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Things you need to know.

  • It’a Bitcoin Palooza in Miami & El Salvador
  • Janet Yellen pushes for $4 Trillion spending to spur inflation
  • G7 ink an ‘agreement’ for a global corporate tax rate of 15% – but not so fast
  • Treasury yields up, Oil churning, Dollar Up and Gold Down
  • Try the T-Bone from Trentino/Alto Adige

Stocks edged higher on Friday…as Treasury yields retreated…… the NFP report showed that while we did add jobs in May, we did not break any records at all…. with new jobs coming it at +559k – below the expectation of +675k, but well ahead of the disaster that we saw in April. The other part of the report showed that unemployment dropped to 5.8% – down from 6.1%, but that is still not enough to fill all the vacant jobs out there that no one seems to want.  Additionally – the Avg Hourly Earnings did climb to 2. % y/y, while hourly earnings m/m climbed by 0.5% – stronger than the +0.2% expected rate.  And this all plays into the ‘Good Witch’ scenario that I described last week…. You see, there is good inflation and bad inflation – (just like the Good Witch of the North – Glinda and the Wicked Witch of the West – Almira Gulch).

You see they tell us that there is such a thing as good inflation and Friday’s mediocre NFP report suggests that good inflation is on the way – rising prices AND rising wages – …or at least that is the line that they are all using….and that caused investors to once again take stocks higher…as all of the talking heads reminded us that the FED is in control…there is nothing to worry about, they are not in danger of falling behind the curve – they got this!
As a result, there were not any fireworks per se, (other than the meme stocks), and stocks moved higher in an orderly fashion.  As expected, – Nasdaq outperformed – rallying 1.5% or 200 pts, followed by the S&P up 38 pts or 0.8%, The Dow up 180 pts or 0.5% and the Russell added 7 pts or 0.3%.

But much of the chatter on Friday was all about the massive Bitcoin conference in Miami, Florida over the weekend – an event that was reminiscent of the CDO conferences in the years prior to the meltdown in 2008 – but let us not go there!  It was – as you can  imagine – the event of the year….people descending upon the city, hotels sold out all the way to North Miami Beach, restaurants sold out, beaches crowded as all of the paparazzi came out in droves….Twitter was on fire on the weekend with posts and analysis of what was going on at the conference – all the big names in attendance only made it that much more interesting and exciting….Expect to hear more about the event on the cable stations today.  In the end – what it says is that Bitcoin (and blockchain) are here to stay – the days of being a non-believer are gone…. It is time to jump on the band wagon, – or at least dip your toes…No one is suggesting that you go ‘all in’…. but you may want to educate yourself on what the future holds.

In a side note – El Salvador’s President Nayib Bukele announced – via video to the conference – that he plans to introduce legislation that will make his country the first sovereign nation to adopt Bitcoin as legal tender as they partner up with Strike – a digital wallet company – as they prepare to build a 21st century modern financial infrastructure using blockchain technology.  Oh, and this will all happen next week.   (Note – this is El Salvador – so I would not base any analysis/investment on this event at all).

I was on TheStreet.com on a ‘LinkedIn live event’ with Katherine Ross on Friday – and one of the conversations was Bitcoin….and while the conference was not the topic, I did give you my opinion of what the chart is telling us – completely ignoring the almost daily cryptic commentary by Lonnie Musk……. Click below to hear my comments.

https://www.thestreet.com/jim-cramer/what-bitcoins-chart-tells-kenny-polcari-about-where-buy

Over the weekend – Bitcoin was a bit volatile but did not react with any conviction to the conference – it has though, been a bit sensitive to comments out of China…. which once again appears to be clamping down on its use and by some negative comments by our friends at Goldman Sachs that suggests that there is ‘little adoption’ by anyone important!

This morning – markets and investors are reacting to the news over the weekend that the G7 is supposedly close to inking an agreement that would impose a global minimum 15% tax on corporate profits for all of the big multi-nationals as a way for countries to tax the profits of digital companies like Apple, Facebook, Google, Amazon – etc.….and while it all sounds good – the road to implementation is full of rocks and potholes.  Which country will be the first to impose the tax? What kind of pushback can we expect from the corporate world?  My gut says – while this made the front page of the WSJ today – it is not anywhere near becoming law…. So, I would not react by becoming a seller in any of these names – on THIS headline – just yet….and initial reactions from companies like FB and GOOG suggest that they may embrace a minimum lower rate across the board vs. the 21% rate here in the states. Whatever!

US futures are a bit lower this morning…. Dow futures are down 20 pts, S&P’s off 10, the Nasdaq off 60 and the Russell off 9 as new inflation concerns remain in focus….

Yesterday – Janet Yellen made some comments saying that Joey should push through with his $4 trillion spending package EVEN it if does cause inflation to surge and rates to rise saying that ‘higher rates would be a PLUS for the US and the FED’.  This as the debate around inflation rages on…. with so many of them reminding us that any inflationary pressures right now are transitory – created by the pandemic that shut the world down…. think supply chain bottlenecks, surging spending and the trillions in gov’t spending all of which should abate according to Yellen.

