if PFOF (Payment for Order Flow) is even LEGAL. Is this guy for real? I mean, it is embarrassing….
Look – payment for order flow was pioneered by none other than Bernie Madoff – back in the latter part of the 20th century (which alone should raise the RED flags). While it was supported by the market maker community for years, the exchanges – led by the NYSE opposed such practice – arguing that it weakened the system and drove order away from the public markets forcing it underground – thereby in fact weakening the broader system among other things – but the SEC in their infinite wisdom disagreed, embraced it and then supported the practice (I should also note that the SEC was a big fan of Bernie’s – but let’s not go there right now) ………
.and then the congressman from Guam – Michael San Nicolas? OMG…. he complimented RH for ‘helping to stick it to the hedge funds and forcing a short squeeze’…. We should throw this guy of the capitol (I mean I do not even know where to start to address this level of inaccuracy) … In the end it was nothing more than political theater…. Democrats arguing for a transaction tax while the Republicans complimented Vlad for bringing ‘investing’ to the masses. The ONLY one that had anything to say that was worth listening to -was ‘the Roaring Kitty’ – Keith Gill. And why? Because he had NO ax to grind on either side – all he did was do his homework, put his money where his mouth is and make an investment -and that investment paid off handsomely. Period. But get ready – Maxey Waters tells us that we can expect at least 2 more hearings on the topic – Oh joy….
Just an update – GME closed down another 11% yesterday ending the day at $40.69 – well below the $475/sh seen only two weeks ago – that is a 91% decline….and I think that this was a direct result of the Roaring Kitty telling the committee that in ‘his opinion’ based on his analysis – he had been buying GME at $4 to maybe sell it $20 (which is what he assumed is fair market value – are you following me here?) In fact – he admitted that the action we all saw in GME was beyond comprehension – something many of us (myself included) were banging the table about. Hey – Mark Cuban! Are you still supporting the $150/sh purchases that you told investors to hang onto?
Ok – stocks sold off a bit yesterday…. after eco data in the morning created confusion for investors…. Housing Starts plunged by 6% (negative) while Building Permits surged by 14% (positive), Initial Jobless Claims rose by 100k and both import and export prices rose more than expected. The Philly Fed Survey was a bit better and 10 yr. yields remain above 1.3% – but in the end the market needed a reason to take a break.
By 10:30 am – the S&P was down more than 54 pts – breaching the 3900 level, while the Dow, Nasdaq and Russell followed suit. As the day wore on – investors got a grip and once again began to focus on more stimulus and the successful vaccine rollout….as they attempted to discount anything negative – which is an issue, but we can come back to that. By 4 pm – while the indexes all ended the day lower – they were well off their intraday lows…. leaving the Dow down 120 pts or 0.38%, the S&P off 17 pts or 0.44%, the Nasdaq down 100 pts or 0.72% and the Russell off 37 pts or 1.67%. Note that both the Nasdaq and the Russell suffered the worst percentage losses, and this makes perfect sense…because they are also the ones that have risen the most, the ones that traders/investors have flocked to…so when it gets ‘hot in the kitchen’ – they will also be the first ones that get ‘cooked’. Not suggesting that they got ‘cooked’ at all – just trying to connect the kitchen reference! Cooked would be to see these stocks fall by 10% or even more. But you get it right?
And then enter stage left – Treasury Secretary Janet Yellen…. taking center stage and once again telling us that we need ‘a big package of stimulus’ for the economy to recover…saying:
“I think the price of doing too little is much higher than the price of doing something big.”
This even as the macro data is pointing towards an improving economic picture as COVID-19 cases are in decline and vaccinations are allowing people to return to normal. As I pointed out earlier in the week – older Americans that have gotten vaccinated are now resuming life as they knew it. They are out to dinner, they are going to see their families, they are spending money….and this is only expected to improve as more and more people get vaccinated. But in any event – more Kool Aid is what the markets wants and so the more they discuss it the more the markets will respond (positively).
US futures are up this morning….as the media is focusing on the Yellen commentary and while that may give a small boost now – until it happens the markets will remain antsy…. advancing when they push it hard and declining when it appears that it is running into resistance. Additionally – and let us not kid ourselves – investors are keeping a keen eye on 10 yr. yields and the idea that inflation may reveal its ugly head sooner rather than later. 10 yr. yields that rise quicker than expected will spook the markets and cause the re-pricing that many expect…. but a more gradual methodical rise in rates over months and not weeks will have a lesser impact on equity prices – yes, prices will still adjust lower, but maybe not to the extent they will if yields surge to 1.5% or greater in days – not weeks. And if they pierce 2%, I expect much more resistance in the near term.
