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Things you need to know

  • Jay ‘tee’s’ it up but doesn’t really commit to a start date
  • Inflation is still transitory – stop asking
  • AMZN reports after the bell…. don’t expect them to disappoint
  • Robinhood debuts today…. $38 IPO price, 52 million shares to market, small enough to create panic driven buying in what could be a FOMO IPO.
  • Oil up, Bitcoin up, Ethereum up, bond prices down sending yields up
  • Try the Potato & Eggs

So the day started with Lizzy Warren taking to the airwaves telling Ken Langone and asking anybody with more than $50 million is cash, assets, jewelry, painting, bitcoin, real estate etc….be subject to an ‘annual wealth tax’  – in her words a ‘tiny, little tax’ that would then pay for new roads, bridges, free childcare, free education, free healthcare, free everything….to be clear….it’s just a ‘tiny little tax’ that they wouldn’t even miss but one that they would pay year in and year out…..Does she not understand that all of these people paid taxes on the money as it was earned – as it should be – so now she wants to tax them again and again, just because they have been successful? It’s time to move on….

Stocks struggled most of the day and then began to find footing when the FED came out at 2 pm and signaled that rate are to remain at zero (for the foreseeable future) but did indicate that they have begun talking about talking about when to ‘tap the brakes’ as they say – when to pull back on all of this monthly stimulus – but he qualified it by saying that

“There are still some ways to go’….and “the economy has made progress toward these goals, and the committee will continue to assess progress in coming meetings”     

He went onto say that the clock is ticking on tapering, but it is not happening now and will not happen in September (this was not unexpected) – but expects that it will start sometime late this year or early next – a timetable that many have been talking about for months now…. Oh, but he did say that he promises to offer ‘plenty of advance warning before any decision is made to start scaling back.’  In the end as the WSJ puts – he ‘teed it up’….

He also continued to express the fact that inflation is ‘transitory’ and that he is not changing his view on that – even as consumer prices are rising at a pace not seen since 2008 with no end in sight….– so stop asking – he is not taking responsibility for the surge in consumer prices – it clearly is ‘not his fault’….and finally he said that covid variant  risks to the economic outlook remain a threat.

By the end of the day investors sent the Dow down 128 pts, while they sent the S&P’s down 1pt, the Nasdaq up 102 pts, the Russell up 33 pts…. the 10 yr. yield ended the day at 1.24%, oil advanced by 60 cts to end the day at $72.25 – remember that panic selling last week that took oil down to $65?  Ridiculous…. Energy – XLE was the strongest sector yesterday (hello demand…) up nearly 1% while Consumer Staples – XLP was the weakest falling nearly 1%, Value trade was down while the growth trade was up….

Away from the FED – we got blowout numbers from FB – yet they are signaling a possible slowdown in ad revenues ahead….(putting pressure on the stock), in addition we were not disappointed with GOOG, AAPL, MSFT or BA….Boeing reported its first quarterly profit in more than 2 yrs. and expects this recovery to lead to a stronger than expected recovery in air travel and is ready to take full advantage of it – they are just waiting on China to recertify the 737 Max and then place 100+ orders for the plane.

Today we will hear from another 2 dozen companies – MA, BAX, MRK, TROW, ICE, MAS, NOC, & VLO to name just a few,  but the ‘big one’ that everyone is sitting on the edge of their seats for is AMZN – but you’ll have to wait until after  the bell – expectations are for them to report $12.28/share and for anyone that expects them to disappoint – think again…..surely – they will blow thru every expectation and send Lizzy Warren into a frenzy….Ytd – the stock has underperformed the broader market it is up 12.5% while the broader market is up 17%.

And new to the party is Robinhood – it will trade on Nasdaq under the symbol HOOD – (you know I thought it should be HOODWINKED!) …. stock was priced at the bottom end of the range – $38/sh and they are banking on the fact that they held out 35% of the offering for ‘hooders’ – that they hope will come in in droves driving the market up substantially giving it that IPO POP.  Vlad Tenev and Baijiu Bhatt each sold $50 million worth of their stock on the pricing last night and at that price they each become ‘billionaires’ – the total offering was 52.4 million shares (not a huge amount – respectable – but small enough to create panic buying which is exactly the story they want to create).  The IPO raised $2 billion dollars…. At the IPO price – HOOD is now valued at $32 billion.