In any event – that is the focus this morning….and later in the week – the markets will get the latest CPI (Consumer Price Index) report and expectations for that are UP.  Y/Y results expected to be +4.7%, ex food and energy of +3.4%.  Avg hourly earnings are also due, and the jury is out on what that result will be…last month we saw real avg hourly earnings fall by 3.7% (which is a negative) – so what will this week detail?

Word that the FED is likely to ‘hint’ at thinking about tapering in the June meeting that begins on the 15th and ends on the 16th seems to be the rumor – but they will make it clear that they are NOT READY to start any formal discussion…..this is more jawboning, more laying the groundwork, more preparation for the markets so that when they do become ready to start talking about tapering, investors will not react by stamping their feet and markets will sell off violently……but to be clear – they will sell off as investors reprice the risk to valuations.  Because valuations in a zero-rate environment are very different from valuations in a 3% – 4% environment.  It is just math – nothing more…. if investors do not assume that rates are going to 6% – 8% (or yet even higher…). In any event – the near-term volatility is far from over -and in the short term – inflationary pressures are real….so I would expect to see downside pressure in the weeks ahead.

10 yr. Treasuries are up currently at 1.57%, the Dollar is trading just north of 90 and gold is down another $5 at $1886/oz.  Oil is digesting its latest push higher but is still trading at $69.22!

European markets are churning around the flat line with no eco data due out across the region – the chatter will be about the G7 global tax agreement and this week’s inflation data out of the US.    In mid-morning trade we see the FTSE +0.14%, CAC 40 -0.04%, DAX -0.00%, EUROSTOXX +0.01%, SPAIN +0.12% and ITALY +0.63%.

Bitcoin is up 1% at $36,200, Ethereum is up 3% at $2,800 while Doggey Coin is unchanged at 0.37 cts.

The S&P closed at 4229 – taking back 4200 after piercing it last week.  I have been saying that the markets feel a bit tired, extended and needs some time to digest what is coming down the pike this month – and I continue to believe it…. Just to be clear – we have been stuck in this 4100/4250 range for 2 months now…. While the trendline channel suggests a range of 4125/4325.  CPI and FOMC are the next real drivers….so expect more churn until we make it through both.

Text INVEST to 21000 to get my digital business card – give me a call if you want to discuss the markets or a plan.  You can now get a video version of this note on my

YouTube Channel.

https://www.youtube.com/channel/UCI-MTlH2FdbMNvpZ2b_ELrg

You can follow me on Twitter – @kennypolcari

Take Good Care

Chief Market Strategist, Consultant
kpolcari@slatestone.com

T-Bone w/Wine and Onions

Today’s dish hails from the very northern region of Italy – called Trentino/Alto Adige….this is a complex place and has a variety of influences that are visible in the language, the food, and the culture.  During his rule (1805-1814) over Italy – Napoleon Bonaparte annexed this land from Austria.  He then renamed the region Adige – reflecting the Adige River that runs SE to the Adriatic Sea – as he sought to erase any historical affiliation to Austria.

The people speak Italian, and the Austro/Bavarian dialect of the German tongue.  As a result, they appreciate foods with ingredients like sauerkraut, horseradish and liverwurst, food much closer to the Austro-Hungarian empire than the Roman empire – so yes – this is Italy, but this dish is not pasta, polenta or Parmegiana.  It has no cream or tomatoes.  It does have garlic and wine.   It is a steak dish sautéed in onions with white wine -…….Easy to make and not fancy at all…. Takes no more than 30 mins to make and serve.

For this you will need:  thin sliced T-bone (or some other cut of thin sliced steak), butter, garlic, white wine, onions, flour, and s&p. (Mushrooms – optional).  **I also add a shake of oregano – as I like the taste…it is completely up to you…try it first on a small piece and see how you like it.

Start by slicing the onions, mushrooms (if you are using them) and garlic and then sautéing in butter and olive oil in a frying pan large enough to accommodate the steaks.  Keep the heat on med so that you do not burn the butter or the onions.

Next – season the steaks with s&p… then lightly dredge in flour.  Set aside.  When the onions are soft and translucent – turn up the heat and add the steaks.  Brown on one side for about 3 mins…. turn over and now add a splash of white wine – maybe like 1/2 cup.  Scrap the bottom of the pan and allow the wine to steam off a bit.  If it all evaporates – feel free to add just a bit more….cook for about 3 more mins…(depending on thickness – but remember – you do not use a thick steak for this dish).

When done – you can serve three ways:  1. Make a bed of onions/mushrooms and then place the steak on top or 2.  Place the steak first and then cover in a blanket of the sweet wine infused onion/mushrooms  or 3. Slice the steak on a diagonal and serve family style surrounded by the onions & mushrooms.

Serve with a garlic/herb rice pilaf and a mixed green salad.  Have the Chianti available for your guests.  This is also a great dish to make and bring with you to a potluck dinner hosted by your neighbor…as it is easy to make and goes along way….

Buon Appetito.