At 6:30 am – Dow futures are up 42 pts, S&P’s up 9, the Nasdaq ahead by 46 and the Russell up 21…all attempting to rise but remember what I have been saying – one step forward – two steps back – each attempt at a push higher feels less robust – suggesting that investors are becoming a bit more cautious and that markets are a bit
extended…..this is not new news at all – but it does seem to get lost in the story.
Eco data today include Markit US Manufacturing PMI – exp of 58.8 (very bullish) and Markit US Services PMI of 58 (again very bullish). Existing home sales m/m expected to show a 2.4% decline.
European markets – after also taking a bit of a break are attempting to push higher this morning as well, but again not with the same gusto…. again, suggesting a bit of exhaustion. US macro data, US 10 yr. yields, more stimulus talk, loosening lockdown requirements and improving virus data all on investors minds. Eurozone flash composite PMI climbing to 48.1 from 47.8 – while improving is still in contractionary mode…. anything less than 50 suggests weakness – but again the trend is going up – so that must be good for something! German composite PMI coming in at 51.3 – in expansion mode – with manufacturing outperforming services. France PMI fell to 45.2 from 47.7 – going deeper into contraction as stricter lockdown measures hit that economy hard. At 6:30 am – the FTSE -0.19%, CAC 40 +0.52%, DAX +0.47%, EUROSTOXX +0.56%, SPAIN +0.49% and ITALY +0.26%.
Oil – guess what? It’s down today….and why – because the surge in the past week due to the storm that ravaged Texas and a bunch of other states is starting to wane…..Refineries that we shut down in Texas are now opening up and oil execs telling us that output would be returned to normal in a couple of days….and this is causing all of the trader types to hit the SELL button to ‘lock in profits’ – and this should surprise no one. Oil is off $1.40 or 2.3% and this on top of yesterday’s pullback. I would not be surprised to see oil pull back to the mid 50’s.
Bitcoin – up $707 to $52,750….is getting a bit of a boost again after Janet Yellen suggested that this is getting serious now and that for wider adoption – it will need to be completely regulated to assure investor and system protection…. suggesting that the Treasury is no longer poo pooing the idea of crypto currencies. And its off to the races….
The S&P closed at 3913 – after piercing and testing below the century mark…. before rallying back to end the day down 17 pts. You can feel the angst in the markets, and I ask again – Will we be able to ignore the negatives that are bubbling beneath the surface and keep telling ourselves that it is all OK? We remain in the channel of 3771/4040. You know how I feel – the market feels tired – and the attempts to advance feel less robust…. There is no reason at all to chase anything.
In any event – stick to the plan, trim where necessary and put money to work in some of the underperformers…. Stay awake…. this is not the time to doze off.
Text INVEST to 21000 to get my digital business card – give me a call if you want to discuss what I can do for you.
Take Good Care,
Chief Market Strategist, Consultant
Pasta Piselli – is a peasant dish – hails from Naples and has roots that date back to the Greco -Roman period – 50 BC to 300 AD. This period and the resulting cuisine were enriched by centuries of influence of the many different cultures that at one time or another controlled the Neapolitan region. Much of the cuisine took on the traditions of Campania (countryside) and many of these dishes were created around pasta and a host of vegetables & cheeses…. – So today I bring you Pasta and Peas – simple, rural, and some would say a peasant dish…. but go to any fancy Italian Restaurant and you will not pay peasant prices…. enjoy – You should be able to feed a family of 4 for about $12.
Slice a large onion and sauté in oil – add a dollop of butter……when soft – 10 mins or so…. add one bag of frozen peas and stir to coat…. add s&p and lower heat to med low and cover. Cook for 20 mins…. stirring occasionally. Check for doneness. they should be soft and juicy….
Bring a pot of salted water to a rolling boil and add 1 lb of med shells. Cook for 8 / 10 mins or until aldente. (I use shells because the peas nest themselves nicely inside the shell)
Strain pasta – always reserving one mugful of pasta water. Return pasta to pot and add back almost half the water to re-moisten the pasta…. Do not make it wet…. just moist. Add in the peas/onions/oil and 2 handfuls of grated Locatelli Romano cheese – stir and serve. Simple, easy, and only two pots to clean.