Trump Turns Up the Heat on China / Try the Summer BBQ

Kenny Polcari Uncategorized Leave a Comment

Things you need to know:

  • US/China tensions heat up – causing angst in global markets
  • AstraZeneca is the new vaccine darling – US commits $1.2 billion
  • China/Hong Kong tensions heat up – causing markets to fall
  • Oil retreats as traders take profits on the headlines
  • Democrats launch an offensive – Biden appears on CNBC Squawk Box
  • Try the Summer BBQ – 2 recipes today to enjoy this weekend.

Happy Memorial Day – Thank a Veteran – I would usually say ‘Hug’a Veteran – but I can’t say that this year….Tell them how great they are to defend our nation and wish them peace and prosperity

Trump turns the heat up on China, as the very public battle between the two countries takes center stage, (Trump trying to make China a leading campaign issue),  Congress working on a bill that could force Chinese companies to ‘delist’ from US stock exchanges, macro data around the world continues to plunge, Germany in ‘recession’, Eurozone PMI’s continue to plunge, and here at home – Initial jobless claims came in higher than expected as 2.45 million more people joined the ranks of the unemployed, Philly Fed Survey falls to -43, US Manufacturing and Services PMI’s well into the contraction zone,   IBM to cut an ‘unspecified’ number of jobs, Best Buy and Macy’s report weaker numbers, the Moderna vaccine conversation slips quietly into the night as AstraZeneca is the new pharmaceutical darling.  It’s a mixed bag of information for sure causing the markets to become erratic.  The S&P attempted to test and kiss 3000 but as suspected was rebuffed (see yesterday’s note) …at the end of the day the Dow lost 101 pts or 0.4%, the S&P gave up 23 pts or 0.78%, the Nasdaq lost 90 pts or 0.97% and the Russell in complete defiance to the headlines rose 63 cts or +0.05%.

Virus update – Say hello to Astra Zeneca –

AstraZeneca announces a licensing a deal with the UK’s University of Oxford’s Jenner Institute revealing that they are also ‘close’ to finding a vaccine for the coronavirus that has crippled the world….. and the US government is about to write a $1.2 billion check  ‘to secure the supply of a potential vaccine that could be ready as soon as the fall’.  This vaccine is being tested on humans and the $1.2 billion will fund a 30,000 human being vaccine trial in the US this summer and IF successful will guarantee the production of more than 300 million doses that promise to be ready in the fall if the trial is a success….now the $1.2 billion is in addition to the other money that has been awarded (by the US) to other pharma giants, Pfizer and JNJ in a race to ramp up production of their potential vaccines not due until sometime in 2021.

Now while the AstraZeneca news is positive investors remain concerned as Donny turns up the heat on Xi Xi just as China prepares for the widely watched and most politically significant event of the year for them – the Chinese People’s Political Consultative Conference in Beijing that began yesterday amid concerns that we could witness another wave of global infections.  As the world awakes – all eyes remain focused on China and what’s next – Donny and Xi Xi are now in a very public feud over a number of issues – not the least which is – where did the virus originate and who is gonna pay for the global destruction created by the wrath of this virus.  Right behind that is a brewing feud over the already signed phase 1 trade deal and what is at risk if this feud continues and then what about phase 2 and even phase 3 parts of the deal…

All this happening as spring turns to summer and the 2020 presidential election cycle enters high gear.  Expect to hear more from the Democrats about their platform – Joey Biden appeared on CNBC’s Squawk Box at 8 am – expect that interview to create headlines all day….the big questions remains – who made the short list for the VP spot and what will their platform look like…..First, we can expect a strong woman – names in the mix include CA Senator Kamala Harris, Michigan Governor Gretchen Whitmer,  Minnesota Senator and former Presidential candidate Amy Klobuchar now no one said these are the only names on the list but they are surely ON the list.  News of the DNC’s choice should be announced in the weeks ahead…as they need to celebrate the ‘new democratic party’ and then flood the country with appearances and speeches as they challenge Americans to reconsider who runs the country.  Next, word yesterday that the Biden camp is shifting further to the left to include the Sander’s supporters – will only create more concern among the electorate and the markets. If true, we can expect pressure on Tech, Healthcare, Financials and Energy as those are sectors of the economy that the Sanders campaign was targeting….