While I am not a supporter of this company, it will be interesting to see how well it is or is not received by both institutional and retail investors.  Word had it that the stock had traded as high as $55 share in the private market which would be a 44% premium to the IPO price and that would be seen as a good day by Tenev….and it would give the IPO buyers a quick flip – let’s see if the ‘diamond hands’ hooders suddenly become ‘paper hand flippers’ too!

Eco data today includes the 1st release of 2nd qtr GDP – exp of +8.5%, Personal consumption up 10.5%, Initial jobless claims of 385k, Continuing Claims of 3.1 million while Pending Home Sales is expected to be flat m/m and down 3.3% y/y.

This morning US futures are up…. The Dow + 125 pts, the S&P up 9 pts, the Nasdaq down by 12 pts and the Russell is up 20.  The 10 yr. yield is trading at 1.25% this morning and oil is up again trading just below $73/barrel.  The VIX is trading at 17.63…. sitting right on trendline support.  A breach below trendline will give stocks another boost while any move up will cause some investors to pull back and wait….

Bitcoin pierced $40k and is now trading at $40,300, Ethereum is trading at $2300.

The S&P closed at 4,400 – and while the trendline does provide room for further upside it feels a bit tired right here…. with earnings season winding down now, August tends to quiet down a bit and then we enter the ‘fall season’ which tends to be a seasonally volatile time under normal circumstances.

The latest covid variant is causing renewed concerns around the country and we are starting to hear about companies re-thinking the re-opening of offices etc.  Twitter closing offices in CA and NY immediately with no guidance on what’s next yet. The CDC is now demanding the return of mask wearing whether you’re vaccinated or not – individual states will provide further guidance with lines drawn down the political spectrum…. Republican states running with if your vaccinated you’re good and if you choose not that’s your issue and your problem if you get sick.  Democratic states demanding everyone wear a mask no matter if your vaxed or not.  And you can feel the tension rising again….

In any event – the virus variants remain risk factors for the markets especially as we come into the fall…. I am still thinking we get a 7 – 10% correction…. but so much will depend upon ongoing macro data.  In addition, expect to hear from different FED members that will now begin to take to the airwaves to float different balloons to see how it is received.

In any event – stick to the plan…remember – investing is dynamic…keep some cash ready to deploy, but don’t be so quick on the trigger just yet…

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.

You can follow me on Twitter – @kennypolcari

Take Good Care

Chief Market Strategist, Consultant

Potatoes & Eggs

Time for a time-honored favorite – real comfort food. – You can never go wrong with Potatoes & Eggs. This is one of those basic yet classic dishes that never goes out style… you can eat for breakfast, lunch, or dinner – Enjoy.

For this you need: Eggs, potatoes, garlic, onion, s&p, butter, olive oil, fresh grated Parmegiana Cheese and if you prefer a pinch of Italian seasoning.

Preheat the broiler to high.

Peel a couple of russet potatoes and then slice – now toss into a pot of boiling water – bring the pot back to a boil and blanch for 3 – 5 mins… Remove – strain and set aside.

In a large bowl – crack 6 to 8 eggs – Beat well – add a splash of whole milk (or 1/2 & 1/2), season with s&p (and if you like a pinch of the Italian seasoning). Add a handful of grated cheese. Mix well – set aside.

In a large oven safe frying pan – melt a dab of butter, add a squirt of olive oil and heat. Now add in chopped garlic and sauté. Next add some sliced onions and sauté – until soft and golden… add back the potatoes and brown on both sides.

Next – pour the egg mixture into the pan and allow to set. Twirl the pan to allow the egg to spread and cook. Once the edges begin to pull away – place the pan into the oven under the broiler…Watch as it quickly cooks the top of the “frittata”. Remove and slide onto a large serving platter – cut like a pizza.

Have toasted slices of Italian bread on the table for your guests to make a sandwich.  Serve with Ice Cold whole milk.

Buon Appetito.