Overnight news out of Asia reveals a couple of things……

  1. that China is set to impose a new set of security laws on Hong Kong causing stocks in Hong Kong to plummet – falling 5.6% as the grip tightens sparking fears of another wave of uprisings.
  2. That China will not set a 2020 GDP target for the country citing the uncertainty over what Covid19 has done to their economy and the global economy making it nearly impossible for them to offer ‘guidance’…
  3. Rising tensions between the US/China have the potential to derail the phase 1 trade deal never mind future negotiation – with China saying that ‘they will not flinch in the face of any escalation of tensions with the US’ – suggesting that a fight is on the horizon.  Investors hit the SELL button causing Japan to fall 0.8%, Hong Kong -5.6%, China falls by 2.3% and the ASX lower by 1%.

As the morning turns to afternoon in Europe – markets there are mixed……for all the reason cited above and growing concerns over a new wave of possible infections as Europe and the US begin waking up, continued weak macro data and lack of clarity over what’s next as protests are sure to rise over the weekend in Hong Kong.  Economic news reveals that UK borrowing has soared to a record high of $75.8 billion and retail sales have fallen 18% as the virus takes its toll on the UK economy.  At 6:50 am – we see  FTSE -0.98%, CAC 40 -0.32%, DAX -0.50%, EUROSTOXX -0.41%, SPAIN +0.22% and ITALY +0.75%.

US futures are under pressure as the day begins….in pre-market trading Dow futures are suggesting a loss of 100 pts, the S&P off by 13 pts, the Nasdaq lower by 48 pts and the Russell lower by 4 pts. It is Friday and it is a long weekend – Happy Memorial Day – markets are closed on Monday – so expect a Risk Off tone to the market – mimicking what is happening around the world.  There is SO much that can happen over the next 4 days…..and expect Hong Kong to be at the top of the list – which in the end will NOT price stocks, but may give some investors a reason to take money off the table…..be patient – make your shopping list and get ready if some of these names get dislocated because of the political upheaval – Remember – negative political headlines and issues cause short term negative moves but do not price stocks in the long term.  What we are seeing is that as the global economy wakes up – businesses and people are attempting to return to a sense of normalcy….and the economy is attempting to rebound….Will it be fast, no, but will it happen, yes.

Eco data today includes nothing…so the focus is on the broader geo-political issues and the re-awakening of the world.

Oil is down 6% today….the China syndrome is driving the action…..No China GDP forecast and Hong Kong issues, all giving reasons to take some money off the table after oil’s recent surge up and thru $30/barrel.  The talking heads are telling us today that the issue is about falling demand because China refuses to offer a GDP forecast….and to that I say – Baloney!  How about you tell it like it is – not that demand will fall – because it won’t – the world is waking up and demand will surge and the oil market is telling you that – remember it has rallied more 90% off the late April lows of $18/barrel….all because they told us that DEMAND IS EXPECTED TO SURGE as the world awakes….and today you telling me that demand will suddenly fall just because China refuses to offer GDP guidance?  Really?  Do we even believe any guidance that China gives?  How about oil is down today because the negative political headlines are giving investors a reason to take profits after the surge….demand is not going anywhere but up – stop the hysteria. We remain in the $27/$39 range defined by the short and long term trend-lines…Energy names are a buy and if they come under pressure today – all the more reason to take a look at your favorites.

The S&P closed at 2948 after having tested as high as 2978 – only 22 pts from that ‘kiss’. Today will most likely be an off day as the headlines present a negative tone, there is not macro eco data and we are coming into a long weekend here in America.  For the past couple of weeks I have been opining on what happens if we kiss S&P 3000 – Will she reject us or not?  Will she push back and say ‘not so fast big boy’  or will she welcome the advance offering little to no resistance?  I  suspected that when we did kiss her – she would turn us away and she did…..…as there are too many questions left unanswered….The long weekend is here, the headlines are mixed to nervous, so much can happen over the weekend that many trader types will go home flat – why leave yourself exposed – buyers will be patient and passive – no reason today to ‘take stock aggressively’  the headlines don’t warrant it.

Take good care.

 

Kenneth Polcari
Chief Market Strategist, Consultant
kpolcari@slatestone.com

 

Short Rib Burgers and the Spinach/Orzo Summer Salad

It’s Memorial Day weekend – and it is time to celebrate America and celebrate life.  These burgers are a favorite….they are crazy good…. they are a bit of work – but if you have the time and you really want to impress – go for it.

Refer back to the Short Rib recipe below.   Make 1/2 dozen ribs – the night before……cool and then shred the meat off the bone…. Now when ready…. bring the shredded meat to room temp and then mix the cooked short rib meat with the ground chuck (now use real ground chuck – not lean hamburger meat…you want it to have the fat for flavor) season with s&p and form the burgers.  Light the grill and let it get nice and hot and cook.  Top with sautéed onions and Monterey jack to complete this burger.

While this is cooking – butter the Brioche buns and toast either on the grill or in a frying pan……Then place the cooked burger on your bun – with fresh lettuce and the sautéed onions.  Mayo and Ketchup on the side.  Outstanding.   Complement this with the Spinach/Orzo salad – recipe below.

Braised Short Ribs

Begin with 6 / 8 beef short ribs.  season with s&p and then brown in a frying pan with a bit of Olive oil.  Make sure to brown all sides being careful not to burn the meat.  After you have browned them – place them in a large/deep baking pan.  Lining them up on their sides.

Next –  large Chop – 2 lg White Spanish Onions, 1 bunch of celery stalk, 1 bag of carrots.  Smash 4 /5 cloves of garlic and add to the meat – making sure you disperse the garlic all around.  Next add the chopped veggies right on top.

In the frying pan that you used to brown the meat – add:  1 can beef broth, 1 can tomato paste, and 1/4 to 1/2 bottle of red wine.  mix well and let the broth come to a boil for a couple of min as you steam away some of the alcohol in the wine.   Bathe the short ribs in this mixture and cover tightly.   Place the baking dish in the oven – preheated to 350 degrees. Let cook for 4 hours – tightly covered.  Once cooked allow to cool and then shred the meat off the bone and set aside and follow the instructions for making the burgers.

Summer Salad – Spinach and Orzo w/Ricotta Salata

This is a great dish to serve at your next BBQ or even better to just have in the fridge.  It is simple to make – no longer than 12 mins max.  For this you need:

1 lb of Orzo pasta, garlic, olive oil, fresh spinach, Ricotta Salata Cheese and s&p. (now you can substitiute spinach with Arugula if you prefer)

Bring a pot of salted water to a boil and add in the Orzo.  Let it cook until aldente – maybe 8 mins.

While this is cooking – heat some olive oil in a pan and sauté garlic….just allowing the oil to take on the garlic flavor – do not burn the garlic….now remove from heat and set aside.  Cut the Ricotta Salata into small bite size cubes – set aside.

When the Orzo is cooked – strain – always keeping a mug of pasta water – just to remoisten a bit.  Now return the Orzo to the pot and add back about ¼ cup of the water – mix to re-moisten – do not let it puddle….now toss in the fresh spinach leaves (or Arugula), the oil and garlic – mix well to coat.  (You want just enough oil to coat the pasta – you do not want the pasta bathing in the oil) Now add in the Ricotta Salata and mix again.  Put it in a bowl and refrigerate.  Done.  It is a perfect side dish to any summer BBQ meal or is even good to just eat right from the bowl….

Buon Appetito.